Welcome to 2011: Sunday Morning Thoughts 2 January 2011

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With the New Year underway we are all looking more hopeful towards the immediate future.  This past holiday season showed signs of the return of consumer confidence.

All signs indicate we are still slowly emerging from our deep recession.  It is a slow process, but nonetheless we are emerging.  Consumerism from the holiday numbers looks like it is making a comeback, with a usage of cash instead of plastic.

Although the DOW almost made it to 12,000, it is now going into another cycle.

As for the housing market, even with the recent interest rate hike, will remain a flat line, then a sudden down turn and on to leveling out and slowly appreciating.  In the coming weeks you will hear and read more from many analyst about the impending double dip in the housing market.  Actually a good thing for investors; there’s always a silver/platinum lining to all clouds, buying now for homes, office space, and apartments deserves more than a light consideration.

Leveraging your money as a private lender can earn a nice return without the headaches of ownership, so if you don’t feel like owning an income property then make an income with being a private lender.

The Rising DOW and Falling House Values

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It seems as though with the raising of the DOW property values are on the decline.  The DOW, even in its unsteadiness, has made more gains over the past few months than real estate.  As long as the DOW maintains its cycle it will end the year with a positive gain.

 But, what about property values?

With the onslaught of more foreclosures and less and less successful loan modifications, property values will continue to decline.  This means you will be finding more and more deals, especially since credit lending is becoming tighter.  Loose lending practices which landed home owners in the current foreclosure mess are now a thing of the past, or are they just taking a break for now.  Our past banking system has taken a bad toll on our economy. 

The economy will not improve until people begin to feel more secure, and lending institutions become more accountable with the extending of credit.  More individuals are continually moving towards using cash only at the registers, and at home are using scissors on the once preferred method of spending.  

Will being a liquid society help the economy to stabilize and have growth? 

Becoming liquid will cause a slow down in the growth of our economy.  How many people are able to buy a car, house, or any other big-ticket items with cash only?  It takes time to earn, and save. 

Does this sound like bad news?  Yes in a way it is.  But if you are able you can take the bad news and turn it to the benefit of yourself and others.  How can the average person extend a helping hand to a snowballing problem?  By understanding the principles of arbitrage whether it be negative, neutral, or positive.  Money invested wisely can make money no matter which arbitrage is present. 

So which is better the DOW or real estate?  Learning to capitalize on situations with diversification is best.

The DOW 12,000 Get Ready

 

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The DOW is poised and ready to hit 12,000 before the end of the year.  There are many things, including the current cycle, which factor into the greening of the stock market.  Don’t let today fool you.

The weaker dollar (read “What IS the Value of Money” blog post) the fed’s lowering interest rates to historic lows-cheap money if you can get it-, unemployment not changing too much, and the halting of more than one million foreclosures.  All this is more attractive to domestic and foreign investors.

How will this impact America, an improving recovery.  The recovery will still stay slow but the pace will pick up a little bit more.

The real estate market will also benefit with the halting of many foreclosures.  This will be a false positive improvement for the real estate market.

The foreclosures are only halting to perform a final check of documents before going to the judge for court approval.  So the process of foreclosure will continue but will stop to ensure there are not any mistakes or oversights.

It only makes sense for lenders to do this; it is already costing the lender legal fees to start the process of foreclosure.  To go to court only to have the foreclosure rejected and then have to check paper work for inaccuracies and then return to court to take another stab at it, is only costing money and time, neither of which is currently in great abundance.

Investors can leverage all this new information to increase their portfolio’s value.  Remember there is still an avalanche of foreclosures on the horizon and money is cheap but hard to get.  So, investing in real estate will prove to be the best investment in the long run.

Stock Market 11,000

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We are well on the way to a Dow Jones Industrial Average 11,000.  Although this past week it has not been looking very good for the stock market, the DOW’s dip thongs have proven to be a roller coaster ride of holding ones breath before a sudden drop then the exhilaration of a pull up hill to yield better returns.

 

But will it stick?

 

Once before we experienced the DOW above 11,000, the market had rallied so well.  The bull market had kept the bear away and everyone reaped the benefit of an over valued stock market.

 

Well, today we flirted with the DOW 11,000 but by the end of the day will we be saying it was an anomaly, or a foreshadowing of the weeks to come?

Green Light Stock Market: Sunday Morning Thoughts 19 September 2010

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Well as told in the blog last month, September is proving to be as predicted, a positive ending month.  With even more data coming next week it looks like smoother waters ahead.

But wait, we are not out of the deep end just yet.

Our current cycle is much like the cycle of the 1929 stock market, the market at that time zig zagged often.  Stability was much sought after but was not happening fast enough for the majority of the world.

Now with September being the green light month one could only wonder will the remainder of the year be as promising or even better.

The real estate market, even with some areas having false positive signs of growth, housing is slowly beginning a somewhat luke-warm rebound.  But the best strategy for now would be to invest in commercial property and hold for at least five years.

The single family residence market, with prices half or even less than half of what they were selling for five years ago, will eventually become hot again.  Short sales are the new “it” thing to do at this time, but instead of selling the property, a hold strategy would be best for future appreciation.

The History Lesson of the Stock Market Crash

Prior to the crash people were receiving higher incomes. With more income average people invested in the stock market driving prices up.  With an unbelievable amount of prosperity there looming in the background, was the thought of a stock market crash.

Then it happened.

Economist had warned of a crash, a bubble bursting, but it fell on deaf ears.  So then the tragedy began, the bottom fell out and everyone scrambled to keep from losing everything.

The world was succumbing to a global economical crash and a wide spread fear of a faulty recovery.

The banks began failing one by one, occasionally four or more at a time.

And don’t get me started on the whole immigration thing.

When reading this article please keep in mind the title, the history lesson of the stock market crash.

If history has taught us nothing but one thing, in time everything repeats its cycle.

The previous stated lesson is from the crash of the 1920’s the last quarter of 1929, October 24^th to be exact.

Back then a group of bankers pooled their money to buy stocks to convince others to stop selling their stocks, while in this century we experienced the Goldman- Sachs scandal, a legal pump and dump.

An Unethical confidence game.

Although there were rumors the bankers were secretly selling their stocks after the pooling and buying.  This would still be a legal pump and dump.

Unethical.

In the stock market crash of 1929 the bottom was not finally felt until July 8, 1932, an approximate time period of two years, nine months, and two weeks and two days.

Even today economist are looking at the stock market crash of 1929, comparing it with our current economy.  The global economy at that time was bleak, but not too long after, the healing did begin.

We started a new cycle of growth.

Our new cycle of growth is going to be small hops (as stated in a previous post) which will total one big leap when we look back a year from now.

A recovery is not an overnight fix.

At this time we should take advantage of the downturn before the upswing and invest in the one tangible asset that will appreciate in the very near future.

Commercial real estate is seeing more foreclosures and is due for even more, making the prices unbelievably low.  This low will not last more than two to two and half years.

The residential housing industry is also going to experience another down turn before its appreciation upswing.

As far as the stock market, well picking stocks like Warren Buffett is better than Jack Rabbit investing any day.  The Jack Rabbits seem to go broke while Warren is still making gains.

So think about where you would like to be in five years.

Would you like to be thinking about how you shoulda, woulda, coulda (sown) invested to (reap) profit, or will you be thinking about all that you are reaping because you realized it was time to invest.

Our Topsy Turvy Economy

With the stepping down of Obama’s lead financial advisor Christina Romer one would begin to wonder who will take her place.   According to Reuters there are three candidates Austan Goolsbee, Jared Berstein, and Laura Tyson.

This news of a prominent member of Obama’s financial advisory will possibly impact the stock markets, causing foreign investors to be more apprehensive of America’s economic recovery.

This new change in the presidential financial advisory, mixed with higher unemployment and stagnant growth in many sectors, the stock market for Friday will likely end down.

But the cycle for this month of August is a negative ending of the DOW.  This prediction is based on previous cycles.  When looking at the previous cycles of the month of August plus lagging unemployment, sluggish consumerism, and the dollar losing more value it is not hard to predict that the month of August for the DOW will be a non gaining month.

Conversely, tangible assets are going up at a steady pace.  Gold and silver are gaining more on a daily basis.

Real estate is not too far behind with some markets seeing some slight increase in price.  Although another wave of foreclosures in residential and commercial will soon be coming.

Warren Buffett defined the difference between investing and speculation in this famous passage from his book, The Intelligent Investor:

The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels, at which he would be wise to buy, and high price levels, at which he certainly should refrain from buying and probably would be wise to sell.

Now is the time to invest in real estate.  Take advantage of the market being low and having an abundance of real estate that is due to appreciate.  For more information on how to take advantage of our current real estate market http://www.BackedByRealEstate.com

Realistic Investing vs Speculative: Sunday Morning Thoughts 01 August 2010

Warren Buffett defined the difference between investing and speculation in this famous passage from his book, The Intelligent Investor:

The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels, at which he would be wise to buy, and high price levels, at which he certainly should refrain from buying and probably would be wise to sell.

This statement can apply to the new wave in investing, binary options.  This is a loose example of how binary options work; the premises is to state whether or not a stock or commodity will go up or down in the next ten minutes.  Although this is a rather pedestrian look at the inner workings of binary options, this is basically the way you play the hand.

If you picked up on the poker, or card game reference, this is what binary options sum up to be, yet another casino game.

Currently on the trading floor a lot of speculation has been transpiring.  Many investor newsletters are giving their predictions for stocks, commodities, etc. to have in their portfolios.

When choosing to invest you will have to have a proven earning strategy to see a return on investment.   Not matter how you look at investing you will always be speculating or projecting on a number of factors.

Studying the cycles is also a proven strategy to help increase a return on investment.

Everything in nature has a cycle.  To better understand the cycle of things is to watch and make note of changes.

The changes could be obvious or very subtle.  Noting the changes in the cycle we can then project what will likely happen next.

The housing and commercial housing market also have a cycle, when the prices go up drastically in any given area that same area have a hard bottom.  Examples would be Stockton, CA and the Inland Empire.

The house prices in those areas where going up up up almost everyday by leaps and bounds.  Then suddenly the market in those same areas fell down just as hard.

The Inland Empire was a growth area in the late eighties then became a declining area a short time later.  Fast forward to the late nineties, the same area was growing past its highest peak.  Then with all things fell as sharply as it went up.

If you were to invest now in the Inland Empire the starting strategy would be to hold the property knowing it will appreciate as in times before, and then sell the property right at the peak or slightly before the peak.

The stock market also has a pattern because all things in nature follow a cycle.  This is one of those rare times when all really does exist.  But also note within a cycle are also more cycles contributing to the larger cycle.

In real estate the job market fell in the early nineties with companies cutting back to purchase stocks back from their investors.  For our current housing market the down turn initiated from the sub prime lending and over extension of credit; similar to the late eighties early nineties.

So with all cycles now is the low time in the market, the time to buy and hold.  Appreciation is waiting.