“Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all.” -Dale Carnegie
Happy 4th of July! We are so fortunate to live in a country that allows us to be free to pursue our happiness. Despite these trying times and the choppiness of Democracy at work, we should be so proud and confident of our young great nation!
During the early years of WWII Nazi submarines, operating in wolf packs, roamed the frigid waters of the North Atlantic with impunity sinking an alarming number of British military and merchant ships. Hitler was confident that his U-boats could blockade England and eventually starve the British people into submission.
In the summer of 1940, while the Battle of Britain was being played out over London, the Germans unmercifully sank over 300 British military and merchant ships. Prime Minister Winston Churchill, fearing the negative impact these devastating losses might have n the nation’s morale, ordered the information withheld from the public. In an effort to reduce the appalling number of causalities lost at sea, Churchill instructed the British Royal Navy to begin a study to determine what, if anything could be done to save more lives during sea rescue.
While interviewing the survivors an interesting discovery was made. To their complete astonishment, the researchers noted that the survival rate for the younger, presumably more physically fit sailors was remarkably lower when compared to the older shipmates. The study concluded that the older sailors had a significantly higher survival rate due to the fact that they had overcome more adversity and therefore, had developed greater confidence in being rescued than the younger, less experienced sailors.
History is replete with examples of people who felt like quitting but didn’t, only to realize incredible accomplishments. Just before those great accomplishments, you like would have heard them say, “I hate this!, This sucks! When will things turn around?!…” Well, I am here to tell you that we have turned the corner. Although the press is talking a “double-dip” we are not seeing it. We are definitely seeing continued activity but not much momentum.
As Gary London says, we are in the “search and rescue” phase with investors and tenants looking for bargains and opportunities while anticipating the economic upswing. I like to call it a “wobbling economy”, like a child who crawls then wobbles, then walks and eventually runs.
This summer we have three significant milestones to work through so we can keep “wobbling.” First, the end of QE2. The QE2 program is scheduled to end in June and the Fed says there won’t be a QE3. I think we are going to get a stealth QE3 by way of the Fed reinvesting in maturing bonds, release of the strategic petroleum reserve to keep oil prices down (oil is a proxy for interest rates), and possibly the lowering of the tax rates on corporate profits held overseas (over a trillion dollars!) Second, the battle over the debt ceiling. This showdown has as much to do about the ceiling and spending as it does about the Presidential elections in 2012. Republicans won’t compromise for fear of the Tea Party splintering off and doing what Ross Perot did in 1992, splitting the vote. Knowing this, the Democrats will likely try to force the hand. In the end, we are likely to see the tension and then compromise which will mean higher taxes and less spending (see below.) Also, don’t let it be lost on you that the Presidential election cycle is now in play. This likely means that we won’t see any meaningful fed rate increases until the first quarter of 2013. My advice – Go Long! Borrow all you can get from stingy lenders now.
The third milestone facing us this summer is the debt crisis in Europe. Lest you think this is not our problem, think again. European banks have about 90% of the exposure to places like Greece but through reinsurance, US banks have about 50% of the European banks’ exposure. And remember us taxpayers back up the US banks. So guess what? It may not be Greek to you but it maybe 50% of you to the Greeks!
As mentioned above one sure thing is the government spending is going to decline. What and where will we likely see this outcome?
• Expect more private ownership of freeways and other means of transportation.
• Slower retail spending due to higher taxes, high unemployment, fewer reductions in retail prices through imports (cheaper dollar.)
• Office space by government and agencies and funded nonprofits will decline.
To further President Clinton’s famous admonishment, “It’s the economy stupid”, I would tell the world (especially those in real estate), “It’s about jobs!” Despite the decline in the outlook in the National economy, San Diego is up 11,400 jobs over last year. Unemployment is at 9.6 in May which is below the 10.1% it stood at last year at this time. Furthermore, the University of San Diego (USD) Index of leading economic indicators for San Diego has recorded its 22nd gain in 25 months (with the other 3 months unchanged.) We just need two ingredients to keep up this slow wobbly recovery – more jobs and more consumer confidence. A jobless recovery is a lie as much as saying that taxes are revenue enhancements. We have an unemployment crisis!
Also on the positive front, we have seen a continued positive upturn in the number of inbound sign calls since March (a good proxy for market activity.)
As we celebrate the birth of our Nation and the proverbial dollar, we pray for more employment and dollars in all of our pockets; I thought you would enjoy this story about our lowly Dollar Bill – Happy 4th!
The Dollar Bill
On the backside of the One Dollar bill, you will see two circles. Together, they comprise the Great Seal of the United States. The First Continental Congress requested that Benjamin Franklin and a group of men come up with a Seal. It took them four years to accomplish this task and another two years to get it approved.
If you look at the left-hand circle, you will see a Pyramid. Notice the face is lighted, and the western side is dark. This country was just beginning. We had not begun to explore the West or decided what we could do for Western Civilization. The Pyramid is uncapped, again signifying that we were not even close to being finished. Inside the capstone, you have the all-seeing eye, an ancient symbol for divinity. It was Franklin’s belief that one man couldn’t do it alone, but a group of men, with the help of God, could do anything.
‘IN GOD WE TRUST’ is on this currency. The Latin above the pyramid, ANNUIT COEPTIS, means, ‘God has favored our undertaking.’ The Latin below the pyramid, NOVUS ORDO SECLORUM, means, ‘a new order has begun.’ At the base of the pyramid is the Roman Numeral for 1776. (MDCCLXXVI)
If you look at the right-hand circle and check it carefully, you will learn that it is on every National Cemetery in the United States It is also on the Parade of Flags Walkway at the Bushnell, Florida National Cemetery, and is the centerpiece of most hero’s monuments. Slightly modified, it is the seal of the President of the United States, and it is always visible whenever he speaks, yet very few people know what the symbols mean. The Bald Eagle was selected as a symbol for victory for two reasons: First, he is not afraid of a storm; he is strong, and he is smart enough to soar above it. Secondly, he wears no material crown. We had just broken from the King of England. Also, notice the shield is unsupported. This country can now stand on its own. At the top of that shield, you have a white bar signifying congress, a unifying factor. We were coming together as one nation. In the Eagle’s beak, you will read, ‘ E PLURIBUS UNUM’ meaning, ‘one from many.’
Above the Eagle, you have the thirteen stars, representing the thirteen original colonies, and any clouds of misunderstanding rolling away. Again, we were coming together as one. Notice what the Eagle holds in his talons. He holds an olive branch and arrows. This country wants peace, but we will never be afraid to fight to preserve peace. The Eagle always wants to face the olive branch, but in time of war, his gaze turns toward the arrows. They say that the number 13 is an unlucky number.
This is almost a worldwide belief. You will usually never (or seldom) see a room numbered 13, or any hotels or motels with a 13th floor. But think about this:
13 original colonies
13 signers of the Declaration of Independence
13 stripes on our flag
13 steps on the Pyramid
13 letters in Annuit Coeptis
13 letters in ‘E Pluribus Unum
13 stars above the Eagle
13 bars on that shield
13 leaves on the olive branch
13 fruits, and if you look closely,
13 arrows
And finally, if you notice the arrangement of the 13 stars in the right-hand circle you will see that they are arranged as a Star of David. This was ordered by George Washington who, when he asked Hayim Solomon, a wealthy Philadelphia Jew, what he would like as a personal reward for his services to the Continental Army, Solomon said he wanted nothing for himself but that he would like something for his people. The Star of David was the result. Few people know that it was Solomon who saved the Army through his financial contributions but died a pauper.
