howard jackson's 2017 annual real estate market forecast · market forecast ©®™ by howard...
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Howard Jackson's 2017 Annual Real EstateMarket Forecast ©®™
by Howard Jackson, MAI, SRPA
NYS Licensed Real Estate Appraiser and Real Estate Broker
www.howardjacksonrealestate.com
Dated: January 1st , 2017
Although the information in this report has been obtained from sources that Howard Jackson Real Estate believes to be reliable, we do not guarantee the accuracy, and such information may be incomplete or condensed. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice. This report is for information purposes directed to the real estate professional only and is not intended as an offer or solicitation with respect to the purchase,sale or financing of any type of real property interest.
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Howard Jackson's 2017 REAL ESTATE MARKET FORECAST ©®™
We are pleased to present the 30th consecutive Howard Jackson’s 2017 Real Estate
Market And Economic Forecast ©®™ .
GENERAL OVERVIEW OUTLINE
1. Introduction and historical perspective including key issue summaries including themain, powerful forces interacting with the economy and real estate market. You willclearly see where the economy was, is now and forecast to be in 2017 and beyond.Included will be substantial historical references making comparisons to current andforecast conditions more meaningful.
2. Howard Jackson's 2017 REAL ESTATE MARKET FORECAST ©®™ – with each relevant item related to real estate being described, analyzed and a specific forecast. These include the commercial, residential real estate market , office, industrial, hotel,retail, land, issues of importance affecting real estate.
3. Other items (macro and micro economic factors) such as: issues of importance in real estate, GDP growth, Unemployment, Interest Rates, Capitalization Rates, Mortgage Interest Rates, Wall Street, the Fed's beginning of interest rate normalization, Consumer Confidence, Recession, Inflation, Deflation, Stagflation, Energy will be covered in abbreviated depth including handy, historical reference charts.
4. Overall Observations, Conclusions and Comments of the 2017 Annual Real Estate Market Forecast
5. Howard Jackson's Economic Blueprint ©®™ for Growth for 2017 including a detailed analysis of the economic laws and principles underlying the blueprint. Also included willbe specific plans on how to improve the economy which include tax changes.
6. About the Author, Howard Jackson, MAI, SRPA, Licensed New York State Real Estate Appraiser and Licensed New York State Real Estate Broker
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Table of ContentsIntroduction and Historical Perspective.....................................................................................................5ISSUES OF IMPORTANCE FOR REAL ESTATE...................................................................................9Unemployment.........................................................................................................................................12Gross National Product – GDP ..............................................................................................................14Consumer Confidence..............................................................................................................................18Inflation ..................................................................................................................................................21Recession Possibilities.............................................................................................................................25REAL ESTATE FORECAST STATISTICS FOR 2017...........................................................................27OFFICE....................................................................................................................................................27Manhattan – Office .................................................................................................................................28Long Island Office – Third Quarter 2016................................................................................................30Office Sales Market..................................................................................................................................31RETAIL....................................................................................................................................................31Manhattan – Retail – Submarkets - Cushman Wakefield........................................................................33Retail Market – 3rd Quarter-2016............................................................................................................34Long Island..............................................................................................................................................34HOTEL.....................................................................................................................................................35INDUSTRIAL..........................................................................................................................................40Property Appreciation Rates....................................................................................................................42INVESTMENT PROPERTY SALES .....................................................................................................42PREFERRED CITIES FOR INVESTMENT ........................................................................................43RESIDENTIAL........................................................................................................................................44Manhattan.................................................................................................................................................46Brooklyn...................................................................................................................................................47Nassau......................................................................................................................................................48Suffolk......................................................................................................................................................49Queens......................................................................................................................................................50 .................................................................................................................................................................51 .................................................................................................................................................................51Residential Real Estate Market Forecast Summary.................................................................................51REAL ESTATE FINANCE .....................................................................................................................52Interest Rates............................................................................................................................................53Commercial Real Estate Finance.............................................................................................................56Bridge Lending........................................................................................................................................56Construction Lending...............................................................................................................................57Real Estate Equity Investment Capital.....................................................................................................58Capitalization Rates.................................................................................................................................59Real Estate Taxes.....................................................................................................................................62Stock Market............................................................................................................................................62Energy – Oil 2017.................................................................................................................................63 .................................................................................................................................................................63
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.................................................................................................................................................................63Clean Energy-Solar..................................................................................................................................64Stagflation................................................................................................................................................65Bailout and Financial Stimulus................................................................................................................66Global Competitiveness ..........................................................................................................................66OVERALL CONCLUSIONS AND OBSERVATIONS...........................................................................68Howard Jackson's Economic Blueprint-Introduction .............................................................................70Basic Economic Principles and Forces Influencing the Economy...........................................................76Howard Jackson’s Economic Blueprint For 2017 ©®™........................................................................84Will The Economy Continue To Feel Better in 2017?.............................................................................92About The Author ...................................................................................................................................93Historical Client List ...............................................................................................................................98
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Introduction and Historical Perspective
The FED has moved out of quantitative easing mode and beginning the process of interest rate normalization by now raising interest rates which started in December 2015. In fact, therewas a 2nd (25 basis point) increase on 12/15/2016. At that announcement, it was stated that there probably would be 3 additional (25 basis point) increases throughout 2017.
The issue of currency manipulation, competitive devaluation and currency wars while not appearing on the main stream media, is substantial factor in economic outcomes. This will be discussed in great detail. This affects trade between countries. It was mentioned during the Presidential debates as well in the President-Elect's statements.
All of the above are the major macro economic factors impacting the economy going into 2017. There are minor, contributing factors and those affecting real estate will be covered.
Two concepts should be kept in mind when reading this forecast. Regardless of all of thenews, press, op-ed pieces, financial dynamics, these two concepts will always remain as thecentral tool and concept of investing in real estate and the related financial markets.
1. Value is the anticipated present worth of future benefits. The market pays acurrent price based upon its “perception” of future benefits.
2. Risk vs. Reward: The price of an asset is based upon its risk weighed against itsreward ( income and appreciation ). The more accurate and clearer thisrelationship is in the market, the better the market will function and debacles likethis will be literally non-existent. The after affects of the sub-prime mortgagecrisis and residential real estate market meltdown continue. There have beenmajor settlements by banks. It is anticipated that there will be continue to begiant civil and criminal actions to recover the billions lost which has alreadybegun in earnest in 2011.
Later in this forecast, will be presented Howard Jackson's “Economic Blueprint” for 2017. Anumber of simple, sensible economic, fiscal plans that will turn a slowly growing US economyinto a powerful economic engine providing quality jobs, better GDP growth, low inflation,better investment environment and the social safety and military network. There is no magicor mystery to it. It is basic, economic and market common sense that everyone can relate to.
President-elect Trump will assume office on January 20th, 2017.
Here are some critical comparisons of key indicators such as employment, interest rates, etc.that past Presidents inherited when they took office.
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ISSUES OF IMPORTANCE FOR REAL ESTATE2017
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According to The Counselors of Real Estate “CRE”, the top 10 issues affecting real estateare:
https://www.cre.org/external-affairs/cre-2016-2017-top-ten-issues-affecting-real-estate/
1. The Changing Global Economy
2. Debt Capital Market Retrenchment
3. Demographic Shifts
4. Densification/Urbanization
5. The Political Environment
6. Housing Affordability and Credit Constraints
7. The Disappearing Middle Class
8. Energy
9. The Sharing/Virtual Economy
10. The Rise of “Experiential” Retail
On the Watch List:
The Counselors of Real Estate organization noted that close runners-up in development of The CRE Top Ten Issues Affecting Real Estate 2016-17 list included 21st Century Manufacturing & Industrial, Infrastructure, and “Unknown Unknowns” (such as terrorism and trade agreements) which are factors that could affect commercial and residential markets.
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Unemployment
The US jobless rate currently is at a nine year low of 4.6 %
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Source: Bureau of Labor Statistics
December 16, 2016
It was reported on 12/16/2016 that the unemployment rate for Long Island in November 2015 was 3.7 %.
The economy has started to feel good again but not by all. This will continue to get better through 2017.
The incoming President-Elect has announced broad plans of job creation including major infrastructure plans, tax code changes and addressing the free trade issues.
Three of the issues affecting the lack of vibrant growth are the tax code, regulations and the actions of the FED. Additionally, China has experienced a slow down as is the European economy. They may have to change their economic model from export driven to one with more consumption driven. More information about this will be presented at the end of the Howard Jackson Economic Blueprint.
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Gross National Product – GDP
Gross National Product (GDP) has been slowing down towards the end of the year, probably due to China and Europe slowing down. Those countries have been enacting a US version of QE – quantative easing. Following are the relevant statistics.
Global GDP GROWTH
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Source: World Bank
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Source: World Bank
Source: Trading Economics
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The chart below is presented to show the historical perspective during the market crash of 2008.
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Given a new President of the United States, who is strongly pro-business and growth, I expect GDP growth for 2017 to be in the 3-1/2% - 4-% range.
Consumer Confidence
On November 29th, 2016, the Conference Board released the following statement regarding consumer confidence: “The Conference Board Consumer Confidence Index®, which had declined in October, increased significantly in November. The Index now stands at 107.1 (1985=100), up from 100.8 in October. The Present Situation Index increased from 123.1 to 130.3, while the Expectations Index improved from 86.0 last month to 91.7.”
For historical perspective, on November 24th, 2015, “The Conference Board Consumer Confidence Index®, which had decreased moderately in October, declined further in November. The Index now stands at 90.4 (1985=100), down from 99.1 in October. The Present Situation Index decreased from 114.6 last month to 108.1 in November, while the Expectations Index declined to 78.6 from 88.7 in October.”
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Source: Doug Short, Advisor Perspectives
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Here is a history of consumer confidence statistics:
It is forecast that the consumer confidence index will rise again over 120 in 2017 due mainly to an improving economy, the FED normalizing interest rates, the New President taking office on January 20th, 2017, real estate market, international trade and other variables to be covered later.
Inflation
There are basically two types of inflation: cost push inflation or demand pull inflation. Sometimes, it is called “ too much money, chasing too few goods”. The focus will be core inflation which tends to be a stable period over period effective measurement. Spikes, upward or downward in food and energy, are generally not considered in core
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inflation but they can have a profound effect on economic activity and GDP.
The FED, through its quantitative easing program has been trying to push the inflation rate to 2%. This will be discussed in depth later. But with this policy, inflation will be created ultimately and hopefully the FED will act in a way that brings price stability at zero percent inflation and not 2%.
But inflation must also be looked at another way – a loss of purchasing power. For example, the item I bought for last year for $1.00 now costs $1.10 today. That indicates an inflation rate of 10%.There has been substantial amounts of dollars injected into the economy by the FED and this ultimately causes inflation since this is the cause of the erosion of the purchasing power of the dollar.
Except in extreme cases, inflation is a monetary phenomenon where the central banks pump more money into the economic system without a corresponding rise in economic output. One of the fears of the quantitative easing was that it would lead to run away inflation.
Inflation is a serious economic disease that if left unchecked, could destroy a society. Once inflation gets into the economic system it begins to cause damage in two ways: a hidden tax and a loss of purchasing power. The longer it is left to fester, the harsher andmore painful is the cure. Inflation is a policy induced event not a free market event.
Here is a link to a video in which Milton Friedman, the economist, describes how to cure inflation: https://www.youtube.com/watch?v=jE7zxo61Xc8
The only way to deal with inflation effectively is to slow monetary growth. Some would argue that the velocity of money is also a factor. This would wring inflation out of the market.
The problem is that when the FED creates money the good effects come first and the bad effects lag behind by a few years (inflation).
Now when the time for the cure comes (slowing or reversing monetary growth), the bad effects come first and the good effects lag behind by a substantial period of time. That iswhy it is hard to persist with the cures for inflation.
The growth of credit cards is also a form of money which has to be factored into the inflation equation. The current system of fractional reserve banking is also a contributing factor.
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The FED has stopped quantitative easing but said it would be patient with regards to raising interest rates gradually. This month is raised the interest rate by ¼ of 1%. They indicated thatthey expected to raise interest rates three times in 2017, assuming their forecasts remained on target. Although the economy had a good year, the GDP growth slowed towards the end of the year. The FED feels that the inflation rate is still below its 2% target. Is this the new definition of stable prices – 2% inflation. That seems absurd. The target for inflation should be 0%. Why couldn't the FED or central bankers in general, try to have a zero inflation policy?
Another problem is that the FED is now starting to raise interest rates while the major economies in the rest of the world are starting on their versions of QE – quantitative easing and are lowering interest rates and some have negative interest rates.
Oil prices have risen over the past few months and it is very likely that strong economic growth will continue along with low inflation for a good part of 2017 in spite of some headwinds from the slowdown in China and Europe.
Many economists will be quick to say that a little inflation is good for it minimizes the risk of deflation – which they tend to equate with a shrinking economy. But deflation could also be the falling of prices of certain goods due to technological advances – such as the ball point pen, the personal computer – so there are good kinds of price deflation. This type of falling prices for individual goods is the reward for capitalism and the free market and elevates people's living standards.
Numerous economists in the public sector are giving second best solutions (sub-optimal) to problems like this when they are perfectly capable of giving first best solutions. Why? Probably due to the political factors – not being able to sell it to the majority politically and the numerous reasons behind that.
Generally central bankers, for example, the FED pursue policies to have slight inflation in the economy. If inflation is slight, it can actually spur further economic growth. If pricesrise slowly and gradually, it can encourage people to buy now and avoid future price increases. This increases demand, employment, driving further economic growth. In this way, a healthy economy can usually sustain a 1%-2% inflation rate. But this can be a trap for eventually inflation gets out of control. The basic fallacy of this policy is that inflation works against savings and investments which are the only way an economy canprosper, wealth can be created and the standard of living rises. Savers won't save when interest rates are too low and investors won't make significant, long term investments if they are not sure what the value of the future dollars they will be paid with are worth.
According to this FED logic, people feel more confident and buy if they have to pay morefor something. But in reality, it is the opposite, people want to be able to buy more with the dollar, not less. Buy being able to buy more, their standards of living go up. If pricesrise due to inflation, they only can buy less and the standard of living goes down.
How is inflation measured. It is measured by the Bureau of Labor Statistics (BLS) using the Consumer Price Index (CPI). The Index is based on a survey of 23,000 businesses, and records the prices of 80,000 consumer items each month. The CPI will tell you the general rate of inflation. This benchmark is also used for other purposes.
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It is forecast that inflation for 2017 will remain at the 1%-2% for the year. It will then accelerate in 2018 -2019 which will cause the FED to agressively normalize interest rates before inflation gets out of control.Hopefully the FED will speed up the normalization process before inflation rises. Other central banks have enacted similar QE policies as the US is phasing out of it's QE policy. This could exascerbate inflation issues globally.
Recession PossibilitiesThe recession officially ended in June 2009. For 2016, the economy it posted 4 consecutive quarters of GDP growth and the unemployment rated dropped to 4.9%.
The FED raised interest rates again this December and indicated it would raise them three times in 2017 in its interest rate normalization process.
For all of these reasons, it is forecast that the chances of a recession in 2017 is close to zero. But the economic recovery has been anemic and the major cause of this is the actions of the FED with excessive money creation which debases the currency, causes inflation which in turn negatively affects savings and long term investments which are the key to economic growth, wealth creation and increasing standards of living.
The fact that the President-elect has as priorities: to lower taxes and fix the antiquated tax code as well as embark on a major infrastructure plan, both of whichwill be very good for the economy.
For historical reference purposes, below is a chart indicating recessions of the pastas well as the duration of such recessions.
There are a few potential externalities that could be problematic.
One is that the other major economies – China, UK, Japan, Germany have to do more rather that wait for the US economy to lead the world to stronger economic growth.
The other is that the central banks have been utilizing excessive money printing and hopefully this won't cause inflation.
But ultimately they will have to unwind from this and that will be followed by rising interest rates.
The US central bank ( The FED) has started this process which the other countries haven't and in fact, some have negative interest rates.
As the FED's normalization process continues, this could “clash” with the other countries
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keeping low and sometimes negative interest rates.
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REAL ESTATE FORECAST STATISTICS FOR 2017
OFFICE
OFFICE RENTAL MARKET
The office rental market has been showing continued signs of improvement whileconsistent reports indicate that the financial sector ( Wall Street, the bankingindustry) intends to make large reductions in staff. The World Trade Center hasfinally opened.
Some of my esteemed colleague's produce very specific, detailed market reports.These reports have graphical and statistical data about historical activity for theyear in the various markets in New York City and Long Island. I have presented anexcerpts from each. The web sites are listed as follows:
1. www.colliers.com
2. www.cushwake.com
3. www.savills-studley.com
4. http://www.us.jll.com/united-states/en-us
5. www.avisonyoung.com
6. www.cpexre.com
7. www.cbre.com
8. www.nailongisland.com
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Manhattan – Office
Market Boundaries – Source: Studley
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New York City is an international and most sought after market in the world.
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Long Island Office – Third Quarter 2016Source: Cushman and Wakefield
In the web sites mentioned above, there are reports, and statistics about this end of the market not only in the US but also world wide.
According to market research, interviews with the major real estate brokerages, the rental market will have slightly more activity and rental rates will probably remain flat in terms of rates per square foot throughout most of 2017 with a bias for upward trends. Vacancy rates are expected to remain relatively unchanged.
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Office Sales Market
I forecast 2017 to be the next step in a continuation of a pivotal year which began in 2010. With continued, improved local, regional, national and international economies, I anticipate that 2017 will will be substantially better than 2016 probably 15% - 20% moretransactions over 2015 which will be significantly noticeable. This is mainly due to increasing availability of mortgage financing and continually improving economic conditions.
Currently Manhattan is the most sought after location in the world.
Please see below for a combined sales report.
RETAILIn the web sites of the real estate brokerage firms mentioned above also have data on retail that can be accessed.
All of that information is driven by micro and macro economic fores which will be summarized here.
2016 has been a better year economically than 2015, primarily driven by an improving economy and consumer confidence. But good or bad economic news in retail is seemingly always a lagging factor. This sector has always appeared to be simple but yetcomplex and many time difficult to analyze on a macro economic scale, let alone micro-economic factors. Add to that the increasing market share on-line sales are taking from the stand alone brick and mortar retail establishments.
On line sales continue to increase. It is now part of the standard practice of the businessmodel.
Many retailers make 40% of their annual revenues from Black Friday through Christmas.
Many newer built communities were developed around master plans. But not really so for the New York Metropolitan area.
What are the factors that make a retail project successful:
1. Location, 2. Demographics ( population) , 3. Access /transportation ( parking),
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( subway and or bus) 4.State and strength of the economy, 5. Transportation, 6. Disposable Income, 7. Products and product mix, 8. etc.
Usually in retail, there is good news, which is then followed by either a new retail development, or higher rents. If good news continues for a prolonged time in areas where there is no master planning, then “junk” retail is built. This is a lagging economic indicator.
On the other hand, if existing retail is good and then there is bad news, then stores go dark ( go out of business), rents fall, vacancies soar ( which damage other tenants should this occur in a strip mall or shopping center), concessions increase, new retail development stops etc.
In past forecasts, I would place specific numbers on rental rates, vacancies. Given the unique nature of what has happened, I won't in that way. Instead, I would reiterate that the numbers - retail rentals will be higher in the average locations and vacancies will be lower. For the lower end of the retail market, the rents should be stable ( at the 2013 levels). In general, 2017 will be somewhat better for retail. But the well placed, well located, correctly tenanted mid to large retail locations should do even better. This will also be true for the smaller retail.
Economic growth has had another year of continued but slow growth. Given the leading and lagging effects, this growth, which is forecast to continue, will noticeably translate into decreasing vacancies and increasing rents.
The unemployment rate, which has been falling will be the key driving force, from a macro-economic prospective. This rate is expected to continue to improve during 2015.
One factor to watch in the increasing volume of Internet sales. It ultimately will mean that any significant retailer with physical store space will also have to have an internet presence to capture that end of the market. Some retailers have added an internet presence to their physical presence. This has been having a profound effect on traditional brick and mortar retail.
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Manhattan – Retail – Submarkets - Cushman Wakefield
Cushman Wakefield – Manhattan Asking Retail Rents – Third Quarter 2016
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Retail Market – 3rd Quarter-2016
Long Island
Source: NAI Long Island
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Overall it is forecast that the retail market will continue to improve with slightly increasing rents and decreasing vacancies going forward in 2017.
HOTEL
The hotel market has had a year, which is noticeably better than 2015. This was influenced by a number of micro and macro economic factors including the cost of energy, continued sub par but improving US and global economies.
But in the New York City market, the rates have declined due in part to the large volume of new rooms entering the market. This gives consumers more choices. Reports by HVSindicate that approximately 29,000 new rooms will enter the market place by the end of fiscal year 2016.
Here are two hotel news, statistics type web sites:
http://www.hotelnewsnow.com/
http://www.str.com/default.aspx
There is a continuing battle about access to the internet for the hotel guests.
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Source: Cushman and Wakefield
According to Steven Rushmore, Jr., MAI, HVS, here are the top and bottom ratings according to their Hospitality Valuation Index:Top 10 Current Year
Rank Market Value Change
1 Oakland 12%
2 San Jose 10%
3 Huntsville 9%
4 Los Angeles - Long Beach 8%
5 Charlotte 8%
6 San Francisco - San Mateo 7%
7 Las Vegas 7%
8 Sacramento 6%
9 Phoenix 5%
10 New Orleans 5%
Bottom 10 Current Year
Rank Market Value Change
71 Tallahassee -11%
70 New York -8%
69 Atlantic City -4%
68 Cleveland -4%
67 Denver -3%
66 Chicago -3%
65 Hartford -3%
64 Miami - Hialeah -3%
63 Portland -2%
62 Albuquerque -2%
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My colleagues at HVS http://www.hvs.com/ publishes much detailed information and reports.
Hotel financing continues to remain somewhat problematic given the issues of the fall out of the residential real estate market crisis and to a lesser extent the market crash of 2008. The financing picture is slowly getting better, but the lack of freely available financing has been a limiting factor in the sales market. But it has improved over 2016 and it is expected to improve greatly in 2017.
The search for reliable real estate equity capital partners has never been more intense since this will probably be the best time to invest for decades to come. There is only one place right now where excess liquidity is abundant and that is the mid east. There are probably only 3-5 people with access to the heads of Royal Families, Sovereign wealth funds, Multi-billionaires, the largest Sharia compliant banks in the world etc. These real estate equity capital investors also have a liking for hotels. US based real estate equity capital partners have shown an increased interest in hospitality products.
Risk factors will be the economic issues in Europe and possible rising interest rates as aresult of the FED's normalizing interest rates. The last 4 quarters of economic growth in the US economy give strong evidence of this.
Given the relatively good economic news in the last quarter, ADR's will stabilize in the weak areas of the US and continue to improve in New York and the other gateway cities.Occupancy rates are expected to continue to improve over 2017. This will set up an even better year for 2018.
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INDUSTRIALLong Island Industrial Market – 3Q - 2016
Source: NAI Long Island
But because what has been happening with the rest of the world wide economy, many of
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the large industrial companies are starting to bring the work done overseas back to US production facilities. This is due to the increasing wages in places like China and the high cost of transportation. This has a positive ripple effect throughout the industrial market.
Although for Long Island and New York City, the price of land is so expensive and the rents for industrial / warehouse property so low, that the economic incentive to continue industrial or warehouse use is not there. But given the above trends, that could change. For purely industrial, the year ahead would appear to be flat with slight declines. There has not been much new industrial building in the NYC and metropolitan area and some of the existing industrial buildings have been converted to "flex" space or straight office use. This trend will continue for 2016 albeit for the New President's trade and industrial policy going forward including TPP. Industrial land, operating costs are very high in the New York Metropolitan area, compared to other markets. But the location, juxtaposition to Manhattan, the major airports lend this area to specialized industrial use.
Past and sometimes forgotten industrial locations such as the Gowanas Canal area, are making a resurgence. This is due to the juxtaposition to Manhattan and the ability to have viable alternate uses.
Combined with a better focus on fair trade policy, this will signal the start of an more rapidly improving sector of the economy that seemed to be forsaken as dead or dying. Words like outsourcing seemed to be the dominant, singular vocabulary.
It is it clear that the US, as is the rest of the world, is governed by a simple law of economics called “ The Law of Comparative Advantage”, which simply states that a country or an area should make products that they are best suited to make – cost and labor factors come to mind. However, many countries try to retain “comparative advantage” by enacting tariffs, making imports more costly then the same products made in their country. This is surely to be highly contentious, but free and fair trade ultimately brings high quality products, innovation, lower costs for the international community. Additionally, when countries as an aggregate have economic surpluses, theytend to do good things – and more importantly, avoid getting into conflicts leading to war.
But as countries that benefited from outsourcing want to have a higher standard of living, the low costs no longer prevail and those jobs move elsewhere. The US large pockets of industrial areas that have been neglected over the decades are prime for resurgence.
One trend is the continued development of “inland ports”. These are industrial sites withthe following major features: 1. Located at the juxtaposition of a number of major national highways, 2. Having Class “A” rail lines at the site, 3. Having its own airport as well as being close to an international airport, 4. Having the land to build large supporting industrial facilities which can take the large cargo containers, and either load directly on to trucks or rail cars, or subdivide, partially manufacture and then put back
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into large cargo containers and ship. Among other things, this drastically reduces drayage costs, not to mention fuel and labor.
It is forecast that the industrial real estate market for New York City and Long Island will continue along the lines of 2014. Market prices, vacancy rates will show improvement while rental values are expected to remain relatively flat.
It is expected that a number of industrial buildings will be converted to other uses, particularly to flex space and high tech manufacturing which includes artificial intelligence and robotics and in some rare instances, residential. The alternative uses of industrial sites weighed against the lack of new construction of industrial will continue to erode the supply of industrial and warehouse properties.
Financing has improved for industrial buildings in 2015.
The overall market for industrial will be significantly better in 2016 than in 2015 as the economy continues to improve.
Property Appreciation Rates
AS MARKET CONTINUES TO IMPROVE
Retail 1%-1-1/2%
Office 1% -3%
Industrial 1% -2%
Multi-family 3%-5%
Hotel 2% - 3%
Assisted Living 1% - 3%
INVESTMENT PROPERTY SALES
The investment sales market has been continuing to perform well. There have been a number of very large transactions.
Manhattan has been rated as the ultimate safest place in the world to invest as per an article by Real Estate Deal -
http://therealdeal.com/blog/2014/12/16/russian-investors-flock-to-nyc-safe-haven-video/
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PREFERRED CITIES FOR INVESTMENT Figure 10: Best Metros for Investing
Which metro in the Americas do you believe to be the most attractive for property investment purchase?
2016 Rank Metro 2015 Rank
1 Los Angeles 4
2 New York 2t
3 Dallas/Ft. Worth 2t
4 San Francisco 1
5 Toronto *
6 Atlanta 9t
7 Seattle 5
8 Washington, D.C. 8
9 Denver *
2016 Rank Metro 2015 Rank
10 Boston *
11 Chicago 9t
12 Austin 6
13 São Paulo *
14 Miami/So. Florida 9t
15 Calgary *
16 Phoenix *
17 Charlotte *
Source: CBRE Research, Americas Investor Intentions Survey 2016. *Not in top 15.
Canada
Top Ranked Metros:
1. Toronto
2. Calgary
3. Vancouver
Latin America
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Top Ranked Metros:
1. São Paulo
2. Mexico City
RESIDENTIAL
The residential real estate market has shown clear signs of improvement in the 2016.5 “ buy / sell season”. This was driven primarily by improving economic conditions, employment and the reduction of foreclosures of the market.
There is a real concern about the FED's beginning to normalize interest rates, its impact on rising mortgage interest rates and the subsequent impact on housing sales and prices going forward in 2017 and 2018.
The most pressing concern, but one that is not given continuing mainstream media coverage is the argument that the FED has created a stock and real estate market bubble by holding interest rates at almost zero for the past 6 or so years.
If proven to be true, the FED's normalization of interest rates ( mortgage interest rising) and with a tepid economic recovery, this could be a trigger point for the housing market to slow its rate of increase or even decline.
On December 23, 2015, the Wall Street Journal published and artlcle relative to this ( housingmarket) and said that there were a number of major cities to be concerned about. In this article, they made specific references to Case-Shiller indexes and presented the appropriate graphs.The move towards normalization of interest rates by the FED will cause some issues for both markets and are of concern, this Wall Street article presents historical and current documentation. Here is the link to that article:
http://blogs.wsj.com/economics/2015/12/23/which-housing-markets-have-the-most-to-worry-about/
President-elect Trump's plans for substantial economic gains over his Presidency, if successful, could mute this argument.
Here is what I forecast will happen in 2017 for the residential real estate market. My micro and macro economic reasons for it are contained in strategic and logical places within this forecast.
Here is a list of my colleague's web sites containing the reports I mentioned. These reports have very specific information about neighborhoods, sales and other data. Each site has a version of their residential real estate statistics and market analysis.
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1. http://www.halstead.com/2. http://www.elliman.com/ 3. http://http://www.bhsusa.com/market-reports 4. http://www.coachrealtors.com/ 5. http://www.corcoran.com/ 6. http://www.mlsli.com/ ( Long Island Multiple Listing Service)7. http://www.realtor.org/ (National Association of Realtors)
Following are some key excerpts from all of the above. It is recommended that if there is a serious interest, the web sites should be visited and the full reports accessed. Each of the reports prepared by my colleagues are excellent, contain mega amounts of information and data, are well written and well documented.
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ManhattanBrown Harris Stevens
3Q – 2016Manhattan
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BrooklynBrown Harris Stevens
3Q – 2016
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Nassau
MLS-2016
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Suffolk
MLS-2016
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Queens
MLS-2015
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Residential Real Estate Market Forecast Summary
I expect to see the following for 2017
1. Continuing concerns about the FED's normalization of interest rates and the impact on residential mortgage interest rates, home sales and values. The FED raised rates again this December and signaled that there would be three rate rises in 2017.
2. A continually improving residential sales market noticeably better than 2016. But there have been signs that the ultra high end of the sales market might be topping out.
3. A stabilized market in terms of values, meaning values are rising.4. A significant lowering of DOM ( days on market) or marketing time.5. There will be a tighter spread between asking and selling prices.6. A better supply of residential real estate mortgage financing. But there are issues with
FNMA and Freddy Mac that haven't been resolved. 7. I also expect to see a larger role of PMI ( Private Mortgage Insurance) which is based
upon the free market rather than government guarantees.8. For the time being, I forecast a larger share of the market with rental units.9. There are still some appraisal issues such as requiring 8-10 comparables instead of
the usual 3. It will take time to sort this out. As reported by the Appraisal Institute, “Realtors Upset by 'Excessive' Appraiser Comp Requirements” Some lenders have started mandating that appraisers provide as many as eight to 10 comparable transactions in their reports, which the National Association of Realtors called "excessive" in an Oct. 11 news release. They alleged that the requirement was affecting home sales. Prior to the housing crisis, lenders typically required around three comparable properties. Hopefully this will be resolved before the 2013 “ buying-selling” season otherwise it is sure to impede the process. About 90%-95% of all homes on Long Island are sold through REALTORS on MLS ( Multiple Listing Service).
10.Expect to see the mortgage interest deduction being heavily defended by many partiessince its removal would cause harm to the fragile residential real estate market recovery. But it's removal could happen if the majority believes that a low tax rate -flat tax( 13% - 15%) on a broad economic base, little if any deductions, will actually bring in much more revenues than high tax rates. ( See Howard Jackson's Economic Blueprint for more details and additional information)
Should the economy continue to improve in 2017 over 2016 which I believe it will, I expect slightly more vibrant increase in housing prices on Long Island and New York City. However, as reported in many publications, areas in Florida, Nevada and California, were hammered with double digit losses in values over multiple years. I think it will take a few more years
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before those areas recover. But these areas have started to show substantial improvements in 2013 especially since large blocks of foreclosures were bought by investors and leasing them to tenants. The true statistics for 2016 can only really be collected and analyzed in late September, after the traditional “ buy – sell “ season that takes place generally between April and July. It is forecast that for the NYC – metropolitan area, that multifamily, in particular the rentalside, will do even better in 2017 and most of that evidence will appear late in the year, after the normal “buy-sell” residential cycle that occurs generally from March through September.
REAL ESTATE FINANCE
In any real estate investment, there are usually two sources of capital: 1. Bank financing( mortgage) and 2. The owner's investment – down payment (equity). A Ph.d course could bemade here about this, but a few clear and concise points will be make which will clearlyhighlight the issues (both positive and negative), along with recommendations to get the realestate market financing back to sustainable, reliable sources – which provide natural freemarket regulation about the effective use of capital.
The world of the secondary market for commercial and residential mortgages is generally agood thing – a very good thing in fact. It is the things that happened to these mortgages oncein the secondary market that the trouble started. Rating agencies, tranches, slicing anddicing, in order to be able to sell part or all of a giant portfolio to investors in pieces. That isthe residential side. But if there are issues with the formulas used, clearly problems with therating agencies, ultimately a large portfolio by Lehman ( reportedly) could not get sold in theopen market, which soon backed up the entire residential real estate residential mortgagemarket. These negative aspects of the residential market, spilled over into the commercialmortgage market. It is slowly starting to get cleatred up. But the volume from the height inCMBS transactions dropped over 90% and for 2010 is is barely 10% of what it once was at itsheight and 2011 was not much better, but improved noticeably throughout 2012 and 2013.There was nothing inherently wrong with the commercial real estate market, at that time. Butwhen the stock market tanked in 2008, then the economy soon followed. The collapse of theresidential real estate mortgage market and its implications had a direct, negative impact onthe CMBS market. It wasn't long after that when the underlying fundamentals of thecommercial real estate market became negatively affected.
The CMBS market had a reasonably good year in 2016 and I expect 2017 could be better butthe FED's normalization could be problematic.
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Interest RatesInterest rates perform the price function absolutely necessary in a free market economy and capital markets.
The yield curve (which graphs interest rates) is supposed to mean something. It is the heart of the fixed income market.
The 10 year treasury rate is the central rate in the world markets. Arguably is the reciprocal of asset values.
During the last 6+ years, the FED as kept interest rates at almost zero which has distorted the function of the interest rate mechanism.
Earlier this December, the FED raised interest rates another 25 basis points. In announcing that raise in interest rates, they indicated that the would make three additional interest rate increases of 25 basis points each in 2017.
The FED is a very powerful, central bank. It can set the “basic” interest rates and controlthe supply of money, among other things. As of December 16th, 2013 it announced the beginning of tapering the quantitative easing program starting at $10 billion per month. But the FED also said its intentions were to keep interest rates low for a while longer. In late 2014 it announced the end of quantative easing and that it would be “patient” in raising interest rates back to market level.
The banks raised the prime rate to 3.75%.
This has been anticipated and it is a sign that the economy is getting better.
The Federal Reserve is indicating that it will raise interest rates four more times before the end of 2016, but traders in the financial markets don’t believe it. They’re expecting just two more hikes in the coming year. The Fed’s lack of believability on rates could complicate its jobof steering the U.S. economy next year and beyond.
The Fed damaged its credibility over the past half-decade by repeatedly stating that it expected to raise interest rates, only to back down when stronger growth failed to materialize.Traders made easy profits by betting against the central bank, defying an old maxim on Wall Street—“Don’t fight the Fed.” Now Fed Chair Janet Yellen and the rest of the monetary policymakers have to persuade the financial markets that this time, they really, really mean it.
“That range is significantly higher than what the market is expecting. The market is looking forthe federal funds rate to be a little under 1 percent a year from now”, says Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott. He bases his calculation on trading in the highly active eurodollar market, which traders use to bet on U.S. interest rates. (The
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federal funds rate is what big banks charge each other for overnight loans; pushing it higher affects a wide range of other rates.) The bottom line: The markets’ distrust of the Fed’s take on rates could complicate the central bank’s efforts to normalize monetary policy.
The FED has kept interest rates so low for so long that many mal-investments have been made, there is excessive speculation.
When interest rates are kept artificially low, this steers money away from savings and investments which are the key to a strong, vibrant economy which increases wealth and the standards of living.
Higher interest rates would encourage savings and discourage borrowing.
It is also a sign that interest rates, held artificially low to stimulate economic activity, will begin to rise to market levels over time in a graduated process. This means short-term, long-term and mortgage interest rates will rise. It also means than interest rates paid onsavings accounts will also rise.
Updated 12/31/2016
Prime rate, federal funds rate, COFI
This week Month ago Year ago
WSJ Prime Rate 3.75 3.50 3.25
Federal Discount Rate 1.25 1.00 0.75
Fed Funds Rate 0.75 0.50 0.25
(Current target rate 0.50 -0.75)
11th District Cost of Funds 0.598 0.601 0.963
Read more: http://www.bankrate.com/rates/interest-rates/prime-rate.aspx
Although the FED has successfully navigated through the financial market and economic collapse, the pace of the current economy is still of concern. Based upon recent FED meetings and comments, it appears that the FED will keep interest rates at this level for at least another year But this is uncharted territory and the markets ultimately will set the rates. But if inflationary expectations are low that the anticipated rise in rates should be modest.
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Prime Rate
Banks generally set prime rates, based upon what the FED interest rates are. It is the rates charged to their “highest” quality borrowers. The less the quality, the higher the rate. Usually commercial mortgage interest rates are not based upon this rate. But the prime rate is important in every other aspect of business financing, since businesses have to borrow money periodically too.
Historical Graph
The FED started normalizing interest rates in December 2015 and as such the banks raised the prime rate to 3.75%
Residential Mortgage Interest Rates
Residential real estate mortgage rates are still at historic lows and are expected to be at that level for at least the next year.
As of December 31, 2016
30 Year Fixed – 4.12% 3.63% (12/31/2015)
15 Year Fixed - 3.28% 2.75% (12/31/2015)
5/1 ARM - 2.75 % 2.63% (12/31/2015)Read more: http://www.bankrate.com
Mortgage rates have moved upward since the FED's normalization process has begun.
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The consensus of economists believe that the ultimate normalized rate (set by the market) will be about 300 basis points higher then today, assuming no negative external shock.
The residential market has been returning to normal – making contributions to GDP, appreciation in property values etc. The year 2014 was a substantial turning point in a steady, upward direction. 2016 seems to have the makings of a very good year for the residential real estate market.
But there are concerns that the real estate market and stock market are in a bubble and subject to sharp, downward moves. There is an inherent risk of this happening over the next few years.
But if the economy can move forward with GDP growth over 3% over the next few years,this risk would be greatly minimized.
Commercial Real Estate Finance
Capital markets and the economy are complex systems. This is defined by diversity, connectedness, interaction and adaptation.
Conventional real estate debt financing is plentiful and it is expected to be so throughout 2017. Interest rates will be affected by the FED's normalization processand anticipated to be 70 to 100 basis points higher by the end of 2017.
Going into 2017 there seems to be more vibrancy and volume of CMBS. The secondary market for commercial mortgage backed securities continues to improve, and it will, so will the availability of mortgage financing improve. But there are still issues, including increased appraisal requirements. Interest rates for commercial mortgages will fluctuate moderately and then stabilize towards the end of the year. The rates could be 150 - 200 points over the corresponding treasury rates. I expect 2017 will be a dramatic improvement over 2016 in terms of originating, closing and selling into the CMBS market. At the end of 2017, I expect a much better year but probably 20%-30% lower than the high reached in 2007.
Bridge Lending
This is also referred to as “hard money lending”. In past forecasts, I have pointed out the significant dangers and issues. For example, the amount of fees, points,
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interest rate levels, loan to value ratios, seem to make most of them effectively meaningless in terms of effective use of the borrowers.
A bridge loan is a loan usually taking out one loan until a permanent loan can be arranged, usually for a period of 1-3 years. In certain cases, it can be an effective tool.
Many of these proposed loans contain provisions for large amounts of non-refundable, up front fees.
While there are some quality bridge lenders out there, the amount of time, effort, resources expended to actually find one and then to actually get a bridge loan closed that is beneficial to the borrower is an enormous, time consuming, labor intensive task.
Some of the things to consider about getting involved in a bridge loan are:
1. Is it the right financing vehicle? Getting from one existing loan to an ultimate, permanent loan.
2. Are there up front fees? Yes, there will be fees for legal, appraisal, environmental etc, but those shouldn't occur until a loan commitment is made.
3. Concerning LTV's ( loan to value ratio). Is the appraisal based upon “ as is” value or “ value upon completion of renovations and releasing- stabilized ”, for example?
4. Request a sample of a term sheet, loan document etc., and look carefully for loop holes, or for excuses for taking an up front fee and then not closing the loan. Many of these bridge lenders, also called private money lenders, are not regulated by the FDIC, the FED and the other alphabet soup of other regulators.
Construction Lending
Given this market, at the moment, construction lending has improved significantly. For basic land type deals, there is cautious interest, but to get beyond that, the strong fundamentals have to be there. But residential construction is happening and will continue to increase in 2017 but in certain markets such as New York City there have been signs of a market pause.
Interest rates are expected to rise over the course of 2017.
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Real Estate Equity Investment Capital
Financing is the life blood for real estate – residential or commercial. But in any real estate transaction there is financing ( mortgage) and (equity). Many real estate developers and operating partners wanting to capitalize on the major turn around of the real estate market lack substantial equity.
In recent news reports, it indicated that the US will be a net exporter of oil and in fact be the largest producer. But for the time being, the mid east is still a massive source. As such, the mid east has the largest source of excess liquidity in the world.
Many of the sources of investment by the mid east ( Royal families, industrialists, sovereign wealth funds etc.) used to be Wall Street funds, banks etc. When Wall Street collapsed, these mid east sources also lost giant amounts of money. So collectively, their thinking is not to invest in Wall Street funds, banks etc. but to invest directly in high quality real estate projects. This will be done by co-investing with high quality real estate operating partners.
The mid east sources of real estate capital work a bit differently than traditional US sources. Instead of receiving an investment memo about a “deal” and then going from there, a different way must be observed. These sources are relationship driven which means a number of visits to prospective real estate equity capital sources must be made. If after that, the mid east sources like the high quality real estate operator and the projects, they generally will co-invest. This takes initial time and effort. But the good news here is that if a mid east source likes the company and initial investment, they generally will continue to co-invest going forward.
The US based real estate equity capital market has also improved dramatically through 2016. It is expected to have an even better year in 2017.
Given uncertainties abroad, many sources of real estate equity capital from China, the Arabian Gulf in particular will make greater allotments of real estate equity capital in 2017 over 2016.
This means that there can be a large, continuous supply of real estate equity capital. The advantages are: 1. Deals that normally couldn't be effectively pursued, now can. 2. The credibility of the real estate operating partner increases rapidly exposing them to “ off market deals”, and 3. They can grow from a mid sized real estate operating company to one of the top real estate operating companies.
In 2017, we have over 425 major sources of US based real estate equity capital
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partners as well as sources in the 5 major oil producing regions. All of these sources are looking to co-invest with real estate operating and development partners in US projects.
By going to our web site, www.howardjacksonrealestate.com and accessing the real estate financing link, you will be provided with key, detailed information.
You may also contact Elle Tini, Senior Asset Advisor, to discuss any real estate financingpriject. Her contact information is: cell # (516) 318-1683, or email her at:
Capitalization Rates
I don't think capitalization rates will change much initially during the first part of 2016 but will creep up as markets begin to adjust to the FED's tapering off the quantitative easing.The FED will continue to keep interest rates historically low but slowly rising and GDP growth is anemic, but positive. But we have had another year of consistent GDP growth, but without inflation. Here is my presentation, and much has to do with the increased requirement of equity.
Here is an example of what I'm talking about. Here is a common method of developing acapitalization rate, a bit sophisticated, but please notice the inputs on the left, the mortgage and equity. Each represents a certain percentage of the total investment with certain rates associated with each position. Notice the equity position, the 2nd position has a higher compensation to the equity position. I'm going to present a "normal" financing capitalization rate development and the "current" one, hopefully temporary, in which the banks require larger equity. I'm keeping all other variables the same. In reality,there would be some differences.
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THE (NORMAL) MORTGAGE SITUATION
THE NEW MORTGAGE SITUATION REQUIRING LARGER EQUITY
Notice the difference in capitalization rates with a 15% change upward in equity requirements. It is about 60 basis points higher. Yes, arguments could be make about the other factors in the capitalization rate that could or should also change along with theequity requirements. For example, (depreciation- future value of the property forecast to be lower) would result an even higher capitalization rate. The mortgage term could be lowered which also would result in a higher capitalization rate. As of the writing of this
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Parameters CalculationsM = Mortgage Ratio 65.00% 0.65 M x 0.094845 K = 0.061649E = Equity Ratio 35.00% 0.35 E x 0.110000 Y = 0.038500I = Mortgage Interest Rate 7.25% Weighted Rate 0.100149T = Mortgage Term/year 20 E = Equity Yield Rate 11.00% Less: Credit For Equity Build-upN = # Payments per period 12 0.65 M x 0.326773 % PD x 0.059801 SFF = 0.012702K = Mortgage Constant 0.094845HP = Holding Period (Years) 10 Less: Appreciation Annual % Appreciation in Value 1.00% 0.10 APP x 0.059801 SFF = 0.005980App = % Appr. over HP 10.00%SFF = Sinking Fund Factor 0.059801 Equals: Overall Rate 0.081467 @ Y(Rate) & HP(Period)% PD = % Mtg. Paid Off Over HP 0.326773 Rounded to 8.10%
Parameters CalculationsM = Mortgage Ratio 50.00% 0.50 M x 0.094845 K = 0.047423E = Equity Ratio 50.00% 0.50 E x 0.110000 Y = 0.055000I = Mortgage Interest Rate 7.25% Weighted Rate 0.102423T = Mortgage Term/year 20 E = Equity Yield Rate 11.00% Less: Credit For Equity Build-upN = # Payments per period 12 0.50 M x 0.326773 % PD x 0.059801 SFF = 0.009771K = Mortgage Constant 0.094845HP = Holding Period (Years) 10 Less: Appreciation Annual % Appreciation in Value 1.00% 0.10 APP x 0.059801 SFF = 0.005980App = % Appr. over HP 10.00%SFF = Sinking Fund Factor 0.059801 Equals: Overall Rate 0.086672 @ Y(Rate) & HP(Period)% PD = % Mtg. Paid Off Over HP 0.326773 Rounded to 8.70%
forecast, the probabilities of changing the other factors in tandem are not fully known or quantifiable. This example is for illustrative purposes. Please note in many real estate tax appeal cases, a simpler capitalization rate formula is utilized. Similar results would be produced.
Published is a national capitalization excerpt and comparison for the major property groups (Viewpoint 2016) nationally by my colleagues at Integra Realty Resources, Inc., www.irr.com
During 2017, economic improvement will continue, rental rates will rise, vacancies will fall which will allow banks to go a bit further out on the risk curve. Interest rates could also rise resulting from the FED's tapering. This will allow for a bit higher Loan to Value ratios ( LTV's), longer loan maturities, higher debt service, and higher capitalization rates, which would, all other things equal, keep property values constant or boost property values. I expect to see signs of this in late 2016. But if this doesn't happen property values, in general, could decline.
Following are the forecasts for capitalization rates for the general classes of property. The extreme high end Class “A” properties trade for much lower rates since many insurance companies, pension funds etc. are tasked to buy only in that end of the market spectrum.
AS MARKET ADJUSTS TO TAPERING FROM THE FED
Industrial 9.25% - 12.00%
Office 7.75% - 9.5%
Retail 7.50% - 12%
Hotel 7.25% - 10.75%
Assisted Living 9.00% - 11.00%
Multi-Family 6.50% - 10.25%
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Real Estate TaxesReal estate taxes continue to be an issue on Long Island. They have continued to rise. The real property taxes are either the highest or 2nd highest in the nation. Property owner's first reaction is to blame the assessor. However, the assessor’s role is to “allocate” the tax burden based upon the Fair Market Value of the properties in the assessor’s jurisdiction. Real estate taxes are set by the operating budget of the County, Town and School. School taxes are a major issue and unlessthat is gotten under control, real estate taxes will continue to rise. Increased State aid would be beneficial. Unfunded mandates contribute to this.
In most areas of the State, the assessments are handled on a Town basis and the school does pay back its share of any tax refunds. Nassau County is the only taxing entity to pay back the school portion of real estate tax refunds. There is serious efforts underway to change this including having the school districts refund their share of the real property tax refunds.
Real estate taxes are an obvious source for government funding. I expect 2017 to be no different than 2016.
I expect there to be more intense competition by cities to attract businesses from other states to their locales by offering real estate tax and other incentives.
Stock Market
For comparison purposes, here were the market statistics on 12/31/2016 at the close of the market
DOW Start of Year: 17,425.02 Close of Year: 19,762.00 Change: 13.41%
Nasdaq Start of Year: 5,007.41 Close of Year: 5,383.12 Change: +7.50%
S & P Start of Year: 2,043.91 Close of Year:2,238.83 Change: 9.54%
The overall market was very good by any standards managing to hit 52 new all time highs for the year. There are a number of reasons for this: anticipation of a continually improving economy and record low interest rates which are a magnet
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for money since other investments such as bonds and savings accounts could not compete.
Continued economic growth will translate to increased earnings for stocks overall.
The new Presidency generally bodes well initially for the Stock Market.
Given the continued growth of the US economy and increase in consumer confidence, it is forecast that the markets, overall, will be up 15%-10% by the end of 2017.
Here is a view of the short positions in the market.
Energy – Oil 2017
A dissertation could be presented here but that would be beyond the scope of this forecast. But there are a few simple good effects of this and some bad effects.
1. With the drop in oil prices, this adds spending power to the consumer with will increaseeconomic output.
2. Industries that are dependent on oil will have lower production costs.3. This also weakens or eliminates the need for Arabian Gulf oil which has a positive
economic and military benefit.4. A downside is that the US oil industry which has been enjoying a major resurgence and
be hurt by low oil prices.5. Countries that depend upon oil revenues for operations, sovereign wealth issues such
as Russia will be hurt economically.6. Prices have been rising over the last quarter.7. OPEC has agreed to slight production reduction.
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Additionally, the following chart show the trend of oil prices over the last few months.
http://www.nasdaq.com/markets/crude-oil.aspx
Oil settles the 2016 year at $53.72 per barrel.
Prices for barrels of oil are important since they factor into a major part of the economy in a multitude of ways. For every increase of $10 per barrel of oil, there is a corresponding increase of $.25 ( cents ) per gallon of gasoline. “According to economist Nigel Gault, every $10 increase in the price of a barrel of oil raises gas prices by about 25 cents. The average American home buys about 1,000 gallons of gasoline every year, so every quarter increase ingas takes about $250 per year from your pocket. Multiply that by more than 110 million households and Gault estimates that steals about 0.2 percent from U.S. GDP “
The impacts of the OPEC production cuts and the US shale production should be net neutral.
It is forecast that the price for oil will stabilize and rise over the course of 2017 to probably in the $60 a barrel range.
Clean Energy-Solar
Regarding solar power, The clean-energy boom is about to be transformed. In a surprise move, U.S. Lawmakers agreed to extend tax credits for solar and wind for another five years. This will give an unprecedented boost to the industry and change the
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course of deployment in the U.S.
The extension will add an extra 20 gigawatts of solar power—more than every panel ever installed in the U.S. prior to 2015, according to Bloomberg New Energy Finance (BNEF).The U.S. was already one of the world's biggest clean-energy investors. This deal is like adding another America of solar power into the mix.
The wind credit will contribute another 19 gigawatts over five years. Combined, the extensions will spur more than $73 billion of investment and supply enough electricity to power 8 million U.S. homes, according to BNEF.
"This is massive," said Ethan Zindler, head of U.S. policy analysis at BNEF. In the short term, the deal will speed up the shift from fossil fuels more than the global climate deal struck this month in Paris and more than Barack Obama's Clean Power Plan that regulates coal plants, Zindler said.
The price for solar panels has dropped significantly over 2016.
Source: Bloomberg News
Stagflation
Stagflation is often most feared for it brings about a deadly combination of the worst in two economic terms instead of one. A stagnant economy (high unemployment) and inflation. If stagflation turns into hyper-inflation, it will destroy an economic base. It appears that the necessary ingredients for stagflation are not here now or on the immediate horizon.
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Bailout and Financial Stimulus
Most of this has happened and overall it seemed to work – preventing economic collapse and stabilizing the economy. The FED has commenced the tapering of the quantitative easing in December 2015 and make a 25 basis point increase in December 2016 and also signaled its intentions to raise interest rates three more times in 2017. This program has worked out very well.
The remaining large developed countries central banks have actually lowered rates to negative interest rates. How this will play out in 2017 remains an unknown.
Global Competitiveness
The US stayed at #3 from last year.
How global competitiveness relates to trade figures is a study well beyond the scope of this article. But the key areas in which countries compete with each other and how they rank make for quasi-statistical opportunities in long range and pattern comparison.
This is the web address of the entire report, over 400 pages:
http://www3.weforum.org/docs/GCR2016-2017/05FullReport/TheGlobalCompetitivenessReport2016-2017_FINAL.pdf
This is a very detailed, thorough and well written analysis of many aspects of each county's economic factors. Any attempt to try to analyze it here would in itself be a Ph.d type of treatise, well beyond the scope of this article. It is highly recommend to peruse the section referring to the United States and the various categories the US is compared to other countries.
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The rankings are calculated from both publicly available data and the Executive Opinion Survey, a comprehensive annual survey conducted by the World Economic Forum together with its network of Partner Institutes (leading research institutes and business organizations) in the countries covered by the report.
OVERALL CONCLUSIONS AND OBSERVATIONS
2016 turned out to be an economy slowly and consistently getting stronger across the board. The recovery was still anemic by historical standards. But there were other issuesthat seemed to be holding back what should have been a much stronger recovery.
With the President-elect taking office on January 20th, 2017, he has a few simple goals but each one can have a dramatic, positive impact on the economy.
These include: revising the tax code to make it simpler, lowering tax rates especially for the middle class, massive infrastructure and jobs plan, repealing and replacing Obama care.
The 2014 residential selling season proved to be"the" benchmark to determine if the residential real estate market is in fact on the road to recovery and normal appreciation. The 2016 residential season did very well overall and 2017 looks even better but there are some warning signs- directly related to the FED's normalization of interest rates which means higher mortgage interest rates.
Real estate equity capital will play a key role in the next few years in all facets of real estate investment. With many of the traditional sources out of the picture, the real estate equity capital sources who are well capitalized will have extraordinary opportunities going forward. The US real estate developers and operators who are savvy enough to seize this opportunity, will catapult their companies to the top. When this happens, other opportunities seem to be attracted to these companies. They will beable to take advantage of these opportunities since they have giant capital sources behind them. We will probably not see this type of opportunity ever again in our lifetimes.
In December 2015, China was awarded Special Drawing Rights in the IMF. It alsoannounced that is was removing its currency peg to the US $.
President Barack Obama signed into law a comprehensive tax bill in December 2015 whichincluded a measure easing a 35-year-old tax on foreign investment in U.S. real estate,potentially opening the door to greater purchases by overseas investors, a major source ofcapital since the financial crisis.
Contained in the $1.1 trillion spending measure that was passed to avoid a governmentshutdown is a provision that treats foreign pension funds the same as their U.S. counterpartsfor real estate investments. The provision waives the tax imposed on such investors under the
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1980 Foreign Investment in Real Property Tax Act, known as FIRPTA.
“FIRPTA has historically made direct investment in U.S. property a non-starter for trillions ofdollars worth of foreign pensions,” said James Corl, a managing director at private equity firmSiguler Guff & Co. “This tax-law modification is a game changer” that could result in hundredsof billions of new capital flows into U.S. real estate.
Foreign investors have flocked to U.S. real estate since the global economic meltdown, drawnby the relative yields and perceived safety of assets from office towers and shopping centersto apartments and warehouses. The demand has helped drive commercial real estate pricesto record highs. Many foreign investors structured their purchases to make themselvesminority investors and bypass FIRPTA
The tax code must be changed, including the reason that it was developed during theindustrial age and is backward in the digital economy.
But the FED had kept interest rates very low for a number of years. This leads to a falseallocation of credit. Among other things, this has the tendency to create asset bubblesparticularly in real estate and the stock market.
This does present a potential risk to the economy. If there is a problem that arises, it willprobably come very quickly, like a flash crash.
If the following can happen, this economic, world crisis can be quickly resolved and place theUS and the world economies back on the road to prosperity. Here is the Howard Jackson Economic Growth Blueprint for 2017 ©®™ plan of action.
There are some very basic fundamentals along with very complicated relationships. Thiswriting will keep the discussions about the important issues in a method and manner that canbe presented in the simplest format possible.
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Howard Jackson's Economic Blueprint-Introduction
Introduction and Recap of Basic Economic Theory
In any economic system, there are unlimited wants and desires versus limited resources. Thus the basic economic system answers the questions:
1. What to produce?
2. How to produce?
3. For whom to produce?
The goal is to get the best possible product at the lowest possible price from anywhere in the world. This is called the “free market”.
Price is the message to both producer and consumer which answers these basis questions and causes those goods and services to be produced in the most efficient manner. This is casually referred to as the “free market”. There will be more on this later. A free market is one where there is voluntary cooperation for a better way to solve problems rather then to turn those problems over to government to solve.
The price is expressed in two forms – money and interest rates. This are the two most important signals in a free market economy. That is the prime reason that the market should set the rates not the FED or some planning authority. Ultimately when the market sets the value of money that tends to produce a stable currency under which the economy produces sustained and long term growth without inflation which yields the highest standard of living.
It is the issue of having public, political power vs. private economic power. In a free market there is limited government vs. a large private sector economy. There are many examples of problems with large government bureaucrasy such as the Department of Health, Education and Welfare (HEW), which apparently is the largest government bureaucracy in the world, according to economist Milton Friedman.
To have a strong, vibrant, growing economy with little to no inflation, there are four basic underlying elements necessary:
1. Savings
2. Investment
3. Stable money
4. Production – Without production, there can be no economic activity. From gains in productivity, all other economic benefits flow. Profits direct production. It is the
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amount of goods and services produced that deliver the level of prosperity.
Stable money is crucial in a healthy, vibrant economy. Money should remain neutral with regards to prices for the long term.
Money is a store of value, medium of exchange, a measure of price, a means of accounting. Imagine if one day there are 12 inches in a foot, the next day 11 inches, the following day 13 inches etc. The very same thing applies to money.
If the market doesn't trust the value of money then the following happens:
1. There is less investment.
2. The investments that are made are less productive in that they are made in current projects rather than in future projects.
3. Investments that are made are risky enough but if you are uncertain about the value of the future dollars you get back it adds more uncertainty to investments which is a major component of why our current recovery is stagnant.
4. Money should have a fixed value. If this isn't gotten right, then even though everything else was gotten right, the system won't work.
5. Money is social trust, a promise – debasing money undermines the social fabric.Much of the unrest occurring recently can be traced to this.
6. When money is stable in value, brainpower goes for a productive use. Before 1971 before the US went off the gold standard, there was very little currency trading. Now currency trading is a major, global financial activity.
7. With unstable money, the damages done aren't apparent and identifiable until too late.
8. Money isn't about greed, it is about trust. It tells us what society values.
9. When money is unstable, it defrauds customers and suppliers of their due. In certain extreme cases, it could lead to the rise of a dictator. It also leads to unrest, for example, Egypt, Syria.
10.When money is debased, inflation occurs and society gets the feeling that they are being defrauded – fixed incomes, salaries have less purchasing power, while other people through financial gimmicks are reaping unwarranted gains. The necessary link between risk and reward is severed.
11. When money is debased, the market creates mechanisms to cope with this which have been referred to as hedges and to the extreme, financial gimmicks-basically gambling. These items do not produce a produce such as a car, food, fuel, a home etc. But this adds complexity to the economic system and normal direct relationships between risk and reward, price and value become distorted.
When the discussion of money comes up usually the word finance also comes up. This is obliquely related to money but very different. So there is no confusion, here are the basic functions of finance:
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1. A payment system
2. Wealth management
3. Allocation of capital
4. Risk mitigation
Your paycheck, quality of life, consumer confidence, national security and other factors are all related to a central theme that governs everyone’s lives. It is called “economics”.
Economic factors and principles affect every aspect of our private, business, government, national and international interests and every day life. Many times factors about economics are distorted, misquoted, misunderstood, misused, debated and often ignored.
Economic decisions that will be made will have an impact on business, government and private lives. What will the resulting impacts be?
Many times, a significant economic policy is enacted and most all of the attention is focused on the short term impacts, which are presented in a positive light. But rarely are the long term consequences of that action focused on – these are generally very negative in nature.
Economics seems to always be too difficult to understand and use except for a few. Many times these few are quoted in the media, on TV or radio and only portions of their complete statements are presented. This makes consistent, useful understanding of what they said almost impossible. That is why most just simply accept these decisions and hear the pundits debate these decisions on the popular news channels.
But economics doesn’t have to be ignored simply because in the past is seemed to be too difficult to understand, not applicable and for other reasons.
Certain economic principles and theories can be easily understood and used effectively in every aspect of life.
Following is a short prelude that will explain the basic economic principles and theories in such a way that can be effectively understood. This will enable the reader to utilize this understanding in making certain decisions which will have a positive financial impact.
This will also set up an even better understanding of the economic blueprint that follows.
It will also enable the reader to effectively analyze and understand the impacts of economic decisions made by others such as the Federal Reserve System, political candidates, heads ofstate, military tacticians, government agencies, business leaders to name a few.
Introduction and Historical Perspective
We now live in a fiat based economic world, in simple terms, each country ( except now for the Euro), has its own currency and based upon the economy's relative strength of that country, that currency has a value related to other counties currencies. The strength and the holding power of the Euro has been tested to the extreme during 2011, 2012 and more during2013, 2014, 2015 and probably well into 2016. This is called “fiat” currency since the
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currency is not backed by anything, for example, gold.
We used to be under a gold standard which President Nixon took us off of in 1971. Below arelinks to educational videos that take this into great detail. The most important aspect of this isthat under the gold standard, there would be imposed fiscal discipline on governments and there would be more stable currencies.
Arguments can be made that the gold standard is outdated in the digital world of today and there is some element of truth to that, But this standard did impose a sense of discipline aboutthe governments ability to create money and the value of the $ is relatively stable.
Hopefully the new administration will make this a priority.
There is no magic or mystery about having a world class economy with low unemployment, strong GDP growth, high confidence, low inflation and a balanced budget. This article will carefully explain the key factors of how the economy works and the steps necessary to accomplish this end.
After reading this section of the forecast, most readers will say things like: “ why haven’t we been doing this all along?” or “what is the President (Congress) going to do about this?” etc.
Specific steps ( policies) that can be done, will be presented at the end.
This article is written so that the average person, who doesn’t have a Ph.d in Economics can effectively understand what is going on and be in a position to make an informed decision about what steps to take going forward. It is recognized that much of the key points discussedhere, could be discussed, defined etc. in much greater detail. But that is well beyond the scope and goal of this treatise.
Economic System Defined
An economy is a fairly complicated, man made system that ultimately arranges for the provision of goods and services to people, businesses and government. It is the way that this is done that separate economic systems from one another and which can also have a profound effect on the quality of life one experiences.
While it may seem chaotic, unpredictable, obtuse, it does have many aspects about it that canbe described, analyzed and forecast. Like a human body which can be described as complex,difficult to understand, an economic system does have certain forces that drive it that can be described, analyzed, communicated, forecast and understood.
An economic system is a complex vehicle that ultimately distributes the goods and services produced to the consumers located within that system. It could be people, businesses or government or all.
Our system is referred to casually as a free market system. The means of production are owned by the private sector. Everyone is free to utilize their skills, labor, capital and land to maximize profits -without coercion . They are also free to buy or not buy any product presumably the best and the cheapest price from anywhere. The amount of profit that could be made is unlimited. This causes competition which spurs innovation and technological breakthroughs. The down side is that if an enterprise fails, everything could be lost. That is the risk.
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It is price which is the message about what to produce and what to consume. It is the distortion of price – by the FED that causes other things to happen economically that wouldn'thave ordinarily happened.
Over the years, certain economic cushions have been put in place such as Social Security, unemployment insurance to buffer the risk of loss of income. To encourage certain or a change in economic behavior, tax laws were put in place or modified. Along with this the influence of “special interests” grew.
This then becomes the beginning of political influence on the economic system. At one end in its purest form there is the free market system and on the other end – socialism -where the government decides the needs of the people and owns the means of production and resources to accomplish those goals. In simple terms, socialism is an economic system ladenwith government influence and many of the basic needs are provided for by the government.
In socialism, people get certain, defined income and benefits regardless of what they produce. For example, take two people assembling I-phones. One assembles 30 I-phones inone day and the other makes one I-phone. They both get paid the same wage and get the same benefits. Thus, under this system there is no innovation and ultimately the system will collapse.
In the free market system, the communication of those needs and wants are communicated almost immediately and clearly. In the socialistic system, that communication is often delayed,ignored, mis-communicated which ultimately results in inefficiency, the needs not being met and mis-allocation of resources putting aside getting the best possible product at the cheapest price from anywhere.
Free markets turn scarcity into abundance. But there is a great risk. The vehicle that attemptsto do this invests much capital, labor, other resources. The reward is making a profit. Therisk is that the venture fails, goes bankrupt. This is a process that must not be interfered withso that the allocation of resources in bringing to market the best possible products at thelowest possible prices can function normally. But this process has been interfered with in thequantitative easing process the “QE's”. Now the big question the FED faces is how quickly toget to normalization of interest rates (market rates of interest). The FED said it would bepatient which is understood to mean that this process will take a few years. Ultimately this isa good thing for it will let the free market, through the price process, properly and efficientlyallocate the scarce resources.
This is based in an environment where we have unlimited wants and desires vs. limited resources. There are generally two basic types – free market or government controlled or planned. There are variations of each.
It allows all of our wants and desires (within limits) to be fulfilled by the best possible products at the cheapest possible prices.
Price is used as a message to ultimately make these decisions- what to produce?, how to produce? , and for whom to produce? This must not be distorted by government intervention. For when it is, it gives the whole economic system mixed messages and in most cases those messages are incorrect and cause unintended consequences most of which are bad. This also gives a distorted picture of a “market” economy. Price is the quickest, most efficient way
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of communicating this message between consumer and producer.
The problems of quantative easing, although it seemed to have worked, is that it distorts the pricing mechanism and money goes into areas it might not ordinarily go searching for the highest rate of return at the lowest risk. Not to mention discouraging savings and investments the key to long term economic growth and prosperity.
Also if government borrows money, it takes it away from the private sector ( Say's Law). But under certain, dire circumstances, the economy needs an investor, spender of last resort to keep the economy from collapsing or to spur it out of a recession.
The idea of quality of life comes into play for it is the market’s perception of the quality of life that figures into the equation that ultimately decides what appears on the market place to be bought by the consumer. Also to be considered in this equation are environmental issues and workplace factors. It seems that a cycle is evident. When a new low cost country is discovered for production, that country seems to do increasingly well because the labor costs are low as well as lack of environmental concerns. But as this country begins to prosper, labordemands to be better compensated to get a higher quality of life, environmental issues become more of a concern and then this area is no longer the low cost producer.
In our economic system, which in theory is a free market system, the market will be the regulator, the decider of products, value of our currency relative to the other currencies in the world economic system and the other issues. In a free market system, which is open, full and free communications, free trade, generally the right products will get to the right consumers asif guided by an ‘invisible hand”.
The problems arise when this system begins to get manipulated by governments, businesses and other factors. These factors could be: taxes, tariffs, regulations, actions of foreign governments etc. There are also some certain, basic, economic principals or laws. When those principals or laws are understood, then things start to make sense. It is when steps are taken to circumvent these principals, that things start to get complicated, mis-understood and unintended side affects come into play. These steps are primarily legislation based – tax laws,trade policy, economic policy etc. Sometimes these steps were enacted in prior economic times. These steps, at best, may have made sense then. But as times change, these steps may no longer make sense and be actually harmful. But they still remain in place.
It seems evident that capital, the means of production (land, labor, capital and entrepreneur spirit) will gravitate to an economic location where the capital and profits can be maximized with the minimum of risk. This should happen without artifical distortion by actions, for example, of central banks who enact policies that artifically supress interest rates.
In simple terms, a free market lets market dynamics make these decisions, as opposed to a non-free market ( i.e. Russia) where a central planning organization makes these decisions. The free market would do a better job of regulating itself rather than government.
The free market system theoretically fosters the ability for any consumer to buy any good at the cheapest possible price anywhere. This will ultimately produce the highest living standards at the lowest possible price. It also reacts more quickly, effectively and can handle multiple, complex inputs.
In the modern world, information, finances and means of production can be moved anywhere
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quickly. Old notions of a company providing a starting job lasting a full career and then retirement are becoming relics of the past. This is inevitable and provides challenges but it also provides opportunities which educational necessities have to be woven into the current overall educational system.
The US and the rest of the global economy is finally starting to recover from a global market crash and recession beginning roughly in 2008 commonly marked by the fall of Lehman Brothers. There is more to it than that.
The US is now in a global economy and in some part is subject to market/economic forces over which is has little or no control. In the early 1950's and 1960's the US enjoyed 5 major advantages: 1. A large capital base, 2. Large and unrestricted market share, 3. Superiority in education, 4. Little or no competition, 5. Ease to implement technological advances. Over the last 2 decades many of these advantages have been degraded.
Basic Economic Principles and Forces Influencing the Economy
These principles and forces influencing the economy are limited to the key ones in the interests of keeping this article simple, brief and focused on the most important ones.
Supply and Demand
In simple terms, if a producer makes a product and can sell that product for a profit, then there is a demand for it. Everyone can make products, which consume resources, so there is a limit. What is that limit? Basically, a producer will continue making the product as long as a relative profit is being made. If the profit is very high, then other producers ( competition) will come in and produce a similar product, the price will fall, as will the profit and the amount of product will also fall. This is an example of how the operation of the free market regulates products, resources and prices. Admittedly simple in description, it is accurate and it generallyalways works.
Law of Comparative Advantage
This means that certain countries, states, localities due to their location, position, resources are better able to make a certain product than other countries, states and localities. For example, a locality on the water is better able to harvest fish products and an inland farm. A location near an oil well is better able to extract, refine and export oil than a city. There are many other examples that follow from this.
A relation to this would be known as the specialization of labor. A person or business could specialize in something they do very well, sell their product or service for money and then be able to purchase the goods and services they want or need.
The problems arise when technology and change occur. Certain localities that once had this advantage, no longer have it. So vehicles such as tariffs, trade barriers are used to protect thelocalities. This is an example of “steps” mentioned earlier. This then escalates into trade wars,protectionism and the free market breaks down. It could also lead to war.
These vehicles ( steps) are also used internationally to persuade a country to do one thing or another. A classic example is the US embargo of oil and other product against Japan in 1940-1941. This prompted Japan’s attack on Pearl Harbor and other resource rich countries on December 7th, 1941. This was the follow up start to WW2 which actually began in September
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1939 with Germany’s invasion of Poland.
Additional problems occur when a government subsidizes a produce so that in can enter a foreign market at a very low price relative to the existing price of that product. Then a market share can be had an expanded. For example, the TV industry in the 1970’s.
Guns vs. Butter
This is an example of a possible production scenario. It is as it sounds – civilian products vs. military or some combination there of. If there was no such thing as conflicts or wars, this discussion would be unnecessary and the private sector and the free market would make most of the economic decisions.
This macroeconomic theory simply illustrates the relationship between a nation's investment in defense and civilian goods. The US for example, has to choose between two options when spending its finite resources. It can buy either guns (invest in defense/military) or butter (invest in production of goods), or a combination of both. This can be seen as an analogy for choices between defense and civilian spending in more complex economies. If the US decides on a certain amount for defense spending, the remaining limited resources are available for the civilian side ( personal and business).
While it is a simplification, it is a decision that has far reaching consequences and is a theoretical balance of guns versus butter which best fulfill its needs, with its choice being partly influenced by the military spending and military stance of potential opponents. This doesn’t correlate well with a free market economy since the political decision of defense spending is made and then the rest of the national resources are left to full the needs and desires of the nation.
Perhaps the best known actual usage (in translation) was in Nazi Germany during World War 2. In a speech on January 17, 1936, Minister of Propaganda Joseph Goebbels stated: "We can do without butter, but, despite all our love of peace, not without arms. One cannot shoot with butter, but with guns." Sometime in the summer of the same year, Hermann Göring announced in a speech, "Guns will make us powerful; butter will only make us fat." This was derived from Military History and Columbia World of Quotations.
A part prime minister of England, Margaret Thatcher said at a speech at Kensington Town Hall– 1/19/1976 , "The Soviets put guns over butter, but we put almost everything over guns. ” Astonishingly enough, the Soviet Union ultimately collapsed by the sheer weight of unsustainable military spending relative to its economy.
United States President Lyndon B. Johnson's Great Society programs in the 1960s is an example of the guns versus butter model. While Johnson wanted to continue New Deal Liberalism, he was also in the arms race of the Cold War, and Vietnam War. These put strainson the economy, and hampered his Great Society programs. This was derived by PresidentialProfiles.
There is also the factor of an economic multiplier. If a dollar is spent in the US to buy goods orservices, the receiver of the dollar spends that money for goods and services and so on. Without getting technical, it is estimated that the multiplier effect could be 5. Whether the economic multiplier is a bit more or less in not important.
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On the other hand, if the US has 100,000 combat troops in a foreign country, all of that moneyis spent over there. Not to mention that the act of war destroys things and doesn't increase the quality of life. The amount of money could be in the billions of dollars. Virtually none of that money is re-circulated here. More importantly, all of that money spent means it is subtracted from the total US resources and the remainder is left for the civilian goods and services.
If the US or any nation is involved in a war over a protracted period of years, it means that all of the money spend annually for defense is drained from the economy. In World War 2, England was forced to try and put an end to the war since it was on the verge of bankruptcy.
There are technical studies that debate the impacts of guns vs. butter to finer degrees. But the bottom line is that defense spending does have an impact on the civilian side of life in thatit takes away from resources that could be spent or invested in the civilian aspects of life.
Financial Gimmicks
An economy is based upon products produced by the butcher, baker, candle stick maker ( products) . Add to that a banker, real estate broker, home builder (services) , etc.This is easily understood.
But as the economy became more sophisticated, certain financial products ( gimmicks) beganto arise. It seemed that one could make money, but really didn’t produce a tangible product. Taken to the extreme as in 2008, it was tantamount to legalized gambling, but in case of a failure, the taxpayers would ultimately bail out the participants. Given the state of technology, computers and communications, vast amounts of capital could be gained or more importantly lost, in fractions of a second. If you look at the recent collapse of the financial and banking system followed by the economy, much of this damage was caused by products like this. The same held true in the era of the Great Depression. There was a major law enacted after the Great Depression to prevent this from happening again. This law stayed in effect for many years but was ultimately repealed in the 1990’s. This sowed the seeds that ultimately resulted in the financial market and economic collapse of 2008.
The further removed from the basic goods and services of the economic system a financial product is, the more the propensity that it is or could be a financial gimmick.
The free market should have no government regulation, in theory. But there should be some operating guidelines and regulations which should be kept to a minimum. For example, is money issued by a nation real? How are the legitimacy of stocks and bonds maintained? Howare investors protected from fraud or manipulation? It there transparency? Etc. The idea is to set up guidelines so that the free market can operate. But at the latest market crash, financial meltdown and economic collapse seem to indicate, there is more regulation necessary. In the stock market crash of 1929 and the resultant Great Depression, almost the same thing happened. Certain regulations came forward from that.
Given what has happened in the aftermath of the current market crash, the obvious issues created by the Crash of 1929 and the resultant Great Depression, one thought comes to the forefront – The Glass Steagall act.
After the Great Depression, the Glass Steagall act was passed in 1933 which, in effect, put basic banking and investment banking in two separate and distinct categories. It also
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established the Federal Deposit Insurance Corporation (FDIC).
In the later part of the 1990’s decade, this was slowly repealed and a major financial collapse occurred not to soon afterward. JP Morgan actually applied to the FED to be allowed to expand a loophole in 1989 and in 1990 received permission to underwrite securities as long as this didn’t exceed 10% of its business.
When the Senate voted to pass Gramm-Leach-Bliley by a vote of 90-8, it reversed what was, for more than six decades, a framework that had governed the functions and reach of the nation's largest banks. No longer limited by laws and regulations commercial and investment banks could now merge. Many had already begun the process, including, among others, J.P. Morgan and Citicorp. The new law allowed it to be permanent. The updated ground rules were low on oversight and heavy on risky ventures. Historically in the business of mortgages and credit cards, banks now would sell insurance and stock.
Throughout the 1990’s applications were made by financial institutions to continue to mix and merge businesses once prohibited by this act and slowly the power of the Glass Steagall Act eroded. In 1999 after 12 attempts, the Glass Steagall Act was finally repealed. It was called the Financial Services Modernization Act. On November 4th, 1999 Senator Byron Dorgan spoke out against the repeal. 10 years later, he was vindicated. Unfortunately it was as a result of a crisis.
If financial firms are divided into two categories ( banks and unlicensed financial firms). Banksthat want to live on deposits, "repos" and money-market funding would require a government license and be subject to stringent regulation of their safety and soundness. They'd be guaranteed a government bailout if things went wrong, but they'd also have to pay some kind of advance compensation for that guarantee.
Unlicensed securities firms wouldn't be permitted to fund themselves in the short-term market — their capital would have to come entirely from the equity and bond markets. Nor would theybe eligible for a government bailout. They would be just allowed to go bankrupt.
If securities firms were forced to fund themselves in the long-term markets they would be smaller and much less profitable than today's financial giants. This would solve the "too big to fail" problem immediately.
The money market funds would probably fade away, because the new rules would make their business models untenable. Regulators such as Securities and Exchange Commission Chair Mary Schapiro, who said in February that these funds are so susceptible to panic-driven runs and so poorly supervised that we are "living on borrowed time" before a blowup in the sector threatens the stability of the financial markets.
The crash in 2008, while precipitated by the sub-prime mortgage crisis, was driven by the unraveling of the short term market. Had all these unregulated firms not been allowed to access the short term market in the first place, this current economic crisis probably wouldn’t have happened.
The problem of the rating agencies also has to be figured into the equation. During the sub-prime mortgage crisis and the aftermath, the rating agencies rated pools of securities as investment grade. Major investors, pension funds, individuals bought massive amounts of these securities – a high rate of return and low risk ( as per the rating agencies). The rating
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agencies were wrong and this initial financial calamity turned into a financial nightmare. It wasn’t the investments per se, that were wrong, it was the risk relative to these investments that were mis-analyzed and ultimately mis-priced. Thus massive amounts of investment capital were chasing these investments not knowing the real risk vs. reward profile. Had the market clearly and accurately understood the correct risk vs. reward profile, the amount of money flowing in would have almost self regulated itself and moved to other investments as the risk vs. reward profile relative to other investment would have dictated.
This is a simple problem that must be corrected. It hasn’t been addressed adequately at this point but it must be. The free flow of capital to investments must be based upon clear and accurate information. To the extent this has been compromised ( the loss of business for failure to give a favorable recommendation, incompetence on the part of the analysts etc.), a distortion of the risk vs. reward profile proliferates, the worldwide flow of capital is mis-appropriated and the market economy model also gets distorted.
It is clear that something like this the Glass Steagall Act has to be re-enacted. On such transactions fitting into the category of investment banking – other than basic banking, issuance of stocks, bonds, the investment banks could be permitted to do just about any type of trade, as long as no basic bank deposit money utilized and other reasons previously mentioned. But for the time being, the Dodd –Frank legislation is the substitute for it. But this is over-papering this situation many more times than necessary.
While this is a bit more complicated, a simple guide could be utilized. Does the transaction fit into the model of directly causing the production of goods and services for the economy? Is there excessive leverage? If the product doesn’t and there is excessive leverage, then there should be some type of regulation.
The free market economy should have little regulation, but the regulations should be clear, simple and powerful. A sound investment should be clear, simple and should be rewarded if successful. A strong economy gets built on good products, innovation, appropriate financing and hedging of risks. It doesn’t get built on gimmicks. But if a company, financial institution wants to take a risk on a financial product, it should be free to do so provided there is no leverage.
Then there is the new issue of the LIBOR scandal of July 2012. It is unclear how this will play out but already some major banks are rushing to make settlements.
A last minute bill was passed by Congress to keep the government open, but it had no open debate and was passed with a quick vote. The trouble is that the bill negated a regulation regarding derivatives which was the major factor involved in the market collapse of 2008.
This issue is sure to come up in the legislative session of 2016.
Federal Reserve System – The FED
This is going to be debated for some time to come, mainly because it is a bit complicated; partial information released to the news media seems to be the standard; and an easy answerseems unlikely.
The FED was founded in 1913 and had a basic mandate of price stability and over the years other mandates were added – maintain full employment, lender of last resort and recently
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being in charge of regulating the banking system.
Initially the FED was prohibited from buying US debt ( treasuries). This provision was put there to force a balanced budget. But soon afterward this was changed to where the FED could buy US debt. Problems arose afterwards and it a major factor today.
Behind all of this is our basic money system. While an historical recounting of money is interesting, it is well beyond the scope of this article and actually unnecessary. Money is a store of value, a unit of value, measure of price, unit of calculation and used to facilitate the actions of the basic economic system.
For better understanding and putting certain, popular myths to rest, a hard, objective look, hasto be taken at the two money systems going forward. In real terms – a country can’t devalue its way to prosperity – meaning by its printing more money, its goods are cheaper to sell abroad. Producing a world class economy focusing on real and legitimate goods and servicesin a free and open world economy is accomplished by orderly, economic growth. This then extrapolates into a steady and strong economic climate.
There are two types of money. Money that is backed by gold, for example and money that is backed by the US Government, for example ( fiat based). The US went off the gold system in 1971.
Two striking details about this – gold based money limits, to a degree, the amount of money inan economic system. Fiat based money systems, use fractional banking reserves and can create money out of thin air.
While this is true of a fiat based system, the world financial markets price currencies, one against all others, so if a country decided to print excessive currency, this would result in the devaluation of the particular currency and this would lead to inflation. Terrible economic times have been associated with this. Although, mistakenly, certain theories hold that by lowering the value of the currency it makes exports cheaper abroad thus increasing trade at home. Butthis is somewhat illusory since a country can't devalue its way to economic prosperity.
Inflation is really the loss of purchasing power of a unit of currency. Sometimes it takes a while for this to happen. Since the collapse of the market and economy in 2008, the FED has enacted quantitative easing – putting more money into the system, and the critics say this will cause inflation down the line. If that happens, then the FED will drain money out of the money system, which will slow or even stop the economy, which will then causes prices to fallor inflation to slow down or worse deflation. This is also known as a boom/bust cycle. It is verypainful for many at both ends. But inflation hasn't happened yet. But eventually economic principles will come through in the end and the debasement of our currency will cause inflation.
The question is “ how do we get there”? Many times, smoke and mirror solutions will give the appearance of solving a short term problem only to have a more severe problem requiring more severe solutions cropping up a bit later in the cycle.
It appears that the FED did make some correct moves resulting from the crisis and financial market meltdown of 2008 by preventing a world wide panic but it also did other things that were problematic. This could be described as the FED taking the role of a “planner” which should never be the case. But this is also hotly debated in that the critics say that the banks
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should have been left to fail. There would have been some economic disruptions but it would have let the system clear itself. There is a lot of truth to that. With all of the QE's and money printing and zero interest rates, things like savings and investments which are the key to long term economic prosperity have been put on hold over the last 6 years.
In the free market economy, recessions need to happen to clear the system of mal-investments. What the FED has ultimately done by there policies is to delay this process fromhappening.
Below are links to more detailed discussions on this very important matter.
Currently the FED is underway in the normaliztion of interest rate aspect which is the unwinding of the QE's that it initiated as a result of the financial crisis of 2008.
The FED raised interest rates by 25 basis point this December and signaled that is would have three more 25 basis point increases in 2017,.
Ultimately this will cause money to be directed into market oriented, profitable ventures which includes savings and investment which are the cornerstones to a solid economic system.
Should the FED be the central planner of the monetary system? No, it should be the free market. The FED should stick to its mandate – price stability, low inflation and low unemployment. Unfortunately due to the financial crisis of 2008, it had to get involved in preventing a financial disaster.
Role of Government
It is the private sector that is the source of innovation, wealth creation and jobs. It is the driving source of the free market system. The government simply re-distributes it.
The role of government should also be as a mediator so that private parties, businesses etc. can use it to mediate disputes, protect the quality of the currency, defense of the nation etc. But the role of government should never be to protect us from ourselves.
Above all, the government should be small relative to the private sector. It is the private sectorthat is the ultimate producer of goods and services – locally, nationally and world wide.
But government can play a good role. How? By doing things that individuals, businesses can’tdo by themselves. For example, investing in infrastructure – bridges, roads, sewers. Taking the lead in incubating new technologies, defense, the rule of law, maintaining the value of money, making sure investments are safe from fraud, facilitating free and open investment. In the case of a national emergency, making sure it is dealt with.
Government should not be in the business of providing goods and services to the private sector unless absolutely necessary. It does it now, for example, in the areas of military spending. But recently, it has been pointed out that this expense is giant, relative to others. News stories point out that this area is too large to be audited.
Government also mandates certain things that need to be done. What this effectively does is to drive up the cost of a product, increase taxes, the cost of doing business. It may not sound like much but when it is compared internationally, it may mean the cost of the US product or doing business in the US is more than another comparative location, so the business will go there.
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Orderly Economic Growth
In a bottom line analysis, a long term successful economy seems to have orderly economic growth as one of the factors. It is always lead by the private sector. It doesn’t mean that the economy doesn’t have issues, but it means that the issues are overcome and the economy moves forward – low unemployment, continued increases in productivity, low inflation and ultimately balanced budget.
It also means that the above principles mentioned are recognized by people, investors, government and industry. Certain nations will continue to take advantage of possibilities, but these principles have a way of leveling things out in the long term and the major economic powers, basically considering these principles, seem to remain as a major economic power.
Will new technology, scientific discoveries and inventions change the effect of these principles? The short answer is no. Businesses that continue to invest in research and development although paying a high up front price, will reap an extraordinary reward with a new technology development or scientific discovery. There are substantial issues regarding intellectual property. News stories report that certain countries, backed by their respective governments, are engaged in wide spread economic espionage and intellectual property theft.This has widespread and alarming economic ramifications.
Investments in basic education by countries and economies as a whole will, over the long term, have a better equipped work force for the economic conditions that lie ahead.
Savings and investments in the future are also the key and must be rewarded ( competitive rate of return).
All of the above, when taken in the aggregate, will contribute to orderly economic growth meaning a steadily growing economy, stable political environment, low inflation and a high quality of life.
Conclusion
A number of economic principals, theories and factors have been presented in a simple way in order to understand our basic economic system- how it works, the impacts of key decisionsand how those decisions affect personal, business, local, national and international lives.
While the US system is a free market economic system compared to a socialist or other system, some decisions affect that freedom.
There are also some issues that, while effectively presented, will continue to be debated at the highest economic scholarly levels – a fiat based money system or a money system based on gold, rewriting the tax code, for example. I think that our current based fiat money system is effective currently and going forward but it should be re-examined in detail periodically.
There are some aspects of the economy where a simple economic concept may be “modified”for various reasons including political.
By having an understanding of the simple aspects of how an economy works, one can reasonably see how by modifying some of these principals, changes in the economy can be made. Changes that can be immediately seen, changes that can be seen over a few quarters
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and years, and changes that can only be seen over a long period of time.
But what can be seen is that when an economy follows simple principles – investment, research, science, technology etc, the economy will have stability, short and long term growth and many of the good amenities that come from a situation like this.
Defense spending also plays a key role in the freedom of the United States and the other nations of the world. But it comes at a very high economic price. What that price is and the balance between the military and civilian side will no doubt be the subject of political debated for decades if not centuries to come. But currently, the size of the military budget and apparatus has to reviewed in light of current and future threats.
By investing in things like – plant, equipment, science, technology, human resources, research and development on a long term basis, more likely than not, these investments will pay off well, not only for the investor but for the economy at large.This also includes savings. When this is applied in the aggregate, a great economy usually follows and is sustained.
The rewards for this type of economic behavior should be maintained for that will continue thistype of behavior.
Unfortunately, this doesn’t always happen. The goal of this economic treatise, was met by presenting the key and simple economic principals so that the individual, business, government, national and international interests can see the economic and political implications of the manipulations of these principals.
Howard Jackson’s Economic Blueprint For 2017 ©®™
The US economy has basically recovered from major financial shock, a market collapse, economic decline not to mention all of the above has affected the world markets and economies. The recovery has not been as robust as desired and Europe and China have been slowing down and in fact have enacted their versions of QE.
The US is the world’s largest, diverse, strongest economy. It is a highly coveted market place as well as being the safest political environment. Although, there has been much media coverage about the US economy “falling off a cliff”, there are clearly a number of steps that can be done which will continue the US economy in its dominant role in the global economy. These steps are clear and unambiguous and will get the economy moving forward, increase confidence among consumers, investors and the private sector portion of the economy. Thesesteps will produce immediate, medium term and long term positive results.
As the US economy, markets as well as the world’s economies and markets continue to stabilize and improve, there are a number of things that could be done to make this process happen more quickly and keep the resultant vibrant US economy and the world economies moving forward with continued growth in GDP, lower unemployment, low inflation and less political instability resulting in an overall higher quality of life. But actions need to be taken now not only by the US but also by global world powers.
Enacting what is necessary to ultimately having a smaller government, larger private sector, enhanced economic base, simplified tax code will put the US economy on the path to being ina vastly better position then it is now.
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An environment which facilitates and encourages basic investment in business, human resources, science and technology will strengthen the means of production and strengthen and enhance overall competitiveness. This in turn, provides demand for product and services.This, along with other steps, will channel massive investments away from financial gimmick types of products – financial speculation, the culmination of which ended in the Great Depression in the 1930’s and the major US and world market decline of 2008/2009. A little speculation can be good, but not when it represents the major portion of total investment relative to the basic side of investment in business, plant, machinery, human resources, science and technology.
Hopefully with the President-elect taking office January 20th, 2017 and the House and Senare under the same party, the political side be quickly resolved and positive action can be taken. All of the issues and principles discussed above and the economic blueprint for economic prosperity below, will be a part of this election.
Following is Howard Jackson's Economic Blueprint for 2017 ©®™ which will restore and enhance the economic luster and power going forward. This will also contribute to the stabilization and growth of the world economies most all of which have a substantial economic relationship with the US.
By following the following steps (presented in a simple, understandable format), the US and hopefully following the world economy, will have the greatest period of peace and economic prosperity every known. Not to mention the highest quality of life.
1. Free Market – The market will regulate itself. It doesn’t need government to make it work. It will also continue the spark of creativity and freedom that makes the US the greatest country and one those other countries emulate. It can also react more quickly and efficiently to the increasing complexities of the market – much more quickly and effectively than a centralized government planning system. The highest standard of living also flows from this. This should be looked at in terms of 21st century capitalism. This also includes interest rates; the market should set the rates. Interest rates are themost important signal in the economy for it establishes the relationship between risk and reward. When the FED keeps rates artificially low for a long period of time, investors start investing in things they normally wouldn't do. So do people. Since they can't get a return on savings then tend to speculate in the stock market under the guiseof investing. With a Free Market legitimate savings and investments will return. Without this, a strong, sustainable economy with low inflation can't occur.
2. Free Trade – No tariffs. Let other countries sell to US the things that they can produce the cheapest and let the US sell to counties the goods and services they can produce the cheapest. The goal is always to be able to buy the best possible product at the lowest possible price no matter where is comes from. This is also known as the law of comparative advantage – specialization. This is how the standard of living rises to its highest possible level. This would have to be done with global cooperation and in a phased in way. This includes eliminating tariffs, gradually. The NAFTA treaty should also be upgraded and modernized. It was written pre-internet, for example. It should be done tri-laterally and not bi-laterally although bi-laterally things could be
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implemented more quickly, but the changes wouldn't last long. Although major, positive changes were made with the treaty, most of the benefits were to the large players. The Mexican economy has radically and positively changed. The TPP trade agreement is most likely to pass and it will create opportunities. There will be issues here in the US. But the tide of world trade is already here and we simply have to adapt going forward to take advantage of the opportunities instead of trying to create barriers to slow down or prevent change. The sudden Presidential executive action on Cuba has opened many opportunities. The introduction of the free market system into Cuba will transformthat country to a thriving metropolis within 5 years. There are many potential opportunities for trade for small and mid-sized businesses. But there are a number of under the radar regulations which can hold up these small business initiatives that need to be eliminated. Additionally, amend the IMF charter to call currency manipulation ( competitive devaluation) as a trade subsidy.
3. A sound money system. Money is a medium of exchange, a store of value, serves as aunit of pricing, a unit of economic calculation. Currency is much like money except for one thing – being a store of value. This also includes a free exchange rate – currently afiat money system in which all currencies are traded against each other in an open market. Each is freely and openly exchanged on Wall Street and the international exchange. A lingering issue is Nixon’s taking the US dollar off the gold standard in August 1971 as well as repudiating the Bretton Wood’s agreement. Also the issue of using this system to backdoor finance government deficits. This is an area of continuedexploration. It's importance can't be over stated and a detailed discussion is beyond the scope of this forecast. The currency system regulated by the opern market world wide is a technically market perfect system but with a flaw that central banks can manipulate interest rates and print money. But there is still a lot of cushion for countriesto manipulate its currency. If money is neutral, it has no bearing on output. Following is a link to a book called “ Currency Wars” https://www.youtube.com/watch?v=ZSl9SAl8cQU .It is an excellent, historical and analysical book which describes basically “ currency manipulation” by countries to get a trade advantage. It starts back at the beginning and discusses in detail all of the financial panics, crises etc. and how they developed, what was done and whether what was done was correct or not in light of economic principles. The economic and political implications are enormous and far reaching. Another excellent video is “Currency Wars and Reform of the International Monetary System”. https://www.youtube.com/watch?v=cs1Xwm1TuIM Additionally withthe current 10% requirements, banks also create currency. Conerns about the supply of money (M2) and the velocity of money also factor in. There has to be a strong link between effort and reward as well as risk and reward. When there is currency devaluation, manipulation, money printing by the central banks, the price mechanism gets distorted and without accurate prices the links between supply and demand also get distorted. Asset bubbles occur in situations like this.
4. Demand based economy – falling prices create demand. Increasing demand creates jobs. Falling prices are a reward for capitalism. But people don’t want jobs for the sakeof a job, they want it for was the benefits a job will buy – increase of the quality of life. But people have to be employed productively. If no one is producing anything, then a salary has no value. Look at the Russian economy before it collapsed.
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5. Boom and bust cycles – When the Fed pumps too much money into the economy, it creates a boom, then a recession occurs ( the bust). Here is where the market tries to correct the problems created and establish an equilibrium. There have been continuingdebates that the FED’s interference in the market with lose financial policy, while clearing up a bad situation, is actually sowing the seeds for the next economic calamity. Examples of this is the 2002/3 easing, leading to the housing bubble, leading to the 2008 market collapse. There are probably contributing factors, but there is strongevidence of substantial probability that this is true. Also a question of terminology – if the economy's GDP went from 1% growth in 2012 and to 3% in 2013 and projected to go to 4% that means the economy is expanding, if the reverse were true, then the economy would be contracting. It is most often confused resulting in the continuing implementation of poor economic policy. This definition has nothing to do with whether or not there is inflation or deflation. For example, if prices were falling on certain goods (deflation), that is a good thing. But if prices were falling across the board because of continuing weak demand, that would be a contracting economy, not deflation. The other issue is over-reliance on central banks and debt to resolve severe recessions. Instead restore more powerful growth engines such as: investment in infrastructure, improvements in the labor market ( productivity) and corporate tax reform.
6. Initiate tax cuts and greatly simplify the current tax code – eliminate loop holes and target a 13% -15% rate with a broad tax base. You can’t tax an economy into economicprosperity – the Great Depression is an example. There have been studies done indicating that the lower the tax rate, the more in taxes that will be collected – assuming a broader base. Let US companies repatriate their capital back to US for new investments without a tax or minimum tax. The issues with “inequality” have ultimately to do with the return to capital vs. the return to labor. If there were higher taxes on the return to capital and lower on the return to labor this could go a long way to solving this inequality. Additionally, the current tax code is an altered relic of the industrial age era. It is woefully arcane in our current digital age economy. Ultimately the tax code will have to be completely revamped in order to interact with the modern economy. It should be written to do the least amount of damage possible to the economy. More attention will have to be focued on the elements of where income is earned vs. where it is taxed. Close and eliminate the carried interest loop hole. Allow for full expensing of investments ( plant and equipment) in the year the investment wasmade.
7. The Glass Steagall Act or a reasonable facsimile should be re-enacted. Unproductive investments in financial gimmicks should be either eliminated or strictly curtailed. Currently the attempt to do this is the Dodd Frank legislation but it is a poor attempt in that it doesn't accomplish the end results and the costs of compliance are enormously and dis-proportionally high especially for the small and mid-sized banks.
8. One economic system goal is to make the poor people rich not make the rich people poor. If you tax people who work and pay people who don’t work, guess what you will get? The middle class recovery will play an important role going forward. But this can't happen unless and until the current tax code is revised. More focus and emphasis has to be put on this long neglected and key aspect of the economy.
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9. Discontinue using trade as a political weapon. Look at North Korea, Cuba, Iran. Trade embargos don’t work and they end up making life time enemies, especially unintended ones. But with Cuba, late in December, the President by executive action, re-opened trade ( albiet limited) and relations with Cuba after almost 60+ years.
10.Limited government –Reduce government spending. The government should be limited to its basic functions – for example, protecting the US from outside enemies, keeping peace and order and home and acting as an intermediary over our disputes. The role of government should be to protect ( mediate) other parties from harming the individual. But never to protect the individual from harming oneself. All of the agencies trying to impose regulations on how individuals should behave should be eliminated. Having voluntary cooperation ( free market) is clearly the best way to solve problems rather than turning these problems over to government. In rare instances, government could act as a catalyzing agent to get things done that individual businesses could not get done individually such as the space program. Government doesn’t produce wealth, products or services. It simply redistributes them from those who produce to those whodon’t produce. This should be done in a way that does not cause collateral damage. The role of government, other than to keep law and order, works best when focused ona single task i.e. World War 2. But it is grossly inefficient in trying to manage an economy with all of the complexities, consumer tastes. This should be done by the unfettered operation of the free market system. Government will continue to grow so long as people believe that the only way to solve their problems is to turn them over to government. The government should have an intelligent and supportive relationship with the business sector (private sector).
11.Continue to have a strong military to protect the US from outside threats. Also the global economy prospers by the US military and economic efforts abroad. This resource should be used carefully going forward since it is a very expensive commodity. Once spent, it is not available for civilian or free market initiatives. Is the current level of spending appropriate for the potential threats of today? Could it be reduced and still maintain its effectiveness? By how much? By reducing this spending,this money would be free to go into the private market and produce the goods and services that would increase the quality of life.
12.The unwinding ( tapering) from the quantitative easing has begun in 2014 and the normalization of interest rates has started in December 2015 Although it sounds good in its present form and has been well received by the markets, so far, there is still muchmore to go. When normalized, the interest rates will allow money to go into the areas that will produce market driven products based upon demand. It will also start the two basic economic necessities for a strong economy – savings and investment to resume which has been missing for the last six or so years.
13. Incentive the initiatives in the private sector that create jobs, initiate research, development, new products. Initiate investment into R&D that would make better products more cheaply and efficiently. The focus should be on long term thinking. Industries should be targeted that are industries of the future- many of these would be rapidly growing small businesses. Along with that should be more emphasis on research and development. And along with that should be worker training or upgraded
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training for the jobs and industries of tomorrow. This will bring back the middle class.
14.Continue to reduce regulations. Eliminate agencies that control products that should beleft to the operations of the free market and society.
15.Inflation raises taxes without anyone voting for it. It is also a dangerous disease to an economy. But yet FED policy is to continue with quantitative easing until there is substantial and continued inflation. This then begs the question –“ and then what?”. The FED's target is 2% inflation. This continuing of the FED's continuing to print moneyto get to this 2% target is a bad idea. It is like pouring gasoline on a fire. Shouldn't the inflation rate be close to 0%? If you have, for example, 2% inflation for 10 years, that means that if you had a savings account for retirement, that account would lose 20% ofits purchasing power. Additionally, long term investments, necessary for economic growth and wealth creation is curtailed for long term investors don't know what the value of the future dollars they will be paid with will be worth.
16. Much of our work force is immobile meaning if a single mother currently unemployed and get a good job in a new state, there is no way currently this person could move there and take that job. This is inhibiting many good and capable workers from filling positions.
17.Has the FED done it's job? Maintaining price stability? Maintain full employment? Lender of last resort? Bank regulator? Have the effects of QE develop a self-sustainingeconomy? The role of the FED should be limited to stabilized prices – zero inflation and to be the lender of last resort. In doing this, the FED would have to exercise more regulatory authority over the banking system and markets to insure stability. But it should not be in a position to be a “planner” and at times, let the recession take its course to clear the market of mal-investments. What is has been doing is to try and soften the effects of a recession which prolongs the problem. An economist of the Austrian School ( Libertarian), Peter Schiff, has testified in front of Congress about these issues. Here is a link to that testimony - https://www.youtube.com/watch?v=TzyYENGZKpI . Here is another link to a speech he gave about why the FED should beended - https://www.youtube.com/watch?v=3en75HjKvyo
18. Empower the IMF which would lead to better growth globally. In essence, the IMF would be the world's central bank. This is a complex area with substantial ramifications.A global economic group should study this in more depth and make recommendations.
19. With the Presidential-elect taking office on January 20th of this year, hopefully there will be a clear referendum on changes in the tax code, the commencement of substantial infrastructure projects, a jobs program, and the role of the FED, military and global influence, climate change to name the major issues.
20. With TPP, what is know is basically a good idea in that it tries to address the global market changes that are happening and inevitable. It is 29 chapters long. Congress wants to add one additional chapter to address currency issues (currency manipulation/ competitive devaluation).
21. New trade agreements should specifically address the issues of currency manipulation. The Bretton Woods agreement didn't address it.
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22. The price of energy has fallen dramatically which is a help to economic growth except to the energy producers. Alternative energy sources, especially solar, wind, thermodynamics as replacement to carbon based energy sources (oil, natural gas) are the right steps moving forward. As new energy sources are considered, the price of that energy source is irrelevant but the net energy is.
23. Regarding emerging markets globally, BRICS approach is a dominant factor and thereis a very large developing market emerging. BRICS is the acronym for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa. The grouping was originally known as "BRIC" before the inclusion of South Africa in 2010. One issue is that many of these markets are based upon dominant “tourist” dollars rather then on “dedicated” dollars. It could also be stated as the dedicated investor vs. the cross-over investor. It remains how this will play out going forward given that the US FED will be raising interest rates which other global central banks are actually starting to do the US version of QE – quantitative easing.
24. For the US economy, the restoring of more powerful growth engines going forward such as infrastructure, labor markets and corporate tax reforms. Along with this has to be less reliance on the FED (central banks) and debt financing.
25. The issues of the rating agencies and how they are regulated has to be brought undermore scrutiny as well as FASB – the accounting standards which have seemed to be pushed to the side. One recommendation is that stock options should be expensed. These options have to be represented as a cost on a company's balance sheet. After much wrangling with the lobbyists, stock options are mentioned as a line item in the footnotes.
26. Eliminate student loan guarantees. This will force the education providers to compete which will drive down the prices of tuition and increase the quality of education.
27. The parasitic economy – is the situation where businesses, people etc. use the law to get something that they could not get voluntarily in the marketplace. Attaching to someone else's wealth. This issue has to be looked at more closely and changes need to be made to move this aspect of the economy to a free market basis.
28.Use QE to reduce private debt instead of creating asset bubbles.
The US economy is doing better than last year and substantially better when it took the catastrophic hit in late 2008. As the economy continues to improve in 2017, it will make more and more specialized products. This will have a tendency to leave people behind. But the freemarket can also correct that as well. The current education system nationally does not factor in how productive workers ( skillwise) and move from one job to another as the aspects of world trade and new technology affect the economy.
By enacting the above points, the US economy will bound to new highs, a better quality of life,act as a positive catalyst for the rest of the economy with less government, lower taxes and little to no inflation. I believe that this is the just part the starting point of a 10-15 year economic expansion and that GDP growth will continue to accelerate, unemployment will continue to decline and inflation will remain low. But embedded within this is the caveat that
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the FED will start the normalization process and there won't be any catastrophic side effects. There are no historical perspectives to draw on.
Below are links to detailed lectures about key economic points made above.
Dr. Milton Friedman – Free Trade – Producer vs. Consumer
http://www.youtube.com/watch?v=QXkX4POxA0g
Public Polity Debate between Dr. Authur Laffer and Jared Bernstein, 1/12/2012
http://www.youtube.com/watch?v=e2GAdPNa1Fg
Dr. Arthur Laffer – Taxes and The Economy
http://www.youtube.com/watch?v=QTjxZwxVK7k
What is Money? Joseph T. Salerno, Congressional Lecture
http://www.youtube.com/watch?v=b-a1ddv9E20
This was one of the best speeches I have ever heard about money, prices, FED, gold, inflation, deflation, depression.
Joseph Stiglitz, "War and the Economy: The True Cost of Conflict"
http://www.youtube.com/watch?v=jRPYq2Ndzfk
David Stockman, The FED is the problem.
http://www.youtube.com/watch?v=xJ0LLi8rJZw
and
The Great Deformation
http://www.youtube.com/watch?v=BhigdkNh7a4
Peter Schiff
What about money causes economic crisis?
http://www.youtube.com/watch?v=npJ0CUT8d_
Thomas Piketty
Capital in the 21st Century
Many charts, graphs.
https://www.youtube.com/watch?v=heOVJM2JZxI
The actual speech. An extraordinary explanation and documentation about income inequality.
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Below is the link to get the actual documents.
http://piketty.pse.ens.fr/en/capital21c2
Income Inequality, What can be done about it.
Paul Krugman
https://www.youtube.com/watch?v=DGmUtJkTaqc
Thomas Piketty, Paul Krugman and Joseph Stiglitz: The Genius of Economics
https://www.youtube.com/watch?v=Si4iyyJDa7c
Will The Economy Continue To Feel Better in 2017?
The basic micro and macro economic factors for an improving economy recovering from the crash of 2008 are in place and working. The year 2016 finished with modest momentum continuing from 2015.
Energy prices have risen but are still relatively low.
The clearly improving real estate market (residential, commercial, residential new construction) , plus continued increases in GDP, lowering of the unemployment rate and increasing consumer confidence collectively will make the economy to continue to feel much better towards the first quarter of 2017 and accelerating through out the year and continuing in 2018.
The normalization of interest rates by the FED, meaning the economy is self-sustaining, bodes well for the economic items to form or continue to improve upon the US economy which is the most sought after economy in the world.
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Howard F. Jackson, Jr., MAI, ASA, Chairman, NY State Certified
Anne Jackson (1898 - 1978) Joseph Jackson (1890 - 1939)
About The Author
Howard Jackson - Real Estate APPRAISALS • EXPERT WITNESS TESTIMONY • REAL ESTATE FINANCE (DEBT AND EQUITY)
Qualifications of Howard Jackson, MAI, SRPA New York State Licensed Real Estate Appraiser and
New York State Licensed Real Estate Broker
General Experience Overview
Howard Jackson, MAI, SRPA, NYS Licensed Real Estate Appraiser and Real Estate Broker has been appraising real estate throughout the United States. He is a graduate of LaSalle Military Academy, with honors including 4 years of Army ROTC. He did his basic training at Fort Dix. He continues to serve in an Honor Guard Unit ( USV-11th Regiment – www.usvny.com) performing the Full Military Honor Funeral Ceremonies. He also arranges mid to large scale real estate equity financing and places select investment grade real estate.
He represents the 4th generation of the Jackson family in real estate going back to the 1890’s where his great grandfather founded the original firm. His grandmother Anne Jackson was thefirst licensed woman real estate broker in NY.
He began his appraisal career at Associated Appraisers whose major assignment was the reassessment of the Town of Islip consisting of 96,000 parcels. He has been appraising all types of real property around the United States subsequent to the reassessment assignment. These properties include all forms of commercial and residential properties (1-4 family), shopping centers, nursing homes, office buildings, apartment buildings, hospitals, nursing homes, congregate care facilities, hotels, motels, SRO’s, industrial buildings, banks and land projects, raw acreage, partial interests, easements, historic properties, theatres, cemeteries, partial interests, military facilities . In addition to appraisal assignments, he has prepared other reports for clients such as feasibility analysis, environmental damage valuation, highest and best use determination, economic analysis, cost – benefit studies, market forecasting, asset management, property acquisition and disposition, real estate equity capital raising and
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debt placement.
Professional Designations - Licenses
He holds the MAI and SRPA designations from the Appraisal Institute. He is also a NYS Licensed real estate appraiser and real estate broker. He is also approved by the NYS Department of Transportation as an accredited real estate appraiser. He is approved as a realestate appraisal instructor for NYS Department of State – Division of Licenses.
Real Estate Appraisal Services
All types of commercial and residential real estate can be appraised for either financing, legal or other purposes . Review appraisals for all types of properties can also be prepared.
Expert Witness Testimony
He has qualified as a real estate appraiser expert witness as well as related fields since 1972.This includes bench and jury trials in both Federal and State Courts as well as various tribunals and hearings. The subjects of these proceedings typically are trusts and estates, tax certiorari, condemnation, zoning, land use, equitable distribution, legal and architectural malpractice, environmental damage valuation, bankruptcy and other forms of litigation.
Authorship – Publications, articles, press quotations
Howard Jackson has written five books: "Key Writings in Real Estate©" "Real EstateValues and You©" and "Understanding Real Estate Values for Successful Investing©" and " The Real Estate Appraiser and The Law©" www.upublish.com/books/jackson-h.htmand“The Secrets of Power Politicking© www.upublish.com/books/jackson.htm .
He has written over 400 articles, monograms and bi-lines. He has also been quoted in mostof the major real estate and news publications and periodicals since 1968. A representativesample of these articles or monograms are contained in the expanded versions of his CV.
He also writes Howard Jackson’s Annual Real Estate Market Forecast ©®™" which in 2017represents the 30th consecutive year of its publication. The 2017 version is available on thecompany web site.
He has been an advisory board member of Standard and Poor’s National REAL ESTATEINDEX. He has also been a contributor to the National Real Estate Index sponsored byStandard and Poor's Corporation and published by the Liquidity Fund since 1989.
He regularly contributes to national real estate / economic surveys complied and published by
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Real Estate Research Corporation.
Howard Jackson's Past Computer Writings ( articles), Seminars, Modules, Speeches - a compilation of titles A comprehensive list of these articles may be found on his full and expanded CV located on the company web site..
He also wrote a comprehensive user’s manual for "The Real Estate Appraisal DataManagement System ©®™", the comprehensive real estate appraisal computer softwareprogram, which he also wrote.
Real Estate Finance
He has been retained by a number of major real estate companies to raise real estate equity capital for their projects in 2016. Each company’s real estate equity capital requirement is in excess of $100,000,000 each. He has over 225+/- domestic and 115+/- foreign sources of real estate equity capital as well as EB-5 financing.
Key Note Assignments
Some of these assignments begin with large scale reassessment projects including the Town of Islip consisting of 96,000 parcels of land. Other keynote assignments include various internationally known properties, a 500,000 + square foot office building in Los Angeles, majorhotel properties and large scale subdivisions. He has also been retained as an expert witnessfor plaintiff in the largest real estate limited partnership fraud case and has been retained by defendant in a large environmental damage claim against a large oil company as well as by plaintiffs in major cases. He has also appraised unique properties and situations such as timber farms, liquor manufacturing and distributing facilities, NIKE missile sites, aircraft testingsites and research laboratory facilities. He was retained as exclusive advisor to Reckson Associates Realty Corp., an REIT In their $20,000,000 +/- acquisition of the first mortgage position on Garden City Plaza, a 400,000 square foot office building located on the westerly edge of Roosevelt Field, Garden City, L.I., New York. He testified in front of the Blue Ribbon Commission on the reassessment of Nassau County. His largest appraisal assignment concerned an equitable distribution case involving two hotels in New York City. The appraised amount was in excess of $220,000,000.
Public Speaking, Lectures, Teaching
He has spoken around the United States on a wide variety of topics based around real estatevaluation and related subjects. These topics include: computers, software and applicationswithin the real estate profession, expert witness testimony, legal issues, macro and microeconomic factors influencing real estate valuation, highest and best use, internal rate ofreturn, real estate valuation models using computer software ( i.e. Excel), databases, datamining and other subjects. He has been approved as a lecturer by the New York StateDepartment of Licensing to teach real estate courses for license recertification as well ascontinuing legal education courses. His courses and lectures have been accepted for
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recertification credits by the Appraisal Institute, Bar Associations and other real estateorganizations nationally.
In May 1983, he did the Jackson-Kogelman Seminars on Real Estate Mathematics andComputers at the Cornell Club in NYC with Dr. Stanley Kogelman. Dr. Kogelman is theauthor of Mind of Math and The Math Solution. Dr. Kogelman was Howard’s Chairman of theMath Department of his company at the time.
In 1983 he put on a seminar called “ Geographic Information Systems and Remote Sensing Trends – Real Estate Applications”. It was held at Associated Builders and Owners of New York's Offices in New York City. The speakers were: Howard Jackson, William Campbell of NASA and Charles Killpack of Iris International. Mr. Campbell and Mr. Killpack discussed the trends of Geographic Information Systems (GIS), remote sensing of data coming from satellites and their capabilities from a current viewpoint and future applications and Howard Jackson developed sources and methods applying those applications to real estate appraising, analysis, land use, tax assessments, municipal functions and potential military applications.
He has been an adjunct associate professor of Real Estate at the New York Institute ofTechnology, Long Island University, Queens College, New York University, Hofstra University,Nassau Community College, New York University. He has been an instructor of Real EstateAppraisal, Investment Analysis, Real Estate Broker courses for the Long Island Board ofRealtors, New School for Social Research, The Learning Annex, Real Estate Training Centerand The American School of Real Estate. His course, “The Real Estate Appraiser and theLaw” has been taught live and on-line at the Appraisal Academy in Chicago(www.appraisalacademy.com)
He also appears as a guest lecturer at various real estate functions. He has participated in mock trials as a real estate appraisal expert for the Nassau County Bar Association at HofstraUniversity in 1974. He also gave a continuing education seminar in 1994 at the Nassau County Bar Association called “What Every Attorney Should Know about Real Estate Appraising”. In 2001 he also gave a seminar about Environmental Damage Appraising and Stigma to the New York City Bar Association. He spoke at the Apartment House Council (1983) regarding the Emergency Tenant Protection Act on Long Island. He has spoken for the Suffolk County Real Estate Board on various real estate issues. He has also spoken for the American Institute of Real Estate Appraisers, the Society of Real Estate Appraisers and the Long Island Society of Real Estate Appraisers and the National Association of Corporate Real Estate Executives (NACORE). In March of 2004, he was a seminar leader for his courseentitled “The Real Estate Appraiser - from the Appraiser to the Court Room” - How to become an outstanding expert witness. It is approved for CLE for Law in NY, CT and NJ and approved for Continuing Education in Real Estate in NY. He has a proposed course called Environmentally Impaired Real Estate - From Valuation, Stigma to Saving the Deal ©®™ being finalized for a future date. It will have CEU and CLE credits for attorneys, real estate appraisers and real estate brokers/salespersons.
He has appeared on CNN, Channel 12 News and Channel 21.
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Some of his real estate courses have been video recorded and appear in selected real estate schools on-line education web sites.
He has trained and mentored 100’s of real estate appraisers, real estate brokers and sales persons.
Computer Expertise
As an OEM for Hewlett Packard, he wrote a comprehensive software application called "The Real Estate Appraisal Data Management System (TM) 1981 which revolutionized data management and computer technique applications in the field. It received acclaim in a June 9,1982 newsletter by the Society of Real Estate Appraisers which said "...appeared to be the most futuristic minded and to have the most complete and advanced computer system of anyone at the seminar.".
Based in part, upon an article he wrote entitled Artificial Intelligence Applications for the Real Estate and Financial Industries ©®™, published by Real Estate Finance Journal, Winter 1988, pages 83-84 a software program was developed entitled Real Estate Appraisal Using Predictive Models, by Allan Most, etal, which was subsequently patented - Patent # 5,361,201, dated 11/1/1994
He has been a pioneer in developing computer programs for the real estate industry for the past 30 years and has written many programs for handheld calculators, PC's and minicomputers in languages such as BASIC, COBOL, FORTRAN, SPL, C++, HTML, JAVA, JAVA script and visual BASIC.
He has studied computer science, programming and related topics at Hofstra University, Grumman Data Systems Institute as well as taking numerous courses – lectures on line sponsored by Microsoft, Google, Hewlett Packard, MIT and IBM.
Professional Awards and Achievements
He is also the recipient of a literary award presented by the board of directors of the National Association of Review Appraisers. The subject of that award was his article entitled "Component Depreciation - What Every Review Appraisers Concern Should Be". He has also received a Certificate of Appreciation from The Society of Real Estate Appraisers. The theme of this certificate was "in recognition of service to the profession rendered as a contributing author to The Real Estate Appraiser and Analyst. The National Association of Corporate Real Estate Executives (NACORE) awarded him a Certificate of Appreciation "In recognition of outstanding service to the association".
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He wrote a comprehensive software application called "The Real Estate Appraisal Data Management System (TM) 1981 which revolutionized data management and computer technique applications in the field. It received acclaim in a June 9, 1982 newsletter by the Society of Real Estate Appraisers which said "...appeared to be the most futuristic minded and to have the most complete and advanced computer system of anyone at the seminar."
He is also the author/developer of a continuing education seminar entitled Practical Tips ForThe Modern Appraiser©®™. This seminar has been approved for two hours of continuing education credits by The Appraisal Institute.
He was also a co-developer of "The Jackson-Kogelman Series of Real Estate Math and Computers" in 1983 with Dr. Stanley Kogelman, former chairman of the math department at SUNY Purchase and author of "Mind Over Math" and "The Math Solution" which was approved for continuing education credits.
He developed the seminar " Using a Real Estate Appraiser - From the Appraisal to the Courtroom ©®™" in 2003 which was approved for CEU credits for real estate appraisers andCLE for attorneys.
He has developed a course and seminar for CEU and CLE entitled " Expert Witness Testimony From "A" to "Z" , Basic Concepts to Advanced Applications" ©®™ in 2004.
He was elected as an active member of the New York Academy of Sciences on October 1st, 1980.
For more detailed information on any of the above topics, please visit the company web site: www.howardjacksonrealestate.com
Historical Client List
Financial Institutions
AdvantaAmerasia BankAmerican Savings BankAmeriFederal Savings BankAllianceApple BankAsia BankAssociation Southold Savings BankAstoria Federal Savings & Loan AssociationBA MortgageBank of ChinaBank of East Asia
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Bank of Great NeckBank of IrelandBank of New YorkBank of California Facility, San Francisco, CaliforniaBank Central AsiaBank LeumiBank of North CarolinaBank of VirginiaBank of ChinaBankers TrustBarclays Bank, Ltd.Bayridge FederalBayside Federal Savings & LoanBeacon FederalBear StearnsBrokers FundingBrookside Savings & LoanBroward National Bank of FloridaCardinal Federal SavingsCentral Federal SavingsCenterbank MortgageCentral National Bank of ClevelandChang Hwa Commercial Bank, Ltd.Chase Manhattan BankChemical BankChinatrust Bank (U.S.A.)Chinese American BankCitibankCitizens Mortgage CorporationCity and SuburbanCollege Point SavingsColumbia Savings & Loan, Columbia, GeorgiaColumbia EquitiesCommercial Bank of KuwaitCommonwealth Eastern Mortgage CorporationCommunity National Bank and TrustConnecticut BankContinental BankCoreastCounty Attorney's Office, Nassau CountyCitizens Savings Bank, San FranciscoCredit Suisse Suburbia Federal Savings & LoanCountrywide FundingDade County Federal Savings & Loan AssociationDale Mortgage
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Dime Savings BankDollar Dry DockDollar Savings BankDormitory Authority, State of New YorkEABEast River Savings BankEastbankEmpire of AmericaEquiCredit Erie County Savings BankExecutive Mortgage Bankers, LtdFairmont FundingFar West Savings, CaliforniaFederal Deposit Insurance CorporationFHAFHBFinancial EquitiesFirst Federal Savings and LoanFirst NationwideFirst National, MassachusettsFirst National Bank of Hollywood, FloridaFirst NH BankFirst Lincoln Bank, Rochester, New YorkFirst Union MortgageFirst West MortgageFlagstar BankFourth FederalFNMAFranklin Savings, Kansas City, KansasFreddyMacGE MortgageGeneral American CorporationGenesis MortgageGirard BankGlenby MortgageGlobe MortgageGMAC Commercial MortgageGMAC Residential MortgageGreat Western Bank & Trust, Phoenix, ArizonaGreenwich Capital MarketsGSL SavingsGuardian Life InsuranceHansen SavingsHeller FinancialHempstead BankHome Owners Federal Savings & Loan, Boston, Massachusetts
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Home FederalHongkong BankHua Nan BankIndustrial National Bank of Rhode IslandInternational Commercial Bank of ChinaIsland Federal Savings and LoanIrving Trust CompanyITT Small Business FinanceIvy MortgageJersey MortgageKorea First BankLehman Brothers, Conduit ProgramLyons Savings & Loan, Chicago, IllinoisMarine MidlandMaspeth Federal SavingsMetLife Real Estate InvestmentsMidlanticMission savings, Mission, KansasMitsubishiMoody's Investor ServicesMorsemere Federal SavingsNara BankNational Bank of North AmericaNational Westminister BankNew Jersey Business FinanceNew York Life InsuranceNorth Conway Loan and Banking Company, New HampshireNorth Fork BankNorstar BankNorwestNVR Mortgage BankNYS Housing Finance AgencyPalm Beach FederalPan American National Bank, New JerseyPeoples Trust Company, New JerseyPHH MortgagePonce de Leon Savings & Loan, Puerto RicoPrudential MortgageeRaritan Valley Savings & Loan AssociationReliance Federal Savings BankResidential MortgageRichmond Hill SavingsSeamans Bank for SavingsSecurity PacificSmith Barney Conduit ProgramStamford Federal
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State BankSun Bank, Fort Lauderdale, FLThe Bowery Savings BankThe New York Bank for SavingsTravelers Mortgage ServicesTroy SavingsUlster SavingsUnion Savings BankUnited Orient BankVillage Savings Bank, Rye, N.Y.WachoviaWestwood Savings & Loan AssociationWhitestone Federal Savings and LoanPrivate Lenders and Mortgage BankersAFC Realty CapitalApex Credit CorporationAvco FinanceBoston Capital PartnersBridge CapitalCarnegie CapitalCarold CorporationColonial MortgageeDartmouth PlanDelaware Valley Mortgage & Trust CompanyEsses & Union Mortgage CompanyEvans Financial CorporationGoldome Credit CorporationHMC Funding CorporationLakeshore FinancialMarschall AssociatesMutual Credit CorporationOxford MortgagePMC Capital, Inc.Public EquitiesRockwell EquitiesThe Money StoreToday Funding CorporationU.S. Money CenterU.S. CapitalUnion CapitalReal Estate Companies, Business and IndustryADEMCOAscot ManagementAgree Development CompanyAlgonquin Property ConsultantsAllen Group
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Allen Cymrot & AssociatesAllstate InsuranceAmerican Property InvestorsAmerican Realty TrustAmerican EquitiesAmerican Title InsuranceAmerican United Life InsuranceAmurcon Equities CorporationAngeles CorporationArthur Young & CompanyArundel CorporationAscot ManagementAspen Capital CorporationAssociated Property ManagementBankers Life Insurance CompanyBenenson EquitiesBerkeley Square RealtyBest Products, Inc.Blue Cross-Blue ShieldBorden CompanyBoston Capital PartnersBrad Zackson, Dynamic GroupBremar Holdings CorporationBreslin Realty Development CorpBrown Williamson Tobacco Corporation, KentuckyCapital Holdings GroupChicago Investment CorporationChrysler CompanyCIGNACiticorp Realty ConsultantsCMP PublicationsCollins Food InternationalCommonwealth PacificCommunity Program CentersConey Island Resorts, Inc.Continental Mortgage Insurance CompanyControl Data CorporationCooper Horowitz, Inc.Coordinated FinancialCRI, Inc.Cross & BrownCrownpoint SecuritiesDeAnza CorporationDeMatteis ConstructionDiversified Equities, Inc.Diversified Realty Group
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DRW Investments, Ltd.East Coast CapitalEast River Management CompanyEngel BurmanEquidyne Properties, Inc.F.D. Rich Construction companyFirst American TitleFord Motor CompanyFord Motor CreditGardner Capital CorporationGeneral Electric CompanyGeneral Motors CorporationGeneral Electric Pension FundGoodyear Tire Company, KentuckyGrand Union CompanyGrayside RealtyGregg & AssociatesGrubb & EllisGrumman Aerospace, N.Y.Guardian Mortgage Investors, Jacksonville, FloridaHall Real Estate BroupHamilton Investors, Inc.Hemsley-SpearHoulihan-ParnesHuntington Hartford EnterprisesInflight MagazinesInsurance Company of North America, Chicago, IllinoisIntegrated Resources, Inc.Intercontinental Pacific Group, Inc.International ElectronicsInvestment Management AssociatesJ.D. Branmaur, Inc.JMB RealtyJohnstown American CompaniesJRD Management CompanyJosepthal & Co.Kalmon DolginKenbee ManagementKrupp Realty & DevelopmentLandauerLandmarks Restoration Corp.Laventhol-Horwath, N.Y., ChicagoLennar PartnersLenoir IndustriesLieberman companiesLionel Corporation, Pennsylvania
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Magnetic Coil, Inc.MAQ, Inc.McDonald'sMedico IndustriesMilex Industries, Inc.Murdock & CollNational Diversified Industries, PennsylvaniaNational Property AnalystsNational Development CouncilOneonta Investors AssociatesOppenheim, Appel, DixonOppenheimer Properties, Inc.Park Forest AssociatesParkview AssociatesPearce, Mayer & GreerPolimeni EnterprisesPrime SitesPrudential Property Casualty GroupR.A.J. Development CompanyRadiceRadio Corporation of America - RCARealcoReckson Associates Realty Corp.Resource Investments, Inc.Rexford National Corporation, CaliforniaRobert Corso Real EstateRobert A. McNeil Corp.Rochelle HoldingsRubin Wachtel Baum & LevinRudin ManagementSamson ManagementSchenley Distillers, Inc. - NationwideSequoyah EquitiesShearson-American ExpressShearson Real EstateSonnenblick Goldman Sotheby Parke Bernet Galleries, N.Y., CaliforniaSouthern Airways Facility, Atlanta, GeorgiaSouthmarkSouthwestern Life Insurance Company, Dallas, TexasStone Bridge CompaniesStonehenge Capital CorporationSummit Insured Equity, Inc.SYMST.B.S. EnterprisesT.I. Home Transfer
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The Garden City CompanyThe Related CompaniesThe Terlene Group, Inc.The Investment GroupThe Patrician GroupThe Mortgage Corporation of America, Inc.The March CompanyTriton Capital CorporationU.S. Life Insurance Realty CompanyU.S. Plywood CorporationUnion Mutual Insurance Company, MaineUnited Artists Theatres, Inc.United RealtyUnited Southern RealtyVMS Realty, Inc.Volume ShoesWestern Union Telstar Tracking Systems, California, New JerseyWinnebago CorporationAttorneys-at-LawAlbanese & AlbaneseArthur NadelBarbara L. DeMareBardey, Miller & ArnowBondy & SchlossBirbower & MontalbanoBronstein, Summer & AnsellCarro, Spanbock, Fass, Geller, Kaster & CuiffoAndrew GrunebaumCasey, Haythe & KrugmanCertilman, Balin, Hyman & AdlerCertilman, Haft & LebowCheckow & KisnerCostigan, Hyman, Hyman & MartoneCullen & DykmanDawson & SchwartzDaSilva & KeidelDreyer & TraubD'Amato & LynchD'Errico & CaputoFarrell, FritzField, Lomenzo & TurretFinley, Kumble, WagnerFlower & PlotkaForman & KingstonFrenkel & LomasFriedman, Altschul & Popplein
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Stephen GassmanGehrig, Ritter, Coffey, McHale & McBrideGold, Sax, Meyer & SirlinGoldberg & FinmanGoldfarb & FleeceGrenier, Humes & NolanGulotta, Margolin & GulottaHyat, Hyat & LandauHyman & HymanIngber & KlapperIrving LevineJacobowitz, Garfinkel & LesmanJasplan, Kaplan, Levin & DanielJoseph AppelmanJoseph LiteJoseph LubinKavanach, PetersKemp HannonKoeppel Sommer & Martone, P.C.Kramer, Lowenstein, Nessen, Kamin & SollKroll & BlachorKronish, Lieb, Weiner & HellmanLee GoldinLehrman & BreiterLevitan & FriedmanLinette, Schechter & ReicherLord Day LordLysaght, Lysaght, KramerL'Abbate & BalkanMcCarthy & DorfmanMcKee, Dorris, Riebesehl & PeltzMeltzer, LippeMeyer, Suozzi, English, KleinMitchell KayMudge RoseNaidich & SmolevParket & WaichmanProskauer Rose Goetz & MendelsohnRaymond, Frank, Schneider, Levine & Feldman Wormse@, Kiely, Alessandroni, Mahoney, IwyersRessa & DiNapoliRichard GabaRivkin, Radler, KremerRobert C. MichaelisRobert I. FutermanRobert Hart Jewell
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Rosen,Colin, FreundRoss & HardiesRuskin, Schlissel, Moscou, EvansSamuel Goldstein & SonsSchiff, Turek, KirschenbaumSchroder and StromSiegel, Fenchel, PeddyShore & ReichSolin & BreindelSpeno, Goldberg, GoldmanThomas F. LiottiWhiteman, Ciovacco & GorrayWhitman & RansomWiener, Zuckerbrot, Weiss & BrecherWofsey, Certilman, Haft & LebowWydler, Balin, Pares, Soloway, Seaton, Margolin, N.Y.Hotels and Country Club FacilitiesAggieland Inn, College Station, TXAir Host Inn, Tampa, FLAmericana, Rochester, N.Y.Bahia Mar, FloridaBeachcomber Hotel Resort, N.Y.Bristol Hotel, N.Y.Carousel Inn, Columbus, OHCedar Brook Country Club, Nassau, N.Y.Chatwell HotelsColiseum Motor Inn, Nassau County, N.Y.Colonie Hill Complex, Hauppauge, N.Y.Econolodge, Knoxville, TNEl Patio Beach Club, N.Y.Elizabeth Caterat Hotel, New JerseyGlen Oaks Country Club, Queens, N.Y.Gurney's Inn, Montgauk, N.Y.Hempstead Country Club, N.Y.Hempstead Golf Club, N.Y.Hilton Hotels - Various LocationsHoliday Inns - NationwideHoliday Inn, Bermuda - St. Thomas, J.S.V.I.Hotel Empire, N.Y.Howard Johnson's - NationwideInn on the Square, Cleveland, OHIronshore Country Club, West IndiesLaurels Hotel & Country Club, N.Y.Midway Hotel, N.Y.Par Central Hotel, Queens, N.Y.Raceway Motel, Corp.
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Ramada Inn, Lumberton, North CarolinaRolling Hills Golf Resort, Davie, FloridaSan Geronimo Hilton, Puerto RicoTimber Point Country Club, Suffolk, N.Y.Travel Lodge Hotels - NationwideTravelers Hotel, N.Y.
Restaurants and Other Related Facilities Nationwide Dunkin DougnutsHardees RestaurantsSambo's RestaurantsGino's AssociationPizza HutKentucky Fried ChickenSizzler Steak PubsVictoria Station RestaurantsMcDonald's RestaurantsCocos/Reuben's - Western States Plankhouse - CaliforniaBurger King7-Eleven Stores - Nationwide Convenience Stores - NationwideHospitalsBayswater Health Related Facility, Far Rockaway, N.Y.Baytown Hospital, TexasBrunswick Hospital, Suffolk, N.Y.Cardiac Medical and Health Care Center, Yonkers, N.Y.Charter Oaks Facility, GeorgiaCoral Gables Hospital, FloridaElwood General HospitalFlorida Medical CenterLakeside General Hospital, Nassau, N.Y.Limited Care Facilities - National LocationsLong Island Jewish Medical Center, Nassau, N.Y.Manhasset General Hospital, Nassau, N.Y.Massapequa General Hospital, Nassau, N.Y.Miami International Hospital, FloridaMid Island HospitalParsons HospitalRockville General Hospital, N.Y.South Nassau Hospital, Nassau, N.Y.Srydam Health Related FacilityStony Lodge HospitalUnited Cerebral Palsy Nursing Homes, Limited Care and Full Care
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Many types of these facilities have been appraised around the country and in the New York Metropolitan Area. They range from 50 bed to over 1,100 bed facilities ( such as the A Holly Patterson facility).
Educational FacilitiesSouthampton CollegeNorth Merrick U.F.S.D., N.Y.Valley Stream District, N.Y.East Meadow U.F.S.D., N.Y.St. Mary's School, Garden City, N.Y.St. Pauls School, Garden City, N.Y.Hofstra University, Hempstead, N.Y.Adelphi University, Garden City, N.Y.Educational Inst. ServicesNassau Community College, Garden City, N.Y.Levittown U.F.S.D., N.Y.Mineola U.F.S.D., N.Y.Farmingdale U.F.S.D., N.Y.AccountantsBertucelli & BarragatoSeidman & SeidmanPeat MarwickKenneth Laventhol & CompanyArthur AndersonHaver PorchenickArthur Young & CompanyZimmerman & CompanyArnold GruberWeiner, Margolin, EvansRogoff & ChaninTurman & EimerMarks, Shron & Co.Employee Relocation CompaniesGeneral Electric Relocation ServicesHomequity/Homerica, Inc.Ticor Relocation ManagementEastman Kodak Relocation ServicesEquitable Relocation servicesExecutrans, Inc.Alcoa Industries Relocation ServicesWestern Electric Relocation ServicesEast DilSinger Relocation ServicesRevlon Relocation ServicesDun & BradstreetMajor oil companies
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British PetroleumGulfTexacoShellMeritCities ServiceMobil Oil CorporationSun OilExxonSav-WayAmocoCumberland FarmsUnited States GovernmentGeneral Services AdministrationInternal Revenue ServiceFederal Aviation Agency - Int'l - Regional Airports U.S. NavyCorps of Engineers, U.S. ArmyFederal Housing AdministrationHousing and Urban DevelopmentResolution Trust CorporationFDICUnited States Postal ServiceUnited States Attorney, various Districts National Park ServiceRetail Stores - NationwideAlbert's Furniture StoresAlexander'sB. Altman & CompanyBest ProductsBroadway-Hale Department StoresDillon StoresFortunoffHartfield ZodyHoward StoresJ.C. PenneyK - MartKinney ShoesLevitz CentersLord & TaylorMacy'sMartin'sNeiman MarcusNewmark & LewisPearle Vision CentersSafeway StoresSears Shopping CentersSkaags Furniture Stores
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Southland Corporation - 7-Eleven StoresWickes Furniture StoresZody's Department StoresState of New YorkDepartment of Public WorksDepartment of Transportation – Accredited Real Estate Appraiser Dormitory AuthorityLong Island State Parkway CommissionDepartment of HealthDepartment of Mental Retardation and Developmental DisabilitiesMetropolitan Transportation Authority MTANational Park ServiceNYS Housing Finance AgencyCity of New YorkCorporation Counsel, Public Housing Agency Department of Real EstateDivision of Acquisition and Land ValuationNew York City Economic Development AgencyMunicipalitiesTown of IslipTown of BrookhavenTown of HempsteadVillage of Westhampton BeachCounty of NassauCounty of SuffolkVillage of Lake SuccessBronx Housing CouncilCity of New YorkCity of YonkersCity of White PlainsVillage of MineolaVillage of HempsteadCity of Glen CoveJericho Fire DistrictCounty of NassauBethpage Fire DistrictUnionsN.Y.S. Teachers Retirement FundInt'l.'Union Operating Engineers, Washington, D.C.CWA 1109Municipal Credit UnionAmerican Airlines Credit UnionDelta Employees Credit UnionBaxter Credit UnionLocal 210 Health InsuranceUtilitiesPenn Central Railroad
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Long Island Lighting CompanyArkansas Light & Power Company FacilitiesDuke Light & Power Company, North CarolinaAshland oil CompanyCarolina Light & Power Company, North Carolina Consolidated Edison, New YorkMetropolitan Transportation Authority, New York CityChurchesSt. George's Episcopal Church, Hempstead, N.Y.Diocese of Rockville-Centre,. Long Island, N.Y.Cathedral Properties, Garden City, N.Y.Diocese of Long IslandChurch of the IntercessorOrder of the Passionate FathersCatholic Charities
Special Purpose Properties
In this category, the firm has appraised over 3,500 parcels for the City of Long Beach, City of Glen Cove, Village of Rockville Centre, Village of Hempstead, Village of Lindenhurst, Village of Westhampton Beach, and the Village of Lynbrook. Included also were studies on air rights, bridges, easements, tunnels, streets, municipal buildings, hospitals, medical centers, nursing care facilities, banks, theatres, rail terminals, track and power line rights-of-way, race tracks, amusement centers, regional shopping centers, gas service stations, converted buildings, piers, docks, waterfront parcels, beach properties, man-made lakes, airport facilities, resort hotels, nuclear power plants, and distilleries. The firm also has appraised the Town of Islip consisting of 96,000 parcels of real estate for tax assessment purposes. Inherent is the firm's use of (CAMA) Computer Assisted Mass Appraisal techniques and GIS ( Geographic Information Systems) in re-assessment project implementation, re-assessment project consulting and procedural audits.
The firm has also appraised significant environmentally damaged properties in litigation. The most recent case being in New York City in 2012.
The firm's largest valuation was $210,000,000 for two hotel properties in New York City in 2006 in an equitable distribution matter.
Click here to go to the main page: www.howardjacksonrealestate.com
Open to new information:
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Should you feel you have a study ( economic, real estate), economic or market research and analysis that should be considered for the 2016 Annual Real Estate Market Forecast, please feel free to send to this author's office via email.
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