Tuesday, February 26, 2008

I've had a bit of an epiphany over the last couple of days. I'm still feeling it out, trying to reason it through, so bear with me. I'm not sure it's the sort of thing that can be proven or not proven.

It may just be....that the poor minimum wage job earners who service both the tourist industry and the retirement community in Bend.....may weather this downturn better than the so-called rich. After all, they've been managing to survive while costs of living in Bend have gone up and up. A downturn may turn out to be a relief.

There seems to me to be an irreducible minimum of clerks, maids, waitresses, gas station attendants, etc. etc. that an economy like ours needs. I believe that tourism, while it may go down a bit, isn't going to disappear. The massive chain stores and their minimum wage employees aren't going anywhere. Nor are the retired suddenly going to pack up and leave.

Several events have happened recently that made me start thinking this way.

First, I have a customer who started doing renovations last year. He was in today, talking about how last year at this time he was very concerned about the future, even though he had jobs lined up. This year, he said he actually wasn't as worried, even though it looked even more doubtful. He'd become "used to it". I laughed, and told him he had become a true Bendite.

A true Bendite can live with the fact that Bend is a great place to live even without money, as long as you figure out a way to manage it. The old Poverty with a View mentality that was common here 5 or 10 or 20 years ago. So, you don't go out to dinner as often, you wear you're clothes and drive your car a little longer, you relax and breathe in the mountain air.

The second was an article quoted over on the Bubbleblog2, (maybe from the NY TImes? couldn't tell), which talked about the slowdown in Utah and said this:

"Another big part of the West's boom has been affluent retirees, who bring non-wage income to spend and have swelled the economies of places like Coeur d'Alene, Idaho and many other picturesque, once-backwater towns now undergoing "Aspenization." Bend, Oregon and Walla Walla, Washington are two classic examples. These new arrivals may be changing towns too fast and driving prices way beyond what locals can afford, but they do have an economic advantage: Retirees keep on spending during a downturn, since they are living off savings."

I'll repeat, retirees keep on spending during a downturn, since they are living off savings...I may be stretching my definitions here, after all they do say 'affluent' retirees. But I'm talking about spending average money, not crazy rich money. I would quibble with the above definition of what retirees spend and how they act. I suspect most new retirees to Bend are going to spend most of their money in normal, everyday places.

(I admit, this whole argument I'm making breaks down if you include the majority of retirees as the very wealthy.... I'm defining them as people who spend moderate money, who are more likely to shop at Walmart than an art gallery.)

And the third thing was seeing how many tourists have been in my store and by observing the behavior of my own regulars. My regulars are cutting back, mostly, but just a little. I've lost a few, but not so many to be concerned. Most of them weren't earning the big bucks before, during or after the boom. Meanwhile, I seem to be seeing almost as many tourists as before, and many of them are from parts of California that I would've thought stricken.

But see, I've never really noticed that rich spend huge amounts of money in my store anyway.

If a minimum wage customer wants 50.00 worth of graphic novels, he will buy them. Maybe, at the last moment he'll put a 5.00 item back. If a middle class customer wants 50.00 worth of graphic novels, he'll buy them. If a rich customer wants 50.00 dollars worth of graphic novels, he'll buy them, and maybe throw on a 5.00 item.

But really, they all buy the same stuff, at about the same pace -- dictated more by interest and opportunity rather than income. A rich person doesn't suddenly say, Oh, hell, I only need 50.00 worth but I'm rich so I'll buy 100.00.

Not my kind of business.

If you'll all remember, I've always thought it was the High-End businesses that were doubtful. They never did well before this last five or six years, and I have a sneaking suspicion they won't do well now that the boom is over. I suspect that their expectations, their expenses are too high. They overshot. They aren't depending on small tourist sales, or modest retiree buying, or on locals, but on the idea that we're Aspen, that the rich are going to throw money around.

I even suspect it wasn't the rich who was spending all this money, anyway. It was people who felt they had to act rich, eat out in fancy restaurants and drive big S.U.V.'s and live in McMansions because they were involved in industries that demanded the appearance of wealth. Some will adjust down to old Bend, others will crash and burn.

The rich aren't going to save Bend. It's going to be the retired and the tourists, who will spend most of their money in places that pay minimum wage. It's going to be the regular folk who will be at the center of economic activity. Right where I want to be.


Bewert said...

Re: appearance of wealth.

Welcome to W's world. Spend until you are so in debt you'll never get out of it, so you can look "wealthy" and "successful".

Sometimes I think there is a group of uber-rich that are purposefully running our country into the ground, as they are trans-national and only care about themselves, not our country. And this group includes the Bushes and everyone else that is an investor in the Carlyle Group. Can you imagine a private equity group that has $75 billion, an average of over $68 million per investor? That has only two other partners than its founders: CalPERS and an Abu Dhabi gevernment fund? That both elder and junior Bush have been or are "advisors" to?

Check it out--the list of people associated with it is stunning. These folks don't care about average Americans.

Bewert said...

Hey, Dunc, fix my misspelling if you can--"government", etc. Thanks!

Anonymous said...

In a town, where the town blogger is min-wage, everyone is min-wage.

A town seen through the eyes of dunc.

Yes, poverty with a view, but during this last building BOOM, our view has forever been destroyed. Make NO mistake almighty dunc, that Bend is now ONLY POVERTY, without the View.

Any low income APT complex that had a view was converted to CONDO during this boom, the days of low income housing including views is forever OVER.

Low wage jobs? First of all 1/2 of ALL min-wage jobs will implode by definition, cuz 1/2 of all retail is going to shutter.

Sure most jobs will be low income, like I have said for long, as long as you have less than $5 product ( comic mag's,... ) to sell to your customers, you'll most likely 'survive' the depression. Just don't start getting stuck with HIGH inventory, like this game icons, cuz when the shit hits the fan, parents are going to quit spending $100/mo on Juniors toys.

Let's fall back to the old Bend, that I'm so fond of, Bars and Hardware stores, folks will once again, have to be fixing the home themselves, and they'll want a downtown HW store they can walk to ( save on gas money ), and they'll be lots of bars selling CHEAP beer, nobody will be buying 'micro brew', unless you home-brew.

Will there be some kind of celebration by the poor? Most likely this recession ( depression ) will be like the infamous 1890's 'Rich mans recession', which only effected the money people. Hedges, CDO's, CMO's have been wiped out rich have seen 3/4 loss on their investments, the poor were poor going in to this, and will be poor during and after.

Focus on your business, dunc, and listen to what your regular customers want.

I think your tourists coming to Bend, are going to trickle down to almost zero. It's only going to take a few more suicides, a few more women with infants assaulted in parking lots, and few more 1,000 beggars, and Bend-Oregon will be avoided at all costs, by tourists. This never was Aspen, and everyday its becoming more like East-LA.

Duncan McGeary said...

I don't know....the following article from Slate kind of fits in with what I'm saying about the low-end surviving this mess, even if it is about F##$king Walmart.

The Wal-Mart PuzzleThe economy's tanking. So why is it thriving?
By Daniel Gross
Posted Tuesday, Feb. 26, 2008, at 6:31 PM ET
Wal-Mart. Click image to expand.Wal-Mart

Given the economic headwinds, one would think that a retailer catering to lower-end consumers would be doubly slammed. As the subprime-mortage mess shows, people at the bottom of the income ladder are struggling. And as for the retail sector generally, don't ask. Retail sales have been sluggish in recent months, and national chains are shutting down stores by the dozen. From Nordstrom down to Target, fourth-quarter profits have been disappointing.

Which brings us to the mystery of Wal-Mart. The nation's largest retailer, which caters to working-class customers, seems to have something of a sweet spot. The stock closed Tuesday at $51.40—its highest close since March 2005. Amid the market turbulence of the last six months, Wal-Mart's stock has risen nicely and has pasted the Standard & Poor's retail index. Wal-Mart's stock makes an excellent proxy for the health of the working-class consumer. So how can it be that Wal-Mart's stock is outperforming its tonier, trendier rivals?

I'd point to four reasons:

First, while Wal-Mart's overall sales aren't rising dramatically, they are rising—on a total and same-store basis—even as the economy grinds to a halt. In the fourth quarter (PDF), the combined U.S. sales of Wal-Mart and Sam's Club (the company's warehouse division) rose 5.2 percent, while same-store sales rose 1.6 percent for Wal-Mart and 2.5 percent for Sam's Club. And this is happening at a time when many large retailers have suffered declines in same-store sales. The reason is that Wal-Mart sells necessities, not discretionary items. The overwhelming majority of its sales are not impulse buys. Even in a recession, most people don't drastically reduce their spending on staple groceries, light bulbs, or diapers.

Second, Wal-Mart's cheapo reputation is serving it well. For much of this decade, Trading Up has been the governing retail paradigm. In an age of easy credit and expanding consumer choices, masses of consumers took to shopping for staples at cheap outlets while indulging their passions at boutiques. Underwear from Wal-Mart, but chocolates from Godiva. Mac and cheese in bulk at Costco, but Starbucks for caffeine jolts. But that mentality is so 2005. As the latte era grinds down and credit tightens, Americans have stopped trading up and started trading down. That plays right into the hands of Wal-Mart, whose brand identity is all about saving people money. Underwear and Hershey's kisses from Wal-Mart. In a pinched economy, consumers are embracing their inner skinflint. And Wal-Mart is a penny pincher's paradise.

Third, the stock market is famously a futures market. While today's closing prices reflect data on last quarter's sales and profits, they also reflect investors' beliefs about what sales and profits may be in the coming quarters. And there's good reason to believe Wal-Mart's will hold up well. Unlike many retailers, Wal-Mart expects its profits will rise modestly in 2008. And the economic-stimulus package President Bush signed earlier this month seems to have been designed to help Wal-Mart. It funnels cash to individuals making less than $75,000 or to families making less than $150,000, many of whom might shop at Wal-Mart. Three hundred dollars really isn't enough to put a dent in a payment for a new car or to pay off a mortgage, but it might be enough to spur a shopper to throw a few extra goodies into the Wal-Mart shopping cart.

Fourth, as the U.S. economy idles, the rest of the world is still growing quite rapidly. And Wal-Mart finally has meaningful international sales to report. In 2003, international sales were just 16.7 percent of overall revenues. But thanks to aggressive expansion in Mexico, China, and elsewhere, Wal-Mart has become an increasingly multinational corporation. In the 12 months that ended in January 2008, international sales rose 17.5 percent and constituted 24.2 percent of overall sales. In the most recent quarter, international sales rose 18.8 percent from the year before and for the first time accounted for more than 25 percent of total revenues. The growth in rapidly expanding international operations is adding more dollars to Wal-Mart's top line than the slower growth of the massive U.S. base. Having essentially saturated the United States, there isn't much Wal-Mart can do to increase sales dramatically here—especially at a time of economic strain. But the behemoth of Bentonville has found a way to tap into the continuing global boom.

The past several years have been something of a lost decade for Wal-Mart investors. But if the current trends of slow domestic growth and a global boom continue for the next two years, Wal-Mart may yet salvage the '0

Duncan McGeary said...


I can't even figure out how to correct my own spleeling....doh!