To follow up on the previous post, I'm starting to look at the psychology of the consumer again.
While I wouldn't put in the dire terms that Buster put in the comments, there is a fine line between having a wounded consumer and a mortally wounded consumer. To my mind, it's better to be informed and skeptical, but not panicked.
Last night, I began wondering about all those people who have secure jobs, or relatively secure jobs. This is probably the majority, even the vast majority of consumers.
But they've cut back, nevertheless. It's a natural response. But most of them are still coming in and getting their favorite comics, or buying a book, or pulling the trigger for a toy that wows them.
What would be very dangerous is if they didn't just cut back, but stopped spending altogether.
I think that's what all the stimulus package talk is all about. Maybe Buster is right, and little of it will reach Bend in truth. But as long as the 'impression' is out there that SOMETHING is being done, I believe that the consumer will continue to be careful, but not stop altogether.
Obama is a plus, because he holds out the potential for improvement. The stimulus package is a plus, because it looks as though something is being done. The bail-out -- god help me -- is a plus, at least psychologically -- because it keeps the Big Bank Fails headlines out of the paper.
On street level, I saw the immediate impact of Bears, Sterns going down. Then the even bigger impact of Lehman brothers, and Bernie Madoff was the nail. I suppose, Murphy being a tricky bastard, that I should expect at least one more real eye-opener, and hope the psychology doesn't turn permanently bearish.
The underlying conditions are stark, but I can deal with them as long as there isn't another total shift in psychology.
Subscribe to:
Post Comments (Atom)
9 comments:
Lets see its all psychology. Its ok to ignore the fact that many people with secure jobs are already up to their eyeballs in debt. That they are now starting to realize that maybe they really should be saving money. That the concept that you really didn't need to save because of the equity magically being created in the never dropping housing industry was really false and as a result you really do need to plan for retirement.
It is more than psychology. Or maybe it is psychology in that the US consumer has been delusional about their economic situation for the last 20 years and are now starting to realize just how delusional they have been.
It is psychology to a degree, but a large part of it is economic reality. The need to save, the need to puts ones finances in order, the need to reduce debt, prior to buying things which are not necessary.
The recession following 9/11 was psychology. This one is the result of real deleveraging, reversing the multiplication of money that privded easy credit without appropriate risk based loan guidelines.
Now, Rdc, where did I say it was "all pyschology"?
If anything, I've neglected that over the last year or so.
I agree with you on all the other points.
By the by, I was talking to a guy that said that a couple of years ago, the City of Bend was installing 10 water meters a day, or more than 50 a week.
Today, it's one per week.
He said there are 700 homes in Bend who have had their water turned off....
CACB $2.23
-1.54 (-40.85%)
And it's Friday.
This could be a watershed day in Central Oregon.
The recession following 9/11 was psychology.
*
For every DOLLAR that Al-Queda ( bin laden, Bush family saudi contractor ), spent on 911 ( twin-tower ) hijack, the US government lost $1M during the first year of the event (911).
It's estimated that OBL spent $20k on the 911 hijack, and that the cost to the US was over $20 Billion dollar loss ( First year of 911).
Much more than psychology is/was at stake with 911, that is why I believe when history books of the future are written about US depression 2.0, 911 will be our 1929. Today we're at 1933, and but this time the depression has been expanded 2X in time.
In response the 911 black-swan, BUSH released 'easy-money', which that event now will cost at least $2 Trillion, and that's just newly printed money this year and last.
When the final history books have been written for every dollar al-queda spent, it will have cost the USA over a billion dollars.
The original goal was to bring the US to its financials knees an for all indication, all they have to do is sit and wait.
Note for the record in Persian, "al-queda' means the Base, it was always the CIA base setup by Ronny-Raygun back in the afghan war, for full history on the real origin of 'al-queda' read book 'Charlies Wilsons War', not the movie.
Never count on a panicked person making sane decisions. I know of one case where a seller put in a new yard and then immediately turned off the water.
"It is more than psychology. Or maybe it is psychology in that the US consumer has been delusional about their economic situation for the last 20 years and are now starting to realize just how delusional they have been."
All true, but the psychological factor is still huge.
When stocks and real estate are rising we see the "wealth effect" -- people are willing to spend money freely because they see the value of their portfolio and their home as increasing, even though their incomes haven't increased and their gain in wealth is only on paper.
Now we're seeing the "poverty effect" -- even people who are not in debt and are financially secure are tightening their belts because they see the value of their portfolios and their homes shrinking, even though the loss is only on paper.
Well its been said "Greed & Fear", what more needs to be said?
So what over simplifications don't provide insight, or prediction, they're just handy, and quite often used by fools to simplify the complex.
Take Bend, "Learned Helplessness" (google this term), has been inoculated into the populace. Sure its a branch of psychology, but again knowing that isn't knowledge.
It is impossible to spend much time in Central Oregon without hearing the name Brooks Resources.
Generally, once you hear that name, you’ll soon hear the name of its chairman, Mike Hollern.
I first met Mike when we started the historical society at Black Butte Ranch. We began the organization in 1997 by offering programs with speakers of historical interest. A few people told me that I should ask Mr. Hollern, the chairman of a very busy and successful company, to come and speak to our group. Brooks Resources had not been involved with the Ranch for many years and I thought it would be next to impossible for someone as busy as him to be willing to come out and speak to a group of Ranch homeowners.
Somehow I dug up the courage to call him. The first astounding thing about that call was finding that Mike actually answered his own phone. Very quickly into the conversation it became evident that I was speaking with a truly exceptional person. He was thoughtful and gracious and to my amazement, willing to speak with the group.
The day he spoke we had fifty people in attendance. Given the fact that only about 250 people lived at the Ranch at that time, and many of them were still south escaping the cold, the attendance was significant. Some people already knew Mike because they had owned property at the Ranch for a long time. Many were like me; their only knowledge of him came from reading Peggy Lucas’ book There is a Place. We were all quickly captivated. Hearing him share stories of risk taking, struggle and good luck gave new value to what was around us.
Born in 1938 in Minneapolis, Minnesota, Mike’s mother was a Brooks of the Brooks-Scanlon lumber company. As a young man, Mike didn’t immediately join the Brooks-Scanlon organization after graduating college. He wanted to prove to himself that he could achieve something on his own, so he took a job as a television announcer in Billings Montana.
After a year, Mike concluded he was “no Chet Huntley or David Brinkley,” so he moved his young wife to California. He spent two years earning an MBA at Stanford University. He stayed at the university for two years after graduation, becoming Assistant to the Vice President of Finance, while raising a family – he has four children. He said he learned everything there from financial planning to fund-raising.
In 1965 an opportunity to join his family’s company arose, this time in Central Oregon. Mike joined Brooks Scanlon in July of that year as Administration Manager. Though headquartered in Minnesota, by the late 1960s Brooks-Scanlon owned nearly 300,000 acres of Central Oregon timber land. The timber industry was beginning to face hard times. All of the timber mills in Sisters had closed by 1963, devastating the town. “Old-timers” remember the 1960s as a time of mass unemployment and a great depression in Sisters Country.
As Mike told us in his talk in 1997, “Brooks realized they were not just in the timber business, but in the land business.” They had been looking at their Central Oregon timber land as an opportunity to become land developers. Brooks Resources Corporation, a subsidiary of Brooks-Scanlon, was established in 1969. Mike became President of Brooks-Scanlon and Chairman of the Board and Chief Executive officer of Brooks Resources in 1970.
The first development for Mike and his new company was Black Butte Ranch. Mike used his relationship with Stanford University to help him find the people he wanted to build the new resort.
Though Black Butte Ranch was the first, it was only the beginning. People looking in today may say it was all easy. What they may not remember is the terrible recession in land prices in the 1980s. There were times then, though Brooks Resources was land rich, it was cash poor. Only strong leadership and a commitment to the area let Brooks Resources continue through those tough years.
Today, Brooks Resources and Mike Hollern are the premier developers in Central Oregon. Having created showcase developments like North Rim on Awbrey Butte in Bend, they are moving out to Prineville and Madras creating astounding opportunities for new arrivals to Central Oregon to buy beautiful but affordable homes and land.
A man of vision, yet grounded in the simple values of family, community and concern for others. Mike Hollern is a special part of Central Oregon history.
Post a Comment