Market Perspective

Forces Impacting the American Economy – Part 5

Posted by on Feb 23, 2012 in Ned Massie, Perspective | 0 comments

We started this series reviewing the three strongest negative and three strongest positive forces impacting the American economy.  After looking at what we believe are the three most negative forces, we are now looking at the three most positive forces.  Of the positive, force number 2 is: Interest Rates – The Federal Reserve is going to keep interest rates stable and low during 2012 because they recognize that the American economy needs the accelerator to continue to be pressed down.  Although the American economy has been in recovery for two years, the European Central Bank (ECB) proved inept, resulting in a European Recession of 2012. The Fed is fighting two wars, a tepid American economic recovery partially caused by the American banking industry being under siege and the European Recession of 2012. Therefore, The Fed launched in the fall of 2011 what they call “Operation Twist” in order to reduce mortgage rates and it is succeeding.  The USA will go into the spring market of 2012 with mortgage rates in the 3’s for perhaps the first time in American history. How much of a positive influence low mortgage rates will have on the USA residential market in the spring of 2012 will be determined by whether or not the current administration in Washington gets out of the way.  Since the current administration is an advocate of Big Government as the solution to everything, look for the impact to be muted but mildly positive. We enjoy helping our clients determine the best strategies for their land investments.  Call us...

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Forces Impacting the American Economy – Part 4

Posted by on Feb 17, 2012 in Ned Massie, Perspective | 0 comments

In this series we are looking at the six strongest forces, three negative and three positive, which are impacting the American economy.  Having examined the three most negative forces, here is the first of the positive forces: On Shoring – Tsunamis in Japan and turmoil in China have helped American based companies realize that having products produced in the United States enjoys several positives in terms of controlling both costs and supplies.  Production based in the USA enjoys many benefits absent in China and other countries. As a result, there is enough movement of manufacturing jobs from overseas countries back to the United States that the term “On Shoring” has been created to describe this phenomenon.  This is a reversal of the “Off Shoring” that occurred over the last 20 years – watch this shift grow. However, understand that the new facilities will have a higher use of technology, including robots, than the manufacturing facilities that left America in the 1990’s.  Even with that significant change, the overall impact of On Shoring will be a net positive for the American economy. If we had real leaders in Washington, this trend would be maximized.  The 2012 elections will determine whether the leadership will be sent to Washington that will encourage this paradigm shift. But there are other important and positive forces at work in the American economy.  Keep tuned as we explore them. Call us today so that we can help you maximize the opportunities that the land market recovery is providing to land investors.  Remember, not all tracts of land are equal.  Let us help you determine the best strategy for your land investments....

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Forces Impacting the American Economy – Part 3

Posted by on Feb 9, 2012 in Ned Massie, Perspective | 0 comments

Continuing our series on the six strongest forces impacting the American Economy, we need to pay special attention to one major negative force… China. China – Like all command economies, China’s will ultimately fail.  Too many distortions will build up over time because of the lack of feedback in a command/communist economy. Without the market feedback of capitalism, capital is wasted on producing unwanted goods.  The excess produced goods ultimately drive down the value of those excess goods.  The result is called an economic dislocation but to us laymen it is recession or depression. The good news is that the Chinese Yuan is almost totally disconnected from the balance of the world.  This means that the turmoil that China is experiencing internally (one symptom being a reported 180,000 riots in 2011) will actually not transfer to the rest of the world, EXCEPT in the form of commodity prices. The Chinese Communist government continues to use construction to provide jobs to the masses so that there will be less turmoil.  Employed folks typically do not riot so stability requires the Chinese leaders to create jobs. Having built some cities that are unoccupied, China has now announced plans that they are going to build more apartments over the next five years than exist in any country in the world.  The construction should keep their economy percolating and global commodity prices stable.  Without it, the opposite on both of those would be true. However, it also means the Chinese Bubble will continue to expand.  The question is not if it will “Pop”, but when.  While the bursting of the Chinese Bubble will be severely negative to the world economy when it occurs, the short term negative is the continued false demand for commodities which will heighten the speculative fever in each of the relatively small commodity markets. Speculation means volatility and volatility means uncertainty…and business hates uncertainty.  Hence, heightened uncertainty is a negative force. Next time we will begin looking at the three positive forces impacting the American economy. While the land market recovers, you have the opportunity to reposition your land investments – we would be happy to help you determine the best strategy.  Call us...

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Forces Impacting the American Economy – Part 2

Posted by on Feb 3, 2012 in Ned Massie, Perspective | 0 comments

From our perspective there are six strong forces, three negative and three positive, that in combination predict the American economy in 2012.  In this series we are looking at each of the forces individually, both negative and positive.  Here is negative force number 2: Negative Force II – Europe.  Although they are currently financially stronger than the European banks, anyone who believes that our American banks are not at risk to the potential contagion of European economic distress is not really paying attention.  Money today moves at the speed of a single global electronic market. It is our opinion that Chairman Ben Bernanke has been brilliant during this economic crisis, especially when compared to Mr. Trichet of the ECB (European Central Bank).  While the former ECB Chairman often lectured Dr. Bernanke, as a result of Trichet’s bad decisions, Europe is headed back into recession while the U.S. is in recovery. Wondering how deep a recession Europe will experience means Europe is an economic negative force.  In our global economy, the economic water is always trying to find its equilibrium point. The fact is that the European economy is or will be in recession in 2012.  The question is… will the European Recession of 2012 be deep enough to cause the U.S. to go into recession as well? We will give our answer at the end of this series. In the meantime, the recovery of the land market gives you the opportunity to reposition your investments for the next decade.  Since not all tracts of land are equal, let us help you determine your best land investment strategy.  Call us today....

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Forces Impacting the American Economy – Part 1

Posted by on Jan 27, 2012 in Ned Massie, Perspective | 0 comments

From our perspective there are six really strong forces, three negative and three positive, that in combination predict the American economy in 2012.  In this series, we will look at each of the forces individually, both negative and positive. Negative Force I – The Banking Industry Not just here in the United States, but around the world, banks are de-leveraging.  In some cases, such as here in the US, the pressure to do so is driven by bank regulators.  The bank regulators are insisting that banks get their capital in proper ratio to the amount of loans (which banks call assets) on their books. In Europe the pressure is also from the market because of recent negative impacts to the stock of banks that raised capital by selling additional stock.  Since banks cannot raise more capital by selling stock, one alternative is reducing the amount of their loans. Either way, banks are reducing the amount of loans on their books.  The bottom line for the American economy is that until banks INCREASE their lending, which expands the available amount of credit, the economy will continue to struggle. Therefore, this is the most negative force.  It will probably slowly shift as individual banks get healthy enough to begin to INCREASE their loans.  That slow shift means a slow recovery. We are happy to help you determine the best strategy for your land investments.  Call us...

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Land will be THE BEST Investment for the Next 40 Years – Part 3

Posted by on Jan 19, 2012 in Ned Massie, Perspective | 0 comments

As we discussed in the previous articles, in 1964 my father bought 80 acres in the country for approximately $65 per acre.  At the time he was convinced that he had made a bad decision. 47 years later, after the value declines experienced in the Great Recession, that 80 acre tract of land is worth 40 times what he paid for it.  Is there any other asset or investment he could have made that produced a higher rate of return over the 47 years? It is important that we examine some of the reasons why his investment rate of return was so impressive: Inflation – Certainly played an important part in the increase in value but is far from the whole story.  Good land is a phenomenal hedge against inflation and the land that he bought absolutely accomplished that investment objective. Increased Demand – Population growth means increased demand for food and fiber.  When the land was purchased by my father, its highest and best use was crop land and timber land.  Today, the land is mostly timber land but it has other potential uses as well.  As the population of metro Richmond has increased the edge of metro Richmond has gotten a lot closer to my father’s 80 acres.  Therefore, reflecting what land can provide, the demand for land has increased over the 47 years. Of the two components, the increase in demand for a variety of reasons far outweighs the inflation in terms of determining an increase in value of 40 times the original investment.  In today’s uncertain world, there is a lesson to all those who want to place their money where they can get the highest rate of return and be secure. We enjoy helping folks with their land investments because we understand that not all tracts of land are created equally.  Call us, we would like to help...

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