CDC Commercial Inc

June 2013 Monthly Letter

Well with Memorial Day just passed and graduation in full swing, I thought this month I would share some interesting facts and figures. First in honor of our American Patriots.  Since our nation’s founding, more than one million American Soldiers, Sailors, Airmen, Marines and Coast Guardsmen have paid the ultimate price in defense of our nation, and it is their final sacrifice that we honor with solemn  reverence.

I have always adhered to the policy of not betting against the Fed.  In the past, we have seen the Fed and our Congress try to turn our housing market into an ATM machine.  Now with the Fed purportedly 25% of the stock market, I am worried they are trying to make another ATM machine.  The talk is that quantitative easing may be coming to an end and this will lead to higher rates (note to self: lock-in rates and Refi’s now). For some time, the market has regarded quantitative easing as the liquor that spikes the punch. Take away the liquor and you might as well take away the punch bowl.  No one can predict if the winding down of quantitative easing will spell the end of the market’s bullish run. The hope is that other market factors (i.e., recovery) will take over and serve as the true catalyst. The concern is that we are all running to stand still.

Just as you shouldn’t bet against the Fed, I strongly believe you shouldn’t bet against San Diego.  As you know the sun always shines in San Diego and summer visitors are big business;

  • During the 14 weeks between Memorial and Labor Day, more than 21 million visits will be made to San Diego County beaches and more than $450 million spent on everything from gas for the car to sunscreen and sand shovels, according to findings released by the National University System Institute for Policy Research.
  • On an average summer day more than 114,00 tourists will visit San Diego County.

Other important pluses for San Diego are;

  • Military: the San Diego region’s military industry is second to none in terms of size, concentration and output.  Of the 25 largest U.S. Metropolitan areas, San Diego dwarfs every other metro in the metrics mentioned.  Even the nation’s capital, which ranks second in federal military employment size and GDP, employs approximately 39,000 fewer people and creates $2.8 billion less in GDP than San Diego’s federal military economy. (Source San Diego Regional EDC.)
  • Home Sales: San Diego remains one of the most expensive for-sale home markets in the U.S. and prices continue to increase.  From Q3-Q4 2012, home prices grew nearly 3 percent in the San Diego region.  Every one of the 25 most populous U.S. metros experienced an increase in prices from Q4 2011-Q4 2012, with San Diego outpacing the U.S. average at 13.2 percent. (Source National Association of Realtors.)
  • Venture Capital: In the 4th quarter of 2012, the San Diego region ranked 10th out of the 18 regions tracked by PricewaterhouseCoopers in terms of VC dollars invested in regional companies.  Biotechnology companies were the biggest recipients of VC dollars.  Software, energy and medical devices were the other major industry recipients.  In total, San Diego received more than $1.1 billion in VC funding in 2012, which is approximately $190,000 more than the region received in 2011.  (Source: PricewaterhouseCoopers Money Tree Report.)

And perhaps the most important number, unemployment in San Diego is at its lowest level in five years.  So hopefully it’s not just our beaches but our job market that will attract all of those newly minted graduates in the months ahead.

If I were to give one piece of advice to all of those of about to graduate, it would be to own your work.  Practice your craft every day and be patient and disciplined to ride out the hills and valleys that are the result of the marketplace. The successful ones in life are those that exhibit “Grit” and I define Grit as passion + perseverance . It is something that I am proud that we exhibit here at CDC Commercial.

After 28 years in this business (25  writing this crazy monthly letter!), we have obviously experienced enough success to remain viable but it is truly an honor and privilege to work with and for you, our clients, that makes it all worthwhile.  Thank you for the opportunity, it is not one that we take for granted.  I hope you enjoy the story.

Grade Redistribution in the Classroom

An economics professor at a local college made a statement that he had never failed a single student before but had once failed an entire class.

That class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, “OK, we will have an experiment in this class on socialism. All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A.

After the first test, the grades were averaged and everyone got a B.

The students who studied hard were upset and the students who studied little were happy.

As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy.

When the 3rd test rolled around, the average was an F.

The scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

All failed, to their great surprise, and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great but when government takes all the reward away, no one will try or want to succeed.

It could not be any simpler than that.

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