Wednesday, August 3, 2016

The Big Stretch

In The Big Short, author Michael Lewis tells the story of a very small number of astute investors which realized that our economy had been falsely inflated by subprime mortgages, mortgage-backed securities, and the massive amount of cash flow that occurred by the mere movement of these questionable loans.  While the vast majority of the country continued to jump on the housing bandwagon, these astute investors managed to steer clear of what would turn out to be an historic housing collapse.  Perhaps even more impressive was the manner in which these individuals devised an ingenious way to bet against the housing market, thereby capitalizing on what in retrospect was an inevitable economic crisis.

What, if anything, does this tale have to do with Rochester, aside from the fact that slow and steady Rochester was relatively insulated from the housing bubble? For the past several decades, Rochesterians have been told that the Flower City's time is up.  Rochester, Upstate New York, and the entire Rust Belt have seen their heyday.  Life is infinitely better in North Carolina, Florida, and Texas.  Continued population loss, economic decline, and urban blight are inevitable.  Yet through the mass hysteria, a small group of people has quietly done its homework.  This group of developers, artists, and entrepreneurs believes that Rochester's urban density, intellect, creativity, fresh water, and agriculture can provide immense returns in the future.  Clearly, these visionaries have taken a significant gamble by betting against the grain.  With some persistence, they might be handsomely rewarded.

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