After the Election, Now What?  

This month I feel prompted to offer some thoughts as we move forward with an uncertain economy and our break the bank government debt.  Clearly the as citizens of the United States of America we are facing some challenges.  Our recent election was very divisive and further demonstrated a philosophical split within the country.  And no matter which side of the election you were on I think we can all agree on a few things. 

First, we have a mounting debt crisis that cannot be addressed by taxing just the rich, it is just impossible.  I heard today that it is estimated that allowing the Bush tax cuts on the wealthy expire will bring in an extra $80 - $90 billion a year.  Did you know that money will only cover our government's spending for about 10 days each year?  It won't fix the problem.

There must be cuts in our spending or the interest on our debt, our country's debt, will consume so much of the revenue we take in that we can't support the many programs we have in place.  I heard it said, several years ago that the interest on the debt consumed $0.49 of every dollar received in taxes.  Recently I heard the interest we are paying out is larger than our entire defense budget.  So I expect taxes to go up, ON EVERYONE.  They may not call it taxes, they may call it fees, or charges, etc. etc.  I always think of any money I HAVE TO pay to the government as a tax.  

Second, interest rates will rise.  With interest rates near 1% how can this not be the case?  The question is when will this happen?  When it does, it will also mean we will pay more for everything.  In addition, a rise in interest rates will increase the amount of interest we pay on our nation's debt.

Third, mandated government health care will profoundly impact businesses and people in our country.  Some impacts will be positive and some negative but the spending on this alone will demand more money be collected by the government to pay the cost of the health care bill.

This all sounds pretty gloomy but it need not be so.  There was an election several years ago where I was pretty upset at the outcome.  My father was still alive at the time and he offered these words of wisdom.  "No matter who is elected president it generally will not have that great of an impact on your life."  And you know what, he was right!  Sure I suppose it could have a huge impact if we didn't have so many checks and balances or if there was some catastrophic event that was handled poorly but as long as we live in a free nation we will always have a greater impact on our lives than the President or any elected official will.  In the United States of America we are still largely Captains of our own ship!

So I have some rules I am trying to live by that have helped me better Captain my ship and I thought I would share them with you.

• Limit how much time you pay attention to the media:  I didn't say ignore it entirely but limit it.  Remember news organizations have a need to attract viewers, listeners, or readers.  There is a saying for most news organizations, "if it bleeds it leads!"  In other words, bad news sells.  Paying too much attention to this stuff can cause fear, anger, or despair and the bottom line is few if any people ever achieved their dreams from a position of fear or anger.  Limit your exposure to negative things and keep your eyes focused on your dreams! 

• A JOB is not enough.  For most people a JOB = Just Over Broke.  The poor guy who works for someone else is always at the mercy of the continuation of that organization.  Just recently Hostess, a company who has been around ever since I can remember, shut down and filed bankruptcy due to an impasse with the unions and I am sure other issues.  No matter who or what you think is to blame for the shutdown the fact is those poor people are out of a job.

This reminds me of a discussion we had in one of my MBA courses.  The professor asked the class who are the stakeholders in a business.  Well the class offered numerous answers; the stock holders, the board of directors, the town in which the business operates, the banks, the bondholders, etc.  The professor taught me a valuable lesson that day when he reminded all of us that the #1 stakeholder in any business are the employees, because if that business shuts its doors, it is the employees who have the most to lose.

• Create multiple streams of income:  In the many seminars on wealth creation that we have been to over the last few years one theme that jumps out is that "if you are willing to do what others won't for a few (5 or so years) then you can do what others can't do for the rest of your life."  What these gurus are teaching is that if you give time and effort to things that can generate the right kinds of additional income your life will be changed forever.  We now know many individuals, on a first name basis, that implemented these changes and are now multi-millionaires.  So we know it can be accomplished!  We are going to do this too.

Of course the gurus are all selling their latest and greatest ideas for building wealth.  Mary Jane and I have been to a lot of these seminars, some are excellent, some not so much.  We have now settled on two efforts that we know will provide us a very nice retirement.  We'd be happy to discuss these with you if you are interested. 

• Embrace change:  Insanity is doing the same thing over and over again and expecting a different result.   How many of us get into a routine living day to day, wanting more, but unwilling to make changes in our lives.  So embrace the changes, sure it will be hard but if done right, your life can be changed for the better forever.

• Focus on the future:  Ask yourself this.  What do you want your life to look like in 5 years?  What will you need to do to get there?  If I don't make a change will I get there? 

Brady Dennis of The Washington Post reported on November 15th that an annual audit set for release on Friday the 16th would project that the federal agency that insures millions of home loans across the country could face losses of $16.3 billion, a figure that far exceeds earlier estimates and one that raises the specter that the Federal Housing Administration could need taxpayer aid for the first time in its 78-year existence.  

In announcing the estimate, FHA officials were quick to point out that the dismal numbers do not mean the agency has a current operating deficit or "insufficient cash" to pay its insurance claims.  Rather, the agency noted that any decision to draw upon taxpayer funds would not come until early next year, when the Obama administration makes that determination in its annual budget.

FHA acting commissioner Carol Galante said in a statement, "We will continue to take aggressive steps to protect FHA's financial health while ensuring that FHA continues to perform its historic role of providing access to home ownership for under served communities and supporting the housing market during tough economic times."

Not everyone is confident about the agency's health going forward.  Rep. Spencer Bachus (R-Ala.), chairman of the House Financial Services Committee, told reporters Thursday that the FHA "is running out of money for the first time in its history."  Bachus said the agency is "burning through" its remaining reserves and soon will need a multi-billion dollar infusion of cash from the Treasury."

Will a Rise in Home Ownership Rates Hurt the Multifamily Sector?

Bendix Anderson, Contributing Writer for National Real Estate Investor (nreionline.com) echoes what we wrote over a year ago.  Times are good for multifamily properties with high occupancy rates and the ability to generate greater revenues by increasing rents.  However with prices down and recovering in many markets, thus taking uncertainty out of the home ownership market, home ownership should be on the rise.  So will a rise in home ownership negatively impact the multi-family industry sector?

MJ and I agree that in many areas of the country the single family housing market is improving thus taking some of the uncertainty out of the house buying decision so home ownership should increase.  However, there are other factors to consider.  Many of today's renters have had their credit damaged in recent years so it may be much more difficult for them to finance a home purchase.  In addition, uncertainty over taxes and tax deductions may also slow the move to significant increases in home ownership.

In addition we believe two major factors will keep multi-family properties a good bet for several years to come.  First, for the last several years permits pulled to build new multi-family properties have been at an all-time low.  It takes about two years for a property to be ready once the permit is pulled so supply will remain low for a while.  Second, many younger people are living with parents or sharing space until their finances improve.  If the economy does improve many these individuals will want their own space, usually rentals.  So we think the multi-family sector is still a good investment.

Laughs and Interesting Stuff 

HOLY EMAIL

One day God was looking down at Earth and saw all of the rascally behavior that was going on.  So he called one of His angels and sent the angel to Earth for a time.

When the angel returned, he told God, "Yes, it is bad on Earth; 95% are misbehaving and only 5% are not." 

God thought for a moment and said, "Maybe I had better send down a second angel to get another opinion."  So God called another angel and sent him to Earth for a time.

When the angel returned he went to God and said, "Yes, it's true. The Earth is in decline; 95% are misbehaving, but 5% are being good." 

God was not pleased so he decided to e-mail the 5% that were good to encourage them and give them a little something to help them keep going..

Do you know what the e-mail said?

Okay, I was just wondering, because I didn't get one either.

White Wedding 

Attending a wedding for the first time, a little girl whispered to her mother, "Why is the bride dressed in white?''

The mother replied, "because white is the color of happiness, and today is the happiest day of her life."

The little girl thought about this for a moment then asked, "So why is the groom wearing black?' ~~~~~~~~~~~~

Dad Bragging

Three boys are in the school yard bragging about their fathers.

The first boy says, "My Dad scribbles a few words on a piece of paper, he calls it a poem, they give him $50."

The second boy says, "That's nothing. My Dad scribbles a few words on piece of paper,he calls it a song, they give him $100."

The third boy says, "I got you both beat. My Dad scribbles a few words on a piece of paper, he calls it a sermon, and it takes eight people to collect all the money."

Police Exam Question

A police recruit was asked during the exam, "What would you do if you had to arrest your own mother?"

After a little thought he answered "Call for backup."