Barney Frank, Obama, and Harry Reid love to blast all of us capital markets people and successful business people, as bad fat cats, and the cause of all the crisis. Yet here we are watching disgraceful political theater go on and on causing real damage to the economy. Empty threats from Geithner, as a series of, the world will end dates which keep moving, and the usual rhetoric from Nancy and Obama about how all the seniors, children, and working Americans (I guess the rest of us either don’t really work or are not American), will suffer while we get away with not paying our “fair share” of taxes. I presume you know that 47% of America pays no income tax and the top 10% of us pay most of the taxes. There is zero possibility the government will not pay interest on maturing notes, and they will roll them. I hate the references to “those who are more fortunate”. I am not more fortunate and neither are most of you. I started with minus nothing and I worked my butt off all my career to earn everything I have. Nobody gave me a penny. I paid my taxes. I presume that is the case for most of you. Just as Las Vegas has been decimated by Obama bashing, now it is our turn to get bashed and trashed because we worked harder and sacrificed more to get where we are, and we lived responsibly.
Obama claims he is the one cutting deficits, but his cuts do not make a real dent once interest rates rise. Nancy says no to any entitlement reform, yet everyone, including her, knows there is no way the country can survive with entitlements rising the way they are. But when we complain that the Dodd Frank rules cut out all the profit of CMBS by requiring the holdback of all of the profits, we are bad people. When Boeing builds a billion dollar factory in order to create jobs and build their business, the NLRB says shut it down and abandon it, and they wonder why jobs go overseas. Now that card check has failed in Congress, they use the NLRB to change the rules so the vote is in ten days instead of 30, and it is by majority voting, not the majority of the workers. And they wonder why jobs go overseas. The EPA institutes new rules for car mileage that make cars much too expensive for the average buyer, but then they wonder why auto sales will be low and unemployment increased. They just assume people will buy these expensive cars.
Everyone tells the White House and Congress it is all the new the regulations, and the uncertainty, unknown rules to come out of Dodd Frank, unknown consequences from Obamacare, and high corporate taxes that is the biggest issue, but then they claim they are cutting “unnecessary regulations”. On CNBC this week Barney claimed he was really in favor of more control over Fannie, yet it was he who covered the accounting cooking of the books and refused to allow much tougher regulation. Then we get Ron Paul and Michelle Bachman and their band of crazy’s suggesting it is just fine if the government defaults.
In the end they will do something, the nation will survive, but not nearly as well as it could have. Other than Daly, there is nobody in the administration or leading the Senate who ever had to meet a payroll, make risk decisions on investments, and work 14 hour days. They simply don’t understand. It is early to tell yet, but I believe Rick Perry has a real shot to be the next president. I am not supporting him since I don’t know enough about him yet, but just look at the field and the economy, and it seems a fairly obvious conclusion by process of elimination.
Bottom line for all of us. It will be a long slow recovery, jobs will be slow to return, home prices will stay low for a long time, retail sales will grow slowly, banks will continue to struggle to find revenue growth, lending will be tough, real estate values will likely not move a lot higher in the short run in the middle of the country, achieving high returns (over 20%) for PE firms will be hard, and will mostly mean going out on the risk curve. Europe will do something with bailing wire and bubble gum that will avoid the real issues with the Euro, but like the US, the politicians will duck solving the real problems. Greece will survive for awhile until it can’t make believe any longer, and in time there will be a true disconnect from the Euro and a devaluation.
The world will go on despite politicians, we will all find ways to do deals and make money, but now we have more headwinds and we need to be smarter, more careful, and leverage more carefully. Buy good real estate and collect cash flow, and in time values will continue to rise and maybe they won’t kill the deduct for mortgage interest on commercial buildings, but don’t count on that. If they take it away from houses, you can write the political rhetoric about the fat cats getting a break on the interest deduction when the poor working American lost his home interest deduction, and now may actually have to contribute to the general welfare of the country by paying a little tax.
2012 is going to really be interesting.
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