Economic outlook

 I am not an economist but I am an investor, a businessman and an information junkie. My opinions are just that, mine. I am making investment and business decicions based on these opinions.

Economic outlook: The economy is showing uncertainty. That is because people are unsure of their own future outlook. The big banks and non-bank banks are all still playing games with all that cheap money that they are getting from the Fed's treasury window and not lending to Mr. and Mrs. small businessman, and that is hurting the economy (read the squeeze post ).

Home loans are dirt cheap and anyone needing a house to live in or who can refinance should be doing the math on that, best opportunity in my life time and I'm 62 years young.

Interest rates are being kept low to stave off a slowing of the economy and the government is afraid of higher unemployment. I figure another year of low rates then a slow uptick until they reach 6%., maybe 36 months from now.

Inflation: it is coming. When is a tough guess but it will last a long time. Oil is heading up because everyone in the business wants it to, and the oil producing countries need it to go up. That will help drive prices up. All other natural resources are under demand pressure from 3.6 billion people (mostly in China and India as well as Asia) All wanting a higher standard of living. Many countries including China have sovereign wealth funds that are buying up these resources around the world and assuring their countries supply at everyone else peril. All this will drive inflation, count on it.

Real estate: Housing prices will rebound. May take five years. Why? Because everyone has to have a place to live and work and that is just a fact. True, people will not look at their home as a cash cow for maybe ten years at the soonest, but inflation will bring that back too.
Commercial real estate is suffering from the super tight credit market. Because commercial loans are renewed every five years, the properties have to be reappraised, and that can put a loan in default. Commercial real estate is slow to come down and slow to recover. It is also slow going to fix troubled properties. I think prices will be flat to declining for a few years until money loosens up.

On the plus side there are some real bargains in all of the real estate markets. Time to go fishing for deals. You make your money when you buy, so buy when it is a buyers market and this is our first buyers market in fifteen years.

Stocks: Don't hold your breath. It will be up and down for a few years. There are some deals out there but tread easy and carefully and most definitely long term. Think strong companies, strong balance sheets, history of paying dividends and history of profitability. Look world wide for these.

What am I doing: Investing in income producing residential real estate. If inflation comes I can raise rents. If I need to I can live off the cash flows. In my retail business I am running lean, paying down debt, and converting to paying cash as we go.

 I have added an Economic Essays section to the articles list.