Posted by:
Trenton Flock @ 4:20 PM
Though some sectors of commercial real estate remain stable and profitable, many retail and hospitality spaces are sitting vacant as poorly-performing tenants shut their doors. Beyond the lack of cash flow, commercial real estate investors with vacant spaces face a vicious cycle much like
the Broken Windows effect in foreclosure-struck neighborhoods, wherein the vacant space may attract crime, loiterers and vandalism, which further decreases traffic and eventually compels existing tenants to move when the lease is up. However, some commercial real estate investors are overcoming this problem by turning to unconventional tenants to fill these spaces.
A
recent AP article highlights some interesting examples of this trend. My favorite:
“In November, mall owner Pennsylvania Real Estate Investment Trust snagged New River Community College as a tenant for a former theater space in its New River Valley Mall in Christianburg, Va. The satellite location features seven classrooms, four computer labs, a science lab, two auditoriums, testing and conference rooms and office space."
A cinema complex seems difficult to convert successfully, but using theatres as auditoriums with plenty of study space just outside in the lobby and a concession stand is honestly quite brilliant. I like it much better than my idea to convert an abandoned Chuck E. Cheese into a funeral home (though I still insist that a ball-pit and an animatronic band would improve any wake).
Shopping malls and strip malls especially are facing high vacancy rates as larger chains begin to falter in leaner economic times. Levitz, Zales, Ann Taylor, PacSun and Foot Locker are closing hundreds of stores this year. Linens 'N Things and Sharper Image have already filed for bankruptcy protection. I guess radio-controlled backscratchers and self-cleaning plungers aren’t quite recession proof.
To generate income from vacant stores, larger malls are leasing empty storefronts as billboards while they search for new tenants. Malls large and small are also courting first-time and independent business owners by offering short-term leases with attractive rates, according to the AP article.
This may be bad news for many corporate retailers and their employees, but it isn’t necessarily bad news for commercial real estate investors in the long term and it is certainly good news for small business owners. Larger companies with more overhead will continue to suffer in a recession, but savvy entrepreneurs in control of their own expenses can still come out on top. Meanwhile, their landlords will still enjoy a regular income and a more diverse use of their property, which could guard against future fallout like that of Sharper Image.
Beyond all of that, this sea-change could even benefit the consumer, as erstwhile interchangeable chain shops become inoculated with local talent and independent ventures. In years to come, some malls may have a local flavor beyond the bland corporate spumoni that one customarily finds. The times may be sour for some retailers, but as in all upheavals, there could be sweet results for those who can adapt—most of all, investors and entrepreneurs.
Labels: business, economy, real estate, recession
Posted by:
Trenton Flock @ 8:04 AM
Disclaimer: This blog post contain explicit lyrics and should not be viewed by children.
Another heaven-ordained American right is under attack by rising fuel prices: the right to inflict your music upon others.
Long known for their frugality in touring, indie bands are finding that they can’t even break even when playing in remote locations thanks to the rising price of fuel. As quoted in an
AP article on MSNBC, 23 year-old indie minstrel Steven Garcia had this to say about budgeting for his now-canceled tour:
“Once I ran the numbers it was a ‘There’s no (expletive) way’ kind of moment.”
Indeed, such an articulate sentiment will strike a chord with any driver these days. It’s surprising that we haven’t seen more artists tackling this issue in their music. Allow me to seed a few songs:
Punk | Gangster Rap | R & B |
Sixty bucks to fill my tank?
This must be some kind of prank
F*** you Exxon, F*** you Shell!
You oily pigs can go to hell! | My baby mama toll me she need money fo’ gas.
Now da b**** is Super-Leaded ‘cause I popped a cap in her a**.
So I’m doin’ hard time, but you all is da chumps;
Droppin’ soap is still better than getting’ r**ed at the pump. | Oh baby, baby, you know you’re my world; it’s true.
I’d drive three-quarter miles just to be there next to you.
Call me, baby girl, and you know that I’ll come
You’re my baby (You’re priceless) You’re my Super-Premium. |
With CD sales already on the decrescendo, it has been suggested that artists would have to adapt and drum up most of their money through concerts and merchandise, as Prince did when he gave away copies of his latest CD in the U.K. to advertise for his concert. Under these circumstances, however, it’s questionable if young bands can avoid losing money, let alone make it. The East Coast has a greater density of towns which affords artists there a slight advantage over West Coast and Midwestern bands, who have a lot of awe-inspiring, wide-open spaces to suck their wallets dry between cities.
I have a possible solution: In the past, I’ve recommended
teepees to solve the housing crisis. In a similar vein, I say we resurrect another bit of Americana to keep American rock and/or roll alive—the wagon train.
If these musical pioneers are willing to cram seven people into a single van and hit the highway to hell with half a ton of equipment designed to be as noisy as possible, then they can probably manage in a covered wagon. This “bandwagon,” if you will, might allow musicians to save money, to grow rugged and to connect with American history. As an added bonus, it’s eco-friendly...like when Sheryl Crow toured using only bio-fuel, except without the smug self-righteousness.
It seems, though, that some artists will still be getting around the old-fashioned way (as opposed to the old-old-fashioned way). Ann Yu, singer of indie band LoveLikeFire, has this to say in the AP article:
“What else can you do? It’s just the battle scars of trying to get your music out there. And for every band that doesn’t or can’t do it, there are other ones that can and will.”
Ms. Yu is probably right. The road to fame has always been arduous, and high gas prices are just one more stumbling block, and probably less damaging than band politics, drug addiction and the stress of divvying up groupies after the show. More than ever, artists must have serious dedication and financial savvy (or a trust fund) to make the cut. Which is to say, whatever their "sound" may be, they all sound more and more like one thing: investors.
Labels: fuel prices, inflation, Oil, recession
Posted by:
Trenton Flock @ 12:57 PM
Though not nearly as compelling as lesbian rumors surrounding LiLo, or gay rumors surrounding Scott McClellan, or gay/lesbian/horrifying reality surrounding the “Sex and the City” movie (the reality being that it made over $55 million on its opening weekend), you may have heard that there are food shortages and riots around the world. You may not have yet heard that more and more Americans are going hungry, though it would be spurious to say that we are anywhere near as desperate as some of these starving nations.
Bangladesh, Egypt and India—to name a few—have all had violent and occasionally deadly food riots in recent months as failed crops, storms, gas prices and government corruption continue to cause food shortages. The ultra-rich in these countries are—as always—doing nothing. I won’t debate the ethics of this, or whether or not they are morally obligated to help. But could they at least not do things like building
the world’s most expensive house, estimated at $2 billion, in the thick of it all?
Marie Antoinette is famously misquoted as saying: “Let them eat cake.” It seems today’s grande bourgeoisie has a different approach: “Let them eat dirt!” And in Haiti, that’s just what they are doing.
No longer able to afford staples like beans and rice, impoverished Haitians are increasingly reliant on mud cookies for sustenance—and I don’t mean grandma’s chocolate, walnut recipe. The confections are made of baked river mud mixed with salt and vegetable shortening and called Terre (as in ‘Terra-cotta’, ‘terra firma’, and ‘terrifying’). Eating mud does not make one ill, but it isn’t exactly a balanced meal and it effectively serves only to stave off hunger pangs.
I have followed Haiti’s situation closely over the last decade, and I’m glad to see that quite a bit of media attention has been bestowed on the troubled island in recent months. However, in terms of our ability to give aid, it couldn’t come at a worse time, as we too are seeing signs of food shortage...or at least fund shortages. An AP article recently printed in the
International Herald Tribune reveals that 99 percent of 180 food banks have seen an increase in clients, some listing an estimated increase of 40 percent. According to the Labor Department, the highest increase in food prices in 18 years just occurred in April. Food banks are begging for increased funding, and so I find it doubtful that we will be able to do much for other countries at the time.
Another article shows that Americans are turning to dirt for sustenance, too, but not in the same capacity as the Haitians. The largest seed company in the U.S. has seen a double in sales over the last year as more and more people are deciding to grow their own produce, according to an
AP article on MSN Money. And they aren’t the only ones:
“Seed Savers Exchange, a nonprofit dedicated to preserving heirloom vegetables, ran out of potatoes this year and mailed 10,000 tomato and pepper transplants to customers in early May, double its usual amount. The organization, based near Decorah, Iowa, sold 34,000 packets of seed in the first third of this year, more than it did all last year.”
William Blake said, “In seed time learn, in harvest teach, in winter enjoy.” But those days of leisure might be over. The new dictum appears to be, “In seed time sow, in harvest reap, in winter eat the cat.” And sorry, Santa—no cookies this year, unless you don’t mind a nice, silty aftertaste.
What does the future of the food shortage hold? Will Wolfgang Puck Express find competition against a chain of Michel Lotito Pica Buffets? Will the South Beach Diet give way to the Donner Diet? My crystal ball says things won’t be getting too dire just yet. As grease vats are emptied by
grease bandits, we may have to forgo fried food, and people may be apt to take their toast with little spots of penicillin rather than chucking it at the first sign of mold (a smear of bleu cheese will cover that right up!), but we won’t be starving just yet.
Still, some investors may want to follow these food price surges and
invest in farmland or consumables. Investors may also find a cash cow in
dairy industry investments. With
controversy surrounding biofuel production and its contribution to food shortages, investing in biofuels seems a little riskier, but keep your ears to the ground on that one. And taste some soil while you’re down there. It never hurts to try...
Labels: food crisis, inflation, recession, stagflation
Posted by:
Eric Ames @ 3:28 PM
As if we needed another reminder about the dire straits of the current U.S. economy, the New York Times just published an article which makes an excellent point as to why things are only going to get worse.
What the New York Times points out in their article is that states and cities have yet to contract their budgets, but that is coming. Local governments have a fiscal year which begins July 1, and many of them are planning drastic cut backs to spending.
These local governments account for around $1.8 trillion of the nation’s $14 trillion economy, and their spending accounts for around double that of the Federal government, according to the article. In the past year city and state governments have spent approximately $40 billion above and beyond their budgets, which has aided in keeping the economy above water, but now the consensus is that they are going to have to scale back. Goldman Sachs is predicting that local governments will retract their budgets around $50 billion this year creating a total drop in spending of approximately $90 billion. With this major decrease in spending, and the loss of consumer confidence it is likely to invoke, we might not be able to avoid a recession for much longer.
Certain states will certainly be hit harder than others, with the biggest problems being faced in those areas which are suffering the most from the housing bubble. Local governments draw a large portion of their tax revenue from property taxes, and with property values dropping upwards of 20 percent in some areas, we can expect to see serious budgetary issues.
One of the likely casualties to these budget cutbacks will be schools, according to the article. In my mind this is a shame; considering the state of our school system, this is one of the last areas we should be cutting. Apparently this is the easiest place to make the cuts, though, or at least the one that will create the least problems for elected officials in the immediate term.
We can expect a good number of layoffs as a result of these cutbacks, and consumer confidence will likely shrink further as more people begin to fear for their jobs. By contracting spending, though, people will in essence create a self-fulfilling prophecy by which more businesses are forced to make cutbacks as their profits shrink, and more people lose their jobs as a result. The local government budget cutbacks might just be the straw that breaks the camel’s back, but we’ll have to see how it all plays out.
Who knows, maybe the next president will enact another economic stimulus thereby postponing the inevitable once again. Not only are we piling more and more debt on our nation’s youth, but we are going to cut back on their education as well. So, to sum it up it is not a good time to be a young person in America. Guess I better go up the budget a bit for my daughter’s savings account, as well as create a budget for private school tuition. Looks like we are going to need it…
Labels: economy, recession
Posted by:
Trenton Flock @ 11:17 AM
Disclaimer: This post is a departure from our usual material, in which we discuss “facts” and “figures” and all that nonsense. Today we’re sticking with black-hearted pessimism, which generally makes whatever one says more accurate than “facts” and “figures” ever could.
The Case-Shiller indices showed a decrease in home prices greater than 2 percent for the fifth consecutive month—14 percent since this time last year. On the upside—in terms of percentages—if it keeps this pace one can view the drop in prices as logarithmic: never quite reaching zero, but still abysmally bad. On the downside...well, that is the downside.
But on the down-downside—to coin a phrase, on the abyssal-side—tax and insurance costs are rising, offsetting further any deceleration in our decline. To anyone who purchased a home in the last six months: Pray for rain. You may soon need do without indoor plumbing.
But all is not lost. In this land of opportunity and innovation and class rule there is always a modest proposal to be found to address our woes, and I have stumbled upon one: Teepees!
Yes, teepees. I would say ‘yurts’, which are more stable, but this is America, former home of the teepee, and I’m pretty sure that we’re at war with the Mongols (or soon will be, given our record). But where, you must be asking, shall we find sufficient hides to create enough teepees for all the displaced homeowners who cannot even afford rent as those prices, too, have risen? We have wiped out most of the larger animals on this continent, and plastic tarps (being petroleum products) will soon be out of most people’s price range. Whence shall the raw materials come?
It is common knowledge that we are the most obese nation on the planet, though this will not be the case for much longer as we all begin to starve. As inflation and unemployment rise and wages stagnate, we shall all soon be The Biggest Losers. But as you also know, the excess skin from our deflated bodies will remain on our newly chic and slender frames. Tanned by days and nights exposed to the elements, this excess skin will make ideal hides for the creation of teepees.
Am I suggesting that we slay and eat the fat? No, no, a thousand times no! We’re at least six months away from that sort of desperation. But do consider how our multi-billion dollar cosmetic surgery industry—which is also on the slide thanks to a 16-year low in consumer confidence—might benefit from a boom of tummy tucks, and consider how Green and eco-friendly it would be to recycle our own skin to create a roof over our heads. To coin another phrase: “Home is where the abdominoplasty is.”
So on the abyssal-side, we can expect home prices to fall, inflation to rise, waistlines to shrink and national debt to grow (but for the banks, who at least are being paid back in depreciated dollars). My advice: Keep your economic stimulus wampum close to your chest and sharpen your scalpels. My crystal ball says the Case-Shiller index next month will show more of the same—with an added return to new-home prices decline (up this month!). See you at the pow-wow.
Labels: economic stimulus, economy, housing bubble, real estate, recession
Posted by:
Eric Ames @ 9:39 AM
With all the doom and gloom talk about the current (or looming, depending on your view) economic recession and housing bubble, I thought it would be nice to talk about some of the benefits that should be realized by these otherwise negative events for a change. An economic recession is not a joyous time for most people, as jobs and wages are cut and belts are tightened, but there are some positives.
The housing bubble, for one, should be looked at as an overall good thing for many people who were priced out of the market. In many parts of the U.S., homes were just flat out getting too expensive; now that they have dropped by double digit percentages in most areas, they are becoming more affordable. Obviously this isn’t necessarily a good thing for current homeowners, but it is certainly a correction that needed to be made.
Another benefit of the economic recession is that it should serve as a wake-up call to investors and consumers alike. Things were going so well that many investors got big heads and took on a too much risk. Consumers on the other hand didn’t bother to save and instead decided to spend every penny they had and then some. The pain people are experiencing now as a result of those actions should be remembered next time a boom and bust comes around. This might be wishful thinking, as it seems people didn’t learn this lesson after the dot-com bust, but hopefully this time will be different.
In addition, I hope that this economic turbulence will force the government to re-evaluate their spending habits and overall budget. The U.S. government is wasting more money than we can even imagine on things which are producing either no, or little, benefit for our country. If the U.S. government were a business, they would have gone out of business a long time ago. They need to figure out which programs are producing significant ROI to the country and cut the programs that aren’t holding their weight.
Lastly, one of the key benefits for investors from an economic recession is that they are often able to buy assets cheaply. Smart investors will look to capitalize on everyone else’s panic and desperation and buy up their assets at a hefty discount. Often times it is possible to actually make more money in a recession than during the boom. Less competition and desperate sellers mean lots of opportunity for investors. The trick is that investors need to make sure they aren’t buying assets which are going to decline in value.
While economic recessions are gloomy times, there are some benefits that can be derived from them. Hopefully you prepared yourself for this economic recession and are prepared to profit from it instead of falling victim to it. If not, then learn from your mistakes and make sure next time you are ready. Regardless of what some people say, there will likely be more recessions in your lifetime. Make sure you are prepared.
Labels: economy, housing bubble, recession
Posted by:
Trenton Flock @ 1:51 PM
The Fed is meeting again today and tomorrow. To mark this diminishingly historic occasion, I have composed the following ditty. Ahem...
There once was a man named Bernanke:
For the banks, an immaculate flunky.
When their assets all failed
with our money he bailed
them all out like a good little monkey
Thank you. Thank you.
As the Fed disappears behind the curtain yet again, ‘O we of little faith’ are bracing for yet another quarter percent drop in interest rates. Soon it will be official: You will likely see more appreciation on kitsch from the Franklin Mint than anything that comes out of the U.S. Mint. My friends all laughed when I plunked down 100 smackers for my Mystical Dreamcatcher Pocketwatch, but who’s laughing now?!
For those of you who didn’t have foresight enough to invest in chilling likenesses of dead royalty and zirconium encrusted daggers, allow me to predict what the Fed is planning to do. Just let me look into my Dragon of Lore Crystal Ball (a steal at 5 payments of only $39.99!)...
Abra-cadabra!
~~Ah yes...I scry a rather stoned-looking Bernanke telling the table that he knows exactly what needs to be done. Well! That’s good news!~~
~~Oh. He wasn’t talking about the economy. He was suggesting that they order pizza.
But still...based on his track record, that’s one of his more reasonable suggestions.~~
~~Now someone else at the table is telling him that no one there can afford to have a pizza delivered
because food and gas prices have soared again.~~
~~Bernanke insists that “Referendum Deepdish” be passed as they can just print more money
in the office next door. The motion is passed.~~
~~Someone raises a new motion: Will the Reserve lower interest rates again despite the fact that it has done nothing to mitigate the housing crisis or prevent a recession? They ask the chairman directly.~~
~~Bernanke teeters in his seat for a moment, opens his mouth...and then passes out on the floor.
The attendees concur with the chairman’s motion to drop the interest rate again. Motion is passed.~~
~~The pizza arrives. The delivery fellow receives a lousy tip.~~
As we can see, it’s all business as usual at the Federal Reserve. But before I go off to polish my collection of Elvis Head Silver Dollars, I leave the Fed with three bits of advice:
- These are tough, confusing times, and I do in fact sympathize with anyone tasked with sorting this out, but your methods have proven to be the financial equivalent of bloodletting for the ailing economy. Try something new for once, PLEEEEEEEASE!
- We know the banks own you (literally), but at least pretend that you have the interest of the American people in mind. You know, we love a good circus act. And if you piss us off, then...
- Don’t stiff the pizza boy: He knows where you live.
Labels: Bernanke, Fed, finance, inflation, recession, stagflation
Posted by:
NuWire Investor @ 8:22 AM
Housing Market Meltdown! Mortgage Crisis! Recession! Recession! Recession! The media sure is being an awful killjoy these days, aren’t they? Since when did the fourth estate care so much about real estate? Can’t they bring us some good news? Can’t they compare the market meltdown to rich, gooey fudge, or the collapse of our economy to a light-hearted game of Jenga?
As the news of the market grows increasingly dour and consumer confidence sinks further into the toilet, a few voices have arisen hither and thither, proclaiming that the market may not be as bad as it seems and that now may still be a good time to buy. Some of these voices go so far as to claim that our negativity may be our own worst enemy. One such voice belongs to Mr. Bob Mathe, a Realtor for Coldwell Banker quoted in the Oshkosh Northwestern. Mr. Mathe had the following wisdom to share:
"The market really hasn't been bad here. We're still selling stuff.”
Great news, Bob! “Stuff” is good, and “selling stuff” is even better. Really! Kudos!
Cultural and commercial meccas such as Oshkosh, which are ostensibly more recession-resistant, are seeing growth in housing prices. Mr. Mathe seems to think that it can only continue to go up, right? Because that’s not at all what people were saying before the market burst everywhere else. Could a guy named “Mathe” have his numbers so wrong? Heaven forefend! So why aren’t people buying?
When in doubt, blame the media:
"If the media would stop talking about it, people would not be so hesitant."
You’re right, Bob. I’m sick and tired of these party-poopers telling me to prepare for a storm. Sign me up for a dozen pre-construction condos. I just can’t go wrong!
But it isn’t just biased peons like Mathe that are preaching good vibrations. Seasoned guru Suze Orman also just released an article in which she states that buying a house now may not be such a bad idea, but she’s careful enough to specify areas of particular caution.
“All those stressed-out developers are motivated to make deals. That can mean sharp price discounts or great offers to help with your mortgage financing,” she advises, but is quick to remind readers that being surrounded by half-finished homes is hardly conducive to your home’s value appreciating. For a real horror story on this subject, see this recent article from the AP about residential projects abandoned or delayed in the wake of the housing crisis. Empty homes, new or not, can have serious ramifications for those living or investing nearby. This definitely applies to home buyers considering foreclosure properties as well.
With recent polls declaring that 60 percent of Americans will not purchase a home in the next two years, it’s no wonder that people like Mathe are rallying the consumer. These are lean years ahead, and even Orman’s position, at heart, is a carefully frosted bitter pill that ultimately admits that only a select few are in any position to be buying a home at this time, and even those who can find the funding and commit to “stay put for at least five years” are taking a risk.
So bring on the doom and gloom. Wishful thinking and betting on imaginary wealth are what caused the housing crash and the mortgage crisis, and erring on the side of caution may take a toll on the economy as a whole, but it’s the only way one can ride out this recession. “Buy now”? Don’t buy it...
This was a guest post by Trenton Flock, Web Editor at NuWire.
Labels: foreclosures, housing bubble, real estate, recession
Posted by:
Eric Ames @ 8:36 AM
The Iraq war is being debated on many different levels. One is the idea that it could be the cause of the U.S. economic recession. Politicians and economists are divided on the subject. Most Democrats, including presidential candidate Barack Obama, claim that the Iraq war has had a substantial effect on the U.S. economy and should be examined as one of the primary reasons for the U.S. recession. Most Republicans quickly dismiss the claim as being without merit, but a growing number of Republican s, including Republican Presidential candidate Ron Paul, strongly oppose the war based on its economic fallout. But is the Iraq war to blame for our economy’s problems? Let’s look at arguments from both sides of the debate:
The Iraq War caused the U.S. economic recession
In a Washington Post article, Nobel Prize-winning economist Joseph Stiglitz argues that the Iraq war is to blame for the economic recession for the following reasons:
- The oil-producing countries have so much money that they don’t need to produce much oil. Because they don’t have the immediate need for cash, they are able to plan better for the future by pumping less oil and charging more for what they do produce. By doing this they are able to keep more oil for future use.
- The government has spent so much on the Iraq war and gone so far into debt that it has been unable to keep the domestic economy in check through tax cuts and other internal investments.
Senator Barack Obama had the following to say at a recent forum, according to the same Washington Post article: "If we can spend $10 billion a month rebuilding Iraq...we can spend $15 billion a year in our own country to put Americans back to work and strengthen the long-term competitiveness of our economy."
Senator Obama has a valid point to his argument. This war was entirely financed with debt, which in itself is bad, but ultimately what has our country received in return for that investment? At least if we are going to go deeper in debt, we should probably be using those funds for something that might actually help our economy, and our country.
According to a CNN poll, 71 percent of Americans believe that the Iraq war is at least partially responsible for the economic downturn.
The Iraq War Is NOT responsible for the U.S. economic recession
While it is easy for politicians to say the Iraq war has caused many of the world's problems, there is little evidence that the war is directly responsible for the economic recession. In response to the arguments made by Stiglitz, according to the Washington Post most economists believe that the price of oil is rising because of increased demand rather than a shortage of supply. Furthermore, Martin Baily, former chairman of Bill Clinton’s council of economic advisors, had this to say: “The credit crisis we got into is because of the housing boom, the relaxation of lending standards and certainly a lack of adequate supervision," Baily said. "I don't see a connection with government borrowing."
Conclusion
I can see validity in the arguments from both sides. Considering all the other problems that the U.S. is facing—in particular, the housing bubble—while I think it is a little farfetched to say that the Iraq war was the sole cause of the economic recession, it is equally foolish to say that the costs of the Iraq war have had little if any impact on the U.S. economy. Wars are not free, and the U.S. has spent billions of dollars on this war, financing it entirely with debt, which will have to be repaid one way or another.
Labels: Barack Obama, economy, recession, Ron Paul
Posted by:
Eric Ames @ 9:14 AM
The woes of the U.S. housing market are not news to most people, but how bad is it really? This may put things into perspective: The widely-used Standard Poor’s/Case-Shiller index saw an 11.4 percent drop in January—the largest in the history of the index, which was created in 1987.
The index has shown 19 consecutive months of falling house prices. Some people may believe that this is the absolute bottom, but this assumption may prove to be premature. If full-fledged recession takes hold in the U.S., as
71 percent of economists believe, then things are going to get much worse before they get better.
The S&P/Case-Shiller index tracks 20 metropolitan areas as part of its 20 city composite index. Of those 20 MSAs, only Charlotte, North Carolina showed a rise in home prices, but it was only 1.8 percent, which isn’t too exciting. Real estate in Charlotte has held up fairly well during this housing crisis for various reasons. For more background, read our article:
Investing in Charlotte Real Estate.
On a darker note, 10 of the 20 cities tracked by the index showed double digit losses (Washington DC, Minneapolis, Phoenix, San Diego, Los Angeles, Detroit, Tampa, San Francisco, Las Vegas and Miami). In addition, all 20 of the cities tracked, including Charlotte, have shown diminishing growth over the past five months.
Investors should make sure that they are selecting investment properties very carefully. If you buy
cash flow property that is making money from the day that you buy it, your risks are substantially reduced. Knowing how you will make the mortgage payment each month will help immensely in the volatile housing market we have today.
Labels: housing bubble, investments, real estate, recession
Posted by:
Eric Ames @ 8:51 AM
According to a survey done by Duke University and CFO Magazine, nearly 90 percent of the chief financial officers (CFOs) surveyed don’t foresee economic recovery coming until 2009. Why is this important? CFOs are one of the key decision makers in companies, and if they see economic woes continuing through 2008, then their companies probably won’t make many expansionary investments this year. One wild card in this is the business investment tax breaks given as part of the Bush administration's economic stimulus package.
Since business investments are a major part of our economy, it is not a positive sign that most of the businesses out there are hesitant to make them at present. If businesses fail to make investments in equipment and other expansionary measures, the road to economic recovery will become much more difficult. Their fear will become a self-fulfilling prophecy. I can’t say that I blame them, though. I too am pessimistic on this point, and personally I think that a 2009 recovery is rather optimistic.
How the Bush economic stimulus package tax breaks will affect business investment this year remains to be seen, but I feel that it won’t have the impact that the administration is hoping it will. If the economy shows improvement later in the year, then one can bet that more businesses will take advantage of the tax benefits before they expire, but, at this point, it appears that most businesses think expansionary investments are too risky.
Investors out there should take note of what these CFOs are saying. If they believe that economic recovery won’t come until 2009, then their approach will likely make it a self-fulfilling prophecy and recovery won’t come until at least then. Unless one finds a tremendous investment opportunity, one is better off playing it safe, or focusing investment monies on investments that better perform during economic slumps.
Labels: economic stimulus, economy, recession
Posted by:
Eric Ames @ 7:00 AM
According to an economic forecasting survey conducted by The Wall Street Journal, 71 percent of the 51 economists polled believe that we are in a recession. This is in stark contrast to the economic poll done by The Wall Street Journal in December, in which only 38 percent of the economists thought the U.S. were even heading towards a recession. If 71 percent of that same pool of optimistic economists thinks that a recession has already arrived, then it is a safe bet that it has.
Let’s all take a minute to remember that recent, laughable announcement from our President Mr.
George Bush stating that the U.S. was not facing a recession. Come on, George. At what data were you looking? I know that you have to keep a positive spin on things, but to flat out say that the possibility of recession was slim was simply lying to the American people.
Now that a majority of economists agree that we are in a recession, the next topic to debate is how bad it is going to be. According to the same survey, the economists put the odds of a deep recession at 48 percent. Looking at how overly optimistic the group has proven to be, it is safe to assume that the real odds are significantly higher The problems in the U.S. economy are so numerous that I must believe that the recession will be hard felt and that they won’t be fixed any time soon.
Investors who have not already begun preparing for a recession need to start now and ask themselves certain fundamental questions. During a full-on recession, job cuts are rampant. Do you have adequate savings to get you through in the event of a job loss? Plan for the worst, but hope that it doesn’t come to that. People must also evaluate their investments. The market is going to be very volatile during a recession. Are you properly diversified? Have you considered alternative investments? Many of these will greatly outperform stocks during a recession. For some investment ideas take a look at NuWire’s
top 5 recession investments.
Labels: Bush, economy, recession
Posted by:
Eric Ames @ 10:44 AM
While I was reading blogs this morning, I came across an interesting post from Pat Kitano over at Transparent Real Estate. In his post, he has a recession map of the U.S. which shows how different states are in various stages of economic development. Each state is designated as in a recession, at risk of recession, in recovery, or currently expanding.
Surprisingly enough, the map shows that a majority of U.S. states are actually in a period of expansion right now. It is no reprise that states experiencing the worst from the housing meltdown, such as Michigan, Nevada, Arizona and Florida, all made the recession list.
When people look at the term “recession,” they generally look at it in terms of an entire country. Breaking it down to the state level is a novel concept. If you are curious about the recession map and the category into which your state falls, check out Pat’s post:
Recession Map.
Labels: real estate, recession
Posted by:
Eric Ames @ 8:27 AM
There is a debate right now in the financial world concerning whether or not the U.S. has entered into a recession, but who is right? Does the government’s latest jobs report, which showed that employers eliminated 63,000 jobs last month, confirm the recession?
Ultimately no one knows exactly when we “officially” enter a recession or not. The government certainly won’t admitted to it if we are, and they are going to do their very best to delay any mention of it. To identify whether or not we are truly in a recession, we have to look at the GDP. A recession is defined as two straight quarters with negative GDP growth. The problem is that those numbers are reported so far behind, and then later adjusted (typically for the worse), that by the time we can look know what the real numbers are we’ll quite possibly have been in the recession for some time.
The job report came as a surprise to most people, as the official estimates anticipated an increase of around 25,000 jobs. Typically in a recession, jobs are a trailing indicator. It takes some time for businesses to start feeling the effects of a recession which ultimately lead to layoffs. The fact that jobs are declining would typically back up the argument that a recession is already here.
The difference in this jobs report, though, is that the unemployment rate actually fell (to 4.8 percent), which means that people were leaving the work force entirely. The baby boomers are beginning to retire, and so we are entering a period where this will be a common phenomenon. The question we have to ask is whether these jobs will be replaced. If companies are forcing employees into early retirement, or removing the jobs altogether, then it will still have the same net effect as typical job reductions. However, if these companies will eventually replace these retirees with new people, then the outcome is a little different.
My gut tells me that the first possibility (forced early retirement) is very prevalent. I have felt for sometime that we are looking at an unavoidable recession, and to me this is just the first round of “nice layoffs.” I suspect that there will be much harsher ones still to come.
So while this latest jobs report does not “officially” tell us a recession is here (as only the GDP numbers can do that), one can begin to see the writings on the wall. My advice is to start planning for a recession (save your money, “what if” you lose your job, etc), because if you plan and it doesn’t come you are much better off then if you didn’t plan and it does come.
Labels: economy, recession
