Economic overview from a conversation with Daniel Dokhanian and REAG and UCLA
Dr. Peter Linneman's Fall 2020 Capital Markets Webinar Moderated by Bruce Kirsch
A remote economic session done recently with CCIM Southern Nevada.
This is being written before the outcome of the U.S. election is known. Our view is that the people always win in a democracy. This is the beauty of democracy which redeems it from all of its messiness. The challenge is that people find it hard to believe that anyone can disagree with their honestly held views, particularly after these views have “been made clear” so many times. But remember, people value different things and that in a democracy they are entitled to make their decisions based on what they – not you – view as most important to them.
Whatever the election’s outcome, we encourage everyone to remember that you did not ask who someone voted for as they did your open heart surgery, offered you a helping hand after you tripped on the sidewalk, put out your fire, repaired your broken pipe, or when we sent a soldier into harm’s way. We are all in this together, and no one is either “correct” or perfect.
It is important that we strive to be people of good will and understanding. Democracy is our core value and the opportunity to express your view peacefully and without judgment is critical to achieving that objective. We wish everyone love during these times.
Economic thoughts for the week ending October 23, 2020 from a webinar done with Willy Walker, CEO Walker & Dunlop.
Economic thoughts for the week ending October 9, 2020 from a webinar done with Graham Partners.
Economic thoughts for the week ending September 18, 2020 from a podcast done with Trademark Property.
Economic thoughts for the week ending September 11, 2020
Dr. Peter Linneman's Summer 2020 Capital Markets Webinar Moderated by Bruce Kirsch
Economic thoughts for this week as shared with Wharton Houston Alumni Club with James Noteware.
Economic thoughts this week as presented to Graham Partners.
A conversation this week with Realty Mogul, CEO Jilliene Helman.
Economic thoughts for the week ending June 26, 2020
Current State of the Market from a podcast I recently did with RealCrowd
Economic thoughts for the week ending June 12, 2020. This from I panel I participated on with BisNow
Economic thoughts for the week ending May 29, 2020
From a recent conversation with Michael Covel, Trend Following
Economic thoughts for the week ending May 15, 2020. From the webinar done with Walker & Dunlop
An article from Connect Commercial Real Estate with our views from yesterday's webinar with Willy Walker, Walker & Dunlop
An article from BisNow with commentary on the webinar I did this week with Willy Walker, Walker & Dunlop
Economic thoughts for the week ending May 7, 2020
A webinar I did this week in collaboration with biproxi. https://www.youtube.com/watch?v=4swAapkZyHU&feature=youtu.be
My thoughts on the economy this week are taken from a call I did with colleague Brendan Wallace at Fifth Wall. https://youtu.be/XP3MBmIiubI
The Jobless claims report came out today with another 3.8 million filing for unemployment last week. That totals in excess of 30 million in 6 weeks. If you would have done a classroom exercise of how many jobs would be lost within two months, any decent student would have gotten this answer within a couple of million. It was that obvious. So how is it that the governments of the world made no mention of it when they did their now infamous “flatten the curve to save the medical system” speeches? If they were surprised, that is shocking. If they were not surprised, what were they thinking? Perhaps they thought no one would notice.
The reported 4.8% decrease in Q1 GDP is nothing. As we sit here today it is about 5% below the end of the first week of March. That is not 5% on an annualized basis, it is on an actual basis. Annualized, that is about 37%. The worst in US history triggered by the worst economic policy in history.
Economic thoughts for the week ending April 24, 2020
Economic thoughts for the week ending April 16, 2020
There were 5 M unemployed at the end of the first week of March. Plus 6 M more since last Wednesday (which will not be reported until next Thursday morning). That is 33 M on a roughly 162 M labor force that had 157 M working On March 6. That means only about 129 M still working today. That is 20.4% unemployment as of now. It was 3.5% March 6. Even if every death would have lived a long and healthy life (more than half in Pennsylvania were in nursing care facilities; not independent or assisted but nursing which is typically a year or so of life), if 1 M die it's 28 jobs per death. And that is if no further job losses. More realistically it is closer to a maximum of 100,000 net deaths (almost all with pre-existing medical conditions) if we opened up, it is already 280 jobs per net life (if no further job losses).
Economic thoughts for the week ending April 9, 2020
Today's jobless claims report is dead on to where we predicted a month ago. And these numbers are a week old already. In the past week, another 6-10 million became unemployed. That means that as of this moment there are about 28 million unemployed. It was 5 million the end of the first week of March. True unemployment rate at this moment is about 18%. It was 3.5% the end of the first week of March. We must quickly flatten this curve. The human destruction that lock down has created is unmeasurable. It is not dollars versus lives; it is lives versus lives
If COVID does not disappear and instead becomes a part of life, we will have ongoing deaths due to it. Assume the worst that each year we have a 4x (net of those would have died from something in the near term in any case) normal flu deaths (which includes people who would have died of other causes) means a future of an additional 200,000 deaths a year in the US year after year. This would increase US deaths from 2.8 million a year to 3 million, a 7% increase.
US death rate was 9.4-9.6 from 1950 to 1974. It has risen from 8.1-8.2 from 2008 to 2013 to about 8.9 prior to COVID as drugs and chronic diseases took their toll. A further 10% increase raises the death rate to about 9.8, or slightly above what it was from 1950-1974 (when it fell to 8.1 by 2008). That is, drugs and chronic diseases have increased our death rate in the past 7 years about like COVID will change it going forward (absent a vaccine or treatment).
These additional deaths would reduce US population growth by about 5 bps a year. In addition, reduced economic activity (for example, reduced travel and leisure activities) because of COVID fears might reduce long-term growth by about 10%, or about 20 bps. That means our growth rate would fall by 25 bps, which is about $52 billion a year.
Economic thoughts for the week ending April 2, 2020
We expect new unemployment claims for last week (announced this Thursday morning) to be 10-12 million, up from about 210,000 three weeks earlier. And the numbers for this week (released on Thursday of next week) will be even larger. Macy, Kohl’s and Gap combined could be 350,000 this week. In a little over 3 weeks the US unemployment rate (not officially reported for several weeks) will have gone from an all time low of 3.5% to 17%.
Economic thoughts for the week ending March 28, 2020
How deadly is the coronavirus? It's still far from clear - A report from Dr. John Lee - The Spectator
12 Experts questioning the Coronavirus panic. https://www.globalresearch.ca/12-experts-questioning-coronavirus-panic/5707532
The stock market rose on Thursday as news that the lead author of the Imperial College study (which was THE underpinning of all shutdown programs) testified Wednesday that they had “tweaked“ their model, resulting in 25 times fewer predicted deaths. Yes, you read that correctly. So the report that frightened the UK into shutdown with an estimate of 500,000 deaths and hospitals overwhelmed says “oops” it will be more like 20,000 deaths. And instead of 2.2 million deaths it will be more like 88,000. And he goes on to note that about half of these would have died before year end anyway. This is because as Stanford and Oxford (and many others) researchers suggested, many more have already been infected.
This not only massively reduces the death rates by massively changing the denominator, it also means that massively fewer people remain who can still be infected. These bad assumptions (inconsistent with the data in a lot of ways) explain why they predicted something massively more dangerous than anything we have ever witnessed before. And that is because it isn’t remotely dangerous as had been advertised. In fact, it is probably 25-100 times less dangerous than originally advertised.
This does not mean it isn’t nasty to some people. In fact, about 5,000-40,000 in the US will die as a result of it that otherwise would have lived (out of a population of 330 million, of which 2.4 million die in a typical year). That is equivalent to a bad flu on top of the already existing flu. But even at the upper limit of this range, it is only a 1.7% increase in annual deaths (as opposed to a 92% increase based on original assumptions). And while every life matters, wholesale destruction of economies and social freedoms would certainly not seem warranted by such a number. And this is the upper bound. Unlike the typical flu, it seems to be largely asymptomatic in most people but really bad when not.
As to why it is swamping some hospitals, it is all the normal sick people in ICU plus the small percentage that are really sick and would otherwise be healthy, plus a whole lot of people who would die (some-but not most-who would die spread over the next 10 months all happening in a few weeks). Normal ICU is hectic and with these two additional groups it is really stressed in the most heavily hit areas (though many are not stressed at all).
This single faulty model is responsible for tens of millions of lost jobs, ruined weddings, trillions of dollars wealth losses, cancellations of holidays, tens of thousands of business failures, lost social connectivity and massive unprecedented government interventions around the world. A great lesson that things that do not pass smell tests are probably false.
WOW!!!!! This is the lead of the Imperial College study that was the guiding force behind all the dramatic shutdowns and sell offs. Staggering admission. But at least brave enough to admit it. His current numbers are consistent with the Stanford and Oxford numbers. The good news is that this could cause life to soon resume.
The problem now is a lot of damage wrought by the study. And politicians and their advisors will be slow to reopen and admit their honest errors. His new model suggests about 80,000 US deaths from it, about half who would have dead anyway by year end. Typical flu is 30,000-60,000 a year (suppressed by vaccine). So it is by this model now like a bad flu on top of the flu. Not nothing but a long way from 2-4 million. Oxford and Stanford people were seemingly on target.
Not surprisingly, there is no immunological consensus given. It has never existed. It is amazing how the decent, but limited Imperial College report, swept the narrative and policy everywhere. It (like me) is nothing but an Excel model based on snippets of data and conjecture. Imagine the damage to the real estate industry if one of my analyses, over the many years, would have been imposed by law on the industry. I might generally be better than a lot of others a decent amount of the time, but no one is that good. That is what has occurred with the Imperial College study. The fact that many others agree does not make it right any more than saying a lot of people agreed with me at any point in time.So my thought for the day is: assume that (as is the case for many sicknesses and diseases) we find no vaccine or effective treatment for 20 years; what would the shutdown have really accomplished except destroy the economy and lives, vastly expand the footprint of the state and risk social unrest? While i hope we have treatments soon, it is more than arrogant to assume a cure around that corner. Where are you? We are self-isolated for two weeks at home in Center City Philadelphia. Be safe. PL
Peter Linneman Joins Willy Walker to discuss the economy
Just reread the now widely cited Imperial College study. This is the source of the “flatten the curve” approach to spread the timing out in order to keep peak load below hospital care limits. It is essentially an Excel variant of old linear programming models with the objective to keep cases below capacity. Not surprisingly, anything that slows the spread works towards this goal. They note several times that there are economic consequences of this approach.
This study has been adopted as the model to follow by most governments. What is completely lost is that to avoid a medical surge that strains the medical system entails immediate surges in lost jobs and output that strain both the economic and social system. That is a curve that also must be flattened.
Two weeks ago, new unemployment claims were about 210,000. One week ago they were 280,000. My guess is that it will be 4-6 million for the week just ended. And the coming week I expect another 5-15 million. As I noted in my talk, there are 15 million idled workers in hospitality/leisure alone and probably another 4 million in retail. Plus probably 20-40 million service workers. Many of these will be paid for awhile. But others will not. No need for food service workers and janitors at closed universities and schools.
The unemployed curve could easily rise from about 5 million (out of about 152 million workers) two weeks ago to 20 million today to 50 million by mid-April. That is a curve beyond society’s capacity in my view. And the same thing will proportionally happen in other countries. Not least is the concern is what happens when a third of the workforce is unemployed and locked down and not in school. The social unrest potential is staggering. All in a month from the most prosperous economy in US history.
A single flatten the curve strategy is simply not viable. Adaptations are necessary. We need to shutdown the shutdown before we have mass unemployment and social unrest.
Meanwhile the treatment combination used in France shows complete success within six days on those infected. It is based on a small sample but the good news is that the two drugs are easily available and approved and in wide production.