It's not hard to see who is embracing recession

By DAVID MOON, Moon Capital Management, LLC
May 24, 2009

When my kids were younger and played connect-the-dots puzzles, I could usually glance at the page and quickly figure out that the completed picture would be a sunset or a Calhoun’s menu. Now that they’re eight-years-old, the puzzles are a bit more complex. Even after connecting all the dots, I can’t always tell what the picture is supposed to be.

Trying to figure out the economy is the same way. There are a bunch of dots that we know are somehow related to each other. Connecting those dots, however, doesn’t always clarify the picture. When we connect seemingly unrelated pieces of business information in an attempt to reach a conclusion about the economy, sometimes the results don’t stand up.

Consider some of the ways companies and people are reacting in the face of the current recession. In the same week that we learned that only $28 billion of the federal government’s $787 billion planned stimulus spending has yet occurred, two leading economists have gone on record as saying that the recession ended last month – even before we spent 96 percent of the stimulus funds.

Those two dots don’t even seem to be on the same puzzle – but they are. It’s just hard to determine the order in which they should be connected.

During recessions and other periods of economic challenges, people engage in anxiety relieving activities. These include things like eating chocolate, drinking beer and, in parts of Alabama, beating their dogs. Fewer jobs…higher stress…increased demand for M&Ms and Natural Light.

Perhaps that explains some recent recession reactions of two seemingly unrelated companies.

Victoria’s Secret’s television ads are some of the most erotic film shorts being produced today. I have a good friend who is a senior newspaper editor and amateur theologian. He considers these ads pornography. He believes and thinks that watching these ads places my soul in jeopardy.

Since Victoria’s Secret is a public company, I consider watching the ads investment research.

In the most recent Victoria’s Secret ad, extremely attractive, healthy young women spend 15 seconds shedding pieces of the company’s underclothes.

Bras are apparently easier to see if models are holding them, as opposed to actually wearing them.

Finally, one of the girls contorts herself across a chair, bending her back in a way that would amaze any neurosurgeon.

The punch line then scrolls across the bottom of the screen, carefully placed so that it doesn’t block the view of the company’s product.

“Experts believe there is actually one thing that can improve during a recession. Dress appropriately.”

Message received. Loud and clear. OK, recession equals anxiety relieving activities…cheap beer, candy, increased redneck violence and naked chair wriggling.

Like Victoria’s Secret, Pfizer is another business that is embracing the recession, not running from it. Rather than simply sit around and watch people lose jobs and suffer, what is it doing?

Offering free Viagra to men who have lost their jobs and health insurance this year.

It’s not hard. Connect the dots. In difficult economic times, not everyone drinks beer or eats M&Ms.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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