The New Rules Of Work

value based on performanceperformanceAlmost every day now there is a news item about “the 1%”, talking about their increasing incomes. And right below the “1%” story there’ll be another news item about unemployment, and persistent wage stagnation in other job sectors.

Inequality is becoming a front burner issue for politicians, because so many voters are being affected. On a regular basis now the President talks about the need to “address inequality”.

Clearly inequality is asserting itself in the US, and other countries around the world, but what’s behind it?

It’s not the narrative in the Press about rich people being selfish and greedy. Greed and myopic focus have always been a part of making a lot of money, going back centuries. It is just more out in the open now that those generating wealth are doing it so easily.

It is also not outsourcing, although this has played a part. In the last ten years outsourcing is responsible for roughly two million jobs going overseas. The business owners and managers responsible for those decisions didn’t make them because they are heartless, or unpatriotic people. They made them because the level of productivity produced by the US based workers was available in another country at lower cost, and if those jobs weren’t outsourced now to keep the business alive, the jobs would be gone in the not too distant future anyway, when the business filed bankruptcy, unable to compete in the global marketplace.

Outsourcing has definitely put people out of their existing jobs, but it hasn’t stopped them from re-educating themselves, or acquiring new skills that are in higher demand.

These two issues have currency with the Press because they make for good news stories, and there are easily identifiable “good guys” and “bad guys”. But as usual with the Press, they are just whipping up fervor so you go to their pages and click on their ads.

The inequality of income that is reshaping Society today is not caused by Greed, or by Outsourcing. It is being caused by machine technology entering the workplace, and the increased ability of business owners to measure the performance of their employees.

Namely, how they measure value.

                  Inequality Is Being Driven By Machine Technology Entering The Workplace, And         Employee Performance Being Precisely Measured

To get a fast track understanding of this, think about the world of professional sports. In 2015, John Lester of the Chicago Cubs, and Clayton Kershaw of the L.A. Dodgers, will each be paid $30 million for their services. The average MLB salary in 2015 is $3.8 million, and the lowest paid player this year will receive $58,237.

If you look at the NBA and the NFL the situation is basically the same.

The reason there is such a huge yawning gap between the very top and the very bottom, and why the average is closer numerically to the bottom than to the top, is that every single aspect of these athletes’ performance is being measured.

If you are a major league baseball player there are 16 individual statistics being generated by your performance on the field. Over time, taking into account streaks and slumps, your overall value to the team, and the contribution you make to the team winning games, will be revealed. There will be no way to spin it, it will all be in the numbers. And it is from those numbers the player’s “value”, what a club is willing to pay to acquire the player’s performance to help them win games, is derived.

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Posted by Ben - September 15, 2015 at 12:16 pm

Categories: Markets   Tags: , , , , ,

The U.S. Economy Is Sick. Problem, Or Opportunity?

apartment investing opportunityA couple of weeks ago President Obama was on one of the last Jon Stewart shows. John Stewart gave him a bit of stick about inadequate VA services, but he let the POTUS get away with saying, “… the Economy, by every metric is better than when I came into Office, and so, the reason I can sleep at night is I say to myself, ‘you know what, it’s better.’”

Most people hate statistics, which is why comments like this can be let slip by.

There is a “metric” though the President either missed, wasn’t made available to him, or if it was he chose not to look at.

That is, the labor participation rate.

According to the US Bureau of Labor Statistics labor participation has been in decline since February of 2000, when it reached a high of 67.3%. Today labor participation is at a new low, not seen since the 1970’s, of 62.6%.

Of the 250 million people of working age in the U.S., 149 million of that total number have a job. 8 million people want a job, but don’t have one. However, there are 93 million people who don’t work, and don’t want to work.

That last figure should cause an Apartment entrepreneur pause.

Despite all the Federal Reserve huffing and puffing about its dual mandate and 5% unemployment, about 30% of the entire U.S. population, who are of working age, do not consider themselves part of the work force.

This is a staggering number.

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Posted by Ben - August 24, 2015 at 12:42 pm

Categories: Markets   Tags: , , , ,

Buying Opportunity Ahead

stock market crash aheadThere is a saying on Wall Street, “Bulls make money, Bears make money, Pigs get slaughtered.” Right now, we are in ‘pigs get slaughtered’ territory. The only people buying now are Greater Fools blindly buying because prices have always gone up.

Housing markets, whether they be single family, multi-family, high end, low, end, Class A, Class C, have been distorted beyond all functional recognition, and are decoupling from the natural forces of supply and demand thanks to intervention of monetary stimulus by the Federal Reserve.

High end single family sales are growing, while mid to low end single family sales are cratering. Roughly 30% of US single family sales are cash sales, with increasingly foreign buyers now that the Chinese credit bubble is going ”pop”, and the Greek exit of the EU unfolds.

Multifamily, be they Class A, B, or C are at peak valuations thanks to land value adjusting to years of Fed driven monetary stimulus. In the case of Class C apartments, occupancy rates are at all time highs thanks to falling real incomes and increasingly fewer people able to afford a home.

After six years of Federal Reserve money printing, the result is a Frankensteinian economic monster, riddled with unintended consequences and serving no-one, except those at the very top.

To get an idea of how absurd things have become, have a look at the price chart for the Standard and Poors 500 Index, which serves as a rough barometer of US economic health. Read more…

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Posted by Ben - June 26, 2015 at 12:46 pm

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4 Ways To Wholesale An Apartment Building

wholesale transactionWholesaling an apartment building is usually only thought of in terms of an all cash transaction, where the seller agrees to a low price in order to get a cash sale and the end buyer comes in with cash plus bridge financing to fund the transaction.

This is indeed a tried and true model, but they are only available in any kind of abundance at a certain stage of the real estate market cycle. Once a market heats up, the deep discounts are harder to find.

If you broaden the transaction types you can do, you are able to wholesale more deals in a single market over a longer period of time.

Below are four transaction types that will expand your opportunities as an apartment wholesaler.

1. All Cash For Double Discount Price: This is the classic scenario for wholesaling an apartment building (or any other piece of commercial real estate). The property is usually distressed and attempts to market it have been unsuccessful. To price your offer as a wholesaler you first look at what would make sense for property as a value-add. You then discount price again to take into account what you need to make for an assignment fee. Persistent follow-up and negotiation by the wholesaler gets the deal under contract at a double discounted price, and the end buyer comes to closing with cash paying the single discounted price, cashing out the seller and paying the apartment wholesaler their assignment fee. As long as market conditions allow for extremely low prices, end buyers are able to easily mobilize capital for your asking price and deals go through easily. Read more…

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Posted by Ben - December 19, 2014 at 2:28 pm

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