By Sri Keshava, special to Omkara World
LOS ANGELES, December 4, 2011— Speaking with a new acquaintance in May of this year, I asked, “So, where do you think the market goes from here?”
We’d enjoyed 26 months of a bull market with some modest pullbacks, all of which bounced perfectly off a delightfully ascending trendline. Without any tangible improvement in the economy, Wall Street had nonetheless decided stocks were worth a full 100% more than the lows hit back in March 2009. “We’re going up,” she said, leaving no room for debate. “At least till the end of the year.”
“Really?” Like a horoscope junkie, I love checking what the so-called pros think. “Yep. Up. Definitely up.” And she’d know, being the manager of a rather prestigious hedge fund. No more than two weeks later, we’d broken through support and were on the way down again. We haven’t broken to new highs since. If I met her today, I’m sure with the same authority she’d quack, “Yep. Down. Definitely down.”
The stock market is being run by institutional day traders, whether they be screaming in the pit, sitting behind monitors or an algorithm triggering huge sell or buy orders. There is no value trading left, besides perhaps for the much-loved Buffett.
For the most part, when the market is trending higher, traders pile on and run it up 2-4% in one day. Wake up on the wrong side of the bed? No matter, traders pull on their shorts and throw the market face-first into the mud to the tune of another 2-4%. Up. Down. Up. Down. Don’t feel bad- Traders are making money up, down and sideways.
It’s financial masturbation and Mom, Pop and everyone else on Main Street has had enough. Headlines abound expounding, “Market Volatility is Driving Main Street out of the stock market.” And some real estate agents are vouching for it, especially on the Westside of Los Angeles, where agents are seeing the trickle down effect on Main Street. After two of the worst years, many agents are claiming their business more robust than ever.
For the truly wealthy, there is never a bad time to buy. Hold long enough in a diverse, major market (and not Detroit), the market is bound to go up over the decades. But for those who don’t have money to burn, i.e. the 99%, there truly is a good time to buy and a time when one should sit on the fence. And fence-sit the masses sat. Until now.
For those who are blessed enough to retain a down-payment after the past recession years and who can qualify for today’s more stringent loan guidelines, this is a time of incredible value in the real estate market. The old adage: “When it’s cheaper to rent than to buy – rent. When it’s cheaper to buy than to rent – buy” holds true. And perhaps more pressing, average Americans don’t feel there is anywhere else to put their money.
They can’t compete with institutional traders who pump and dump the market on any given day. Buyers like Erin Miller don’t camp at Zuccotti Park; she lobbies with her money. A resident of Venice CA, she says, “I have no faith in the stock market. I’d rather put my money into bricks and mortar, something I can touch.”
She’s sick of waiting. She wants to move on with her life. Buyers like Erin want a home: one in which they can raise a family or rent out to an ever-robust rental market. (The horde of would-be buyers who didn’t or couldn’t purchase in the past few years has increased rental demand to the point of insanity on the Westside of Los Angeles.)
While pundits argue ad nauseam as to whether we’ll double dip, savvy buyers are locking in interest rates at all time historical lows of 3.75-4.5% confident of what their cash flow will be for the next 30 years. Regardless of what arbitrary value sale-price the market suggests now or in the future, real estate is a commodity that will continue to exist, save for some catastrophic act of God (or Taliban).
In the meantime, owners will raise a family in their four walls or earn meaningful rental income, which is more than one can say for Lehman Brothers and WAMU stock, widely held by Mom and Pop investors until their implosion. These painful memories remind buyers like Erin to stay away from Wall Street.
The silver lining is this aversion to the roller coaster ride is translating into the green shoots of a tangible real estate recovery for America. So while Wall Street dines with politicians to the tune of $35,000 a head, America’s 99% is busy buying back our great nation’s stability, one house at a time.
Sri Keshava is a holistic entrepreneur who has made her passions, her business. She is the author of Gurus, Rock Stars & the Men In Between (a memoir from monk to punk diva in two seminal spiritual rock bands), co-director of Taal Dance Company, licensed real estate agent with a penchant for green, host of Gorgeous Green Homes and contributor to wellness and investment journals.
Other Articles from Sri Keshava:
“Gross National Happiness”- A better indicator of national well-being?
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Adam is a Reiki Master, certified Health and Lifestyle counselor, Intrinsic Coach, Licensed Massage Therapist, 20 year practicing bramana initiated Bhakti Yogi, Spiritual advisor, visionary, jock and veteran of the “hardcore punk scene” all rolled into one. His clients have included celebrities, politicians, professional athletes, and professional sport team owners. Adam is the founder of Omkara World and produced the mind/body fitness DVD “Intelligent Fitness."
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