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Sit My Ass Down on CNBC!
So guess who predicted both the housing bust and the recession?
Take a guess.
Warren Buffett?
Jim Cramer?
Suzie Orman?
Lou Dobbs?
David Bach?
Actually, none of these people predicted the coming downturns.
But I did, and I have proof. Yup, your very own MJ DeMarco. Remember the name folks as Peter Schiff has nothing on me!
When I told my brother about my predictions, he called me out and said “Bull shit! You didn’t predict jack!”
Oh yea?
The beauty (and ugliness) of Internet forums, is that what ever diatribes you spew, they become permanent residents in the fabric of Web space. They are digital records of our thoughts frozen in time.
August 10th, 2005
On this day I boldly made a prediction. I created a new thread in one of my favorite forums. It read: “And the housing bubble begins”.
If you can’t remember what was going on in the summer of 2005, let me refresh: Housing was at an all time high and finally started to level. People could sell houses in days, sometimes hours. People were flipping crazy (no pun there) – they’d buy a house and hold it for 3 months, and sell for big profits, without even adding value. Others refinanced their property every few months, withdrew the cash, and spent it like a drunken sailor.
I saw this exuberance so I wrote that a bubble was coming.
AUGUST 10th 2005
I have reason to believe the “Housing Bubble” is starting … (at least here in Phoenix)
Let me give you the reasons why….
1) Investors are liquidating their rentals in hopes to cash out.
2) Influx of sellers (Investors cashing out and home owners looking for a quick liquidation) is causing MORE SELLERS.
3) Interest rates have gone up = LESS BUYERS.
4) Higher interest rates erode investor margins on cash flowing houses forcing them to SELL.
5) Rapid appreciation have priced buyers out of the market = LESS BUYERS.
6) Salaries in PHX have not appreciated in correlation with housing = LESS BUYERS.
7) REITS in the last 5 days have lost 10% of their values and their dividend yields are at an all time low.From the law of supply and demand — when sellers exceed buyers, prices drop. All this throws us in a direction of MORE SELLERS and LESS BUYERS.
Furthermore, when the plumber that comes over and fixes your toilet starts bragging about how much $$ he has made in Real Estate, you know its time to sell.
I believe this is the beginning of the end.
Here is the thread, or the proof.
Now this posting was met with some doubt.
- “I don’t see values going down anytime soon”
- “Yeah its great to predict the bubble will burst every year, then you can say “SEE” I told you!! IN the meantime I’m picking up houses like crazy from all the people who believe the hype, keep it up!”
- “All indications are that housing, at least in areas I work with they still look very strong for 2006 so far”
July 18th, 2006
In response to a question on the forum regarding the likelihood of recession, I responded with some observations from my environment currently occurring at that time.
July 18th, 2006
I wrote…
Inflation = Less $ To Spend
High Oil = Less $ To Spend
High Interest Rates = Less $ To Spend
Adjustable Mortgage Interest Changes Now Starting = Less $ To Spend
Higher Credit Card Costs = Less $ To SpendLess $ To Spend for the avg consumer = Corporate Earnings Tank
Everything points to RECESSION, or at least, a minimal growth economy – I certainly don’t see a return to a bull market. When the average person doesn’t have surplus $$$ to spend, the economy doesn’t grow. We are a spending based economy fueled by consumer spending. This environment doesn’t favor consumer spending any which way.
In the last 3 years, consumer spending (and the economy) was fueled by cheap money; low mortgage interest rates, credit card rates, cash-out refis (fueled again by cheap money). Throw in the Bush tax-cuts and you have a booming economy.
Cheap money is gone and so is our little run up. There is nothing left to spurn consumer spending; job growth? Nope. Salary/wage increases? Nope. Nothing!
One year ago when everyone was praising REAL ESTATE! REAL ESTATE! BUY BUY!!! I made this post (the post show above) based on the same cause-effect scenarios.
The actual links to the Posting And Thread with the predictions.
So what is the point of this?
Buy my book! I want to show you that I’m the man and Peter Schiff has nothing on me! I belong on CNBC as the next guru!!
Ok ok … just kidding.
Seriously, the point is this: Your environment always leaks clues to where things are heading – it can shine a light on both, future problems and future opportunities. I was able to forecast the future because I took clues from my environment and assembled the bigger picture, like a 50 piece puzzle. You have to be cognizant of your environment and see outside of your little worldly bubble. Doing so will give you insight into the future — a money making future (opportunities) and a money saving future (problems).
For example, when you buy food at your local grocery store, do you make a beeline into the store, focused on your “to buy list”? Or did you notice that the gift card shop next to the grocery store was closed? And the nail shop was gone? And the cleaners? Did you notice they were vacant? Did you notice that that great new French restaurant already went out of business? Do you notice? Or do you not worry about it, or recognize it, because “it’s not my problem”.
Now if you saw, and recognized all of the above, can you guess which sector is heading for a serious downturn that might not be a big story right now?
FASTLANE ACCELERANT
Forecasting problems, as well as opportunities, lies in your ability to recognize your environment and to identify trends. If “it” is happening in your neighborhood, there is a good chance it is happening elsewhere.
Future problems, like opportunities, lay clues around you. Break through the glass ceiling of your own world, stick your head out, and look around. You might be shocked at what you can see, and what you can predict.
Cheers,
MJ
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When I was in my 20's, they laughed and said I was nuts. "MJ! You're dreaming!" Then, I got the last laugh. I retired in my 30's and now live a dream. Those same people now whore their life away for a paycheck only to reclaim their salvation on the weekend. With a correctly executed Fastlane plan, everyday of your life can be your weekend.
Hot damn, is head swelling contagious? lol Lotta “I’s” in your copy there red hot. Whiskey night maybe… ;)
I should add while giving you a hard time, the lesson is always appreciated. (get that video cam out of the package)
Good post MJ, I missed this one earlier.
Do you have any predictions on what will happen in the next year or two other than the seemingly logical conclusion everyone has arrived at of waiting for markets to bottom and snapping up bargains?
I believe we are far from a bottom. Expect Alt-A defaults and commercial mortgage defaults to skyrocket in 09. We will see a record number of bankruptcies from once, solid companies. I believe we are 18 months away from a “bottom”.
Unemployment will top at 11-12%.
Disclaimer: I am not a guru and this is my opinion based on the clues I see in my environment.
I am a Realtor, and I am homeless.
Friends and family called me nuts when I sold my dream home in CT in July 2005.
Having experienced the late 80’s real estate crash, (lost over a million net in houses and land) the signs were all here again. “We buy houses for cash” was a sign on every street corner. Hmmmm, where have I seen that before?
Still renting, looking for a bottom, but more pain to go I believe for homeowners as unemployment, foreclosures, and credit crunches are still staring at us.
“Pushing on a string” is the problem. Lower interest rates are inaccessible for homeowners with no equity.
Smart people learn from their mistakes, really smart people learn from the mistakes of others.
The tax law for homeowner’s initiated in 1997 gave us a huge windfall of captured equity, tax free, and has been a healthy cushion during thiis time of economic turmoil.
No guru here either, just learning the art of self-responsibility.
MJ is dead on with his insight in my opinion. Companies like circuit city etc are closing their doors, and the domino effect is obvious for people, commercial real estate inventory, and malinvestments by the banks and the derivative market.
We saw the need for alternative income for our “job”, and as an entrepreneur embrace the mentality of being 100% responsible for our success or failure.
With every good wish for President elect Obama, I plan on getting up and going to work anyways.
Just found your website a fewweeks ago, glad I did.
@Dennis: Thanks for the insight and adding your own personal experience to this … glad you enjoy the commentary ….
MJ, you are correct in, “What is happening in your area is probably everywhere else” philosophy. Especially here in Phoenix . We went up dramatically, higher than most of the country, so we are down dramatically at this time.
I arrived at your site after driving beside you the other day on Chandler and reading the website on the Lambo, (so it is an advertising expense). When you had the Silver Lambo we had a short run late one night up the Club West hill. I have a classic Euro model Ferrari. I assume by where you turned that you are in Eagle Ridge. I am in Sierra Canyon off 7th Dr.. If you ever want to grab a drink at the Native down the road I would like to meet you personally as we both live in the same area. Thanks for the article, and looking forward to your book!