The Oregon Biz Report - Business News from Oregon

By Dr. Eric Fruits
Econinternational

The Oregonian recenty reported that Portland’s newest commuter rail project, known as WES, will be about $34 million (25 percent) over budget.

The latest estimates put construction costs at $166 million.

The newspaper also reports that the rail project is designed to carry 4,000 passengers a day.

Assuming a 30 year life for the project, a 7% discount rate, and 250 days a year of operation, construction costs alone will be $13.38 per passenger.  Add in operating costs, and the costs of mass transit will likely exceed the costs of driving by 50 percent or more.

By Guest Opinion,

A PERSONAL OBSERVATION: Three different local restaurants described their holiday losses as each totaling over $200,000 when including both the recession and the winter storm.  Owners complained of media sensationalism over winter storm warnings as unnecessarily driving away customers.  For instance, the pre-Christmas week had only one major storm day, yet it was common for an entire weeks of Christmas parties were cancelled.   One mall had five out seven of their restaurants closed during a day in which the roads were clear and no snow was falling.  The snow levels predicted that day never occurred.

BY Bill Conerly, Businomics, Conerly Consulting,

The newspapers report that the chief banking regulators are urging banks to lend money.  But the front-line bank examiners, the men and women who work face to face with actual bankers, are giving different orders.  They are telling banks to build up capital and liquidity, which can only be done by SLOWING lending.

The Wall Street Journal reports the phenomenon with this quote:
“It’s so incongruous when the four regulators publish a joint press release imploring banks to lend and saying they should do their duty under their charter, when at the same time the regulatory field forces are bludgeoning community banks to death,” said Camden Fine, chief executive of the Independent Community Bankers of America.”

1. Which company this week announced “best ever” sales for their holiday season?
A) Amazon.com
B) Anheuser-Busch
C) Blockbuster video
D) Dollar Video

2. Who won this year’s USA Today’s poll for the most admire man?
A) Michael Phelps
B) Barack Obama
C) Pope Benedict
D) Billy Graham

Good News:  The forecasted drop in consumer spending was less than anticipated due to the drop in gas prices. (US Commerce Department)

Bad News: Unemployment claims at a 26 year high.

Loan Performance House Price Index State Rankings by First American CoreLogic:

1. California      -28.25%
2. Nevada          -25.43%
3. Arizona         -20.06%
4. Florida          -17.84%
5. Rhode Isld    -16.12%
6. Wyoming      -13.46%
7. Hawaii          -13.12%
8. Minnesota    -10.51%
9. Washington  -9.52%
10.Illinois         -8.40%
11.N. Hampshire -8.13%
12.Oregon         -8.02

Source: First American CoreLogic, LoanPerformance HPI, Single-Family Detached as of October 2008

José Pinomesa, President
Oregon Independent Auto Dealers Association

This is exactly what the OADA-Oregon Auto Dealers Association would like to propose for the 2009 legislative year.  This has been proposed by them on behalf of new car dealers in order to reduce the cost of overhead in these slow economic times where auto sales have fallen dramatically.

The OIADA-Oregon Independent Auto Dealers Association has not been as happy with the news media since they report it as “All Dealers” are in favor of this when it cannot be farther from the truth.  The OIADA has primarily used car dealers as members.  It can be said that most new cars today are sold from Monday through Friday and used cars are still sold seven days a week.  Since used cars cost far less they are purchased by those that have less money and those that have to work their forty plus hours per week.  With both spouses having to sign on the dotted line for financing the only real time they have is weekends.  Since Saturdays is a very busy day to catch up from the work week then Sundays make a perfect day to purchase a vehicle before the work week begins again.

By Bill Conerly, Businomics, Conerly Consulting

Here’s the good oil forecast:  back in the fall of 2005, I predicted oil prices going back down to $35.

Here’s the bad forecast: I said it would happen by the end of 2006.

Right price target, wrong time span.  So what went wrong?

1. Which NW based company beat analysts expectations with a 9% earnings boost?
A) Starbucks
B) Jeld-Wen
C) Nike
D) Reasor’s foods

2. Which Las Vegas Casino sold for a cheap $775 Million this week?
A) The Mirage
B) The Venetian
C) The Flamingo
D) Treasure Island

Wells Fargo –According to the recent Wells Fargo/Gallup Small Business Index surveyed in November, small business owners’ optimism fell to its lowest level since the survey’s inception in 2003. The score now stands at 10, a 35-point drop since last quarter. The Index has been declining since mid-2007.

“The Index hit a record low last month, which appears to be the result of a sharp decline in consumer and business spending,” said Dr. Scott Anderson, senior economist at Wells Fargo. “Despite the significant decrease in overall optimism, four of every five small business owners said they did not perceive credit as difficult to obtain. It appears that the Fed’s injections of capital and liquidity in the banking system may be having some effect on maintaining credit flow.”

By Alyssa Williams, Biz Reporter

The Starbucks Corp. may need to cut $400 million of costs next fall to prevent further sales decline, but Howard Schultz, Starbucks chairman and chief executive, maintains that the company shouldn’t change its business toward the type of discounting performed at fast-food chains.  Schultz needs to take another look at the MacDonald’s Corp., whose cheap meals increased sales by 7.7% in November. The reason is clear, breakfast items, chicken sandwiches and value menu options.

Starbucks may have offered a loyalty card and other promotions for cheaper drinks, but when customers typically pay $4 for a cup of coffee, people are going to buy less in an economic recession. More faithful costumers are making fewer coffee runs to save money.

Oregon’s seasonally adjusted unemployment rate rose to 8.1 percent in November from 7.2 percent (as revised) in October. The state’s unemployment rate has risen sharply over the past five months after remaining stable throughout the first half of the year at near 5.5 percent. The U.S. seasonally adjusted unemployment rate rose to 6.7 percent in November, from 6.5 percent in October.

In November, Oregon’s seasonally adjusted nonfarm payroll employment declined by 6,300 jobs, following a drop of 11,700 (as revised) in October.

By Dr. Eric Fruits
Econinternational

Several states are considering a real estate transfer tax to help boost state and local budgets.  During the booming real estate market, such taxes were considered to be relatively low-cost: When a market is hot, everyone can get warm.  Now that housing is cooling down, the transfer tax throws a wet blanket on shivering sellers.

Earlier this year, Toronto imposed a land transfer tax on the sale of real estate within its municipal boundaries.  A recent study (PDF) published by the C.D. Howe Institute finds that the transfer tax caused a 16 percent decline in the number of single-family homes sold and a 1.5 percent reduction in house values. Unsurprisingly, the decline in house values is approximately equal to the amount of the tax.

Which Oregon restaurant opened their 85th store this week?
A) Newport Seafood Grill
B) McCormick and Schmick’s
C) McMenamins

This week Universal Studios is trying to stop….
A) Blockbuster.com from offering downloadable movies
B) Netflicks from rent their movies for free
C) Red Box vending machines from having new releases

By Alyssa Williams, Biz Reporter

Daniel Reese, partner and media relations specialist of the Portland advertising company The AD Agency, believes advertising, even in an economic crisis, is crucial to the success of a business. The first impulse for many businesses in financial trouble is to cut marketing, he said. However, he suggested it is more effective to modify your message instead of cutting it altogether.

“If you believe in advertising in a good economy, you should believe in advertising in a bad economy,” said Reese. “You just need to change the advertising with the times.”

By Nike Kern, Biz Reporter

More than 100 members of the Willamette Valley Wineries Association hosted its annual Wine Country Thanksgiving this past weekend across the region where revenues and participation were mixed depending on the winery due in part to the economic crunch along with other events throughout the state competing for dollars.

“Oregon’s patriotism was running high,” says Dan Nechemias, direct sales manager at Argyle Winery in Dundee.  “We are very pleased with the turn out as it was higher than last year for us.”  Argyle believes that its customers from both Oregon and Washington realize that this is the right time of the year to purchase wines that may not be available year round. Participants could be seen traveling in limousines and tour buses to responsibly enjoy themselves throughout the weekend.

By Mark G. Neil, ChFC, CLU
President Northwest Wealth Advisors,
Radio Host, Your Money and Your Life

Now that the elections are over and the political bickering is on hold for awhile we can take the time to look at where we have been and where we might be headed.

First the history.  YTD the S&P500 is down almost 39%.  All major indices are down to historic levels and there has been little to cheer about so far this year.  The reasons for the historic drop are numerous.  The collapse of the housing market and the liquidity crisis back in 2007 started the slide.  More trouble followed on Wall Street as big name firms like Lehman Brothers, Bear Stearns, Fannie Mae and Freddie Mac soon realized how overvalued most of their assets were.  Their highly leveraged balance sheets were filled with mortgage backed securities whose values were in a free fall as a result of the housing and liquidity problems. Commodity prices had reached historic highs brought on by speculators who also were able to convince the public that the high prices were the result of increased demand.  The high prices and liquidity difficulties spawned the slowdown in business and rising unemployment resulted from layoffs and consolidations. 

By Bill Conerly, Businomics, Conerly Consulting

We’re in recession.

The Business Cycle Dating Committee of the National Bureau of Economic Research, a non-profit foundation, announced that the last economic expansion peaked in December 2007.  Read the full report.

I’ve been asked frequently why it takes so long for an official determination.  Here’s the story.  The government does not define recessions.  Back in the 1920s, the NBER began a research program into our economic history, resulting in a set of dates of economic peaks and troughs.  NBER has continued to update this chronology.  NBER is an academic organization, and its business cycle dating program is a service to the scholarly research community.  It is not meant to be a current commentary on the economy nor a forecast of future activity.

Which of the three US auto firms indicated that they might need to use bailout funds from Congress?
A) Chrysler
B) Ford
C) GM

Which NW based company Saw annual sales rise 50% compared to the other companies which reported declines this week?
A) Cascade Corp.
B) Alaska Airlines
C) Yo Cream

Dr. Eric Fruits, Ecobnomist
Econinternational

Portland housing prices dropped another 1.3 percent in September, marking the fourth straight month of declining home prices. Nationwide, the Case-Shiller composite index continued 27 months of declines. While Portland’s market has not seen the same declines as the composite, the graph to the right suggests that the Portland market lags the the composite by about a year. If this trend continues, Portland may see further drops in home prices over the next year or so.