Saturday, January 24, 2009

Madd Money: The Economy and the "Mall Effect"

I realize that I probably seem a little bit strange in this day and age, where very prognosticator is talking about "the worst economic crisis since the Great Depression" and "consumer spending falling off a cliff" and many other doomsday scenarios. I also find it interesting how much of it lined up perfectly with a presidential election cycle.

Now don't get me wrong, I am not saying that there aren't dark clouds about, or that there aren't people who have genuinely gotten hit with the current economic downturn tht we are seeing, nor am I denying that we are currently in a recession (now that there is concrete data that proves the point), but still, I've yet to see major indication that life as we know it is about to end.

One of the prime indicators that I notice, and I see it every day when I come home from work, is the "Mall Effect". My train station is next door to one of the Peninsula's better known malls (The Shops at Tanforan). In this economic downturn and the loss of consumer confidence and all that's been reported, I'd expect the mall parking lots to be empty or at least closer to half full... yet that's not the case at all. Instead, the lots looks to be 80-90% full on any given day. Now, it's entirely possible that there are a lot of people out just "window shopping" or "hanging out" (and let's face it, that's a common pastime for a few generations of teenagers now, I know it was when I was one), but that still points to the fact that people are out and about in the marketplace. Additionally, at least with the people that I am currently talking to, there has not been a major increase in unemployment. For every hundred or so people I know, I think there may be one or two that are now looking for work because of being laid off... and hey, that fits with the current numbers.

So what's my point with this particular missive today? I'm a strong believer in the notion that "my economy" is more important than "the economy". What's more, "my economy" is really the only one I have any control over. I want to encourage everyone to focus less on "the economy" and look to your own economy instead. How are you doing? What does your savings rate look like. How are your retirement contributions? What does your liabilities side of the balance sheet look like. To borrow from the oft sung primary song, have you "built your house upon the rock" or have you "built your house upon the sand"? If you have built your house upon the rock of holding tangible assets from a position of actual ownership, then as the rains come down and the floods come up, it's a good bet that your house will stand firm. If, however, you have "built your house on the sand" of credit and leverage, this may prove to be a very challenging time, and as the rains come down and the floods come up, we may well see may houses built on the sand "wash away".

Granted, that particular song is meant to be a metaphor for building a testimony and having faith, but it's not too far a stretch to apply it to your own economic well being. Take a look at where you are at today. Look to see if you have a cash emergency fund, if you can clear out debt, if you can make a larger contribution to your etirement savings, and while you are at it, perhaps make a point of picking up some long term staples to keep in your home. If you find that yor house is currently built on sand, consider this a chance to move and rebuild on rock (and for those scared of the market gyrations, consider that this may well be a great time in the history of the market to get a *great* deal on the market as a whole, which is how I'm treating it :)!).

Most of all, look around you and see what is happening in your own life. Don't give too much attention to the pundits and the prognosticators. They are paid to pontificate on the overall state of the world as a form of entertainment. Personally, I'd rather look at the actual numbers and actual actions... and judging from such actual actions like the "mall effect" in my town, it doesn't look to be as dire as the talking heads are making out to be. Time will tell if I'm right or wrong on that particular front, I guess :).

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