Wednesday, February 20, 2008

"We Become What We Think About"

Many years ago, a recorded message took on a life of its own. Earl Knightingale recorded "The Strangest Secret" and it is the only "message" to have earned Gold Record status.
What was the strangest secret? According to Earl, it was neither strange, nor a secret. Simply put: "We Become What We Think About." He alluded to the fact that this concept could be found throughout the Bible and that many famous men had paraphrased it before. I was reading the Wall Street Journal's Marketplace and Money & Investing sections this week, when all this came back to me. Scott Patterson wrote a razor sharp piece titled, "Housing Cycle Is Caught In Vicious Circle." He said that we are in a "negative feedback loop" in the housing market, where one day's problems create a broad set of behaviors that only make things worse.
Consider this: As home prices fall, more families see their mortgage situation go "upside down." They want to walk away and leave the home empty, which further depresses prices... and more join the negative loop. Then consumers, in general, pull back (fewer cars, movies, vacations, TVs, dinners out, etc., are purchased)... Ooops, more negativity. Banks get worried and tighten credit and guess what? More downward pressure on home prices. "Negative feedback loops can be pernicious," he says, "when an economy relys heavily on borrowed money." Ever take a second mortgage? Checked your credit card balances lately? Not good for many.
Also in the Journal this week was a "Small Business" piece about all of the "Foreclosure Niche Industries" cashing in on the tough times... I'm not against these - they have their place - sort of like the loveable tow truck industry. When reading about a woman who is doing appraisals for the banks (as part of the foreclosure process) my compassion meter hit a 10. "From outside, the small white house appeared to be in good condition, but as Ms. Norris unlocked the door, she braced for what might be inside. At worst, squatters or drug dealers she'd have to sweet talk her way around, or mold so thick her throat would close up. At best, she'd probably find debris and tattered possessions, a snapshot of despair faced by the vacating homeowners." Wow... This reminds me of the stories told by the generation before me... stories about The Great Depression.
Back to that negativity thing? The trick for policy makers, they say, is to break through this adverse feedback loop. The psychology of risk aversion behind these negative loops, says Patterson, is hard to alter once it sets in. "We become," you see, "what we think about." That's why breaking the chain this time could be harder than anyone expected.

Monday, February 4, 2008

2008 Super Bowl & The Economy

Giants 17 - Patriots 14
"Success is not final, failure is not fatal: it is the courage to continue that counts." (Winston Churchill)
The Brits knew a thing or two about "the courage to continue" in the first stages of WWII. They were just accross the pond from France, which was in the proccess of being occupied by Europe's tormentors of the day. Their daily dose of U2 rockets slamming into London was surely in poor taste. But Churchill stayed the course... (Winnie was just too cool with that Derby hat, funky Bulldog, and big cigar)
Anyone who follows football knows how historically significant Sunday's game was. The Patriots were a machine all season long. "Brady to Moss - Touchdown." Undefeated. Amazing. In the end, they will be one of the few losing super bowl teams who gets remembered. It was looking like the Pats had it in the bag. Then one of the great last minute drives of football lore unfolded. The Giants fought back against the odds and, like Churchill and the Brits, overcame their adversary when it counted.
I tend to see metaphors all around me. This real estate market (and the economy in general) is like the Patriots. Las Vegas says recession will win. I'm not betting on that. Some folks make the biggest inroads when times are toughest. I want to be like Eli Manning on that 83 yard final drive... surounded by rabid defenders pulling on his jersey... the guy escapes a sure sack and lofts it to Tyree (who must have put super glue on his helmet) to keep it alive. And that was after the insane catch and run by Boss. Then they pound out a fourth and inches... by inches. Burress goes to the corner of the end zone - Eli lofts it - Game over. So much was on the line. That's how I feel about this market. We're in our 10th Fiscal Quarter of "doom and gloom." You know what? I'm done with that. That is sooo.. 2007. I'm going to find people and tell them the truth: This is the best time to buy real estate in Florida since the 1940's. If you really want to buy - and you're sitting on the sidelines - shame on you...

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