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10/9/09 9:23 PM
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The Double Deuce
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Edited: 10/09/09 9:23 PM
Member Since: 10/22/02
Posts: 5798
 
Just wanted to get your opinion. It's been over a year since Lehman Brothers has collapsed and the country is at least through the early innings of the credit crisis. How do you see the economy as opposed to one year ago? How is real estate doing in Florida in the most recent months? Any opinions on commercial real estate? Do you think we will be in better shape or worse a year from now?
10/10/09 9:40 AM
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Personally I think we are in for a long time economic winter. I think there are too many big issues unresolved at this time. I don't think it is a doomsday scenerio like many predict. It is just part of how cycles play out. In my opinion, the core of the problem is character of leadership. For too long, self agenda over serving others has become the norm vs. the exception in all areas of leadership. If history proves true, changing this part of the process takes a lot of time. Equally the pain and suffering necessary for society to demand a different character of leadership is pretty ugly (I don't think we are near that point).

As for real estate, there is a lot more activity but no doubt the Buyers are in charge. Condidering the level of discounting due to bank problems, even buyers today want discounts on value and they can get it. Banks are still buried in problems and they won't go away soon. I think we have seen the worse but I don't see "business as usual" coming back any time soon.

Equally, I think we will see a change in consumer thinking as it relates to debt. Why? The pain they are suffering because of it is deep and emotion. The level of suffering often dictates the committment to change. I think you will see consumers move in the direction of borrowing less and living within their means.

Finally, I think there is another major force that will drive down global growth. I think the entire economic system has way too much debt and de-leveraging will be the way with all aspects of society. Just look at the US as an example. Before the Great Depression, debt to GDP hit 275% and didn't get back to 50% until 1955. We are currently close to 800%. I don't know how anyone could look at that amount of debt and not understand how it has a long-term negative impact on the US, especially our currency and our dominant economic position in the world.

As for the last year, I think the comback in the economy and confidence is a function of where it was a year ago. The system almost melted down and there were unprecended decisions made to prevent that scenario. The brings fear to a new level. Now the fear has subside so it feels better. In my opinion, it doesn't change the problems.

Anyway, that is a quick answer to something that requires a lot more time and information to explain my conclusions. I guess what I would tell you is that I hope I am wrong. However, I doubt it :( One final comment. Adversity and chaos are often a catalyst for opportunity. If you know how to play the game, it isn't hard to win. My businesses are booming these days and I think the best is ahead for me. Unlike many, I am educated and know how to win any game in business. Sadly, many will follow the same path, stick their head in the sand, and hope life gets better. As I tell everyone when I lecture, there is only one way to survive and thrive in the future - focus on driving income. Cutting back won't work when we are all going to experience the greatest money grab in history (taxes, fees, escalating prices, etc.)
10/15/09 3:25 PM
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DirkH
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What is your opinion of Ken Fishers asertion that the US is actually UNderindebted. He basis this on the fact that we can borrow so cheaply (what are T bill yeilding?), and our Return on Investment is MUCH higher than our borrowing costs?

If people are willing to loan you money at 2% and you can make 4% then why not?

I realize bridges, roads, ports, power lines, and the like actually are investments with real return whereas a lot of crap the govt. spends money on is just that, crap.
10/16/09 5:34 AM
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Edited: 10/16/09 8:00 PM
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I haven't read Ken's opinion so I can't offer much of a comment. However, it sounds like some of my friends who borrowed a bunch of money from their homes to buy other property as an investment during the real estate boom. Without exception, they are ALL broke now. The theory of borrowing and using for better returns only has value if that is what is done and the investment model works. However, if something happens on the investment side, then all you have is a bigger problem.

I find that the average person in not capable of making good investment decisions. Equally, that profession is filled with saleman who set up people for failure because saleman generally are poor (or unconcerned) about risk. I will tell you that leverage and debt are useful ways to make money. I have a currency model that I have been using for over a year that is a leverage model on spreads that makes me 1.5 to 2% a month (it is an arbitrage vs. trading model and way too complicated to explain in this email) However, you better understand what you are doing or you are simply going to compound problems.

Debt can fuel growth or destruction. For consumers, too much of it is used to live over ones means. For society, too little is used for productive decisions that would drive GDP and too much is wasted by government. A classic example is Small Business and the stimulus act. How do you take 1% of the stimulus for small business when it drives almost 70-80% of all employment when you claim your goal is to get people back to work. In the end, I think your leadership makes too many decisions based on the efforts of lobbyist and big business and not enough to serve the masses and insure our Country will have a better future.

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