The Worst Business Environment In The Past 40+ Years

[Adamski]

Guys,

I am so disgusted right now. Michigan's economy teeters on the verge of Depression with the unemployment rate at 15%. Many businesses are struggling to remain solvent. Laundromats in my area are down 40 - 50 percent over the past few years. A couple have closed but a new one has opened in this, the worst business environment I've seen in the last 40+ years.

This whole mess began when the banks started doing sub-prime (low credit worthy buyer) home loans. Then Californians went crazy with buyers bidding more than the asking price in the existing home market. TV shows like "Flip This House" became popular as everyone wanted to jump on the low interest rate real estate bandwagon. AIG began bundling groups of sub-prime mortgages into up-rated derivitives (packaged real-estate investments rated inappropriately high) which were sold to investors around the world. Well, as we all know, this whole house of cards eventually collapsed and brought our entire economy down with it. The rate of home-owner default sky-rocketed. We bailed out AIG to save the world economy at the expense of our own. Did you know that some banks even defaulted on their own real-estate mortgages? I guess that the banks don't want to pay a $10,000,000 mortgage on a bank building that's only worth $6,000,000 any more than a home owner wants to pay a $300,000 mortgage on a home that's only worth $200,000.

So here we are today. High unemployment, tight money, the economy in the dumps, multiple families living together in a single residential unit, the stock market down, the bond market not looking good either and our government broke. Hey, it can only get better from here ... right?

[MrMachine]

Guys,

I am so disgusted right now. Michigan's economy teeters on the verge of Depression with the unemployment rate at 15%. Many businesses are struggling to remain solvent. Laundromats in my area are down 40 - 50 percent over the past few years. A couple have closed but a new one has opened in this, the worst business environment I've seen in the last 40+ years.

This whole mess began when the banks started doing sub-prime (low credit worthy buyer) home loans. Then Californians went crazy with buyers bidding more than the asking price in the existing home market. TV shows like "Flip This House" became popular as everyone wanted to jump on the low interest rate real estate bandwagon. AIG began bundling groups of sub-prime mortgages into up-rated derivitives (packaged real-estate investments rated inappropriately high) which were sold to investors around the world. Well, as we all know, this whole house of cards eventually collapsed and brought our entire economy down with it. The rate of home-owner default sky-rocketed. We bailed out AIG to save the world economy at the expense of our own. Did you know that some banks even defaulted on their own real-estate mortgages? I guess that the banks don't want to pay a $10,000,000 mortgage on a bank building that's only worth $6,000,000 any more than a home owner wants to pay a $300,000 mortgage on a home that's only worth $200,000.

So here we are today. High unemployment, tight money, the economy in the dumps, multiple families living together in a single residential unit, the stock market down, the bond market not looking good either and our government broke. Hey, it can only get better from here ... right?

Yeah...even Hitler is upset...... http://www.youtube.com/watch?v=bNmcf4Y3lGM

[Howard]

No Larry, it can get worse - much worse. No bank ever went up to a person with a gun and said you must buy this house! Yet our current administration refuses to accept that individuals were the problem and need to take personal responsibility. Instead they vilify the banks and anyone else they can point a finger at. They refuse to accept that it was people like Barney Frank that forced banks to make loans to people that could not pay for them. Now they are passing a whole host of legislation without paying attention to the laws of unintended consequences. Just wait to see how all these laws Fu... Up things.

Just one example, they want to ban short selling and hedging. So, it is quite possible that companies like Coke, P&G, Delta will not be able to hedge. What that means is that consumer prices may jump up and down like crazy as manufacturers cannot control their costs and pass them along.

The best solution is to get the government out of everything except National defense.

[chad]

Guys,

I am so disgusted right now. Michigan's economy teeters on the verge of Depression with the unemployment rate at 15%. Many businesses are struggling to remain solvent. Laundromats in my area are down 40 - 50 percent over the past few years. A couple have closed but a new one has opened in this, the worst business environment I've seen in the last 40+ years.

This whole mess began when the banks started doing sub-prime (low credit worthy buyer) home loans. Then Californians went crazy with buyers bidding more than the asking price in the existing home market. TV shows like "Flip This House" became popular as everyone wanted to jump on the low interest rate real estate bandwagon. AIG began bundling groups of sub-prime mortgages into up-rated derivitives (packaged real-estate investments rated inappropriately high) which were sold to investors around the world. Well, as we all know, this whole house of cards eventually collapsed and brought our entire economy down with it. The rate of home-owner default sky-rocketed. We bailed out AIG to save the world economy at the expense of our own. Did you know that some banks even defaulted on their own real-estate mortgages? I guess that the banks don't want to pay a $10,000,000 mortgage on a bank building that's only worth $6,000,000 any more than a home owner wants to pay a $300,000 mortgage on a home that's only worth $200,000.

So here we are today. High unemployment, tight money, the economy in the dumps, multiple families living together in a single residential unit, the stock market down, the bond market not looking good either and our government broke. Hey, it can only get better from here ... right?


I belive it will only get worse. I work in the cellular industy, I supply handsets to 6 counteries worldwide, I sell direct to the carrier and i have seen business drop about 50%. Matter of fact for the last 45 days our biggest client has put a stop to buying. I got into the laundry mat business because it was a safe invesment if you knew what you where doing. Even right now i have seen at least 5 new stores open up that are goin for 800-1.2 mil, yet i have seen so many run down stores closing or being put for sale. There is alot of investores from overseas that our coming to live in cali and the only way to get a visa is if they buy a business... These investores are spening cash money anywhere from 300-600k cash down on a mat. Little do they know about the business but it gets them a visa into the country.

My sister lives in ann arbor, and so does my businss partner.

Right now if you have cash money its the best time to get into a business.

I was closing to getting our 3rd mat, the guy wanted 200k and it was "netting 3k" which i knew was BS. I was going to do a complete tear down and open it up into a 24hr store. I went back and forth with the broker explaning to him that the store was only worth 50k... any how the guy ended up selling it for 70k to someone else... the other buyer only bought 130k worth of equment.

This ecomny does suck, and i belive we are so far from seeing any light.

[Adamski]

Paul,

I don't know how you found that YouTube clip but it hit the nail right on the head.

[MrMachine]

No Larry, it can get worse - much worse. No bank ever went up to a person with a gun and said you must buy this house! Yet our current administration refuses to accept that individuals were the problem and need to take personal responsibility. Instead they vilify the banks and anyone else they can point a finger at. They refuse to accept that it was people like Barney Frank that forced banks to make loans to people that could not pay for them. Now they are passing a whole host of legislation without paying attention to the laws of unintended consequences. Just wait to see how all these laws Fu... Up things.

Just one example, they want to ban short selling and hedging. So, it is quite possible that companies like Coke, P&G, Delta will not be able to hedge. What that means is that consumer prices may jump up and down like crazy as manufacturers cannot control their costs and pass them along.

The best solution is to get the government out of everything except National defense.

I agree with all you guys. It's probably going to get worse, and it could get a lot worse. I also agree that Barney Frank (and "The Community Investment Act" and ACORN), had a lot to do with causing this mess. Amazing how they keep building laundromats. It seems none of us are safe from new stores. Doesn't matter whether it makes any SENSE to build a new store....they are mostly being built by people who don't know a damn thing about this industry, and they are screwing it up. Cash is king. I would be very leery to hold too much debt right now.

Larry, so sorry to hear about your situation in your State. I think we all may be right behind you because this administration is spending like a drunken sailor.

[SonomaJoe]

I'm not excited about the economic malaise I see for the near future, but I'm also not running around like "chicken little". Five years ago, I was extremely nervous about the economy & more specifically the RE market. I sold SFR's & bought apartments, laundromats, & a MHP. I think it time to start looking for innovative/technology startups or businesses.

Just think, the last recession you guys did not have a BB with a captive audience to spout off, be thankful for the little things


Jw

[Adamski]

Paul and Howard,

As I recall, the Community Investment Act was intended to clean up our cities through increased home ownership. The thrust was to remove restrictions and lower interest rates so that more people could qualify to buy a home. It was thought that increased home ownership would reduce inner-city blight and decay while, at the same time, enhancing civic pride.

Of course, private lenders took the plan to a whole new level with companies like Country Side offering ARMs with no money down ... even financing 110% of the purchase price. It was like offering cigarettes to a teenager for $1.00 a pack. Who's going to refuse? Only the non-smoker. Who were the non-smokers in the housing boom? Those who knew that it was all too good to last long term. Those who knew that, eventually, all things move back toward the norm.

So there's plenty of blame to go around. Like a disasterous plane crash, it was not caused by any single factor. It was a combination of many factors - a perfect storm of reckless government de-regulation, misleading private lenders, greedy investment bankers, reassuring realtors and naive buyers who together caused the most dramatic real-estate bust in the history of the world.

[Howard]

Larry, I agree with most everything - except "misleading private lenders, greedy investment bankers". Individuals have to be held responsible for their own actions - like the way this country worked until sometime in the late 1960's or early 1970's. These days there is no such thing as being responisble. If you screw up it must be someone elses fault. If you have an accident there must be someone to sue. All this crap has to stop, or we are going to be in deeper and deeper doggie doo.

[Adamski]

Guys,

Just to give you an idea of how bad this economic decline is here (I know it's not this bad everywhere in the country); they're removing some of the street lights in downtown Muskegon to reduce the city's annual operating cost. The state is now talking about focusing on just 4 areas of funding: Education, Transportation, Health and Law Enforcement. There is talk of encouraging private enterprise through the elimination of competing state-operated businesses. Perhaps they'll even stop giving away washers and dryers to the poor through the state's FiveCap program. That would certainly be a step in the right direction.

Some Michigan representatives are finally coming to realize that when private business profits decline, employment declines. When employment declines, state tax revenue declines. Tax revenue losses cannot be made up by simply raising existing tax rates higher or creating entirely new state taxes. Higher tax costs simply reinforces the cycle by decreasing business profits which encourage more businesses to move out of Michigan which results in declining employment resulting in further decreases in state tax revenue. Therefore, the only feasible way to balance the state budget is through reductions in spending.

So today we remove the mid-block street lights. Tomorrow ... ?

[mjwalsh]

Larry,

You make some very good observations & points about what makes the USA work & for that matter other places in the world that choose to oppress us business folks! Their intentions might not always be bad ---- but the actual net effect is what is key!

MJ

[mmurra]

Larry -I hope you are right about Michigan legislators "getting it" Mark