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3 Likely Outcomes of a Trump Administration on Commercial Real Estate

November 24th, 2016|

The Comfort of Opinion

John F. Kennedy once said, “Too often we enjoy the comfort of opinion without the discomfort of thought.”  This quote rings true when you look at all the opinions circulating on the internet about a Trump Administration.  Opinions range from euphoric to apocalyptic depending on whose political views you like to read.  This article will not change your opinion one way or the other about Donald Trump.  It’s not meant to.  This article discusses the impact a Trump Administration will have on commercial real estate.  Before I take a stab at that topic, let’s look at Trump’s economic thinking.

A Shift in Economic Thinking

Assuming Donald Trump governs like he campaigned, his economic ideology will be a major sea change in thinking for the Republican Party.  It will no longer be the party of Ronald Reagan.  Instead it will be characterized by:

  • Decreasing globalization and free trade. NAFTA (the North American Free Trade Agreement) will be renegotiated.  Participation in the TPP (the Trans-Pacific Partnership) will be withdrawn.
  • Fiscal policies that have the potential to greatly stimulate the economy but also have the potential for huge budget deficits.
  • The promotion of policies stimulating traditional domestic manufacturing above other sectors of the economy.

For the first time in our nation’s history we will have a real estate developer as president.  It stands to reason that his proposed policies should be very good for commercial real estate.

Trump Team Needs Capable Negotiators

As of this writing, President-Elect Trump has yet to name his economic team.  No one knows how much of his economic agenda he’ll be able to enact.  Because of Senate rules, Democrats still have considerable influence.  Consequently, how much legislation gets passed will require cooperating with the Democrats.  He’s president, not king.  So he cannot just decree that his policies be put into law.  To succeed Trump will need to have people on his economic team that are capable legislators.  They need to know how to negotiate well with the other side.  If not, very little will get through the Senate.  Let’s assume he is successful in getting his policies enacted.  Shown below are three likely outcomes that will affect commercial real estate: (more…)

A Bubble in Search of a Pin – The Unintended Consequences of Low Interest Rates

October 25th, 2016|

World’s Central Banks Lowered Interest Rates

In response to the Great Recession of 2008, The Federal Reserve and other central banks of the world artificially lowered interest rates. Their thinking was that lower interest rates would spur economic growth.

So the Fed has left rates near zero for about eight years.  The Japanese and European central banks have gone even further by introducing negative interest rates as a means of stimulating their respective economies.  So how have they done?  Have they successfully promoted economic growth?  Unfortunately no.  After eight years of ultra-low interest rates the world economy is teetering on recession.

But the Fed believes its policies have worked, that without their strong intervention the Great Recession would have been far worse.  Other respected economists believe otherwise.  They believe The Federal Reserve policies of interest rate repression and quantitative easing have thwarted the normal recovery process.  I generally agree with their opinion but that’s not the point of this article.

Regardless of who’s right and who’s wrong there are several unintended consequences.  So let me first begin by identifying the winners and losers resulting from the decisions made by the world’s central banks.  And then let’s look at potentially the most egregious unintended consequence of low interest rates which is still looming on the horizon. (more…)

  • treasury rates question mark

Why U.S. Treasury Rates Will Continue to Decline

June 24th, 2016|

Over the past couple of years I have gone out on a limb and stated unequivocally that U.S treasury rates will not rise any time soon.  While all the pundits keep predicting that The Federal Reserve Chair Janet Yellin will raise the federal funds rate, I’ve consistently said whatever action she takes is relatively unimportant to five and ten year treasury rates.

Past Comments

Shown below are a few examples of what I’ve said: (more…)

  • treasury rates question mark

How Will The Currency Wars Affect Interest Rates This Year?

March 21st, 2015|

As a commercial mortgage broker I’m often asked my opinion about interest rates. “What do you see them doing over the next year,” they ask? For the sake of full disclosure, my track record for accurately predicting what interest rates will do six months to a year out is dismal. (more…)

The Five Most Interesting Articles I Read this Month

January 26th, 2015|

Hey, it’s me again. By now most of you know that I like to read. It’s my passion.

As you know there are lots of good quality commentary and insightful articles that are overlooked by most of us. But unfortunately for every good blog post or news article there are many, many more that are not. (more…)

My Crystal Ball Forecast for 2015 – 7 Predictions

January 10th, 2015|

I’ve always believed it’s better to have an opinion and later be found wrong than to be a person who has no convictions, or courage to state one’s opinion, and be safe from the criticism that naturally follows from missing the mark. As the saying goes, “Fools rush in where angels fear to tread” applies to me. (more…)

The Five Most Interesting Articles I Read in the Month of July

July 28th, 2014|

Last month I began a new monthly blog post titled, The 5 Most Interesting Articles I Read in the Month of June. I was pleasantly surprised to see how many of you trusted me to find you good articles to read. So I’ve decided it will become a regular end of the month blog post at Marshall Commercial Funding. (more…)

John Mitchell’s Forecast – Will The Fed Take Away the Punch Bowl in 2014?

November 4th, 2013|

A former Federal Reserve Chairman once described The Fed’s role as “taking away the punch bowl when the party gets going.” By that he meant that The Federal Reserve needed to know when to stop stimulating the economy with its monetary policy so as to avoid creating inflation or asset bubbles. It’s an easy concept to understand, but very hard, if not impossible to do.

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Four Factors That Will Affect CRE in the Next 12 Months

July 12th, 2013|

While it’s routine to make predictions at the beginning of the year, it’s not so common to do so when the year is half over but I feel compelled to do so. There are a number of factors that have been set in place over the past several months that will start having an impact on commercial real estate. Let’s go through four of them:

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Quantitative Easing: End of an Era, Or is It?

July 1st, 2013|

A couple of weeks ago Fed Chairman Ben Bernanke hinted that the Fed’s bond buying program known as quantitative easing would begin tapering down in 2013 and, assuming that the economic indicators were still positive, that the program would come to an end in 2014. We all know what happened next: the stock market plunged, precious metals prices were crushed, other commodities, such as oil and gas prices tanked and bond yields soared as the 10-year treasury notes increased by 50 basis points in the space of a week. This all occurred because Bernanke obliquely suggested a possible change in this Fed program. (more…)