Wednesday, January 7, 2009

Yes, but.....

Silver linings.

Interesting responses yesterday to my request for 'silver linings' in the economic cloud.

I agree with most of them, with a few 'yes, buts...' For instance, my friend Wes brought up the lower gas prices, which I think kept Christmas in Bend from being a complete disaster. Jesse's suggestion that a winnowing out of retail will help the survivors. Yes, but...we will have to endure endless liquidations and 'going out of business' sales over the short run.

The Short Run.

Not to change the terms in the middle of the argument, but I think I was really referring to the time span of the next six months. And the limited area of Downtown Bend.

But in talking to the Bulletin reporter, I realized I was -- to say the least -- ambiguous about it. I can't speak for others, I can't predict the future (as Jesse says, that would be foolish.) I find myself being negative until someone points out I'm negative, and then wanting to give 'yes, but...' answers. Or I find myself being positive, until someone acts surprised, and then giving 'yes, but...' answers.

"You were going to kill me, weren't you!"

"Well.......yeah. BUT I was CONFLICTED about it!"


So part of it is, I'm very negative about the short run, the next six months. Less negative about the rest of the year -- after all, my three biggest months, July, August and December come in the second half of the year. And even less negative about the long run -- two or three years down the road.

After all, what better place to be in Bend than Downtown? Where else are you likely to get significant foot traffic? I can look forward to the Oxford Hotel opening, and the shops at the base, further increasing development west of my store where there used to be nothing.

It's about ME.

And finally, my own financial circumstances are the best they've been in 25 years of business. Partly because I planned for this event, and haven't really been hurt by it so far. (What good would it have done me to have five good years, and then give it all back in the last year?) Plus my experience.

But mostly, I don't have that nearly 10 years of paying back my credit cards with 40% of my gross profits. Imagine trying to do that.

So, yes....things are going to be tough. But....I think we'll be all right.


Watched Charlie Rose last night, and he had a couple of Nobel prize economists on; and boy were THEY NEGATIVE! Interesting how the experts have turned completely bearish, while formerly bearish (Jesse?) seem to be looking for the upside.

Secondly, turns out that my State Accident Insurance Fund -- SAIF -- which I have to have to hire an employee, wants 525.00 from me whether I have an employee work one hour this year, or every hour this year. "It's the minimum."

So, if I don't intend not to work every day this year, I'll have to pay whether I like it or not. So...525.00 less cash than I thought.


jessefelder said...

Watched Charlie Rose last night, and he had a couple of Nobel prize economists on; and boy were THEY NEGATIVE! Interesting how the experts have turned completely bearish, while formerly bearish (Jesse?) seem to be looking for the upside.

I don't have a clue when the economy will turn around. And I don't know when the real estate, commodities market or stock market will find a bottom. I don't know if inflation or deflation is a bigger risk to the economy over the coming 12 months. And I don't know what will happen downtown over the next 6 months ;-)

What I DO know is that the majority is usually wrong.

Right now the majority expects a stock market crash over the coming 12 months (sentiment poll). The majority thinks there will be no inflation over the next 30 years (as evidenced by Long Treasuries). The majority of consumers have never been more pessimistic about the prospects for the economy (U. of Mich. poll).

As a business owner/investor/citizen, I have to assume that these beliefs are wrong.

"Half of the people can be part right all of the time,
Some of the people can be all right part of the time,
But all of the people can't be all right all of the time.
I think Abraham Lincoln said that.
'I'll let you be in my dreams if I can be in yours.'
I said that." -Bob Dylan

That's my story and I'm sticking to it!


RDC said...

Next 12 months it is definately deflation, Inflation is in the 24-36 month out range.

Companies are shedding capacity at a rapid rate (Alcoa's announcement as an example). While we have weathered the immediate impacts of the credit crisis, we are just starting to see the impacts of the recession. We still have substantal issues with residential real estate with resets of option arms and ALt-As which will occur in 09 and 10. We now have the collapse of several retail firms. The growing problems with commercial real estate. Increasing levels of unemployment.

This is the first recession brought on by deleveraging since the great depression. It is going to take a while to work through. The money which drove the last few years is just plain not there anymore. The consumers, businesses, etc. have to work out of their debt issues.

The value of the debt to be worked off is far far greater then any kind of stimulus plan the government will put into place. It will at best cushion the bottom, but at the expense of drawing out the problems and oftening the recovery. Every dollar of debt the government spends in stimulus will equal 1.30 is resistence at some point along the line.

If you look at expected earnings for the S&P 500 they are projected to be $42. If you compare that to a P/E of 12 you get an S&P value of 504. That is why the academic economists are so negative. On the other hand becasue the market has bounced up the Wall Street realted economists are somewhat positive. But they are looking bottom up and the academics are looking top down. I would go with the top down view.

Keep in mind no one that you see on TV or that you read articles by has ever lived through this kind of recession (anybody that has is long retired and they were not an adult when it occured). All of their experience is in short term recessions with the longests being the 80-82.

Jason said...

525? Yikes.