What is wrong with this Picture?

Average yearly salaries:

US Army $23,000 per year average salary

US Citizen $50,000 per year average salary

Federal Employee $74,000 per year average salary

Member of Congress $174,000 per year average salary

This week, for comparison, I will be posting salaries of the top five Hedge Fund managers, athletes, TV stars, CEO’s and movie stars.

Yesterday, the Administration has indicated that they will impose a freeze on salary increases for the next two years. Although this approach was implemented by most companies two years ago, a hiring freeze was also instituted by most firms. The federal government should also implement a hiring freeze. This move was political and a smoke screen when the spending is not over!!! The safe food legislation is under consideration by Congress in the lame duck session. Oh no, more spending.

Government spending is out of control and they want to reduce the deficit on the backs of the federal employees! Why not cut the salaries of the administration and congress. Congress should pass legislation reducing their salary to $1.00 per year for the next two years.

Current State of the Economy

GDP
Advanced Estimate for 1st quarter 2010   3.7%
Final Estimate 1st QT 2010                      2.7%

Advanced Estimate for 2nd quarter 2010 2.4%
Current Estimate 2 QT 2010                   1.7%

Advanced Estimate for 3rd quarter 2010 2.0%
Second Estimate due 11/23/10                ?        2.5%
Third Estimate due 12/22/10                   ?

3rd Qt Second Estimate higher in part because of 8.95 % increase in federal government spending. However, this is a good sign for the economy --- right?

The following are Fed predictions moving forward:

The Economy
The economy will grow only 2.4% to 2.5% in 2010 which is down from their previous forecast of 3% to 3.5%. If the second 3rd QT estimate was reportedly higher, why would the Fed seem pessimistic in their prediction?

In 2011, the Fed expects the economy will expand by 3 % to 3.6 %.
By 2013, the Fed predicts the economy will grow around 4.0%.

Unemployment
The current unemployment rate is 9.6% and the Fed expects will remain relatively constant the balance of the year.
For 2011 they expect the unemployment rate to hover around 9.0% in 2011. This is much higher than their June projection of around 8.5%.

Inflation
The Fed expects prices will rise about 1.5% in 2011. This is not a serious problem. However, if salaries do not keep pace, the 70% of the economy will be affected. However, in previous posts, I tried to make a statement that inflation will be higher than their prediction due to their actions. Only time will tell.

Housing (not a Fed prediction)
Sales of previously owned homes slipped 2.2% in October and housing is heading into a traditionally slow period – the holiday season.

Mortgage rates are slowing trending up

Home prices continue to decline but the % decrease is much slower and prices are starting to increase in some markets!

In 28 major metro areas during October, the housing supply trending lower. Primarily due to the “papergate” foreclosure problems and the banks delaying the foreclosure process.

Housing is now different ---- mortgage rates ↑ Supply of Homes ↓ Home prices ↔

Fannie Mae’s survey:
69% surveyed thought that it is a good time to buy a home
85% surveyed thought it is a bad time to sell a home.

But what happens when foreclosures are again released by the banks? Spring 2011 will be a key turning point for housing – existing and new construction. After the holiday season, the Super Bowl and the “spending season” are over and we enter spring optimism, what will the housing picture look like?

I try to outline thoughts and published data/information for you to judge for yourself. Prepare for the worst and hope for the best!

Holiday Weekend!

Happy Thanksgiving!


Invest in others this holiday weekend. Have a safe and Happy Thanksgiving.
Back on Monday - if I survive black Friday!

The Time to Sell is Now!

Trying to sell a home elsewhere in order to come to the Carolina’s? That has always presented a challenge for people who want to relocate – even more so today with current market conditions and mortgages sometimes presenting challenges too. One thing is for certain however, and that is that there has never been a more compelling time to go ahead and sell that home.

1. Interest rates are at an all time low.
2. Inventories of properties have never been higher.
3. New construction starts are at an all time low.
4. Shadow inventory of properties foreclosed or short sales are on the upswing offering great opportunities.
5. The Carolinas are not affected with seasonal swings.

Unload now, even if it means accepting pain. It will allow you to reduce carrying costs; reduce repair and maintenance worries; and get a great deal on the swing in your new location.

It’s not always an easy decision, but if you consider the facts, in most instances you’ll find the decision can be anxiety and drama free allowing you and your family to get settled in your new home in the Carolinas much quicker!



Winterize Your Home Now

Here are some main points on winterizing your home:

• Prepare your fireplace by inspecting the damper, storing chopped firewood away from your home, and removing soot and creosote.

• Call an HVAC professional to inspect and clean your furnace. The best piece of advice I can give you is to turn the furnace on and have it inspected before the coldest winter months. The last thing you want is to have a faulty furnace when the temperature starts to plummet.

• Inspect your doors and windows for cracks and exposures. According to EarthWorks Group, the average American home has leaks that amount to a nine-square-foot hole in the wall…that’s a lot of cold air coming into your home during those winter months!

• Clean out gutters and prevent the formation of potential ice dams by removing any debris. Ice dams result in water backing up and freezing in your gutters which can then cause water to seep into your house.

• Drain air conditioner pipes and shut off the AC water valve. If you’ve never experienced a burst pipe during a winter freeze now would not be the time to start. Shutting off the AC water valve and making sure the pipes are drained will save you from many unnecessary headaches this winter.

• If you leave on vacation, leave the heat on at least 55 degrees.

• Prepare an emergency kit of candles, batteries, non-perishable food items, first aid, matches/lighters, and water.

Taking these few steps before the winter weather moves in will help your protect your home and prevent future damage.

Undergraduate courses on Land Development

At North Carolina University Charlotte, the Civil and Environmental Engineering Department Chair, Dr. David Young, David Naylor and I created a five course land development concentration for the students. The concentration includes Sustainable Design and Stormwater Management and I had the opportunity to create three of the five courses:

Land Development I – this course is an overview of the real estate development industry, the role of the land development engineer and the interconnection of infrastructure elements. This course includes hands-on class exercises including the art of contouring. Students are required to make presentations.

Land Development Design – Uses a base plan with boundary, topography and lot layout to prepare infrastructure designs for roadways, storm drainage, SWM, water and sewer facilities. Students use AutoCad extensively to prepare designs.

Land Development Studio - This course is designed for civil engineering students to “think outside of the box”. There are three main elements. They prepare a single family lot subdivision, a multifamily site plan and a large-scale property land use plan. They will also have in-class exercises preparing a commercial site plan and a mixed use plan. They are required to present their plan in a “mock” Planning Board environment.

UNCC registration started on Monday of this past week. The Land Development Studio class closed within 2-days with 20 undergraduates and 3 graduate students registering for the class. I am looking forward to teaching this class again next semester. The land development concentration program for civil engineering students has been embraced by the students and supported by the Department. This is the first undergraduate civil engineering land development concentration in the nation!!

Inflation or Deflation or Stagflation?

My Summary:
If the economy is based on 70% consumer spending and the bulk of the balance is our national debt - - -

What are the motivating factors for anyone to buy --- ANYTHING?

From Wikipedia, the free encyclopedia
One remedy to a liquidity trap is expanding the money supply via quantitative easing or other techniques in which money is effectively printed to purchase assets, thereby creating inflationary expectations that cause savers to begin spending again. Government stimulus spending and mercantilist policies to stimulate exports and reduce imports are other techniques to stimulate demand

Government is causing inflation to encourage us to spend money?

Without a question, as prices rise and interest rates trend up, people that HAVE TO BUY will purchase. For housing, many will stay where they are due to job insecurity and the lack of confidence in the economy.

Interest rates have never been so low and this has NOT jump started the economy and housing continues to slump.

In the Jimmy Carter days of stagflation, we purchased a home with an 18% interest rate. I was working for a large regional builder/developer and in charge of our housing product design and projects.

We used the phrase “nice but not necessary” in selecting products and features.

Every element of the house was questioned as we achieved a price point that generated sales. Of course the housing market today is much different with foreclosures and short sales. The company survived to build another day because government changed under the leadership of Ronald Reagan.

I really thought the housing market would turn around in late 2011. I am not sure this will happen. By definition the recession ended in 2009. In reality, we are in an inflationary, deflationary and stagflationary period of time. This is an unparalleled circumstance in our history.

I have to reach back to my previous recession days to regenerate solutions that carried the day. As an example:

1. Instead of a compelling price ---- start using the phrase “over whelming” price to generate a sale. Watch what the retailers do this holiday season.

More to come in future posts…….

Inflation – Deflation – Stagflation?

Not being an economist and certainly not following any of the economic “experts”, I wanted to provide information on inflation, deflation and stagflation. It seems by reading the pure definitions that we continue to have mixed signals from government and various interpretations from the experts. Remember, the experts predict and then proven right or wrong several months later after data is compiled for verification.

Here is my take on the economic cycle and where we are headed:

Inflation – the information and data would indicate inflation is on the rise. It seems logical to me that inflation would increase after a long period of low inflation. It is the economic cycle. How high will inflationary pressures go and will we experience hyperinflation is the question.

As an example: flat screen TV’s. There is an oversupply if you believe the media and prices will come down sharply for the holidays. Will you buy a new flat screen TV or will you say “nice but not necessary”?


Deflation - from Wikipedia, the free encyclopedia

“A deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price”

Doesn’t this definition represent our housing market? Housing prices continue to drop although less drastic than previous months. The market will be flooded again with foreclosures after the banks work through their own “papergate”.


Stagflation - From Wikipedia, the free encyclopedia

“In economics, stagflation is the situation when both the inflation rate and the unemployment rate are high.”

Inflation is here.
Unemployment remains high at 9.6%. Although I do not track unemployment benefits, I am sure there will be a point in time when the 99 weeks of unemployment benefits run out. And, will those receiving the benefits all of sudden have a job?

Tomorrow’s post will be my summary and predictions (for what it is worth!!)

Stagflation

From Wikipedia, the free encyclopedia

“In economics, stagflation is the situation when both the inflation rate and the unemployment rate are high. It is a difficult economic condition for a country, because then inflation and economic stagnation are occurring simultaneously, and until recently no macroeconomic policy had predicted this occurrence.


Economists offer two principal explanations for why stagflation occurs. First, stagflation can result when the productive capacity of an economy is reduced by an unfavorable supply shock, such as an increase in the price of oil for an oil importing country. Such an unfavorable supply shock tends to raise prices at the same time that it slows the economy by making production more costly and less profitable. This type of stagflation presents a policy dilemma because actions that are meant to assist with fighting inflation might worsen economic stagnation and vice versa.


Second, both stagnation and inflation can result from inappropriate macroeconomic policies. For example, central banks can cause inflation by permitting excessive growth of the money supply, and the government can cause stagnation by excessive regulation of goods markets and labor markets, either of these factors can cause stagflation. Excessive growth of the money supply taken to such an extreme that it must be reversed abruptly can clearly be a cause. Both types of explanations are offered in analyses of the global stagflation of the 1970s: it began with a huge rise in oil prices, but then continued as central banks used excessively stimulative monetary policy to counteract the resulting recession, causing a runaway wage-price spiral.”

Inflation & Deflation

The following definitions are from Wikipedia. Tomorrow, I will post information on stagflation.

Inflation
From Wikipedia, the free encyclopedia

Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply. Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities, as well as to growth in the money supply. However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.

Deflation
From Wikipedia, the free encyclopedia

In recent times, as loan terms have grown in length and loan financing (or leveraging) is common among many types of investments, the costs of deflation to borrowers have grown larger. Deflation discourages investment and spending, because there is no reason to risk on future profits when the expectation of profits may be negative and the expectation of future prices is lower. Consequently deflation generally leads to, or is associated with a collapse in aggregate demand. Without the "hidden risk of inflation", it may become more prudent just to hold on to money, and not to spend or invest it.


A deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price. Since reductions in general price level are called deflation, a deflationary spiral is when reductions in price lead to a vicious circle, where a problem exacerbates its own cause.

Seasonal FuturesCharts.com provided the following graphs.

                                                                                                                  SUGAR 

                              COFFEE

For Your Review

Real Life Case Study on Health Care Reform

BlueCross BlueShield of NC is raising our health insurance premium by 26%!!

When we asked why and wanted to change some of the provisions of our plan, we were provided with the following explanation:

“If you like your health plan, you can keep it” --- we were told this on many occasions.

The Affordable Care Act of 2010 included a “grandfathering’ clause. Has nothing to do with age but allows you to keep your current plan and be exempt from SOME of the new health care provisions.

It is clear to me that the new health care provisions as outlined by BlueCross BlueShield will increase costs but a “grandfathered” plan will be exempt as the new provisions are phased in from 2010 – 2014.

If you change your health care plan in any of following ways, your plan will no longer be protected under the “grandfather” status:

• Elimination of benefits to diagnose or treat a particular condition
• Any increase in cost-sharing percentage requirements --- coinsurance
• Increase in fixed-amount cost-sharing requirements (deductibles, out-of-pocket limits or copayments)
• Employer contributions reduced by more than 5%
• Any decrease in the dollar amount of the overall annual limit

BlueCross BlueShield cites the Administration as predicting that by 2013, only 55% of large employers and 34% of small employers will maintain grandfathered plans. As a sole proprietor, we must evaluate the monthly cost, “grandfather” provisions, and health status while GUESSING what Congress will do about the new health care legislation.

  

Reality: Current monthly cost of $681 will increase to next year’s rate of $858.

  

We want to increase our deductible to lower the monthly cost but this will result in a loss of the “grandfather” status which will result in an increase of health care costs. It seems to me the health care reform law, at least for my family, only increases my monthly cost without an improvement in health care.

Oh by the way, what about your health care plans?

Inflation is Already Here!

Posted Nov 7th 2010 11:10AM by Connie Madon at BloggingStocks

www.bloggingstocks.com/bloggers/connie-madon

“Bernanke claims that inflation is below the Fed's 2% target. That's hogwash! Sure if you use the "core" CPI, which leaves out food and energy, that may be the case. Not to worry.”

“But tons of inflation have already been created. Look at these commodity prices and say there's no inflation:

• Gold is at an all-time high, with the December futures at $1,397.70 per ounce.

• Silver is at a 30-year high, with December futures at $26.748 per ounce.

• The December U.S. dollar futures are at 76.69, down from 89.11.

• Cotton is at an all-time high. Price increases are being passed on to consumers.

• Sugar is at a 30-year high. Soon there will be price increases in sugar products.

• Oil is trading at $86.65 per barrel, pushing $90.

• Gasoline is already $3.00 per gallon, with $4.00 gasoline on the way.

• The grain markets are exploding. December wheat is at $7.28 per bushel, corn is at $5.87 per bushel and soybeans are at $12.84 per bushel. “

In my opinion, inflation is here and will continue. Will the Fed be able to manage inflation or will it be runaway inflation? Are you prepared?

As an example:            How would $5.00/gal gas change your daily life?

I-10 in LA (Sept 2010)

Relocation Stats

2010 relocation statistics are indicative of the lack of jobs and the inability of job seekers to sell their homes. I find the statistics very interesting. From 2001 - 2009, the annual average percentage of job seekers relocating is significantly different from the previous two decades. In 1986 and 1993, the spike in percentage most likely is a result of coming out of recessions. Should we expect a similar spike in relocation's once jobs return? The question is, however, will jobs return before housing prices recover? My guess is YES. Also, if we experience an increase in inflation --- which includes gas prices, where jobs are located will become an important issue for job seekers.

The Federal Reserve & Inflation

$600,000,000,000 - just a small accounting error on my part!!

Will this be enough to trigger inflation? Prepare for the worst and hope for the best.

The Small Business Jobs Act Signed

The recently signed legislation is intended to provide more funding for small businesses and cut their taxes. $30 billion dollars has been allocated for small business loans.

I applied for an SBA loan in 2000 as a sole proprietor and obtained funds to buy an office and equipment. It worked and it is time to try again!

In the bill, there are provisions which may be of benefit to your business. Deductions will be treated differently and tax credit provisions may also help you.

The new law also allows cell phones to be expensed at their full cost if certain conditions are met.

Setting up your business takes money. This new law allows start-up expenses to be deducted up to $10,000. These provisions are a positive change but will it make a difference if a sole proprietor has to compete with a newly defined small business?

Election Results

I am not one to predict and regardless of our opinions on the election outcome, how will the federal government now govern for “We the People”?

Repeal, amend, veto and gridlock OR

Working to create jobs and getting our economy back on track. The new Congress starts in January 2011 and based on the process, we will not see immediate significant changes and results will lag --- perhaps by the third or fourth quarter, 2011, we will see positive movement in the economy. I will continue to watch and report housing trends.

As housing goes so goes the economy.

ELECTION DAY

Isn’t our election day becoming more like American Idol every year? Some people now have a certain amount of time to vote as many times as they can!

Did you VOTE today?

GOOD LUCK AMERICA!

The Economy

GDP

2nd quarter 2009           -0.7%

3rd quarter 2009             2.2%

4th quarter 2009              5.6%

Advanced Estimate for 1st quarter 2010            3.7%

Final Estimate  1 QT 2010                                2.7%

Advanced Estimate for 2nd quarter 2010                       2.4%

Current Estimate    2 QT 2010                                      1.7%

Advanced Estimate for 3rd quarter 2010                             2.0%

Second Estimate due 11/23/10                                                   ?

Third Estimate due 12/22/10                                                      ?

I look at trends and it seems that from the advanced GDP estimates to the final estimate, the estimate of growth rate decreases as more data becomes available. Also notice that the advanced estimate also seems to be on a downward trend.

I will post the third quarter data in Nov and Dec.