January 21 , 2008
Perspective on Real Estate
The Presidential election drones on with the press demanding a clear winner each time. The press is a giant ear that listens for errors (that they define), with a giant eye that never closes, and with questions that are insipid and arrogant. There are no ethics, except to destroy oppositions, with made-up internet-carried (the new media) that cannot be refuted through any normal means. These media are of the future and have money support that is immense and devoid of morality or principle! We have a supreme court whose eyes are as blind as a president and vice-president, and court jesters who cry “freedom” everywhere, except at home as they sculpt liberty in Iraq to their own ends.
Business and the Economy: The consumer worries Wall Street. There has been a surge in credit card defaults and auto loans. Wow, now that’s something to worry the calmest heads, and another reason for gold to rise to its newest peak. Rising gold should make all of us worry as it thrives on fear.
One fear: The Home-equity Crisis about to Strike! We have not begun to perceive the deterioration of the economy like a multi-headed snake about to strike, especially the deniers. The Fed has little control of this deterioration, except to tell us it understands what other’s find confusing. Leaders must understand confusion and begin to define its implications and consequences of ignoring it.
Innovation: The Commerce Department will begin measuring innovation. I have told you that we need new measurements besides the traditional ones, with which we are so comfortable. It is more important to make sure that we measure all the data that impacts growth or lack of it, so we can glimpse at both shadows and reality.
As part of the global economy, we see companies which are leaders in their foreign sales, such as Hewlett-Packard, IBVM, Cisco Systems, Dell and Microsoft.
Investors see Recession and the Market keeps dropping. Sales and starts of homes are way down and not getting better. The experts are asked: "how close to bottom are we?” and “what will bottom be? Figures, so far, have not reflected how much the pricing has fallen. It is closer to 20% rather than the few percentage points most often quoted. This is very serious stuff and being a giant is no protection. I’ve often reminded us that the big simply make more noise when they fall, whether we hear the crushing sound or not!
More wise men are recommending renting than buying. (The housing industry has never been able to solve its biggest fault—not having a trade-in program that fuels the auto industry!) The car dealer (new or used) has a cushion on how much of a trade-in he can offer on your present car/trade-in.
Renting gives you much more value and flexibility. You can take time to reason it out and don’t have to get rid of a home before buying another one. The downside is always that you’ll have a landlord, one of the most hated words ever created. Yet, managers are better trained and more aware than ever before.
Finally—but as slow as molasses and as sticky—the administration tells us that the economy is slowing faster and that action is needed. (The Dow has fallen 14% from its peak in October). Always, the action is to quickly lower the taxes of the rich! These guys are driven to starve government so that it has no flexibility, when flexibility carries key answers on what to do. Answers and actions are necessary to get a hold of the frightening volatility of the markets unless you’re a gold bug who thrives on unpredictability
New Book: "House Lust: America’s Obsession With Our Homes,” by Daniel McGinn. Bubbles are created by the madding crowd that falls in love with something, makes a mob out of simple individuals, and creates a love affair between a fool and his obsession. Builders never created obsolescence, since they brought the range and oven into the kitchen and added them to the mortgage. What they did do, with the demands of the consumer, is larger cubic footage for rooms that had been built, since the days when affluence first made one man richer than another (hence neighbor envy was born).
I used to warn clients that if a prospect asked the square footage of a model home, they had failed to tantalize the prospect with the model—for that is what a model was supposed to accomplish through furnishings and landscaping, as Carol Eichen Passivoy taught us.
State’s Jobless Rate Surges. Saddled with growing joblessness, (4.8% to 6.1% Dec to Dec) California also has a huge deficit.
Consumer Spending Shows a Sharp Dropoff in December. Now that’s scary!
srg
