Nearly every day someone asks me how they should be investing their money. I tell them, “Buy some gold.” Then I qualify it: “It probably wouldn’t hurt to own something that’s been of value for more than 2,000 years.”
Typically, they follow up by asking what I think will happen to the local economy, and, in particular, the local housing market. Not one to mince words, I tell them, “If it’s not the roof over your head, sell it.” I explain that the real estate market, inflated by the loose policies of the Greenspan years, saw people borrow like never before in history. This, in turn, made real estate the greatest investment ever on planet Earth. With sophisticated financial products and accounting tricks, the banking system then carefully hid this debt while the president of our country did absolutely nothing about it!
When speaking of investing in gold, most nod along in agreement, seeing the logic. Yet I doubt many have taken advantage of gold’s increase from $270 from the day Bush took office eight years ago to the recent price of $870. My outlook for Telluride real estate, however, is a completely different story and elicits a wildly different response. Until recently, most people would look at me in disbelief when I suggested the “value” of their homes could possibly make a U-turn. “It’s different here,” would be the nearly universal response.
Of course, Telluride will continue to be desirable, special, and unique. But the crimes have been too great this time and the unwinding will more than likely spread without mercy. My feeling is that Telluride will not be spared.
Recently, Seth Cagin interviewed several local Realtors for a story in the Watch. I was glad to see that the brokers he spoke to were somewhat realistic in their assessment of the market. Yet I was exasperated that some of them continued to speak with bravado of the years ahead. In the article, T.D. Smith of Telluride Real Estate Corp. goes out on a limb when he states, “I don’t think we’ll see significant deflation like other markets have.” George Harvey similarly proclaims, “The affluent still believe in Telluride. The person who buys in 2008 or 2009 will look real smart at a cocktail party in five years.” It’s impossible to say whether the economy will experience deflationary or inflationary forces, and it's even harder to predict who will look smart at a cocktail party in five years. Most financial and investment professionals are required to disclose that past results are not indicative of future results. It is unfortunate that Realtors are not similarly obligated to refrain from making potentially misleading statements.
I don’t enjoy writing about potential hardships in our local newspaper; yet hardships can be learning experiences, and you’ve got to look at all sides of any equation if you wish to make wise decisions. If the national economy continues to slow down, and if less people throw that extra mil or two on a home in Telluride, and if there are less people on the planes coming into our regional airports, and if less people spend their money in the stores and restaurants, then what can we do about it?
First and foremost, we need to be less dependent on the national economy. For Telluride to hold its own, we need to begin thinking about creating alternatives to the tourist and housing industries. One of the first rules of wise investing is diversification – or not putting all your eggs in one basket. Telluride resident Amy Levek thinks that any place that relies on one “industry” will be inherently weaker than one that includes a diversified economy. “Like an ecosystem, which is healthier when it has a diversity of species, a place's economy is stronger and more resilient when it is does not depend on a single source of income. Telluride, while masquerading as a tourist-based economy, has received the vast majority of its income from real estate and development.”
I’ve been giving some thought to what kinds of cottage industries might be able to gain a foothold in San Miguel County. Using Wagner Custom, the local ski manufacturer, as an example, I approached Erik Dalton at Jagged Edge recently and asked him what he thought about actually making Jagged Edge clothing again, and making it in San Miguel County. We both agreed that the local work force had great potential. The big problem -- according to Dalton -- would be competing with the Chinese, the very people who now own and operate our former clothing industry.
Hastings Mesa resident Bob Hennessy goes a different direction: He suggests that Telluride has a wealth of people with great knowledge and passion for renewable energy, green building, and environmental issues. “If we could put together a way to funnel that ‘energy/knowledge’ to the rest of the world, we could have a source of employment and income outside of construction, real estate or tourism. I suppose some sort of think tank for corporate America.”
The questions I think we need to ask ourselves are: How can we become an example of a new re-localized economy? How can we work together to become more productive and thus more prosperous? What will it take to develop the ability to sustainably feed, clothe, house, and power ourselves with the know-how, natural resources, and financial capital that already exists in our own backyard? How can we better guarantee our own well-being?
History is littered with empires.
Even if America’s time has not come to an end and the current national downturn proves to be mild and short-lived, it is time for us to implement new ideas and develop new income sources. The key to protecting our economy and potentially side-stepping the current financial crisis will be to nurture and expand locally owned businesses. Going one step further, we will need to direct our savings to new local endeavors. Antiquated securities regulations all but ensure that Americans’ savings wind up exclusively at Fortune 500 corporations – and this must change. Albert Einstein once said, “The true sign of intelligence is not knowledge but imagination.”
We can only control our destinies in San Miguel if we imagine that we can. In fact, we already have an organization, The New Community Coalition, in place working towards these ideals. Yet to truly bring about the changes that I believe necessary will require investment - an investment in ourselves. And I ask you: why, in a place such as this, can’t we lead the way?