Last week was rough. Amid various corporate writedowns (Citibank, Merrill Lynch, American Express) and Bernanke’s admission that the economy is tanking, the headline that grabbed me was McGraw Hill layoffs over worries that S&P will have fewer offerings to rate this year. While no surprise, rating agency ennui underscores the emerging fallout for companies that live off of transaction volumes (bankers, brokers, investment managers, etc.). Numbers will be down, down, down in 2008. The next shoe to drop–more layoffs and a higher unemployment rate. And that’s when office markets really start to feel the pinch on NOI growth. New York has some cushion, but won’t be immune, especially as the Wall Street powerhouses scale back after digesting their losses and assessing forecasts.Weak Christmas sales portend consumer capitulation. Fed rate cuts are designed to encourage more borrowing and spending to keep consumers in the game. But that’s the problem in this country. We spend and borrow too much and save too little. People realize their homes are no longer piggy banks and credit card debt taps them out–Amex problems stem from cardholders cutting back spending out of necessity and rising delinquencies. Household debt stands at 136% of disposable income. Our government red ink, meanwhile, makes us the the world’s biggest debtor nation. And we should all go further into hock?Michigan votes this week. Romney talks about restoring the state’s moribund economy by helping the car companies out. McCain rightly points out that car company jobs aren’t coming back, and talks about providing job training programs to help restore the state. Memo to Michigan and the candidates: Get with reality, unless the Detroit carmakers develop, engineer and market a car for the 21st century–one that doesn’t operate on gasoline and look like a tank, they’re not just in the hospital bed, they’re dead. If car makers ever get with reality, those new vehicles probably won’t be built in Michigan anyway. The factories are old, the climate is too cold, and manufacturers will operate in cheaper, warmer right-to-work states or outside the U.S. all-together. And job training for what–low paid Wal-Mart clerks? Well that fits our economy. Our number one industry becomes spending at the mall as long as we have something left in our bank accounts or more importantly on credit lines.Rent the video–”Who killed the Electric Car?” It will help you understand why Detroit is in so much trouble and why our country remains so dependent on Middle East oil.© Miller Ryan LLC 2008             

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