Effect of current market declines on the DR

Andy B

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Jan 1, 2002
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Chris,
First it's comforting to read that you want more discussion regarding the current market's decline in the US and it's effect on the DR.
Second, it's pretty difficult to reply to the above when the thread was closed. That said, the most immediate effect is going to be a decline in US tourists coming to the DR as many of those are middle to upper-middle class wage earners, those very people that are getting slammed by the big drop in the DOW. These people just happen to be the very market that much of the DR's tourism promotion efforts are aimed at. Translation: hotels will lay off workers and a second high season will not be as good as hoped, especially after the US passport debacle affected the last one (and is still affecting us). Tourism is over 10% of the DR's GDP. With the American segment comprising about half of this the implications are clear. With the declining market and world market instability, tourism this summer has already been off, about 80% at this end of the Samana peninsula. The rest of the country is also experiencing a decline although the government won't admit it. Ask hotel owners in your area for the real scoop.
The big brokerage/money houses are a large source of international development funds, the kinds of monies that fund developments in the DR. With the beating they are taking it follows that funding is drying up as they are trying to maintain liquidity at this time. Foreign markets are also finding the going rough. And as I said in my original post replying to the question about Florida mortgages, the Chinese market's practice of allowing people to borrow from a bank and then invest those funds in the Asian stock market because it pays more is really scary. Also, China's manipulation of international money is slowly wearing the US down and if continued in conjunction with their other market practices, will result in China's capture of the US without ever firing a shot. I hate to think of the repercussions of this and maybe the DR better cozy up to the Chinese even more so than they already have (although they'll probably end up owning the DR, too).
Finally, maybe this should have been posted in the Debates forum but the implications for daily life in the DR are clear: a volatile US market is already affecting us and it's going to get worse.
 

Chris

Gold
Oct 21, 2002
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www.caribbetech.com
Andy, not sure what happened there - the boss will let me know when he gets around to it.

Anyway today looks better: "Wall Street regained its composure today as stocks roared back from their worst day in three weeks, recouping most of yesterday?s losses."

Also, this is not just a US thing, but all the stock markets are affected. I agree with you that the effect on the DR will come mainly from the US and Canada however.

But, I think it is early days and we don't know yet what the overall effect is going to be. Here is someone that I really enjoy reading: not for the accuracy perhaps, but more for the over-the-top use of language in describing what happened. It is funny stuff! Clusterfuck Nation by Jim Kunstler

It would be nice to hear from others in the tourist and real estate trades. How is business generally? (Yes, yes I know it is summer and a little quiet in the Islands!)
 

Ringo

On Vacation!
Mar 6, 2003
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My point of view? I think Andy is correct and that not only will the Dominican Republic, but most of the world will be seeing a change for the next few years.

I trade (stock market) daily and have real estate investments and have seen them all take a dive, slowly for a couple of years. The last couple of months have been very ... not good for my U.S. accounts. That being said, I did very well for many years so I am concerned, but not going to panic. My investments in the D.R. and style of living have not been effected. I do see my D.R. real estate not enjoying a market "up" for some time that has been the norm for the last 5 years.

The American lending markets have been, and will continue for some time, to effect all levels of spending. In short, money is short. Not just in the U.S., but noted in all major markets.

Regards, Ringo
 

johne

Silver
Jun 28, 2003
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From this viewpoint

I don't trade the stock market as I devote all my energy to real estate.
The mood here (in general, for the masses) is kind of like a curtain closing on a show. People are not talking about second homes, larger homes, or flipping houses. They are talking about the availabilty of money. If they can't find money here to fund purchases for U.S.
homes, buildings, warehouses, how could they be thinking about funding yet another investment outside the U.S.?

Those that do real estate as their business will always be searching for the next opportuntity as in the Cap Cana development going on, but it will be just that much harder for the small guy to be interested in investing in something like that. Where will he get the money if his own house in Florida as an example is not saleable and has been on the market for the past 6 months?

Take for example the family that bought with5% down or zero down and now is faced with an adjustable mortgage he can't afford. Where does he get the bux to take a trip for a week or ten days to the DR?
I don't know--somebody tell me.

JOHN
 

Malibook

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Jan 23, 2002
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That said, the most immediate effect is going to be a decline in US tourists coming to the DR as many of those are middle to upper-middle class wage earners, those very people that are getting slammed by the big drop in the DOW.
The DOW is only 30 stocks and it has not had a big drop.
Even a 10% correction would be quite normal and healthy.

The US housing ATM is broken (or is that fixed) and people have to stop living beyond their means.
 

Andy B

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Jan 1, 2002
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www.elmarinique.com
In a little over a month's time the DOW lost about 1,500 points, or a little over 10%. If it were only a correction the market could live with that however this goes a lot deeper. With the DOW only earning about 5% this year, the drop equals an earnings loss of at least a year for many investors. For the average small investor, the kind of person that makes up a lot of the DR's tourist base, this is a hard pill to swallow. And it's not just the DOW and housing that's in trouble. Financials took a worse hit with a worldwide credit crunch heavily contributing. This is far from over with housing not expected to recover before the end of '08, if then. Although the Fed injected quite a bit in the market 2 weeks ago in an attempt to shore it up, more is needed. The market is hoping the Bernake and the FED will reduce interest rates soon. He's expected to make some sort of announcement tommorrow and not let the country slide into disaster. Even the R word is now popping up. CNBC (my primary source of info) has been covering all this well among other financial networks and is reporting that volitility is high and is going to stay that way for a while. Consumer spending and confusion over the direction of the economy are also the big issues. That's one of the reasons we're seeing such highs and lows from day to day and the experts are still suggesting a cautious approach.