I was packing my bags for a shoot tomorrow that we're booked to do for a law firm located in the downtown area, when I stopped for a few minutes to look at the financial news on my computer. I noticed that the stock market (the Dow Jones Industrial Average) has dropped nearly 13% this week, effectively wiping out all the gains for this year and much more. The short term retreat of the market is mostly because of the widespread fear/logic that the coronavirus will affect enormous numbers of suppliers based in China and that the short fall of assembled goods, commodities and other cogs that drive industry will be in short supply around the world, which will hamper businesses in every corner of the globe.
As the virus spreads through big markets like the E.U. and north America there is also the realization that fears of the pandemic will cause consumers to snap wallets shut and shelter at home, away from bars, restaurants, shopping malls and events. Travel will be curtailed and the hospitality industry will directly suffer. The slowdown of all the consumer and B-to-B businesses will mean fewer assignments for photographers and lower marketing budgets for everyone.
So, I guess one thing we can expect is a retardation of business engagements and more re-use of old stock imagery by clients. But this slowdown will also have a negative effect on all those folks who like to buy stuff or need to buy necessities; like cameras and lenses. It's true that many of the cameras and lenses we want to buy are still made in Japan but I'm guessing that the vast majority of Japanese branded cameras and lenses are now made and/or assembled in China and neighboring countries. More or less the epicenter of the virus outbreak...
Even in the cases where our favorite products are made in Japan the tsunami a few years ago made it painfully evident that the supply chains for nearly ever electronic product run through China; be it the raw materials, or the tiny resistors that fit on critical circuit boards, the shortage of one part delays an entire shipment and radically disrupts the sales cycle, and plays havoc with consumer demands.
My take on the equipment side of this new crisis is this: if you are planning a purchase and the product is already on retailer's shelves you may be smart to buy it now because it may be that when supplies on hand dry up getting the next batch into the system might be dramatically delayed.
Looks like the bubble we've all been watching on Wall St. is in the slow motion beginnings of a wild and scary pop. Guess all we can do is hunker down, try to figure out where the bottom might be and get ready to drop all those bucks we saved up by not buying Leica and Hasselblad gear, or sparkly Bentley automobiles, into equities as they bottom out. If history repeats then we'll all ride the up cycle back to happiness. If history has been permanently disrupted (does happen from time to time) then I hope you've been buying real leather camera straps because I'll be posting a good recipe that uses them to make soup....
9 comments:
Thanks for you comments Kirk:
With 10,000 boomers retiring each day, these 10% + market drops could have a great impact on those moving into this next stage of life. They may need to sell some of their holdings when the market is down - thus triggering a negative timing of withdraws risk scenario. Those seeking some kind of return on their investment seem to be either forced into very risky instruments or not seeing much of a return at all. It is an interesting world indeed!
The good news is that, unlike most of the world, the U.S. does has a substantial millennial population. These folks are still in the higher spending years of life and this should help our fiscal situation for several years to come.
The last recession shook some photographers out of the market, the next one (whenever it comes) may do the same to camera makers: when we come out of whatever is just ahead of us, I'd be surprised if there will be enough pent-up demand to even approach the camera sales explosion that followed the 2007-09 crash or save every camera maker.
Ken
Creating panic in the short term is a good business objective for those with money. They know that they haven't lost a nickel unless they have to sell. On the flip side it's buy buy buy with any cash you have. Those making money in the stock market look to the long game. Sure you can bet on failure and make some good coin as well, but for that you still need cash.
The unfortunate thing is China has the supply chain pretty much all in their backyard. If they go down, then we have real problems. Short term problems, but real problems.
Many corporations take these opportunities to do some employee pruning. Something they wanted to do for a long time maybe but the optics would not have been good and the severance packages extreme. This way they get to blame it on a virus. Who can argue with that?
Eric
If this leads to a recession, it is perfect timing for the upcoming election! Regardless of the duration of the downturn, this may be a good time to look for older equipment if owners unload. I agree with Mr. Ken above that there in not likely to be a lot of pent-up demand as there was after the 2008-2009 crash.
I went shopping for a dishwasher today only to find most models of my favorite brand out of stock with a 3 to 4 week wait. No idea if this has anything to do with the virus. It’s something I have never encountered before.
I you'd bought the right Leica and Hasselblad gear, you'd still be quids in.
This could lead to a recession but until now the market has been strong, bloated yes but still strong. It just might be just a blip on the radar screen if this bug is not the destroyer the doomsayers predict. What's scary is the panic buying in states (including Texas) where this virus has not even had an impact. Remember what the dormouse said.
I just LOVE your last sentence.
Many makes and manufacturers are dependent on China, even EU states.
Swiss watches even high end are linked as are Leica and Hasselblad..
Made in EU is a myth.
Never panic, don't start downsizing unless income starts shrinking..
We don't need all these super features and inflated prices..
Old equipment works fine, slightly slower, less MP, but few even make a print these days..
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