Where is the economy, and where will it be in five months? It is very unclear. Several excellent economists and some members of the Federal Reserve Board think it is recovering reasonably well. Some expect a return to the doldrums, although not a recession. I think it is very uncertain where we are and where it all goes from here.

We are told GDP advanced 4% in Q2, but 1.5% of that was inventory accumulation which will reverse this quarter most likely. Retail sales had been growing at 4% but in July they were flat. Apparently First Data and Visa are reporting maybe they were really better, but that is unclear and I am betting flat is more realistic. That adds to the inventory liquidation scenario if true.

The unemployment rate may be appearing low, but we all know U6 is much more accurate and it is still close to 13%. Obama touts that we are back to employing the same number of people as in 2008. Except there are almost 16 million more people in the population, so we went backwards. Of the 200,000 plus jobs created over each of the past several months, a very large percentage were part time and low wage. Hospitality and restaurants have been hiring, but those are low wage jobs. Some things like oil workers, truck drivers and coders are well paid, but overall wages have not gone up much, if at all after inflation.

It is my belief that retail sales are not likely to grow much going forward since the newly hired are largely not earning good wages, and the already working are not getting raises beyond inflation, so there is simply not the spending power across most of the population. I also have a theory about what is going on. My parents started working in the 1920's. So they were hit hard by the depression, then the war. That experience became deeply ingrained in my parents and their generation. It is why not much happened in the 1950's. It was not until my generation began to graduate from college in the 1960's that things changed and the economy took off. My parents never got over the effect of their early life experiences and remained cautious consumers all their lives even until they died at 100 years old. I believe there is a whole generation of young people now who hit the wall when they graduated from college, or who lost their house to foreclosure, or were unemployed for many months or years. They are like my parents-badly burned and not likely to take on much debt again, and not likely to spend a lot of their income beyond necessities.

Then we are faced with an administration which is determined to have the government run our lives and to stamp out any ability to make a lot of money the old fashioned way- hard work. If you start from nothing, as I and most of my very successful friends did, and you make a lot of money, you are tagged as a fat cat, bad guy, and oppressor of the poor and minorities and women. The huge set of new regulations of everything has made it hard to start many new companies, which is why the rate of new start ups is far below what it normally has been. Try getting a loan. Try even making a deposit. You can't make a cash deposit to anyone else account today. Go try and see what happens. Try to become a new client of the private bank group at one of the major banks. It becomes an 8 week proctology exam so the regulators can see you are not a drug dealer or terrorist.

It has become so onerous that the better quality private bankers at the big banks are leaving for other jobs where they are not burdened by regulatory insanity. Go ask a small business banker at one of the major banks how many fewer sales calls he makes because of all the paperwork he is now required to fill out instead of making loans. Now the EPA wants to regulate any puddle of water and claim you can't develop or have to mitigate rain puddles and nearly dry creeks. The economy is being crushed by over-regulation of everything. You can't grow a capitalist economy with this burden and cost.

Here is one great example. Every hotel was ordered to add a lift to any pool for the disabled. They are rarely used if ever but they had to pay $10,000-20,000 to install one. That was not bad enough. Now the friends of Obama, the tort lawyers, are suing many hotels claiming there should be an extra bolt to hold the lift, or that it is not oiled regularly or whatever other nonsense. It is cheaper to pay the extortionist lawyers a few thousand than to hire a lawyer and fight. It has become a new cottage industry due to a stupid regulation that was not needed. Or maybe you like the war on coal which will force the closure of up to 40% of the power plants in America and throw about 200,000 people out of a job. Or we don't get energy independence because a private equity guy in San Francisco offered $100 million to the administration and the Democrats to not approve it. There went a slew more jobs and cheaper, US-controlled energy.

Just to add a bit of fun we have Syria, Iraq, Iran, Gaza, Ukraine, Libya, and always Russia and China making fools of this administration's playing politics instead of leading the world and maintaining a substantial force in Iraq. Putin runs wild because he knows Obama will do nothing, and Netanyahu tells Obama and Kerry to get lost as do the Egyptians and Saudis. The ISIS terrorists are Hitler and the holocaust revisited except now it is the Christians who are being massacred. Even Holder says the US is at grave risk of an attack. And then we have Rand Paul to say really foolish things, and Elizabeth Warren to stir the anti capitalist pot and propose breaking up the banks. And then there is Obamacare to raise your costs and the new minimum wage push by the president to really push up your costs.

And anyone expects consumers to feel good and go spend??? Does anyone really think corporations are going to make major investments with all this going on and a tax structure that is stupid and anti growth for the US.

We are not going to have real sustainable growth much beyond inflation for awhile. Learn to live with slow growth and excessive regulation for at least two more years until we have someone in the White House who actually held a job, or who was not a community activist trying to transform America into a European type government.

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Joel Ross

Joel Ross began his career in Wall St as an investment banker in 1965, handling corporate advisory matters for a variety of clients. During the seventies he was CEO of North American operations for a UK based conglomerate, and sat on the parent company board. In 1981, he began his own firm handling leveraged buyouts, investment banking and real estate financing. In 1984 Ross began providing investment banking services and arranging financing for real estate transactions with his own firm, Ross Properties, Inc. In 1993 Ross and a partner, Lexington Mortgage, created the first Wall St hotel CMBS program in conjunction with Nomura. They went on to develop a similar CMBS program for another major Wall St investment bank and for five leading hotel companies. Lexington, in partnership with Mr. Ross established a hotel mortgage bank table funded by an investment bank, and making all CMBS hotel loans on their behalf. In 1999 he formed Citadel Realty Advisors as a successor to Ross Properties Corp., focusing on real estate investment banking in the US, UK and Paris. He has closed over $3.0 billion of financings for office, hotel, retail, land and multifamily projects. Ross is also a founder of Market Street Investors, a brownfield land development company, and has been involved in the acquisition of notes on defaulted loans and various REO assets in conjunction with several major investors. Ross was an adjunct professor in the graduate program at the NYU Hotel School. He is a member of Urban Land Institute and was a member of the leadership of his ULI council. In 1999, he conceived and co-authored with PricewaterhouseCoopers, the Hotel Mortgage Performance Report, a major study of hotel mortgage default rates.