Triple Whammy

I've been trying to figure out a way to explain why I think some Bend small businesses are going to have a particularly hard time in this recession.

Whammy 1. The nationwide whammy was pretty awful.

Whammy 2. Bend's bubble was bigger than just about anywhere else.

Whammy 3. Underlying conditions in Bend were never what people thought.

The first two whammy's don't need to be argued much.

Whammy 1.

Pretty clear by now to everyone. But a word about recovery. I doubt we've hit bottom, yet. The stock market isn't a reliable indicator, at least of the short run. And recovery, when it comes, will just mean we aren't going down any further.

We could still be far below what will be the new high a year or two or three after the media declares it all over.

Whammy 2.

Again, you'd think this is clear to everyone. But I still find out-of-towners and many in-towners just think we're suffering a similar fate as everyone else, whereas I think we're going to have it much worse.

I use the phrase, "Bend was a bubble within the bubble."

Bend Economy Man posted some points in the comments that cover this very succinctly.

Over the last few years, Bend MSA has been ranked:

* at the top in median home price appreciation
* at the top in "overpriced" residential real estate
* near the top in year-over-year population growth

...and then...* near the top in absolute unemployment
* at the top in year-over-year increase in unemployment
* near the top in median home price depreciation

Bend's growth was extreme so its decline is also going to be extreme.

I'll repeat:

Bend's growth was extreme so its decline is also going to be extreme.

Whammy 3.

The idea that Bend is different, can be argued. And I'm not sure it can be proved. But I firmly believe it, from observation and experience.

I've a couple of guesses. That our demographic is different -- resembling an hour glass, with people on the top and the bottom, but fewer middle class jobs in the middle.

If I had to come up with one point of difference that probably has the most effect, it's the relative isolation. Most metro areas are nowhere near as isolated. I believe we are the biggest metro area the farther away from an Interstate, for instance. The lack of a proper four year college. The lack of good, solid industry.

But whatever the reasons, the real point of the third whammy is to point out that Bend Small Business was always facing tougher conditions than most places.

As I argued a couple of posts ago, that Bend usually provides minimal return for the investment.

Finally, a whammy within a whammy.

When I say Bend's conditions were never what people thought, I mean that people opened businesses with higher expectations here than most places. They always have.

The trouble with the bubble of the last five years was that this was obscured.

I have a theory that:

Mini-whammy 1:

People opened in Bend with out-sized expectations, which because of the boom economy, looked to be fulfilled.

Mini-whammy 2:

This encouraged other small business to open, and existing ones to expand and take on more debt. High end businesses replaced moderate businesses in Downtown Bend.

Mini-whammy 3:

Not only did business's not plan for the worst, they weren't even planning on prevailing conditions. They built into their business plan endless growth. If your business model was built for the boom years, which were never sustainable in any case, you're going to have trouble.

So not only do they have to adjust down the levels they were actually reaching, but they have to ratchet down from there. This is both hard on the spirit and the finances.

I suspect when their sales level finally stabilizes that it isn't enough to cover overhead. And if it is, they may have lost so much money and motivation on the way down, that it is no longer enough to keep them going.

I'm really open to argument and discussion. Almost none of the third whammy can be proved -- unless you consider Lease Signs in all the windows proof.