Market Perspective

Land Market Forces and Trends for 2013 – Week 13

Posted by on May 21, 2013 in Ned Massie, Perspective | 0 comments

World Economic Trends Has anyone alive today ever seen such a mess as the world economy over the last five years?  The short answer is “NO”. Increasing the risk is that the world economy continues to increase its inter-connectivity every year.  What happens around the world has a huge impact here in the United States on every facet of our economy. Therefore, a discussion of the forces that will impact the land market here in Virginia during 2013 has to include a brief discussion of the world economy.  As I write this in May of 2013, the only way I can hope to discuss this huge topic is to summarize my educated guess as to what will happen for the remainder of 2013. China – Now the second largest economy in the world, second only to the United States, appears to be operating on ether.  Their combined Communism with capitalism by definition will fail.  It appears that for the fourth time in 20 years, their banking system has failed and will be bailed out by the government, their real estate market is an enormous bubble, and they are losing manufacturing jobs due to the “On Shoring” trend.  Those all suggest a recession as the best case scenario.  As a result, I expect commodity prices will fall and internal turmoil will increase. Japan – Tired of two decades of deflation, the new Japanese government actually was elected because of their promise to create inflation.  The devaluation of the Yen has started, will continue, and will have global impacts.  However, it will do nothing to address the core problem that the Japanese population is smaller in number and those that exist are getting really old. Europe – Saddled with a common currency but no central control creates a structure that only succeeds in good times.  Therefore, Europe is destined to struggle.  In 2013, Europe will experience a recession.  The flex point for the world economy is how severe the recession will be. USA – Obama got his tax increase and we will get to enjoy a recession in late 2013 or early 2014.  Obama’s campaigning about the Sequestration is an effort to deflect the blame for the coming recession from his tax increase to the Republicans for agreeing to his idea of a Sequestration.  In 2014 ObamaCare hits the US economy… well, that is next year.  The US economy in 2013 will be tepid but until the recession the only growing major economy in the world. In summation, 2013 will see low interest rates and at best a stagnant world economy.  But a wise investor does not invest for today…rather, for the future. A really good tract of land is the best long-term investment possible.  Not every tract of land will benefit to the maximum from what is coming.  The really good tracts of land will benefit most.  Call us, we would love to help your investment look...

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Land Market Forces and Trends for 2013 – Week 12

Posted by on May 10, 2013 in Ned Massie, Perspective | 0 comments

The Housing Market Historically, the New Housing market has been a Leading Economic Indicator.  While New Housing construction is itself less than 5% of the American economy, the ripple effects impact industries that make up approximately 25% of the American economy. The next time you hear a talking head say that an increase or decrease in New Housing construction will not impact the American economy… well, you just listened to an idiot.  Its impact is huge, as described above. The New Housing market is ultimately driven by demographics and taxes.  Recognizing the negative impact that taxes, called cash proffers, have had on their counties, wisely some counties have eliminated cash proffers from their tax structure.  Residential construction will result in those areas. New Housing construction includes both New single-family homes and apartments.  While the largest generation of Americans EVER, Generation Y (12 to 31 years old) has now entered the housing market, they are disproportionately renting apartments, not buying homes. Preliminary indications are that Gen Y’s college debt is preventing them from qualifying for a mortgage to buy a home.  Another analysis suggested that with the historically low interest rates, Gen Y is skipping the “first” or “starter home” and buying the “move up” home to lock in the lowest possible 30-year mortgage payment. Both trends bear watching.  But the bottom line is that the recovery of the new housing market is positive for various segments of the land market, including development land and timberland. A really good tract of land is the best long-term investment possible.  Not every tract of land will benefit to the maximum from what is coming.  The really good tracts of land will benefit most.  Call us, we would love to help your investment look...

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Land Market Forces and Trends for 2013 – Week 11

Posted by on May 7, 2013 in Ned Massie, Perspective, sample-Uncategorized | 0 comments

Technology Waves of technological changes, especially computerized robots, continue to wash across the United States economy having an increasing tremendous impact.  Here we are going to highlight two trends that will impact the land market in Virginia. Robot Tractors – Early versions have been used in other places in the world, especially Brazil where a combination of GPS, computers, and huge crop land fields saw the original implementation.  Now that combination has evolved to the United States where driverless tractors are running equipment used in production of food.  Computers guided by GPS control the path of the tractor, control the amount of fertilizer or seed or other material being applied, and keep records to manage the productivity of each part of the field.  This will have a huge impact on the cost of producing food. Robots in Manufacturing – Dramatically higher fuel costs plus a rapid escalation in the cost of labor in China is reversing the former trend of American companies moving all manufacturing production to China once called “Off Shoring”.  The reverse, called “On Shoring” is seeing production move from China to other areas with lower labor costs, including but not limited to Mexico, and even back to the United States. The benefits to the manufacturer of products here in the United States is a combination of lower transportation costs, closer management, and better quality control.  The significant change is that fewer humans are needed when combined with robots, so that often the costs in a robot driven manufacturing facility are comparable to the costs of producing the same product in China. Historically, the adoption of technology increases productivity, thereby reducing prices of the goods produced.  While it is always accompanied by fears of fewer jobs in those industries, the economy is dynamic.  Capitalism will reallocate resources to new ventures. New robotic manufacturing will require new facilities throughout its production chain.  That growth will impact land prices in states that have tax and regulatory policies that embrace growth.  In those states, numerous land market segments will be positively impacted. A really good tract of land is the best long-term investment possible.  Not every tract of land will benefit to the maximum from what is coming.  The really good tracts of land will benefit most.  Call us, we would love to help your investment look...

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Land Market Forces and Trends for 2013 – Week 10

Posted by on Apr 29, 2013 in Ned Massie, Perspective | 0 comments

Obama Increasing Taxes Versus Consumer Spending It is a problem that the federal debt has increased from approximately one-half of the American Annual GDP to 100% of our GDP in four years under Obama.  Combine that with the fact that the U.S. government is functioning without a budget, due to the Democrats in the U.S. Senate refusing to have a budget hearing for over three years, creates a really toxic mix. This is not just the height of folly and a demonstration of a dysfunctional government, it is also dangerous economically.  Out of every dollar that the consumer receives in wages or income, historically 25% is spent on local and state taxes, leaving 75% for the consumer to spend.  Remarkably, the typical American consumer saves approximately $0.05 out of every dollar, leaving $0.70 to purchase goods and services.  This parallels the fact that approximately 70% of our annual GDP is consumer-based. When taxes are increased, such that instead of $0.70, the consumer only has $0.65 to spend, then the consumer has to cut back on their purchases of goods and services.  That cut back is called a recession. It is important to note that since the increase in taxes in January, chicken producers indicated that while their sales to grocery stores was stable in January, they saw a significant decline in sales to restaurants.  Even though the American consumer has reduced their dependency credit cards and home equity lines of credit, their overall leverage is still near an historical peak so they are unable to absorb the tax increases recently enacted. This tax increase will lead to a slower economy, either stagnant or a recession.  The outcome will be determined by whether the growth and employment in the new housing industry is enough to offset the decline in disposable income by the consumer. We believe we will see a mild recession in late 2013 or early 2014 which will force The Fed to continue its debt buying binge.  The result will ultimately be higher inflation followed by higher interest rates. Unsustainable actions tend to continue until they do not.  A really good tract of land is the best long-term investment possible.  Not every tract of land will benefit to the maximum from what is coming.  The really good tracts of land will benefit most.  Call us, we would love to help your investment look...

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Land Market Forces and Trends for 2013 – Week 9

Posted by on Apr 22, 2013 in Ned Massie, Perspective | 0 comments

Commodity Prices Commodity prices are best set by a free market.  Unfortunately, in approximately 1998 significant changes were made to the regulations of the U. S. Commodity markets. Supposedly the changes were going to create increased liquidity in these relatively small markets.  Actually, the effect of those changes to the regulations converted commodities into a more speculative asset. Prior to the changes, only a physical user of a specific commodity could participate in that commodity market.  The regulations were changed so that anyone could participate. As a result, today commodity prices often are being used relative to other markets such as to hedge against changes or the devaluation of various currencies around the globe.  This hedging of currency risk by using commodities distorts the demand for commodities versus supply and can lead to violent price swings. Historically, the United States has pursued a strong dollar recognizing that if the American Dollar was strong, then it would minimize the impact of currency speculation on both our economy and the American consumer.  During the Obama administration the dollar has been devalued more than 15%. The Fed in tripling the amount of Dollars in circulation, the amazing $6 Trillion in deficit spending by Obama, the lack of a budget for three years because the Democrats in the U. S. Senate have not even had a budget hearing, has led to the belief that the American government is no longer pursuing a strong dollar but rather a devaluation of the American Dollar. This belief combined with the accelerant of the 1998 commodity regulation changes has resulted in a more volatile commodity market and therefore high commodity prices.  Add to the toxic mix the potential drought in the Midwest where the majority of our grain crops are grown, and it is easy to see that we may experience even higher commodity prices in the future. In the meantime, the Midwest crop land prices have almost doubled in the last six years.  This is important because commodity prices going up increases the amount that Midwest agricultural land investors are willing to pay for productive crop land.  The difficulty comes if the commodity market reverts to a more normal level of commodity prices. Unsustainable actions tend to continue until they do not.  A really good tract of land is the best long-term investment possible.  Not every tract of land will benefit to the maximum from what is coming.  The really good tracts of land will benefit most.  Call us, we would love to help your investment look...

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Land Market Forces and Trends for 2013 – Week 8

Posted by on Apr 18, 2013 in Ned Massie, Perspective | 0 comments

Water Both 2011 and 2012 saw droughts in various parts of the bread basket of the United States.  Many of the long range weather forecasters are expecting another drought in the bread basket of the U.S. for 2013.  At the very least, unusually dry soils at the start of the 2013 season would be counter-productive to maximizing the yields of crops that are planted in the Spring of 2013. But the shortage of water also is impacting suburbia and many manufacturing or processing businesses.  The majority of the human body consists of water.  Humans need to consume a certain amount of water for good health, as well as have water for personal hygiene.  Population growth means an increasing need for a supply of water. A major opposing force to the increased need for water is the difficulty in creating reservoirs today due to the environmental regulations of the U. S. Army Corp of Engineers (COE) and Virginia agencies such as the Virginia Department of Environmental Quality (VDEQ). Reservoirs are most easily built by the use of dams on streams.  However, doing so means impacting both existing streams (VDEQ) and the associated non-tidal wetlands (COE).  Both agencies’ regulations make the construction of reservoirs prohibitively expensive. A wise investor looking for an attractive land investment should consider the existence of a water source such as a spring, creek, existing pond or lake, and river frontage.  Although there are limitations on using those water sources and heightened risk under today’s environmental regulations, it may be better to have water available than it will be to lack it. A really good tract of land is the best long-term investment possible.  Not every tract of land will benefit to the maximum from what is coming.  The really good tracts of land will benefit most.  Call us, we would love to help your investment look...

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