What the housing experts are missing that Warren Buffet sees

Watch the following video. See if you can spot the trend. I’ll give you a hint; it is almost at the very end, but you have to watch the whole thing to pick up on it.

Did you hear it? If not, watch the video again.

Warren Buffet is investing in COMMERCIAL INVESTMENT stuff, the banks that lend money to commercial leasing companies. But these commercial leasing companies aren’t leasing traditional commercial space. They are leasing to commercial property holders that are buying up the inventory of foreclosed properties, fixing them up like flips but instead of flipping for resale, they are flipping for longer-term leases to people who have kids and have grown used to the suburban lifestyle.

These commercial leasing companies are creating suburban slums in the first and second outer suburban rings to city centers.

Watch the video again. Did you catch it? Do you now understand why these pompous “experts” never quite see trends coming? I’ll give you more than a hint on that; I’ll give you the answer.

They are too enamored with the sound of their own voice to listen to what they’re saying.

This is why Congress has no interest in helping out those going through foreclosure. If they intervened, it would slow or stop the flow of inventories into the private residential leasing industry.

The real estate market is heating up and recovering; it’s just not flowing wealth into the middle class but rather, pushing more wealth into the upper classes and corporate coffers. Corporations have found a way to skim off the wealth that even a massive recession creates.

Give me another ten years and see if I’m right. I’ll bet you $10,000 I am.

What does it mean to own something?

I passed this sign on the way through the Village of North Clayton on our way to the “dog park” yesterday and it made me pause. Firstly, because it wasn’t there yesterday so that probably means the economy is starting to move (we’ll lose our dogpark when it does) but also, because the lot is in one of those “planned villages.”

The dirty little secret about these planned villages is when someone buys a lot and builds a building, the developer still owns the property. The structure is on private property even though it looks like a public street. No First Amendment protections, endless association fees and in this case, every business not only pays rent, but a percentage of its sales.

In dog-speak, owning something now means a leash.

Listen to the groundhog

Punxsutawney Phil being yanked from his comfy home by people who can't wait to know the future.
Punxsutawney Phil being yanked from his comfy home by people who can't wait to know the future.
I love Groundhog’s Day. It is a silly holiday that you can just hype up and people giggle at.

When reading a post from Chris Brogan today, along with my Wall Street Journal, The Waterboy and a healthy dose of Morning Joe, I’ve come to a conclusion about this economic mess. The economy prognosticators have it all right. And all wrong.

Here is why Punxsutawney Phil — that famous groundhog — is relevant to what is going on with this economy prognosticators right now and what we can take away from him. If Phil sees his shadow, gets scared and scurries back to his burrow, there are six, long weeks of Winter left. If he doesn’t see his shadow, there are only six weeks left of Winter. Yeah!

We can learn a lot from this annual holiday in Punxsutawney, PA, but accurately predicting the future is not one of them. The “Inner Circle” of Punxsutawney have figured out how to get thousands of people to visit their little town in a very cold part of the country in the dead of Winter and all the news media talking about them for a whole daily news cycle. They created a legend of a groundhog, dress up in top hats, hold this grand ceremony and declare the future of Old Man Winter!

That is all these economy pundits are doing. Nobody knows the future. The quality of the remaining six weeks of winter is not a function of a skittish groundhog or a proclamation made by a fraud in a top hat, but by the decisions you make with that time. Will you hibernate and wait out winter or go out and play with the snowflakes? The choice is yours. Choose wisely.

As I mentioned in my comment to Chris Brogan’s post:

My take on all this future stuff, however, is to look at future films of the past — even as recent as the 1980s. Nobody got the 16:9 television. Even when screens were larger, wall-sized, the 4:3 format still reigned.

For the astute reader, you may have seen the mention for the movie The Waterboy in my opening paragraph. At one point in the movie, (toward the end, you have to watch the whole thing) Coach Klein envisions his nemesis Coach Beaulieu with the head of a cute puppy, is no longer scared of him and adopts a new-found self-esteem.

The next time you watch Joe, Pat and all these other prognosticators on television predicting gloom and doom, envision them with the head of a groundhog.

Then, go make your own future. It will happen whether you wait it out or not.

How this financial disaster is like Catholicism

The Papal Seal of the Roman Catholic Church
The Papal Seal of the Roman Catholic Church
I grew up Catholic.

One of the things you learn very early on is this earthly life is a test of your faith for a reward of either heaven and eternal life or hell and eternal damnation. Life here is supposed to be hard, we are supposed to feel pain because these trials are what helps God determine what kind of person who are and what our reward should be. Yes, I know I am grossly over-simplifying this and I have a large contingent of theologian friends with whom I can argue all day long, so if you don’t agree, please just take that on face value. It will help the analogy move along much quicker.

So you go to Church every Sunday, you help the poor, you don’t commit mortal sins, you do all the things that make you a good Catholic and that in turn will make you a good person. Now, here is where faith wears thin. As you get older, temptations become stronger, specifically, wine, women and song. These things are really, really fun and they make the promise of heaven or hell — while eternal — not believable.

If there is no heaven or hell, if this life is all there is, you sure will have wasted a whole lot of good fun. But, if there is a heaven and hell, and you succumbed to the sins of the flesh, you are in deep do-do.

Moving over to your secular life, as a good citizen, you do good things as well. You live within your means by not buying a house you can’t afford, save money in a retirement plan, don’t put a 58″ plasma TV on a credit card at 28% interest, don’t buy a cherry red Hummer which is really, really yummy looking…. oh, you’re still there… forgive me reader, for I have sinned….

If you are living within your means (good Catholic) and all your neighbors who went out and got drunk on over-priced homes, televisions, cars and stocks get bailed out by the Federal Government (God) what was the point of you living within your means? What if you living within your means actually means that your house is now worth 70% of what it was, you have to spend down your savings because you lose your job and you have no TV to watch to wile away your days of unemployment? Does a great FICO score get you into heaven or is it a worthless ticket?

Are the fiscally responsible who have not been living the high-life of comfort and excess going to now be forced to live with even less because of the sins of their neighbors? Doesn’t God just punish the sinners? How is this fair?

Well it isn’t and it makes one question the value of being a “good citizen.” If I knew with absolute certainty that there is no God, no heaven and no hell, I would be having more fun in this earthly life. I would be sinning and I would care less about the other puppies on this planet. After all, this would be the only go-around I would get and to not grab all I can out of the deal would just be silly.

If I knew with absolute certainty that no matter how fiscally irresponsible I was that eventually the Federal Government would bail me out, that they would force my bank to give me a better interest rate and that I could get a new Hummer every year and a big screen TV for every room of my house, I would not care about excessive credit card debt or paying any part of the principle on my home loan. Saving for a rainy day would be just silly.

But, I am not a gambler and the odds of there actually being a God are a little higher than there not being a God. At any rate, the possibility of spending an eternity frying my tail off just doesn’t sound all that much fun. Why risk it. And, being Catholic, I can always go to confession after sinning (don’t tell God about the loophole.)

I believe that the lack of mental anxiety that comes with living within your means is worth it. Like the Vatican, I don’t believe the government cares about me personally other than I behave myself and don’t make too many waves. By keeping me in a house, family and self-inflicted poverty, they is accomplishing their goal.

I will come out of this recession more intact than my drunken neighbors. I just hope the government can figure out a way to reward the responsible citizen while also making the sinners pay.

But I know our government also believes there is a God and they are leaving the sorting of the sinners to him (or her.) That vote is just way, way too risky and there are no confessionals in Congress.

Put the smart guys in charge, please

Susan Suess Kennedy wrote an article recently for the Huffington Post examining why Americans have such a disdain for smart people. A popular terms among the non-intellectuals and shallow thinkers is “elistism.” The undereducated white guys chant this, along with “drill baby, drill” (which I don’t really get as a mantra, but ok..) Here’s the puppy take on all this.

Way back in the good ol’ days of air travel (pre-1996 or thereabouts) getting on a plane was something that you did because you had really important business. You knew the rules (or got to know the rules quickly) ticket prices were high, but so was the expectation of flyer sophistication and service from the airlines.

At some point, the airlines thought it was a good idea to let anyone fly. They deserved to fly to see grandma, visit the new baby, etc. Ticket prices plummeted and the airports were suddenly overrun by people who really didn’t have a clue where they were going, what they were doing and had expectations of service that was far in excess of the price they paid for their ticket. The airline employees suddenly felt like a “babysitter” when they were hired as a trained air traffic professional. Things got surly and the service and profits plummeted straight to the bottom. In addition, the airlines and airports were so overrun with volume that it was easy for nineteen people to slip into planes on 9/11.

The same thing happened with the housing market. Days were the only people who were allowed to buy a home were those who could actually afford it. They saved their money, they worked hard and smart and they had at least 5%-10% down on a home. They bought a home that might have been a little lived-in, was probably too small and in an area that was not exactly their first choice. And buying that first home was tough as bankers made you sweat the details of employment history, credit history and cash. The money was real and it was hard-earned.

Then, along came a generation of people who deserved to be in a home, regardless of their credit history or income. The question was not whether or not it made sense to buy a home; the question was how do we bend the rules to get you in a home. And so we put a lot of people in houses that they did not work for, they couldn’t afford to buy and more importantly, couldn’t afford to maintain. In addition, we sent a message to all the home owners who did work hard for their homes that their work was just not that valuable. And now, as these $0-down, sub-prime folks are abandoning their homes in record numbers, they are kicking more dirt into the faces of the hard-working folks in the form of lower home values, higher property taxes and an economy in shambles.

The same thing happened with a college education. A time was only the really smart people who tested high on the ACT or SAT, had a solid GPA and could write a coherent paper got accepted into college. Paying for it was another matter, but if you were really smart, you either found a way or were given a way.

Now, colleges are more interested in being in the food service and housing businesses than the business of education. Most colleges will take any student who applies, but require they stay in student housing for their freshman and sophomore years. Their cafeterias are now stocked with branded food items from Chik Fil A, Burger King, KFC, etc. in addition to gourmet lunches and dinners. The dorms are lavish apartments starting at $3,000+ a semester, per student, sleeping four per unit. And every student there believes they deserve a college degree, regardless of how hard they work or the quality of their work.

And we get to the US Elections. On the one side, we have someone who is really smart and is a deep thinker. On the other side, we have a candidate who shoots from the hip, deserves to be President because he served his country for decades and it is “his turn.” Moreover, he has paired up with an “average hockey mom” and journalism major who doesn’t read newspapers, speaks plainly but incoherently and identifies well with the Bubba vote who is able to fly to Vegas for less than $100, lives in a house he can’t really afford, went to a college where he majored in drinking and works at a job for a company that really doesn’t produce anything of value. But, by God, she deserves to be VP!

Despite her dreadful interview performances with Charlie Rose and Katie Couric, Palin could win the debates tomorrow because she appeals to a growing audience that has become dumber and dumber, but more deserving. We have abdicated our need to know facts for sound bytes and slogans to chant. “Drill, baby, drill!”, “U-S-A, U-S-A” and statements like “We are all Georgians”, “Make the Wall Street fat-cats pay” and the oft-used “Main Street vs Wall Street.” We don’t know what these mean, we don’t really examine why they have meaning or even if they do, but they have a nice cadence and chanting them in a large crowd makes us feel a part of something.

We need smart people to start leading this country. We need to quit giving the masses what they want because they feel they “deserve” it. We don’t really have to look very far to see what happens to industries that succumb to the pressures of market expansion at any cost. Eventually, the industry dives to the bottom and crashes. Air travel, housing, education, credit cards, and soon to be the executive branch of the United States.

The office of President and Vice-president of the United States of America should be the hardest job to get in this country. The people who eventually get elected to fill these top jobs should be the best and the brightest, not the ones who can drink beer best with us or who can shoot a moose the best. We need to advance the country forward, technologically, politically, ethically and societally for the next generation of the best and the brightest, not drive the standards down to allow more people to participate. To borrow a phrase from TheLadders.com, if everybody plays, nobody wins.

It’s time to make being smart a thing of value again. We don’t need presidential and vice-presidential candidates mocking community participation, academic accomplishment, reasoned arguments and hard work as elitism. We need leaders who appreciate the value of human smarts and recognize that there is more power in a pen than a sword. Human smarts is the ultimate infrastructure of any society. When that is damaged and devalued, the society will eventually crumble, united or not.

After-post: If you have a chance and have read this far, perhaps you will read one more article by Kathleen Parker of the Washington Post Writer’s Group.

And this says more of the same, but a far better post than mine. Thank you, Deanie Mills.

Seriously, Mr. President…

Yesterday, I got a letter from Montgomery County in Ohio that my home has been appraised for an additional $10,000 over last year. Seriously???

From Bush’s speech last night:

I also understand the frustration of responsible Americans who pay their mortgages on time, file their tax returns every April 15th, and are reluctant to pay the cost of excesses on Wall Street.

Do you really? Do you know what it is like to KNOW your house is actually worth $30,000 less than it was last year because of what you can sell it for and knowing deep in your heart that you probably can’t sell it at any price because there are no qualified buyers in the highest foreclosure rate county in Ohio? Yet, the county increases the appraisal value because that is how it makes money. It is a constant, vicious cycle that you probably have never known and never will.

Please quit talking, Mr. President. Please, just quit talking.

Saying hi

A whole month goes by, 92 walks later and Rufus has not posted up anything on his blog… that is not to say lots isn’t happening, but no time to write it down… argh..

It is raining today. Rained yesterday night and Rufus is pouting. He is sleeping on the carpet piece on the kitchen floor because Christian stole his futon mattress for his student housing…. not liking the rain…

If you have a Facebook account, be sure to join the group Rufus.