2008-09-30

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Today's Great Capital Strike 'Not the Worst Ever' Says NAI Global's Chief Economist

: Dr. Peter Linneman Compares Today’s Market Uncertainty with Past Downturns

The impact of today’s economic downturn and credit crunch is significant and global, but it is in no way the worst in history, and may be a source of opportunity for the savvy, according to a white paper issued today by NAI Global, the world’s premier network of commercial real estate firms and one of the largest real estate service providers worldwide. NAI Apollo, Frankfurt, is the networking partner for NAI Global fort he German market.

Those that think today’s economic situation is the worst ever should consider the Savings and Loan collapse in the late 1980s, prolonged stagflation of 1973-1981, the 1987 stock market crash or the wealth destroyed after the collapse of the dot-com bubble and 9/11 as recent examples of worse situations, says Dr. Peter Linneman, NAI Global Chief Economist.

“The Fed’s decision to establish a real negative short-term rate earlier this decade created a powerful disincentive for investors to invest safely in the market. As investments became riskier and dependent on artificially cheap short-term money, financial firms’ profits magically increased, allowing bonuses to flow like champagne after a World Series victory,” said Dr. Linneman. “This adulation, due in part to the practice of hiding the riskiness of assets, created a false sense that balance sheets were transparent, and have finally led to today’s economic troubles.”

NAI Global’s Capital Markets Update examines this interesting moment in history as substantial risk simultaneously exists politically, economically and in capital markets. Delving into the underlying causes of the current economic situation, the white paper explores the steps lenders need to take to relieve the pressure of the Great Capital Strike. Dr. Linneman also answers some of the industry’s most pressing questions: Is a recession ahead? Will we see the return of a bull market in the next year?

This latest white paper follows U.S. Industrial Markets are Poised for Long-Term Growth, NAI Global’s Chief Economist Dr. Peter Linneman’s market prediction for the industrial sector. NAI Global’s white papers and research resources are available for free download at www.naiglobal.com under Publications/Articles & White Papers.

Dr. Linneman is also Professor of Real Estate, Finance and Public Policy at the Wharton School of Business, University of Pennsylvania, and Principal in Linneman Associates.

Silke Hoffmann for NAI apollo - 2008-09-30

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