Go Chicken Little Go!

So what do we do now that the sky has finally fallen?

Work hard? Work differently? Keep going like we always have? One item I can confidently advise - save your cash. For one, you may need it. You may lose your job for circumstances beyond your control, and be caught with no income for a while. Two, if you don't lose your job, without cash you will lose some opportunities that have begun to pop up, and will continue to surface over at least the next year.

For example, in my lovely Charles Village neighborhood, there is currently a very large, 3 story, zoned for 3 units, right on a prime Saint Paul block, but does need some work, home for sale. It's been on the market for about 25 days, and sold a year ago for $410,000. Since then its been foreclosed on, and now the bank is trying to sell it for $299,000, and guess what, nobody's buying. I even looked at it.

The problem is the price. It's too high. Hello out there, the sky fell, didn't you see it? Apparently everyone else has.

There are other good "REO" deals right in my neighborhood (REO stands for Real Estate Owned, as in, real estate owned by a bank), and nobody is buying those either. The agents are practically begging buyers to come and take a look.

And it's not only real estate where I expect to see deals to be had over the next twelve months. I would look out for deals on all types of big ticket consumer goods, like cars, appliances, big screen televisions, and pool tables because all the fun expensive stuff will go on sale. It's sad, but ebay and craigslist will also see increased traffic, as people start to sell the big ticket consumer goods they bought when everyone else did, and now they're broke, just like everybody else. If you've got the cash, you'll get the deal.

This isn't only because the stock market is in the tank, or because of the increased difficultly in obtaining financing. These properties are sitting on the market because people are scared. They are scared of the uncertainty that lies ahead. They are scared of $5 gallons of gas, and $6 gallons of milk.

But I don't think the sky falling is anything to be afraid of. In fact, I think it is something to welcome. Go ahead, exhale, the party is taking a break. Now's the time to run to the bar and grab a drink, while the line is short, and if you have to go, go to the bathroom now, because pretty soon everybody will be back and you'll never get in!

Remember the last time the sky fell? The last time the party took a breather? It started in the very beginning of 2000, the Nasdaq bubble? Remember? Funny how the world has such a short memory.

I've said it before and so have many others: Get greedy when everyone else is scared.

Delayed Gratification

Some of my earliest and clearest memories are of visits to my father's parents' house. My grandfather had a club basement, complete with real oak panelled walls, a gas fireplace, a built-in couch with a large back-lit photo of Capri behind it, and a glass block bar with multi-colored lights inside. My grandmother liked to bake, and she was somewhat famous in their town for her pound cake. It was so good it'd make a grown man cry. Or at least beg.

She made the icing too, and it was just like fudge, only it was icing. I would eat large amounts of this cake whenever we had occasion to visit them. The cake part was good, better then I knew at the time, but for me, the real treat was the icing, which I would eat last.

I was born with the concept of delayed gratification. I always saved my best assets for another time, for a time when they would become more valuable, or more sweet.

I really never had to learn this behavior, or if I did, I taught myself, because I'm not too sure my parents ever learned it, at least not as well as me.

How do you teach this? I don't know that, but I am sure it can be learned. How many 'successful' friends do you have that you know didn't save a nickel a of that 100k they brought home last year? What did they do with it you ask? Maybe they can't answer that, but I can tell you: They devoured it, like a freshly killed animal they dragged back to their cave. They brought it through the darkness of the cave, over to where their families, friends, and other tribe members waited by the fire. Then together, they tore it apart, raw. Then it was all gone.

What is it worth if you don't save any of it? Lots, if you're only here for a moment. But you're not here for a moment. If fact, with modern science, you may be here for a very long time, longer than any previous generation. So get to it, go out and save, leave the leg, freeze it, save it for the winter, it will be cold, and you WILL be hungry!

"Be fearful when others are greedy, and be greedy only when others are fearful." Warren Buffett

Amen.