Remarks by Manuel Lasaga

President and Co-founder
Strategic Information Analysis Inc.

Recession

First of all, we are in a recession in Miami-Dade. The employment numbers show we are declining. The state of Florida has a much more negative decline in employment, so it is going to feel it much worse. And it is mainly construction related.

Sub-Prime Mess Overstated?

Number two is the sub-prime crisis. The Federal Reserve should be questioned as to its motives and actions in the past six months. Those at the Federal Reserve blame it all on the sub-prime crisis. Let me give you some advice: the next time you are ready for a very important business meeting and you are the last one to arrive, look at the crowd and say “I am really sorry, I was late because of the sub-prime crisis.” They will hug you in empathy and say “it’s okay, we don’t blame you.” So we are blaming it all on the sub-prime crisis and I challenge anyone to credibly say they know the size of the problem. No one knows because by definition, sub-prime means no documentation and no verification. No one has the slightest idea who those borrowers were.  Everyone claims that they know that it was the sub-prime problem. So in a panic since last July, they [the Fed] have been pumping a lot of liquidity into our economy which gets to my other hot button - inflation. I think the sub-prime crisis is overstated, so for good investors, there will be some good opportunities to buy. People are selling at fire-sale prices and astute investors will make some good money.

Inflation and Unemployment

Inflation is at 4 percent, the Fed says it is 2 percent. The Federal Reserve rules that core inflation [excluding food and energy] is the truth; while the CPI is referred to as headline inflation, implying that headlines are meaningless. American consumers think that the CPI is 4.5 percent and that is their expectation. So inflation is the problem. Why? Because people can’t pay for gasoline to go to the store. I think the drop in employment in Miami-Dade will put a little dent in the commercial real estate market.

The Deficit and the Dollar

I predicted two years ago that the dollar will reach $1.50 to $1.55 against the euro. Right now I think that there is a possibility the dollar will reach $1.70 to $1.75 against the euro, again probably temporary. And of course, the ticking time bomb is the Chinese yuan. After the Olympics and after the elections in the U.S., that time bomb will have to be let off, and believe me in irrational times, even the most rational act irrationally. So that time bomb will go off, and the yuan will be revalued at 40 to 50 percent. Run that through your analysis.

International Challenges and Opportunities

I think it’s very well intentioned, but Homeland Security is creating a cast iron dome over the U.S. economy. It’s suffocating international business - well intentioned - but it’s suffocating it. It’s already done irreparable damage to the banking community in Miami.  International banking is basically closing accounts; they don’t care to open accounts. These investors that you are counting on may just lose sight of Miami and go to Europe and other locations. But Miami, as was said by the other speakers, will continue to have a real competitive advantage in international business. We are the experts in moving goods to Latin America and to the rest of the world and now Asia is becoming a dominant link in that trading pattern. Latin America will feel the contagion effect of the U.S. recession probably next year, but countries in the region aren’t going to be as affected thanks to India and China, because commodities prices will remain high for some time.