April 27, 2007

From Administrative Assistant to Loan Officer: GDP Down Markets Up! Welcome to Crazy World USA.

You need to check out this post over at CNN Money:

"(Fortune) -- Dear Annie: Please settle an argument. My daughter is bright, articulate, and ambitious. She is 26 and has worked her way up from an administrative-assistant job to loan officer at a large bank in Miami, and I really believe (okay, maybe I'm biased) that her talents and excellent people skills could take her all the way to the top. Just one problem: She dresses like a streetwalker. I have told her that wearing spike heels, ultra-short skirts, and low-cut blouses to the office will hurt her chances for advancement, but she says this is her style and she is sticking with it. Do you agree that she's making a mistake? If so, will you say so in your column? Maybe she'll listen to you. -Dade County Dad

Dear D.C.D.: A strong sense of individual style is a wonderful thing, but I have to agree that your daughter may be taking "business casual" a bit too far. The trouble with dressing provocatively at work is that it could distract people from her other assets...You can read the rest here. "

The problem with a market frenzy as we just had, many people will mistake sales ability with financial acumen and business skills. As you can see from the above, this dad is concerned about his daughter dressing as a "streewalker" to advance in the loan industry. Now, I have nothing against streetwalkers (funny title since all of us walk the street but anyways), but I do have something against these people suddenly labeling themselves financial professionals. Never would I go to midnight Sally for financial advice, it isn't her skill set. Ever hear about the administrative assistant who became a dentist the next day? Or what about Mike the Starbucks employee who became a defense attorney overnight. I'm sure you know many people who up and left their manufacturing jobs to become surgeons the next day. These so called professionals are nothing but glorified sales people. Looking at BLS stats most real estate agents, brokers, or lenders have little to no college education. I have my real estate license and was once part of the industry and can attest to this from first hand experience. And many mortgage operations run on the premise of a frat or sorority house. There are professionals in the field but very few, I would argue that 20 percent of the entire market truly have any financial sense. You can read up on the Vilfredo principle to understand why my reasoning for this exists. The rest are peddling agents of the Wall Street banks and little do they know that they are the first to get the axe.

Again the market will be purged and is being purged. My phone has been ringing off the hook with mortgage brokers calling me regarding my investment properties. Funny how last year I had a hard time reaching them trying to refinance my out of state property; I guess they figured my modest investments that were cash flowing wouldn't give them as much as the subprime no-loan doc they can push to some wanker with no down payment. Apparently now they have some interest in doing business and made time for me on their busy schedule. Suddenly those subprime loans don't exist and solid credit worthy customers are far and few in between because there is no way in hell we would invest with them; how do you think we've become financially successful? It wasn't by getting the most skewed loans and spending frivolously; the irony is those that are financially successful don't front like those that aren't. Isn't that sweet?

Low barriers to entry plus high wages equals a big draw. I argued in a previous post that we have become largely codependent on real estate as a nation. Nearly 30 percent of all job contributions for the last seven years has been real estate related. This is incredibly large because for the other decades we have averaged 10% growth in this field. Again the market is largely distorted but the world is taking heed and that is why the dollar hit another low in relation to the Euro. Yet folks here are somehow using Voodoo economics because GDP got slammed in the first quarter and stocks acutally went up! My graduate professors must be scratching their heads because what they taught us about business models doesn't apply to the credit extravaganza model of investing we are living through. GDP took it in the shorts today thus letting the markets know that yes, housing is having a large impact on society.

We have a lot at stake with this bubble bursting but so does China. I mean take a look at all the crap laying around your house. I can assure you that 70 percent of everything you own is out of the People's Republic. So if we stop spending and it looks that way, China is going to get a double kick in the groin. The Wall Street Journal showed the first decline in years in Mortgage Equity Withdrawls. Now you can connect the dots; massive hit in housing, less equity to spend, thus leading to less consumer spending.

My bias is that being a professional connotes a certain expertise in an area. Finance and economics are very complex fields; heck even after graduate school I continually have to refine my knowledge. And I can tell you in many of these operations looks do matter especially in the lending and agent side of things. Why do you think we have restrictions in the first place? So things wouldn't run a muck. The hard thing will occur when the economy will need to absorb these people back into the work force. They are going to get a major pay cut because nowhere else are they going to earn six figures without some sort of professional training. Time to go back to school and thus reducing productivity in the workforce. See, at least with the tech bust many people had B.S. degrees in engineering or computer science. They had transferable skills to positions that paid middle class incomes. What about these people?

Am I off with my reasoning??


Kevin said...

Dr. H, you are right on with your assessment. Working in finance and having an MBA in finance, I'm scratching my head as well. GDP disconnecting with the market. It means speculation rather than yields are the basis of investments.


socalwatcher said...

I would agree. I do not have a college degree myself (I did take some at age 20 and currently going again at 31) but the paths to making $100K are few with out one. I currently make more than my mother who has a masters degree and works for the state of IL. The problem is, I am confined to sales of some sort if I want to make a six figure (or close) income. I hate sales and tired of the bottom feeders that have been in my few different sales industries. (Cars and insurance, both easy ones to get into). I have learned that easy money isn't so easy and it is more than just an income, but loving what you do for a living. That is becoming more and more important to me because Sales is just an empty accomplishment with alot of empty people.

As the RE psrty winds down, the work force will again see the flood of people who will take anything that promises an above average income. I for one, am determined NOT to be one of them!!!

chris g said...

Today's subprime mortgage brokers are tomorrow's subservient health care workers. "Ready for your spongebath, Ethel?"

Anonymous said...

And unfortunately for the economy, Sally Streetwalker's "walking" income won't be taxable ;)

Anonymous said...

My two favorites, Dr. House, and Dr. Housing bubble.

Regarding U.S. stocks, one thing to note is that the world is awash in cash, and that U.S. large cap - market diverse (large international revenue component) stocks are one of the few remaining asset classes that still have relatively reasonable valuations.

While I do agree with you on the points of this particular article and the coming "labor pool adjustment", the U.S. is still a "stable" environment for funds to be invested in.

Also, unlike prior downturns where real estate lending errors punished the lenders, this time it has been foisted off on Wall Street. It will be interesting to watch how they handle workouts since the scale will be so significant - maybe some of these real estate professionals can take jobs with the government when they resurrect the RTC to bail out all the pension funds that get stuck with the B&C paper that was securitized. Between the government protecting the "foreclosure victims" and the Pension Bail Outs, I think we will again see a hammer used where a screwdriver is appropriate (pun intended).

Personally, I still don't get how residential RE is sustainable, and worse, how investment in commercial real estate makes long-term sense when cap rates are so out of whack with history. The one potential saving grace for real estate is inflation mixed with stable (read flat) rates over the next 3 years since some of the excess can be sopped up thus minimizing the impact in all but hyper-bubble markets like So Cal - possibly softening even So Cal.

I will continue to read and enjoy. For the record I am in the defense business and other than my home and one commercial building I sold last year have missed the Real Estate $$ bonanza.

A nit, why are you on a first name basis with V. Pareto?

Dr Housing Bubble said...


I'm sure most folks realize this and even Joe and Susie public are starting to realize that housing is way out of whack in relation to fundamentals. We've heard it all year but now we are seeing what happens when markets turn.


I'm not equating a college degree to upper-income jobs, obviously the path to success takes many shapes and forms. Like yourself, you put in many years and experience and that is the value of where you are at. In the last seven years 20 to 25 year olds were pulling in six figures because they could in the housing complex. In addition, many of these people are still developing their identity around who they are so ethically they may be more willing to fudge a few numbers. The party is ending and it is ending fast.


Baths do come with bubbles...


You actually bring up a good point. Many construction workers from our friends down south do not file income taxes however they do kick down remittances to Mexico. WSJ came out with an article highlighting the massive drop of remittances because of the slowing housing market. One of the largest contributing factors to Mexico's success is US remittances. We won't be the only folks affected.


You are correct, my respects to Mr. Pareto. I think the world of him and sadly not many economist can measure up to him in today's fast paced modern era; most so called economist such as Greenspan and Lereah are nothing more than mouth pieces and figureheads for the growing elite. And when I say elite I'm talking about the seven figure club; I find it ironic that those in our country actually like to let our dollar implode while cheer leading these people while they loot the future of America. Total instant gratification.

Anonymous said...

If her daughter were to talk about "a bottom in the housing market," the client may think she was talking about her bottom and say, "I'll take it!"