I got a funny, but sad email yesterday. It was a great little comic of a few kids going Trick-or-Treating. It depicts our current market environment and in somewhat of a faux-pas, shows how kids may be walking through a different kind of haunted neighborhood this year. This comic buzzed around my office before this whole sub prime mortgage failure/ credit crisis/ global recession fiasco started getting worse.
Now, it’s made it second round.
(Forgive me, but I have no idea where it originated, otherwise I’d cite it.)
Not everyone may get our humor. And actually, it’s kind of a bad joke. The person who created it has a valid point. But considering the situation we’re all in, sometimes all you can do is laugh and say “That’s so true…”
The Time Value of Lost Candy
Allow me to explain: I work as a commercial real estate appraiser. Sometimes we have a weird sense of humor, kind of like accountants do (any accountant out there knows what I mean). Basically, the jokes are in terms of regulations, rates of return, and cash flows. Yes, it’s lame. Laugh. But just remember that we’re all dorky in our own ways.
Anyway, when the comic made its first round, we found it funny (and ironic) because the credit crunch only involved residential real estate mortgages. Since my office does not handle residential mortgages, our work was virtually unaffected. So we laughed and said “That’s so going to be this year…,” while hoping that it wouldn’t be so bad.
Fast forward a month or so. Now we’re dealing with a total liquidity crisis. Banks are so scared $hitless that they’ve stopped lending (even to the credit-worthy) or they simply don’t have the money to lend. As a result, the commercial real estate markets have been drastically effected. Projects have been cut back or have been denied financing altogether. This translates into a reduced demand for appraisals. And thus, our office has less work to do than “usual.” So naturally, people are getting worried.
Cobwebs in the Wallet
It is a funny comic. But unfortunately it is true. This year is going to be a rough one for a lot of families. I know it will be for me. And it’s not going to be limited to Halloween; Thanksgiving and Christmas will take a hit this year, too. I’ve already decided to cut back on my holiday spending (partially because I have to save money for a flight to go home to NY for Christmas, among other things).
The upside of this is that among the people who I’ve consulted with, the general consensus is that we’re coming to the bottom of the cycle. There are a few fundamental, economic and technical indicators in the market that show we’re almost there. Picking a bottom is a risky game, but I would say that it’s safe to expect that by mid to late 2009, we will be seeing improvements in housing sales/prices and banking.
Gone Batty
Then again, who knows. Virtually everyone (analysts and gurus alike) have thought we were at the bottom and have been terribly wrong… multiple times. First step to recovery is denial, right?
Anyway, a lot has happened in the past two weeks that nobody imagined ever would. For people of any age, the best plan would be to protect yourself by spending less and saving extra money (if you can). And I am going to second Eric’s recommendations. Do all you can to pay down your debt and prepare yourself.
Granted, twenty somethings have time on their side so they can also take more risks and invest in the market at a bargain prices - but I would not recommend it unless you know what you’re doing. I already told a few friends this: make sure that you are willing to lose every penny and that anything you buy is for the long term. The potential is in riding this out. If you cannot stomach it, at the very least keep your eyes peeled for good investments and expect a few more bumps in the road.
So hold on to your Candy Corns… cauz it’s going to be a hell of a ride.
~K
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