By Jonathan Hipp
It is very easy to justify why it’s okay to be mediocre in today’s real estate market when you listen to the news in its various forms. And then there are all your colleagues and competitors validating all your fears. Markets like this require you to adopt the champion’s creed if you are going to succeed and grow even when all common sense seems to justify the opposite way of thinking. I believe that misery like’s company and it’s easy to become involved in those types of conversations and relationships with family, friends and associates. The thought and attitude used to be that the good times would never end as capital was flowing relentlessly and it seemed everyday that somebody was flipping a property for a big profit and brokerage commission even before they had gone to settlement. It was so easy; we all had keys to the castle. Many brokers and investors made big money by just showing up and playing the game. So here we sit today licking our bruised wounded egos and reflecting and asking where we go from here. I find this from Roger Staubach, former chairman and CEO of the Staubach Company, very fitting for the challenges our industry and ourselves face today.
“To me success is being able to feel good about how you’ve done things. You have to have balance in your life. You can’t think only about ‘what’s in it for me?’ You have to give back and ask for help and say you’re sorry and contribute to the success of others. And you can never give up. Athletics taught me that. You must work hard, prepare, learn from your losses and continue to fight until the very end.”
It’s very true we don’t know how long this cycle will last and we probably haven’t reached the lowest point yet. But I can tell you that it’s always darkest before the dawn.
Showing posts with label free markets. Show all posts
Showing posts with label free markets. Show all posts
Tuesday, March 3, 2009
Wednesday, February 25, 2009
Cohorts of Capitalism
By Cheri Martin
I’ve heard all the statistics, which seem ever-increasing on a daily basis, but during my recent search for a new apartment and subsequent endeavors to furnish my humble abode with furniture and electronics, I have cause to reconsider the widespread premise that America is in a recession.
Capitalism the basis for our economic wealth system in America has been described by different economists, different ways. Milton Friedman, an American economist, statistician, public intellectual, and Nobel Memorial Prize recipient in the field of Economic Sciences once supplied “the social responsibility of business is to use its resources and engage in activities designed to increase profits through open and free competition without deception or fraud.” [NYT, 1970] The Economist, a weekly news and international affairs publication which advocates free markets and minimum government regulation to prevent business monopolies, has hailed Friedman as "the most influential economist of the second half of the 20th century…possibly of all of it."
Fast forward to the start of the economic downturn in December 2007, the fall of Wall Street and the financial sector, coupled with the end of the housing boom and, consequently, nearly 3.6 million people unemployed to date. Yes, for many Americans, including me, the current climate is quite frightful, but I wholeheartedly believe this is merely a market correction and a return to moderation.
For example, when I began looking for an apartment in December 2008, I found less than 10% vacancy rates and $1,200+ pricing. Some of the residential communities, offered special lease incentives, but the lease structures were based on competitive rates and pegged to make money, rather than lose it. This was contrary to the message that mainstream media sends to me everyday that the times could be indicative of the end of days for America the Beautiful, as I know and love her, as a capitalist society.
In January 2009, after 60 years in business, a major US retailer of specialty consumer electronics, appliances and PCs announced that it was closing its doors. Since the announcement, the retailer has closed many of its stores and liquidated inventory to sale at select locations. A few weeks ago, I ventured out to check the prices on their large, flat screen televisions. Upon my arrival, I found the prices were higher on the products with only a minimal discount being given, than they were before they filed for Chapter 11 bankruptcy. “How is this possible that your prices are higher when you are going out of business, I thought, when most of the remaining inventory is previously used display screens?” It just did not seem logical. The store was packed with people like me interested in seeing how much bang they could get for their buck. There were a few takers, but mostly window shoppers willing to return when the real discounts were applied to the products.
My expedition to purchase furniture led me to several different retailers offering similar style and quality products, but under different brand names with moderate to high- end pricing. All the stores were located in the same 1 mile demographic. One of the high-end retailers was going out of business, so I wanted to see what I could find. What I found was $3,000+ beds, yes, ONLY the bed, and $7,000 sofas, definitely out of my league. Given the lack of foot traffic in the store during my visit, probably not a realistic approach for most consumers during these times, especially when the moderately-priced retailer offered the same merchandise at lower prices, with additional discounts and credit financing.
Piero Sraffa, an influential Italian economist, defined capitalism as an entire system of social relations among both producers and consumers, but with a primary emphasis on the demands of production. According to Sraffa, “the tendency of capital to seek its highest rate of profit causes a dynamic instability in social and economic relations.”
The economists seem to have the right idea across the board that capitalism and its success or demise is largely based on relationships, how we choose to forge forward as businesses and consumers, employers and employees, government and citizens. I believe the techniques used to be successful by some in the commercial real estate field are a good example of those that should be applied to revive our sluggish economy. I’ve seen Buyers, Sellers and Brokers alike make concessions on pricing, terms, closing costs, referral fees, etc. in the best interest of getting the deal done and not squandering prime opportunities. The principles of building loyalty, while cultivating new clients are essential to longevity and boosting your image and presence.
Many Americans have money which they are ready and willing to spend and credit to use, but wisely. Some of the businesses I dealt with during my quest, showed me that they recognize how significant the emphasis should be that is placed on the “relationship” component in order to get deals done, which I believe is why they have weathered the current economic storm, and continue to do so. These businesses realize that as cohorts of capitalism, we have a shared responsibility greater than supply, demand and product, to embrace capitalism and protect it, no matter how volatile the times! Capitalism is synonymous with freedom from my viewpoint, and isn’t that what America is ALL about...FREEDOM!
I’ve heard all the statistics, which seem ever-increasing on a daily basis, but during my recent search for a new apartment and subsequent endeavors to furnish my humble abode with furniture and electronics, I have cause to reconsider the widespread premise that America is in a recession.
Capitalism the basis for our economic wealth system in America has been described by different economists, different ways. Milton Friedman, an American economist, statistician, public intellectual, and Nobel Memorial Prize recipient in the field of Economic Sciences once supplied “the social responsibility of business is to use its resources and engage in activities designed to increase profits through open and free competition without deception or fraud.” [NYT, 1970] The Economist, a weekly news and international affairs publication which advocates free markets and minimum government regulation to prevent business monopolies, has hailed Friedman as "the most influential economist of the second half of the 20th century…possibly of all of it."
Fast forward to the start of the economic downturn in December 2007, the fall of Wall Street and the financial sector, coupled with the end of the housing boom and, consequently, nearly 3.6 million people unemployed to date. Yes, for many Americans, including me, the current climate is quite frightful, but I wholeheartedly believe this is merely a market correction and a return to moderation.
For example, when I began looking for an apartment in December 2008, I found less than 10% vacancy rates and $1,200+ pricing. Some of the residential communities, offered special lease incentives, but the lease structures were based on competitive rates and pegged to make money, rather than lose it. This was contrary to the message that mainstream media sends to me everyday that the times could be indicative of the end of days for America the Beautiful, as I know and love her, as a capitalist society.
In January 2009, after 60 years in business, a major US retailer of specialty consumer electronics, appliances and PCs announced that it was closing its doors. Since the announcement, the retailer has closed many of its stores and liquidated inventory to sale at select locations. A few weeks ago, I ventured out to check the prices on their large, flat screen televisions. Upon my arrival, I found the prices were higher on the products with only a minimal discount being given, than they were before they filed for Chapter 11 bankruptcy. “How is this possible that your prices are higher when you are going out of business, I thought, when most of the remaining inventory is previously used display screens?” It just did not seem logical. The store was packed with people like me interested in seeing how much bang they could get for their buck. There were a few takers, but mostly window shoppers willing to return when the real discounts were applied to the products.
My expedition to purchase furniture led me to several different retailers offering similar style and quality products, but under different brand names with moderate to high- end pricing. All the stores were located in the same 1 mile demographic. One of the high-end retailers was going out of business, so I wanted to see what I could find. What I found was $3,000+ beds, yes, ONLY the bed, and $7,000 sofas, definitely out of my league. Given the lack of foot traffic in the store during my visit, probably not a realistic approach for most consumers during these times, especially when the moderately-priced retailer offered the same merchandise at lower prices, with additional discounts and credit financing.
Piero Sraffa, an influential Italian economist, defined capitalism as an entire system of social relations among both producers and consumers, but with a primary emphasis on the demands of production. According to Sraffa, “the tendency of capital to seek its highest rate of profit causes a dynamic instability in social and economic relations.”
The economists seem to have the right idea across the board that capitalism and its success or demise is largely based on relationships, how we choose to forge forward as businesses and consumers, employers and employees, government and citizens. I believe the techniques used to be successful by some in the commercial real estate field are a good example of those that should be applied to revive our sluggish economy. I’ve seen Buyers, Sellers and Brokers alike make concessions on pricing, terms, closing costs, referral fees, etc. in the best interest of getting the deal done and not squandering prime opportunities. The principles of building loyalty, while cultivating new clients are essential to longevity and boosting your image and presence.
Many Americans have money which they are ready and willing to spend and credit to use, but wisely. Some of the businesses I dealt with during my quest, showed me that they recognize how significant the emphasis should be that is placed on the “relationship” component in order to get deals done, which I believe is why they have weathered the current economic storm, and continue to do so. These businesses realize that as cohorts of capitalism, we have a shared responsibility greater than supply, demand and product, to embrace capitalism and protect it, no matter how volatile the times! Capitalism is synonymous with freedom from my viewpoint, and isn’t that what America is ALL about...FREEDOM!
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