[Adrian_Stiff]

Weather. It is vile here at the moment.

I tried to clarify 'the better' thing in my post, Bandon for us in the UK is just  so very remote of course, almost as remote as Askernish!

[TEPaul]

"As a student of economics (not the ridiculous Keynesian kind but the Austrian kind):


Steve Kline:

What exactly is the Austrian kind of economics?

If you ask me the thing that all nations and economic systems today need to keep their eye on is that old so-called "multiplier effect" of money. Let that get out of whack, as it obviously has in recent decades in relation to basic supply/demand factors, and after a while somebody is going to get clobbered bigtime as we have seen recently and will probably see more of until these economic fundamentals get back in line. Sometimes some of these economic "theories" of administrations and such get a lot too "theoretical" in my opinion. This economic stuff, even on macro levels, is never going to be rocket science and nobody should try to make it look like it is. Ultimately it's not all that much different than the corner hardware store model----eg eventually it pretty much needs to get revenues and expenditures into line or it ain't gonna be there! 

[Adrian_Stiff]

Adrian,

I feel just the opposite with respect to the "better" or higher quality course failing.

Those clubs with "THE" quality product will survive.

I don't see the Pine Valley's and Seminoles of the world going under.

I don't know why you associate better/quality courses with expensive courses.
Some of those better/quality courses are fairly inexpensive to belong to.
It's getting in that's the difficult part, not paying the annual dues.

Newer clubs, where the acquisition and construction costs were high, are at risk, but, the older, better/quality clubs will survive.

Location and demographics have a lot to do with survival, but, again, if the quality of the product is outstanding, those private clubs will survive.

I think destination resorts and destination private golf clubs will experience a good deal of difficulty.

I love Bandon Dunes as I did Pinehurst many years ago, but, it's remote and difficult to get to.
I certainly hope it continues and prospers.

Patrick I agree with pretty much everything you are saying... I dont mean ALL the best courses will go, I am referring more to the good newer ones.

[Jud_T]

Adrian,

Spend a couple of winter golf seasons in Chicago before you start complaining...   50 degrees and the occasional dry day looks pretty good from here....

[Jud_T]

unless they raise taxes during a recession.  oh, wait a minute....

[Patrick_Mucci]

Adrian,

I agree, I don't know how the newer, costly courses will survive without a terrible struggle.

[Adrian_Stiff]

I think that the worst is over for business's...thats not to say no buisness will go bust from now, but the worst is over.
We now have to pay for the mistake and that will be higher taxes, taxes are going to be paid by the richer, (the ones that golf, the ones that holiday,) that must mean less disposabe money. The pattern we noticed was membership was static, we lost a few gained a few, our number of rounds increased, margins much smaller though as everyone discounted to get market share. What was down a ot was the group bookings for days away and everyone is trying to chip the price.
I think bookings for the luxury company days will be down for sometime.

[Jeff_Brauer]

Just out of curiosity, what are the best resort courses to ever have gone out of business?  Or, the best courses, period?

I know Lido is one and I could also look it up in Wexler's book but off the top of your head? 

There are many that went from private to public, etc., but what NLE's are the best?

[A.G._Crockett]

Tom - don't discount too much the economy falling another 50%. As a student of economics (not the ridiculous Keynesian kind but the Austrian kind) I think this is fairly likely to happen. It could happen any time from 2010-2020. Most people don't have the faintest understanding of how the monetary system or works or what we are in store for.

As for GCA, it seems to me many courses were built over the past three decades for people that won't be playing golf as much in the future due to contracting incomes. These not so avid golfers liked flash (water falls, water hazards, big clubhouses - even at public facilities, wall-to-wall green, no weeds, length, etc.). But flash will not be sustainable going forward. Courses (like the ones everyone here wants to play at) that were built with an eye to serious golfers (not necessarily good ones) will do better because serious golfers will continue to find a way to adjust their spending habits so that they can still play golf. Out of the way places (like Bandon) may struggle because while the serious golfer loves it it is too expensive and hard to get to. Overall this could be very good for the GCA purists.

Steve,
As a student and teacher of Economics myself, I'm curious as to what you mean by "50%" and how you arrived at that, given that the "Austrians" don't use statistical models, generally speaking.  If you mean by 50% that GDP will decline by 50%, it'll take nuclear war to accomplish that, and GCA will be the least of our worries, I think.

As to the greater question, it is going to be really interesting.  Obviously, courses with little debt to service are in better shape, and those developments based on the most optimistic assumptions of eternal, unchecked growth are in trouble.  But where in between those two extremes the shakeout will occur is an open question. 

It may turn out to be a question with lots of answers, many of which are unknowable right now because conditions change so quickly and so frequently, and many of which are highly individualized to particular courses and local markets.  Economics, after all, is MUCH better at explaining the past than predicting the future, whether you are a mainstream Keynesian, a Friedman monetarist, or a rational expectations theory/Austrian.

[A.G._Crockett]

"As a student of economics (not the ridiculous Keynesian kind but the Austrian kind):


Steve Kline:

What exactly is the Austrian kind of economics?

If you ask me the thing that all nations and economic systems today need to keep their eye on is that old so-called "multiplier effect" of money. Let that get out of whack, as it obviously has in recent decades in relation to basic supply/demand factors, and after a while somebody is going to get clobbered bigtime as we have seen recently and will probably see more of until these economic fundamentals get back in line. Sometimes some of these economic "theories" of administrations and such get a lot too "theoretical" in my opinion. This economic stuff, even on macro levels, is never going to be rocket science and nobody should try to make it look like it is. Ultimately it's not all that much different than the corner hardware store model----eg eventually it pretty much needs to get revenues and expenditures into line or it ain't gonna be there! 

Tom,
Suffice it to say that the Austrians are the Libertarians of the economic world, and that neither the mainstream Keynesians like Greenspan and Krugman, nor the Monetarism school of Friedman put much stock in their ideas.  That's oversimplified, but gives you the idea.  I wouldn't lie awake worrying about it.

[Tom_Doak]

Best numbers I could find (in a five-minute search) showed U.S. GDP fell by 25-30% between 1929 and the bottom in 1933.

I assumed that Steve and Jim were talking about the Dow falling 50% or more, not GDP.  The Dow fell 90% between 1929 and 1933.  But, the world is much more complex today, and a lot more of the numbers we're discussing are based on Monopoly money; I don't think there is anybody who really appreciates what COULD happen if everything goes wrong.

[Adrian_Stiff]

I think that monopoly money is about right.... When it was pretty grim about a year ago, I heard two bankers talking about a situation of scrapping the present money and starting a new currency.

As for 50% etc.... House prices in the UK are still really three times more than they cost to build and a lot of stocks are three times more than what they really should be. P/Es should be single digit really, 25s and 50s for new companies says it all really.

On a plus, if you are retired or have a very safe job you are likely to have more money than ever. Being negative I suppose the good spenders in the golf market would be under 50.

[Jud_T]

Adrian,

With rates at essentially zero on both sides of the pond a p/e of 15-20, which has an implied return of 5-7% is fair to cheap.  Can all stocks and property go to zero, sure, but being short is a fools game, that was last years trade....

[Adrian_Stiff]

Jud- I agree with money at zero and 15/20 P/Es look okay but that is Now, weirdly when money was more expensive P/Es were more. I dont really get why a PLC should trade a twice the value a non PLC (or inc) company. The reason is only hot air. It is that hot air where the bankers and others members of the ponse brigade feast ofcourse.... but that is wrong.

Many stocks should be close to zero, but at the end of the day market conditions decide the price not if a company is actually any good or not. House prices could get back to the cost they are to build, ie land prices fall from £1,000,000 per acre to £6,000. Current UK and values are up to about 100x if you get permission for property, I assume thats not the case in the US.

[Jud_T]

Shivas-

One of the silver linings of the recession, less traffic! (except in Chicago where there are 2 seasons, winter and construction).

[Jud_T]

at the end of the day market conditions decide the price not if a company is actually any good or not

?? at the end of the day fundamentals win out...I don't think the buggy whip stocks are fairing particularly well these days...

[Tony Ristola]

What does this shake-out say about Feasibility Studies?

Tony:

The only feasibility study I've ever heard of which recommended NOT building a course was the one for Bandon Dunes.

Now that is funny.
I'm surprised they did one. A fact finding mission sure... but one that drew conclusions is a little surprising, considering the lore of the investor and his goals.
.

[Adrian_Stiff]

at the end of the day market conditions decide the price not if a company is actually any good or not

?? at the end of the day fundamentals win out...I don't think the buggy whip stocks are fairing particularly well these days...

Market Makers make the price dependent on supply and demand. Very often a companys share price is high on nothing and is lower when the news is actually good. Shares have hope value so even companies which have negative assetts will have some price based largey ofcourse on a wing and a prayer.

[Steve Kline]

50%?  You guys are kidding, right?

We have a $14 trillion economy in the US alone.  You're talking about $7 trillion of production disappearing.  In this whole sub prime, give houses to everybody mess, we're talking about a ballpark $500 billion reduction over two years.  You're basically talking about the end of the world, economically-speaking. 

I don't see how that's even remotely possible.  There are just too many opportunities out there, too many things to be invented, too many ways to be creative and make a buck these days.  It may not be as easy as it was a few years ago, but it's still there. 

Ever looked at a chart of money supply or debt-to-GDP or tried to figure out how much of the economy's growth the last 30 years is due to the expansion of debt? If you do you will be stunned and you will see that we are nowhere near out of the woods yet. The normal average for debt-to-GDP for the U.S. is 150%. That means debt is 1.5 times GDP. Today it is 375% - far higher than the Great Depression. To return to the normal level of 150% means that more than $30 TRILLION of debt needs to be defaulted on or paid down, assuming the size of the economy stays constant. If we look at just household debt as percentage of GDP and we want to get back to the levels of just the year 2000 then we need to write down or default on almost $4 trillion of debt. So we far households have paid off or defaulted on just a few hunderd billion. And, look at the impact that has had on the economy.

And given the rate of money printing around the world I basically expect a major currency crisis to arise but can't really predict when.

I can't compare with most of your guys' knowledge on GCA but I spend a lot of time studying economics and tracking data. I'm fairly certain of where things are headed the next ten years.

[Steve Kline]

Tom - don't discount too much the economy falling another 50%. As a student of economics (not the ridiculous Keynesian kind but the Austrian kind) I think this is fairly likely to happen. It could happen any time from 2010-2020. Most people don't have the faintest understanding of how the monetary system or works or what we are in store for.

As for GCA, it seems to me many courses were built over the past three decades for people that won't be playing golf as much in the future due to contracting incomes. These not so avid golfers liked flash (water falls, water hazards, big clubhouses - even at public facilities, wall-to-wall green, no weeds, length, etc.). But flash will not be sustainable going forward. Courses (like the ones everyone here wants to play at) that were built with an eye to serious golfers (not necessarily good ones) will do better because serious golfers will continue to find a way to adjust their spending habits so that they can still play golf. Out of the way places (like Bandon) may struggle because while the serious golfer loves it it is too expensive and hard to get to. Overall this could be very good for the GCA purists.

Steve,
As a student and teacher of Economics myself, I'm curious as to what you mean by "50%" and how you arrived at that, given that the "Austrians" don't use statistical models, generally speaking.  If you mean by 50% that GDP will decline by 50%, it'll take nuclear war to accomplish that, and GCA will be the least of our worries, I think.

As to the greater question, it is going to be really interesting.  Obviously, courses with little debt to service are in better shape, and those developments based on the most optimistic assumptions of eternal, unchecked growth are in trouble.  But where in between those two extremes the shakeout will occur is an open question. 

It may turn out to be a question with lots of answers, many of which are unknowable right now because conditions change so quickly and so frequently, and many of which are highly individualized to particular courses and local markets.  Economics, after all, is MUCH better at explaining the past than predicting the future, whether you are a mainstream Keynesian, a Friedman monetarist, or a rational expectations theory/Austrian.

50% isn't an exact number as no one can up with it. And yes Austrians don't use formulas because they don't work.But Tom's comment was more expressing an extreme result. I should have clarified by saying that I think an extreme result is likely. It may not contract 50% but it's going to go down a lot and whether it is 25% or more or less really doesn't matter because it's going to be really bad. Life is going to change drastically.

[Jud_T]

Steve,

Sounds like you should buy gold, like every other yahoo out there, shorth the dollar, renounce your citizenship, and load up on firearms...There's no question that we're in for a long slog as people, companies and governments repair their balance sheets.  But a couple of points.  1) Now is exactly when we should be printing money...  2) If any economy can survive this shock, it's the u.s.'s.  If you don't like it, don't let the door hit your backside on the way out....

[David Stamm]

Our economy has never been the same since the Federal Reserve system was created. We need to get back on the gold standard. JMO.

[Jud_T]

I can't wait till everyone who's long gold heads for the door at the same time and it drops 50%.  It's just like the oil trade....

[Jeff_Brauer]

I am no economist, but have no shortage or contraction of opinions.  Just a few thoughts when reading this thread:

Steve Klein,

Do the stats really support your theory that the simpler golf courses with less splash are the best ones?  How many courses from the depression make the top 100 lists versus those of the 1920's?  Southern Hills and Prairie Dunes?   I think developers built waterfalls or moved more earth in the next booms because technology allowed it inexpensively enough. Mac had to do it mostly with oceans and bunker style......

I think for most of us (middle class), the economic adjustment won't be sudden in the next few years - it has been slowly happening over the last 20 or so.  I know I sound like a Democrat here (and I am not!) but it is true that the recent GDP gains were made disproportionately on Wall Street only.  Salaries are stagnant relative to the CPI, resulting in the continually rising debt load of both the govt and private sector - in essence, we still all spend like its 1959 when by historic conventional standards it wasn't wise.

What happens in the economy will primarily be a result of how we handle our debt load.  If we slowly work to reduce it long term and sensibly, it will naturally affect spending downward and be reflected in slower GDP growth.  If we let it go further like the banks did, and the govt does, then someday there will be a more dramatic reckoning.  Since Jimmy Carter got hammered for getting us to try to reduce debt, no candidate will even consider programs to reduce personal spending.  Like corporations, our govt never looks further out than the next election.

Of course, all of the foregoing is mostly uninformed and somewhat simplistic thinking, which I am sure many will disagree wit.  I think I can say without fear of controversy that it will be interesting, though.

[Jud_T]

jeff,

The personal savings rate has already gone back up significantly, as people repair their balance sheets.  The flipside is limp consumer spending for the next 7 years   The real golf question however is how you involve the general public.  People like me will always make room in the budget for golf as it has a high utility to me, and most everyone on this site.  The real golf contraction will be in the folks willing to drop $100-200+/round and spend 5 hours doing it IMHO....Many of whom by the way were the dreaded bankers....

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