As another year comes to a close and we look back at 2011, it ends with more questions than answers for all financial markets, including real estate. Back in the 1980's, when the stock market was tumbling, I remember driving to work and seeing that the stores on Olympic Blvd. were all open and things were operating as usual.
However, why does this current downturn feel more like a pending calamity that will have no end, no silver lining and no way out?
I think that instant communication has created a panic society that is reactionary. What do I mean? As news travels at the speed of light over the internet, the general public as well as investors and large money fund managers react to news, rather than take the time to consider what it really means.
Watching Jim Cramer’s stock market analysis for 15 minutes each morning before I go to my workout is a prime example of panic and reaction, and the lack of any credibility of our news and its analysis of why things happen.
For the past months, Greece’s debt and bailouts were the reason that stocks climbed, but recently the market dropped 400 points with the Italian debt crisis as the hot topic. These are distractions that go along with the Penn State crisis, housing numbers, unemployment and the stateside visit of Prince William.
Now for the majority of Americans, this is a frightening reality. Low interest rates are affecting most older retirees as they have a fixed income that is being absorbed as the equity is being used. Market interest rates should be at 7%+ and prime rates should be there as well. But, we are in a time when “too big to fail” economics prevail and the average American is up the creek without a paddle. Medical costs are a disaster and again, the average American is in the difficult position of deciding between food, shelter or medical needs.
This is a real problem that requires hard answers if it is going to be solved. As I watch the republican presidential debates, I see that we are in worse trouble than I could imagine. Which one of these people could I trust to actually do anything, and which could captivate our country and world to make a real impact? I think Newt Gingrich may have a chance, but we’ll see. The other guy is Ron Paul, who is a genius in economics, but the media makes him out to be a nut.
So we have very few choices and they are not too good. This is why people are marching in the streets and this is why so many people I talk to are somewhat depressed. The media is feeding on any bit of tabloid crap they can report, and sensationalizing everything with a negative spin.
Fortunately, when I get in my car and drive to work, I pass millions if not hundreds of millions of dollars worth or real estate. Bernie Madoff can't hide that on a balance sheet, nor can the hedge fund managers pick it up and move it while we sleep. I can rest easy that if I have a good tenant and low debt, and manage my affairs properly, I will be safe from harm’s way. Real estate in Los Angeles is the single safest investment you can make.
We have a few earthquakes, but for the most part, very little property damage when they occur. The risk comes with not being educated and just buying something you do not understand. I can say that although I have been in real estate for over 25 years, I don't understand the office market. When I have that type of request, I usually refer it out to someone with more expertise. I think I understand retail and am an expert in industrial property, so I look for opportunities in those markets.
My goals for 2012 are the following:
1. Buy more industrial buildings in Los Angeles
2. Buy properties that are adjacent to my existing holdings when possible.
3. Grow my brokerage business by continuing to provide honest market insight for my clients.
Every generation has been faced with challenges that cause the majority to sit and wonder what will happen, while the few build their wealth, holdings and real estate portfolios. They buy first notes, invest in notes, buy buildings and reposition them with different uses and tenants. They are conservative yet aggressive. These syndicates, individuals, families and corporations have a business plan and stick to it.
As we are exposed to uneducated and over-educated reporters and experts who tell us what we should think, it is easy to be distracted from your goals. It is easy to be frightened into inaction. The time to buy is when everyone else is selling, when most are frozen and panicking.
As I see the growth in the companies that have planned well and survived the downturn, I see light at the end of the tunnel. I see many opportunities. This is am amazing time to be alive and I choose to live and thrive. 2012 will be a challenging market to navigate, but if you surround yourself with an expert or a team of experts you can realize success.
Have a happy and healthy holiday season and a great New Year!
