smaller rollercoast 2004 to present IMG_3329

An Economic Rollercoaster

The news is full of opinions about where our economy is headed. Although many forecast events with confidence, the fact is, most get it wrong. Federal Reserve Chairman Ben Bernanke said it well in referring to his own prediction of events “My forecasting record on this recession is about the same as the win-loss record of the Washington Nationals” (WSJ Mar 11, 2009). In context, the Washington Nationals record was the worst in Major League baseball last year. Best advice, don’t count on Ben Bernanke, Barack Obama, or other government officials to stimulate or predict a recovery.

Generally speaking, buyers are still hedging their bet against further downturn in the markets and waiting for signals of a turn. Many investors have been burned so badly, that they are reluctant to reinvest in deals that would otherwise seem too good to pass up. It is nature for the majority of buyers to wait until they are sure a recovery is underway and instead of catching the bottom, they catch the middle or near the peak of the cycle. Whenever it happens, the majority will recognize and act on a changing economy months after it begins. If the deal fits you as a buyer, it is a better to be a little early than to wait for a changing economy and miss the opportunity altogether.

The last 5 years have been the biggest economic rollercoaster most of us have ever ridden. Oil has gone from $30 to almost $150 a barrel and back down again. The Dow increased from 10,000 to 14,000 then dropped to 6,500. Gold has gone from $400 to $1,000 to $900 per ounce with a $350 per ounce fluctuation within the last year alone. Real estate has experienced similar fluctuations in the last 5 years with the largest movements in the land markets. How do you invest in the context of volatility? Always invest with the long term in mind.

The good news about today is that there is more activity from buyers and tenants in commercial real estate now then the end of 4th quarter 2008. Some say it is the beginning of a recovery, some say it is a seasonal fluctuation. From either perspective, increased activity is good news.

Jon Walter is a principal and investment specialist at NAI Utah Southern Region.

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