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Q3 Quarterly Commentary

The tiger walked to the side wall of 12-foot cage, his whiskers brushing the bars as he turned and plodded to the other side. Then back. All day, he paced, a behavior not observed in the wild.

In response to public outcry, the zoo built a beautiful habitat with a moat, splash pool and lush landscaping. With great anticipation, the zookeepers released him into his new world.

He stepped up to the edge of the moat, looked around and begin to pace. Twelve feet across, twelve feet back.

Only with great effort were they able to coax him beyond his old way of thinking so he could enjoy his expansive environment.

The same phenomenon occurs with people. If you’ve known folks who lived through the Great Depression, they also appeared to be boxed-in fiscally by an unseen force–invisible at least to their grandkids. They lived under a sense of dread that what happened before could happen again.

In the aftermath of the Great Recession, many business people live with lingering uneasiness. I too have at times fallen victim to this phantom fear. I’ve been haunted by the thought that we were 12 months away from another recession–for the past 10 years! But none has materialized.

I had a local executive tell me he has these twin creatures on his shoulder, one says that a crash is right around the corner, and the other says it’s going to be fine.

It’s so hard in this world to see reality for what it is. It’s easier in hindsight, but then it’s too late.

So, what is the true state of the economy? Here are some facts:

According to the National Federation of Independent Business, views about expansion are the highest in history, compensation increases hit a 45-year record and positive sales trends are at the highest level since 1995.

These stats would indicate we’re in a boom time.

Among all the good things happening, there’s an added bonus: fiscal stimulus in the way of tax cuts. Never in the history of the United States have tax cuts/stimulus been added to an economy near the end of the cycle. We’re in uncharted water–especially when you layer on the estimated effect of $6.1 trillion in Opportunity Zone Tax Credits in 2019-2021. It’s like we’re on a 3-stage rocket and we just lit the 2nd booster.

So, I’ve decided to ignore my fear-based muscle memory of the Great Recession. The facts are telling me that the next 2-3 years should be a boom time for the US economy.

Our challenge in the real estate world will be to manage our purchases and sales in a rising interest rate and perhaps an inflationary- environment.

Back to the Tiger- he was conditioned to believe that his world wouldn’t change- even when the truth was staring him in the face. Expectational inertia is a powerful force. What things in your own life or your business have changed, but can’t see it yet?

Here’s to seeing the world clearly!

Derek Waltchack

*The curation of these economic data points came from Dr. Mark Dotzour, the Chief Economist of the Real Estate Center at Texas A&M.
I’ve decided to ignore my fear-based muscle memory of the Great Recession. The facts are telling me that the next 2-3 years should be a boom time for the US economy.

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by Suzanne Echols
11.13.2018