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↑ [Highly Recommended] Michael Pettis On The Consequences Of China's Rebalancing (Why Deleveraging Will Slow Growth)
The final 10 minutes are Q&A.
Michael Pettis, finance professor at Peking University's Guanghua School of Management and author of "The Great Rebalancing" and the "China Financial Markets" blog, explained everything you need to know about China's rebalancing at the 2013 Wine Country Conference.
what needs to happen is China's "household income share of GDP" needs to rise. To do this, people's wages need to rise relative to productivity growth, the value of the Chinese yuan needs to rise to make imports cheaper for consumers, interest rates need to rise to increase the real return on savings and the real cost of capital, and privatization needs to occur (also in the form of debt transfers). So that's how you do it. But, unfortunately he thinks China's rebalancing will be a tough adjustment for its economy.
Wow! This is a great lecture.
↑ Why Southeast Asia's Boom Is A Bubble-Driven Illusion – Forbes
This article is a good follow-on to the video by Michael Pettis above. Jesse Colombo:
How Southeast Asia's Bubble Will Pop
Southeast Asia's economic bubble will most likely pop when the bubbles in China and emerging markets pop and as global and local interest rates eventually rise, which are what inflated the region's credit and asset bubbles in the first place. Southeast Asia's bubble economy may continue to inflate for several more years if the U.S. Fed Funds Rate, LIBOR, and SIBOR continue to be held at such low levels.
I expect the ultimate popping of the emerging markets bubble to cause another crisis that is similar (though not identical in every technical sense) to the 1997 Asian Financial Crisis, and there is a strong chance that it will be even worse this time due to the fact that more countries are involved (Latin America, China, and Africa), and because the global economy is in a much weaker state now than it was during the booming late-1990s.
In the coming months, I will be publishing more reports about bubbles that are developing around the entire world — most of which you probably never knew existed.
↑ Real estate's least sexy sector is red hot
While it might seem like a better play to buy older, distressed warehouses, that is not where investors are heading. Today's modern distribution systems require state-of-the-art facilities. That is why new product is in the highest demand.
"There will be more warehouse development because it's the easiest and quickest to build, and there's a tremendous amount of obsolescence in warehouse," said Roschelle [PWC partner Mitch Roschelle]. "You need a robotic kind of model."
Which leaves old warehouses to be repurposed or renovated or removed for other (higher and better) uses.
↑ 2013 home sales reflect boom – Houston Chronicle
Houston residential real estate out of balance: Katherine Feser:
Home sales across the Houston area broke a pre-recession record in 2013, as a booming economy and a buying frenzy in many neighborhoods pushed up prices and created an unprecedented shortage in the housing market.
Sales of single-family homes were up 17.4 percent over a year earlier, the Houston Association of Realtors reported Tuesday. Boosted by a strong December, the region's 73,232 sales exceeded the previous record set in 2006, when 72,376 houses changed hands.
Meanwhile, the local housing inventory – defined as the length of time it would take to sell everything on the market at the current pace – continued to shrink in December, falling to a record low of 2.6 months. An inventory of about six months is considered a balanced market.
↑ China's Elite Wealth in Offshore Tax Havens, Leaked Files Show – Businessweek
The wealth of China's rich, including that secreted offshore, "may not be strictly illegal" but often is connected to "conflict of interest and covert use of government power," said Minxin Pei, a political scientist at Claremont McKenna College in California, quoted in the story on the leaked files. "If there is real transparency, then the Chinese people will have a much better idea of how corrupt the system is [and] how much wealth has been amassed by government officials through illegal means."
When there's still mass poverty in China, and there is, this is obscene don't you think?
It's difficult to see how people with such mentalities will make the best decisions to see China properly through its very huge current economic and financial issues.
↑ Washington issues new radon risk maps | KING5.com Seattle
Do you have a radon alarm in your house, condo, or apartment along with smoke and CO alarms? Read this site's article and watch the news report.
Radon is a naturally occurring radioactive gas that comes from some dirt and rock. It's a problem across much of the country and people who breathe radon gas coming up from basements and crawlspaces for long periods have an elevated risk of lung cancer. Smoking compounds that risk say health experts.
↑ Another Top-Ten Warmest Year – Climate Change Weather Blog
Climate Change, Both the NASA and NOAA datasets have confirmed that 2013 ranked in the top-ten warmest years globally going back to 1880.
Ocean water temperatures were tied for 8th warmest on record despite the entire year having neutral ENSO (El Nino Southern Oscillation) conditions.
When El Nino kicks in again, and it will, it will change many investor's minds about outfitting their properties with green technology. Many who've been doubting that global warming is occurring will become very interested in mitigating and reversing the trend. Those who have taken steps in advance to reduce their energy usage via alternative methods to cool their buildings will be ahead of the game in attracting and keeping tenants.
The following is about the video below:
Published on Jan 21, 2014
This visualization shows how global temperatures have risen from 1880 through the end of 2013. NASA scientists say 2013 tied for the seventh warmest of any year since 1880, continuing a long-term trend of rising global temperatures. With the exception of 1998, the 10 warmest years in the 133-year record all have occurred since 2000, with 2010 and 2005 ranking as the hottest years on record.
NASA's Goddard Institute for Space Studies (GISS) in New York, which analyzes global surface temperatures on an ongoing basis, released an updated report Tuesday, Jan. 21, on temperatures around the globe in 2013. The comparison shows how Earth continues to experience warmer temperatures than several decades ago.
The visualization shows a running five-year average global temperature, as compared to a baseline average global temperature from 1951-1980.
This color-coded map in Robinson projection displays a progression of changing global surface temperatures anomalies from 1880 through 2013. The final frame represents global temperature anomalies averaged from 2009 through 2013.
This color-coded map displays a progression of changing global surface temperatures anomalies from 1880 through 2013. Higher than normal temperatures are shown in red and lower then normal temperatures are shown in blue.
Completed: 10 January 2014
Animator: Lori Perkins (NASA/GSFC) (Lead)
Producer: Leslie McCarthy
Scientists: James Hansen Ph.D. (NASA/GSFC GISS)
Robert B Schmunk Ph.D. (SIGMA Space Partners, LLC.)
Reto A. Ruedy Ph.D. (SIGMA Space Partners, LLC.)
Kwok-Wai Ken Lo Ph.D. (SIGMA Space Partners, LLC.)
Makiko Sato Ph.D. (Columbia University, Center for Climate Systems Research)
Project Support: Robert B Schmunk Ph.D. (SIGMA Space Partners, LLC.)
Writer: Patrick Lynch (Wyle Information Systems)
NASA's Goddard Space Flight Center
Data provided by Robert B. Schmunk (NASA/GSFC GISS)
↑ 47 New York Skyscrapers PHOTOS That Will Make You Fall in Love With the City All Over Again : Places : BOOMSbeat
New York is the world's ultimate skyscraper city. it is home to 5,845 completed high-rises, 97 of which stand taller than 600 feet (183 m). The tallest building in New York is the under-construction One World Trade Center, which rises 1,776 feet (541 m) and was topped out on May 10, 2013. Here are 47 gorgeous photos of New York City skyscrapers.
↑ A Note on the Political Economy of Populism – NYTimes.com
Economist Paul Krugman:
… the public doesn't "get" macroeconomics; lines like "American families are having to tighten their belts, so the government should too" still resonate. You could blame Obama for not using the bully pulpit to teach the nation why this is wrong, and I wish he had made more of a stand. Still, the fact is that this is just a hard story to get across — God knows, half the macroeconomics professors in America don't seem able to understand it — and no politician has ever managed to do it. Consider public opinion in 1936, just after FDR had won a smashing reelection victory. Did the public give credit to his heterodox macro policies, and favor their continuation? No:
And guess what: FDR went along with public opinion, scaled back stimulus, and plunged the nation back into recession — with devastating consequences in the 1938 midterm election.
He is absolutely right that the general population, many politicians, and many economists just do not understand that the US can, and has, easily run deficits during economic downturns to the great advantage of the economy as a whole. What Paul Krugman and others who do get it never seem to want to discuss is how the US government borrowing a dime in the first place before spending currency (it has every right to create without borrowing) is completely counter-productive and specifically designed to increase the very inequality Krugman is deploring. See: United States Notes, interest-and-debt free currency the US can create and spend into the economy anytime it has the political will to defy the banking establishment (which funds political campaigns to prevent that will from asserting itself).
The difference between a United States Note and a Federal Reserve Note is that a United States Note represented a "bill of credit" and was inserted by the Treasury directly into circulation free of interest. Federal Reserve Notes are backed by debt purchased by the Federal Reserve, and thus generate seigniorage, or interest, for the Federal Reserve System, which serves as a lending parent to the Treasury and the public.
So you see, we could have a currency that does not require taxpayers to pay down any debt of the government: no interest; no national debt.
↑ Housing Production Dips Nearly 10 Percent in December | Mortgage News | Daily National and State Headlines
Following an unusual surge in housing starts in November, nationwide housing production fell 9.8 percent to a seasonally adjusted annual rate of 999,000 units in December, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
If mortgage rates hold or go lower for any appreciable time, this will change dramatically for the better.
Rates went lower with the taper, but that's because the taper was counter-productive. Other areas of the economy weaken with the taper. However, with no taper, rates remain low while the rest of the economy is not brought lower (with the exception of the negative aspect of lower rates on fixed incomes of such as retirees).
↑ The first signs of a strong 2014 for real estate | Altos Research – How's the Market?
If you pay attention to your Altos data, you'll know that the housing market bottoms between the second and third week of January every year, like clockwork. …
The first weekly uptick is strong, seasonal, and expected. No sign yet of higher mortgage rates or new qualification requirements hurting home prices.
↑ Fitch changes tune on Canada's 'over-heated' housing market | Financial Post
One reason Fitch believes Canada is not facing a rough road in 2014 is because it expects unemployment to remain stable at around 7%. Another key reason is because of limited use of risky mortgage products, curtailed in this country unlike the U.S. and other jurisdictions by strong government regulation.
But at the same time Fitch still maintains that housing prices are approximately 20% overvalued.
↑ How factory-built homes are shedding their 'cheap' label and exploding in popularity | Financial Post
Here's another from Canada.
After more than three decades in her Toronto bungalow amid growing mildew problems in the 1940s-era home, Ruth Wiens decided it was to start fresh.
She still loved her East York neighbourhood, so the IT professional decided to demolish her existing house and build a two-storey, three-bedroom, 2,000-square-foot home from scratch.
But instead of hiring a builder to construct her new home, piece by piece, Ms. Wiens ordered one from a factory, based on a design she saw in a magazine. She didn't want the harsh Canadian weather to pummel the shell of her home during construction, as her neighbours' new homes had been over the years.
↑ Dallas/Fort Worth Leads U.S. in Both Supply and Demand for 2013 [Video] | Property Management Insider
The return of the apartment construction boom in Dallas/Fort Worth has corresponded to a sustained boom in demand for apartments — allowing occupancy rates to hold at a 14-year high and triggering another round of very solid rent growth.
↑ Mortgage applications rise 4.7% | 2014-01-22 | HousingWire
Mortgage applications continue to climb, rising 4.7% for the week ending Jan. 17, the latest report from the Mortgage Bankers Association said.
The refinance index also reported a 10% jump from last week, compared to the purchase index, which fell 4% from a week ago.
Overall, the refinance share of mortgage activity edged higher to 64% of total applications.
↑ Abe Eyes Land-Price Reflation to Spur Construction Boom – Bloomberg
… the changes will make it easier to construct residential buildings in business districts in designated zones, creating opportunities to improve urban planning and make cities more enticing for employees of foreign companies.
Loosening rules on residential construction in business districts would create more demand for education, medical and other services in those areas, Hatta [Tatsuo Hatta, member, government council on special economic zones] said.
"Labor and other issues are more important and will have an impact over the long term, but this will have a strong impact in the short run," Hatta said of the building deregulation. "The focus, as far as attracting foreign nationals is concerned, is to make living in city centers comfortable," Hatta said.
↑ Behavioral Macro – The Effects of QE on UST Yields—Now the Answers Start to Matter
… many investors and analysts have settled into the notion that we are in a liquidity trap, and that monetary policy here is largely "pushing on a string". While this is still for the most part the current environment, it is finally, slowly, starting to change. Monetary policy can be very, very powerful when the soil is fertile. This is not the time to become complacent about the impotence of monetary policy. That time has passed. It may not be tomorrow, but the efficacy of monetary policy has now become, as the economists might say, a positive function of time.
↑ A macroeconomic assessment of the Cypriot economy after the haircut | Macropolis
Consumers spending their savings is keeping Cyprus afloat.
↑ Condo conversions are on the horizon in Seattle, new report says – Puget Sound Business Journal
The thousands of new apartment units will push the region's vacancy rate up three-tenths of a percentage point to 4.7 percent in 2014, according to Marcus & Millichap. But, "Stable employment growth will generate rental demand, while a potential resumption of condo conversions this year and heading into 2015 will pressure the vacancy rate to back down," …
Condos historically have been built to higher standards; but recently, some developers have been deliberately constructing apartments condo-ready by building to condo standards with the intention of renting them out only until a condo conversion makes financial sense.
↑ Minimum wages and jobs: New evidence | vox
Pierre Brochu and David A Green:
… ask whether turnover rates are different in high versus low minimum-wage regimes.
… the results for less educated workers imply that an increase in the minimum wage results in more stable jobs, but fewer of them. Thus, the policy debate should not just be about the employment rate effects of minimum wage increases but about the trade-off between good jobs with higher wages and more job stability versus easier access to jobs. And the debate is relevant for all of the low educated labour market, not just teenagers.
↑ States Cutting Weeks of Aid to the Jobless – NYTimes.com
… for every worker who found a job, more than two dropped out of the labor force entirely, according to the latest survey by the Bureau of Labor Statistics, which recorded a decline of over 50,000 from June through November.
Many can't even afford to rent unless doubling up.
↑ Strange Brew: Long-Term Unemployment and the Beveridge Curve – Real Time Economics – WSJ
One of the mysteries of the job market is why companies aren't filling openings like they used to. The answer may lie within the large number of people who have been unemployed for a very long time.
↑ How we did Offshore Leaks China | International Consortium of Investigative Journalists
A picture slowly began to emerge: China's elites were aggressively using offshore havens to hold assets, list companies in the world's stock exchanges, buy and sell real estate and conduct their business away from Beijing's red tape and capital controls.
Among the offshore holders were at least 15 of China's richest men and women, high-level executives at state-owned companies and relatives of some of China's top current and former leaders.
Disturbing news arrived in November in the form of a short, encrypted message from an editor in Beijing. The note said that the reporters had been warned by government officials to discontinue their work in the offshore project. They had to pull out immediately from the reporting partnership.
The intimidation of ICIJ's partners came in the midst of a fresh government crackdown on Internet criticism, particularly allegations of corruption. According to the Committee to Protect Journalists, China imprisoned 32 reporters, editors and bloggers in 2013, earning the country the third spot after Turkey and Iran in the ranking of the world's top jailers of journalists.
The International Consortium of Investigative Journalists states: "There are legitimate uses for offshore companies and trusts. We do not intend to suggest or imply that any persons, companies or other entities included in the ICIJ Offshore Leaks Database have broken the law or otherwise acted improperly."
↑ SYRIZA gives up on "odious debt" write-off but not major debt relief | Macropolis
… SYRIZA MP Giorgos Stathakis, part of the party's economics team, has now suggested that only around 5 percent of Greece's debt, which is expected to stand at 340 billion euros or 174.8 percent of GDP at the end of this year, can be considered "odious". "It is the arms procurement programmes and the electrification of the Hellenic Railways Organisation (OSE), which never happened," he told Sto Kokkino radio station. "Over 90 percent of the debt is traditional, public debt of the markets, in other words bonds. There is no legal process to challenge this." His comments caused a stir because at last summer's founding congress, SYRIZA had made one its political goals the writing off of the "majority" of Greek debt.
Stathakis's comment certainly appears to put to bed the long-running speculation about the significance of "odious debt" in causing the Greek crisis as well as exiting it.
Oh, we doubt that it has been put to bed.
↑ Open real estate agent data generates vast new liability for 'pocket listing' brokers and agents | Inman News
… this vast picture of liability could be overblown if the data reveals pocket listings to be a boon to home sellers. While the overwhelming industry consensus casts a great amount of doubt on that scenario, it is possible. Still, there's far more downside potential to taking that position as a broker. Having your company's pocket listing practices justified by data merely allows you to continue doing business as usual. If the data turns the other direction, the vultures looking for deep pockets will start circling quickly.
Professional Liability Insurance coverage is always in order for the real-estate agent/broker.
Sellers who go into these exclusive listings with their eyes wide open may find insurance carriers to be rather formidable adversaries in any court.
Any agent/broker entering into any exclusive should exercise great care in documenting that the seller went in fully informed.
Consult your attorney.
↑ Real Estate in the United States Is Actually Cheaper Than Most Other Parts of the World | The Truth About Mortgage.com
Believe it or not, real estate in the United States is actually really cheap, assuming you compare it to what others are paying in places like Asia, Europe, Canada, and Australia.
A new report released today by Demographia compared housing affordability in 360 markets worldwide and found that the U.S. was far and away more affordable than other countries.
In all, the U.S. accounted for 40 of the 50 most affordable major markets in the world.
↑ Greece will likely begin recovery this year: Is austerity working? | Real-World Economics Review Blog
The IMF is the subordinate partner in the "troika" (including the European Central Bank and the European Commission) that has been calling the shots for the Greek economy these past four years, but it is the one in charge of putting numbers on the page. It repeatedly projected economic recoveries for 2011, 2012, and 2013 that did not materialize.
Now the IMF is projecting economic growth for 2014. But this time they are probably, finally, going to be right. It is vitally important that we understand why.
Last month the Greek parliament approved a stimulus program involving highway construction that is quite large. According to the Ministry of Infrastructure, Transport, and Networks, total spending on this project will be 7.5 billion euros over the next year and a half. This amounts to about 2.7 percent of GDP during this period. For comparison, the U.S. federal stimulus that helped us out of our 2008-09 Great Recession (after subtracting the state governments' budget tightening) was less than 1 percent of GDP.
This stimulus will likely make the difference between growth and another year of recession. Most of the financing comes from European Union grants, so it does not add to Greece's debt.
In other words, the Greek economy is going to grow next year because of a significant policy reversal. The austerity, or fiscal tightening, is basically coming to an end.
Let's try not to forget this when we start hearing Austerians take credit for any Greek growth this year.
↑ Real Estate Market Predictions: What Will Happen in 2014 | Equifax Finance Blog
Will they continue renting? Ilyce Glink:
New households—graduating college kids moving out on their own, new immigrants moving in, or even families splitting into two—are a key part of the housing market. Normally, 1.1 million households form in any given year. But according to recent census data, household formation has slowed since the Great Recession, and only 380,000 new households were formed since November 2012.
The problem boils down to young people, whose job prospects still aren't great and who therefore are still financially insecure. Burdened with student debt and struggling to find solid employment, they're living with their parents or doubling up with roommates, Cutts said. With these young people delayed five to 10 years on buying a home, it's likely that the void of new buyers is going to continue to grow.
Household formation is a key metric to keep an eye on in 2014. If it remains low, it will be difficult for the housing market to return to normal.
↑ A 'tsunami' of store closings expected to hit retail
Get ready for the next era in retail—one that will be characterized by far fewer shops and smaller stores.
On Tuesday, Sears said that it will shutter its flagship store in downtown Chicago in April. It's the latest of about 300 store closures in the U.S. that Sears has made since 2010. The news follows announcements earlier this month of multiple store closings from major department stores J.C. Penney and Macy's.
Further signs of cuts in the industry came Wednesday, when Target said that it will eliminate 475 jobs worldwide, including some at its Minnesota headquarters, and not fill 700 empty positions.
Experts said these headlines are only the tip of the iceberg for the industry, which is set to undergo a multiyear period of shuttering stores and trimming square footage.
Repurposing malls will be interesting.
Some of them would make excellent college campuses or extensions. The parking could be torn up in areas for sports fields, etc.
Can we patent this idea?
↑ Despite Optimism, Employment Trends Remain Disconcertingly Weak – Chief Economist Article – GlobeSt.com
Sam Chandan, President, Chief Economist, Chandan Economics:
What's behind the bullish assessments and tilt in risk-taking? Artificially low interest rates and investor and lender competition have certainly aided in recouping lost property value; that process is largely complete for top tier assets in prime metros. In the arena of property fundamentals, however, it's not a demand-driven recovery. The tally of occupied office and industrial space is slowly returning to its pre-crisis peak, so our buildings are no doubt feeling more full. But that doesn't reflect momentum in job growth as much as a slow recovery of lost jobs and an absence of significant new construction. While sentiment and perceptions are shifting, the job market remains a weakest link in the recovery, constraining the medium-term outlook.
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