The Next Deal

Zeus Update: March 4, 2010

noreply@blogger.com (Brett Hayes) — Thu, 04 Mar 2010 20:34:00 +0000

Lots happening on the theater. First, the weather is finally breaking. It has been the worst Winter on record here which has stopped all our work. That is about to change.

While this was going on, we made some changes to the building. Now, instead of using 9 1/2 inch concrete tilt up walls on the exterior perimeter of the building, we will be using a steel stud system that is skinned with 2" of concrete. It is way lighter, which will allow us to save money on the footers and foundation.

The lobby designs are done. I am using a cool laser show to put the stars up over the open area. This is far more economical than putting thousands of fiber optic strands up in the ceiling. It looks awesome.

Steve LeRose, our new General Manager, is finishing his move from RentQuick to Zeus. We have hired his replacement at RentQuick and things are transitioning well.

The seats have been ordered. The stadium seating is ordered. We are waiting on the final numbers for the projectors, but I expect to have them ordered by the end of the month. I am still unsure about some of the concession equipment, but that will fall into place quickly.

A good thing is that 52" LCD 1080p screens are dropping in price. I need to put in a bunch of these, so the better prices help.

All in all, I am looking at spending close to $6 Million on this project. I need to work day and night at the printing press to put that out in $20 bills. (Just kidding Secret Service guys!).

After Osama Bin Laden Is Dead

noreply@blogger.com (Brett Hayes) — Tue, 23 Feb 2010 01:15:00 +0000

I normally don't do politics on my blog, but I wanted to put these thoughts down.

What happens after Osama Bin Laden is dead? Over the past four weeks, with the help of the Pakistanis, the US has captured or killed a number of high ranking terrorists. They have made a break through on where the bad guys are hiding at and are getting some traction. Eventually, our old buddy Osama will be killed or captured by somebody. I think they still have the $25 Million bounty on him. Just like the Mafia, someone will flip on him. It may not be this year, but it will happen.

So when Osama Bin Laden is dead, what will become of America and her allies' resolve in the "War on Terror" (a stupid name since terror is a tactic, not a people)? The easy answer is that everyone will have a ticker-tape parade and call it a victory. While it will be as such, it will not be the end. Just like Bobby Kennedy's fight against organized crime, it will be long and unending.

It is possible that the Muslim world will tire of the constant suicide bombings that generally kill more of their's than ours. Maybe the chain will break like it did with the Black Panthers, the Weathermen or other domestic terror groups in the U.S. Maybe a two state solution will stick in Israel and the Middle East will settle down for a much needed period of peace. These "what-ifs" are all possibilities, but are not likely.

What is likely, is that after Osama is dead, that the "War on Terror" will follow the same path as the "War on Drugs" where we never really win it, but is just settles into a lower intensity than when it first started. Think back to the 80's when the drug runners were everywhere. Today, they are still around, just like the Mafia, but they are at a lower volume level and therefore not as much of a threat.

I do think that Osama will be caught, killed or die of disease before long. When that day comes, we will be faced with a problem of not having a face and a name for our ultimate enemy. And without a nemesis, the American people will lose interest. Of course, if history repeats itself, there will be some unintended consequence to rise up to replace it. There always is: WWI and Hitler, Hitler and the Cold War, The Cold War and the Russian invasion of Afghanistan, the Russian invasion of Afghanistan and the Mujahidin, the Mujahidin and Al Qaeda, Al Qaeda and 9/11, 9/11 and Afghanistan. So we will have Afghanistan and something else.

The Jobs Bill

noreply@blogger.com (Brett Hayes) — Tue, 02 Feb 2010 01:24:00 +0000

Since I am a big proponent of entrepreneurism, I thought it might make sense to give my opinion of the Presidents jobs bill ideas. Now keep in mind, the bill has not been written yet. So the final bill might not have all the parts in it that are currently being proposed. Based on the big three issues, here is my take:

1. Tax Credit of $5,000 per New Employee: This would be fantastic for creating new jobs. Any business would take advantage of this if they could. However, the is a real issue with fraud and abuse. What happens if someone just shuts down one LLC and starts up another one under a different name thereby firing and re-hiring everyone on staff? How this is worked out, remains to be seen. If they can fix the fraud question, then you are likely to see serious job creation this year.

2. No Capital Gains Taxes for Small Businesses: This to my mind (and experience) would not really be stimulative. A business has capital gains when they sell something for more than what it is shown on their books. For instance, if you have a pickup truck that is fully depreciated and you sell it for $1,000 then you have a capital gain of $1,000. I guess this would reduce the cost of replacing older equipment with newer stuff. That would kinda be stimulative. But the problem is that sometimes you might just sell the truck and not replace it since you laid off the guys who would drive it. The tax reduction is only helpful if people really see the correlation. If it is complex, like capital gains taxes, most won't even know about it and therefore they would not make the actions you want them to make (sell the old truck and buy a new one.)

3. Increase Lending to Small Businesses: This is huge. Right now, the only way to get new money (not loan renewals) is to get a federal guarantee. The feds (SBA, Stimulus and USDA) only have so many people on staff to review all this stuff. That means that there is currently a serious backlog in the lending and borrowing. I know plenty of businesses that could get going if they could just get the money. Increasing the lending is going to be key, but then you need to figure out how to back the feds out of the lending relationships so it will go back to banks and entrepreneurs. Once you are on the i.v. it is hard to get off.

The American Entrepreneur

noreply@blogger.com (Brett Hayes) — Sun, 24 Jan 2010 16:10:00 +0000

We have all heard about the American Business Hero. You know, the one who goes out, risks it all and creates a new business. You can name some of the names: Ford, Edison, Jobs, Gates. These guys, in the beginning were pioneers who reached out to make the better mouse trap. In doing so, they made themselves very wealthy.

However, along the way something happened. Something changed in who they were and what they were doing. In the end, it was no longer them, but the company that had control. They had each created a monster. Today, there are many very large monsters lumbering about the country feeding at will and leaving a wake of destruction behind them. Doubt it? Here is a short list: Enron, AIG, Northern Rock, Walmart.

All of these companies have become so large that they no longer represent the personality or wishes of a single founder. These companies are now mostly run by hired guns who are experts at process, reporting procedures, hierarchy structures and financial manipulation. They are filled with average workers (no free-thinkers except on corporate retreats, please) who do an average job managing an average product for the average consumer. Not too hot, and not too cold.

The shareholder is just a nuisance to these companies. Once a year, they hold an annual shareholder's meeting in some hotel and there the average titans are forced to listen to the average shareholders bitch about their less than average returns. Of course, the company will pay lip service to the shareholders, who ostensibly own the company. Of course, no single shareholder has enough shares to do anything serious about it.

So the average company is very average indeed. Even the self-appointed kings of the boardroom are very average. Their main goal is to move the ship without too much list or lean in the cargo area. Or in other terms, don't rock the boat baby. They accomplish this by creating a system where no single decision can be made by any single person. As a result, you must make all decisions as a group, committee, board or up the chain of command.

None of this is new, of course. This is bureaucracy: a system of management that allows average people to perform averagely.

Juxtapose this with the concept of the American Entrepreneur. In the beginning, Bill Gates did not create a company that would try to monopolize markets, instead, he wanted to make some money which would help him get laid. When Henry Ford started, he wouldn't have formed a committee to see at what point he should recall a dangerously flawed vehicle or not.

In our society, we honor the individual who starts a business. However, we do not separate that individual out of the company as the company become a giant bureaucracy.

So to the point: It is my belief that the individual will be returning to the American landscape. We will see more entrepreneurs emerging from their corporate cubicles of mediocre malaise and walking into the bright sunshine of risk and reward. Twenty-Ten will have more business startups than we have seen since 1999 during the dot-com breakout.

Why? Well, first it will be out of necessity. Those big companies are all smaller in staff now. They cut their staff down last year. It will take a little while before they bloat back up. Secondly, people will find that all the tools needed to start a business are right at their finger tips. Third, the recent collapse of some markets will open opportunities for new debutants.

So break out those spreadsheets. Start working on that business plan. Seek out the answers to your questions and then execute. People will try to dissuade you from doing it, but press on. You know that deep inside you want to be a little above average. The average person always wants to be above average, don't they?

First Theater Seats Are In

noreply@blogger.com (Brett Hayes) — Fri, 22 Jan 2010 19:31:00 +0000

Here is the first set of seats for the new theater. I like these, but will likely like the black ones a little better.

My typically interesting day

noreply@blogger.com (Brett Hayes) — Fri, 22 Jan 2010 00:05:00 +0000

Today was a very interesting day, but strangely enough it wasn't unusual. Here is a sample of what I dealt with today:

8-10 am
Spent most of the morning on the phone and hung out with the wife at the house. Phone calls were about footers, tilt up walls and Haiti relief. I played with my cat, watched some news and listened to some music.

11:00 am
I dropped by Mark's house to discuss the Rotary meeting at noon. Mark is the current club President. I give Mark a ride to the meeting.

12:00 pm
At the Waynesboro Rotary lunch I met with Laurie on a loan renewal, discussed Sarah's trip to Mexico and Paige's new teeth whitening plans. I then spoke for a few minutes about raising funds for la Gonave in Haiti. I supported a matching funds request from the Foundation in what was the quickest Trustee meeting ever. Ten minutes later we had $6,600 raised. I make a recommendation to someone for an attorney. John mentions a secret party that he should not be talking about.

1:15 pm
I drive Mark home after Rotary and then check to see that I have four messages: two contractors looking for work, a reporter, and an architect in Michigan who wanted to give me some ideas on the theater.

1:45 pm
I arrive at RentQuick and assemble the first of the sample theater seats. I meet with a possible new hire. Steve and I talk about the theater, RentQuick and a bunch of other things.

2:15 pm
I talk with Linda about the Haiti funds. She and I brainstorm on ways to get stuff to la Ganove. She has been talking with Cuban rebels about using their sea-plane. I suggest using a large dive boat that operates in the area. I regret not knowing any Columbian drug lords who owe me a favor.

3:00 pm
I talk with the architect from Michigan. We discuss efficiency ratios on the theater, structural steel and how he would change my plans. Ultimately, I am happy with the plan I have.

3:19 pm
I check on BlackBear Title and there is no answer. They are on the phone.

3:25 pm
I contact some Scuba shops and see if any have contacts in the Caribbean who would have a dive boat for hire. No luck.

3:35 pm
I talk with Jerry in LA about the new seats. The maroon will not work with the logo. Other than that, it looks good. LA is getting bad rain. I still need to see the seats from Irwin.

4:16 pm
I drop by Jeb's home office. He runs a new business idea by me. It sounds really good. Very viral. I pay him for paintballs and we plan to do a match soon on his course. His kid played Chopsticks in the next room while we spoke.

5:15 pm
I return home, pick out some cabinet colors and corian tops for the concession stand. I catch up on emails, write a little, eat dinner and hang out with the boys.

6:15 pm
I get the updated concession plans with the equipment cut sheets. Still no pricing yet. The files are huge and would kill my printer if I tried to print.

7:00 pm
I finish writing this blog post. About to go play Modern Warfare II if I can get my wife off the internet.

Zeus Update: Jan 16, 2010

noreply@blogger.com (Brett Hayes) — Sat, 16 Jan 2010 15:33:00 +0000

We now have our building permit and will be putting footers in as soon as the ground is ready. The thaw over the past few days has done wonders for the site. Steve Lilley with S&K Excavating did a great job getting the site clear of the snow so it would be dry and ready to roll quickly.

Just to give you an idea of how big this project is, the footers will be 3' deep. The footers on your house might be 12-18" deep. The cost of the footers, just the footers, is right under $100,000. I had a Realtor tell me that putting in footers didn't mean anything. That I could be bluffing. He clearly did not understand the value of money.

That brings up another point, for some reason there are a number of people who don't think this theater is real. Well, it is and we will be open on September 1, 2010. Just to back up some of the questions of how serious I am about this, here is a list of some of the professionals already contracted with on this project:

General Contract: Jon Sweringen, Platinum Construction
Architect: Robert Pilkington and Dennis Stevens, Balzer & Associates,
Site Engineer: Ray Burkholder, Balzer & Associates
Site Contractor: Steve Lilley, S&K Excavating
Interior Designer: Hiedi Cupka, Interior Creations
Integrators: Jerry Van de Wright and Beven Wright, MIT
Concessions: Proctor Companies
General Manager, Steven LeRose
Banking: Laurie Landes, First Bank & Trust

There are others, but I think you get the point. We are serious, we are coming and we are Zeus!

Help Wanted at RentQuick

noreply@blogger.com (Brett Hayes) — Tue, 12 Jan 2010 19:31:00 +0000

I know this is not the best venue for posting a help wanted ad, however, I figure it is worth a try.

RentQuick.com is seeking an organized individual to join our team. This person must be very focused on our clients. That means when the phone rings, they answer it and do whatever they can to help our clients. They should have experience in inside sales or customer service, sound great on the phone, be willing to learn our system and our products.

The hours are Monday - Friday 9 am to 6 pm. They would be required to carry the after hours phone for occasional late night sales calls and technical support calls. We will train them on all the technical aspects of the job.

We are a small team and work very hard to cover each other's backs. There is no negative culture here. We all get along and support each other.

The pay will be in the $30K-$35K range with paid vacation.

If you are interested in this position, please email your resume to steve@rentquick.com for an interview.

Lobby Interior Designs

noreply@blogger.com (Brett Hayes) — Mon, 11 Jan 2010 15:53:00 +0000

In looking at the interior of the lobby, I have been working for the past few days on a design that will work well.

I know that I will have some (not many) Doric Columns in the lobby. For instance, at the ticket booth and the entrance to the retail space. The bigger problem has been how to handle the ceiling. Unfinished the ceiling is 30' tall. So we have a lobby that is 60x60 with a ceiling of 30' tall. That is pretty big. The huge space overhead would be a noticeable void.

To fix it, I have come up with a new idea. I will drop platforms at 20' high. These platforms will be 10x10 with a 2x2 grid inside them. The tiles in the grid will be as below:

Hanging from the center of these tiles will be a pendant bowl light fixture. There will be two sizes. One will be 60" wide the others will be 36" wide.

Once we add some LED accent lighting on the platform, we are underway. I would put five of the platforms in the lobby with the remaining space open to the 30'. You won't be able to see the upper ceiling since it will be painted black and there will not be any lights up there. This should fill the space, lower the ceiling, give the ceiling depth and interest and add lighting to the lobby.

I am in the process of running this by the architects. If it works, then we are way cool.

Update on Zeus Digital Theaters

noreply@blogger.com (Brett Hayes) — Thu, 07 Jan 2010 01:23:00 +0000

Much has happened since my last post.

We have started work on the site and are about to begin construction of the building. The weather has been awful, but that is okay. We will continue to work around the snow, ice and rain. I have been through and seen worse.

Steve LeRose, my long time friend and confidant, will be the General Manager. He will be leaving RentQuick in March and moving over to the Zeus payroll. Rick Burns will take over running RentQuick.
We have selected Barco digital projectors for the theater. We will use Dolby 3D in two of the auditoriums.
We will have full rocker seats. Each seat will have the Zeus logo on the head rest. The seats will be black leather.
Total seats in the theater is 1,106.
We are about to get a parking variance from the city, which will leave us with 278 parking spaces.
The facade of the theater will be brick with accents.
I am still evaluating whether or not to have a coffee bar in the lobby with cappuccinos.
We have Zeus t-shirts that are showing up all over town. Only the coolest kids are wearing them.
We still expect to open the theater on September 1, 2010.

Zeus Digital Theaters

noreply@blogger.com (Brett Hayes) — Wed, 11 Nov 2009 20:38:00 +0000

Zeus Digital Theaters is my new project. Zeus is an 8-screen, all digital theater being built in Waynesboro, Virginia. The theater is going in on my DeWitt Crossing project.

When I do a new project, people have a hard time catching up with the concept. So below is my little Q&A Interview with myself on the subject.

So, you are building a new theater in Waynesboro. Why there and why now?

Waynesboro is the perfect market for a new movie theater. Why there isn't one already is beyond me. I think the easy answer is that most theater companies overlook Waynesboro because the demographics don't look right on a map due to Skyline Drive and the Blue Ridge Parkway. However, I know the market very well and expect it to perform nicely for this theater.

Why did you call it Zeus?

We all know about the Apollo Theater and the Mercury Theater, but there is no Zeus Theater. Greek gods are great for theater names simply because they invoke the fantasy that is shown in the movies. Zeus works especially well since his icon is the lightning bolt which loosely translates into digital projection.

What is special about the theater?

First, it is the only all digital, stadium seating theater that I have found in Virginia. Second, it will have more Digital 3D screens than any other theater within a 2 hour drive. Finally, the theater will have a retail store inside that focuses on movie related tshirts, toys and accessories.

What is so great about digital projection?

Since 1929, theaters have been showing movies using film. This 35mm film project has held up well for 80 years, however, the movie studios are moving to digital systems which have a number of benefits. With a digital movie, there is no physical print which means that the quality of the image does not decrease with each showing as it does with 35mm.

Also, digital gives us the ability to show 3D films. Finally, digital allows us to show locally produced movies from the public.

Updates on my projects

noreply@blogger.com (Brett Hayes) — Wed, 30 Sep 2009 14:24:00 +0000

Okay, I will admit that I am not very committed to the whole blogging thing. This should not surprise me. I seem to have the same committment problems with writing that novel, pulling weeds and filing paperwork.

Anyhow, here is what is going on:

DeWitt Crossing, my commercial real estate project in Waynesboro, is moving along nicely. I just completed a consulting job with Weaver Insurance to project manage their building on Lot 4. It looks great.

I am well underway with the movie theater project. I expect to have the site plan approved by the end of October.

The restaurants are starting to get interested in the site. Right now, we have 4 looking at lots.

The W. Adin Hayes building is full. In Fishersville, we welcome Dr. Christensen to the J. R. Hayes Building.

Things are moving along nicely. I personally believe we hit the bottom in the recession during July and August. That doesn't mean we are shooting straight up, but it does mean that the worst is over.

Is Inflation a Problem?

noreply@blogger.com (Brett Hayes) — Thu, 02 Apr 2009 14:47:00 +0000

Over the past 6 months, the US government has been pumping liquidity and new cash into the economy. In the 4th Quarter of 2008, consumer prices were deflationary which reflects the drop in demand as shown in the 4Q GDP growth rate of -6.4%.

So here is the issue, at what point will inflation become a problem?

Obviously, there are many other people out there who understand these issues better than me. All I need to know is what to look for to see when inflation comes back.

First, what is the fed doing with the fed funds rate? They have it at 0% to .25%. There is no where to go but up. When they start to raise this rate, it means they are trying to slow the growth rate (demand) and control inflation.

Second, what is the 10 Year Treasury doing? Right now, it is yielding around 2.6%. When the yield gets back above 3.5% and stays there, you can expect more normal inflation to return. It will jump everytime the Treasury prints money but it is the longer term that I am interested in.

Finally, what are the commodities doing. We cannot avoid inflation if oil gets too high. Right now it is in the $45-$55 trading range. If you see this get up into the $60-$70 range, then that will move into the rest of the economy and push up core consumer prices.

I look at inflation for a number of issues:

1. I have lots of money borrowed at Prime + which is tied to the fed funds rate and therefore, tied to inflation.

2. I own lots of commercial land. I need that land to keep increasing in value over the long haul for my equity to grow.

3. Finally, inflation will let me know how the overall economy is looking. (Except in the case of stagflation where the economy stalls and inflation spirals up.)

Dealing With Dirt

noreply@blogger.com (Brett Hayes) — Fri, 20 Mar 2009 20:03:00 +0000

Since I work with dirt quite a bit in developing commercial land and buildings I have learned a few things about it. Here are the major lessons learned in dealing with dirt, excavation and site work:

1. Try to get your dump, fill or storage sites as close to where the dirt is coming from in the first place. It will save you money on the hauling.
2. Include all the seeding and stabilization work in the originial contract with your site contract.
3. Be sure the RLD (Responsible Land Disturber) is the site contractor and not you.
4. Retain at least 5% until the erosion and sediment permit is closed by the governing body.
5. When dealing with rock, it is always better to blast it than to hammer it since you generally do the hammering at an hourly rate. If you can get the rock removed based upon the cubic yards for a flat price, take that. In my area it is typically $60 for mass rock.
6. Watch how much top soil is put down in the finish grading. I have been ripped off by contractors who put only 1-2" down when the plans called for 6". You need at least 6" to grow grass in all seasons.
7. Finally, sell your excess fill dirt. Don't just give it away. Clean, compactable fill is hard to come by. You should be able to recoup those costs.

A Cash Flow How To For The Entreprenuer

noreply@blogger.com (Brett Hayes) — Mon, 16 Mar 2009 18:03:00 +0000

Okay, this year the economy sucks. Yes, we all know it by now. However, for the entreprenuer, it is especially dangerous. The worst thing a small business can do is file for bankruptsy. Of course, you can only go bankrupt if you don't have enough money to pay your debts. The secret is cash flow.

I use a simple process that helps me see where the cash is coming from and going to. For a small business, cash truly is king. Here is how it works:

1. I create a spreadsheet showing all the months across the top row.
2. Then down the side I list all the sources and uses of cash. For instance, free cash flow from RentQuick is listed by each month. If the cash flow is income it is listed as a positive. If the cash flow is an expeniture, then it is listed as a negative. Other items are estimate tax payments, personal use payment, property tax, investments, insurance payments, etc. I list the net cash flow for each business I have. So a startup might be negative and a cash cow might be positive.
3. I then add up all the sources and uses by the month. The resulting spreadsheet shows when I need money and by how much.

Pretty simple.

It is time to get to work

noreply@blogger.com (Brett Hayes) — Sun, 15 Mar 2009 00:02:00 +0000

Over the past six months, I have been holding back like most people. I started to believe that the commercial real estate market was dead so I didn't try anymore. No longer! Come Monday morning, I am going full bear on finding buyers, builders and tenants. I am not going to wait until everyone is on board with the economy. I will start calling everyone in my prospect list to get a deal going.

Everyone gets into a slump. I think I have been allowing too much of the negative market data to hold me back. I am going to get to work on Monday and make something happen. If there is nothing out there, then at least I will know for sure.

Anyone who is ready to do a deal in the Waynesboro area should get in touch with me asap. The rest of the world can sit by while I make something happen.

visit http://www.projecthayes.com for my contact info.

Where does real wealth come from?

noreply@blogger.com (Brett Hayes) — Thu, 05 Mar 2009 13:18:00 +0000

As we are all in a world of crap because of the financial meltdown, I thought it would be relevant to discuss where wealth actually comes from. Over the past decade and a half, it seems that people believed that wealth was created by speculating (they called it investing) in the stock market. In 1997, had you invested $1,000 in a basket of DOW Industrial stocks, you would have lost about 30% after adjusting for inflation.

Where is the wealth? It is gone, but it never really existed in the first place.

Real wealth comes from real profits which are created by real value for a consumer. Buying stocks is not investing except in the rare instance where the company is on the other end of the transaction (IPO and stock offerings). So unless the company is getting the money you are paying for their stock, you are not investing.

What you are doing is buying something that someone else thinks is going to go down in value. Otherwise, why would they sell it?

You aren't investing. Instead, all that has occurred is that the owner has changed.

New Career Choices

noreply@blogger.com (Brett Hayes) — Wed, 04 Mar 2009 22:17:00 +0000

Today, I snuck up to Wintergreen to get a morning of skiing in. While there, I met a great guy named Mark. Mark is about 65 and a retired executive. We rode the lifts between runs and struck up a conversation about the economic changes.

If you were born in 1944 like Mark, then you would have been entered the job market in the mid-60's. At that time, the best place to work was likely GE and IBM. These companies offered defined pension plans for employees who worked there for their entire careers. This is where the retirement parties included a gold watch. The contract between employee and company was straightforward: work here for your entire career and we will take care of you until you die.

My generation is a little different. I was born in 1968 and entered the Marines in 1986. Had I gone straight to college, I would have entered the career mode in 1990 or so. My generation figured out that the defined pension plans were a thing of the past. Big companies made matching contributions to a 401K which I could roll over to another if I were to leave. The implied contract was not for life. My generation was the "free agent" employee. They moved from job to job after anywhere from 2 to 4 years on the job.

Of course, the current market is messing that up for a number of people. If you are sitting on a 401K then you likely have seen the value drop in half over the past year. Companies are now stopping their contributions to 401k plans and if enough time passes, they might not restart them.

My kids are going to have a tougher time putting together a career than I did. I hope to guide them to see the big picture and make choices based upon what works best for them. However, we can agree that the safe old days are over and risk is shifted to the workers away from the companies.

Who pays analysts?

noreply@blogger.com (Brett Hayes) — Mon, 02 Mar 2009 18:56:00 +0000

It seems there are plenty of analysts out there who are paid to make financial predictions. These guys go on CNBC or other shows and make their predictions with a completely straight face. However, if you look at their actual performance, their bosses might want their money back.

Here are a few of my favorites:

May 21, 2008 Arjun N. Murti, analyst at Goldman Sachs predicts oil to hit $200/barrel just before oil peaks at $147 then falls back to its current level of $40.23/barrel.

Jim Cramer predicts Bear Stearns is fine and healthy just before it goes completely under. http://www.youtube.com/watch?v=gUkbdjetlY8

AIG (AIG) "could have huge gains in the second quarter." —Bijan Moazami, analyst, Friedman, Billings, Ramsey, May 9, 2008. AIG wound up losing $5 billion in that quarter and $25 billion in the next. It was taken over in September by the U.S. government, which will spend or lend $150 billion to keep it afloat.

So whats the point? Simple, just because someone makes a prediction, doesn't make it so. Most of these guys are making guesses. They don't know anymore than anyone else really. This isn't a complete insult to them since they know they are really frauds.

The big point is that you need to weigh all the advice, predictions and data then make as best a decision as you can. If you run your own business, focus on the little things and plan for the big things.

There are more at:

If Obama Fails, Who Wins?

noreply@blogger.com (Brett Hayes) — Sun, 01 Mar 2009 15:54:00 +0000

Lately, Rush Limbaugh has been called to the carpet over his line that he hopes Obama fails. Now, since that statement was made, Mr. Limbaugh has clarified this to mean that he hopes Obama's policies fail.

While this blog is not a place for political discussion, it is a place for explaining economics. It is important to look at the alternatives to the statement, "I hope Obama fails". (I call this "game theory light")

Alternative 1: Obama fails and the economy suddenly improves.
Alternative 2: Obama fails and the economy continues to slide.
Alternative 3: Obama succeeds and the economy improves.
Alternative 4: Obama succeeds and the economy fails.

Based upon these options, we are really only happy with #1 and #3. Obviously, we all want the economy to improve and for people to get back to work. I do have a problem with Alternative #4 because by the administration's metrics, success is gauged by job creation. So it doesn't make sense that Obama and his policies could succeed without the economy improving.

Now, let's look at it from the Republican point of view. Clearly, Limbaugh is interested in getting the GOP back into power. So here are the alternatives for the Republicans:

Alternative 1: Obama fails and the economy suddenly improves.--GOP Wins
Alternative 2: Obama fails and the economy continues to slide.--GOP Loses
Alternative 3: Obama succeeds and the economy improves. --GOP Loses
Alternative 4: Obama succeeds and the economy fails. --GOP Loses

This will take some explanation.

#1. If Obama fails and the economy improves, then the GOP would be the political winner.

#2 If Obama fails and the economy gets worse, then the GOP loses because they could only claim to have caused Obama to fail, but without an improved economy and no real plans other than for the government to stay out of it then the GOP will lose.

#3. Self explanatory

#4. This is similar to #2, but in this case the GOP may win politically and the country would lose economically. You could argue that the GOP would win here simply because Obama lost, but the human costs would be pretty high. This alternative is still flawed because Obama's success is tied to job creation.

What is Stimulative?

noreply@blogger.com (Brett Hayes) — Fri, 27 Feb 2009 22:11:00 +0000

This morning, I was watching Fox and Friends to see what Donald Trump had to say. Included in the group on the couch was Geraldo Rivera. As they were picking apart the stimulus plan and discussing about the pork in the law, something really strange happened: I agreed with Geraldo.

This is pretty weird. It is right up there with seeing a goat flying outside the window of a 747. If you ever find yourself agreeing with Geraldo, then you might go a little dizzy as I did. Just sit down, collect yourself and try to regain your composure.

The Donald was saying that all this spending is going to destroy the economy. All we need is time and everything will be fine. Then Geraldo said it. Stimulus spending is any spending. He used the example of a grape juice museum (which is not in the plan). If the government builds the grape juice museum, while not necessarily what we need, it would still be stimulative. He is right!

Anytime the government borrows money and then spends it is in fact, stimulative in the present time or when it is spent. Yes, over the long haul that money needs to be paid back which will come from higher taxes or inflationary repayment (printing the money). But the immediate effect is stimulative.

So while we may not agree with all the things that are being bought, we should agree that any money that is spent and not immediately paid for with taxes is stimulative.

Status on Projects

noreply@blogger.com (Brett Hayes) — Mon, 23 Feb 2009 17:03:00 +0000

For all those of you out there who care, here is the status of my business projects:

RentQuick.com: RentQuick is starting her 11th year and things are going well. Compared to the last recession, we are holding our own. Much of this has to do with the better inventory (Our new Durabooks are a great hit) and a pretty good reputation among our clients. Ultimately, the best part about this company is that after a number of years in trial and error, I have the best team ever. They do more for the continued success of the business than I do.

Hayes Investments: Right now, Hayes only has one empty office space, which is fantastic. In 2008, Hayes Investments started doing project management consulting. We broke ground last week on a 12,000 sq/ft building for a client. Pretty good looking building too. I expect the project management side to continue to grow. We will see how it goes.

DeWitt Crossing: In 2007, the phone was ringing steadily with interest in the project. Right now, I don't think I have had a real phone call on property sales since December 2007. This is where the economy is really being felt. Commercial property is just not going to move while people are retrenching. The unbelievable interest rates help though.

Black Bear Title and Settlement: In November 2008, I purchased Home Front Title from the previous group of owners. We are just getting things where I want them. The office looks great and I expect the revenues to continue to grow this year. Of course, the refi boom will be a great help.

People ask me what I think of the current economic situation. My answer is simple: serve your clients to the best of your ability, pay attention to expenses, try to keep the revenue in line and everything else will work out.

It's Economics Silly!

noreply@blogger.com (Brett Hayes) — Sun, 22 Feb 2009 17:06:00 +0000

Last night I had some friends over for our regular nickle-ante poker game. As the night went on, comments were made about how bad the stimulus package is and how all of this is going to cause rapid inflation.

Of course, the guys saying this stuff were just parotting what they heard on television or the radio. Honestly, do you really think that Rush Limbaugh understands macroeconomic theory?

So what is the effect of the stim and how will it affect the broad economy? To understand this, we must first look at where we are now. In October, the money market pretty much siezed. This caused a ripple effect that quickly caused the failure of Lehman Brothers. Once that hit, then the Treasury Department got involved and pushed through the Toxic Asset Recovery Program (TARP).

After everyone saw that the economic meltdown was underway, then there was a rush to liquidity. You can tell this by looking at the 3 month treasury bills which went to almost 0%. When there is a rapid movement away from leveraged investments to cash, you will see asset prices drop. In other words, lots of people who had stuff that they owed money on sold that stuff at a reduced price. That is part one.

Part two is the forclosure issue. As homeowners go through foreclosure, they lower the value of their homes and their neighbor's homes. This is because when you have an appraisal done on your home, the appraiser looks at the comparable home sales in the area. If Joe down the street sold his home for 30% off then it will affect your home and subsequently what you can borrow against it. This is part two.

Put parts one and two together then you get deflation. Deflation, the opposite of inflation, means that asset prices are moving lower, consumer prices are moving lower, wages are moving lower. It is very, very bad. If you get into a deflationary spiral, then people will hoard money because it will be worth more later. If people don't spend money, then the demand continues to drop and prices keep droping. If prices continue to drop, then deflation increases and people don't spend. I think you get the idea.

So back to the stimulus plan, anyone who understands these forces knows that you cannot let the market fix this on its own. Will the market correct eventually? Sure, but at what cost? This mess will cause massive unemployment, loss of capital, bank failures, hoarding, and eventually price fixing.

As for what it will cost the taxpayers, the choice is simple: either invest in something now, or face lower revenues which will cost the taxpayer just as much.

Here is how it all works:

1. Prices are falling, demand is off causing the risk of a deflationary spiral.
2. The government prints money then uses that money to buy bonds from the government.
3. The money is then spread across the country and is spent. (it really doesn't matter where)
4. As the new money is introduced into the economy, it causes inflation.
5. The inflation counters the deflation which as discussed above is very very bad.
6. Because the treasury actually printed the money, the real national debt does not really increase.

Any questions?

Pray for Recovery

noreply@blogger.com (Brett Hayes) — Sat, 31 Jan 2009 18:05:00 +0000

This afternoon, as I drove down a local road, I saw a sign on the side of a business that said, "Pray for Recovery". Now, I don't know about you, but prayer may not be the best method for getting the economy going again.

So at the risk of offending everyone who believes in the power of prayer, I would like to list some other things that will have a more imediate impact without divine intervention:

1. Get something fixed around your house that needs to be done. This past week, I hired a local handy man, Stu, to put in some more insulation in the attic and fix some leaky doors upstairs which was running up my heating bills. I have needed to do this for some time, but now made sense. He did the work in just a couple of days and was ready to get on it as soon as I called.

2. Refinance your home. Right now, 30 year fixed rates are the best they will ever be. Yes, you need to have some equity in your home and decent credit, but if you do, then you will add hundreds of dollars monthly to your wallet that can be used for things you need. Not to mention, everytime you refinance one of those loans, it is one less loan that is sitting bundled in with the toxic mortgages.

3. Provide a better service to your employer or client. Since we are in a national malaise, it is understandable that people aren't working at their fullest. Now is your time to shine. Focus on what you do and do it better than you ever have before. Think about it. The best and brightest never are in want.

4. If you are spending your money, spend it on services before imported goods. I am talking about consumer electronics mostly here. If given the choice between a $1,000 HDTV and $1,000 in services (get your will redone, have a room painted, have your car repaired, hire a shrink, get a massage, etc) then the money spent will go much further to help the economy. This is because on the TV most of that money is being sent overseas and thus is leaving your local economy.

Pray all you want, but the real way out of this recession is by collective action.

Preparing for the downturn

noreply@blogger.com (Brett Hayes) — Wed, 28 Jan 2009 16:56:00 +0000

By now, if you have not put your small business in a strong position for the economic slowdown, then you are likely having sleepless nights. We can all hope that the worst is over, but chances are that it is only beginning. Keeping in mind that the overall goal for you, the small business owner, is to come out of the recession with what you went into it with, then you may want to do some of the following:

1. Be sure you have plenty of cash. This means talking to your banker to be sure you have a line of credit to carry all the business expenses for 3 months. If you don't have this line set up already, get to work on it now.

2. Keep your receivables down. Everyone is feeling the pinch, so make sure you are collecting on all your invoices quickly. Anything that passes 30 days should be pursued with all your strength. The longer it goes, the worse it gets.

3. Make sure you aren't paying for deadwood. I know it seems heartless, but if you have employees that aren't performing, then you need to get rid of them before they pull your good employees and you down.

4. Get back to being a guerilla. Don't forget to beat the bushes for new business. Now is the time that all that great customer service you have been working on for years should pay off. Provide a needed and valuable service to your clients and they will use you. Call people and talk to them like people. You don't need to spend money to do this, just time.

5. Keep your employees informed on where you are and where you need to be. I never subscribe to the secret finanancial planning. If you need to hit a number in revenue to make things work, let everyone know. They won't ask for a raise, they may just rise to the occasion.