Manager's Cheat Sheet

I had a few requests to post the Manager's Cheat Sheet (101 common sense rules for Leaders) that I posted through my Digg account, but it didn't come through on some feeds.. The categories include body language, getting along with employees, managing yourself, etc. and all of the subcategories for topics.. Worth posting since it didn't transfer thru Digg..

Doom and Gloom within a month?

On light volume with consumer confidence waning and the Fed minutes indicating that they "might" have known that a credit crunch was coming, the market technicals indicate a continual downturn in the markets. In the news today, National home sales continue to slump; the San Diego housing starts are down 37 percent from last year; another capital management firm must liquidate a multi-billion dollar fund; and, a 21-year veteran of the US Treasury Dept and NASA offered one of the gravest predictions I've seen thus far. Let's hope he's only half right:

On Market Predictions in the Current Chaotic Environment.

by Richard C. Cook

Global Research, August 28, 2007

No one can predict how deep the decline in Western economies that is underway will go, because there is so little transparent information. Within the U.S., the government is hiding the severity of the crisis in order to prevent a collapse of consumer confidence.

Realize that the problem does not lie on the side of production. Global industry has the capacity to produce a huge quantity of goods and services. There is even a glut in some sectors, such as automobiles, textiles, IT, and other consumer products.

Rather the problem, as with the Great Depression, is that purchasing power at the consumer level is lacking. In the U.S., purchasing power, as measured by M1, is already in a recession-level decline. The causes are the high level of consumer debt, high cumulative levels of taxation on the dwindling middle class, and the tragic erosion of wages and salaries from job outsourcing.

In the absence of purchasing power, the Federal Reserve has chosen the strategy of trying to outrun collapse by creating inflation. This is the meaning of the bail-outs that are going on. It’s an attempt to devalue debt at the macro level. It’s a hidden tax on everyone but the super-rich. Everyone else is poorer today than they were yesterday.

How long this can go on is unpredictable. It’s another bubble following on the housing and asset bubbles that are already bursting on a daily basis before our eyes.

I don’t see any responsible analyst who foresees any better outcome than a recession that would see the DJIA at a level of 8000-8500 within a few months. Again, maybe the Fed’s printing presses can hold this level of decline at bay for a while longer, but I doubt it.

There are major players in the markets who see an even steeper decline coming even sooner. Some say as soon as a month.

There is also a real chance of an eventual depression-level contraction. How much of a chance, I don’t know. This conceivably could lead to a total collapse of consumer markets, economic paralysis, and widespread homelessness and starvation. Yes, even in the U.S. Agribusiness, bio-fuel conversion, seedless mega-farming, the disappearance of family farming, and the recent disastrous weather conditions place everyone at risk.

At some point, the federal government, at a minimum, has to step in with New Deal-type relief measures. Whether the Bush administration has that capability is doubtful. Look at New Orleans. They may even try to cover everything up by starting a war against Iran. Are they that crazy? Who can say?

There are also rumors going around that there are plans to allow the markets to be crashed by a terrorist event so as to divert blame. I have gotten no reliable confirmation of these rumors, though there are parties placing what people in the markets are calling “bin Laden”-type bets similar to, but bigger than, the “puts” that were placed before the original 9/11.

These types of bets have been placed in the U.S., European, and Japanese markets that assume a stock market crash of fifty percent within the next five weeks. A report was just carried, I’m told, on CNBC.

Some have said the culprit may be China, but it makes no sense for the Chinese to crash the markets while holding U.S. dollars. Others say it is hedge funds at work to try to drive down the markets in a self-fulfilling prophecy.

But a fifty percent market decline? That’s just not conceivable. Even the hedge funds do not have that much power. The federal plunge protection team—known as the “men in black” by floor traders—would never allow them to do something so disastrous. This has caused some to speculate that the “men in black” are parties to the bets.

These remarks probably give some indication of the chaos going on right now in the U.S. and world economies. The only real solution is a new world financial system based on the concept of credit as a public utility. This is what should be implemented to replace the present system of institutionalized usury.

If history is any guide?

One of the benefits of the CCIM network is the fact that commercial brokers actively pass on the most current and relevant information in the market amongst the group. Below is the most recent example of the information that is passed via the listserv of professionals across the country:

Below is a dial in number and password for a tape recorded conference call with the Head of Economics at The Wharton School of Business, Dr. Linneman. I’ve heard Dr. Linneman speak twice in person and he is extremely we versed on the global economies. It is certainly worth your time to spend 15-20 minutes of your day listening to this recording, which will surely enlighten you on where we are today, how we arrived here and how long it should take for the sub-prime debacle to correct itself before we can return to more of a normalized market.

To access the recording, please call at any time:

Playback Dial-in: (641) 715-3439
Passcode: 325596#


Key Highlights of the Call

Two Main Issues:

• Investors have matched short-term capital against long term assets;
• Markets face the perennial battle of fear vs. greed, and while greed wins in the long term, fear is winning today.

Sub-Prime Crisis:

• Poor underwriting, rating agencies failed;
• Only 30% of homebuyers have not locked in long. The losers are the lenders/investors, not the homebuyers;
• The losses are "only $90 billion" a big number but not in percentage terms;
• Margin calls have forced the exaggerated impact in the market.

Historical Perspective: This has happened five times in the past 20 years.

• 1987 - Tax law change - in a strong economy - 18-24 months to recover;
• 1991 - S&L crisis - in a recession - 12-18 months to recover (real estate took longer);
• 1998 - Russian Ruble - in a strong economy - 18-24 months to recover;
• 2001 - 9/11 - in a slowdown - 18-24 months to recover;
• 2007 - Sub-prime - in a strong economy - expect 18-24 months to normalize.

Dr. Linneman anticipates continued economic growth but wider debt spreads and tighter credit standards for 18-24 months. Expect London and NYC to be negatively impacted by rental demand as hedge funds and other financial services companies tighten.

The Fed:

• Keeping interest rates too low for too long in 2003-2004 added artificial fuel to the economy.
  
• Now rates have been kept too high for too long.
  
• With inflation at 2.0% - 2.25%, rates should be 4.0% - 4.5%;
• Open market activity is only a band-aid. The Fed needs to ease rates.

Housing:

• It will take 12-18 months to digest the 400,000-500,000 surplus of homes built.

Real Estate Pricing:

• The REIT market has re-priced; the private market has not;
• Cap rates are about 50 basis points too low. With new credit spreads, cap rates will need to move up about 80 basis points;
• Debt exists but lenders require higher coverage and lower loan-to-value (70-75%);
• Pricing is more reflective of asset "quality" than asset "classes." Regardless of property types, people will now pay more for quality.
• Expect credit to be overpriced for 12-18 months, then normalize.