Market Perspective

The Forces that Will Impact the American Economy and Therefore, the Land Market in 2019 – Week 3

Posted by on Jan 23, 2019 in Ned Massie, Perspective | 0 comments

Politics: Although the blue wave tsunami turned out to be more of a blue ripple, the Democrats now have control of the House of Representatives. Looking at the economy and therefore the land market, there are two critical things to focus on: Our Politicians in both parties have no real desire or incentive to actually solve problems. That would actually eliminate their campaign slogans and fund raising. The Democratic plans of universal healthcare and open borders ignore the mathematical reality that we simply cannot afford their plans. If Democrats raise taxes as they are discussing: (A) taking every dollar of the upper 20% of American households that by itself would diminish the ability of households to buy goods and services, thereby causing economic recession and (B) it would not pay for their plans. In history, we have had equally incompetent politicians. But this may be the first time we have had one political party reflecting the behavior and intelligence of a collection of three year olds. Legislative turmoil is not a positive for the economy. When politicians are focused on power rather than solving problems to grow the economic pie, bad things happen....

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The Forces that Will Impact the American Economy and Therefore, the Land Market in 2019 – Week 2

Posted by on Jan 16, 2019 in Ned Massie, Perspective | 0 comments

Interest Rates: October 1, 2018 was an extremely important day in the economic history of the world. That was the day that the European Central Bank (ECB) actually began to taper their Quantitative Easing (QE). The result was the commencement of turmoil in the global stock markets. That turmoil reflects that as the ECB joins the Fed in reducing QE, (in the U.S. that is allowing the assets on the balance sheet to bleed off, as well as rising interest rates) the impact on assets values around the globe is that they will decline. It is really quite simple. As the cost of money goes up, the rate of return investors demand also goes up, and that means that they can pay less for an investment. The talking heads reading scripts prepared by those who do not understand economics tried to make it a story about the trade wars, etc. But the fact is the driving force of the turmoil is that interest rates are rising, and that means that asset values will decline. The only question is how fast? My prediction – The Fed will either reduce interest rates by July 2019, or they will hold interest rates still for at least two years. That should allow asset values to stabilize and...

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The Forces that Will Impact the American Economy and Therefore, the Land Market in 2019 – Week 1

Posted by on Jan 10, 2019 in Ned Massie, Perspective | 0 comments

Real Economics: The 2017 Tax Act is such a positive economic force it is underpinning the American (and Global) economy along with the American financial markets. The recent turmoil reflects that as The Fed works to “normalize” the functioning of the American financial markets. Our financial markets would have collapsed recently except for the 2017 Tax Act.   Additionally, the tax cuts are actually paying for themselves. Steven Moore of the Heritage Foundation, in an article dated September 19, 2018, highlighted the fact that comparing the typically anti-Republican Congressional Budget Office’s (CBO) economic forecast issued in June of 2017, versus the one they issued in August of 2018, after the 2017 Tax Act showed a remarkable, positive difference.   A summary of his article is that the CBO estimated increased GDP over the next decade will be around $6 Trillion higher. Given the fact that about 18% of the GDP is collected as federal taxes, that represents a $1.1T increase in federal taxes.  The estimated cost of the corporate tax cut is about $500B.  Ignore the self-serving politicians and talking heads that spout venom about the first year’s results of the 2017 Tax Act.   Growing the American economy is the only positive possible solution to our economic challenges.  The 2017 Tax Law gives us that benefit.  The problem is not that taxes aren’t increasing, it is that our government spending is increasing...

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Election 2018 – What is the Impact on the Land Market? Week 5

Posted by on Dec 27, 2018 in Ned Massie, Perspective | 0 comments

January 2019: We are going to start 2019 with ten forecasts about what will happen in the upcoming new year. In the meantime, we at Grant Massie Land Company hope you and your family have a very Merry Christmas and a Happy New Year! We will do our part to make 2019 prosperous for you, our valued reader. Because land is the source of all wealth, a really good piece of land is the very best long-term asset one can hold in their portfolio.

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Election 2018 – What is the Impact on the Land Market? Week 4

Posted by on Dec 18, 2018 in Ned Massie, Perspective | 0 comments

Impact on the Land Market: Increasing interest rates in turn increase the threshold rate of return used to evaluate investments. Moving from 0% to 4% literally ceases the experience that EVERY investment looks good and shifts investors to becoming selective. The prices of those assets not selected will then decrease until their rate of return matches the market’s Threshold Rate of Return. The impact will be greater towards the end of 2019 than the beginning of 2019. Last week’s blog about the impact of decisions by The Fed addressed that sequence. The short version is, if you want to sell some land the time to sell is NOW. The obvious land market segment that will be most negatively impacted is residential development land. The cost of new home construction never decreases but lot values in some segments will decline. Each residential segment will be impacted differently based on demand versus supply in that segment. Timberland has been steady to a slight decline over the last several years. I would rate timberland values as stable in 2019. Similarly, cropland values. Commercial and industrial development land will probably decline for the exact same reasons as residential lots, higher interest rates. Location will have a huge impact on land market trends in each of those segments. Because land is the source of all wealth, a really good piece of land is the very best long-term asset one can hold in their...

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Election 2018 – What is the Impact on the Land Market? Week 3

Posted by on Dec 13, 2018 in Ned Massie, Perspective | 0 comments

Grid Lock: The impact of a Democratic House of Representatives and a Republican Senate is probably government gridlock. Trump is not a typical politician, he is a businessman. It is the highest probability that the Democrats will continue their “Resist” posture in their pursuit of “power”. That means they will have missed an opportunity to find compromises that actually solve problems. Therefore, I believe the greater impact on the land market will come from the ripple effects of The Fed (does it stop raising interest rates or keep raising them) versus the economic stimulus of the 2017 Tax Law. We will witness the resolution of an amazing interaction between those two gigantic forces. If the PhD’s at The Fed have an epiphany and put interest rate increases on hold for 12-24 months, the 2017 Tax Act will prevail. If the PhD’s at The Fed keep raising interest rates in 2019, then The Fed will get to reduce interest rates in 2020 and 2021 to clean up their mess. It appears to me that the economy in the first half of 2019 will be similar to the second half of 2018. The second half of 2019 is probably a recession. Beyond that is too fuzzy to predict. Because land is the source of all wealth, a really good piece of land is the very best long-term asset one can hold in their portfolio....

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