Economic Update-Where’s the Bottom of That Cliff?
- Mar 10, 2009
Recession, depression, panic–or “fallen off a cliff”? Warren Buffet, speaking with CNBC’s Squawk Box on Monday, likened the U.S. economy to Wile E. Coyote, or at least to his propensity for falling from steep precipices. “Not only has the economy slowed down a lot, but people have really changed their habits like I haven’t seen,” he said. Things will get worse before they get better, the highly visible billionaire added, but eventually they will get better (it could take as long as five years, though). “Everything will be all right,” he said. “We do have the greatest economic machine that man has ever created.” Investors who are not Warren Buffet seem a little uncertain of that, however. In the wake of a bad week for Wall Street, the major indices were up Monday morning, but drifted downward the rest of the day. Not quite a cliff plunge, but the Dow Jones Industrial Average was down nearly 80 points, or 1.21 percent, on Monday. The S&P 500 was down 1 percent and the Nasdaq dropped 1.95 percent. “Selling like hotcakes” is a quaint old expression. Maybe it needs to be updated to “selling like McDoubles,” the double hamburger plus single cheese slice that McDonalds Corp. added to its Dollar Menu late last year. The company has reported the addition to be very popular, and one of the reasons that same-store sales in the U.S. for the fast-food giant were up 2.8 percent in February compared with last year. Worldwide, same-store sales were up 1.4 percent. “Now while we clearly prefer a more robust environment, today’s market conditions play to our strengths,” said James Skinner during the company’s most recent conference call earlier this year. He even expressed confidence in China as a growth market for the brand, something not heard quite as much these days: “This year we plan to open another 175 restaurants [in China], the highest number of planned new openings for a McDonalds market in ’09,” he said. Though suffering from contracting demand as companies vanish or downsize, it’s been said that most U.S. office markets have the benefit of not having experienced major overbuilding in the run-up to the recession. The same cannot, apparently, be said for the Dubai office market, according to a new study by Chicago-based Jones Lang LaSalle. With a sudden decline in demand, office vacancies in the emirate have doubled in the last six months to about 16 percent, according to the report. At the same time as demand was dropping last year, space was still coming on line: an additional 4.7 million square feet was added in the second half of 2008, in a market with a little less than 30 million square feet all together. That will not happen again: the report also noted that at least half of the office space planned for development from now until 2011 will not happen, and no one would be surprised if that figure went even higher. The emirate’s hospitality market has taken a hit as well, with Jones Lang LaSalle reporting that occupancies are at their lowest level in five years, now an average of 79 percent. Even the plans to convert the liner Queen Elizabeth 2 into a floating hotel at Dubai may be delayed. The developer Nakheel, which is owned by the government of Dubai, bought the ship in 2007, and still says it plans to finish the conversion this year, but not everyone is so sure.