I was speaking to a friend the other day about the market, the troubles many are in and what is to come. Long story short, Susie Orman’s interview with Oprah found its way into the conversation. Yes, Susie Orman.
In truth, I find I agree with Ms. Orman on many issues, having many months of reserves built up before purchasing a home, being disciplined about saving, etc… however her belief in…
“Keeping up with the Joneses”. She used this is the foundation for telling a girl not to spend money. I find less relevant than a stronger emotion pervading our society.
Entitlement.
We, as Americans, feel entitled to have a “good life”. We feel entitled to be able to go out to dinner when we please, buy a nice shirt, iPod, new shoes, or even have a day at the spa, relaxing and receiving a massage, whenever we please.
Getting your nails done, ladies? How about the dry cleaners, guys?
And what about homeownership even if we haven’t saved for it?
These are all things we can go without, do on our own time, or even budget into our financial schedule.
While we complain about the banks being greedy and scoff at big companies liquidity crisis, take a moment and question what expenditures have you taken for granted.
I understand this is only natural right now as we are all starting to feel the pinch, so I pose this all not to depress you even more, but to ensure you are coming back at this economy with better grounded perspective.
What actions are you living out that are based off your inherent entitlement?
Believe in your abilities to be disciplined, save money, and spend with reason rather than a sense of entitlement.
Buzzword of the week: Skirt Length Theory
“The idea that skirt lengths are a predictor of the stock market direction. According to the theory, if skirts are short, it means the markets are going up. And if skirt are long, it means the markets are heading down.
The idea behind this theory is that shorter skirts tend to appear in times when general consumer confidence and excitement is high, meaning the markets are bullish. In contrast, the theory says long skirts are worn more in times of fear and general gloom, indicating that things are bearish.
Although some investors may secretly believe in such a theory, serious analysts and investors - of examining skirt length to make investment decisions - insist on focusing on market fundamentals and data.” -Investopedia
Please note: I don’t come up with this stuff.
Six Points to Ponder:
1. The market has continued its best impression of a Six Flags “big kid” ride as recession appears unavoidable.
2. Final three weeks of the 2008 Presidential race. Obama appears to be in the lead, however much can happen when it comes to the actual polls. Bush begins packing.
3. Single family home starts at 26-yr low. Mortgage rates up on the week.
4. Citigroup loses $2.8Bn. Google, AMD, and Honeywell post profits. Intel appears strong. Oil at $70.45.
5. The government has demanded eight banks give up part ownership to ensure liquidity. They will in return infuse billions. Gordon Brown, the British Prime Minister has been the leader in dealing with the banks. 6. Our Sports Genius Lucas Herrera proven correct: The Dodgers “blow it”, down and out to the Phillies. The Rays of Greatness one win away from taking down the Old Sox.
Positives:
* Oil is down more than 50% since it’s high of $147bbl.
* Warren Buffett is licking his chops at the apparent misalignment between actual stock price and intrinsic value. Might there be opportunities? Do your research, don’t just buy stocks based off your brand preference!
* New construction slowing down, will help home values stabilize. This is basic supply and demand theory. Limit supply, maintain demand => higher prices.
* Companies are becoming smarter with their money. Google is profiting off their limited expense marketing model. You only pay if a prospective client clicks on your ad. This is far more efficient than blasting huge ads across different marketing channels hoping someone is listening.
* The banking system injection should stabilize the system. Though don’t expect an ease of getting financing anytime soon. These banks will surely pocket much of the cash and wait for a sunny day.
* Forecasted Positive: The Rays in the World Series. Crossing my fingers!
Negatives:
* The economy is slowing rapidly. The majority of Americans are fearful of what is to come. They are running away from good houses. They are holding off on making purchases in hopes of understanding better what is to come. It’s an emotional crisis just as much as an actual economic crisis.
* Mortgage rates up due to fears over a swelling budget deficit. Why does this affect rates? A greater deficit forces the Treasury to borrow heavily. To borrow heavily they will have to entice buyers with higher rates of return aka higher interest rates.
* Gordon Brown, the British Prime Minister, reminds me of the prime minister in the movie “V for Vendetta” or “Mr. Bean”. This worries me if he is the man leading the world in innovative ways for the government to help out the banking system.
Services: Santa Barbara Housing Data
I have many great resources to help you with your next home purchase. Please feel free to give me a call to find out up-to-date statistics and rates.
Current situation: South Santa Barbara County has witnessed a 15% drop in prices since its high in 2005, while the number of sales have dropped about 35%. The strong markets within South Santa Barbara County is the low end, under $1M. Condos and single family residences have come down into the price range of many.
Local:
Surf Swap Meet
Where: City College Parking Lot
When: 9am - 3pm. Saturday, October 18th.
Cost: $0
Why: Pick up some great gear at low costs. Or sell your old surf attire.
Live and Be Well,
Jeff Bochsler
