Vail Valley Business Forum informs
High County Business Review
From punk to country, music about making money, wanting money and taking the money and running blared as about 100 people filed into the Vail Marriott Mountain Resort and Spa for Thursday’s Vail Valley Business Forum.
A morning panel featured speakers on varied subjects, from international trade and real estate to biodiesel fuel, health care and investments. Business news reporter Jane Wells moderated the discussion.
Scott Thoma, senior health care analyst with Edward Jones, and Leslie Schweitzer, senior trade advisor for the U.S. Chamber of Commerce, set out to assure investors that the volatility of the stock market shouldn’t distract people from the fact that the world economy is booming, and, in fact, is seeing the fastest growth in history. The last few weeks’ volatility has been due to the collapse of the subprime mortgage market and rising credit rates, but she said volatility in the market is normal, and in fact it’s abnormal for the market to go so long without down trends.
“Market declines are frequent,” said Scott Thoma, senior analyst on the health care team for Edward Jones. “Now is a good time to get quality investments at a good price.”
Of course, the key to surviving the declines lies in a diversified portfolio, and what separates successful investors from unsuccessful ones, is emotion, or how people react during a downturn, he said.
Schweitzer pointed out that more countries than ever have money to invest, and foreign investments make up $16 billion of Colorado’s economy, mostly stemming from the United Kingdom, Japan, the Nederlands and Sweden. But she pointed out that other countries, such as India and China, are emerging into the global economy.
“Vail could very easily be a target for that investment,” she said. “You are part of this globalization.”
However, she said that Washington doesn’t generally seem to support free trade agreements, which she believes hurts Americans. She said if most public officials had their way, trade will come to a halt. Despite a booming world economy, only 25 percent of Americans support free trade when polled, she said.
Meanwhile, China has $1.3 trillion in foreign exchange reserves that it wants to invest somewhere.
“If we’re saying we don’t want it, then why would they want to trade?” she said. “We need to be engaging with the Chinese so we can monitor them (to avoid things like product recalls).”
Taking a protective stance and walling off from trade will only hurt investments, she said. Unfortunately, trade has evolved to a partisan issue, from which she says we have to get away.
She pointed out that 85 percent of all export business is done by small businesses because they know how to develop relationships and are more prone to take risks because of their entrepreneurial nature. And developing relationships is what it’s about.
For example, Africa is posed for trade, but she says people have to be very cautious about going into Africa because there’s a lot of romance going on about investing there, or having Africans invest here.
“The opportunities are tremendous, but there’s a great deal of education that needs to go on in all countries, because the U.S. does not get good press,” she said. “We have to become more educated about these markets. We can’t just storm into the markets.”
One major difference is the mindset of Americans and their goal oriented, punctual nature. For example, we think in quarters, while other countries think in decades when it comes to assessing growth.
Lawrence Yun, managing director and senior economist with the research division of the National Association of Realtors, did a quick poll, asking how many people in the audience were born in Colorado. About 25 percent raised their hands. In Detroit or Cleveland, he said that number would be approximately 70 percent. The difference? No one wants to move to Cleveland or Detroit, he said, fetching laughs from the audience. Generally, people are moving away from the eastern part of the country and moving to the east.
At the same time, more and more people are buying second and third homes. Vacation home sales rose last year, despite the pessimistic housing market nationwide. Foreigners are also buying second homes, because it’s a status symbol, Yun said. And the Baby Boomer phenomenon is going on in Europe as well as the United States. Plus, the weak dollar translates to a 40 percent discount in U.S. real estate for Europeans, compared to five years ago.
Yun predicted the residential foreclosure rate will continue to rise, which could impact buyer confidence and create a hesitancy or a sense of waiting it out in the market. But he only sees the foreclosures adding 5 percent, or 200,000 units, to the inventory of 4 million homes in the United States.
“I do not see it as having a major impact,” he said, adding that the media may highlight the problem, but he still sees no measurable impact on home prices or sales to come.
Commercial real estate is also doing very well, Yun said, as vacancy rates decline and property owners raise rent to get better returns on their investments.
Of course, the high prices of real estate have been a problem for employees in resort regions, something no one had an answer for. But Yun did say that development could become more attractive by building green homes. He said that will minimize tension when it comes to development.
John Long, director of business development for Blue Sun Biodiesel, wants to make an impact on this country’s oil dependency. He outlined the “good” versus “bad” fuels, saying corn ethanol is bad because it’s not an efficient crop-” it takes a lot of water and inputs and performs 20 percent worse in fuel economy than gas. Biodiesels imported from Indonesia burn their plantations to create the fuel, which emits more carbon dioxide into the atmosphere. He also said soybean is not as good as canola for fuel products.
Although Africa has shown a lot of interest in biodiesel, Long said it’s more practical to think locally, regionally and nationally before going international because biodiesel can’t use existing pipelines. Therefore, he supports biodiesel fuel development within a 200- to 300-mile radius of its use.
He also made some bold statements, such as, “If you took all subsidies out of oil and biodiesel, biodiesel would be cheaper.” Unfortunately, it’s not realistic to remove all subsidies, he said.
He also talked about shale oil, saying it’s expensive to process and extract, but at least it’s local. He said, ironically, oil companies are using biodiesel in drilling rigs and dumping biodiesel into the ground to use as a lubricant to get down thousands of feet to natural gas. All the biodiesel they use is vegetable based, so it’s biodegradable and nontoxic.
While the panel didn’t spend a lot of time on health care costs, Thoma did say the U.S. spends $2 trillion on health care per year, and that’s projected to double in 10 years. Meanwhile, our country has higher mortality rates than others.
Thoma suggested that consumer behavior needs to change, saying people could avoid running to doctors for every little problem and manage their chronic diseases, such as diabetes, to cut down on hospital costs.
Yun pointed out that as foreigners invest in real estate, it could create greater health costs for the country as well.
Rich Galen, a political analyst and former press secretary to Dan Quayle and Newt Gingrich, gave guests who attended lunch his predictions on the presidential campaign. He thinks by Feb. 5, we will have assumed nominees, who will probably be Hillary Clinton and Rudy Giuliani.
Chris Padilla, Assistant Secretary of Commerce for Export Administration, wove a story about starting a lemonade stand as a kid, to make the point of the importance of free trade.
He lived on a cul-de-sac, or a dead-end road, so after a few sales at his lemonade stand, he moved to the local ballpark, where he sold a lot more lemonade but got kicked out by a college kid who manned the concession stand. His point: The ability to trade freely is crucial to success, and barriers hurt American exporters because 95 percent of the world’s consumers live outside the U.S. Still, the U.S. is the largest exporter in the world, with exports rising 81 percent since 1994. Since 2001, when a new free trade agreement went into effect, the U.S. obtained 11 new partners, bringing the total to 14.
“We want good, reliable customers, because less than 8 percent of the global economy buys 40 percent of our goods,” Padilla said, adding that more customers is always better.
Of course, he made the case for free trade, saying that without imports ” from vegetables to workers ” Vail wouldn’t be able to do business.
As for people who don’t support free trade because they disagree with China’s practices when it comes to labor rights, counterfeiting and product safety, he said the question is how to change Chinese behavior.
“Isolation is not the right path,” he said, adding that it would be akin to him going home as a child with his lemonade stand, barricading his house and forcing his sister to buy lemonade at exorbitant prices.
The business expo buzzed with energy, both before and after the speakers, as business owners made contacts with each other. Elly Conklin, of Eagle Ranch, talked about marketing food products they serve on their sleigh rides. She said the forum got her “wheels turning.” She found it especially useful because she wouldn’t have sat home and watched such panelists on television, and therefore wouldn’t have learned as much, but in person they were fascinating, she said. Diane Meehan, one of the co-owners of Coldwell Banker, agreed.
“It was very enlightening. I wasn’t sure what I’d hear, but I was impressed with the level of speakers,” Meehan said, adding that Schweitzer particularly inspired her because she has “broken every barrier as a woman.”
“It was really mind-opening … it spurs me to learn more,” Meehan said.