News: Real Estate, Risk, Economics. May 29, 2015

Linking ≠ endorsement.

Table of Contents
(Click to sections below.)

1) Gudrun Johnsen Closing Remarks – YouTube

2) Sen. Elizabeth Warren: Trade Deal Should be Public Before Congress Votes on Fast Track – YouTube

3) Texas and Oklahoma flooding: 3 dead – CNNcom

4) Official: 'Wall of water destroyed everything in its path'

5) Economist: Texas housing market continues to hold up – Prime Property

6) Heat wave kills more than 1,100 in India – CNNcom

7) Floods in vulnerable Houston no surprise, despite controls | Deseret News

8) 2015 Texas—Oklahoma flood and tornado outbreak – Wikipedia, the free encyclopedia

9) South Bay beaches remain closed while oily goo is cleaned up – LA Times

10) FRB: Speech–Yellen, The Outlook for the Economy–May 22, 2015

11) mainly macro: We want helicopters, and we want them …

12) Technology, inflation and the Federal Reserve | Gavyn Davies

13) Free-market Dogma Has Jacked Up Electricity Bills | Al Jazeera America

14) Tall Trees Sucked Dry by Global Warming – Scientific American

15) Why finance is too much of a good thing – FTcom

16) Government R&D, Private Profits and the American Taxpayer – NYTimescom

17) myCPI – Federal Reserve Bank of Atlanta

18) China's housing boom | VOX, CEPR's Policy Portal

19) The Insecure American – NYTimescom

  1.    Gudrun Johnsen Closing Remarks – YouTube

    She's calling for exactly the right things. Have a watch and listen.

    Concluding Remarks from Gudrun Johnsen of the University of Iceland at Finance & Society 2015

    Add your comment.

  2.    Sen. Elizabeth Warren: Trade Deal Should be Public Before Congress Votes on Fast Track – YouTube

    This is a good clarification.

    Senator Elizabeth Warren spoke on the Senate floor on May 21, 2015 about the bill she introduced with Senator Joe Manchin (D-W.V.) that would require the text of the Trans-Pacific Partnership (TPP) trade deal to be made public before Congress votes on Fast Track authority.

    Add your comment.

  3.    Texas and Oklahoma flooding: 3 dead –

    Flooding from record-setting rains in Texas and Oklahoma swept away hundreds of homes and left at least three people dead.

    Crews are still surveying damage, she told reporters Sunday; between 350 and 400 homes in the Texas county are gone, and more than 1,000 were damaged. Two main bridges washed away, she said, and other sustained major structural damage.

    In 2011, drought and wildfire brought heavy damage to Texas. The drought caused at least $5 billion in economic damage, and wildfire damage amounted to tens of millions of dollars, authorities said.

    There was no mention of El Nino in this article. We wonder.

    Add your comment.

  4.    Official: 'Wall of water destroyed everything in its path'

    As you probably know, it got much worse. Oklahoma and Texas were particularly slammed.

    A record surge 44 feet high sped down the Blanco River late Sunday, demolishing homes and businesses, Hays County Commissioner Will Conley said. The previous record on the river was 32 feet, recorded in 1926.

    "It was literally a large wall of water that came down the Blanco River and destroyed everything in its path," he said.

    The story is hard reading.

    Add your comment.

  5.    Economist: Texas housing market continues to hold up – Prime Property

    Houston appears to have been more diversified than we had thought going into the slump on fracking prices.

    Across Houston, months of inventory — the estimated time it would take to sell all the homes on the market based on the recent sales pace — was 2.9 months in April. While that was slightly higher than the same month last year, it's well below the 6.5-month supply center economists consider to be a balanced market.

    Inventory could take another hit after today's storms, however, as homeowners listing their properties take them off the market to make repairs, or those preparing to sell delay listing after experiencing damage.

    Add your comment.

  6.    Heat wave kills more than 1,100 in India –


    Stifling heat has killed more than 1,100 people in India in less than one week.

    The worst-hit area is the southeastern state of Andhra Pradesh, where authorities say 852 people have died in the heat wave. Another 266 have died in the neighboring state of Telangana.

    Experts say that hot conditions should not usually lead to this many fatalities. But many of the affected areas in India are humid, which worsens the level of stress caused by excessive heat.

    Only about one-third of the country's 1.2 billion people have access to electricity, meaning millions are enduring the blistering heat without relief.

    Add your comment.

  7.    Floods in vulnerable Houston no surprise, despite controls | Deseret News

    HOUSTON — The flooding, property damage and loss of life as torrential rains this week hit the Houston area should be no surprise.

    "It happens fairly frequently," said Sam Brody, director of Texas A&M University's Center for Beaches and Shores. "Houston is the No. 1 city in America to be injured and die in a flood."

    Add your comment.

  8.    2015 Texas—Oklahoma flood and tornado outbreak – Wikipedia, the free encyclopedia

    Preceded by more than a week of heavy rain, a slow-moving storm system dropped tremendous precipitation across much of Texas and Oklahoma during the nights of May 24 — 26, 2015, triggering record-breaking floods. Additionally, many areas reported tornado activity and lightning.[4] Particularly hard hit were areas along the Blanco River in Hays County, Texas, where entire blocks of homes were leveled. On the morning of May 26, the National Weather Service issued a flash flood emergency for southwest Harris County (which includes the city of Houston) and northeast Fort Bend County. The system also produced deadly tornadoes in parts of Mexico and Texas.[5]

    Add your comment.

  9.    South Bay beaches remain closed while oily goo is cleaned up – LA Times

    Cleanup efforts to remove tar balls that washed ashore along a stretch of coastline in the South Bay continued Friday as several beaches remained closed, officials said.

    According to NOAA, tar balls are remnants of oil spills that occur when crude floats on the ocean surface, changing its physical composition in processes known as "weathering."

    After an oil spill, waves and winds break up the slick into small patches, or tar balls, that scatter into the ocean. Tar balls can travel hundreds of miles.

    Add your comment.

  10.    FRB: Speech–Yellen, The Outlook for the Economy–May 22, 2015

    … the generally disappointing pace of wage growth also suggests that the labor market has not fully healed.

    … At the federal level, the fiscal stimulus of 2008 and 2009 supported economic output, but the effects of that stimulus faded; by 2011, federal fiscal policy actions became a drag on output growth when the recovery was still weak. Meanwhile, states and municipalities, faced with serious budget problems due to the recession and required by law to balance their budgets, were forced to cut spending and raise taxes. The recovery has by now boosted tax revenue in most states, though Rhode Island, I know, is among those areas still facing considerable budget strain. Overall, fiscal policy actions at both the federal and the state and local levels look like they are no longer a significant drag on economic growth. So this headwind, I hope, is mostly behind us.

    A third headwind has been the restraining influences on the United States from the global economy. I won't say as much about this factor today, but I will make just a few observations. Initially the euro-area crisis was the biggest headwind coming from the rest of the world. Supported by monetary stimulus, reduced fiscal drag, and significant institutional reforms, the recovery in the euro area now appears to be on a firmer footing. However, growth in many other parts of the global economy, including China and some other emerging market economies, has slowed. Weak growth abroad, together with its accompanying implications for exchange rates, has dented U.S. exports and weighed on our economy. This headwind too should abate as growth in the global economy firms, supported by monetary policies that generally remain highly accommodative.

    … the headwinds facing our economy have not fully abated, and, as such, I expect that continued growth in employment and output will be moderate over the remainder of the year and beyond.

    … Delaying action to tighten monetary policy until employment and inflation are already back to our objectives would risk overheating the economy.

    For this reason, if the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy. To support taking this step, however, I will need to see continued improvement in labor market conditions, and I will need to be reasonably confident that inflation will move back to 2 percent over the medium term.

    … The most important factor determining living standards is productivity growth, defined as increases in how much can be produced in an hour of work. Over time, sustained increases in productivity are necessary to support rising incomes.

    Janet still sees labor slack, but the balance of her speech seems to play it down more than she used to.

    She is now speaking more assertively that more fiscal stimulus is not needed: that the Fed can do the job without the government.

    She may think highly accommodative monetary policy is mainly enough for China.

    "Delaying action to tighten monetary policy until employment and inflation are already back to our objectives would risk overheating the economy." That's the real tipoff.

    Inflation seems to have move front and center: has become more important to her than low wages and the like.

    Her productivity-growth statement seems to ignore that over the last several decades, growth in productivity has not been passed on in the form of higher wages.

    On balance, we are disappointed in Chair Yellen's speech.

    That said, perhaps her speech is more "forward guidance" to see what impact it may have in terms of the "tantrum" result and that she thinks the Fed should experiment with one small rate rise before the end of the year, sit back to see the results, then gauge what to do next.

    We think her fear of overheating is grossly misplaced.

    Add your comment.

  11.    mainly macro: We want helicopters, and we want them …

    Simon Wren-Lewis:

    Politicians will not do what economists call a bond financed fiscal stimulus because spreading scare stories about public debt is a vote winner. That leaves us with a money financed fiscal stimulus, of which helicopter money is one form. With independent central banks, that means giving these banks the power to undertake helicopter money.

    I think the biggest obstacle to helicopter money is probably central banks themselves. This is for two reasons. First, they seem far too optimistic about the efficacy of creating money to buy financial assets (QE), even though they almost certainly need to create far more money by this route than they would through helicopter money, with a far less certain impact. Second, there is this residual worry that creating money now will mean they will lose the ability to control inflation in the future, as if a modern government in an advanced democracy would ever refuse to provide them with the assets they need.

    Money-financed fiscal spending is exactly what we have been advocating here in the US.

    "Monetary-and-Banking-Reform Platform for The United States":  /articles/monetary-and-banking-reform-p latform-for-the-united-states/

    This is a real issue in economics: n&source=hp&q=%22bond+financed%22+%22mon ey+financed%22

    Add your comment.

  12.    Technology, inflation and the Federal Reserve | Gavyn Davies

    There is much less hard evidence now that the CPI and productivity are being mismeasured, but it is possible that productivity might respond to stronger demand for other reasons, such as more intensive utilisation of the labour force within companies, and a catch-up in investment in IT where implementation has lagged behind because of the recession.

    Again however, where productivity gains pass to those at the top (who have less propensity to spend), things won't heat up as readily as they used to. In addition, productivity can increase more rapidly than it used to too. That means that demand won't put as much upward pressure on inflation.

    Add your comment.

  13.    Free-market Dogma Has Jacked Up Electricity Bills | Al Jazeera America

    David Cay Johnston:

    The only way to keep prices high is to restrict the capacity to generate electricity. That's the perverse signal a clearing-price auction sends: Minimize investment in new power plants and profits will stay high, expand investment in new power plants and profits will shrink. That is so obvious it is hard to understand how Chicago School theorists missed it. Equally hard to understand is the willful refusal of the Federal Energy Regulatory Commission to recognize that the electricity markets are being rigged.

    Schuler and Hyman point out that "regulated utilities had an obligation to meet the demands of their customers. In the deregulated market, unregulated generators have no obligation to build anything." So long as limiting investment in new power plants maximizes profits, rest assured that in those 15 states investors will not build and prices will keep rising.

    Unless you own the utility, your business and you are better off under a solid regulatory system.

    Add your comment.

  14.    Tall Trees Sucked Dry by Global Warming – Scientific American

    A well-known scientific principle describing how water moves through plants can help explain why trees may struggle to survive as the planet warms, scientists say in a new study.

    This is sad.

    We're also concerned about the consequences of thinning. Less shade will only exacerbate the problem.

    We think that a combination of quickly moving away from carbon fuels while rapidly increasing the soil's ability to sequester carbon would be the best move right now.

    Add your comment.

  15.    Why finance is too much of a good thing –

    Martin Wolf:

    Houston, we have a problem. We have a great deal of evidence that too much finance damages economic stability and growth, distorts the distribution of income, undermines confidence in the market economy, corrupts politics and leads to an explosive and, in all probability, ineffective rise in regulation. This ought to worry everybody. But it should be particularly worrying for those who believe most in the moral and economic virtues of competitive markets.

    … get rid of too big to fail and too big to jail. ….

    Many would then choose to break themselves up. Once that has happened, fear of the consequences of prosecution should also diminish. Personally, I would go further by separating the monetary from the financial systems, via the introduction of "narrow banking" — that is, backing demand deposits with reserves at the central bank.

    He's suggesting the Chicago Plan of Irving Fisher, et al.

    Add your comment.

  16.    Government R&D, Private Profits and the American Taxpayer –

    … the argument that the government has a stake in innovation could be exploited further. At a minimum, why not embed rules into federally funded discoveries to ensure that companies that profit from these ideas reinvest some share of their profits into additional research, rather than use it for stock buybacks?

    Taxpayers have a large, unacknowledged role in the nation's innovation. They deserve some credit. And perhaps more, if that's what it would take to power innovation's future.

    Add your comment.

  17.    myCPI – Federal Reserve Bank of Atlanta

    These are not official price statistics and should not be used in escalation agreements or in wage negotiations.

    Too bad it isn't geographically based.

    Add your comment.

  18.    China's housing boom | VOX, CEPR's Policy Portal

    A high expectation of future income growth, however, might have been a key driver of price-to-income ratios, and this may not be sustainable.

    The Chinese housing boom is different in many aspects from the housing bubbles in the US and Japan. First, as banks in China imposed down payments of over 30% on all mortgage loans, banks are protected from mortgage borrowers' default risk even in the event of a sizable housing market meltdown of 30%. This makes a US-style subprime credit crisis less likely in China.

    Second, while the rapid housing price appreciation has often been highlighted as a concern for the Chinese housing market, the price appreciation was accompanied by equally spectacular growth in households' disposable income — an average annual real growth rate of about 9% throughout the country during the decade. This joint presence of enormous housing price appreciation and income growth contrasts the experiences during the US and Japanese housing bubbles. The enormous income growth rate across Chinese cities thus provides some reassurance about the housing boom and, together with the aforementioned high mortgage down payment ratios, renders the housing market an unlikely trigger for an imminent financial crisis in China.

    However, how large is the Chinese bubble? What is the vacancy rate, and how long is it expected to last? If incomes won't continue growing at the rate they were, what justifies the high vacancy rates? Who will absorb those vacancies turning them into actual positive-cash-flowing properties rather than speculative vehicles?

    Add your comment.

  19.    The Insecure American –

    Concerning how many of your tenants and employees does this article pertain?

    Paul Krugman:

    … while things could be worse, they could also be better. There is no such thing as perfect security, but American families could easily have much more security than they have. All it would take is for politicians and pundits to stop talking blithely about the need to cut "entitlements" and start looking at the way their less-fortunate fellow citizens actually live.

    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.