Why isn't the economy recovering?

I have been saying for some time that California real estate isn't headed for a recovery, but another dip (barring government intervention like the tax credits, and no growth policies like in SF). It's widely acknowledged that small businesses provide 70% of the jobs in the US.

The current federal and state governments are ideologically opposed to freedom for the people. The lack of transparency and the desire to regulate practically everything is evidence of this.

If you haven't read anything by The Heritage Foundation you need to read this article. More taxes on investment and on earnings to fund "health care". Which is little more than direct payments to insurance companies and pharmaceutical companies. These new taxes when combined with the expiration of the Bush tax cuts will take capital from investors.

Less money for investors, means less jobs. Investors use jobs as a multiplier for their capital. As long as a business is profitable, it is reasonable to hire more employees to make more profit. When taxation and regulation cause a business to become unprofitable, it either adapts or closes, leaving employees struggling as they must  find new sources of income. Read this article about a jobless recovery--which to me is an oxymoron.

As our economy continues to worsen, people are spending less (read this article). I've seen empty commercial buildings all over Southern California. Commercial landlords are handing back keys to the bank, just as homeowners have. There won't be any commercial property bailout--as there is no sympathy from the current administrations for profit makers.

An aside: If you have seen a number of commercial building projects in the works and are thinking this is a sign of an improving economy, you need to think again. If builders do not complete currently approved plans, they will have to submit new plans. These new plans will have to comply with newer building codes, and the newest set of Energy Efficiency codes are much stricter, which will mean much more expensive buildings. I think the builders are hoping that the economy recovers by the time they are done building (and hopefully it is)

So, after all these small businesses go out of business (or don't open at all due to startup costs) we will continue to see more people unemployed. These people are also likely to fall behind on house payments and eventually lose them, adding even more foreclosures to the market.

Let's not forget, that there are lots of public employee unions that are investors. They have retirement accounts that are invested in stocks. So profits also help unionized employees, too. Though, as many of the public employee retirements are guaranteed, any shortfall in retirement accounts caused by a decrease in value of stocks will leave taxpayers (once again) footing the bill, further slowing the economy.

Update for the last 3 weeks

Things certainly seem to be slowing down a bit in the rental market, which is typical for December. One of the vacancies was filled, and I have a firm commitment to rent one of the others around the 15th of this month. Three others remain vacant despite move-in incentives.

The first Wednesday of the month, I dropped off a sailor Christmas tree ornament retired Navy friend of mine in Long Beach. I went by and saw my grandma's new shower and bathroom in Reseda. Had a good conversation with a friend of mine in Santa Clarita. Then I attended the High Desert International Code Council meeting in Victorville. That was quite the trip around southern California.

Most of this time has been spent looking for clients, work, and working on the rentals or interviewing potential renters. Note to people looking to rent: treat it like a job interview, don't show up late without calling and don't look like a complete vagrant. Just saying.

I took a two day road trip to Boise, Idaho. I visited some friends up there, while my buddy took care of business. That was Monday and Tuesday the 7th and 8th.

Now I don't feel so well. I'm downing juice, Airborne ® , vitamin C, and drinking lots of herbal tea. Yesterday I made a hot toddy with some very harsh single malt scotch. Phew!

Over the last couple weeks, while waiting for a negotiator for a short sale, I've been looking at a lot of the regulations coming down the line from the EPA and other government agencies, and how they're going to affect the housing market or, at least, the value of some homes. There are a lot of changes slated, and there's not much chance of avoiding them, as the various agencies and bureaucrats make law by passing regulations, without any voter oversight.

This has led me to question the value of property ownership in general. There are definitely those who should own property, but it is not everyone, and not every property. Older properties are going to need extensive energy efficiency upgrades in order to be sold. With the proposed healthcare reform, the IRS will be enforcing compliance, which means that if for any reason you do not wish to participate, your assets will be liened by the IRS, this includes your bank or your property.

All of these things have really caused me to question the value of owning "things" and property ownership in particular. I would and do put a premium value on any arable land with a water supply. You can't go wrong with a property that is able to grow it's own food, and with possible cap and trade legislation and the fact that the north central valley of California was denied irrigation water this year (to save the delta smelt), you can bet food and energy costs are going to go up. If you can ship your food to yourself from your own property, then you can save on both fronts.

What all of this leads me up to is this: I've tried to compartmentalize my blogs and separate out the various aspects of my life, but property ownership is by it's very nature political, as property is always subject to the vagaries of politics and legislation. Over the last several administrations, property rights have declined, and the current attitudes seem to be contemptuous of property rights on several levels. So I am going to start a political blog in addition to the other ones I have.

Thanks for reading this rant, I hope it was somewhat clear. If not please ask questions, as they help me clarify my thinking and positions.

James

Cash for Clunkers Analysis

I haven't checked the numbers but interesting.....also they (Gov't)
said it stimulated car sales which it did but much misleading info!!!!!

A vehicle that gets 15 mpg and does 12,000 miles per year, uses 800
gallons of gasoline
(Government definition of a Clunker)

  A vehicle that gets 25 mpg at 12,000 miles per year, uses 480 gallons
a year.

So, the average clunker transaction will reduce US gasoline consumption
by 320 gallons per year.

  About 700,000 vehicles were part of the Government's program, saving
224 million gallons per year.

That equates to just over 5 million barrels of oil.

5 million barrels of oil is about ¼ of one day of US consumption.

5 million barrels of oil costs about $350 million dollars at $75/bbl.

So we all contributed, through our taxes, over $3 billion... to save
$350 million.

They'll probably do a great job with Health Care though!
 This was forwarded to me in the email.
The rebates are taxable income, too.