News: Real Estate, Risk, Economics. Oct. 23, 2014

Linking ≠ endorsement.

Table of Contents
(Click to sections below.)

1) Uploading a Fully Encrypted, Full-System Backup to a Secure, Off-Site Server in a Limited-Access, Guarded Facility

2) Documents Reveal Billions of Gallons of Oil Industry Wastewater Illegally Injected Into Central California Aquifers

3) Big banks start charging clients for euro deposits – MarketWatch

4) 6 die in western Pennsylvania house fire – The Morning Call

5) Homeowners file wildfire claims against Washington state | The Today File | Seattle Times

6) Mortgage rates hit 2014 low – Oct. 16, 2014

7) ACORD Industry News – NICB Fraud – YouTube

8) What Markets Will – NYTimes com

9) Banks take big bet on red-hot apartments

10) San Francisco moves closer to legalizing Airbnb

11) Enlist Internal Audit to Help Manage Cloud Risk – Deloitte CIO – WSJ

12) Woman pleads guilty to arson in Las Vegas pet shop fire – Las Vegas Sun News

13) Slump in mortgage rates fails to rally home buyers

14) Gonzalo Causes Damage from the Caribbean to Scotland

15) Canada condo boom rolls on as buildings fall apart | Business Insurance

16) California Sells $350 Million of Quake Bonds: Muni Deals – Bloomberg

17) 'Suspicious' blaze destroys Old Medina Winery

18) 2 rescued after Long Island ceiling collapse – Newsday

19) Mom who set home on fire to collect insurance sentenced | KOMO News

20) Fire causes severe damage to several north Minneapolis businesses; 3 buildings are total loss | Star Tribune

21) Bresee condition has county's insurers worried | News-Gazette com

22) Study Links Hundreds of Ohio Quakes to Fracking – ABC News

23) Neighbors rally around family that loses Lehi home to fire

24) Water main break causes flood damage to 3 dozen buildings in Salt Lake City

25) Tennessee fire marshal says close doors on fire

26) San Francisco Quake Risk Rises Amid Dearth of Insurance – Bloomberg

27) [Very Highly Recommended] US Economy Faltering Momentum, Debt and Asset Bubbles :: The Market Oracle

  1.    Uploading a Fully Encrypted, Full-System Backup to a Secure, Off-Site Server in a Limited-Access, Guarded Facility

    We explained in the linked article that we were "in the process of uploading a fully encrypted, full-system backup to a secure, off-site server in a limited-access, guarded facility. The process has been running for 4 days, and there a 4 more days to go before it will be finished."

    We further said that we wouldn't be posting any of these aggregated-news posts until that process was over. It did end on time, but we ran into two small issues. One is a bug in the cloud software. The other concerns the degree to which we need to throttle our uploads to the cloud.

    We've run three differential backups since our full-system backup mentioned above, have uploaded two, and the third is running as we write this.

    The first we throttled 50%, the second 75, and the third is uploading at 87.5%. That's still not enough. We'll keep cutting it in half until we find that the uploads aren't interfering too much with our usual work.

    We have plenty of CPU and RAM, and we have the software itself throttled in addition to throttling bandwidth usage, as mentioned.

    Anyway, at least we're getting back in the swing of things with our blog posting. It will take a few cycles before we're caught up with all of the most important news as we see it.

    Thanks for your patience and especially your readership. Don't hesitate to comment and share, etc.

    Add your comment.

  2.    Documents Reveal Billions of Gallons of Oil Industry Wastewater Illegally Injected Into Central California Aquifers

    SAN FRANCISCO— Almost 3 billion gallons of oil industry wastewater have been illegally dumped into central California aquifers that supply drinking water and farming irrigation, according to state documents obtained by the Center for Biological Diversity. The wastewater entered the aquifers through at least nine injection disposal wells used by the oil industry to dispose of waste contaminated with fracking fluids and other pollutants.

    Add your comment.

  3.    Big banks start charging clients for euro deposits – MarketWatch

    Several global banks have begun charging large customers to deposit their money in euros, a rare move that could have costly implications for investors and companies that do business on the Continent.

    The actions are driven by policies from the European Central Bank, which in June became the largest central bank to impose a negative interest rate on deposits–meaning banks are paying to park their money with the ECB. The effort is designed to encourage banks to instead use that money to lend. When the ECB dropped those rates further in September, some banks started pushing those costs–or costs related to the rate cuts–onto customers.

    That's exactly why we said that there need to be strings attached. Banks must be forced to educate lenders and to lend to them and work closely with them to assure success, not simply pass along the interest charge.

    Add your comment.

  4.    6 die in western Pennsylvania house fire – The Morning Call

    Four children and two adults died Saturday in an early morning house fire in McKeesport.

    "With this home being fully engulfed when firefighters arrived, there unfortunately was nothing they could do to save the individuals inside," said McKeesport Mayor Michael Cherepko.

    Investigators are trying to determine where and how the fire started, he said. …

    The fire, which broke out at about 6:45 a.m., gutted the two-story frame house, located in the 300 block of Express Way.

    Add your comment.

  5.    Homeowners file wildfire claims against Washington state | The Today File | Seattle Times

    OLYMPIA — Dozens of central Washington homeowners have filed tort claims alleging that the state of Washington mishandled firefighting efforts during this summer's Carlton Complex fire.

    Add your comment.

  6.    Mortgage rates hit 2014 low – Oct. 16, 2014

    Interest rates on a 30-year, fixed-rate mortgage fell to 3.97% this week….

    Mortgage rates have gone lower despite expectations that they would start rising as the Federal Reserve starts pulling back its economic stimulus.

    The Fed has cut back its program of buying bonds and mortgage-backed securities, which everyone expected would put upward pressure on interest rates.

    Everyone? Well, our readers know that we called it that rates would see the 3's yet again; and it happened.

    Until the economic fundamentals are in place, all the talk of higher rates is simply hype. There will be ups and downs in the stock market that will have little to nothing to do with the fundamentals, but the lack of proper fundamentals will always force the economy to ground.

    We need solid, sustained, huge fiscal spending, not any kind of austerity. We also need to pay for it all with bond-free United States Notes.

    Add your comment.

  7.    ACORD Industry News – NICB Fraud – YouTube

    What's being done about insurance fraud (that costs us all in higher rates).

    Add your comment.

  8.    What Markets Will –

    Paul Krugman:

    I'm not mainly talking about plunging stock prices, although that's surely telling us something (but as the late Paul Samuelson famously pointed out, stocks are not a reliable indicator of economic prospects: "Wall Street indexes predicted nine out of the last five recessions!") Instead, I'm talking about interest rates, which are flashing warnings, not of fiscal crisis and inflation, but of depression and deflation.

    If you're not careful reading that, you'll miss the funny and, therefore, the point.

    We completely agree that fiscal is the solution. Monetary QE has not been able to force the string to move by pushing somewhat on one end.

    Fiscal spending takes the string by the front end and drags it. That's what we've been lacking! It would not cause hyper-inflation either, not for a long time, unless they were to pump in some $30 trillion all at once. Even then, it might not, not if they were to spend it wisely on truly productive, lasting endeavors.

    Add your comment.

  9.    Banks take big bet on red-hot apartments

    While single-family housing starts are still sputtering into recovery, up just 1 percent in September from August, multifamily starts continue to surge ahead, up 18.5 percent, according to a report released Friday by the U.S. Census. At that pace, the number of new apartment units could top 368,000 for the year. In September alone, completions of apartments reached a 24-year high. All of this begs the question of whether the market is overheating, and whether lenders, therefore, are taking an ever riskier bet?

    "We view the nation as relatively under-housed," said David Toti, an analyst with Cantor Fitzgerald. "At some point the supply-demand ratio could tip into troublesome territory, but I don't think we're nearly there yet."

    We agree with David Toti.

    Add your comment.

  10.    San Francisco moves closer to legalizing Airbnb

    The "Airbnb law" will be put to a final vote before the city's board of supervisors around 2 p.m. local time, according to the board. The law is widely expected to be approved, and will allow property owners to legally offer their homes as short-term rentals. The growing online Airbnb community has been a boon for travelers, seeking affordable options, and disrupted the hotel and travel industry.

    After the vote, the law will need a signature from Mayor Ed Lee, who has 10 days to sign. The law then would take effect in February 2015. Those currently renting properties using Airbnb technically are breaking local rules.

    …board president Chiu argues the bill keeps short-term rentals in check. "The new law will make it 1,000 percent clear that if you are a landlord evicting tenants to create a year-round hotel, or a tenant using multiple units, you will get hit with fines of thousands of dollars per day, and potential criminal charges,"….

    It passed.

    Add your comment.

  11.    Enlist Internal Audit to Help Manage Cloud Risk – Deloitte CIO – WSJ

    This is timely what with our recent adoption of cloud backups.

    According to Khalid Wasti, a director with Deloitte & Touche LLP, some CIOs are now collaborating with internal audit teams to methodically identify, prioritize, and mitigate risks prior to cloud adoption. "They are scrutinizing risk throughout the technology life cycle—not only risks inherent in migrating to the cloud, but also those that affect vendor selection, implementation, and ongoing monitoring," he says. "This can help management clarify and articulate a company's appetite for cloud risks, and develop strategies for mitigating them."

    Wasti suggests a five-step proactive approach:

    When in doubt, encrypt things with strong encryption. It is better to err on the side of caution.

    Add your comment.

  12.    Woman pleads guilty to arson in Las Vegas pet shop fire – Las Vegas Sun News

    Gloria Eun Hye Lee, accused of setting fire to her pet shop to collect insurance money, pleaded guilty this morning to charges including first-degree arson, according to the Clark County District Attorney's Office.

    Add your comment.

  13.    Slump in mortgage rates fails to rally home buyers

    … Mortgage applications to purchase a home saw no boost at all from lower rates, falling 5 percent from the previous week and 9 percent from a year ago.

    Mortgage rates, while lower now than they were a year ago, have not been the biggest barrier to entry for home buyers in this recovery. Even the high 4 percent range on the 30-year fixed is historically low. The trouble is not the rate, but credit availability. Banks have required higher credit scores, full documentation and strict debt limits because they do not want to be forced to buy back any loans that might go into default. They have already paid billions to the government on bad loans left over from the housing crash.

    We disagree. That is a small part of it. It is dwarfed by low wages, low number hours worked per week, student debt, and remaining consumer debt.

    House prices tumbling will help would-be buyers, but people know low down-payment loans are available. It's the monthly payments that kill the deal. Plus, people aren't buying into the notion anymore that priced only go up. Obviously, they can also fall.

    Add your comment.

  14.    Gonzalo Causes Damage from the Caribbean to Scotland

    AIR Worldwide estimates that insured losses in Bermuda from Hurricane Gonzalo will range between USD 200 million and USD 400 million. To produce loss estimates for Hurricane Gonzalo using the AIR Tropical Cyclone Model for the Caribbean, AIR used track and intensity information from NHC advisories, vortex reports from hurricane hunter aircraft, and actual wind observations from stations in Bermuda.

    Add your comment.

  15.    Canada condo boom rolls on as buildings fall apart | Business Insurance

    Canada's biggest city has more than 100,000 units under construction as developers and investors seek to cash in on condo prices that are up 25.7% in the city over the past five years. The trouble is, many buildings are so poorly constructed that some residents fear that the money-spinners of today could become the slums of the future.

    Glass panels have been falling off newly built Toronto condos, including the luxury Shangri-La and Trump towers and a dozen or more lesser-known buildings across the city. New buildings suffer from water leaks and poor insulation, making them ill-suited to Canadian weather.

    "Many buildings that went up during the beginning of this condo boom are already facing high repair costs, and in many cases lawsuits, because they are built so shabbily," said Ted Kesik, a professor of building science at the University of Toronto.

    "The life cycle is clear. They are OK for the first five years, they gradually deteriorate by year 10 … and don't even reach year 20 before significant remedial work needs to be done. In 50 years these buildings may well become an urban slum."

    Add your comment.

  16.    California Sells $350 Million of Quake Bonds: Muni Deals – Bloomberg

    The California Earthquake Authority, the largest seismic insurer in the U.S., is selling $350 million in bonds to strengthen its ability to pay claims, after the state's first death due to a quake in 11 years.

    Add your comment.

  17.    'Suspicious' blaze destroys Old Medina Winery

    Early Saturday morning, the Old Medina Winery caught flames and nearly burned to the ground.

    The building, located at 2894 Old Medina Road, has been abandoned for approximately six years. Madison County Fire Chief Eric Turner said the blaze was suspicious and the department is investigating.

    Add your comment.

  18.    2 rescued after Long Island ceiling collapse – Newsday

    MINEOLA, N.Y. – (AP) — Two people have been hurt in a ceiling collapse at a shuttered Nassau County government building that's under renovation.

    Add your comment.

  19.    Mom who set home on fire to collect insurance sentenced | Local & Regional | Seattle News, Weather, Sports, Breaking News | KOMO News

    TACOMA, Wash. — A 38-year-old Washington woman who told firefighters how she dropped her young son to safety before escaping a house fire herself has admitted setting the fire and making a false insurance claim.

    Add your comment.

  20.    Fire causes severe damage to several north Minneapolis businesses; 3 buildings are total loss | Star Tribune

    MINNEAPOLIS — A fire has caused severe damage to several businesses in north Minneapolis, and officials say at least three buildings are a total loss.

    Add your comment.

  21.    Bresee condition has county's insurers worried |

    DANVILLE — Topping off at 12 stories, Bresee Tower has easily commanded for nearly a century the title of tallest building in Vermilion County.

    But these days, "high rise" better describes the long-vacant, deteriorating structure's cost to taxpayers rather than its impact on the Danville skyline.

    With a crumbling terra cotta facade — literally — officials at Danville city hall and the Vermilion County Courthouse Annex, which flank Bresee, have had serious concerns for years over the hazard that falling chunks pose to pedestrians, traffic and buildings near its "fall zone," as Mayor Scott Eisenhauer describes it.

    Add your comment.

  22.    Study Links Hundreds of Ohio Quakes to Fracking – ABC News

    A new study suggests fracking triggered hundreds of small, unnoticeable earthquakes in eastern Ohio late last year, months before the state first linked seismic activity to the much-debated oil-and-gas extraction technique.

    The report, which appears in the November issue of the journal Seismological Research Letters, identified nearly 400 tremors on a previously unmapped fault in Harrison County between Oct. 1 and Dec. 13, 2013.

    … "The big question is: Are we doing something now that increases the probability that it will induce larger quakes?"

    Add your comment.

  23.    Neighbors rally around family that loses Lehi home to fire

    Just hours before the fire, the Freestone family was enjoying a barbecued meal and after cleanup began to relax for the evening. During a movie, they said they kept hearing a popping sound.

    As is their habit, the grill had been left on high to clean it before shutting everything down. While cleaning and getting the children to sleep, the outdoor grill was forgotten and is suspected of causing the fire. Flames licked up the exterior wall and entered into the attic, eventually destroying the main level of the home, its contents and the garage.

    Add your comment.

  24.    Water main break causes flood damage to 3 dozen buildings in Salt Lake City

    A water main break has caused flood damage to some three dozen structures, including a school, in Salt Lake City.

    Add your comment.

  25.    Tennessee fire marshal says close doors on fire

    The state Department of Commerce and Insurance last week announced its "Close the Door" campaign and says closing the door reduces fire growth and spread, limits damage to the home and could save lives. The agency says a closed door can hinder flames and smoke from spreading as well as help deprive a fire of oxygen.

    Add your comment.

  26.    San Francisco Quake Risk Rises Amid Dearth of Insurance – Bloomberg

    The San Francisco region will probably be struck by an earthquake with a magnitude of at least 6.7 in coming decades, and most of the billions of dollars of damages wouldn't be covered by insurance.

    A worst-case, magnitude 7.9 earthquake could cause losses of more than $200 billion, according to report released today by catastrophe modeler Risk Management Solutions.

    Add your comment.

  27.    U.S. Economy Faltering Momentum, Debt and Asset Bubbles :: The Market Oracle

    Excellent stuff by Van R. Hoisington and Lacy H. Hunt:

    One factor that connects poor growth with the low inflation and low bond yields evident in the U.S., Europe and Japan is that the velocity of money (V) is falling in all three areas.

    Functionally, many things influence V. The factors that could theoretically influence V in at least some minimal fashion are too numerous to count. A key variable, however, appears to be the productivity of debt. Money and debt are created simultaneously. If the debt produces a sustaining income stream to repay principal and interest, then V will rise since GDP will rise by more than the initial borrowing. If the debt is unproductive or counterproductive, meaning that a sustaining income stream is absent, or worse the debt subtracts from future income, then V will fall. Debt utilized for the purpose of consumption or paying of interest, or debt that is defaulted on will be either unproductive or counterproductive, leading to a decline in V.

    Important new research by four distinguished economists (three in Europe and one in the U.S.) is contained in a report titled "Deleveraging? What Deleveraging?" (Luigi Buttiglione, Philip R. Lane, Lucrezia Reichlin and Vincent Reinhart, Geneva Reports on the World Economy 16, September 2014). It provides additional evidence on the role of "debt dynamics" and the state of the global debt overhang. They write, "Contrary to widely held beliefs, the world has not yet begun to delever and the global debt-to-GDP is still growing, breaking new highs." Further, it is a "poisonous combination" when world growth and inflation are lower than expected and debt is rising. "Deleveraging and slower nominal growth are in many cases interacting in a vicious loop, with the latter making the deleveraging process harder and the former exacerbating the economic slowdown."

    This research also identifies two other highly significant trends. First, global debt accumulation was led by developed economies until 2008. Se cond, the debt build-up since 2008 has been paced by the emerging economies. The authors write that the rise in Chinese debt is especially "stunning". They describe China as "between a rock (rising and high debt) and a hard place (lower growth)." In addition to China they identify India, Turkey, Brazil, Chile, Argentina, Indonesia, Russia and South Africa as belonging to the "fragile eight" group of countries that could find themselves in the unwanted role of host to "the next leg of the global leverage crisis."

    We interpret this research to mean that the monetary policy may begin to become ineffective at emerging market central banks, just as has happened in the U.S., Europe and Japan. Weaker growth conditions in the emerging markets are thus likely to accentuate, rather than ameliorate, poor business conditions in the major economies. Indeed, this year's downturn in global commodity prices is consistent with the beginning of such a phase. The huge jump in emerging market debt is also significant because research has found the severity of economic contractions is directly related to the leverage in the prior expansion.

    Historically, in our judgment, the most important authority on the subject of asset bubbles was the late MIT professor Charles Kindleberger, author of 20 books including the one of the greatest books on capital markets Manias, Panics and Crashes (1978). He found that asset price bubbles depend on the growth of credit. Atif Mian (Princeton) and Amir Sufi (University of Chicago) provided confirmation for Kindleberger's pioneering work and expanded on it in their 2014 book House of Debt. Chapter 8, entitled "Debt and Bubbles," contains the heart of their insights. Mian and Sufi demonstrate that increasing the flow of credit is extremely counterproductive when the fundamental problem is too much debt, and excessive debt can fuel asset bubbles.

    Based on our reading of these two books we would define an asset bubble as a rise in prices that is caused by excess central ban k liquidity rather than economic fundamentals. As Kindleberger clearly stated, the process of excess liquidity fueling higher prices in the face of faltering fundamentals can run for a long time, a phase Kindleberger called "overtrading". But eventually, this gives way to "discredit", when the discerning few see the discrepancy between prices and fundamentals. Eventually, discredit yields to "revulsion", when the crowd understands the imbalance, and markets correct.

    With the nominal growth trajectory extremely soft, U.S. Treasury bond yields are likely to continue working lower as similar circumstances have created declines in government bond yields in Europe and Japan. Viewing the yields overseas, it is evident that ample downside still exists for long U.S. Treasury bond yields, as the higher U.S. yields offer global investors an incentive to continue to move funds into the United States.

    Another factor suggesting lower long- term U.S. Treasury yields is the strength of the U.S. dollar. In many industries, the price leader for certain goods in the U.S. is a foreign producer. A rising dollar leads to what economists sometimes call the "collapsing umbrella". As the dollar lifts, the foreign producer cuts U.S. selling prices, forcing domestic producers to match the lower prices. This reinforces the prospect for lower inflation as nominal GDP wanes. This creates a favorable environment for falling U.S. Treasury bond yields.

    Add your comment.

If you are an investor in 1-4 unit properties in Arizona, California, Nevada, Oregon, Utah, or Washington, please do the financially responsible thing and make sure you have proper Landlord Insurance with PropertyPak™. We love focusing on real estate and the economy in general, but we are also here to serve your insurance needs.

Hill & Usher (PropertyPak™ is a division) has many insurance offerings. See our menu above for more info and links.

Did this post help you? Let us know by leaving your comment below.

Note: This blog does not provide legal, financial, or accounting advice. Seek professional counsel.

Furthermore, we, as insurance producers, are prohibited by law from disparaging the insurance industry, carriers, other producers, etc. With that in mind, we provide links without staking out positions that violate the law. We provide them solely from a public-policy standpoint wherein we encourage our industry to be sure our profits, etc., are fair and balanced.

We do not necessarily fact checked the contents of every linked article or page, etc.

If we were to conclude any part or parts of our industry are in violation of fundamental fairness and the legal standards of a state or states, we'd address the issue through proper, legal channels. We trust you understand.

The laws that tie our tongues, so to speak, are designed to keep the public from losing confidence in the industry and the regulatory system overseeing it. Insurance commissioners around the country work very hard to analyze rates and to not allow the industry to be damaged by bad rate-settings and changes in coverages. The proper way for people in the industry to deal with such matters is by adhering to the laws, rules, and regulations of the applicable states and within industry associations where such matters may be discussed in private without giving the industry unnecessary black eyes. Ethics is very high on the list in the insurance industry, and we don't want to lose the people's trust. That said, the industry is not perfect; but what industry is?

For our part, we believe in strong regulations and strong regulators.

We welcome your comments and ask you to keep in mind that we cannot and will not reply in any way or ways where any insurance commissioner could rightly say we've violated the law of the given state.

We are allowed to share rating-bureau data/reports and industry-consultant opinions but make clear here that those opinions are theirs and do not necessarily reflect our position.