After the Bust

I know that a book could be writting on this subject, and it is not my intent to write one.  There are a number of thing that most people can do to increase their energy savings through lowered consumption.  Some of them are just common sense, and sure you will say “everyone knows that,” while there are a few other suggestions that you may not have thought of.  Here’s a quick list:

1.  Take time to plan your trips, make sure that your routes are the ones that are the shortest and most efficeint.  How many of us think we know a way to get somewhere that is shorter but we have never taken a look online to confirm whether or not it really is?

2. If you can, pay the extra dollars necessary to acquire high efficiency equipment like A/C and heating units.  While you pay a premium for the equipment, most units will save you big over the life of the equipment, especially since energy costs continue to rise.

3. Make an adjustment to your heating or cooling habits, you can work and live in a comfort zone without being in an excessive cost zone.  If you are in the heat of the desert maybe you can live with 75 degrees instead of 70 degrees.  Over an entire summer if you are cooling or heating a 2,000 square foot home the savings can be substantial.  Something as simple as a fan or ceiling fan can make an effective 5 degree difference in cooling or direct heat back down to you before it escapes the room.

4. In keeping with the above, upgarde your thermostat and set it to use less energy when your are gone to work.  You can save the money that the upgraded thermostat costs you in a short time.

5. Shorten the time that your pool cleaning system runs and consider off-peak times to run motors for such purposes.

 6. Cut back on decorative landscaping that is expensive to keep in place.  Do you really need to have acres of decorative grass that requires hundreds or thousands of gallons of fresh water pumped to it for aesthetics? 

7. Unplug electronics or applicances that stay in a ”standby” mode and continue to use power.

8. Incandescent lights use more energy because they create a lot of heat.  While there are still negative feature, fluorescent lights offer a substantial savings. 

9. Check to see if you can get a tax credit for making changes.  Many utility companies offer rebates for making landscaping, thermostat or light bulb changes.  Expect the feds to participate more with major alternative energy credits for solar and other sources.

What about recycling, building ”green” and home tune-ups?  All great ideas, it takes some effort, but with energy bills potentially going through the roof everyone needs to take some time and evaluate their consumption situation.

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Ok, now I understand why this healh care plan is going to be so expensive.  12 million foriegn aliens are going to get free coverage, yes, that makes sense.  If we buy some additional printing presses the U.S. Mint can run the ones that we already have and the new ones faster, and we can print enough money to cover everyone with health insurance in both North and South America.  Why not?  It’s a great idea.  Talk about good international relations!

I guess not guarding the borders well will now be a whole lot more expensive than it used to be.  For every undocumented alien who gets into the U.S., the health care cost will just keep on going up.  I have to say that if I were thinking about moving back to the U.S. given the proposed coverage I would do it for that alone.

It used to be that being a citizen of the U.S. meant something, but I guess that now it does not.  I can hardly wait to hear what happens when they turn away veterans and people who are paying massive taxes because the services are being soaked up by those who are here illegally.  That should turn out to be an interesting sight.

I don’t know about you, but I think this is a terrible proposal that has been added to the plan.  Health care coverage was never supposed to be about taking care of everyone, it was about taking care of U.S. citizens who could not afford coverage.  If we do not know who is a citizen, that is a failure that must be fixed before we move forward.

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If you are trying to follow where we are in the real estate cycle you may want to check out “The Big Picture” at www.ritholtz.com and specifically read the recent post on the blog at http://www.ritholtz.com/blog/2009/07/why-housing-isnt-yet-bottoming/ it has some great arguments about why we are still headed down.  Sadly, I agree with his assessment.  He published the following chart on his site which dramatically displays just how bad things are historically:

As discussed on this site within other posts, there are some who believe that we will not turn around this mess without having housing prices stabilize and turn back up.  There are just too many people who will continue to hit deep negative equity water and dump more real estate onto the market.

I really don’t expect to see prices continue to drop at 32% or more per year, which has been the case here in Las Vegas.  The prices are likely to continue to decrease in price at a decreasing rate.  Las Vegas, unlike many other cities, is adjusting quickly to price drops and my expectation is that we will hit the bottom sooner than many others.  That could occur when home prices find their way below the cost of construction or below their expected or forecasted value based on historic trends.

At some point the psychological aspect of the housing market will change, and assuming credit is available, there will be more people willing to consider a purchase.  The fact that things have fallen so far is of course going to stigmatize the entire market for quite a while. 

When will it happen?  That’s the trillion dollar question that no one can answer.  In Las Vegas we are already seeing many properties sell below what it would cost to construct them.  When you get to about $ 70 per square foot for an average home here, you are near or below the cost of construction (which includes the lot and site improvements).

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The Wall Street Journal had an interesting article today authored by Stan Leibowitz entitled  New Evidence on the Foreclosure Crisis

it’s an eye opener because the article identifies negative equity as the main cause for mortgage foreclosure, not mortgage rate changes or unemployment, which many thought were the reasons. 

It is important to understand that foreclosure are happening because people are finding themselves in debt holes that are so deep that it would take them decades to get out of them, and rather than spend every dollar that they earn trying to make it right (pay it back), people are just walking away.

I imagined that most of the defaults were being made by individuals who were being forced into foreclosure because they could not make their mortgage payments, but negative equity foreclosures are made by people to proactively elect to default.  They are simply trying to better their financial situation.

I can identify with people who don’t want to be straddled with hundreds of thousands of dollars of mortgage debt.  It was fun buying the Mercedes and touring Europe, but when property values dropped and you find that you have to pay it all back, that is just downright brutal, right? 

Based on this new found knowledge, I will again speculate that the American people will elect to default on their large mult-trillion dollar debt in the next several years rather than pay for it via huge tax increases.  California is effectively defaulting its 24 billion budget shortfall via its I.O.U. program.  They should be starting from scratch with a zero based budget, and kill progarms that they just can’t afford, but in the American tradition they would rather default that accept the fact that they simply could not afford them.

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Three dollar a gallon gas is not a welcome sight at the pump, not when unemployment is nearly 12% and home prices are falling at 2% per month.  On top of everything else, we here in Las Vegas just got hit with a fat 7% electricty rate increase.  When you live in the desert and the temperature at times hits 115 degrees you don’t have a lot of choices about paying for power, you either pay or suffer the physical pain. 

Looking to the short term future I would say that things are going to get worse before they get better, and I consider myself to be a relatively optimistic person.  Las Vegas is seeing double digit decreases in sales tax income, visitor volumes are consistently down and have you checked to see just how far room rates have fallen?  You can stay in the Wynn Resort or the Belaggio this Summer for less that it costs to stay in a Ramada Inn in upper Michigan. 

I guess that the bargains are the upside to all of this insanity.  Fewer travelers means that you can play “lets make a deal” on a wide range of travel products and services.  Almost every cruise line has a major discounts going on their cabins and on their on-board credits.  The discounts are much larger for 2010 cruises than they were even for 2009.

I have seen flight / auto trip combo packages to Ireland that include airfare from NYC for $ 249!  That’s a bargain price even for those of us who are suffering through these slow times.

Local Las Vegas restaurants have joined in the discounting frenzy by offering $ 50 dining coupons at discounts of 20% to 50% off, and if you have shunned the shows like The Beatles or Jersey Boys, its time to take a second look.  Like everthing else, there are some great deals around.

Its not much of a silver lining, but maybe some of the bargain discounts will get you a vacation or a dinner that you thought you couldn’t afford.

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Can you see what is on the horizon, looks like $11 a pack cigarettes, higher unemployment, higher gas prices,  the implemenation of a large value added tax (VAT)  increases and all while we are struggling to get through one of the most difficult time in years.  Many have already succumbed to living with increased stress.

I don’t have to tell you how bad stress is for you physical and mental health.  There are hundreds of articles and books already written about strees and the negative effects that it can have on your life.  Stress can make your life much more difficult, and ultimately it can bring you down.

Watching television and listing to radio doesn’t help, most of the popular shows take one side or the other, telling us how much better change will be or saying that we are headed into deep water with the changes proposed.

While I don’t think “don’t worry, be happy” is an entirely appropriate direction, I do think that simplifying ones life is a good idea.  Getting rid of excess baggage in our lives like expensive, gas eating toys is not a bad idea.  Do you really need that second boat or camping trailer?  How long has it been since you got on those ATV’s or motorcycles?

How about making a serious run at your boss regarding working from home?  Even a day or two a week would cut commute time, gas expenses, clothing costs and generally make you life less stressful.  If not, how about trying to get the work week shortened to four 9 hour days?  It takes an effort, but if you can find ways to increase the quality of your life by managing your time better, you will likely decrease your stress.

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It’s easy to get caught up in an easy-going lifestyle.  You know, one that settles you in to doing the same things over and over mindlessly until you are numb and oblivious to the real world around you. 

Did you know that a recent national news story focused on the lack of availability of gun ammunition?  I’m not an alarmist, but I do wonder why there is a rush on gun ammo in this country?  It’s not bad enough that there are a gazillion guns out there, now everyone wants to hoard bullets?

The point is that, just like the evaopration of bullets from the gun shops shelves, the landscape of our future will likely experience rapid change over the next few years.  An inflation as predicted by many would likely flip the economy upside down, we could go from this period of impossible to find money that we are in to a time when we are awash with dollars.  Right now that is hard for many to imagine that scenario, but the psychology of the market can change quickly.

Its hard to point to an object or a service that you are familiar with and not anticipate that things related to it are already changing.  Autos, homes, energy, health care, jobs, money . . . its all in a state of transition, only the stars are (hopefully) not going to realign.

Beyond “expecting the unexpected” is there anything that you can do?  If you are in business, you can anticipate the increasing influence of the global economy by making your goods or services available to foriegn buyers.   You can also watch for the opportunities that rapid change will bring in your area of expertise.  Its difficult to forecast specifics about the future, but its not difficult to see that the world as we knew it is already beginning to change.

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There is nothing as surreal as walking through Downtown Las Vegas an seeing so few people that you think you are on a movie set.  The Malls are dead, restaurants always have empty tables and they have short or no lines and amazingly even McCarran Airport is often empty and it seems to have fewer and fewer people arriving.  Now the multi-billion dollar CitiCenter project, the jewel of the Las Vegas Strip, is in financial trouble with MGM and Dubai World squabbling.  Its a new world out there, one that I have never seen, and never wanted to see.  As the unemployment rate climbs above 10% and the vacancy rates begin to climb in offices and retail buildings the reality of this mess is beginning to sink in.

To make the slow down worse, there is nothing on the horizon that would lead me to believe that this craziness is going to turn around in the next few years.  Even if we were to see a turnaround now, it would take years for any real improvement to take hold.  The “experts” are saying we should look for an end to the downturn in 2010, 2011 or maybe 2012.  In other words, its not happening for a while, so its time to accept the reality of minimalism.

Since I’m a baby-boomer with many years of bad spending habits under my belt it’s hard for me to say the words, but yes, its time to become frugal.  There is less money to go around, and the good times can’t keep rolling without cash.  So it’s time to dump the expensive credit cards, time to sell-off the closet full of useless items and time to save any extra dollars that find their way home.

Its downright wrong that the lifestyle of average Americans has to be downgraded because Wall Street fat cats and government regulators continue to find ways to bend the financial system to their will.  I am always amazed that the biggest crooks just smile for the TV and retreat to their private islands or expensive London homes when they are found guilty or discovered to be guilty of ripping off investors and taxpayers for Billions.  The message is clear, the more deceptive you are the less likely it is that you will suffer any real consequences for your actions. 

For me the economic downturn means fewer trips to the Mall, fewer restaurant visits and more time spent reading and watching rented videos.  It’s not that bleak, but for others this nightmare will mean a lost home, a lost job, a lost retirement and possibly a depression that will be difficult to overcome.

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What does “green” mean?  Beyond the color the Merriam-Webster dictionary  notes that one definition of green is; “tending to preserve environmental quality (as by being recyclable, biodegradable, or nonpolluting).”

Our environmental problems are many and deep rooted and whether you want to accept them as real or not they are on their way to your doorstep, and they will arrive in the not so distant future.  ”The Limits to Growth,” the 1972 book that modeled possible economic growth outcomes pointed to potential global problems and more recently Al Gore’s “An Incontinent Truth” focused on humanly caused carbon dioxide increases that are the cause for Global Warming.

Our meager attempts to date to change direction on the use of fossil fuels and coal in the U.S. will likely have no effect on China or other developing countries that are ramping up their pollution outputs, but as the major environmental pollution abuser we need to lead by example. 

Adjusting to small, fuel efficient autos, significantly increased utility bills and being forced to reduce our consumption will be one of the most difficult adjustments that we as Americans will have to face over the next several years.  The fact that we, as a nation, are now recognizing that environmental problems exist instead of turning away as if they do not is a positive change. 

Most people have heard about the advent of “green” buildings but there are literally millions of products that are claiming to be “green,” and you can access a list by State and by Category at United States Green Products.  Another great source of information on the “green” revolution is Yahoo.  You can find their area dedicated to this topic at http://green.yahoo.com/. 

If you want to start buying “green” now, Treehugger.com provides a Buying Guide that offers a number of alternative products.  If all you can do at this point is make the right choices, this is a great place to start.  Sending a message to businesses that the environment is important will accelerate the development of “green” products and services.

I would like to also acknowledge Tim Willard’s “The Future is Green” blog, it is full of great posts that date back from 2003, and each post includes great information on a variety of “green” topics.  If you would like to read more about climate change, fossil fuel limits, alternative fuels and other articles on environmental topics his is a great source.

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How many people are convinced that because of the financial crisis we are all doomed? How many believe that there will be civil unrest including riots and civil war? I don’t think that there are that many Americans who believe that society will deteriorate to that extent no matter how bad things might get in the stock market, and no matter how bad unemployment or housing prices get.

Let’s face it, things get bad and people react. While many may not like what is happening, and what may happen over the next several months, few will pick up a gun in an attempt to solve the problems. In my opinion the reaction will be more along the lines of belt tightening with food, energy and entertainment. People will also cut back on travel, buy fewer clothes and generally become a lot more cost conscience. Sure there will be an increasing dissatisfaction with the financial realities that we are all worse off, but will civil unrest really solve any of our problem?

Families are forced together in bad financial times and there likely will be an increase in family size as children and relatives who have lost homes have to share accommodations. People will have to work longer hours to pay their bills, and fewer will be able to retire. Even those who are retired may have to reassess their situation as prices increase and the money cheapens.

The coming inflation will not make you rich. Your dollars today will buy a lot more than your dollars in a year of two. There may be more money floating around, but it is likely that it will have lost the power that it now has. So that giant cash hoard that people are holding, most of which was pulled out of the stock market to avoid a crash, will dwindle in value.

Is this a doom and gloom forecast? I don’t think so. Most of these things are already beginning to happen. They are a part of our “new reality,” and as hard as it may be for people to accept where we are going, it’s just a matter of time. What is important is that you prepare for an extended downturn, it may take five years or more to come back from this one.

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