Chicken Little

While discussing the retail world with a friend of mine today she stated that “Chicken Little was right”. To refresh your memory, this fable was about Chicken Little seeing an acorn fall and believing that the sky was falling down. This action created mass hysteria among other animals and ultimately caused many deaths, including that of Chicken Little.

I tend not to believe everything I read. The media and pundits always create hysteria – that’s what sells. If they were around when Edison invented the light bulb they would have published an article lamenting the death of the candle.

However, as I’ve been stating and as appropriately stated to me this morning, Chicken Little was right.

I had dinner with an old college friend last night. Great guy; senior executive at a publicly traded company.

His firm is selling non core businesses. Whereas a year to 18 months ago they were selling similar ventures for 10 – 12 times EBITDA, they can now barely get 2 times EBITDA. Strategic buyers keep lowering their bids; Private Equity buyers are non-existent. Although some of these entities being marketed have significant cash flow, arranging financing for the acquisition may prove to be fruitless. By the way, nothing we discussed is confidential and is part of the company’s well disclosed business plan.

The above represents just another anecdotal piece of information about how bad things are. The Government’s stimulus plan is absolutely not the answer. When the Government enables, productivity will decline and business and consumers will suffer. Twenty years ago I remember a Political Scientist telling me at a seminar I attended that the crux of finances, the money center of the United States, would relocate from New York to Washington, D.C. over the next two decades. Boy was he ever right, just for the wrong reasons.


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