Where Do Investors Go From Here

Even Lloyd Blankfein says it is now very hard to really figure out these markets. However, we all need to make our best guess and move ahead with that until new information arrives. We have the unprecedented decline in oil prices, the Euro declining and potentially reaching par or just a bit higher. The Swiss Franc rising by unleashing it from the Euro peg. Now we have QE Europe and Japan and China unleashing a real anti corruption program, and a balancing act to try to stop the over development, but still trying not to have a cessation of development and infrastructure construction, as those employ hundreds of thousands across the country. Only the US is considering raising rates at a time when the rest of the world is fearing deflation and possibly recession in some countries. All of this leaves aside the potential for black swan events like Paris and almost in Belgium.

So what seems most likely to happen which will impact US real estate. Capital will continue to flow out of Europe and China.  China has recently slowed this outflow in the past few weeks, although it is not stopped. Europe will likely see capital outflows accelerate as major players move out of Euro based assets and into dollar based. There is also the rapidly growing outflow of Jewish capital and businesses from Europe to Israel and the US. Middle East money left a long time ago so is not likely to be a big factor. Japanese money is starting to move out of Japan again and based on approaches I have had recently, there will be substantial Japanese capital coming to New York and major west coast cities. Just what I have been approached about is potentially in the hundreds of millions. So for major US gateway cities, the money will continue to flow in, and potentially will find its way to major secondary cities in smaller amounts over time. This money is more interested in safety than return, and depending on its origin, is either short or longer term. Chinese capital tends to be shorter term, while Japanese tends to be generational. European capital will tend to be mid to longer term depending on what unfolds in Europe. Given the likelihood of further material declines in the Euro, and the inability of the EU to really deal with its underlying structural and tax issues, it is likely that Europe will remain a poor investment for many years, despite all the billions of private equity fund money flowing in. Therefore, it is likely that Europeans will remain in the US as investors for at least three to five years or longer. All we need is another major terror attack or attacks and the funds will flow over here even faster. Israel is another beneficiary of this capital movement.