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A Director's
Chair
Great Depression: Take Two?
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by John Godfrey, Board
Treasurer
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If you have heard any
economic news lately, it hasn’t been encouraging. Almost every news
outlet has compared the current economic times to the Great Depression.
In most cases, when the media is saying the same things we have reached
a zenith of the economic hysteria. So, are we headed to a Great
Depression? I don’t think so.
The economy is definitely different than many of us has seen in the
last 20–30 years. Unemployment rates are climbing and housing sales are
decreasing. During the Great Depression, unemployment rates peaked at
an astonishing 25% and housing prices deflated with individuals maxed
out on debt. There were 9,000 bank failures. There are some
similarities in these scenarios without the extremes.
Housing prices have decreased over 30% in major hit areas like
California, Arizona, Florida and metro NYC. The Capital Region saw
median house prices decrease 1% in 2008. No typo—it’s one percent. I
didn’t see anything in our local news about any bank failures, either.
SEFCU was still around the last time I looked. The national
unemployment rate increase this month to 7.6%. The unemployment rate in
the Capital Region is at 5.9%. The general trend may inch higher.
However, we are nowhere near a 25% unemployment rate.
With all the doom-and-gloom media, one might think the Co-op would be
seeing a hit with our financials. Actually, we ended 2008 with sales up
over 15% from last year. January sales were up near 16% and February is
looking good, too. One interesting thing about the grocery store
business, when the economy weakens sales tends to go higher in the
short-run, as fewer people are eating out. People eat out less and buy
more quality foods from the grocery store instead. I truly believe our
sales trend will continue. There is still a secular trend in healthy
eating. Also remember people aren’t paying over $4 a gallon for gas
now. We are currently around $2 per gallon. That savings is all
disposable income for some Gustav goodies!
The Co-op is at an interesting junction right now with our new store
plans. Conventional wisdom would make one think it is not a good time
to do any major investments; however, this is the best time. We won’t
be competing for construction companies that may have been building the
new pharmacy a block away from another or a new Starbucks a few miles
away from the next. We are at the best time to get competitive prices
on construction bids. Additionally, the raw material costs have
plummeted, thus making building supplies for our new green store less
costly!
No business has had any great success operating on a doomsday scenario.
Thinking about the worst doesn’t prevent it from not happen. As we on
the Finance committee and Board have always done, we will be doing our
monitoring and analyzing of our financials regularly and factor
economic realities. Currently I think the Co-op’s biggest risk is not
doing our project. We didn’t buy our current site to be landlords. We
bought the site to build our Albany destination store as part of our
thought out strategic plan.
As the market drops or you continue to hear the negative press on the
economy, think about what you can do to invest in your Co-op’s great
future. Investing with us is the best investment idea in our current
economic times. You can loan money to the Co-op with maturities ranging
from 5 to 10 years, and interest rates ranging from 1% to 6%. Please
call Lynne Lekakis at 427-7386, or send an email to gocoop@honestweight.coop
for more details on making your loan today!
Let’s show Wall Street what real investing is all about!
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