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 Vallarta Living | Archives
If It Quacks
Peter Wells Scott
We all grew up with the nursery rhyme, "If it looks like a duck, walks like a duck, and quacks like a duck, it must be a duck." That hypothesis generally holds into one's adult years. But, in today's US economy, and internationally as well, if it looks like a recession, acts like a recession, it just might not be a recession.
A recession is popularly defined as two successive quarters of declining gross national product, or GNP. A recession is never defined by stock market fluctuations. And yet, the gyrations in the Dow and on the NASDAQ have evaporated people's fortunes, reminiscent of the debacle of 1929-1932. The NASDAQ of April 2000 broke through 5000 as if 6000 was but a month away. Then the bottom fell out.
One year later, the NASDAQ broke through 1800, on the downside. Microsoft, the bellwether of tech stocks had precipitously dropped from $115.00 per share to test a low of $40.00 per share. The same was true of Amazon.com, Ebay.com, Juniper, Oracle, Palm; virtually all of the "darlings" of the new economy.
Movie star Shatner was one of the few to get out unscathed. He deposited his millions of shares of Priceline.com on an unsuspecting public, willing to exchange glitz for substance. The stock, down from 100, found its way into low single digits.
In the world of financial markets, the pendulum swings both ways. Much like the swinging main sail on a sailboat, wisdom often suggests not going out into a storm, or with an inexperienced hand at the wheel. Federal Chairman Greenspan, after bringing the markets to their knees with his "irrational exuberance" committee, is now lowering interest rates with abandon. Many are asking, "Is it too little, too late?" The answer is still three or four months out there somewhere.
But, from a low on March 22nd, 2001, the Dow is up 17.5% to April 20th. General consensus is that the NASDAQ bottomed on April 4th, and it has recouped 33% since then. A bottom occurs when people can no longer endure the pain. They don't sell out of wisdom, but out of pain. Mutual Fund redemptions are seeking record levels.
So what's a duck to do? When all of the dot coms of Silicone Valley were throwing out IPO monies and stock options across the landscape, people couldn't pay enough for a house. But now, in Los Gatos and elsewhere, there are lines of sellers, reducing their prices on a weekly basis. There are no buyers. Stock options are worthless.
One finds value in under saturation, not over saturation. Puerto Vallarta's North Shore is presently a window of opportunity for folks seeking value in real estate. Foreign plated cars in Bucerías, Sayulita, and Punta de Mita speak to this great thrust of folks wanting to invest real money in real values. The real estate folks in Bucerías complain, "We have prospective buyers, we need listings!" |
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