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Raub Report – May 2012

May 8, 2012

We celebrate Texas Independence Day on April 21st which was the day of the victory over the army of Santa Ana at San Jacinto and the reason for Fiesta San Antonio.  We should pause to remember our great Texan heritage as an independent nation for the ten years from 1836 to 1846.  Our beloved Governor, Rick Perry, made the interesting comment among others during his presidential campaign, that we might secede from the Union.   Hyperbole aside, in a speech recently, Stephen Clark, Chairman of Cypress Real Estate Advisors, said that most analysts see a long period of slow growth ahead for the U.S. maybe even for the next ten years.  Consequently, many large real estate investors are looking to invest internationally in emerging markets to take advantage of faster growing economies.  OK. Then, he went on to make the point of how investors could validly look at Texas as an “Emerging Market;” one that would present a market for investors without the currency and political risks found in foreign lands.

Here are some interesting facts to support that thesis of Texas as an Emerging Market.

The Gross Domestic Product of Texas as a state is $1.3-trillion which, if compared to other nations, would make Texas the 11th largest economy in the world.  Texas is larger economically than Mexico and we are gaining on Italy, France and the U.K.  Texas’ GDP when compared to the BRIC countries is about 60% of Brazil’s and Russia’s, 35% of India’s and 13% of China’s.  See www.texaplex.com for an interesting video.

Texas is the largest exporter of goods in the U.S. grossing more than $100 billion a year in trade with other nations.

In-migration, that is folks moving from other states to Texas, is huge and the Great Recession has only accelerated this long term trend. Austin is the top city in the U.S. for in-migration, more than double the second place city, Tampa.  San Antonio and Dallas are also in the top ten.  Of course, this is because more jobs are available in Texas than in other areas of the country like the Northeast and Rust Belt where there is stagnation or shrinkage.   Texas has created more than half the jobs in the U.S. since 2009.  Texas is projected to grow from the current population of 24 million to 40 million by 2030.  San Antonio is projected to have good employment growth this year with an increase of 20,000 new jobs, and increasing to 40,000 jobs per year in 3 years. This would mean a boom time for the Alamo City with substantial housing growth and commercial development.

Fidelity Investments believes that emerging market countries will be responsible for the bulk of global GDP growth over the next couple of years. “We estimate that emerging markets accounted for about 80% of global real GDP growth in 2011, up from 73% in 2010,” says Mr Stevenson. “We expect this share to stay at around 80% in 2012.”

The world of Emerging Markets is projected to grow at about 6% this year. Texas’ growth rate is projected to be around 3 to 5%, but remember that our economy has a larger base from which to grow than most emerging nations.

Now, I don’t want to be ridiculous; we are not going to secede from the Union.  Been there, done that.   Besides, we can just “offshore” national security to D.C.  And why go through all the trouble of negotiating free trade agreements with California and New York when we already have them?  The Republic of Texas is a strong and growing “Emerging Market” on its own. We have already surpassed Mexico in Gross Domestic Product and we are gaining on Italy and California.  In five or ten years perhaps we should be applying to the G-7 Countries for membership.

Stand proud, Texan!  We are an Emerging Market for the future!

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