News: Real Estate, Risk, Economics. Sept. 27, 2014

Linking ≠ endorsement.

Table of Contents
(Click to sections below.)

1) Global Cities 2015 | Knight Frank

2) German property investors rule the world – but do they rule their own backyard? | The Investor

3) China’s war on pollution could leave Aussie coal out in the cold | Business Spectator

4) Is China really growing at 7.5%? Not according to Citigroup’s ‘Li Keqiang index’ – Bond Vigilantes

5) Why the Fed Is So Wimpy – Justin Fox – Harvard Business Review

6) Goldman in stock trading curb on bankers – FT com

7) Builders Turn Focus to Housing Market – NYTimes com

8) Former Goldman Sachs Executive Sends A Housing Market Warning | MadameNoire

9) Norway Sovereign Wealth Fund | NYC Commercial Real Estate

10) New York’s Harlem enjoys new real estate renaissance – FT com

11) Consumer Sentiment in US Rose in September to 14-Month High – Bloomberg

12) Returning To Your Flood Damage Home – YouTube

13) Addressing mold after a natural disaster – YouTube

14) Restoring your home after a natural disaster – YouTube

15) Top 15 Ways to Save Water – Growing Your Food is #1 – YouTube

  1.    Global Cities 2015 | Knight Frank

    In the next 15 years the world is forecast to add another 1.1 billion city dwellers, nearly the equivalent of the population of India. Across the planet developing more offices, shops, homes, and distribution centres will be critical to house this urban explosion. Premium pricing for real estate is found in cities with the most high-value knowledge workers, which attract the world’s leading corporations. These are the Global Cities, and shaping their future is: The growing centrality of knowledge workers, influencing the location and design of modern offices. Former-industrial areas transform into new districts, bringing offices, leisure & homes closer together. Investors seeking higher returns on theirmoney, offering a pool of funds to back future urban development.

    Add your comment.

  2.    German property investors rule the world — but do they rule their own backyard? | The Investor

    It’s highly likely that the investor base will swell as Chinese, Taiwanese, Korean, Australian and Japanese investors seek to outdo returns in their often-overcrowded domestic markets. Their preference, unlike the pre- crisis players, is for flagship office deals in the core cities.

    It’s a consensus.

    Add your comment.

  3.    China’s war on pollution could leave Aussie coal out in the cold | Business Spectator

    As we’ve been saying for a long time now, Australia is facing trouble ahead. It’s becoming clearer.

    China’s recent move to limit imports of the dirtiest coal from 2015 onwards is a scary prospect for Australian miners.

    The proposed restrictions will ban the burning of coal with high levels of ash or sulphur in areas around major cities, as the Beijing government battles its pollution crisis. Analysts say that as much as half of the thermal coal currently shipped from Australia to China could run afoul of the new measures.

    Add your comment.

  4.    Is China really growing at 7.5%? Not according to Citigroup’s ‘Li Keqiang index’ – Bond Vigilantes

    Say what you like about controversial whistleblowing website WikiLeaks and its embattled founder Julian Assange, but the organisation has lifted the lid on a number of rather glorious indiscretions alongside the more serious leak of military secrets that it has become notorious for.

    One such nugget to be revealed was how Li Keqiang — now Chinese premier, but at the time the lesser known head of Liaoning province’s communist party — admitted over dinner with the US ambassador to China in 2007 that the country’s GDP figures were “man-made” and therefore unreliable. Mr Li went on to say that instead, he focused on just three data points — electricity consumption, rail cargo volume and bank lending — when evaluating his province’s economic progress.

    Citigroup have taken Mr Li at his word and have constructed an inspired ‘Li Keqiang Index’, using the three economic indicators mentioned above to give an insight into the country’s economic health under his premiership.

    This is what we’ve meant by a lack of transparency.

    We believe China has been masking its true economic situation and that things are much worse than the general world population suspects, including many so-called expert China-economics watchers/analysts.

    Add your comment.

  5.    Why the Fed Is So Wimpy – Justin Fox – Harvard Business Review

    Justin Fox:

    Actually witnessing capture in the wild is different, though, and the new This American Life episode with secret recordings of bank examiners at the Federal Reserve Bank of New York going about their jobs is going to focus a lot more attention on the phenomenon. It’s really well done, and you should listen to it, read the transcript, and/or read the story by ProPublica reporter Jake Bernstein.

    …smoking gun is that Segarra pushed for a tough Fed line on Goldman’s lack of a substantive conflict of interest policy, and was rebuffed by her boss. This is a big deal, and for much more than the legal/compliance reasons discussed in the piece. That’s because, for the past two decades or so, not having a substantive conflict of interest policy has been Goldman’s business model. Representing both sides in mergers, betting alongside and against clients, and exploiting its informational edge wherever possible is simply how the firm makes its money. Forcing it to sharply reduce these conflicts would be potentially devastating.

    Maybe, as a matter of policy, the United States government should ban such behavior. But asking bank examiners at the New York Fed to take an action on their own that might torpedo a leading bank’s profits is an awfully tall order. The regulators at the Fed and their counterparts at the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation , and the Office of Thrift Supervision correctly see their main job as ensuring the safety and soundness of the banking system. Over the decades, consumer protections and other rules have been added to their purview, but safety and soundness have remained paramount. Profitable banks are generally safer and sounder than unprofitable ones. So bank regulators are understandably wary of doing anything that might cut into profits.

    The point here is that if bank regulators are captives who identify with the interests of the banks they regulate, it is partly by design.

    We think Justin Fox is being too easy on them.

    There is nothing that we can see where the Fed couldn’t have handled the banks as AIG was handled: nationalization (at least temporarily).

    Safety and soundness of the banking system would have been greatly enhanced, not harmed, by nationalizing the banks to immediately stop them from doing any further damage to the economy, which is actually the Fed’s prime mandate: full employment with controlled inflation/deflation.

    Allowing profits at the banks obtained via clear conflicts of interest to override the strength of the rest of the economy and the jobs of tens of millions of Americans is inexcusable.

    The damage that Goldman Sachs did because it did not avoid conflicts of interest but apparently exploited them, as was made abundantly clear in the US Senate hearings report, should have seen that institution taken over by the government. The same may be said of all the other major players who hyped up the real estate market to sell mortgages and HELOC’s to turn around to securitize them to pass on the risks inherent within them all the while misrepresenting them as sound, even as AAA-rated investments.

    The same “capture” that is shown in this case also occurred with the rating bureaus. Those bureaus, however, are not even quasi-governmental.

    Add your comment.

  6.    Goldman in stock trading curb on bankers –

    Goldman Sachs has banned its investment bankers from trading individual stocks for their own accounts, more than two years after it was blasted by a judge for conflicts of interest which included a banker’s private investments.

    The memo, which was first reported by Bloomberg News, came on the same day that Carmen Segarra, a former Federal Reserve Bank of New York examiner, aired more concerns about Goldman’s conflict of interest policy.

    As for her allegations, Goldman said it “has long had a comprehensive approach for addressing potential conflicts. Ms Segarra, who unsuccessfully interviewed for employment at Goldman in 2007, 2008 and 2009, told her supervisors at the Fed that the company did not have a written conflict of interest policy. A quick Google search, however, shows publicly available Goldman Sachs documents outlining the management of conflicts.

    If Goldman Sachs had a real conflict-of-interest policy and program all along that was being enforced, how were there so many conflict-of-interest problems of such a serious nature?

    Carmen Segarra has made clear that the brief policy statement of Goldman Sachs at the time was vague and didn’t define conflicts of interest, admitted by Goldman Sachs’ top employee for handling them. It was also obvious that there were conflicts, very serious ones.

    Add your comment.

  7.    Builders Turn Focus to Housing Market –

    The Dursts’ move to Astoria highlights a trend in the city in which a seemingly insatiable demand for luxury housing has upended the traditional pecking order in the real estate world. Building glamorous office towers for Fortune 500 companies is not the surefire route to fame and riches it once was.

    With the cost of land soaring and high-end apartments commanding soaring prices, developers whose reputation and wealth rests on gleaming office towers are leaping into the residential market in the hunt for profits.

    Add your comment.

  8.    Former Goldman Sachs Executive Sends A Housing Market Warning | MadameNoire

    Joshua Pollard:

    …mortgage rates spiked more than one percent from May to September 2013. Pollard notes that homes make up 24 percent ($23 trillion) of consumers’ total assets, yet 69 percent of consumers’ liabilities are the mortgages tied to these homes. This imbalance means that a five percent reduction in home prices equates to an 8.6 percent decline in consumer net worth. Using this same ratio we get that a 15 percent home price deflation drops consumers’ real estate net worth by 26 percent ($3.4 trillion). As of June 2014 the price of homes have already fallen in 7 out of 10 of the largest markets and home prices will continue to slow if not drop outright in some places. As home price growth drops investor demand slows as well. Pollard’s report shows how the number of home flipped in the U.S. has declined 50 perce in the last four quarters.

    We largely agree with that but not much with his idea of reducing the number of housing units. Houses will become affordable when the prices drop to where they should, unless all-cash investors jump in again in front of average buyers. If we cut back on the number of houses, even rentals will be too expensive, taking up way too much of people’s incomes.

    Add your comment.

  9.    Norway Sovereign Wealth Fund | NYC Commercial Real Estate

    Norway, surprisingly, now ranks second among foreign U.S. commercial real estate buyers, topped only by Canada.

    Add your comment.

  10.    New York’s Harlem enjoys new real estate renaissance –

    Since emerging as the centre of African-American cultural life in the 1920s and 1930s, Harlem’s real estate fortunes have experienced highs and lows that few pockets of New York City have matched. Blighted by high crime and chronic decay in the 1970s and 1980s, a wave of development in the late 1990s led to a sharp rise in real estate values. Between 2002 and 2006 home prices in Harlem rose 89.7 per cent, according to the Furman Center for Real Estate and Urban Policy at New York University. Yet the 2008 banking crisis followed by steep economic decline pushed Harlem prices down 16 per cent between 2007 and 2010, compared with a 3 per cent fall in Manhattan as a whole.

    Today, as Manhattan’s property market again nears record levels, Harlem finds itself in the midst of another real estate renaissance. New condominiums have replaced decades-old vacant lots, while stately yet neglected brownstones are being freshly renovated.

    Add your comment.

  11.    Consumer Sentiment in U.S. Rose in September to 14-Month High – Bloomberg

    Consumer confidence climbed in September to a 14-month high as Americans’ outlooks for the economy improved.

    The Thomson Reuters/University of Michigan final index of sentiment increased to 84.6, the same as the preliminary reading, from 82.5 in August. The median projection in a Bloomberg survey of economists called for 84.8.

    Employment growth at the strongest pace in 15 years is helping brighten moods, while cheaper prices at the gas pump are making it easier on household budgets. Faster wage increases and more broad-based improvement in employment would help provide an additional boost for sentiment and spark bigger gains in the consumer purchases that make up about 70 percent of the economy.

    There was no mention of the stronger dollar, which will make imports cheaper but exports more expensive, harming manufacturing employment.

    There are numerous variables to consider. Some will be positively impacted, others negatively.

    What we want to avoid is deliberately lessening standards. We don’t want to create a bubble!

    Still, good news is most welcome. We are primarily (not exclusively) demand-siders, and consumer spending is demand-side.

    Add your comment.

  12.    Returning To Your Flood Damage Home – YouTube

    Not everything discussed in the following paragraph is actually covered in the video, but the video is still helpful. The closing section is the same in all three videos (two more right below this one).

    Returning home after a natural disaster. This video will discuss how to return to your home for the first time after a natural disaster. This phase normally follows the immediate aftermath and clearances from authorities. The video goes through a checklist of things to do and look for to ensure the safety of you and your family. The video will highlight things like: what to do if you smell gas, protecting yourself from electrical injuries, wearing waterproof boots to avoid floodwater touching your skin, preventing carbon monoxide poisoning by keeping fuel burning devices outdoors and away from windows, only eat and drink food and water that you know is safe, etc.

    Add your comment.

  13.    Addressing mold after a natural disaster – YouTube

    Again, not everything discussed in the following paragraph is actually covered in the video, but the video is still helpful.

    Mold is one of the most widespread, health-related hazards found in a home after natural disaster, particularly after flooding. This video builds on the first video and specifically talks about what a homeowner can do to address mold in their home. It will discuss the steps to take to prevent mold growth such as: clean and dry wet items as soon as possible, keep wet areas well-ventilated, discard wet materials that can’t be repaired, if you see or smell mold, clean it with a solution of 1 cup household liquid bleach per 1 gallon of water, etc. It will also discuss when to contact a professional and what to look for to ensure you hire the right company.

    Add your comment.

  14.    Restoring your home after a natural disaster – YouTube

    The first half of this video is redundant (a recap). The second half is new material and covers some of things mentioned in the text description of the prior two videos but that were not actually in those videos.

    What you need to know to rebuild. This video covers potential hazards that could arise after a disaster such as lead, mold, asbestos, CO2, and other hazards and how to address them as you rebuild. It will discuss tips to hire contractors that are licensed and capable of addressing the scope of the work and will highlight things to keep in mind during construction.

    Add your comment.

  15.    Top 15 Ways to Save Water – Growing Your Food is #1 – YouTube

    Many of these things can be done and encourage at rental properties. Many landlords know how high the water bill can be. Work with managers and tenants to reduce wasting water.

    John from shares with you the top 15 ways to save water. At present time, many parts of the USA and the world are in drought conditions. In this episode you will learn 15 of the best ways to conserve water. This episode was filmed at The Ecology Center in San Juan Capistrano. Learn more about them at:

    What would you add to the list?

    Add your comment.