Jonathan Christopher

Real-Estate Veteran Sees a Rare Opportunity to Buy Quality REITs - Barron's

If you want to invest in Real Estate, the best bet is actually in apartment rentals, for the following reason:

Housing stock is about 100,000,000 units Annual losses in available stock, due to age, redevelopment, fires, floods, etc are about 750,000 units per year. Now that construction is at about 400,000 units per year, we are actually losing available units at about 350,000 per year. Since people losing their homes still need a place to live, and the population is increasing, perhaps by 300,000 to 500,000 family units per year, we are quickly eating up the surplus.

With an excess of about 2,000,000 units currently on the market, We will eat up the surplus in approximately two years. However the surplus and demand are unevenly distributed. As a result, in relatively tight markets, in growing states (such as my North Carolina), house prices will begin to increase significantly before that two year point. In fact, I would not be surprised to see increases in North Carolina within 6 months.

What have i done? Purchased as many student- housing apartments in NC as possible. During recessions, the young people that cannot get jobs often go back to continue in college to delay the day of reconing.

How Bad Was the 1980s Real Estate Crash?

While few people are talking about the Glass-Steagal Act and it's repeal, I agree with Chris's comments above. At the time I was employed in the securities industry, and told everyone that would listen to me, that this was the STUPIDEST thing I had seen. I predicted then, without reservation, that this would result in Wall Street eating the banker's lunch and was wrong for the country. It was clear that the free-wheeling Wall Streeters would run circles around the rule-bound bankers.

A major policy issue should be re-establishing the equivalent of Glass-Steagal Act.

Odds of Another Swing to Despair Seem High

Dear Mr Herbert Hoover:

I believe you are right and Mr Bartlett is wrong. Government programs did have an effect on the Great Depression.

However, since the Depression did not really end until the US was involved in WWII and the aftermath, I would not categorize the programs as "successful"

Since the start of the Great depression, the US dollar has been on a downward slide. The dollar today is worth about 2 1/2 cents compared to 1929. Much of that decline has been due to continuation of the policies that started with FDR.

Evidence That Big Inflation Is Coming

While I agree with the Hamilton conclusions of upcoming major inflation, there are several things I disagree with:
1. Deflation, in common usage refers to decreasing price levels. There is no mechanism implied in the term. It could be due to decreasing demand or decreasing cash available, or perhaps some legislative action. The result is OVERALL dropping in price levels. We may or may not have classically defined "Deflation" at present, but we are awfully close.
2. Money defined as cash in circulation is too narrow a measure. While it is clear that the Federal Reserve has created an awfully large amount of cash, part of that cash has been counteracted b a large decline in "Velocity" or how quickly that money changes hands. Due to declining economic activity, money is not changing hands as quickly, that is reducing the effective amount of money in circulation, partially or even completely counteracting the increase created by the Federal Reserve.

What this implies, of course, is that as economic activity picks up, there will be a double whammy effect on prices, Quite beyond the intent of the Federal Reserve, the amount of money in circulation will increase as economic activity increases, simply due to the effect of velocity.

It is likely that the Federal Reserve, in an attempt to eliminate the excess funds, will begin issuing huge amounts of treasuries, and will be required to pay very high interest rates to bring the money in.

This action will crush the value of corporates and other bonds, and raising interest rates on mortgages to levels not seen since the eighties. That will by itself drop house prices again.

Commodities Are Bouncing

Your comparisons would look clearer if you used the same time baseline for both metals and oil. If you used 1999 as the starting point for both graphs, it appears that the metal graph would overlay the oil graph pretty nicely.

If that were true, how would that affect your discussion?

Obama's 'Buy American' Plan May Meet China's Export-Led Growth in 2009

It appears that a major factor in deepening the level of the "Great Depression" was the passing of laws raising Tariffs. a "Buy American" policy from the world's greatest EXPORTER is a dangerous step to take. The LAST thing we need is for countries to start a "beggar thy neighbor" policy, because we all know where that will lead.

The First (and Possibly Last) Euro Decade

Perhaps Randy_H could educate me with some specific periods of Gold-based currency inflation? I am only aware of that period in Spanish history when Gold (and Silver) from the New World flooded the markets of Europe. There are corresponding periods of Gold deflation during the life of Ancient Egypt as the burial rites of the pharaohs took these metals out of circulation. Could you be detailed? I am not a "Gold Bug" but am intrigued by the relationship between the past decade of "Gold-defined inflation" and the present period of "asset-defined deflation"

Manufacturing Collapse Reminiscent of Great Depression's Beginning

Axelrod has it right. Last year Buffet would not buy anything Americam. This year he is like a kid in a candy store. Fortunes will be made in this downturn. It could be a Depression - Enough mistakes have been made this year to move it in that direction. But the die has not yet been cast. And there will be winners and losers. Today is a down day?
My accounts are UP today.

Environmentalism May Face Major Setback in 2009

Just to keep things in perspective:

1. The BIGGEST problem in the world is the high and growing world population. Nature will eventually solve this with mass extinctions because we and our politicians do not even acknowledge the problem, much less attempt to solve it.
2. The SECOND biggest problem in the world is GLOBAL WARMING - not the one caused by humanity - though we probably contribute some. The global warming has been going on for 15,000 years, has raised the level of the world oceans by 400 to 500 feet, and has perhaps another 100 feet of sea level rise to go.
3. The THIRD biggest problem is the END of Global Warming - which means we are entering a new ICE AGE - that could be in a few years or in a thousand years. If nature hasn't taken care of problem #1 by this time, problem #3 will likely take care of the population problem.
4. The FOURTH biggest problem is ASTEROIDS - not the dinosaur killers - but the ones like Tanguska, and the one that created the meteor crater in the US Southwest. These are city-killers and occur MUCH more often that we had thought.
5. The FIFTH biggest problem is VOLCANIC ERUPTIONS. Expect major ones every 20 years or so, like Pinatubo and Krakatoa.

Nah - forget that stuff - lets talk about coal mines, taxes and bovine-derived methane instead.

Toyota: Examining the Solar-Car Rumors

You all need to keep things in perspective, and think of appropriate markets.
Remember the "micro- loans" being made in the Third World? A couple of hundred dollars buys the needed tool and a person gains financial independence.

Think of a solar powered car the same way. A light and slow vehicle, able to go perhaps 100 miles per week, on solar power might be exactly what a rural person in Africa or Asia nees to make their life a little easier.

I'm no expert, but sometimes a little "possabilities thinking" is OK to do.

Are Home Prices Still Too High?

Finally - A set of comments that REALLY understand what is happening.
Demographics is the name of the game, and there are too few post-boomers chasing too many homes. (These comments also apply to Retailers, and for the same reason.)

Prices WILL stabilize at replacement cost in each area of the country, once excess inventory is worked off. In rust-belt cities and no-growth towns, prices will keep dropping until homes get destroyed by vandals or the effects of sitting empty.

In places like Chapel Hill, NC (where I bought 4 years ago when this Recession became apparent), prices have been remarkably stable.

In other places, like Maui - which had huge price inflation, prices have another 10 to 40 percent of collapse to go., (depending in part on the re-emergence of Japanese buyers).

Considering a Position in Oil Again

To those of you who do not think additional oil supply is showing up on the market, there are three points to consider:

1. Iraqi oil supply has gone from near zero four years ago to 2.4 MBD today and is headed to 6 MBD within 4 years
2. Natural gas supply from coal fields has resulted in an INCREASE in US gas production within the past 12 months, and can head much higher, displacing oil in the US, and elsewhere.
3. The Saudi's are bringing a new oil field on line, possibly within 12 months, with a capacity of 4 MBD.

Review of "100 Years of Corporate Bond Returns Revisited"

The scenario related to the movement of the "baby boomer hump through the population distribution is correct. That has been the basis of my investing for the past 8 years, and has served me fairly well. However I expect significant differences between the shape of the economic slumbp in the US compared to Japan.

Japan has a relatively simple mono-genetic culture, with very small additions of Ainu, and Koreans, and essentially no immigration - open or clandestine. As a result, the effects of the baby boom marched through the economy relatively unmediated by immigration, and differences in spending, savings patterns,or ethic variations. Their pattern can be viewed as the worst case scenario.

The United States, with a much more varied ethnic base, and significant in migration, will see less of an effect from the "basic baby boom", in the long term. However, in the short term - for the next two years I estimate, the results will be more severe, for the following reasons:
1. Lower savings rate than Japan means less available liquid resources per individual.
2. Undisciplined lending by banks and other institutions at the urging of government agencies, including the Democratic House.
3. Creation of financial instruments that hid the danger of the cresting demographic wave until too late for action.

Now the really important point to ponder: The Chinese one-child policy has created the artificial equivalent of the baby-boom baby-bust demographic wave IN SPADES. I have yet to overlay the Chinese demographic statistics over the US statistics to determine when the effect of their policy will begin to effect their productivity as severely reduced numbers of young workers enter the work force and older ones head to retirement.

There are so many ethnic, cultural, and economic differences between these three countries that this will be a study that will keep be involved for years.

Economic Conditions Force 27% To Put Homeowner Plans on Hold

In housing as in stocks, there is "A time to hold-um and a time to fold-um".
In housing, as in stocks, if you can buy the house at a price BELOW the cost to build it, you will often end up with a profit, over time, in the right area of the country, and with the right timing.

At present, you can probably buy a home in Southern California, Nevada and Florida at below the cost to replace it. If you can also get an 80% mortgage at 5.5% - 6% you will do fine, in those areas, if you don't overpay, and you can keep it for 5 years.

Those are a lot of caveats folks. I've purchased and sold homes in LaJolla, Honolulu, Maui, and North Carolina and turned reasonable profits.
But timing has been key. I bought a condo in Honolulu for $115,000, from a person that had purchased it for $210,000. I sold it 6 years later for $250,000. Since my initial investment was $15,000, that was a profitable transaction for me - but not the prior owner. The difference was TIMING.

U.S. Manufacturing in Freefall

The following forces are in effect:
1. Declining growth due to retiring of Baby Boom generation
2. Declining home purchases by Baby Boom generation
3. Overspending on housing due to Democratic encouraging loans to unsuitable buyers.
4. Under-regulation of bankers due to Republican and Democratic actions
5 Destruction of capital in Telecommunications, Energy, Transportation and Manufacturing due to techonological advances.
6. Irrational Depression by investors.
7. A quickly expanding money supply.

Until we address all these factors via government and the free market, we will have little or no growth, and a spread in Deflationary forces. We could, if we are not careful, end up with an "Inflationary Deflation" where rising numbers of dollars and dropping real prices BOTH occur, wreaking real devastation as inflation follows deflation sequentially. Individuals and families will be whipsawed by dropping home prices and increasing energy and food costs. Companies will be whipsawed by the declining value of their invested capital, and the rising cost of the technologically relevant replacements. Local governments will be squeezed by declining property taxes as operating costs rise.