Quiet Booms

Those of us who live in commodity-producing areas have noticed something recently that many others haven't: the commodity boom is beginning to make its way into the broader economies of these areas throughout the US and Canada.

Cash generated by high prices for tangibles is trickling out into banks, real estate, luxury purchases, and capital investment of every part of North America that has an economy reliant on production or distribution of "stuff."

Minyanville's Ryan Krueger, for example, sees a petrodollar-driven boom unfolding in the oil-refining region of Port Arthur, Texas.

There has been some scattered coverage in the national media about this. Both New York Times and the Los Angeles Times have noted Houston's boom-town characteristics over the past year.

By the time it's all said and done, Houston will prove to have been just the first (and probably the biggest) of many of these kinds of booms.

Dallas, Denver, Kansas City, Oklahoma City (where I live) and other centers of commodity production and distribution will experience similar effects on capital investment, luxury spending, and high-end real estate as oil, grains, livestock, and metals prices remain high.

Maybe it's some facet of this boom-time mentality that has rich OKC oil execs barely able to disguise their lust for other cities' sports teams.

The point I would take from this whole phenomenon of quiet booms, as illustrated by Mr. Krueger's observation, is to avoid letting a blanket conviction obscure the potentially profitable subtleties of a situation.

You don't want to let the idea, for example, that "all real estate is going down" lead you astray any more than the thought that "all real estate is going up" led many investors astray several years ago.

Gross national figures can be illusory: there's no reason an economy or an asset market has to correspond to a national boundary.

They say "all real estate is local." Well, all economics is local, too . . . and it's worth it for an investor to pay very close attention to what's really driving the economy of a particular area before those numbers get folded into GDP.