It’s the spookiest of days, a perfect hour to ponder some scary business patterns.
This Halloween, the economy is in modest growth mode. Unemployment is down to 5.1 percent in Orange County; gasoline has fallen to near $3 a gallon; mortgage rates are below 4 percent; and the stock market is back to challenging all-time highs.
Yet for many bosses, gloomy signals ooze into the picture.
Mike Shapiro, CEO of the HOM Sotheby’s real estate brokerage in Newport Beach, says: “This is the superfecta of spookiness – crisis in Europe, slowing in Asia; Ebola; and volatility in the stock market. It all adds up to a very scary time.”
Here are 13 economic hazards that might unnerve you – or your boss.
BODY SNATCHERS
Heidi Hendy, CEO of the H. Hendy Associates architects in Newport Beach, expects a battle for high-performing employees:
“Once the talent war starts, if your office environment looks spooky, you are not going to win the talent. Traditional offices where panels are high and the workspaces seem siloed will scare them away, and young candidates with strong talent and a good attitude are priceless right now. With the talent war approaching, it is increasingly important to cultivate and develop young talent within your organization.”
JOB KILLERS
John Brynjolfsson, founder of the Armored Wolf investment company in Irvine who describes himself as “a technophile since the age of 5,” ticks off some big-picture problems with the digitization of everything:
“Though there are big winners – think Facebook’s Mark Zuckerberg – there are big losers. Think of the jobs functions eliminated. It affects everyone in the world, even low-wage laborers in the Third World.”
He adds his angst over the “creepy sides of technology that normal evolution of culture and law haven’t been able to deal with – from privacy, bullying and mob rule to polarization out to the extremes.”
CEO NIGHTMARE
Alan Brew, a founding partner from BrandingBusiness marketers in Irvine, says local executives should worry about a loss of corporate focus:
That plague can begin with “the startling realization that new competitors with strong brands are moving into your market and taking away your business. A sinking feeling that the entire sales team is telling different stories to prospects. That even worse feeling that marketing is promising something that sales people don’t even know about.”
When does a bad dream become reality? “That awkward conversation when you can’t explain what your company does in simple terms.”
DATA DEMONS
Richard Blech, CEO of tech security specialists Secure Channels from Irvine, is (not surprisingly) worried about data theft:
“What keeps me up at night is knowing so much of our private sensitive and personal data is susceptible to being breached. The fact that there is a secondary market for stolen digital data means that this problem will not go away until industry leaders and the government make it a priority to protect our private data.”
SUGAR-LOADED HOUSING
Alex Martinez, analyst for the John Burns Real Estate consultancy, fears a bug-eyed housing market:
“In 2012 and 2013, the Orange County housing market was like a kid gorging after a fruitful night of trick-or-treating. Economic conditions were set for solid growth, the market seized the opportunity.”
Today, he says, is “the come-down after the sugar rush, if you will. Orange County’s post-sugar rush state will last through 2015.”
INFO ZOMBIES
Steve Thomas crunches Orange County housing numbers for his ReportsOnHousing, but he cringes at how house hunters devour online data:
“They have access to so much information online, it’s like drinking from a fire hose. Buyers today have turned into computer geeks.” But these same folks don’t notice the ugly fine print: “Property valuation systems are not completely reliable. What spooks me: Buyers feel that they know more than the real estate professionals that they are working with.”
RENT-CHECK HANDCUFFS
Jonathan Eppers, CEO of rental service RadPad from L.A., says high rents may come back to haunt O.C.:
“An imbalance in rent supply and demand has created historic increases in rent prices, pushing renters to spend more and more of their monthly income on their apartment or rental home. This put a lot of stress and anxiety on renters each month when the rent comes due, especially when almost 50 percent of all renters in Los Angeles (area) are spending more than 40 percent of their monthly income on their rent.”
He’s spooked that high local real estate costs “will hurt the middle class and the economy.”
CALIFORNIA CRAZIES
Christopher Thornberg, economist with Beacon Economics, is squeamish about the state economy:
There’s the housing shortage that “keeps me up in the middle of the night. And as things grow more dire, our legislative leaders will be more likely to try and pass measures to ‘fix’ the problem but will only end up making it worse – such as rent control or affordable-housing mandates.”
And the state budget. “I know it doesn’t seem like it now, but like a werewolf, the budget problem only reveals itself during specific times. A rainy-day fund will never replace real revenue reform – rebalance taxes across a wider base and rely less on things that go bump in the night.”
DROUGHT MONSTER
Stephen Sherline, market leader for U.S. Bank’s Private Client Reserve in Los Angeles, fears the fallout from dry weather:
“If the drought persists, it may have an impact on the future economic development of California. Lost revenue from farming and related activities could total $5 billion in 2014. This could affect new business openings and discourage companies from relocating or opening in California.”
HOTEL HORROR
Alan Reay, president of the hotel trackers at Atlas Hospitality from Irvine, offers three reasons regional tourism’s remarkable upswing could meet an untimely demise:
• “The spread of Ebola could curtail traveling and have a ripple effect here.”
• Water shortage. “Hoteliers in areas like Cambria, Avalon, etc. are being hit with financial penalties for not getting their guests to cut back on usage.”
• Rising wages. “Escalating costs, as we have seen in downtown Los Angeles, with the push to $15 per hour for hotel workers.”
GAS GHOULS
Dave Hackett, head of the Stillwater Associates energy consultancy in Irvine, thinks cheap gasoline may prove a mirage:
“The nation is getting a treat this Halloween season with falling gasoline prices. The success of hydraulic fracturing and horizontal drilling technologies has produced an abundance of energy. The trick comes from the ever-changing witch’s brew of California gasoline regulations.”
Hackett is talking about rule changes set for January that amount to higher gas taxes in California. “Enjoy your treats now, but watch out for spooky regulations on the horizon,” he says.
WITCHES’ BREW
Jeffrey Johnson, a partner of medical property investors Cypress West Partners from Ladera Ranch, fears surprising twists in the medical system:
“Uncertainty on the future of health care combined with a challenged economy gave many a reason to pause in the last few years. Now with some direction and comfort, the physicians, hospitals and health systems are making major decisions. The largest being consolidation in light of reimbursement cuts.”
There are no guarantees that shift will ultimately benefit the consumer, Johnson says: “Time will tell, but for now it is the necessary ‘evil’ to keep everyone profitable and growing.”
RATES RISE FROM THE DEAD
Christopher J. Cumella – the other partner of Cypress West – wonders what happens when cheap money goes “Poof!”:
“Just when you think they (rates) can’t go lower, surprise! We know it can’t last forever, so we have to be prepared for a return to a more normal and ultimately sustainable lending marketplace. We will see what ‘spooky’ effect this has on valuations and how the market ultimately responds.”
Contact the writer: 949-777-6727 or jlansner@ocregister.com
