Zachary Karabell, president of River Twice Research, and former Alger executive vice president, has written a very insightful essay / op-ed published in today’s WSJ titled – “There is No ‘The Economy’”.  Karabell has an impressive educational pedigree (Columbia, Oxford, Harvard), and has written several interesting books (The Last Campaign about Truman’s 1948 win and Peace Be Upon You dealing with conflict and cooperation among major religions). 

He’s taken on a different topic in today’s op-ed, specifically the national economy and how we measure and view it.  Here’s a key aspect of his premise-

The notion that the U.S. can be viewed as one national economy makes increasingly less sense. More than half the profits of the S&P 500 companies last year came from outside the country, yet in indirect ways those profits did add to the economic growth in the U.S. None of that was captured in our economic statistics, because the way we collect data – sophisticated as it is – has not caught up to the complicated web of capital flows and reimportation of goods by U.S.-listed entities for sale here.

His premise that there really is no single, unique “national economy” is very similar to one which we’ve been hammering away with since our public debut in February – there really is no “National Real Estate Market”.  Karabell appears to agree –

Look at housing, widely regarded as a national calamity. The regional variations depict something different. In Stockton, Calif., one in 75 households are in foreclosure; in Nebraska, the figure is one in every 1,459; and the greater Omaha area is thriving. Similar contrasts could be made between Houston and Tampa, or between Las Vegas and Manhattan. Home prices have plunged in certain regions such as Miami-Dade, and stayed stable in others such as San Francisco and Silicon Valley. Houston, bolstered by soaring oil prices, has a 3.9% unemployment rate; the rate in Detroit, depressed by a collapsing U.S. auto industry, is 6.9%. The notion that these disparate areas share a common housing malaise or similar employment challenges is a fiction.

We find two points particularly noteworthy in Karabell’s commentary.  First, his admonition that the “old ways” of looking at data dealing with the national and global economies don’t necessarily reflect the reality of today, and certainly the same premise holds for real estate. 

Much of the data that we’ve all relied on historically to assess real estate markets in which we intend to deploy assets, including demographic, job growth, and real estate metrics, may need to be viewed and interpreted in light of new relationships and new understandings of the usefulness (and limitations) of the data.  That’s what we’re all about, trying to procure the best data available, and meld the information together in ways that make the most sense. 

Secondly, he clearly reinforces our point that just as there is not a “the economy”, there is not a national real estate market.  There are pockets of “real estate sanity”, with attendant very reasonable and rational investment potential, around the country.  It simply takes some effort to locate, analyze and find them.  That’s our mission, and we’re refining our processes to help you find them every day. 

Finally - the picture above - no, we don’t think “the economy” is tanking, we just couldn’t resist given the title of Karabell’s op-ed. 

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