US Is in For a Continuation of Uncertainty and Nil Growth

It is pretty clear now that most voters are disgusted with both candidates. The issue now is if the truth about the bribes Hillary took through the foundation will be revealed by hackers, or if Trump will continue to say things that lead one to believe he is ill informed and such a narcissist that he is unable to control his worst instincts. Maybe Putin will just hold the emails and blackmail Hillary. Whoever wins, the next four years are likely to be less than good, and maybe bad. It is also clear now that the election is having a real impact on the economy and on investing and foreign investment in the US. While investor money does continue to come in, it is down 47% vs this time last year. It continues to decline. People I am in touch with in Asia tell me that many Asians are just sitting on cash waiting to see what happens in the election. It’s not clear that they will start investing again once the election is decided. The view is that at least they understand their own country and market. For now, they are willing to wait and see. Translation: the surge of Chinese and other Asian capital into US-based CRE will be far more limited, and it will mainly be institutional capital into larger deals. Values in the US will decline over time.   If Hillary gets elected, either we will pay more in taxes, or we will see another massive gridlock as Congress refuses to pass her agenda. Gridlock is the most likely outcome. Corporate tax reform is unlikely because she will not do that without a big tax increase on guys like us. One thing that can really upset CRE is the end of carried interests being cap gains. That would really upset how things get structured. It would dramatically reduce PE fund returns and might result in a real change in promote structures.  There is no question Washington is coming after carried interest taxes.   There is such concern over the election that it is almost certain that the economy is going nowhere for the next nine months. Obama will shove through more damaging regulations and nobody will want to invest a lot until we see what happens in November and after inauguration. It appears Trump is now of the attitude that if he does not win he just goes back to living well as an egomaniacal private businessman, so he is not going to do what he needs to in order to win. A version of “you need to be willing to walk away from the table and go on to the next deal.” Hillary lives in fear of the next email release from Wikileaks or whoever. If anyone is still under the illusion that Hillary and Bill were not using the foundation to take massive bribes and using the personal email server to delete the proof, then you should go back to reading nursery rhymes. Just think about a president who could be blackmailed by various foreign donors, not to mention Putin. The result is the economy is not going to improve much if at all, that CRE is not going up in value much if at all for quite a while and maybe for years. The Republicans might lose the Senate—although probably not—and they will not lose the House, so nothing good will come from DC for a long time. Maybe there will be infrastructure funding, but I would not count on it. We are in for a continuation of uncertainty and nil growth.