How to Survive the Economic Downturn - Part 1

by Doug Marshall, CCIM
Published August 27, 2009

Back for an “encore performance” is a 3-part series that I sent out in January. For those of you who missed it the first time or those who want to re-read again, read below. Enjoy!


The downward spiraling of the economy has not yet bottomed out. No one knows where this is heading. Not the experts, not those in high office, no one.

Watching the harmful repercussions of this bad economy is like watching a train wreck in slow motion: there is very little you can do to minimize the carnage. It’s going to happen, with or without you. The best you can hope for is that you personally steer clear of its path of destruction so that it doesn’t suck you down, too.

Those of us who work in real estate sales or some related field, such as finance, title and escrow, legal, etc, have been and will continue to be particularly hard hit by the dramatic slowdown in the economy. Heck, we helped bring on this crisis. It only stands to reason we would be some of the most affected.

But there are some time-proven principles, if applied that can help us out of this quagmire. In a three-part series, beginning today, I will share eight principles to help you avoid being a victim of the current economic decline.

Go Back To the Basics
For those of us in any kind of sales profession, we learned the critical importance of marketing ourselves when we got started. It wasn’t easy, but we learned to make those telephone calls or attend those networking meetings where we met potential customers for our business.

We learned the hard way that our ultimate success was dependent almost solely on how many marketing contacts we made each week.

But when times are good, which they have been for many years, we slowly drift away from the discipline of making those marketing contacts, instead relying on satisfied clients to refer business back to us.

Now the phone has stopped ringing. What do we do? We go back and do what made us successful in the first place. In a slow economy like this, marketing ourselves becomes more critical than ever.

Stay Absolutely Focused
At the beginning of every year my wife and I go to the beach for a weekend to plan for the year. We prepare questions about our personal and professional lives that we ask ourselves, reflect on, and discuss with each other.

As I pondered these questions over my planning weekend, I had an epiphany. The cartoon light bulb actually went on over my head. It was this: all of these “important” issues were a distraction from the overall point of focus for this year, which is to market myself like there is no tomorrow.

To do anything else would be a distraction from the immediate need of the moment, which is to get business through the door.

What one thing do you need to do this year that will best help you survive this economic slowdown? Identify it, and forget all the other things that are begging for your time and effort but which are simple distractions to the bigger picture.

Determine What Differentiates You From Your Competition
Consider doing a brutally honest self-assessment about your product or service. What core competency distinguishes you from your competition? Conversely, what do you do that is no different than anyone else?

For those of us who are commercial real estate professionals, no matter the particular discipline, we provide our clients a service which is often difficult to distinguish from our competitor’s. For most of us, there are only nuances that make us stand out from the next guy.

If you can’t differentiate your product or service from that of your competition you’re in deep trouble. You end up being a commodity in the eyes of your clients; just one of many possible choices. Let’s face it, there are no real differences between true commodities, whether you’re talking about corn or a barrel of oil.

On the other hand, I marvel at the loyalty of those real estate investors who will only use the services of one particular title company. How does a title company, providing near-identical services as the next, generate such loyalty? They do it by delivering a quality of service that exceeds the customer’s expectations. And they do it consistently.

Hence the repeat business that many of them enjoy.

In order to succeed in a slowed-down economy, abandon or at least downplay those things you do or sell that so look like everybody else’s. Focus on those things that make you unique.

End, part one

Small Upticks - We'll Take 'Em!

Doug Marshall
Market Assessment
Published August 20, 2009


Oh, how exciting! Houston, we have a positive indicator.

For months, the news on the economy, especially as it relates to commercial real estate, has been gloomy.

Looking at the numbers, it’s been too difficult for us to believe that the “recovery” considered underway for the economy in general is going to apply, in real-time, to commercial real estate.

We were, after all, the last shoe to drop in the global downturn. Further thuds are pending, we have said: inflation, huge defaults in commercial loans… just more bad news.

So naturally when the Labor Department issued their monthly jobs report on August 7, we were as surprised as most macroeconomists.

And, in dissecting these numbers, we have of course decided to approach with caution, bringing out the poking stick to try to determine how real these numbers are.

The unemployment rate, according to this report, dropped from 9.5% to 9.4% during July.

It’s an encouraging sign to many that the jobless rate shows any improvement at all, when many were predicting 300,000 lost jobs instead of the 247,000 actually reported.

However, it’s important to maintain perspective and context:

• This is a definitive, historical trend. As seen below in Barron’s Chart Of The Day from August 7, a one month drop in unemployment does tend to happen when a recession has ended.

So it’s encouraging that this might be considered empirical evidence, pointing to recovery.

• On the downside, this certainly doesn’t mean that unemployment will continue decreasing. A third of those currently out of work are long-term unemployed. And these workers will find it harder to re-enter the work force, no matter how unemployment is slowing. Many have given up looking for work and, when they decide to try again, it’s going to play with that number.

So is this a recovering economy or an economy “adapting” to a lessened workforce (1)? An unemployment rate of 9.4% may be a heartening sign, but only compared to the Great Depression.

Still, at this point in our economy’s spiral, we’ll take any positive number that’s based on real improvement. Not caution to the wind, mind you, but crossed fingers…


Sources:
Barron’s Chart Of The Day, August 7, 2009
(1) Larry Doyle, http://www.senseoncents.com/

That's What I Said!

Doug Marshall

Market Assessment
Published August 4, 2009


Yes, hindsight is 20/20. Yes, wearing the mantle of officialdom often means having to censure oneself and not say what you know, for the greater good.

Shown below is a very illuminating speech by Ben Bernanke, current Chairman of the Federal Reserve, back in 2002 before he attained his lofty position and had reason to hold his tongue.

After months of telling you that I believe inflation is on the horizon, it depresses me to realize that Bernanke knows it, too, and has for some time. He opines:

“The conclusion that deflation is always reversible under a fiat money system follows from basic economic reasoning.

A little parable may prove useful: Today an ounce of gold sells for $300, more or less. Now suppose that a modern alchemist solves his subject's oldest problem by finding a way to produce unlimited amounts of new gold at essentially no cost.

Moreover, his invention is widely publicized and scientifically verified, and he announces his intention to begin massive production of gold within days.

What would happen to the price of gold? Presumably, the potentially unlimited supply of cheap gold would cause the market price of gold to plummet.

Indeed, if the market for gold is to any degree efficient, the price of gold would collapse immediately after the announcement of the invention, before the alchemist had produced and marketed a single ounce of yellow metal.

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply.

But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.

By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services.

We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”


This from the one man in the nation, perhaps in the entire world, that has the most weapons at his disposal to bring inflation under control.

Over the past several months the Bush administration followed by the Obama administration have poured trillions of dollars of money we don’t have to prevent a banking collapse, to bail out the American auto industry and then to stimulate the economy out of our current recession.

This excessive money creation by the Federal Reserve has to adversely impact the value of the dollar.

The verdict is still out whether they will succeed on any of these fronts but this we know for sure: the once mighty dollar is going down for the count.


Source:
Erste Group Research reprint of Ben Bernanke, “Deflation: Making Sure ‘IT’ Doesn’t Happen Here.” November 21, 2002. http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm