Marc Courtenay's  Instablog

On a serious note, Eddie Bauer (Nasdaq:EBHI) has filed for Chapter 11 on Wednesday. The company is known for outdoor-like clothin. It is said that CCMP Capital Advisors LLC has bid $202 million in cash for its assets.

Other buyers may also make bids while the company is under court protection.Bankruptcy rumors had been swirling as Bellevue, Wash.-based Eddie Bauer struggled with slumping sales amid the recession. This is probably still the beginning of the end for many speciality retailers and "non-necessity" purveyors.

Consumer prices meanwhile rose less than expected in May and posted the steepest annual drop in 59 years, according to government data also released Wednesday, fresh evidence that the recession is keeping inflation in check.

The bad news here is that deflationary-forces are still prevalent, and if prices are not rising that's a sure sign that demand is waning.

Low prices will make it easier for the Federal Reserve at its meeting next week to keep a key short-term interest rate near zero, where it has been since December.

Bond yields ticked up earlier this month on concerns that signs of an improving economy would force the Fed to raise rates later this year. But most economists consider a rate increase unlikely until next year.

Another sign that the economy is still bad is that people like me are buying so-called "recession-resistant" investments like B&G Foods. I targed their "Enhanced Income Securities"(EIS) which trade under the symbol BFG.

Each EIS consists of one share of common stock (NYSE:BGS) plus $7.15 of 12% senior subordinated notes due 2016. Thus each quarter, when a dividend is paid (currently 17 cents) an EIS holder receives a 17 cent dividend PLUS $0.2145 in interest for a total quarterly payout of $0.3845.

I'm told that approximately half of B&G's shares trade as common stock, while the remainder are part of the EIS. So in a potentially deflationary economy where there's high unemployment, companies that sell "comfort food" like maple syrup and affordable foods like Cream of Wheat and Los Palmas Mexican foods most likely will do okay. Meanwhile we are comforted by the nice dividend.

I'm also holding more "defensive" positions like VZ, T, Novarits (NYSE:NVS) and Varian Medical (NYSE:VAR). This isn't like me except when I sense there are "more shoes to drop and more cockroaches in the walls" of our economy.

And now for the humorous side of my article. Yes, even in a bad economy we have to laugh and keep our sense of humor. So here are the "Top 12 Indicators that the Economy is Still Bad":