It’s a beautiful thing to be able to tie in anything guitar related with a relevant eye on the investment world, particularly when writing from the vantage point of our “Van Halen Conference Room.”
“This” phenomenon perfectly describes what we would view as the highest probability outcome for the intermediate economic outlook. X percentage of the global economy fits this bill: weird economic shutdown, weird 2nd derivative spending outcomes, a complete blowup of global supply as it was tossed upside down by dealing with these 2 issues, the corporate world panicking to react to it by over-ordering everything in sight which naturally has the effect of exacerbating the original problem..and then it..stops. And what we are seeing below is the microcosm of what is/will be happening. Conclusion: an inventory problem recession. Utterly normal, utterly cyclical and utterly properly buyable at x levels per security.
Fender CEO Andy Mooney – March 2022 in Forbes:
“We grew at roughly mid-30% per annum during the pandemic,” says CEO Andy Mooney, who joined privately held Fender in 2015 when revenues were $400 million and single-digit sales growth was the norm. “Last year we took in over $1 billion in demand. For supply chain reasons, we were not quite able to satisfy that demand, but we came damn close.”
16mm people have taken up guitar during Pandemic: Fender study
And then last week HcaMag.com
Fender, the Los Angeles-based guitar manufacturer, has joined the growing list of American employers reducing headcount ahead of an anticipated recession. Roughly 300 employees, ranging from senior management to production line workers, have been laid off, Guitar.com reported. YouTuber Dylan Mckerchie (Dylan Talks Tone) broke the news, claiming a source stated that the workers making up the “entire afternoon shift” at Fender’s factory in Corona, CA, were let go.
And neatly summarized by a guitar dude on Reddit:
“Guitars are discretionary spending, my man. When inflation is 9%, layoffs are happening, and consumer confidence is down people are not going buy guitars and gear like the pandemic boom. If you have scaled your business up to increase production 20% and you see the bottom falling out (return to prepandemic sales) you find yourself with 20% more production capacity than you need. You scale that back down. It doesn’t mean starvation mode, necessary. It just means that boom cycle is over. Warehouse space is filling up fast with excess supply all over the place from companies who had large orders that were delayed due to supply chain issues (called the bullwhip effect). Now they have stock no one wants to buy. For Pete’s sake Busch Light is flying off the shelves again. Shit is getting real.”
Drummer Jokes still accepted here.
