News: Real Estate, Risk, Economics. Nov. 8, 2014

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Table of Contents
(Click to sections below.)

1) Eurozone outlook … what's to be done? – YouTube

2) The Inland Empire's Apartment Market is (Finally) Heating Up – YouTube

3) Rental property number 11 after the rehab – YouTube

4) Trends in unemployment and other labor market difficulties | Trends in unemployment and other labor market difficulties : Beyond the Numbers: US Bureau of Labor Statistics

5) Rents skyrocket well beyond wages

6) London's Cheesegrater Skyscraper Investigated Over Bolts – Bloomberg

7) Luxembourg Leaks, Secret Tax Deals Exposed | International Consortium of Investigative Journalists

8) Saudi Cut In Oil Price for US May Lead To Price War | naked capitalism

9) Quantitative Easing for the People by John Muellbauer – Project Syndicate

10) EconoSpeak: Public Works, Economic Stabilization and Cost-Benefit Sophistry

11) The Deal to Sell 6,000 of Detroit's Blighted Properties Falls Apart – Businessweek

12) Fannie, Freddie post profits in 3Q, will pay dividends to Treasury | The Columbian

13) Why offering 3 percent downpayment mortgages is not a return to lax lending – The Washington Post

14) Hidden Remodeling Surprises – YouTube

15) THE EMPLOYMENT SITUATION — OCTOBER 2014 | US Bureau of Labor Statistics

16) Sears Holdings explores creation of REIT to raise cash

17) Nonresidential Construction Employment Slips in October

18) Giant hog farms are making people sick. Here's why it's a civil rights issue. | Grist

19) CHERRY GROVE: Dredging of finger canals in Cherry Grove could cost homeowners $24k apiece | Local News | MyrtleBeachOnline com

20) Kansas has high rate of vacant foreclosed home | Local News – Home

21) Five American Cities Back From the Dead – 24/7 Wall St.

22) Will 2015 be the year of jobless growth? – Forum:Blog Forum:Blog | The World Economic Forum

23) Multifamily Acquisition and Management Benchmarks – YouTube

24) Filling the void: Paterson sets sights on hundreds of abandoned properties | NJ com

25) Jobs Data Show Steady Gains, but Stagnant Wages Temper Optimism – NYTimes com

26) The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare | Rolling Stone

27) 1 killed, 1 injured in Fremont apartment building fire | The Today File | Seattle Times

  1.    Eurozone outlook … what's to be done? – YouTube

    The European Commission has slashed its growth forecasts for the eurozone. Chris Giles, economics editor, and global economy news editor Ferdinando Giugliano discuss the challenges facing the currency union and how it can return to growth.

    Add your comment.


  2.    The Inland Empire's Apartment Market is (Finally) Heating Up – YouTube

    Riverside/San Bernardino, one of the poster-child markets of the recession and a late-recovery market, has seen apartment fundamentals surge of late — with occupancy rates and rent growth levels hitting long-time highs.Riverside/San Bernardino, one of the poster-child markets of the recession and a late-recovery market, has seen apartment fundamentals surge of late — with occupancy rates and rent growth levels hitting long-time highs.

    Add your comment.


  3.    Rental property number 11 after the rehab – YouTube

    My 11th rental property after the rehab. Cost was about $12,000 to fix up and it is now rented for $1,400 a month. The home was bought for $109,152.

    Add your comment.


  4.    Trends in unemployment and other labor market difficulties | Trends in unemployment and other labor market difficulties : Beyond the Numbers: U.S. Bureau of Labor Statistics

    The Bureau of Labor Statistics (BLS) has for many years published various measures of unemployment and other labor market difficulties. There are six "alternative measures of labor underutilization" published each month in the Employment Situation news release.1 These measures provide insights into a broad range of problems encountered by workers in today's labor market.2 The official unemployment rate, also referred to in the list of alternative measures as U-3, is defined as the total number of unemployed persons as a percentage of the labor force, while U-1 and U-2 are more narrowly defined and U-4 through U-6 are broader in scope.

    Add your comment.


  5.    Rents skyrocket well beyond wages

    Lease a two-bedroom apartment in Miami, and you could be putting more than half your salary into the rent check. The same is true for Los Angeles and New York City—and it's only getting worse, according to a report from real estate company Trulia.

    Rents are rising most in the local housing markets where renters are already stretched thinnest. In the five least affordable markets, rents are now 7.8 percent higher than they were a year ago.

    "Rents are rising because of strong demand that supply hasn't kept up with. …

    Add your comment.


  6.    London's Cheesegrater Skyscraper Investigated Over Bolts – Bloomberg

    Engineers are trying to find out why two steel bolts broke off from the 47-story London tower known as the Cheesegrater, falling five floors to the street.

    Add your comment.


  7.    Luxembourg Leaks, Secret Tax Deals Exposed | International Consortium of Investigative Journalists

    Secret tax rulings, revealed by ICIJ for the first time, show how global companies cut deals with Luxembourg to save billions on tax bills.

    Key Findings

    • Pepsi, IKEA, AIG, Coach, Deutsche Bank, Abbott Laboratories and nearly 340 other companies have secured secret deals from Luxembourg that allowed many of them to slash their global tax bills.
    • PricewaterhouseCoopers has helped multinational companies obtain at least 548 tax rulings in Luxembourg from 2002 to 2010. These legal secret deals feature complex financial structures designed to create drastic tax reductions. The rulings provide written assurance that companies' tax-saving plans will be viewed favorably by Luxembourg authorities.
    • Companies have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes. Some firms have enjoyed effective tax rates of less than 1 percent on the profits they've shuffled into Luxembourg.
    • Many of the tax deals exploited international tax mismatches that allowed companies to avoid taxes both in Luxembourg and elsewhere through the use of so-called hybrid loans.
    • In many cases Luxembourg subsidiaries handling hundreds of millions of dollars in business maintain little presence and conduct little economic activity in Luxembourg. One popular address — 5, rue Guillaume Kroll — is home to more than 1,600 companies.

    Key Findings

    • Pepsi, IKEA, AIG, Coach, Deutsche Bank, Abbott Laboratories and nearly 340 other companies have secured secret deals from Luxembourg that allowed many of them to slash their global tax bills.
    • PricewaterhouseCoopers has helped multinational companies obtain at least 548 tax rulings in Luxembourg from 2002 to 2010. These legal secret deals feature complex financial structures designed to create drastic tax reductions. The rulings provide written assurance that companies' tax-saving plans will be viewed favorably by Luxembourg authorities.
    • Companies have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes. Some firms have enjoyed effective tax rates of less than 1 percent on the profits they've shuffled into Luxembourg.
    • Many of the tax deals exploited international tax mismatches that allowed companies to avoid taxes both in Luxembourg and elsewhere through the use of so-called hybrid loans.
    • In many cases Luxembourg subsidiaries handling hundreds of millions of dollars in business maintain little presence and conduct little economic activity in Luxembourg. One popular address — 5, rue Guillaume Kroll — is home to more than 1,600 companies.

    Add your comment.


  8.    Saudi Cut In Oil Price for US May Lead To Price War | naked capitalism

    We're glad Yves Smith delved into this. This bit we found exceptionally helpful in pondering what's goiing on:

    …some pet targets may not be hurt as badly as hoped. Russia will suffer more of an opportunity loss than an actual cost from the price reduction, since the ruble has fallen significantly against the dollar. The Saudis may hope to partially displace Russia as a supplier of oil to Europe (now roughly 1/3 of the total) but refineries would need to be retooled to refine the Saudi's light crude, so it isn't clear whether even what amounts to bargain prices will offset this cost (and readers point out that Russian crude may also produce a better mix of distillates for European use, since they are much heavier users of diesel fuel than the US).

    We'd like to know more about that.

    Add your comment.


  9.    Quantitative Easing for the People by John Muellbauer – Project Syndicate

    John Muellbauer:

    …a €500 ($640) check from the ECB could increase spending by about €34 billion, or 1.4% of GDP. The extra tax revenue that such a rebate would produce would reduce government deficits significantly.

    We agree that money directly to the people would be better than what the US has done. However, the amount of money would have to be enough to increase demand-spending after people use the money for paying down debts. The payments would have to continue long enough that there would be enough demand-spending after people had saved up a nest egg or cushion against the next feared downturn.

    Add your comment.


  10.    EconoSpeak: Public Works, Economic Stabilization and Cost-Benefit Sophistry

    Today, the role of government and the intention of cost benefit analysis is very different from what was professed in the foreword to the National Resources Board's 1934 report. How has that happened?

    "Many difficult conceptual issues such as externalities, consumer surplus, opportunity costs, and secondary benefits that had troubled earlier practitioners were resolved and other unresolved issues, such as the discount rate, were at least clarified." — Maynard M. Hufschmidt, "Benefit-Cost Analysis 1933-1985"

    Just what are those "secondary benefits"? What are the "opportunity costs"? How did the difficult issues get resolved? And who cares?

    What if I told you that "secondary benefits" was a cipher for "wages of labor," that "opportunity costs" was code for "return on capital investment" and that a significant portion of those supposedly sacrosanct financial "opportunities" result from cost-shifting? What if I pointed out that the "difficult issues" were "resolved" by declaring that wages were of little concern to public policy making but that profits were paramount?

    Would you conclude with Hufschmidt that these difficult "conceptual" issues had been "resolved" or "at least clarified"? Or would you object that these are political, not conceptual, issues and that they have been suppressed and arrogated by the ideological framing and technocratic jargon of cost-benefit analysis? I leave the last word to John Maurice Clark:

    "It comes down to this, that any use of labor that is worth anything at all is worth that much more than nothing. In that respect the socialist view of business depressions is correct and any rebuttal that attempts to explain away this fact by the reckonings of financial expenses is a bit of economic sophistry." Studies in the Economics of Overhead Costs (1923).

    Add your comment.


  11.    The Deal to Sell 6,000 of Detroit's Blighted Properties Falls Apart – Businessweek

    Just a week after his surprising bid to buy more than 6,000 tax foreclosures in Detroit, casino and real estate developer Herb Strather has withdrawn his offer, the Detroit Free Press reports.

    So, the cost of demolition was too much to make it pencil out. That's what we we're wondering.

    Add your comment.


  12.    Fannie, Freddie post profits in 3Q, will pay dividends to Treasury | The Columbian

    With its previous payments totaling $134.5 billion, Fannie has more than fully repaid the $116 billion it received from taxpayers.

    Freddie Mac posted net income of $2.1 billion for the latest quarter. Freddie, based in McLean, Va., will pay a $2.8 billion dividend to the government. Freddie will have paid $91 billion in dividends, exceeding its government bailout of $71.3 billion.

    Freddie had fully repaid as of last year's third quarter, and Fannie as of the fourth quarter of 2013.

    Add your comment.


  13.    Why offering 3 percent downpayment mortgages is not a return to lax lending – The Washington Post

    The researchers — Taz George, Laurie Goodman and Jun Zhu — analyzed the performance of low down payment loans backed by Fannie Mae in the recent past. (Fannie accepted 3 percent down until late 2013.) They found that the default rate for loans with 3 percent to 5 percent down were very similar to the default rates on loans with 5 percent to 10 percent down. They also found that very few borrowers got the lower down payment loans (peaking at 3.4 percent in 1999). And nearly all of those who did had top-notch credit.

    The thing is that many borrowers went underwater by vastly more than a 10% down payment. The object of a larger down payment is that it's harder to go under water and easier to sell or refinance during harder times. That said, we acknowledge that credit history typically is more determinant.

    Add your comment.


  14.    Hidden Remodeling Surprises – YouTube

    A few good tips for the novice:

    Are you planning a home remodeling project? There are a number of surprises that can happen during any home improvement project and My Fix It Up Life shares a few hidden surprises to watch out for in this video.

    Add your comment.


  15.    THE EMPLOYMENT SITUATION — OCTOBER 2014 | U.S. Bureau of Labor Statistics

    Total nonfarm payroll employment rose by 214,000 in October, and the unemployment rate edged down to 5.8 percent, the U.S. Bureau of Labor Statistics reported today [Friday, November 7, 2014]. Employment increased in food services and drinking places, retail trade, and health care.

    Add your comment.


  16.    Sears Holdings explores creation of REIT to raise cash

    Struggling retailer Sears Holdings said it was exploring the conversion of 200-300 stores to a real estate investment trust (REIT) and offer it to shareholders through a rights offering to raise cash.

    What terms would be beneficial to investors?

    Add your comment.


  17.    Nonresidential Construction Employment Slips in October

    Historically, a leading indicator:

    The U.S. construction industry added 12,000 jobs in October, according to the Bureau of Labor Statistics (BLS) preliminary estimate released Nov. 7. September's estimate was revised upward from 16,000 to 19,000 net new jobs. Nonresidential construction slipped in October, losing 1,900 jobs on a monthly basis.

    Add your comment.


  18.    Giant hog farms are making people sick. Here's why it's a civil rights issue. | Grist

    Interesting take:

    The foul stench and pollution caused by North Carolina's industrial swine farms has long impacted the quality of life — and the health — of nearby residents. This is a civil rights issue, according to environmental justice advocates. Earthjustice filed a complaint in September against the North Carolina Department of Environment and Natural Resources….

    As a residential landlord (or landlord to any sector other than factory pig-farms), would you buy near one of them?

    Add your comment.


  19.    CHERRY GROVE: Dredging of finger canals in Cherry Grove could cost homeowners $24k apiece | Local News | MyrtleBeachOnline.com

    Spread over 10 years:

    When Will Mann built his home in 1969 near a channel off House Creek, he never thought he and more than 700 other property owners overlooking the water could be on the hook for dredging the channels to the tune of up to a maximum of $24,000 apiece.

    Dowling said the dredging is expected to increase property values along the channels by up to 40 percent, which is part of the reasoning city officials have used to say property owners should foot the dredging bill.

    Add your comment.


  20.    Kansas has high rate of vacant foreclosed home | Local News – Home

    …Daren Bloomquist says Kansas' rate is so high because it has a small number of foreclosures, so its percentage of vacancies will be higher than a state with many foreclosures.

    We don't follow the logic there. What are we missing? What does the total have to do with the percentage? We don't see the cause and effect.

    Add your comment.


  21.    Five American Cities Back From the Dead – 24/7 Wall St.

    One major reason for the resurgence in these areas has been a growth in manufacturing jobs. From 2009 to 2013, manufacturing employment in Toledo and Indianapolis rose by more than 9%. In Kokomo, employment in the sector was up 7% in that time. A number of developments in recent years have contributed to manufacturing growth.

    Add your comment.


  22.    Will 2015 be the year of jobless growth? – Forum:Blog Forum:Blog | The World Economic Forum

    Even China, which has enjoyed unprecedented growth in competitiveness and exports, has seen manufacturing employment decline over the last 20 years, thanks to its rapid industrialization and use technology and automation. This is a long-term trend and we are likely to observe these phenomena across the world, even among emerging economies as they travel the well-trodden path of industrialization.

    Add your comment.


  23.    Multifamily Acquisition and Management Benchmarks – YouTube

    This is an excellent video to very quickly inform you where to focus a critical portion of any apartment-complex-investment analysis.

    Thanks to the National Apartment Association's 2014 Income and Expense Report, we've summarized dozens of pages of tremendously rich information in to a quick 7 minute video that you can use as an owner to compare your existing multifamily assets to or to use as a benchmark tool for acquiring your next apartment complex.

    Add your comment.


  24.    Filling the void: Paterson sets sights on hundreds of abandoned properties | NJ.com

    The city sent letters to the owners of 1,200 abandoned properties in late October. Under an ordinance passed this summer, the owners have 60 days to respond with a plan to rehabilitate their properties.

    If they don't, the city will file a court order to take the properties and rehabilitate them.

    Add your comment.


  25.    Jobs Data Show Steady Gains, but Stagnant Wages Temper Optimism – NYTimes.com

    …the report also found that wages were rising only slightly faster than the rate of inflation, fueling the debate over just how strong the labor market really is. Over the last 12 months, wages are up just 2 percent, which helps explain much of the disconnect between increasingly cheery assessments from many economists and the public's continuing discontent.

    A broader measure of unemployment that includes discouraged job seekers or those stuck with only part-time work dropped to 11.5 percent, down more than 2 percentage points from the seasonally adjusted figure from a year ago.

    The headway on jobs can be seen as validation of the Federal Reserve's decision to end its bond-buying campaign last month, while the lack of wage growth is likely to add caution to the Fed's considerations over when to raise interest rates next year.

    Mr. Perez noted that workers had benefited from few of the gains in productivity in recent decades. "Sweat equity isn't translating into financial equity, even while the C.E.O.s of those companies are reaping dramatic rewards," he said. "That's the angst and frustration that I see across this country."

    Add your comment.


  26.    The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare | Rolling Stone

    This article confirms everything William K. Black has been saying for years and years about accounting-control fraud at the largest US banks that sold toxic mortgage-backed securities around the world and that caused the Great Recession that's really been a global depression.

    Add your comment.


  27.    1 killed, 1 injured in Fremont apartment building fire | The Today File | Seattle Times

    Seattle police say that a 58-year-old man who suffered second and third-degree burns on his hands during an apartment fire in Fremont Thursday night was injured trying to save an elderly neighbor who was on fire.

    The 81-year-old man who suffered burns to 95 percent of his body died hours after the fire, according to the Seattle Fire Department.

    Add your comment.


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