Sunday, August 12, 1990 - North Shore News ~ 9 “ASTHMA on ALLERGY ~ PROBLEMS? ~ Need 10. homes. to . test environmental . _ air products.. A Place To Go When You're Pregnant And Need Support: | GIRTHRIGHT | Coll 987-7313 » Free Pregnancy Test « 229 Lonsdaie in Vancouver Cail 687-7223 ; A valuable lesson from Joseph Kennedy ONE OF the celebrated stories of the Great Depres- sion was generated by Joseph Kennedy. During a routine day in 1929 he was in the elevator of his office building when the operator said to him, ‘“‘Mr. Kennedy, I heard that General Electric is going up today. You should buy some.’” Folklore has it that Kennedy, upon reaching his office, in- structed total liquidation. He sold every share he owned in every company. His shocked staff waited for an explanation. Kennedy just grunted: ‘‘When the elevator boy says buy General Electric, it’s time to get out of the market.’’ Kennedy was cash rich while associates were jumping out of office windows. I vividly recall the fall of 1980. One morning the newspaper published a picture of hundreds of people, like youngsters waiting for a rock band, camping out over- nisht to ensure themselves of ad- wussion into the next real estate agents’ course. That morning, I delivered a spontaneous editorial on the radio relating, among other things, the Joe Kennedy story. The advice was Clear: it’s time to get out of the market. get Armed with this certain knowl- edge, I was nevertheless intrigued by friends who were ‘‘flipping’’ properties. Those who ignored my sage advice continued making enormous profits. Banks couldn’t lend enough money. Through this boom, managers who lent the most were promoted and paid huge bonuses. The pru- dent ones who thought like me were transferred to lesser locales. There seemed to be no end. An associate of mine picked an op- portune moment to suggest that he could use some help in a quick flip. The professional appraisal was at a higher number than the selling price. Growing insecure about my prophecy, I took the plunge. A terrible thing happened. Three short days after buying this land, we sold it for a $50,000 profit. We hadn’t invested 10 cents. Kipling observed ‘‘if you can deal with triumph and disaster, and treat those two imposters just the same,”’ in the text of his cele- brated poem /f, Death, carnage, business reverses — this stuff is easy to handle. Quite inexperienced at the subtle arts of victory, this $50,000 windfall was a glorious invitation to oblivion. It provided certain knowledge that my dour broadcast predic- tions were wrong. We sailed into our next flip — a larger undertak- ing — in February 1981. The flip ended in 1988. Through the misery of 20 per cent mortgages, it helped not a bit to see banks fail and careers ruin- ed because of the same greed that 926-6242 1852 MARINE DR. WEST VAN Gary Bannerman OPEN LINES led to abandoning my own con- victions. My bankers at the time thought I was signing a swell deal. We were all nuts. ate In Toronto recently, | met with ’ many business people. They talked about nothing but the recession, record numbers of bankruptcies, 125,000 manufacturing jobs lost and falling real estate prices. Occasionally, I’d penetrate this gloomy haze to inquire as to the health of their own businesses: they all were doing better than ever. Was it not true — asked my undernourished West Coast mind — that real estate was only settl- ing back after blistering peaks? (Answer: ‘‘oh yes.’’) And were there not record numbers of in- corporations during the past few years? This received a grudging affirmative. The Class of '8! was thriving on this recession. The newcomers, who could still taste the untainted flavor of victory, were getting clobbered. Left, right and centre. The Midas Touch reigns supreme. Beware of the hot shots who have never lost, for theirs is a passport to the sheriff's office. ake Our economy invariably follows Toronto, but Richard Alien, chief economist with B.C. Central Credit Union, appears to be sug- gesting that che worst of the hur- ricane will pass us this tine. The industry suffering the most — manufacturing — is extremely small in B.C. It’s a national disgrace how little Ontario buys from the West, but this time it may be a blessing. Our principal markets are in Asia, Europe and the United States. The real estate industry is ex- ceptionally nervous at the mo- ment. Sales are slow and com- panies are jettisoning the poor producers. For buyers, the market is out- standing. Prices are still high — much higher than they will be a year from now — but the selec- tion is superb. When prices totally stagnate, only the desperate sell their homes. The variety will be nowhere near what you see today. Property is a superb barometer of the economy. Make a note of The Bannerman Theory: errors are restricted only to my own investment portfolio; the universal vision is awesome. There is a nine-year invariable cycle. The market begins to hum in year five with frenetic activity. Year six is laced with heavy cost and disappointment, but few disasters. Seven is calm and peaceful, rumbling with some momentum before exploding in glorious profit through most of year eight. Sanity then starts to prevail and prices sink fast. The overextended and overicveraged ones panic. Desperation sales drive down the averages and everyone talks about recession. Problems begin toward the end of year eight and disaster reigns through year nine. Ie all starts again in year one. Those with cash get handsome deals. Prices don’t change much through years two and three but the markets grow progressively busier. Anything that can go wrong — except price — seems to take place in year four. Where are we now, you wise ones ask. 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