Deals Move On But The Risks Remain

It seems that many people in our business have determined to just ignore Washington and much of the rest of the world, and just assume all will be OK and we should just move on. Maybe that will be OK, but more likely not. Others feel politics has nothing to do with us and I should ignore that aspect. I believe Washington and politics and the world at large will determine the future success of our business and the ability to obtain well priced leverage, the level of cap rates, and the ability to get investors to move ahead.

It is pretty likely that interest rates will begin to move up from here. Slowly, but inexorably. It is also almost certain that there will be no good resolution to the fiscal mess the US is in. Neither Obama nor the leading Democrats seem to have any real interest to tackle the deficit or entitlement reform. They say pretty clearly they think it is all about raising taxes even further, and Obama clearly has no intention to sit with the Republicans and negotiate a grand bargain. This does not seem to be a negotiating position, but it appears they really believe there is no need to reform entitlements and that they can just limit deductions on top of raising rates. Boehner has stated he refuses to continue to talk to Obama. Harry Reid proved he is unable to even work with McConnell. That is really disappointing as that is how deals always got done in Congress.  The leaders sat down and worked it out. The president got directly involved and acted like a leader. We have none of that now.