Herman School of Business
Red Sox Rally
Remember when the Boston Red Sox were down three games to one against the Yankees just a few years ago. All seemed hopeless and yet they pulled off a miracle some say was the greatest comeback in sports history. Others went another way. They say the Yankees had the greatest choke in sports history. It’s all in how you look at it isn’t it.
The economy is now stumbling…or is it? Housing prices are collapsing. Or are they just readjusting to what they should be now that the false loans will not be around to drive up prices? Keep this in mind if you want to invest in real estate. While you will be getting a bargain compared to what the last buyer paid for a place…my contention is that you are only paying what you should because of fair market lending. That means don’t think “flipping houses” is coming back anytime soon. If you are going to buy a bargain, make sure you can wait long enough before you expect to make a profit.
Service businesses need to be alert. My service business made millions when loans collapsed, because I was on the side of the equation where money had to be made because people had to sell assets to convert them into cash regardless of the price they got…and I always was being paid a portion of recovered funds, regardless of how much sellers were losing. If your service business is necessary in hard economic times, then you are about to make hay while the sun shines, the sun in this case being a rainy, cloudy, dark brooding economy. But if your service business comes from discretionary income you can forget it. Think like this…people will drink their troubles away but they won’t run to a tanning salon for a feel good orange glow. Booze beats artificial sun in this case.
If you are selling luxury condos, or expensive time shares, or high end automobiles right now, just remember your history. A few years ago the government decided to put a luxury tax on boats. It killed the boat building industry, because people could keep their old boat rather than pay an exorbitant price for a new one topped off by a major punishment tax. People can’t buy things they don’t need unless one of two things are in place…either they are rich and don’t know the economy is in trouble…or the poor klutz buyer has so much credit available to him that he thinks he is rich because every time he slides that little piece of plastic through the machine…they keep giving the poor shmo more stuff.
Belt tightening is here to stay for awhile. Bankers hate it as much as you do, because they like booking major profits on high interest loans. See, the bankers don’t get it either. They still haven’t faced the consequences of their actions and realized that giving money to people who can’t pay it back is not booking profits but creating losses. And they ran out of money to keep giving it away on credit. And now they scream for the government to do something about the problem so they can get back to making more bad loans. So, don’t worry that these realistic dark economy clouds will stay forever, because someone in Washington is already printing checks to give everyone, even though the country is creating debt we can’t pay…and another guy in Washington is going to keep cutting interest rates to bankers to give them more money to give away…so this time next year we will all be claiming that the American economy is booming again…but I bet it will mean people are going deeper in debt to make that happen.
- Posted: 29 January 2008
- Comments: 0
- Category: Business failure
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