Monday, February 2, 2015

If you believe in Government Statistics – Where do we go from here?


I don’t believe the statistics put together by federal government employees but it is however the only way to judge the nation’s economy as a whole. Over the years the baseline for each statistic has changed since they change the parameters, criteria or definitions

We do however know of our own economic turmoil and that felt by our sphere of influence.
We really don’t need statistics to tell us that we are in a national downward spiral only to get worse. But the media and statistics are telling us a positive economic story – so who is correct?

I understand why you might not buy into my theories after all it is only me and like-minded people against the IRS, BLS, EPA, DOJ, HUD, Administration, Congress, main stream media and 24-hour cable news.

Is the economy getting better for you? I pray that it is but for most of us – not so much.
Can we not reach out to those in need or have we lost our own hearts and souls along the way?

Regardless of your circumstance, let’s consider the nation as a whole and review some statistics. Bureau of Labor Statistics is the source for most of the data. You have to draw your own conclusions based on your own research but comparing current data to 1980 should open your eyes!!

For ease of reference, in the late ‘70’s and early ‘80’s we had a deep recession; the worst since the Depression until now! The early 80’s was a devastating period of time for housing and is in stark comparison to now except for a few key stats.

                                                                      1980            2010           2012           2014


Employment to population Ratio           60%                  58.5% (3/10)         58.5% (3/12)     59.2% (12/14)

Calculation of the Ratio:                                                Labor Force Employed  /  Total Population

1980 Population                                             230,176,000
Employed                                                     138,000,000

2014 Population                                                                                                                        325,127,000
Employed                                                                                                                                 192,000,000

This is a half full or half empty conversation. The problem is that there are about 100,000,000 more Americans in 2014 than in 1980. Of this population increase, only 50% are employed.

More importantly, the 1980 statistics represent a deep recession and in 2014 we are 6-years into the “recovery”.


Median Income                                       $17,710                 $53,469    $52,117          $52,250 (2013)

2014 median income data will be released in September 2015

4th quarter 2005 median weekly earning $658

4th quarter 2014 median weekly earning $796

The spin – Median income has increased over 20% since 2005.
The reality – WHEN is the last time you received a raise? Income has remained flat over the past 6-years.


National Debt                                              32.5%          87.1% (1/10)          99.4% (6/12)        101.5% (12/14)
as Percentage of GDP     

USA debt OVER                                   $17,000,000,000,000

World population                                             7,000,000,000

If every human on the face of the planet contributed $2,400 to pay off our debt, we could start over! However, the world median income is less than $2,000 PER YEAR!

Reality – are your credit cards charged to the maximum? What do YOU do? (a) add another credit card to your wallet and start buying more stuff OR (b) start paying off your credit balances

In most cases, the interest rate for a credit card stays constant but extremely high.
For the nation’s debt the interest rate can change – what will happen if the interest rates goes up 1%?

      1980           2010               2012            2014

Inflation Rate                                   14.8% (3/1980)      1.24% (7/10) 1.41% (7/12)         0.8% (12/13)

Ground Beef $ / lbs                              $1.29                  $2.49                        $3.08               $4.15 (1/15)

Interest Rate                                    18.10% (7/1980)      4.75% (2/10)            3.50% (7/12)         3.65% (1/15)

Housing Starts                                    888,100               587,000                 780,000             947,000


The Great Recession ended in June 2009.
Over the past 30-years on average, inflation has been below 3.0% and interest rates above 6%

Please tell me that you see a stark difference between 1980 and 2014 for inflation, interest rates and housing starts.

What will happen to housing as the Fed starts to raise interest rates? We will see a jump start in sales because buyers will get off the fence but then we will hit a brick wall – enter another recession or worse!
The pent-up demand for housing and the lack of housing supply are staggering.  


Median price *                                 $67,000 (12/80)     $241,200 (12/10)     $258,300 (12/12)   $298,100 (12/14)
of Ex. Homes
* Source: Census.gov

For historical reference: the median price of homes peaked at $262,600 in March 2007.
I had a weekly series of posts on why there was a 15.4% housing price increase over the past 2-years if you are interested in knowing more, let me know and I will send you the information.

At what annual salary do you need to buy the 2014         $298,100 median priced home? 
                        3.5% down payment                              $18,800 (+ $6,000 for closing costs)       $25,000 cash needed
Mortgage amount                                                          $279,300
@3.65% interest rate     Salary needed between:             $59,600 - $99,400          Median Income: $52,250 (2013) 

1. Buyers do not have the cash for a down payment.
2. Buyers have too much debt
3. Buyers have been lulled into a comfort zone and have lost the best time to buy a home.
4. Interest rates will eventually have to be raised and housing affordability will turn into “Where will our children live”?



Inflation
Source: Wikipedia, the free encyclopedia

Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.

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
Source Wikipedia, the free encyclopedia
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
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. NOTE: has the drop in gas prices changed your driving habits?
A combination of excessive money supply and over regulation can lead to stagflation.


What statistics do you believe?
Are you complacent and could careless?
Do you think we are in an economic dilemma?
Do you believe anything our inside the beltway elected officials tell us?

Consider my conclusions which you may or may not agree with. Your opinions are valuable to the discussion:

We are turning into a “What about Me” society
Our personal responsibilities are being eroded away daily
The Fed is between the sword and the wall.
My economic expertise is limited to my experiences during past recessions and analyzing current data to form an opinion:
We are in a deflationary period but once the Fed raises interest rates, the Fed will not be able to stop inflation which in turn will lead to another deep recession.
This will happen before the next Presidential election.



            

Saturday, January 3, 2015

2015 will be Different

2015 will be Different – Goal 1

For the New Year, why not select goals that change your vision and outlook on life?
I have 3-simple but powerful goals for 2015.

I have always wondered why older people are generally bitter and out of touch with daily events. All you have to do is turn on cable news, read the internet news, or listen to those inside the beltway. The barrage of bad news day after day will turn us bitter and out of touch. We can’t let that happen to us regardless of age.
I don’t want to be bitter; I want to be a blessing.
I don’t want to be beaten down; I want to lift up.
I don’t want to be negative; I want to be a positive influence. 

For me, I have three simple but powerful goals for the New Year. The first is


Be an Optimist – I want to be a positive role model and always find the good in everyone. Appreciate life everyday! 
Our minds are clouded everyday with the evil in the world shaking us to our core. We can’t let events that are out of our control shape how we live or how we should think. We can however impact one person at a time by changing our outlook on life. Being an optimist is not a new phenomenon but practicing each day may be. It doesn’t take much to change our own outlook and by relentless practice, we will change one person at a time from bitterness and sorrow to hope and joy.

Practicing optimism in the face of pessimism is easy. A smile, a hug, and holding a door open for someone else goes beyond practicing a daily act of kindness. It is common courtesy and decency toward all of those people you encounter each and every moment of every day.
Start with your sphere of influence and work with them to have a positive and impactful 2015.
If you are reading this post, let’s work together to promote a positive and encouraging outlook each and every day in 2015.
   
A pessimist sees the difficulty in every opportunity;
an optimist sees the opportunity in every difficulty.
Sir Winston Churchill

When it is dark enough, you can see the stars.
Charled A. Beard

No pessimist ever discovered the secret of the stars or sailed an uncharted land,
or opened a new doorway for the human spirit.
Helen Keller

2015 will be Different – Goal 2

For the New Year, why not select goals that change your vision and outlook on life?
Yesterday I posted my first of three goals for 2015 – “Be an Optimist”
My second goal is just as simple but more powerful because we must think of others rather than ourselves.

Invest in Others – I want to assist others succeed without expecting anything in return. We must lead by taking care of others. We must show the way when it doesn’t seem to be a way! If you and I can make a difference in someone’s professional career, we have succeeded and must move on to the next person.

If you are reading this, you are my valued connection. I care about you and want to assist you succeed in your career. I can give you my experience, connections and career advice. Each week I will be asking my contacts; “What can I do for them”.
We must reach down and pull people up in 2015.

Will you join me in taking your time, experience, and know how by passing it along to those willing to succeed in the workplace? 

If you are reading this post, let’s work together by investing in others each and every day in 2015.


"It is one of the most beautiful compensations of this life
that no man can sincerely try to help another without helping himself."
       Ralph Waldo Emerson

"Success has nothing to do with what you gain in life or accomplish for yourself.
It's what you do for others."
Danny Thomas

2015 will be Different – Goal 3

For the New Year, why not select goals that change your vision and outlook on life?
My first two goals will guide me into 2015 and beyond:
“Be an Optimist”
“Invest in Others”

To achieve my first two goals, I must change my heart and mind to know that you can’t accomplish these goals without the benefit of time!


 Live in a State of Gratitude – We are all given 86,400 seconds in a day and it is a shame to waste a second.  We must act rather than react by not waiting for others to lead because we must take care of others. Think for just one moment – what do you do with your time? Perhaps it is time that we all use more of our time for others. The following poem outlines a path in which my time will be used in 2015.

From the writings of Harold Warbeirn)

Because the world is poor and starving,
Go with bread

Because the world is filled with fear,
Go with courage

Because the world is in despair,
Go with hope

Because the world is living lies,
Go with truth

Because the world is sick with sorrow,
Go with joy

Because the world is weary of wars,
Go with peace

Because the world is seldom fair,
Go with justice

Because the world is under judgment,
Go with mercy

Because the world will die without it,
Go with love.

2015 will be different!


 My three simple goals are life changing and we should strive to impact one person a day for every day in 2015.
Please join me in the 2015 challenge of a life time – changing our hearts and minds.

2015 will indeed be a different year for me. It is a year the torch was passed to me.
I am willing, able and determined to lead by example.
I will stay positive in the continuous storm of life and be a safe haven for others.
I will see through eyes of love and understanding.

2015 will indeed be a different year but only in a good way. We have to pay attention to world events but not let evil rule our outlook. We have to pay attention to national policies but not let career politicians take away our joy.  We must turn to God and He will show us the way.

First Corinthians 13 tells us that “love is patient and kind. It does not envy, nor boast.
It is not proud. It is not rude. It does not seek its own way, is not easily angered,
and keeps no record of wrongs.
Love does not rejoice in evil, but rejoices in the truth.
Love believes, hopes and endures. Love never fails.”

HAPPY NEW YEAR!

Monday, November 17, 2014

What path have you been on and will you change?



With technology, changes are happening to us faster and without regard to consequences. 

Do we care who is on the cover of Time magazine as “Man of the Year”? Do you really buy a magazine to read? When is the last time you read Time magazine?

Who is the last news anchor that told the truth and reported without an agenda or bias? Do you really watch main stream evening news?

Who reads a newspaper anymore? Do you really read the NY Times, Washington Post or Wall Street Journal?

Who besides politicians care about what they have to say?
Do you really trust any politician?
Why is politics a profession? Why should it be a career?


We have let others influence our values. Please add to the list.
  
Just Right                                                                  Politically Correct
Goodness                                                                  Darkness
Humble                                                                      Arrogant
Trust in God                                                              Gods/Atheist/Agnostic
Personal Responsibility                                          Government Responsibility
Truth                                                                           Distorted Truth
Property Rights                                                         Eminent Domain     
Save                                                                           Spend
No debt                                                                      Debt
Act                                                                              React
Deregulate                                                                 Regulate
USA                                                                            UN
Individual Salvation                                                  Collective Salvation
Manage Your Own Money                                       Let Government Distribute Your Money

I am 100% sure we can make it together as long as a significant event doesn’t change us before we have a chance to change ourselves.

Invest in others.


Tuesday, November 11, 2014

The Greatest Generation and Patriotism


Our society is changing every day more so because members of The Greatest Generation are no longer around to guide us. Most were raised during the depression and fought in World War II. Their hardships were beyond belief and our admiration fades as our focus turns to world events. Time marches on.

I can’t imagine the sacrifice my parents and grandparents made during World War II and extending today to our hero’s serving in today’s military.

I can’t imagine graduating from college one day and the next day, enter the military. Training to protect freedom around the world and not return home for 4-years. Today, we would consider this an inconvenience and for The Greatest Generation – a duty.

Before it is too late, talk to a member of The Greatest Generation and listen to their stories, pride, and patriotism which are unparalleled. As the greatest generation shrinks in numbers, have you passed along their memories to your children and grandchildren? 

The torch always passes to the next generation but if the next generation doesn’t know our history or of the sacrifice of our own family members, how will they know what freedom really means? 
Patriotism of The Greatest Generation never faded but our patriotism displayed after September 11 did not last.

During the 60’s and 70’, our country went through a transformation that affected our patriotism. We did not regain our sense of patriotism until the first gulf war and then September 11. We are back to the 60’s because we are being guided by those that influenced the change.

What are we missing that pulls us together as a nation; a hero, a role model or a leader?
Our Hero’s are always humble.
Our role models invest in us.
Where are our leaders?
Complacency has overshadowed patriotism.
Technology has overtaken interpersonal engagement.

When we are caught between the sword and the wall, we will rise to the occasion.
However, the Greatest Generation will not be at our side for they have passed the torch to us. It is a shame that we will wait for a tragic event to stir patriotism when we must protect our freedom every day!

Freedom to worship
Freedom of the press
Freedom of speech
Freedom to vote

Everything we do every day is predicated on our freedom.

Thank you to all that have served and are serving in our military. God Bless you all.


Monday, October 27, 2014

In spite of all the hurdles, we still have to build new homes!


The following real estate hurdles have created a perfect storm against a traditional recovery:
pent-up demand,
short supply,
rising home prices,
less available land to build on,
more government regulations controlling the industry,
                                    labor shortages,
material shortages,
inflation,
wage stagnation,
delayed family formations,
and higher interest rates.

We have always been faced with industry changes and adversity.
The rewards still outweigh the risks.

Success in the face of adversity and turmoil is not for the meek.

For the near future, we need to start thinking about doing what we do and always have done differently i.e. stop printing money!

The change in the family structure to a 2-income family caused the median price of homes to skyrocket. In the ‘70’s, the move-up market was created! The second income added over 30% to the available income to be qualified for a home mortgage.  The housing market shifted over night as builders built homes to meet the demand primarily driven by available family income – the housing market changed in the ‘70’s!

1970 - 1979                 2010-2012                   2014

Prime Rate                                          12%                             3.25%                          3.25%
Housing Starts                                    888,100                       800,000                       947,000
US Population                                213,300,000                314,000,000                317,000,000
Home Ownership Rate                       64.4%                          65.3%                          64.8%
Participation Rate                               61%                             64.0%                          63.0%


If you stay in your home and didn’t sell your house, you are better off today than 10-years ago. I am not suggesting that we all need to live in our homes for 10+ years to realize a gain but we do need to stop looking at buying a house as a pure investment.



 Buying a home has advantages;

1. It is a hedge against inflation
2. It is an investment in your community
3. It is the foundation for your family
4. It is like the weather, wait and the price will change over time
5. It teaches us to slow down and mobility is not the answer anymore
6. It is a savings account
7. It is a memory scrapbook
 
The housing industry has always led us out of a recession and it would seem so again. Housing data, pricing, demand is currently the bright spot in the economy or are we headed to another bubble?

I am suggesting that the economy is being overshadowed by everything else that is going on here and around the world. Without the focus on the economy, we are heading to bubble #2 and this will be brought on by the housing industry.

I am outlining 10 reasons why we are headed to bubble #2. You may consider this a negative or pessimistic outlook but it is a reality and I pray will be proven wrong. If you are not paying attention to our economic problems because of everything else, I don’t blame you.

We are entering into unchartered waters and the economy may be improving in spite of the problems. We must take care of others, plan for the worst and pray for the best. 
Unfortunately, I think housing will take us into a depression which will last for years. Entering into military conflicts used to always serve more than one purpose – military expenditures always helped the economy rebound. Not so much anymore.

Why will the housing industry led us into another devastating bubble and may happen as early as the 3rd quarter of next year? I am outlining 10 reasons for you to fully consider and research to either disagree or reluctantly agree. In any event, share your thoughts for others to consider. The lack of attention on the economy is the problem.

1. Families are staying in their homes longer changing the supply and the demand curve.

2. Economic fear is in the hearts of homeowners – why sell if you don’t have to.

3. Lack of new home construction will be the achilles heel of the housing industry driving home prices higher and higher.

4. The bottom line is that there is a generation of buyers sitting on the sidelines watching without being able to or even wanting to buy a home; delaying family formations; and inability to find jobs.

5. Without a sustainable economy and job growth buyers will not be able to nor want to buy the most important product of their life ---- a home

6. In 1979, the motto was “Where will our children live?”  Maybe not today but soon, we will be saying this over and over again.

7. Immigration policies may add millions to the housing problem.

8. Inflation will force housing prices higher outpacing family incomes.

9. Labor and material shortages in the housing industry will cause production delays causing higher costs

10. The Fed will try to manage a gradual rise in interest rates but will fail miserably.

Salary
less more taxes  
less higher consumer debt 
less inflation
less higher health care costs

plus lack of housing  supply 
plus increased home prices 
plus higher interest rates
 
equals a problem for homebuyers and sellers.