“What Recession???”  

Issue 50

By:  Ron Brounes  

June 2001


Each day I read the Wall Street Journal (or local business press) and get the feeling that the “sky is falling” as the domestic economy comes to a literal standstill.  The unemployment rate is climbing as layoffs force more and more hard working Americans to look for jobs.  Manufacturing is slumping as demand for “Made in America” products is on a steady decline.  Consumer spending is down as the Average Joe/Joan takes one look at the market value of that stock portfolio (as compared to last year) and decides to stay away from the malls and cut back on those purchases.  Inflation is taking a major bite out of our pocketbooks as energy prices fly through the roof and rolling brownouts leave Californians in the dark (not that they weren’t already).  Corporate execs warn of missed earnings; analysts revise profit estimates downward.  Talks of the dreaded “R” word have once again resurfaced. 




And yet outside of the newspapers, I get a very different picture of the state of the times.  The other day an associate of mine asked me when I could join his family on their new boat.  When I mentioned that I had a great time with them a few years back, he quickly pointed out that he has since upgraded and now has a “bigger, faster, luxury cruiser.”  At a recent meeting I attended, everyone was talking about their plans for the summer.  One guy reminded us of their summer home in Telluride, Colorado where they have family and friends visit for a week at a time.  (I have yet to receive my invitation.)  Another “poor” soul complained that his family had no real plans and would have to make do at the Houstonian (a reasonably nice fitness/country club in Houston).  Almost as an afterthought, he remembered that his in-laws were taking them all to Hilton Head for a week, though he was not sure what he would do there.  (The tone in his voice would have seemed to indicate that he had been exiled to Siberia….Then again, I know his in-laws.) 


At a business lunch, I was told by an associate that last year was his most profitable year in business ever.  He quickly added that he is stimulated entirely by his work and not driven by money in the least.  As we left the restaurant, he had to walk me over to see his brand new Jaguar.   On a similar note, I have two acquaintances who have pre-ordered those newly designed $70,000+ Lexus convertibles.  Another guy I know recently bought the lot adjacent to his current home, just so his kids would have a bigger yard in which to play.  When I shared these stories with a friend who has driven the same beat-up Chevy for the past 10 years, he scoffed at the materialism that has infiltrated our society.  Later that day, I accompanied him to the liquor store and watched him order a case of French wine from the Bordeaux region for something like $200 a bottle.  (The wine won’t even be here for two years.)  


While attending a conference a few weeks back, I shared a cab with two associates who were trying to guess how much money a lawyer friend was earning at their firm.  They debated about whether he had crossed the crucial $1,000,000 threshold, but finally agreed that he wasn’t making a dime over $800,000.  (The cab driver seemed virtually unimpressed…On the other hand, I am thinking of going back to law school.)   And then there’s Dennis Tito who took his summer vacation a tad early this year, having received a discounted $20,000,000 fare from the Russians to travel to the International Space Station.  (Talk about piling up those frequent flyer miles.) 



Having analyzed (and overanalyzed) the mixed signals I was getting about the state of the times, I have reached several somewhat “contradictory” conclusions.  Perhaps the economy is not really as bad as has been portrayed by the business press?  Certainly, we know that the media loves to sensationalize the news stories, so maybe those “Chicken Little” claims about a recession are vastly overblown.  While average Americans seemingly love to share stories of their “rags to riches back to rags” stock market experiences, the reverse wealth effect does not appear to be altering their standards of living in the least.  Then again, perhaps, they made so much money in the markets that a mere 50% pullback makes little difference to their purchasing power?  


Or perhaps they have become so accustomed to their excessive lifestyles that they are finding it difficult to alter their spending patterns?  Maybe this will prove to be a good thing in the long run as such splurging on cars, vacations, and wine can only contribute positively to the economy and may, in fact, carry the country out of this so-called recession much faster.  (Unfortunately, we will not benefit domestically from Tito’s contribution.)  Or maybe this will prove to be a bad thing and those individuals will wake up one day and realize they have negligently blown through their accumulated wealth and will face more dire times in the future (summer homes in Vail instead of Telluride, $150 bottles of California Merlot instead of $200 Bordeaux’s).  Only time will tell.


In the meantime, I can only guess that the numbers don’t lie entirely and the economy is indeed experiencing a slowdown.  With that said, today may represent a decent time to evaluate your current financial situations and make any adjustments necessary.  The wealth created from the surging stock market over the past decade caused many people to begin living far above their prior customary standards of living.  Now that times have changed, we may all need to make a few minor alterations to our lifestyles to ensure that we do not spend beyond our current means and continue saving for our futures.  The short-term luxuries of today should never take priority over the long-term comforts (and peace of mind) of tomorrow. 


As a sidebar, perhaps I need to reevaluate the individuals I’ve been hanging out with both professionally and socially?  Are these even the type of people with whom I should choose to be associated?  Are all these materialistic possessions really what’s important in life?  Is this contagious “keep up with the Jones’s” mentality healthy for a humble, hard working Average Joe just trying to eke out a living?  I mean when I really think about all of the fast boats, fancy cars, luxurious summer vacation homes, exclusive country club memberships, huge back yards with large swimming pools, million dollar compensation packages, it kind of makes me wonder…just why am I friends with a guy who drives a 10 year old Chevy?  


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FOR WHAT IT’S WORTH is a publication of Brounes & Associates focusing on business marketing and general communications strategies. Please call Ron Brounes at 713-432-1910 for additional information. The results are in from last month’s survey which asked which types of newsletters you guys prefer. By an overwhelming margin, readers chose option “C,” a combination of the more technical investment/economic pieces and those with mere gibberish and self-deprecating anecdotes. I would like to take this opportunity to thank all (both) of you who responded and especially that one “jokester” who wrote “take me off your stinkin' list!”  (Thanks Mom.)  That little bit of comic relief really helped break the monotony of a rather stressful day.  (And don’t worry, I know you were kidding and don’t really want to be removed from my database.)