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We Live In A #VUCA World!

We live in a #VUCA world!

The acronym?

Volatility, uncertainty, complexity, and ambiguity. I’ve had a lot of clients, associates, and others asking about:

SVA (smaller issue)

Credit Suisse (bigger issue)

Signature Bank

I have a great circle of economic minds… my notes from various conversations on this topic:

If you go back to 1974 you can see 12 significant hiccups in the financial systems, including the 1994 bankruptcy of Orange County, California, where I raised my kids and grandkids.

Of the 12 events since 1974, 60% led to a recession. With the FED lowering rates from 1 month to 11 months post each of those events.

The FED policy has been the most aggressive tightening in 40 years, yet all the indicators seem to be the economy is absorbing this at a rate not seen before. But something broke…

Concentration (all your eggs in one basket) is a high-risk strategy not to be taken by the faint of heart.

A surge in deposits (influx of COVID money into the economy and more) in a low-interest rate environment lead to a surge in deposits. To boost yields, SVB (and others) turned to long-term bonds, yet SVB did so WITHOUT hedging. (A high-risk move & looking back, was a massive mistake of judgment and leadership)

Policy matters – in 2018, we saw a rollback of the Dodd-Frank requirements, which raised the level of banks subject to stress tests. SVB was not subject to stress tests and extra accountability. As we are seeing – accountability matters.

What will the FED do?

Who knows, but probably no hike or up to 25 basis points as we see conflicting issues, especially persistent Core Inflation.

Core inflation is still high (too much money chasing too few goods)

Retail sales and producer price index weaker

The recent labor report was mixed

A business associate and well-respected economist, Dr. Lawerence Yun, said it well several years ago, “easy money and ample liquidity has implications.” Expect more volatility, heed the benefits of diversification, and a flight to quality. This is not a time to take undo risks.

For my real estate friends – control what you can control – life still happens: birth, death, divorce, jobs, non-owner occupied exchanges, and more. Serve those that need your services. Now more than ever, they need a local area expert. I’m seeing a flight to quality in full-time professional agents with stable track records of delivering results. if you don’t have this base, it could be time to team up and join an experienced team lead.

Control the controllable.

Control the Controllable
Control the Controllable

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Mark Johnson

Mark's passion and expertise is enabling real estate broker-owners and team leaders to create the systems, structure, and processes to support their growth. He also enjoys sharing his thoughts on business success on his blog: www.winningtheday.blog

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