The extraordinary lack of political leadership everywhere in the western world is not only appalling, but it is the reason we have a deteriorating economy throughout the world. Obama is clueless and more concerned with himself than the country, and Merkel dithers. The basic structure of the Eurozone is inherently impossible to manage in a crisis such as now presents itself. Cameron has struck his own course outside of the Eurozone and so is really not part of the crisis in Europe. He seems to be doing many of the right things fiscally to get the UK back on track and to keep the British pound and the British banking system on a sound basis now that their near collapse is being rectified. There is no hope that leadership will suddenly appear and so we are very likely to continue to bounce from crisis to crisis, and the economies of major countries will bumble along for quite awhile. It is highly likely that Greece will depart the Euro as it should. When and how is the only issue. They need to be spun out and devalue or this will just go on. Greek bonds are never going to be kept out of default even if it is made to look like it with a swap of new notes for old which is effectively a default. The sooner they restructure the Euro and separate out the weak countries the better. Having this go on month after month is only going to cause investment to be on hold and consumer spending to contract or stall. They have already clearly stated that the governments will support the banks so there will not be a replay of 2008. This is not Lehman II. Everyone knows this is coming and is preparing for it. It will almost be anti climatic when it happens.

Various economists project that the new Obama plan will raise GDP 1.5% -2%. Hopefully that is true. However it solves little in terms of the real issues of the deficit and long term growth. If he had coupled that with an expert, non political committee to devise a complete reform of taxes, dismissed the Boeing case, stopped Dodd Frank so there can be a review of some of the unworkable provisions like the ones related to CMBS, stopped the EPA from issuing any more regs until a complete independent cost benefit can be done, stopped the banking regulators from going after banks for not making new mortgages in low income areas, come with a new plan to have the private sector take over the foreclosed homes in some new form of PIPP or similar program, stop the attacks on the banks, and ease up on criteria for issuing new mortgages and especially refinancing. It is those longer term macro issues which can really turn around the economy. It will never happen, but if it did the economy would boom.

For real estate we will now mostly muddle through. With continued slow economic growth, reluctant and volatile debt markets, and slowed consumer spending, no political leadership until we get a new president, and continued crises in Europe, it is unlikely we will see robust activity. However for those who know how to underwrite, and who can access deals, it is a very good opportunity to find very good long term acquisitions. This will likely continue to be the case for at least another two years as many current owners feel increased pressure. Balance sheet lenders are active now and there is funding available for good deals and strong sponsors. For those able to take advantage of this next two years and who are longer term holders, this will be a great opportunity to make substantial capital gains over the next five years. It will take caution in selecting investments, good fundamental underwriting, assumptions based on the downside protection, and moderate leverage. The key will be focus on fundamentals and patience. You will not be able to steal an asset, but times will improve over the next five years and then, if you did your underwriting well now, you will be well rewarded.