FOCUS ON THE ECONOMY
THIS TIME OF THE YEAR, INTO THE FAST START of the first quarter of 2005, we are flooded with a potpourri of interacting economic, cultural, political and social issues. Many of these issues are a "parry-and-thrust" position, arguing contrary positions which attempt to support diametrically opposed viewpoints.
In this short Note, it seems worthwhile to contrast several viewpoints which are often heard or seen in the media, especially around the first quarter of the year. When we reexamine such philosophical background, many issues previously thought as being on "solid ground" may cause one to revise thinking on important issues, as well as to laugh a bit, even at ourselves in the mirror. For the moment, consider some of the following issues and their implications as to whether the assumptions made are correct or incorrect.
The following areas are a collection of different positions that affect social, political and economic areas in which we often find ourselves in conflicting and/or disturbing positions. Each of the following areas is attributable to a number of individuals, cited in the following work. Their insight often gives us a chance to reflect on some of the areas indicated.
A. WHAT IF?
In an interesting short note by Byron Wien , U.S. Senior Investment Strategist at Morgan Stanley, in the book Surprises of the New Year: 2004 http://www.morganstanley.com/ourviews, Mr. Wien considered surprises that might impact our thinking if these circumstances came into fruition. These "surprises" included:
1. Osama bin Laden is found.
2. The Federal Reserve ends up not raising rates (any more than it already has).
3. The stock market is strong.
4. Improper practices by mutual funds are no longer in the news.
5. The question is whether the European Union will unravel.
6. Pharmaceuticals and certain other large-cap companies perform very well.
7. The positions of Saudi Arabia result in overall deteriorated political developments, such as the price of oil moves above $40 a barrel. (The $60 amount has already been exceeded!)
8. Silver gains an attractive position; gold moves to $500 per ounce. There is some question as to the value in the market for stocks, bonds and other currency.
9. The Japanese market picks up.
10. Republicans have important changes that take place, such as key folks in the Bush Administration resign, such as Secretary Rumsfeld.
Since this article was written, several events have taken place (eg, the upward movement on the price of oil). However, some projections and predictions are food for thought even though they may often be inconsistent with other positions.
B. IMPORTANCE OF CULTURE
In many of our classes, such as International Real Estate (at the Burns School of Real Estate and Construction Management, Daniels College of Business, University of Denver), we emphasize the importance of cultural aspects in making investments. Business and investment decisions are not normally made solely by examining financial issues. This is especially true when dealing on an international basis, as opposed to simply within the United States.
In an interesting article by Professor Dick Lamm, Executive Director at the Center for Public Policy and Contemporary Issues at the University of Denver, "The Elephant In the Room: How Culture Matters," Head-First Colorado, P. 47 (Fall 2003), Professor Lamm, three-term Governor in Colorado, emphasized the importance of cultural issues as to decision-making and life in general. Professor Lamm focused on what is important in educating our children.
Contrary to what many have learned in commercial real estate or other investment arenas, Internal Rates of Return (IRR) and Return On Investment (ROI) are not the only areas of focus. Many decisions are strongly influenced by non-financial considerations, such as the desire to own property, the desire to reside in a given location, ethical issues, safety of individuals (as opposed to simply safety of capital), and many other non-financial issues. …