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Changing of the Guard
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With the Dow Jones Industrial Average (DJIA) dropping 504 points yesterday and me being the “504 Expert,” I thought it must be a sign to comment on that course of events. While Lehman’s bankruptcy, Merrill’s sale and AIG’s capital call are indeed worrisome, the sky isn’t falling for the American economy at-large. The financial markets may be reeling, but it’s always the worst when you’re smack in the middle of things . . . a little perspective is needed.

Lousy lending standards and excessive leverage stoked by ridiculously low interest rates are the roots of today’s financial crisis . . . but it’s largely confined to just the well-publicized, finance industry. The economy is not crumbling — it’s been growing at an average rate of 2.37% for the past 6 quarters. The non-housing portion of the economy (which comprises roughly 95% of total U.S. economic activity) is quite stable with the non-housing real GDP having grown at a 3.2% clip over the past three years. Productivity of the average U.S. worker has risen an average of 2.6% annually during the past 10 years (the largest gains in 40 years). For every dollar of U.S. economic output generated today, we burn less than half as much oil as 30 years ago — and the price of a barrel is now close to $95, almost $50 less than the high in July. Times are better than they appear… but it helps if you unplug the television and skip the “doom and gloom” headlines in every other media (this is also why you should have the courage to be buying currently discounted assets like commercial property right now). Obviously, this being an election year and politicians doing what politicians do best to get our attention, neither can sling quite enough mud at each other in their attempt to paint a picture of Armageddon in our minds . . . alleviated only if we vote for our “savior.”

As I’ve written previously, among the many roles a Chief Executive Officer has is that of “hope-purveyor,” of remaining calm, optimistic, and reasonable. Employees, business owners, and their advisors regularly look to me to gauge where things are headed. I always marvel a little at me being the “calm one,” but such is my place. I strive to be a “merchant of optimism.” So this blog post is as much for my employees and partners, as it is for our investors, Clients, prospective Clients, and the business community as a whole.

Today’s headlines suggest to me that we’re entering a New Era in our society — one where the venerable old names don’t really matter that much anymore. We’ve been headed in this direction for some time with the disruptive technologies the IT world has wrought everywhere. But now, the staid, conservative financial and banking communities are finally feeling the tremors (or should it be the “earthquakes”) of change. What Lehman, Merrill and AIG had in common was resting on their laurels too long, not adapting to change as quickly as they should have, and becoming victims of their own hubris. All of these actions left them distant from their customers… and if there’s one absolute fact in this New Era, it’s this: customers want to be closer to, not further away from, their service-providers. They want their service-providers to understand them. When you’re busy creating exotic financial instruments that hardly anyone really understands, just how exactly do you expect Clients to feel closer to you?

In this new world of constant communication, social-networking, and Web 2.0, people don’t just want “service-providers,” they want “Experience-providers.” They want their business relationships to be comprised of Experiences . . . service, alone, is not enough anymore. “Satisfaction” is merely expected. “Delightful experiences” are something to shoot for. I believe that’s what we’ve provided our Clients with from day one, and it’s a major contributor to our growth and successes. Contrary to what every pundit once said, the computer and other electronic gadgets have actually brought us closer together, not further apart . . . so if you’re hiding behind your email or voicemail, you’re making a MAJOR mistake by not engaging with your Clients and Prospective Clients. Of course, if you’re bloated with layer after layer of management and suffer “Big Dumb Company-itis” (as I call it), then getting close to your clients is pretty tough to do.

It strikes me as unreasonable to expect a Wall Street firm to still be around 160 years after its founding. It strikes me as odd to think the original DJIA should somehow match today’s DJIA. Change is the other member of the triumveriate of Constants: death and taxes being the other two, of course. Am I the only one who wasn’t exactly surprised by the “Old Guard” changing? I’m surprised it took this long.

What we witnessed yesterday — and it should be more apparent daily — is that Schumpeter’s “creative destructionism” is alive and well within our economy. The strongest survive, as they say, but to be strong these days requires being smart, swift and adaptive. Our firm is the personification of this trend — we probably couldn’t have started 15 or 20 years ago and actually thrived against the Giant banks in our industry . . . like we have. But today, being the cigarette boat instead of the supertanker is appreciated by the consumer . . . actually, it’s demanded by them. Old, established brands are doing everything they can to hold-off the oncoming wave of new entrants.

With us, it helps that the entrepreneurial spirit prevalent among our employees resonates with our target market of business owners and entrepreneurs… while we compete in a world filled with 20+ year employee veterans who have no comprehension of the risks, burdens and thrills our ideal Clients endure weekly. If you want your business to thrive in this New Era, then you’ve got to Stay Close to your Clients and Prospective, Ideal Clients. You’ve got to Give Them an Experience they can’t get anywhere else by anyone else. You’ve got to Delight Them, but also, you have to do the heavy-lifting of Creating the Next, New Thing. Anything less than these strategies and you’ll more than likely be working for a dinosaur. Surely, you remember what happened to them . . . they once roamed Wall Street, too.


  1. David T. Alderman says:

    Chris, I appreciate the postive outlook and the facts, not hype. Have a great rest of your week.

  2. Tom Edrington says:

    Thanks for the link to your blog. The commercial sales biz in Tampa and Florida in general is frightful. No lenders want to lend and if they do, they want to lend $500k on a $1 million property.


  3. Rob Kampen says:

    Chris, Thanks for some words of sanity and a realistic perspective amongst all the doom and gloom merchants that seek to destroy confidence and create FUD (Fear, Uncertainty and Doubt). Some much needed correction in the market is occurring, lets hope that the pendulum swing of correction does not over compensate and unduly penalize those that have solid business propositions!

  4. Ken Cook says:

    Good job, Chris, and not too far off from what I wrote earlier on AR. I appreciate your positive calmness and share the effort with you. If this were not an election period the air would differ markedly. Last night as the members of the House addressed the chamber I, as normal, remained aghast at the great chasm between the Left and the Right as the Right made such effort to “cross the isle” and achieve real change for the better – not just change for the sake of change. This is a GREAT time to invest in real property and we have acres of it for sale in Atlanta alone. To quote J. Paul Getty, “Buy when other people are selling.” And to quote one of my mentors, Ray Palermo, “Scared money runs.” This is the time where real investors create not only net positive ROI but a legacy for their descendant generations to come. Thanks again Chris and continue to raise high the torch of common sense, the banner of wisdom and the sword of opportunity.

  5. David Brindley says:

    I enjoyed this article on the Changing of the Guard today. I am very optomisitc in the midst of the uncertainty surrounding us and think like you that this is a time of clensing in the financial industry. Those who stay committed and provide exceptional service will not only survive but thrive in this market.

  6. Jose Diaz says:

    Thanks. I think the same – the economy is strong the American Spirit is still alive and nothing will break it.

  7. Kirk McAnsh, D.C. says:

    I couldn’t have said it better myself!

    Keep up the good work and articles. We are brothers in spirit!

  8. Richard Reyes says:

    Wonderful comments Chris. The pending death of Lehman, AIG, and others points to a free market system that works! In free markets, companies that make bad investments, take unnecessary risks and hurt investors; face the ultimate penalty – They are evolved out of the system.

    The market is an excellent mechanism for communicating value creation. When companies fail to create value they are forced to close their doors. This frees up resources, employees and capital to greater uses. It also teaches a cautionary tale to companies that would seek to create business models that are inherently flawed.

    Unless a viable financial conglomerate should choose to purchase these companies, they should be allowed to die a slow painful death like any other company that is mismanaged. The market is dealing out retribution and it is swift and merciless.

    Take heart. Free markets and capitalism are amazing tools for growing wealth. Lehman may never recover but markets will. No one knows if the next 20% movement in the US market will be up but the next100% movement is always up.

    Keep it real !!!

  9. Hal Hoadley says:

    Chris, As always, I read your blog and find that you are on top of your game. Nothing is as it seems at first. Once you look past all the rheteric you can get a better perspective. I especially took notice in your last paragraph. We need to keep close to our clients, customers and business partners and provide them with an experience and not just “customer service”. You need to let your clients and customers know that you are still there and provide them with “What’s New”.

  10. scott says:

    I doubt you will post this but thought I would write in response to your post,anyway .
    I agree with some of what you are saying in terms of the economy growing and that we are not technically in a recession , BUT that hides the fact that JOBS are being lost every month at a pace that is very very scary . Over 600,000 jobs have disappeared and we can’t continue an economy that loses that number s of jobs every month . The jobs that are being created are mostly retail, government or low paying jobs .
    I also disagree with you that this problem is contained to the financial sector . If you look at the Wall Street Journal today and the marketplace for overnight lending has dried up and the bond pricing is approaching credit card rates for many firms – 14 -18% . There is a crisis of confidence and the banks are afraid to lend to each other , hence why the central banks are having to step in and make these unprecedented aggressive actions to try and stop the panic and keep things flowing . Treasury Secretary Henry Paulson was being questioned at a news conference Monday discussing the current situation and said “ then system was created in the 1930’s and is broken and does not function based on today’s marketplace” ..He doesn’t have the power or authority to fix it , all he can do is help bandage up a broken mess . He is smart and doing what he can , but as an insider ( he was former chairman of one of the largest Investment banking firms in the world , Goldman Sachs ) he has extreme knowledge of the market place and he knows there is little he can do other than the things he has tried to do to keep things liquid and flowing .

    This will spread into the broader perspective as businesses will not be able to borrow or will have to pay much higher rates with much worse covenants IF they can get credit at all .Many small business owners are telling me their receivable are less collectible than they were a year ago and it is taking longer to get paid .

    Last year we heard the same thing from government officials about the “sub Prime ” problem, They kept saying it was contained and it was far from being contained and was symptomatic of the credit driven society we are in and the economic policies driven by retail and consumerism of “have what you want now and MAYBE pay for it later . Unfortunately history repeats itself and every 80 years there is usually economic collapse . Although there are sources to find financing out there besides the banks,9 we have recently published a guide to that at and we work with many of those companies to get innovative financing done, the view from outside the US is one of laughter and derision at our mess ,which was created by loose credit, liberal lending and the capitalistic pursuit of growth at any cost. That’s enough for now ..

  11. Ann Hutchens says:

    Chris, as you know, this is the first year for my business. I have been advised that we are “back in the 30’s” and that we could be in trouble. However, we have been growing. I think innovation is a key…as well as a positive perspective.
    Thanks for encouraging words.
    Ann Hutchens

  12. admin says:

    Dave, to answer your question RE: Can this program be used to refinance commercial properties?

    Not presently (unless the debt has been in place less than 9 months, like with a ground-up construction deal), but we do have conventional financing that we regularly use for refinancings.


  13. Walt Cameron says:

    Thanks, Chris, for the link to the blog. I thought I was the only Media person and lender not preaching doom and gloom in our economy.

    I have a readio show in the Midwest that hits 4 state and 98 counties…I also conduct Financial, HOme Buyer, and Credit Restoration Seminars all over the country.

    The mood is the same…the negative media infiltrating our homes, cars, and minds. Enough already!

    This is my sixth economic downturn going back to 1981…and it has always recovered….bigger than ever. Just let the market make the adjustments…not the Fed….markets always reward good financial decisions and punish bad decisions….as it should be…

    It’s good to have a kindred spirit who feels the same way I do about the economy…

    In fact…we have the best first time home buyers market in seven years and the lowest interest rates since 2005…..families should be lining up to buy homes instead of renting….and they would…if they weren’t scared to death everytime they turn on the TV or listen to the news….

    Keep emphasizing the positive spin on the economy…we have enough doomsayers out there!

  14. Jeff Rauth says:

    Bottomline the commercial side is still performing! We are still at historic lows on default rates.

    Did you see the default rates by the MBA? we only ticked up to .52% on the cmbs side! that .04% since the beginning of 2008. And life insurance loans are still only .03% in default!

    Heres a link to the report.

  15. Benny Amrein says:

    Fantastic wordpress post, I will be sure to save this in my Mixx account. Have a good day.

  16. Car Insurance In Warren says:

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