Waterloo Foreclosures – Problems Are Arriving In Great Batches And That Can Be a Very Good Thing!
by: Geoff Ficke
William Shakespeareâ famous quote from Hamlet, âWhen sorrows come, they come not single spies, but in battalionsâ, is particularly relevant today.
All of the news seems bad. The negative numbers are huge. The human devastation seems interminable. Governments everywhere seem to have lost control. Debt is perverse on a personal, corporate and governmental level.
This glass seems to be mostly empty. It is not!Â
From the depths of disaster grow the seeds of opportunity. Much as Mother Natureâs wildfires clear overgrowth and enables fields and forests to regenerate themselves, so does the opportunity that germinates from social and financial meltdown. The removal of diseased institutions affords entrepreneurs and reformers the chance to fill an essential void.
Throughout history dynasties, dictatorships and tyrants have risen, and ultimately fallen. They are usually replaced by something much better.
The violence of the French Revolution enabled Napoleon Bonaparte to turn France into a warrior state under his dictatorial rule. His âWaterlooâ enabled the state to develop into a modern democratically governed republic. The Hapsburgâs in Germany, the Hohenzollernâs in Austria and the Bourbonâs in France all enjoyed the wealth, power and comforts of royal rule before being deposited on the junk heap of history.
Hitler in Germany, Hirohito in Japan and the Communist dictators of Russia all fell and were succeeded by democratic governments with a modern, more open style of governance. Their oppressive rule guided their populations disastrously to decades of war, hunger and societal despair. Something much better has acceded their brutality.Â
Businesses have historically expired if they did not evolve and regenerate themselves as markets progressed toward new technologies. The home delivery of ice in the first half of the 20th century was replaced by the mass marketing of refrigerators. Carts, whip, buggy and bicycle manufacturers disappeared as the automobile developed as an affordable method of conveyance. The acceptance of Thomas Edisonâs incandescent light bulb greatly diminished the need for thousands of local candle makers.Â
As the automobile industry developed there were hundreds of nameplates producing niche vehicles. Names like Packard, Stutz, Essex, LaSalle, Dusenburg, Austin and Cord and most other makes of automobile grew, stagnated and died as they could not compete with newly developed tastes, technologies, economies of scale and mass manufacturing techniques pioneered by magnates such as Alfred Sloan, Henry Ford and Walter Chrysler. General Motors, Ford Motor Company and Chrysler became behemoths with vast profits, international distribution and massive marketing programs. The rest simply faded away leaving little but reminiscences.Â
Today âThe Big Threeâ, Chrysler, Ford and General Motors are all staring at the grim reaper. To paraphrase Shakespeareâs Hamlet quoteâ âtheir sorrows are here, and they are here in battalionsâ. Every mistake that management and labor could make that would harm a commercial institution they have made, and often repeatedly so. Wrong choices in models, lack of recognition of the ultimate issue of fuel economy, boring styling, strangling union work rules and poor quality perceptions are just some of the reasons that âThe Big Threeâ are so close to being the three, the two, or the one midgets. It appears highly unlikely that they will continue to exist as independent entities.
Much is made of the potential loss to the United States of any, or all of these iconic carmakers. And yet, automobile manufacturing in the country is booming. Mercedes-Benz, Subaru, Honda, BMW, Toyota, and Nissan have all built factories here in recent decades. Volkswagon has announced that they plan to, as well. Each of these makes has targeted features, styling and benefits that they incorporate into their machines that âThe Big Threeâ had not identified. Also, they have all built their factories in âright to workâ states, where labor union influence is minimal. While paying excellent wages and providing competitive benefits, these foreign Companies are not hog tied by arcane, non-productive work rules. They do not confront legacy costs that price domestic manufacturerâs models at such high retails.Â
We are all being effected by a global financial conflagration. The future economic welfare of citizens, industry and governments all over the world are intertwined and will be decided by how the people who got us into this mess approach getting us out. I use the pronoun âus, because we are almost all to blame.Â
Home foreclosures are surging because of stupidity and greed. People today, certainly in the developed countries, crave things they do not need and can not afford. Some people should not own homes. They can not afford the maintenance, the insurance, the down payment, or the taxes that accompany homeownership. A married couple with one child and a 00 per month income, should never have attempted to purchase a 0,000 home, with 4 bedrooms, on a sub-prime loan with nothing down. They were fools, as was the lender, the mortgage broker and the buyer of the derivative that this loan was packaged into.Â
Banks and insurance Companies that purchased these esoteric mortgage derivative vehicles, historically hugely profitable, are falling like flies. Northern Rock in England, ING in Holland, Indy Mac, Countrywide, Wachovia and WaMu here, are only a few of the powerhouse financial institutions that are now closed, merged or selling off assets. The insurance giant AIG has been taken over by the government. Lehman Brothers, one of the most venerable, respected investment banks was shut down by the government. Merrill Lynch has been sold to Bank of America.Â
Fannie Mae and Freddie Mac have been hammered for their role in precipitating the credit bubble that has lead us to this precipice. The Congress, which passed laws spurring Fannie and Freddie to make dubious loans to non-creditworthy borrowers, is looking for scapegoats. A number of our sainted Congressmen want to see âperp walksâ. I agree. However, I am confident that the real âperpâsâ wonât walk.Â
The problems seem endless and daunting. They are coming âin battalionsâ. Nevertheless, we will survive this, hopefully learn from it, and prosper from the opportunity to fill the gaps opened by systemic failure. The equity markets appear to offer a âonce in a lifetimeâ opportunity to profit from the steep losses incurred because of the panic the credit debacle has induced. Strong, agile financial institutions, such as Wells Fargo and State Street, will emerge to fill the vacuum left in the wake of the disappearance of hundreds of firms.Â
Individuals will have to make more prudent purchasing decisions. 84 and 96 months car loans will disappear, making luxury automobiles more difficult to acquire. âSkin in the gameâ in the form of down payments will be required to purchase real estate, benefiting the homeowner and the lender.
Credit cards will be harder to obtain and the credit limits will be lower.Â
Every person can use this maelstrom as an opportunity to review real needs and wants. Living beneath oneâs means might even make a comeback.
Geoff Ficke has been a serial entrepreneur for almost 50 years. As a small boy, earning his spending money doing odd jobs in the neighborhood, he learned the value of selling himself, offering service and value for money.
After putting himself through the University of Kentucky (B.A. Broadcast Journalism, 1969) and serving in the United States Marine Corp, Mr. Ficke commenced a career in the cosmetic industry. After rising to National Sales Manager for Vidal Sassoon Hair Care at age 28, he then launched a number of ventures, including Rubigo Cosmetics, Parfums Pierre Wulff Paris, Le Bain Couture and Fashion Fragrance.
Geoff Ficke and his consulting firm, Duquesa Marketing, Inc. (www.duquesamarketing.com) has assisted businesses large and small, domestic and international, entrepreneurs, inventors and students in new product development, capital formation, licensing, marketing, sales and business plans and successful implementation of his customized strategies. He is a Senior Fellow at the Page Center for Entrepreneurial Studies, Business School, Miami University, Oxford, Ohio.
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