It’s no secret that the US economy has been rattled since the whole sub-prime debacle, and is probably in the tank for at least the short term. Latest news shows a ton of job cuts, as this article from the Wall Street Journal excellently demonstrates… U.S. suffers biggest jobs drop in 5 Years as downturn spreads.
The biggest hits are being taken in the financial sector. A research institute recently came out and said that the industry will lose up to 200,000 jobs. From this, a large chunk will be taken out of New York, which is a the power center of the sector, what with Wall Street and the New York Stock Exchange.
If I had to take a guess, I’d say times aren’t too good in the Big Apple at the moment, with a lot of people feeling stress from job insecurity and the market downturn. They are probably going to watch what comes out of their wallets quite closely for the next little while, and this could have disastrous effects for business in the area.
Seeing how a huge chunk of the world’s money flows through the city, there are a lot of companies which most likely have their earnings tied to local prosperity. One that immediately came into my head was Starbucks.
Big league finance is a stressful job which pays out heavily. With extra dollars to spare and longer hours to work, it makes sense that the working men and women of New York would be drawn to the premium coffee Starbucks offers. However, with rough times here and more to come, it seems like switching to cheap coffee would be a perfect way to save a few bucks. I’d predict that all these troubles are going to hit Starbucks sales pretty hard in New York, as well as other financial districts around the U.S.
The stock is currently trading at $18.50 US under the symbol SBUX. Yahoo has a one year target of $23.08, but I don’t think that’s right. If you’re with me, you could take a short position on the stock, buying a put with an expiry a week or so after a set of quarterlies or something. I would do it, but I’m a student… what money do I have?
Think I’m wrong, or just an idiot? It’s quite possible, but at least let me know! Also, I’m sure there are a bunch of other companies that will get hit by this (or helped?)… any other ideas?
