Is This The Return of the $1 Hot Dog?!
Friday, April 3, 2009 | Ethan Roberts
Tycoon readers, a friend recently e-mailed me a joke that I want to pass on to you. Aside from being funny, it's somewhat relevant to today's topic. (But don't worry, it's clean.)
Two 90-year old men, Moe and Sam, have been friends all their lives. But now Sam is dying, and Moe dutifully visits him every day in the hospital. One day Moe says, "Sam, we both loved baseball all our lives and we played minor league ball together for many years. Please do me one favor: When you get to heaven, somehow you must let me know if there's baseball up there."
Sam looks up from his death bed and says, "Moe, you've been my best friend for years. If it's at all possible, I'll certainly do this favor for you."
Shortly afterward, Sam passes on. A couple of nights later, Moe is awakened from a sound sleep by a blinding flash of white light, and a voice calling out to him. "Moe, Moe!"
"Who is it?" asks Moe, sitting up. "It's me, Sam." "Sam, oh my God, where are you?" "I'm in heaven", says Sam. "And I have some really good news, and a little bad news."
"Holy smokes! Tell me the good news first," says Moe.
Sam says, "OK, the good news is that there's baseball in heaven. All of our old buddies who died years ago are here, too. Better than that, we're all young and spry again, and it's always springtime, and it never rains or snows. Best of all, we can play baseball all we want, and we never get tired!"
"That's fantastic," says Moe. "Beyond my wildest dreams! But Sam, tell me, what's the bad news?"
"Moe, my old friend, the bad news is ... you're pitching on Tuesday!!!"
I read last week that the National Basketball Association (NBA) is borrowing $175 million, and making it immediately available to bail out 15 teams in the league that are facing large operating losses. The Orlando Magic team says it has been losing $15 million to $20 million annually and now needs a "bridge loan" to survive. Hmmm, who does that remind you of ... GM ... or a couple of large U.S. banks?
It's not surprising to hear that several major league baseball clubs are also struggling. The huge salaries demanded by athletes and their agents have increased astronomically over the last 20 years, but ticket prices can only go up so much before Joe Average decides that he'd rather stay home and watch the game on television. The Detroit Free Press just reported that season ticket holders have declined from 27,000 in 2008, to only 15,000 for the 2009 season that begins next week. Given the horrible economic climate that exists in Michigan right now, this should not come as news to anyone. Who can justify taking the family out to a ball game when you're laid off?
But larger, more-successful markets are not immune to the same troubles. The New York Yankees, who just built a new $1.3 billion stadium, are having a lot of trouble selling their $2,500 premium box seats and $1,000 luxury suites. Corporations are tightening the belts, and these seats are unaffordable to the ordinary citizen. So, they are going unsold. In fact, the Yankees had to hire a prominent Manhattan residential real estate brokerage to sell many of these high-priced seats for them!
But hey, for your $2,500, you get a seat behind home plate, waiter services, free parking, free food and access to three private clubs. Now, I don't know what goes on in those private clubs, but the rest of those perks will probably save you at best $50, which really isn't very much. Nice trade-off for a $2,500 seat!
Waiter, could you bring me a hot dog, and your best bottle of 1995 Dom Perignon White Gold Jeroboam champagne to wash it down?
By contrast, the Cincinnati Reds ball club is to be commended for astutely announcing the return of the $5 single-game ticket, along with value-priced concession items at its ball park for 2009. Many of the value-menu items, such as a hot dog, 12-ounce soda, bag of peanuts and ice cream cup, have been reduced to only one dollar! With the exception of opening day, the $5 tickets are on sale for all regular season games this year.
It's obvious that the Reds' management gets it. In 2009, the American public is looking for value, whether this value that they covet is in trashed-down stocks, foreclosures at half the original price, going-out-of-business sales, the "buy one get one free" dinner or that one-buck hot dog. Those businesses that give the public the value they are seeking will be the ones who will survive this recession, depression or whatever this mess turns out to be by the time it's over.
Other franchises across the country, such as the Anaheim Ducks and Philadelphia Flyers (both hockey teams), have also announced that they will at least freeze ticket prices for their upcoming seasons.
Turning to other industries, let's see who else "gets it." My vote goes to the Subway franchise. It ran a huge television campaign for its $5 foot-long subs (aka, "heroes" in New York, "grinders" in Connecticut and "hoagies" in Philadelphia), and saw its business flourish. Yet not content to let the initial increase subside, the chain has now added $1 value items, called "sidekicks," to the mix. These are items such as soda and chips, for which they used to charge $1.29 to 1.79. Every time I go into Subway, there is a long line of people, waiting to buy those five-buck subs. And the portions are anything but skimpy.
No pushing, boys; plenty of $5 meatball subs for everybody...
Even Starbucks (SBUX) finally got it and decided to add value meals to its high-end food products. Of course, I have to ask, what in heck took them so long? Why did they wait until their stock was trading in single digits to become value-minded? I predicted the demise of their stock for Tycoon readers, based on their emphasis of high-priced coffee, way back in November 2007.
It's no wonder that, from the stock market highs of mid-September, 2008, the Dow 30 companies that cater to value, such as McDonald's and Wal-Mart, have performed the best during this long bear market. Another non-Dow company that has done very well is Dollar Tree (DLTR), which sells each and every item in its stores for a measly buck. DLTR is up about 10% in that time, while the Dow and S&P 500 are both down about 30%.
As a value-based realtor, I have specialized in selling foreclosures for over a dozen years. I still get a charge when one of my customers buys a house at a price that is significantly below current market values. I love finding them these bargains almost as much I love finding them for myself!
But recently, I have seen everybody and his brother-in-law jumping on the foreclosure bandwagon. Driving around town, even among the most-posh real estate companies, there are huge signs that beg you to "stop in for a free list of our foreclosures!" In better times, most of these haughty companies would not be caught dead showing the typical foreclosure, but now it's a matter of economic survival for them. Almost 50% of the sales in Florida these days are either foreclosures or short sales. Today's consumer is looking for real estate value, along with protection from further price declines in the market. Who can blame them?
On the other hand, these parking-lot real estate signs could be a portent, perhaps even a contrarian indicator that better times are ahead. Usually when everyone jumps on the bandwagon of anything, it means the end of that trend is near. If this keeps up, next we'll be seeing highway signs for foreclosures!
Ethan's vision of real estate investment heaven...
So the key term for 2009, and perhaps even 2010, is VALUE. Suddenly it's 1965 again, with the return of the $1 hot dog!
As consumers, we need to demand and look for value in all things, whether it's buying a car, a house, a stock or even a pair of socks. My philosophy has always been to seek and find high-quality items when they can be found on sale, not just to buy any old junk because it is cheap. Let's face it, recessions are terrible times because people lose their jobs, companies go out of business and people can lose their life savings when investments tank.
On the other hand, when you can buy a foreclosed 1,500-square-foot home, built in 2006, for less than the price of an 1,100-square-foot home, built in 1989, in a regular sale, that kind of value is the silver lining to the dark clouds of a recession.
Value for the consumer can also be found in abundance these days in absolute auctions, "going out of business" sales, and private merchandise ads displayed on Web sites such as Craigslist and eBay. Even Facebook, formerly known for being a social Web site, is now getting into the act, combining with Oodle.com, a classified site, to become future competition for Craigslist.
And if you are a business owner, giving the consumer value in both products and service is going to be mandatory for a long time to come. If you don't heed this message, be assured that your competition will.
So today, I am interested in hearing from my readers on any of the following subjects, related to recessionary value:
Have you found any "steal of a deals" lately in purchased goods?
Are you a business owner who wants to share what you have been doing to provide more value to retain customers?
Did you buy stocks near the 666 S&P "bottom" and make a killing?
Have you, like myself, bought any foreclosure real estate lately?
Until next time, if you're looking for me, I'll be having a great time, ushering in the new season at my local minor league baseball stadium, with my $5 ticket and the one-dollar food menu. And of course, despite the recession, what I really want to say right now is ...
As consumers, we need to demand and look for value in all things, whether it's buying a car, a house, a stock or even a pair of socks. My philosophy has always been to seek and find high-quality items when they can be found on sale, not just to buy any old junk because it is cheap. Let's face it, recessions are terrible times because people lose their jobs, companies go out of business and people can lose their life savings when investments tank.
On the other hand, when you can buy a foreclosed 1,500-square-foot home, built in 2006, for less than the price of an 1,100-square-foot home, built in 1989, in a regular sale, that kind of value is the silver lining to the dark clouds of a recession.
Value for the consumer can also be found in abundance these days in absolute auctions, "going out of business" sales, and private merchandise ads displayed on Web sites such as Craigslist and eBay. Even Facebook, formerly known for being a social Web site, is now getting into the act, combining with Oodle.com, a classified site, to become future competition for Craigslist.
And if you are a business owner, giving the consumer value in both products and service is going to be mandatory for a long time to come. If you don't heed this message, be assured that your competition will.
So today, I am interested in hearing from my readers on any of the following subjects, related to recessionary value:
Have you found any "steal of a deals" lately in purchased goods?
Are you a business owner who wants to share what you have been doing to provide more value to retain customers?
Did you buy stocks near the 666 S&P "bottom" and make a killing?
Have you, like myself, bought any foreclosure real estate lately?
Until next time, if you're looking for me, I'll be having a great time, ushering in the new season at my local minor league baseball stadium, with my $5 ticket and the one-dollar food menu. And of course, despite the recession, what I really want to say right now is ...
See you next time!
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Ethan Roberts
Chief Investment Officer
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