News: Real Estate, Risk, Economics. Mar. 18, 2016

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Table of Contents
(Click to sections below.)

1) No Change: FRB: Press Release–Federal Reserve issues FOMC statement–March 16, 2016

2) Man Charged in Deadly Fire Says He Was Smoking Near Oxygen – ABC News

3) Balanced Budget Amendment "Very Unsound Policy," Leading Economists Warn | Center on Budget and Policy Priorities

4) Our Four-Decade Antitrust Experiment Has Failed | Mother Jones

5) How to Know What Cap Rate to Shoot For on Any Given Rental Property

6) Extreme Altruism by Peter Singer – Project Syndicate

7) Why being generous is good for your health | World Economic Forum

8) This Planned Offshore Wind Farm Will Be a Boon for Sea Life and New Yorkers | Inverse

9) Merced County fire officials inspecting properties for overgrown weeds to help prevent fires | abc30 com

10) Wealth Inequality in the US and Beyond – YouTube

11) North Texas Commuters Hit with Damaging Hailstorms

12) Penn. Hails House Committee Passage of Private Flood Insurance Bill

13) Southern US Floods | ALERT™ :: Event Summary

14) mainly macro: It's the politics, stupid

15) What Ayn Rand Got Wrong About Human Nature and Free Markets – Evonomics

16) House Republicans cling to false promise of austerity in their budget resolution | Economic Policy Institute

17) Alternative Dispute Resolution: Avoiding Eviction Court

18) Raising Rent: The Ultimate Guide

19) The Fed and the Quest to Raise Rates | The Center for Economic and Policy Research

20) Why the Fed should allow wages to rise – CBS News

21) Australia, NZ property prices the strongest risers, Asia prices lag, Knight Frank survey finds

22) China home prices post biggest rise in almost two-years on red-hot demand in big cities | Reuters

23) High prices a drag on California's housing market

24) Spring Outlook 2016 – YouTube

  1.    No Change: FRB: Press Release–Federal Reserve issues FOMC statement–March 16, 2016

    Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further.

    … the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent.

    If there any such thing as a non-transitory effect? Anyway, the energy scene is being driven by geopolitics too. Iran is still ramping up.

    Add your comment.


  2.    Man Charged in Deadly Fire Says He Was Smoking Near Oxygen – ABC News

    Hisle acknowledged he had been warned by neighbors and friends about smoking near the oxygen tank.

    "Everybody here has told him, `One of these days, you're going to blow yourself up,'" Johnny Hill, 28, of Winchester, told the Lexington Herald-Leader. "Anybody with common sense knows you don't smoke around oxygen. He knew it because everybody in this complex told him."

    Add your comment.


  3.    Balanced Budget Amendment "Very Unsound Policy," Leading Economists Warn | Center on Budget and Policy Priorities

    A balanced budget amendment to the Constitution would be "very unsound policy" that would adversely affect the economy, a group of leading economists including four Nobel laureates explain in a letter today to President Obama and Congress, which the Economic Policy Institute and the Center on Budget and Policy Priorities spearheaded. …

    … Let the President and Congress make fiscal policies in response to national needs and priorities as the authors of our Constitution wisely provided.

    If we'd issue debt-free currency rather than borrow, there'd be no such thing as an unbalanced federal budget.

    Let's be smart. Let's stop borrowing. Let's peg the money supply and in circulation circulating at a proper rate based upon real productivity.

    Everything else is just noise or private greed.

    Add your comment.


  4.    Our Four-Decade Antitrust Experiment Has Failed | Mother Jones

    This reminded me of a link and quote from March 14th.

    The early 20th-century approach closely associated with Supreme Court Justice Louis Brandeis saw big business as a political problem, not just an economic one. Big business, the thinking went, was incompatible with democracy both because of its ability to influence public officials and because of the power that big business had over the lives of ordinary citizens. http://propertypak.com/2016/03/14/news-r eal-estate-risk-economics-mar-14-2016/#0 3141615

    Add your comment.


  5.    How to Know What Cap Rate to Shoot For on Any Given Rental Property

    For help deciphering different properties with different cap rates, check out "Battle of the Cap Rates."

    I have to be honest, though. Despite all this talk about cap rates, I have to tell you that I only explained all of that because it's the question that keeps getting asked.

    There is actually a calculation I like better than cap rate.

    Cap Rates vs. Cash-on-Cash Returns

    Calculating the cash-on-cash return is what I believe is the more important calculation if you are trying to figure out whether a return is "good" or not. Ultimately, a cap rate doesn't tell you how much return you are making on your investment — unless you pay for the property in cash, in which case the cap rate and the cash-on-cash return are the same.

    Add your comment.


  6.    Extreme Altruism by Peter Singer – Project Syndicate

    Peter Singer:

    … we, too, feel that we ought to live much more ethically, and the people described in Strangers Drowning are a standing reproach to our own way of life. If they can live by higher moral standards, then so could we. If we could believe that all altruists are hypocrites, we would not feel so bad; but Strangers Drowning demonstrates that this comfortable belief is false.

    There are people who devote their lives to others, for no reward other than the knowledge that they are helping others and acting in accord with their own values. Many of them find their lives immensely rewarding and fulfilling. But that is not why they do it.

    If we, as a society, as the human race, would devise and put into action vastly more democratic economic policies and practices, the huge disparities wouldn't exist in the first place; however, we shouldn't do it to feel better, though we would. We should do it because it's the moral thing to do.

    Add your comment.


  7.    Why being generous is good for your health | World Economic Forum

    Okay, this approach considers deliberately giving for the sake of your own physical health. In my experience, focusing on self is not the proper mentality. Don't do it for yourself. Let whatever positive impact it will have on you just happen. Focus on the other. Also, make a deeper connection so that giving doesn't have to have such a close direct connection. Helping those with whom you have no other connection but being a fellow human is profound. Think about it.

    Here endeth the lesson. It's not my intention to come off as preachy. It's just a subject very close to my heart.

    Don't get me wrong. I'm glad Ashley Whillans, et al., have gotten into the subject. I don't think they would have unless they cared. I don't think it was purely "scientific" or "academic" but also emotionally important to them because they care about people. Maybe I'm wrong about that, but I hope not.

    Add your comment.


  8.    This Planned Offshore Wind Farm Will Be a Boon for Sea Life and New Yorkers | Inverse

    I like it!

    New York State has set aside 127 square miles of sea floor for offshore wind farm development, the Bureau of Ocean Energy Management announced Wednesday. The block of ocean, located 11 nautical miles south of Long Beach, may one day be home to a 350-700 megawatt wind farm, proposed by the New York Power Authority.

    Add your comment.


  9.    Merced County fire officials inspecting properties for overgrown weeds to help prevent fires | abc30 com

    Green grass is a welcome sight after four years of drought, but the wet weather has also helped weeds grow several feet tall in some areas and it's only a matter of time before they start turning brown. "This grass reacts very quickly to these warmer temperatures, so, you're going to see it dry right out," said Division Chief Mark Lawson, Merced County Cal Fire.

    Add your comment.


  10.    Wealth Inequality in the US and Beyond – YouTube

    It's no secret that wealth inequality has grown, both in the US and abroad over the past several decades (after moderating somewhat in the post-WWII era). What has been particularly notable about the work of Emmanuel Saez, Professor of Economics at the University of California, Berkeley and INT grantee, is the quantification of that inequality. His work, done with Thomas Piketty, includes tracking the incomes of the poor, middle class and rich around the world.

    You know you're an econ geek when you don't have to look up any of the terms used in videos like this.

    Anyway, it's a great overview.

    My view is that the 1950's US often gets an unfair bad rap. Sure, there were huge problems; but we actually went backwards in many regards starting with the Reagan/Thatcher ear and massive, reckless in many cases, deregulation.

    All of that is nicely summed up in the video (recommended).

    I hope Marshall Auerback isn't becoming a Georgist. He's been mentioning Georgism in different videos. George had a good heart, but a single tax (the one and only tax) being a land tax, would not be a good idea. We know a great deal more about land from a biological and ecological standpoint now, and Georgism appears to me to be grossly insufficiently sensitive to those things. Use it or you lose it is just not good policy. However, Georgism could be radically adjusted to handle it.

    That said, if we could radically alter Georgism and get it accepted by the masses, we could do better than that anyway. Why not go to what would be better right from the start?

    Add your comment.


  11.    North Texas Commuters Hit with Damaging Hailstorms

    … hail as large as baseballs ….

    …extensive damage to their fleet of vehicles from large hail knocking out windshields.

    Add your comment.


  12.    Penn. Hails House Committee Passage of Private Flood Insurance Bill

    Miller said the Flood Insurance Market Parity and Modernization Act (H.R. 2901) would … [require] lenders to accept private flood insurance if it complies with state laws and regulations and includes the required limits of coverage.

    Add your comment.


  13.    Southern US Floods | ALERT™ :: Event Summary

    Record flood levels have been broken along several rivers and bayous, including the Sabine River at Deweyville, Texas (where a 130-year record was broken), Bayou Dorcheat at Lake Bistineau near Shreveport, Louisiana (where a 1991 record was topped by over 2 feet), Bogue Falaya River near Covington, Louisiana (where the river crested almost 3 feet above the 1993 record), Tchefuncte River near Folsom, Louisiana (where a 1983 record was broken), and Coldwater River at Marks, Mississippi (where a 1991 record was broken).

    At least six deaths have been reported as a result of the flooding, and at least 6,500 structures in Louisiana, Texas, and Mississippi have been damaged. …

    More than 6,000 structures in Louisiana alone have been damaged by flooding, according to initial figures released on March 14 by the Governor's Office of Homeland Security and Emergency Preparedness. Officials warned the count is likely to grow as damage is assessed in southeast Louisiana after water levels recede.

    Add your comment.


  14.    mainly macro: It's the politics, stupid

    Simon Wren-Lewis:

    Cut taxes, and use the deficit as an excuse to cut spending. For the Conservatives it has proved to be a winning formula ….

    It's the same here in the US.

    Add your comment.


  15.    What Ayn Rand Got Wrong About Human Nature and Free Markets – Evonomics

    Denise Cummins:

    The Prosperity Index measures over 100 countries on 89 economic analysis variables. The top 10 countries on this index in 2015 were Norway, Switzerland, Denmark, New Zealand, Sweden, Canada, Australia, Netherlands, Finland and Ireland. (The United States ranked 11th). What do these countries have in common? They all incorporate generous social programs with capitalist democracies. They confer generous welfare benefits through the redistribution of wealth, yet civil liberties are abundant, and there are few restrictions on the flow of capital or of labor. So it seems that countries that incorporate social programs into their socioeconomic policies do in fact thrive.

    Ayn Rand didn't know what she was talking about. She couldn't have been more wrong. I think she was the most dangerous and corrupting person I ever heard.

    Add your comment.


  16.    House Republicans cling to false promise of austerity in their budget resolution | Economic Policy Institute

    A reasonable assumption:

    Hunter Blair:

    The cuts in fiscal 2017 of the House GOP budget resolution total $186 billion. We assume a very conservative multiplier of 1.25—Medicaid and SNAP have very high multipliers (between 1.5-2 or even higher), so 1.25 strikes us as quite conservative. This 1.25 multiplier implies that the House budget cuts will place a 1.2 percent drag on a GDP growth in the next year. This loss in GDP means, all else equal, that job-growth in the next year will be 1.4 million less. Putting that in context, job-growth in 2015 was 2.7 million, so the pace of job-growth would be cut by more than half in the coming year.

    There are always other factors at play that can alter things above or below the average for the multiplier, but one thing is for sure. The economic system forwarded by the vast majority of Republicans is highly counter-productive. The data show it quite clearly. Laissez-faire capitalism does not work! It never has and never will. The more we try it, the worse things will be.

    Add your comment.


  17.    Alternative Dispute Resolution: Avoiding Eviction Court

    Some states allow landlords to include clauses in their Lease Agreements that essentially say "Tenant agrees to use XYZ mediation/arbitration service to resolve any disputes not relating to habitability." Michigan is not one of them—if you live here or in any state that forbids such clauses, your best bet is also the simplest: ask the tenant. Many tenants can't afford legal fees, and alternative dispute resolution can potentially save them just as much money as it saves you.

    Add your comment.


  18.    Raising Rent: The Ultimate Guide

    This is a long article. I did find it useful as a reminder of the tenant's perspective.

    Now everyone looks at increases differently, but once you start finding yourself in the 7-8% plus range, tenants start to think "Will these increases continue indefinitely?" and "Maybe it's time to start looking for a new place to live." As a landlord, you must be aware of the hidden message you're sending tenants by increasing their rents.

    In my estimation, that's the most valuable paragraph in the article.

    Your longtime, best-paying tenants will be especially concerned about continued large increases when the property's operating expenses are not increasing at anywhere near the rate of the rent increases.

    Add your comment.


  19.    The Fed and the Quest to Raise Rates | CEPR Blog | Blogs | Publications | The Center for Economic and Policy Research

    With no evidence of inflation posing a problem any time soon, the Fed should be looking to boost the economy rather than slow it.

    We need the right fiscal policy to speed things up, but the macro-illiterates are still in charge.

    Add your comment.


  20.    Why the Fed should allow wages to rise – CBS News

    From the best economics aggregator in the blogosphere (yep, it still exists), professor of economics, Mark Thoma:

    … for the median wage-earner, wages and compensation declined by 4 percent and 1.9 percent, respectively. The bottom 40 percent of workers suffered an even greater decline in compensation than in wages, indicating that including benefits as well as pay results in a more adverse trend.

    What will it take to get wages growing for those at the lower end of the income distribution? …

    … When the economy is near full employment, wages rise much faster.

    Achieving full employment — and despite a jobless rate of 4.9 percent, we aren't there yet because so many workers left the labor force during the recession, and many will return as conditions improve — depends critically on the conduct of monetary and fiscal policy. Unfortunately, even though aggressive government spending on infrastructure would push employment higher and help the economy reach its full potential, political stalemate makes it very hard to imagine Congress enacting any fiscal policy program of the scale needed.

    … it's not necessarily the case that an increase in wages will translate into an increase in prices, particularly at a time when the division of income within firms has favored profits over wages. …

    … with elected officials more concerned with political maneuvering than coming to the aid of people in need, the Fed is the only hope left beyond waiting and hoping these problems will somehow fix themselves.

    There's widespread belief that the Fed cares more about the interests of the rich and powerful than it does the working class. This presidential election cycle provides ample evidence of this sentiment, and future rate decisions present a golden opportunity for the Fed to show that the vast majority of people, those who toil each day to produce the goods and services we all enjoy, come first.

    And they say that those who study economics are more self-centered. Well, Mark is one exception, and maybe we can break the rule altogether.

    Add your comment.


  21.    Australia, NZ property prices the strongest risers, Asia prices lag, Knight Frank survey finds

    Housing prices in Australasia rose the most last year, with both Australia and New Zealand seeing climbs exceeding 10 percent, while prices slumped in Singapore and Taiwan, Knight Frank said Friday.

    Add your comment.


  22.    China home prices post biggest rise in almost two-years on red-hot demand in big cities | Reuters

    China's housing market is a crucial engine of growth, accounting for 15 percent of gross domestic product. With the broader economy decelerating amid weak exports, factory overcapacity, slowing investment and high debt levels, authorities are hoping the property market will help stabilize growth.

    But a breakdown of NBS data points to persistent softness in property markets in smaller cities where a glut of unsold houses have weighed on prices.

    The government is cracking down on money leaving China. Where else but the real-estate bubble can people put their money to speculate? With hardly a welfare state, they end up personally accumulating saving a great deal.

    Add your comment.


  23.    High prices a drag on California's housing market

    "I think the major trend that you're going to see is millennials leaving California," Appleton-Young told the California Desert Association of Realtors during an annual forecast on Thursday in Palm Desert. "Unlike 20 or 30 years ago, there's actually a lot of cool places to live today where there are jobs. Coupled with being able to be more mobile."

    … affecting the California housing market is the increasing unaffordability of homes, driven in part by low inventory.

    Add your comment.


  24.    Spring Outlook 2016 – YouTube

    As a near-record El Niño begins to wind down, NOAA issued its spring seasonal outlooks on March 17th for flooding, drought, precipitation and temperature.

    Add your comment.


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