Spending vs. Savings — the confusion


I’m confused.

Growing up, I heard it a lot…. “Save your money….”

I finally bought into it, and for the most part I’m glad I have lived by that approach – with a few glitches along the way.

But lately, as I’ve absorbed this business beat, I’ve been hearing something else as the economy takes a dive — respected people, business leaders, politicians…now many of them are saying, “Spend your money….”

It’s the only way we are going to bring our consumer-driven economy back to health.

Noted leaders in retail, in car sales, lament the downfall of their industries as they plead with consumers to keep the economy going by buying their products. It’s the only way titans such as GM became such titans, and employed so many people – because people spent money on their products, which fueled and came to symbolize the American way of life, some say.

Consumer-driven our economy absolutely is. Consumer spending drives 70 percent of our economy. It’s what creates jobs, buys homes, cars….

It drives our credit markers. It drives everything…

I’d like to think much of that spending is for what we need. But I doubt it. For some – even myself at times – the swipe of a credit card feels good, and that debt I’m tacking on to my balance might even be to indulge myself.

But I’m still worried.

We’ve got conflicting messages in this society. Spend vs. Save. Spend vs. Save.

Commercials for cars and awesome televisions lure us while our parents and the people who know better tell us to not take the bait.

While some may say this is just a byproduct of living in a market economy, it seems to me the consequences are very dangerous. Credit card companies get kids out of college to get credit cards, and they go out and rack up a bunch of debt. Our own government -our own leaders – rack up trillions in debt, as if it’s a good thing.

And then we act shocked when our economy goes down the drain because a bunch of bankers sold off their risk to a bunch of other financial folks, who sold off their risk.

What’s the message – if you’re not a business school graduate. Should we save? Should we buy?

It seems like a tension that needs to be worked out. I don’t know about you, but it seems like some of the tension can be worked out in our schools. How come I feel bad that none of this financial stuff came my way while I was in school? Maybe I wasn’t listening, but I’m pretty sure there was no class at my school called Financial Literacy 101, or Bank Account Basics. In a society geared on getting us to spend, it seems like we need some kind of counterbalance to get us to save – or at least know the best way to spend.

I don’t think we get that. We have to learn in times like these – and that’s the worst time – because we are scared to spend. And that fear isn’t good for any business.

I’ve resigned myself – again, with a few glitches on the way – to buying what I need, instead of what I want. Maybe that’s the only way to go. But it’s hard. I want that fancier car, the nicer suit, etc.

But is buying all that stuff – or even being able to buy all that stuff — the American dream?

Let’s hope we haven’t come to that.

Among the things I’ve learned on this beat over the last four months as a business reporter, is that our economy is grounded on consumer confidence. Close our wallets and the entire economy shuts down.

That sure seems like an awfully flimsy foundation for an economy. I hope I’m wrong.

There’s got to be more than getting people to buy something that drives society.

At the end of the day, maybe saving will get us to whatever that something is. But that’s going to take a lot of sacrifice.

NAMM show will likely reflect downturn in economy

The NAMM show – an annual showcase for music equipment manufacturers to display their latest wares – will be held next month in Anaheim.

And I’m guessing that much of the buzz among vendors at the event will be the nation’s faultering economy. After all, music programs and libraries are typically sone of the first things to get cut, or at least signficantly reduced, when times are tight.

NAMM President and CEO Joe Lamond put it this way:

“In our history we’ve seen the Great Depression, multiple recessions, world wars, extinction of entire instrument categories and the invention of new ones,” he said.”Iconic brands have come and gone. Through it all, NAMM Members have shown guts and determination. NAMM Members are survivors.”

I certainly hope they are. Because music is a massive part of who we are. It’s one of those universal languages that really does bring us all together.

I began playing the guitar at the age of 12, and from that time on music has been a big part of my life. And it’s been a multi-cultural experience, a broadening journey that prompted me to learn classical guitar, jazz guitar, country guitar and just about everything in between.

The best part? It’s something you take with you wherever you go. Your talent – however marginal or advanced it may be – is a gift you can open up and share with others. and they don’t even have to learn the language … they already speak it. 

Stellar Business Bank forges ahead

April of 2007 was certainly not the best time to launch a new bank.

But that’s when Stellar Business Bank was born. And despite all the woes that have since roiled the economy – a severe downturn in housing, the collapse of many financial and retail institutions, scores of layoffs and a climate in which U.S. automakers are struggling to survive –  Stellar has managed to hold its own.

 The Covina bank reported a net loss of $1.6 million for the first nine months of 2008. Not good. But Timothy P. Walbridge, Stellar’s president and CEO, said that’s still in line with other California banks, many of which reported similar losses for the same period.

Walbridge also noted that several key indices are trending the right way for Stellar. As of Sept. 30, the bank reported assets of $88.1 million, a 37 percent increase from the prior quarter. Total deposits were $67.9 million, up 57 percent from the previous quarter.

Not bad for a bank operating in this economy – especially when other banks are getting government help.

Retailers banking on gift cards

I always figured retailers would be happy when shoppers forgot to use the gift cards they received.

After all, that’s money in the pocket for Wal-Mart, Target and all the other businesses that offer these pieces of plastic. It sounds good in theory. But with the economy being so tight, big players and and small ones alike would rather have you come in and redeem the cards, according to Al Frank, a retail analyst with DeLoitte & Touche.

“This whole holiday season has been about driving traffic into the stores and moving merchandise off the shelves — even if you lose some money on the merchandise,” he said.

Well, that’s a dynamic I’d never considered.

It’s a little sad, but I guess times are so lean that retailers are willing to take a loss on the cards in hopes that shoppers ultimately spend more money. In many cases, it probably works.

But with companies like Circuit City, KB Toys, Linens ‘n Things and Mervyns already filing for bankruptcy protection …I hope it works fast.

Surviving with a niche

I’ve talked to a few business lately, who are bucking the trend of larger ones that are going bankrupt.

They are niche businesses — custom shoe shops, vacuum salemen, bra merchants and others.

And they’ve all mentioned that even as the economy tanks, they are staying alive, because they cater to such customized needs that we all need them.

There are the custom-fitting shoes for the wider foot; the vacuum bags you can’t find at Wal-Mart; and the bra that fits just right.

So, at a time when the Circuit Cities of the world are failing, it’s good to know some businesses that sell stuff we need are still afloat and are optimist



Traffic not all it was cracked up to be

The traffic in and around Westfield Santa Anita Shopping Centre seemed intense on Friday as shoppers looked for good deals.

But I have to back up a second. As much traffic as there was, mall merchants and customers said it wasn’t as intense as last year.

In fact, one couple — who were visiting the mall — said looks can be kind of deceiving.

The traffic around the mall was not because of more shoppers, but rather it was because of opening day at Santa Anita race track.

A merchant at the mall said, yeah, it was busy, but a lot of it was just “social” traffic. That is, people just wanted to get out — but they weren’t necessarily buying.

It’s just more bad news for retailers.

Look, I suppose, can be deceiving.



Prop. 13 or Bankruptcy

Some judges may find themselves working from home:

“I’ve been on the bench for 23 years, and I’ve never seen anything like this,” said David G. Sills the presiding justice for the Fourth District Court of Appeals, Division Three.”

Some say  answer: is to end prop. 13, which “was cleverly designed to make it virtually impossible for California to raise taxes…the result, of course, is that California has been deferring maintenance for a very long time. Now their judges will be working from home, their schools will fall further into decay, and their bridges will continue to crumble.”

Others say, “We have reached the tipping point and fell over. This is the right time for the State to declare bankruptcy, defeat those that approve of illegal tax increases–which if enacted will bring about more unemployment–and repeal those laws that kills jobs and growth.”

A ‘Friendly’ refusal

Who would have thought that a bank would actually refuse to take money. But sure enough, that’s what Friendly Hills Bank in Whittier did this week.

They turned down a cool $1.6 million in Treasury bailout money that would have been used to buy up preferred stock in the bank.

Many banks have taken the billions available in government bank bailout money, of course. But here’s one — perhaps even the only one, though we’re still checking —  to have applied for part of the billions available, and refused it once the government had approved it.

Officials seemed to shy away from saying it was a public relations coup. But I suspect it.

The word “government bailout” isn’t exactly a marketing director’s dream, even if your bank doesn’t need the money.

Anyway, good for Friendly Hills. They can afford to refuse it. And in the end, that’s got to make their customers feel good.