October 25, 2010

Residential Real Estate, Commercial Real Estate....

The American economy is very resilient and over the past decade we've made it through some tough ups and downs where some people made money and some people got burned.  As the market goes up - there are a lot of "con artists" stating that the economy is sound and can reach even new highs (remember the dot-com bubble, and the credit-era of 2007?).  When the market is super hot and everything is going up - investors can quickly become infected with greed and FOMO disease...(Fear Of Missing Out).  Only to be dissapointed when the market comes crashing down and they're stuck with something they paid too much for.

On the contrary, when the market is in a deep recession or depression - similar to the one we just came out of or are currently in - these same "con artists" pop up again.  This time around they tell you that interest rates are so low and property is cheap...and you need to buy now before everything goes up.  Or they may tell you that you should get out of the stock market because everything is crashing down and you need to put your money in bonds.  Maybe they say you need to trade in your gold metals in return for declining-in-value paper dollars.  Should you believe them?  Who do you trust?

You must learn to trust yourself...that gut feeling...or second thought that we have and so often choose not to listen to.  Also we must do our own research and use some common sense.  Let me elaborate on residential real estate....

During the 2007 credit-era, banks were allowed to lend out money on an 10:1 ratio... that means if a bank has $1 million dollars of actual cash in its vaults - they are allowed to "create" or lend up to $10 million dollars for mortgages, car notes, and various other small loans to give to consumers...they're able to do this because the money is "backed" by the full faith of the bank not going broke or "failing"...(some banks are deemed "too big to fail"...remember?) Even though they failed us anyway...nevertheless...because the banks had so much (paper) money to lend, they were willing to give it away to whomever had a pulse and simply asked for it (i.e., home builders).

Builders got loans to start residential construction...even if they didn't have enough home buyers to move into the properties.  So what happens to the newly built homes?  Investors rush in to flip the properties....to other investors foolish enough to buy it from them....and the cycle goes on until the price of the house doubles, triples, or even quadruples...then the price comes crashing down.  Today, we have several of these types of properties on the market for dirt cheap, as well as foreclosures...but still not enough buyers.  I think it's funny how there are some investors looking for new home construction as a sign that the economy is back...lol. 

New home construction will not solely be a sign that the economy is going strong again...but for those investors looking to "get in while the gettin's good", they should also be prepared to hold these assets for about 5-7 years before even considering to sell again.  If you're just looking for a good rental - then look hard....don't just buy the first thing because it's cheap.

A good sign that the economy is returning to full swing might be to take a look at commercial real estate...you know, strip malls, hotels, business offices, shopping centers, etc.  Might not be a bad place to invest your hard earned money if you haven't already.  Why?  Because the US is still a consumption based economy - so business travel will soon pick up as a sign that corporations are earning again (I'm currently writing this article while on business travel).  People will want to start enjoying those very much needed vacations again (the airline industry is a good investment as well).  Don't believe me?  Take a Saturday and drive up to your favorite outlet mall this wknd and look at how full the parking lot is. 

Trust your own instincts...do your own research and learn about Investing 101...if you need help, find a tutor or someone offering an investment class.
The consumer is slowly coming back around...and the bulls are starting to see red (or in this case, green).


October 24, 2010

401ks get tapped....

Interesting article...


I'm not too surprised though - as most people are trying to stay afloat during the current state of the economy.  This is evident that many Americans are living beyond their means - and a good reason "why most Americans will not be able to retire".

We're not investing enough, we're not saving enough....be sure that you're not "following the crowd" with your finances.  Be different.  Be financially responsible for your future. 


October 12, 2010

Investments for 2011 and words for Corporate America. Just 2 quick thoughts of mine...

My investment picks for 2011

There's a war going on....a war with your money...yes your paper money.  Nations all over the world are becoming increasingly interdependent, and yet simultaneously more powerful ever since they all left the Bretton Woods system and began to intervene in the currency markets (i.e., The Plaza Accord).  But to avoid giving you a big history lesson - ever since the most powerful governments of the world began to meddle in currencies, have you noticed that the standard of living and potential for retirement has dramatically decreased for citizens in almost all countries?  The governments of the world are printing money and increasing the debt levels with reckless abandon (something our founding fathers feared would happen if there was a central bank, i.e. Federal Reserve).  While placing the burden onto its citizens via increased taxes and steadily pushing up the retirement age.  The only winners in this game is the International Monetary Fund, the World Bank, US Federal Reserve, Goldman Sachs, Bank of America, UBS, Wells Fargo......see a trend?
Forget what your "financial advisor" is telling you about how you should only invest in stocks and bonds...what good is your money in stocks when you find out that your company has been "cooking the books" (Enron, Worldcom, MCI)?  What good is your money in bonds when you find out that your company will file for bankruptcy (Chrylser, GM, Delta)?  What good is your retirement if your sole source of retirement income will be the stocks and bonds owned by your 401k?  or your IRA?  Assuming that you're able to retire considering the government keeps raising the retirement age....and we all know that social security in the future will barely pay our cellphone bills.

So what will I be investing in for 2011?  What's going to maintain your level of wealth going forward?  Well, I'm glad you asked.  Because I'm going back to the basics - I'm investing in the same vehicles that the most powerful governments and wealthy people are investing in...or should be investing in.  Commodities!  (Oil, Gas, Silver, Wheat, Corn, Coffee, Pigs, Cows, etc.)  And also real estate! (Land, Buildings, REITS, etc.)  Why do I like these investments?  Because as the government keeps printing money - the value of our dollar goes down.  And what goes up?  The cost of food, electricity, gas (notice how gas prices are slowly going up?), shelter, transportation, etc.

The wealthiest people in the world are starting to catch on to this trend....the governments with the most cash on hand are looking to diversify into commodities as well (i.e., China).  China and other countries with cash surpluses are looking to buy up oil wells in the US, Canada, Africa, and other countries around the globe.  These types of transactions create jobs nonetheless, but ultimately we will be working for China's prosperity.  I probably just opened up another can of worms with that statement - but I'm forcing myself to stop here...to insure that these are quick thoughts of mine.

Generation Y & Corporate America

Oil and water.  Stripes and Polka dots.  They don't mix.  Nor do Generation Yers and traditional Corporate America.  Why?  Because most of us do not see the point in working 8am - 5pm, M-F, without any flexibility for the next 50+ years of our life.  Key word is flexibility.  Look for Corporate America to change as we know it going forward...hopefully. 

Corporations today (especially newer corporations) are becoming more efficient, leaner in operations, more productive, and more flexible.  Relaxing the standards in the dress code, hours worked, and allowing for some telecommuting.  While this is just the tip of the iceberg - I expect more Gen. Yers to force change at the top...and for those corporations reluctant to change - watch as they wither away.  Because the intelligent hyper-flexible Gen Y individual will probably leave the corporation or become an entrepreneur and compete against it.

Most corporations have decisions made at the top and then those decisions trickle down to the employees.  But instead it should allow for decisions and ideas to flow horizontally throughout the corporation and allow for the employees to have input with the managers about the direction the corporation should go.  This allows for more profitable corporations and bigger salaries for all those who are employed by it.  It's a win-win environment...the managers win because they realize that better ideas and improved operations can come from those who are currently working in the operational positions.  Employees win because they have a sense of ownership and more input and involvment within their company, and more communication and transparency with upper management about the finances and direction of the company.

That being said...I still root for the employee and the entrepreneur that lies within.  Because your financial position and financial outlook on life is a lot better as an entrepreneur.  Leverage the skills you learn on your job and then find make a plan to branch out on your own after 3-5 years on the job.  It will be tough, and success might not come right away...but keep working at it.  Or give up and just settle for a mundane 8-5, M-F job where you have to ask some other adult to use your vacation time, where you feel you're making less than you're worth, and you're subject to a dress code...for the next 50+ years.  The call is yours.