Observations of the bank that just failed
The collapse of Silicone Valley Bank is an interesting business story. 1, I guess it’s a pretty big bank, and its collapse will have material impacts of the nascent tech startups that banked and stored their money there - starting immediately with missed payroll, and only snowballing from there.
From my perch it’s interesting to already see pleas that not just $250,000 of deposit insurance gets covered, but that all amounts of lost deposits get covered - I guess the ‘too big to allow to fail’ is a lot smaller than it used to be.
2nd, this seems, even to a non-banker like me, as to be wholly predictable, based on what I’m reading - they had large deposits, they safely invested them into safe havens, which became less safe as interest rates rose, and people pulled money out at first because higher yields were possible elsewhere (with simple CD’s paying 4.5% and more), so that began to stress SVB’s cash flow, and the only way to raise money was to sell the safe haven investments at increasingly bigger losses. That should have been highly predictable - seems almost obvious. Why would anyone keep money in a bank paying 1.5% when you can get 5% with no added risk? And these deposits were held by a lot of institutions and corporations, which move money seeking yield faster than say you and me.
3rd, the capital markets are no help, especially for a bank, since if a bank is seen in need of raising money, then people lose confidence in that bank and a bank run logically follows, as people want their money to move to safer shores. There’s a cliche, which I can’t remember and I’m not close enough in my guessing for Google to help, that says - more or less - that if a bank has to reassure depositors about the safety of their money, then it’s too late for that bank. The suspicion of distress is all it takes for a panic that feeds on itself.
3, I didn’t know it at the time, but it seems like the failure of Real Eats, the company that has shipped delicious food to my door for the past 12 months is related to the Fed action as well- that yields can be had that are attractive in very safe CD’s, bonds, treasuries, what have you, that not as many people are investing in capital raises these companies need. That was one of the reasons the CEO gave, meaning the company had only existed, and possibly only could exist, in an environment of low interest rates and eager capital markets and private equity, since it was not profitable. Of course, to me, it seems like having a business plan that generated profits would have hedged this.
4. All this happens as I moved out a good portion of investable funds into CD’s, and considered as 100% some of the banks that are now subject to the liquidity rumor mill.
This just reminds me again that the investing professionals out there really have no real crystal ball or even much forecasting ability. If you weren’t predicting this simple concept of how interest rates could impact banks, then how can you pretend to know something about more complex situations. One thing is for sure, it will be a great couple of weeks for business journalism, which is right up my lane.
I saw this post on Instagram about my friend Piers, moving out of Lot 5 at Dawson Lane - Farmhouse 42. He sold after 4 or 5 years and is moving to Boulder. Our houses always sell, and I bet he made $400k. The diversity of our clients, their individual and family achievments and accomplishments, is one of the neatest parts of our Catskill Farms journey, and I’ve said it before that what would really round out this Founder’s job the best, was if I actually had time to hang and get to know them better, since they really are best in class.
The men laying some stone at my house clearly were enjoying the views at breaktime, judging from their chair set ups.
And a snow man at a client meeting, that they had just constructed. Reminds me of my son's art - everyone is always smiling in his sketches and drawings.
I don't think I've blogged this much in a decade. Fun to be back in the saddle and leading from the front.
Interesting Business Stories
There are actually some really interesting business stories out there, and I’ve always been a big fan of business journalism. Since as a business owner, I’m a big consumer of goods and services, I have a decent eye for out of the ordinary stories and a few recently have come to mind. I always compare my business and our efforts with these, and a lot of times it gives me consolation that I’m not the only one at times failing to live up to the goals of the business.
I like this watch brand, Lilienthal Berlin, and they are sort of like the equivalent of a craft brewery or micro batch whiskey maker - cool, expensive but not obscenely so, craftsmanship, stylish, etc… So I’ve been wearing a few of theirs over the last few years, and 1 day my watch band broke which I sent back to them to repair, that then started, and I’m not lying, a 6 month effort to get my watch back. My communiques just seemed to go into a black hole of random and informal responses of ‘it’s in the fulfillment center’ and then nothing, but the email signature tags were lacking and really any graciousness or explanation, or really a feeling of anyone actually doing anything about it. It was a weird experience that I thought would take 48 hours and turned into half a year and a lot of effort - there seemed to be no way to escalate the issue, like everyone who worked there were former surfers and now had a day job. I did get it back last week, after I put a person on it fulltime. I'm sure not what they have sketched out in meetings for customer experience.
(pictures of a Barn home we are building in Forestburgh, during the rough in and siding stage - moving right along).
The 2nd one is a real tough one for a single dad/guy who struggles with nutritional eating. So I’ve been experimenting with food delivery companies for a year or two and the ones where you have to put the ingredients together, but those that come ready to heat and eat. Even a non-foodie can recognize the difficult task of selling pre-packaged meals, not much different in practice than a TV meal of old, but with fresher ingredients, and not frozen. But a lot of them just get old quick and the taste isn’t there until I found Real Eats, which sold packages which you boiled - didn’t matter what it was, you were able to boil it and it was excellent, and I had been on that kick for over a year, eating pretty good, with a good variety. They were based in the Finger Lakes of NY. Then, out of the blue, they went out of business. Poof. Gone. Dietary habits once again at the mercy of whim, hunger, convenience - never a good combination. I can cook, or have succeeded in the past when I put in the effort, but I don’t enjoy it and don’t do it much.
The 3rd one I’m surprised has not made the news since it’s big news - Rejuvenation (high end home furnishings) merged with a few other big name brands, and the merger resulted in a gigantic shit shoe of incompatible computer systems, lost item codes, deletion of customer histories, and other horror stories. We have tried to order, or return, and the poor soul on the other end is taking the SKU code, and then comparing that to a SPREADSHEET’, then doing a few other tricks, just to take an order on an item and it can’t be done by computer. So whatever is going on over there is really bad, and I wish them a speedy fix, since I’m sure there is a lot of stress, when some of the biggest brands in the world merged, and those millions of orders that come in by computer, now must be answered by phone, identify the order, change the old SKU to a new SKU with the aid of a spreadsheet, tally, order. God forbid you have to make a change, a return, or refer to your purchase history. One can only imagine the tempers flaring in each department of that company.
Sometimes you see those stories, and all you can is ‘there for the grace of God, there I go.”
(landscaping posts edited and/or removed as we move towards resolution)
Roads not Taken
I’ve been thinking a lot of how one stays in business for 20 years when some peg the number of failures within 15 years at 65%, and within 5 years at 45%. Now, just because you are in business and hanging on by a thread doesn’t mean that you are enjoying the small business ride you are on - many times, once you are in it, it’s hard to get out, profitable or not. You have debt on assets, employees, little alternative job prospects, etc… So if 45% are failing after 5 years (and I think the number is higher), then the real number of ‘alive but just barely’ is certainly higher - operating a business on life support is hardly living.
But that’s not my point. My point is as business owner you get lots of opportunity to celebrate your good decisions, and lick your wounds after bad decisions. Those are tangible experiences with tangible results.
What’s not tangible, but as important or more since it is occurring on a more or less continuous basis, are the actions, tasks, investments, upgrades not taken, but passed on. Could be a new piece of software, a new piece of land to buy, a new employee, a new headquarters, or a million other things that you steer away from, steer clear from, with little ceremony, with little regret, with little self-congratulations - just things that come across your radar that you let go.
Everyone remembers the client that you should not have worked with that turned into a shit storm, but not the one that you didn’t return the calls for long. Everyone remembers the piece of land that propelled you into the big leagues, but not the 40 you reviewed and passed on. The loan you didn’t take, the relationship you didn’t cultivate, the software you didn’t buy, the equipment you didn’t invest in, the employee you didn’t hire, the neighbor you didn’t piss off, the town you didn’t work in, the fight you didn’t pursue, the asset you didn’t buy.
Yes, the big decisions that work out is where all the glory is. And the ones that don’t add a lot of spice to life. But let’s be honest, in between those 2 extremes lie the thousands of ideas that were reviewed and vetted with little ceremony, that your experience just steered you away from. That’s the power of experience and expertise, and there is little tangible glory in it, but it’s of vital importance.
We have another barn going up in North Branch NY - this one is one of our favorites, with a first floor primary master suite that is sweet indeed.
Previous Version of this home.
12th search result on the Jastrem Landscaping google search, and climbing!
Business Landscape of Sullivan County
It wasn’t long ago when I guess an old business acquaintance who I had a falling out with a decade ago and hadn’t spoken to since, must have bought two $100k Telsa’s. He’s a contractor, so clearly he had some good pandemic years, or maybe just needed the accelerated depreciation, but whatever.
So I guess he was having real issues with these 2 expensive cars, so much so that he made a rudimentary TikTok outside one of them after I guess causing a scene with his dissatisfaction and almost getting arrested. I’ve heard some similar reports of Tesla’s being a pain and having issues, and most significantly, the service departments being quite arrogant, dismissive and rude. He then must have selected ‘send to all contacts’, hence how I got on the receiving end of it.
All this to say, even though there is zero love lost between me and him, and I hadn’t thought about him for years, I felt bad for him that he had been pushed to this point of frustration - we all work way too hard, deal with way to much bullshit, that when it’s time to do a self-reward, it’s hard earned and I wish anyone well in the exercise. And as builders, we are so constantly going way over and above just to keep everyone happy or in a good place, when you see treatment like the landscaping to me, or Tesla to this guy, or I could name a dozen others, I take it personally, since I know it’s literally the last thing this guy needed while trying to enjoy the spoils of his hardwork.
I read a ton of newspapers - everywhere I go, I read newspapers. Most Sundays I sit around reading the London Financial Times. Local newspapers are good too, and I’m lucky enough to not live in a news desert which is impacting so many communities - the areas I roam most frequently - Sullivan County, NY, Ulster Cty NY, Pike County PA- have literally a half dozen or more small papers, keeping track of planning boards, town boards, sports, courts, letters to the editors, etc… The existence of a local paper, or inversely, a lack of one, has big consequences.
A few weeks ago, I was reading the Sullivan County Democrat, which has been around I believe 125+ years and in it I saw 3 interesting tidbits, that relate to me indirectly.
First one is that I was reading a paper at all, and that it was the Democrat, which has been around for a century plus. I read, write letters to the editors, and even write for them on occasion.
The 2nd was the announcement of our community bank, Jeff Bank, had what I believe was reported to be its highest earnings per year on record, and they’ve been around 100+ years as well. The relationship I have with Jeff Bank, and I have wrote about this in the past, is one of those relationships that go back to the very beginning of Catskill Farms, back in 2002 or 2003, when I approached this local bank with a request for funding for Farmhouse 1, in Narrowsburg NY. I asked for $300k, they lent me $100k, and off we went. Then my credit line went to $300k, then the bank offered a $1,000,000, which was big money back then. I remember standing by my phone/fax thermal paper machine, watching the approval come through in 2004 in my 400 sq ft shack I was squatting in. From there, each idea or incremental advance I wanted to make I spoke with Jeff Bank, who I don’t think has turned me down for a loan in 20 years - they loan, I pay, on time. It’s a simple agreement, a simple bargain. CEO George Kinne was my commercial loan lender when he started with the bank, then rose through the ranks to what I believe was the youngest bank president. You think about all the storms you had to weather to be in business 100+ years - wars, depressions, the heyday of the Catskills, the decline of the Catskills, big bank competition in the 2000’s. Their business plan reminds me of mine - stick to what you know, and don’t be tempted by the flashy gold coin idea of the day.
The other was a short story about the Heron Restaurant - been in business 11 years now. When they first opened, Sullivan County didn’t have many good restaurants, and so this crew came into to town, opened everyday, had a great menu and bar, and not only revitalized the town of Narrowsburg, but showed, once again, like I have said for 20 years - there are profitable niches and lanes of business in Sullivan County - you just have to identify them, and then stick to them, get better and stay in your lane. I remember early on at the Heron, I would go in there on a Saturday morning for brunch, and every table was filled by a Catskill Farms homeowner, because when I started building up here, there were literally zero amenities to support my idea of country living - people came for my homes, and then figured it out from there. The Heron has been around forever now it seems, and just sticking around is cause for celebration, but sticking around and killing it, and improving the whole dining scene in the county by doing it well, that’s worth any and all accolades they get.
I’ve said it before and I’ll say it again - the economic cross-multiplier of our efforts over 20 years, has literally generated out of thin air, hundreds of millions of dollars of spending in Sullivan County, helping schools, towns, restaurants, libraries, ambulance corps, hardware stores, real estate agents exist and even thrive. And you can't overstate how the bold actions of one, embolden and empower others to envision taking the risk and plunge. So part of the wonder of this whole capitalism system, is how my idea, and a bank’s credit, and a lot of hard work, generated hundreds of millions of dollars of economic activity. Poof -
It’s different now - with a much established business group, a lot of restaurants and hotels, a lot of neat small businesses. But I remember when…
Some times it's just easier to measure our progress by keys of houses and binders of past jobs - that's when it really hits home the extent of our efforts.
