From Starbucks to Costco, Main Street’s Pocketbook Snaps Shut

Starbucks FactorBack in August, I wrote an SMW Money Channel column called “The Starbucks Factor.” The story was about Starbucks’ announcement that they planned to close 600 stores. A bit shocking for all of us who became accustomed to a new Starbuck’s opening every day of the week. I concluded that when $3.50 lattes were no longer affordable that the economy was about to take a dive.

Fast forward eight weeks to the New York Stock Exchange in a free fall and all the ingredients for a financial meltdown on Main Street are in place.

As the sales of most retailers are sinking according to reports just released today, Costco had a very health 7% rise in sales. In fact all forms of economizing are in fashion. From the sale of Campbell soups to the stocks of grocery chains, people are fleeing Target and Red Lobster and heading down to Costco and Safeway.

The 24-hour news channels, in their usual state of perpetual panic, have announced the end of civilization. Will people ever understand that there are fat times, lean times and all those in-between times?  This is not the “end of days,” just a bad run for the economy.
When exotic coffee drinks go out of style and six-packs of economy sized cans of Dinty Moore Beef Stew are flying out of Costco, we are in “an economic downturn.”

The question is not whether or if we’re in a bad economy, but simply how deep and how long? When you write about finance the temptation to place your bet on that question is irresistible. My guess is that this economy is like clear air turbulence. No one saw that it would be this bad and you can’t bet just how long it will continue but while this past week has been a scary ride I continue to believe that the markets will soon find their bottom, stabilize and start heading back up slowly.

This is not 1933, the days of hands-off government is long dead. Whether here, or in Frankfurt, London, Paris, Brasilia, Tokyo, or Shanghai, regulators are determined to put an end to this crisis in the credit markets and provide enough liquidity to keep the situation from worsening. In the world banking crisis of 1933 none of these mitigating factors were in place. If I’m wrong, and this crisis is far worse than I suspect it will be, you can take comfort in the fact that we’ll all survive lean times. It’s not like you’re living in Baghdad in 2003 wondering what George W. Bush means when he says “shock and awe.”

Just dust off your Costco card, lock up your Bloomingdales’ card, and hold tight. As Scarlett O’Hara taught us about tough times, “Tomorrow is another day!”

 Martin Brown – Money Editor

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