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↑ Millionaires See Real Estate as Top Investment for 2014 – Bloomberg
U.S. millionaires see real estate as the top alternative-asset class to own this year, according to Morgan Stanley. (MS)
About 77 percent of investors with at least $1 million in assets own real estate, according to a survey released today by the New York-based investment bank's wealth-management unit. Direct ownership of residential and commercial properties was the No. 1 alternative-investment pick for 2014, with a third of millionaires surveyed saying they plan to buy this year. Twenty-three percent said they expect to invest in real estate investment trusts, the second-most popular choice.
Wealthy foreigners have bought high-end U.S. properties for their safety and because they're denominated in dollars, the world's reserve currency, he [Mitchell Roschelle, real estate advisory leader at PricewaterhouseCoopers LLP] said. This helps domestic millionaires maintain the value of their property investments.
"It creates competition, which drives the price up for everybody," he said. "The sellers have multiple channels to sell into. That gives you more liquidity."
↑ The Worst Places in the World
It's an interactive graphic.
↑ Steve Keen: A Computer Simulation of Monetary Dynamics – YouTube
One of the world's top economists; highly underrated:
The financial crisis that ran from 2007 to 2009 has been called a "Minsky Moment," meaning it offered a much-needed reminder to all economists of Hyman Minsky's neglected dictum that "capitalism is essentially a financial system."
But even with this reminder, it is hard to know what to do next, since it is difficult to express Minsky's vision using the standard equilibrium methods of economics. Arguably that is one reason that Minsky has remained a minority taste in economics.
Steve Keen, a grantee of the Institute for New Economic Thinking, wants to change all that by developing a computer simulation tool that captures the monetary side of the economy in a realistic way, including its non-linear dynamic development over time. When Keen is done, students of economics will be able to build their intuition by simulating money flows through the banking system. And professional economists will be able to explore complex interactions without imposing limits of tractability, simply by tweaking the model and seeing what happens.
Keen gives credit to Augusto Graziani's writings on the monetary circuit for showing him how to translate the complex workings of the monetary economy into something that can be programmed to run on a computer. He met Graziani in 1998, the same year he finished his Ph.D., and has been following the money circuit ever since, first in his own work and now by developing tools for the rest of us. Sometimes new tools are what we need to create new thinking.
↑ U.S. Freeze Costs $3.5 Billion Including Travel Delays – Bloomberg
Winter storms that brought heavy snowfall, freezing rain and Arctic air to the U.S. last month will probably cost more than $3.5 billion in economic losses….
Freezing weather is already leading to claims at insurers, including many tied to frozen pipes that burst…
As a landlord, did you issue a statement to your tenants about how to prevent freezing pipes?
↑ How Eroding the Middle Hits Economic Growth – NYTimes.com
… the shift of income to the wealthiest Americans can reduce consumption over all, according to many economists, and therefore economic growth for everyone — poor, middle and rich, too.
Alan B. Krueger, a Princeton economist who was a top economic adviser in the Obama administration from 2009 to 2013, estimates that had the shift in income gains to the wealthiest earners since 1979 been more uniformly distributed, annual consumption would be $400 billion to $500 billion higher today, equal to about 3.5 percent of gross domestic product.
… some economists on Wall Street, hardly a bastion of left-wingers, tend to agree with Mr. Krueger's take.
We agree with it. How about you?
↑ Bonds are suddenly the hot investment – Chuck Jaffe – MarketWatch
As the investing world headed into January, it was almost universally accepted that 2014 would be a bad year to own bonds and bond funds.
As the investing universe begins February, it seems that everything has changed.
Suddenly, bonds are the hot investment, the thing the experts are saying to buy. Fears of a bond bubble—a collapse that was supposed to occur the instant interest rates started to rise—have dissipated, and investors who were being told to give up their bond funds are now being told to circle back for more.
In the slow-moving world of bonds and bond funds, it may be the fastest reversal in thinking ever.
Well, our readers know that we cautioned everyone that the rush out of bonds was premature. It wasn't bond prices that concerned us but a weak economy. It's still weak and just got weaker with the taper.
↑ Raghuram Rajan on Why Stimulus Has Failed – Project Syndicate
Raghuram Rajan, Governor, Reserve Bank of India:
The only sustainable solution is to allow the supply side to adjust to more normal and sustainable sources of demand — to ease the way for construction workers and autoworkers to retrain for faster-growing industries. The worst thing that governments can do is to stand in the way by propping up unviable firms or by sustaining demand in unviable industries through easy credit.
In our view, that flies in the face of the crisis of the 1930's being overcome by the fiscal spending of the New Deal, which turned into the American powerhouse economy of the late 1940's and 1950's.
The war effort played a huge role in it. It was government spending that employed all the previously unemployed.
We could do the same thing but rather than in a war of violence and destruction, for just plain good growth.
↑ Top 10 cities filled with real estate investors | 2014-02-05 | HousingWire
Which cities had the most investors coming in an buying up homes?
Especially investing in order to turn properties into single-family rentals?
↑ San Antonio's apartment market gaining more jobs, more units – San Antonio Business Journal
Tricia Lynn Silva:
In 2013, developers added 4,000 apartment units to the local multifamily sector, according to a new report by Institutional Property Advisors (IPA), a Marcus & Millichap Co.
In 2014, that number will be even bigger — with developers on track to add 4,700 units to the local multifamily landscape.
Cause for concern?
No, according to the Texas 2014 Forecast that IPA released ….
↑ PIMCO | Investment Outlook – Most 'Medieval'
This is exactly right. Bill Gross, Managing Director, PIMCO:
… borrowers such as households/businesses/local and foreign governments/financial institutions have been less than eager to pick up the slack. With the deficit now down to $600 billion or so, the Treasury is fading as a source of credit growth. Many consider that as a good thing but short term, the ability of the economy to expand and P/Es to grow is actually negatively impacted, unless the private sector steps up to the plate to borrow/invest/buy new houses, etc. Credit over the past 12 months has grown at a snail's 3.5% pace, barely enough to sustain nominal GDP growth of the same amount.
The Fed tapering when the fiscal spending is going in exactly the wrong direction while the economy is still extremely weak, is backwards. Yes, dollars are coming home from emerging markets, but that means the global economy is going down before the US economy has risen enough to handle making up the difference. If the Fed keeps tapering prematurely, it will run into a wall: disinflation, a steadily slowing economy, and rising unemployment.
If they do continue, we'll hope we're wrong. So far, we haven't been.
↑ Why is Ralph Nader cozying up to a bunch of hedge funds?
"On the side of affordable housing, believe it or not, is one of the most powerful lobbies in Washington, and that's the National Association of Realtors. Corker-Warner isn't going anywhere in Washington unless the Realtors get behind it, and I don't think they ever will," Nader said. "They aren't angels either. They've made a lot of money. However, they know that when you have a stable market with adequate capital, when you have decent underwriting standards that aren't too risky, that they're going to have a good time, and they're going to make money, and it's going to be predictable."
We think perhaps 10% skin in the game for private lenders isn't good enough. Maybe taxpayers need to stop having to backstop private enterprise altogether. If it needs backstopping, shouldn't it be a publicly owned entity in the first place? If the taxpayers have to pay for it, then why should some at the top reap the lion's share of profits? If they are going to reap such profits, let them take the full hit when they fail. Let the public sector takeover where the private sector fails and where it would be too destabilizing for the economy as a whole to simply leave a hole for more private enterprise to be too timid to get back in, leaving the economy in a severely depressed position. That's the basis for considering something worthy of being a public utility in the first place. Thoughts? Isn't our view a combination of libertarian and progressive economics and finance? Where the private sector can do a good job and not ruin the economy, let it. Otherwise, do what's best for the people as a whole. Don't leave the lower class getting poorer, and don't sit by watching the middle class disappear into the lower class.
That's a cursory overview of the subject. We might not go so far as to say it's overly simplistic, but the subject is up for many judgment calls. See, for example: Natural monopoly.
↑ Michael Heise shows why some — but not all — emerging-market currencies have come under attack in recent weeks. – Project Syndicate
Michael Heise, Chief Economist, Allianz SE:
The region's reliance on commodities is fraying nerves. If Chinese economic growth turns out to be weaker than expected, commodity prices and exports are likely to fall, undermining Latin American countries' growth. However, with global industrial-production indicators climbing since the second half of 2013, pointing especially to improvements in the advanced economies, gloomy forecasts for commodity markets seem off the mark.
Paradoxically, China, the country currently under the brightest spotlight, is the only major emerging economy whose currency rose slightly against the US dollar in January. Given the enormous challenges that China faces — from rebalancing its growth model to addressing credit and real-estate bubbles — this is remarkable. Chinese officials are poised to tighten monetary policy and impose regulatory measures to curb debt momentum, which is bound to mean sacrificing short-term economic growth in order to put growth back on a stable footing. Evidently, the markets think the authorities are up to the task.
We think this outlook hinges on the Fed's future taper actions. If the Fed continues on, or even accelerates, tapering, the global economy, including China, could take a major hit.
↑ Prasad assesses strength of U.S. dollar in NYC talk | Cornell Chronicle
Prior to the Great Recession, the dollar was depreciating at about 1 percent per year and looked to have been already knocked off of its pedestal. The crisis was effective in reversing that trend as foreign markets have turned to safer investment options amidst the economic turmoil.
While investing in the U.S. dollar is seen as a safer option for foreign investors, Prasad [Eswar Prasad, Dyson School's Tolani Senior Professor of Trade Policy; senior fellow, National Bureau of Economics] did offer a caveat in that emerging markets offer investors an opportunity to diversify. The dollar's stronghold could shift and is, in fact, likely to depreciate against emerging markets over the long term if those markets are able to earn credibility and convince investors that they are able [to] keep inflation low, he said.
↑ Live Blogging: The Commercial Real Estate Debt Landscape | Commercial Observer
Mr. Borter to Mr. Otten: How do you set your pricing?
Mr. Otten: Do you really expect me to tell you that? You go first [laughs].
↑ Understanding emerging-market turmoil | vox
This article is good at showing that while the taper has been impacting emerging markets, there are many factors at play. Kristin Forbes:
Over the next few months, discrimination across countries is likely to become more sophisticated. Countries will also be assessed on characteristics such as their foreign reserve stockpiles, inflation, recent credit growth, and currency mismatches (which affects resilience to depreciations). Increasingly important will be government policy responses. As shown in Forbes and Klein (2013), countries which allow their currencies to depreciate will see a boost to growth after several quarters (although this is often preceded by an initial slowdown). Countries which respond by imposing capital controls and raising interest rates will tend to see a contraction over the next few quarters. Countries will increasingly be evaluated based on actions they choose, rather than on factors outside of their control.
↑ 5 Truths Of Tech-Hub Housing Costs – Forbes
Trulia's Chief Economist Jed Kolko releases a special edition of Trulia 's Price and Rent Monitors which looks at affordability in housing markets with local tech industries. Prices today are 82% higher in tech hubs than in other large metros, but most of this gap existed before the modern Internet era. Furthermore, housing markets differ radically among tech hubs: the most affordable, Raleigh, costs one-fifth as much as San Francisco and has ten times as much new housing construction.
1. Rising home prices in tech hubs are in line with national trends.
2. Rents are rising faster in tech hubs than in the rest of the country.
3. Buying a home in a tech hub is much more expensive than in other housing markets.
4. Housing in tech hubs was expensive even before the modern Internet era.
5. Housing affordability in tech hubs depends a lot on housing construction.
The article fleshes out details.
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