4 minute readAnother Monday, another dunk into the glass-half-full-glass-half-empty pool of humility.
How do you feel about and characterize this past Friday’s The common denominator of these data points is that they tend to run counter to narratives that shape our plans. Assumptions support our planning; what happens if our assumptions – even ones based on the consensus of expert thinking – don’t prove correct, or go sideways? Up to this moment, Dec. 2022, we’ve seen strong evidence that homebuilders and their partners have done well at solving for many of the specific challenges of the past traumatic downturn during the GFC. Will those lessons learned shield everybody from the stresses and shocks of what’s working its way through the world, national, and local economic backdrop? Here’s a perspective that focuses on financial and investment wisdom, but one builders and their investor and manufacturer ecosystem would find equally helpful. It’s an excerpt from Morgan Housel‘s Psychology Of Money, and the point here is that to succeed, you’ve got to survive. More than I want big returns, I want to be financially unbreakable. And if I’m unbreakable I actually think I’ll get the biggest returns, because I’ll be able to stick around long enough for compounding to work wonders. Planning is important, but the most important part of every plan is to plan on the plan not going according to plan. A barbelled personality – optimistic about the future, but paranoid about what will prevent you from getting to the future – is vital. What matters little in the waning days of 2022 is who’s correct or not about the next Fed policy rate move upward. Nor does the one after that make all that big a difference, but – overall – what the ultimate rate caps out at and for how long, and most importantly, what that does to consumers’ mindsets, buying behaviors, and, finally, house prices. Here’s Fed chair Jerome Powell’s latest thinking on the “destination” and duration of a Fed rate peak: He outlined two possible strategies for proceeding. One would be to quickly raise the fed-funds rate well above the 5% level broadly anticipated in financial markets and then lower it right away if it turns out they have gone too far. Another would be to “go slower and feel your way a little bit to what we think is the right level” and then “to hold on longer at a high level and not loosen policy too early.” It’s anyone’s guess as to what consumers’ appetite, tolerances, break-points, etc. will be when Fed policy rates start to stabilize and markets reset a new floor under mortgage interest rate expectations. Still. root outcomes for user-audiences of The Builder’s Daily are what we’re getting at here: that as many of you as possible survive the tough going in the months ahead, and come out of that period stronger for it – whether it’s midway through 2023 or a year later or even longer than that. As we see, there’s data evidence enough everywhere to either confirm your comfort zone of confidence or to keep you up tossing and turning at night in panic. Choose whichever filter you want to process the information, but remember, when it comes to planning: the most important part of every plan is to plan on the plan not going according to plan. The power of healthy skepticism and humility in business shines through in those who’ve been around through cycles of varied cause and nature. And we’ll see a lot of them on the other side of this one as well.
