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Doug Poretz

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  • Delinquent Borrowers, Shadow Inventory and the Implications for Homebuilders [View article]
    Great article and insights on the part of you and White as well ... I would continue the logic until I got to this conclusion: an increase in home foreclosures (with a growing percent of distressed sales arising from what used to be premium mortgages and upper scale homes) will infect numerous other collateral industries, which, in turn, will radiate out to other industries. The speed and power of an economic recovery will experience a major setback. The financial markets will be forced to accept the reality that not only are things not about to get better and that market has gotten way too far ahead of reality way too fast (not the first time for that) but they are actually going to get worse than before (probably without the drama of a near-miss meltdown of the global financial markets), and people will lose wealth in the process. The government will have to step-up as the safety net of last resort, but the lack of resources and the over-abundance of political grandstanding from all players will mean that if there is any action from the government, it will be too late and too little and the economy will simply have to find its own non-artificial bottom.

    For anyone who wants to read-on, I think there is another significant reason why there will be more foreclosures at the higher end of the market. In normal times, the residential real estate market is a food chain. The buyer of a starter home allows the seller of that house to become a buyer of a move-up house, who in turn creates a buyer of a second move-up, and the chain goes on. However, when a creditor sells a home, they don't become buyers, and they don't create other buyers. That's also the case with a distress seller: they go rent; they do not become active players in the food chain. So, if you really want to quantify the size of the market (I am not motivated to do the math), you'd take a look at the starter-home percent of the market over the past several months -- it is the only segment of the market showing any vigor to speak of -- then factor out of the number of sales that were by a creditor or distressed seller. The rest of the sellers MAY become buyers (assuming they decide that would be a smart thing to do, that they can afford it, and/or that they can get credit) -- and that is the size of the real residential real estate market. Now marry that weak number to the inventory of homes (including the shadow inventory discussed in the article), make some assumptions about how many home sales can occur in a year (which will require some assumptions about what you think 2010, 11, etc are going to look like), and you end-up with an estimate of how long the residential real estate market will stay at a bottom. My gut tells me about 7 years, but I am certain it can be quantified along these lines.
    Dec 31 10:11 AM | 5 Likes Like |Link to Comment
  • Residential Property Values: The Numbers Still Say 30% Left to Fall [View article]
    Look at the fundamentals any which way you want (and White's view as expressed in his article is as good if not better than many others) -- those that are pointing south and/or seem to be fragile are very sober, realistic trends we'd rather ignore -- while those that are pointing north are largely what I believe to be aberrant activities inadequate to consider real "trends" but enough to cause wishful thinking -- so the question is: does the investor wants to invest on the basis of wishful thinking or sober reality? The industry of Wall Street has already given their answer: they search for "green shoots," institutionalize them into trends, invest on that basis, push the market higher, thereby encouraging others to say "hey the market is going to go up because the market is going up" -- and I sort of remember that type of thinking existed about tulip bulbs and about the "dot.com" economy and about the homebuilding bubble .....
    Dec 31 08:51 AM | 9 Likes Like |Link to Comment
  • 6 Things You Need to Know About Housing for 2010 [View article]
    I agree with everything you said about the first half of 2010; I disagree with everything you said for the second half of 2010 -- and beyond. Assume there is a recovery in the works: Should we assume GM hires back all its workers? Should we assume all those who helped build homes in the booming past will be working on new homes in a "recovery?" Should we assume that all those who have migrated to buying online will go back to the stores, requiring the re-hiring of all the retail employees who have been laid-off? Should we assume all those who decided not to ramp-up their credit cards and to save and control spending instead, will return to days of taking their credit as high as possible while they spend lavishly on the basis that economies only improve? Should we assume that healthcare costs will stabilize or even go down, or that employers will face ever-steeper costs of providing healthcare benefits to their employees, thereby thwarting their ability to re-hire old employees, to say nothing of hiring new employees? Should we assume that all those people laid off from jobs in declining manufacturing industries will find jobs in Knowledge Economy industries? Certainly there will be "some" return to what we formerly considered "normal" and "some" success stories -- but whereas "some" might be enough to achieve stability, it will not be enough to create significant growth -- instead, in my view, we will bounce along bottom for 5-7 years, get used to a period of stability, which will eventually be replaced by a new period of growth and associated irrational exuberance again. In the meantime, "exuberance" in economic/financial terms is more an issue of wishful thinking, being in denial, and acceptance of the false premise that if the stock market is moving up so must be underlying fundamentals.
    Dec 24 11:35 AM | 6 Likes Like |Link to Comment
  • Home Sales Skyrocket, Backlog Clears [View article]
    Two basic flaws to optimistic views of a recovery in residential real estate:

    1. The lower inventory is misleading because there are a lot of houses for sale that aren't even in inventory. I winter in southern Florida. There are houses here in a fairly high end community where I rent that the owners would love to sell but the demand and prices are so low that they aren't listed. They aren't counted in official "inventory" numbers, but if "inventory" included homes listed for sale + houses that would be listed for sale if the owners had any hope of actually selling it, the total inventory would be significantly higher. Those houses will come into inventory if and when demand and prices pick-up, translating into a continuing overhang that will dampen or forestall a true recovery for a few more years.

    2. Residential real estate is a food chain. Under normal conditions, when someone buys a house, the seller becomes a buyer of a move-up house; they buy that house and the sellers usually become buyers of their next move-up house, etc. But these aren't normal circumstances -- houses are being sold by banks and other lenders and they will not become buyers and houses are selling houses under distressed circumstances and they aren't going to become buyers of another house (in the short-term at least) either. So, the normal food-chain phenomenon isn't happening to the usual degree, and that, too, will dampen or forestall a recovery.

    It's going to take years -- AFTER the market reaches a point of stabilization -- for there to be a real recovery. House prices will bounce along bottom for several years -- and I think that such stability will be the best we can hope for during the next few years (5-7) -- we ain't at stabilization yet.
    Dec 23 09:02 AM | Likes Like |Link to Comment
  • America's Multiple Choice Economy [View article]
    How long do we keep saying "recovery from this recession is sluggish" until we start saying "this isn't a recovery at all"? If "recovery" is a synonym for "return," i do not think we are going to have a "recovery" because I do not think we are going back to what we had for at least a decade .... there have been too many cultural changes, including the accelerating (both in speed and impact) transition from a Manufacturing Economy to a global Knowledge Economy.
    Oct 19 10:42 AM | 1 Like Like |Link to Comment
  • Zenith Optimedia Sees Global Ad Declines Approaching 7% in 2009 [View article]
    Based on 40 years in the communications business (at high levels, successful by most standards), I would assert that there is no one "future" to marketing communications. The entire communications industry (not only media, but communications services firms such as ad shops, pr firms, etc) is in a radical revolution that is shaking communications to the very core. You can take a look at my blog or some of my previous articles on the topic that have been published in Seeking Alpha for more detailed thoughts on the subject. Whereas it might be possible to make a stock market bet on the industry or some aspect of it, the bet should only be topical -- a year from now the industry will be totally different. Twitter didn't exist as a company 3 years ago, really only started picking up critical mass in the past year or so, and is now considered by many "THE" future of communications, despite the fact that they haven't figured out how to generate revenue, much less a black bottom line. I think it will play a role -- along with the next Twitter that is being designed right now by some guys drawing on a napkin over lunch (or the contemporary equivalent) and that will be declared "THE" future next year. Just as Facebook was "THE" future a year or two ago. And just as SEO was "THE" future a year or so ago too -- hey, it's still "THE" future according to many. It is most likely that there will need to be a total capitulation of the industry (possibly on the horizon now) before we'll be able to predict the prospects of tools and distribution channels into the future. Of course, it is hard to argue with Mr. Hakimglu, who on his Seeking Alpha profile asserts: "I'm infallible and therefore when I say time to buy, it is time to buy."
    Apr 16 10:23 AM | Likes Like |Link to Comment
  • The Speech Newspapers Need to Hear [View article]
    There is another part of the communications industry that has "blown it" -- that is the advertising, p.r., interactive, new media, etc. agencies. [Fair disclosure: I am in the business -- you can check my profile linked above to understand my bias.] The agency business has two basic flaws: 1) time is the fundamental criteria for billing, remuneration, and measurement of efficiency -- that is just plain crazy -- clients don't care how busy you are or not -- they care about value received. You can check out what Washington Post Pulitzer Winner Steve Pearlstein wrote about that model here: tinyurl.com/ylobdq 2) agencies are siloed by virtue of distribution channel (advertising, pr, digital, events, etc.) --- why would agencies encourage segmentation in an era when content/message is king and you can deliver that message through a variety of ways in coordination to maximize expense and effectiveness.

    It ain't only newspapers that have "blown it" in the communications business.
    Apr 7 10:59 PM | Likes Like |Link to Comment
  • Standard and Poor's Whacks Advertising Companies [View article]
    The real problem with the advertising stocks isn't the economy -- the economy will be the straw that breaks the agencies' back -- but the core problem is that they have the wrong business model it is outdated and has at least two basic flaws. I have been in the communications business for 40 years and have written about this extensively at my blog (linked above).

    First of all, agencies bill on the basis of time. They remunerate on the basis of time. They measure success, make promotions, award bonuses and are totally driven by the time sheets that dominate their businesses. Crazy. Clients don't care how busy their agency may or may not be. They only care about whether the value they expected to receive is being delivered at a minimum. Time has very little to do with that. Skill, commitment, capabilities have a lot more to do with that. In fact, an agency's interests are just not aligned with their client's interests when the agency is obsessed with time. That is a core fundamental of the agency business, and it will kill them eventually.

    Secondly, agencies are structured and organized on the basis of silos defined by distribution channels. That is, there are ad agencies (or "practice groups" within larger firms) that are separately identifiable because they buy time or space on a distribution channel owned by another enterprise. PR is identifiable because that effort seeks to "earn" coverage on someone else's distribution channel. Digital, interactive, events marketing -- go through the list of those specialities of the communications business and they all refer to the distribution channel. But this is 2009 and the way to get a message to an audience is by using whatever distributuion channels work. That goal is undermined when agencies are organized by silos where each practice group seeks to win more of the client's budget for their silo rather than seeking to be part of an integrated team that has the single shared goal of hitting a homerun for the client. This, too, will eventually kill the existing business model.

    Washington Post Pulitzer Prize winning business reporter Steve Pearlstein wrote about this outdated model about three years ago and his points are still valid. You can read where he said here: tinyurl.com/ylobdq
    Apr 7 10:01 AM | 3 Likes Like |Link to Comment
  • A Paperless News World: Kinsley Nails It Again [View article]
    Here is the perspective of someone who has spent 40 years in the communications business (p.r., investor relations, interactive/digital, advertising, etc.). We are seeing the end of the Fourth Estate. tinyurl.com/ced8ku

    This will be an especially dramatic loss at this time when the world is so volatile politically and the truth can be corrupted, rumors can be created, communities and be coalesced and moved into action via the Internet, globally, real time, 24/7/365. The agendas of online writers who do not necessarily need to subscribe to journalistic standards, who can even deceive their readers as to who they are, what credentials they may have, and what their goals are is just not equivalent to the professional journalist. I know papers like the Washington Post and the Wall Street Journal have their own biases, but they also have a fundamental priority on accuracy and clarity. That's going to exist in the future but it will not set the tone of news as the newspapers/journalists do today. It will be a very costly loss when journalism ebbs more and neo-journalists assume their former role. It just isn't going to be the difference between reading something on a sheet of newsprint versus reading what's on a screen.
    Apr 6 08:30 PM | 3 Likes Like |Link to Comment
  • Newspapers Can't Compete with 'Us' [View article]
    There is a major problem on the horizon. Along with vthe death of mainstream media (most assuredly happening) we are also seeing the death of journalism and the rise of neo-journalism. The consequences are very significant. Seekling Alpha published my more robust comments for those interested: tinyurl.com/d5m63x
    Apr 6 11:48 AM | 1 Like Like |Link to Comment
  • So How Good Was Housing Data in March? [View article]
    Statistics can be deceiving -- I just posted an article (drawing on four years experience as VP of NVR and numerous consulting assignments with other homebuilders) tinyurl.com/co7dpw that explains that the vigor of first time homebuyers is basically meaningless to the bottoming process because they are buying those houses from creditors and distressed sellers who will not use their proceeds to buy another house, as in a normal market. The difference is that under normal circumstances the seller of the first home becomes a buyer of their first move-up home and the people that sell that house become buyers of their second move-up home and thus a food chain is created and the market becomes vibrant. But that doesn't happen when the seller of the first time home doesn't become a buyer of another home. So the figures of "health" in the market are basically meaningless except for the fact that inventory is being absorbed for an eventual recovery.

    Additionally, the low mortgage rates are not impressive because the qualifying standards are so high and because appraisals are so fluid that they are torn up at the settlement table and new debt:equity ratios need to be established, sometimes killing the deal.

    We are so far off from a residential real estate bottom. "Glimmers of hope" may exist, but that flicker of light that you may see from them is very faint and very off in the distance.
    Apr 6 11:35 AM | 5 Likes Like |Link to Comment
  • Government's Failure to Communicate [View article]
    Sorry, but I disagree with your premise, based on my 40 years or so in the communications business.

    First job in communications is to define your job this way: 1) I want to achieve these specific goals; 2) to do that, I need to develop well-crafted messages (researched and tested); 3) to these specific targets; 4) whom I can reach by these distribution channels. Let's take a look at how Obama is doing that.

    1. The primary goals (it seems to me) Obama is seeking is enough support for his platform of "change" (which is more philosophical than topical) so that he can continue to experiment with aggressive ideas in the hopes that one or two or more will actually accomplish something. The agenda for Obama is "change" and change translates into "action" and to do that he needs to create the environment and support that will allow him to "act." And he hasn't stopped moving and acting since he won the election.

    2. His messages have been crafted, researched, tested, polled, focus-grouped and honed to resonate. I believe that is why his messages remain very broad -- because the mood of his supporters is broad in nature: they dislike certain people and institutions (bankers, financial services companies, certain corporations and corporate executives, and many politicians whom they identify as against them and their interests in favor of their own partisan vested interests). This is an attitude that demands the very agenda of "change" that Obama seeks to promote. The ability of the Obama campaign to develop a message, refine the message while staying consistent, and then to stay on message has been extraordinary and will be studied by communicators as a successful case history long into the future.

    3. His targets -- his supporters -- are well-defined. He is the first politician in a very long time who has been able to create passion among the broad economic and political middle. Look into his poll numbers and the singular characteristic that stands out is not his large numbers of support, but the ardor of his supporters. The amazing thing is that such passion is usually associated for single issues (guns, abortion, ERA, environment .... just think of the major campaign issues of previous campaigns) -- but in Obama's case he kept focusing on mood issues: discontent, lack of faith in the government, belief that the nation was going in the wrong direction, etc. Every poll I read (including many proprietary polls taken by the research group within my own firm) showed that the people who possessed that "mood" was very wide and deep. Those were Obama's targets in the primary, the general election and his presidency thus far.

    4. Distribution channels. Let's get real. The Obama campaign has put in place a remarkable infrastructure for campaigning (including during his term in office) and he has merged that with incredible communications skills and the ability to do a town hall meeting in any city in the US, in a town in France, and on the Internet. He is on TV every day, using both news opportunities and creating his own, including prime time news conferences and exclusive interviews to TV news hosts.

    I think Obama can fine tune his communications campaign, sure. But it is totally baseless to assert: "All the substance of the government’s plans has been released through channels that simply don’t get the attention of most Americans. Op-eds written by unknown government officials in the Wall Street Journal, appearances on news shows by these officials, press releases, and the creation of new websites such as financialstability.gov just won’t cut it." So is the assertion that "The President himself must expend some political capital to get the people on the side of the government."

    That just does not make sense to me. If you want a communicator's view of Obama's successes and failures, I've written a bunch on the subject that you can find at my blog, linked above.
    Apr 5 09:37 AM | 2 Likes Like |Link to Comment
  • Markets Have Hit a Bottom, But Is It THE Bottom? [View article]
    Your article is excellent but it is based virtually entirely on looking at the economic/market crisis as solely an economic/market crisis -- I don't think it is. I think this is primarily a cultural problem of widespread irrationality from all quarters (governments, individuals, institutions and the investment/finance community as a whole). As such, cultural change will be one of the results -- among the cultural changes will be a much more conservative consumer, and that will be important because the consumer accounted for somewhere around 70% of our economy at the peak. In addition, it is becoming increasingly clear that the world is on the precipice of major political issues -- take a look around the world (see this narrated, self-running PowerPoint for details: tinyurl.com/daaua9) -- what will happen to markets worldwide if any of the massive protests erupt into something more than just "ordinary" protests? If you missed it (which wouldn't be difficult given the US mainstream media virtually totally ignoring it), 3 million people protested throughout France last week -- and look for major events at the G20 meeting coming up. The threat is very real and growing as the recession spreads. Then there are the issues of a globally interconnected financial market. And there is also the turbulence that comes from the transition from a manufacturing to a knowledge economy. And volatility not only in the price volatility but the access to basic commodities such as oil and food. So, the analysis of whether we are at a bottom that is based on economic and capital markets issues is enlightening but too shallow. Personally, I am not worried about whether the market is at a bottom of not at this moment -- I am much more worried about non-economic news that could blow away the entire cocept of a bottom.
    Mar 25 08:38 AM | 7 Likes Like |Link to Comment
  • The End of News Media or Just an Accidental Business Model? [View article]
    I would not worry about the end of news media. There are plenty of distribution channels to get messages (including news, ads, etc.) to audiences. The distribution channels will increase and change. That isn't the problem -- the problem is that JOURNALISM as we have known it is dead and we are beginning to see the rise of neo-journalism. That is really a very serious issue, espeically as the world is in turmoil. More thoughts on greater detail here: tinyurl.com/b8b5ey
    Mar 18 09:22 AM | Likes Like |Link to Comment
  • If You Believe Bernstein's Estimates, It's Time to Buy Ad Related Stocks [View article]
    I am the co-founder of a 100-person communciations firm based in DC and I have 40 years of experience in PR, advertising, and (more recently, of course) interactive. I will focus these comments on your comments about WPPGY, OMC, and IPG. I believe they all have inherent and very major flaws in their business models. Rather than reiterate those views here, if you are interested, I laid-out my thoughts here: tinyurl.com/dk8ked

    Beyond the analysis at that link, I can tell what is happening simply because I am on the receiving end of emails and phone calls from people who are leaving the big agnecies. Many have been laid-off; many more are afraid (with good reason) for being laid-off in the near future; and many (especially the most talented) just want to get out of a big ship that will take a very long time to turn around. If this was a topical isolated and temporary phneomenon, it might be an opportunity for the big agencies to pare expenses and eliminate some deadwood, etc. The problem is that in this business when people go and client teams experience rapid turnover, clients become impatient, especially when their own budgets are under pressure and their bosses are yelling for new ideas and approaches.

    In short: from someone inside the business ... I see absolutely no reason to think that the big agencies have a bright future in the short-term.
    Mar 18 09:07 AM | 1 Like Like |Link to Comment
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