Thursday, July 31, 2008

Commercial Building Has All But Stopped.

I continue to be fascinated by the Commercial Real Estate (CRE) market, my interest fueled by the aggregate website, KeyPoint Partners.

They provide some very revealing statistics in the article, Retail Construction Hits a Red Light. (Retail Traffic).

" is coming to a screeching halt at projects across the country as developers reevaluate proposed centers' economic viability."

"...developers delivered 6.3 million square feet of space in those sectors (neighborhood and community shopping centers) during the second quarter--two-thirds of the planned 9.7 million square feet of space that was supposed to come online. “That, to me, signals that some of the projects are being either taken away or delayed,” says Abigail Marks, economist at CBRE/Torto Wheaton."

"However, Marks forecasts the full impact of the current downturn won’t be realized until next year, when only 14.7 million square feet of new neighborhood and community center space is projected to come on-line. In the first half of this year, developers in the U.S. began construction on 71 million square feet of retail space, according to CoStar Group, Inc., a Bethesda, Md.-based commercial real estate information provider. That figure represents a 24.5 percent decrease compared to the first half of 2007, when construction was started on 94 million square feet of new projects.

"With the conditions in the retail sector deteriorating precipitously, real estate developers are abandoning projects that appeared to be sure bets a year or two ago. As retailers pull back, many developers have opted to forgo construction of centers that have gone so far as breaking ground."

"One reason there hasn't been an even steeper decline in completions this year, says Continental's CEO David Kass, is that most of the financing for retail projects scheduled for delivery this year was completed years ago."

First, I've been saying for some time that I thought if a shopping mall hasn't already broken ground, it probably won't be built. This article is saying that even some projects that have already started are being stopped.

Secondly, there is obviously a two year gap between the original downturn, (first half of 2007), and the full implementation of cancellations and delays (first half of 2009).

Third, that unlike housing permits, which after all depend on millions of individual choices, the construction industry has come to an almost complete stop. As I read it, a drop from 94 million sq. ft. in early 2007, to 14.7 million sq. ft. in early 2009; let's say, a 80% drop.

An 80% drop in building.

So, in another six months or so, almost all construction will cease, except those projects already being constructed.

And left unsaid, is how long this moratorium is likely to last. Does it mean that even green lite projects won't come online for another couple of years?

In another article, (Plain Vanilla Shell) there is a surprising exception. Circuit City, which once was on the verge of being bought by Blockbuster and which has been having troubles. ("Sales fell more than 11 percent in the first quarter of this year, resulting in a net loss of $164.8 million.")

Nevertheless, they are steaming forward with more store expansions:

"... 45 to 55 new stores opening across the country over the next year, Circuit City Stores, Inc. said. The move is raising eyebrows among industry analysts, who caution that expansion might not cut losses.

"Circuit City is pinning its future on turning around its retail options," said Alexandra Biesada, a retail expert at Hoover's, a corporate analysis company."

I think I know what they're doing here. They're rolling the dice with someone else's money. Obviously, they got the go ahead for these new stores in the past, and it's firm enough to start building. (The article mentions it's doubts they'll get any further credit...)

This is what I call in retail store terms, Tom Petersoning It. A retail store who is having financial difficulties but who still has good terms and credits with their suppliers, orders more material than they can really afford in hopes that they can raise cash.

Of course, the problem is, it's usually just more of the same product that already isn't selling. If it was as easy as ordering product that would sell better, they'd have already done it. It's a desperation move.

Another trick would be to contract for way more advertising than you can realistically afford, in hopes that it will somehow spark business. Until they take that toy away from you.

Neither option is ethical; done with foresight, it might even be fraud. But I'm actually surprised more retailers don't try it. I think by the time stores get to this point, they are so discouraged they just kind of give up.

I figure Circuit City thinks it's going to go bankrupt anyway, and they might as well try building some "new" models.

The CRE market, overall, seems much more responsive to economic conditions. Or so I would believe, if I hadn't just watched them go on a building spree. Or perhaps, it's just that they are bowing to the reality of a credit squeeze.

If my theory that mass market stores were depending on new stores to continue their little ponzi schemes, we're in for some interesting times.

Wednesday, July 30, 2008

Evil Genius.

John Stanley, Woody Woodpecker, @1947

"Everything is working out perfectly..."

Well, not exactly. I added new books and games so that my sales would go up, not so they would simply replace the sales I'm losing in other parts of the store.

Still, it's a good thing I did it, huh?

Yesterday was interesting. I counted 7 parking spots at mid-afternoon, and 5 parking spots later on, outside my store. But I also did a customer count (something I haven't been doing for awhile) and that came to over 100 visitors, which for a Tuesday is a high number. On the other hand, the per customer total was terribly low, until one of my last customers (from Wyoming) spent a bundle.

Hard to read the tea leaves, but here it is.

It feels slow to me. My sales this month is going to be very close to last year, but I also let loose the purse strings, so my profits will probably actually be down. Last year, August was my first down month, so now the comparisons will be with months that were down instead of up. May even begin beating last year, here and there.

Meanwhile, all the houses for sale in my neighborhood are still for sale. What are you seeing?

Hearing all kinds of rumors about more restaurants closing; that couldn't have been more predictable, could it? Did a drive around on 3rd Street before work yesterday. Pro Image just opened a SECOND shop, this one specializing in hats. Hmmmmm. Have the hat place across the street from me, so obviously that's a sub-culture that I'm not familiar with. Always reminds me of when people come into my store and I'm selling the hell out of something and they ask, "Do people really buy that?" Uh, yes.

Damn we have a bunch of new department stores and furniture stores. Would seem to be lousy timing. Kohl's, for instance. Figure all these were in the works when the economy went south. Wondering if any other new projects will actually break ground.

Parking garage still seems suspiciously sparse at night.

Still, both Linda and my store are doing O.K., so I'm not sure what to think.

I have a saying, If my store is slow, in six months I'll find out everyone else was even slower.

Next spring will be an interesting time in Bend. If we keep muddling through like we have been, we may just escape the worst. could easily be the beginning of a two or three year slide.

Here's what we don't know. We don't know how much of the vaunted 'equity' money is still floating around. We don't know how much resilience there is in these families; and whether when it comes to the crunch, they will they make the necessary adjustments. Survival instinct will kick in. Most people will find to their surprise that they don't need as much as they thought.

This has just started. So, we'll probably muddle through. Everyone will just cut back.

For myself, I just need to keep concentrating on keeping down the debt and building up the reserves.

Tuesday, July 29, 2008

They're shooting liberal Unitarians?

Oh, my god. Now they're shooting liberal Unitarians. Really, it would be hard to find a more peacenik bunch, outside the Quakers.

I really don't care for 'politically correct' thinking; but I can take quite a bit of extreme views as long as they're honest. If I don't like it, I can always go somewhere else. (Actually, I don't mind extreme views if they're used for effect or to make a point....if they're honest, I just think they're wrong and move along. But I think a full range of views is a good thing. But not when it's monomaniacal.)

Monomaniacal. Give it a rest.

I don't talk politics or religion at the store.

I try to ignore politics and religion on the other blogs.

I already know how I'm going to vote in November, and no amount of Faux News or CNN ninnyness is going to change that.

But I do have to wonder if constant scapegoating and name-calling and stereotyping is a healthy thing.

I suppose a sicko with a gun doesn't need provocation.

I guess I wish some other blogs would stay on topic. I'm kind of tired of wading through political rants when I want my real estate news, or whatever. Though I suppose politics and real estate are inextricably linked.

I used to enjoy the venting. But it's just gotten meaningless.

And I should make it clear -- I'm tired of these political subjects from BOTH sides. Nothings more guaranteed to make me change the channel.

You know who I'm talking about.

Monday, July 28, 2008

A First.

This a first. I've used an illustration in this blog. I thought about just typing in the square footage, to keep my prose purity, but this graph just speaks volumes.

I had a couple of reactions to this graph.

One was, "Holy Shit, I hope people don't stop shopping!"

The second was, "No worries, Bend. Kohl's is on the way."

I've maintained all along that Bend is over-retailed. I just wish I could find out how much square footage we have....

Anyway, a more nuanced examination...

We got lots of space here in the U.S. I suppose, you can throw up these huge cheap boxes and make them cost effective. Kind of like, every time I wonder if I should somehow streamline my internet activities, I realized, no --- the internet is effectively infinite. And so we can just keep this ponzi scheme of store building going and going.....

Secondly, we've fallen into this weird sort of situation where it appears to me that the rest of the world loans us money for us to buy the goods they make. Not sure how that works. But these stores are absolutely full of crap we don't need.

God, I hope the rest of you never become like me, (non-consumer) or me and every other store I know of is doomed.

But not surprising that everyone in in such deep debt.

There was an article in the Bulletin this morning about how hard it is to get a business loan. Now, I had no intention of going to the bank to ask for money, but I'm wondering if I shouldn't take some of the cash I'm paying off the credit cards each month and keeping it. Not spending it, but stashing it.

Just in case. You know, if they suddenly withdraw the offer. Because even though I rarely have to resort to emergency borrowing, it seems prudent to me to have the capacity. I can still get the credit cards paid off, but not until I have more of a cushion in place.

There is another article about a 'poor' homeowner, too. By Gretchen Morgenson. (Who the website Calculated Risk is constantly badgering, even having a designation of "Picking on Poor Gretchen." I think they're too hard on her. I believe, in fact, that she's more right than wrong about her stance on Heloc's: her take was more like mine, and CR was more like RDC, if you will.)

But the reporters always seem to pick the worst examples. Maybe there aren't any good examples. Maybe everyone who got in trouble was stupid or greedy. Makes you wonder.

Meanwhile, here in Central Oregon. The first house has sold at Yarrow. Linda and I took a drive over there last year, and this is a large development.

I doubt that the profits from one house would pay for the yearly office expenses.

They've sold something like 9 or 11 houses over at the Iron Horse; which probably paid for the transportation costs, and maybe the water bill.

They're waiting for the turnaround? Good luck with that. If they can sell a house a year, they ought to be able to afford the water trucks to spray the dirt and keep down the dust and tumbleweed.

(Clint Eastwood music......the true western experience.... Shane! Shane! Come back Shane!)

Meanwhile, not a peep in the paper about the vaunted opening of Tetherow golf course. By the world famous gold developer, Kidd! Who opened a new course at St. Andrews! The kick off to a world class development?

Nope. Silence.

There's a story there. The silence speaks volumes.

Then there is the nice article reproduced over at Bendbubble2 about how people who have less money tend to spend it on showier stuff. That there is an inverse proportion to income and how big the jewelry, cars and McMansions they buy.

So....would that explain all the huge, flashy SUV's and McMansions in this town? I've always had my doubts about people's ability to pay for these things; a suspicion that it was borrowed money.

And finally, I leave you with this, which I found kind of humorous. In the Names in the News section of the Bulletin: Jessica Lange is trying to sell her house in Stillwater, Minn:

"....Lange spoke with disappointment of changes in Stillwater. She says it went from a little town with lots of characters to a "yuppified" place with too many gift shops and condominiums."

Snort. Oh, did she say lots of character or lots of characters?...either way.

This is my town, come hell or high water.

But if we truly have rich folk in Bend, they'll think nothing of splitting if we start to look rundown. That's what I think, anyway. It's not about the town, you's about them.

Sunday, July 27, 2008

Muddling through or....

...who's going to save us now?

I am not talking about my store. I'm actually ahead of last year this month, at this point. So far I've been close to beating last years sales 3 times before, only to fall back in the last few days of the month. Because of the sequence of days (slowest vs. busiest) I sort of expect that to happen again this month.

But that means I've come very close to beating last year, ending up just slightly below, 4 out of 7 months. Meanwhile, because I'm not building my inventory this year, my profits have been much better. The other 3 months frankly sucked.

So....what's happening?

As I said a couple of days ago, I was all ready with a theory and then had a huge sales day. But in reflecting on it, I think that 'huge' day just reinforced what I was going to say.

Don't anyone snicker at me -- but I think the 'events' have had a beneficial effect on my sales this year.


Well, I've always maintained that events are useful when times are slow. I've always said that the events in the 'off' season are useful. What I was objecting to was closing the streets and distracting my customers on peak weekends and hours when we would have sold a bunch without any help.

Well, based on what I'm seeing this year, every season is an 'off' season.

If you are a retailer in Bend, and you don't make money in July and August and December -- you probably don't make money. My regulars seem to have cut back, resulting in their paychecks not stretching to the end of the month and thus that tale-tell drop off in the last week. And I don't believe the tourists are coming in the numbers or are as willing to spend as in the past, thus necessitating the 'events' and the excuse to open their wallets.

It's not a good sign when businesses are closing in the peak season....

So what are we depending on to keep the retail market humming? It seems to me that we are a little too reliant on the inexperience of new businesses, who from what I can see, don't know the Bend cycles. They tend to open at the wrong time, for one thing, often completely missing the busy season.

And you just have to wonder about the judgment of someone who would open a restaurant in Bend right now. Or a dress shop. Or a jewelry store. Or any of the other high end businesses.

Oh, I know what happens. Each new store thinks they're unique, that they have it down.

But like anything else, it makes sense to play to odds rather than believe you are going to beat the odds.

If there is an average of one independent bookstore nationwide for each 100k in population, then it seems.....very brave to open in a county of 100k that already has 6 bookstores, plus Barnes and Nobles. Seven if you stretch the definition to my store.

But notice how non- 'sexy' businesses, such a shoe repair, or used bookstores, or ....even comic shops are represented by just one or two; indeed, I've lost most of my single competitors in the last year or so.

But if they want to do it, why not let them? Why do I want to stomp on their dreams?

Hey, they may indeed have a new idea, or just be better at it than anyone else.

But if you were reaching to put your hand on a hot stove, I hope I would warn you.

There are real life consequences to opening a business. You could lose your shirt. Hell, based on the odds you will lose your shirt. Be sure that you have another shirt in the closet.

There have been a few suicides in this town because some people went 'all in', doubled down, bet the farm. And lost it all.

RDC was saying that I just complain and grumble. I joked back that complaining and grumbling and bitching and moaning were what blogs were all about. If you have all the answers like RDC you aren't going to tell us, are you? No...contentment writes a blank page. So I agitate, respectfully, that there are dislocations in the business climate in Bend. Probably just as out of whack as the housing was.

So....what happens now. Do we muddle through?

This is where I take a step back and say: if the spaces on Greenwood haven't been leased by now, what do future tenants have to look forward too? The normally slow fall, one good month in December, and then that long drought between January and July.

If, as seems likely, the housing prices don't stabilize, and we continue with this 25 building permits per month average, I foresee a lot of pain ahead.

Saturday, July 26, 2008

Greenwood status report.

At last count, there were 13 available retail spots between Pilot Butte and Bond. Yesterday, I counted 15 spaces. I believe 2 have been filled, and 4 more spaces have become available.

My wife's store, the Bookmark, is on Greenwood, and I'd think for some businesses it would be a great location.


Meanwhile, a restaurant at the Northwest Crossing has closed -- which you know wouldn't surprise me. I still think it's going to be hard for that area to become a retail center.


The Bluteal has an ad in todays Bulletin saying they're closing after 31 years. They haven't been
downtown that whole time, and I'm not certain if it's the same owner(s). 31 years is a long time, and it may just be natural evolution. Still, again it's one of the older businesses that has decided to quit....


There have been at least 2 prominent individuals in Bend who have committed suicide in the last couple of months because of real estate -- or, at the least, who were heavily over their heads.
Should the media mention this fact?

I think in both cases, yes. Because of the way in both cases there was a great deal of promotion on the front part, it ought to be revealed what the end result was. If it wasn't for all the media attention these individuals and their projects got upfront from the media, I'd say leave them alone. But how is anyone ever going to get warned about the dangers of speculation if we sweep it under the rug? Real estate became the biggest news story in Bend; so people in real estate are news.

Nevertheless, I'm glad it's not my decision.

Calculated Risk blog has a whole entry on how the media has a tendency to sensationalize suicides. Our local media doesn't do that.

Like I said, it's a judgment call. It's very sad for the families. But I think the real estate boom was so extraordinary in Bend, that news that ordinarily would be respectfully ignored needs to be revealed.

It can be done in a respectful manner, but with perspective. This is what this person was saying at the height of the boom, and this is what he ended up doing.

A growing town = a chance for reinvention.

It's probably just part of the perils of blogging, but I find myself blogging about things before the circumstances have really played out. Then something happens that completely contradicts what I was saying.

I was all ready, for instance, to talk about how slow the second half of the month has been, and I had a whole theory prepared about how that meant the tourists weren't coming and I was seeing locals' paychecks stretched and blah, blah,blah.

I also had a blog yesterday where I talked about how few books -- relatively speaking -- I'd sold at $ .50 and $ 1.00 during the Krazy Days sale, how the public wasn't interested, and how I might have been better off just selling books at regular price.

And then, yesterday, I had sales that were nearly three times my average, brought my second half of the month right back up to the levels I was doing in the first half of the month, and has got me.... wondering....what's going on? There were people all over the place, yesterday. (Without the streets being closed, I might add...)

I also sold several hundred books, and had my best book-selling day ever. Books are now firmly my second best-selling product, which absolutely astounds me.

See, despite the logic of business being bad; I mean, it seems to me that business SHOULD be bad; well... it isn't. At least not so far.

(I'm going to interject a strange note here: I firmly believe, based on the evidence, that Bend is in for some rough times, which means my store is in for some rough times. I think logic dictates that, and I've found that 90% of the time, when the reasoning side of my brain cries danger that I should pay attention. I can't imagine that we're going to weather this without damage.) And with that, I continue with my coyote side.

I've been taking it slow and easy on ordering new books. But they continue to show strength.

I guess I'm leery of being sucked into another big investment, only to see it fade. But then again, books aren't exactly a fad. Seems like a pretty solid business, to me, right about now. I think I'm in the honeymoon phase.

I've got the huge luxury of not having to depend on books for my bottom line. And an even bigger luxury in that profits on used books are fantastic. They seem to have smoothed out the slow days. In fact, it appears that I've had a downturn in most of the product I was carrying last year at this time, but new games and new books have compensated.

Comics and graphic novels are still my bread and butter, doing from 3 to 5 times as much as books.

Still, for the first time, I'm wondering if I might not be able to have my cake and eat it too. You know, be a full bookstore and a full comic shop and still have all the other sidelines as well.

As usual, the biggest problem is space.

It's probably simply not possible to carry enough new books in the space I have available to be considered a full-line bookstore.

However.....I think... I believe, if I'm in tune with the culture at large, that I can make a small number of books seem larger.

If I carry all the Hunter S. Thompson books, for instance, and it just so happens a documentary about the Gonzo journalist comes out, then I look pretty good. If I keep doing that, keep guessing right, then the store will loom larger than it actually is. I'm such a huge reader, that I feel as though if anyone could do it, I could. I'm not going to be a Barnes and Noble, a Camalli or Paulina Springs or Sunriver Books. know what? I might be able to get close, especially if I specialize in fiction. So...that seems credible to me; a bookstore that specializes in fiction. As far as I'm concerned, graphic novels fit right into this mode. I sold 5 Watchmen, yesterday. That's a bunch. A huge amount for a book that's been around for a decade. And all to non-regular, non-comic buying customers. Cool.

We longtime residents, and local bloggers, tend to bitch about the growth of this town. About all the 'cali' newcomers; about the fact that everyone has lived here for 5 minutes.

But I think it allows an old business like mine to reinvent itself on a constant basis. I know the other Downtowners will probably never come around, (hell, they never came around in the first place) and many of the older residents will never check me out, but I have a chance to perform well and be rewarded by new residents, new tourists, new friends.

Friday, July 25, 2008

#@%^&$& Credit Cards!

I've been paying off my credit cards in full for the last three months, maintaining a zero balance. This month I finished paying off my "Line of Credit" for business checking, which is the last of the debt.

I got my B of A card statement today. There in fine print is: "Please note: Your due date has changed...."

Sure enough, and strangely enough, I owe 5 days earlier. Gosh, I wonder why the date didn't change to 5 days later?

And...there was no envelope for the bill to send back.

Nice. Do I use a blank envelope and lose it in the works? Do I make a trip down to the bank and pay in person? Do I sign up for their online presence and give them all the info?

I don't want to do any of these things. Nor should I have to.

So....if I was of a suspicious nature, I'd think they were trying to screw me.

I'm sure it was all innocent.

@%#$@$%@ Credit Cards!

(Edited: Actually they moved the date up 8 days. At least they included a notice, in nice small fine print.....)

To continue the saga. I call them. They say the bill was sent on the 18th, which means it took 7 days to get here. Almost nowhere does it take seven days, five days is the norm.

Let that pass. So I ask, "If I send to the payment address, will it get there?"

"Oh, no. You need a special code and address."

But you see, I knew that because it happened to me several years ago.

So, assuming a 7 days mailing time to be safe: I have 4 days to pay the bill upon arrival.

4 days.

Which if I had done the logical thing and addressed my envelope to: "Mail payments to;
Bank of America, P.O. Box xxxx, Baltimore, Md 21297-1220," It ALMOST CERTAINLY wouldn't have gotten there!

Yes, sir. Good thing I don't have suspicious nature.

I'm sure there was no intention of trapping the unwary.

That would be cheap trick.

Surely Bank of America wouldn't resort to cheap tricks?

Hey, Congress! WAKE THE FUCK UP!

News Flash: Most people don't read.

So I spent a couple of hours Wednesday night at the Bookmark, filling boxes from Linda's storage room with books, and hauling them to my car.

Next morning, I laid them out on the sidewalk in front of my store, went back to the house for a table, then one more trip to Linda's store to load up on more books.

This is the first Sidewalk Sale I've participated in, in years. Back when I was a kid, the Krazy Days sales were a big event -- when downtown Bend was pretty much the only shopping center in Bend, and back when the word "SALE" hadn't been diluted to nothingness.

Then went inside Pegasus and conducted normal business. Every once in a while, someone would come in with a pile of books, and there was a fairly constant flow of people bringing in one'sees and two'sees.

Went outside three or four times and consolidated and straightened books.

Then spent another half hour at the end of the day, carrying the boxes and tables inside.

The result? Sold about 105 sale books; I'm thinking about half paperback and half hardcover.

Now these were good books, but they tended to be of a 'type'; lots of mystery hardcovers, and lots of genre paperbacks.

Still, the most noticeable thing to me is how many people just walked on by, not even glancing.

I don't think I could ever walk by piles of books without at least peeking.

About an hour into the day, I'd sold probably 20 books, and made a grand total of maybe 15 dollars. Had a guy saunter in, go over to my regular books, and spend 20.00 on two or three books at regular price. And I thought, Hmmmmm.

Here's the thing, for all that work and activity, we made a mere 30% more in books than we usually do.

More than once, I had interested buyers leave the used book section of my store when I informed them of the sale. (How could I not?)

I don't want anyone to think I'm sorry I did it. We get lots of good books traded in, and I'm glad to find them a good home. It's better that someone reads them than that they sit in storage. It's a good way to get noticed, since from what customers tell me, everyone downtown tells them "no one's selling books."

But it points out the conundrum that I've always maintained is at the heart of every promotion and or sale. That whatever extra you make is probably paid for in labor, time, space. Fine if you want to do it, but be aware of the costs.

We're going to keep this going for all four days. I'm going to snag some S.F. and children's books and non-fiction from Linda's store, all of which were under-represented. Of course, I'm expecting more activity on the weekend than from a Thursday.

Still, I'd thought to do this every Sunday, on a lesser scale, and I think maybe this has taught me that might not be very useful in terms of sales. I may still do it, just as a promotion. (Or until I'm told I can't have anything on the sidewalk. Which rule seems to be broken on a regular and haphazard basis....)

Like I said, I'm just glad to get these books in people's hands, and the selection -- which was pretty good yesterday -- should be even better today.

Thursday, July 24, 2008

Sidewalk sale, sidewalk sale!

Come on. You read, don't you?

Yeah, 1.00 for hardcovers, .50 for paperbacks.

Lots and lots of them.

Wednesday, July 23, 2008

"He's gorgeous and dead...."

Comic sales are down, from even a year ago.

And yet, comic movies couldn't be any hotter.

I've spent years trying to figure that out. Movies have zero effect on comic sales.

I have no explanation. So I shrug.

The quote in yesterday's Bulletin from a girl standing in line for the Batman movie about Heath Ledger, "He's gorgeous and dead...."

I suppose you could say something similar about Robert Downey, Jr. 'He's gorgeous and almost dead..."

As good an explanation as any.


"If money wasn't an object...."

Again, it's the older businesses that are folding up. Kayo's is closing it's two oldest branches (I believe it had a site in south Bend for years). When you see only one of three restaurants doing well, I suspect it has a lot to do with management and labor. It's hard to split good help into three parts....

Tum-a-Lum going out? I suspect that the downtown area isn't a great place for semi-industrial anymore, which is why Parr's is leaving the area too. When you have to move, closing is another option.

I loved the comment by Redmond City Manager Michael Patterson: "We definitely want to see them in Redmond in one form or another. If money wasn't an object, we would certainly buy it."

Me too buddy. Me too.

Pesky money.

Anyway, I think we're going to see a lot more of this. Still way too many restaurants around.

I don't believe the real crunch time has even started. We've been coasting on vapors in Bend for the last six months to a year, and I think there is only a couple of drops left in the tank.

Going into this fall, and then winter, and then spring.

If things don't turn around early next summer -- which I personally don't expect, THEN we'll start seeing to real reality adjustments.

Which means, I think, that the feds just made a mistake not taking the 1.5 million dollar offer for the Liberty building downtown. Those prices for downtown real estate are just out of bounds, in my opinion.

When people ask me if their cards or comics are 'worth anything', I always say, put them on auction on E-Bay. Pure capitalism. What people are willing to offer is what it is really worth. Sure. You may hit a dud.

So try a second time, or a third time. You may get a slightly better offer, but you have to subtract the extra time, labor and investment. But go ahead.

It seems to me that the value of downtown real estate ought to be correlated to the dollars per foot generated by retail. On that scale, I'm betting we are way out of bounds. That is, if the Pearl District in Portland charges say 2.50 a foot, but generates an average of say 30.00 a foot; and downtown Bend charges 2.50 a foot and generates 20.00 a foot, than you see the problem. Those are completely made up numbers -- I'd love to see the real figures, but unlikely to ever find them. Still, I wouldn't be surprised if the proportions are about right.

That is, the downtown owners have real estate that is worth a fortune based on prices paid a couple of years ago, and their charging a comparable rate. But the retail in that space is seeing nothing like that kind of increase. But because the owners can still GET that increase, they're asking for it.

I suppose it will take a couple of boutique spaces staying unrented for more than a few months to change that.

But I can tell you this, based on the business I've seen downtown this summer, everything is overpriced.

Tuesday, July 22, 2008

Best part of Batman? The Watchmen....

Went to the first showing of Batman on Monday. Moderate crowd. Hell of a movie.

Intense, and laying it on thick. It's what I've always said; the closer they hew to the spirit of the comic, the better the movie. Personally, I like the grimness -- he's the Dark Knight, after all. A little bit of humor, and Heath Ledger made me laugh out loud a few times with his very odd, but somehow completely appropriate line readings. Didn't think it was too long, or too intense or too confusing, like I've read from a few reviewers (have they gone to action flicks lately?)

The Joker was played as a complete psycho freak. There is violence, but if you notice they cut away every time there was a close-up act. The real violence, what would scare me if I had kids, was in the psychotic tone of Joker's voice. Very scary.

No one's mentioned the soundtrack, which really amped up the amphetamine intenseness.

I noticed they stayed away from the Batcave pretty much altogether.

Me and Pat and customer Josh, spent a good half hour at the store, yesterday, trying to figure out who the next villain in the movie well be -- the Penguin is icky gothic. I suppose he might work.

Oh, and the Watchmen trailer? Gave me a shiver. People have no idea what's coming.

It's going to be the 2001 or Star Wars of comic movies, hopefully lending legitimacy to comics from then on.

But then again, why should I care? Comics are great, and if you aren't reading them, it's YOUR loss.


At least read the Watchmen...

Monday, July 21, 2008

Author signings.

Linda and I decided to go for a drive, yesterday. Stopped at the 7/11 and was asked where we were going.

"We're going......" twirling my fingers. "...that way." Found myself pointing south.

Sunriver it was. It's been a long time since I've really driven around that place. More run down that I remember, with smaller units than I remembered (though I saw the richer enclaves from a distance behind the fences.) No lawns, which is really a nice ethos which I hope they keep. I remember when Sunriver consisted of the old lodge (where we used to have our high school Proms) and a few neighborhoods. And apparently you can have any house color you long as it's tan (or a closely toned gray or brown.)

Anyway, checked into the Sunriver bookstore, and was greeted by Connie, (Dave e-musing's wife), who recognized me and Linda, and introduced our 'his and her' bookstores.

I grabbed one of the fancy pens they sell there (Linda and I are both suckers for stationary accouterments) and started stealing ideas.

The upstairs was almost all travel books, which in Sunriver makes sense. The other young lady who was clerking asked if we did Good Sense books, and I said that so far I'm pretty selective. I carry books that are asked for and a little offbeat, and used the example of Chuck Palahniuk.

"Oh, we don't carry him. The owner doesn't like him."

Which sort of surprised me: I don't tend to think I eliminate books based on my own feelings. But, of course, I do. I just don't do it quite so specifically.

One of the first things Connie says is, "You said that you don't believe signing create business....I want you to know that we are going to have 70 people here this afternoon."

I don't remember quite saying that; I mean, it's the kind of thing I could've said, but if I did, I wasn't being as nuanced as I actually think.

Yes, signing can create a good deal of business. But I think I was saying more that the fundamentals need to be in place, first. And that it's a great deal of work. In a sense, you have to have a sort of infrastructure in place -- a certain tone, a certain capacity in inventory and employees and organization. If you have all that in place, and you're are so inclined, I'm sure signing can be a big boost. Just dealing with the visiting writer would seen like a lot of work, however. Dealing with a crowd is not something I like to do. (Not sure about expense.)

If the authors come at their own expense, you've got to be able to convince writers and publishers that it's worth their time.

Anyway, it's not my personal proclivity. I'm interested in the reading, not the listening.

Personally, I think it's a huge effort. I put my efforts into inventory. But I can see how it would be helpful to stores like Sunriver Books, or Paulina Springs, or Camalli.

As we were driving around, I started thinking about the 'Good Sense' program for independent bookstores, and realized I haven't been as nuanced about that as I should, either.

I've said before that I think it makes stores into 'clones.' But that isn't quite right; in a way, the Good Sense program helps independent bookstores find the best books for their kinds of stores.

If I was ordering, say, a hundred books a week, I would need to look at the Good Sense list and the bestseller lists.

But I'm ordering more in the range of 20 or 30 books so far, and that means I can stick to books that have sold and need to be reordered, or my own quirky choices, or books that have reached my attention through recommendations, or rave reviews, or by special request, or just by random browsing.

I'm at an interesting level with new books. They've sold very well, and I'm tempted to really increase my inventory dramatically. But I only have capacity for about maybe twice as many as I currently have, and would like to keep the luxury of filling that capacity with the very best books. Taking my time and hand selecting them.

Besides, I believe I'm selling about as many books as I would even with higher inventory.

But it's very seductive to go crazy and fill every nook and cranny with books. That's my tendency. But I'm fighting it.

I was going to do my taxes yesterday, (2007, don't ask), and so I began digging into the 'box' where I tossed all the receipts throughout the year. I throw away any receipt that was paid for by a check, so half the job is just laying all the bank statements and credit card statements out on the table in sequence.

At the end, I was missing two bank statements, and three credit card statements. Went to the store and grabbed the 2006 box and 2008 box, came back, went through the whole process again, twice, and found all but one of the credit card statements.

Here's where I do the obvious to most of us, but the miraculous to me. I'm able to go online and get a copy, thus saving myself a no doubt frustrating phone call and possible long wait for a hard copy.

Slowly but surely I'm learning stuff.

But I still have to do the damn taxes.

Sunday, July 20, 2008


Shall we parse the Bulletin again? I figure it's a lot like Kremlinologists in the 50's and 60's: trying to figure out what the dirty rotten commies were really saying, who was up and who was down, required a good deal of analysis.

Since I've lived in Bend my whole life, and have been reading the Bulletin probably since about 1970 or so, you can call me a Bulletinologist.

I know I'm in the minority among bubble bloggers in that I think the Bulletin is a pretty good paper. Much better than average, in my opinion, has it's quirks.

So the usual upbeat or at least neutral headline (more neutral than upbeat these days), the usual upbeat first and last paragraphs, and the usual real information in the middle.

The bad news is there, it just isn't really pointed out. They leave that to the the Bulletinologists.

Local bank shares don't reflect the 'real' health of the banks, so pay them no mind -- and oh, by the way, the shares went 'up' last week. (Contradiction #1). The banks are healthy -- unless there is an 'extended' downturn. (Contradiction #2). Banks are "healthier than they appear", which is not exactly the same thing as saying they are really healthy. (Contradiction #3). Local banks have had a good 5 to 10 years, and have built reserves, but they invested "heavily in markets such as Central Oregon, where real estate values may continue to drop." A 'negative' reserve, if you will. (Contradiction #4.) I'm barely past the first couple of paragraphs, and could go on and on with this.

Anyway, I'm already worn out -- suffice it to say that the actual substance of the article is anything but rosy.

The second article about local builders again was more downbeat in substance than in tone. Sure, if you go out and pick top builders of custom homes, who are finishing off projects financed by wealthy owners, things look pretty good.

Never mind that there are very few of these jobs available at the top, and probably very few wealthy owners who can finance their own houses left in the pipeline.

The editorial about how the economy will turn around? But of course! But when? And I think when you make the comment that it's not as bad as in the past, you need to add the word "YET." But they are probably right -- because the 80's were truly horrid. A The 80's were more like the Great Depression in Bend, than any other recession, even a severe one.

Anyway, the Bulletin is slowly coming around. I think they don't want to spook anyone. But I also think they truly believe this is a normal downturn (like my nemesis RDC) that we'll get back on track soon and Bend is just so great that we're just great. It's great that we're great. So there.

Saturday, July 19, 2008

The Life-style Mall is dying.

I've been turning my attention to the Commercial Real Estate Bubble, lately.

The Housing Bubble done popped.

Despite my dire warnings, up until very recently, I still harbored a belief that my house was going to retain some of the bubble value. I find that I don't believe that anymore. I think my house is going to end up near what I paid for it, or possibly even lower.

That's O.K. It's a fixed mortgage, I intend to live in it for the foreseeable future, and I've made enough payments over the last five years or so to make it unlikely I'll be upside down.

Meanwhile, I think the CRE bubble is heading toward us like a runaway freight train.

I stumbled across a webside that is extremely revealing. Keypoint Partners Retailer Roundup. It's a commercial real estate blog, that is strangely factual, as far as I can tell. It seems to be willing to discuss negative developments, or at least reproduce articles from elsewhere that are negative. Not sure what to make of it, frankly, because that's pretty unusual. Certainly haven't seen it with any of the residential real estate blogs. Possibly, they just assume the public isn't paying attention to them, and they can talk turkey.

One of their latest entries is below. "Hard times for open-air shopping."

What's interesting about this, is that it brings up two of my favorite theories.

One: the shopping environment is shaped as much by fad as by any hard numbers.

Two: the whole chain-store phenomenon is a ponzi scheme.

So...come to find out that many of these chain-stores are backing out of opening in these new malls. (As a 'cluster', me-too, lemming like behavior.)

But if they are ponzi schemes, as I maintain, how can they afford not to open new stores?

I'm going to bet that they CAN'T open new stores because they can no longer BORROW THE MONEY!

A couple of weeks ago, I talked about how the Commercial Mortgage-backed Securities, which account for 70% of all CRE financing, was down 96%

96% ! ?

That's more or less a complete stoppage on the part of the financial credit availability for commercial properties.

So we're going to find out just how many of these chain-stores, like Steve and Barry's are ponzi schemes, and how many are legitimate businesses.

But I'm going to carry the point a couple of steps further. Think of all the people who were building those malls.

Then think of all the people who were going to work in those stores.

And then think of all the product that was going to fill those stores, and the people who produce them.

None of that is going to happen, now.

We've got a long ways to go.

Hard times for open-air shopping

The hottest trend this decade in shopping-center development has gone cold.

Known as lifestyle centers, the open-air shopping venues offer small parks, fountains and cafes amid name-brand retailers selling fashion apparel, housewares and other discretionary fare.

Developers raced to add new ones as they became popular with shoppers, especially women between 20 and 50 years old, a coveted category. Meantime, construction of traditional enclosed malls all but stopped.

But now, with the economy slumping and shoppers spending less, retailers that had flocked to the centers — like Chico’s FAS Inc., AnnTaylor Stores Corp. and Talbots Inc. — have begun canceling expansion plans and even shutting stores. Others, such as Linens ’n Things Inc., have sought bankruptcy protection.

This couldn’t happen at a worse time for lifestyle-center developers, which were putting up more of the shopping centers than ever. Last year they built 37 centers totaling some 12 million square feet, or roughly 40 percent of the total lifestyle-center square footage added this decade, according to market-research firm Portfolio & Property Research Inc. Double the 2007 total is now under construction, and three times as much is in the planning stages.

The economic slowdown, of course, means many of the planned projects won’t leave the drawing board. But many centers where constuction has begun will probably have difficulty leasing space when they open. That raises the specter that eventually they may not be able to pay their debt, adding to the strain on the already ravaged finance sector.

Leasing problems have clearly begun. Developer M.G. Herring Group opened its Uptown Village regional lifestyle center in the Dallas suburb of Cedar Hill in March with only half the space occupied and the rest walled off with wood panels bearing the center’s marketing images. President Gar Herring says he has so far signed retailers for 60 percent to 70 percent of the 725,000-square-foot project, though it remains only half occupied five months after its opening.

In Brighton, THF Realty Inc. has filled most of its new Prairie Center retail project with such big-box retailers as Dick’s Sporting Goods Inc. and PetSmart Inc. But Prairie Center’s small-shop space — erected in a lifestyle-center format nearby — is mostly empty. Half a dozen tenants, including Heidi’s Deli, Verizon Wireless and Elite Nails, are sprinkled among vacant storefronts sporting “for lease” signs.

Herring and THF executives say they anticipate no difficulties paying their debt service on the projects.

Some believe that the lifestyle-center craze was about to run its course in any case. The metropolitan locations that are best suited to the centers are mostly taken. “There were a number of projects proposed in markets that didn’t really have the (sales) demand to support the projects,” said Stephen Lebovitz, president of mall owner CBL & Associates Properties Inc., which has built two open-air centers.

Certainly the centers being built now show an evolution in the approach to the centers. Recent versions have larger formats and more diverse tenant rosters, including department stores and movie theaters. Few developers now propose the original format, which offers only small shops and spans 200,000 square feet or less.

“Those are dead,” said Maury Levin, a retail-property broker at commercial real estate firm KLNB Inc. in Baltimore.

Construction of other retail-property formats is also slowing as consumer spending wanes. Portfolio & Property Research forecasts that in 2009, retail-space construction in the top 54 U.S. markets will drop 48 percent, to 71 million square feet, from this year.

Existing properties are hurting, too. Vacancy rates at U.S. malls and shopping centers have climbed to 7.4 percent this year, the highest level this decade, according to market-research firm Reis Inc.

Many developers that have the option are canceling or scaling back projects. Citing slow progress in leasing, Opus Corp. opted to proceed in phases at a lifestyle center in the Seattle suburb of Issaquah, Wash., scheduling the opening of 150,000 square feet of shops in 2010. It had planned to open three times as much space in 2009.

In Canonsburg, Pa., developer Cullinan Properties Ltd. has delayed by a year, to 2010, the opening of 200,000 square feet of small shops intended to accompany a 14-screen movie theater as it struggles to lease the space.

What’s tripping up many developers is the tendency of lifestyle-center tenants to travel in packs. The centers often don’t have big anchor stores, so many retailers insist that several complementary stores agree to open in a given center before they will do so. “You may have 10 tenants you want to get, but eight are waiting until the fall to make a decision and the other two are waiting on those eight,” said Frank Natanek, Cullinan’s group president of real estate and marketing.

Poag & McEwen Lifestyle Centers LLC, which has developed 10 lifestyle centers, recently scrapped plans for one in Boise, Idaho, after five retailers reneged on signing leases there and then several more did the same. The Memphis, Tenn.-based developer proceeded with construction of a lifestyle center in Plainfield, Ill., only after tenants there waived the requirement that certain fellow retailers such as Chico’s join the project. Chico’s has pared its expansion markedly to 45 new stores this year from 118 last year.

Despite these stresses, most new lifestyle centers aren’t in danger of immediate foreclosure. Developers and lenders typically structure construction loans to carry fledgling projects through lease-up periods, and they’re hoping that the economy will rebound by the time those reserves are depleted.

“You’re not really going to see these projects get turned over to the lenders until later this year at the earliest,” said Ben Yang, an analyst with Green Street Advisors.

Source: Rocky Mountain News

Picking the right from the wrong.

The Oregonian article below about struggling small business is interesting.

I should say upfront that I think the biggest 2 reasons that small businesses fail are

1.) They are mis-calibrations in the first place. Whenever I express doubt about the viability of a business, someone will always point out how great that other store is, how nice the owners are, how great the service and selection.

But do they have a market? Is their store calibrated to serve that market?

That's the biggest reason in my opinion that a business doesn't continue. Just not judging how many people are likely to walk in the door and spend money over the long run.

2.) Owners mistakes and or failings. Being under-capitalized, spending too much on infrastructure and inventory, (or too little), being unhelpful or unfriendly....generally just doing dumbass things.

The reasons mentioned in the article, high gas prices and or the poor economy, aren't enough to doom a business that is otherwise solid, in my opinion.

I was talking to a customer about my perception that every used bookstore within a hundred miles of Powell's City of Books seems to want to copy his formula. For instance, filing new and old books together.

In my opinion, Powell's succeeded despite this practice, not because of it.

The same is true of any business. Some businesses fail despite doing a lot of things right, and some business succeed despite doing a lot of things wrong. The trick is not the copy the wrong things just because you see them, or not to throw out the right things just because the business failed.

Lots more businesses forced to shut doors
Economy - The bankruptcy rate jumps in the second quarter, with Oregon among the worst hit
Saturday, July 19, 2008
The Oregonian

Driven by a sour economy and skittish consumers, U.S. business bankruptcies saw their sharpest quarterly rise in two years, jumping 17 percent in the second quarter of 2008, according to an analysis by McClatchy Newspapers.

Oregon came in with the third biggest percent increase between the first and second quarters.

Commercial filings for the first half of 2008 are up 45 percent from last year, as the national climate for commerce continues to deteriorate amid rising energy and food costs, mounting job losses, tighter credit and a reticence among consumers to part with discretionary income.

From April through June, 15,471 U.S. businesses called it quits, according to data from Automated Access to Court Electronic Records, an Oklahoma City bankruptcy management and data company.

States that saw the biggest increase in filings were Delaware, Montana, Oregon, Maryland and Connecticut, suggesting the economic gloom is spreading beyond large population centers.

It was the 10th straight quarter that business bankruptcy filings have increased. Nearly 29,000 companies filed in the first half of 2008.

An additional 60,000 to 90,000 businesses probably have closed, because roughly two to three businesses fold for every one that files for bankruptcy, said Jack Williams, resident scholar at the American Bankruptcy Institute.

The vast majority of these failed companies are among the nation's 23 million small businesses, with fewer than 100 employees. Their fortunes have tumbled as the national economic downturn has deepened.

"The climate is turning desperate for small businesses," said George Cloutier, founder of American Management Services, a consulting firm that helps small companies increase profits. "They are in crisis, and as these numbers show, it's getting worse and worse."

Larger enterprises typically have more capital to weather downturns, but many of them also are reeling from the sputtering economy.

"I've been doing this for 36 years, and this is clearly the worst I've ever seen," said Harding Dawahare, the president of the Lexington, Ky.-based Dawahare's clothing store chain, which employs more than 400 people.

It was 1907 when Dawahare's Syrian immigrant grandfather, Serur Dawahare, began packing his mules with bags of fabric and linens and peddling his goods door to door to coal miners in eastern Kentucky.

From those modest beginnings, Dawahare's grew to a 32-store clothing chain with outlets throughout Kentucky and a few stores in Tennessee and West Virginia.

However, Harding Dawahare did the unthinkable recently and filed for bankruptcy after amassing more than $9 million in debts. He said his problems began after a tough year in 2006, but it was the 2007 holiday season that did him in.

"We had a great third quarter, but if you don't have a good fourth quarter, you're not going to make it. And that's essentially what happened. The economy tanked in late November and it never came back, and we just couldn't overcome it."

More than 20 percent of the newly shuttered businesses were in California, which logged 3,141 bankruptcies in the second quarter.

Texas fielded the next-highest number of bankruptcies with 1,168, followed by Michigan with 702 and Florida with 635. New York was next, with 618 petitions, and Colorado had 547.

Commercial bankruptcy filings reported by Automated Access to Court Electronic Records are typically higher than official government figures because of a more thorough reading of the petitions.

Robert Lawless, a law professor at the University of Illinois and a bankruptcy expert, has researched and written about the federal government's underreporting of business bankruptcies. He estimates roughly one in seven people who file for consumer bankruptcy do so in connection with their businesses.

Tom Clements' pet shop in Tampa, Fla., started seeing steep declines in business in April of last year.

"We didn't know what it was at the time, so we were trying to work through it," Clements said.

But as sales stayed flat for the next 15 months, Clements, 62, realized the economy was forcing customers to make tough choices. "Obviously, a puppy isn't something that everybody has to have."

With listed assets of about $2,605, Clements filed for Chapter 7 bankruptcy in June, owing more than $260,000 for back taxes, a property lease, auto leases, unpaid inventory, dog food, phone service, advertising, pest control, waste removal and other services.

"I absolutely loved that business," Clements said wistfully. "It's the kind of business where people were happy. You come, get a puppy or a dog, you go home happy. Unfortunately, I'm not a philanthropist."

Friday, July 18, 2008

Nostalgia Overdose

Linda gets CD's mixed in with her books once in a while. A chance to hear music I might not ordinarily buy, or that I used to own as an album.

She got in The Best of Simon and Garfunkel.

Oh, my god. Nostalgia overdose. It's just too much.

"I have to be careful about the Beatles, too," I tell my wife. "It just reminds me that I used to be young...."

"Ahhhhhh...." Linda says, sympathetically.

"Probably best. Raging hormones and all...."

"Yeah, we'd probably hurt ourselves."

Oh....wait. It's a comic?

They're doing it again.

The Batman movie is really good. But it's about a guy in spandex.

For most critics, that's big time cognitive dissonance.

See, if it's a comic character and it's good, doesn't that mean comics have the potential to be just as good?

No....not if the movie "Transcends the Genre" or "Redefines Comics."

You see, I don't read fantasy. Oh, I read Lord of the Rings, but that's different.
You see, I don't read science fiction. Oh, I read 1984, but that's different.
You see, I don't watch cartoons. Oh, I watched Spirited Away, but that different.

See....they aren't really fantasy, science fiction, or cartoons.....

Whew...that's better.

That Nolan fellow must be a genius to come up with all this, because surely it didn't come from a mere comic.

Ever notice how almost always everyone thinks the original books are better than the movies? That must not be true if it's a "comic." One critic went so far as to detail all the reasons the movie was different from the comic because of the subject matter -- thus proving absolutely that he'd never read a Batman comic; which have been dealing with the exact same themes at least since, The Dark Knight Returns, by Frank Miller.

Wouldn't want to believe that the Batman movie is dealing with characters, themes and subjects that have been in the comic book world for decades, if not from the beginning.

Done really really well, but a comic book movie nevertheless.

Deal with it.

Thursday, July 17, 2008

What am I, chopped liver?

It occurred to me while reading the Source's article on BAT that one beneficiary of the rising gas prices might be mass transit. I mean, despite my doubts, I was probably going to vote for the transit district anyway (because I'm a bleeding heart liberal), but I'm beginning to think it might actually have a chance of passing.

Another Bend home builder having problems -- it seems to me, the fourth or fifth major player. Way back around a year and a half ago, when Brooks Resources pulled out of a small project down on the river, I've been watching as most of the other builders just seemed to keep on building.

A curious side effect of having a 'sitemeter' is that I can see how people are referred to my blog. It's been interesting how many found BMWJAMAGEH from searching "lawsuit" and the name of a prominent local firm or individual. Most have been covered in the newspaper already, I just thought it curious. I haven't had the tool long enough to know if this is just background noise or a sudden uptick.

I was talking to a city official from another town, who worked in Eugene during the times when they tried to revoke the downtown 'mall.' He said, even though it was clear to almost everyone that the street closures weren't working, that the people who put it into place and a few downtown merchants who for whatever reason preferred it, were able to block all efforts to change course.

Sounds familiar.

I hesitated to talk about this, because the person I'm talking about is very nice. But another store owner came into the store with a "greeting card" while I was ringing up some customers. I figured it was probably a condolence card, or maybe even a card to Linda at the Book Barn or something.

No, it was at thank you note to Pronghorn for 'sponsoring' our street during the summer fest. The music and linen covered tables were "first class."

I sort of casually mentioned I wasn't working the weekend, and that I was generally opposed to closing the streets. "But..., " I said, " We did very well, this weekend, so maybe things are changing."

"We did horrible business," this person says. "But that's another matter...."

O.K. I wanted to say. Why isn't that the crux of the matter? Why are you wanting to change to subject instantly? Even though my store has started to overcome the negatives of the events doesn't mean I don't think it's a legitimate concern. This conversational turn has happened over and over again when talking to other merchants, but none of them seem aware of the others.

And while we did very well on the weekend, we've had a real slow last three days, which as I've mentioned before is a typical reaction to events. Taking away with the left hand what we were given with the right.

Anyway, I probably missed a chance to actually do something that the others on my street were doing, but the other store owner was already starting edge to the door. I mean, it was all very friendly and all, but the person assumed I didn't want to sign and left.

I noticed that the downtowners are having a sidewalk sale on Thursday through Sunday next week. I've finally got something I can put out on the sidewalk! I'm going to stack hundreds of hardcover books and sell them for 1.00. And hundreds of paperbacks and sell them for .50. I'd love to have a permanent display, actually. Not sure if I'm allowed (though it seems there are plenty of other merchants using the sidewalks these days....)

Wednesday, July 16, 2008

Time Slowing Formula .

I've decided to figure out a "Time Slowing Formula."

See, I'm on this locomotive that seems to be speeding up, the trees and people are whizzing by in the windows, and the cliff is approaching.

Time to slow it down.

So....not watching T.V.? Not spending so much time online?

Does adding activities slow time, or speed it up? Does even being aware of the passage of time slow it down or speed it up?

When I was a kid, the summer seemed endless. I don't remember thinking much about the passage of time, except the looming school year; which I could usually ignore until the last couple of weeks.

As a kid I wasted time profligately. I had no awareness that lazing about the house, or walking around the woods could possibly be a waste.

Maybe it's the very thought that one needs to use time "productively" that makes it seem to slip away.

Does spending more time with people make time faster or slower? Time alone? Quiet time?

Could setting time aside to contemplate time make it slow down? To what purpose?

I used to be willing to waste an entire day or two on hangovers...heck, having a cold seemed a real luxury, a guilt free vacation, with sniffles.

Car trips always seem to drag....are we there yet?

Does spending time with loved ones speed time up? Doesn't absence of loved ones make time drag?

Is extending time even the proper question? Isn't it the quality of time that counts? After all, being in pain, or waiting for someone to pick one up, can make time drag endlessly. Not something to pursue. On the other hand, having fun is a sure fire way of having time speed up.

In fact, anything that I get engrossed in speeds time. I can remember sitting down to write on my novels, and looking up to realize 4 hours had passed.

I suppose being in pain and going on long car trips with boring people would really slow time down. Hmmmmmm.....

How about spending less time in other people's heads -- books, movies, T.V. and more time in my own? And yet when I was a kid, I read endlessly. I watched as much T.V. as I was allowed.

I think just getting out in nature is one sure-fired way to get time to slow down. Spending time in the garden.

That and eliminating T.V.

Any other ideas?

Pegasus's Long Tail.

Since I consider Pegasus Books a "Long Tail" kind of a store, the article below was interesting. I use the term pretty loosely --I'm not sure if I technically qualify, since the theory really seems to involve the Internet. But it's a good approximation of what I'm trying to do.

Good approximations is how I think.

Most of what I do at Pegasus is the result of trial and error, of constant experimentation, of keeping what works and discontinuing what doesn't. I try to test presumptions on a regular basis, and if my experience runs counter to the 'common wisdom' so be it.

I've found that professional business advice is a dangerous thing to follow -- mostly because they aren't really talking about mom and pop business. Especially the advice you find in books and magazines -- which are really designed to sell more books and magazines. Yet...some of the tidbits I've picked up over the years have been immensely valuable. It's trying to figure out what's useful that's hard.

I think of Pegasus as a general pop culture emporium; much like a general store in a small town, it behooves me to carry as much variety as possible. (In a sense, I'm dealing with such a small minority of customers who like what I carry that I'm a small town within a larger one.)

The smaller the customer base, the wider the aperture needs to be to catch them. The wider the customer base, the smaller the aperture can be.

Admittedly, I am still swayed by the general consensus if I don't have direct evidence to the contrary. For instance, I took it for granted for years that I should only carry product that turns over at some arbitrary number of turns -- 4 or 5 times a year.

But just in the last few years, I've found that I can get away with much slower turns than that.
It's not as if I could take the time, money and space I devote to the slow moving product and move it into faster moving product. My store is at the point that the 'faster' product is already fully supported, and doing more wouldn't help. In other words, I've already explored those options and they don't quite get me to where I need to go. We reach a saturation point: carrying 10 boxes is enough, and carrying 15 boxes won't speed it up.

So, I add slower moving products with certain caveats. That they not take up too large a footprint; that they don't require too much customer support; that they don't distract me from supporting the faster moving product.

Same thing with profit margins. Since I've been involved with toys and cards almost from the beginning, I've never had the luxury of "keystoning" and became used to smaller margins.
Again, like with turnover, it would be pretty stupid to invest in lower margin product if I could put that money into good selling higher margin product. And again, I've already done that and it didn't get my store to where I needed it to be. Again, I've reached the saturation point.

So I accept lower margins on some product lines, I accept lower turnover, because it has broadened the appeal and reach of the store. I can carry the best 20% of each sideline, and everyday someone comes in who wouldn't have bought anything else in the store. There is a kind of self correcting mechanism in sideline product; whatever you carry is usually more than anyone else, and the infrequent customer is usually delighted to find it at all. I ameliorate much of the problem by being constantly vigilant for sales and bargains and being opportunistic.

On most sidelines, I accept the fact that 80% of the possible customers will walk away --

All this can be done if I buy within cash-flow; borrowing money to bring in slower moving, lower margin product would probably be a case of 2 steps forward and 3 steps back.

I know of comic shops who survive -- who flourish -- with just carrying superhero comics. But I could fill my entire store with that narrow a product line and my sales still would get me no more than 20% of the way to survival. I finally just started throwing more and more ingredients into the stew until it tasted good.

Messy and time-consuming. But if it was easy, if it was formula, if it was a science and not an art, then anyone could do it. Especially the chain-stores, who I've learned will always win in the end.

I've created such a hybrid of a store -- a pop culture extravaganza -- that no one else would be willing or able to reproduce.


Nearly four years ago, first in a widely cited article and later in a best-selling book, Chris Anderson posited that the Internet, with its vast inventories of books, albums, and movies, would liberate the world from blockbuster schlock. Anderson, the editor of Wired, labeled his concept "the Long Tail," after the shape our digital desires leave on a graph: When we buy stuff online, we can reach beyond big hits and into the "tail" of the demand curve, where we're free to indulge our most obscure passions. Anderson argued that serving our niche interests could also make for booming Web businesses. This was the thrill of the Long Tail—it seemed to offer a way for art and commerce to thrive side-by-side.

Now, just in time for The Long Tail's paperback release, the book has fallen under critical scrutiny. Anita Elberse, a marketing professor at the Harvard Business School, recently examined several years' worth of American movie- and music-sales data. The entertainment business has indeed seen its inventory shifting toward a Long Tail curve, Elberse writes in the Harvard Business Review. The shift is slight, however, and Anderson's Long Tail is also "extremely flat."

It's true that we're now buying more obscure movies and music than ever before. But we're merely nibbling on these niches, Elberse reports, while we continue to gorge on a small selection of hits. In 2007, 24 percent of the nearly 4 million digital songs available for sale through stores like iTunes sold only one copy each, and 91 percent of available tracks sold fewer than 100 copies each. The story is the same for the movie business, where, between 2000 and 2005, the number of titles that were purchased only a few times "almost quadrupled." The Internet offers us a buffet of everything—and yet we're mainly settling for the likes of The Love Guru and You Don't Mess With the Zohan.

Elberse's findings are more than a little surprising. The Long Tail wasn't just a pet theory; as Anderson sketched it, the phenomenon arose out of actual innovations in commerce. Take Anderson's signal example of Long Tail success, British mountain climber Joe Simpson's Andean-survival story Touching the Void. When it was released in 1988, the book saw only modest success and then essentially disappeared from stores. But a decade later, after Jon Krakauer published Into Thin Air, a mountaineering-survival hit, Simpson's book enjoyed a sudden boom. The cause was online word of mouth—recommendations for Touching the Void on Amazon's Into Thin Air page pushed people to purchase a book they'd never heard of. After it was reissued as a paperback and made into a documentary, Touching the Void's sales eclipsed those of Into Thin Air. Before the Internet, such out-of-the-blue success for a deep-in-the-tail book could never have occurred.

But according to Elberse, that sort of anecdote is the exception. The reason? We're not very adventurous. Elberse examined the rental habits of customers at Quickflix, a Netflix-like service in Australia. She found that no group of customers exhibited "a particular taste for the obscure." Sure, a small number of customers regularly rented films from deep in the catalog—but they tended to be people who watched a lot of movies generally and so had much more "capacity" for venturing into the Long Tail. And still they chose a lot of hits: The most widely traveling Quickflix customers picked only 8 percent of their rentals from the least popular of available titles and 34 percent from among blockbusters.

In the 1960s, sociologist William McPhee argued that obscure cultural fare faced a further hardship in attracting an audience. McPhee said that for any product category—books, movies, songs—there are generally two kinds of customers: those who buy a lot and those who buy a little. Or, if you prefer, there are buffs, and there are boors. Boors flock to the popular stuff. The buffs, too, like what's popular, but they're more willing to try obscure fare. It would be a mistake, however, to consider buffs open-minded; if you've ever audited an undergrad film class, you understand that such people are often insufferably critical. Here's the hitch, then: The customers who are most likely to try an obscure book, movie, or song are also the most likely to pan it.

Elberse saw evidence of this phenomenon at Quickflix, where obscure titles received, on average, lower ratings than popular ones. Success stories like that of Touching the Void depend on positive online ratings, but the propensity of buffs to rate down titles in the Long Tail limits such possibilities. Maybe Touching the Void just got lucky—more often, what's in the Tail stays in the Tail.

Anderson, who has worked with Elberse before, told me he's happy that his theory is receiving serious academic attention. But he dismisses most of her findings. In particular, he contends, she's picturing a much bigger "head" of the demand curve than he is. Anderson says, for example, that every song that's not available at a Wal-Mart store should qualify as a Long Tail title. Everyone agrees that sales of tracks not available at Wal-Mart account for a significant part of the music business.

There is no winning this technical debate. (Elberse calls Anderson's definitions "arbitrary.") But even if Anderson is right and Elberse is wrong, the shift from hits to niches is obviously slight—we are not entering an era devoid of blockbusters. Anderson readily concedes this and points out that he's never predicted the end of big hits. Often, though, his fans have.

It's also clear that even in this supposed age of the Long Tail, companies that favor a slow, meticulous approach and a small catalog see enormous rewards. Look at Pixar's many blockbusters (or those of its cousin Apple). Or witness the rise of Twelve, the book imprint founded by editor Jonathan Karp that's given rise to a string of best-sellers during the past year. Twelve publishes one book every month, far fewer than others in the industry; this devotion to a few titles, Karp believes, not only produces better books but also books that strike a broad chord and books that everyone wants. "It's been a truism among my colleagues that generally people want to be reading what other people are reading," Karp told me.

Considering that Anderson popularized his theory by coining a catchy phrase, there ought to be a name for Karp's model of working slowly to produce big hits. Let's call it the Big Head theory of entertainment.

Tuesday, July 15, 2008

The fundamentals.....suck.

This is kind of an interesting time. You know that old saying the government trots out when the public is panicking? "The fundamentals are sound?"

Well, the fundamentals suck. But it seems to me that the public isn't panicking.

Or the other classic chestnut: If you can keep your head when everyone around you is panicking --- you just don't understand the situation.

I think what it most reminds me of is, that war and famine and pestilence are just over the horizon, and you suspect its coming your way, but you shrug and go about your business. What can you do about it?

People partied all weekend at the Summer Fest, Linda and I went to see some great movies, business has been good. I don't personally know anyone who has lost their job because of the "fundamentals" or been unable to sell their house. None of my customers who work in the construction trade are having trouble finding work.

Haven't I always been a great proponent of the theory of local observance? That what you see in your business and in your neighborhood is more telling that what you read in the news?

(I realize, that's a contradiction: I guess I mean, there is the mainstream news that you could read without realizing how dire things are, and there are the financial news outlets that are all but screaming, "Game over, man!")

Maybe this is a case where the mainstream media is actually doing us a service by not telling us the worse. Hell, a person watching watching Faux news channel or Rush Ditto would think the problem was that Obama has a scary middle name.

Maybe this is a case where the alphabet soup nature of economic news, the heavy jargon are obscuring the fundamental weaknesses.

Maybe this is a case where the bears have howled so often, that everyone just ignores them.

I've done what I could. Lowered my debt, hunkered down. I'm not willing to go to the extremes of growing my own food, buying a gun, burying my money in the backyard. I'm not even ready to pull out of WaMu.

I'm just watching with great interest.

Monday, July 14, 2008

The Right Stuff.

This weekend beat last weekend by about 15%, for which I've already expressed a Mea Culpa. But --- if I may -- I'm going to give myself credit for that. I think the mix of product currently in the store is producing the results I hoped for. Adding new books and boardgames has mainstreamed my store to such an extent that people are more willing to take it seriously, and more willing to hang around.

So far I am 15% above last year this month, overall. I've reached this point a couple of times this year, only to have a dramatic falloff the second half of the month. So far, I've had 3 months significantly down in sales, and three months where I almost but not quite broke even with last year. Profits, on the other hand, are way up.

The mix just really seems to be working.

It took about 6 years to get here, once I set out to accomplish it. I got to the point where I doubted myself -- that I was just buying to buy. That I couldn't stop myself. I actually agonized quite a bit about it on this blog.

But...since I've now spent about 6 months not overspending I think I'm willing to give myself credit for getting it right. I had to keep adding product, mixing and matching, trying and experimenting, until I got the right results.

There were several missteps along the way -- rather large investments in product lines that didn't really produce. And I'm surprised by the positive results of both books and games which I thought would be more difficult.

As usual there were some unforeseen results -- this time in my favor. Adding more new books had increased my used book sales as well, which is great considering my profit margins on used books. It has been easier to keep up the inventory that I thought it would be.

Frankly, it took 6 years to accomplish because by trying to increase my inventory within my cash flow, I was in a sense trying to pull myself up by my bootstraps. No easy task. You have to have a great deal of patience, and probably confidence that you'll still be around long enough to see the conclusion.

Of course, there is never a moment when I can stop morphing the store. But -- for now at least -- I think I have the right mix of stuff.

Sunday, July 13, 2008

Bastion of Old Bend.

I got the following e-mail, yesterday.


I lived in the Old Bend for the first 13 years of my life. I was a baseball card fanatic back then so I used to come into your store a fair bit in my childhood. We left and moved overseas in 1989 when it was still a charming small town but held on to our house in Bend.

Having had a chance to come back a few times in the intervening 19 years, it always amazed me how much things had changed. New freeways, new big box stores, new developments, etc. The New Bend. A lot of the friends that I grew up with there and their families have moved away. At this point I would have no desire to come back to Bend.

We eventually did sell your house last summer just before the market completely froze up and we made some money. But it still saddens me to see what happened to my hometown. It's good to see that there are still some bastions of Old Bend left. Good luck with your business.


Name withheld until I get permission."

Nice, huh?

Couple of numbers really leap out at me, and explain the genesis of the letter. First, that he was 13 years old when he left. Back then, I had a whole lot of 13 year old customers -- and obviously, based on the thoughtful e-mail, I'm guessing he was a thoughtful kid.

Now? Not so many thoughtful 13 year olds, some but not many.

Secondly, the 1989 date. That was the last year of the "Golden age" in baseball cards. The very next year, it started going south. Another year or so, I was having knife fights in the alley with many of the 'baseball card fanatics', of which I still bear the scars. By 1992, I was pulling the plug on cards, because we were well past the "Greed age" in cards, and on into the "Ragamuffin phase."

I came up with the idea that there are only two reasons to do something in business; either because it's fun (but maybe doesn't make money) or it makes money (but maybe isn't fun.) When it is neither fun nor makes money, get out!

I've also always said that 1989 was the last year before the big box invasion. The last year when local businesses were filling most of the niches. The last year that most newcomers were still trying to fit in instead of overwhelming us. (Linda says: they just overwhelmed us, they weren't trying.)

Anyway, it was a nice reminder of a more innocent time.

Saturday, July 12, 2008

Mea Culpa's

We had a very busy day yesterday, during the bike race.

Stupid, stupid quail creatures. Found the cat perched over the nest last night, so she's going to stay inside for the duration of gestation -- which will drive both her and us crazy. The parents were back on the nest this morning, so no harm.

I'm really enjoying Spook Country, by William Gibson, now that I'm halfway through, after panning it a bit in a review yesterday on the Pegasus Books blog. His style is just difficult for me to get used to, at first.

Despite all my doom and gloom talk, business has been pretty good. My customers who are in the construction trade, most seem to be doing very well.

I spelled Penis wrong. It's actually kind of funny, because I keep getting hits from foreign countries. If I had actually spelled Penus right, I'd be so far down the list I'd probably never get any hits.

Writing a blog is like owning a house: I don't have a landlord to call in to fix things, and I don't have a copy editor/fact checker to fix things.

I live in paradise. Had a European woman yesterday asking about hiking trails, and realized how long it's been since I really went anywhere.

I apologize to the people throughout the world who innocently tap in "minimum wage jobs" or "middle age jobs" or "best jobs" and come up with me. Stick around, learn about Bend and comics....

Friday, July 11, 2008


I've felt a fair amount of Blogenfruede over the last few days. The collapse of Indymac and the strains on Fannie Mae and Freddie Mac have felt... inevitable, somehow.

Yep, I knew this was going to happen.

Well, not this...but something LIKE this.

One of the first blog entries I made was to say: Bubbles pop bigger than you think, and the consequences last longer than you can possibly believe.

You see, I've often kicked myself for getting so deep into baseball cards; yet the real damage wasn't getting into them, it was in not getting out of them quickly enough. I was obvious they were ridiculously overpriced and overproduced. But....I couldn't believe that the system wouldn't somehow absorb the damage, somehow, someway. I mean, surely the card companies couldn't be that stupid.

I was completely naive and clueless.

The collapse of the comic market only reinforced that lesson. It was bad enough when comics quit selling -- but it was the reaction... the overreaction...of the powers that be that really created the havoc. Marvel panicked and bought a distributor; the other comic companies panicked and consolidated around another distributor. And before you knew it, two thirds the comics shops had disappeared, and every distributor but one.

The bigger the bubble, the bigger the damage. Sports cards were huge for me, and comics were too. Pokemon, beanie babies, pogs? I handled them well, but they also didn't have the potential to drag the whole system down with them. Only the unwary, and by then I was a very, very
wary wabbit.

This could still get much worse, especially in Bend.

What a drag it is....

One thing I didn't anticipate about getting older is that I couldn't stay awake at night. I used to watch my Mom nod off in her chair at night, and wonder how that could happen. Nowadays, I find myself trying to make sense of the same paragraph several times, and then waking up with a snort.

It's really cut into my reading time. I used to turn off the telly around 11:00 and read for a couple more hours, at least.

I wake up earlier too, but that isn't my natural reading time.

I've watched T.V. less over the last month or two than I have in years. The networks really broke the connection this year. I got so tired of waiting for shows, that I gave up.

I also can't overcome the negative effects of beer, anymore, either. I still like to drink, but the cost is just too high ordinarily.

I woke up with minor gargoyle eyes -- it's obviously an allergy, or something. I know I have severe reactions to burning sage, and I think sometimes it depends on what kind of stuff is burning in the wildfires.

I usually don't care much for over the counter medications; I think cold pills are worst than the disease, most of the time. Tried some visine, this morning though and it seemed to help.

Going to head into work this morning, but then try to get out of downtown before the race starts. Thankfully, Pat doesn't seem to mind working these festivals, which may account partly for why I don't complain as much.

The quail are safe. I think our cat has forgotten them. When they are nesting, they are nearly invisible.

Another thing that happens when you get older -- you talk about health. Have I told you about my prostrate?

The Bulletin seems to be coming around a bit: the articles on real estate seem a bit more in the downbeat. But everything you need to know comes from the following stats:

June, 2005 Housing sales: 296
June, 2006 248
June, 2008 114

Or this:

Feb., 2008 56

Or this:

"In Bend, builders submitted an average of 25 new building permits per month from January through June...."


It appears that the employment around here has switched over to commercial. In that vein, I offer the following from Keypoint Partners site: (And submit for your consideration that anything that hasn't already started being built -- won't be.)

When the credit crunch first broke in earnest last fall and froze the U.S. commercial mortgage-backed securities (CMBS) market in its tracks, the most bullish prognosticators predicted a mere blip. Many expected issuance in the U.S. to be down from $237 billion in 2007, but thought it could reach $150 billion. The conservative estimates put the expected 2008 volume at $100 billion.

Today, those worst-case scenarios are looking wildly optimistic.

Through the end of June, U.S. CMBS issuance had reached just $12.1 billion according to Commercial Mortgage Alert, an industry newsletter. Overall, that's a 91 percent drop compared with the first six months of 2007. In June itself, $1.3 billion of CMBS bonds were sold. That was up slightly from the $900 million in May, but down more than 96 percent from the record $37.4 billion in June 2007.

In all, analysts are no longer calling for any kind of rebound this year. Analysts from J.P. Morgan Chase & Co., in fact, expect the second half of 2008 to be even quieter than the first, with full-year CMBS issuance volume totaling $20 billion.

What's the upshot of all this? Since CMBS loans accounted for about 70 percent of all commercial real estate financing in 2007, it means prospective borrowers still have no place to turn and the slowdown in investment sales that has plagued the sector won't be resolved any time soon...