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CLOUDY Temp: 45 °F Wind: CLM at 0 mph Wednesday, December 11, 2002 SECTIONS Home Page Local News Sports Business Obituaries Life Opinion - Politics AP News Weather Classified Archives Site Map EXTRA HomeLife Magazine W3 Magazine Jobs @ Mail Tribune Tempo A & E Oregon CarZone Wellness Connection Real Estate Newspaper in Education Prime Times Outdoor Journal Personals Movie Times TV Times E The People CLASSIFIEDS Find a Car Find a Home Find a Job Find Everything E SOUTHERN OREGON Automotive Communities Entertainment Publications Recreation Calendar ABOUT US FAQ What's New Advertise Home Delivery Classified Ad Contact Us Media Kit Email Story to a Friend July 25, 2002 Investors exchange stocks for real estate By GREG STILES Mail Tribune The bear market that has eroded more than $6 trillion in investor wealth and more than a trillion dollars in the past month, took the day off Thursday as the Dow Jones Industrials saw their second-biggest point gain ever. Even so, the slump has had an impact on the Rogue Valley and few analysts see this as the start of a new bull market. A continued bear market could manifest itself in contrasting ways in Southern Oregon and it already has changed where investment dollars flow. An unscientific sampling of economic thought reveals: A new push into single-family residence market by investors. Older workers delaying retirement. A decrease in charitable donations. Concern that rising insurance rates are hurting businesses that otherwise are faring well. Coldwell Banker Pro West Real Estate agent Doug Morse, who handled more than $23 million in transactions in 2001, says he can’t find enough single-family homes to meet current investment property demand. "Usually, you don’t have a lot of financial planners and stock brokers buying real estate and you don’t see real estate agents buying a lot of stocks," Morse says. "The last couple of weeks, I’ve had four financial planners buying rentals. That’s what everybody’s buying right now." Investors, he says, are targeting houses up to about $140,000, while avoiding apartments and duplexes. A negative tide in the market often leads people to invest in their homes says Jeff Cutler, chief executive officer of Cascade Investment Council. "People in Southern Oregon will continue to upgrade their homes, remodel and put money into their house rather than the stock market," Cutler says. "That’s a traditional pattern." He says the decline’s greatest impact has been on a small percentage of wealthy people. "People of ordinary means are not overly affected by stock market problems because they don’t have a great percentage of their wealth in the stock market." Cutler sees a parallel between the current stock market climate and the late 1960s. "People were seeing they couldn’t make any money in stocks in 1968 and 1969 and there was an amazing urge to get out of apartments into a home," Cutler says. "That lasted for quite a long time, and I think that’s a recurring theme. Shrinking nest eggs have caused changes in personal strategies as well as spending habits. "Companies may end up having more experienced employees, which means more expensive employees," says Lyn Hennion, vice president with Strand, Atkinson, Williams & York. "People may put off purchasing toys — boats, snowmobiles and that kind of stuff. It will be interesting to see what people’s back-to-school expenditures are like." She sees a hunkering down among consumers accompanied by a wait-and-see attitude. Charitable organizations are feeling a pinch, she says, "because people aren’t feeling as generous." That’s in part because they don’t have the same resources they did a few months earlier. "I’ve seen a big drop in my IRAs and 401(k) and I may not be able to retire when I want to," says Roger Hull, president and chief executive officer of Capital Associates. "The middle class that buys their kids Nike shoes, where both are working with an income of $50,000 to $75,000, they’re going to become a little more conservative. They’re going to put off buying a new car for a while or buy used." One indicator of a flagging economy is a drop in motor freight activity. Given Jackson County is a hot-bed for trucking it’s all the more significant. "If the consumer isn’t buying, retailers are not ordering from wholesalers and manufacturers slow down," Hull says. "That means there’s less freight to move. Right now, the problem is finding enough trucks to move the freight." One aspect of the stock decline has been that insurance companies no lo0nger can expect earnings from market investments to compensate for losses incurred as they lowered rates to increase market share. Insurance rates, says Hull, could put some motor carriers out of business. "Some carriers have seen their liability insurance rates increase 100 percent, Hull says. "It’s really hammering them." U.S. Bank economist John Mitchell says money flowing from the stock market to the safety of interest-bearing investments has driven down interest rates and supported the housing industry. "If you are talking about implications of declining stock prices over a protracted period," Mitchell says, "then you’ll start seeing a change in discretionary things like car sales and high-end restaurant meals. That’s where you’ll first see evidence." If portfolios are depleted far enough, he predicts there might be an influx of retirees into the work force. "It could be secretarial or any number of ways," Mitchell says, "perhaps on a part-time basis to supplement income." But even spikes such as Wednesday’s may not be enough to hold the bears back for a while. "The economy is going to be sluggish a lot longer than people expect," says Will Reishman of Euro Pacific Capital. "We’ve been in a decline that has surprised even the bears to some extent. It seems the market is anticipating a double-dip recession. If that happens, job growth will be slow and it will be harder to get pay raises, especially if we’re in a recession as we go into the Christmas season. That’s going to affect places like Bear Creek Corp. "Ultimately, it comes back to the dollar. If the dollar suffers badly, I think we’re going to be hurt by a loss of purchasing power. This could very well lead to rather serious inflation, even in a sluggish economy. It could signal a return of stagflation similar to the late 1970s." Reach reporter Greg Stiles at 776-4463 or e-mail [email protected] Printer Friendly Version Email Story to a Friend Subscribe Archive: Click to Search Mail Tribune Home Local News | Sports | Business | Obituaries | Life Opinion - Politics | AP News | Archives | Site Map E Southern Oregon | Classified Copyright 1997-2002 Mail Tribune. All rights reserved. Privacy Policy webmaster feedback A D V E R T I S E R S