RICHARD RUSSELL’S SECRET BAROMETER POINTS TO A WEAKER ECONOMY
Richard Russell has been around long enough to know that wild swings in the spending habits of the wealthy generally correlate with broader economic trends. And according to one of his “secret barometers” the economy is beginning to slide (via King World News):
“La Jolla is a wealthy town. Walking around La Jolla you note that this town is unlike most of the country. La Jolla is an isolated town built on wealth. But I have a secret barometer. I often call out to a local deli to order a sandwich.
In normal times it takes 20 minutes from the time I call the order in until the time the sandwich is delivered. But lately I note that I call in my order, and five minutes later the order is delivered here. Evidently, business is very slow at the deli and my order goes out immediately.
I also hear that the La Jolla restaurants have slowed down in April — for the first time in this recession. Evidently, what’s happening in the rest of the country is finally hitting La Jolla.”
Not sure how much credence I’d put in an indicator like that, but it’s interesting to note nonetheless. Being a resident of the same area I can’t say that I’ve noticed similar trends and La Jolla has kind of been in a weird little recession (at least local businesses with tons of store closings and empty shops) for years now….Then again, Russell’s been a San Diegan far longer than I have so respect the elder….
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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23 Comments
I am not surprised to see this indicator weakening. Some possibilities:
1. California’s taxrevenues are down double digits. Reports clearly suggest that corporations are leaving the People’s Republic of California (in droves ??).
2. Falling US interest rates (=less income)
3. In the last 20 years California’s population increased by 10 million people. But only about 150.000 of them were paying taxes. Other were welfare recipients.
4. The upcoming nationwide taxhikes (e.g. “”Obamacare-tax”").
“”The problem with Socialism is that one day you run out of other people’s money”". Source: former UK prime minister Margaret Thatcher.
Great quote; hadn’t heard that.
I’ve come to the conclusion after years of watching the various political groups that what M Thatcher really meant was:
“The problem with politics, is that sooner or later they run out of other peoples money”.
Much clearer!
I do fully agree for the full 100%. And it happens in the US AS WELL.
There is no such thing as “other people’s money” when you alone can create your own money.
What about the $ 1,000 billion US military budget (including all military related spending of other departments) ? Isn’t that one giant Socialistic (pork)spending program as well ?
So Cullen, you strongly opposed Hussman’s data-centric view that a recession is imminent, but give even a tiny amount of credence to a single anecdote from a bewildered old man who routinely spouts off all manner of nonsense? There seems to be a hole in your research process.
1. I said I wouldn’t put much credence in this, but that I found it “interesting”.
2. I post Hussman’s stuff almost every single week and absolutely love his approach….
California is almost completely dysfunctional. This is obvious to most folks who don’t live there (and especially to those who have already got out of Dodge). San Diego and Silicon Valley are the only areas still functioning, but they can’t carry the state forever.
The only thing San Diego “carries” is beer, beach bodies, rich retirees and beautiful weather. It’s a rather dead business environment. Which is kind of shocking considering what a hidden gem it is in CA….You’d think the weather would attract more businesses and wealthy innovators, but San Fran is carrying that burden obviously. Still, San Fran isn’t “real” CA. The one you envision with beaches and beautiful weather. So I’ve never understood why it’s such a bustling place. Personally, I wouldn’t live anywhere else in the USA than San Diego. The problem is, you need a job to do that and after real estate crashed the jobs crashed with it….It’s a mess.
Gotta agree with you there. I remember there was a comic strip I read once where the punchline in response to “he’s gone to a better place” was “San Diego?”. I can’t understand how, with its perfect weather and coastal location it isn’t the largest city in the U.S.
Make that happen, CR…
I’d prefer it remain a secret. Fewer fishermen to compete with.
Looks like that SPX short you layered on at 1320 might be real close to getting profitable finally…
I’ve been flat for weeks now. Got out of shorts during the last big woosh lower. Basis was like 1380 or something so it ended up being a decent trade on an absolute basis and poor on a relative basis….
Isn’t the navy/defense spending a major pillar (surely it beats out beer)?
Yes, but we’re really lacking in private sector economic activity. Navy is huge here….
Yes, San Diego is a navy port. But General Dynamics considered the tax system too punishing. So, they packed their bags and moved to another state.
That’s not really true. Nassco is one of GD’s largest marine systems. You can apply for a job here. http://www.nassco.com/careers/how-to-apply.html
My guess is they moved their HQ to Virginia to be closer to the US govt. Makes sense considering their line of work. And VA just happens to be tax friendly. That’s why all the big govt dependent businesses are located on the Dulles corridor….Ironically, right near where I grew up….
I didn’t know that Cullen. Where did you grow up? (If you don’t mind me asking)
Alexandria. Went to school in DC my whole life. Graduated Georgetown U right before moving to San Diego for a girl. Still have my whole family there. It’s still “home” even though I’ll probably never leave here….You live there? Or used to? It’s a great area.
I grew up about 60-70 miles north, right across the Mason Dixon line. I watched all of the DC TV stations and listened to DC 101, so DC was “my city”, even though I only made it there a couple times a year.
I’m a little further north now, but I still get down that way quite a bit. I fly out of Dulles a lot too.
San Diego benefits greatly by tourism.
With the demise in large part of manufacturing industries, tourism is a large asset to any city able to capitalize on its effects.
There is nothing better than someone earning money elsewhere and leaving it here.
As far as the La Jolla factor goes, I do not put much credence in it.
La Jolla is suffering from effects of a real estate market gone insane.
Few who bought there in the past 10 years could really afford the prices they paid, and even the ones who could afford it, took a huge hair cut that has detrimentally affected their net worth.
Motley Fool has an investing theme that revolves around high-end luxury goods, on the theory that this has been the best-performing sector of the economy. Things like BMW, luxury beers, jewelry.
Not sure how it is performing, but it’s an interesting idea.