By Ozzie Jurock
This article appeared in The Vancouver Sun on September 28, 2002
There isn't a week that goes by without someone sending questions about this or that guru (this month? The depression/deflation is REALLY going to come this time). Makes me wonder ... who are these people anyhow that forever and a day preach the doom in real estate?
Probably the same misguided souls that told us to leave BC in 1969, or that preached the end of the world in 1974 when the Dow Jones average collapsed by forty percent and Vancouver house prices tumbled by 20%. Or perhaps it was the bankrupt crowd of 1981 as major developers were swept from the scene and the mostly dire forecasts about this 'backwater' were shouted from the remaining rooftops and people moved in droves to Toronto. Nay it is the crowd of the eighties as Toronto's real estate prices soared and we bemoaned our stumbling ways. Perhaps it was the crowd of 1990 who fearful of the 13.3% 5-year term mortgage told us to move out of real estate. The trouble is of course that they are always greatly respected gurus (at their time). And that makes them so dangerous.
It was Harry Browne in 1974 who said: "Sell your real estate," and then told us to buy gold too early and sell too late. Howard Ruff who told us to buy dried food in 1980, Ravi Batra who predicted the depression of 1990 and John Erdman's novels of the "Crash of 1989 (and - of course - '79. Ha?)". All seemed so true at the time, so overwhelmingly convincing.
So, beware your personal 'it is a depression/deflation gurus of 2002'. They are sincere every time, they believe in their story ... but do they know that they don't know?
Probably the most distinguished Gurus were the 'Club of Rome' which in 1972 issued the study 'Limits To Growth'. This 'club', a collection of distinguished industrialists, scientists, economists, sociologists and government officials from 25 countries was widely regarded as the top forecasting agency in the world. The study - in the making for some three years - produced a 197-page report that shocked and rocked the globe. The world would run out of gold by 1981, mercury by 1985, tin by 1987, petroleum by 1992 and copper, lead and natural gas by 1993. Growth was not sustainable.
The study had a phenomenal impact.
This esteemed group KNEW WHAT THEY KNEW and when prices of oil rose dramatically and other soaring energy prices followed, they were more and more listened to. The future looked grim indeed. Gasoline rationing in the US - yet while the world fretted - in reality growth came back bigger than ever. In fact, energy reserves which were predicted to run out ROSE by more than 50% during the next 20 years (and as a result of enhanced recovery methods may increase by another 200% by 2005) and oil reserves are now expected to last another 90 years. The price of oil - forecast to be in the hundreds of dollars per barrel - actually fell from $40 a barrel at the end of the seventies to $15, the price of agricultural products halved and in some cases fell by 75% (adjusted for inflation). Natural gas reserves estimated by the Club in 1972 to be 1,500 trillion cubic feet revised the estimate upward in 1987 (15 years later!) to 4,000 trillion cubic feet. Global reserves of copper doubled between 1970 and 1987, silver reserves climbed by more than 60 percent and gold reserves actually rose by 50% and bauxite reserves were up by more than 35%. In fact, all forecasts about dwindling supply, rising prices were so spectacularly wrong - that one might impugn malicious intent. Throughout the 80s and early 1990s cost of bauxite, coal, cocoa beans, coffee, copper, cotton, hides, iron ore, lead, manganese, nickel, oil, potash, rice, rubber silver, soybeans, tin, sugar collapsed ... many falling to their lowest level in half a century. Enough said....
So, beware your own personal gurus. Anyone wanting to project a future of doom, a future of less growth, better remember this fine Club, because they didn't know that they didn't know. They were listened to, they were esteemed, they made sense at the time and they were wrong.
Today's 'demographic' gurus (we will no longer want to live in houses) will also be proven wrong.
As far as we real estate investors are concerned ... look back, go the library and read the 'real estate gurus' over the last 50 years - I mean the ' now it is over' kind gurus, the ' bubble' gurus and find out they were always wrong in the end. A three-five year reversal and then wrong. Owning real estate ended up outperforming most investments for the average family. Owning your own home is the major and defining difference between North Americans and other countries of the world. It is the ONLY true wealth creator over time. The aspect of 'leverage' (low down payments) allows a family to create an asset. An asset that can be inherited by the children ... And that will continue throughout your and my lifetime. Doesn't take away from the fact, that you must do some research, some reading, some learning and some nail baiting - but look at your Vancouver friends and relatives over the last 40 years. We could not have had a more volatile market and yet ... had you bought - at any time - you had outperformed all other. If you want to hear more gurus ... and do some learning come to The October 5th, 2002 Real Estate Outlook conference at the Renaissance - 6 'gurus' speak about condos, recreational, investment and 'the future'. Call 604-683-3870 for tickets and info.
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