Tuesday, March 8, 2011

Keep your eye on the big picture

I hated hearing that in the military.  The "big picture" was talked about alot in the military.  And no one ever seemed to see it, or so it seemed.  It was code for "you don't know what I know, and that's why I'm here and you're there".  It was code for "you are ignorant."

Luckily, those days are history.  Today though, I find myself using that phrase as a way of describing where we're headed in this horrible economy.  People are too focused on where we are at today, and not where we are going tomorrow.  Where we are going is what will ultimately make, or cost you money.  Being able to recognize where we are going tomorrow, and how the herd will react to that when it starts happening can allow you to profit big time.




While everyone is arguing about what to do to fix our economy, take comfort in the fact there are people with a lot of money at stake working hard on fixing our economy.  Also keep in mind that small fish like you and I have absolutely no control over the economy, even as votors.  So instead of worrying about what will or what wont fix things, we would be much better served using that time and effort to determine what will be done, and how we can profit from it.

Don't let the corporationsists scare you.  That's a tactic they use to control us, and manipulate us into giving them more power.  Things aren't as bad as they seem.  We've been through hard times before, and we'll see hard times again.  Remember what has always followed bad times in the past:  Good times!

Everyone is pissing and moaning about the economy, and they risk missing the boat entirely.  We are on the cusp of another terrific economic boom.  I know it doesn't feel like it...  yet....  But that is exactly the time to take advantage of it.  Before the herd begins to move.

Just look at this timeline of economic growth in America since 1929.  Every economic recession is followed by a period of economic expansion.  Just in my lifetime, the stagnation and fuel shortages of the '70s were followed by the "Regan years" that many consider a great time of prosperity.  The end of that decade brought a recession and the "Savings and Loan Scandal."  That was followed by a period of huge growth and profits we call "The Internet Boom" or "Internet Bubble."  When that bubble burst, we had a terrible recession that was followed by a period of expansion many called "The Housing Bubble."  I remember driving by homes in 1995 that were half built, and left standing unfinished for years...  I remember wondering how we could have allowed the economy to crumble like that and wondering if the economy would ever recover....  Then I watched as people swept in, bought those properties for almost nothing, finished the construction and sold them for tremendous profit when the market recovered.  Not only did it recover, it soared to heights never before seen in our country.  That's what the economy does.  Up and down over on a micro view, but on the macro view, our economy has continually moved higher and higher.  There's no reason to believe that pattern is going to change.  Only two things are absolutely certain in our economy...

1.  The economy will go up

2.  The economy will go down.

The trick is to time it right.  When the herd is buying, you want to be selling.  When the herd is selling, you want to be buying.

So what does that mean for us in this economy?  There are many sectors you can profit in during the impending period of economic expansion.  My favorite is real estate.  Many people are really sour on real estate because they made (or saw others make) really stupid mistakes and got burned.  Remember what Jim Cramer says...  "Bulls make money, pigs get slaughtered."  The pigs really got slaughtered bad in this recession.  That creates tremendous opportunity for us to profit.

There is little doubt the economy is recovering...  How will that affect real estate?

Housing Trends - Lets remember, during the last period of expansion, many apartments were converted to condos and are now owner occupied...  And there is very little money available for new construction of apartments, so we're not building many.  With that in mind, consider the affects of the recession on homeowners and renters.  Many home owners over purchased, or used the wrong financial vehicle to purchase, and have either lost their homes, or are preparing to lose their homes.  That means they'll be renters now.

Impact of recession on renters - In addition, the recession caused many people to lose their jobs.  So many people are unemployed right now.  Even more are under employed.  That has caused many people to condense their living arrangements.  Many people have moved in with family members to reduce their living expenses.  When their financial situations improve as the economy recovers, they are going to spread out.  That means there will be more renters.

Population growth - On July 1, 2008, the population estimate for California was 38,148,000.  In 2010, the population was estimated to be around 38,965,000.  Substantial growth, in spite of the recession and the contracting housing market.  What does that tell us?  It confirms my previous statement that people have condensed their housing arrangements.  When the population rate increases as vacancy rates and foreclosures are on the rise, the only explanation is higher density living.  But it gets even better:  By July 2013, we're expected to grow to more than 40,000,000 people. Considering that's only two years away, and we're not seeing much of an increase in home or apartment construction, what will that mean?  Extremely low vacancy rates, extremely high rent rates.  That's what it means.  By 2013, it'll be extremely difficult to find a place to rent, and when you do, it'll be more expensive than it's ever been.  In other words, you want to own rental property.

Even though, in my opinion, it's the best, real estate is not the only sector where you can make money.  If the stock market interests you, wireless technology is probably the sector that will provide much of the near future growth in the stock market.  Nucor is a steel company that obtains much of its raw material by recycling and re-using steel.  Focused on energy efficiency, very little is wasted, and they are planning to build a co-generation power plant for even more energy efficiency.  Alternative energy production is eventually going to earn huge profits for the forward thinking investor.  Over the next 10 years or so, bio-fuels are going to replace diesel fuels for large trucks, buses, and trains.  There is a huge opportunity to get in early on this transition and profit from it.

No matter how you take advantage of this recession, the point is that you must do it.  Don't get bogged down by the scare tactics of politicans (especially the GOP).  Our country isn't going away.  Our economy is going to do what it's always done.  Up and down over the short term, up and up over the long term.  The only question is will you take advantage of it?

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