Gary Shilling is both a prominent economist and financial adviser who has been around for a long time. And, while he's inclined to more often be a bear than a bull, in the main when he postulates, most listen.
Mr. Shilling is predicting that the U.S. economy has entered a deflationary stage, and that it will continue at a rate of at least 2% for the next ten years or so.
Deflation is sort of a self-fulfilling prophecy. People think that prices will fall because of low sales, and that they'll be able to buy something they want today, cheaper tomorrow. Consequently the market reacts to lack of sales by lowering prices, thus lowering profit margins, and lo and behold, the buyer's guess comes true. He and others made it happen.
We are definitely seeing strong signs of deflation in home prices. What few buyers there are, are in no hurry to buy, and when they do find a home they like, they'll end up not putting it under contract because they don't like the color of the kitchen or some other ludicrous reason.
I'm inclined to think Mr. Shilling's concerns are correct, and that by letting the temporary tax incentives sunset at the end of this year will exacerbate the problem. Extending them for another year is worth the gamble.
BILL CHERRY, REALTORS
DALLAS - PARK CITIES
Our 45th Year!
214 503-8563
Bill: Excellent post and point well made! While I'm certainly not an economist, I have been around long enough to just know some things instinctively. Certainly could use some good, positive, sustainable news.
Thanks for posting this Bill..Some very good points here...Enjoy the day.
Great post. Thanks for the news.
It's all supply and demand. In our area, the sales have declined, and the inventory has increased. Pricing will follow.
Interestingly, we talk ourselves into these problems.
Now is the perfect time to be buying and selling homes if your plan is to move up. If you don't understand why, email me and I'll explain it to you -- no cost or obligation. (This offer is for anyone in the U.S. and Canada.)
It is not the time to be liquidating or churning your investment portfolio. In general, it's the time to be buying more of the stocks in your portfolio, thus averaging down the loss and dramatically increasing the opportunity for gain as the market begins sustain recovery. If you don't understand why, email me and I'll explain it to you -- no cost or obligation, especially since I'm not licensed to sell equities.
The last persons investors should be listening to are those who are attempting to convince the investors that what the investors did before and the predicament their estates are in was the fault of the past investment advice they received, and that the New Adviser has the answers.
He doesn't.
Hi Bill deflation is really a scary thought. I guess I kind of agree with you about the tax cuts but on the other hand I would like to see deficit reduction. Now reducing govt spending is certainly one leg of the chair. But ending the tax cuts I think is another. but I have to say I am wishy washy on the subject and could be convinced other wise.
Charlie -
You want to know the first rule of a Jewish businessman? Do nothing, wait and see.
(Throughout my life, I've been business partners with far more Jews than Gentiles, primarily because I prefer Jewish business partners.)
The second rule of a Jewish businessman is never buy land until you are ready to use it.
The third rule of a Jewish businessman is a paraphrase of a mitzvah. There has to be something on the table for everyone.
So if you combine all of these, the obvious leave it as is. There's no need to rush. There's no proof a change will make a positive difference.
Not all Jewish business men fit in your mold Bill. I am afraid that when the economists predict something like Gary Schilling has that it can get into the psyche of the consumer. We only have to look at Japan for this example. Thanks for your post
Oh, I guess I intellectually know they don't, but I think all I've been associated with in business have. Of course you're right about the predictions. Deflation is, seems to me, primarily caused by the psyche of consumers.