Tuesday, February 3, 2009

10% Reduction...

I have had this thought in my mind that the economy seems to be contracting about 10%. I was reminded of this as I awoke to my radio (KYW) news that the Pennsylvania State Revenue was 11% below expectations. They reported Sales Tax was off 7%, Personal Income Tax was off 13%, corporate tax was off 18%, inheritance tax was off 10% and real estate transfer tax was off 35%.

This matches the performance at the running store in January - we were down 10% excluding our recently opened website - RunningCompanyShoes.com.

It kind of makes me think that maybe we got 10% ahead of ourselves the past decade. People took out too much credit, and basically extended the economy more than it should have naturally grown. Now that we take the 10% step back, it is very painful. It is painful for the 10% of the workforce that is getting laid off. It is very painful for the states and other government organizations to be coming up 10% short of their revenue projections. And of course businesses get an unusually high % of their profits from that last 10% of business. For example at our little running store, that 10% in revenue makes the difference between a small profit and a loss.

As an investor, I am not quite sure it is time to jump back into the market. The problem is that 10% is still rippling thru the market and economy. And earnings are still in the process of being impacted negatively. And probably will be thru the end of this year, even with the stimulus packages being enacted.

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