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  • Ups and Downs - Summer 2019


    Mike Glasser has been a real Debbie-downer lately. Our illustrious President has been sending out email after gloomy email, mostly having to do with the increasingly hostile political and regulatory environment in which developers and property owners must operate.

    Sadly, these emails keep coming because things really do seem to be getting demonstrably worse. One email in particular really got my attention. This was an email with a link to an article that appeared recently in Jacobin magazine which describes itself as a “leading voice of the American left.” The article is entitled, “Developers Want to Destroy Chicago. We Won’t Let Them.” The author is Cristina Groeger.

     

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  • Ups and Downs



    It’s been a wild start to the year and much of the news, especially over the past month, has been all about politics. Now, I know I’m supposed to steer clear of politics, but I can’t help myself. Both the local and national media have been obsessed with all things political. And who can blame them? With the release of the Mueller report and a riveting local election, there has been little appetite to talk about anything else.

     

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  • Ups and Downs - Will the Last One to Leave Please Turn Out the Lights…



    Chicago is a proud city with an impressive history – it was the fastest growing American metropolis of the 19th Century. It rose from the ashes of the 1871 fire to become bigger and better than before. It is the birthplace of the skyscraper and deep-dish pizza!

     

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  • Ups and Downs - Fall 2018



    We live in turbulent times. It seems as if everyone is angry all the time and, increasingly, willing to act on their anger. This was on full display the last week of October when a political zealot and all-around loser living out of a van in South Florida tried to send pipe bombs to prominent Democrats, and then even more so when another, even bigger loser walked into a Synagogue in Pittsburgh and opened fire. The eleven dead were among a congregation of innocent people peacefully gathered in the presumed safety of their place of worship. This was just the latest of a never-ending string of shootings with semi-automatic weapons that have become as American as apple pie.

     

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  • Ups and Downs - Summer 2018



    By any measure, the economy is exceptionally strong. The unemployment rate was 3.9% in July and has been below 4.5% for over a year. We have seen an extraordinary run of net job gains which have now continued uninterrupted for almost eight years. The last time we registered a monthly job loss was September 2010. May and June both saw net gains of more than 200,000; in February, the gain was 324,000.

     

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  • Ups and Downs - Spring 2018



    If you look at a chart of the Dow Jones Industrial Average over the last ten years, you see an almost unbroken upward trajectory that started early in 2009 at the depth of the Great Recession, and continued until nearly the end of January of this year.

     

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  • Ups and Downs - Winter 2018



    It has been an interesting year in many ways, both good and bad. A turbulent 2017 in Washington spilled over into the New Year with a government shutdown marking the Trump administration’s one year anniversary. Instead of attending a gala celebrating in Mar-a-Lago, President Trump spent his weekend in Washington DC in the wake of the happily brief government shutdown. This came after an especially turbulent and acrimonious week of in-fighting in Congress that came to its seemingly inevitable climax on Friday, January 19. As the clock struck midnight, no 11th hour reprieve could be found to stitch together a divided and polarized nation.

     

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  • December 2017 Market Update

    December 2017 Market Update | Steve Cain, RPBG Director - Writer / Editor
    December 4, 2017
     

    We have come to the end of another year and it’s time to look forward to the next. As my work load has increased, I’ve found it more difficult to find the time to do these monthly updates. As a result, I’m going to pull back to once a quarter instead of once a month, and my updates will appear in The Builder, the quarterly newsletter of the Rogers Park Builders Group.

    It’s been a terrific 2017 for the organization which continues to be a positive presence in the Rogers Park community and remains strongly committed to its well-being. Over the past couple of years, we have truly put our money where our mouth is, and we plan to do more of the same in 2018. Members of RPBG should feel good about the contributions we have made and deserve a hearty round of congratulations. I wish everyone a Happy Holiday Season and a Prosperous New Year – here’s to an almost complete and very successful 2017, and best wishes for an even better 2018.

     

    Steve Cain is a local investor and serves as Secretary of the RPBG, and he also writes and publishes our well received newsletter, The Builder.The views expressed in Steve’s Market Updateare his own, and do not necessarily reflect the views of the organization.

     

     

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  • November 2017 Market Update

    November 2017 Market Update | Steve Cain, RPBG Director - Writer / Editor
    November 8, 2017
     
    The latest jobs report came out on Friday. It showed 261,000 new jobs created in October, a welcome reversal of the job losses that occurred the prior month. In fact, the October report revised the September numbers, shifting from a negative (minus 33,000) to a positive (plus 18,000) net new jobs. Unemployment also fell from 4.2% to 4.1%, the lowest it has been since December 2000, nearly seventeen long years ago!
     
    The October jobs report is certainly good news for the economy. Part of the reason the October number was so big is the same reason the September number was so low. You may recall we had some interesting weather late summer and early fall this year with three major hurricanes wreaking havoc on the economies of the Texas and Louisiana Gulf Coast, Florida and Puerto Rico. The devastation caused by these storms temporarily put a lot of people out of work. No one expected all of these job losses to be permanent, and the October jobs report is one measure of the ongoing recovery from those weather events.
     
    But the trend is still clear. With the upward revision in job numbers for the month of September, the US economy is now in its 85th month (that’s seven years and one month) of positive job growth. This is an impressive number by any measure, and represents one of the longest stretches of job growth the country has ever experienced.
     
    If there is any bad news in these job and unemployment numbers, it is that the distribution of these new jobs remains uneven, and is not widespread across the country. The Chicago area seems to be a good example of both the good and the bad of this trend. While the Central Area booms, the rest of the city and region are not doing as well. Overall, the Chicago area economy is growing, but at a slower rate than the nation and most other large metro areas. 
     
    One indication of this trend is housing values. While a few downtown and near-downtown zip codes have seen housing values recover to pre-recession levels, most of the rest of the city and suburbs have not. The downtown economy may be the region’s golden goose, but it is not large enough to lift the whole region. Previous large job losses in manufacturing, and current weakness in retail, continue to hobble many parts of the Chicago area. The region’s growing economic sectors are simply not dominant enough to completely make up for the weaker sectors across all areas of the city and suburbs.
     
    In my own experience, we have seen weaker demand and declining effective rents for our few remaining available apartment units in Rogers Park and other far North Side neighborhoods. Some of this is simply due to the time of the year. The pre-holiday months of November and December are often the most difficult time of the year to find tenants. 
     
    But some of this seems to be due to a shift in the market. After years of steady rent growth and strong demand, the market appears to be tilting from a landlord’s market to a tenant’s market. We have had to reduce rents and are still seeing tepid interest. These observations are anecdotal and personal. I can’t say that other property owners have been experiencing the same thing. But the pain is real – we are having a harder time renting units.
     
    Perhaps the continued economic expansion will rev things up in Chicago again and the spring leasing season will bring a return to stronger demand and increasing rents. I, for one, am holding my breath. The national trends do not apply equally to all places. Chicago is not Austin or Seattle. We are just going to have to live with that reality… and keep hoping Amazon chooses us for their next headquarters!
     

     

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  • October 2017 Market Update

    October 2017 Market Update | Steve Cain, RPBG Director - Writer / Editor

    October 2, 2017

    What a way to end the summer. Three hurricanes – Harvey, Irma and Maria – came in quick succession and devastated a wide swath of the Texas Gulf Coast, much of Florida from the Keys to Jacksonville, numerous islands in the Caribbean and, perhaps worst of all, Puerto Rico. The fifty-plus inches of rain in Houston put about a third of that city under water at the height of the storm.  The subsequent flattening of the Keys and near-complete collapse of the electric grid on Puerto Rico will make for a very long recovery in all of these locales. It also guarantees a steady and significant flow of FEMA money to these hard-hit areas.

    Yet even as the US southeast suffered some of the worst hurricane damage in many years, the economy continues to hum along and the stock market keeps breaking new records. There are probably a number of reasons why the economy continues to perform so well. High on that list is Congress’s push to implement tax reform.

    You might think that, after three tries and as many failures to repeal Obamacare, the markets might be a little leery of the current attempt to reform the tax system. But one look at the Dow Jones suggests otherwise. The markets seem to believe that, past failures notwithstanding, the Republican majorities in the House and Senate and a Republican Chief Executive are all that’s needed to get some sort of tax reform across the finish line. It also doesn’t hurt that the primary investors in the markets – notably the billionaire class – like the tax reform proposal a lot.

    And why shouldn’t they? While these reforms are being touted as mainly benefiting the middle class, the statistics tell a different story. The Atlantic magazine reports that a study by the non-partisan Tax Policy Center finds that that taxpayers in the top 1% of households by income will reap approximately 50% of the tax reform benefits. Whether it is the reduction in the top tax bracket from 39.5% to 35%, the elimination of the alternative minimum tax, or a dramatically lower tax on corporations, the wealthiest Americans will benefit the most. For the half of all taxpayers at the lowest end of the income scale, the proposed tax reform will net them just 10% of the total tax savings.

    But there are still some big hurdles that must be cleared before tax reform becomes reality. It’s much easier to cut taxes than it is to pay for them. The current tax reform plan knows exactly where it would like to see taxes cut. But it is vague about how where it will find the money needed to keep these tax cuts from exploding the national debt.

    Of course, there is the well-worn promise that tax cuts will lead to faster economic growth and higher overall tax revenues – maybe this time it’ll even work out that way? Then there is the general promise that the plan will eliminate lots of special-interest loop-holes and deductions. But which ones? Every loop-hole seems to have its own lobbying group, and you can bet they are all gearing up to fight any effort to cut their loop-hole. Already, the ingenious Republican plan to eliminate the deduction of state and local taxes (generally highest in the Blue states like California and New York) is running into major pushback from the many Republican Representatives who live in the more conservative districts of those states.

    We can expect a lot more of this before the proposed tax reform plan ever passes, if indeed it ever does. In the wake of the Obamacare failures and the dubious record of Congressional achievements thus far in 2017, perhaps the markets are being, oh, I don’t know… irrationally exuberant? We will know soon enough. Meanwhile, it sure does feel good to see the Dow zoom ever higher – above 22,500 as I write this article. How much longer can it last? My prediction – at least as long as the tax reform plan seems like it might actually pass. 

     

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  • September 2017 Market Update

    September 2017 Market Update | Steve Cain, RPBG Director - Writer / Editor
    September 4, 2017
     
    The long Labor Day weekend is always just a little bittersweet. As much as we love the extra day off, we know it also marks the end of summer, the return of cooler weather and, for many of us, a renewed focus on making those end-of-year numbers before the holidays hit.
     
    This year, like the last several, we can get back into work mode without worrying too much about the state of the economy. According to the Bureau of Labor Statistics (BLS), the economy has not seen a net decline in the number of jobs since September 2010. That makes the 156,000 net new jobs in August the 83rd consecutive month of job gains, one month shy of seven years! 
     
    But, about those 156,000 jobs... expectations were higher with predictions at about 200,000. The BLS also revised job numbers downward for June and July by 41,000, reflecting an economy that is expanding, but at a sluggish pace. Finally, unemployment ticked up to 4.4% from 4.3%. Not a big change, and nothing that anyone seems to think is worth losing sleep over. But it is not the robust growth than many have been hoping for, and that the stock markets still seem to believe is coming. Despite the mildly disappointing news, the equities markets continue to perform well with the Dow Jones just under 22,000 as I write this market review.  
     
    Perhaps the biggest surprise of the latest round of economic news is the surprising weakness is wage growth. This is especially puzzling, given that the unemployment rate has been at or below 5% since September 2015. Generally, when unemployment falls to “full employment” levels (somewhere in the 5% range), pressure on wages increases. But that does not seem to be happening, at least not right now. The good news is that this may cause the Federal Reserve to hold off on further increases in interest rates. But the bad news is that, for a lot of Americans, wages are still barely keeping up with expenses.  
     
    One big concern not reflected in any of these numbers is the impact of Hurricane Harvey which devastated Houston and other parts of the Texas and Louisiana Gulf Coast at the end of August. Houston alone accounts for approximately 3% of the US economy, and the state of Texas accounts for almost 10%. The flooding in the region was widespread, impacting residences and businesses alike. Even worse, there is at least a possibility that these horrors could be compounded by Hurricane Irma which is now a Category 4, and could potentially blow into the Gulf of Mexico later this week.
     
    Putting aside the possibility of a second hurricane, the recovery from Hurricane Harvey is likely to take many months and cost tens of billions of dollars. Although fewer people died in Harvey than Katrina, the devastation could be more impactful on the national scene for the simple reason that Houston is a much larger and more economically important city than New Orleans.
     
    We won’t know for another month what impact Hurricane Harvey had on the national economy, but it is hard to imagine that it will not be felt, at least in the short term. The statistics are staggering. One million cars unusable; 40,000 homes destroyed and many more damaged; oil refineries shut down. Just east of Houston, the entire city of Beaumont is still without running water. For tens of thousands of Texans, getting back to work will be difficult if not impossible. Even those with dry houses and working cars may find that their employers are shut down or inaccessible. For those whose cars were destroyed by the floods, just getting to work in car-dependent Houston will be a major challenge. 
     
    Kind of makes crying over the end of summer seem a bit silly. There are worse problems in the world – just ask anyone who lived through Harvey.
     

     

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  • August 2017 Market Update

    August 2017 Market Update - Chicago leads major U.S. cities in population loss, sees drop for 3rd year in a row | Steve Cain, RPBG Director - Writer / Editor

    The economic recovery is a little like the Energizer Bunny – it just keeps going. Signs of the good times are all around us. The Dow Jones hit another high, breaking through 22,000 for the first time on August 2. The jobs report for July showed 209,000 new jobs for the month and unemployment declined to 4.3%, the lowest rate since March 2001. Corporate profits have generally exceeded expectations. By any measure, this seems to be an economy hitting on all cylinders.

    Hidden in all this good news is the somewhat surprising slump in the dollar relative to other currencies. Normally, the red-hot US economy would translate to a stronger dollar as more investors rush to invest money in the US. But just the opposite is happening with a declining dollar against pretty much all the major world currencies including the Euro, the Chinese Renminbi, the Japanese Yen, the Swiss Franc and even the British Pound which has been pummeled in the wake of Britain’s decision to pull out of the European Union.

    The decline in the dollar is also surprising, given that the US generally – and the US dollar in particular – are considered safe-havens in a turbulent world. But this time, it looks like the world is laying at least some of the responsibility for global turbulence at the doorstep of the United States. This has much to do with recent antics in Washington and, more recently, the saber-rattling between Donald Trump and the North Koreans. Whatever the reasons, our currency is not doing as well as our economy.

    Perhaps the best measure of the nervousness in the equities markets is the performance of the VIX, also known as the Volatility or “Fear” Index that was created by the Chicago Board Options Exchange. As recently as July 26, this index dropped below 9, it’s lowest reading ever. But over the past few days, the index has risen again, partly due to escalating tensions between the US and North Korea but possibly also due to growing concerns about American leadership (or the lack thereof) on the world stage.

    So, here we are once again wondering if we should pop the champagne or run for the hills? If you’re looking at the stock market, unemployment rate or corporate profits, this is indeed the best of times. But if you’re wondering how far those North Korean intercontinental ballistic missiles can really travel, then perhaps buying more stocks is not your primary concern.

    My best advice – assuming North Korea hasn’t launched a nuclear missile at Guam, or the US hasn’t launched a pre-emptive attack on Pyongyang by the time you are reading this article – is to take a deep breath and relax. It’s still August, a generally a slow month for the markets while many Wall-Streeters are out on vacation. So, do like the magnates. Take a break. Go to the beach (it doesn’t have to be The Hamptons) or escape to your cabin. We only have a few weeks left to enjoy the summer before school starts up again (well, maybe not in Illinois – but I digress). Enjoy the last weeks of our all-too-short summer season. Fall is just around the corner and summer hours will be a thing of the past very soon. We’ll be back at work worrying about the next crisis before you know it. They’ve been coming fast and furious lately. No sign that that is going to change anytime soon.

     

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  • July 2017 Market Update

    July 2017 Market Update - Chicago leads major U.S. cities in population loss, sees drop for 3rd year in a row | Steve Cain, RPBG Director - Writer / Editor
    These are strange times. Our political world has rarely felt more divided, acrimonious, unsettled and unpredictable. Such conditions generally spread outward, affecting people’s confidence in the future and, ultimately, the direction of our economy. But in today’s world, all the anguish about our body politic seems to have little impact on the economy which continues to hum along as it has done for years and shows every sign of continuing to do.
     
    On the national level, the past few weeks have seen considerable hand-wringing about the future of health care. On the left, there is a palpable fear that the Republican proposals from the House and Senate will take away the “essential benefits” that the ACA made law, force millions back into the ranks of the uninsured, and transfer billions of dollars from the poor to the rich. On the right, there is enormous anger at Washington which is thoroughly and completely in Republican hands, yet seems unable to deliver on the promise that has held the party together for eight long years and four election cycles – to replace, if not completely repeal, the Affordable Care Act – better known as Obamacare.
     
    On the state level, if anything, things are even worse. There is a dark cloud hanging over Illinois, and it seems to grow blacker and more ominous with every passing day. The state’s calamitous stalemate over the non-existent state budget is about to enter year three. Only this time, there appear to be some real-world consequences that just might start to get the attention of everyday Illinoisans who seem to have brushed off our civic dysfunction up until now. 
     
    Specifically, the three major ratings agencies are all threatening to cut Illinois’ bond ratings to junk, an ignominious first in the illustrious history of our great country. With junk status bestowed upon our bonds, other impacts begin to unfold, some of which seem likely to draw the ire of our fellow citizens. Among these is the impending shut-down of all construction work on area highway improvement projects. That would include the rebuilding of the Circle Interchange and I-55/Lake Shore Drive, a development that might just catch the notice of commuters heading into and out of the Loop. Five state universities could be forced into bankruptcy. And oh, by the way, no more Powerball ticket sales in Illinois. Now if THAT doesn’t get people riled up, nothing ever will.
     
    The conflict over health care in Washington, or the budget in Springfield, are just the latest skirmishes between the Democrats and the Republicans in an endless stream of conflicts that have been raging between the two parties and, more fundamentally, between Blue and Red America. Yet the stock markets – always a good barometer for how the country is feeling about the economy – are once again near historic highs. The Dow Jones closed Friday, June 30 at 21,349, not far from the all-time high of just over 21,500 earlier in June. 
     
    Am I the only one who feels like the disconnect between our political and economic realities is getting hard to reconcile? Has anyone else felt a little schizophrenic when contemplating the permanent state of crisis that defines our politics, and the blue skies and roses that describes our economy?  I will admit to being delighted with the performance of my investment portfolio; but I’m still afraid to turn on the radio in the morning to listen to the news. And I have a feeling I’m not the only one. I just can’t seem to shake this feeling that something has to give. I just hope it’s something good. The way things are going, it is getting harder to be an optimist these days.
     

     

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  • February 2017 Market Update

    The stock market continues to love the new order. The Dow Jones closed over 20,000 for the first time in history on Wednesday, January 25. But there is also nervousness over what appear to be impulsive directives from the new President whose preferred means of communicating is by Tweet.

    Perhaps the most consequential actions of the new administration regarding the economy were the disagreement between President Trump and Mexican President Enrique Peña-Nieto, and the subsequent changes to immigration policy.

    The melee with Mexico began when President Trump announced that construction of a wall between the two countries would move forward, and his insistence that the Mexicans pay for it. At about the same time, the president announced more aggressive measures to deport undocumented residents.

    The announcements and their timing proved to be awkward for the Mexican President, and undiplomatic by any measure. Peña-Nieto, who had been planning to visit with President Trump in Washington the following week, came under intense pressure to call off the meeting. When Trump all but told him not to come if he would not agree to pay for the wall, Peña-Nieto announced that we would do just that and stay home.

    Within days of his spat with Mexico, President Trump imposed sweeping restrictions on immigration. Trump’s executive order bans all immigration to the US from seven, majority Muslim countries for 90 days; bans refugee resettlement for 120 days until some as-yet undetermined additional vetting procedures are put in place (the ban is permanent for Syrian refugees); and sets policies that would prioritize Christians over Muslims for future immigration approval.

    Any possible rupture in trade between Mexico and the United States would likely be much more painful for Mexico than for the US. Mexico is highly dependent on the US economically, sending 80% of its exports to this country. Nevertheless, there are reasons to be concerned about what is transpiring between the two nations, the new immigration restrictions, and what this all portends for the future.

    Soon after Peña-Nieto cancelled his trip, the Trump administration floated the idea that a 20% tariff would be imposed on all Mexican goods to pay for the wall. While this threat was quickly pulled back as just “one option” among many, it raised an interesting question. If President Trump is willing to start a trade war with one of our closest allies, our third largest trading partner, and a country with which we share a 2,000-mile border, what else is he prepared to do? And how will it impact the economy going forward? We really are in uncharted waters – no one knows what will happen next.

     

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