Friday, September 11, 2015

Why the Fed Won’t Raise Interest Rates

September 17th is rapidly approaching, and on everyone’s mind is whether the Fed will continue their dovish stance or begin to raise interest rates. Here’s a few reasons why the Fed will most likely continue their ZIRP on the September 17th FOMC Meeting:
1.       Slowdown in China
2.       EM currency depreciation
3.       World-wide Oil glut
4.       China’s US Treasury dump
5.       Recent market volatility
6.       Weak labor participation
7.       Inflation expectations not met

Although we seem to be hitting the Fed’s unemployment expectations, the fact that the labor participation pool is at its lowest point in 38 years (dismal 63%) means there isn’t as much job creation as one would expect. The slowdown in China and its recent effect on currencies worldwide means the U.S. is less likely to afford an interest rate increase as that would only strengthen its currency even more in relation to other countries, which would lead to more import activity and less domestic inflation. World-wide oil glut is also having an international deflationary effect on prices world-wide, especially transportation costs. Lastly, China has been burning through US reserves in defense of the Yuan, ~$100 B in August, which can in of itself have serious implications on core paper yields.

For us real estate guys, we may still have a few more months to get that refi done we’ve been holding off on….but don’t wait too long :)

Thursday, August 13, 2015

Surge in Commercial Real Estate

Check out this interesting article on real estate prices.