- In Florida, colleague Steve Sjuggerud tells us that everyone talks about making money in real estate.
“Quick quiz for you,” he writes. “What year was it? Miami had 25,000 realtors, the price of a beach lot was $800,000 (in today’s dollars), and a summer issue of The Miami Herald was over 500 pages. Believe it or not, it was the summer of 1925.
“South Florida’s real estate boom in the 1920s ended very badly. Some coastal real estate in Florida today bears a resemblance to the 1920s boom, and even to the tech stock boom of the late 1990s.
“On my island here in Florida, whenever you ask well-off folks around here what they do, they all say the same thing: ‘I’m in real estate.’ The truth is nobody’s talking stocks anymore.
“If you’re not ‘in’ real estate, you’re supporting the real estate business around here…contractors, banks, architects, builders, etc. Outside of tourism, there is no other business here. Just like Miami in the 1920s.
“South Florida’s bubble in the 1920s ended quickly. In the fall of 1926, two hurricanes came. On September 18, 1926, 400 people died and many thousands were injured, as the hurricane ripped roofs off of houses and tossed elegant yachts into the streets of Miami.
“Oceanfront lots probably didn’t hit $800,000 in today’s dollars in south Florida again until the 1980s…so it would have taken at least 60 years for someone who bought at the top to break even.
“It ‘feels’ like Nasdaq 4,000 right now here on my island…we’re not far away from the peak of Nasdaq 5,000…”
- And a reader from Canada:
“Actually, I work for GMAC here in Halifax, Nova Scotia.
The stink of it is that you are absolutely correct. Our branch manager announced recently that GMAC is contributing most of GM’s profits. Everyone seems to be proud and elated. I, on the other hand, was immediately concerned upon hearing this chest beating, ‘look at how great we are doing,’ peacock strutting, boasting. People just don’t seem to get it. What happens when rates rise?
“Financing is a give-away scheme right now, but it won’t be forever. You and I and few others know that manufacturing is a must for long-term prosperity. This is one of the reasons why I have become an avid and eager investor in all that is real, primarily gold and gold stocks. The future does not look bright for the dimwitted.”
- Does the future ever look bright for the dimwitted? Nature, in her majesty, smiles on the dim and the bright — but not at the same time. The dim do well toward the end of a trend. As they pile into an investment in the last stages of a bull market — prices rise. For a while, they seem like geniuses. Then the trend reaches its peak, and they fall down the other side like tourists rolled of the cliffs of the Grand Canyon; the bright lean over with broad grins and yell — “I told you so.”
But Nature does not spare the bright, either. They feel very content with themselves when the market hits bottom. The dim are ruined. Then when prices begin to move up again, the bright hold onto their gold…and miss the biggest bull market in their lifetimes.
As Uncle Remus used to say: “Dere’s dem dat’s smart an’ dere’s dem dat’s good.”
Here we will put our money on “dem dat’s good.” If they don’t win…well, too bad. They should.
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century.