Spending the weekend trying to figure out if there is a true way to differentiate yourself as an investment banker 1 month ago
Joshua Peterson tweetdeck social site mashup is great...when are they going to include linkedin, justmeans etc!? 1 month ago
Just read an hbr article about the reconstructionist approach to defining and executing corp strategy....this is what banks should be doing 1 month ago
So Christmas is over and what we expected was realized, retail sales were dismal for the holidays and the industry is bracing for massive carnage! Being a former real estate guy, I think of not only the retail businesses, but also the massive amount of real estate that has been committed to bricks-and-mortar operations. There literally is a place to buy WHATEVER you want on any corner in any adequately populated city in the United States. Overall retail vacancy averaged roughly 7.0% over the past few years…I’m thinking mid-high teens once things calm down. But, its not where we land that will be the most interesting question, but where will will “normalize”.
In 5-10 years we could be back on the path to prosperous bliss…spending away and saving nothing. However, I think that there will be a fundamental shift in people’s shopping habits for a number of reasons that will result in the decline of retail real estate and permanently change retail and retail real estate as we know it:
1. I think people have realized that the feeling of instant gratification is not worth the long term pain. I, along with many others, am guilty of this financial suicide. I’ve analyzed the interest I’ve paid on my balances over the past few years…disgusting!! People will be more prudent with credit cards (pay balances off every month), and folks will start saving their money for those rainy days.
2. McMansions out…more realistic sized homes (1,500-2,500 sf) in! If people have smaller homes…well… they buy less stuff.
3. Two thousand nine will be the year online retail will be a focal point for retailers because of the lower cost structure. Yes, people like to go shopping for the “experience”, however, many of those people who go for the experience end up doing comparison shopping and buying it online anyway. So…retailers must still have stores…but, they may be able to get away with fewer stores…fewer stores=bad for real estate. Also, with Gen Y in the driver seat, many of them prefer to use the Internet. The shopping mall is really only a place to hang out with friends.
I’ve enjoyed many of the small shops and boutiques on one of Denver’s most heavily traveled boulevards, Broadway, unfortunately, I know many of these unique treasures will disappear over the next couple years as things get tougher. It will be interesting to see how the retail and retail real estate landscape changes.
So now you got what you wanted (well at least $17.4 billion of it). So now it’s up to your management, the workers and the UAW to make this right. There are many of us (including myself) who feel you don’t deserve this. The legacy of the car industry will be used at business schools worldwide to teach future leaders how NOT to run a company. But now you have been awarded the taxpayer’s hard earned money, so what are you going to do with it? Management, will you promise to no longer operate within the status quo, will you promise to have cutting edge 21st century thinking instead of 19th century thinking? Will you promise to make more fuel efficient or better yet, alternative fuel vehicles the core of your fleet starting in 2010? Will you promise not to be back in 6 months or less asking for more money? UAW, will you promise not to NOT make the US auto industry the most uncompetitive in the world by holding management and shareholders hostage ?
These are the questions we, the taxpayers and funders of your bailout must know. If you can’t answer us truthfully with the answers we expect then I fear not only for you and the hundreds of thousands of workers you employ, but for all of America. I don’t want us to be seen as a Pinto!
I first want to apologize to those readers who have taken the time to read my posts. I’ve been away for too long. I truly appreciate your readership. Lately, I’ve been focusing my energy on landing permanent employment.
One thing I have noticed while perusing various sites dedicated to the Cleantech Revolution, is that folks (both advocates and pundits) are starting to question the viability of the revolution during a recession (or depression) and the precipitous drop in oil. I have two points to make to keep us focused on what we are doing.
1. I’ve been reading a pretty interesting book, “Behavioral Finance and Wealth Management” by Michael Pompian, which touches upon some of the irrational actions and decisions that investors make, and how to adjust our investing strategies to take into account the fact that we are…well human. The book outlines several “biases” that many investors exhibit that would lead to sub-optimal investing decisions…one of these biases is called Representative Bias. The general description of Representative Bias per Pompian is that as humans, “people have developed an innate propensity for classifying objects and thoughts”, and “when they confront a new phenomenon that is inconsistent with any of their pre-constructed classifications, they subject it to those classifications anyway, relying on a rough best-fit approximation to form the basis for their understanding of the new element”. Many people still view the energy revolution as something that would be nice if we could do it if its convenient…maybe “save a few trees”, maybe “clean up the air a little bit”, but they don’t understand it is something we MUST do for the sake of human kind and to maintain or improve our quality of life. For many years the alternative energy movement has been viewed as a “tree hugger” or “hippie” movement so investors, I fear, still may classify it as such…almost as a luxury as opposed to a necessity.
2. This recent post on Seeking Alpha exemplifies the narrow-mindedness of those pundits who attempt to analyze the problem. Like looking at the current cost of oil only, it is simply one input in the entire economic analysis of using fossil based fuels instead of using alternatives. First of all, we all know that oil will not stay at $45 forever. When we emerge from this global slump (the big question is when), the price of a barrel of oil will rally as the global race to secure supplies will resume. Second, many do not factor in the myriad of longer term negative economic impacts of using fossil fuels vs. alternatives.
So I say to all those pundits…you are missing the picture. Just analyzing one input to the analysis is dangerously incorrect. To all those faithful investors who are hanging in there (and who have been pummeled by the market), we must stay the course. The tide has shifted in our favor despite all those negative headlines. We are going through very challenging times. More has changed this year than the past 70+ years. The economic turbulence gives us a chance to succeed in our revolution. We have to remain strong and see this through for the sake of humankind.
Below is my response to the mass email I received, launched from a McCain supporter. The back and forth has sparked some good discussion.
It is amazing how the election season brings about such passion…this is good old fashioned American politics…love it or hate it…we find ourselves willingly or unwillingly ensconced in all of its glory.
One thing that disturbs me the most is that racism, sexism, ethnic and religious prejudices are starting to rear their ugly heads…in America! The richest, most advanced country on the planet…still succumbs to such base hatred and bigotry. We need to get passed this..now!
So I ask all of you…people that make more than $250k and those who make only $10k…is America better off than it was 8 years ago? I believe we can ALL honestly answer that question…the answer is NO. Something has to change in the country the status quo is broken. How can any of us say we love America when we kick our fellow Americans in the teeth just to get ahead for our personal benefit. Hey…let you in on a little secret…IT’S OK TO GIVE YOUR FELLOW NEIGHBOR,YOUR FELLOW AMERICAN, A HELPING HAND! Greed and lack of accountability has infected this country like a virus…destroying us from the inside out until it totally consumes us leaving an empty shell. I am a top 5% earner…and I don’t care if my taxes go up…because I love my country and I don’t like where it’s headed! I don’t have to service a mortgage on a McMansion (who needs a 6,000sf house anyway) nor do I need a fleet of SUV’s! I would rather help rebuild this country than buy a bunch of crap I don’t need…let’s look at it as an investment in our country. For those of you who state that the government does a horrible job of running ANYTHING…well, let’s just look to the spate of scandals and bankruptcies in corporate America over the past decade to quell those concerns.
Are you happy to spend $10 billion a day for Bush and Cheney’s oil war? This money could have been used here to develop alternative fuels and for the education for OUR future leaders! The total tally will be $3 trillion dollars when its all said and done! Who is going to pay this…all of us! I don’t know about all the readers here, but I would rather devote my $3 trillion of tax dollars to develop alternative fuels, to address our crumbling and outdated infrastructure and re-introduce our children to math and science, than to death and destruction.
This country needs change Barack Obama is the answer for this change. The status quo of the neo-con, republican political machine will not bring about change to this country, but will only sink it further until it plunges into the abyss.
I’m half way through the FDR biography written by Jean Edward Smith. I’m in the meat of th book which describes FDR’s election for Governor of New York in 1929 and the Presidency in 1932. The period of time, of course, is uncomfortable similar to today…as I mentioned in my previous posts.
Roosevelt made a comment that strikes at the heart of what we need to achieve today…we need to assist ALL Amerians for America’s sake. His comment that “Hoover sought temporary relief from the top down rather than permanent relief from the bottom up. These unhappy times call for the building of plans that put their faith once more in the forgotten man at the bottom of the pyramid”, should be the calling card ALL of us regardless of socioeconomic status, race or creed…now!
The rally today was tremendous. The chilly, Denver fall day was a perfect backdrop. The crowd was immense and enthused about the man they will put into the Presidential office in 9 days. Barack, was his typical fantastic self. He spoke of something that is especially important to me…the move to make Americans feel proud again…for Americans to feel like, Americans once again.
I think we have forgotten how to be Americans. We have forgotten how to walk down the street and say “hello, good morning”, we have forgotten how to help the struggling American elderly woman cross the busy street. We have forgotten how to help out our American neighbors. Some of us our so disconnected from one another that some of us don’t even know our neighbors! It’s so easy to do in this world of sprawling suburbs, high speed HOV lanes, texting and email and the pressures of an ever increasing, hectic life!
Let’s slow down. Let’s opt for the walkablke, bickeable cities instead of the impersonal car-centric suburbs, ride your bike or walk…say hi to the people that you pass. Riding your bike or walking is an amazing thing, you actually notice so many things about your neighborhood that is impossible zooming by in a car. Pick up that phone and actually CALL them! Look after your neighbors…your fellow Americans. Let’s learn to be Americans once again.
I’ve been doing a ton of networking with new contacts…and have had several discussions with alot of my friends and acquaintances as well. The premise of most of those discussions have been positioning…positioning for new opportunities as soon as the dust settles from our current mess. In addition to picking up the wrecked remains, the push to become more global will intensify.
I recently had coffee with one of my friends ( and aspiring Cleantech entrepreneur), and I came up with the phrase, Humanist Capitalism. I quickly described Humanist Capitalism as, making a difference in our society and making a little bit of money at the same time. It’s important not to sacrifice “doing good” for the sake of profits. This is a core value of mine, and I believe that many are joining the movement. For example, I’ve heard evidence of folks leaving industries they’ve been in for most if not all their careers to join the Cleantech/Green Collar Job movement. Not only because this will be a source of tremendous growth and opportunity, but because they want to say…”I want to help save this planet, for my children and their children!”
In the 21st century, Global Business views and Humanist Capitalism will be overriding themes. We must dismiss unilateralism, overriding arrogance and profits at any costs. It is a new era of business…do you agree?
The release of the Beige Book today cited “Broad Weakness”, a reported (but obviously expected) continued plunge in retail sales…-1.2%, and the worst of all, employers will be awarding little, if any pay raises next year (if you are even lucky to still have your job). Right now the real median income is less than it was 8 years ago ($50,233 vs. $50,577) during one of the largest boom cycles…are you kidding me! Ehhem…someone…some millions have been absolutely, completely left out of any type of prosperity. If they bought and held both equities and homes…well…they lost out even more!
So, currently, there is over $900 billion in revolving credit out there. Revolving credit (which we know as the beloved credit card) are consumer credit card balances…what they don’t pay off every month. We are getting real close to massive consumer capitulation here. Loss of job, loss of home, diminished savings = throwing in the towel and telling Giant Credit Card Co., I’m not going to pay the bill this month….I’m not going to pay…ever! For many bankruptcy doesn’t seem so bad anymore, hell, their credit was already ruined when they sent the jingle mail. Recently, a consulting firm forecasted a charge off of $96 billion in 2009, I think it could be worse than this.
So here is the next shoe, massive write-downs due to credit card defaults, it has started to happen…the fallout will increase dramatically next year. The credit card crisis will not be AS deadly as the mortgage crisis, but the poison will once again infect the world as…you guessed it….credit card recievables are packaged up into ABS (Asset Backed Securities) and sold to money managers around the globe.
Lastly…and I hate reading…and agreeing with posts like this because I’m ordinarily a very optimistic person, but, here is a good read I found on Seeking Alpha…“Our Coming Depression”.
I had mentioned on my post “Tough Times”, that my days at my current position are winding down. So I am embarking on a road of transition…from a commercial real estate banker to a Cleantech/Sustainable Product Private Equity Investor/Venture Capitalist. (Anyone out there hiring!?) I’m hoping that I could apply my skills to something that is more personally fulfilling, and it seems as though others are making similar career changes.
OWWW!!! I think the bottom has fallen out! After today’s plunge, I think that most people have decided they’ve had enough…regardless of your “retirement time horizon”…it is absolutely getting scary. I have a 30+ year time horizon, and I’m questioning my remaining equity positions! Where is the damn reset button!
So now, my opinion is that we are going into a depression. You could raise that possibility if GM (which by the way has a smaller market cap today than it did in 1929) fails. Let’s see if GM becomes a state-sponsored institution, like many of our banks will become.
So here are my investment ideas for the Depression of 2009-2011 or what is now being termed…Depression 2.0:
Go long:
1.) A firearm…to protect what you have,
2.) Canned and non-perishable goods…those soup lines can be a pain,
3.) Land and very modest living quarters out in the middle of nowhere…because things might get a little crazy in the urban areas.
You may not even need capital for the 3rd investment as people may be giving real estate away!
The world will emerge from this, but it will be VERY painful for at least 2-3 years. After the dust has settled, America’s economic dominance will have faded. The “Rise of the Rest”, the term coined by Fareed Zakaria in his book The Post American World, will accelerate. At that time, invest in China, India and Brazil.
