Today, I donned my business finest and made my way to the Beverly Wilshire Hotel for the NAI Capital, Inc. 2014 Global Market Outlook Conference. I was invited to the event by a NAI Capital broker who is near and dear to me so I thought I would show my support. I was pleasantly surprised that not only did the "continental breakfast" include quiche, but also that a global outlook could have application to myself and my clients who are local to Los Angeles.
The conference was held in a panel format featuring NAI Capital's chief economist, Dr. Peter Linneman and NAI Capital's Executive Managing Director of International business, Mauro Sarmiento. Both gentlemen are tremendously accomplished in their field and have travelled the world to bolster their strong roots in academics with real world experience.
1) What is going on across the world can affect investment here at home.
The panelists began their discussion of the global state of affairs by focusing on the most topical international crisis, Crimean conflict. They emphasized that even though many Americans could not pick out Crimea on a map, the conflict can have an effect on our national economy. The conflict chiefly impacts domestic companies that are invested abroad and are not insulated from embargoes. This quandary hearkens back to the never-ending debate over the U.S.'s responsibility to police the world.
2) If you want to see your capital grow, you need to go where other investors aren't going.
Foreign investors only want to invest in cities with names they have heard. London, New York city, and Washington, D.C. are all highly coveted domestic cities for investors but while there is capital going into these cities, the return is not high. If you are investing domestically but want to be ahead of the market, consider investing in Texas or Virginia where housing is cheap and business taxes are low.
Note: Los Angeles did not make the list of highly coveted domestic cities for investment. The panelists argued that this is because growth has stunted for the California economy.
3) California is its own worst enemy.
Growth in California has plateaued because of high business taxes and rising home prices. California has some major businesses present but all of them boast a negative cash flow. If California would like to rise to its former status, it will need to strongly consider cutting taxes and creating more affordable housing.
4) Low interest rates are not always a good thing.
Low interest rates are helpful to home buyers but still detriment the economy. Low interest rates mean low rates of return on investments, loans and savings accounts. Dr. Peter Linneman stated that the fed must increase interest rates to drive up investment.
Don't agree with the panelists? Comment on this post and let us know your thoughts!