A year ago, if somebody told me they were moving their business to a new location, it was a new, improved and larger location. This year, it's to save money.
A year ago, if somebody told me they were moving to a new job, it was a because it was an advancement, with better pay. This year, it's because it's the only job they can find.
A year ago, if I asked a furniture salesman, or a spa salesman, or any other kind of sales business, how they were doing, they'd say, "Great!" and mean it. This year, they tell me it's horrid. And mean it.
And so on. I think it has begun to sink into people's consciousness what is happening. Faster and deeper than even I expected. I've been cutting back on expenses for almost a year now. I can't imagine how the new businesses are going to be able to cut back quick enough if they're only starting now. I can count on one hand the number of business owners downtown who experienced the last major downturn in the 1980's. They are going to be stunned and shocked.
Last fall, I mentioned that I thought it was important to set a benchmark in advance. I do this in my business planning, because it's too easy to rationalize away results of the moment, or conversely, make too much of them.
Selling less than 100 houses in March, was the benchmark I mentioned back in November as a sign we are in deep trouble. We sold less than 100. It's possible over the next three months we may sell a bit more than that, but we really needed to sell bunches and bunches more than that.
Actually, I think the number of houses for sale is under reported, the prices are over reported, and the under the table deals, desperation sales are happening completely unreported.
Of course, most businesses aren't going to say a word. Most are like the business of a competitor of mine last year who was talking big, but who I found out yesterday closed at the beginning of March. I'm sympathetic. I could wish people wouldn't listen to the media or cut back at all.
Still, I started this blog with the intention of being real. I suppose, if I was really hurting, I probably wouldn't post this. I did have to sleep on it. I thought about just storing it, and then springing it six months later saying, "Look! I was right!" But then, the opposite possibility is there that I don't post it because I was wrong, and that seems a cop-out to me.
If I'm going to do this blog at all, I need to say what I think. The entire context of everything I might say about Pegasus or Bend or my own personal circumstances come from what I really think. If I was anonymous, I wouldn't think twice about posting this. And the clincher, I'm making my decisions based on these conclusions, so I may as well share them. Otherwise, nothing will make much sense.
I think the Heloc removal has turned out to be a good thing, if unsettling. I really thought I was going to be immune to a downturn. (Silly me. I forgot one of my rules of thumb; downturns hurt everyone.) It has really firmed up my suspicions, and made me act more aggressive toward cost cutting and debt removal.
I think a whole lot of 'back up' capital is going to be spent this spring and next fall to keep up appearances. (And of course there will be many exceptions; businesses that do well despite everything.) So you may not see much cracking on the outside, but behind the scenes.... I am already hearing customer after customer tell me they've been laid off or their hours have been cut. And this is the busy season for the housing market, and we're headed into the busy season for the tourist business.
I still get pretty good tourist business -- after all, most of the north of the U.S.A. doesn't have it as bad as Bend, Las Vegas, Arizona, California and Florida. It's going to hit the valley too, eventually, though not as bad as here.
And I still get the customers with steady jobs. Any of you folk ready this who have solid jobs, just ignore this entire post!
My sales are down, but not more than I predicted and allowed for. More alarming to me is that I'm seeing volatility I haven't seen in years. Horrid day, followed by gangbusters day, followed by average days, followed by gangbusters, followed by horrid....followed by gangbusters....like that. The averages are still there, but it's a bit more stressful getting there. The thing that is encouraging is the broad range of stuff I'm selling -- just like I hoped and planned.
And I really want to emphasize that Downtown is really proving out. The foot traffic we get downtown is so high, that it can take a downturn and still be much higher than anything I am used to. It will probably be the last place in town to feel it. Yes, the rents are high. But, then again, we actually get customers.....
I'm totally psyched that my diversification efforts over the last five years are really paying off. Having 10 product lines, fully stocked, has fueled sales that simply wouldn't have been there before. This is the situation I've been planning for. But it is getting a big ragged around the edges, enough for me to think it will get worse. I've adjusted my orders accordingly.
As I've said before, knowing in advance that someone is going to sock you in the jaw, doesn't make it hurt any less. We'll work our way through, but it will be work.
I want to emphasize that I think Pegasus is going to weather this just fine. Remember, I always talk this way --have for the last 28 years. This is the most solid we've ever been. I just hate to see us have to cut back at all. One way to put it: While sales are down, profits are actually up. It's weird that way. I'm more or less harvesting the fields already tilled, rather than planting new crops. When things are good; I tend to expand as much as possible, increase sales as much as possible; in preparation for times like this.
So, not only do I think we'll be fine, I think some opportunities are going to open up. I know how to do this; it feels really familiar. Not so much because of past recessions, but because at least 4 or 5 times, I've seen major product lines completely dry up overnight.
Part of the trick is recognizing and accepting that it's really happening. I've hedged my predictions until now; I wanted to hold out hope. I was afraid of looking foolish if I predicted a severe downturn, and then it didn't happen. But so far, every prediction I've made, no matter how negative, has been undercalling it. I may be wrong -- I hope I am wrong-- but I think this is the real deal.
So I'm calling it. The country may be in a mild recession, but we in Bend are headed for a deeper one.
If I had to pick one factor that I think is unavoidable, I'd have to say that the inexorable declines in California and Vegas and Phoenix and Florida are going to have consequences to places like Oregon and Colorado. I don't see how we can escape that.
That's why I think all these people who are still spouting the Pollyanna lines of "Bend is different. People want to live here" are going to pay a steep price for not being realistic. I'm not mad at them. I feel sorry for them.
I think Bend is already getting it worst than the rest of Oregon. And it's happening two full seasons before I expected it. (I was thinking it would really sink in this Fall.) I don't think we are headed for Road Warrior territory, as Bilbo would have it, but an occasional vacancy, that lasts more than a few months..... Look at Greenwood, which went from almost no vacancies to about 16 big vacancies over the last year..... (Obama just filled one, for the next few months....) Landlords are having the same problem as house owners in adjusting their rates downward.
So yeah, I think we are losing jobs at a rapid rate. I think locals are already cutting back. I think we are already beginning to lose population. And I don't care what the statistics are saying, I'm seeing and hearing it every day. Tighten your belts, folks.
If I was involved in the real estate, building, or financial services business in any way, I'd be looking around for a way to supplement my income. Because, I'm beginning to think that our feeder market from California is going to grind to a halt; and the majority of sales we'll be seeing are short sales and foreclosures. (Which don't profit anyone but the buyer, I believe.) It will, as I said, obscure the truth.
I know how it feels. Years ago, I would have a decent looking month on the balance sheet. But I'd look back and see the Perils of Pauline; making a lucky sale, here; cutting a deal there; doing an aggressive sales pitch here; giving up a prized product for less than it's worth there.
You make what you need, and from the outside it looks fine. But it isn't the same as just asking and getting the price you want.
That's the kind of market I think we're headed for. I wouldn't mind in the slightest being wrong. But if it's like I think it will be? Thank god I've had lots of practice....
2 days ago