Morning Folk!!
How can folks stay ahead of the game when they deny the
reality of the times? I am not sure what drives human nature. I just observe
how it manifests. I talked about the recession before there was a recession. It
bothered some. I guess for those guys I should just BS them because reality is
a bit hard to deal with. They are not pigeons, they are ostriches. The closer reality gets, the more they
bury their head in the sand and don’t want to deal with it. Cash reserves begin to get lower and the longer the downturn lasts, the better chance we have of hitting a 'Breaking Point.'
So here we are, the summer of 2010. We had that little blip
of an increased business cycle. That was just what it was, a blip. We are in some of
the most troubled times of most of our lives. I can’t remember when so many
things were at the brink. The brink and climax. The brink any way you want to
look at it. So many things at the very edge. The world is a tinderbox. This is
not going to be a boring summer. This is going to be some very unsettling
times.
But that does not mean there is not opportunity. That just
means it is time to make hay. Not be an Ostrich. This is the time to take a
risk, but you better bet right! This is not a time for big mistakes. It is a
time for a big win. But you have to be selective. Be patient. You don’t need
100, you need 1. Just 1 hit during this era.
We are in a hurricane of an economy. In that type storm you
can have ferocious winds and torrential rains one minute and then perfectly
calm the next. Then ferocious winds and torrential rains. The process repeats
itself many times. Until you get that final squall. Hang on, that is always the
worst one. The one that does the MOST damage because it hits when everything is
weakened. I believe we are going into the economic squall. Folks are weakened and the worst is yet to come.
The things I see I just don’t like. What if I told you that
the cost of homes could drop another 15%-50% no matter how good your property
or the location? I can draw the picture for you to show you EXACTLY why that is
LIKELY to happen. Not everywhere.
But let’s take this scenario from my local area.
You have beach areas and you have inland areas about 30
minutes from the ocean.. Originally because it was much less expensive inland.
But in time even the inland was built up.
So what happens when you own a $10 Million house in the inland area and
houses on the ocean are selling for $5 Million?? Well, you have a very big
problem. First of all you can’t sell that house inland. You can walk away. You may be
forced to walk away especially if you owe over $ 5 Million. So then what is the
value of that $10M house??
$3M????? Remember, you can buy that house on the ocean for $5M. The bank is likely to get it back. So timber!!!
The most expensive homes in the least desirable areas are about to crumble.
That is just a housing example and the reason I use that is because it will
paralyze folks for decades. They can’t sell, that means they can’t move. They
may not be able to afford it long term, so they just walk away. Collapse. It
will be played out in town after town and city after city. I really want to be
wrong, but the above case is happening everywhere at every level. Next to domains, nothing I pay attention to more than real estate and the weakness I see and the REASON for that weakness.
There is an equation here and it is based on time and years
and whether you will have the resources and/or income and how long. So if you
can wait things out, you can do very well. But the market out there is like
quicksand and I don’t think anyone has a handle on how this will all play out.
Countries going broke and states are out of cash. Believe it is not happening, fine.
Be an Ostrich. But things are unstable at best. They can spiral out of control.
Look around,, things are already out of control.
You can and should thrive during these times. But that is
only up to one person in the world. As I stated early on in this downturn, you
can hit the throttle and go for it, or you can pull back on the throttle and
surely get washed away. It is your choice and your choice alone…….Pigeon,
Ostrich, or Eagle.
Have a GREAT Day!
Rick Schwartz
Scott Alliy
I want to live in a van down by the river! Seriously though the one thing to keep in mind throughout the uncertainties that are here and that will surely increase is this …
Other people have needs.
Using your example of housing economic doom for some will mean opportunity for others. Movers and relocation companies will be the beneficiary of business from those that will be misplaced. Mortgage and title companies will eventually be the beneficiary of business when properties get relisted and sold.
Service providers like landscapers and renovation companies will be the beneficiary of the banks need to protect the properties they find themselves stuck with.
It all starts with understanding basic human principles and as you said human emotion and from that extracting the likely behavior and actions of the masses.
Assuming you have belief in self and in your ability to capatalize the opportunities that will arise the secret to success will be a result of being ever vigilant and having a willingness to act quickly upon those opportunities that you notice with an undying determination to succeed.
The future is bleak the possibilities for profit and gain endles. Both are true only we can decide which is more correct for us.
Tim Davids
Right Scott. I sold a home to a single mom for about 25,000 less than that house would have sold for 3 years ago. She would not have been able to buy it at the higher price.
Fair priced homes still sell well. Rick, how many people really are in the 5-10 million dollar buying range? Just guessing 2-4% of the whole population.
Average price in the whole Chicago area is just south of 200k.
Rick Schwartz
Tim,
I only used that example because of the vivid picture it presents. Plus it makes you really stop and think that they lost 100% of their equity and in many cases even more than that because the bank may go after them for the shortfall.
The mid range homes have taken an even bigger hit and that sector is in rougher shape. So many folks are either locked in or have to walk away.
If you are buying, GREAT opportunity. Great opportunity to lock up the property you want and be able to select it, but don’t be surprised if that investment goes down before it goes up. The number of foreclosures about to hit the market are staggering.
I am seeing some prices roll back as far as 1980 levels on some condos.
Rick Schwartz
In 1980 I lived in this condo on the ocean. They sold for $80,000 at that time and the economy tanked. They went up to about $250,000 a few years back. They are now $80,000 again. If you live in the $250,000 condo you bought that is now worth $80k and the expenses are based on $250k, what do you do?? Good chance you will soon just be walking away if the market does not rebound soon. It is likely to go to $60k before the $100k mark because of supply and demand. When the bank gets it back, they may only get $40k.
Just numbers. Very concerning numbers for those in that position.
George
Interesting post Rick. In fact, I was starting to think that the economy (at least here in Canada) has already started to rebound. Barring the gulf spill and the Euro (two huge events) it seems as though opportunity in a down market may have passed. I am starting to see interest rates climb, our dollar fall and general rebounding. I was starting to think the party was over and that people with the means are not in as comfortable a position as was the case even 2 months back.
Rick Schwartz
When you drill down a little deeper you ask questions about the people inside the house. Likely he was a job creator. After a hit like that it will take a long time before he hires again until he recovers himself. Multiply than 100’s of times. Thousands of times……
mobi lies
While people will have to ride out the wave of fluctuating real estate prices you can take comfort in knowing that domain name values will continue to reamin stable, except for .mobi of course which always was and always will be WORTHLESS. While an ostrich might stick its head in the sand, you appear to have your head stuck up your — when it comes to .mobi
George
@mobi lies… give me a break. If you can’t contribute a worthwhile debate then why do you bother posting? If you have a strong opinion to a topic why not state your case in a manner that is conducive to debate instead of direct attacks.
People like you ruin comments and forums for the rest of us.
ANON
Hmm, so the guy (and hundreds of others) buys one .mobi out of speculation, and all of a sudden he’s an idiot?
One mistake doesn’t ruin his, or any other investors livelihood.
Dean
Really It get’s down to lifestyle choices and what you are comfortable with.
In my youth I bummed around the country and slept a few times under bridges, back then I did not have a care in the world and it did not seem such a big deal because it was in the spirit of self discovery and adventure!
Now, I live in a 4 bedroom house with a swimming pool and enormous backyard with just my girlfriend and 3 dogs and I worry about shit that never mattered to me. Still, I count my blessings because I don’t have to punch a time clock or answer to anybody. I think if I lost all tomorrow I could still be happy camping in the woods.
I have met many rich people that were miserable motherfuckers. Guy’s with a Rolex on one arm and a blond half their age on another and they were still unhappy. Money is great thing to have, but you can’t measure your self worth or happiness by how much of it you have.
Rick Schwartz
Health and Happiness trumps everything. The happiest guy I ever met was pumping gas at the corner station. Luckily, we all get to choose our own paths. Like the Janice Joplin song says….”Freedom is just another word for nothing left to lose”
Donny
Add another 15 – 30% drop in prices for home market on the coast. When the next hurricane rolls along it is going to pick up all that oil in the ocean and destroy the food crop and beach front property for thousands of miles.
Black oranges?
Texas and Florida grow alot of food.
My guess- The Dow 6000-6500 by Nov-Dec
Dean
Your absolutely right Rick without your health you have nothing. I think the one good thing that can come of this housing crisis is that it will force people to explore alternate living experiences and make them re-evaluate their lives.
All that Hippy stuff about communal living, Ecology, growing your own crops, etc, is starting to make more sense.
T.M. Poacher
@ANON”One mistake doesn’t ruin his, or any other investors livelihood.”
Very true anon but the problem is that first to have to recognize and admit that you’ve made a mistake” and until you’ve made that leap you are stuck. Unlike real estate Rick apparently still has some faith in .mobi.
http://www.miamiherald.com/2010/05/30/1656390/some-investors-refuse-to-lose.html#ixzz0pWF0yzkV
Even Mike Berkins blog says that”people will put flowers.mobi on top of their worst domain purchases of all time” but Rick in his ususal singleminded and stubborn way is sticking with the extension!
First .mobi and npow BPSPILL names….yep, long live the King.
Dean
The one thing I am having a hard time reconciling is if we live in a society that is broken of what use will domains be?
I don’t generally read many blogs, but 2 blogs I check on an almost daily basis is this one (Ricks)and this guy’s:
http://globalguerrillas.typepad.com/
Some people might write him off as a crackpot or nihilist, but having been an ex CIA member he has an interesting take on things.
Ace
Rick, I have recently started reading your blogs. At first it made little sense. However as I read them multiple times, it makes more sense. Its not that the language or style of writing is difficult, nor am I challenged in any way. The words of wisdom and insights you offer are really great. Thank you.
Dave Carpenter
Those sound like the guys doggin Rick from the other thread. I understand why Rick tunes these idiots out.
mike
I agree, the worst is yet to come. A lot of people are losing their jobs, many small businesses are closing down even in prime areas in Los Angeles.
SDM
Rick,
I’ll tell you the worst case scenario: The 21st century equivalent of castles & moats. No doubt, you have already considered this.
For those who think I’m kidding, search this phrase:
“guarded gated communities”
It’s no joke.
I’m not a doom and gloomer, but I do like to know which way the wind is blowing.
What say you, Rick?
Big Jack
@SDM – It’s definitely no joke. It’s why many of us have moved to Montana, Utah, Idaho, the Dakotas, and Eastern Washington.
Out here, we don’t need gated communities. As the saying goes, if you can get past the dogs you still have a hundred yards to run before meeting me with my defense tools.
Home invasions are almost unheard of. The bad guys almost always end up in body bags courtesy of the home owners.
Big Jack
But back to Rick’s post: Absolutely!
My friends are losing their businesses, there is absolutely no commercial credit available, work crews are being paid in state IOU’s, kids are graduating from college and can’t find jobs, the FED is not only adding trillions of FRN’s, but they are allowing Europe to come to the Fed Swap Window and offload stinky Euro’s.
The economy is and will continue to compress (deflation) until that”tipping point” is hit and all hell breaks loose with inflation.
ScottM
Rick has hit it right on the head. I lived in Vegas for 11 years (just moved back to the midwest thankfully!). You have never seen so much false wealth built up so fast disappear quicly within about 2 years.
When you have several families of illegals living 15-20 to a house in the nice suburbs because of the mortgages they got with phony documents that they couldn’t otherwise afford something’s got to give. And it’s the property values because once you have several houses foreclosed in a subdivision your property value has gone to the shits.
And it will probably happen all over again. You can today buy a house with pool and everything for $250,000 that sold for 2.5 times as much 5 years ago. The same type of speculators or illegals will again buy them up, keep refinancing them if they can get away with it and the cycle repeats all over again until the market bubble bursts again.
UFO
But what they will do is inflate housing prices via inflation.
Inflation also allows the government to spend on the basis of the printing press.
Inflation is the final instrument in monetary policy and I think they will use it, it gets the banks above the water line and housing equity on the right side of the ledger (or the left side if know your drs/crs).
The government is robbing you right now with the reserve rate at practically zero with inflation near 3-5%. To inflate house prices by 20% it just 4-5 years at around 4% inflation….
LS Morgan
I think wealth protection is going to be a big deal going forward. We’re coming down from a colossal bubble of deficit spending that we employed to falsely prop our standard of living.
Sure, we’ll inflate the currency as is standard, but the more odious boogieman is the shifts in sentiment that occur in times like these. It’s never a good time to be a have-not, but right now and looking forward, it’s a troublesome time to be a have. The piper is at the porch and there’s only a few people with the means to pay him.
People shouldn’t get tunnel-vision with compounding risk to make more, more, more. Now might be a good time to step back, take a breath and plan some strategies should ‘things change’ in the way of forms of taxation, too.
Stephen Douglas
@ Rick,
Don’t you own a home on the beach in Florida?
John
Look to the rest of the world to see how things might be here. In most parts of the world, the middle class on up live in militarized enclaves. Violence is commonplace and life has little value. The only security comes to those who can provide-produce-grow their own needs. I am not saying run for the hills, I am saying there IS a worse we can slide to.
Jeff Schneider
Hello Rick,
Most people Cannot handle the truth. They read media generated opinions by liberal entities whose editors only allow them to write certain portions of their news releases.
Bottom line : What the media releases to press are fabricated illusions. There will be many who read this comment and say BOY is this guy negative. The reality is they cannot handle the truth, because they have no idea what the real truth is.
The ostrichs of the world are ridiculed and discounted so as to perpetuate DENIAL. What you are talking about above is not popular,but some will do their homework, regardless and it will help some make good decisions.
Most will not like you, but some will love you for your honesty. SERVE THE PEOPLE and you will reap the rewards.
Gratefully,
Jeff
Joe
Buy IDN
Jason
@Rick,
Almost four years ago you made a huge purchase – flowers.mobi. I assume it was you that acquired the domain. What do you think about the .mobi market?
I owe a dozen .mobi domains targeting travel places and services such as empirestatebuilding, pier39, yellowcabco,forces, cablecar, fitnesstraining, and a few other .mobi domains.
Would it be best to stop buying .mobi or make a purchase when a premium name surfaces? I stopped purchasing .us domains too.
Bargain domains accepted 30 of my domains. None of the,m have attracted any attention. I decided to use a few of my domains to take another direction.
I appreciate any advice. Your article was well written. Thanks.
Jason
Michael Hallisey
I wish the prices to lease commercial buildings would start going down faster! In my city every other building is up for rent and there still trying to get the same high prices. Pretty soon there is not going to be any stores left.
Dave Wrixon
Nice post Rick, but I seem to remember telling you all this back in 2007, at which time you were the one doing the ridiculing, along with a couple a member of the now defunct Bido.com team. I told you the answer was divest the hell out of the US. Am I still wrong?
IDN's are Dumb.......bleck
Dumb Duck you are always wrong, and still wrong on your IDN’s. Terrible idea.
You claim that there are more people in this uncivilized areas where your idiot IDN’s are, but the biggest economy is in the United States….and that means dotcom.
Dotcom is King you goof. Nobody even knows what the hell IDN’s are. You could live to one thousand years old and it still is a fraud.
The United States is where everybody wants to be. You can take your rinky dink IDN’s and have someone living in a hut with zero dollars type in your name.
Big deal. You are a fool who just does NOT GET IT.
Anthony
Well… if your reading this, Rick has unblocked my posts;) yeah!
I hope your Mother is well Rick, have you gone on a cruise with her yet?
I dislike seeing Rick Schwartz being talked of negatively about the domain industry. But I understand.
I also understand his frustration with ignorance, and…. stupidity? call it what you will. But, I understand.
He has tried to help over and over, if individuals are willing to read. But their not, what is one to do?
“You can lead a horse to water, but you can’t make him drink.”
The .mobi extension is the one with the best chance of ever replacing or being congruent with .com. How is MOBILE said in your lingua? mobi? que? ahhhhh! mobile, si? .mobi eh? ok.
no comprende? oh well, we can’t communicate. Have a nice day. Adios!
Anyway,like Michael Jordan said,” I succeed because I fail”, everyone remembered the shots that won games, but no one ever remebered all the shots that he missed to lose games.
Stop the energy flow of wanting this guy to fail and shift it to the success of your endeavors and you might get some where. He pisses me off too, but what really pisses me off, even if I don’t always agree, is that he makes sense.
My conclusion, he does not believe in GOD. Why do I say this? If he did, he would be at peace with the ingnorance of society and understand his role in being a teacher to the masses without frustration. Just my take. But who am I
And, ScottM, I live in Vegas as well…
false wealth is given only to those that want it. The wealth of the world is here in Vegas every weekend, and that my friend will never change.
I’m sorry you did not make it here, you should not have given up so quickly. Pride is probably the worst enemy, and the most powerful sin in vegas there ever was or will be. What other state in the US can you go to where you can find a multi millionoaire or billionaire willing to lose a six figure sum on the turn of a card? Daily New Jersey, not monthly or annually. Vegas is unique, and it takes unique people to succeed here. And that all depends on what your definition of success is. Good luck my friend, Best Wishes.
Vegas will always be here, simply because it is the city of SIN and sin will happen until the very last second of whatever you think the fate of the world will be.
Yes, the worst is yet to come. Be nice Rick, don’t get frustrated. What will remain after all this is the strongest of our race, both mentally and physically.
Figure out where your strengths are and make moves.
See you on the other side!
BillW
@”IDNs are dumb”.
1) IDNs ARE .com, and .net etc. Now they are also rolling out as idn.idn (both sides of the dot in foreign languages, and soon .com aliased to its tranliteral where you can have BOTH idn.com and idn.idn(com equivalent).
2) IDNs were created for non-English speaking people to give them URLs that are easy to brand and easy to remember.
3) Way too many domainers that will never have the need to use them seem to feel”threatened” by IDNs.
4) Follow the money: Between ICANN and the various International registrars the IDN projects will be investing over xxx,xxx,xxx into these new domain markets.
They system has taken about 12 years now to go from concept to reality. IDN.IDN is live in the root for 4 languages just happening in the last 60 days, with another 12+ cued up for the near future.
David Wrixon
Did I mention IDN?
Are you guys getting paranoid here. in case I think up some dumb idea without telling you?
Trust me, nobody is trying to starve you of dumb ideas.
Louise
This is a really nice post.
What about beach erosion? Those inland homes are going to be more valuable than you give credit, as ice caps melt and oceans levels rise.
ScottM
And we’ll see if Jim Cramer is ballsy enough to put a buy recommendation if BP stock eventually drops to $10 a share, down from $30 today and from $60+ before the spill.
If there was ever a too-big-too-fail company this one is it, whether you like it or not. Obama and the government will not let BP go under because their futures are so intricately tied to it and so is the entire gulf recovery. If BP goes under none of the victims will get paid anymore unless by the US taxpayers. And 40% of BP’s shareholders are US citizens, probably a lot of retirees and pensions are in BP.
Altaf
@ScottM:
Thanks for those info. What we need to know future value of domains relevant to BP Oil Spill.How will it be taken by all?
Altaf
how Mr. Tonny managed with pres. Mr.Obama or US Congressmen in his interview with them? Was he truthful? was he nervous? Will BP resolve our ordeals? That of the ordeals of dolphins,birds,turtles,fish and many more lives that were perished due to US Oil Spill?
May be never!