The Impact of the "Phony Scandals"
You might wonder what does Watergate, the IRS enemies list, Benghazi and the cover up have to do with real estate. The answer is potentially a lot. For those too young to have lived through it, Watergate occurred in June, 1972, during the Nixon reelection campaign. It took two years and a whistle blower in the FBI, and a determined duo of reporters at the Washington Post, to uncover it and bring about the end of the Nixon administration. At the time the White House managed to cover up the break in and the involvement of the White House. As part of that whole scandal there was an enemies list and the IRS was used to go after those who disagreed with or resisted the Nixon White House. For a long time the mainstream media did not cover the break in that much, and the cover up was successful. Until a senior FBI official became the secret Deep Throat and gave Woodward and Bernstein the real story. As the scandal grew, the White House became more and more unable to function, and the government was badly hobbled during the process. Not unlike the Whitewater scandal and impeachment of Clinton, and not unlike Iran Contra. Interesting how Hillary seems to reappear in the middle of another major White House scandal.
Now we have Benghazi and that cover up of the policy decisions by Obama and Hillary which led to the deaths of four Americans. If the policy had been much different in Libya, and had been robust, and if Hillary had not ignored near screaming pleas from her own people, including the ambassador, for more security, the whole thing would never have happened. If Obama had not wanted everyone to falsely believe that terrorism was over and he did it, then the cover up would not have happened. However, here we are with another major White House cover up, an initial disregard for it by the mainstream media, and suppression of evidence. Now we have an unfolding of an IRS attack on enemies of the administration. Just like under Nixon. It is not possible that some very low level IRS employees in Cincinnati undertook to go after conservative groups opposed to Obama on their own. Such action is illegal and we now know from Mr Hull that no low level bureaucrat does things like this of their own initiative. It came from the top and likely really emanated from the White House. This is far from over. Then we add the James Rosen scandal to try to suppress leaks to Fox and other negative press, and perjury by Holder to further that cover up.
This is all going to grow into a major scandal and will likely begin to consume more and more of the White House time and further attempts to cover up. There is much more here than has become known as yet, about Benghazi and now the IRS scandal and enemies list. It is a replay of Watergate.
So what does this have to do with real estate. As these scandals unfold, they consume the administration of the moment. This is just beginning to unravel, and since Hillary intends to run for president and Obama is trying to push his liberal agenda, the Republicans know they have a great scandal on the hook and they are not going to let it go. Fox, which is the Woodward and Bernstein of today, is vindicated and is now going to be all over this. Cheryl Atkins of CBS News, who dug into this story and was told to be quiet, is now vindicated and is pursuing it further. Very soon the White House will be buried in trying to maintain the cover up. The new Obama line that the scandals are phony and stopping his economic plans is just a dumb effort to further the cover-ups and chage the subject. It will fail. That effort will fail. That means there will be no ability of the White House to do deals of major magnitude with the Republicans. There will be no fiscal agreement, probably no tax reform passed, and no good news for the economy. With all the other bad things economically going on here and around the world, there will be no leadership by Obama to help get out of the economic doldrums. Result, low rates will probably go on longer than they otherwise, might, tax reform will not likely get passed, there will be no infrastructure bank or other infrastructure programs passed. If Obama could not get background checks passed in the Democratic senate with overwhelming public support in the polls to pass it, then there is no possible way he is going to get anything like deficit compromise, tax reform or much of anything else. Sometime in the next couple of months Syria will expand, as it did yesterday into an attack on Turkey. Now we have Israel and Turkey in direct military confrontation with Syria and Iran and Hezbullah pouring in troops. Obama will have a crisis in the mid east explode in the midst of all the scandal. There is simply no way the White House has time to do much of anything for the US economy.
So rates stay low, rents will not grow much as the economy bumbles along, capital investment by companies remains muted, unemployment remains very high, uncertainty gets worse, and real estate as a result begins to flat line as the distressed properties are mostly dealt with now, and those opportunities are few and far between. This is going to continue for much longer than you may expect. By the time this all unfolds it will be 2014 election season and nothing will get done in Congress. You should just batten down the hatches and not forecast great upside to anything. Continued low rates will be here to help your current returns be very good, but big pops on rents or values is simply not going to happen.
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