News: Real Estate, Risk, Economics. Mar. 5, 2015

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Table of Contents
(Click to sections below.)

1) David Murray calls for controls on hot housing market

2) Janet Yellen slams Wall Street for "brazen" lawbreaking and poor ethics – Vox

3) Asian Investors Diversify Global Real Estate Strategies

4) China's Debt Binge Spawns Asset-Backed Bond Boom – Bloomberg Business

5) Impotent Western Sanctions Fail To Disrupt Russian Energy Exports

6) To Fight Inequality, Tax Land – Bloomberg View

7) Decor from JUNK- 10 DIY Salvage Ideas from Shannon Quimby (HGTV, BHG) – YouTube

8) Mortgage application volume rises 0.1%: MBA

9) China: Domestic Insurers Must Boost Capital to Cover Shadow-Banking Risk

10) Extreme Weather Hits US Hard: Munich Re

11) Top 10 States With Most Tornado Claims: State Farm

12) PandaLabs Annual Report 2014 was record year for cyber-attacks | Business-Cloudcom

13) Low-Income Programs Not Driving Nation's Long-Term Fiscal Problem — Center on Budget and Policy Priorities

14) A Developing Front in Resilience: Electricity Microgrids – Urban Land Magazine

15) Investor sentiment sours from US equities towards Eurozone and Japan | ETF,Global markets,Investment,Markit | Markit Commentary

16) Signs of Intelligent Life in Economics Profession | Al Jazeera America

17) Equity Firms Are Lending to Landlords, Signaling a Shift – NYTimescom

18) US money illusion? – YouTube

19) German Real Estate: Why Investors Are Buying It Now – Forbes

20) Carlos Slim buys Spanish real estate on the cheap

21) Jobless Claims Rise to Highest Level Since May — 3rd Update

  1.    David Murray calls for controls on hot housing market

    Australian regulators need to consider introducing caps on borrowing to stop house price growth and further risk to the financial system, says the head of the Abbott government's financial systems inquiry David Murray.

    We know he's right.

    Add your comment.


  2.    Janet Yellen slams Wall Street for "brazen" lawbreaking and poor ethics – Vox

    Janet Yellen:

    Beyond focusing on capital and liquidity, the Fed also promotes safety and soundness by seeking to ensure that banks are well managed and subject to strong governance by a board of directors responsible to shareholders. It is unfortunate that I need to underscore this, but we expect the firms we oversee to follow the law and to operate in an ethical manner. Too often in recent years, bankers at large institutions have not done so, sometimes brazenly. These incidents, both individually and in their totality, raise legitimate questions of whether there may be pervasive shortcomings in the values of large financial firms that might undermine their safety and soundness.

    Beyond these very tangible gains, we see some evidence of improved risk management, internal controls, and governance at large firms. But large firms still have room for improvement in this area, and supervisors will be watching closely. The compliance breakdowns in recent years that I mentioned earlier in my remarks undermine confidence in large firms' risk management and controls, which has implications for financial stability.

    We aren't for the Federal Reserve System; but while we have it, that's the kind of talk we want to hear. It's why we were for Janet for the position, in addition to that she called the post-recession economics quite well.

    We don't believe she made her remarks simply to fend off Rand Paul but truly believes in what she said, which makes her the best Fed Chair at least during our years of hearing Fed Chairs.

    Add your comment.


  3.    Asian Investors Diversify Global Real Estate Strategies

    Marc Giuffrida, Executive Director, Global Capital Markets, Asia:

    Alongside the emergence of new capital, the early adopters of global investing are starting to evolve their strategies beyond the traditional gateway cities. While the acquisition of trophy assets continued to attract headlines, and New York and London remain the top destinations for investment, perhaps the biggest untold story for 2014 has been the movement into secondary gateway cities such as Paris and LA as well as regional centers of the UK. This trend can be best seen in the falling concentration of the top five global destinations among the total pool of Asian cross-border investment.

    Likewise, there is a shift in the types of assets Asian investors are seeking. While office continues to be the preferred asset class, particularly for new investors, there was a significant uptick in activity in hotels and industrial assets. Investors feel that by looking to new markets and asset classes they will be able to secure better yields and face less competition from other investors.

    Add your comment.


  4.    China's Debt Binge Spawns Asset-Backed Bond Boom – Bloomberg Business

    "There's been no real economic crisis in China in the past few decades, but if a severe one happens, the performance of the underlying assets backing these securities could deteriorate significantly," said Jerome Cheng, a structured finance analyst at Moody's Investors Service in Hong Kong.

    That's a huge understatement.

    Add your comment.


  5.    Impotent Western Sanctions Fail To Disrupt Russian Energy Exports

    Excellent reporting by Andrew Topf, though we disagree on who caused the Ukrainian problem:

    Energy exports from Russia, in the form of coal, oil, natural gas and uranium, continue to flow unimpeded, despite Western efforts to damage the Russian economy for interfering in Ukraine.

    In some ways, the sanctions have had the desired effect. But in others, notably the energy trade, they have failed, and in fact it could be argued they have backfired, by hurting the businesses that do business with Russia. Moreover, the sanctions have further isolated Russia from Europe and drawn it closer to alternative energy partners, namely Turkey and China.

    Add your comment.


  6.    To Fight Inequality, Tax Land – Bloomberg View

    Peter R. Orszag:

    Henry George advocated forcefully for a land tax in his 1879 book, "Progress and Poverty." More than 135 years later, perhaps its time is ripe.

    Here's our prime objection. Someone who doesn't have a high enough income could lose his or her fully paid-for land. We do not like land or property taxes. We don't like sales taxes either, as they disproportionately hit the poor. We prefer the progressive income-tax if we are to have any tax at all.

    Taxes aren't really necessary. The government could get along just fine without them. The system would be quite simple, but we won't go into that here. We've covered it before and will again. Stay tuned.

    Add your comment.


  7.    Decor from JUNK- 10 DIY Salvage Ideas from Shannon Quimby (HGTV, BHG) – YouTube

    Fun change of pace:

    In this short interview, Derek "Deek" Diedricksen (HGTV, DIY Network, Relaxshacks.com) talks to Budget-Design Expert and Magazine Stylist Shannon Quimby, whose expertise deals with taking found items, and junk, and re-making, or re-imagining, them into new decor pieces for homes. Shannon's work is often seen in magazines ranging from Better Homes and Gardens, to Country Living, Vintage Style, Flea Market Style, and beyond. She is also author of the book "Color, Create, Decorate", and has contributed to many others such as "Salvage Secrets: Transforming Reclaimed Materials Into Design Concepts" and "Salvage Secrets: Design And Decor". She has also worked for, and appeared, on HGTV, and The DIY Network.

    Add your comment.


  8.    Mortgage application volume rises 0.1%: MBA

    There are an ever dwindling number of borrowers who can benefit from a refinance, given how long rates have been so low. Clearly the threat of higher rates spooked some, but not a lot.

    Mortgage applications to purchase a home fell 0.2 percent week-to-week and are down the same amount from a year ago. Rough winter weather continued to plague much of the nation, but builders and Realtors alike say weather is not the problem, home prices are.

    Add your comment.


  9.    China: Domestic Insurers Must Boost Capital to Cover Shadow-Banking Risk

    Insurers are turning to shadow-bank assets amid sliding bond yields, deploying mounting premiums as the number of Chinese over the age of 60 exceeds 200 million. … Similar opaque investments led to the near collapse of American International Group Inc. during the global financial crisis.

    Add your comment.


  10.    Extreme Weather Hits U.S. Hard: Munich Re

    New research sees the warming in the Arctic as an important factor in the increasing and persisting cold-air outbreaks towards the south…. A study of the Potsdam Institute for Climate Impact Research also establishes a correlation between weather extremes in summer with the accelerated melting of ice in the Arctic.

    Add your comment.


  11.    Top 10 States With Most Tornado Claims: State Farm

    Tornado and high winds are some of the most destructive forces of nature. While tornadoes are frequent in the Great Plains, South, and Midwest, there is no state in the country that isn't at risk.

    Add your comment.


  12.    PandaLabs Annual Report 2014 was record year for cyber-attacks | Business-Cloud.com

    How vulnerable are your business, your family, and you?

    The PandaLabs Annual Report for 2014 shows that the bad guys were on their game in 2014 as record after record fell under persistent cyber-attacks.

    Add your comment.


  13.    Low-Income Programs Not Driving Nation's Long-Term Fiscal Problem — Center on Budget and Policy Priorities

    It's not necessary to cut benefits going to the poor, quite the contrary.

    If the question is whether low-income programs are contributing to the nation's longer-term budget challenges, the answer is that, outside of health care costs, the opposite is the case: those programs are shrinking modestly as a percent of GDP, falling below their 40-year average in 2018 and then edging down further. Spending on low-income health programs is continuing to rise, but total spending on low-income programs is projected to remain essentially stable into the future as a percent of the economy.

    This picture is consistent with another CBPP analysis,[9] which finds that outside of Social Security and Medicare, total federal program spending is below its 40-year average as a percent of GDP and is projected to decline further. When Social Security and Medicare are added in, total program spending will rise slightly over the next decade, from 19.0 percent of GDP to 19.3 percent. While the large majority of the increases in those two programs reflect the aging of the population, the increases also reflect the rise in health care costs.

    The nation faces a challenging but manageable long-term fiscal problem. Rising Social Security and health care costs, increased interest payments on the debt (primarily reflecting the effect of higher interest rates as the economy continues to recover), coupled with insufficient revenue levels, mean that after 2018, debt is projected to climb slowly but steadily as a percent of GDP. Debt cannot grow indefinitely as a percent of GDP without eventually causing economic harm and falling living standards. Policymakers should address this long-term trend in a balanced fashion.

    Nonetheless, the assumption that means-tested safety-net programs are experiencing ever-increasing costs and contributing to the long-run budgetary challenge is mistaken.

    Add your comment.


  14.    A Developing Front in Resilience: Electricity Microgrids – Urban Land Magazine

    We've been a big fan of this technology for many years.

    Power reliability is becoming an increasingly important consideration in real estate development, and that is causing some property owners and managers to seek more stable and secure power systems such as microgrids—self-sustaining power generation systems that are connected to the traditional utility power grid but which are capable of running independently from it when necessary.

    Some homes and businesses already have backup generators to cover power outages, but microgrids differ from those backup systems in their ability to provide uninterrupted power. Also, because microgrids are often developed with renewable energy sources such as solar or fuel cells, they can offer greater flexibility, energy efficiency, and cost savings compared with those offered by the traditional utility grid or backup generators, which typically are powered by diesel fuel.

    The largest private real estate project in the United States, the 17 million-square-foot (1.6 million sq m) Hudson Yards project under construction in New York City, is among the newer developments planning to incorporate a microgrid, which will eventually power its first three buildings. If another Superstorm Sandy hits the East Coast—or if any storm blows down power lines and causes a power outage—it will not affect the electricity supply to Hudson Yards.

    Historically, microgrids had been used as a power supply only for remote communities, such as island populations. But in the past few years, some institutions that need uninterrupted power, such as military facilities, public-safety operations, and health systems, have been adding microgrids, and their use is expanding to commercial offices, industrial facilities, and grocery stores.

    This growing interest is driven by fears of power outages ca used by extreme weather along with the increasing attractiveness of renewable systems because of falling prices for solar and battery storage solutions. …

    Superstorm Sandy serves as the poster child for the appeal and benefit of stable, uninterrupted power. While that storm in 2012 caused power outages for 10 million utility customers in 24 states from Maine to Florida, an emergency shelter at South Windsor High School in South Windsor, Connecticut, was powered by a microgrid. In addition, Princeton University was able to stay powered up and serve hot meals for two and a half days until utility power was restored. And at a New York City housing cooperative called Co-op City, its self-contained central plant was able to keep the lights on for 60,000 residents in dozens of high-rise buildings and townhouse clusters.

    But reliability is hardly the only advantage of a microgrid. More than half of all planned microgrids are expected to incorporate solar power, which promises more energy efficiency than a typical building power system. Plus, many microgrids include the ability to sell excess electricity back to the utility grid, which can reduce a facility's utility bill.
    Power reliability is becoming an increasingly important consideration in real estate development, and that is causing some property owners and managers to seek more stable and secure power systems such as microgrids—self-sustaining power generation systems that are connected to the traditional utility power grid but which are capable of running independently from it when necessary.

    Some homes and businesses already have backup generators to cover power outages, but microgrids differ from those backup systems in their ability to provide uninterrupted power. Also, because microgrids are often developed with renewable energy sources such as solar or fuel cells, they can offer greater flexibility, energy efficiency, and cost savings compared with those offered by the traditional utility grid or backup generators, which typically are powered by diesel fuel.

    The largest private real estate project in the United States, the 17 million-square-foot (1.6 million sq m) Hudson Yards project under construction in New York City, is among the newer developments planning to incorporate a microgrid, which will eventually power its first three buildings. If another Superstorm Sandy hits the East Coast—or if any storm blows down power lines and causes a power outage—it will not affect the electricity supply to Hudson Yards.

    Historically, microgrids had been used as a power supply only for remote communities, such as island populations. But in the past few years, some institutions that need uninterrupted power, such as military facilities, public-safety operations, and health systems, have been adding microgrids, and their use is expanding to commercial offices, industrial facilities, and grocery stores.

    This growing interest is driven by fears of power outages caused by extreme weather along with the increasing attractiveness of renewable systems because of falling prices for solar and battery storage solutions. …

    Superstorm Sandy serves as the poster child for the appeal and benefit of stable, uninterrupted power. While that storm in 2012 caused power outages for 10 million utility customers in 24 states from Maine to Florida, an emergency shelter at South Windsor High School in South Windsor, Connecticut, was powered by a microgrid. In addition, Princeton University was able to stay powered up and serve hot meals for two and a half days until utility power was restored. And at a New York City housing cooperative called Co-op City, its self-contained central plant was able to keep the lights on for 60,000 residents in dozens of high-rise buildings and townhouse clusters.

    But reliability is hardly the only advantage of a microgrid. More than half of all planned microgrids are expected to incorporate solar power, which promises more energy efficiency than a typical building power system. Plus, many microgrids include the ability to sell excess electricity back to the utility grid, which can reduce a facility's utility bill.

    Major obstacles consist of utilities and governments trying to block this technology's ability to 1) reduce utility-company profits and/or 2) allow people to go completely off the main grid.

    Add your comment.


  15.    Investor sentiment sours from US equities towards Eurozone and Japan | ETF,Global markets,Investment,Markit | Markit Commentary

    Chris Williamson, Chief Economist, Markit:

    Data from Markit on exchange traded funds reveal investor appetite moving with divergent outlooks for central bank policy. The sharpest outflows of funds exposed to US equities for six years suggest investors are worried about the impact of tighter policy at the Fed and the impact of a stronger US dollar on corporate earnings. Looser policy outlooks at the ECB and the Bank of Japan have meanwhile encouraged investors to move into these markets seeking gains associated with central bank stimulus and weakened exchange rates, the latter likely to boost exports and earnings.

    Add your comment.


  16.    Signs of Intelligent Life in Economics Profession | Al Jazeera America

    Dean Baker:

    Back in the 1990s, the policy types and political figures who held the views now espoused by Summers, Krugman, Stiglitz and Sachs were not just considered wrong but not serious enough to merit attention. They were know-nothings who didn't understand modern economics.

    Many elite economists still insist that unemployment due to inadequate demand is not a problem. They continue to press concerns over budget deficits, as though the economy would somehow be better off if we cut annual spending by $500 billion, or 2.7 percent of GDP, to balance the budget. And the Federal Reserve Board stands ready to start raising interest rates, as if inflation is a problem that need concern us any time in the foreseeable future. And most economists still believe that any proposed trade deal is a good thing.

    But those of us who want to advance a more sensible economic agenda must recognize the opening that has taken within the profession. There is no longer a mainstream consensus for bad economic policy that redistributes upward. That is real progress.

    Add your comment.


  17.    Equity Firms Are Lending to Landlords, Signaling a Shift – NYTimes.com

    Three big private equity firms — the Blackstone Group, Colony Capital and Cerberus Capital Management — are betting that so-called landlord loans to small and midsize investors will become the next big opportunity to profit from the rebound in the United States housing market. The private equity firms are providing financing indirectly to hundreds of real estate funds buying single-family homes, something that until recently was not widely available.

    …86 percent of all investors owning 10 homes or fewer. Leaving aside the giant institutional buyers like Blackstone's Invitation Homes, Colony's own Colony American Home affiliate and American Homes 4 Rent, analysts at KBW estimate that just 14 percent of investors own about 11 homes to 250 homes each.

    Add your comment.


  18.    US money illusion? – YouTube

    Wages adjusted for inflation?

    The dollar set a fresh high against the euro ahead of the ECB meeting and Friday's US payroll growth. John Authers asks whether US wage growth is greater than many realise, thanks to low inflation.

    Well, even if that's correct, Yellen will be looking very closely at overall slack and the long-term direction of, and rate of increase (if any) in, gas prices.

    Money seems to be heading to London and Japan and elsewhere too, which will slow things in the US.

    Add your comment.


  19.    German Real Estate: Why Investors Are Buying It Now – Forbes

    Germany had long been tipped as the rising star of European real estate and now seems to have finally come into its own. "European investors, particularly those from Southern Europe, are still drawn to London but are also turning to Germany: if you are looking for a safe haven in the event of a Eurozone dissolution, London and Germany play a similar role," notes Bailey. "A lot of money is flowing into the German market and we had not seen this historically."

    Add your comment.


  20.    Carlos Slim buys Spanish real estate on the cheap

    The world's top billionaires are battling for Spanish property. Bill Gates, George Soros and Amancio Ortega have all taken stakes in real estate companies or bought emblematic buildings in Spain. Now Carlos Slim is building his own Spanish empire on the cheap.

    Add your comment.


  21.    Jobless Claims Rise to Highest Level Since May — 3rd Update

    The number of Americans seeking first-time unemployment benefits rose last week to the highest level since May, but harsh winter weather may be to blame for the recent spike.

    Separately, the Labor Department said U.S. nonfarm productivity decreased at a 2.2% annual rate during the fourth quarter of 2014, a potential drag on the economy. The revised figure is a downgrade from the earlier reported drop of 1.8% but roughly in line with a consensus forecast decline of 2.3%.

    Unit labor costs in the nonfarm business sector increased 4.1% during the period. Productivity growth averaged 2.8% per quarter from 1995 to 2005 but has since registered about half that pace.

    Add your comment.


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