Despite the mass media, there is a very good chance things will go well from here. It all depends on who blinks this week over the border wall and subsidies for Obamacare. My bet is it all gets resolved somehow. Marine Le Pen did not win enough to have a good shot to win the final election in May. Emmanuel Macron seems a reasonable, intelligent banker who hopefully will fix the mess in France and help stabilize the EU. He has to lower taxes, increase the work week, and cut the massive over-regulation. In short, he has to do a French version of Trump and get the economy moving again.
In the US, it is highly unlikely we will have a shutdown. Wednesday the tax plan outline will appear and while it is missing a lot of the fine points, it will demonstrate major tax cuts are coming and it will be very stimulative. The Democrats and the press will attack it as a cut for the rich along with the usual left wing rhetoric, but reality is we will have major tax cuts this year and they will be backdated maybe to January 1. Expect carried interest to be changed to ordinary income. There will be an accompanying special low rate for repatriation of offshore money and that tax will be used to provide the equity for the infrastructure bank which will then issue America bonds to fund the massive infrastructure work plan.
Obamacare will be replaced by June 1, and will further cut taxes and stimulate the economy. Again the press and Dems will claim it harms the poor, etc., but reality is it will still provide the subsidies to help poor people and premiums and deductibles will fall, helping the middle class.
Deregulation is well under way and will accelerate as the year goes on.
The big change geopolitically is now Chinese president Xi Jinping is cooperating with Trump on North Korea. They made the obvious trade- stop Kim in exchange for a much better trade deal. It appears China has already materially reduced gasoline to N Korea which means the army cannot wage any war with no fuel. There are likely more things going on that we will never know about. It is very possible Kim will be assassinated as the only real way to solve the problem. How they pull that off is un known, but do not be surprised if it does happen at some point. Kim might fire of another nuke to show he can, but then China will be under enormous worldwide pressure to act even more firmly or really suffer economically. Xi needs robust trade with the US to sustain the Chinese economy and his hold on power, so in the end he will cooperate with Trump.
The intelligence committees will issue reports showing zero collusion between Trump and the Russians and then the whole story will come out about how it was all a story made up by Obama and Susan Rice and John Podesta to discredit Trump, and try to stop him from undoing the Obama legacy. It will be a major scandal like Watergate and the Dems will get creamed in 2018 if all of the above turns out to happen.
For CRE all of this is good if it plays out as I believe it will. The economy will thrive, the world will be safer. Iran will try to start something, but we will prevail. The Saudis, Israel, UAE and the US will step up cooperation and ISIS will be defeated this year in Iraq and Syria. Assad will be gone and Putin will realize Obama is gone and he cannot any longer do as he wishes. His economy is very weak and he will conclude he is better to cooperate with us than challenge us. Secretary of State Tillerson is not Kerry or Hillary and Putin knows this is a whole new ballgame. Terror will remain, but be much more controllable once ISIS no longer has a headquarters. The recruiting will dry up once that happens.
By 2018 there is a chance the US economy could be on the start of a new period of real growth. But a lot can go wrong, and the black swans are everywhere, and things could go very wrong in lots of places. Be cautious, but hopeful. It is not yet time to go out on the risk curve.
The views expressed here are the author's own.
Despite the mass media, there is a very good chance things will go well from here. It all depends on who blinks this week over the border wall and subsidies for Obamacare. My bet is it all gets resolved somehow. Marine Le Pen did not win enough to have a good shot to win the final election in May. Emmanuel Macron seems a reasonable, intelligent banker who hopefully will fix the mess in France and help stabilize the EU. He has to lower taxes, increase the work week, and cut the massive over-regulation. In short, he has to do a French version of Trump and get the economy moving again.
In the US, it is highly unlikely we will have a shutdown. Wednesday the tax plan outline will appear and while it is missing a lot of the fine points, it will demonstrate major tax cuts are coming and it will be very stimulative. The Democrats and the press will attack it as a cut for the rich along with the usual left wing rhetoric, but reality is we will have major tax cuts this year and they will be backdated maybe to January 1. Expect carried interest to be changed to ordinary income. There will be an accompanying special low rate for repatriation of offshore money and that tax will be used to provide the equity for the infrastructure bank which will then issue America bonds to fund the massive infrastructure work plan.
Obamacare will be replaced by June 1, and will further cut taxes and stimulate the economy. Again the press and Dems will claim it harms the poor, etc., but reality is it will still provide the subsidies to help poor people and premiums and deductibles will fall, helping the middle class.
Deregulation is well under way and will accelerate as the year goes on.
The big change geopolitically is now Chinese president Xi Jinping is cooperating with Trump on North Korea. They made the obvious trade- stop Kim in exchange for a much better trade deal. It appears China has already materially reduced gasoline to N Korea which means the army cannot wage any war with no fuel. There are likely more things going on that we will never know about. It is very possible Kim will be assassinated as the only real way to solve the problem. How they pull that off is un known, but do not be surprised if it does happen at some point. Kim might fire of another nuke to show he can, but then China will be under enormous worldwide pressure to act even more firmly or really suffer economically. Xi needs robust trade with the US to sustain the Chinese economy and his hold on power, so in the end he will cooperate with Trump.
The intelligence committees will issue reports showing zero collusion between Trump and the Russians and then the whole story will come out about how it was all a story made up by Obama and Susan Rice and John Podesta to discredit Trump, and try to stop him from undoing the Obama legacy. It will be a major scandal like Watergate and the Dems will get creamed in 2018 if all of the above turns out to happen.
For CRE all of this is good if it plays out as I believe it will. The economy will thrive, the world will be safer. Iran will try to start something, but we will prevail. The Saudis, Israel, UAE and the US will step up cooperation and ISIS will be defeated this year in Iraq and Syria. Assad will be gone and Putin will realize Obama is gone and he cannot any longer do as he wishes. His economy is very weak and he will conclude he is better to cooperate with us than challenge us. Secretary of State Tillerson is not Kerry or Hillary and Putin knows this is a whole new ballgame. Terror will remain, but be much more controllable once ISIS no longer has a headquarters. The recruiting will dry up once that happens.
By 2018 there is a chance the US economy could be on the start of a new period of real growth. But a lot can go wrong, and the black swans are everywhere, and things could go very wrong in lots of places. Be cautious, but hopeful. It is not yet time to go out on the risk curve.
The views expressed here are the author's own.
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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.
