Saturday, May 5, 2012

Looking behind the curtain

Don Campbell, president of Canada’s Real Estate Investor Network (REIN) always warns people to ‘look behind the curtain’. What he means by that is that you have to be aware as to what motivates the person that tries to sell you an investment or a piece of real estate. One of the most obvious motivations ‘hidden behind the curtain’ is that of the Realtor, or for that matter of any other broker:  in order to make a living the Realtor has to sell.
The more he or she sells the better the financial reward. A Realtor in the ‘Million Dollar’ club who has hauled in a million plus dollars in gross commissions is quite successful, but does he or she provide YOU with the best deal?  Probably not; that Realtor is probably supported by a team including other subordinate Realtors.The chance that you actually sit down with the ‘Millionaires Club’ member is small let alone that you get his/her undivided attention. You still may get a good deal, but an experienced Realtor with a more modest operation may do a lot better for you.

Another example of ‘looking behind the curtain’ is that of newspapers and newspaper reporters. My wife used to be a freelance reporter and still many of her friends and acquaintances hail from that background. These are often nice people, very personable and with a degree in English literature, journalism or political sciences. They usually are observers of society or of business or whatever they from time to time focus on. The last thing they are though is being  a participant in those observed matters.
They are employed by media that attract customers by writing attention grabbing, newspaper selling stories. Headlines are nothing more than billboards drawing you towards reading the story. Once you’re hooked they have made their sale. The story may contain something that has very little connection to the headline and sometimes the headline only highlighted a minor aspect of the story or is outright misleading regarding its true content.

So how much credence should you give an article on investing by a person that never invested or who has not any qualification in the investment industry?  Some of those articles have actually been written by investment professionals but still may constitute not much more than a self-serving piece of prose. Yet many investors fall for these stories and base investment decisions on them.

Really how many of those writers have ever been in Europe other than for a rushed 2-week vacation? So where lies their expertise when writing about the demise of the European Union? Or when they write about the European debt crisis or about their political leadership?  Really, is their opinion that much better than yours? 

Many writers do not even have investments of their own, but whatever headline is created for whatever purpose, these days, headlines and 'news' seem to scare stock market investors in their boots.  Some writers are actual Americans  living in the U.S., but still is their expertise sufficient to declare the end of the U.S. empire and its economy? Is their on paper expressed opinion even sincere or are they trying to build fear that draws in continued readership?

I grew up in Europe;  I went there to school. I still visit Europe every other year or so. I don’t predict the decline of Europe. Neither do I jump on the jump wagon of the exploding populations of emerging economies such as India and China. Yes, it seems these days obvious to predict endless economic bliss in China and to declare Europe or the U.S. dead. In my humble opinion that is greatly premature.

I think that Europe represents the frontier of a new demographic trend. Our world population cannot and will not grow without limitation. In fact, world population stabilization is predicted by many demographers to occur by the midst of this century. So, unbridled population growth is something of the past and so is our reliance on unbounded economic expansion that depends on such population growth. Europe is in the demographic frontline of this new economy that does not require ever-growing consumer demand. The U.S. and Canada are not far behind. And the supply of cheap labour may prove to be a pipe dream that has no future or has a very limited future. Now where do you want to invest? I suggest you start looking behind the curtain!

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