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Business Outlook & Plan2/26
![]() We have wide range of differing views on where we are as a country and where we are headed. This post pertains to the economics of that and how it effects your shop and what your plan is to deal with it going forward. In 2006 I became concerned with what I saw and prepared for what eventually became 2008 & 2009 and while having to tighten our belt somewhat came through it relatively unscathed due to what I forecast and my plan for dealing with it. However, this wave of free money has lasted longer than I thought it would and I have probably missed a fair portion of the upside of this housing boom due to now having (or in my case maybe not wanting) to have the capacity to manufacture as much product as I could have sold. So there have been times I've been right and times I've been wrong. In general I'm a cautious individual, more interested in the freedom to live my life the way I want and not wanting to be tied to liabilities of debt or the risk of running a huge shop with many livlihoods that depend on me- that outlook tends to be the prism I view through. In the macro picture, I love what Trump is attempting to do, but he has been handed a you know what sandwich in the terms of national debt, personal levels of debt & several other reasons that will make the severe downturn we are due for in my opinion much closer to fruition- even if the deep state didn't want to drop the next Great Depression in his lap, and I believe they do. So my continued plan is this. Take on as much work as I can, but only work that turns over fairly quickly. I'm not stuck on any long drawn out payments many months down the road. And I will continue to use other peoples labor and risk appetite to my advantage in the form of outsourcing certain components as much as possible. By doing this I can stay completely debt free and also by using local small outsourcers keep costs at a manageable level. If I believed as Pat did in the demographics or as many do in the economics I would go all in, but my tendencies and also my outlook won't allow me to do so. In other words I have plateaued as a business and am fine with it. 2/26
![]() They are called leading economic indicators for a reason.
2/26
![]() Pat,
For example, your whole thesis is that millennials are getting that to that age where they want to start a family and due to the demographics of that age group coming of age we will see a boom in housing. Now if I could agree with the first half of that thesis, I could agree with the last half. But this demographic does not believe in traditional families- from marriage to raising a family. And the ones that due put it off 10 years later than normal. Often not being able to accomplish that family because their beliefs to not coincide with actually finding a mate and starting a family. Then you have to get into the financials of it. A huge set of this group still live with their parents with no end in sight. Another large group have enormous student debt. They also have to move to metro areas, where housing prices price them out of the market, to find a job. I won't even get into their beliefs on owning vs. renting due to them being of a impressionable age in 2008. You trying to make it a simple addition equation (group of people + coming of age=boom in housing), but the fact is you have to be doing calculus on this with a great many inputs that have differed from past generations. Pat, I hope you are right but I would bet heavily against it. 2/26
![]() IMO you want to stick close to the data. I don't know about your area but around here it is amazing how many women there are pushing strollers. All life wants to survive, which means procreate. This is not a new idea. Yeah there are things that bother me too like the influence of entitlements and there greater age of child bearing, whether Latinos will have the income to buy houses without section 8 housing. In general there is an axiom called Occam's Razor, which states that when considering a situation move to the conclusion that requires the least number of assumptions. People make babies, people require single family residences for child rearing. 2/26
![]() Pat, I think it was you who in the last post said that data can be said to mean what you say. If I would have stuck with the data being presented in 2005 I would have been sunk. That is the reason for my post, to gather everyone interpretation of the data- the cards they have been dealt and see how they were going to play them. I respect your opinion, I know it is hard earned through a lot of honest reading and research. I just think it is dead wrong. The only people I see making kids are the ones who cannot buy a house- let alone custom cabinetry. But let's roll with your side of the argument- how are you proceeding believing what you are believing? I mean actions speak louder than words, no? I don't mean that as a challenge or negatively but honestly. If you truly believe this then you must be positioning yourself accordingly. What are you doing? 2/26
![]() FamilyMan, As an aside, since you are talking about shit sandwiches, lets talk about the one Obama inherited. In 2008 the world was on the brink of a complete financial meltdown. This was after 8 years of a Republican Bush-Cheney administration. The banks were completely unfettered and indemnified against risk by the banking laws in place at that time. The automakers were on the brink of collapse. We had massive amounts of blood and treasure committed to fighting a nation who had absolutely nothing to do with 9/11. Osama Bin Laden was still directing traffic for global terrorism. Well, the auto companies are flourishing now, Bin Laden is dead and cabinet shops are booming. If I were you I would just keep doing what makes you successful. Take as much work on as you are comfortable with. Remember that you will soon age out, your knees will go and your eyesight won't support great woodworking. Myself, I am hiring more crew.
2/26
![]() Make hay while the sun shines. Technology is on an absolute rampage right now making everything waaay to unpredictable.The ability to adapt will trump all else....or so they tell me.
2/26
![]() I do have one question about the 2008 meltdown that is still nagging me..... Rather than just having the government step in and bail out the banks, why didn't they give the money to the people who took out the mortgage with the requirement that they pay the mortgage off. This way the banks would get their money but all the debt would go away too? Pat? Econ 101? Any ideas about this?
2/26
![]() Kali,
Does the Farmer's Almanac say it is going to be a wet year or are we going into a 100 year drought? Or are we growing on irrigated land- is the fed still printing money? If it's either a really wet year or we are irrigated, are so sure that we are buying the harvestor of all harvestors, the big 80'ers with GPS, air conditioning and satelittle radio- or are less sure and just fixing up the old Ford tractor with some duct tape and bailing twine hoping to reap the benefits but not willing to go all in? I agree things are far too unpredictable. I am positive in my outcome eventually but way less sure on the timing. So I have taken measured steps to reap some, but not all of the benefits of the free money and have tried putting that away for when it stops. Sort of like hay, grow while the weather is good and the still eat while the weather turns bad. cabmaker, you are giving credit to someone who should not get it. It is all on the fed, both the 1920's which we are living in now and the 1930's which is what we will be living in tomorrow. And think this temporary boom will only cost our grandkids and great grandkids a chance at a decent life, let alone one better than ours. We will eventually have to pay, or there will be a reset. Either way it will be ugly and yes, I blame Bush, his spending and his wars almost as much as Obama. On Bush you are correct. Unlike Obama, I think he actually loved his country, but was misinformed at best and inept at worst. 2/26
![]() FamilyMan, I wouldn't worry about the sky falling down (unless of course Trump annihilates all of our working relationships with the countries that have influence over North Korea). What keep property values high in the Okanogan and eastern Washington hinterlands is all the tech money from Seattle. These workers buy vacation property where you live and want a better grade of cabinet . Twenty years ago the local denizens could buy the land their cabin is on for what you sell them a kitchen for today. You are not selling your kitchens to third generation loggers or ranchers. Brick & Mortar operations are going by the wayside. JC Penneys is closing 140 stores. Sears is just about gone. Soon it will be the grocery stores. People still got to buy groceries and TV sets and they're going to buy these from Amazon or the new start up that competes with Amazon. For better or worse Amazon is located three hours from your shop (about your delivery range). Amazon is not going away. Grocery stores might however. Right now they differentiate themselves by having fresh produce (from Mexico). Without their produce department to provide an incentive for customers to come in, it's going to be really hard to sustain all that asphalt parking lot and associated expense of heating and staffing a store. The hinterlands where you live may never have Amazon home delivery but the grocery stores you shop at are joined at the hip to the grocery store paradigm. As these brick & mortar stores drop by the wayside your neighbors (who don't have as big a garden as you) are going to be suffering. The best thing we can all hope for is to not have a trade war with the people who feed us.
2/26
![]() Unlike Obama, he ACTUALLY loved his country? Is this the best you got? 2/26
![]() My situation is different, my niche dissappeared, I shut down my shop thinking I would go get a job. But I didn't remember that that was not able in my bag of tricks. So I went to work as an installer but had to stop because of colon cancer, but have since beat that. But having tired of depending on the vaguries of being an employee. I have decided to contract woodwork again. I'm buying a small CNC and looking for a new niche. Predictions are hard, especially about the future. The best way to predict the future is to create it. The best advise I have heard is from David.
Reality Check this country has a 20 trillion dollar GDP. As in the US kicks ass. We are due for another recession, but it will be mild. To put it in baseball terms I would be looking to steal second, not stay close to 1st. 2/26
![]() Pat, glad you beat the cancer. What type of CNC product are you going to make? I hope you are right, but I do not believe so. Any thoughts on the fourth turning? I've always thought along those lines and seeing someone put a name to it and sync it all up with dates and events adds more credibility to it. I was reading something today that Bannon may think along those lines. Nothing new under the sun. Humans and society progress not linear but cyclical, only the technology changes what it looks like somewhat.
2/26
![]() FamilyMan, I was hoping you would elaborate a bit on your contention that Obama does not love America. It's useful sometimes to understand the general philosophy behind how people interpret the world. By all measures the economy is roaring. It certainly is in cabinet land. This is an environment that Trump inherited from Obama. It is certainly a lot different than the one Obama inherited from Bush. The Obama administration had to be doing something right or this would not be the case. Pat can probably trot out a chart to refute this but the narrative around me right now is that things are a lot better than they were when I was bidding 14 jobs to get one. I imagine the economy is a whole lot better for you too. Right now you are asking for advice about how to manage your growth opportunities. The Obama does not love our country is similar to the Obama was born in Kenya meme. Trump traded on the birth certificate story for a long time. Did you guys actually think this was true? Did you actually have any doubts? Do you think he is secretly islamic? How do you get to the point where you think Obama does not love our country?
I do tend to agree with you about Pat's analysis of demographics. I agree with him that all new parents want a house with a back yard to raise their kids. I agree with you that this is an opportunity that is only available to those with a lot of resources. Fortunately for both of us, our customers are the ones with those resources. I personally think the rich are going to get richer. 2/26
![]() Presidents do not have much if anything to do with the economy. At best they will have some impact in the following years. Mostly in a negative way as with LBJ and other presidents. One thing right now that would be disastrous is if Trump passed tariffs. This is counter intuitive but if you disagree look up the consequences of Smoot Hawley passed by Hoover. I don't know anything about the 4th turning, I saw a tape made by Peter Diamandis about it but that was it. Again making plans based on unlikely events (no matter how plausible) is not a good idea. Either way it is your call. But allowing negative influences to influence your thinking will not have good effects. Again David's advise is good in all situations, produce and do awesome work. Money is not wealth, wealth is the things that money buys. Focus on producing valuable products and services and you will do better no matter what the situation. 2/26
![]() I get a lot of my thinking from Logan Logan
Pat,
But there are some here I respect and wanted to get their thoughts. I don't plan on changing my strategy, but I love data- I'm an information junkie and even if I don't agree with the others knowing what they think helps me in my implementation of my strategy. I always like to know what the word on the street is.
At the precipice of the crash debt was brutal. Debt is usually not a good idea. But with interest rates so low it is not a bad idea on the other hand interest rates figure to stay low for a long time. In charts the trend is you friend.
Pat
Stay healthy dude ,and make sure you enjoy whats left.I know it goes without saying ,everyday is a gift for all of us.
Best Regards RC
Thanks Rick and FM
Well, Tim, I see that you have many questions, some for me, some not.
I'll start with your basic misunderstanding of the '08 problems.
The Community Reinvestment Act, dating from the days of Carter, required banks to make, what shall we say? Questionable? Yes, that's it, questionable loans.
Later HUD guidelines ("Affordable Housing Goals") put the force of law into unilateral declarations from HUD about the volume of "low and moderate income" loans lenders should make, as in by Cuomo, then the HUD Secretary under Clinton, who jacked the requirement up to 50% of all loans in 2001.
Combine all of that with a swarm of operatives from Fannie and Freddie and HUD and the Federal Reserve (the biggest bank regulator of all) lecturing meetings of bankers about how to comply with the new and much higher requirements for super-easy credit to people who shouldn't have gotten it.
Remember that the Fed and other federal regulators had and have absolute power to deny any bank the right to expand here or there or do this or that. If they weren't complying with HUD and/or CRA loan requirements, too bad for your planned expansion or acquisition.
What did we get? Nothing down loans, down-strokes financed by grants, then later little or no documentation of anything, indeed what ultimately became known as NINJA loans -- no income, no job, no assets loans.
What are known as Alt-A and sub-prime loans. Total junk. All at the behest and unspoken threat of the government.
No sane banker would have done this on their own. Banks only went along with it because they 1) had a regulatory gun at their head and, 2) more importantly, F&F would buy every single piece of crap loan they could originate. And so they did. And there were, of course, a LOT of them to buy. Literally trillions of dollars worth of crap loans.
Fannie and Freddie always insisted that these garbage loans were a small part of their portfolios. Tiny percentages. Those claims were outright (now proven) lies. F&F's financial statements were chock-full of outright lies.
Remember Franklin Raines? Former Clinton OMB director. Then Chairman of Fannie. He was made to give back $24.7 million, years later. Should have gone to prison.
The evil Bush tried (twice) to rein in this HUD/F&F nonsense. No such luck. Representative Barney Frank (MA-D) said (famously, or perhaps infamously) Gee, "let's roll the dice a little longer" during one Congressional hearing on F&F when the idea proposed was to put a stop to the insanity.
Ultimately, about 75% -- 75 PERCENT -- of F&F's portfolios turned out to be made up of absolute JUNK loans -- Alt-A and sub-prime.
All that junk was securitized by F&F, mostly as AAA risks, which turned out not to be the case as defaults snowballed after prices peaked.
The greater fool theory of investment only works for so long. And if the bag-holders at the top have no reserves, which they didn't, the theory doesn't work at all, not even for a month or two.
And F&F went bankrupt anyway -- they couldn't securitize all of the junk and they were stuck with the dregs.
And there you have a government-caused "crisis" which never should have happened AT ALL. And never would have but for the feel-good idea that more people should own their own home ASAP.
100% government's fault. Primarily Carter and Clinton, but ALSO Bush. Bush agreed it was a good idea to increase home ownership rates, and didn't do nearly enough to stop the insane lowering of lending standards. Bush tried, but failed miserably to raise a sufficient stink about what was going on.
Increasing home ownership is always a good thing as long as it's happening because people can afford it and do it of their own volition in their own interest.
If it's caused by ridiculously low lending standards FORCED on lenders by the government (as it was) along with a public perception that "RE can never go down" it will all eventually crumble, the only question is exactly when.
I recommend that you read everything by Peter J. Wallison about it, including his book on the topic "Hidden in Plain Sight.”
As far as I can tell he is the foremost expert on how and what really happened. His analysis is much more detailed than my brief summary.
And fully documented, with all of the ugly facts about F&F. And it is ugly.
As for the banks, they got what amounted to LOANS (in the form of agreements to purchase "troubled" assets above current market prices) whether they wanted them or not (apparently some at the point of the Federal Reserve gun in the hand of Treasury Secretary Henry Paulson.)
"That's a nice bank you've got there, it would be a shame if something happened to it." Which was the message to the few who didn't want any Fed money. Can't have you guys who weren't suckers for "AAA" CMOs embarrassing all of these other fine, upstanding dopes who fell for it, hook, line and sinker. When the Secretary of the Treasury delivers that message to you, you take the money, go home, give it back at the earliest possible moment and keep your head down.
The government via TARP handed out $425+ billion to PURCHASE DISTRESSED SECURITIES from banks (which were causing problems on their balance sheets) and we got it ALL back plus about $15 billion in interest and stock gains, although there are apparently still a handful of small banks who owe $300 million or so. About .007% of the $425 billion. Pretty good for government work. They spill more than that ($300 million) every day in waste, fraud and abuse.
The government has no business GIVING a dime to anyone who made a bad real estate investment, whether a bank or individual.
On top of it all, the government screwed over GM and Chrysler bondholders, in favor of the UAW. In a routine bankruptcy proceeding. NEVER happened before. Nice precedent, government. Introduce more uncertainty to bond investments where it used to be guaranteed that you were first in line to be paid if there are problems.
Not to mention that if GM and Chrysler been allowed to liquidate, ALL of their valuable assets would have been acquired routinely in bankruptcy proceedings. Only difference is that the cars they're making today would have Toyota or Volkswagen or Ford nameplates on them. All the suppliers would be happily making parts for the new owners.
As a final aside on that, I own a small position in Ford. Why? I like auto industry prospects and F never asked for or took a dime from the federal government. They were smart enough to not need any help from anyone. Maybe these guys know what they're doing.
As for grocery stores, they're not going anywhere, at least not in the next 15-20 years. Sure there'll be some attrition, starting with the unionized ones.
Gosh, that'll probably create new "food deserts" in places like Chicago. I guess that'll create new demands for "free internet" so one can order from AMZN or WMT or whoever.
As for the economy in general, we have achieved a lousy average growth rate of about 2% per year for 8 years IN SPITE of the empty suit formerly in the White House, not because of him.
This is the guy who tried to kill the entire coal industry and almost did it, would have restricted oil and gas development EVERYWHERE but only managed to do it on federal lands.
The same guy who said we could never drill our way out of high prices, who said we would never see $2 gas again. And there was something about keeping your plan and keeping your doctor.
And was happy to burden everyone with new regulations of all sorts, for example, ridiculous overtime regulations. There are hundreds of examples.
Oh, and of particular note to thousands of cabinet shop owners who have worked countless 100-hour weeks creating and carefully nurturing their businesses, "You didn't build that."
I reject the conspiracy theories about him being a Muslim. But, when it comes to foreign policy, what would he have done differently in Egypt, Libya, Iran, Syria or Iraq if he actually was a Muslim? Nothing I can think of. None of his actions were beneficial to us.
You know, when you run around bowing to people like the Saudis, people might get the impression that you aren't really big on the idea the America is the most important country in the world. Which leads to conspiracy theories, ad infinitum.
Not my theories, but after 8 years it's understandable how they might have arisen.
Econ 101,
You're doing the KellyAnne thing again.
Obama is not the President. Trump is the President. We have one President at a time.
Trump selected General Flynn to be the top National Security Advisor. Flynn was apparently representing Russian interests rather than ours.
It a binary evaluation:
1) Did the Trump people vet General Flynn?
If they didn't know about these connections they should have known about them.
If they did know about the connections, what was the reason they kept him in the position?
Even GOP Rep Daryl Issa (the man who wouldn't let Benghazi go) says we need an independent investigation of the Trump campaign connection with Russia.
The rest of your arguments are just misdirection, like Kelly Anne Conway used to do before she lost credibility and Trump stopped putting her in front of TV cameras.
Huh. I refute you point by point, and all you want to talk about is evil Russkies?
Wait a minute. Are not these the same Russkies our previous glorious dear leader told (when he thought the mic was off) "This is my last election. Tell him [Putin] that after my election I'll have more flexibility."?
The same Russkies to whom our previous disaster of a Secretary of State gave a misspelled, ridiculous plastic "reset" button thereby making a total fool of herself?
Those Russkies? Who, just 2 years later took the Crimea and a good hunk of southeastern Ukraine?
Oops. No more mister nice guys.To the great consternation of all and sundry liberals? Particularly some alleged smart-guy running for president in 2012 who said to Romney in a presidential debate "The '80s called, and they want their foreign policy back."
You can't have it both ways. Make up your mind.
Not that it matters, I suspect that Trump is laughing at the pretzels you have to twist yourselves into, Issa notwithstanding. Poor Issa had a close call last time around, so he's trying to cover his butt by acting like a Democrat. He is in Cali, after all.
Not a problem. It's all good. I won't convince you and you'll never convince me. Other people can read your claims and my responses and make their own minds up.
All I can say is that if you want more Trump, keep up the non-stop silly attacks, that's how you convince a few thousand voters every day, day in and day out, that they need more Trump, not less..
So how can you hire a guy for NATIONAL SECURITY director and 24 days later have to let him go?
Who's driving this clown car?
I clicked on this thread hoping for some enlightening information and discussion about business plans. Instead, I get this stupid tinfoil hat conversation. Lay off the politics. Stick to woodworking.
Cept when you lift your head from the dust bowl, economics/politics and business are inseparably connected.
Most woodworkers got into woodworking to get away from the noise, but business activity, the interaction of exchange, is where the noise is.
My plan going forward is to invest in good used machinery, use components and quality parts to help me gain output, and not expand with a new shop or adding employees, but to raise pricing to match demand. This way the balence of exposure to reward is maximized.
Robert,
Although I disagree with your forecast for the future, I have nevertheless changed my tactics a bit since the last recession. As you know, I am fortunate to be located in one of the healthiest parts of the country economically. This is pure luck on my part, thanks to Great Grandpa for moving his family here back in the 1930's. I have spent the last 25 years setting myself up for this very moment, and I am taking full advantage of it. This year we are producing at double the volume of years past. This has required some new machinery, some new vehicles, some more employees, and more space. A younger me would have done this more recklessly. The older and wiser me does this much more conservatively, much to the chagrin of the banks. I now pay cash for machines and vehicles. We occupy all 5 units in a 5 unit warehouse style condo. Each unit lease is negotiated separately for no longer than 12 months. We can expand and contract our square footage like a lung. I outsource everything I can, and am careful to spread this out among several vendors lest they stumble and fall. We buy a lot of doors and drawers, probably $50,000 per month, the last thing I need is one of my vendors dropping the ball. I use contract labor for sales, shop help, installation, delivery, drafting, and project management.
In short, I can go from an organization doing $300,000 a month with 20 people to $50,000 a month with 2 people within 30 days and do it debt free.
This is the lessen I've learned. My new, younger project manager scoff's at this approach and I'm sure is planning how he's going to do it bigger and better someday.
DS
DS, your plan is much like mine just on a quarter of the scale. Being about the size you were back when you started me in this industry is I have found my sweet spot or more accurately the limit of my comfort level. But we are able to scale up and down quickly much like you to limit risk and leverage other people's risk-outsourcing. Good to hear from you. Hope the family is well. Take care.
My plan going forward is to invest in good used machinery, use components and quality parts to help me gain output, and not expand with a new shop or adding employees, but to raise pricing to match demand. This way the balence of exposure to reward is maximized.
Matt, yes that also rings familiar or in sync with what I'm trying to do. Although I did invest in a spray building this last year and that has paid dividends.
FWIW the consensus is to wait and see how the tax cuts roll out from Trump which should materialize in Aug.
If he goes forward with the tariffs all bets are off as it will be detrimental to commerce.
Watch the President's speech tonight.
There is some conjecture that he will offer citizenship to undocumented immigrants who do not have a criminal record. This could go a long ways to raising wages for workers and productivity for businesses. This will in turn help lift the economy and help us all sell more cabinets.
If you think about it, the primary complaint between granting citizenship to those who are already in the country is that they are lawbreakers and we are a nation of laws.
In this scenario the path to citizenship would be just like it was for my father when his mom carried him across the Canadian border in 1913.
Badabing! Baddaboom!
No more consternation about criminals.
Now there is still the color of their skin. That's the big white elephant in the room that nobody can actually own up to. It's kind of like us trying to create systems for our employees to indemnify weakness when the real problem (that they are not allowed to say) is that they really are quite ambivalent about our profit margins.
By getting these people out of the shadows we eliminate employers paying them the low wages that depress wages for everybody else. By getting them onto legitimate payrolls all the Fica & Fed taxes get paid. Who cares whether or not they choose therefore to send their money home to their family.
Family centric behavior is a good thing. We can use these people as a role model and help get the crops in for everybody.
I hope he does it. We could then re-direct all those dollars from the wall to higher & better use.
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