Agora Financial’s Rude Awakening

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Taipei, Taiwan

• A bull market in vacancies sweeps Midtown Manhattan offices,
• Corporate cutbacks continue even as commentators declare recovery,
• And we invite you to kick off your shoes and drift off to paradise…

Joel Bowman, reporting from back in Taipei, Taiwan…

A friend called us from New York City recently with the news: “That’s it, buddy. They finally let me go…along with another 20% of my department. Frankly, I’m surprised I lasted this long.

“But it’s a good thing,” our mate continued, “It really pushes me to get this [new] thing up and running.”

Our friend is an entrepreneurial young man with goals of owning and running his own business one day. He’ll probably succeed, too…which is why we were happy to see him made redundant from his soul-destroying job at a large, Manhattan-based financial services company.

“Have you seen the movie Office Space?” he asked, trying to explain the corporate life to your gypsy editor. “It’s just like that. Everyone has ten bosses and every boss has another ten of his own. You spend your whole life going out for drinks with these people, schmoozing and trying to get a foot on the next rung of the ladder. Everyone does it…and everyone hates it. Then, one day you just look around and think, ‘God, it this all there is?’”

Our friend’s story is not at all unique. According to Kenneth McCarthy at brokers Cushman & Wakefield Inc., 80,000 pink slips were handed out in New York over the past 18 months alone. Last month the unemployment rate there rose to 10.3%, the worst in more than 15 years. And, despite parroted proclamations of recovery from every necktie on every news channel, firms up and down Manhattan are still cutting back.

As these firms “streamline” their workforce, they also find themselves with plenty of unnecessary workspace. Back in the bubble days, companies might have just converted the unused area into a cigar lounge for the tens of tens of bosses…or a ping pong room to get the creative juices flowing…or another conference room to execute their backlog of deals. But now, those deals have dried up. Times are tough and cash-strapped companies are squeezing every dollar they can from every inch of available carpet space. Ergo, a new bull market has arrived in Midtown Manhattan, as the chart below illustrates.

Vacancy rates are at their highest since the third quarter of 2004, according to research from Cushman & Wakefield. Meanwhile, rents fell 5.2 percent from the second quarter to $57.08 a square foot and were down 22 percent from a year earlier.

All in all, it’s a pretty tough time to be hocking real estate in New York City. Fortunately, not everywhere is New York City. And, as we are prone to say, it’s always happy hour somewhere in the world.

So rather than regale you with sob stories and hobo harbingers, we thought we’d dedicate the rest of today’s issue to a place where the happy hour bell is ringing rather loudly these days.

See if you can guess the locale with these few hints:

• The local currency is appreciating against the dollar and the government has amassed an impressive $255 billion in foreign reserves…
• A recent oil discovery has drawn billions of dollars in trade deals and loans from countries eager to do business there…
• Already the world’s largest producer of sugarcane and coffee, this country is also a net exporter of cocoa, soybeans, orange juice and tobacco…
• Half the country is covered in rainforest…
• Its beaches are almost as world-renounced as the bronzed, lycra-clad woman (and men) who adorn them…
• The local drink is an intoxicatingly refreshing mix of cachaça, lime and muscovado sugar served over crushed ice…
• They just added the 2016 Summer Olympics to their list of upcoming festivities, which also includes the 2014 World Cup…
• And finally – and rather conveniently – the cost of real estate there is not so dissimilar to the kind of severance package a downsizing New York finance firm might pay out…

We are talking, of course, about Brazil, one of the so-called “BRIC” economies (Russie, India and China being the other three).

At this point, we’d like to ask you to “X-out” of your excel spreadsheet for a second, grab a cup of coffee and take your shoes off. Lee Harrison, editor of International Living, shares some details from paradise in today’s column. Please enjoy…

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The Hidden Side of My Brazilian Island
By Lee Harrison

I sped across the causeway and penetrated the lush, tropical landscape of the island of Itamaraca. But instead of continuing through the hills to the popular beaches, I veered left…toward the mysterious “north end” of the island.

It’s the end that few people ever see, and even fewer buy property in.

I got off to a quick start on the nicely-paved road, but the paving only lasted 100 yards. After that, it was a jarring, bumpy dirt road that continued for the next half hour, during which I traveled less than four miles. I drove through a lush forest preserve, skirted winding rivers, climbed hills, and even passed an old prison with its odd museum inviting passers-by to stop in.

But when I crested that last hill it was worth it, as I looked down on the small village with the shimmering blue Atlantic stretched out beyond.

The “north end” of Itamaraca is a hidden jewel. In fact it’s so well-hidden that I’ve never been here before…even though I live on the same island, just a few miles away. There are three main areas that draw people to this part of the island: Praia do Sossega, Enseada dos Golfinhos, and Ponta da Ilha (aka Pontal da Ilha).

Praia do Sossego is the only one of these areas that I’d consider a town. And even then, I use the term loosely. The village has a general store or two, a restaurant, a bar, and a couple of other businesses. Otherwise, it’s a mixture of small vacation homes, luxury villas, and a handful of fairly new condos. A couple of small beach bars and a long stretch of white-sand beach round out the amenities. Praia do Sossego (restful beach) is the first landing you’ll make on the north end, whether you’re arriving by road, or by the ferry crossing. The ferry costs about 50 cents at high tide, and half that at low tide. But don’t plan on taking your car on the voyage…

As you travel up the fine-sand beaches to the north, the next populated area is Enseada dos Golfinhos (inlet of the dolphins). This sector feels fairly new, and consists mainly of vacation homes; some of which are quite luxurious. Amenities here are even slimmer…a small general store and a couple of beach bars that serve fresh seafood and cold beer.

At the top of the island, it takes on a more upscale feel as you enter Pontal da Ilha (Point of the Island). This part of the island seemed to have the highest concentration of nice homes, the widest, calmest beach, and the most well-kept surroundings. The roads were in good shape, I saw no litter or disrepair, and they even had a neighborhood watch association to keep an eye on things.

Pontal da Ilha faces north instead of east, so it does not see the head-on wave action of the Atlantic. So the waters here are deep blue and very calm. The beaches enjoy views of the ocean to the right, the estuary to the left, and the hills and homes on the mile-distant neighboring mainland.

And property prices are amazingly low for a haven with such peace and natural beauty. I saw two lots on the beach at Pontal da Ilha selling for right around $30,000 (they were on the beach pictured above.) In Enseada dos Golfinhos or Praia do Sossego, a nice vacation home (not beachfront) will set you back between $32,000 and $45,000. A two bedroom, one-bath condo in a small, new beachfront project is going for $47,000.

But remember, this area is remote, and there are few amenities. If you come to the north end of Itamaraca, don’t come for the nightlife…come for the peace, tranquility, and natural beauty.

Joel’s Note: Are you interested in the lifestyle and investment opportunities that South America has to offer? As it so happens, your senior editor, Eric Fry, will be presenting at an investment conference in Buenos Aires next month and the hosts have asked that we extend a warm welcome to our Rude readership. For more information on the event, see here.

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[Rude Endnote: Yeah…there’s no hope of us doing any work now. We’ve got about ten screens up, all searching for beachfront real estate around the world. Markets…you can wait until next week.

Until then…

Cheers,

Joel Bowman

The Rude Awakening
aussiejoel@the-rude-awakening.com