Violence in Mexico

For those of you concerned about the violence in Mexico and your security while visiting, here’s a good website to check out. Please pass it along!

www.thetruthaboutmexico.com

Excellent Rolling Stone Article

If you haven’t read this piece, you should. Great job of explaining how America got into the mess it currently finds itself.

In essence, Paulson and his cronies turned the federal government into one gigantic, half-opaque holding company, one whose balance sheet includes the world’s most appallingly large and risky hedge fund, a controlling stake in a dying insurance giant, huge investments in a group of teetering megabanks, and shares here and there in various auto-finance companies, student loans, and other failing businesses. Like AIG, this new federal holding company is a firm that has no mechanism for auditing itself and is run by leaders who have very little grasp of the daily operations of its disparate subsidiary operations.

Read the whole article here.

PV on CNN.com

I like the slant this writer has put on the situation:

PUERTO VALLARTA, Mexico (CNN) – A lot of Americans are wondering: Is it safe to travel to Mexico? It depends where you go, and what your intentions are once you get there.

Folks in this charming coastal resort recall what happened a few years ago when an unsavory element hit town. Destruction of private property. Drunken acts of lawlessness. One gang of hooligans, according to a taxi driver, actually went so far as to toss a mattress out the window of a 12-story hotel and onto the beach below.

The culprits weren’t narcotics traffickers. They were what Mexicans refer to as “Los Spring Breakers.”

He’s put a little humor into the situation to try and show that its perhaps been  built up to be much more serious (at least in PV) than it really is (and this is from CNN!). Its worth reading the whole article. I think he gets it right what many Mexican think about the current drug war taking place in their country.

Living month-to-month

This is shocking:

A MetLife study released last week found that 50% of Americans said they have only a one-month cushion — roughly two paychecks — or less before they would be unable to fully meet their financial obligations if they were to lose their jobs. More disturbing is that 28% said they could not make ends meet for longer than two weeks without their jobs.

50% of Americans have only a one-month cushion???

That rules out at least half the American population as potential home buyers!

Americans are in a collective state of financial depression as many admit they could only cover their bills for two months at most if they found themselves suddenly jobless, a nightmare more and more worry may come true. The results of a bevy of surveys found a growing number of consumers are only a couple paychecks away from a household collapse even as many scramble to shore up savings. Rainy-day funds appear to be a distant memory as households burn cash to cover food and energy bills as well as mortgage and car payments.

A large number of households say that even one missed paycheck would spell financial ruin. And even in households that remain well off, the surveys show a festering fear that financial problems are lurking.

For the complete article, click here

Weekend Reading…

Looks like Trump may not be completely off the hook for his involvement in the Trump Ocean Resort Baja project.

 

Donald Trump was sued Friday by buyers who lost millions of dollars in deposits on a failed hotel-condo in the Mexican border city of Tijuana. The 69 buyers purchased 71 units in Trump Ocean Resort Baja and paid deposits totaling between $18 million and $20 million, said Bart Ring, their attorney. Buyers were told last month that the luxury oceanfront project was being scrapped and that there was no money left to refund deposits. In December, they were told the project had only $556,000 left after collecting $32.2 million in buyer deposits. (Continue)

 

“El Chapo” Guzman, Mexico’s notorious leader of the Sinaloan Cartel, has made Forbe’s Billionaire list!

 

Who says crime doesn’t pay? A suspected drug lord who is Mexico’s most-wanted fugitive made the Forbes list of billionaires on Wednesday with a fortune described as “self made.” The magazine estimates Joaquin “El Chapo” Guzman’s worth at $1 billion _ No. 701 on the list, right between a Swiss oil-trading tycoon and a U.S. chemical heir. Dozens of other people were also tied for the spot. (Continue)

 

And the stories continue about drug-related violence:

What happens in Mexico doesn’t stay in Mexico. As drug-related violence escalates south of the border, its effects are being felt as far away as Maryland and Minnesota, where federal agents last month made hundreds of arrests and seized tons of cocaine traced to Mexico’s ruthless Sinaloa cartel. Skirmishes among rival gangs have spilled across the border into El Paso, Texas, and San Diego. Phoenix is suddenly the kidnapping capital of the U.S. A recent National Drug Intelligence Center report says Mexican cartels have a foothold in 230 U.S. cities, where they have forged alliances with local gangs to distribute drugs. Atty. Gen. Eric Holder says the cartels are a national security threat. A State Department travel advisory warns that tourists visiting Mexico have been injured and killed in public places, and “dozens of U.S. citizens have been kidnapped across Mexico.” Its most recent dispatch specifically warns against spring break excursions to Tijuana and Rosarito Beach. Can Puerto Vallarta be far behind? (Continue)

Although I am not enjoying the publicity that Mexico’s is receiving regarding the drug-related violence, as it has very little to do with Puerto Vallarta, the question asked above “Can Puerto Vallarta be far behind?” is definitely relevant, as is the fact that “perception is reality”. The positive side of all this is that the problem can no longer be ignored, by either Mexico or the USA, so hopefully something will get done about it. This problem can’t be solved without US participation. With every TV news channel playing this over and over, President Obama and well and the House and Senate members, can’t avoid it. The problem is no longer contained to within the borders of Mexico. I expect we’ll see a substantial increase in America’s role in this “war” quite soon.

Vallarta Safe? (Part II)

I just finished reading Fareed Zakaria’s book “The Post-American World“, (not bad, but I like his TV show better), which talks about the fear that has entered the lives of Americans in recent years. (Sounds like its another negative-America book but its actually not). He compares it to how it was when he first came to American as an 18-year old student, how he was in awe of the country and the people, who seemed capable of anything and taking on anything. It reminded my of myself as a young Canadian growing up next to this country, feeling like I got the “short end of the stick” because I was not born south of the border, as an American. But that has changed.

Probably President Roosevelt’s most famous line was “All we have to fear is fear itself – nameless, unreasoning, unjustified terror”.

For Americans to say that they will not travel to Puerto Vallarta because of cartel violence, beheadings or kidnappings strikes me as “unjustified terror”.

Fareed writes: “America has become a nation consumed by anxiety, worried about terrorists and rogue nations, Muslims and Mexicans, foreign companies and free trade, immigrants and international organizations.” 

John McCain, in his book Why Courage Matters – The Way to a Braver Life, (who Fareed also quotes), wrote “Get on the damn elevator! Fly on the damn plane! Calculate the odds of being harmed by a terrorist. Its about as likely as being swept out to sea by a tidal wave.”

Calculate the odds folks. How many visitors to Mexico, to Puerto Vallarta, have been a victim of drug cartel violence? Who knows anyone, anyone, who has been kidnapped? Or of someone you know that has experienced any form of violence down here? And then go read the local newspaper to see what’s happened in your city or state recently. Violence or robberies do sometimes take place in PV (they do everywhere), but they are not frequent. Its just that when it does happen, it blasted all over the international news, over and over again. Sensationalism. Because the robberies or violence in your home town are not “sensational” enough these days. Its much more exciting to talk about drug cartels in Mexico and try and link it to how safe your son or daughter may be down here on Spring Break. The only problems we have had here lately is when they were so drunk they got into fights or fell off terrace railings of hotels.

Drug cartel violence is serious and it does need to be not only contained but curbed. But the violence, for the most part, is a long ways away from PV, and it hasn’t involved foreigners.

Mexican Drug Wars – a solution?

When talking to Americans about what is going on in Mexico with regards to the drug cartel war, I’m surprised by how many respond by saying that 1) This is our problem too, we are the one’s that have created the demand and therefore need to help solve this problem, and 2) a solution is to just legalize drugs and make it a health issue instead of a “war” issue. This article in The Economist shows that there are others who feels the same way.

Vallarta’s “Cash” Market

The Vallarta real estate market has been referred to often as a “cash market” , in that people pay cash for properties rather than financing the purchase. Well, this isn’t actually true. In most cases, people re-financed a property back home, usually their primary residence, using a second mortgage or home equity loan, in order to make the purchase.

People began to take out “home equity” loans, to use some of the equity they had acquired from quickly rising home prices. This became known as MEW or “Mortgage Equity Withdrawal”. 

Problem was, prices had risen higher and faster than they ever had before historically. This wasn’t really “equity”, it would prove to be “artificial equity”. As home prices began to drop, this “equity” began to disappear.

The chart below shows the Case-Shiller USA Home Price Index and how it has performed over the years. It shows how much the average home price had increased over the previous year, based on a 20 major US city composite. Starting in 2003, home prices started increasing by more than 8% a year, actually peaking in 2005 at 20% increase. This showed amazing appreciation. I’ve colored in a portion of this to show the years, and the appreciation, that drove this market.

Unfortunately, this couldn’t last, and when prices started to fall, they fell quickly. In 2008 prices for this index has dropped by nearly 20%. And its still dropping.

This next chart shows what a typical house would have appreciated by if it was in one of these markets. A home that was worth $400,000 in 2002 would have appreciated to $775,000, nearly double, in just five years.

Many people decided to make use of this new found “equity” to purchase toys, and some, second homes in places like Puerto Vallarta. Interestingly, the median price of a condo in Vallarta in 2008 was just over $300,000, making it very affordable for people who saw their homes appreciate in the manner shown above. This, not cash, is what drove the Vallarta real estate market for the past five years. Unfortunately much of this “equity” has been lost, so people are back to having homes worth what they were in 2002, but with mortgages  larger than the new value of the home.

So the question now is, how will this effect the PV market? We know how its effected the market in the USA, with record foreclosures. It is still uncertain how this could effect Vallarta.

“This product was meant to help people do construction on their house, [and] do debt consolidation—not to take out every last dollar of equity in their home to finance a different kind of lifestyle. This is the reason that the US consumer is all spent out. They used debt and home equity—as opposed to Income gains—to finance an improving lifestyle. After the vacations are passed, the big screen TV and new cars become old, what are you left with?”

Charles Scharf, head of J.P. Morgan’s retail business on home equity loans.

Vallarta’s Expensive? Compared to what?

In Friday’s edition of the Wall Street Journal, in the Home Section there’s a piece called “Relative Values – Diamonds in the Rough” that  features homes/condos at top golfing communities. Featured is a 2,300 f2 oceanfront condominium with three bedrooms that is located in Maui on the Kapalua Bay beach, one of 39 units  in the gated community of Coconut Grove. Its listed for sale at US$6.3 million.

Last year there were only three condominiums that sold for over US$1.5 million in the Vallarta region, all three located at Hacienda de Mita in Punta Mita, also a golf community. They are also oceanfront but 50% larger than this unit in Maui. Monthly maintenance fees are US$2,000 in Maui, compared to US$900 at Hacienda de Mita, which includes master fees for Punta Mita and insurance coverage.

Its all relative, I guess.

Digital PV Lifestyles

If you haven’t signed up to get Vallarta Lifestyles digital version, you are missing a great way of how a print publication can be available via the Internet. For those of you outside of Vallarta, it allows you to receive the magazine – for free. And, especially with the newest issue, you receive a lot of bonus content, in the form of videos, slideshows and audio interviews. www.vallartalifestyles.com.