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Although we did not see a huge jump in the 10-year yield last week, I want to reflect a bit as I see some confusion.  The overall stock market got hit fairly hard during the same time-frame.  Normally, we would see the 10-year yield drop when money is fleeing the stock market.  However, that did not occur.  So, it appears that the expected rate increases from the FED and the perceived trouble over Italy won out in their influence.

Let me now take a step back to look at a few things.  When the stock market gets hit like it did, I believe it is trying to tell us something.  Yes, we always have factors that influence both the stock market and interest rates.  Some factors influence in one direction, while the others go the opposite way.  That is why timing markets is so challenging.  Trying to read which factors win in the tug-of-war is not easy.

I bring all of this up as tariffs seem to be winning in their influence.  The cost of steel (for example) has been hit pretty hard.  This then leads to increases passed on to the consumer eventually.  It also will affect new construction that is dependent on materials that are affected by the tariffs.

Circling back to the stock market, my guess is that we have seen our best productivity numbers.  Long-term, the tariff war might be good for the US.  However, in the short-term, it is difficult to see how companies (that utilize materials that are affected with increased prices) won’t produce weaker profitability.

Note that for several years we have had a lot of stimulants to the economy.  If you recall, we had several iterations of Quantitative Easing and then we moved to tax reform.  Both of these added money to the system.  Combine that with extremely favorable interest rates and it is easy to understand why the GDP improved.

Now take the reverse of that; and then one would expect markets to be affected in the opposite direction.  It just makes sense.  However, some other factors may kick in to move us toward the next positive expansion.  At this point, the factors seem to be pushing us more toward an interim correction.  And, all of this still has us looking at a potential recession in about two years.

Investments Opportunities for Purchase with Strong Cash Flow:

Back on the January 15th update, I wrote about “Creating Residential Listings Using Commercial Opportunities.”  Each week,  I am presenting some of those investment opportunities to better educate all on what is actually available.  Note that these are all Single Tenant Net Leased properties that have listed in about the last 10 days.  In addition, I assumed a 5.50% loan with 50% down.  This is just a small sample of what is actually available.

If you assume investors in the Bay Area are getting a cash flow of 3.5%, then you can see the potential improvement with these properties above.  This approach is great for the investors desiring increased cash flow, an opportunity to get out of daily property management, and/or taking the challenges of rent control off the table.  Should you wish to discuss any of these or others, then give me a call.

That’s it for this week.  As always, feel free to give me a call with any of your strategic financing needs.

Articles of Interest:

Bloomberg reported “The Sears Bankruptcy Is Likely to Inflict Pain on Mall Owners for Years.

The DI Wire reported “Treasury Department Issues Guidelines on Opportunity Zone Program.”

See the table below for approximate interest rates.



Type Rate Fixed Term
Apartments 4.645% – 5.260% 3 to 10 year (30 yr amortization)
Commercial 4.955% – 5.560% 3 to 10 year (25 yr amortization)
SBA Lending Call for Options Call for Options
SV Commercial Lending