The Story of the Would-be Taxi Tycoon
Wednesday, August 13th, 2008
By Michael Lombardi, MBA for Profit Confidential
It was 2005 and property prices in London, England, had risen to heights never seen in North America. For one million dollars U.S., you could hardly buy a flat in London.
I happened to be in London that summer surveying the real estate market and people’s attitudes towards the economy and where prices were headed. This brings me to my taxi bicycle story that veteran PROFIT CONFIDENTIAL readers will be familiar with.
In central London, where traffic is congested and the streets narrow, taxi bicyclists are the norm. Picture a low bicycle pulling a two person, rectangular, fabric-sided caboose on wheels and you have taxi bicycle. You’ll find many of these in New York around Central Park.
One evening, I was taking a taxi bicycle back to the hotel after dinner and I struck up a conversation with a cyclist, an entrepreneurial young man in his late 20s. I brought up the booming London real estate market and he was quick to add his thoughts.
“London property prices go up 10% every year like clockwork, everyone knows that.” The young man already owned two flats just outside central London and was planning to close on his third investment property in the next week.
“How do you get financing?” I asked.
The reply came, “Banks are easy to borrow money from for London real estate because they know it keeps going up.” The more I tried to explain to the young man about the ups and downs of real estate and that he was too young in his career (as an aspiring Donald Trump) to be familiar enough with real estate cycles, the less he would listen. While it may not be scientific, at that point, combined with other talk I was hearing in London, I became convinced that the real estate market in London had become a bubble just like many cities in North America.
This morning, the Bank of England slashed its forecast for economic growth in the United Kingdom again, as jobless benefit claims hit a record not seen in 16 years. Unemployment in the U.K. has now risen six straight months in a row. One report I read said that the fallout from the United States subprime mess has cost U.K. banks over $200 billion and over 20,000 jobs. As for the property market, it is the worst it has been in almost two decades.
I often wonder what happened to that taxi bicyclist. He was a casualty of the enticing London property boom… likely one of thousands who got financially hurt as the bubble became a bust.
Tomorrow, a great story for you on how our own real estate market is faring and the newest players in the North American real estate market. You’ll be surprised.
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Tags: bank stocks, real estate, stock market, U.S. banks
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
