Community News

Last month, I attended the National Association of Realtors (NAR) annual conference which is always a fine opportunity to share ideas and insight with top real estate professionals from across the country.  There are always first-rate speakers who bring up many topics that give points to ponder long after the conference is put to rest.

Forbes publisher Rich Karlgaard was one keynote speaker who brought a healthy dose of optimism to New Orleans.  Among his recommendations is that people should not just sit back and wait for the “news” that the economy has recovered.  According to economists, recovery has been in the works for over a year even though most people don’t intuitively feel it.  The “financial blackout” ended in the spring of 2009, but the revitalization has occurred sporadically and not across the board, especially in the areas of the stock market, unemployment, GDP, and housing.  Be prepared to experience a long and slow return to normal.  Most importantly, remember that improvements will be on a local level so keep in tune with the micro economy versus the macro.  Karlgaard followed up the conference with a recent article in Forbes entitled “Seven Reasons For Optimism”. (http://www.forbes.com/forbes/2010/1206/focus-rich-karlgaard-innovation-rules-seven-reasons.html)

Here are some of the good news “Tail Winds” Kaargard discussed in New Orleans.

Global growth is strong and will help states like Montana with solid demand for beef, wheat, and oil exports.  China has the potential to experience an “epic housing bubble”, and it will be interesting to watch its economy evolve.  Just the past few weeks have brought news of Chinese leadership trying to put the “brakes” on growth.  Also of note is the emergence of a very technically competent workforce.  Many of our “smart products”, including iPhones and iPads, are manufactured in China, not just because it is cheaper to do so there.

American corporations have more cash on hand than they typically do, yet are not investing by normal guidelines.  Some estimate that $3.2 trillion is being held as U.S. companies wait to see where Congress will take tax cuts and health care implementation and watch consumer confidence.  Another $1 trillion is sitting off-shore and is subject to a 35% corporate income tax to bring back more working capital to the United States.

Low borrowing rates give businesses an incredible opportunity to expand.  For example, Microsoft borrowed money to buy back shares even though they have a surplus of cash.

Some of the smartest people and companies are very bullish.  Noted examples include Warren Buffet, Microsoft, and IBM.

Americans have” hung in there”, and capitalism is back.  There is an amazing resiliency within the United States.  Our country was founded on opportunity and entrepreneurship.  Companies and individuals are still very cautious, but they are starting to move with optimism.

In a growth recession, there is aggressive restructuring.  Those who invest in the future win, while the defensive will fail.

There are many similarities with the 1970s recession. National morale was poor, and mid-term elections brought a further balance of power.  In the recession of the 70’s, the stock market fell 48%, this time 52%.  Unemployment rates reached 10% in the 1970s, and now we are facing 9.8%.   History has proven that it was one of the best decades for entrepreneurs.  U.S. giants emerged such as Fed Ex, Southwest Air, Microsoft, and Apple, just to name a few.  Technology took a major step with the first email sent in 1972, and the first-word processor was made by Intel in 1971.

Many of you will remember Karlgaard’s book Life 2.0: How People Across America Are Transforming Their Lives by Finding the Where of Their Happiness.  I found myself quoting it in a recent B2B this past summer.  One of the central themes of this 2004 book was that if people could live wherever they desired, they would choose certain attributes.

Of particular note at NAR were his comments on the emerging consumer.  There is a huge change in America’s buying patterns, and certain concepts are working.  For example, great design sells.  Americans are looking for “coherency”, and people are hungry for stability. It is important to be in the right place at the right time with the right product.  Money is traveling at the speed of light.  Sales innovation is at an all-time importance, with consumers wanting real-time analytics at their fingertips.  We are moving to an IQ-driven economy, where “smart phones and smart drinks” are in high demand.  And consumers and companies alike are looking for a sense of purpose.

So here are some final thoughts.  How will the recovery take place? Clearly, it will not happen all at once or equally across the nation.  One of Karlgaard’s predictions is that the new, more savvy consumers will look to relocate to communities where education is highly revered.  University towns will fare much better in the recovery.  A trend we have seen for years is that MSU and our vibrant arts and culture scene are “tipping points” for those relocating.  Consumers are also looking for a sense of purpose and moral values, which plays well for small-town communities in Montana.  The places that will recover quicker will have a global appeal and be lower than the national tax base.  Although we have state income tax and estate taxes, Montana is attractive to retirees and second-home buyers because of no sales tax, reasonable property taxes, and no realty transfer tax.  The recovery will also favor states with resources available for export to the global economy.  Montana’s abundance of oil, natural gas, cattle, and grains will play a big part in our state’s rebound.  All in all, this is more “Good News” for our region and state.