Are you ready for the challenges ahead?
I have had occasion over the past few weeks to visit and chat with clients, friends, business associates and peers. Especially since the Nov. 2 elections, the theme is, “So, where are we and where are we going?”First, the good news:• The global economy is still ticking.• The Great Recession is “technically” over.• The unemployment rate fell in November, as employers cut the fewest jobs since the recession began.• U.S. GDP was calculated to have risen 3.2 percent in the last quarter. (Note: this figure will be revised numerous times.)• The Dow Jones Industrial Average is back over 10,000.• The global economy is still ticking. (Did we already mention that?)Now for the bad news:• Government debt is rising rapidly.• Voters are not convinced that much/all of the stimulus money is/will be well spent.• The focus on a national health-care plan is confusing and likely premature until there is a clear view of where the U.S. and global economies are heading.• U.S. unemployment will continue to rise into (through?) 2010.• The U.S. military is way over-extended in both Iraq and Afghanistan• Commercial real estate capital flows and refinancing will be a big challenge in 2010 (and 2011, 2012 and 2013!).• Federal, state and county governments are running huge deficits. While there may be another round of stimulus monies for state, county and local governments, then what? Locally assessed values of homes have dropped 6 to 16 percent, which means towns and schools have to increase real estate tax rates to raise the same revenues.There is no computer, defense, electronics, telcom or dot-com boom to pull us out of this current down cycle.That’s enough bad news!As an avid reader, I am most eager to understand what the economy will present for opportunities and challenges for my five to 10 remaining working years (hopefully not 15!), not to mention for my twentysomething son and daughter.Whether you are conservative or liberal, red or blue, Democrat or Republican, we are all either basically optimistic or pessimistic/cynical. As someone who spends much of my time selling or leasing, I am by nature optimistic. I remember the big regional economic correction of 1989-1993. This time will be different in many respects, but not all. I currently see dozens of challenges in front — fiscal, economic, health, education, Medicare, Medicaid, Social Security, the wars on terror, huge annual budget deficits. I worry that our immediate future could be stagflation or flat line, as Japan has experienced for the past 19 years.I need to contemplate the various scenarios for Norton Asset Management, for my family and for our customers and clients. We clearly do not see a sudden strong rebound. Maybe it is a protracted “VW” with some sectors and businesses doing well, while others struggle. Maybe it is the hockey stick — a slow, gradual return to steady growth and economic expansion, and maybe just maybe it is the flat line for a decade or more.So the best advice I can give you in the short term is to borrow or buy the book, “The Limits of Power: The End of American Exceptionalism,” by Andrew Bacevich. This is a short summary of the U.S. attempt to influence world diplomacy since the Truman administration. Congress over the past 50 years has abdicated to the executive branch, and none has done a stellar job. Read this book and mull it over.It is not a Democratic or Republican issue. Neither party has performed above mediocrity. We need to reassess our resources,talents and capabilities and then formulate a foreign policy and economic policy that are achievable within our means. Plentyto think about over the coming holidays.Bill Norton, president of Norton Asset Management, is a Counselor of Real Estate (CRE) and a Fellow of the Royal Institution of Chartered Surveyors (FRICS). He can be reached at firstname.lastname@example.org.