Tuesday, January 6, 2009

Blue Sky

You gamble, you lose.

Recently, I was watching a documentary on gambling. They sent two guys out with a set amount of money; one played 'smart', avoided the sucker bets, worked the odds. The other just played for fun.

In the end, the one who played for fun had a tiny bit left, the one who played the odds had nothing left.

But the obvious answer was -- if you gamble, you'll lose, no matter what you do.

Silver linings, anyone?

Over the last four months, I have several times challenged readers of this blog, and have asked innumerable people in my store, to give me a silver lining in the economic cloud. "Give me some blue sky," I've said. "I'll listen. Give me a ray of sunshine!"

No one can really come up with anything better than, "Oh, maybe it will be O.K."

Buzzzzzzz. Wrong answer.

Obama Bump?

The only one I could come up with was an amorphous change of heart on the part of the consumer. At first, I thought there might be an Obama bump. But, if anything, sales got worse after his election. (There was a wave of bad weather, but still....)

Obama and 'change' is pretty much still the only silver lining I can find. His stimulus programs, whatever they may be, won't really effect things materially for months and months.

Maybe just announcing them? Maybe?

On the other hand:

1.) Housing isn't going to rebound anytime soon. Foreclosures and short sales will continue to rule the day. I think this will get much worse before it gets better.

2.) Construction. Whenever the currently being built projects are done, that'll be it.

3.) Employment. Hey, I just let my employee go.

4.) Retail. More closing than opening, bigger places closing than opening.

5.) Tourism. Probably not going up, we'll be lucky to stay even. But even if they come, I expect they'll spend less.

6.) National economy. Not looking good, but I think they'll recover before we do.

7.) Comic, game, card, books, industries. Again, not as strong as they've been in the recent past.

Over the next six months, I think Downtown Bend is in for it.....

Local Blue Sky.

But I do see a few things developing that might help.

My location may benefit from the opening of the new Hotel, and the new retail at the end of the block.

With any luck, my new lease won't be too bad. And I have plenty of options.

I've managed to keep debt down, cash reserves, and I have plenty of experience at sudden drops. I managed to get through the entire January ordering period without buying anything but 'sale' product (another way to take advantage of a slowdown.) In about one week from today, I'll be ordering for February, and I have 30% more per month to spend.

Books have been working well for us, and I'm pretty sure I can build on that.

My wife's store continues to do well.

Anyway, I just think it's important to be realistic. Not to gamble. Not to rely on amorphous Blue Sky.

10 comments:

Marge said...

Hey Dunc,
Do you sell 3D glasses?

RDC said...

If you really gamble according to the odds, you don't gamble. All games have a negative return. THe only possible exception is poker or other games where you play against other players and not against the house. But even there you need a considerable skill advantage yo makeup for the houses take.

Wes said...

Dunc,

Houses are more affordable and becoming more so every day. Gas prices are currently low. It's a good time to go to school. I earned a graduate degree in the last big recession that helped me obtain and hold a good job for the past 20+ years.

Unemployment is a powerful stimulus to make changes in your life. I know from personal experience.

Violent crime is down. We don't live in Gaza, Somalia or any one of a thousand different places around the world where life is incredily more difficult than it is here (or in Bend).

If things are so bad, why are we struggling with an obesity epidemic?

Most of us have the capacity to change our circumstances. Too often, we fail to make the choice and simply let events dictate what happens next.

The last time I was in Bend, the town looked nice. The ODS Companies just opened a new facility. I haven't read about anyone freezing to death or starving in Bend in recent months.

Opportunities exist for those who choose to see them. I know a bookstore owner in downtown who has a great wife, a successful business, a nice home and really insightful old friends.

How's that for Blue Sky?

Regards,

Wes

jessefelder said...

1.) Housing isn't going to rebound anytime soon. Foreclosures and short sales will continue to rule the day. I think this will get much worse before it gets better.

"2.) Construction. Whenever the currently being built projects are done, that'll be it.

3.) Employment. Hey, I just let my employee go.

4.) Retail. More closing than opening, bigger places closing than opening.

5.) Tourism. Probably not going up, we'll be lucky to stay even. But even if they come, I expect they'll spend less.

6.) National economy. Not looking good, but I think they'll recover before we do.

7.) Comic, game, card, books, industries. Again, not as strong as they've been in the recent past.

Over the next six months, I think Downtown Bend is in for it.....


Just to play devil's advocate: aren't these nothing more than anecdotes and platitudinous speculation? Where is the evidence things are going to get worse?

If you demand evidence and hard reasoning from your optimistic antagonists shouldn't you be held to the same standard?

Here's some hard facts about a possible economic rebound:

1) The Fed and the Treasury have already implemented the biggest financial stimulus in the history of the world.

2) Long-term interest rates are now the lowest in the history of the US Treasury and credit conditions have dramatically improved over the past six months.

3) Congress is planning additional economic stimulus aimed directly at taxpayers and homeowners - $300 billion in tax cuts and sub-4% mortgage rates are on the table. In addition, banks will soon be forced to reduce loan balances in the court system. This is bullish for both real estate and consumer spending.

Them's the facts.

Best,
Jesse

PS - It's my humble opinion that economic forecasting is, at best, a fool's game. ;-)

Duncan McGeary said...

"It's my humble opinion that economic forecasting is, at best, a fool's game. ;-)"

Yeah, but I got to do it for business.

Silver linings.

That's what I was looking for.

Obama stimulus, granted. But months away, I believe.

Long term interest rates: But it seems like it's pushing a wet noodle so far, and the banks sound like they're tough about lending.

But sure...we can hope those will have the desired effect.

I was pretty much looking at the next six months downtown, which is admittedly a short window.

Duncan McGeary said...

Wes,

Gosh, I hope I didn't sound like I thought things were hopeless.

Just that the next six months look tough. 'Challenging' is the weasel word.

Actually, I was interviewed by the Bulletin this morning, and I found myself optimistic about Downtown over the long run, and my own situation even in the short run.

But I still think there's a killer's row of problems facing us currently.

Wes said...

I think you usually leaven your pessimism with hope. I was just responding to your request for silver linings, of which there appear to be many.

I completely agree that there are a killers' row of problems in the months ahead. I'm grateful I'm alive to confront them, although occasionally a little pissed that I have to.

Duncan McGeary said...

Marge,

I have some Indiana Jones packs (1.00) that have little fold out glasses.

Not all glasses work for all 3-D, though.

jessefelder said...

Okay, Dunc. Silver linings:

1) Commercial rents have been coming down around the country including here in Bend - this is a positive for local businesses.

2) Housing affordability has improved dramatically over the past couple years as a direct result of the bursting bubble in residential real estate.

3) Due to the recession and concomitant (and historically very rare) reduction in demand for gas, the price has fallen over 60% in just the past few months - this is an immmediate boon to consumers.

4) The credit crisis has forced many who were living beyond their means to begin scaling back - the national savings rate has improved after decades of consistent deterioration.

5) As happens at this point in every economic cycle the weaker competitors in a variety of industries (retail especially) are being weeded out making for an improved competitive landscape for the survivors.

Do these not make for a compelling "silver lining" to your dark, economic storm clouds?

-Jesse

PS - As a business owner you don't need to make specific economic forecasts you just need to make safe assumptions which, as your long success attests, you are very good at.

tim said...

>>If you really gamble according to the odds, you don't gamble. All games have a negative return.

It's rare, but sometimes state lotteries work their way up to positive expected return.

Of course, even then, the chance of you winning is less than the chance of you getting killed driving to the store to get the ticket (seriously).