Building today’s Real Estate Portfolio

You can always build a Real Estate portfolio, no matter what the market is doing. There is always something to buy that will fit your criteria, it’s just harder to get some times. My real question is why anyone would want to build a portfolio today because of all the deep pocket investors that are flush with cash. I look at Ballard as the perfect example. All of those apartment buildings have given new life to Ballard, but it may not be the life Ballard wanted.

Massive development has brought in thousands of housing units that cater to renters, who may become life time renters. There is no reason not to be a renter if you can make better equity by managing your money, and outside investments. Many people use gold as an example. If you saved your down payment money with gold purchases over the past ten years you may have made a profit better than other savings vehicles. I personally don’t like gold it’s just a topic that gets thrown into the housing bubble mix.

That’s right, I used the example of the housing bubble. We had a major Real Estate market crash in 2008. Since that time the Federal government has done everything it could to prop up the price of property and created another bubble through deep pocket, all cash investor buying. Those Real Estate purchases have been for returns no greater than 6%, but there may well be some price appreciation based on when, and what the investor bought.

I see other opportunities for cash, but Real Estate may be safe with the backing of the United States government. I have been wrong before, and will be again, but I don’t see how a small portfolio investor is going to come out well in today’s market place. To me it’s a sever gamble to build a Real Estate portfolio. I’d wait until the Fed moves on to building a stronger economy.

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Day Trading

Day trading is a term used for stock market investment done usually from home by an investor who is at home or a one person office. It’s an addictive practice that relies a lot on personal research. I forget about day trading because what I do is all Real Estate related. I would day trade if I weren’t so overly involved in our small business. Small business is the best investment any one cam make today.

Before this new stock market initiation there was only one investment strategy for us to have which would be in all cash Real Estate, small investments less than $100K. Probably there are good deals in emerging markets in that price range, but I don’t think you need to go any further than Miami. Here in Seattle you can go South to Tacoma  to find $100k properties, or less. The rental returns pay higher than any bank.

I spent some time looking at the stock market in the past couple of days, and listened to Cramer a few times. With this new wave of knowledge I started looking more closely at some of the companies that I follow, from afar, through the financial news.

For as much attention as the stock market, and commodities demand there are some real sleeper companies that are traded in the stock market, and some that are coming out with Initial Public Offerings that are pretty advanced.

I don’t have stock tips for you. All I’m saying is that there are places for cash that may have great returns. It’s something I would probably explore, more, and will set up an account this week end, with a financial planner. I don’t think it’s a place I want to go alone.

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The Decline to Deflation

One of the Fed Presidents said today he would stop Quantitative Easing if he had his way. He finds the results of this practice sketchy, and I agree, it seems to be doing more harm than good.

Low interest rates with low risk means safe harbors for cash. The global markets are awash in cash with to few opportunities. We even have cash flowing into residential Real Estate which pushes up competing bids for the same properties. The first time buyer has very little chance against an all cash investment purchase.

In terms of Real Estate, which has become extremely volatile, it would be one of the last places cash would go, yet here we are. It looks more like a pump, and dump to me, with investors hoping for quick profits by over heating the market place.

Banks have found more money in lending to each other than to the consumer, even though the consumer is paying stupid prices for everything due to low financing costs. Once you take low monthly payments off the table the price of things goes down.

Cash is already leaving commodities, like gold, and oil. The price of oil, and gas are declining which adds to my idea about deflation. The global economy is slowing, in order to get more cash circulating we have to make thing more affordable.

Let me repeat, once you take low monthly payments off the table, prices have to decline. When it’s no longer smart to buy with a credit card, or loan, pricing is all that is left.

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Deflation would be Good

There was was no Brie Cheese at Sam’s Club, and QFC has some lower priced substitute brands of Brie rather than the good stuff. I personally want the more expensive good Brie if I’m going to buy it, which I admit isn’t often. There has been a lot of substitution at the super market lately. Lower prices on coupon ads to get you in the door, but I see fewer of the higher priced products in the grocery.

I noticed gas prices are coming down after touching $4 a gallon again. What seems to be lagging is the price of housing, and transportation. Some cars have come down in price, but the auto industry, like Real Estate, is living off that low interest rate payment plan.

The consumer has debt, lot’s of it. There are charts, and graphs all over the place, the debt clock is the one I put up the most. Deflation would help to broaden our national economy so that more people had more money to create more velocity of money in the middle class. Something has to give in order to get more dollars into working people’s hands.

Business can survive, and thrive with a little lower price point. Business can get more market share by attracting consumers with a reasonable set of pricing rather than having to make a killing on each sale. We are a cash rich economy right now that is stuck by the fact that cash is sitting in reserves rather than in working capital.

Next post will be about how the government interference needs to come to a slow end, and taxation, along with regulation of small business needs to be lightened.

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Economy Improvement

A lot has gone on since the sequester came, and went with a whimper. Most notably, for me is that the stock market stayed the same, and Real Estate seems to be hot. Then we got the new unemployment figures this week, and it looks like another shoe is about to drop. Well, it may drop, but it won’t mean anything. We’ve got war with Korea on the horizon.

War with Korea would be very good news. If we could get that Korea thing settled, one way or the other, Asia would be better off. China seems to have come around to that way of thinking also. I have great faith in our trade capacity with Asia. We, especially on the West coast, have a lot to gain.

As far as Europe goes, I don’t really care. All Europe has done is make the US dollar that much more attractive. The emerging markets concern me, but I think they have made some in roads in capital flight that has also improved the US economy in terms of Real Estate.

Real Estate prices in India, China, Russia, and South America have quadrupled. A lot of those cash purchases in California are attributed to foreign investors. If you can sell off your equity in India, China, Russia, or South America, you can invest here for a smaller return, but a safe harbor.

Trade with Asia, and capital flight make me excited about our economy. All we need now is to increase manufacturing, which I think is coming. I think with the low returns available in the financial market there may be less risk aversion in things like building products here. We have everything we need to be a successful exporter of goods.

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Introducing Treasury Secretary Jack Lew

There was nothing significant about the rounds that the new Treasury Secretary made to different media outlets this week, except to assure us everything is on track to economic stability. It seems to me he was a calming influence on a week of some extremes.

The stock market made new highs, and bank executives were grilled by the Senate, even Allen Greenspan made an appearance this week saying everything was fine in the financial markets. We are of course faced with across the board budget cuts, that Paul Ryan budget proposal, and a lagging stalemate in Congress.

What I think is going on is that the Fed is getting ready to pull back the easy access to cheap money. The too big to fail banks are being asked to over capitalize, and in that process interest rates will go up. Compared to other countries our banking system looks like a safe bet, and the value of our currency is solid.

It seems like everything is on track for a stand alone banking system, free from government help. It would also mean that the pricing of Real Estate will become more realistic. Ultimately it will mean consumer credit will tighten.

I look at it as good news, but we will see.

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