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My predictions for Obama's first year

Posted Jan 19th 2009 4:30PM by Jonathan Berr (RSS feed)
Filed under: Economic Data, Politics, Housing

Like all good marriages, the union of Barack Obama and the American people will start tomorrow with the best of intentions. The problem is that it won't last, particularly when it comes to the economy.

The president-elect already is at odds with House Speaker Nancy Pelosi over whether to repeal the Bush tax cuts before they expire in 2010, according to the Wall Street Journal. The economic stimulus package is expected to top $850 billion as part of Obama's pledge to create jobs and reducing taxes. Meanwhile, the housing market continues to stink and the stock market continues to be dreadful.

Improving the economy is going to be a long, painful process. Think turning around a super-tanker and you get the idea. Good news is going to be hard to come by over the next 12 months. Bad news will be plentiful. Here are some predictions of the troubles that lie ahead for the economy no matter despite Obama's best intentions.

Corporate bankruptcies -- Experts are predicting one of the biggest waves of corporate bankruptcies and restructurings in years. Already, Circuit City Stores Inc. (OTC: CCTYQ) has bitten the dust and the year is just getting started. Loads of retailers who are already operating on the razor's edge of profitability may be pushed over the edge. I doubt that enough credit will be unlocked by government fiat to address this problem.

Continue reading My predictions for Obama's first year

Who on earth would want to buy Circuit City?

Posted Jan 16th 2009 8:00AM by Jonathan Berr (RSS feed)
Filed under: Best Buy (BBY), , Financial Crisis

Circuit City Stores Inc. (OTC: CCTYQ) continues to negotiate with potential buyers who the company says want to continue operating the second-largest electronics retailer. I will believe it when I see it.

The retailer has gotten its butt kicked by Best Buy Co. (NYSE: BBY) for years. Its penny-pinching ways has resulted in lousy service because the company was too cheap to pay experienced sales help. Moreover, this is a bad time to sell electronic gadgets and gizmos that are the very definition of discretionary spending. Retail sales have dropped for six straight months.

Anyone hoping a white knight will rescue Circuit City, which has more than $2.3 billion in liabilities, is going to be surely disappointed. The bankruptcy spooked real estate companies with mall holdings that rent to Circuit City and other chains.

Whatever interest there is in the chain is likely from liquidators and real estate investors. Even these buyers are going to drive a hard bargain because of the distressing number of chains in the same situation such as Linen's 'n Things and KB Toys Inc.