Posts Tagged ‘kenworth’
WordPress v. Facebook
Loyal readers will note that I’m frequently on Facebook and less frequently here. You may have also noted (or not….) the very different tone of my two sets of writings. My pure FB posts are generally either my (fairly strident) political views or mental meanderings about family, travel, restaurants, and bars. In other words, normal stuff. My blog posts lean to business, finance, and the economy, with a bent toward real estate. By construct, the “voice” on this blog is different than the “voice” on FB.
Here’s where life gets interesting. I had the honor last week to speak to a small audience at a luncheon at Seattle’s historic Rainier Club about the economy. It’s quite impossible now-a-days to separate “economy” from “politics”, much as I might like to. Calvin Coolidge, I believe, said that the “business of America is business”, and the current government in D.C. has adopted that mantra. Sadly, the current government in D.C. appears to know quite little about mainstream business. they know a bit about a few things, and almost nothing about most things. That said, they’ve sold a bill-of-goods to many mainstream business folks. I saw a truck heading into Seattle today with InfoWars and “Arrest Hillary” bumper stickers. The driver was a bearded young man who appeared to be a hard working fellow. He’s been sold on the notion that the government in D.C. is on his side now, and they’re going to make everything a lot better. I’m waiting to see that. I haven’t seen anything yet out of D.C. that suggests this government is representing anyone other than Russian bankers and the Koch brothers.
At my Rainier Club talk, a questioner — clearly a Trump supporter — commented that the benefit of the new administration was that they were dismantling onerous regulations which affect small business. I reminded the questioner that I’m Chair of the Board of a business headquartered in Seattle, and that nearly all of our regulations are imposed by the City of Seattle and the State of Washington. I further reminded him that these regulations make Seattle the sort of place where creative people wanted to live, and since my bread and butter is hiring creative people, I’m happy to put up with these regulations in order to hire creative folks. I noted that Amazon, Starbucks, Nordstrom, Weyerhaeuser, Expeditors International, Expedia, Alaska Air, Microsoft, Boeing, Costco, the Russell Group, Symetra, F5 Networks, Paccar (who make Peterbilt and Kenworth trucks) and a host of other global companies were also willing to put up with these Washington State regulations in order to be able to tap into the brain trust that wants to live here. Intriguingly, the most “regulated” cities and states in the nation tend to be homes to the most forward-thinking and growing businesses. Indeed, New York and California have over 20% of the Fortune 500 headquarters, and the states which are generally the least regulated have no Fortune 500 or even Fortune 1000 companies (Montana, Maine, South Dakota, Wyoming, West Virginia, New Mexico, and Alaska). You go figure….
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Tea Leaves and Such
Flying back from Milwaukee to Seattle last night, I sat next to a fellow who owns several big truck dealerships in the mid-west. (Seattle, famed for Boeing and Microsoft, is the lesser-recognized headquarters of Paccar, the world’s third largest maker of heavy trucks, after Daimler and Volvo. Last year, they made and sold over $16 Billion worth of Kenworths and Peterbilts.)
ANYWAY, after the usual “how’s business?” question, I got an earful. Turns out no one’s buying heavy trucks right now, even though financing is historically affordable, and customers have cash. Why? Simply put, his customers are scared of the fiscal cliff. (We also talked about customers deferring potential acquisitions until after/if tax rates go up, but he said that this wasn’t a big issue in his surveys of customer sentiments.) He noted that demand for long-haul trucking was down, and noted that his trucking-company customers were reporting a lower volume of hauling for consumer retailers.
Now, if this was an isolated incident, we could write it off. However, the danger of the fiscal cliff isn’t just what will happen after January 1. Much like an impending hurricane, people are already packing their bags and getting out of the way or hunkering down and bolting the doors.
What is the impact on real estate? While it’s too early to completely quantify, clearly there is reluctance right now to make new investments in office, industrial, and retail. Add to this the realization that the apartment boom may have leveled off, and we have a fairly flat new development market on the horizon. This doesn’t bode well for real estate private equity firms that are focused on development profits or capital gains, but it does mean that income-oriented real estate (publicly traded REITs for example) may exhibit some buying opportunities due to both their tax advantaged nature. The most recent Current Market Commentary from NAREIT shows slight downward trends in apartment, office, and retail vacancy, with all three sectors showing positive rental rate growth (albeit at lower levels than earlier this year). The three-year moving average for renter household formation continues to trend upward, while the owner-occupied household formation is in negative territory (despite recent gains in home sales and housing starts).
Notwithstanding the dangers of the fiscal cliff, changes in non-farm payrolls have been strong and positive every month since mid-2010, and even though unemployment is higher than anyone wants to see it, the trend has been solidly downward since the peak of late 2009. As such, the fiscal cliff is the most significant economic problem on the horizon today. Fix it, and we continue on the track to full recovery. Let us drive off the cliff, and…. well, that’s a pretty good mental picture, eh?
From a small northwestern observatory... 