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The
past week has been extremely busy. I attended IMN’s 6th Annual Real Estate Opportunity and
Private Fund Conference in Laguna Beach. Then I presented at the Cambridge
House Investment Conference in Vancouver. While real estate and natural
resources may seem extremely different they are actually closely related.
IMN’s
Real Estate Conference
The
conference was exceptionally organized at a wonderful location in Southern
California on the beach. The general tenor of the conference was rationally
gloomy despite the sunshine. Scott Smith, Direct of Real Estate
Investments for the New Mexico State Investment Council said to the full
conference hall, “Let’s
be honest. You have closed no deals since July. Please do not
call me or leave a voicemail because I will not be checking them for six
months.”
A
common theme from these industry professionals was that this was the biggest
event they had seen in their career, they did not know when it was going to
end and not to catch a falling knife. Steven Orbuch, President of Och-Ziff
Real Estate which manages about $25B throughout the world in multiple
countries said, “The
depth and breadth is seen in every market and is still in the early
stages.”
I had
an interesting talk during a reception with a DLA Piper senior
partner. He was incensed at 24 year old Maserati driving idiots who
could not get into law school but were able to sell credit-default swaps and
other structured financial products which are now vaporizing firms and have
destroyed this industry. He had 30-35 deals lined up at the end of 2007
and completed only 5 in 2008. I have a great story to tell about my
chat with him but will leave it to the podcast.
A symptom of
the underlying problem is that bid/ask spreads have been widening
tremendously. In many cases there are no bids. Alvin Katz a
partner with Mayer &
Brown succinctly summed up the situation with “There is a full stop in
deals.” Perhaps the best advice came from Ambrose
Fisher a managing director for Oaktree Capital Management, L.P. who said, “Batten down the hatches and try to
survive to the other side. It will be at least
2010-2011 before the fundamentals begin to improve.” Marc Perrin
a managing director with Starwood Capital Group Global, LLC said “I
don’t disagree with anything Ambrose is saying.”
While predictable it
is interesting to see the real estate market go into stasis. I wonder
if they read my 1 Feb 2008 article about the deflationary credit contraction. ”This is why
stock markets have been crashing as investors flee into T-Bills.
Ultimately, investors ensconce themselves within a deflationary but invincible and immoveable golden
forcefield.” In other words, ‘batten down
the hatches’.
Eventually
I will move into and purchase a lot of real estate.
However, unlike these ‘professionals’ I have a reasonably
good idea of when I think the market will bottom and when to begin
purchasing. The monetary metals are used to perform mental calculations of value or the pricing mechanism.
Currently,
an average American home costs about $220,000, 18,333 ounces of silver or 248
ounces of gold. I will begin looking for real estate deals, both
commercial and residential, when an average American house is around
500-1,000 ounces of silver or 75-80 ounces of gold. Until then I have
battened down the hatches, there is no bid from me and because I own
unencumbered gold I will survive to the other side and be liquid to buy.
CAMBRIDGE
HOUSE INVESTMENT CONFERENCE
I was
surprised with the traffic at the Cambridge House conference. I think the
final tally was around 7,000 with about 1,500 walk-ins that paid $25 at the
door. I suppose the $50/ounce rise on Friday is helpful for all the
activity.
During
my panel presentation I was interrupted twice with applause so that was
encouraging. I am sort of like a cross-eyed javelin thrower
always keeping the crowd on their toes and never quite knowing how I will be
received. Thom Calandra even quoted me as saying, “Wall
Street is a bunch of sociopaths. You can’t grow a conscience if you
don’t have one.” The DLP Piper attorney has legitimate cause for being enraged
but as I tell on the podcast his client has even more cause!
My
presentation was on the development and intensification of the
deflationary credit contraction. Several people found it extremely
enlightening and useful. As most people scamper off as soon as possible
after the presentations I was surprised the Q&A lasted about 40
minutes.
I
think I need to develop a good foundational document of about 45-50
pages to provide a solid grounding in the principles at work. While
most of the information is available it is scattered and unorganized
throughout about 100 posts which could be formidable for a new reader.
If you would find such a document valuable please leave your
comments.
GATA has their 10
year anniversary this year. In light of the happenings in the
real estate market a paragraph from the 14 Jan 2008 GATA Wall Street Journal ad is particularly
enlightening, “The objective of this manipulation is to conceal the
mismanagement of the U.S. dollar so that it might retain its function as the
world’s reserve currency. But to suppress the price of gold is to
disable the barometer of the international financial system so that all markets may be
more easily manipulated. This manipulation has been a primary cause
of the catastrophic excesses in the markets that now
threatens the whole world.”
As the
gold cartel and complicit Wall Street sociopath’s actions continue
failing the derivative illusion begins dissipating and holders of capital ensconce themselves
in a golden forcefield. Then more markets will move into stasis like
the real estate market already has. Remember, the system does not so
much collapse as evaporate and the rate of evaporation is increasing.
Trace Mayer
RuntoGold.com
Trace Mayer,
J.D., holds a degree in Accounting from Brigham Young University, a law
degree from California Western School of Law and studies the Austrian school
of economics. He works as an entrepreneur, investor, journalist and monetary
scientist. He is a strong advocate of the freedom of speech, a member of the
Society of Professional Journalists and the San Diego County Bar Association.
He has appeared on ABC, NBC, BNN, many radio shows and presented at many
investment conferences throughout the world.
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