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At the moment the US is the only country in the world enjoying robust economic growth. The EU is again in decline. Emerging markets are in potentially serious trouble as commodities prices decline and China’s economy continues to slow to a point of serious problems. In the EU there are not only major economic issues, but more serious political issues which are not going to get resolved for a very long time. Merkel and Germany essentially ran Europe for the past 15 years.  Merkel was the defacto president of Europe and the Bundesbank held a major influence over the ECB actions. Now Merkel is weak, and on her way out. She will be replaced as party head next year, and it is highly unlikely she will remain as Chancellor for the rest of her term. The country is moving right due to the refugee flood, and other nations like Hungary, Poland, Italy, Austria are no longer toeing the German party line. Italy has basically told the EU it is doing what it wants and not what the bureaucrats in Brussels tell them to do. This has set up a real test of who runs finances in the EU, the individual nations or Brussels. Macron thinks it should be Brussels, and Italy and others think it should be a sovereign decision. We then have Brexit coming to a finality in March. It is very unclear right now how this will end. Most likely there will be a deal, but there is no certainty it will pass Parliament. A hard Brexit will further create dysfunction in a already dysfunctional trading block.

The EU will be in disarray for possibly one, or two, or maybe even more years. Macron insists on the EU in Brussels having near complete control of budgets and other fiscal and monetary issues. Several other countries refuse to go along. The right and populists are getting stronger, which means less control by Brussels. Even if Italy and the EU work out their differences, it will just be temporary. There will be more fights to come. None of this bodes well for the EU economic growth. Macron tried to reform France, and made some progress, but he has now hit a wall with a 29% approval rating. Badly needed additional reform will not happen. France will continue to be a slow economy and bogged down in bad labor and tax laws. Germany will be in political no mans land for another year or two. The old order has been stopped and dismantled. What comes next is unclear. Their economy is slowing and the refugee issue remains a big problem. Merkel did it to get a lot of low cost labor, but that is now ended, and the issues of absorbing these people is creating major political issues. Italy remains a basket case and the new government is not going to get things straightened out, and potentially will make it much worse. So all of the major EU nations have big problems and the UK will be out. Investing in the EU is very high risk, and could be a real loser going forward.

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Joel Ross

Joel Ross began his career in Wall St as an investment banker in 1965, handling corporate advisory matters for a variety of clients. During the seventies he was CEO of North American operations for a UK based conglomerate, and sat on the parent company board. In 1981, he began his own firm handling leveraged buyouts, investment banking and real estate financing. In 1984 Ross began providing investment banking services and arranging financing for real estate transactions with his own firm, Ross Properties, Inc. In 1993 Ross and a partner, Lexington Mortgage, created the first Wall St hotel CMBS program in conjunction with Nomura. They went on to develop a similar CMBS program for another major Wall St investment bank and for five leading hotel companies. Lexington, in partnership with Mr. Ross established a hotel mortgage bank table funded by an investment bank, and making all CMBS hotel loans on their behalf. In 1999 he formed Citadel Realty Advisors as a successor to Ross Properties Corp., focusing on real estate investment banking in the US, UK and Paris. He has closed over $3.0 billion of financings for office, hotel, retail, land and multifamily projects. Ross is also a founder of Market Street Investors, a brownfield land development company, and has been involved in the acquisition of notes on defaulted loans and various REO assets in conjunction with several major investors. Ross was an adjunct professor in the graduate program at the NYU Hotel School. He is a member of Urban Land Institute and was a member of the leadership of his ULI council. In 1999, he conceived and co-authored with PricewaterhouseCoopers, the Hotel Mortgage Performance Report, a major study of hotel mortgage default rates.

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