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Mon, Aug 19
A Compendium of Property & Capital News
Mon
Aug 19
A Compendium of Property & Capital News

Chase Bank’s Economist Delivers Positive Pitch at Douglas Elliman’s Luxury Ritz Tower Event

June 19, 2019 - By Jim Morrison
The Residences at The Ritz Carlton Towers, Boston MA

BOSTON–Dozens of ultra-luxury real estate agents packed a penthouse unit at The Residences at The Ritz Carlton Towers Monday night to hear JP Morgan Chase Bank’s forthright head economist contradict the doom and gloomers - as he made his case that the economy still has a lot of positive momentum behind it and no obstacles in its path.

The gathering was hosted by Douglas Elliman’s Live in Luxury Team, Pam Cushing and Haley Cutter, held in their opulent listing at 2 Avery Street PH2, Boston. Headliner James Glassman, managing director of JP Morgan Chase & Co. and head economist of Chase commercial banking explained in simple terms why he thinks the good times will continue to roll.

Glassman told the crowd the best metaphor for the where we are in the economic recovery is the ninth inning of Game 3 of the 2018 World Series between the Red Sox and the Dodgers. Baseball fans will remember that was the only game the Sox lost in that series.

The game was tied 1-1 in the ninth and —like in the current market recovery— most viewers thought it would be over soon. But that game went another nine extra innings, ending after seven hours and 20 minutes, making it the longest World Series game by both innings and time.

“There’s something unique about the market today, Glassman said. “Going back to 1790, there’s one of two things that typically triggers recessions: One is: inflation flares up (this shows up in residential real estate first). But today, inflation is close to 2 percent. If inflation is not the danger we face today, that’s 90 percent of what you need to know. The other thing that trips recessions is: financial imbalances. Things like the fascination with the dot com speculation in the 90s. The telecom problems and the Y2K phenomenon. In the early 2000s, speculation drove house prices to 50% higher than we’d ever seen before. I don’t see anything like that today.”

Glassman said the reason so many people think the next recession is around the corner is that recoveries have never lasted very long. Once the economy reaches near-full employment, inflation kicks in, the Fed raises rates and the party ends. But that’s not what’s happening this time. And what about Trump’s trade wars?

“I don’t worry much about tariffs,” Glassman said. “Trade is a two-way street. We don’t hold all the cards. There’s the assumption that the consumer is going to pay for this. If I were China, I’d ask the Peoples Bank to devalue currency 7-8 percent and make it look like a market process. What happened a year ago? That’s what they did. The Chinese people are bearing the burden of tariffs so far.”

The big concerns on Glassman’s horizon will take decades to impact the real estate market. “The real answer to what’s going on has to do with global trade imbalances,” he said. “It means the world isn’t consuming as much as it normally would. That’s going to take several decades to work itself out.”

Glassman noted that demographics will also drive the business narrative going forward. “When the growth of the working-age population of your country is slowing down, you don’t need as much investment,” Glassman said. “The Japanese and Europeans have known this for decades. Until 2008, the working population of the US was growing at 200,000 people per month. Today, that has slowed to about 65,000 per month. That drives rates down and those trends are not going away.”

Despite the current political climate at the federal level, Glassman said he expects legal immigration to pick up as people around the world continue to learn that there are 7.5 million jobs open in the U.S. that we can’t seem to fill.

“The federal budget is not the threat the CBO tells us it is,” Glassman said. “I think we’re going to find out our economy has the ability to grow faster again. We certainly don’t see these concerns in the bond market.”

James Glassman, JP Morgan Chase Bank