Monday, October 27, 2008

Where Do The Markets Go From Here?

What Market Am I Talking About?

The answer to that question is really that it is the readers choice to decide. Whether we are talking about housing, mortgages, commodities, stocks, bonds, currencies or commercial real estate, we are at what can only be called an extremely elevated state of flux and angst in all of them.

Some good news came out of the the housing sector on Friday with a greater than expected number for existing home sales from September. While good news, the reality is that the housing sector remains stalled and borrowers that want to borrow had better have stellar credit, strong income and plenty of money to put down.

The Ted Spread, after showing signs of improvement most of the week went into a stall as LIBOR remained pretty much unchanged and there was a renewed flight to quality in T-bills.

Volatility measured by the VIX reached new record highs. This measure of fear and anxiety which has normally ranged between 15 and 25 hit a record close to 90 before settling at 79.13.

So What Is The Answer?

The bottom line is that there are an incredible amount of cross currents and events that are going to play key roles. At this point many remain unknown as to how they are going to play out, which makes making bold predictions extremely difficult at best, and insane at the worst.

Who is going to win the presidential election in the United States, as this will play a role in how we move forward? How well and successfully will the bailout plan be implemented, and what new developments will crop up (such as the plan to include some insurance companies under the TARP)? How long and how deep will the recession be in the United States, Europe, Japan and the developing countries? Will there be any extraneous events that will create even more world turmoil? Can the governments around the world continue to cooperate with each other in the implementation of fixes designed to mitigate the problems.

Can we avoid the political finger pointing and search for the "cause" of this problem, accept the fact that politicians on both sides of the aisle are complicit and move forward in a bi-partisan way to really look for solutions that benefit the people that put them in office in the first place?

These plus any others that anyone can think of. I certainly hope so. Fed meeting this week, with no reason for them not cutting rates at least 25 b.p.

An Admission Of Economic Angst From A Surprising Source

The sports industry, normally only interested in squeezing every last nickel out of the people that attend the games (which with current prices tends to be the corporate suits), has begun to put a freeze on ticket prices in many markets, and some are offering packages designed to make a game affordable to the typical family of four that is quickly getting priced out.

Score one for the true "fans" (at least in some markets).

1 comment :

  1. Is The National Association of Realtors (NAR) inflating their membership count?

    According to various sources there are big difference between the real estate head count of the National Association of Realtors and other credible sources. Recently, RIS media stated total agents to be 291,000, Taro Systems stated 329,000 and NAR claims a whopping 1.1 million. A spread of over 700,000 real estate agents. There could be several motivates why NAR inflates their numbers and several Theories.

    Theory 1: NAR has long been the power to thwart off the IRS claim to exempt the Real Estate Agent as an independent contractor and not subject to employer withholding taxes. NAR has been the power behind the lobbying to have a special tax provision for the real estate agent in the IRS tax code. If it was not for this specific exemption, the Real Estate Company would be required to collect withholding taxes. Would the IRS maintain this exemption if NAR agent head count were significantly lower?

    Theory 2: In most sales organizations, the rule of thumb is 80% of the business is done by only 20% of the sales agents. This rule has long been accepted in the individual real estate office. That being said, if you take 20% of 1.1 million that equates to only 240,000 agents; certainly a far cry from NAR’s claim of 1.1 million agents. So is NAR counting agents that do little or no business or business to an occasional family member to receive commission discounts?

    Theory 3: NAR is about power and greed. High numbers bring credibility but often disconnected from the real world. NAR long fought to control the transaction between the buyer and seller. This practice held true until the internet let the cat out of the bag (control of homes for sale information). Through the internet the consumer can get free information from,,,,,, and all 850 individual Board of Realtors. Let’s face it, NAR has long lost the battle of control of the information, but still have not recognized it yet.

    Theory 4: Most Sellers that employed the use a Real estate agent have many things in common. How little we actually saw our agent and when inquiring on the status, only to be told they were working on it. I know there is a vast amount of labor that goes into selling a home but the agents all to often fail to communication their activity. So sellers assume that their agent is lazy and only in it for the commission. Large agent head count can make one think that a single bad experience was an exception and assume with the other 1,099,999 agents they don’t have the same problem of lack of communication. Again deception by large numbers! Many free tools such as an account on can bridge the gap of communication with its 24/7 360 degrees of communication to sellers.

    Theory 5: A substantial revenue stream to NAR is affiliate memberships, sponsored partnerships and National Trade Show conference revenue. Inflating Head counts misleads advertisers to believe in a higher return on investment and therefore spend more dollars in advertising, booth space and all the ala carte marketing material required from a single source. Is this much different from Bernard Madoff pozie scheme? In either case both are very misleading to all.

    So what theories support NAR’s motive. How about all five! If NAR maintains such a strict code of ethics, then why did they not rat out the irresponsible lending, appraisal and mortgage practices that has sent this country into turmoil.

    Douglas Lee

    CEO, Taro System, Inc.

    Grand Rapids MI