Best of the Internet Labor Day 2007

Do you find it nearly impossible to get through all the crap you need to do so you can get to the stuff you want to do? Avanoo gives us the answer to this problem in the best blog post for the month of August.

Who is going to kick Google’s butt and become the next killer web app? Robert Scoble thinks he knows. I think he may be right!

So what’s scarce now? Respect. Honesty. Good judgment… says Seth Godin, find out how you can capitalize on your character traits.

Falling real estate prices are good for about 70% of the population. Does that sound like crazy talk? It isn’t. Time magazine published an op/ed piece with a new perspective. I rarely agree with this yahoo (Kinsley), but this time he’s right and I’ve been saying it for the last seven years. The skyrocketing real estate market is bad for most of us.

Afraid of globalization and outsourcing? Is America being sold out to foreigners? No. It’s fearmongering nonsense. We heard it in the 80s – Japan was going to dominate the world and wipe out our economy. In Innovation and Entrepreneurship, Peter Drucker brilliantly countered every one of the fearmongers of the 1980s and 90s and each of Peter’s predictions has been proven correct. It’s the same today, we hear all the nay sayers foretelling doom and gloom for America… China and India are going to wipe us out economically. Bunk. We are helping each other grow. Wipro just out-sourced 500 jobs from India to Atlanta because of the high cost of labor in India. The cost of labor is rising everywhere in the world. Prosperity is spreading everywhere. Good, it’s about time.

The old industrial workday schedule (9-5) should die. We live in a creative, networked, always on, world economy. We need to maximize ourselves by working when we are most productive.

Want to set up a home based business/office but you have doubts and questions? put together a goldmine of information that may answer your questions.

Do you think the US national debt is out of control? That we are mortgaging the our grandchildren’s future? That the economy is going to come crashing down so dramatically that it will make the Great Depression look like Michigan Wolverines home opener? While the national debt is bad, it’s better than deflation. Steven Conover the Skeptical Optimist gives us an idea why the doom and gloomers are wrong. Everyone could use a little Marco economic education. The national debt is not analogous with your personal debt or your business debt. It is a completely different animal.

It’s back to school tomorrow for our public school children. My condolences… :-P

For all my regular visitors – I appreciate your patience with my infrequent posts recently. I’ve been buried in other commitments and I decided to wait until I had something to say rather than waste your time with filler posts.

7 thoughts on “Best of the Internet Labor Day 2007”

  1. And an excellent post it is. Thank you so much… I learned a little something today. Always a pleasure to return here… even after taking a break for a few months. :)

  2. Congrats to Appalachian State. A perfect example as to how over ranked Michigan is at the start of every new season. While they may consistently be a top 25 team, all the hype surrounding them each year is unwarranted. It is nice to silence this BS right out of the gate rather than drag it out for a few months.

  3. Yikes on the public school system picture…! I never thought I’d hear myself say it, but maybe there is something to school uniforms. Look at the Japanese… and their scholastic achievements. Something is horribly wrong with the U.S. public school system. Where’s the enforcement? I’m sure they at least have some semblance of dress code – what’s with the whimps too afraid to enforce it?? Sigh! Thanks for getting my blood boiling LOL!

  4. Hi Steve! You state: “Falling real estate prices are good for about 70% of the population. Does that sound like crazy talk? It isn’t. Time magazine published an op/ed piece with a new perspective. I rarely agree with this yahoo (Kinsley), but this time he’s right and I’ve been saying it for the last seven years. The skyrocketing real estate market is bad for most of us.”

    And from the article: “Whenever the price people will pay today depends on the belief that other people will pay even more tomorrow, you’ve got a bubble.”

    It’s just a shame so many are hanging their financial lives on these prospects! Use to be real estate was something you could count on, now you’ve got to ask yourself is there really anything out there??

    Food for thought. Thanks!

  5. James, the real estate market is just like any other asset class. In the 1990s, the stock market was a sure thing, while other periods made bonds a hot place to put your money. Real estate, just like cash, stocks or bonds will go through cycles, and those who get in too late get burned.

    Look at all of the people who were late to the party and began throwing money into tech stocks in 1999. Oops! It is seven years later and some may still have not recovered completely. But for a decade their friends and family were already in the market making money hand over fist, but by the time the majority of people had the courage to get in, it was too late.

    It has been the same effect with the housing market, just a longer bullish trend. For years it was almost common knowledge that if you bought a house or property, it would increase in value without a doubt. Unfortunately the trends can never last forever, and as people over the last few years began to get greedy and try to make even more money in real estate, they are finding out that they may get burned.

    This whole ordeal is just another reminder of how important it is to keep your wealth distributed across various asset classes. If it isn’t smart to have 100% of your money in a single stock, it isn’t smart to bet your retirement on the value of your house. By having an appropriate mix of everything from equities, bonds, cash, and real estate, you are far more likely to weather the storm regardless of what bubble bursts.

    Finally, one of the benefits of major downturns such as this one in real estate is that it opens up new opportunities. While it can be an ugly situation for those in trouble, the markets are efficient and while money is moving out of one type of asset, it will begin to move into others. Not only that, but the housing problem presents an opportunity for new business ideas to evolve in an attempt to solve the problem. It is this constant ebb and flow of the economy that drives innovation and provides opportunity.

  6. Jeremy and James,

    I purchased my first home in 1994. Our agent had been selling homes for 20 years in our market and he said, “After closing costs, don’t expect to break even for five years.” That held until 1998 when our maket exploded. It made very little sense to me then and it makes very little sense to me now. I talked to an agent at the beginning of the boom and he said, “Buy now, you can’t go wrong, you can sell in three months and make 5-10%.” No one hemmed or hawed, they just kept paying too much expecting that the price could only go up. Historically residential real estate is a poor investment scoring about 1-2% adjusted for inflation. There are exceptions, but generally your house is an expense, not an investment.

    I feel bad for the people getting burned right now, but I am also happy for the young people just starting out who will find housing more affordable. Just like the dot com bubble things got really stupid at the end.

    The big unknown here is immigration. the US adds about 2 million people to the population each year. Someone wrote that if it continues, that means we will create the equivilent of 12 cities the size of Los Angeles by 2050. In that environment, I don’t see how residential prices can’t increase dramatically. There will be massive demand for space.

  7. “Historically residential real estate is a poor investment scoring about 1-2% adjusted for inflation. There are exceptions, but generally your house is an expense, not an investment.”

    That is exactly the problem, people view their home as an investment and people are generally ignorant about inflation. Like you said, if your home is averaging a modest 5% increase in value on paper each year, after inflation you’re only making a percent or two.

    But, take an example where someone buys a home for $200,000, and at 5% and 15 years later, they sell it for over $400,000. The homeowners are ecstatic because they are amazed at how easy it was to double their money, what a great investment! Wrong, that was not an investment, and after all said and done, you probably lost money. After all said and done, you may have realized a true gain after inflation of $80,000. Even then, when you factor in the interest you’ve paid and the relatively small amount of principal paid off during that time, your gain on that investment isn’t such a pretty picture.

    People simply don’t factor in inflation, and they don’t even consider interest or equity over time. What most people see is the fact that they can double their money in 15 years, and when you’re talking a few hundred thousand, it makes people think they are making good money on their home.

    It all comes down to a shift in the way people think about their homes. For the longest time it has been the American dream to own a home and everyone wanted a piece of it. When people were making quick money in short amounts of time with real estate, more people wanted a piece of the action without taking the time to understand what they were doing. Sure, owning a home is great, and it can increase in value and result in making money, but it just isn’t as simple as most people are led to believe.

    I’m also interested to see how immigration plays out. Land is a precious resource, and like you said, when you have to keep building houses or apartments, you need to buy more land, and that should spell increasing prices.

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