“I think, it’s going to have a major impact, on both commercial real estate and also retail real estate valuations. Once people experience working from home and understand how productive they can be, more so than working in an office, I think a lot of people will not go back to the office, but will continue to work remotely. I think companies will find it a positive because there will be less expenses, potentially more productive employees and a greater selection of employees, as they don’t have to identify someone in a specific city.
In the short term, I think major cities are going to get hit really bad. I just don’t see for example people in New York Jumping on a train to come in from New Jersey or Connecticut. Long term there’s a lot of real estate/commercial real estate in New York city that’s going to be vacant. I think it not only affects those buildings, but it also affects all the small businesses that service those people, restaurants, drug stores and so forth.
I also think there’s going to be a big impact on residential. There’s a lot of people who own apartment buildings in New York and I don’t see all of those leases being renewed, leading to a significant decline in rental rates in major metropolitan areas.”
I think when people work from home, if they’re motivated, they’re going to work more hours. There’s a lot of people who are use to very long commutes into a city, and now they have all that time to be much more productive, versus sitting in a car or sitting on a train.
Once people get use to working at home, they’re probably more likely to work on weekends. The difficulty with companies is determining which of their employees are self-motivated and which aren’t. Those who are self-motivated will be much more productive working out of their house and those that aren’t self-motivated, either have to work in the office or be replaced by people who are self-motivated. Ultimately, coronavirus is a catalyst to significantly increase the percent of people working from home.
I think it’s going to have a major detrimental impact on industry conferences. We still have ours (AgeCroft) on the calendar for November. With that said I think there’s a high probability that all hedge fund conferences taking place in 2020 are cancelled at some point. It’s going to be difficult to put on a hedge fund conference until a cure or antidote comes out for the coronavirus. Hopefully that’s early next year but nobody knows.
We’ve completely changed our business model, where we are now doing a hedge fund educational webinar series called “Gaining the Edge.” I’ve just been amazed at the growth. Our New York conference, we sell out with 700 people and it takes a lot of work to pull it off. These webinars in a very short period of time, have really grown in popularity, we’re having one in a week and a half and I expect over 1,000 people to participate.
The whole concept of these webinars is fairly new. We did them last year and got a fair number of people to participate, but nowhere near what we’re getting now. Once people experience these webinars, at least from the investor stand point, not the hedge fund but the hedge fund investor, I think they’re much more efficient with their time. They can hear what is said on the panel, they’re not getting harassed by other hedge fund people at conferences and they don’t have to travel.
I think these webinars are here to stay and there’s a benefit to being a first mover. There’s going to be certain people in the hedge fund industry doing these webinars who are going to be massively successful at getting registrations and those who don’t as it’s a very competitive space. Those who succeed, will be those with very strong brands in the marketplace, who provide really good content, aren’t just trying to sell their firm and know how to market the event. If you don’t do all three, you’re not going to build a successful webinar series.
I am very concerned about the amount of fiscal stimulus being used by the US. Part of it is where short term rates are, part is the mass amount of securities the Fed is buying, which is basically creating more currency. It also includes a massive government deficit.
At some point it is going to have a significant impact on the value of the currency. The only thing the US has going for it, is the fact that other people are doing the exact same thing. From a relative standpoint, there really is no good alternative. You cannot continue to expand the economy, without inflation coming back at some point. The worst possible scenario would be an environment with a contracting GDP and run-away inflation.
What’s interesting is, the question you previously asked, was basically the keynote speech I did at my conference before the coronavirus hit. I also wrote a paper 1 month ago about what people should do, and I think people should be very diversified.
I don’t believe in making large allocation changes to a portfolio, or letting people’s emotions dictate how they should invest their portfolio. I certainly don’t think this is the time to take a lot of risk in a portfolio. If you’re a large institutional investor like a pension endowment foundation, you probably should be 50 to 60 percent in equities. That’s a combination of both publicly traded equities, private equity and real estate equity. I think you want a large allocation to diversifying strategies, that are not correlated with the equity and fixed income market. I would have a smaller amount in fixed income that is lower duration. I don’t think you want to own long duration fixed income, because at some point, you’re going to see interest rates rise.
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