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Subject: Re: Glass half full

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Message Thread:

Glass half full

4/29/20       
DJS

It'd be easy to dwell on the negative since we seem to be bombarded by it everyday. Even members of this forum are predicting economic collapse, but that's nothing new; they've been predicting it for years. It hasn't come and its not going to come. At least not for our industry. As custom cabinetmakers we could not be in a better position.

I have bid 3 times more work in April than any previous month in the history of my company. Some of that can be attributed to contractors being stuck at home catching up on paperwork, but it doesn't diminish the fact there are many, many projects out there in the pipeline.

During the great recession, the people with money still had money. They just chose not to spend it while everyone else was suffering. They got over it in a big way, and they're still not over it. Our sales have grown every year and I predict this year and next will be no different. That would have happened anyway, but this pandemic is only going to solidify that trend.

During the boom of the 1990's, the majority of our work was for estate style homes on acreage. All the rich people wanted big homes with a horse barn. After the recession, for whatever reason, tastes changed and it become more stylish to buy and remodel classic homes in the city. Or tear down the classic home and build a new contemporary home in its place. The cabinet packages were the same amount of money, we just delivered them to a different zipcode.

With this Covid-19 pandemic, every single one of those people is re-thinking their choice of city living. They are going to want to migrate to the suburbs again, or farther. They're going to want space. Property to surround them and square footage to live in. They're thinking about sheltering in place for months at a time, and making that space as large and luxurious as possible. They're going to have the money to do it because they'll no longer be flying in planes to vacation destinations or vacation homes. That vacation money, that 2nd home money...that's all going to get dumped into the primary residence. It'll have movie theatres, tennis courts, swimming pools, rock climbing walls, classrooms, vegetable gardens, and most importantly HUGE kitchens and lots and lots of built-ins.

We are lucky to be in this industry.

DJS

4/29/20       #2: Glass half full ...
David R Sochar Member

Thanks for the accurate positivity. Our observations match yours on the short history of residential desires. I would add that once the McMansioneers saw their $5M estate devalued to just another empty $1M house, they reconsidered ever building that big again.

But, build they must, even if it is smaller and as you say, a different zip code. Pent -up demand is still demand - or is it 'demand in the bank'?

Those monstrous kitchens and baths will still be shoehorned into what we call 'jewel boxes' - smaller houses with more than everything.

4/29/20       #3: Glass half full ...
Anonymous

I will watch this thread with interest. Short term, 3-4 months, I believe you to be correct. But medium and long term I could not disagree more strongly. It will be brutal. In America, and only in America, we have lived in an anomaly in human history for the last 90 years. Normalcy bias. We will be lucky to have a currency, let alone a single country within a few years. Go anywhere- Any European country, China, Russia, South America- every country and region has faced it. Only Americans think they are immune from reality. But reality catches up with everyone.

4/29/20       #4: Glass half full ...
Leo G Member

Right now I'm setup until late summer as far as I can see. Couple of kitchens and some smaller jobs along with a few more cabinet jobs.

Doesn't take much to keep one guy busy.

4/29/20       #5: Glass half full ...
DJS

Anonymous,

I work exclusively for people who are in the top 1% of income earners in the United States. In my state alone, that's over 200,000 potential customers. I don't know exactly the hardship you're referring to that every other country has supposedly faced except for us, but every country you listed still has a 1%. They haven't gone away, and they won't go away here. I reject your reality and substitute my own.

You made the same predictions a few years ago and a few years before that and a few years before that. Let's remember to talk again in 2023 and see how things are going.

DJS

4/29/20       #6: Glass half full ...
Patrick S Gilbert

This is reality before the Rona. It may take a while to come back but it will, this is NOT like the 2008 recession

I listened to Will Sampson and Alan Beaulieu, he said the same thing

Alan Beaulieu lecture

4/30/20       #7: Glass half full ...
TonyF

During the Great Recession, I managed to skate through with sufficient work until early 2010 before I felt any real effect. Much like the others here, most of my work was for people of means, mine being contracted through interior designers. When it hit me it hit hard, and my business never returned to the pre-Great Recession level.

I look at the numbers, and while I have no formal finance training, it is a bit worrisome to me that the level of national debt exceeds the national GDP, and this recent bit of free money for the masses hasn't helped that ratio any. I will probably have to use my personal relief check to pay for the additional taxes that will be required to offset the issuance of the personal relief checks.

I would be curious if the deferred spending that is anticipated will be of a similar nature to that of the "Roaring Twenties", which was preceded by the last pandemic that this country faced, and may end with a similar outcome, since the concept of debt does not seem to be acknowledged, and a crash may be in our future, give the freewheeling, credit-card fueled spending that everyone anticipates.

Perhaps I could impose upon Pat Gilbert to furnish a chart that shows the rise of national GDP with an overlay that shows the rise of the national debt, and see if one coincides with the other, posing the question: Is there any real growth, or is it an illusion fueled by debt?

I would be curious if the anticipated consumer high of pent-up spending desire is sustainable. Yes, the rich will have money, but will they spend it with you? You guys make it sound like not only is the glass half full, it will be overflowing any day now.

It is only in hindsight that one can identify a trend towards the "end of empire" that every empire has faced, and that this one will face eventually. Is this that moment? Maybe not. But while you are busy building cabinets for the rich, what will become of the thousands of small businesses that will not be able to re-open, and what will that do to the country?

Hopefully, you will not be saying "Let them eat cabinets", to paraphrase a beheaded ruler of an empire that met its demise, and who probably did not see that coming.

Count your blessings. Just sayin'.
TonyF

4/30/20       #8: Glass half full ...
DJS

TonyF,

If you and Anonymous turn out to be correct, does it change what we should be doing on a day to day basis? The debt scares me too which is why my glass is only half full. But all I can control is squirreling away as much money each and every day that I can. If the apocalypse comes, I'll turn that cash into whatever currency is more valuable at the time, whether it be bullets or cabbage.

DJS

4/30/20       #9: Glass half full ...
Patrick S Gilbert

Not a very useful chart but here it is.

The debt will go way up because of entitlements, the US has huge borrowing power so it will be irrelevant

Leading economic indicators (LEI) are there for a reason.

Rome lasted for over 1,000 years

It's a little early to look for the collapse of the US. Eventually it will collapse mostly because of a lack of productivity but that is a long way off.


View higher quality, full size image (1168 X 450)

4/30/20       #10: Glass half full ...
Anonymous

I guess I'm confused. By any measure you have to be a 1%er yourself. If you are concerned and squirreling away every dollar you can why do you think other 1%er's will not. I know a few. They are not spending. Now the 1%ers in wealth and not income may still spend, but that drops your pool of potential clients significantly. Your tech, higher up the food chain client may be making $600k a year but they aren't worth 30+ million. Bezos and Gates might be willing to spend some dough when they aren't trying to conqueor or kill the world.

The last six weeks has opened some eyes. It's a lot healthier, easier, safer and better all around to exchange some of that squirreled money ahead of time for those beans, bullets and band aids and more importantly the skills to use them when needed. In a place that they can be used.

I'm not sure why you don't think I'm not taking advantage of the years when "you're right." I am in spades. But the year I happen to be right if you haven't taken advantage of the years you were right it could cost you dearly or everything. Don't assume money in the bank will be yours.
You seem to think I must be an angry, fearful, holed up loner. When in fact my family is thriving, my business is thriving, I travel around the country, I hit the road in a classic car. Seeing the writing on the wall and getting prepared doesn't mean life doesn't have to be great. In fact, all it does is bring an extra piece of mind and fun time and skills learned with your family.

4/30/20       #11: Glass half full ...
Leo G Member

The debt isn't going away - ever

It's past the point where it can be paid off - ever

So now the idea is to take advantage of it while you can. The system is going to crash and burn. The only question now is... when?

Sothe govt borrows all the free money you can, turns it into tangible assets and when the crash comes those assets are still here.

It's not if, but when. And that when has been pushed off for such a long time it's really hard to imagine.

But at this point in time my work keeps coming in, and I'm going to keep making stuff while I can.

5/1/20       #12: Glass half full ...
Harold Pomeroy  Member

There are so many large and small factors determining the success of a company that it's hard to generalize. On factor that is universal is the fact that many people in the woodworking business process a raw material into a finished product, creating wealth.

I buy lumber for about $5.a board foot, and sell it processed into millwork for about $120. a board foot. all the machines and shop are paid for, no employees, and the supplies are minimal. I have work through late fall. In a service trending economy, manufacturing niche market items required for buildings has an increasing comparative advantage.

5/1/20       #13: Glass half full ...
Adam

I’d like to get involved building Pandemic houses. Moats & Gates. Off the grid. Star Trek worthy personal medical treatment facilities. Wine cellars, cold storage. The ability to hibernate in luxury for years.

All of that needs some nice wood to make it pretty.

5/2/20       #14: Glass half full ...
TonyF

I understand that we have to move on, and we have to have a business as usual approach until something truly radical happens, and having a backlog of work is a good feeling and inspires confidence; all I am saying is to not get too giddy about it.

Hungry people will get desperate, those with no work may undercut your prices while matching your quality, client loyalty may be tested, custom woodworking "needs" may be reassessed. No one knows what direction this will take.

Adam, you do realize that once you know the location of those off-the-grid, luxury pandemic houses, they will have to kill you.
:^) Smiley emoji for the ASCII generation.

TonyF

 

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