Market Perspective

Land Market Forces and Trends for 2013 – Week 1

Posted by on Feb 26, 2013 in Ned Massie, Perspective | 0 comments

Introduction Since the peak of the land market in 2007, we have witnessed an amazing cycle in the land market.  As the financial markets plunged the land market activity ceased to operate for two years.  Starting in 2010, we have witnessed the land market sorting out the New Normal values. At Grant Massie Land Company, our perception is that ultimately the land market is rational.  But to make sense of the land market at any given time, one has to understand the forces and trends that are influencing it. We have seen that the best investment decisions are made when one is focused not on what is occurring today, but how the forces and trends in the land market will probably play out over the next 12 to 24 months.  Get that right and your investment decisions can be enhanced dramatically. Therefore, at the beginning of each year we attempt to identify for our readers the most important forces and trends we believe will impact the land market over the coming year.  By highlighting those we feel are most important, we hope we can help you make the best possible decisions relative to your land portfolio. Land is an exceptionally complex asset and we believe that our databases enable us to help our clients make the very best decisions to accomplish their goals.  We like to make our clients look brilliant.  Give us a...

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Don’t Just Survive, Thrive – Week 16

Posted by on Feb 20, 2013 in Ned Massie, Perspective | 0 comments

Land is The Source of Wealth Every product consumed on earth originates in land or from the use of land.  Many folks consider land to be a simple asset class.  At Grant Massie Land Company we hear it so often we coined a phrase to describe that attitude… “all dirt is dirt and all trees are trees”. In reality, land is the most complex real estate asset class.  The land market consists of a huge number of different market segments, each on a different market cycle.  It is complex. My parent’s farm is on the market.  At its current appraised value, it represents an increase of 1600% in value over a 55 year period of time.  What a fantastic investment and that does not include the value of their joy of ownership. We are living in turbulent times, the likes of which we Americans have not seen in over 70 years, if ever.  While we are moving through this period of history and hopefully away from the brink of disaster, because of amazingly poor leadership we are nowhere close to stability. Our recommendation is that you take advantage of the market distortions that exist so you will benefit financially.  To do so you should buy one really high quality tract of land at today’s very attractive price.  Select well and that tract will provide many benefits to you over the next several years. Our goal is to help you thrive, not just survive your way through this economically historic time period.  Call us, we enjoy making folks look...

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Don’t Just Survive, Thrive – Week 15

Posted by on Feb 13, 2013 in Ned Massie, Perspective | 0 comments

Stagflation is Ugly The “Perfect Storm” that we are experiencing is the result of a combination of bad decisions made by our elected officials since the Asian financial crisis of 1997 – 1998, on top of the Clinton Administration decision to change our tax code to encourage information technology business investments and discourage manufacturing.  Someone forgot that manufacturing is the basic creation of wealth. In manufacturing, a variety of parts are assembled and sold when a profit can be made doing so.  By definition, that means less valued parts are combined into something of greater value than the cost of assembling them. When the 1997 – 98 Asian financial crisis occurred and those countries devalued their currencies by 80%, their manufacturing costs plummeted, as did the price of their finished good.  American manufacturers could not compete if their manufacturing plants and employees remained based in the USA. The outflow of American manufacturing to Asia, especially China, began in 1999 and accelerated from there.  The hollowing out of America happened very quickly.  The resulting pain is easy to see today. With Obama “leading from behind”, the Democratic controlled Senate that has not held a budget hearing in three years, combined with The Fed trying to revive our economy by themselves, we are doomed to a stagnant economy and increasing inflation.  That is a condition called “Stagflation”, last experienced under another failed President… Jimmy Carter. In “Stagflation” the economy struggles and job growth is almost non-existent, but the cost of everything goes up because the buying power of the dollar is reduced due to inflation. So the key question you should be asking is “How do I invest to combat stagflation?”  The answer is to focus on the effects of inflation and buy hard assets such as land that will protect your buying power even as the value of the dollar declines. To take advantage of the result of these market distortions you should buy one really high quality tract of land at today’s very attractive price.  Select well and that tract will provide many benefits to you over the next several years. Our goal is to help you thrive, not just survive your way through this economically historic time period.  Call us, we enjoy making folks look...

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Don’t Just Survive, Thrive – Week 14

Posted by on Feb 7, 2013 in Ned Massie, Perspective | 0 comments

Devaluation Feels Good … Initially Since 2007 we Americans have been through a Perfect Storm financially.  But now we are simply witnessing the problems of “leading from behind” and the resulting dysfunctional Federal government.  History may provide some guide to our future. In 1997 the collapse of the banks in Thailand led to a global bond market crisis.  The crisis ricocheted around the world as various countries, including Mexico, Brazil, and Russia defaulted on loans. The epicenter of the problem was in Asia.  Their solution was that almost all of the Asian countries devalued their currencies by 80% in 1998. As a result, the products we Americans paid $5 for in 1997, by the end of 1998 we could buy for $1.  American consumers were ecstatic and the Asian economies soared.  However, our American manufacturers were unable to compete. Hence, American manufacturing moved to Asia, primarily China.  Referred to as the “Wal-Mart Effect”, China became the place to manufacture products much of which entered the American economy from a Wal-Mart shelf. The hollowing out of America happened very quickly.  The resulting pain is easy to see today.  But, less obvious are the facts: If the currency exchange rate is like water in a u-shaped tube, the water will ultimately seek its level on both sides of the u-shaped tube; Manufacturing leads to innovation where the manufacturing occurs. Does that mean we will have inflation of about 500% in order to be equal to where we were in 1997?  To us, QE3 is a clear signal The Fed wants inflation. We believe that investing your dollars today to combat future inflation of this magnitude is critical to your financial security.  After the inflation arrives it will be too late to start investing.  The investments need to be made now during the trough of this Great Recession. To take advantage of the result of these market distortions, you should buy one really high quality tract of land at today’s very attractive price.  Select well and that tract will provide many benefits to you over the next several years. Our goal is to help you thrive, not just survive your way through this economically historic time period.  Call us, we enjoy making folks look brilliant....

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Don’t Just Survive, Thrive – Week 13

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

American Banks Capitalism only thrives when banks are able to lend money, a critical form of capital, to entrepreneurs and businesses.  As is shown by the economy of a third world country, you can have a population that wants to work hard and consumers that would like to buy goods or services, but if capital markets do not exist or cannot function… nothing happens. Closer to home, relive the Savings and Loan crisis with me.  President Jimmy Carter decided to reform the banking industry in 1978.  He changed a lot of rules (paradigm shifts and distortions) concerning the savings and loan industry, expanding their ability to lend.  They followed the new rules and eight years later the savings and loan (S&L) industry was in collapse. The government intervention that time was called the Resolution Trust Corporation (RTC) which took over the failed S&L’s.  The RTC was so effective that by the time they completed their work, there were no S&L’s. Fast forward to 1999 when Clinton set the expansion of home ownership as a goal for his administration.  One of his brilliant ideas was to force banks to make loans to those that did not meet the existing criteria for obtaining a loan.  Representative Barney Frank (future author of the Dodd-Frank bill) appeared on television and stated that opposition to requiring banks to make such loans was because “Republicans are opposed to poor folks owning cars and homes”.  No mention was made of the valid concern that the loans would not be repaid. The requirement of CRA 99 was that banks would make loans to unqualified borrowers in an amount equal to 5% of each bank’s total assets.  However, banks typically have capital equal to 10% of their total assets.  Further, if a bank’s capital get down to 8% or less of total assets that bank “fails”.  Easy math suggests that CRA 99 set the stage for American banks to fail en mass. Conversations with bankers today demonstrates that they continue to shrink their loans on real estate under pressure from Dodd-Frank regulations and bank examiners.  That is called “deleveraging” and is contrary to a growing economy.  Furthermore, an illiquid real estate market is an oxymoron. To take advantage of the result of these market distortions you should buy one really high quality tract of land at today’s very attractive price.  Select well and that tract will provide many benefits to you over the next several years. Our goal is to help you thrive, not just survive your way through this economically historic time period.  Call us, we enjoy making folks look...

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Don’t Just Survive, Thrive – Week 12

Posted by on Jan 24, 2013 in Ned Massie, Perspective | 0 comments

Destroying the American Housing Industry The new housing industry impacts approximately 25% of the American economy.  It is impossible to have a strong economy in the USA without the participation of the new housing industry. New housing is not just single family homes.  It also includes multifamily housing.  In fact, when the housing starts number is reported each month, that number reflects the total starts for both single family and multifamily. The USA is blessed to have a growing population.  That has been one of our characteristics for hundreds of years.  While the sources of primary growth have periodically shifted between births and immigration, the constant increase in population has provided economic growth.  A review of countries that are not enjoying economic growth demonstrates that it is impossible to have declining population and economic growth. Recognizing that “owners” have a different perspective than “tenants”, our government has wisely created incentives for Americans to buy their homes.  To facilitate that result, over the years since the Great Depression, a variety of government agencies and entities evolved to facilitate home ownership. One of the Government Sponsored Entities (GSE) that was created is The Federal National Mortgage Association (FNMA) often referred to as Fannie Mae.  Fannie Mae and her sister GSE’s existed to buy home loans from banks and brokers with the intent of selling them as an income producing asset to investors such as insurance companies. These loan packages were attractive because they were conservatively underwritten and carried an implied Federal Government guarantee which made them AAA.  Recognizing that the American taxpayer had some potential obligation, Fannie Mae was always VERY conservative in its criteria for the loans. In 1999, to achieve his political goal of increasing home ownership, Clinton appointed his friend, Franklin Raines, to be CEO of Fannie Mae.  Within a few months of his appointment, Mr. Raines changed the loan criteria so that Fannie Mae would begin buying the loans of unqualified borrowers – what we now call subprime loans. But 0nce they were bought by Fannie Mae, packaged together, and sold to investors those subprime loans carried a AAA rating because they were backed by us taxpayers!  This is like the fairy tale of spinning gold out of straw… and just as real. Franklin Raines received bonuses equal to tens of millions of dollars before he left Fannie Mae and we American taxpayers got nailed with the problem of making good on the guarantees.  Today, the entire housing industry is trying to recover but is operating on fumes.  The ripple effects continue to impact 25% of the entire economy, including the land market. To take advantage of the result of the market dysfunction, you should buy one really high quality tract of land at today’s very attractive price.  Select well and that tract will provide many benefits to you over the next several years. Our goal is to help you thrive, not just survive your way through this economically historic time period.  Call us, we enjoy making folks look...

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