by Estela Lopez -Project Pegasus Inc
Fear and negativity.....that was the title of my last report, and things have gotten progressively worse on that front. We currently appear incapable of reining in that negativity which continues to undermine all recovery, much like a runaway horse that’s been spooked. The juggernaut of fear and uncertainty has reached panic proportions. Riots in London, and mass hysteria ripping through the stock markets.....and why? One word fear , fear of the unknown, fear of loss, fear from the sheer weight of negativity. One of the first markets to open trading ahead of others is the Australian stock market, which opened on Monday wiping 60 billion because of fear. A ridiculous one at that, purely based on sentiment and not logic because the source of that fear, has no real impact at all on Australia. All because of reaction to the downgrade of the US credit rating by Standard and Poor’s to AA++. First of all....was it really that much of a shock? It’s been feared for some time. Secondly.... it’s not the end of the world, and there are still two other rating agencies Moody’s and Fitch who are maintaining the AAA. Thirdly.... and perhaps most importantly, it should be noted that S&P stated their decision was based on the lack of agreement by political parties in the US, over raising the debt ceiling.......that’s the irony that it had less to do with the actual state of the economy. The more shocking concern was that many US legislators appeared not to care if the US defaulted..... thus the decision by S&P to downgrade.
It was mildly depressing to watch the reaction of people interviewed on the streets of NY outside Wall Street. Although most admitting to not really having a clue what was going on.......all were ready to predict the end of the world as we know it. Aside from US pride taking a dent, is it really that catastrophic? Gee.... I don’t know ask Brazil who’s just had their credit rating lifted by Fitch to BBB, and their economy is being held up and recognised around the globe as going from strength to strength. The point is you can always find a number of reasons to predict disaster, yet you can equally gain a measure of hope if you look at economies around the world, like Brazil who are not only picking themselves up from the GFC but growing steadily. Harder to not get lost in the doom and gloom I know....unfortunately there are many doomsday merchants who seem to actually revel in predicting dire straits, rather than exercising some restraint and looking for a way out. Much like what's currently wrong with Washington, and their inability to come together as a cohesive group of lawmakers, instead of playing the blame game.
Not everything is as gloomy as publicised, oil price is falling and the corporate sector is doing quite well, manufacturing for one. Many companies have recorded record profits, companies like Apple 15.7 billion in revenue, Toshiba, Starbucks and many more. Economic research from Scott Macdonald of Aladdin Capital Holdings, indicated the outlook was overall not quite as catastrophic as we are led to believe. He was on CNN only a few weeks ago, stating US corporate sector was sitting on 2 Trillion in cash. This is in fact reflected in commercial vacancy rates continuing to decline.
From the first quarter of this year to the first quarter of 2012, NAR expects vacancy rates to decline 0.5 percentage point in the office sector, 1.3 points in industrial real estate, 0.1 point in the retail sector and 0.9 percentage point in the multifamily rental market. The fact remains, as mentioned in my last report.......lack of construction will essentially result in demand. Lawrence Yun, NAR chief economist, said a pullback in construction is helping stabilize the market. “Very limited construction of new commercial real estate over the past few years has essentially fixed the supply of available space,” he said. “This means vacancy rates could fall quickly from any increase in demand for commercial space.”
