Zell’s ‘Lack Of Supply’ = Bad For You

January 31, 2012 by jsalimando · Leave a Comment
Filed under: Scene + Herd 

If you’re a construction contractor, you won’t be comforted by Sam Zell’s answers in a Q-and-A he did recently with National Real Estate Investor magazine.

Zell (who is sometimes called “the grave dancer” because he buys properties no one else wants and comes up smelling like roses) is a real estate industry living legend. He’s made a fortune (perhaps several fortunes, really).

Key to being a genius in markets is not only buying, but knowing the right time to sell. Zell demonstrated this in spades as recently as 2007, when he sold Equity Office Properties for a big number of billions . . . just before the Fit hit the Shan.

[Additionally, he's the chairman of Anixter!!!]

Here’s the key Zell answer (to a question about “the macro view” of commercial real estate in 2012):

Zell: There are a lot of things going on at the same time. The good news is that with the exception of apartments, there is little or no new supply. And I don’t think we’ll see much new construction in 2012.

At the same time, if you look at the overall economic picture, it’s likely that we’ll have positive growth in 2012, although there may not enough of it to dramatically change our unemployment numbers. That means the demand on the real estate side is still open to question. I think you’ll see a slow fill up of existing space.

On the finance side, a lot of the “pretend and extend” transactions done in 2008 and 2009 with terminal dates in 2012 and 2013 are likely to have to be redone in a different economic environment than was the case three or four years ago. Banks and holders of those debt instruments have many more options now than when they agreed to these extensions. That will lead to some interesting turmoil in the industry.

Overall, real estate is about supply and demand. I am concerned about the demand, but I’m comforted by the lack of supply.

Guy Says 2012 Could Be Worse

January 31, 2012 by jsalimando · Leave a Comment
Filed under: Scene + Herd 

Don Short, who blogs on ENR’s website, says 2012 could be worse for construction than was 2011.

Short’s commentary is not necessarily world-beating. The piece is his opinion.

BUT: He might be right.

Data Centers ‘Hot’ In OR’s Desert

January 31, 2012 by jsalimando · Leave a Comment
Filed under: Datacom/VDV + Data Centers 

One of the biggest Pacific Northwest building booms takes place in the desert of central Oregon as companies clamor to construct data centers, housing acres of computer servers.

. . . from a 1/23 blog post to the Engineering News-Record site.

CES: Does The E Now Stand For Electrical?

January 31, 2012 by jsalimando · Leave a Comment
Filed under: Intelligent Buildings, Lighting 

At the recently held Consumer Electronics Show in Vegas, there was one heck of a lot of stuff about electrical — controls and esp. lighting.

I did not attend, but I read the post-event write-ups and wrote a piece rounding up the highlights as reported.

Included: “The largest gadget ever” displayed at any CES event.

Update: Paper Bet — Gold vs. S&P 500

January 31, 2012 by jsalimando · Leave a Comment
Filed under: Economic Thoughts, Site Stuff 

In a post here on 2/1/2010 — on the old site software EleBlog used — I advocated a “paper” bet: Go long Gold, go short the S&P 500.

At the time, they were almost even. Gold was $1,105. The S&P was at 1,089.

Had you shorted the S&P 500, you’d be experiencing SIGNIFICANT PAIN. The thing closed yesterday at 1,313.

On the other hand, Gold is at almost $1,740 this morning.

. . . a $635 gain in the long, a $224 loss in the short. So far, it’s been a pretty fair bet.

- – - – -

Note: In the original, the call here was that Gold would get to $1,500 while the S&P would drop to 800.

At this point, one of those targets has been taken out.

I wouldn’t make a big bet on it even now, but it’s still very possible for the S&P 500 to take a big fall . . . especially once “the market” comes to realize that the numbers on which it is basing its optimism are totally bogus or, as in the Housing situation (see Shiller post from earlier today) — misinterpreted by most analysts.

 

EMCOR Stock – 5 Months Later

January 31, 2012 by jsalimando · Leave a Comment
Filed under: Company Docs + Comments, Current Data 

In an Aug. 30, 2011 post here, the EleBlog posted a quasi-endorsement of the stock of EMCOR Group — the company that houses the largest EC in the U.S. (and the largest mechanical contractor, too).

According to Yahoo! Finance, the 8/30/11 close on EME stock was $23.13.

Yesterday’s close: $28.52. That’s a 23% gain (not counting dividends) over 5 months.

In the same period, the S&P 500 has gone up 8.25%.

 

Shiller On Housing: Bottom’s Not In

January 31, 2012 by jsalimando · Leave a Comment
Filed under: Economic Thoughts 

Lots of people, organizations, and publications have proclaimed that 2012 will mark “the bottom” in U.S. housing markets — or that the bottom has already happened.

They might be right.

Robert Shiller, the economist, has been consistently right about markets and housing. His book, Irrational Exuberance (which was a good read) came out in early 2000 . . . just in time to foreshadow the (first) major recent collapse of the U.S. stock market.

More recently, the Case-Shiller Index has been used to grab a monthly handle on how Housing is doing.

Today, I came across an interview with Shiller. It’s with Henry Blodget, a guy who really needs to go away and sit in a corner with a tin dunce cap on his head (and also with others painfully inserted in each of his orifices) for the rest of his life.

I overcame my hatred of Blodget — which is quite legit, I think — to read the thing. Two quotes from Shiller (with Blodget’s questions):

BLODGET: And you’re an expert in bubbles and I’ve looked at some on your work going back several hundreds of years on housing. Have you ever seen a bubble where there wasn’t a major overshoot?

SHILLER: Well, the problem is we’ve never had, in the United States, a bubble like this, of this magnitude before. That’s the problem. That’s the fundamental problem of economics. We’d like to be statisticians but in fact the world is always changing on us. So we end up having to use judgment. We’re not very good at that.

AND

BLODGET: Going back to the point about interest rates… People make a huge to-do about the affordability of houses. In your research on house prices, do interest rates actually matter? Or is mortgage finance such a new concept in the history of home ownership that you just don’t have enough data?

SHILLER: I think historically, if you look at it, interest rates don’t seem to matter very much in determining home prices. In terms of forecasting, which you’re asking me to do, to forecast the change, the big thing in forecasting home prices is momentum. It’s different than the stock market. So if it’s been going up it will continue going up and if it’s been going down it will continue going down. By that model, which is the most successful forecasting model for home prices, prices will keep going down.

 

 

A ‘Wack’ Job

January 29, 2012 by jsalimando · Leave a Comment
Filed under: Company Docs + Comments 

New Orleans City Business has run a series of stories on “wack jobs” — “individuals who have chosen unusual careers.”

Getting his moment in the “wack” limelight back in November was John Espenan Jr., owner of Star Electrical Contractors (Belle Chasse LA) — who does maintenance work on two area bridges.

Someone has to do this work, of course (changing lights out on the bridge). You and I might not think this is a “wack” job. But it sure takes a certain type of human being, according to the article — which included this:

During one job, Espenan found out why a ladder built inside the middle support beam of the older bridge, completed in 1958, was seldom used. Halfway up, he became claustrophobic and was pouring sweat.

“I had my feet on the ladder rung and my back up against the wall and I’m sticking my head out of one of the holes,” Espenan said, laughing.

Even in open air, there’s cause to sweat. On the older bridge, Espenan has to walk around one-foot holes in the steel supports. Nuts, bolts and washers can fall down on vehicles below, although he says Star has been accident free since taking the job.

When his work is done and Espenan can look out over the Mississippi River, he describes the cityscape as viewed from the top of the bridge as surreal.

“Not many people have been that close to the top of a ship when it’s in motion,” he said.

Iowa’s Gov. Stands On The Law

January 29, 2012 by jsalimando · Leave a Comment
Filed under: Scene + Herd 

. . . even tho the law might be dumb. Here’s part of a 1/23/12 report from RadioIowa.com:

Governor Terry Branstad has filed a formal objection to a state rule which requires farmers to hire a state inspector to review electrical work done on their farms.

Branstad says legislators specifically exempted farmers when they passed a law regarding electrical inspections of commercial businesses, but the Iowa Board of Electrical Examiners over-reached and made it apply to farmers, too . . .

By filing the objection this morning, Branstad shifts the burden of proof if a group of farmers file a lawsuit on the matter and the governor says that means the state board will have to prove it had the authority to act despite the way the law was written.

6 Of 40 Co. Employees Are Family

January 29, 2012 by jsalimando · Leave a Comment
Filed under: Company Docs + Comments 

Luppen & Hawley is a 92-year-old EC (and mechanical contractor) in northern California, according to the Sacramento Business Journal.

Interestingly enuf, none of the 6 people employed at L&H (out of about 40) appear to be related to any Luppens or Hawleys — they all stem from John Delbert O’Connor, who headed the company’s electrical department in the late 1920s . . . and, in a process described in the article, ended up owning the place.

A look at biz in the Sacramento area (the answer below is O’Connor’s):

How is business?

Pretty slow. The economy, as everybody knows, is slow, and Sacramento more so than most. We’ve had to lay off a few people, but we have always run a pretty lean operation. More than 40 people work here now. We don’t have as many field people working as we’d like, and that’s a function of the work we have.

It doesn’t look very good to me for the next 12 to 18 months. I think it’s going to take a while for things to shake out, but I have to believe that in the long run we’ll be OK because of the performance record we’ve established.

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