If It is Raining...Sell Umbrellas

America is one of the richest and most dynamic economies in the world, providing the freedom and markets that give individuals the ability to succeed in business and to achieve ultimate financial freedom. Success in business, sports or any other endeavor can usually be found through applying hard work, determination and perseverance in an individual´s efforts to succeed. The United States of America is recognized throughout the world for this, and not just by Americans. In fact, ironically enough, many success stories that come from wealthy people currently living the "American Dream" come from immigrant workers whom have travelled to the U.S. from a great distance and under dire circumstances to be able to use our democratic and capitalistic system to start a new life with endless possibilities in commerce, land ownership and through wealth building in our various market economies.

A key virtue of success found in the U.S. is our beloved "American Spirit", which is the ability to envision all the possibilities and the freedom from which to pursue that dream with all your might. If you believe it can be done, it usually can, which is an empowering feeling for those whom embrace an idea. However, due to the emotional nature of "spirit", the U.S. economy and the financial markets that support the American Dream can be as volatile and temperamental as the ocean. The mood can be calm and comforting, bright and balmy or it can be dark and tumultuous. In order to navigate the choppy waters safely and to sail smoothly during the calm seas, you must have an understanding of business cycle management and how to use it to your advantage.

Business cycle management is an old college course study that teaches you how to manage your sales and business growth during various economic cycles. This is very important to a business owner and/or a sales professional to always know when to spend and to grow and when to save and conserve resources. Another benefit of paying attention to the trends in the economy is that you can redirect your marketing efforts or services to areas of the market that are doing well and/or need your services, rather than attempting to market to segments of the market that cannot afford your services or don´t need your product due to financial strain or some other sector related concern.

Government policies are the primary drivers of business growth or business deceleration in various sectors of the economy and these policies can give way to excess or can cause financial strain on businesses, employees, investors and individuals during shifts in these policies, so it is vital to use policies as a compass for the future direction of your business.

A clear example of this is the affect lowering interest rates had on the housing market from 2001 through to 2005, creating the subsequent "boom" in the housing market. Conversely, the opposite has recently occurred from 2006 through to today, with home values and home ownership declining rapidly due to rates rising quickly from 2006 to late 2007. In recent months, the new policy has been to lower rates and the Fed has dropped the Fed Funds Rate to 2% from 5.75% which is expected to help the housing sector. However, policies take time to take effect on a sector and sometimes they may fail to produce the desired results immediately if the sector is deeply ingrained with issues, such as the housing market is, so it will most likely being a much longer process to gain stability and growth than it was in the past due to the enormity of the situation.

Home values are still decreasing in most real estate markets due to lender liquidity issues and the lack of available financing for higher LTV loans and stated loan programs, of which so many home purchases were made over the past few years. The drop in value prevents many properties from being refinanced or sold due to negative equity or lack of loan approval, which should mean the real estate decline will continue. Assuming that government "policies" do work, we should see an improvement in housing and the financial sectors over time; however, due to the severe nature of the financial issues created from the boom cycle, I expect at least 2-3 years for the real estate market to find a bottom and for homeowners to "re-distribute" their loans and property.

This decade´s "boom" in housing has created wealth for many investors across the nation, however, many market participants didn´t notice the warning signs or failed to take appropriate action during the good times and failed to prepare for the inevitable bust cycle. Therefore, it is sad news to learn that there are so many people losing their homes to foreclosure and to watch so many mortgage companies, wholesalers and financial service companies go out of business. Business cycle management and a conservative growth strategy is essential for building wealth for a business, as well as for you personally.

The good news during these difficult times is that an incredible opportunity exists for investors whom know how to locate and finance real property at severe discounts to market price. I recall when the market was near the peak and I wrote the article, Adjustable Rate Mortgages – is it Doomsday for American Real Estate? on April 1, 2006, and I remember wishing I had bought more property 11 years prior when the housing market was in a severe slump here in California in late 1995, when I bought my current residence.

My primary regret is that even as I was personally selling my vacation home and I was pleading with clients to sell all of their highly appreciated investment property and commercial real estate to generate capital for equity investments that would provide liquidity, dividend income and growth while real estate was in retraction, I still kept my primary residence against my own belief that we were going to see a massive real estate recession. The reason I mention this is that my home has declined in value by approximately $380,000 from peak to trough and, since I couldn´t imagine "renting" a home for my family, I missed out on my own advice. Now, not only have I lost the opportunity of ´netting´ an added $380,000 on top of the remaining equity that is in my home since I bought it, I have also lost out on all the opportunities the stock market would have presented during its move higher over the same time period. This is a great example of the psychology of home ownership and how this false sense of security can affect financial decisions.

That being said, I am someone whom is always eager to learn from mistakes and this lesson has illustrated some exciting new viewpoints for evaluating the current housing situation and may provide some useful information to gauge how long it might be for the housing market to stabilize, then to recover. The sense of worth and security a home brings to a family is something you can´t put a value on and based on personal experience, I believe it is this "intangible" that will provide the thread to hold the housing market together once a bottom is found. I believe that the homeowners whom have financed their loans over the long term in fixed rate loans and are able to service their debt over time, will help soften the blow to housing values as the ARM holders slowly getting squeezed out of their homes. However, as an opportunist in the real estate market, I see this difficult time presenting exciting profit opportunities all the way down the bear cycle in home values and even better opportunities as the market cycles back up in about 6-9 years.

Therefore, although I´m still very bullish on the stock market for the long term (with the exception of the potential market crash this Summer), I am now becoming very interested in real estate assets that are being sold at nice discounts to market value. In fact, I have recently created a division in one of my affiliated companies (Rubicon Financial´s RADD Program) that provides investors with opportunities to buy foreclosures and non performing notes at deep discounts from some of our partners in the financial services community due to financial strain on these financial institutions that need to re-capitalize their balance sheets by selling their defunct assets.

Adversity equals opportunity if you approach your business and your investments with the appropriate mindset. Whenever there is a business or financial crisis, you should always be looking for the opportunity, not the problem. As a mortgage professional or lender, our company Rubicon Real Estate & Mortgage has been working hard to create new loan programs and services that help homeowners refinance their existing homes into long term loans that they can afford, advise home owners that are in over their heads to sell and to live within their means and create loan programs for new homeowners and investors to get into homes and investment properties while real estate is becoming affordable again. Look for values and deals, be patient and always make recommendations to your clients that will benefit them the most in the long run, not what will benefit you or your business today.

In times of heightened political tensions, national financial stress, recessions or during national security concerns, such as during September 11, 2001, the American people can become severely emotional, causing commerce to be interrupted dramatically. An example of this was after the September 11th terrorist attacks, business and citizens were seemingly paralyzed from doing business for months after the attacks. The stock market plummeted, business sales declined dramatically and it seemed like the world crawled into their ´retro´-1950´s bomb shelters and hid from the world, gripped in fear and mourning. However, savvy investors were scooping up depressed equities through funds, pensions and trusts creating extraordinary wealth in the stock market bull cycle that began again in March of 2003.

Success often comes with the inevitable possibility of failure and the reality of this can be seen on a regular basis, just watch business news and you´ll notice that "sectors" come in and out of favor, like the tides of the ocean. Money ebbs and flows into various segments of industry during various economic and political cycles and the damage can be seen on a regular basis if you just know when and where to look.

In closing, I write about the volatility of the markets and the poor condition of the housing and financial markets to illustrate that after every recession comes an inevitable recovery. Luck favors the prepared, so if you watch for the boom cycles and save your profits during the good times and then allocate those dollars during times of weakness in your industry, accumulating businesses, employees or assets at deep discounts to relative value , you and your business will be successful regardless of what the financial weather is like.