Good Sunday morning! I opted for mimosas instead of coffee this morning and am now feeling good enough to share my insights with you after an intense week on all fronts. I hope you are all safe and well. This is my tenth letter and, I must admit, the opportunity to write each week has been a cathartic experience for me. If reading my letters has provided the same relief for you, then I am fulfilled.
Last week I was focused on the application of “street smarts” to six insights that I felt were material enough to share with you. My hope is that you have adopted “street smarts” as you go about your daily activities. Let’s have a look at some takeaways from this past week:
The stock market. Wow. Talk about a recovery…this week’s V-shaped bounce back was a marvel to watch. Just one small problem – a glitch referenced in the fine print of the Bureau of Labor report regarding unemployment, which likely resulted in a far too optimistic story. But, given that this is an election year, manipulation is possible. Experts have opined that such activity is nearly impossible, but I disagree. With trillions of dollars at stake, anything is possible.
Re-opening of the economy has been a disaster so far. There are no consistent policies and procedures in place to enable the re-opening process to be effectively implemented. There is a difference between wishful thinking and reality. “The World Has Changed.” Four words spoken by Warren Buffett that require deep reflection, understanding, and adaptation. Until there is effective leadership, which may not occur until after the November election, many will be afloat in doubt and confusion. For those with the foresight to adapt, opportunities abound. Proper accounting of how and where people live, work, and play in this changed world will be a boon for real estate investment. Office buildings are already being re-designed by architectural firms to meet the challenge of bringing people back to work in a safe environment. This creates opportunities for investors to purchase and re-configure office buildings that meet the needs of a changed work force.
Civil unrest continued this week in response to the senseless killing of George Floyd and the racial inequalities that remain in our country. Somewhat lost on the national stage last week was the continued economic inequality, which remains a huge issue. Millions of people without jobs or working for less pay than is needed to support their livelihoods is a significant problem. This problem will likely be addressed by a New Deal type of approach. With a huge labor pool available for work, infrastructure projects will be the focus of government policy in the months ahead. Once again, real estate investment will thrive as major infrastructure projects will generate profits for investors while providing much needed well-paying jobs for the unemployed. Airports, roads, bridges, ports, electric car charging facilities, high speed rail, etc. will flourish.
Affordable and safe housing will receive massive government support. Look for the low-income housing credit program to be re-invigorated and expanded. Tax credits provided to real estate investors will stimulate development of much needed housing in areas where it is sorely needed.
The $3 Trillion stimulus package approved by the House and wallowing in the Senate will be further delayed based upon the belief that we have turned the corner and the economy is rising from the depths of despair. Our leadership points to the recently dramatic recovery in the stock market as evidence of a miraculous V-shaped economic recuperation. I would love to believe this, but it just isn’t reality. There will be a recovery, no doubt, but the process will involve tremendous effort, support, and change, and it will not happen overnight. As this unfolds, there are tremendous challenges and opportunities for investors to embrace and yield significant returns.
For the past ten weeks, I have discussed many topics that were of great interest to me, and I hope for you as well. Thank you for the opportunity to share my thoughts with you.
Real estate investment in the Westside region of Los Angeles has been my unwavering passion and profession for over 40 years. It brings a smile to my face knowing that we at Christina have created quality and enduring projects that have supplied thousands of people with better housing, great shopping experiences, and quality workplaces, all while providing jobs for many and generating wealth for our investors.