Maven: Stop Blaming Subprime

In the latest turn, Carnival cites housing for cruise troubles.
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Rest assured that you could not get The Business Press Maven on a cruise ship at gunpoint. Something about paying for the privilege of the recently increased chance of ship-borne diseases and hurricanes doesn't quite appeal to me. The ice sculptures come up slightly short as consolation.

But I've been fascinated by cruise ships as a business, and this morning, I must ask the question: When it comes to the cruise group, is housing the new weather?

I only ask because in light of

Carnival's

(CCL) - Get Report

first-quarter earnings report Friday, which looked pretty good, it got busy lowering expectations on the important Caribbean market. Or was it raising them? Even three days later, I am unclear, though today might hold the answer in its claw.

In a somewhat comical turn, articles began to appear, blaming the company's possible trouble or recovery (like I said, I'm confused) in the Caribbean market on the American housing market and the attendant loan issues. That's just like the way retailers, most of which are indoors,

blame any failure on Mother Nature.

The business media, with their distant relationship to the concept of independent thought, simply regurgitate what management has said. Tellingly, management and the media rarely credit Mother Nature for good news. That's always due to brilliant merchandising calls.

But enough about retail and the weather. Let's get to cruising and subprime loans. Said Howard Frank, Carnival's vice chairman and chief operating officer, on a conference call: "We do believe the current Caribbean softness is an economic issue." Got that?

The

Associated Press

,

doing Frank's bidding, actually followed the quote immediately with the statement that industry executives (plural, though unnamed -- always watch that one-two punch, investors) have said that the Caribbean market's troubles "can't be blamed on fundamental problems with the industry, such as market saturation or consumer boredom. Rather, it's a cyclical problem based on problems in the U.S. economy, specifically the housing market and lending issues, that have cut into consumer travel spending and affected the middle market demographic."

So, um, the housing market -- which in real terms has hardly come down -- and loan issues -- which just came to the fore in recent weeks -- have caused people to stop taking so many cruises to the Caribbean. But they still take plenty of cruises to places like Europe. That side of Carnival's business, as it made clear, is doing well.

I was trying to make sense of this when it felt like someone had smashed an ice sculpture of Venus over my head.

Because Carnival's Frank

then went on to say that, in recent weeks, the Caribbean business seems to be picking up.

More details on that would be announced Monday, he added, meaning today. This, the same Caribbean business that we had just finished hearing was suffering from housing and lending woes. So in the past few weeks, amid enormous fears of subprime-lending troubles cutting economic life in America down to a few gumball-machine transactions, the Caribbean business has been looking good again? The same business that those industry executives (plural, unnamed) have said was being hit by housing?

Oy. Actually, that gets a rarely deployed double-oy.

Micky Arison, Carnival's chairman and CEO, was quoted as saying prices for Caribbean cruises were being cut somewhat. Maybe that is tempting the company's customers for Caribbean travel -- classically middle-class cruise-goers -- back from the European and other trips they seem to be taking more recently.

This brings up some interesting questions. Have they been afraid of hurricanes in the Caribbean lately, but for a few hundred bucks less, are willing to sail through one? And is that an economic issue ... or a weather-related one? I guess we'll learn more today, with the company's announcement.

In case we don't, though, here's one thing that business media critics have been saying. (Note the plural there, not to mention the frequently deployed nod and wink.) The timing of the weakness or strength in the company's important Caribbean market has nothing to do with home lending. As in the case of retail, when an excuse can do two things at once, it is not legitimate. And as for weather, fear of hurricanes cannot be a factor, if, for a few bucks off, people seem willing to enter the eye of the storm.

Carnival has done well in transforming middle-class travel by enticing Middle America into taking Caribbean cruises. But right down to the last ice sculpture, it has done such a good job that it has created its own monster, as it were. This is completely anecdotal, but all the cruisers I know have spoken about how, bored with countless Caribbean trips, they've begun making more-exotic forays.

I don't know whether this will be reflected in today's announcement or whether it is ultimately good or bad news for Carnival. I just know that -- with apologies to industry executives and their lapdogs in the media -- this, like the weather in retailing, has nothing to do with the subprime market.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;

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