Friday, September 24, 2010

Music from when I was twenty.........

Bill McBride's Calculated Risk offers more raw information,
statistics, and charts about our economy than your typical blog. 
I found myself nodding my head as I read this commentary-here.

He wrote a year ago:

     "[T]here is still far too much existing home inventory, a
     sharp bounce back in housing starts is unlikely, so I think
     a rapid decline in unemployment is also unlikely.

He wrote on the 22nd:

     "Usually near the end of a recession, residential invest-
     ment (RI) picks up as the Fed lowers interest rates. This
     leads to job creation and also household formation - and
     that leads to even more demand for housing units - and
     more jobs, and more households - a virtuous cycle that
     usually helps the economy recover.

     "However this time, with the huge overhang of existing
     housing units, this key sector isn't participating. So in this
     recovery there is less job creation, less household
     formation, and less demand for housing units than in a
     normal recovery.   This is sort of a circular trap for both
     GDP growth and employment that will persist until the
     excess housing units are absorbed.

Many people have written at great length about the "great
recession".   One aspect that I think does not get talked about
enough is the cause of McBride's "huge overhang of existing
housing units."

In the year 2000, market study gurus projected  that Central Ohio
could absorb 6,200 new homes per year.  Between 2000 and
2006, the production building industry built some 8,600  MORE
houses than the market studies said Central Ohio could absorb. 
In other words, by January of 2007, forgetting any other issues
with the economy, there was more than a year's surplus of newly
built homes available in Central Ohio. 

Judging from what I read in the papers, the production building
industry replicated this behavior all over the country.  In some
of the "hot growth" markets, I suspect they overbuilt to an even
greater degree.

The building spree was great news while it lasted.  Lots of
construction jobs, lots of supplier jobs, lots of developer jobs.
Construction became the engine for our economy. 

Unfortunately when the industry should have been gently
applying the brakes, say 2003, it got caught up in the mass
hysteria of "real estate values always go up" and stepped
on the accelerator instead.

This is one of Calculated Risk's fun charts.  It shows the
pace of home building over the years.  Click on the chart to
enlarge it, or go here.  Nothing in our economic history
would suggest that a building spree like we enjoyed from
2000-2006 was possible, or sustainable.

If we are lucky, we may see a return to the building levels
of the 1990's by 2013.  It would be an accomplishment,
and recovery, we could be proud of.

Wishing for a return to 2003-2006 is asking for trouble. 
It is just not sustainable.

More of the 1,001 rules........................

13. Avoid gossip. Never write a bad word about someone,
especially in an email or on a website. It will always come back
to haunt you.

40. Honking your horn won’t make them go faster.
51. You won’t always be the strongest or fastest. You can be
the toughest.
74. Philanthropy is not measured in dollars and cents.
96. There is rarely a need to raise your voice. At the ballgame
is one.

131. Know your neighborhood like the back of your hand.
173. Find yourself a good hideout.
199. Limit your time in California.

231. Keep your passport current.
249. Identify your most commonly used word or phrase, and
eliminate it.
Rules for My Unborn Son
Walter Lamond

It will be a sad day.............................

if the Barnes & Noble at Easton ever closes.

Article in the National Real Estate Investor highlights some of
the issues facing "the country's leading bricks-and-mortar
bookseller."  "Industry insiders wonder if Barnes & Noble
might have to slim down its base of 1,300 stores in response
to the changing book market", meaning Amazon and e-readers.

Full article here.

Favorite excerpt:

     "But retail consultants feel that actual books resonate
     with consumers.  And Barnes & Noble offers a rich
     in-store experience..........'whereas there is a value
     in having a physical book.  Some people simply
     prefer them'."

Got that right.

Rotary's 4-Way Test.................

Friend Dave, a successful businessman and artist, reported that
he had this framed and placed in his office, on the opposite wall
from where he worked.  Everytime he looked up from his desk,
there it was.  He said it "made all the difference."

A bit more from Wayne Dyer........................

The elevator to success is out of order today.  You're going to
have to take the stairway, one step at a time.


Life is never boring, but some people choose to be bored.
Boredom is a choice.


Why not think about some things you've never done before
and do them just because you've never done them before
and for no other reason?


Did you ever notice how difficult it is to argue with
someone who is not obsessed with being right?


The secret of abundance is to stop focusing on what you do
not have, and shift your consciousness to an appreciation
for all that you are and all that you do have.


These are the good old days.


To not forgive is to fail to understand how the universe
works and how you fit into it.


Quality rather than appearance..........ethics rather than rules.......
knowledge rather than achievement........integrity rather than
domination.......serenity rather than acquisitions.


Once you know that what you think about expands, you
start getting real careful about what you think about.

Thursday, September 23, 2010

A Birthday Extravaganza..............

The Boss, born this day in 1949

John Coltran was born this day in 1926

Ray Charles was born this day in 1930

Julio Iglesias was born this day in 1943

Who knew? Self-teaching.......The Law of Unintended Consequences at work........

"Children will learn to do what they want to learn to do."

"A teacher that can be replaced by a machine, should be."

"If children have interest then education happens."

In exchange for seventeen minutes, you can witness the power
of supporting the natural curiosity of youth.  Good stuff.

"Holidays are fun today, but they remind us of events in which outcomes were uncertain and disaster a real possibility."

The above quote reminds me of why I like Mathew Ferrara's blog.
I always learn something.  I always get a fresh perspective.

His latest post, channeling his inner Bate, encourages the marking
of our calendars with eight dates in the last quarter of the year. 
Each date is an occasion to refresh, recharge, rethink, and

Here is the first date on his calendar, just to get you started:

     October 2: Weave some homespun. On Ghandi’s birthday,
     recall how the Indian statesman urged his nation to
     become self-sufficient through gentle “non-cooperation.”
     The same advice applies to the housing industry. It’s time
     to stop cooperating with bad ideas and undisciplined
     performers, whether in our offices or in the halls of
     government. Start quietly and peacefully cutting ties with
     anything holding back your growth. Whether it’s a non-
     performing agent or a non-performing listing, begin the
    gentle and steady process of asking all parties to go their
    separate ways. You won’t find success if you’re still
    pouring salt in your wounds next year.

Thanks Matt.

Wouldn't it be loverly if............................

Jeff Tredgold, my favorite economic futurist, does some
day dreaming- here

Eliza Doolittle's day dreaming is a little simpler.

Wisdom about real estate investing.......

"In my experience the new 'private equity' is really the old 'private
equity that was sitting on the sidelines as real estate values ran
up in the late 2000's.  These investors stayed out of the feeding
frenzy and kept their powder dry for the eventual fall out."

- Tom Jaros


"We use an analogy of a three-legged stool that needs all three
legs to stand on its own - one leg is the credit of the tenant,
the other leg is the lease term and quality of the lease and the
third leg is the underlying real estate value and potential."

- Jeff Hughes


"Properties with an investment-grade tenant will receive
strong consideration from buyers, providing the lease term
has 10 to 15 years remaining."

-Alan Pontius


"If an investor buys a net lease they want predictability
of cash flow and predictability comes from a credit

-Jonathan Hipp

All four quotes courtesy of an article in the
Heartland Real Estate Business journal

Something to remember while taking in the news...................

I long for the days when happenings in the real estate market are
not the daily headlines.  It is much healthier for everyone if our little
industry gets relegated to page 2 of the Business section of the

Until that happens..........................

Our friends from Keeping Current Matters remind us that
"compared to what" really matters.  Here.

Professor Richard Green shows his frustration with the
statistics du jour, here.

Mathew Ferrara adds his two cents to the conversation,
here and here:
    "If the real estate industry is ever going to clear current
    supply, and pursue better practices in market creation
    in the future, it’s time to stop reporting fictional
    measurements as actual market changes."

Wednesday, September 22, 2010

Now where were we?.......Oh yeah, music from when I was 19.......

Brutus shrugs off a tackler, makes it to the endzone............

Looks like a late hit......................


Read a blog yesterday by Andrew Zezas titled "Passive Real
Estate Brokers.........Striving for Mediocrity".  Here.
I do not know Andrew Zezas, although I suspect he is a very
focused, disciplined, and successful commercial real estate
broker.  I felt convicted by a number of things he wrote.

     "You can always spot a passive broker in a
      crowded room.  They show up to important
      meetings dressed in
      colors, no tie, maybe a sports jacket, and worse!'

Ouch.   I wasn't sure what to do with the Zezas post.  And
then Jim Harrison came to the rescue.

I was first led to Jim Harrison by Cultural Offering.  After reading
one of Kurt's posts I acquired a copy of In Search of Small Gods.
The "wow" factor in Harrison's stuff is pretty high.

The Hammock Papers was on a Harrison kick Monday.  Especially
appreciated was his inclusion of The Paris Review interview by
Jim Fergus, in which appeared the following:

      "Conversing with the poet-novelist is somehow akin to
      watching his dogs work the cover for birds. They race
      off on tangents, describing broad loops and arcs, or
      tight circles, always returning in a controlled, if
      circuitous, pattern that is at once instinct, training,
      ritual, and play."

Hah!   This feels like how I work.  One would struggle to call
it disciplined, somehow has worked.  Off on tangents,
broad loops and arcs,  a controlled, if circuitous, pattern
that is at once instinct...and play.  That feels about right,
and after reading Zezas, a relief.

I won't be wearing that tie to work today.

Warming the cockles of my heart..................

New local commercial construction!!!!   Yea!!

Getting a site ready for potential users, Southgate Corporation
shows some moxie returning to their spec roots:

Just finished framing.  A new Frisch's Restaurant is on the way.

Tire Discounters.   Big push is on to get it open this fall.

Verizon Wireless.   Just finished and ready to open
(and pay rent!)

Who says there is no business activity?

Does this headline strike you as strange?...........

Home Sales in U.S. Probably Rose in
Sign Real Estate Market Is Stabilizing

Full article from Bloomberg here.     Probably?

Excerpt here:

    "Purchases of new and previously owned homes rose 7
     percent to a combined 4.395 million annual pace,
    according to the median forecast in a Bloomberg News
    survey. A separate report may show orders for long-
    lasting goods excluding transportation equipment
    rebounded last month.

"Probably", "may show", " according to the median forecast".
The news just hasn't been the same since Walter Cronkite

Imagine my relief...........

Tuesday, September 21, 2010

If you do not do another thing today..........


Chuck Jones.................American Icon

Chuck Jones was born this day in 1921. As an animator,
cartoonist,  and director,  he brought me countless hours of 
amusement and entertainment.  His honor roll included Bugs
Bunny, Daffy Duck, the Road Runner, Wile E. Coyote,
Sylvester the Cat, and my favorites, Tom and Jerry.

Is owner financing making a comeback?....

We have been brokering and investing in real estate for a long
time. Long enough that we could measure by cycles rather than
years.  There have been several cycles in which the traditional
lenders were so flummoxed by economic or regulatory
conditions that owner financing (also known as "creative
financing")  was necessary for the real estate market to fully

Please know that our experience is centered around small town
Ohio.  For the most part, real estate markets are local.  It is
sometimes a mistake to extrapolate a local experience into "the
way it is".  We are just not big city types and never had any
desire to be Californians, where seller financing has long been
part of the charm of owning real estate.  So...your experience
may differ.

From 2000 to 2007, owner financing was pretty much a
memory.  Banks and mortgage brokers were so eager to lend
all the money you could possibly need and at such historically
low rates, that they crowded the  sellers out of the lending
market.  Not that sellers were complaining, mind you.

Owner financing, at least in our market, usually takes the form
of a second mortgage.  The buyer gets a traditional mortgage
from a savings & loan or bank for 50%-70% of the purchase
price, adds some cash, and the seller holds a note for the

When we first started investing in the early 1980's, cash for
down payments was mostly a theoretical thing, so owner
financing was imperative for us to be able to buy.  It worked for
both parties.

One might have expected a surge in owner financed deals in
2008.   If it happened, I am not aware of it.  Perhaps the
shock of the popping bubble had to wear off first.  Now that
we have all had time to acclimate to the way things are, I
suspect that owner financing is becoming more prevalent.

Exhibit A in that suspicion is the Creative Financing Journal
brochure that crossed my desk last week.  Someone named
Michelle Rivers sent it to us.  She is in the business of buying
the notes created by owner financing.  Her web site is here.

We have bought and sold a few notes, although not for a
long time.  It is an interesting and potentially profitable
business requiring some specific expertise.  But for the
business of buying and selling notes to work, there needs
to be a surge of owner financing to create those notes. 

We would consider the return of owner financing to be a
good thing.  It means that the real estate community is
getting creative- which is always fun, and it means that
some buyers and sellers are starting to agree on what real
estate is worth.

It has to be a good sign.

The headline reads...........................

"Tight Consumer Credit Poses Obstacle
  to Recovery"

Full essay here. The accompanying chart looks like this:

Interesting quote:

     "Among the factors cited for the decline in consumer
     credit are the continued de-leveraging by creditworthy
     borrowers and the denial of credit to less qualified
     borrowers,  including many who remain unemployed or

Editorial Comment:

Only in baby-boom America would paying off debt be considered
an impediment to a healthy economy.  Only in "entitled" America
would denial of credit to those who might be challenged to pay
the loan back be considered an "obstacle".

How about changing the headline to:

"National debt levels are shrinking,
creating strong and sustainable
foundation for economic recovery
and well-being."

Go ahead, call me a dreamer.

"This tremendous mess......."

Faithful readers will remember my fondness for Richard Feynman.
Feynman (1918-1988) was a professor, a physicist, a man of
letters, an explainer of the impenetrable mysteries, and a lover
of the inconceivable nature of nature.

Our friends at were nice enough to post a five
plus minute video of Feynman being Feynman- here.  Enjoy!

Monday, September 20, 2010

A Poem for Monday...............

Homage: Doo-Wop

There's so little sweetness in the music I hear now,
no croons, no doo-wop or slow ones where you could
hug up with someone and hold them against your body,
feel their heart against yours, touch their cheek
with your cheek - and it was OK, it was allowed,
even the mothers standing around at the birthday party,
the rug rolled back in the living room, didn't mind
if you held their daughters as you swayed to the music,
eyes squeezed shut, holding each other, and holding on
to the song, until you almost stopped moving,
just shuffling there, embracing, as the Moonglows
and Penguins crooned, and the mothers looked on
not with disapproval or scorn, looked on with their eyes
dreaming, as if looking from a thousand miles away, as if
from over the mountain and across the sea, a look
on their faces I didn't understand, not knowing then
those other songs I would someday enter, not knowing
how I would shimmer and writhe, jig like a puppet
doing the shimmy-shimmy-kokobob, or glide from turn
to counterturn within the waltz, not knowing
how I would hold the other through the night
and across the years, holding on for love and dear life,
for solace and kindness, learning the dance as we go,
learning from those first, awkward, shuffling steps,
that sweetness and doo-wop back at the beginning.

-Joseph Stroud

Let's sway to the Moonglows..........

A few thoughts from a favorite.........Wayne Dyer

Most people are searching for happiness. They're looking
for it.  They're trying to find it in someone or something
outside of themselves.  That's a fundamental mistake.
Happiness is something that you are, and it comes from
the way that you think.


Fear itself does not exist in the world.  There are only
fearful thoughts and avoidance behaviors.


True inner serenity will always elude those who sit in
judgment, since they use up their life energy in anger
at what is.


The measure of your live will not be in what you
accumulate, but in what you give away.


If you expect to be upset, then you will seldom disappoint


Try viewing everyone who comes into your life as a teacher


In Zen they say, "Before enlightenment, chop wood, carry
water.  After enlightenment, chop wood, carry water." 
You've got to chop and carry.  That's just part of the
human condition.


It is intelligent to have a plan, but neurotic to fall in love
with it.


Perhaps the single most outstanding characteristic
of healthy people is their unhostile sense of humor.

It may not be the end of civilization as we know it, but you can see it from here.......

TigerHawk shows the way again.

Sunday, September 19, 2010

A Verse for Sunday.................

25.    "For this reason I say to you, do not be anxious for your life,
as to what you shall eat, or what you shall drink; nor for your
body, as to what you shall put on.  Is not life more that food, and
the body more than clothing?

26.   "Look at the birds of the air, that they do not sow, neither
do they reap, nor gather into barns, and yet your heavenly
father feeds them.  Are you not worth much more than they?

27.    "And which of you be being anxious can add a single
cubit to his life's span?

28.    "And why are you anxious about clothing?  Observe
how the lilies of the field grow; they do not toil nor do they

29.    yet I say to you that even Solomon in all his glory did
not clothe himself like one of these.

30.   "But if God so arrays the grass of the field, which is
alive today and tomorrow is thrown into the furnace, will
He not much more do so for you, O men of little faith?

31.    "Do not be anxious then, saying, 'What shall we eat?'
or 'With what shall we clothe ourselves?'

32.    "For all these things the Gentiles eagerly seek; for your
heavenly Father knows that you need all there things.

33.   "But seek first His kingdom and His righteousness;
and all these things shall be added to you.

34.   "Therefore do not be anxious for tomorrow; for
tomorrow will care for itself.  Each day has enough
trouble of its own.

Mathew 6: 25-34
The Open Bible

....the story of incentives.....

2:50 -  "...people were incentivized essentially not to see the truth
right before their eyes...."

3:55-  "...the incentives are for both parties to milk Wall Street
for massive campaign contributions....."

Gaping Void Gaping Void

To Nietzsche or not to Nietzsche....................

Faithful readers will know that this blog enjoys S. Peter Davis's
Three Minute Philosophy series.  Here is his atypical entry on
Friedrich Nietzsche. 

I will confess to being a history major who struggled with the
only philosophy course I ever took.  After watching Davis
refuse to interpret Nietzsche for me, I picked up a copy of
Beyond Good and Evil, which for some reason found its way
onto one of my bookshelves.

Nietzsche starts out Paragraph 202, in the sub-section titled
On the Natural History of Morals, this way:

     "Let us straight away say once more what we have
     already said a hundred times:  for ears today offer such
     truths- our truths- no ready welcome."

No kidding?   Later in the paragraph comes the following

      "But that the tempo of this movement is much too slow
     and somnolent for the more impatient, for the sick and
     suffering of the said instinct, is attested by the ever
     more frantic baying, the ever more undisguised fang-
     bearing of the anarchist dogs which now rove the
     streets of European culture: apparently the reverse
     of the placidly industrious democrats and revolutionary
     idealists, and even more so of the stupid philosophasters
     and brotherhood fanatics who call themselves socialists
     and want a 'free society', they are in fact at one with
     them all in their total and instinctive hostility towards
     every form of society other that that of the autonomous
     herd (to the point of repudiating even the concepts of
     'master' and 'servant'- ni dieu ni maitre says a socialist
     formula-); at one in their tenacious opposition to every
     special claim, every special right and privilege (that is
     to say, in the last resort to every right: for when every-
     one is equal no one will need any 'rights'-); at one in
     their mistrust of punitive justice (as if it were an
     assault on the weaker, and injustice against the
     necessary previous consequence of all previous society-);
     but equally at one in the religion of pity, in sympathy
     with whatever feels, lives, suffers (down as far as the
     animals, up as far as 'God'- the extravagance of 'pity
     for God' belongs in a democratic era-); at one, one
     and all, in the cry and impatience of pity, in moral
     hatred for suffering in general, in their almost
     feline incapacity to remain spectators to suffering,
     to let suffer; at one in their involuntary gloom and
     sensitivity, under whose spell Europe seems threatened
     with a new Buddhism; at one in their faith in the
     morality of mutual pity, as if it were morality in itself
     and the pinnacle, the attained pinnacle of man, the sole
     hope of the future, the consolation of the present and
     the great redemption from all the guilt of the past- as
     one, one and all, in their faith in the community as the
     savior, that is to say in the herd, in 'themselves'......."
I won't speak for anyone else, but that is enough Nietzsche
for me today.