Wednesday, November 14, 2007

Retail has a logic and a momentum of it's own.

I read once that the Japanese were horrified by the failure rate in Silicon Valley. But out of that creative destruction emerged a few cutting edge companies that the Japanese couldn't have incubated themselves. (Though they are pretty good at refining the process.)

I figure sports cards, for instance, became an unprofitable business a good 15 years ago. But there was always some old semi-retired guy willing to try, always some amoral 20-something who tried to become the Crazy Eddie of the internet. And they kept just enough of the card companies around for me to still make a bit of money, and 15 years later cards as a legitimate part of my mix.

To me, the housing bubble was a much more dangerous event. Houses went up in price too high, and too fast. And fundamentally, too many houses were built.

But retail is different. Sure, almost all these new places are going fail. Most of the old places have already failed. But they leave a beautiful corpse. They create excitement and traffic flow and interest. Restaurants, for instance, have always had a horrible failure rate, but that hasn't kept them from popping up on an endless cycle of renewal. Money is churned. Out of the wreckage will emerge a few winners, and a few survivors.

Sure, we could have some boarded up windows downtown, but I doubt it. And if we do, the boarded up buildings will be much nicer!

11 comments:

Anonymous said...

I wonder how many of the over-building has been related to trying to anticipate the wants of the "baby boomer" generation. I've read and heard more than I care too about how they are large in number, and are changing everything about 'retirement'.

The baby boomers are more wealthy, educated, and independent-minded than any previous generation. When they retire they're still "active." They move to some location based on amenities.

The construction sector has seemed overly fixated on anticipating the needs of the baby boomers -- where they'll live and what they want. They want to live in condominiums because of no maintenance, yet they want master baths the size of a squash court . . .

How much of the over-development is tied to this? Obvious examples are The Plaza and Tuscany Pines.

Bewert said...

I think you have a good point on the retail, especially downtown. The tourists are not going to stop coming. We do have nice landscapes and amenities, especially for active folks. And they will spend money.

But they won't buy several thousand second homes. They aren't "the rich". The RE mess is going to hurt a lot. But good retail, value-oriented retail will survive. Now, as for the male salon...

Anonymous said...

One thing that is clear from the October meeting's, and that is the Juniper Ridge Consultant is to be Paid $2.5M, and that the cash will come from the $3M they got from Schwab. Then the $5.5M for Knife-River will come from a bond to be floated in Dec 07, for $5M.

I guess its easy to ask for a muni-cdo bond at xmas, the citizens will never know, by then the money will have been spent, and the mea-culpa will only be me-so-sorry, I wonder if knife-river is at all sweating if they'll get paid. There's a million ways this bond deal could fall through.

One thing is for certain, thanks for the Schwab Cash Kuratek gets his.

I cannot believe this was all not a bait&switch setup all along. It's just too fucking fishy.

The whole deal with the architectural firm is the same he used for bay-meadows, its the same game he played in San Mateo played out here.

The CUNTS running city hall are so embarrassed they bullied poor fucking Brogman of $3M of SCHWAB stock-holder money, e.g. real cash.

Classic confidence scam, rather than granny calling the cops and saying she was robbed, she quietly pays the bill.

BEND IS SO FUCKING FUCKED.

***

Remember CityHall meeting tomorrow regarding the Anderson 'stick-up' of WALMART for the $5M, in the name of "Urban Renewal Funding", Walmart is pissed, the SHIT WILL HIT THE FAN TOMORROW!!!!

Anonymous said...

Important meeting for those with a strong stomach.

***

Nov 13,2007
Public invited to Highway 97-Cooley Road meeting
by Bend Weekly News Sources
small font medium font large font
The City of Bend invites community members to attend a Stakeholder Sounding Board meeting on November 15. The meeting is being held to review preliminary evaluation results for design concepts to improve the intersection of Highway 97 and Cooley Road. The Stakeholder Sounding Board is an advisory committee that provides on-going feedback on the project. Participation is open to all interested people.

The meeting will be held from 12:30 to 2:30 on Thursday, November 15 in the Board Room at Bend City Hall, 710 NW Wall Street in Bend, Oregon. To get to the board room, enter the building on the west side.

The City of Bend, the Oregon Department of Transportation (ODOT) and Deschutes County are working together to identify an improvement to the intersection of Highway 97 and Cooley Road that will accommodate traffic for the next ten to twenty years. The project identified through this process will keep traffic moving until improvements to the Highway 97 corridor are implemented. The City of Bend plans to select a preferred design concept for the intersection of Highway 97 and Cooley Road by the end of the calendar year.

For more information about this meeting or the project please contact Nick Arnis, City of Bend, (541) 388-5542 or by email. Alternatively, you may find information at the City of Bend’s website under the Bend MPO and find the link to the US 97/Cooley Road project.

Bend Economy Man said...

I've read and heard more than I care too about how they are large in number, and are changing everything about 'retirement'.

The baby boomers are more wealthy, educated, and independent-minded than any previous generation. When they retire they're still "active." They move to some location based on amenities.


OK let me lay this theory on you. I've heard the stuff about how the Baby Boomers are "wealthiest generation ever" and "biggest generation ever". True and true.

But what makes everyone so sure that as a generation, these Baby Boomers will be able to retain their wealth? Right now, the Baby Boomers are the CEOs, the senior managers, the top lawyers, the top bankers, the top doctors -- in short, at the peak of their earning potential. But is this because of their age and experience (as in, in the top echelons of any organization there are a lot of Baby Boomers because 45-60 is the age where this typically happens), or is it because they're a "special," "active," "independent-minded" generation?

The idea that Baby Boomers can retire en masse to amenity-rich locales and enjoy a retirement of previously unimagined luxury assumes, FIRST, that the Baby Boomers will remain wealthy through retirement, and SECOND, that in each of these locales there will be an infrastructure (including human resources) that will be affordable enough so that Baby Boomers don't spend their money too fast.

The problem is that a generation the size of the Baby Boomers (28% of the US population) distorts markets. Some have compared the effect to the bulge a rabbit makes in a snake who just ate it. It's easy to imagine that as Baby Boomers retire, two things will happen to deplete their wealth fairly quickly, based on the simple market rule of supply and demand:

FIRST, too many Baby Boomers have the same plan: to raise money for retirement by selling a big house and to "downsize" into the home where they'll spend their retirement. However, as the generation following behind them (even including foreign-born people) is much smaller and less wealthy, the supply will probably exceed demand for such homes. This is true for the securities in 401(k) accounts and other assets the Baby Boomers will need to sell to live on during retirement - the prices of such assets will in turn likely drop.

SECOND, as the Baby Boomers retire and get older, they demand different goods and services. As demand goes up, so do prices. Retirement plans made based on today's costs--medical care, domestic help, pharmaceuticals, beach condos, sailboats, RVs, books with oversize typefaces and so on--might not cover the increased costs that will result when over 1/4 of the US population reaches retirement age over the course of just 15 years.



ANOTHER THOUGHT - BE CAREFUL WHAT YOU WISH FOR. Right now, amenity localities such as Bend are courting, nay, COUNTING ON Boomers to move here with their wealth in their non-productive years. They regard this as a good thing. But if circumstances conspire to make the Boomers poorer faster than anticipated, areas to which Boomer retirees will have the [sorry Grandma & Grandpa] burden of providing essential services to a large and not-so-wealthy aging population.


In short, there are reasons to be skeptical about the prospect of an unprecedentedly prosperous retired Baby Boomer generation. And frankly, I think that a lot of Baby Boomers realize this on some level, but still more just haven't considered the possibility.

And while it's not always smart to extrapolate what's happening now into the future, if we DO extrapolate today's trends over the next 10 years--a falling dollar, decreasing real estate prices, increased inflation of food, fuel and other everyday items, rising living standards in the developing world, and a US where manufacturing is becoming important again--into the future, then you have an older generation whose homes don't represent a big storehouse of wealth, whose other investments have not kept pace with inflation, who have trouble re-entering a manufacturing-oriented workplace where alertness and able-bodiedness are becoming more important, and who find that they can't find people from overseas willing to provide personal services at the prices they became accustomed to during the strong-dollar days.

Anonymous said...

Yes, BEM pretty much says what I have said.

Look Bend didn't pay for its infrastructure, we're lacking ADA bigtime, ok fine tens of 1,000's of dying geriatric types descend upon Bend, most will be broke once the medical problems kick in, how is the county going to pay for the mess?

Beware of what you ask for.

Bend Economy Man said...

I've already probably gone on enough about this, but here goes more.

To me, the notion that Baby Boomers will retire with more relative wealth than previous generations is one of those that doesn't stand up to 30 seconds of thinking it through.

It's like the real estate sales pitch of 2 years ago: "buy now or be priced out forever." Impossible. And no one serious took it seriously. Was any blue-ribbon committee ever convened about the coming crisis of a landed class and those who are priced out of homeownership forever? No, of course not, because when you think it through for 30 seconds you realize that non-homeowners HAVE to be able to afford to become homeowners or the whole real estate economy falls apart. When you heard "buy now or be priced out forever," someone was trying to sell you something.

Same with the Baby Boomers. When you hear that they'll retire in style and leisure, wealthier than any previous generation, they're trying to sell you something. A quick Google search reveals that when academics and government agencies discuss the retirement of Baby Boomers, they don't say "well, they're so well-invested and wealthy, they're the first generation we really don't need to worry about providing for in retirement."

No. Serious people who aren't marketing anything treat it as a crisis--that Medicare and Social Security will no longer work, that social services programs will be overextended, and in short they're trying to figure out how to maintain the standard of living not just of the Baby Boomers, but of the entire country that'll have to support them. If serious people took seriously the idea that Baby Boomers are set up for life, this wouldn't even be an issue.

The thing is, once you are past working age, simple inflation can easily wipe out the entire nest egg you were counting on for retirement. Ever hear of the wage-price spiral? It's bad for everyone, but especially bad for those who no longer earn wages. If you work, wages go up in an inflationary period. If you're retired, you'd better have made some good investment decisions if you want inflation-beating returns.

And if I'm right, then it bodes even worse for the second-home market. Nothing eats up a fixed income like the mortgage and property tax on real estate. The original idea with a 30-year mortgage is that you get your last one in your 20s or 30s, then your house is paid off by the time you retire - no rent, no mortgage, the Golden Years. I don't know what the hell people in their 40s-50s-60s (certain relatives included) are doing taking on $5000-a-month mortgages that they'll be paying well after they're on a fixed income. I guess they're actually HOPING for inflation and that magically their 401(k) returns will somehow keep up.

Duncan McGeary said...

Bem, I've always heard that not only are their prime earning years over, but their prime spending days as well.

That's why high rated T.V. shows can get cancelled, because only duffers are watching them.

Most of them are downsizing, for goodness sake, yet Bend is full of stores that seem to be counting on them spending big bucks on new furniture and blinds and knick-knacks.

Bend Economy Man said...

Bend is full of stores that seem to be counting on them spending big bucks on new furniture and blinds and knick-knacks.

Well, Dunc, the way I look at it is, most of the people who moved here made an irrational decision just by moving here, so if anyone's going to spend money on that stuff in spite of what common sense might dictate, it's a lot of our townsfolk.

See, aside from homesteaders who moved here at the turn of the century, and loggers and millworkers who moved here in the first half of the 20th century, and even Realtors and builders who moved here in the last 10 years, the rest of the people who live here moved here because of "lifestyle."

And if you can think of a difference between moving someplace for "lifestyle" and moving someplace "to live out a fantasy," then let me know.

I'll freely admit that I'm here because my parents were living out a fantasy. It's not necessarily a bad thing--I mean, you're a comic book store owner who's also into SF and fantasy so I don't have to tell you that not every decision has to be based on economics and cold hard logic. But at the same time, the META-fantasy is expecting a decision based on "lifestyle" to also pay off financially.

Duncan McGeary said...

But what I've noticed is that is wears off. Sure, they have green meadows and snowmen and blue rivers in mind when they get here, but before you know it they become shlubs, just like the rest of us.

We strip them of their extra cash, and then they're just living here, just like the rest of us.

Bend Economy Man said...

But what I've noticed is that is wears off. Sure, they have green meadows and snowmen and blue rivers in mind when they get here, but before you know it they become shlubs, just like the rest of us.

Absolutely right. You grew up here as I did, so you know this isn't Fantasyland. It appears so from afar. "Good from far, but far from good." You lose some problems by moving here, only to gain new ones.