Quote for the day

"The amount you laugh in your relationships with others is the true measure of the health of your personality." --Brian Tracy

4TH QUARTER 2009 NEWS

4TH QUARTER 2009 NEWS




FEBRUARY 2, 2010

MARKET COMMENTARY


THE ECONOMY: THE GOOD NEWS IS THAT THE "GREAT RECESSION" ENDED IN THE THIRD

QUARTER OF 2009 WITH 2.2% GDP GROWTH. AS PAINFUL AS IT WAS (REAL GDP FELL

3.8% OR $566 BILLION IN THE TWELVE MONTHS PRECEDING THE SEPTEMBER BOTTOM)

THE GREAT RECESSION WAS NOT THE WORST IN THE LAST 40 YEARS IN MANY WAYS.


THE GREAT RECESSION LASTED 25 MONTHS WHILE THE 1980-1982 RECESSION LASTED 35

MONTHS. THE UNEMPLOYMENT RATE IN THE GREAT RECESSION PEAKED, AT LEAST FOR

NOW, AT 10.2% BUT REACHED 10.8% IN THE 1980-1982 RECESSION. CORPORATE

PROFITS FELL 22.9% DURING THE GREAT RECESSION COMPARED TO 30.4% DURING THE

1973-1975 RECESSION.


NOTWITHSTANDING THE "LESS BADS" ABOVE, THE GREAT RECESSION TOPS THE LAST SIX

RECESSIONS SINCE THE 1969-1970 RECESSION IN DECLINE IN GDP (-3.8%), DECLINE

IN REAL HOUSEHOLD NET WORTH (-25.8%), DECLINE IN AUTO SALES (-40.1%),

DECLINE IN COMMERCIAL CONSTRUCTION (-70.2%), DECLINE IN INDUSTRIAL OUTPUT

(-16.9%) AND DECLINE IN S&P 500 REAL RETURN (-54.1%).

WITH MOST ECONOMISTS EXPECTING A 3% PLUS INCREASE IN GDP IN THE FOURTH

QUARTER, THE GREAT RECESSION IS HISTORY, BUT THE RECOVERY IS FRAGILE. IT HAS

BEEN FUELED IN PART BY FOUR TIMES THE AMOUNT OF STIMULUS DOLLARS APPLIED IN

ALL POST-WORLD WAR II RECESSIONS COMBINED. CONCERNS ABOUT HOW AND WHEN THIS

LIQUIDITY IS WITHDRAWN FROM THE ECONOMY, POTENTIAL SPIKES IN INFLATION,

DOUBLE DIGIT BUDGET DEFICITS - THE HIGHEST AS A PERCENT OF GDP SINCE WORLD

WAR II, INCREASING OIL PRICES (UP $30 FROM APRIL 2009 LOWS) AND HUGE LOSSES

AND CONTINUED BANK FAILURES AS COMMERCIAL REAL ESTATE IS RECAPITALIZED,

POINT TO, AT BEST, A SLOW RECOVERY, AND PERHAPS A "DOUBLE DIP" RECESSION.

FOR REAL ESTATE, CREATION OF JOBS IS ESSENTIAL. IF PEOPLE HAVE JOBS,

CONSUMER CONFIDENCE INCREASES. IF CONSUMERS ARE CONFIDENT, THEY BUY HOMES

AND GOODS FROM RETAILERS. IF THEY ARE CONFIDENT THEY RENT APARTMENTS. TO

SATISFY THESE NEEDS, RETAILERS NEED SHOPPING CENTERS AND MANUFACTURERS NEED WAREHOUSES. THEY ALL NEED OFFICE SPACE, ETC.

THE U.S. UNEMPLOYMENT RATE IS 10% (DOWN FROM 10.2% AT ITS PEAK). THAT

REPRESENTS A LOSS OF 7.24 MILLION JOBS DURING THE GREAT RECESSION.

EMPLOYMENT TODAY IS AT THE SAME LEVEL IT WAS IN 2004 EVEN THOUGH THE U.S.

POPULATION HAS GROWN BY 14 MILLION PEOPLE SINCE THEN.

IN TERMS OF COMMERCIAL REAL ESTATE FUNDAMENTALS, WE WILL NEED THE RETURN OF

THE 7.24 MILLION JOBS THAT WILL HAVE BEEN LOST TO THE RECESSION, PLUS AN

ADDITIONAL 1.5 MILLION JOBS TO FILL THE NEW SPACE THAT CAME ONLINE SINCE

DECEMBER 2007. THAT IS, IN ORDER TO RETURN TO THE REAL ESTATE SUPPLY-DEMAND

FUNDAMENTALS THAT EXISTED AT THE BEGINNING OF 2008, WE NEED TO ADD ROUGHLY

8.74 MILLION JOBS, OR ABOUT 4.9 YEARS OF NORMAL GROWTH. IF JOB GAINS START

IN MARCH 2010, THIS LEVEL OF JOB INCREASE WILL NOT OCCUR UNTIL LATE 2014 OR

EARLY 2015.


- THE LINNEMAN LETTER, 2009/2010 WINTER ISSUE P. 12-13

THE JOB LOSSES AFFECT ALL SECTORS OF THE ECONOMY WITH ONLY THE GOVERNMENT

GROWING JOBS DURING THE GREAT RECESSION. SIMILARLY, NO GEOGRAPHIC AREA IS

IMMUNE WITH AUSTIN, TEXAS BEING THE ONLY MAJOR U.S. CITY SHOWING POSITIVE

EMPLOYMENT GROWTH DURING THIS PERIOD (0.9%).

NOR IS IT CLEAR THAT THE MASSIVE STIMULUS PROGRAMS CREATED BY CONGRESS AND  THE PRESIDENT HAVE HAD A MATERIAL IMPACT ON SLOWING JOB LOSSES.

THE TRUTH IS THAT NO ONE KNOWS HOW MANY (IF ANY) JOBS WERE CREATED BY THE

STIMULUS. ALL WE KNOW IS THAT SINCE THE STIMULUS PACKAGE WAS APPROVED, WE

HAVE LOST 6.1 MILLION JOBS, AND THE UNEMPLOYMENT RATE HAS RISEN FROM 6.2% TO AS HIGH AS 10.2% THUS FAR. IN FACT, THE UNEMPLOYMENT RATE TODAY STANDS 200

BASIS POINTS HIGHER THAN THE 8% THE PRESIDENT INDICATED WOULD BE THE MAXIMUM WHEN THE STIMULUS BILL WAS PASSED.

- THE LINNEMAN LETTER, 2009/2010 WINTER ISSUE, P. 16

COMPLICATING THE JOBS PICTURE FURTHER, WHEN JOB CREATION BEGINS ANEW, THE

ECONOMY NEEDS TO ADD 100,000 JOBS A MONTH TO KEEP UP WITH THE GROWING POPULATION EVEN BEFORE EMPLOYING THE 7.4 MILLION WORKERS WHO LOST THEIR JOBS

DURING THE GREAT RECESSION. MOREOVER, THE CURRENT 10% UNEMPLOYMENT RATE DOES NOT CONSIDER THE WORKERS WHO HAVE STOPPED LOOKING FOR WORK BECAUSE OF THE

POOR JOB ENVIRONMENT OR THOSE WHO ARE WORKING PART TIME BECAUSE FULL TIME WORK IS NOT AVAILABLE. COUNTING THESE WORKERS BOOSTS THE UNEMPLOYMENT RATE TO 17% AND ANOTHER 5 MILLION WORKERS TO BE FULLY EMPLOYED. - WALL STREET

JOURNAL, JANUARY 9, 2010

EVEN THOUGH THE JOB RECOVERY WILL CERTAINLY BE PROTRACTED, THERE ARE A

NUMBER OF "GREEN SHOOTS" APPEARING IN THE ECONOMY:

* REAL HOUSEHOLD WEALTH IS UP $833 BILLION SINCE IT BOTTOMED AT $51.8

TRILLION IN THE FIRST QUARTER OF 2009

* CONSUMER CONFIDENCE IS UP FROM A LOW OF 55.3 IN NOVEMBER 2008 TO 67.4



* MANUFACTURING CAPACITY UTILIZATION IS UP 250 BASIS POINTS FROM ITS

LOW OF 65.1% IN JUNE 2009 (20 YEAR AVERAGE IS 79%)

* BANK EXCESS RESERVES AT THE FED REMAIN CLOSE TO $1 TRILLION WHICH

COULD BE LEVERAGED TO $7-$8 TRILLION IN NEW LOANS



* AFTER-TAX CORPORATE PROFITS ARE UP 15% AFTER BOTTOMING IN THE THIRD

QUARTER OF 2009





DEBT REFINANCING:

ALONG WITH LEASING MOMENTUM, DEBT REFINANCING REMAINS THE MAJOR CHALLENGE

FACING THE COMMERCIAL REAL ESTATE INDUSTRY. COMMERCIAL MORTGAGE LOAN

MATURITIES ARE EXPECTED TO TOP $250 BILLION FOR THE FIRST TIME IN 2010

BEFORE PEAKING IN 2012 AT OVER $300 BILLION. TOTAL MATURITIES THROUGH 2012

ARE EXPECTED TO EXCEED $1.1 TRILLION.





ALTHOUGH RENTS AND OCCUPANCIES CONTINUE TO DECLINE IN MOST MARKETS, MANY

BELIEVE THE BOTTOM IS NEAR. LOW INTEREST RATES AND AN ACCOMMODATIVE STANCE

BY REGULATORS IS ENABLING BANKS TO RESTRUCTURE DEBT AND "KICK THE CAN DOWN

THE ROAD" WITH HOPES THAT ECONOMIC GROWTH AND INFLATION WILL RESCUE MANY

LOANS THAT ARE UNDERWATER TODAY.





A SENIOR PERSON AT TREASURY SAID TO A SMALL GROUP OF US THAT IT IS NOW

OFFICIAL TREASURY POLICY TO EXTEND AND PRETEND ON REAL ESTATE LOANS. IN

OTHER WORDS, THE POLICY STATEMENT FROM LAST WEEK SAYS, IF YOU CAN MAKE AN

ANALYSIS THAT SAYS EVEN IF THE CURRENT VALUE IS LESS THAN THE LOAN, IF YOU

CAN DO A SPREADSHEET THAT SHOWS IF YOU EXTEND FOR 3-5 YEARS, AND IF THE

ECONOMY GETS BETTER, AND IF THE LOAN CAN BE AMORTIZED DOWN TO WHERE THE LOAN

IS NO LONGER MORE THAN THE VALUE, THEN THE LENDER DOES NOT HAVE TO TAKE AN

IMPAIRMENT - WRITE DOWN. LOANS ARE TO BE MODIFIED BY RATE REDUCTIONS,

DEFERRAL OF RESERVES, AND DEFERRAL OF AMORTIZATION OR WHATEVER. JUST NOT

PRINCIPAL REDUCTION. THIS IS JUST LIKE THEY ARE DOING IN HOUSING.



- NOTES FROM URBAN LAND INSTITUTE, NOVEMBER 2009



WHILE THE POLICY IS SIMILAR TO THE ONE EMPLOYED UNSUCCESSFULLY BY THE

JAPANESE IN THE 1990S, IT MAY PRECLUDE, FOR NOW, MASSIVE BANK FAILURES IF

TODAY'S UNDERWRITING STANDARDS WERE STRICTLY EMPLOYED. MOREOVER, VERY LOW

SHORT-TERM RATES HAVE CREATED THE STEEPEST YIELD CURVE IN 30 YEARS HELPING

TO RECAPITALIZE THE BANKS.





REAL ESTATE VALUES:

MOODY'S ESTIMATED THAT REAL ESTATE VALUES FELL 43.7% FROM THE PEAK IN 2007.

REIT PRICES PLUMMETED 70% BEFORE REBOUNDING 13.5% AFTER RAISING $17.2

BILLION OF COMMON EQUITY TO STABILIZE THEIR BALANCE SHEETS AND PAY DOWN

DEBT.





COSTAR ESTIMATES THAT NATIONAL VACANCY RATES WILL PEAK IN 2010 AT 16% FOR

OFFICE BUILDINGS AND 11% FOR INDUSTRIAL BUILDINGS. WITH PROPERTY LEVEL

FUNDAMENTALS CONTINUING TO DECLINE AND CAP RATES RISING, ALBEIT ON VERY LOW

SALES VOLUMES, MANY IF NOT MOST, LEVERAGED ASSETS PURCHASED OR REFINANCED

DURING THE 2005-2007 TIME FRAME CAN CURRENTLY BE VALUED AT LESS THAN THEIR

DEBT.





ROBERT KNAKAL IN HIS "CONCRETE THOUGHTS" COLUMN IN THE NEW YORK TIMES

ESTIMATED THAT BETWEEN 2005 AND 2007 THERE WERE 15,000 PROPERTIES SOLD OR

REFINANCED IN NEW YORK CITY THAT NOW HAVE NEGATIVE EQUITY VALUES. APPLYING

TODAY'S UNDERWRITING STANDARDS HE ESTIMATES THAT THE $165 BILLION IN DEBT ON

THESE BUILDINGS WOULD REFINANCE AT ONLY $65 BILLION, OR $100 BILLION OF

NEGATIVE EQUITY. WHILE THIS ANALYSIS MAY BE EXTREME, IT DOES SUGGEST THE

DEPTH OF THE PROBLEM.





THE "KICK THE CAN DOWN THE ROAD" STRATEGY CAN WORK ONLY IF MARKET

FUNDAMENTALS IMPROVE, OR AT LEAST STABILIZE, AND CAP RATES COMPRESS.

PROFESSOR LINNEMAN'S ANALYSIS SUGGESTS THAT THIS CAN HAPPEN EVEN IF REAL

ESTATE FUNDAMENTALS CONTINUE TO DETERIORATE.





OVER THE NEXT THREE YEARS, WE ANTICIPATE THAT, ABSENT AN UNUSUAL

INFLATIONARY SURGE, THE 10-YEAR TREASURY RATE WILL RISE APPROXIMATELY 150

BASIS POINTS, WHILE THE RISK PREMIUM ASSOCIATED WITH PROPERTY WILL FALL BY

AS MUCH AS 250 BASIS POINTS. IN ADDITION, AS JOB GROWTH IN THE COMING YEARS

ABSORBS THE VAST AMOUNTS OF SPACE EMPTIED AS WE LOST 7.24 MILLION JOBS

DURING THE GREAT PANIC, WE ANTICIPATE THAT THE EXPECTED LONG-TERM GROWTH

RATE WILL RISE BY APPROXIMATELY 100 BASIS POINTS. TAKEN TOGETHER, THIS LEADS

US TO ANTICIPATE THAT CAP RATES WILL BE APPROXIMATELY 200 BASIS POINTS LOWER

IN 2-3 YEARS. THIS IMPLIES CAP RATES OF 5-6.5%. AS A RESULT, WE ANTICIPATE

APPRECIATION OF PROPERTY PRICES IN THE COMING YEARS, IN SPITE OF ERODING

CASH FLOWS.





- THE LINNEMAN LETTER, 2009/2010 WINTER ISSUE



QUOTES FROM THE PUNDITS





WE WROTE IN OUR SECOND QUARTER 2008 REPORT "IF THERE HAS BEEN ANYTHING GOOD

COME OUT OF THE GREAT CREDIT CRUNCH TO DATE, IT IS A PLETHORA OF GREAT

QUOTES (NEW AND PRIOR MARKET SEASONED)". SINCE THEN THE GREAT RECESSION HAS

PRODUCED MANY MORE:





* OUR GREATEST STRENGTH IN THE U.S. IS OUR OPTIMISM AND OUR GREATEST

WEAKNESS IS OUR MEMORY. IN A YEAR, TIGER WOODS WILL BE A HERO AGAIN. - BARRY

STERNLICHT, CEO STARWOOD CAPITAL GROUP



* GET YOUR FACTS FIRST, THEN YOU CAN DISTORT THEM AS YOU PLEASE. -

MARK TWAIN



* FAILURE HAS NO PARENTS AND SUCCESS HAS A THOUSAND FATHERS. - SOURCE

UNKNOWN



* THESE ZOMBIE PROPERTIES (DEBT EXCEEDS VALUE) ARE CHICKENS WITH THEIR

HEADS CUT OFF. THEY'RE STILL STRUTTING AROUND EVEN THOUGH THEY ARE DEADER

THAN DOORNAILS, AND THEY'RE GOING TO HAVE TO CHANGE HANDS. - MATT ANDERSON,

FORESIGHT ANALYTICS



* THE BEATINGS WILL CONTINUE UNTIL MORALE IMPROVES. - PETER LINNEMAN



* FEAR OF LOSS IS TO CAPITALISM AS FEAR OF HELL IS TO CATHOLICISM. -

HOWARD MARKS



* LEVERAGE IS MONEY OF THE MIND MEANING IT CAN VANISH IF THE LENDER IS

ABLE TO TAKE HIS MONEY BACK. - JIM GRANT

General Colin Powell's Rules to Live By

"It's better to be prepared for an opportunity and not have one than to have an opportunity and not be prepared." -- Whitney Young

1. It ain't as bad as you think. It will look better in the morning.
Mike says:  unless you were drinking the night before

2. Get mad, then get over it.

3. Avoid having your ego so close to your position that when your position falls, your ego goes with it.
Mike says:  Don't become emotionally invested in the outcome of something over which you have no control.

4. It can be done!

5. Be careful what you choose. You may get it.
Mike says:  Read The Secret or Conversations with God and you will better understand this.

6. Don't let adverse facts stand in the way of a good decision.

7. You can't make someone else's choices. You shouldn't let someone else make yours.
Mike says:  You can pick your friends. You can pick your nose.  But, don't pick your friend's nose.

8. Check small things.
Mike says:  I see the punch line, but I'm not doing it!

9. Share credit.
Mike says:  I learned this very early and it is true.  Learn it as quickly as you can.

10. Remain calm. Be kind.
Mike says:  This is extremely important.

11. Have a vision.

12. Don't take counsel of your fears or naysayers.

13. Perpetual optimism is a force multiplier.



-- General Colin Powell's Rules to Live By

Are you moving toward breakdown … or breakthrough?

Are you moving toward breakdown … or breakthrough?


February 3rd, 2010 ·
Every major difficulty you face in life is a fork in the road. You choose which track you will head down, toward breakdown or breakthrough. Dick Biggs, a consultant who helps Fortune 500 companies improve profits and increase productivity, writes that all of us have unfair experiences; as a result, some people merely exist and adopt a “cease and desist” mentality.

He continues,

One of the best teachers of persistence is your life’s critical turning points. Expect to experience 3-9 turning points or “significant changes” in your life. These transitions can be happy experiences … or unhappy times such as job losses, divorce, financial setbacks, health problems and the death of loved ones. Turning points can provide perspective, which is the ability to view major changes within the larger framework of your lifetime and let the healing power of time prevail. By learning from your turning points, you can grow at a deeper level within your career and life.

If you’ve been badly hurt, then start by acknowledging the pain and grieving any loss you may have experienced. Then forgive the people involved – including yourself, if needed. Doing that will help you move on. Just think, today may be your day to turn the hurts of your past into a breakthrough for the future.

Don’t allow anything from your personal history to keep holding you hostage.



~ From The Maxwell Daily Reader, July 15
http://johnmaxwellonleadership.com/

Avoid the Top 10 Resume Mistakes

By Peter Vogt, Monster Senior Contributing Writer

It's deceptively easy to make mistakes on your resume and exceptionally difficult to repair the damage once an employer gets it. So prevention is critical, especially if you've never written one before. Here are the most common pitfalls and how you can avoid them.

1. Typos and Grammatical Errors

Your resume needs to be grammatically perfect. If it isn't, employers will read between the lines and draw not-so-flattering conclusions about you, like: "This person can't write," or "This person obviously doesn't care."

2. Lack of Specifics

Employers need to understand what you've done and accomplished. For example:

A. Worked with employees in a restaurant setting.

B. Recruited, hired, trained and supervised more than 20 employees in a restaurant with $2 million in annual sales.

Both of these phrases could describe the same person, but the details and specifics in example B will more likely grab an employer's attention.

3. Attempting One Size Fits All

Whenever you try to develop a one-size-fits-all resume to send to all employers, you almost always end up with something employers will toss in the recycle bin. Employers want you to write a resume specifically for them. They expect you to clearly show how and why you fit the position in a specific organization.

4. Highlighting Duties Instead of Accomplishments

It's easy to slip into a mode where you simply start listing job duties on your resume. For example:

Attended group meetings and recorded minutes.

Worked with children in a day-care setting.

Updated departmental files.

Employers, however, don't care so much about what you've done as what you've accomplished in your various activities. They're looking for statements more like these:

Used laptop computer to record weekly meeting minutes and compiled them in a Microsoft Word-based file for future organizational reference.


Developed three daily activities for preschool-age children and prepared them for a 10-minute holiday program performance.

Reorganized 10 years worth of unwieldy files, making them easily accessible to department members.

5. Going on Too Long or Cutting Things Too Short

Despite what you may read or hear, there are no real rules governing the length of your resume. Why? Because human beings, who have different preferences and expectations where resumes are concerned, will be reading it.

That doesn't mean you should start sending out five-page resumes, of course. Generally speaking, you usually need to limit yourself to a maximum of two pages. But don't feel you have to use two pages if one will do. Conversely, don't cut the meat out of your resume simply to make it conform to an arbitrary one-page standard.

6. A Bad Objective

Employers do read your resume's objective statement, but too often they plow through vague pufferies like, "Seeking a challenging position that offers professional growth." Give employers something specific and, more importantly, something that focuses on their needs as well as your own. Example: "A challenging entry-level marketing position that allows me to contribute my skills and experience in fund-raising for nonprofits."

7. No Action Verbs

Avoid using phrases like "responsible for." Instead, use action verbs: "Resolved user questions as part of an IT help desk serving 4,000 students and staff."

8. Leaving Off Important Information

You may be tempted, for example, to eliminate mention of the jobs you've taken to earn extra money for school. Typically, however, the soft skills you've gained from these experiences (e.g., work ethic, time management) are more important to employers than you might think.

9. Visually Too Busy

If your resume is wall-to-wall text featuring five different fonts, it will most likely give the employer a headache. So show your resume to several other people before sending it out. Do they find it visually attractive? If what you have is hard on the eyes, revise.

10. Incorrect Contact Information

I once worked with a student whose resume seemed incredibly strong, but he wasn't getting any bites from employers. So one day, I jokingly asked him if the phone number he'd listed on his resume was correct. It wasn't. Once he changed it, he started getting the calls he'd been expecting. Moral of the story: Double-check even the most minute, taken-for-granted details -- sooner rather than later.

Breaking News - Jobless Claims Rise Unexpectedly to 480,000

"The Labor Department says that new claims for unemployment insurance rose by 8,000 to a seasonally adjusted 480,000. Wall Street economists had expected a drop to 460,000."


So, what does that mean for you?  It means that to make your job search more effective in the face of more competition, you have to do a much better job of looking for work.  As I have written, you need to take a very serious approach to marketing yourself, networking with current and former colleagues, work the job boards, work social networking sites like Linkedin and Facebook, and if you are unemployed, make looking for work a full-time job in and of itself.

If you are employed, start working on your network today.  Reach out to former colleagues.  Get involved in professional groups where like-minded people gather.  Make sure your resume is current, and reflects what you do today, plus any promotions you have received.

Lastly, if you are on Linkin, sign-up for groups that will help you network.  You would be surprised how many people you can reach that way.

Mike says:  This is a jobless economic recovery, so don't expect unemployment to break anytime soon. 

Breaking News: Federal Government to Grow to 2.15 Million Employees in 2010

The Obama administration projects the number of employees on the government payroll will grow to 2.15 million this year, reportedly making it the largest federal workforce in modern history and fueling criticism over the size of government.
The Obama administration projects the number of employees on the government payroll will grow to 2.15 million this year, reportedly making it the largest federal workforce in modern history and fueling criticism over the size of government.

The Washington Times reported Wednesday that the bulk of the increase is on the civilian side, which is expected to grow by 153,000 workers in 2010.

The expansion means the workforce will top 2 million for the first time since President Clinton declared that "the era of big government is over," according to the newspaper.

The expansion comes even as Obama calls for cutting the deficit and imposing a three-year freeze on some non-security spending.

Mike says:  The government is a tax consumer, while you work to contribute to the tax base.  No unemployment or jobs problem in D.C.