Deconstructing the U.S. Economy: The Non-Recovery

By: Eric Sprott

We are now in the 5th year since the “official” end of the Great Recession (the National Bureau of Economic Research (NBER), which officially dates U.S. recessions, said the recession ended in the second quarter of 2009), but it hardly feels like a recovery. Nonetheless, the media, sell-side economists, central bankers, the IMF, etc. all claim that the U.S. economy is now firmly out of the woods.

President Barack Obama said in his State of the Union speech that he believes 2014 “can be a breakthrough year” for the U.S. economy and the IMF, which raised its forecast for U.S. GDP growth in a report titled “Is the Tide Rising?”, now predicts growth of 2.8% in 2014.1

However, a closer look at the data suggests that things are not improving and that the U.S. economy remains frail. Many point to the unemployment rate as a sign that things are getting better. Indeed, it has been declining steadily for many years and now stands at 6.7%. However, what many seem to forget is that the unemployment rate is declining for the wrong reasons.

Yes, the U.S. has been adding new jobs, but a large share of the decline in the unemployment rate can be explained by discouraged workers leaving the labour force.2 This effect can be seen in the falling participation rate. Many argue that this decline in the participation rate is structural and is caused by population aging. This explanation is superficial and misleading.

Figure 1, shows the contribution to the total participation rate for various age groups. As shown in Figure 1, since January 2005, the participation rate has fallen by 2.9% (from 65.8% to 62.9%). Of this decrease, 1.3% and 4.7% were driven by the 16-24 and 25-54 age groups, respectively. The rest was offset by a 3.1% increase in participation by the 55+ cohort.

FIGURE 1: CONTRIBUTION TO U.S. PARTICIPATION RATE (%)
maag-03-2014-T1.gif
Note: Sum of individual components adds up to total participation rate.
Source: Bloomberg, Sprott Calculations

This is reflective of a deep problem, as it suggests that baby boomers are failing to make ends meet and have to work for longer or even come out of retirement, and that the future workforce, those in their prime working years, are leaving the labour force.

Interestingly, without the “3% contribution” from the 55+ cohort, the labour force would have fallen below 60% for the first time since 1971, a period when the participation rate was starting to expand, driven mainly by women entering the workforce.

But that’s not all; many of those in their early 20s, seeing how hard it is to find a job, are staying in college for longer, amassing outrageous levels of student debt in the process. This is obviously not a sustainable solution. Delinquency rates on student loans (the bulk of them insured by the U.S. Government) are now at all-time highs (Figure 2). Most of these student loans have been securitized and sold to investors with the Government’s stamp (sound familiar?).

FIGURE 2: STUDENT LOANS % 90+ DAYS DELINQUENT
maag-03-2014-C1.gif
Source: Bloomberg, Sprott Calculations

For all the rest (ages 25-54), the participation in the labour force has also been declining, although at a slightly slower pace. Nevertheless, the average U.S. consumer is still worse off than it was before the Great Recession. Real disposable income per capita (Figure 3) is lower than it was at the end of 2005 while, over the same period, health care costs have increased from 10.0% to 11.5% of GDP (Figure 4), thereby reducing funds available for discretionary spending.

FIGURE 3: REAL DISPOSABLE INCOME PER CAPITA
INDEX 2005 Q4 = 100
maag-03-2014-C2.gif
Source: Bloomberg, Sprott Calculations

FIGURE 4: HEALTH CARE SPENDING AS A % OF GDP
maag-03-2014-C3.gif
Source: Bloomberg, Sprott Calculations
Not surprisingly, lower disposable income and discretionary spending levels for the average American are reflected in declining retail sales growth (Figure 5 shows the year-over-year growth rate in retail and food services sales).

FIGURE 5: RETAIL AND FOOD SERVICES SALES
YEAR-OVER-YEAR GROWTH
maag-03-2014-C4.gif
Source: Bloomberg, Sprott Calculations

Moreover, since the summer of 2013, when the Federal Reserve lost control of the bond market (see our article “Have we lost control yet?”, June 2013)3, we have seen a clear deterioration in demand for credit dependent purchases. Since these purchases are mostly made on credit (mortgages, car loans), increases in interest rates have made them unaffordable to many customers. Thus, because of the large and sudden increase in interest rates, housing sales have slowed significantly, as can be seen in Figure 6. Similarly, car sales growth has been on a declining trend since it peaked in mid-2012 (Figure 7).

FIGURE 6: U.S. HOME SALES
YEAR-OVER-YEAR GROWTH
maag-03-2014-C5.gif
Source: Bloomberg, Sprott Calculations

FIGURE 7: US AUTO SALES
YEAR-OVER-YEAR GROWTH
maag-03-2014-C6.gif
Source: Bloomberg, Sprott Calculations

On the supply side, things do not look rosy either. The U.S. composite PMI has been more or less flat for the past 3 years (Figure 8) and has suffered a sharp decline since its August 2013 “peak”. Other indicators, such as the durable goods new orders have been growing at a declining pace (Figure 9).

FIGURE 8: ECONOMY WEIGHTED MANUFACTURING & NON-MANUFACTURING COMPOSITE PMI
maag-03-2014-C7.gif
Source: Bloomberg, Sprott Calculations

FIGURE 9: US DURABLE GOODS NEW ORDERS
YEAR-OVER-YEAR GROWTH
maag-03-2014-C8.gif
Source: Bloomberg, Sprott Calculations

To conclude, numerous indicators of the state of the U.S. economy point to a non-recovery:

  • The participation rate is low and supported by baby boomers working more or coming out of retirement.
  • Students (the future labour force) are defaulting on their loans in record amounts.
  • Disposable income is still below its pre-recession level.
  • An ever increasing share of disposable income is being spent on health care, crippling discretionary spending.
  • Higher interest rates are further depressing discretionary spending (home and auto sales).
  • All of which is resulting in anemic business and economic activity.

Claims that the U.S. economy is suddenly rebounding have been made before. They are misleading at best and fallacious at worst. It would not be surprising to see further deterioration, which would force central planners to initiate additional unconventional intervention (i.e. Quantitative Easing).

Post-scriptum:
Wow! In a recent Bloomberg article, Andrew Gracie, an executive director at the Bank of England (BoE), was proposing that in the event of a bank failure, regulators could suspend derivatives contracts affecting the failed bank on a global basis.4 He further argues that “The entry of a bank into resolution should not in itself be an event of default”. In other words, the solution proposed by the BoE to deal with a bank that fails and that has entered in a mountain of derivatives contracts is to suspend the market.

But this misses the point. As usual, regulators try to patch things up instead of proposing true solutions. What they are effectively proposing is to suspend reality, yet again, and pretend that there are no problems. This is even worse than suspending mark-to-market! How ironic that the same regulators who allowed this to happen are the ones who ask the market to suspend reality.

1 http://www.imf.org/external/pubs/ft/weo/2014/update/01/
2 See the January 2013 Markets at a Glance,“Ignoring the Obvious”: http://www.sprott.com/markets-at-a-glance/ignoring-the-obvious/
3 http://www.sprott.com/markets-at-a-glance/have-we-lost-control-yet/
4 http://www.bloomberg.com/news/2014-03-04/boe-seeks-derivatives-pact-to-prevent-a-repeat-of-lehman-cascade.html

Keeping the Housing Bubble Inflated

It should be abundantly clear and obvious that thegovernment and Wall Street want nothing more than to keep home prices inflated and are sticking out a giant middle finger to the majority of Americans.

You might have missed the glorious news that our stunningly cunning Senate decided to reinstate the heightened loan limits for Fannie Mae, Freddie Mac, and the FHA (aka the entire stinking mortgage market).  Of course the lobbying arms of the housing industry went gaga for this policy even though it keeps prices further inflated in bubble states like California and New York.  Good job politicians, I’m sure the checks from the FIRE industry will come in just in time for the 2012 election!

Since our politicians care so deeply about working Americans, they are also examining a push at giving residential visas to foreigners looking to buy at least $500,000 in real estate.  Forget about the fact that the median home in the U.S. costs more like $170,000 to $180,000.  Then we have the Federal Reserve artificially keeping mortgage rates at historic lows and you hit the trifecta of housing welfare for expensive bubble ridden states while the overall economy falters.

Continue reading “Keeping the Housing Bubble Inflated”

The Worst Housing Crash Since the Great Depression

This is reposted from an article at DoctorHousingBubble.com.

The worst housing crash since the Great Depression just got worse. What happens when home values pop in other bubble metro areas? New home sales fall 82 percent from peak versus 80 percent during the Great Depression

This is likely to be the first ever global economic disaster caused by real estate sponsored by big banks.  During the Great Depression real estate values collapsed as the economy contracted and millions lost their jobs.  That is the typical pattern of real estate bubbles bursting.  Something in the economy creates a vision of a new paradigm and money starts flowing into real estate as a consequence of this euphoria.  This happened inJapan as their economy and stock market frothed over with mania.  There is no time in history that the entire world from the U.S. to Canada to Australia to Spain to China suddenly went into a massive trance and believed that real estate suddenly would carry the weight of every single economy forward.  Of course what we are seeing is the unraveling of this system.  The bubble has burst.  Yet the banking system that relied on real estate as their game of choice in the casino cannot come to terms with reality because it would render them insolvent (which they are by the way).  So instead, the charade continues yet the public is catching on to this mass deception.  What happens when the worst housing crash since the Great Depression gets worse?

Deepest fall in new home sales ever

new home sales

There is little demand for new home sales because the public with weak incomes and an economy that is still struggling has little appetite for overpriced homes.  Even if the appetite were there, the incomes are certainly not.  The juice that kept the game going was debt.  As we have seen with the debt ceiling bread and circus we might be reaching a limit in regards to what we can take on without adding on subsequent real growth.  I know when the contraction started occurring some could not envision the correction lasting longer than a year or two.  People have been conditioned to quick changes and have a hard time realizing that the housing market of the 2000s was a historical mania.  That is it.  It is done for a generation just like Tulip mania or any other mass delusion.  The fact that home prices are now inching closer to early 2000 price levels simply does not jive with the religion many believe.  During the Great Depression, new home sales fell 80 percent from peak to trough.  In this crisis we have fallen 82 percent.

The chart above is rather startling but makes sense given that we have 6 million homes lingering in theshadow inventory.  The way banks are leaking out inventory we are bound to have a lost decade (or two) in our books.  Unless something radically changes the policy is to bleed the productive economy for the ill-gotten gains of the big bankers running this country.  This is why after trillions of dollars funneled to the banking sector little has been done in terms of boosting incomes or home prices.  Where do you think the money went?  It certainly didn’t go to adding jobs:

civilian population employment ratio

This is a troubling chart.  The civilian employment-population ratio is a better measure of employment success in our economy.  We are now back to early 1980s levels.  What is more troubling is the jump from the early 1950s on had to two with the rise of two income households.  The two main driving forces for this reversal are a poor economy and demographics.  How can people look at these trends and think things will reverse?  Even if things do change the demographic change is built into the system.  Some point to wealthy immigrants as the catalyst for rising home prices but we are unable at the moment to provide quality jobs to the masses of the unemployed.  Unless we find an age reversing pill this trend is sticking around for years.  There are limits in life even though Hollywood and Wall Street would like to convince people otherwise.

Bubble still going on in many U.S. areas

The general collapse in home values has left many believing that the housing market has reached a trough simply by default.  That may be the case in many states where home values never really had excessive bubbles yet many highly populated metro areas are still in significant bubbles.  When these bubbles burst financial losses will be large yet again and you can expect the financial system to dig deep into the pockets of struggling Americans.  What happens when these places pop as they will?  Let us look at some of those overpriced regions:

most overpriced metro cities in united states

Source:  Fiserv

This data is current and you can see even after major price corrections these areas are overvalued.  On both coasts, these bubbles still rage but California is still the leader in bubble metro areas.  Folks are delusional thinking this is sustainable.  These bubbles will pop.  It can happen quickly or drag out for years.  The above ratios are flat out unsustainable.  Just take a look at the median home price to median income ratio.  This will pop.  In addition, many of these areas have high unemployment rates.  Take a look at San Diego that nearly has a double-digit unemployment rate for the county.

What is important to also note is that these prices have already fallen by 10, 20, and even 30 percent in many cases from their peak.  They are still inflated.  The shadow inventory in these markets is dramatic.  At a certain point reality will need to be faced and when that day comes, you will see prices moving lower.  That is the only way out or we can grow household incomes and double it in the next few years but do you see that happening?  I would love to see evidence that our financial system would reward productive behavior instead of putting all the money into the hands of the banking system that largely operates like a vampire on the productive side of the economy.  We do need banks, but investment banks should be spun off and allowed to make their own non-systemic destabilizing bets.  At the moment the financial system is simply looking for ways to pilfer funds from the majority of Americans.  If they could find a method to profit from slamming Americans lower they would do it.  Many a hedge fund made billions by gambling and speculating on the failure of American homeowners.

So what happens next?  It is an interesting side note that during the typically hot summer selling season with mortgage rates at all-time lows that home sales are weak.  Why?  At a certain point it boils down to income.  Many that have their brains cleansed by the 1984 media machine think that just because many people have luxury cars or dress a certain way they are wealthy.  They are not. The data does not back up this phony studio set and many are starting to realize that the financial Wizard of Oz is more smoke and mirrors than anything real or tangible.  Certainly there is tremendous wealth in the country but not enough to support entire metro areas with inflated prices.  Just because the mainstream press isn’t reporting this next bubble bursting doesn’t mean it won’t happen.  Heck, they didn’t start talking about the most obvious housing bubble in generations until it blew up in their face.

Severity of Commercial Real Estate Impairment of Banks Is Decreasing

While commercial real estate continues to burden the nation’s 7,584 insured banks and thrifts, the severity of the CRE-related impairment is gradually decreasing. Most of the recuperation is stemming from write-downs and attrition in construction and development loans, the dearth of new lending and from improvement in the multifamily sector.
Busted Bank
As deteriorating conditions lessen, the amount of capital that banks have available to loan should increase. Banks are already setting aside fewer dollars to deal with the losses, according to the FDIC. New provisions for loan losses fell to $20.7 billion in the first quarter from $51.6 billion a year earlier. This marks the sixth quarter in a row that loss provisions have had a year-over-year decline. It is the smallest quarterly loss provision for the industry since third quarter 2007.

“Certainly this has been aided significantly through the continued low interest rates engineered by the Federal Reserve,” noted CoStar Group Senior Real Estate Strategist Christopher N. Macke. “If the termination of QE II or some other factor leads to rising interest rates, banks will have to rely on strengthening property fundamentals to offset the rising rates – commercial real estate’s version of “The Amazing Race.”

The total amount of CRE loans outstanding fell by $32.3 billion (2%) during the first quarter. At the end of March, insured institutions reported holding $1.58 trillion in CRE-related loans, down from $1.61 trillion at the end of 2010.

The total amount of construction and development loans on bank books fell by $25.9 billion (8%) to $295.6 billion.

The total amount of nonresidential loans (including owner-occupied buildings) on bank books fell by $6 billion (less than 1%) to $1.07 trillion.

However, the total amount of multifamily loans on bank books was flat falling by just $300 million to $214.5 billion.

The total amount of distressed CRE assets (delinquent loans, foreclosed assets and restructured loans) at banks stood at $170.9 billion, just 1.3% of all outstanding bank assets.

Total delinquent CRE loan balances (loans 30 days or more past due or in nonaccrual status) fell by $3.5 billion (2.8%) during the first quarter. At the end of March, banks and thrifts reported $121.6 billion in delinquent CRE-related loans, down from $125.1 billion at the end of 2010.

Delinquent construction and development loans fell by $4 billion (6.9%) to $53.8 billion.

Delinquent multifamily loans fell by $400 million (3.8%) to $10 billion.

However, delinquent nonresidential loans grew by $900 million (a 1.6% increase) to $57.8 billion.

The balances of foreclosed assets continued to grow at the nation’s banks from $30.9 billion at the end of the year to $31.2 billion as of March 31. All of that increase was in nonresidential properties, which grew by $500 million to $10.7 billion.

The amount of foreclosed construction and development projects fell about $100 million to $18 billion; and foreclosed multifamily properties also fell by about $100 million to $2.5 billion.

The total amount of restructured CRE loans at the end of the first quarter stood at $34.9 billion, (the amounts are not available for previous quarters). Of those restructured loans, $16.7 billion (48%) were again delinquent or in nonaccrual status.

The number of insured commercial banks and savings institutions reporting financial results in the first quarter declined from 7,658 to 7,574 in the first quarter. One new reporting institution was added during the quarter, while 56 institutions were absorbed through mergers and 26 institutions failed.

From the big picture of gradual recuperation in CRE bank assets, we’ve pulled together some of the highlights from the individual bank numbers.

  • The number of institutions on the FDIC’s “Problem List” increased from 884 to 888 during the quarter. Assets of “problem” institutions increased from $390 billion to $397 billion.
  • Of the 7,584 insured banks in the country as of March 31, distressed CRE assets made up 1% or less of total assets at 4,298 banks.
  • 566 banks out of the total of 7,584 (7.4%) hold more than 80% of the distressed commercial real estate on bank books. The 10 largest banks in the country hold $49.4 billion in delinquent, foreclosed or restructured assets (29%).
  • Wells Fargo Bank holds $2.24 billion of commercial real estate properties on which it has foreclosed, including $1.14 billion in construction and development properties and $868 million in nonresidential properties. Citibank holds the largest amount of foreclosed multifamily properties at $710 million. While high in dollar amounts, the total amount of CRE distress at these two banks is 1% or less of their total assets.
  • Distressed CRE assets make up more than one-third of total assets at five banks: Builders Bank, Chicago, IL; First Choice Community Bank, Dallas, GA; High Trust Bank, Stockbridge, GA; Security Exchange Bank, Marietta, GA; and Cortez Community Bank, Brooksville, FL.

The Recovery Will Be Bifurcated

Big Lenders and Big Borrowers Will Be the First in Line as Credit Returns to the Economy
By Mark Heschmeyer

These are the best of times for cash-rich borrowers and lenders, but they continue to be tough times for less well-funded borrowers and lenders. Just as the investment markets are bifurcated with top-notch properties in top-tier cities commanding escalating prices and lower tier properties and cities still fighting uphill climbs, so too does it appear that the capital markets are split between the haves and have-nots.

“There seems to be a dam that is keeping the flood of capital provided by the Federal Reserve from flowing to smaller real estate borrowers and properties,” said Chris Macke, senior real estate strategist for CoStar Group. “Expanding the recovery in commercial real estate hinges on breaking this dam.”

The split between cash-rich businesses and those in need of capital has set the stage for a bifurcated economy, with growing challenges for small- and medium-sized companies.

“Depending on where you stand, the debt maturity crunch ahead could either look like a crack in the pavement or the entrance to the Grand Canyon,” Deloitte LLP reported in a new paper this week entitled: A Tale of Two Capital Markets.

In it, lead researcher Dr. Ajit Kambil, research director, CFO Program, Deloitte United States, reported that cash is also unevenly distributed across industries, not just among companies within a particular sector. Unless the financial services industry lends or invests its cash in varied industries, companies outside of financial services could face potentially severe credit constraints.

Deloitte said the convergence of growing demand for debt with supply constraints has created a new normal in the capital markets. A more accurate descriptor would be two new normals – reflecting dramatic differences between cash-rich and cash-challenged companies. Competition for capital will most likely favor investment grade companies over non-investment grade companies as both seek to refinance debt obligations.

What is true across industries is also true within the commercial real estate industry, according to CoStar Group. Last September, CoStar’s Property & Portfolio Research (PPR) subsidiary “delved into how larger banks are much better positioned than smaller banks to “earn their way out” of the current cycle,” said Mark Fitzgerald, a CoStar debt strategist. “And as they recover, with life insurers in better shape as well, this contributes to the bifurcated market, as both of these sources of capital tend to lend on larger, coastal assets, whereas small banks are in worse shape, and this will hurt the recovery in secondary and tertiary markets.”

Since the downturn began, earnings for larger banks, while far from strong, have outperformed their smaller counterparts, CoStar reported. Perhaps the most important reason why this is so is the portfolio composition for larger institutions. The 20 largest banks hold 61% of all bank assets but are underexposed to commercial real estate loans. The bigger banks also have been more aggressive in taking write-downs.

CoStar’s Fitzgerald projected that large banks will “earn their way out” of the Recession in about two years, while regional and community banks could take two to four times as long.

As the economic recovery develops, CoStar Group projects that it will bring mixed blessings to CRE investors.

On the one hand, economic recovery enables banks to earn their way out faster, achieve better execution on poorly underwritten or nonperforming loans, and therefore sell distressed CRE assets at a faster pace.

On the other hand, such economic recovery minimizes the attractiveness of the distressed asset opportunity, as pricing is firmer and disposition of assets is likely to be at a controlled pace.

Furthermore, the modest pace at which banks return to health will minimize the amount of “fuel” (leverage) available to propel a robust rebound in asset values.

With limited leverage, borrower liquidity now also matters. And in that regard, big firms hold the edge. The 9,000 largest companies hold $9 trillion in cash reserves and that level of liquidity makes them more fundable.

An analysis of non-investment grade debt and changing credit spreads finds smaller companies are especially vulnerable to increasing spreads and volatility in credit markets. Differences in cost or difficulties in access to capital can be a key source of competitive disadvantage.

Deloitte research said that most non-investment grade debt is generally concentrated among small companies with market capitalization of less than $5 billion while larger companies’ debt is almost completely investment grade. For the most part, smaller companies tend to have lower credit ratings and company size is a key variable in credit ratings.

Deloitte research found that prior to the recession, companies in the aggregate were accumulating cash in excess of what they needed to grow. This was fortunate as many companies entered the recent recession with unprecedented amounts of cash on their balance sheets – allowing them the flexibility to navigate the worst of the credit crisis.

These cash reserves are unevenly distributed and mainly reside in the financial services industry, with about $2 trillion of cash outside financial services. Unless this cash is deployed to refinance companies, there is a potential deficit in refinancing non-financial service industry debt.

Towery: Prepare for an Economic Meltdown

Prepare for an Economic Meltdown

By:  Matt Towery

In 2006, I examined a series of surveys we conducted nationwide and then predicted a collapse of the housing market. Plenty others followed with similar forecasts and postmortems over the following months and years. But my column was among the first.

I’ve made predictions about other slowdowns in the American economy. I’ve been mostly correct, although in 2010, I suggested that the stock market ultimately would plunge. Turned out that it climbed instead of descending. The fact is that it’s easier to predict the weather next month than to get an accurate read on the future of the stock market.

My timing was off in predicting a plummeting of the stock market, my but theory still stands. But the sobering news may extend beyond just that. A more immediate happening could be the sudden and silent rise in the cost of living for average Americans, thanks to continuing stagnant wages, plus unemployment that is higher than the official numbers. These numbers don’t take into account the many who have fallen off the unemployment rolls or have simply given up looking for work.

It’s true enough that some of those who predict oil prices may be overstating the severity and the extent of the unrest in the Middle East and North Africa. There is little question that the outcome of this broad geopolitical conflict probably won’t be decided for at least months.

Observers should recall that when the pro-American monarch in Iran was overthrown in 1979, most foreign policy experts in the Jimmy Carter White House believed that university students, bureaucrats and the educated classes in Iran would form a loose coalition that would transform that country into some kind of democracy. Then the Islamist Ayatollah Khomeini entered the stage. Within a year, Americans had been taken hostage in the U.S. embassy in Iran.

Although jobless claims were down this week and some other economic indicators now look a bit better than they have, we now face the possibility of inflation spiking, and of a lack of quality jobs being created.

Until we see corporations and especially small businesses enjoying sustained expansions, we’re going to keep chasing our tails in an ongoing circle of weak and weaker economic growth.

Now for a truly troublesome economic cocktail, throw in the instability in the Arab world. We can’t know yet who will be in control of some of the region’s immense oil reserves a year from now. The existence alone of this political instability may keep both the oil and stock markets in flux.

But the biggest economic moment of truth will be stateside. Corporations have squeezed their employees, their vendors and every other possible resource, all just to keep upping their profits year after year.

But all the blood already has been squeezed out of this ever-hardening rock. We are now seeing indications that, except for military outlays, capital expenditures are still lagging.

The big banks that enjoyed public bailouts are now recovering, but they are still hoarding too much cash. The result is a cutoff of capital flow. At some point, there will be an end to the benefits corporations have enjoyed from their rounds of cost-savings.

What this likely means is that in 2012, unemployment likely will stay above 8 percent. And that number won’t include all those who have given up looking for a job. Some economic demographic groups may see overall job gains, especially the college-educated and women.

But even as they and maybe some others start to climb out of the misery of the past few years, corporations probably won’t be able to keep pulling the white rabbits of continuing profits gains out of their hats. Profits will level off as quarters are compared to quarters a year previous. Fear and reflexive stinginess will again grip corporations and banks, and they will keep on with their boycotts of expansion. That could kick the economy back into another tailspin.

What to do? We could start by not taxing at high rates those who create jobs. The best temporary solution would be to eliminate capital gains taxes, or at least cut them drastically. That would free up capital and thus motivate corporations to use the new capital to expand their businesses and employ more people. Perhaps the only companies to get this tax break should be those that use the savings to expand.

Just a thought.

Matt Towery is author of the new book, “Paranoid Nation: The Real Story of the 2008 Fight for the Presidency.” He heads the polling and political information firm InsiderAdvantage. 

Commercial Property Market Coming Back?

There seems to be some indication that the long-awaited commercial property market crash may not happen. US Banks are reporting that 90 day delinquencies are leveling and that more liquidity is coming into the market enabling delinquent loans to be refinanced. Rankin Commercial Properties indicates that institutional investors are coming back into the CRE market once again.

Mark Heschmeyer, writing in the CoStar Advisor, in an article titled, “US Banks Report CRE Loan Troubles Subsiding Amid Strong Quarterly Earnings” reports that: Continue reading “Commercial Property Market Coming Back?”