BOOMING BARNEYS' BANKRUPTCY BEFUDDLES BUDDY.

Byline: Floyd Norris The New York Times

My friend Don called on Friday. We were good friends in college, but he lives a long way from New York and we seldom talk.

"I see that Barneys is broke," he said. "What's the matter? Are all those rich New Yorkers doing so badly that they can't afford expensive suits any more?"

"No, no," I replied. "Barneys says it had great sales at Christmas, and that everything would be fine but for a nasty Japanese landlord." Don was a science major, a smart enough fellow, but he never took the trouble to understand Wall Street.

"What's the landlord trying to do?" Don asked. "Collect the rent?"

"Exactly," I said. "But Barneys figures that Isetan, the landlord, gave them such a long lease that they really are a partner, and therefore shouldn't try to collect the rent. Instead Barneys thinks the landlord should be happy to have a minority stake in the chain of stores."

"It still sounds to me like they aren't doing so great," Don replied.

"It's all part of a complicated financial strategy," I said. "Barneys figures that by putting pressure on Isetan in bankruptcy court, it can force it to compromise."

"Do you think that would work for me?" Don asked. He runs a small business, and would do a lot better if he didn't pay rent.

"No, no," I replied. "These things only work for the big boys. Your landlord would just get a new tenant."

"It seems to me that Isetan might try that," Don replied. "You know, I always wondered how there could be that many rich customers." I should mention that Don knows Barneys because he was with me when I bought a suit there almost 20 years ago.

More recently, he asked if I still shopped there and I explained how it had changed from a discount men's store to an ultra-high-fashion operation that was expanding to Chicago and Beverly Hills.

"Say," Don continued. "I hear that Christmas was pretty bad for a lot of retailers. It seems odd that one that did well would file for bankruptcy, but I never did understand high finance." That's one reason I like Don. He knows his limitations. "How's the overall economy doing?"

"I don't know," I replied.

"You don't know!" he exclaimed. "What do they pay you for, if not to read those boring statistics?"

"The government stopped releasing them when it shut down," I replied. "The only number we've gotten lately shows that consumer debt growth slowed a bit in November. But most economists think that we're going to have slow but steady growth for a couple of years."

"So how come Christmas was so bad?" Don asked. "You don't think the government would stop releasing statistics just so the voters wouldn't know there was a recession building, do you?"

"You've been watching too many Oliver Stone movies," I said. "There's no way the government could get that organized. And look at the stock market. It zoomed last year. That's not what happens when a recession is looming."

"So why did the Dow fall this week?"

"Because the budget talks broke down," I said. "It has nothing to do with the economy."

"And Barneys going broke has nothing to do with bad sales."

"Exactly," I replied. "I knew you'd understand."

"Sorry," Don said, "but I have to go. I think I'll call Fidelity and move some money out of stock funds."

"Why?" I asked.

"You wouldn't understand," he replied.