Study in Contrasts

Last week I read two news stories in such stark contrast to each other that flummoxed me so much I almost blew a gasket thinking about the repercussions.

• Big Pay Packages Return to Wall Street
  Compensation on Track to Soar as Earnings Recover From Crisis; 'Like It's 2007 Again'
  (http://online.wsj.com/article/SB124649352055183157.html#mod%3Dtodays_us_money_and_investing%26project%3DBONUSES0907%26articleTabs%3Dinteractive)

• ADP Estimates U.S. Companies Cut Payrolls by 473,000
  http://www.bloomberg.com/apps/news?pid=20601087&sid=a5utvno88qDM)

OK, so the investment banks are now officially bank holding companies and are supposed to be levered considerably less than the dangerous 30:1 leverage ratios before the big crash. But just today a Barclay's analyst comes out and says that Goldman Sachs sees no limits on leverage and no reason to pull back on any of its business lines. That's a convenient line of thinking for a firm that now has access to the Fed's discount window and can effectively print money for themselves on the spread between short and long-term yields driven primarily by the administration's stimulus policies. Let's not forget the short-term rates have been artificially suppressed by government actions and long-term rates are reflecting concerns about inflation as a result of the same actions. The circularity of this is astounding.

Back in September when the conversion by the two remaining investment banks to bank holding companies was announced and there was financial blood all over the Street, the New York Times ran an article with the following:

"It also is a turning point for the high-rolling culture of Wall Street, with its seven-figure bonuses and lavish perks for even midlevel executives. It effectively returns Wall Street to the way it was structured before Congress passed a law during the Great Depression separating investment banking from commercial banking, known as the Glass-Steagall Act."
(http://www.nytimes.com/2008/09/22/business/22bank.html)

Hmmmm....sounds like we've got a disconnect between what was supposed to happen and what is actually happening. Goldman's basically saying it's business as usual against a backdrop of worsening labor, housing and general economic conditions that's raising the spectre of a second stimulus package. When I think hard about this my mind hurts. The general population is getting kicked in the proverbial nuts over and over again while the Lords of Wall Street jump on the back of the government and stroll merrily unencumbered by the concerns of the common man. And as the year progresses and awareness of this grows, I sense we're in for a pretty significant populist uprising. All I really know though is this just ain't right.

Minimize Me

One of the most enjoyable documentaries I've ever seen was "Supersize Me," a 2004 film chronicling Morgan Spurlock's month-long McDonald's-only diet. The psychological and physical torment he experienced was as compelling to watch as it was revolting to contemplate. Here we had an otherwise healthy man destroying his body little by little over the course of a month. By the end it's clear if he continues on this path he would seriously endanger his life. As viewers we're thankful he's done with his misadventure by the end of the month.

Mr. Spurlock's artery-clogging journey parallels in some ways the American consumer's behavior during our most recent debt-fueled economic binge. During that time it seemed as though enough would never be enough for all but the most frugal among us. Immediate gratification was the preferred path since people could acquire anything and everything they wanted without really having to work for it. The only problem with that path was the non-trivial requirement to incur sizable and in many cases unsustainable debt loads to live the showcase lifestyle. Like Mr. Spurlock at the end of the movie, we are now dealing with the painful after effects of this binge and trying to figure out how to improve our financial diet and get healthy again.

A lot has been written about the 'paradox of thrift,' a primary policy conundrum being addressed by our current administration. That paradox is essentially this: what is in the best interests of people individually (higher savings and investment, less consumption) is not necessarily in the best interests of the country as a whole since consumer spending accounts for roughly 70% of total economic activity. Keeping our economy propped up when its citizens are already way overleveraged, unemployment is high and jobs are scarce is not unexpectedly proving to be a herculean task. Unfortunately much like the government after 9/11 that asked us to go out and shop to support the country, this administration has been employing equally spurious incentives geared toward goosing short-run consumption despite the potential adverse longer-term impacts.

Thankfully though, we're starting to see early signs of rationality and prudence creeping back into consumers' decisions as they attempt to define for themselves their own 'new normal.' A couple good examples:

• "A survey released this month by the National Association of Home Builders shows that the average home built during the first quarter of 2009 was 2,335 square feet, down from 2,629 square feet during the second quarter of 2008."
  (http://online.wsj.com/article/SB124630276617469437.html?mod=googlenews_wsj)

• "...the savings rate surged to 6.9 percent, the highest level since December 1993."
  (http://www.bloomberg.com/apps/news?pid=20601068&sid=an7UdA7Bo8xg)

It appears many are now waking up with a grueling hangover and coming to the realization that over-consumption is a costly and unhealthy habit. The perception that more material possessions translates to happiness may finally be over for some - at least until the memory of this whole episode fades. Many are learning to minimize, rather than supersize their lives as a natural response to economic pain. They have found that simplifying and downsizing - actions which unfortunately provide headwinds to the administration's short-term economic goals - lead to a better way of life. It will be quite interesting to observe the future policy tensions created by such actions of rational self-interest.

Play the Ball Where it Lies

The US Open golf tournament that concluded today provided a reminder of one of the many important life lessons that are part of the game. At Bethpage Black this weekend, golfers had to contend with not just the extraordinary difficulty of the course and the pressure that comes with playing in a major tournament, but rainy weather conditions that consistenly stymied their rhythm and momentum. This was a tournament that ended on Monday not because of an 18-hole playoff but because of multiple weather delays. In the end, a talented but lesser-known player named Lucas Glover prevailed over such legendary names as Phil Mickelson, David Duval and Tiger Woods.

What's interesting about this is that the simple luck of the draw allowed Glover to play the majority of his tournament in good scoring conditions while many other players, including Tiger Woods, played in conditions much worse. Though golfers would confess their frustration that the conditions differed so much among the players (and frankly contributed to the end result), none would gripe about his fate or blame his result on this. This is because in golf, players know they have to play the ball where it lies. You hit it into the tall weeds, you deal with the circumstances and play it from there. Golfers are trained at putting the last shot behind them and focusing simply on the next shot ahead.

A teacher of mine, in response to my griping about some result, once told me "it's not a question of fairness." His glib retort to me was eloquent in its simplicity. He essentially told me life is not fair so I'd better deal with it. Over the years I have come to realize this was one of the most important pieces of advice I'd received. It's easy to get bogged down in self pity about things, particularly when life throws us one of its inevitable curveballs. But the ability to take that circumstance, accept it and move on with purpose is the only way to turn it around. Obsessing about the past does nothing but impede our future.

Many here in the US get bummed because they don't have enough money to buy that fancy new car or take that luxurious vacation abroad. Meanwhile, almost half the world (over 3 billion people) lives on less than USD $2.50 per day (source: http://www.globalissues.org/article/26/poverty-facts-and-stats) and roughly 80% of the world lives on less than USD $10 per day. The magnitude of these numbers are astounding:

They don't play much golf in places like Zambia and the Gaza Strip (where over 80% live below the poverty line), as their concerns are typically more about survival than the neverending pursuit of increasing comfort. I would venture to say that if more people here in the US thought about where their own ball really lies, they'd realize it's been lifted up, cleaned and placed for them right in the middle of the fairway, 100 yards from the pin. Just a simple wedge will get them to the hole. The lion's share of people on this earth will never even get to take that shot.

On Individualism

I was reminded this past weekend of the importance of collaboration while watching the NBA Finals. It was particularly instructive to hear Kobe Bryant's remarks about winning after the final game. He basically said every really good team has a dynamic duo or key group of players, and that no championship can be won on the back of just one player. When I heard this, I thought back to the Kobe who, as a rookie, tried to take it upon himself to win a key playoff game against the Utah Jazz and threw up three airballs. The Lakers season was over after that first-round loss in 1997.

This is not to criticize Kobe; in fact quite the contrary. He showed rare moxie and poise at an incredibly early age and displayed the kind of unrelenting self-confidence and fearlessness that allowed him to take shots most others would not dare even contemplate. But in this most recent season, he seemed to evolve into a much more mature and seasoned leader - which is saying something given his previous remarkable achievements.

Much like Michael Jordan before him, both of these 'best-ever' talents took some time before they finally realized that they would have to make the rest of their team better to achieve greatness. Kobe over the years has come to realize that true glory comes from team championships, not individual accomplishments. And, those championships are won not by a single star, but by a group of team players who rise above the competition with their collective effort.

This got me thinking about the difference between individualism and collectivism and how different cultures approach teamwork and define success. Recently, a co-worker and friend from Asia sent the following in an email to encourage the team (primarily US-based) to support each other through a rough patch when performance was lagging plans:

Fact 1: As each goose flaps its wings, it creates an “uplift” for the birds that follow. By flying in a “V” formation, the whole flock adds 71% greater flying range than if each bird flew alone. Lesson: People who share a common direction and sense of community can get where they are going quicker and easier because they are traveling on the thrust of each other.

Fact 2: When a goose falls out of formation, it suddenly feels the drag and resistance of flying alone. It quickly moves back into formation to take advantage of the lifting power of the bird immediately in front of it. Lesson: If we have as much sense as a goose, we stay in formation with those headed where we want to go. We are willing to accept their help and give our help to others.

Fact 3: When the lead bird tires, it rotates back into the formation to take advantage of the lifting power of the bird immediately in front of it. Lesson: It pays to take turns doing the hard tasks and sharing leadership. As with geese, people are interdependent on each other’s skills, capabilities, and unique arrangements of gifts, talents, or resources.

Fact 4: The geese flying in formation honk to encourage those up front to keep up their speed. Lesson: We need to make sure our honking is encouraging. In groups where there is encouragement, the production is much greater. The power of encouragement (to stand by one’s heart or core values and to encourage the heart and core values of others) is the quality of honking we seek.

Fact 5: When a goose gets sick, wounded, or shot down, two geese drop out of formation and follow it down to help and protect it. They stay with it until it dies or is able to fly again. Then, they launch out with another formation or catch up with the flock. Lesson: If we have as much sense as geese, we will stand by each other in difficult times as well as when we’re strong.

Her email highlighted for me the different approach that our cultures often take when addressing a challenge. I'll never forget the startling and mind-boggling display of teamwork of 2,008 Chinese drummers pounding in unison at the most recent Olympic opening ceremonies:

It struck me that as a culture, we in the US have long canonized the star individual performer, particularly in business, politics, entertainment and sports. We put these people on pedestals often to our own detriment. We seem to forget that none of these people whom we (often falsely) project as an icon of greatness would ever be in that position if not for the collective effort of the people supporting them. The wisest among them realize the fallacy of this and view their 'underlings' as anything but. Like Kobe, they recognize the power of the team and know that leadership is best viewed from the bottom, not the top. And they know that the view from that perspective is far more satisfying.

Priorities, Priorities

According to The Wedding Report (a research firm in Tucson, AZ), US couples on average spent almost $22,000 - excluding the cost for a honeymoon or engagement ring - on their wedding in 2008. Though that was down from roughly $27,500 the year before and will likely decline further in 2009 due to the recession, that still means the average total cost including ring and honeymoon has to be close to or even over $30,000. Note that the average age of marriage for women is 26 and for men, 28.

This got me thinking it would be interesting to connect the dots between the average wedding cost and the average household savings for retirement at later points in life. According to the Congressional Research Service (www.globalaging.org/pension/us/2009/retire.pdf), the median savings for a family with the head of household between ages 45 and 54 was $67,000 in 2007. For the group between 35 and 44, the median was just $37,000. For the non-mathematically-oriented among us, the median is the midpoint of a data series, basically in this case the level at which half of the households have more and half have less than this amount (the mean often skews north of the median with these kinds of stats because high net worth folks can push the average much higher - e.g. just add Bill Gates into a grouping and take a look at mean versus median levels).

It's fascinating to me that the average household savings a decade or two after the wedding isn't that much more than the cost of the event that got the household started in the first place. I wonder how often families that find themselves in tenuous financial circumstances regret the amount of money spent on their wedding. Obviously many marriages are funded, at least in part, by parents. But that's still money flowing out of the family coffers never to be seen again. I'm not saying that spending money on marriages is a wasteful allocation of family funds, it's just that the amount of spend should more closely correlate to a family's available resources. From the above statistics, it's clear that it doesn't.

All of this is kind of like the Starbucks coffee retirement lesson - stop buying that latte and scone every day and you'll retire a millionaire. It's a basic rule that small dollars of savings compounded over long periods will yield tremendous financial outcomes for retirement. For the amount of money spent on the typical wedding, cutting back by even 10 to 20% or more can be the difference between having a comfortable cushion in retirement and spending your remaining days stressed about how little money you've got to last. This isn't a particularly romantic notion, I know, but it's reality. And I would venture to say many couples would make different decisions about their wedding with the benefit of this kind of financial hindsight.

Slow Down

The younger generation seems to have become all-consumed with the concept of constant connection. Sites like Facebook, Twitter, MySpace and myriad lesser-known players provide the forum for anyone to connect and communicate with millions of people all around the world. It's not uncommon for people to have hundreds, if not thousands, of 'friends'. I'm not the first, nor will I be the last person to ask myself, why?

I suppose the frivolous nature of this type of communication is generally harmless, but it can lead to a skewed sense of what a real connection is and consequently an altered view of what friendship means. Deep and meaningful connections with family and friends are the lifeblood of our existence on this earth. With them, we thrive, but without them, we become empty and lonely souls. So if our social life is filled with ephemeral and frivolous connections, that can only limit one's capacity for the type that take time and emotional investment to build.

That's why I feel it's about time people stopped feeding the ever-expanding social networking monster and re-engage with a world where substantive conversation and true friendship is the norm and not simply the purview of those of us who "just don't get it." Back in 1989, there was a similar movement to counteract fast food and fast life called 'Slow Food'. That global movement now has over 100,000 members in 132 countries and continues to build momentum as people like the First Lady Michelle Obama support its principles.

Read about the Slow Food Movement here:
http://www.slowfood.com/

Perhaps if enough people find this interesting, we can start a parallel movement to counterbalance the influence of these omnipresent social networks. We'll call it the 'Slow Friend Movement', get some venture capital and build a huge company out of it! jk ;-) But in all seriousness, it is about time to slow down and have some meaningful conversations with our family and friends. That means infinitely more than a simple text message exchange. Trust me, we will all be richer for it.

Never Bet Against the House

I posted the other day on the topic of the Supreme Court temporarily postponing the Fiat / Chrysler merger to review the application for a stay by a group of Indiana state pension funds. My expectations were that the ruling in this case would be based on the rule of law, rather than the politics of the moment. We have our answer now. Yesterday the Supreme court announced that it would not allow the stay because the Indiana pension funds did not meet an appropriate standard for the stay to be reviewed, thereby clearing the way for the merger.

Full ruling here:
http://online.wsj.com/public/resources/documents/chrysler_percuriam0609.pdf

My read of this is essentially the Supreme Court punted on making any ruling whatsoever, since the statement linked to above noted that the Court was not issuing a legal opinion that could be extended to any other case, thereby obviating its dangerous extension to other bankruptcy filings. All this in the spirit of the 'greater good' argument espoused by the government.

A few key quotes:

"A denial of a stay is not a decision on the merits of the underlying legal issues."

"A stay is not a matter of right, even if irreparable injury might otherwise result."

A stay "is instead an exercise of judicial discretion, and the 'party requesting the stay bears the burden of showing that the circumstances justify the exercise of that discretion.'"

"Our assessment of the stay factors here is based on the record and proceedings in this case alone."

Our government has done an admirable job in protecting its citizens from further shocks to the economy since taking office. I'm just not sure that its view of the 'greater good' for the economy is actually that. Stepping into market corrections to disrupt the natural order of capitalism and economic cycles may have some unfortunate long-term unintended consequences.

In my view, the biggest risk facing our economy is a never-ending whack-a-mole game where every action to stave off further economic declines produces yet another, equally problematic outcome requiring additional unprecedented government intervention. What was once unprecedented then becomes standard and expected. And, economic incentives and investor risk tolerances adjust accordingly. That would be an unfortunate scenario.

Which brings me to a key tenet in gambling - never bet against the house. With gambling, though, it's clear what the rules are. If the rules continue to be ever-changing as they seem to be with this government, I would expect that principle to apply with even more certitude.

Rules, What Rules?

I was astonished earlier today when I read a headline that read: "U.S. Asks Supreme Court to Permit Sale of Chrysler Without Delay."

The grounds on which the government attempted to exert influence were economic - that is to say that its urging of an expedient sale of Chrysler to Fiat was based largely on the grounds that the sale would avoid significant job loss and avert potentially calamitous economic circumstances. (from CNN http://money.cnn.com/2009/06/08/news/companies/chrysler_stay/index.htm?postversion=2009060816): ...in a filing Monday U.S. Solicitor General Elena Kagan, arguing for the administration, said the losses to the Indiana pension funds "cannot outweigh" the potential broader problems a collapse of Chrysler would present. " As an economic matter ... blocking the transaction would undoubtedly have grave consequences," Kagan wrote. "Even if the stay were continued for a short time and Fiat did not withdraw from the transaction, the consequences of delay for both Chrysler and the United States government would far outweigh any benefit to applicants."

This sounded like a potentially inappropriate exertion of influence given our constitutional mandate of maintaining an impartial body to interpret and provide guiding principles on the rule of law. The Supreme Court is not and should not be subject to political influence.

With an important caveat that I'm not a lawyer, the case at hand should be judged on purely legal, not economic grounds. Basically there are classes of creditors in structured proceedings that stand in line for the bits left over after a Chapter 11 reorganization or Chapter 7 liquidation bankruptcy. What has happened in this case is that the government has very obviously prioritized the claims of unsecured creditors - e.g. the UAW - over the claims of secured creditors such as the Indiana pensions. It's hard to make a straight-faced claim that this preferential prioritization was anything other than a cold, calculated political move.

Below is a quick excerpt from the Wall Street Journal concerning the pension funds' position (copy of full pleading at http://online.wsj.com/public/resources/documents/indiana.pdf):

"The pension funds argued the sale, orchestrated by the U.S. and Canadian governments under bankruptcy laws, was illegal and that the federal government exceeded its bailout authority with its involvement.

"The negative economic consequences of permitting an unlawful sale to proceed may well over time dramatically outweigh Chrysler's short-term harm," the funds said."

What is clear to me is that the outcome of this case will set an important precedent for the rule of law in corporate bankruptcy - impacting the current GM proceedings - and will in turn affect the risk tolerance of investors to deploy capital. This is no trivial matter.

By the end of the day, the prudent Ruth Bader Ginsburg made the wise move of halting the deal for now, "pending further order from the court."
http://www.ft.com/cms/s/0/804bf34a-546c-11de-a58d-00144feabdc0.html

The Indiana pension funds have taken an important stand that other creditors were unwilling to take due to the politics of the moment. The chess match has now begun. Meanwhile, the clock is ticking on the June 15 deadline set by Fiat to complete the sale. Suffice it to say that there will be many interested parties in the ruling on this case. I hope and expect that this Supreme Court ruling will be based not on the politics of the moment, but rather the rule of law, as it always should be.

Grading on a Curve

I thought it would be interesting to revisit the Federal Reserve's stress test measures used to give the banks a strong bill of health, which added confidence to the markets and helped to attract much-needed private capital back into those financial institutions. The results showed that the largest 19 banks in the country would have to raise in aggregate approximately 75 billion to withstand the 'Alternative More Adverse' scenario metrics. Here were the official measurements as released on February 25, 2009:

1. Percent change in annual average.
2. Baseline forecasts for real GDP and the unemployment rate equal the average of projections released by Consensus Forecasts, Blue Chip, and Survey of Professional Forecasters in February.
3. Annual average.
4. Case‐Shiller 10‐City Composite, percent change, fourth quarter of the previous year to fourth quarter of the year indicated.

The results of this test were released less than one month ago on May 7 (though unofficially leaked during the preceding weeks). Full details of the stress test results can be found here:
http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090507a1.pdf

Well, here we are on June 6, and we are starting to get indications of where these metrics are trending:

Real GDP: Q4 2008 - Q1 2009 was -5.7%

Civilian Unemployment Rate: 8.5% (average of monthly Jan – May rate); most recent month was 9.4%

House Prices: Q1 2008 – Q1 2009 was -19.0% (note the one month 10 city index from March 2008 to March 2009 comparison was -18.6%, which was the headline number in the press)

Seems to me the stress test was designed to give an 'A' on a test they knew the banks would only be able to score a 'C' at best. Grading on a curve can be problematic if the results give a false sense of accomplishment, as inevitably real ability is exposed over time. Hopefully I'm wrong about what this test means.

The Beginning of the End or the End of the Beginning?

It was announced today that the US economy lost another 345,000 jobs in May, driving the unemployment rate to 9.4% from 8.9% the month before. Hallelujah! So *just* 6 million jobs have been lost since the beginning of this recession, which is now approaching its 18th month. The jobless rate is at a 25-year high and the highest since it registered 9.5% in August of 1983. Ahhh, the summer of ’83 - those were the days. But I digress…

Looking further back before the summer of 1983, the unemployment rate also hit 9.4% in May of 1982 on its way up to a post World War 2 high of 10.8% in November and December of 1982. The economy by the summer of ’83 had begun showing some signs of life and the resulting effect to the unemployment rate was that it slowly improved from the beginning of 1983 but yet still didn’t drop below 7% for two consecutive months until November of 1986. Definitions vary, but ‘full employment’ generally is defined as an economy with an unemployment rate of below 7%.

Meanwhile trouble continues to brew on the horizon. It’s awfully hard to imagine any kind of recovery scenario when states are facing enormous budget deficits, consumer and business credit is difficult to come by, unemployment is still rising, interest rates have nowhere to go but up, residential and commercial real estate values continue to slide, the dollar is weakening and consumers are finally starting to get the message en masse that it’s important to spend less and save more of their hard-earned income than they grew accustomed to during the crazy buildup to where we are today.

There’s no way we’re close to the end of this economic down cycle yet.

Lie to Me

I don't wanna know what I know to be true,

What I need you to do, tell me another lie

- Ne-Yo, "Lie to Me"

I've found it fascinating the importance of psychology on the markets and consumer behavior. It's as if 'confidence' in and of itself can make things better. To some degree, perhaps that's true, since consumers are more likely to spend if they feel 'confident' in their economic futures. But, what if that confidence is based not on truth, but something else? We all know somebody who seems oblivious to their own shortcomings and sports an incomprehensibly large ego as a result. Pride goeth....bla bla bla...I defer to one of the great publications of our time for its sage remarks on this topic:

http://www.theonion.com/content/news/nation_ready_to_be_lied_to_about

Enjoy the read.

Step One

I've been thinking about writing a blog for some time and thought I should finally get on with it...

In this, my first post, I thought I'd pass on some info I pulled together for a couple friends who are thinking about buying a home in Northern California. They were looking for some some constructive info about housing to help them think through what will be a very big decision in their life.

So, here are my recommendations for anyone about to buy a home or wanting to understand the dynamics behind the most recent housing boom and resulting bust:

1. Go to www.trulia.com/rent_vs_buy/ to do an analysis of the rent versus buy equation. You can customize based on specific data points. It’s probably the best one I’ve seen and should help you as you sort out the equation for your own decision. Trulia is also a great site for exploring available homes when and if you decide to go down that path.
   
   
2. Check out these interesting housing blogs to get some real market insight (as opposed to popular press articles and realtor spin, both of which I’ve often found to be misleading):
   
   www.doctorhousingbubble.com/
   www.fieldcheckgroup.com/blog/
   
   
3. Read this excellent presentation that is both factual and intellectually honest for a primer on what has happened with housing and what may still be ahead of us:
   
   www.scribd.com/doc/9306954/T2-Housing-Analysis-Nice-presentation-about-the-current-economic-crisis
   
   
4. Wade through this meaty research article from 2006 written by Robert Shiller, a Yale economist well-known for the creation of the Case-Shiller housing index and a recognized authority on the housing market (note free registration required at Berkeley Press):
   
   www.bepress.com/ev/vol3/iss4/art4/
   
   
5. Look at the below chart of Shiller’s research showing a historical view of 116 years on housing prices (chart covers 1890-2006) adjusting for the effects of inflation from an article in the NY Times. Note that every boom cycle has been followed by a downturn but there had never been a boom like the one we just experienced:
   
   (www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html)
   
   
6. Skim this amusing press release (propaganda piece) from the National Association of Realtors (NAR) from summer 2008, demonstrating the type of communications that they send out to make people think it’s always a good time to buy. Anybody taking advice to buy last year would likely be in serious trouble now – they conveniently never point out the pernicious adverse effects of leverage:
   
   Over the Long Term, Owning is Better than Renting
   July 2008
   (471 words)
   
   In today’s market, an increasing number of savvy consumers are asking themselves whether they should rent or own a home.
   
   [Full name of your local association of Realtors®] advises that while there are many factors to consider in deciding whether to buy or rent, the most important questions to ask are:
   
   “Can I afford to buy?”
   “Is homeownership a good investment?” and
   “How long do I plan to stay in my home?”
   
   The answer to the first question may well be that you can’t afford NOT to buy, [full name and title of your local spokesperson] said. “None of the money you spend on rent is returned to you, either through savings or as an investment.”
   
   Homeownership, on the other hand, has tax advantages over renting. And homeownership allows you to leverage your money, [last name] said.
   
   When considering the investment value of a home, think about this: Dollar for dollar, the rate of return on an individual’s cash downpayment on a house is substantial. Buyers typically use their own money to cover only a small portion of the purchase price, but the home appreciation they realize is based on the total value of the property.
   
   Homeowners benefit from the power of leverage. Over 10 years, a $10,000 investment in the stock market at a normal 10 percent market rate of return would yield $23,600. The same investment as a down payment on a $200,000 home at a normal appreciation rate of 5 percent would return nearly five times the average stock market return, at $110,300.
   
   [Last name] points out that homeownership is how many American families begin to accumulate wealth. According to data from the Federal Reserve Board, a homeowner’s net worth is 46 times that of a renter’s.
   
   However, if you are planning to move fairly soon, you may want to consider renting, [he/she] said.
   
   “Housing is not a quick-in, quick-out investment. When purchased for the long term, housing is one of the safest investments consumers can make. In addition to the savings accumulated through a buildup of equity and tax advantages, a home provides shelter. No paper investment provides this benefit,” [last name] said.
   
   Of course, homeownership is not just about money. Homeownership provides shelter and security to families, and fosters involvement in community life as well as participation in democratic institutions. Homeownership also provides important social and economic benefits. It is the cornerstone of a healthy community and the basis for positive community involvement, [he/she] added.
   
   Consumers who are considering buying a home should contact a Realtor® in their local market, who can help them begin to build their future through homeownership. To find a Realtor® here in [name of your community], contact the [full name of your local association].
   
   
7. View a couple commercials that will shed some more light on realtor sales tactics (first from 2007, second from 2006):
   
   www.youtube.com/watch?v=AYiX2BuRVhg&NR=1
   www.youtube.com/watch?v=Ubsd-tWYmZw

In general, I've found that people believe what they want to believe about housing. But armed with this info, one should be able to come up with a more informed view than what seems to permeate the press these days...