1. 1Impact Fall 2009 Edition
Ryan & Coppola Law Firm, LLC Investor’s Guide
The Prince Charles Effect
Q ueen Elizabeth II was born in April, 1926.
She ascended to the throne in 1952 upon the
death of her father, King George VI. Her
eldest son and heir apparent Prince Charles was born
Current business leaders can learn an invaluable
lesson from the Royal line. Succession plans and
demographics are the keys to the impact of these
in 1948. Prince Charles’s eldest son Prince William leaders, the experienced and the unproven.
was born in June, 1982. Their respective ages are 83,
61, and 27. Demographics: The characteristics of human
populations and population segments, especially
The Queen’s accomplishments are considerable; the when used to identify consumer markets: The
era of her rule begins with “the greatest generation” demographics of the Southwest indicate a growing
and continues into the 21st century. population of older consumers.
Charles, first born of the Baby Boom: Charles has As we seek safe passage from the longest recession
worked in the military, architecture, urban planning, on record, as we look for signs that the markets –
charities, and his functions as the Prince of Wales. investment, residential, commercial property,
insurance, and banking - begin to trade consistently,
William, first born of the Millennials: Following in we need confidence that our business and personal
the education and military traditions of the Royal plans are ready for trade growth. These plans guide us
Family, William is currently working in Search & toward financial strength and independence. They are
Rescue with the Royal Air Force. William is part of guides for peace of mind.
the rising “Digital Generation,” the first generation
weaned on digital technology. Trade expansion in 2010 involves more than
executing the business plan. Study the demographics
The Queen’s reign is fifty-seven years and counting. of the economy where you participate – local,
Charles will potentially reign a maximum of twenty national, or global. The recession branded the strong
years. William’s reign could be thirty or more years. and weak regions. The demographics highlight the
skills that separate the strong from the weak –
What will be the “Prince Charles Effect?” Will college/trade education, digital skills, and strong
Charles: practical experience vs. limited education, limited
1. Focus simply to serve his short-term legacy? digital skills, and limited opportunity/experience.
2. Connect the history and technology between
the two centuries and the generations for If you lead a business today, developing the
Great Britain’s long-term benefit? succession plan is as critical as your business plan.
The Prince Charles effect defines the contribution of
2. today’s aging leadership – in politics, business, and A second stimulus may yet be required to stabilize
government. the consumer. Our stimulus proposal is simple:
Provide a 4.5% fixed interest rate to qualified primary
Economic Update homeowners to buy or refinance their homes for
We recorded the following positions in the last
newsletter: 2010. The productive consumers who own property
and pay their bills will reap a windfall of $300 or
Late summer 2009 should provide clear signs of more in monthly disposable income to invest, pay
recovery. Most economists agree that this recession down debt, or spend with a conservative manner
will officially end in late 2009 – we believe the borne from the Panic.
recession may be ending now. A jobless recovery is States can participate by lowering home sale closing
predicted –we believe too many workers were let go costs. They would gain more income via the higher
and need to be rehired as this recovery gains strength. volume of sales.
As vacant, foreclosed, and unsold home inventories
We lost vast sums of wealth in 2008, and almost all decline, the overall value of the “toxic assets”
citizens suffered in the economic breakdown. increases. Our housing market begins normal trading
The S&P 500 has gained 40% or more of the losses patterns. Confidence and market value are restored.
from a year ago. Financial panics cause a loss in the
broad spectrum of the market, not in specific industry When will we see progress and regain our
categories (i.e. tech boom/bust). Recovery should strength? The markets are slowly moving forward.
continue for the patient quality investor at a swift The gains will be slow at first. Momentum will
pace. increase each quarter in 2010. Make your plans to
participate in this recovery now. The upside potential
We lost confidence in our systems. We have is much higher than the downside, and the deliberate
adjusted our lifestyles rapidly, and we have adapted risk taker will be rewarded.
to this “economic reset.” Legitimate confidence
requires a stronger economic base, and new
leadership.
Impact Top Stocks for 2009 (Global)
Our leaders failed at virtually every level. Company Quote 1-1-09 09-01-09
There is little change in the executive or political Price Price
suite. Board directors affect the former; we cast our GE GE 12.90 13.34
ballots to affect the latter. Lafarge LFRGY 11.95 20.35
Pfizer PFE 17.11 16.38
The Federal Reserve, U.S. Treasury, Congress, MBIA* MBI 3.08 6.13
White House and Justice Department are now in BB&T BBT 19.81 26.64
full attack to address and correct the fallout. The AES AES 8.04 13.25
stimulus funds are reaching state and local projects, Dupont DD 23.53 31.05
but less than 25% has been utilized. Arch Coal* ACI 15.45 16.88
PetroBrasil PBR 23.78 38.95
The three key ingredients we need to move FndtnCoal FCL 15.16 35.93
forward are time, trust, and confidence.
Iron Mtn IRM 22.04 28.56
The current healthcare debate indicates that trust and
confidence need more time. Americans desire facts, *Author owns stock shares.
clarity and honesty.
Investors are slowly moving forward into the
markets. The “trading market” of hedge funds and The views and information discussed in the commentaries
professionals continue, but investors see potential at are as of the date of publication, are subject to change, and
may not reflect the views of the firm as a whole. The views
current prices for long term gains.
expressed in the commentaries are at a specific point in
time, are opinions only, and should not be relied upon as a
3. forecast, research, or investment advice regarding a recession, like the US. The UK economy shrunk 0.8%
particular investment or the markets in general. in the second quarter, while Italy’s was down 0.5%.
Information discussed should not be considered a
recommendation to purchase or sell securities. Unlike in the UK, however, economists in the US
believe the worst may be behind them. ‘‘It’s quite
possible, though not certain, that retrospectively,
Six of world's top 10 economies out of recession we’ll say that the recession ended in July or August,
may be September,’’ Nobel laureate Paul Krugman
Some light showed up at the end of the recession was quoted as saying.
tunnel on Wednesday as France and Germany
announced unexpected returns to the growth path, There is evidence that his is not undue optimism. The
which means that four of the world’s five largest pace of job losses in the US slowed more than
economies and six of the top 10 are now not in forecast in July and the unemployment rate dropped
recession. for the first time in more than a year. US GDP also
shrank by just 0.3% (equivalent to an annualized 1%)
Adding to the sense of optimism, the US Federal in the seconnd-quarter after a 6.4% drop in the
Reserve left rates unchanged, saying that the world’s previous three months.
largest economy was showing signs of leveling out.
Both France and Germany had been predicted by That explains why US Federal Reserve is willing to
most economists to face a decline of about 0.3% in bet that the nosedive the economy had witnessed in
their GDPs for the second quarter (April-June) of recent months is behind it. Over the last two years,
2009, but they surprised themselves and the rest of the US has witnessed its worst financial crisis in
the world by announcing that they’ve actually decades, but that could be ending, which is good news
recorded growth of 0.3% each. for the world since it accounts for a fifth of global
GDP.
Among the five largest economies of the world, 8-14-09 The Economic Times
measured in purchasing power parity (PPP) dollars —
which is more of an apples to apples comparison — Despite Promising Signs, Many Wary that
China and India are already growing at healthy rates, Recession's Knockout Punch Could Still Come
although lower than their own pace for the last few Commercial Real Estate Industry Says Recovery is
years. Japan too has climbed out of recession and so Not Around the Corner
has Germany. These economies and the US account The End Is Near (for This Recession).
for 47% of world GDP in PPP terms. So read some of the economic placards that have
been trotted out in policy statements these days with
The Eurozone as a whole is also now projected to catchphrases such as 'Sustainable Recovery.'
have contracted by just 0.1% compared to the 2.5% 'Recession Is Coming To An End.' 'Policy Actions
fall in GDP in the first quarter (January-March). The Having an
growth rates reported by Germany and France may Effect.' 'Seeing Green Shoots of Growth.' and 'The
seem like nothing to get excited about, but Crisis Has Stabilized.' Many pointed to the more than
considering that German GDP shrunk by 3.5% in the 2,000-point climb in the Dow Industrial Average over
first quarter and France’s by 1.3%, it is quite a smart the last three months as proof that federal stimulus
turnaround. measures appeared to be having an effect in rousing
the slumping economy.
Among the world’s other large economies, Brazil is
also now no longer in recession having grown by Just this week, chief economists from JPMorgan
1.5% in the second quarter. Chase & Co., Wells Fargo & Co., PNC Financial
Services Group, Morgan Stanley and others said they
Among the world’s large economies, UK, which is expect the economy to "recover from its deep slump
the seventh largest and Italy, the tenth, remain in by late summer." The group that makes up the
Economic Advisory Committee of the American
4. Bankers said they expect the nation's gross domestic
product (GDP) to increase 0.5% in the July- I believe the real question lies in what the Federal
September quarter – this after falling a projected Reserve System will do. They can exponentially
1.8% in the April-June period. create liquidity or illiquidity with their actions. Given
Such signs have raised hopes that the end of the that they are a private bank with little real oversight,
recession may be in sight and that it is time to turn it is hard to say what their motives are and what their
attention to making money again among real estate actions will be. As we all know, commercial real
investors and service providers. We put those estate
questions to CoStar Group customers and readers. Do won't recover until banks start making loans again.
they see the end in sight and what do they see the The credit tightening has caused massive devaluation
future holding for the commercial real estate and has resulting in an evaporation of trillions of
industry? This article will address comments on the dollars of wealth in this country. Private central banks
first question have historically manipulated markets all over the
world. Unfortunately, I think our Federal Reserve
So, is the end of the recession near? Not as far as Bank is no different and we're experiencing that.
commercial real estate is concerned, was the
overwhelming answer we received. The downturn will not bottom out until the
"Since they repaired the Hubble Telescope last government pulls away from the podium. Until then,
month, I suppose someone could argue the end of the we will continue to see fluctuations in the economy
downturn could be theoretically 'in sight.' Otherwise, and a snail's pace velocity in real estate. For example,
the way we see it, not so much. The system is still too we learned yesterday that [President Obama] is
much of a cauldron of bad debt, soon-to-be bad debt, seeking more power to take over any company "too
nonexistent credit availability and weak big to
employment drivers," said Steven D. Sandler, CEO of fail." With that news, foreign stock markets declined,
Crosswind Capital LLC in Rye, NY. as did our market. Even though real estate works in
If you compare the economy to a boxing match, the conjunction with the economy, the federal
recession has probably delivered its worst blows. But government has added even more downward pressure
according to comments made by CoStar Group via TARP [Troubled Asset Relief Program]. TARP
readers, commercial real estate may still have more has created a stalemate in the troubled asset arena. As
rounds left to fight and the recession may still have a long as money is pumped into banks without having
knockout punch: to off-load assets, we will not see the RTC-type
Federal initiatives are prolonging the hurt by discounts.
artificially propping up banks' troubled real estate June, 2009 CoStar.com
assets.
Maturing debt loads and rising loan defaults will
continue to keep property values and deals down for a
long time.
Consumer spending is weak and continues to fall
because of deteriorating net worth in home values and
rising unemployment.
All of which are continuing to hurt property
fundamentals, and will likely continue to do so until
real growth returns, which is not in sight.
The following are excerpts of comments and insights
from wide sample of real estate executives across the
country who say the industry is still in for a
protracted fight. Next week, we'll take a look at what
the industry can look for and what it will look like
when recovery does begin.
