Monthly Letter

August 1, 2009

RE: Monthly Letter

Dear Clients:

July 1, 2009

RE: Monthly Letter

Dear Clients:

Happy 4th of July!  I’m very reflective this year.  I’ve seen outdoor grilling go from my first Hibachi to the Weber to the gas grill, and now I see outdoor cooking centers that include chrome, refrigerators, and even dishwashers!  I’m afraid it is a bit like our economy has been, great growth and improvement until we lost focus, overbuilt for our needs, and now need to find our direction again.  I hope for your sake and our economy that we can once again find one of the great joys of summer, that easy going, lazy family time, the old picnic table with the plastic tablecloth, the kids carrying bowls of potato salad and chips, and Dad slaving over the hot dogs and hamburgers on the barbecue with a spatula in hand.

As you read this, 77-year-old GM is going through bankruptcy, the US economy has gone through its worst decline in 50 years, economists are predicting hyper inflation, North Korea is suspected of trying to launch a 4th of July missile at Hawaii, the Taliban is trying to join the nuclear club and Israel is looking for an excuse to turn Iran into a glass parking lot, California is so in debt that it has to close state parks, and, oh yeah, the swine flu is predicted to come back in the fall.  Closer to home, your retirement portfolio is worth 40% less than 2007, your house is worth 20% less, and you’re scrambling to stay afloat because your friendly banker has cut your credit line. Did I get everything?

I’m reminded of the words from the movie Network: “I’m mad as hell, and I’m not going to take it anymore.”  More often than not, we can’t control what happens around (or to) us.  We do, however, have total control of how we respond.  Constant worry and fear is our brain’s way of “preparing us” for the worst.  It causes us to be on guard and brace for impact.  Wow, what an exhausting way for us to go through life.  No one can predict what is going to happen in the next few years.  We can say with absolute certainty, however, that every person has inside them the ability to cope and adapt to just about anything life can throw at us.  And that is one thing we can never lose.

Here are a couple of ways to channel your outrage:

1.    Speak up.  There is an urgent need to follow how members of Congress are voting: http://www.congress.org lets you sign up for updates and forms to e-mail them your opinions.

2.    Fight the spin.  The airwaves are filled with spin and misinformation.  Our country is undergoing unprecedented change.  Use Google to learn more.  Try http://www.sunlightfoundation.com to see the text of the bills and where earmarks go.  Be a watchdog.

Despite growing unemployment, continuing home foreclosures, and a crippling state budget deficit, there are growing signs that the economic slump in San Diego could be approaching a bottom.  The University of San Diego Index of Leading Economic Indicators has had its first uptick in two years.  If this trend continues, we should hit bottom by year end or early next year.  UCLA Anderson Forecast reports that California is moving out of “intensive care” but is still “very sick.”  The biggest problem ahead is probably the weakness of the recovery ahead.

The Fed will probably control the road ahead with one of two scenarios:

1.    Ease interest rates higher to curb inflation.  However, higher rates will curb economic growth and housing, thus prolonging the recession and speed of recovery;

2.    Keep short-term rates low to encourage economic growth and higher employment.  This would create easy borrowing, and the Fed would be forced to either accept higher taxes to lower the deficit or monetize it by printing money to buy Treasures.  This could place enormous upward pressure on inflation not unlike the 1970s and scare China and other foreign investors who we rely on to finance our debt.  Neither scenario offers a pretty choice.

Jay Leno reported that the price of a postage stamp has gone up to 44 cents.  The government says they have to because fewer people are using the mail.  That’s government thinking for you.  Hey, nobody’s buying our product — let’s raise the price!

Here’s what we’re seeing in the market battlefield:

1.    We are working 2-3x harder for every deal.

2.    Lenders involved in more deals - pre-foreclosure decisions.

3.    Jittery tenants proposing cheap deals.

4.    Need for creative deal making.

5.    Weak and fearful existing tenants.

I am glad that our banks have apparently survived their stress tests.  I hope you realize I survive a stress test every morning when my alarm goes off for me to go to work!

As you settle in around the picnic table this weekend, please enjoy your friends, your family, and your freedom.  Hopefully, you’ll also be able to share this month’s story…a little bit of our patriotic history.

Regards,

Don 

Don S. Zech

CDC Commercial, Inc.

Real Estate Services

TAPS
 
We in the United States have all heard the haunting song, “Taps.”  It’s the song that gives us that lump in our throats and usually tears in our eyes.  But, do you know the story behind the song?  If not, I think you will be interested to find out about its humble beginnings.

Reportedly, it all began in 1862 during the Civil War when Union Army Captain Robert Ellicombe was with his men near Harrison’s Landing in Virginia.  The Confederate Army was on the other side of the narrow strip of land.  During the night, Captain Ellicombe heard the moans of a soldier who lay severely wounded on the field.  Not knowing if it was a Union or Confederate soldier, the Captain decided to risk his life and bring the stricken man back for medical attention.  Crawling on his stomach through the gunfire, the Captain reached the stricken soldier and began pulling him toward his encampment.  When the Captain finally reached his own lines, he discovered it was actually a Confederate soldier, but the soldier was dead.

The Captain lit a lantern and suddenly caught his breath and went numb with shock.  In the dim light he saw the face of the soldier.  It was his own son.  The boy had been studying music in the South when the war broke out.  Without telling his father, the boy enlisted in the Confederate Army.

The following morning, heartbroken, the father asked permission of his superiors to give his son a full military burial despite his enemy status.  His request was only partially granted.  The Captain had asked if he could have a group of Army band members play a funeral dirge for his son at the funeral.  The request was turned down since the soldier was a Confederate.  But out of respect for the father, they did say they could give him one musician.  The Captain chose a bugler.  He asked the bugler to play a series of musical notes he had found on a piece of paper in the pocket of the dead youth’s uniform.  This wish was granted.  The haunting melody we now know as “Taps” which is used at military funerals was born.