Friday, November 9, 2007

"The very rich are different from you and me," said F. Scott Fitzgerald.

Had a woman in the store who works for Morgan Stanley. They've moved to the fourth floor of the Franklin Crossing building.

She told me she's worked for them since they were Reynolds; then Reynolds, Dean Witter, etc. etc. Been in Bend since 1988, so she's seen many of the changes. That's a long time, I give her that, especially to keep the same job. But:

"You just missed most of the trauma that downtown went through in the '80's," I said. "We were just coming out of the trough around '88. But I will say, almost all of the old guard that were here then are gone."

She told me there was a retail store on the third floor of the Franklin Crossing, I forget what it was. Must get major foot traffic, I said, sort of like opening a business in my back hallway. One thing I was told when I started was never open a retail business that wasn't on the ground floor. There are exceptions but the odds aren't good.

I told her that downtown had lost most of it funk. That to be interesting, it needed a bit of pepper, a bit of ginger, a bit of spice, and some sugar. Instead, it was turning into all sugar.

And, as these things go, I asked her what she thought of the housing market. I asked her if she had ever heard of the housing blogs, and she hadn't. (I've yet to run into a housing person who has.) But when I mentioned that I thought, with so many jobs related to housing, that there was a possibility that the population of Bend could even drop, she shook her head decisively.

"Too many wealthy people are moving to town," she said.

"Yeah, but Bend is too big to fill with only rich people. How many are we getting per month? 10 millionaires, twenty millionaires? It just can't be enough. They might be building their custom homes, but what about the rest?"

She more of less dismissed my argument. "There is some real big money coming to town. I know."

O.K. O.K. I believe her.

One of the problems I think I'm having is that, perhaps, I don't understand the rich. I was raised in an upper middle class doctor's family, so I haven't lived my whole life in the 'minimum wage' class. But I've never understood the ostentatious spending of money. My next door neighbor sells jewelry, and to me, most of it it look like overpriced trinkets (not his stuff specifically, but the whole diamond industry.) I wonder if we're so different from the Indians who sold Manhattan for bangles and trinkets. I don't understand why people need huge houses, bigger and bigger cars, and all the rest.

Added: The more I think about it, the more I enjoy the analogy of Manhattan to downtown Bend. In my building alone, we traded some real goods and services -- engraving, shoe repair -- for trinkets and bangles and bolts of cloth.

So if I don't understand the rich , maybe I don't understand what's happening to Bend.

One real revelation to me was when my house doubled in value. Suddenly, in theory at least, I was worth a 175k more than the day before. I started to understand how it was possible for people who had done even better than that selling their house in California, to open a business that looked crazy to me.

The rich, and the very rich, are a whole nother level above that. They are operating on premises that leave me mystified. The woman from Morgan Stanley said, "The people moving here don't worry about mortgage rates."

So, how can I ever understand their motivations?

I fall back on my assumption that even the rich don't like to lose money. Even the rich get bored with businesses that don't turn a profit. Even the rich won't stick around a town that has lost his mojo.

9 comments:

IHateToBurstYourBubble said...

The rich, and the very rich, are operating at a level that leaves me mystified. The woman from Morgan Stanley said, "The people moving here don't worry about mortgage rates."

If she's been at it for 15+ years, she's probably not dragging bottom, and just fails to understand that her little corner of the World, does not a town make.

Stocks are actually doing incredibly well given the housing turmoil. 2007 bonuses will come down... but just from $1mill to $950K, or something.

This woman's grasp of the "macro" economic picture of Bend is viewed thru the windshield of a Hummer -- the unsavory bits are hermetically sealed OUT.

Duncan McGeary said...

I think Bend has gotten to the point where the average business owner feels like they should be rich. That everyone else is rich. That Bend is jam packed with rich.

An antidote to that is the wayback machine of other downtowns I've visited.

I remember talking to the head of the downtowner organization in Albany. It was obvious to me that he wasn't big money, that he was perhaps a prosperous businessman, at least compared to his compatriots.

And the dislocation I felt when he kept trying to compare what was happening to Albany to Bend.

"You really, really need to visit Bend," I told him.

The point being, is that if what happened to Bend happened to Albany, or Baker City, or Richland, that the very people who think they want it would very likely be forced out.

But I also wonder how much of the 'rich' talk is an illusion. I'm told it by person after person. Yet, a visit to Albany reminds me of what Bend was like not that many years ago. That Bend seemed more rooted in reality, even if it wasn't shiny.

Duncan McGeary said...

I totally agree. I mentioned the McMansions and the hummers and told her that Linda has found that some of the people who drive up in Mercedes and fur coats are the one's who complain the most about our measly prices.

She said, "That's new money. I don't understand them. Old money doesn't act like that. Many of them are really nice."

IHateToBurstYourBubble said...

Plus, I think many, rich & poor alike, are trying to "talk" themselves into a "recovery"... typical Bend. Many people are burying head firmly in sand, cuz they DO NOT want to know how far down their house has gone. They're not in imminent peril via forced liquidation or anything, but they did get their last refi injection A WHOLE YEAR AGO, and this years edition is looking iffy, and if it is POSSIBLE, it ain't going to put a new Lexus in the garage.

There will be a big Echo Bust, when the reality of housing prices in the crapper, paired with no more housing ATM, team up to make Christmas bill paying a nightmare.

Long about February, we'll see fewer fur coats...

Anonymous said...

"This woman's grasp...is viewed thru the windshield of a Hummer -- the unsavory bits are hermetically sealed OUT."

Wow, I didn't know that Hummers could do that ... my 1994 Isuzu didn't come with that option. Maybe this explains the Xenon headlights now common on upscale cars. It's the automotive version of viewing the world through rose-tinted glasses.

Duncan McGeary said...

We're Wiley Coyote, we've just run five feet past the edge of the cliff, we're just looking down and a look of dumbfounded dismay has come over our face as we look into the camera.

It's a long way down.

Anonymous said...

There are lots of rich people in Bend I know many of them. They have been in a panic for the past two years. Its been hard to get more than 4%, instead of living off interest, they'll all living off equity.

Many 'brokers' at these banks and money-houses in town, only cater to rich, which is generally defined as over $1 million in non-real estate liquid assets. That's the minimum, before they'll open the door.

Now, did you see what happened to the Southeby's Auction, lots of stuff didn't sell.

Next, of course our 'rich' are going to get letters in the next 6 months that their principal is gone.

There's going to be MORE high-end homes for sale, and they're already down +30%.

The 'rich' moved to Bend in-mass during the last five years, and they all assumed buying a +2M home was an 'investment'. Now that they're burning principal in savings, and incapable of getting better than 4%, of course many did sign up for HEDGE-FUNDS, and those 'rich' are going to feel very poor.

In summary, you stock-broker is right she's only dealing with the rich. New accounts walking through the door, is what she should be looking at.

With regards to the 'experts' now saying the crash is 3 years old, if you look at TOLL brothers you'll see they peaked three years ago, and they're most likely going BK, so now all the experts with confidence can say RE peaked in 2005.

CACB up a little, I think the buy-back finally kicked in, Wash-Mu really down.

I really think we may be seeing close to bottom timmy boy, you had better buy that mcMansion while you can still get a loan.

Lastly, on YOUR rich, the problem for these people, they all live in these BIG gated-comm's with HOA's of $1k/mo because of security, the average burn is like $10k/mo because these places are BIG. 4% on $1M is only $40k, that will not even pay for a month in Italy.

Theres a few $10M rich in Bend or bigger, most most are in the 1-10M fold, they're burn is over $250K/yr, that's about the MIN lifestyle, your subtract their home burn, and that's 1/2, $10k/mo is not enough to live like the rich&famous.

Again take a look at Southebys, they just lost 25%, because they're auction imploded, the rich are broke.

Anonymous said...

"This woman's grasp...is viewed thru the windshield of a Hummer -- the unsavory bits are hermetically sealed OUT."

*

This is because when you trade the hummy in on the rich persons 'lease' three years later, you owe more than it worth. A lot of hummy owners are gasping.

Bend Economy Man said...

"There is some real big money coming to town. I know."

I can't understand, then, why the average income figures never move. We're not even at the top of Oregon, let alone on a par with Greenwich, CT, Malibu, Palm Beach, Palm Springs, Aspen, Bainbridge Island or even Lake Oswego.