I love traveling. Not only for the personal rewards, but for the business rewards as well. There are few things that an investor can do that give them a true feel for the market. Most investors get their outside information from various financial TV networks which is almost guaranteed to poison your mind with inaccurate information. Others get it via word of mouth. Some of the lucky ones are in a position to see the economy at work on a daily basis via their jobs. But few forms of information gathering can be as useful as traveling. Like troops in battle, a traveler gets a real feel for what’s going on on the ground. During my recent trip back home to the suburbs of Washington D.C. a few things really stood out to me:
- People are still obsessed with residential real estate. The bubble might have burst, but the fever hasn’t subsided. As we said in our 2009 investment predictions, this was likely to occur in residential real estate as signs of recovery appeared. Investors truly believe this is a great buying opportunity. I can’t tell you how many tv shows I still see on various networks about flipping homes or how to profit from the real estate market. The Real Estate section in the Washington Post has entirely replaced the pathetic Business section they once had. And most importantly, consumers still talk about real estate like it’s the place to be. The fever is still very much alive and that makes me wonder how long this market will move sideways to down. This looks like classic bubble psychology to me…
- The malls are eerily quiet. I love visiting malls (and I absolutely loathe shopping). But where else can you ask 5 different store employees about the sales outlook in different industries? Three things really stood out. First, I purchased a pair of dress shoes at a well known store. The store clerk actually took the shoes and put them back on the rack when I handed them to him. He thought I was returning them and was shocked that I was actually purchasing them. He told me no one was actually keeping the items they had purchased before Christmas. Second, there were dozens of jewelry stores in the malls I visited. And 5 out of 10 of them had signs out front saying “we will buy your gold!”. Third, there are an incredible number of vacancies at the malls. One large mall I visited had an entire department store vacancy which probably accounted for 10% of their entire store space. Incredible.
The takeaways: residential real estate fever is still here, consumers are still hurting, gold fever is high and commercial real estate remains a mess.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.