As we watch the stock market decline on worries about the economic crisis in Greece spreading to other European countries such as Spain, Portugal, Ireland and Italy and the resultant increase in the “fear index,” the question we all have to be asking ourselves is "How does this affect me, my business and commercial real estate in general?" The simple answer is that the effect can be positive if we look at Europe’s problems as an opportunity for us in the United States to be a “safe harbor” for international business and capital. Consider the following U.S. data:
- In the past quarter, productivity increased a healthy 3.6%. It is up 6.3% over the past four quarters, the fastest growth in 48 years and three times the historical average annual productivity growth.
- First time unemployment applications fell by 7,000 last week, the third straight weekly decline.
- The Dollar Index is the highest since April 2009.
- The interest on 30 year bonds fell the most in 14 months to 4.19% (this is the money we pay to finance our national debt).
- Crude oil declined by $3.88 per barrel today, continuing its descent, which means fuel will be less expensive in the near future.
- Interest rates for home mortgages fell to 5.07% from 5.25% one month ago.
- Nike plans to increase its sales by 40% to $27 billion in five years.
After hours, Activision reported a first quarter increase in net income to $381 versus $189 million one year ago, with gross revenue increasing by 33% — well ahead of predictions. So did Hanover Insurance outperform with their net income rising to $41.8 versus $25.8 billion. Kraft’s sales increased 26% to $11.32 billion with net income increasing to $1.88 billion from $660 million one year ago. RealNetworks reported a profit of $3.2 million versus a loss of $12.1 million a year ago, although sales fell by 9%. Las Vegas Sands reported revenue of $1.33 versus $1.08 billion and trimmed its loss to $.04 from $.12 per share in the quarter while Macau gambling revenues are up 70% (unfortunately, MGM Grand didn’t share in the good news due to the continuing financial drain from its City Center project in Las Vegas).
Whether the market is in a correction or we’ll see it jump up once again as the violence in Greece abates and (hopefully) Jean-Claude Trichet, the head of the European Central Bank, is able to adequately reassure the international financial community of the Bank’s commitment to European economic stability, the harsh reality is that capital is going to flow to safe harbors (which means the United States) and considering the volatility of the stock market in recent history, what better investment is there than in commercial real estate (especially as it’s a leveraged investment)? What better consumer is there than here in America? Where is it safer (think of riots in Greece, financial meltdown in Dubai or political uncertainty in England) to locate and/or expand a business than here?
From our perspective the bottom line is that activity continues to increase in all of our offices in all of the markets we serve. We’re seeing an increase in gross commissions received and there’s less competition on the street (brokers and brokerages) to compete with NAI Capital and its brokers. If now is not our time, then when will it be our time? Each of us needs to discard the negativity of the past two years and ignore the pundits and economists who often (if not most of the time) seem to get it wrong. Let's shake off bad news, like today’s stock market decline, and recognize the simple fact that the United States is emerging from the worst recession in any of our collective memories. We must reenergize and refocus our efforts, and look towards a very productive and financially rewarding 2010, and, as they say, “It’ll be heaven in 2011.”
Sincerely,
Mike Zugsmith
Chairman
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