Street Talk

Street Talk: Economic complications

By the book.

January 20, 2017
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Speaking at the CFA Society West Michigan luncheon held at the University Club of Grand Rapids this past week, ClearArc Capital Chief Investment Officer Mitch Stapley had some words of advice for the assembled group: “We are going to earn our money this year, gentlemen.”

Invoking James Carville's famous line of advice to then-Presidential candidate Bill Clinton, Stapley's presentation, “Brexit, Sanders and Trump: It’s the Politics, Stupid,” painted a portrait of what to expect from the nation's economy in 2017.

Stapley cited several factors that will serve as strong headwinds, as Donald Trump's administration looks to grow the economy, possibly even returning to the days of 3.1 percent average GDP growth. But to do so, the Trump administration will have to overcome higher interest rates, inflation rates and the rising level of debt, which likely will hamstring the administration’s flexibility to leverage the economy.

“Your ability to borrow in markets without rates becoming higher becomes more complicated,” Stapley said.

Stapley also highlighted a number of factors that will work in the new administration’s favor. Specifically, he cited wage growth moving closer to pre-recession rates of 3.5 percent, the uptick of new households and a sharp rise in domestic auto sales at the end of 2016 all contributing to a stronger economy in 2017. Additionally, the administration's pledge to alleviate regulatory restrictions should allow for an economic bounce.

Market upheaval

The question on the mind of millions of Americans was the first one asked during the Q&A session at the 2017 West Michigan Healthcare Economic Forecast: How will the incoming administration impact the forecast for the health care industry?

Probably surprising no one in attendance, the biggest impact to the health care industry likely coming down the pipeline will be the impending changes and possible full repeal of the Patient Protection and Affordable Care Act. Data included in the 2017 Health Check report presented by Grand Valley State University professors Kevin Callison and Leslie Muller revealed in West Michigan, just 1 percent of employers surveyed did not offer health insurance.

Muller said even a partial repeal of the ACA would send shockwaves across the economy, as the act itself has many moving parts. For example, if lawmakers were to eliminate the employee mandate, it could have huge ramifications for employers. Likely, a change in the employer mandate wouldn't impact larger firms that had offered insurance prior to the mandate. But for small, mom-and-pop shops that may have dropped insurance coverage because of the alternatives offering coverage for pre-existing conditions by the ACA, any repeals could have a major impact.

“What happens if that goes away — either the pre-existing conditions clause or we don't have the marketplace anymore — they may have to juggle to figure out how to afford insurance again,” Muller said.

Michigan Department of Health and Human Services Director Nick Lyon, who was part of a four-person panel that also presented at the outlook, said the repeal of pieces of Obamacare “will impact all of us in some fashion.” The unpopular pieces of the act most likely to be repealed are the clauses which provide tax credits for those who are eligible under the exchange, and Lyon said more than 600,000 people are enrolled in the Healthy Michigan plan and more than 300,000 Michiganders receive coverage through the Health Insurance Marketplace.

“There's going to be a lot of instability,” Lyon said. “If you remove the mandates and you take away some of the funding that provides for financial stability, what we're seeing right now is that marketplace coverage plans are beginning to get very nervous about what 2018 is going to look like.”

Retail roundtable

In anticipation of the International Council of Shopping Centers P3 Retail symposium March 7, Colliers West Michigan associate Chris Prins recently hosted a smaller ICSC Next Generation get-together at Peppino’s Sports Pizzeria and Sports Grille.

Prins’ event gathered dozens of people to the restaurant to network and panelists from Holland’s Lumir, Colliers and Rockford Construction.

The March event at the JW Marriott will include three panels of real estate experts discussing Grand Rapids retail.

Prins will moderate the first session of “Ted Talks,” which will include Steve Calverley, CEO of Maplegrove Property Management; Rick Chapla, The Right Place vice president; Michael A. Khouri, vice president of Woodland Mall owner PREIT; and Moosejaw’s director of retail, Nick Rau.

The second session, Redevelopment Ready Communities, will include Christine Zuzga, planning manager for the city of Battle Creek, and Mike Franzak, a Muskegon zoning administrator and economic development planner.

Lormax Stern Development Corp. partner Chris Brochert; Ada Planning Director James Ferro and CWD Real Estate Investment Managing Partner Scott Wierda will discuss current West Michigan development in the third and final session.

Getting social

Facebook overwhelmingly is the most-used social media platform by small business owners, according to the latest Small Business Association of Michigan Barometer survey.

Seventy-five percent said Facebook is the social media platform they use most often, followed by LinkedIn at 31 percent and Twitter at 26 percent.

When asked the most important use of social media for their business, 28 percent said to attract and engage new customers, 28 percent said to improve brand awareness and 16 percent said to network. Forty percent said social media increased their number of customers, 29 percent said it increased sales and 21 percent said it increased profits.

“The extensive business utilization of Facebook certainly goes against the stereotype of this social media platform being mostly a place to share selfies and status updates,” said Michael Rogers, SBAM communications officer. “Small business owners clearly recognize that it’s a valuable customer acquisition tool.”

Free resources

Through new partnerships with providers of free digital resources, Grand Rapids Community College has replaced almost $590,000 in textbooks with free or less expensive versions.

Last February, GRCC joined Rice University’s OpenStax program, which provides free, high-quality peer-reviewed textbooks. In the fall semester, more than 90 GRCC class sections — including biology, math, business, theater, English, history, physics and chemistry classes — used the open-educational resource (OER) texts.

“I think our first semester (was) a big success,” said Michael Vargo, dean of GRCC's School of Arts and Sciences. “Anything that we can do to reduce the cost of attending college improves access to higher education in our community.”

The total cost of the commercial textbooks that GRCC replaced with OER versions was $589,828. Actual savings to students varies, depending on whether they would have bought a new or used textbook or if they would have rented — or gone without — one. With OpenStax, students may use the texts online for free or pay a significantly reduced cost for a printed version.

OpenStax research shows 90 percent of students opt for the free online textbooks. That would mean that students in GRCC's OER class sections saved more than $570,000 during the fall semester.

Vargo noted the savings estimates do not take into account one group of students: those who wouldn't have purchased a textbook.

“A recent study indicated that 40 percent of students don’t purchase a required text because of the cost,” he said. “Community colleges serve a large number of impoverished and working-class students, who are particularly susceptible to increases in higher-ed costs. The OER initiative plays an essential role in assuring equitable access for economically challenged students — populations (primarily) served by community colleges.”

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