Catching Up

I’ve been away awhile – being too busy to blog isn’t a bad thing!  I have been keeping up with my reading and thought this might be a good time to share some articles on events and trends that are swirling around us today.

First, if you weren’t able to attend one of the “Emerging Trends” conferences that Urban Land Institute hosts every year, you owe it to yourself to get caught up with the thinking in the commercial real estate arena for 2014.  Take a look at the “Emerging Trends 2014″ report and let me know if you concur with what the “thought leaders” are looking at…you can download it here.

There are a couple of newsletters that I follow weekly, if not daily.  One of them is the PIMCO Investment report – Bill Gross over there has some excellent insights.  “The Second Coming” does not disappoint…”asset prices are dependent on investor expectations and the confidence in the policy makers and the effectiveness of their policies.”  The continued weakness in all sectors – c’mon even my hardcore left-wing friends have to admit this “recovery” ain’t all that:

recession3From a developer’s perspective, I would far rather build in a municipality that had strict barriers to entry and a grueling approval process but that when once your plans are approved, as long as you build according to the approved plans, you get your Use & Occupancy Permits.  The alternative of a  loose approval process coupled with an arbitrary inspection process leads to huge cost overruns and delays.

Let’s face it, Obamacare has passed and Dodd Frank has passed, but in both of these instances, the regulations are still being made up. So far, the regulations for Obamacare swamp the bill itself by a factor of 30. In the case of Dodd Frank, a whopping 28% of the regulations haven’t even been proposed!  And, particularly in the case of Obamacare, it’s implementation is apparently subject to the whim and the (ahem, cough) political aim of the Administration.  There is enough uncertainty in business to not have to worry about a constantly changing landscape.

But enough on that.

Contrary to a lot of the big brains one hears on the air today, I do not believe the U.S.  is in decline.  Let’s start with who will not “run the world” in the future.  Most folks believe it is China’s destiny to do so  and we hear a slew of yellow peril type stories as a result.  I have always contended that demography is destiny.  China is a demographic time bomb and you don’t have to dig too deep to reach that conclusion.  One of the better pieces on the subject comes from Stratfor – here’s their take.

Next up,  Russia.  Yes, they are rattling their saber at the Ukraine as we write and there is not a lot the U.S. seems to be able to do about it.  But Russia’s death rate far outstrips their birth rate and despite the best efforts of Vladimir Putin to get folks in the Motherland to canoodle together a little more, their future forecast is not bright.  Lewis Grizzard once joked that he wasn’t afraid of any country that couldn’t master the flush toilet – not sure things have gotten any better in the Soviet err Russia – take a gander through the wonder that was the Sochi Olympics.

This is not to say that we are sans problems.  We’ve got more than our fair share. In the near term, despite some sense of recovery in the housing market, we could be dealing with bubble issues  soon.  The single biggest problem that I see is cultural.  The mathematics of deficit spending only work in the short term.  Over the long term, the interest on the debt devours the edifice it was built upon.

entitlements-historical-tax-levels-680

 

Oh, and did I mention entitlements?  That’s the cultural part.  We are perilously close to that point where those that receive entitlements can out vote those that fund them.  It is the two wolves and a sheep sharing a meal scenario.

It is far past time for some adult conversations – remember when your Mom and Dad told you “no,” or made you wait or earn something?

But despite all that, I really can’t think of anyplace else on earth than here for entrepreneurship, opportunity and the chance to do well than right here in the good old USA.

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About MHH

Marty Heflin is a real estate developer, professor of finance and cross country coach. He comments on a wide variety of subjects from cross country running to REIT stock valuations.
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