The Idaho Group Blog

Economic Double Bubble, Toil and Trouble

With slow but steady improvement in the economy’s vital signs, two questions are gnawing at analysts’ brain pans.  First, is this a sustainable recovery with the power to fuel substantial job growth?  Second, what will happen when the “double bubble” ruptures and some $1.7 trillion in commercial real estate notes come due over the next few years?

Most economic prognosticators portend a sluggish recovery with continued job losses throughout 2010.  New job growth will be slow, they say.  Too many businesses are changing fast or forever gone, like GM’s Saturn Division.  We can’t expect the same jobs to reappear and be filled by the same folks who were laid off.  Plus, globalization and the Internet have changed the game.  Look for new jobs to develop in health care, education, government and within new or fast-changing industries.

As for the double bubble effect, commercial real estate values are down about 35 percent since the peak in 2007, according to Moody’s.  Unlike residential mortgages, commercial loans are much shorter term—usually five to 10 years.  The first $300 billion in commercial-backed securities will come due in 2010.  Obviously, many businesses are on their knees due to the slowdown.  So there is a shortage of cash to payoff real estate loans, especially where property values have fallen far below contract values, which would cause buyers to bring even more cash to the closing table to accomplish a refinancing.  Meantime, lenders have locked down their underwriting guidelines and all but stopped making commercial loans, despite claims that they are open for business.

The Idaho Group Blog

Weekend Essay: The Global Warming Debate

The radio news squawk lately has been about Global Warming, the latest in an endless supply of silly partisan battles.  As I hear one team arguing that a new Senate bill will create jobs and save the planet, I hear the other team telling us that same Senate bill will increase our taxes and crush the economy. Since we all side with the home team, it’s no wonder polls asking us – Global Warming, True or False? – are becoming red and blue in color.  And just like NFL football, I’m tired of the commercials…let’s get to the game!

We’re arguing a pointless debate.

Both sides are wrong because the very premise of the debate is flawed.

It’s not about “if” global warming is real or “who” is to blame.  How can anyone “know” that our planet is warming, let alone “know” humans are the cause of the warming?  To think that we understand how this living system we call earth operates is nothing but over-inflated human ego.  The fact is we don’t know what’s going to happen.  Every time we think we know what’s going on in nature, we get proven wrong.  Let’s stop the debate and get to the real problems.

This is my breakdown for all the proud-to-guzzle-gas-rednecks and all the entitled-Prius-latte-drinking-hippies….we’re going to have too many people on the planet soon and too few resources to keep our current economic system moving.