Wednesday, January 12, 2011

Lovable Losers! Housing falls for 53 straight months

How many of you have that person in your family that can't win for trying?  I know that I have a few, in fact I seem to collect them as friends and relatives.  I guess I have a soft spot for the underdog.  When I was in my undergrad, I studied stocks and bonds, not a really exciting course of discussion for some, but when you are dealing with companies, there is a lot of personality to many of them, not unlike the lovable losers in our own lives. Think of Apple and its feud with Microsoft or Geico's Cavemen and the many other brands that live in Americana today that have taken on personas all their own.  Well, in investing, sometimes investors get attached to things because of the sexiness of the brand, or its perceived value regardless of its economic value.

I promise, this is going to tie in nicely with housing in a minute, but if you will allow me one story.  I grew up a fan of comic books and when I was studying stocks, one of our projects was to take an imaginary amount of $5M and invest it in a diversified portfolio and make daily transactions, the guy with the most money at the end of the semester wins.  One of my stock picks was Marvel.  The stock was going gangbusters for me, but then there was a falling out between Stan Lee and the rest of his board and there was a big suit over movie profits and the stock price tanked.  Guess who held on out of a misplaced sense of nostalgia?  That's right, me.  I did really well in that class, but that failure taught me a very important thing.   Emotional attachment to things, can cause you to lose in the endgame.

An interesting article was posted on CNBC today and it used the word "Depression."  Though our overall economy is not in a depression, if we look at housing prices overall for the US, we have lost value for 53 consecutive months.  That is over 4 and 1/2 years.  You may have children that started college and have never been able to study a single month of rising housing prices in a college career dedicated to finance without cracking open a historical chart.

The issue that I have with this, and this is partly the fault of media, partly the fault of nostalgia, partly the fault of fear, a myriad of factors that have lead us to hold on to a losing economic asset.  We love our homes, it is where we brought home our first child, raised the kids, had Christmas parties, proposed to spouses, and felt safe from a turbulent world.  There is so much emotional attachment to those four walls that many have or will lose the endgame because they cannot let go.

When we deal with foreclosure, strategic default, efficient breach, or whatever term you like to use, the simple fact is that in order to take action, rather than letting the economy dictate to us what is going to happen, we have to shed some of the emotional baggage. Yes it is your home, but as cliche as it may sound, home is where you heart is and that should be your family, not the four walls that are acting like an economic prison dragging us further into depression.

Look at the lovable losers in your life, give them a hug, because family and friends are the important parts of our life, and then look at the loser economic asset, take a picture and let it go.  Whether its a stock that is attached to a childhood memory or a house that you just can't afford to see drop in value one more month and let it go. Depression doesn't have to hold us, we can fight back and come out economic winners.

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