September 2009 Developments - 22

Outlook Q&A with an Economist M arci Rossell speaks on the nexus of economics, politics, culture, and the media. Her animated style was honed when she served as the popular, lively chief economist for CNBC in the months immediately following September 11th. She takes complex economic issues (often dull in the button-down business press) and makes them relevant to people’s lives, families, and careers. savings rate in the United States brieﬂy dipped below zero. You cannot use these conditions for benchmarks going forward. I think you must go back to the pre-Asia crisis time period, the mid-1990s, to ﬁnd a normal business climate. Developments: The lack of credit capacity continues to hamper real estate markets, including the timeshare industry. What signs do you see (if any) that reasonably-priced debt will be restored in 2010? Rossell: Short-term credit markets are still trying to digest the back log of securities that were frozen out of the market late last year. Investors are snapping up old paper at bargain basement prices rather than take a chance on untested new issues. That credit market “trafﬁc jam” is still being wound down. Spreads have fallen dramatically this year already, and some indicators of volatility have dropped back to precrisis levels, all signs of stability in credit markets. But like so many others, the timeshare business model came to rely on cheap credit and the ability to easily securitize their paper in the last decade. That environment, in my opinion, is not coming back for that kind of cheap credit availability. Developments: In terms of the regulatory environment, will more regulation only help or harm where we now are economically/ﬁnancially? Rossell: The danger in all regulation is that people began to feel “too safe” and stop doing their own due diligence. This is especially true for the ﬁnancial industry. Because of FDIC insurance and bank regulation, people put their money in any old bank, never questioning the quality of its loan portfolio. Because mutual funds are highly regulated, people allow direct withdrawals from their paycheck into their 401k, never questioning the safety and soundness of mutual fund companies. Because the SEC exists, investors trusted Bernard Madoff, never questioning the phony statements they received. I agree I agree our current system needs an overhaul, but beware of the urge to layer on additional regulations that deter ordinary people from doing some of their own monitoring. our current system needs an overhaul, but beware of the urge to layer on additional regulations that deter ordinary people from doing some of their own monitoring. Developments: The hospitality industry has been especially affected by the fearful mood of consumers, in large part because of employment concerns. What are your predictions concerning the unemployment rate and consumer conﬁdence? Rossell: In most downturns, employment is the last thing to recover. But well over 90% of the workforce is still employed, still collecting a paycheck, and still able to vacation. As prices for travel, energy, clothes, and lots of other goods fall, those people will be able to take advantage of the deals that are out there right now. Developments: The median income in the United States is matching the median home price for the ﬁrst time. What are the larger ramiﬁcations of this fact, especially related to our industry? Rossell: The median house price has fallen to about $170,000, the ﬁrst time in years that it has been affordable to the median household (that makes about $55,000 a year). This is a crucial condition for stability in housing; it is the fact that will ﬁnally put a ﬂoor under that market. Doing so aids the recovery of the overall economy, allowing unemployment to decline, incomes to recover, spending to increase for all things—especially for things like vacation travel. Prior to her career in broadcast journalism, Marci served as corporate economist and investment spokesperson for OppenheimerFunds, one of the nation’s largest mutual fund companies. Before moving to Wall Street, she was an expert witness for Deloitte and Touche in court cases involving economic issues. She began her career as an economist with the Federal Reserve Bank of Dallas and is currently a visiting professor at DePaul University. Marci brings a world of experience— from Main Street to Wall Street—when discussing the U.S. economy, international events, and movements in capital markets. Developments sat down with her in July, after her engaging presentation at the June Trustee Retreat in Boston, and got her predictions and insights on the state of the economy, ﬁnancial markets, and much more. Developments: The “new normal” is a term often used by ﬁnancial media and others. In your opinion, what will be the “new normal” for businesses like the timeshare industry? Rossell: The early part of this decade— 2001-2006—was anything but normal. Interest rates were at record lows, housing prices were at record highs, and the 22 Developments • September 2009

September 2009 Developments

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