There was a recent comment on Bendbubble2 of someone who was suspicious of Paul-doh's motivations. Personally, I think he's just an opinionated bastard who wants to world to hear his opinion. Just like the rest of us.

Anyway, the writer implied that only "disgruntled locals" were reading his blog.

I plead guilty to "disgruntled local" .

But not for the reasons you might think. I'm not disgruntled because of the growth and the congestion and the attitudes. Like I've said before, without all that I probably wouldn't have a business or a livelihood.

No, I'm disgruntled because this growth can't be sustained. Because it was built on hype and promotions, instead of real jobs. Hype permeates this town; from over-blown businesses (and too many of them); to overblown developments with overbuilt houses with unnecessary gates; to a city council who has overreached in public transportation and Juniper Ridge; to residents who have pristine hummers and SUV's that are twice the size they need to be.

Meanwhile, Mirror Pond will be allowed to fill with silt; the roads will be hastily patched; free parking will be taken away; white elephants like the Tower Theater will continue to sit; money is going toward lawsuit settlements instead of police and fire services and so on.

Because the self-important, over blown exceptionalism that pervaded this town, by people who made no real effort to understand the history or ethos of the area.

You tell me every time you sing the praises of Trader Joes that you would really want to live in Bend, California.

Everyone of you who says this is coming from a town that had a Trader Joes. Which means that you want to turn Bend into the town you left. You want to move to Bend, and pull the mass market in here after you.

That's what makes me disgruntled.

How liberating. Until yesterday, I hadn't even realized I was feeling restrained.

I feel better now. When even Bilbobust thinks I'm too negative, I think I've finally positioned myself where I belong. I've always been more comfortable being a contrarian. Makes me nervous when too many people agree with me. And I feel silly being the voice of reason.

It did sort of clarify how I really believe. I'm tired of looking for reasons why the economy of Bend might not get as bad as my gut instinct tells me. Thank god for Publius and the following comment:

I think your sky-is-falling attitude is both overly pessimistic and inaccurate. From what I can see Bend is doing very well. Within a block of my house two homes are being built and another is being remodeled. The stores I shop at are busier this Spring than I've ever seen them. Traffic today, a mid-week weekday, was more congested than on a summer weekend. Where I work we're overwhelmed with business. Bend is booming and prospects are good.

Yes! That's the yin to my yang I've been looking for! I want that kind of disputation -- no I need that kind of disputation. I know the sentiment exists, because I run into it every day at my store. Not from the construction people, anymore, I have to say, but the average newcomer to Bend.

Weirdly enough, that's what tells me the opposite. As long as I hear the 'boom' talk, I know we still have a ways to go. It's when everyone is on board that we've finally busted that we will have hit bottom.

About 8 years ago, the card manufacturers started putting more and better cards in the 'hobby' boxes -- the 'retail' boxes at the mass market were still cheaper. So, I'd very carefully explain the difference to the customers; and I could see in their eyes that it just didn't compute. Customers wanted cheap, not nuance.

But over the last two years, even the most casual of card customers quickly nod their head in agreement. Enough of them had bought a box at Walmart and found it half empty to finally understand.

Like I said, I went back into sports cards because I perceived them to have finally hit bottom.

Because the excesses don't get sweated completely out of the system until then.

Same thing with the Bend economy. As long as the illusion exists that nothings really wrong nothing will really change.


Publius's comment got me to start wondering about finding a new way to explain why small businesses in Bend are due for a world of hurt.

In my own particular corner of the retail world, I have less small competition that I did 18 years ago. Indeed, I'm last man standing. Taking into account expenses and costs, I'm probably making about the same income per product line as I was 18 years ago -- I've just adapted by having twice as many product lines.

Yet there are four times more people here. How can that be?

One easy answer -- the mass market has more than filled the void in competition.

I keep wishing someone would do the research on this; but there was a Wall Street Journal or New York Times (I sure wish I had saved it) about 5 years ago that claimed Bend was the Second Most Over-retailed Town in America. (Las Vegas was first, and no doubt will ALWAYS be first.)

So I'm just going to lay this statement out there and let someone prove me wrong: Bend is the most over-retailed (normal) metro area in America.

So how do I explain all the small businesses all over town? I think the influx of boom money is responsible for almost all that, and if that boom money is drying up, so will a whole bunch of businesses. It's not the 'high-end' shops who are going to avoid this, either. In fact, I believe they'll be the first casualties.

Still, Publius, I'd love to know if you think that it is smart for the builders to be building two houses on your block. I'd love to know what businesses you think were busy. And what business you are involved in that was "overwhelmed."

Details, please.

A year ago, if somebody told me they were moving their business to a new location, it was a new, improved and larger location. This year, it's to save money.

A year ago, if somebody told me they were moving to a new job, it was a because it was an advancement, with better pay. This year, it's because it's the only job they can find.

A year ago, if I asked a furniture salesman, or a spa salesman, or any other kind of sales business, how they were doing, they'd say, "Great!" and mean it. This year, they tell me it's horrid. And mean it.

And so on. I think it has begun to sink into people's consciousness what is happening. Faster and deeper than even I expected. I've been cutting back on expenses for almost a year now. I can't imagine how the new businesses are going to be able to cut back quick enough if they're only starting now. I can count on one hand the number of business owners downtown who experienced the last major downturn in the 1980's. They are going to be stunned and shocked.

Last fall, I mentioned that I thought it was important to set a benchmark in advance. I do this in my business planning, because it's too easy to rationalize away results of the moment, or conversely, make too much of them.

Selling less than 100 houses in March, was the benchmark I mentioned back in November as a sign we are in deep trouble. We sold less than 100. It's possible over the next three months we may sell a bit more than that, but we really needed to sell bunches and bunches more than that.

Actually, I think the number of houses for sale is under reported, the prices are over reported, and the under the table deals, desperation sales are happening completely unreported.
Of course, most businesses aren't going to say a word. Most are like the business of a competitor of mine last year who was talking big, but who I found out yesterday closed at the beginning of March. I'm sympathetic. I could wish people wouldn't listen to the media or cut back at all.

Still, I started this blog with the intention of being real. I suppose, if I was really hurting, I probably wouldn't post this. I did have to sleep on it. I thought about just storing it, and then springing it six months later saying, "Look! I was right!" But then, the opposite possibility is there that I don't post it because I was wrong, and that seems a cop-out to me.

If I'm going to do this blog at all, I need to say what I think. The entire context of everything I might say about Pegasus or Bend or my own personal circumstances come from what I really think. If I was anonymous, I wouldn't think twice about posting this. And the clincher, I'm making my decisions based on these conclusions, so I may as well share them. Otherwise, nothing will make much sense.

I think the Heloc removal has turned out to be a good thing, if unsettling. I really thought I was going to be immune to a downturn. (Silly me. I forgot one of my rules of thumb; downturns hurt everyone.) It has really firmed up my suspicions, and made me act more aggressive toward cost cutting and debt removal.

I think a whole lot of 'back up' capital is going to be spent this spring and next fall to keep up appearances. (And of course there will be many exceptions; businesses that do well despite everything.) So you may not see much cracking on the outside, but behind the scenes.... I am already hearing customer after customer tell me they've been laid off or their hours have been cut. And this is the busy season for the housing market, and we're headed into the busy season for the tourist business.

I still get pretty good tourist business -- after all, most of the north of the U.S.A. doesn't have it as bad as Bend, Las Vegas, Arizona, California and Florida. It's going to hit the valley too, eventually, though not as bad as here.

And I still get the customers with steady jobs. Any of you folk ready this who have solid jobs, just ignore this entire post!

My sales are down, but not more than I predicted and allowed for. More alarming to me is that I'm seeing volatility I haven't seen in years. Horrid day, followed by gangbusters day, followed by average days, followed by gangbusters, followed by horrid....followed by gangbusters....like that. The averages are still there, but it's a bit more stressful getting there. The thing that is encouraging is the broad range of stuff I'm selling -- just like I hoped and planned.

And I really want to emphasize that Downtown is really proving out. The foot traffic we get downtown is so high, that it can take a downturn and still be much higher than anything I am used to. It will probably be the last place in town to feel it. Yes, the rents are high. But, then again, we actually get customers.....
I'm totally psyched that my diversification efforts over the last five years are really paying off. Having 10 product lines, fully stocked, has fueled sales that simply wouldn't have been there before. This is the situation I've been planning for. But it is getting a big ragged around the edges, enough for me to think it will get worse. I've adjusted my orders accordingly.

As I've said before, knowing in advance that someone is going to sock you in the jaw, doesn't make it hurt any less. We'll work our way through, but it will be work.

I want to emphasize that I think Pegasus is going to weather this just fine. Remember, I always talk this way --have for the last 28 years. This is the most solid we've ever been. I just hate to see us have to cut back at all. One way to put it: While sales are down, profits are actually up. It's weird that way. I'm more or less harvesting the fields already tilled, rather than planting new crops. When things are good; I tend to expand as much as possible, increase sales as much as possible; in preparation for times like this.

So, not only do I think we'll be fine, I think some opportunities are going to open up. I know how to do this; it feels really familiar. Not so much because of past recessions, but because at least 4 or 5 times, I've seen major product lines completely dry up overnight.

Part of the trick is recognizing and accepting that it's really happening. I've hedged my predictions until now; I wanted to hold out hope. I was afraid of looking foolish if I predicted a severe downturn, and then it didn't happen. But so far, every prediction I've made, no matter how negative, has been undercalling it. I may be wrong -- I hope I am wrong-- but I think this is the real deal.

So I'm calling it. The country may be in a mild recession, but we in Bend are headed for a deeper one.

If I had to pick one factor that I think is unavoidable, I'd have to say that the inexorable declines in California and Vegas and Phoenix and Florida are going to have consequences to places like Oregon and Colorado. I don't see how we can escape that.

That's why I think all these people who are still spouting the Pollyanna lines of "Bend is different. People want to live here" are going to pay a steep price for not being realistic. I'm not mad at them. I feel sorry for them.

I think Bend is already getting it worst than the rest of Oregon. And it's happening two full seasons before I expected it. (I was thinking it would really sink in this Fall.) I don't think we are headed for Road Warrior territory, as Bilbo would have it, but an occasional vacancy, that lasts more than a few months..... Look at Greenwood, which went from almost no vacancies to about 16 big vacancies over the last year..... (Obama just filled one, for the next few months....) Landlords are having the same problem as house owners in adjusting their rates downward.

So yeah, I think we are losing jobs at a rapid rate. I think locals are already cutting back. I think we are already beginning to lose population. And I don't care what the statistics are saying, I'm seeing and hearing it every day. Tighten your belts, folks.

If I was involved in the real estate, building, or financial services business in any way, I'd be looking around for a way to supplement my income. Because, I'm beginning to think that our feeder market from California is going to grind to a halt; and the majority of sales we'll be seeing are short sales and foreclosures. (Which don't profit anyone but the buyer, I believe.) It will, as I said, obscure the truth.

I know how it feels. Years ago, I would have a decent looking month on the balance sheet. But I'd look back and see the Perils of Pauline; making a lucky sale, here; cutting a deal there; doing an aggressive sales pitch here; giving up a prized product for less than it's worth there.

You make what you need, and from the outside it looks fine. But it isn't the same as just asking and getting the price you want.

That's the kind of market I think we're headed for. I wouldn't mind in the slightest being wrong. But if it's like I think it will be? Thank god I've had lots of practice....

"Core" inflation as measured by the government does not include food or energy?

That's absurd!

I've just got to quit reading these damn financial blogs. I had no idea we were this far off the road.

I think I'll just concentrate on my own -- anecdotal -- observations for awhile.

Looked out the window while talking to a customer and commented, "There are 8 empty parking spots in front of my store! I haven't seen that in years." A minute later, there were 12 empty parking spots on my block.

It seems like I should be able to develop some measure of economic health that compares job applications, cold calls, people trying to sell me product, and empty parking spots.

Seems about as accurate as government statistics.

Boring personal stuff.

Linda was in Portland over the weekend, visiting the kids. I thought I'd drink some beer and hang out at home, do some gardening, and just relax. Friday night, said, no, I want tomorrow clear. Left the beer alone. Then proceeded to do nothing but watch friggin' golf all day.

Next day, I make a deal with myself. Read 10 comics and dig up 15 sq. ft. of sod, and the rest of the day you can slack. Watch golf, but do book work.

Late in the afternoon I went out to do my 15 ft. and spent the next 3 hours digging around in the dirt. Went in, took a shower, and stared at the beer in the fridge. No, I want to do more gardening tomorrow. I want to be clear.

Next day, blogged and napped, napped and blogged and did nothing. Still no beer.

Linda called yesterday afternoon, and the sound of her voice just lifted my spirits. House felt empty all weekend. Panga went into her office and just meowed for an hour. It's good to have my wife home.

Came to work this morning feeling good and clear, and wishing I could go outside. Just have to get through the day without doing reorders, and I'll consider it a success.

Going to do another 15 ft. of sod tonight. (Only 250 ft. to go....)

So routine. I love the routine. Boring and safe. Have lost 5 pounds this month, so far. Have managed to save bunch of money at the store. Outside gardening and planning the next couple of decades of landscaping (knock wood) and reading my books and doing a bit of writing.

So boring. If I could, I'd be even more boring. I'd create a room with nothing but a mat in the middle. Go in there and sit. Not meditate, I hate clearing my mind, but letting it drift. No outside stimulation at all. No noise, no colorful graphics, no people.

I haven't turned on my (c.d. ) record player in months. If I just weaned myself of the T.V., I'd have nothing but time.

Mr. Excitement.

At the start of my second two week moratorium on reorders. I plan to do this for four months total. First month was painful. But I expect it to get harder and harder as the spring wears on. I will be making 'special orders' for customers, so no request will go unfilled. But anything speculative or experimental is going to have to wait until summer.

The two weeks of reorders each month I do make, is calculated to make sure that inventory holds up, and evergreens are replaced.

I would have been doing something like this no matter what. The outside economy has given me more motivation, to be sure, but I was needing to do this anyway. After five years of expansion, and spending, it is time to consolidate. I pretty much ran out of room late last year, and ever since I've been trying to refine the mix, rather than just buy more, more, more.

Sometime over the next year, I'll need to start renegotiating my lease. I have no reason to believe that my landlord won't treat me fairly -- we have a 27 year history, after all. But, just in case, it would probably be prudent to have less debt and more cash. Which is something I should do anyway. I intend to stay, unless it's impossible. But cash gives me options.

An irony, as always, is that I tend to make actual cash profits when sales are flat or declining. I seem to just be more disciplined and focused.

Meanwhile, also a strange little thing that seems to happen -- I tend to diet during the same months I'm doing tight budgeting. Never consciously, just seems to go together. Getting my own habits under control.

And finally, the following article has made me feel a little better about my disappearing HELOC.

YOU THOUGHT YOU HAD AN EQUITY LINE

Gretchen Morgenson
New York Times, April 13, 2008

"The latest example of this is in the mass freezing of home equity lines of credit going on across the country. Reeling from losses on their wretched loan decisions of recent years, lenders are preventing borrowers with pristine credit and significant equity in their homes from tapping into credit lines that they paid dearly to secure." (Italics are mine.)

Rolling recession.

Something I noticed about Bend again and again is that we seem to benefit from surges later than other places, and we seem to be affected by downturns later as well.

Even in this modern, interconnected world, I think that still holds true.

For those who are paying attention, it's a huge advantage. You can watch what's happening elsewhere and gear up in time to take advantage. Again and again, I would get word of a hot product, magic, or pogs, or whatever, and I'd go out and get some and set up supply chains and then watch the product sit there and gather dust for a few months. I'd call my wholesalers and complain; "Are you SURE this is Hot?" Don't worry, they'd say. Everywhere else it's selling out.

I remember getting pogs in a year early and just getting blank looks. At the beginning of the following summer, I at least started getting inquiries, so I set up a nice display and sold a few. And then, one day a few weeks after school started, I walked in the door and there was a huge line at the front of the pog display. Boom. We rode that wave for all it was worth.

But exactly six months before the boom ended, indeed at the very peak of sales in Bend, I started hearing how it was dying in San Fran and Seattle; three months later, just as a pog store was opening in the mall (I kid you not), I heard it was all but dead elsewhere.

It gave me the chance to start cutting back at the six month point, which took some real courage when sales were still so strong, and all but stop ordering at 3 months from the end.

I'd say the recession in Bend is about where pogs were then. Still enough plausible deniability to make you doubt yourself. Still some activity. That same pattern has held for just about everything. We get the benefits later, we drop later....and the downturns last longer.

Jesse Felder's local blog, My Back Pages, has printed a revealing map graph:

"PMI Group, one of the largest mortgage insurers in the nation, officially categorized Deschutes County as "highest risk" for future home price declines, along with areas such as South Florida, Southern California, Las Vegas and Phoenix."

The graph pretty much shows large swathes of Florida and California and Arizona in bright red.

And up north, a strange little square of red smack dab in the middle of Oregon.

It's what I've been trying to say all along. We are getting plenty of warning. It's a huge advantage to us -- to be able to read month after month of very dire happenings in Florida and California and to able to prepare for it. The national Housing Bubble Blog was replete with comments from realtor's and bankers, almost the exact same words we hear now from locals. It's like getting flu shot.

It can be hard at this time of year to stay focused. I'm trying to keep my eye on the dangers, and not get swayed by the strange lack of news or comment. Like the eye of the storm. It takes but a half an hour for me to spend so much money on my store that it will takes months to repay.

So I'm trying to stay patient and alert.

Paul-doh always seem to find enough material to write one of his rants, which is always refreshing to me. But even he got 'just' a little over a hundred comments last week (maybe twenty pertinent comments....)

But again, this strange quiet is familiar. It happens in every downturn, and there isn't any way around it. The truth, the real situation' won't come out for months, about the time when it doesn't matter anymore. In other words, you can't wait for confirmation, because by then it's too late.

So far, so good. I know what to do, I just have to do it.