As The World Turns was one of the longest running daytime soap operas in television history. And yes … there are valuable lessons for investors.
From 1956 to 2010, As The World Turns followed the lives of a fictional collection of high-paid legal and medical professionals.
Unlike other shows in the genre, which tended towards sensationalism …
… As The World Turns was nuanced in drawing viewers into the underlying story-lines. The pace was more real-world than melodramatic.
Perhaps it was this deeper intellectual engagement that captivated the audience for decades.
Of course, technology has changed media.
More noise leads to more sensational reporting in desperate ploys to capture attention. It’s the opposite of intellectual.
Today, much of the world’s story-line comes in sound bites, tweets and posts.
And like Pavlov’s dogs, we’re conditioned for short attention spans …
… expecting anything important to be short, loud, obvious, easily understood, and hopefully entertaining.
If information isn’t sensational, it feels unimportant. So we ignore it.
This could be why day-trading is so popular with many young “investors”. It’s hyper-stimulating.
But the real world changes SLOWLY … though surely … even in the internet age. Before Google, Amazon and Facebook … AOL dominated.
Of course, slowly but SURELY … the landscape of the internet changed … and is having a profound impact on everything … including real estate.
Impatient investors might overlook important slow-moving changes … and then miss opportunities or suffer damage from risks they didn’t even see developing.
For years, we’ve been talking about the long-term decline of the dollar …
… and the persistent collapse of interest rates …
Both have significant ramifications for investors … real estate and otherwise. Just as AOL lost it’s dominance slowly, so might the dollar.
But we’ve covered this often, so we’ll simply continue to suggest the financial system may be approaching a fundamental reset …
… and investors are wise to think outside the dollar while preparing for a temporary credit market collapse.
(Hint: Liquidity is good. If credit markets seize, prices usually crash, and bargains abound until credit markets are restored and prices re-inflate.)
If it’s not obvious, the key is getting in FRONT of the wave. Positioning depends on how nimble YOU are in relation to how fast the wave is moving.
Most ordinary investors are unwilling or unable to stay as liquid as needed to nimbly capture big opportunities when shift happens quickly.
However, when a lot of investors all chip in, then together they can grab a big opportunity quickly … even if it’s something none of them could, would or should do alone.
Of course, being able to buy is one thing. Knowing what and where to buy is another. And the best clues aren’t in soundbites and sensational headlines.
Real estate story-lines are often hidden in boring macro-trends … often only visible to diligent market watchers.
One is the so-called “Amazon effect” … as the growth of online shopping and its resulting shipping boom crushes retail and catapults commercial real estate.
Yes, it’s obvious to everyone now. But it’s been going on for many years … and there’s more to the story than meets the mainstream eye.
Of course, COVID-19 is accelerating this trend … and many others … which is why we did a deep dive into the COVID-19 crisis from an investing perspective.
And consider that before e-commerce started reshaping retail, off-shoring shifted manufacturing and its jobs to far away markets … impacting real estate investing in many markets.
Ironically, COVID-19 might accelerate the return of off-shored manufacturing … which is another slow developing storyline we’re following.
The point is … as the world turns, shift happens … often slowly.
And by the time the shifts become obvious, it might be too late to move into position to capture the best opportunities … or avoid the worst pitfalls.
In 2008, we learned businesses will take jobs to more affordable and business friendly places … even off-shore … to survive in tough times.
Similarly, people will change locations and occupations to find work. Many construction workers from Las Vegas ended up in the oil business in Texas.
Ken McElroy taught us strategic market selection … picking geographies with jobs tied to drivers which are difficult if not impossible to move.
Energy is one of the drivers Ken was focused on coming out of 2008. It’s hard to move an oil well to China. That was a good call.
Of course, oil is a complex and volatile industry so we wouldn’t pick a real estate market driven purely by energy production alone. It’s why we avoided North Dakota during the Bakken boom.
When it comes to geographically linked industry, distribution is one of the most stable because it truly follows the old adage: location, location, location.
Distribution hubs are all about location.
Because even if all the stuff is made in China, India or Mexico, it’s still shipped in boxes moving through domestic hubs to American consumers.
This was true before manufacturing was off-shored. It’s been true while shopping moved from in-person to online. And it’s still true during COVID-19.
Distribution is a boring, stable real estate story-line that’s a little hidden under all the sensationalism of the crisis du jour.
So coming out of the last crisis, we focused on Dallas (energy, distribution, and more), Memphis (distribution), and Atlanta (distribution, and more).
Notice a common denominator? And a decade later, the underlying story-line … and the markets it supports … continues to be strong.
Of course, small investors aren’t buying warehouses, distribution centers, truck sales and service centers, rail hubs, ports, or shipyards.
But small investors and syndicators CAN own the residential rental properties which house the employees of all those places.
This allows you to combine the resiliency of residential real estate with the geographic desirability of distribution to add stability to portfolios in uncertain times.
And best could be yet to come …
When capital is moving into expanding these centers, it usually means more jobs and housing demand in those markets down the road.
BUT … you can’t see these trends early by limiting yourself to tweets, memes, soundbites, or mainstream financial media. It’s all far too unsensational.
However, professionals in commercial real estate often diligently track the slow but large flow of capital and transactions into the space.
Strategic real estate investors watch these mega-trends and use them as clues about where and when to scurry into place …
… ESPECIALLY while short-attention span investors are NOT paying attention or are scattering like cockroaches in the light of uncertain economic times.
So … take a deep breath … you’ve come this far … and ponder these points …
Are the millions of people in the U.S. going anywhere soon?
Is it likely someone will create a technology to negate the need for people to live in houses or have stuff shipped to them?
We don’t think so.
Therefore, even though there’s a LOT of sensationalism in the temporary economic drama … the underlying story-line is as slow and steady as the world turns.
So when we came across this midyear 2020 report on the “Elite 11” U.S. industrial markets, it captured our attention.
The report is authored by a 40-year old commercial real estate firm. It provides insight into commercial space growth indicators in 11 key markets.
Among them are Atlanta, Dallas-Fort Worth, and Houston.
While DFW led in absorption, Houston led in expansion, and “Atlanta will very likely set a record total square footage delivered … by the end of 2020.”
And they’re all in business and landlord friendly states … compared to others which seem intent on chasing business out.
Remember, a fundamental priority of real estate investing is to pick strong markets and product niches FIRST …
… then build a boots-on-the-ground team … and THEN find properties.
Properties are best chosen in the context of markets and sustainable economic drivers.
So while people may not shop in stores or work in offices as the world turns … it’s highly likely they’ll always need a home and stuff.
So in an unstable world, smart investors will figure this out. Better to be among the early.
Distribution is a real bright spot right now … so while COVID-19 makes the future murkier, it doesn’t erase essential human needs.
And if the current uncertainty frightens short-attention-span investors into staying on the sideline, even though the underlying story-line is stable …
… it’s a chance to stay calm and “be greedy when others are fearful.”
Until next time … good investing!