Adaptive Budget Consulting
Benefiting from change is “as easy as A B C.”
A. Study change
B. Adapt to change
C. Benefit from change
Things change. Your budget can change. It may have already.
You may have noticed that the budgets
of many people and many organizations have changed lately in similar ways. You may have been surprised by this pattern of changing budgets and the related changes in economic behaviors
As things change, different people may notice a particular change at different times. A few notice first. Some notice second. Many notice much later.
As different people notice a particular change, they begin to adapt to that change. A few adapt first. Some adapt second. Many adapt much later.
Also, when someone understands a change that is emerging, they also may have additional time to understand the change and know how to adapt to it well. People who notice the change first not only can adapt first, but may adapt with more clarity. People who only notice a change much later may be so surprised that they react to the change suddenly without actually being clear about exactly what is changing.
Budgets are what is changing. In fact, budgets are always changing, but sometimes there is a change in the pattern of how budgets are changing.
Here is a key concept of tha piece: “…price changes are based on willingness and ability to buy and sell.”
By “ability to buy and sell,” I meant the budgets or cash available of people and organizations. So, when budgets change, then perceptions and psychology change (“willingness”), further resulting in behavior changes (of buying, selling, borrowing, and lending). When the behavior finally changes, the prices reflect that change. So, budgets change first, which increases or decreases the ability to take varous actions, which changes the willingness to take those various actions, then the actions change, then the new market prices eventually measure the prior change in behaviors, perceptions, and budgets.
“[W]e can profit from the collapse of the credit bubble and the subsequent stock market
divestment [also known as "more selling than buying," which results in declining prices]. However, real estate has not yet
[as of March 3rd, 2003] joined [with stocks] in a decline of prices fed by selling (and foreclosing). …[Y]ou may deem this prime time to liquidate investment property (for use in more lucrative markets).”
“As with liquidating real estate investments, …you may deem this prime time to join the ranks of those who have been re-allocating their assets from dollars [US Dollars
] to something more stable.”
“…more and more investors will… re-allocate to more stable investments like bonds or more lucrative investments that are rising dramatically like commodities (especially gold and oil).”
So what has happened since that March 2003 publication? Was there a wave of real estate selling, foreclosures, and falling prices? Yes, and it started to show up in the US by mid-2005 in places that previously had been leaders in the real estate boom, like Phoenix, AZ
and Las Vegas, NV
, where prices fell by over 50%.
Did the rise in bonds, gold, and oil continue? Yes, yes, and yes. Note that oil prices tripled from 1999 to 2000.
While the rise in bond prices may look tiny compared to oil’s 4-digit gains or gold’s 3-digit gains, let’s compare it to the broad US stock market (S&P 500) and the technology-heavy NASDAQ 100
Finally, let’s look at the US Dollar Index
(of foreign exchange rates against other major currencies). Declining from it’s high in 2001, it fell over 40% by 2008.
Once again, I want to emphasize the word “yet.” Again, various changes were obvious by early 2003, given that many of them started in 1999.
“…real estate has not yet [as of March 3rd, 2003] joined [with stocks] in a decline of prices fed by selling (and foreclosing).”
By noticing certain changes early, but then also understanding them, I was able to expect, by early 2003, a future surge of foreclosures in real estate markets.
In 2004, I published “The Real US Deficit: Oil” in which I introduced the term “The DominOIL Effect.” (see www.thedominoileffect.com
) I detailed the predictable future of rising fuel prices
and the chain reaction that would destabilize real estate markets (which started in the US in 2005) as well as stock markets
(which started in 2007 in the US). Note that I repeatedly say “in the US” because similar changes showed up in the former USSR
, in Japan, and in the EU
In 2005, I published “Worth its weight in… oil,” contrasting the practical economic importance of fuel with the relative triviality of something without widespread practical value like gold. Note that gold has very little inherent functional value and is mostly valued because gold can be exchanged to eventually get things of immediate practical like gasoline.
Again, budgets are the core issue (particularly the effects on budgets of the cost of fuel). When people and organizations presumptively speculate about their future fuel costs wthout researching the reality of global fuel markets, their budgets can decrease suddenly.
They also may have been surprised at the natural consequences of the wave of decreasing budgets, which was less spending (on things besides fuel) and thus less lending (since there was less suprlus cash available to lend after fuel expenses) and of course much more selling eventually (especially for markets sensitive to changes in lending and borrowing patterns… like real estate). But not everyone was surprised.
Many people noticed these changes early- or at least a few. Many people understood the changes emerging (or accepted the assistance of someone who did) and attentively adapted to what is happening.
In addition to minimizing exposure to rapidly de-stabilizing markets like tech stocks, real estate, and financial stocks, there are also enormous profits available for those who understand early what is changing and then adapt to benefit from what is changing. Further, as various legal systems and political systems adjust to changes in global economics, those who adapt early can minimize their exposure to legal and political risks and maximize their legal protections through the most reliable legal adaptions.
People adapt to changing budgets, changing economic behaviors and prices, as well as changing tax laws and bankruptcy laws and so on. Some people will adapt differently than others- some sooner and some later. The different adaptions will produce different results.
Adaptive Budget Consulting offers you support in understanding what is changing and exploring different alternatives available so you can choose the relevant methods to adapt to what is changing. You can minimize your financial risks and your legal risks, plus maximize your legal protections and financial benefits.
All you have to do is call us (or reply to this). It’s that easy to get started now.