Everything We Do is a Learning Experience. "If" You Let It Be.

I got a call last Friday to do a commercial BPO. I said yes before I thought about it. But, I said yes. They were very generous with the fee. That's not important to me as maybe it once was, but, it's a courtesy, it's respect. And I like that.

The organization was a west coast REO management firm. I just told them up front, if that was the fee, I wanted it paid. I've been stiffed before. Didn't care much for it. That comment was received in the spirit that it was offered. Mutual respect.

I have a dear friend that has been a commercial appraiser for some 60 years. He's in his 80's now, and I take care of his house for him. I don't like to do it, but it's respect for a friend. I guess I'll be painting his front door before the hot weather comes. But I called him, told him to pull some comps for me. He showed me a trick on the appraiser's website I didn't know, and the rest came very easy.

I don't chase residential real estate, and foreclosures are rare indeed. So it was a struggle to get my mind around this project after I'd been trading stocks for six months. I've been struggling to get my insurance right, my phone right, everything is out of kilter it seems. Everyone is working from home, so what would this 3600 square foot office building be worth? I take this stuff very seriously, and put together a good presentation, or so I thought. The law firm in the office building was an owner / tenant. That was a huge advantage. The location was great. The building was remodeled and pristine. There were several remodeled office buildings of similar size that had been empty for two or more years. But this all came together very well. I submitted the report, and the Chief Cook and Bottle Washer sent me an email, thanking me for a wonderful job. So, what was the lesson in all this?

The tenant told me that he was in very good financial shape with a small office, because he knew of several very large firms that had four floors, and were in varying degrees of trouble. Makes sense. If you're leasing out space, you're in trouble. If you're leasing space, you are in the driver's seat. Appraisal firms have Covid disclosures that basically say we have no idea what is going to happen. I'm not an appraiser, but I think I can sum it up very succinctly.

First thing is, as I see, interest rates have spiked in here, the 5, 7, 10 and 30 year treasuries are all up in yield, and it is troubling on a relative basis. That puts the kibosh on lots of projects, maybe not because of some exhorbitant yield, but because it's people that make lending decisions, and they may be more reticent to extent financing for projects.

Inflation. Go to Home Depot, search the internet for a chart on copper. Look at the inflation creep happening. I don't eat a lot of beef, but I noticed a good steak is $11 a pound. Gas is now $2.60 up from $1.95. And now, we are shutting down domestic production, and bombing the Middle East. I've seen this movie several times. Not a favorite. The sell off in the stock market today was not of a correction variety. It was much, much more serious. I love it as a trader. But the average Joe that put his money in funds or ETFs and forgot about it because interest rates were so low will get quite a shock when he looks at his balances. Perhaps after all, trees don't go to the sky.

Today it was reporting pending home sales fell by 2.8%, and the major builders were all down around 6%. Why so drastic? Perfection was priced in. What we are witnessing is not perfection. Michael Burry, the hero of of "The Big Short" properly calling the CDO crisis, although early, has said he expects Weimar Republic inflation numbers. Look it up. Wheelbarrows full of Deutsch Marks would buy one loaf of bread, if you could find a loaf of bread. We are in a period of time where half the country thinks the election was stolen, knows DC is under an undeclared Martial Law, and suffer a sitting President with advanced dementia giving billions away for no good reason. Soon the National Debt will top 30 trillion dollars. That interest has to be paid, and that bill is going up along with interest rates. The real unemployment number, by the way, is 10%. Not 6%. It's closer to 10%. And with a government that seems to hate working people that is going to go up and fast. There's a lot more to this story, but we'll draw some conclusions from this.

First, the empty office buildings will be sold down the road for much less than their listing price, and may be REO's at some point. In my area, we still haven't cleared up some from 2008. With more and people unemployed, and interest rates going up, they'll be less consumer demand, and the economy will slow to a crawl. The stock market may well rally and take back some of these losses, but more than likely give them up just as rapidly entering a protracted bear market. I also anticipate more shenanigans from the hooligans in DC. All of these events affect confidence. You hear it expressed as "consumer confidence", but people will withdraw even more than now. I wouldn't rule out more violence as fringe groups seize what they see as opportunity arising from the chaos. Warm weather brings that on.

So, what does the head of a house hold do? How do we cope? This has all happened before. My mother told me of listening to the radio, and hearing this place called Pearl Harbor had been bombed. The people in upstate New York had no idea where Pearl Harbor was. My wife's mother lived around the Puget Sound area, and they feared a Japanese invasion. They got by but with much sacrifice, and we will too. But for many, this will be two steps back and maybe one forward. Has to happen. But it will, like all things, end at some point.

First, be conservative in all things financial. Before you buy that hot stock or spec home, think! What will be the consequences should those deals NOT work? Sometimes, it's best to SOH, sit on hands, so you won't become SOL.

Second. Most of you are in a much different place than me. But I didn't blow that BPO off. I knew if I did the job on time (I was three days early) and well, they'll be more business and listings down the road. And, I left the tenant/owner a business card. Just a habit with me, I always run scared. If business slows, dries, stay upbeat and make contacts. Only three reasons to take a deal. The deal, the experience, the contacts. You just may find out later you'll need those contacts.

Third. Thank people. Be complementary. The email from the REO Manager made my day. That little email. I simply asked him to verify receipt, and comment on the completeness of that report. He took the extra step, and I appreciate it. Right now go to Dollar Tree, and buy a pack, they come in ten, of Thank You note cards. Nothing gaudy, just "Thank You" on them. Try ten. Watch what comes back. Who ever got a thank you card, and was miffed?

This texting, everything is about me, my feelings are hurt generation has a lot of growing up to do. The real world doesn't give two sniffs about your feelings. It 's up to each and every one of us to take the high ground and move forward. My feeling is we are in for a very difficult time. Trump may have hurt your feelings, but Biden is going to destroy your lifestyle. Step up. Now!