Posted by ray@lcorn on September 04, 2003 at 19:00:11:
Tony,
It’s not a matter of class vs. class. That’s an emotional response that looks only to fix blame or rationalize victim status.
If the object is to try and gauge the direction of the economic conditions, then we need an objective assessment of facts to determine direction of economic inertia. In short, we have to look for cause, not effect. The dynamics at work are infinitely complex and varied. No one can accurately model all the possibilities. So we extrapolate conclusions from key data, knowing all the while that the margin of error can be substantial. One wit characterized economic forecasting as pretending to know what 280 million people are going to do when they get up in the morning. That’s a broad assumption.
On a global scale, the shift in manufacturing jobs is actually a benefit to the US. The Wall Street Journal had a great editorial a couple of weeks ago that pointed out that if we were in charge of China right now we would be enduring charges of colonial exploitation. We are essentially using China to produce our goods, and they are doing so below the cost of production through gov’t subsidies. One of China’s largest customers is Wal-Mart, who is also the largest employer in the country. The effect of higher tariffs, floating currency and political maneuvering on the financial health of our own firms is immense and immediate. The ties between US industry and the emerging Chinese market are many and binding.
This is the end result of our transformation from a manufacturing economy to a service and knowledge economy. It’s painful and disputive, but the choices were made ten years ago with the goal of ensuring the longterm health and welfare of our population. On the basis of restraining the rise in the cost of living, raising the aggregate standard of living and stabilizing immigration patterns, the effort has succeeded. There are instances for each of those factors that are not improvements. But with any sea change, just as with a rising tide, not all motion is forward. It’s the cumulative effect that becomes reality.
And no direction is certain. All factors are subject to change. That means that when we look ahead in our own little worlds we have to keep in my mind that we can make decisions today based only on the knowledge that’s available today. And those decisions are being made 280 million times a minute as we speak, with every individual’s acts on a daily basis.
Drop the emotional reactions and look for the facts.
Gee…I thought i was talking facts. So i guess we aren’t giving away technology jobs (jobs that US Students have slaved 4 years of their lives on, only to learn after graduation, they were being replaced by technical help in India for $1 hr).
The manufacturing analogy is a little old. Alvin Tofler and the 3rd wave, Megatrends, we’ve read them all…almost 20 years ago…Old story…New Paradigm.
BTW, those books spoke of the turmoil created (as you suggested)by a shift in the economic waves of change. Agrarian to Industrial to Information-technology. (you know the story).
My point is this (as it relates to Real Estate Values). Jobs Drive Real Estate Values…nothing more. Jobs are the underlying base of GNP (who knows is this figure is correct or made up). Jobs create factories, schools, developments, offices, etc.
You want to track Real Estate Values…track Jobs!
And with Jobs going away…so do Real Estate Values!
Posted by ray@lcorn on September 05, 2003 at 08:45:01:
Tony,
Your point is a good one, and also one I agree with. I drifted too far into the philosophical ether of why, rather than focusing on what drives real estate values.
You’re right of course… real estate values in any given market are directly affected by employment levels, but watching that number alone will not give you the real-time information needed to act ahead of the curve.
When the layoffs hit an area, it’s too late to sell and too soon to buy. Identifying the bottom of a downturn in real time is one of the hardest things to pin down there is. I say that from experience of being often wrong (but seldom in doubt). (smile)
Conversely, when an area starts on an upswing, if you’re only watching employment indicators then by the time you’ve identified the uptick, RE values are already rising from the increased demand. If you’re quick you catch maybe half of the demand-induced rise in value. I’m a developer, and I need to be in the market before my competition. Being there halfway through isn’t the way to get deals done.
So the challenge (for me) is to identify markets that are most likely to experience a rise in values, ahead of the curve. Don’t be so quick to discount the work of Toffler and Naisbitt… there is a lot of accumulated wisdom there that applies to our current times. I revisit their works often. And for current thinking on identifying markets, add to the list Dr. Richard Florida and his book “The Rise of the Creative Class”; also “Boom Counties” by Dr. Jack Lessinger. (Dr. Lessinger has a new book out which I haven’t read, “Schizomania: Split Society, Perilous Economy, 1990-2020”, that sounds very pessimistic, but that is truly me judging the book by the cover!)
And for thoughts on spotting the leading edge I’d recommend “The Tipping Point” by Malcolm Gladwell. A friend sent it to me a few months ago and it is one of those books that just keeps coming up in my thoughts… a sure sign that the ideas within are valuable.