Our friend Ben is looking after us. Not only did he take a pass on taper, but now Dudley has suggested that it may be November or even later before taper begins. You can pretty well take that to the bank given his role at the Fed. The more there is a continuation of Cruz playing stupid games for his own benefit, and the more Obama refuses to act like a adult president and says he will not even discuss any compromises, the longer it is likely that taper is on hold. It is pretty certain there will be a continuing resolution to drag out the playtime of all these children in the sandbox, which will just force the Fed to continue to keep the economy and the capital markets from crashing. Cruz will be crushed by the leadership and he will be left looking the fool that he is. The real problem is Obama and Patty Murray and Harry Reid thin k they can do similar stupid games to get another tax and spending increase. Pelosi even said in an interview “there is nothing left to cut in the Federal budget.” If one of us said something similar in our business we would be thrown out of the room. I have been told by a friend who has known her for over 20 years that Nancy will say anything no matter how stupid it is, if she thinks it advances whatever it is she is pushing at the moment. When I listen to all of this I reach several conclusions: 1. There is no intelligent or adult person in Washington who can get anything accomplished, 2. It is very likely the US economy will limp along for another 18 months until after the election and the next Congress is seated. Then it depends on whether Cruz has completely destroyed the Republican chances of winning the Senate, or has completely blown it for the party to ever get control in the next decade. Right now he is the best thing saving Obama. The Republicans should have just let Obamacare go forward, presented an alternative program, let the Dems vote that down, and then let Obamacare go ahead fully funded to crash and burn and let the unions scream for revisions to it. Had they done that they would have swept the 2014 election and looked like grown ups. Cruz has single handedly done irreparable damage to the economic outlook by pushing his own personal agenda to run for president. Ego has such a powerful ability to overcome common sense.

So where does this leave us in CRE. Rates will remain too low for a lot longer than any of us would have thought. I know of one case last week where someone was negotiating with a lender on Wednesday and after Bernanke made his announcement the rate dropped 35 basis points. Some on rate and some on spread. I have no idea why spread dropped, but it did. So you will still be able to borrow at absurdly low cost, do deals you should not otherwise be able to justify, get better values on sale than you otherwise should, and stay uncertain. The negative is rents and hotel rates will not continue to rise as they have been since the economic uncertainty will continue much longer than it should have. As the budget battles get more ridiculous more uncertainty will prevail. Then starting in January we are into election mode, Obamacare is in place and slowing the job market even further, consumers will be more cautious, and we just continue to muddle along with the economy going nowhere as the political wars heat up and as Obamacare becomes the newsmaker, and the IRS, Benghazi, Holder lying to Congress, and the other scandals ramp up. In short, it will be a mess for 2014. No leadership, another Nairobi somewhere, and continuing uncertainty. Add to this all of the uncertainty in Syria, Iran, and the rest of the mid east and northern Africa from terrorists, (I forgot they are going away because Obama says they are).

It seems a good time to buy and take 5 or 10 year fixed rate debt. Just be sure you underwrite to an exit cap at least 100 basis points higher than you acquire at, and be ready to sell at anytime depending on how the world unfolds. Do deals that give you high levered current returns as the probability of making a large capital gain is very uncertain. If you can earn 12%-15% cash on cash current, then the exit becomes much less the driver, and that allows you far more flexibility to sell whenever it seems right since your returns are already in your bank account.