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Friday, Mar 29, 2024

Cash Flows Quickly From Stock Market to Real Estate

Cash Flows Quickly From Stock Market to Real Estate From The Newsroom by Michael Hart In this issue, much of which is taken up by a midyear report on the state of the Valley economy, we ask a lot of questions. Certainly it is customary for publications like this to do such a thing once or twice a year. The timing of events this year makes it particularly interesting. A similar issue back in January was overshadowed by the events of Sept. 11, by trepidation about the long-lasting impact that tragedy might have on our businesses and by an economy headed downward anyway and pushed along by the psychological malaise many Americans then felt. In the meantime, above and beyond any developments here in the San Fernando Valley (and looking back now, it’s hard to believe all this has happened just since January), we’ve had the beginnings of the slow demise of Enron, Arthur Andersen, Global Crossing, WorldCom and whatever the scandal du jour happens to be as you’re reading this. Closer to home, in the San Fernando Valley, we have companies in several sectors I’m thinking primarily of manufacturing, retail, entertainment and technology struggling desperately with the same problems they had at the beginning of the year and, paradoxically, a residential real estate market that refuses to quit. Realtors had the busiest June in 14 years and the median price of a single-family home in the San Fernando Valley is a record-breaking $320,000. All of which indicates the rest of 2002 will be what? Beats me. Over the last couple of weeks, the Business Journal editorial staff has asked something close to the same question of a lot of people: What is ahead for the rest of the year? What, 10 months out, was the real impact of Sept. 11 on our lives and our businesses? As you look at this issue of the paper, you’ll see more voices expounding on those topics than you might typically see, and I leave it to you to draw conclusions. Some of those who have analyzed, opined, theorized, etc. are hopelessly optimistic, some are thoughtful, some are bitter. What surprised me perhaps more than anything else we worked on this week was the intensity of responses provoked by our regular Forum feature elsewhere on this page. The simple question of how recent accounting scandals have changed one’s personal investing strategy seemed to quicken the heartbeat of anybody we asked. Joel Block said we need to ask our accountants and financial advisors who else besides them is making money off of us. Richard Paegelow said he’s never been madder about anything. If you ever needed an official announcement, consider this it: What has been termed the corporate corruption scandal has moved out of Wall Street and all the way down to every branch office of every franchised discount stockbroker in Woodland Hills and Sherman Oaks. People who used to look at their 401k statements once or twice a year now are inclined to kick the dog on a daily basis. The conventional wisdom is that all that money flowing resentfully out of the stock market is finding its way into real estate, thus the record-breaking sales and prices. However, conventional wisdom and experience tells us there’s a limit to how high the median price of a house in the San Fernando Valley can go before that infamous bubble bursts and those prices just as quickly head back down. (At that point, I guess, all those phantom profits we enjoyed a few years ago will truly, once and for all, be gone.) Add to that the anxiety provoked by the ebb and flow of the secession debate (and our poor pro-secession friends have had such a bad time lately, I’m reluctant to pile on here) and it looks to me like you’ve got an atmosphere where most people would be afraid to do just about anything except sit quietly and say to themselves what we always say at times like these: “This too will pass.” Michael Hart is editor of the San Fernando Valley Business Journal. He can be reached at [email protected].

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