It is still not clear what to make of the May jobs report. Even if you add back Verizon, the number is very poor. With the downward adjustment of March and April, May might not be an outlier. Car sales have dropped, energy jobs are not ready to return until oil hits $55 and cap ex by companies is still way below what should be happening. The messages are clearly mixed, but trending lower possibly. Europe continues to struggle to stimulate its economy but there is little left that Draghi can do and as the strikes in France show, there is little political sup[port for the kind of labor reform thatg is required to make Europe a well functioning zone. Italy is hopeless maybe for decades as there is no backing of the prime minister to reform labor laws. Greece will be toast for years to come. Portugal is barely solvent and Spain can't get its political act together.
China is in a major debt crisis and the only hope it has to bail out is for a massive restructuring of loans by banks and government support to the banks to help cover the losses. There is still not the massive effort needed to shutter state owned companies. China will be a serious basket case for a few more years. To make matters much worse, Xi is moving the country back to 30 years ago before political and economic reform, and he is consolidating his own power as dictator. The only question is will he be assassinated in the next 2 years and will such an event shift things back to the reform era. His potentially being assassinated is a actively discussed rumor in China, and it may be feasible since he has ruined and jailed many powerful people.
Obama continues to pour out regulations that are suffocating the banks and business in general. It is now so bad that the cost to small companies is so onerous that it is hard to make it in some fields. The recent Supreme Court decision stating that the EPA and Army Corps had way over stepped their authority in the peat bog case was critical to CRE. The Obama team is out to destroy fossil fuels the way they did coal. Almost no new export facilities are being built for oil and coal, and new regs on fracking make it more expensive to restart wells. Now we even have pressure to violate peoples right to privacy because a few people can't figure out what sex they are. That battle has just begun but it is one m more example of the radical left run wild and being completely oblivious of the cost borne by businesses and local governments due to these ridiculous rules.
It is now highly likely there will be no rate increase for awhile, and we need to wait until we see July employment before we know if we are in a true slowdown. The participation rate is now so low it is hard to understand how social security and Medicare can survive as they are. There are just not enough workers to pay for the retired any longer along with paying for welfare for illegals, massive food stamp increase and the Obamacare subsidies.
The good news is real estate may be one of the best ways to protect capital and collect at least a halfway decent yield. Hotels is probably not where you want to be in this environment as things are already slowing and are likely to slow further. Unfortunately the April STR numbers do not make sense. Each week in April they showed declining occupancy and low revpar-below 2%. Then they suddenly claim all of April was up 2% in occupancy and 5% in revpar. I have asked someone at STR to explain how this is mathematically possible, but so far no answer. One or the other numbers are wrong, so it is unclear how STR does its calculations, and if any of the numbers are really accurate. Even the optimists are now saying growth in hotel income is slowing and that is in the face of the high dollar, slowing job growth, declining corporate profits, and a slow economy worldwide. If the jobs picture does not improve it could be a long summer in the hotel business.
It is still not clear what to make of the May jobs report. Even if you add back Verizon, the number is very poor. With the downward adjustment of March and April, May might not be an outlier. Car sales have dropped, energy jobs are not ready to return until oil hits $55 and cap ex by companies is still way below what should be happening. The messages are clearly mixed, but trending lower possibly. Europe continues to struggle to stimulate its economy but there is little left that Draghi can do and as the strikes in France show, there is little political sup[port for the kind of labor reform thatg is required to make Europe a well functioning zone. Italy is hopeless maybe for decades as there is no backing of the prime minister to reform labor laws. Greece will be toast for years to come. Portugal is barely solvent and Spain can't get its political act together.
China is in a major debt crisis and the only hope it has to bail out is for a massive restructuring of loans by banks and government support to the banks to help cover the losses. There is still not the massive effort needed to shutter state owned companies. China will be a serious basket case for a few more years. To make matters much worse, Xi is moving the country back to 30 years ago before political and economic reform, and he is consolidating his own power as dictator. The only question is will he be assassinated in the next 2 years and will such an event shift things back to the reform era. His potentially being assassinated is a actively discussed rumor in China, and it may be feasible since he has ruined and jailed many powerful people.
Obama continues to pour out regulations that are suffocating the banks and business in general. It is now so bad that the cost to small companies is so onerous that it is hard to make it in some fields. The recent Supreme Court decision stating that the EPA and Army Corps had way over stepped their authority in the peat bog case was critical to CRE. The Obama team is out to destroy fossil fuels the way they did coal. Almost no new export facilities are being built for oil and coal, and new regs on fracking make it more expensive to restart wells. Now we even have pressure to violate peoples right to privacy because a few people can't figure out what sex they are. That battle has just begun but it is one m more example of the radical left run wild and being completely oblivious of the cost borne by businesses and local governments due to these ridiculous rules.
It is now highly likely there will be no rate increase for awhile, and we need to wait until we see July employment before we know if we are in a true slowdown. The participation rate is now so low it is hard to understand how social security and Medicare can survive as they are. There are just not enough workers to pay for the retired any longer along with paying for welfare for illegals, massive food stamp increase and the Obamacare subsidies.
The good news is real estate may be one of the best ways to protect capital and collect at least a halfway decent yield. Hotels is probably not where you want to be in this environment as things are already slowing and are likely to slow further. Unfortunately the April STR numbers do not make sense. Each week in April they showed declining occupancy and low revpar-below 2%. Then they suddenly claim all of April was up 2% in occupancy and 5% in revpar. I have asked someone at STR to explain how this is mathematically possible, but so far no answer. One or the other numbers are wrong, so it is unclear how STR does its calculations, and if any of the numbers are really accurate. Even the optimists are now saying growth in hotel income is slowing and that is in the face of the high dollar, slowing job growth, declining corporate profits, and a slow economy worldwide. If the jobs picture does not improve it could be a long summer in the hotel business.
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