There is no doubt about it…issues with this economic recession are continuing to unfold. One thing no one has even been talking about much is the commercial real estate meltdown that’s not yet happened. Read the article in the Christian Science Monitor I just linked, and you’ll get a peak into what I’m talking about. This is why I spend so much time talking about the economy. It’s essential to know what’s going on around you…to go on investing, running our businesses and lives like usual and waiting for things to “come back around” is not going to help right now. It’s likely going to be a long time before things prosper for the US as a whole again.
We Can Still Create Wealth
I’m firmly resolved in my belief that it’s absolutely in the cards for all of us to prosper in the coming years, but it’s going to be an individual pursuit, not a collective experience. And to make it happen, we have to face facts…
The Economic Recession has Not Bottomed
Take a look at how over-leveraged our residential real estate market had become, and how it led to a meltdown. We are now contracting and heavily de-leveraging, to the point our financial system is almost at a standstill. Well, commercial real estate is even more leveraged. A LOT more leveraged. With businesses going under and employees being laid off…who is going to rent all this commercial space? Gerald Celente of Trends Research submits one very possible answer…no one. Here is a video clip of Gerald Celente giving his opinion (keep in mind this guy is hardcore; he does NOT have a positive outlook on America in the coming years, so it’s easy to discount him. Just keep in mind that he’s been predicting the market very accurately for well over two decades)…
High leverage in real estate means a couple things. One, it means you can likely not afford much vacancy. You are highly leveraged, which means you have very little equity, which means you are unlikely to have a large enough cash reserve to handle long vacancy rates. Commercial property tends to have considerably longer vacancy rates than residential real estate does. Two, it means you need a high rent in order to cover expenses. Again, low equity means high debt ratio. More debt = high debt service. All this adds up to many commercial investors all over the nation, at this very minute, piling up vacancies that they can literally not afford for very long at all. Even the property that is rented, is not commanding rental rates sufficient for covering these highly leveraged investors.
More Foreclosures to Come
I am open to other theories, but I don’t see how this is not going to lead to a massive string of foreclosures and losses which dwarf what we’ve seen in residential real estate.
Yes, we’ve seen a rebound in the stock market in the past couple days. This is a good sign that credit has started to loosen up, which may appear to be a good thing. We’ve printed trillions of dollars to get this loose, and our biggest troubles still lie ahead. I still say at some point, we are going to have to change course.
We Will Not See Hyperinflation…I Don’t Think
I believe we will change course. I believe the US will change course and do the right thing. I don’t know how far it will go before we decide the path we’re on is obviously not working, but I don’t think we’re going to allow our leaders to lead us into Zimbabwean-type hyperinflation. That WILL happen if we keep on this course, but I think we’re going to change our game plan, bite the bullet and pay for our debt at some point.
How to Get Rich, Even Today…
This is obviously the crux of the issue isn’t it? Here’s how to get rich, create wealth and prosper in today’s economy…create value for others. HUGE value. That’s it. That’s the big secret. Regardless of how it may feel to watch our nation lose a quarter of a million jobs in one single month, the world keeps on spinning. This means something critical: people need to eat, they need a place to live. They will always need goods and services. The basics of business and building wealth remain intact, and this is a huge point not to be underestimated. There is OPPORTUNITY today. But the rules have changed. It’s time to be proactive. It’s time to learn new skills, and stop looking for the answer. You are the answer. That’s how we started, and it’s where we are again today. It’s how all great things are built. It’s time to get our hands dirty. Trust me; it’s gonna be OK