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↑ An Optimistic View: “China’s Shadow Banking Malaise – NYTimes.com”
PETER BOONE and SIMON JOHNSON:
… the Chinese government is making it clear that the nonbank financing instruments will not be bailed out, while the big banks are still obviously supported by the government. Just as in America and Europe, China’s biggest banks will live for another day, but the shadow banking sector is set to shrink.
So instead of facing a Lehman crisis, China’s financial system is facing a more standard credit bust, driven by the drying-up of the nonbank markets and some losses on bank loans.
On net, the total effect of a China slowdown could be small for growth in the United States or Europe, but it would definitely be more negative for raw material exporters and countries that produce manufactured goods imported by China. The fears that the world may be facing another “Lehman crisis” emanating from China seem very far-fetched.
The argument is that China’s economy is too small yet to drag the world’s economy down much with it. Let’s hope they’re right, but let’s also keep breathing.
↑ Rising Seas – NYTimes.com
This is a very important global real-estate issue. It’s happening so quickly too and is threatening to speed up dramatically.
Some areas of the globe are especially vulnerable to rising sea levels. As land recedes under advancing waters, governments are faced with the costs of building defensive seawalls and relocating coastal populations — and in some extreme cases, finding new homes for entire island nations.
↑ NASA measures snowpack in California, Colorado [cached]
Improving on the old method of taking snow samples from the ground, scientists said that from the lofty heights they can calculate snow depth to within 4 inches and water content to within 5 percent.
↑ Hong Kong buyers push London real estate into stratosphere
London real estate is among the most desirable in the world, attracting wealthy investors looking for high returns — often at the expense of city natives who are being priced out of many neighborhoods.
Foreign money so dominates that nearly 70% of newly built properties in prime areas of central London were bought by foreign nationals between 2011 and 2013
But some developers fear the appetite for London properties may slow as the government prepares to tax future investment gains made by non-residents.
Currently, only UK residents are subject to capital gains tax on their second homes — a tax that is usually levied at 28%.
The capital gains tax change, due to take effect in April 2015, will require overseas buyers to surrender some of the profits they make on UK property.
Some foreign buyers will be affected by another tax change. From this month, the government is applying stamp duty at a rate of 15% to any purchase of residential property worth £500,000 or more made through a company.
And pressure is building for measures to prevent foreign investors being offered first refusal on prime London real estate. The city’s mayor has urged developers to stop marketing new homes to overseas buyers before they’ve been made available to Londoners.
Realty Mogul, lauded as one of the top real estate crowdfunding platforms just one year after its inception in 2013, has successfully raised $9 million for its platform in a Series A round led by Canaan Partners.
This deal represents one of the largest Series A funding made by a female chief executive officer, and Jilliene Helman, Realty Mogul’s CEO, seeks to “bring the $11 trillion commercial real estate market into the 21st century.”
Realty Mogul is currently open to accredited investors who have a net worth over $1 million or an annual income above $200,000.
↑ Softer demand seen in SoCal housing market – latimes.com
more residents moved to other counties than moved in, according to the census. And while that’s long been the case in Los Angeles County, it’s a newer phenomenon in places like the Inland Empire and Orange County.
Indeed, the Riverside metropolitan area, which saw a flood of moving trucks in the last decade as families shifted east from L.A. in search of cheaper housing, recorded negative migration last year for the first time since 2009 even as births helped it to continue its population growth.
Los Angeles and San Diego counties also had negative migration, though at a far slower pace than during the housing boom.
In San Bernardino County, nearly 11,000 more people moved out than moved in, and the county had the second-slowest population growth in the Southland.
↑ Institutional investors cool on housing market – MarketWatch
So if institutional investors are backing out, should individuals as well? “Regular homebuyers are not likely to step in,” says Susan M. Wachter, professor of real estate and finance at The Wharton School at the University of Pennsylvania. The national median sales price of U.S. residential properties — including both distressed and non-distressed sales — was $164,667 in February, down 1% from the previous month, but still up 4% from February 2013.
↑ Hugh Frater: Fair Chance No Mandates on Fannie/Freddie This Year – YouTube
Hugh Frater, CEO of Berkadia, shares his insights with Multi-Housing News/Commercial Property Executive regarding the commercial property financing market. There is plenty of good news for borrowers: Most financing sources are looking to increase their loan volumes in 2014, and there is a fair chance FHFA will not require Fannie Mae and Freddie Mac to further reduce their footprint by a set amount this year, says Frater.
↑ Behavioral Economics: Too Much Influence on Policy? – YouTube
Professor Glenn Harrison of Georgia State University discusses the role of behavioral economics in public policy in this wide-ranging interview.
↑ Abe’s sales tax rise – YouTube
The last time Japan raised consumption tax in 1997, it helped tip the economy back into recession. As part of his Abenomics plan, Shinzo Abe will lift the tax from 5 to 8 per cent on April 1. The FT’s Jennifer Thompson talks to people in Tokyo’s Hibiya district about what they think of the tax rise.
↑ Tumbleweed tornado? Scary ‘dust devil’ filmed by firefighters in Colorado – YouTube
At first, you wonder what the big deal is. Keep watching.
Wildland firefighters in Colorado got a scare recently when a whirlwind came through their fire scene and sent burning brush flying through the air.
↑ 5.1 earthquake rattles Southern California; homes damaged – latimes.com
A magnitude-5.1 earthquake centered in northern Orange County rippled across the Los Angeles Basin, and preliminary indications suggest the long-feared Puente Hills thrust fault may have caused it.
The quake caused pictures to fall of walls, glass items to shatter and furniture to tumble down in some homes near the epicenter. There were also reports of some gas and water line damage as well as scattered power outages.
↑ Manhattan Real Estate Feels a Russian Chill – NYTimes.com
Rich Russians have long been a force in the city, headlining some of its flashiest apartment sales, but now many are fearful that buying a New York apartment could have political ramifications at home. And even if they were willing to risk President Vladimir V. Putin’s ire, economic sanctions and visa restrictions might soon make such purchases impossible.
↑ Blackstone Closes €5.1 Billion/$7 Billion European Real Estate Fund – MarketWatch
Blackstone BX +1.98% is pleased to announce that it has
closed its fourth European Real Estate Fund at its cap of €5.1 billion ($7 billion). This makes it the largest ever dedicated European Real Estate fund.
Ken Caplan, Head of European Real Estate at Blackstone, said:
“We are hugely grateful to our investors for their continued support. The fact that we raised €5 billion in just six months from first to final close is testament to the ability of Blackstone’s 60-strong team dedicated to investing in European Real Estate. We have a successful 17 year track record in Europe and are excited about the opportunities to continue executing investments across Europe, delivering unparalleled speed and certainty to sellers and the expertise to add value to our properties.”
↑ What Housing Bubble? Trulia Says U.S. Home Prices Still 5% Undervalued – Forbes
Last decade’s bubble was rooted in the national housing finance system, rather than localized price speculation. Today, several markets are now more than 10% overvalued, but the majority still look undervalued.
Trulia’s Bubble Watch shows that national price levels today are roughly in line with fundamentals, like incomes, rents, and historical price paths. Even though recent double-digit price gains look unsustainable, current national price levels are not cause for alarm. Sharp price gains, like we’ve had in 2012 and 2013, are not the sign of a bubble unless price levels look high relative to fundamentals. Furthermore, the slowdown in price gains make it less likely that we’re heading for another bubble. The key region to watch is coastal California, especially southern California, where prices are most overvalued today.
That’s the most intelligent analysis we’ve heard from Trulia. It doesn’t mean that things can’t turn downward from here though. In our view, much depends on what the Fed does next time out. If they act like they plan to just keep tapering no matter what, we think we’ll see a more obvious downturn.
… first reported on this type of fraud in August of 2013, but the scam has resurfaced ….
This is a very long but informative article.
Methane (CH4) is a powerful heat-trapping pollutant, much more potent pound for pound than carbon dioxide, and is the second most important climate pollutant overall. Curbing the big sources of methane is essential to meeting the President’s climate protection target of reducing U.S. heat-trapping pollution 17 percent from 2005 levels by 2020. And curbing methane will also help reduce other toxic and smog-causing pollutants from oil and gas development and other industries.
↑ Tornadoes touch down in Northern California, 12 homes damaged near Sacramento
Several tornadoes touched down during storms in Northern California, including one twister near Sacramento that damaged a dozen homes and left a path of debris about 300 yards long.
The National Weather Service says a funnel cloud touched down near Roseville shortly after 6:15 p.m. Wednesday.
Fire Department Division Chief Kathy Finney tells the Merced Sun-Star that 12 houses suffered roof damage and six reported fence damage. No injuries are reported.
The weather service says a tornado also touched down in Ordbend, in Glenn County. KNTV says there are reports of at least four twisters, which are rare for California.
The northern half of the state is experiencing wild weather including thunderstorms packing heavy winds.
An inch of rain was reported in some areas.
Showers are likely to continue through the weekend.
↑ How many hours must minimum-wage earners work to afford rent?
NLIHN says raising the federal minimum wage alone does not solve the complex issue. The nation must also address a shortage of about 7 million affordable rental units for extremely low income households, defined as 30% of an area’s mean income. Eliminating that shortage would cost roughly $30 billion a year for 10 years, according to NLIHC.
Last week, something remarkable happened. The Bank of England let the cat out of the bag. In a paper called “Money Creation in the Modern Economy”, co-authored by three economists from the Bank’s Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. In doing so, they have effectively thrown the entire theoretical basis for austerity out of the window.
That’s why we’ve been saying that the US could issue debt-free money to pay off the National Debt. That’s just one aspect of what could happen. We could fund all the new infrastructure we want and do it interest free. If we were careful to only fund productive changes, we could also completely avoid inflation even while everyone’s standard of living were to greatly rise.
↑ Economists Already Understood the Money Multiplier (not) | PRAGMATIC CAPITALISM
This is a good follow-up to the link above. Cullen Roche seems to both understand and claim not to understand MMT (Modern Money Theory).
Endogenous just means that the bank creates the money. It means internal versus exogenous (externally sourced money: deposits of “government” created money).
↑ BBC News – Is Shenzhen the new Silicon Valley?
Three of the five largest mobile handset companies in the world are from one country and it’s not the US.
Shenzhen-based Huawei, Lenovo and ZTE are Chinese companies that rank alongside Ericsson and Samsung.
And it’s not just volume of sales. ZTE has been the most innovative company in the world based on international patent filings over the past three years, totalling some 50,000 patents last year.
So, could Shenzhen in China surpass Silicon Valley?
↑ A spring thaw for mortgages?
Analysts at Bank of America this week expressed concern that the Federal Reserve’s tapering is having a far more negative effect on credit availability than anticipated:
“As of now, purchase activity has yet to recover from the body blow of higher rates that followed last spring’s taper talk. We remain skeptical that the weakness is just due to the weather. We believe the demand side for mortgage credit remains intrinsically weak and find it hard to believe that it will strengthen into higher rates. Further weakening seems more likely to us if the Fed were to prematurely raise rates.”
↑ Emerging market liquidity squeeze: it’s the US current account, stupid /Euromoney magazine
The upshot of Gave’s argument is the EMs ex-China have inevitably run up current-account deficits thanks to weak US demand and now the chickens are coming home to roost. Gave elaborates on the mechanics:
If the US current-account deficit exceeds what private-sector entities within reciprocal economies need for working capital, then part of this flow will move to reserves held by foreign central banks. And these reserves will be deposited back at the Fed to finance US budget deficits. This circle of dependence was described by the French economist Jacques Rueff as the “imperial privilege”.
However, if the amounts generated by the US current account are insufficient to meet overseas nations’ needs, then those economies will, as already outlined, be forced to either borrow dollars (not a long-term solution), flog domestic assets or run down foreign-exchange reserves. Hence, when I see central bank reserves deposited at the Fed falling, I know that we are getting close to a “black swan” event, as dumping these precious “savings” is, for any country, always a desperate last resort.
This is the pattern which started to unfold last July. But in the intervening period a most unusual pattern has unfolded. Central bank reserves held at the Fed (ex-China) have fallen, while the number is rising when China is included.
He adds that the implication is China during the past six months captured the whole pool of global liquidity from the US current account. This view correlates with JPMorgan analysts, who estimate a cumulative capital outflow of $100 billion since last May out of 22 EM economies — ex-China and Middle East.
By contrast, China appears to have attracted a similar $100 billion of capital inflow over that period, Nikolaos Panigirtzoglou, lead author of the bank’s benchmark Flows and Liquidity report, concludes.
So that’s how the Fed is getting away with it: China has been picking up the slack. How long can it go on before biting back? China was already in economic and financial trouble before the Fed started tapering. It’s not more than about 13% of global GDP, but it’s been the producer engine. The other EM’s can’t afford to pick up where China would be forced to leave off if China pops. Does the Fed really know what it’s doing? We don’t think so. Perhaps it wants to force employment back into the US though. If so, it’s a perverse method.
↑ Russian belligerence damages CIS risk profile /Euromoney magazine
As the political tensions morph into economic problems for Russia and Ukraine, other regional states are becoming embroiled in the crisis, notably Kazakhstan, which had been improving in Euromoney’s Country Risk Survey.
With the impact of Ukraine’s problems and the annexation of Crimea now well-documented, the effects on Russia and other members of the Commonwealth of Independent States (CIS) is becoming clearer.
That’s based upon what they call a “crowd-sourcing approach to measuring risk.” We don’t know how accurate that method’s predictions have been.
↑ Commercial property in Europe: A skyscraper too far | The Economist
It is rock-bottom yields on government bonds that have nudged investors toward property. As the price of prime assets rises and growth prospects brighten, some are moving into second-tier cities, dicier properties and recovering basket-case countries. The buyers are taking a gamble that economies will liven up enough to fill buildings with paying tenants.
France has attracted less investment than Britain or Germany, where economic growth looks steadier, and has seen a smaller proportional increase than Ireland or Spain, which promise assets on the cheap. But even in the robust German market there are signs that the bust is not over.
↑ Christopher Whalen: So what is today’s nonbank business model? | HousingWire
If you actually know the world of distressed servicing, there are three golden rules when it comes to a non-performing loan.
First is keep the owner in the house.
Second is protect the asset and make sure that maintenance, taxes and insurance are current. And third is to preserve the cash flow of the loan via loan modification, if possible.
Keeping the family in the house and protecting the asset and cash flow, even with a substantial modification, is always better for the note holder, whether that is Uncle Sam or a private investor.
↑ The top 10 things every renter needs to know | HousingWire
After the housing market crashed in 2008, the number of single-family renting households has grown by leaps and bounds. And it doesn’t appear like that increase is going to slow down any time soon.
The National Association of Realtors expects that within the next 10 years, 5 to 6 million new renter households will be created.
According to U.S. Census data, the rental vacancy rate has dropped from 8.4% in 2009 to 4.1% in 2013. With approximately 34% of all U.S. households paying rent and rental rates climbing by 3.2% in 2013, renters have to be smart and make sure they’re choosing the right place to call home.
With that in mind, here [is] a list from Homes.com of the top 10 things every renter needs to know.