The ‘confidence’ game

With manufacturing shrinking, and retail and service sectors growing, there is little debate we live in a consumer spending-driven economy. We’re not talking about FRM, Bernie Madoff, or any other Ponzi scheme – we’re talking the Consumer Confidence Index, both at the national and local levels.Consequently, it is this amateur economist’s view that until this measure improves, we will continue to wallow in our current state of “uneventfulness.”The year 1996 was appropriately termed the “irrational exuberance” period, by then-Federal Reserve Chairman Alan Greenspan. This held true during the stretch from early 2005 to January 2008. It was an unprecedented time of consumer and corporate spending, real estate value appreciation (much of it not real, as we’d later find), and increased stock valuations.This stretch was quickly followed by some lessons learned today. Credit scores don’t pay bills – regular income does. Real estate is still a good play, but you better have more than a six-month hold time in mind – more like five to 10 years. While savings are good, too much of a culture swing has consequences.I’d like to expand on this last one. As a banking executive, I’m proud of many for living within their means and being converted to savers.However, it is also difficult to see the millions of dollars – yes, scores of millions – sitting on the sidelines when a clear portion should be invested in our communities, not in money-market accounts bearing anemic albeit safe returns.Believe me, I understand the hesitation and it is natural. We have hopefully seen the
worst of unprecedented unemployment, foreclosure activity and stock market volatility.This has caused havoc in many New Hampshire households, including my own. I was “severanced” in 2008 after a bank merger. My wife, after 20 years of gainful employment with a major New Hampshire insurance carrier, was “restructured” out last year.Getting in the gameThere are a couple of facts to the positive here, though.New Hampshire’s unemployment through April was showing consistent improvements at 4.9 percent. This means about 95 out of 100 people ARE employed. Some may be underemployed, yes, but still, 95 are employed. Also remember that, since 2002, we’ve never been better than 97 percent employed.Half of the homes in New Hampshire are mortgage free; that speaks to our conservative heritage.Opportunities remain in fair abundance.Many people have changed careers or have opted to start their own business during this difficult past few years.What’s my point in all this? Simply this: If you or your company has an opportunity to purchase real estate, hire or expand your business, maybe even start one, do it. Go ahead and pull the trigger.This is not for everyone, but I have personally put my money where my pen is. We recently purchased a piece of investment property from the Federal National Mortgage Association, aka Fannie Mae, one of the government guarantee agencies.Are our tax dollars at work? I suppose, but these will have to end up someplace.It might seem scary, but after pulling together nearly every piece of liquidity we had and taking out a conventional loan, it has been a few months and we are proud to be able to provide decent, clean, housing to a family who needed it. This was something we could not have done in the “boom” years. If we had the dollars, we’d do another.Consider this quote from Berkshire Hathaway’s Warren Buffet in a recent issue of Newsweek: “Money will always flow toward opportunity, and there is an abundance of that in America. [Our] best days lie ahead.”I certainly don’t know it all, but I know this much – pricing on many investments remains excellent, borrowing rates have never been lower, but deposit earning rates have also never been lower.So are you going to get in the game?Don St. Germain, executive vice president and chief lending officer at St. Mary’s Bank in Manchester, can be contacted at