Magazine article Real Estate Issues

"BUBE"-Is the Market a Bull or a Bear?

Magazine article Real Estate Issues

"BUBE"-Is the Market a Bull or a Bear?

Article excerpt

1. THE GAME

"THE TERM "BUBE" IS A YIDDISH TERM for grandmother.* It is pronounced "buh-bee."

[ILLUSTRATION OMITTED]

A Jewish grandmother can be stern, strong and directed. But, more often, the grandmother, Bube, is often sweet, kind and understanding. The question is to know the mood of Bube.

By a metaphor, one could ask: "Is a Bube stock market a Bear or a Bull?" That is, is Bube a "bear" (stern, strong)? Or, is this the day of the Bube "Bull Market" (sweet, kind and understanding)?

The term "Bube" often gives mixed messages to grandchildren, as to grandmother's mood. There can also be "confusion" as to the mood of the market. It is not always clear which factors actually influence Bube--or the Market--and the degree of such influence.

A. PROJECTIONS

Inconsistent signals are being given by the market. Are increasing interest rates good or bad? Is inflation good or bad? Is the interest rate (prime) moving up too quickly? What are the impacts of war, terrorism, the election, deficits, employment and other signals or signs of consumer confidence on the economy?

There is confusion as to whether the market is a bull or a bear market. What is Bube's mood--and how long will it last? Since economists cannot answer the questions--without many hedges, maybe we should ask Bube--depending on her mood!

We have all heard, read, and seen multiple projections and suggestions from various entities that shed "light" on the path of the U.S. economy in the next 6 to 12 months.

The general format of the chosen game seems to be "Monopoly" during the past several decades when considering "playing" in the real estate market as well as the U.S. economy. The new game is to guesstimate the behavior of many variables and how they will affect the economy. Those variables might be such factors as economic growth, including Gross Domestic Product (GDP), Gross National Product (GNP), and many other indices which, allegedly, give us "insight" as to how the economy is actually performing and, implicitly, how it will perform.

In an article addressing how the U.S. economy is performing and how it will perform, by James R. DeLisle, Ph.D., there is a continuing attempt to prognosticate. [DeLisle, James R., "Real Estate and the Economy: The Train Has Left the Station," The Appraisal Journal 5 (Winter, 2004)].

According to the DeLisle article, some factors to consider as key indices in the analyses include GDP, GNP, whether employment is increasing or decreasing, inflation, interest rates, the stock market, consumer confidence, real estate markets and aspects within those markets, including capital funds.

Many factors influence the U.S. economy, Despite uncertainty about where those factors may move, given the interplay of many facets of the economy, there is general reliability as to GDP, GNP, and related numbers in the U.S. economy.

However, when attempting to compare the U.S. position with foreign markets, there may be differences because of a lack of reliability in the reported data from some other countries. Such indicators as to the performance of markets, including the Gross Domestic Product (GDP), are noted in The Economist on a regular basis. (The concern is often focused on the issue of reliability of the data.)

When looking to the factors indicated by Dr. DeLisle (or by others who report the same type of information), recent indicators, if accurate, seem to be fairly positive. For example, the United States shows a GDP growth position for the year 2004 of somewhere in the range of 4.1% to 4.5%.

Employment growth has been improving in recent months. General concerns voiced by some economists on the current economic position is that the U.S. unemployment rate will continue to fall, reaching close to 5% in 2004.

As another example of favorable trends in the market, [reported in the Meyers Group "Housing Market Key Indicator Alert" (May 10, 2004)], existing home sales are still very strong. …

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