Trump Comes Across A Bit Too Clever For His Own Good

brucewilds.blogspot.hk / By: Bruce Wilds

Trump Often Comes Across As Too Clever By Half

Too clever by half is an old British saying, it refers to someone who is too confident of their own intelligence in a way that annoys other people. Often the reason a person gets labeled this way is because they come across as arrogant. The word braggadocios has been used to describe Donald Trump, synonyms for this word according to thesaurus.com are blowhard, boaster, bragger, show-off, and windbag. None of these are very flattering and over time such behavior has a way of wearing on people which often results in a backlash accommodated with negative consequences.

The polls continue to show Trump lacks broad support and his favorability ratings can't seem to get out of the cellar. Ironically his recent bombing of a Syrian air base in reaction to a chemical attack that killed children did receive kudos, however, it was from never Trump people, neocons, and liberals who believe in intervention. In fact, many of the supporters that constitute his base were a bit down in the mouth. Another way to gauge how President Trump's base is reacting to his moods is how they react to the tweets he sends out at any time of the day or night. When he twitters the President is able to bypass the mainstream media but it often gets their attention and a fair amount of negative coverage. Still more important is the reactions to the messages he twitters can vary greatly among those who voted him into office.  

One thing many people find troubling is that after just a few months in office Trumps has brought America to the brink of war, and I don't mean with just one country or foe. You can flip a coin as to whether it is the Korean peninsula that will light up with a nuclear glow, Europe erupting into conflict with Russia, or we will awaken to find thousands of American troops being dispatched to the Middle East. Years ago an attorney cautioned me that when negotiating a deal I sometimes came across as a little coy, I have always questioned his terminology, however, admit that when young and leaning far into the wind I might have gone a little too far. My point is when you play fast and loose the potential that you may lose control of events increases dramatically.

A Growing Concern For Trump Supporters

In just the last few days a growing number of articles have surfaced on the subject of Trumps "flip flops," needless to say but this does not bode well for those seeking stability and wishing to go to bed at night wishing or thinking they will awaken to a world where little has changed. And let me be clear, we are not talking about what might be labeled as minor issues. We are focused on some of the key issues of the day such as whether China is and should be pursued as a currency manipulator or whether he will reappoint Janet Yellen to head the Federal Reserve. Even his stand on NATO which has a direct bearing on national security and the Export-Import Bank threw his support behind after opposing it during the campaign leaves many of us a bit puzzled.

The mainstream media is quick to point out Trump's shortcomings and makes a big deal over ever falling out he has with his staff he remains brash and bold and supremely confident. While he claims he's running a well-oiled machine others give the impression that a revolving door needs to be installed to accommodate those rapidly becoming disenchanted with the way things are being run. Inside the White House, a bubbling cauldron of different ideas are competing for power and the President's ear. With this in mind, everyone should remember it was a populist message of draining the swamp that resulted in his election and while often discounted as "common folk" these voters are not necessarily as simple minded as the pundits might lead you to believe. 

For many Americans supporting Trump was not easy or did not come naturally, however, they saw Hillary Clinton as even less acceptable. A series of recent flip-flops on positions are beginning to irritate and concern his base. If this continues they will begin to doubt what he is really about. If voters who supported Trump become convinced he is playing them for fools it is likely they will loudly voice their discontent. In some way we are looking at a choice of style, Trump has repeatedly said he likes to play cards that are unexpected to keep the opposition off balance, however, when you unsettle those who support you it has a way of coming back to haunt you.

This article has been a while coming and setback several times to give Trump time to settle in but like many Americans, I viewed Trumps failure to move healthcare reform forward coupled with Republicans pathetic excuse for an answer to improve healthcare as far short of inspiring. This has raised a great deal of doubt about his ability to deliver on other issues and while Trump predicted that Democrats will own ObamaCare if it falls apart reality may not support his view. A recent poll from the Kaiser Family Foundation shows a majority of voters, 61 percent said they now blame Trump and Republicans for “future problems” with the healthcare law. Since the GOP is in control of the government “they are responsible for any problems with it moving forward.”

While some of this can be explained away as a strategy change or that he is evolving it has and should raise concern. Part of the problem is we were promised better than this, and not only better but quickly, we were promised we would win so much we would get tired of winning. To hear Trump talk at times you get the idea he thinks it is all about him. For example, Trump has both praised and blamed himself for the strong dollar. “I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me,” said Trump. This means whether he realizes it or not, by taking credit for things not directly flowing from his position he also opens and creates the situation where he may also be blamed and have criticism heaped upon him for things out of his control.

We must not underestimate just how polarized America is and because of that any event playing out poorly or a few bad news cycles can put Trump in a precarious position. A little humility on the part of Trump would go a long way towards defusing the anger that is beginning to smolder as his supporters witness a flip flop here and a flip there. With Trump detractors eagerly awaiting the day when he fails and receives his comeuppance Trump best remember who his friends are and that in Washington he has very few of them. There will be bad days, there always are, and before they erupt Trump would be wise to remember the message he put before the people if not the populist most likely unleash their wrath upon him.

Housing Policy Heaps Misery On Private Sector Landlords

We as a society create trouble by trying to deny that many people go through life making their own difficulties and then allow the government to sidestep the issue by pawning the problem off on the private sector. To those who have ever been landlords they most likely have found out that evicting someone is both expensive and a massive headache. While you on occasion see an article on how renting out a house you own can create a source of extra money you seldom see pieces on how it can cause you massive grief. Failing to protect the rights of landlords and adding to their responsibilities has driven many providers of housing from the market.

Many New High Priced Housing Unit Are Being Built

A newly released article on Mises Wire titled, "Fannie and Freddie's New Bubble" details how the giant GSEs, placed in government conservatorship in September 2008, have now, virtually all by themselves, created another bubble, this time in the multifamily rental market. Not long ago, Fannie Mae crowed how they had provided $55.3 billion in financing and supported 724,000 units of multifamily housing in 2016, this is the highest volume in the history of its Delegated Underwriting and Servicing program. Fannie Mae and Freddie Mac still having housing blood on their hands from the 2008 financial crash and we should consider this proof the GSA simply doesn't get it.

Many factors feed into the complicated market that provides a roof over the heads of the American people. Mary Salmonsen writes for multifamilyexecutive.com states that cheap interest rates make for low Cap (capitalization) rates and nationwide, “Mid-/high-rise cap rates declined to 4.8%, and garden apartment cap rates to 5.6%, both historic lows,” she writes. This means developers can build, lease up and flip projects at sky-high valuations based on projections of ever higher rents in coming years. An article in Business Insider warns the US apartment market has become overdeveloped, with supply outpacing demand, especially in the most expensive segment of the market. Most likely if history is any indication many of the resulting loans from this construction will end in default and come back to haunt us in the coming years.

An article that appeared in my local paper detailed how after a dozen years after opening on the IPFW campus, a university funded by the state, student housing has not achieved full occupancy since the last of the buildings opened in 2010. Currently, the units are more than a quarter empty, exactly how much was not indicated. Stories that delve into what is happening in our communities are important, I consider them as "microeconomic" images of what is occurring in many places across America. The crux of the article after you got past all the positive spin was taxpayers will be carrying the burden of this government over-expansion for years but the problem was being managed, only by reading between the lines was it apparent the whole fiasco has not been a positive for the community.

Landlords Cannot Price In Risk From Nightmare Tenants

A story I was told by a property manager caused me to ponder just how much society has changed over the years and wonder how much of it was due to social policy. While attending the second phase of an eviction hearing yesterday an older couple asked her if she represented the landlord then told how their two rentals, something they planned for and viewed as a way to help them through retirement by producing a little income had become an albatross around their necks. Sitting in court, visibly shaken and holding a stack of pictures showing the damage caused by a tenant they said that dealing with renters was ruining their lives and they would do anything to just get out of the business. Sadly, many landlords in a similar situation still owe on their properties and cannot just walk away.

Over the years government in many areas of the country have bent over backward in an attempt to "protect the consumer" and in many ways, this is creating an army of irresponsible people who go through life exploiting loopholes in the system. This even goes as far as making it much harder to check the credit of someone wanting to rent in an effort to protect a person's privacy, cast aside is the fact those of us renting an expensive piece of property are putting themselves at great financial risk. Landlords find their claims are usually pursued and disputed in the small claims division of the court where getting an eviction or judgment against a bad tenant is both time consuming and expensive. Adding to this ugly reality are limits often in place that mean only a fraction of their loss will be covered, where I live the limit is generally $3,000. It is not difficult for unpaid rents and damages to greatly exceed this amount.

To give someone unfamiliar with the numbers a better idea of the cost we will use some figures that give an idea of what landlords face. Let us start with two months lost rent $2,300, unfortunately, it is not uncommon for a tenant who stays for several years slipping behind a little behind here and there without ever getting caught up to run up a hefty sum. The cost of filing with the courts generally ranges from $90 to as much as $400 and are often topped off by paying an official from the sheriff's office to serve the papers, to this we often have legal fees which can run from $250 to $5,000. In some areas, it can take as much as 180 days to finally get someone out of a property and when this is done it is not uncommon to spend $2,500 clearing out the property and getting it ready to lease. Starting from the position evicting a tenant is a losing proposition we should consider the fact many landlords never see the first penny of a judgment they are finally granted because many deadbeat tenants eventually declare bankruptcy or simply don't pay and such collections are difficult to pursue.

The government holds responsibility for much of our housing problems and even more so in low-income situations because government policy holds little penalty for those who are irresponsible. The chief reason many people are evicted is because they do not follow the rules, damage an apartment or not paying their rent. An eviction on someone's record usually means they become ineligible for government housing programs. By making them "ineligible" for certain programs the government shrewdly and cleverly sidesteps having to deal with these people. The brutal truth is that government housing cherry-picks the best of the low-income renters providing them with very low rents and nice apartments and dumps the worst on the private sector. The unintended consequences of government policy that sidesteps responsibility for the dysfunctional poor over time only add to America's housing woes by driving up the cost of renting.


Footnote; The article below sheds a bit of light on this issue.

http://brucewilds.blogspot.com/2016/05/evictions-in-america-plight-of-poor.html

Footnote #2; Another place government policy is leading to problems is when it comes to food stamps or the program known as SNAP.
  http://brucewilds.blogspot.com/2012/01/food-stamp-reform-needed.html

Psychological Warfare And Propaganda Out Of Control

 brucewilds.blogspot.hk / By: Bruce Wilds

Today Messages Are More Sophisticated

Anyone who doesn't believe that countries use psychological warfare and propaganda to sway the opinions of people both in and outside of their country should be considered naive. On the same note, those fixated on Russia and obsessed with it trying to influence our election may be a bit paranoid. The point is almost everyone attempts to throw their weight around and influence events that are about to unfold. If you remember prior to our election Mexico had nothing good to say about Donald Trump and could even have been accused of being in a full court press to discourage Latinos from voting for him.

Taking the idea of trying to influence a vote to even a higher level, just prior to Britain's vote on Brexit then sitting American President Obama visited the country and warned, or you might say even threatened, that a vote to exit the Euro-zone would result in moving Britain to the "back of the line" when it came to negotiating a new trade agreement with America. The fact that few Americans felt or indicated his statements were totally out of line added to the appearance that America is more than a little hypocritical considering our history of meddling in the affairs of other countries.

Currently, a propaganda war rages with many Americans hellbent on convincing the rest of us Putin is a thug and a bully. Putin is and has been the focus of those busy creating an enemy for America for without an enemy warmongers and fearmongers cannot thrive. Ironically when President Trump bombed Syria he garnered the praise of both the neocons and liberals who believe in intervention. It seems the group least impressed were those who actually put Trump in office hoping things would change and he would put to an end America's policy of constantly involving itself in conflict after conflict.

Yes, psychological warfare and propaganda are real weapons and have become as powerful as bombs. Psychological games which are related to the mental and emotional state of a person and geared to undermine or shape opinions. The problem is this sector of the government and economy has grown bigger and stronger and by its very nature, it wants to take more control. We have every reason to be concerned and worried considering revelations of just how big the government intelligence agencies have grown since 9-11 and how unlimited their spying and surveillance operations have become. As an example look at the part of this apparatus known as the NGA.

New NGA Facility Under Construction In St. Louis

A recent news story on the NGA also known as the National Geospatial-Intelligence Agency tells how they recently announced plans for a new $1.75 billion facility to be located in St. Louis. It should be pointed out most Americans have never heard of this agency and would not be able to explain what it does or the name of the person at its helm. The NGA is the agency that acts as our "eyes in the sky" and is in control of both the pictures taken and the data generated from them, and it is big, which this PDF link delving into its mission and St. Louis expansion confirms.

Throughout history, spies have always drawn suspicion. Conspiracy theories and "false flags" are everywhere and we have good reason to be suspicious because governments across the world often aided by an easily manipulated bias mainstream media are full in when it comes to generating propaganda by spreading vague unproven speculation and quoting unnamed sources. The contemporary term false flag describes covert operations that are designed to deceive in such a way that activities appear as though they are being carried out by entities, groups, or nations other than those who actually planned and executed them.

The man responsible for bringing much of what we know about the size of what is sometimes referred to the "deep state" and for giving us an indication of what it does is Edward Snowden a former National Security Agency contractor. Snowden has become a polarizing figure, some Americans consider him a whistle-blower who sacrificed his career and freedom to inform the American people of government intrusion into their private lives, and others view Snowden’s motives as less than noble. Those in the latter camp believe that, intentionally or not, his actions benefited the intelligence apparatus of adversary nations and that he should be tried as a traitor and suffer harsh consequences for his actions.

It is not unexpected that those running different divisions of this colossal spy network would be a little miffed at Snowden and want his head on a stick because articles then reported how the surge in CIA resources funded secret prisons, a controversial interrogation program, the deployment of lethal drones and a huge expansion of its counterterrorism center. One of the better places to get an idea of what is being spent, and where, is to explore the top-secret funding of the Black Budget operations in a site put out by the Washington Post. This is where you will find details of the $52.6 bn request for 2013 by America's 16 spy agencies. http://www.washingtonpost.com/wp-srv/special/national/black-budget/  Sadly, most of the information we have only looked at expenditures through 2013 when Snowden gave us a look into the size of this hidden empire.

Still, the overriding question is, when have we gone too far? While we are constantly reassured the main goal of these clowns is our protection it is difficult to forget the words of Lord Acton who back in 1887 wrote, Power tends to corrupt and absolute power tend to corrupt absolutely. This tends to make it difficult for those of us who have grown distrustful of those in power to think they always do the right thing or that false flags have not become a common weapon in trying to embarrass your enemies. With this in mind and the warnings of writer George Orwell lingering in our minds about the ability of governments to morph into police states, we should be aware of the potential of abuse and that we may all be well on our way to becoming no more than slaves to those we have empowered to serve us.


Footnote; We all know in life on occasion a need for secrecy exist. In an attempt to be humorous I find I want to add one final thought, a little more accountability would be nice, however, if they told us more they might have to kill us. A few of the articles from the archives related to this post can be seen below.
 http://brucewilds.blogspot.com/2015/02/ukraine-was-and-is-failed-state.html
 http://brucewilds.blogspot.com/2013/06/governments-spying-on-their-citizens.html
 http://brucewilds.blogspot.com/2014/07/when-propaganda-and-surveillance.html

Expect Slow Growth Coupled With Stagflation Ahead

brucewilds.blogspot.hk / By: Bruce Wilds

Slow Economic Growth And Stagflation Ahead

It may be time to dust off the term "the new normal" a reference created after the 2008 financial crisis to describe an economy mired in slow growth. The term has not been used much lately but has become the reality we face. Many people are beginning to realize that central banks can only do so much through printing money and lowering interest rates. These actions carry with them some very strong and nasty side effects that have taken hold in our economy. This includes capital being poorly allocated and markets being distorted by money flowing into risky assets in search of higher yields. The puzzle we now face is how this will play out going forward and what constitutes a reasonable expectation for future growth.

Over the last few years, we have continued to see many companies cut their workforce or rotate and replace higher paid workers with lower paid employees. We have also witnessed production continuing to be outsourced to offshore factories in an effort to increase profits. Many companies have seen profits grow as sales have remained relatively flat. In some cases where margins have been squeezed stock buybacks and cost cutting have been the only driver of higher profits. This has occurred at a time where sales have been propelled forward by cheap money rather than by real or pent up demand. Few people have realized that record government deficits and a shift to more healthcare spending by consumers facing soaring insurance premiums as a result of Obamacare are also inflating and driving the GDP higher but not in a good way that reflects quality growth.

Slow Growth And Growing Debt!

We are back to the reality that going forward we face slow economic growth for as far as the eye can see, with our future resting on job growth it could be argued that the so-called recovery is nothing to brag about. Many of the jobs being created are not "quality" jobs and to make matters worse an army of robots are being designed and built to take even those jobs away. Details of the last job report touted as proof of an economic resurgence indicate the job market weaker than many economists thought. The expected number of jobs missed the Econoday consensus estimate of 175,000 and also the ADP forecast of 263,000. with the BLS reporting an increase of only 98,000 jobs and downgrading the last two months. While the average weekly hours of all private employees held steady at 34.4 hours and wages did increase as expected again it is important to remember many of the jobs added were part-time.

We should figure the deflationary effects of lower interest rates, increased oil supplies, and falling commodities are largely behind us. This means grinding stagflation is on the horizon. While oversupply in the auto sector pressures sales margins and provides lower prices to consumers it will be more than offset by rising health cost and other increases throughout the economy. This means going forward we should expect very slow growth as QE comes to an end and the government at some point becomes forced to deal with runaway spending. The reality is our America's future cannot be sustained forever on just the exports of Boeing aircraft, the sale of phones and computer tablets we manufacture overseas, or increased internet usage. We need to look at more substantial and broader based benchmarks. At the same time, it is not realistic to think the American consumer can continue to support exporting countries like China and Japan by racking up a 600 billion trade deficit year after year. 

A strong case can be made that the economy is about to stall under strong headwinds as the burden of past debts and future promises made to those retiring and unable to find good jobs begins to weigh heavily upon society.  Tensions have become elevated in many parts of the world as ISIS continues wreaking havoc and a flood of refugees flee war-torn areas. Protest and political unrest in countries like Brazil, Turkey, Pakistan. and throughout the Euro-zone may be about to get worse. In addition, we cannot rule out the possibility of conflict with North Korea or a major war breaking out, it is clear the world is rapidly changing and nobody has a crystal ball that will predict how this will all play out, but one thing is certain, and that is storm clouds do exist. This leaves the possibility at any time the markets could morph into a "realizing market" that grinds slowly downward or that at some point the wisdom of buying every pullback changes and the market simply drops like a stone.

Speculation based on mere hope is not a solution to our complex problems and today long-term planning is in short supply. Silly talk about the fact that the deficit is beginning to shrink is like saying it is now safe for someone who can't swim to jump into the water because in is no longer as deep ignores reality, the drop is small and the depth still great. Even with today's low-interest rates, we are adding to the deficit at near record numbers never witnessed except during major wars. How America and countries across the world react to the stress that comes from slow economic growth and how it will affect our budget and culture as the long-term cost burden of carrying the unemployed builds has yet to be determined. It is becoming increasingly clear that the logic and motives of those forecasting a bright and robust economy need to be scrutinized.



Footnote; A post I wrote some time ago remain strongly tied to the message of just how large our debt has grown the link can be found below. Other more recent articles can be found in my blog archive, thanks for reading, comments are encouraged,
         http://brucewilds.blogspot.com/2013/01/ugly-math-made-simple.html

Show Me The Money! I Want Proof Not More Promises

 brucewilds.blogspot.hk / By: Bruce Wilds

As I flip through positive story after story and positive article after article it seems the big issue is whether we actually believe things are really getting better. An example is a Project Syndicate piece that starts out. "After nine dreary years of downgrading their GDP forecasts, macroeconomic policymakers around the world are shaking their heads in disbelief: Despite a populist-propelled wave of political tumult, global growth is actually set to outperform expectations in 2017." It continues and goes on to announce, if I may paraphrase, "green shoots" have appeared and better times are just around the corner unless the bad people kill them off.

The people referred to in the Project Syndicate article that could derail economic growth are of course the populist and those who are unenthusiastic about globalism. Sadly, we have been hearing for years the promise the global economy is about to turn the corner. While such enthusiasm and faith are supposed to be uplifting if the reader does not feel it in their bones this just begins to come across as more hope being dished out as today's special. During the last eight years, we have watched hope change and die many times so please forgive those of us who hold back their excitement until we see tangible proof that things are really getting better.

We Have Grown Tired Of Promises, Show Us The Money!

Show me the money! Now here is a phrase that gets our attention. Years ago it was etched in our minds when used in the 1996 hit movie, Jerry Maguire. Whether it is the promise of better government or that a company like Tesla that lives on the government tit and burning through cash can really make money, I grow weary and more dubious that positive change is just around the corner.

Many of the experts, pundits, and academic know-it-alls continue to spew out how it is the fault of the populist and other backward thinkers with little faith. The same article referenced earlier goes on to state, "The threat to globalism seems to have waned in Europe, with populist candidates having lost elections in Austria, the Netherlands, and now Germany. But a populist turn in upcoming elections in either France or Italy could still tear apart the European Union, causing massive collateral damage to the rest of the world." Simply put, it is the fault of the people and not the unholy alliance of the Federal Reserve, the government, and the too big to fail banks that have left so many of us trapped in our current plight.

It could be argued the Fed and those in Washington have been both complicit and superbly entrepreneurial when it comes to the Ponzi schemes or pseudo-economics hocus-pocus that has allowed the current situation to simply roll along. The misdirected actions of Central Banks and governments across the word since 2008 have not been driven by the people but rather by those within the Government Financial Complex. Years ago President Eisenhower warned the American people about the Industrial Military complex, but nobody warned us of an even more evil alliance that exists today, that of the "Financial-Political Complex."

We desperately need changes to our economy that will foster an environment of growth but the results have not been forthcoming. It is far easier to make a promise than keep it. We see this occurring at the local level as well as in Washington, where I live several times a year announcements are made of glorious projects and in their unveiling, the swaggering presenters even go as far as giving details and timetables for completion. It is only when years or even decades later when we stumble upon an old article that we are reminded of all the hoopla that resulted in nothing. A line from an old Jerry Seinfeld  episode states, "it is easier to make a reservation than to keep it."

Thanks to globalism at times it has appeared America's biggest export has been its jobs.Year after year America imports around five hundred billion dollars more from other countries than they export.  This means we have a giant trade deficit, when we add this to our enormous government deficit it is easy to see that we are living far beyond our means. A good example of a recent promise in "limbo" and unfulfilled is the rapid repeal and replacement of Obamacare with something much better. Sadly, my friends your chances of survival most likely will be greatly improved if you don't hold your breath until the promises of better times arrive. The time for more proof and fewer promises is long past due.


Footnote; The Fed must at some point begin to ponder a real exit strategy and end the massive and corrosive stimulus that the economy has come to expect. The article below asks you to tell me again how things are getting better!
http://brucewilds.blogspot.com/2014/10/tell-me-again-how-things-are-getting.html

A Case For Stronger Commercial Real Estate Prices

Typical Office Building, What Next?

 brucewilds.blogspot.hk / By: Bruce Wilds

This article is an attempt to make a defense of real estate prices which have risen over the years. If it appears flimsy that is because it is based on the theory of real estate being the "cleanest dirty shirt" in our closet of investments options rather than a powerful argument of guaranteed strong demand going forward. This extends to real estate investment trust (REITs) as well. REITs are companies that own and in most cases operate income-producing real estate such as malls and office buildings. Needless to say, those that have paid way too much or spent way too much for a property will not walk away unscathed. While I have grave concerns for the economy going forward to anyone questioning whether "I do eat my own cooking," and have invested in real estate the answer is yes. Because of my background in construction and development, I lean towards the area of commercial real estate and consider this my wheelhouse.

To Repurpose A Building Becoming Common

It is often because of the high entry bar for getting into this market that many people choose to invest in REITs rather than buying commercial property or income producing real estate.  We should always remember that real estate has several big negatives such as being expensive and difficult to maintain, especially when vacant, and that as an investment it is often very illiquid. As in many other sectors of our economy the bigger players are pushing out and eliminating their weaker and smaller competition this means as the mom and pop operations slowly exit this market once and for all both prices and rents will most likely firm or may even explode.

In many areas of the country, companies are paying rents that are far too low in relationship to the real rate of inflation and the standpoint of current replacement cost. Of course, we cannot enter a conversation about real estate without hitting on the factor of interest rates and the availability of securing suitable financing. These factors have a direct bearing on the value and ability to sell a property as well as its worth. Over time they also tend to play havoc with supply because when rates are high or money is tight new construction gets difficult to finance and little gets built. The length of time of both the loan commitment and how it will end, such as in a "balloon payment " becoming due or an escalating interest rate are also important. In recent years the life expectancy of many types of real estate is changing especially here in America where it is not uncommon to tear down a relatively new building for obsolescence or to avoid taxation when it cannot be leased.

When I entered the business decades ago the rule of thumb was even with high single digit interest rates if the property could make payments amortized over 30 years and make a little money inflation and time would make it profitable, these rules no longer apply. Time and Mother Nature are enemies of developed real estate, the constant assault of the wind, sun, and rain over time take a toll on all aspects of a building. When a building becomes vacant income stops but taxes, insurance, basic utilities, and maintenance continue. What is considered a great location one day can rapidly be reduced to merely so-so with the announcement of a factory or plant closing. This is why it is very important to have a keen knowledge of an area, what makes it tick, and current trends when determining what a property is worth and whether to invest. The size and age of the building, as well as a person's ability to find hidden value in how the building can be used, are all important factors as to its potential.

A Desperate Seller In An Illiquid Market Is An Ugly Event

Changing trends are constantly feeding into the math that affects property values and ultimately determines supply and demand. The very nature of our changing business environment where outsourcing has become so common creates an environment where whole departments can be shut down at a moments notice, this makes building ownership a much riskier proposition. An example of just how important this is can be in altering a market is apparent in the shrinking demand for office space and workers due to computers and new technologies which lessen back office and record keeping operations. Even as the demand for such space has abated companies have chosen to crowd more workers ever closer together in smaller workstations and cubicles. This has resulted in many office buildings "under-leased" or a sitting empty all across America.

With so much of the value of real estate based on income and cash flow, it is not surprising that when a building goes vacant its value tends to drop like a stone. This means if you are toying with putting your foot into the real estate pool a key message here is, avoid debt! It is one thing to buy or own property but getting it to show a profit is a horse of a different color. Taking this to the next level, when a building and its owner fall into financial difficulty it is often a case of "watch out below" as its prospects and price diminish. Bring the combination of a desperate seller together into an illiquid market is the formula for a chaos. Another situation that puts a seller at a strong disadvantage is owning out of state property where they have nobody with real skin in the game in the area to protect their interest. Financial difficulties such as being foreclosed on or lengthy legal wrangling can place a building in limbo and take a property off the market for years.

Whether it be through mergers or consolidation of operations the total demand for space is not increasing in many regions this makes it difficult to increase rents to cover rising cost and upgrading properties to keep them competitive. When a business leases a building seeing the transaction as an alternative to building or buying it can simply be to maximize flexibility. In such a situation leases negotiated tend to be rather one-sided if several suitable options exist and the Lessee chooses to exploit the Lessor who knows it may be several years before another tenant materializes. One place an independent owner will most likely not find help is by hiring a big firm to manage and lease their property. it is only logical that they will steer the best prospective tenants into one of their closely held properties first.

Real estate, especially commercial real estate, is not an investment for the meek or inexperienced investor and while I mentioned REITs it was not in any way an endorsement of such investments. It is important to remember that when wisely purchased real estate does have certain investment characteristics that hold merit, chief among them is that real estate is tangible and real. When things go well real estate has the potential to produce a stream of steady and growing income for decades. In addition, replacement cost has soared in recent years and are not expected to drop going forward. Much of this is the result of changing codes and requirements fostered on builders and developers by the government on all levels. The bottom-line is that if you can keep someone in a building that pays rent when all is weighed and measured real estate can be a much safer investment than holding debt that might end up in default or paper promises that may never be fulfilled.


Footnote;  In the past, I have put forth the idea that inflation could rule the day even if central banks are unable to keep the wheels on the bus and we suffer an economic collapse. This powerful force also known as stagflation can devastate those improperly invested. The article below explores the basis of this theory.
 http://brucewilds.blogspot.com/2016/03/inflation-or-deflation-debate-continues.html

Amazon Is Not The Answer To Creating A Better America

 brucewilds.blogspot.hk / By: Bruce Wilds

Small Business Has Continued To Fall

Amazon is one company that I simply cannot embrace. I strongly urge people to consider what kind of community and society they want in coming years before jumping on the Amazon bandwagon. Amazon is a self-promoting hype machine that is far from transparent and while politicians fall over themselves to be in its shadow it is not our friend. Because of its massive advertising budget and other ties to Amazon, we find the media often seems to be in bed with Amazon and portray the company as both the flavor of the day and the future of commerce.  This means you seldom hear anything bad about the retail behemoth in these stories put before us that are in effect free advertising. These so-called news articles are often spun to place Amazon in the most flattering light.

Killing Jobs, Small Business, And Communities

Only as local stores continue to close, our children cannot find jobs, and property values begin to wither it will become apparent we have made a deal with the devil. Amazon excels in creating illusions that fail to hold up under scrutiny. Its vision of drone delivery is an example of the kind of pop it can garner with such a strategy. One thing is certain you can count on the media to never tell the truth or the whole truth and anything but the truth. Below are fifteen things Amazon is not in a hurry to tell you. I tried to stop at ten but found it impossible. This is not about holding back the future but making an effort to shape the kind of world and communities in which we live. This is something we do every day with the rules, laws, and regulations flowing from government.

#1.  Far from transparent Amazon cranks out a message that positively spins its image as the consumers champion while in reality, it looks to a future where workers are replaced by robots as it goes about putting small companies out of business. The strong ties Amazon has developed with politicians should give us pause. Consumer rights organization Consumer Watchdog.org says tech giants, including Amazon and Facebook, have been spending record-setting amounts in lobbying Washington. The Internet giant's primary corporate arm nearly doubled its lobbying expenditures in 2015 versus the previous year. Amazon spent around $9 million on lobbying in 2015, a 91 percent increase over the $4.74 million it spent the year before.

#2.  Amazon has pursued a strategy of fast growth and worming its way into becoming an intricate part of our lives, this includes buying companies and folding their sales numbers into Amazon to increase sales even faster. They seem to go to where the fast growth is even if the sector has yet to be proven profitable. This has worked because the myth of future profits around the corner has been dangled before investors like a carrot. It should be noted that a key weakness in their business plan is that new competition can now cheaply and easily replicate the most profitable parts of Amazon and cherry pick much of their future potential.

#3. When government subsidizes groups like Amazon the cost is shifted onto both the taxpayer and its competitors. I contend that only because of its political connections could the money-losing United States Postal Service agree to a special deal with Amazon to do Sunday deliveries in two cities? This is wrong on several counts. The first and biggest reason is that the USPS is an extension of the U.S. Government and a money losing one at that. Another problem is this hurts all the smaller mom and pop businesses and brick and mortar stores in a community. While this arrangement may add revenue to the postal service it still is not the job of the government to compete with private delivery companies such as UPS and Fed-X. Claims that the USPS makes money on these deliveries offsetting other losses does not justify such intrusion by government into the private sector.

#4. The company is not a great job creator or even interested in creating jobs. This was highlighted with a positive spin in a press conference where Bezos talked about 1,382 newly deployed Kiva robots, in Amazon’s warehouses, a sign of future intentions to limit "job creation". When Amazon does create jobs we often find the employees are unhappy and have complaints about both pay and the way they are treated and dehumanized. In 2011 it was publicized that at the Breinigsville, Pennsylvania warehouse, workers had to carry out work in 100 °F (38 °C) heat and many suffered from dehydration or even collapsed. Loading-bay doors were not opened to allow in fresh air because  "managers were worried about theft". Amazon's initial response was to pay for an ambulance to sit outside on call to cart away overheated employees.

#5.  When he is not smiling on stage the Jeff Bezos the CEO of Amazon is not an easy going fella. Amazon has faced accusations of putting undue pressure on suppliers to maintain and extend its profitability. One effort to squeeze the most vulnerable book publishers was known within the company as the Gazelle Project, after Bezos suggested, "that Amazon should approach these small publishers the way a cheetah would pursue a sickly gazelle."

#6.  A great deal of the sales Amazon has generated in the past have been tied to Amazon’s "no sales tax" advantage. This often makes a big difference with penny-pinching shoppers. This is especially true when it comes to buying big-ticket items such as consumer electronics, the absence of sales tax can be a major motivation to shift the order to Amazon and more appealing than instant gratification.

#7.  Amazon is a tax dodging machine the U.S. online retailer had previously reported that sales in  Britain grew to 6.7 billion dollars in 2013. However, accounts filed at Companies House show sales of just 620 million dollars for Amazon.co.uk. with tax payments of just 6.5 million dollars. The company claims all is on the up and up and it has to do with the point of origin and from where the goods are shipped. Margaret Hodge, chair of the public accounts committee, said that UK shoppers should boycott Amazon over the level of tax it is paying.

#8.  Amazon abuses and exploits the brick and mortar stores that line streets throughout America. These are the stores that employ our family members, support little league teams in the community, and add value to our lives. It could be said that Amazon has the social conscious of a gnat when we look at the company we see no community generous givebacks of the kind that are encouraged by so many brick and mortar retailers. 

#9.  Hardcore and nasty are terms that could be used to describe the hardball tactics the company has used during negotiations. A while back, Amazon shut down a Texas distribution center after the state sent the company a bill for $269 million. That intimidating figure, according to the state, was the total amount of sales tax due between 2005 and 2009. After a series of lengthy talks, Amazon reached an agreement where it will be forced to collect sales tax from Texas residents but managed to avoid paying millions in back-taxes.

#10.  That hardware sales like Amazon's Kindle and Fire do not hold much promise as a driver of future profit. The company cannot compete in such a crowded field and it is merely a fig leaf in hopes of wedging its way into a broader but still questionable market of after sale revenue.

#11.  Like Tesla Motors the stock of Amazon defies logic but has been propelled forward by an environment of cheap and easy money. Add to this blowing shorts out of the market and momentum trading and you arrive at a bubble ready to burst. While Amazon continues to buy companies, the revenues from these companies add to their sales growth but still, no profits exist. If they are a distribution company their stock should be trading at around 18 times earnings. When you look at the P/E ratio on Amazon you find it is over 180 times earnings because the company makes so little money.

#12   Some time ago Bezos referred to Amazon's victory over IBM in a  legal battle to service the cloud computing needs of the CIA we can only assume this has to be in relationship to the American government collecting more data and in effect spying on the American people. Just how much revenue the company pulls in from the government through veiled web service subsidiaries like "Vadata" seems to be deeply buried away but one thing is clear, while the full scope of Amazon’s business relationship with the government is hard to confirm the company’s cloud segment has done business with a slew of agencies including, NASA, HHS, and DOJ.

#13.  When it comes to AWS (Amazon Web Services) the company is slow to share specific numbers, but tech industry insiders seem to agree that only Microsoft and Google are in the same league. What many people forget is that AWS comprises only a small percentage of their overall revenue. This is an arena where a slew of competition exist and more is coming online each day as the equipment and facilities become easier and less expensive to build or replicate, but Amazon claims this adds a great deal of value to its stock price.

#14.  Jeff Bezos founder of Amazon has been the person who has benefited the most from this soaring stock market star. Even if the company's stock price comes crashing back to earth while he would most likely lose a lot of money he could sidestep the total devastation many shareholders would endure. MarketWatcfh shows Bezos as having a real time net worth of just over 70 billion dollars making him the second richest man in the world. This means it is conceivable that he will survive and that he would have advanced warning of Amazon's impending doom, but it is logical to think he would be able to shelter assets and hedge in ways the average shareholder could not.

#15.  Amazon should receive the "Job Killer Of The Year Award", The company has positioned itself so it employs a minimum labor force at relatively low pay. This means they will be able to apply massive hurt to small businesses forced to pay workers higher wages as more minimum wage laws come into play across the nation. Amazon can avoid locating in these higher pay areas and ship into them. Meanwhile, small businesses will have to cut hours to reduce overhead making them less convenient to their customer base and inadvertently pushing customers towards more online purchases.

For all the praise many people and politicians heap upon small business they are often quick to cut the very throat of the creator of much of our wealth and jobs. The sale of goods over the internet has a great deal of merit, but how it is carried out can have a profound effect on society. While the people who love and support Amazon might claim the points above show Amazon and its CEO to be clever, cunning, and masters of the game, an argument can be made that an aura of evil hangs over much of what he has created. The low prices many consumers buying from the company claim to enjoy come with a hidden price often paid for by others. It is difficult to overlook how Amazon has exploited and targeted existing businesses that positively affect and add to our communities.  

Years ago another company whose name started with the letter "A" was also about to take over the world, its name was AOL. Today long after its mega-merger with  Time Warner it is almost forgotten and has been placed in the dustbin of history. When all is said and done, Amazon a company that has not proven itself to be profitable may experience a similar fate. A word to the wise, if you don't want to be left holding shares in a company that has been severely downgraded by both analyst and the public you might think about some of the things above that Amazon is in no hurry to tell you.



Footnote; This is a follow-up post to an earlier article about Amazon that debunked the myth they are good for the economy and its role as a major job killer. As politicians tout how they helped Amazon create jobs in a certain area or state they often fail to comprehend the number of jobs destroyed or the damage inflicted from the unfair competition they have endorsed. More in the article below dispelling the myth Amazon is a job creator.
 http://brucewilds.blogspot.com/2015/07/amazon-is-job-killer.html