Linking ≠ endorsement.
⇧ Is TPP trade deal a massive giveaway to major corporations? An exchange between Obama and Sherrod Brown – The Washington Post
We must say, US Senator Sherrod Brown’s statements concerning the ISDS (Investor-State Dispute Settlement) in the TPP (Trans-Pacific Partnership) agreement are excellent.
Right off the bat, he correctly disputes President Obama’s characterization.
Under ‘investor state’ provisions, a foreign company can mount trade challenges against laws and regulations.
You should read the entire article.
In closing the article, author Greg Sargent writes, “… this provision of the TPP — like so much of the rest of the deal — probably can’t be evaluated until we actually see it.” Drop the “probably.”
The clock is ticking. The longer the President waits before he shows us, the less time we’ll have to evaluate it. That’s his plan, and we think it’s anti-democratic, as we’ve said before.
⇧ The Dollar Joins the Currency Wars by Nouriel Roubini – Project Syndicate
The world would be better off if most governments pursued policies that boosted growth through domestic demand, rather than beggar-thy-neighbor export measures. But that would require them to rely less on monetary policy and more on appropriate fiscal policies (such as higher spending on productive infrastructure). Even income policies that lift wages, and hence labor income and consumption, are a better source of domestic growth than currency depreciations (which depress real wages).
The sum of all trade balances in the world is equal to zero, which means that not all countries can be net exporters — and that currency wars end up being zero-sum games. That is why America’s entry into the fray was only a matter of time.
The problem with QE is that as designed and so far implemented, it has not stimulated velocity.
Since we have a mostly neoliberal-Republican legislature, we won’t get the needed fiscal stimulus either. The longer they rule that way, the more lost decades we’ll have.
⇧ Why Your Property Management Business Needs a Lawyer | McBrayer, McGinnis, Leslie & Kirkland, PLLC – JDSupra
While one may represent oneself before a court, one cannot represent another without a license to practice law. That, in effect, is what happens when a business owner tries to represent the business [as a separate legal entity] in court.
⇧ Why Do Real Estate Investors Fail? – YouTube
Many real estate investors never buy a house or rental and many lose money when they do buy. Educate yourself and you will have a really good chance of being a successful investor. Here are some ways to avoid common mistakes.
⇧ How Much Should You Spend on Rent When Budgeting? – Quicken Support
We’ve been thinking about what residential tenants can do in the face of rising rents. We did an Internet search on it, and this Intuit article popped up fairly high on the list.
People living in cities where rents are steep might dedicate as much as 50 percent to rent payments, but they must typically give up something else in order to do so. The 50/30/20 budget suggests that you should give 50 percent of your income to necessities, 30 percent to discretionary spending — the fun things — and 20 percent to savings or paying down debts. In theory, this, too, can increase what you can comfortably spend on rent if you move some of that discretionary 30 percent over to the necessities column.
There’s an old saying: “It’s very expensive to be poor.”
If rates keep rising the way they have been relative to wages and in the face of so much labor slack, the homelessness rate will also continue growing.
The problem isn’t with the poor being lazy. The problem is with the economic system that’s geared against the poor rather than for them.
We could have enough housing and jobs and high enough wages if we were to change the economic system in the right ways.
No one would have to lose with the right changes.
⇧ Australia Tightens Rules on Real Estate – NYTimes.com
Foreign investors who illegally buy houses in Australia and the agents who help them face increased hefty fines and prison terms of up to three years under new penalties aimed at cooling soaring property prices in Australia.
⇧ Real Estate Goes Boom (Again) | IAG Breaking News
Our sources offer planners advice not only on property management but also on private partnerships, REITs and real estate-related mutual funds, preferred placements and other strategies.
Because no matter what strategies they choose, they say a laser-sharp focus on valuations and cash flow is essential to navigating a market in which the low-hanging fruit has all been plucked.
That’s the truth.
⇧ Not real estate; more like real estates | Dallas Morning News
Rather than conspicuous consumption (showing off wealth), we’d rather read that these billionaires all got together and built affordable housing.
“It tells you that there is a new class of collectible — they’re trophies now,” Dan Conn, CEO of Christie’s real estate brokerage, said of the most lavish homes being acquired.
They could do that and still have very nice houses of their own.
⇧ Housing values: Why the divide isn’t narrowing
The number of borrowers who owe more on their mortgages than their homes are worth fell to the lowest level in eight years, but those who are still “underwater” are drowning faster than ever in foreclosure.
⇧ Kansas shows us what could happen if Republicans win in 2016 – The Washington Post
Kansas is committing fiscal suicide for an ideology that is only pro-rich and is highly counterproductive in the short and long term.
The consequences in Kansas, after all, are a result of fulfilling the great Laffer Curve dream that has Republican presidential hopefuls such as Marco Rubio, Scott Walker and Chris Christie all salivating: dramatic tax cuts, concentrated among those at the top, coupled with the promise that such action will, through trickle-down voodoo, increase tax revenue and boost economic growth.
In the real world, politicians rarely get to carry out that budget plan in a big way. Then Kansas Gov. Sam Brownback (R) came along and, with a Republican legislature on his side, passed sweeping tax cuts in 2012. Despite faith-based forecasts promising bountiful revenue, tax receipts have come in, again and again, hundreds of million dollars below projections.
⇧ Why Bobby Jindal Is Superman. Sort Of. | Observer
This is another example where someone who should know better, doesn’t.
Facing a massive budget shortfall, Jindal has decimated higher education funding and shuttered hospitals, even as New Orleans and Baton Rouge are in the nation’s top five cities for HIV infection rates. Moody’s is on the verge of downgrading the state’s credit rating. Publications with names like The American Conservative are posting pieces with names like “How Bobby Jindal Wrecked Louisiana.”
What should he do? He should not run for President but rather invite a bunch of macroeconomists to his state to help him dramatically turn things around.
⇧ China Rethinks Safety Net for Its Banking System – NYTimes.com
On April 21, for example, China’s huge domestic bond market experienced its first default by a state-owned company, and analysts expect more to follow.
The banking sector sits at the center of the overhaul effort. For years, China’s banks have paid ordinary savers generally low rates on their deposits and lent those funds to state-run companies, which have been known for making wasteful investments. Allowing market forces to play a bigger role in this process is intended to push banks to more accurately price risk when lending.
Deposit insurance is just the first step — and a relatively easy one. The government also plans to remove the caps on interest rates that banks pay on those deposits, which officials have signaled could happen as soon as this year.
⇧ macroblog – Federal Reserve Bank of Atlanta
… Thursday’s Employment Cost Index report showed a more sizable uptick in the wage and salary growth picture. Year-over-year growth in the first quarter was 2.5 percent, up from 2.1 percent in the fourth quarter of 2014. Another wage measure that we discussed in a February macroblog post also moved notably higher in the first quarter. That measure, which is derived from earnings data in the Current Population Survey, increased from 2.8 percent in the fourth quarter of 2014 to 3.2 percent in the first quarter of this year ….
There’s still slack though, plenty of it.
⇧ mainly macro: UK election: it was mediamacro wot won it
… normally you would ask how on earth something like the budget deficit could trump standards of living when judging economic performance. This is where the mediamacro myth of Labour profligacy is so important. One of the lasting images of this election was the man in the recent Leaders Question Time who accused Miliband of lying when he said that the global financial crisis rather than Labour profligacy had caused the deficit. (Second clip here.) He just knew that the last government had bankrupted the economy, and it appears many in the audience did too. And who could blame them: coalition politicians go unchallenged when they say it, and lots of newspapers repeat the line endlessly as fact.
It is a myth, pure and simple, but an important myth, because it places the blame for stagnant or falling living standards during the coalition government on their opponents.
⇧ Global growth report card — is the world slowdown temporary? | Gavyn Davies
In China, hard landing risks seem to have increased with generally very weak data appearing in April, and this has now prompted the authorities to increase the scale and urgency of measures to boost economic activity. There is still plenty of scope to ease monetary policy in conventional ways (ie cuts in interest rates and reserve requirement ratios), but the PBOC is also reported to be contemplating forms of unconventional easing, by using the central bank balance sheet to assist in the resolution of troubled debt in the local government sector. Policy in other Asian economies is now also pledged to boost the growth in domestic demand.
The financial markets seem confident that these measures will succeed in restoring activity growth rates in China to target in coming months, but it is too early to point to any firm evidence on that front.
In the US, the official GDP growth rate in Q1 was only 0.2 per cent, while the latest underlying activity growth estimated by our model is 1.8 per cent. (Because the GDP figures contain a lot of statistical noise, the model is not intended to track GDP directly on a quarterly basis.)
Most economists are taking the view that a combination of bad weather and bad luck has temporarily reduced the US growth rate in Q1, just as it did in the first quarters of several previous years. In addition, rapid cutbacks in US oil drilling activity have reduced investment spending in Q1, while the beneficial effects of low oil prices on consumers’ expenditure are taking longer to come through.
⇧ Thanks to Expensive Housing, 27 Percent of LA Lives in Poverty – Unaffordable Housing – Curbed LA
People in the lowest income quartile spend a disproportionately high amount of their earnings on rent: 67 percent. More than two-thirds.
As always, the root of the problem is a total lack of affordable housing.
⇧ Nonbanks Target Single-Family Rental Investors – NYTimes.com
Financing options for real estate investors have been expanding as nonbank lenders step in to fill what they see as a lucrative void.
While investor interest in single-family rental properties has remained high, regulations have made it tough to obtain sufficient financing through Fannie Mae and Freddie Mac. But more private lenders are sizing up investment borrowers on their own terms, and extending higher-priced credit to landlords and so-called flippers alike.
⇧ Did Labour over-spend? – BBC News
Of course the crisis would have been less acute if the Financial Services Authority and the Bank of England had taken earlier prophylactic action to prevent the banks lending and investing in their insane and greedy way.
That’s a fact, but it’s really an indirect or different issue. Most importantly, it’s not the Tories’ point. The Tories weren’t opposed to deregulation at all, and they certainly wouldn’t have been saying that such deregulation would lead to an economic crash. We doubt very seriously that many of the voters are making the point that the BBC is making here.
⇧ China’s Slowing New Normal by Michael Spence – Project Syndicate
… in order to boost demand, China will also need increased household consumption and improved delivery of higher-value services. Recent data suggest that, notwithstanding recent wage increases, consumption amounts to only about 35% of GDP. With a high household savings rate of around 30% of disposable income, per capita disposable income amounts to roughly half of per capita GDP. Expanded social-security programs and a richer menu of saving and investment options could go a long way toward reducing precautionary saving and boosting consumption. But what is really needed is a shift in the distribution of income toward households.
Another key challenge concerns China’s slumping property sector, in which construction and prices dropped rapidly last year. If highly leveraged developers are under stress, they could produce non-performing loans — and thus considerable risk — in both the traditional and shadow banking sectors.
Fortunately, Chinese households’ relatively low leverage means that the kind of balance-sheet damage that occurred in some advanced countries during the crisis, leading to a huge drop in demand, is unlikely, even if real-estate prices continue to decline.
However, the shock of an extreme fall in real-estate values would likely cause the economy to freeze up.
⇧ Clash of the manifestos: Debt and Deficit – Full Fact
The Institute for Fiscal Studies says that from 2010/11 to 2014/15 the government borrowed approximately £100 billion more than it planned to at the start of this parliament.
This wasn’t because the Coalition failed to cut spending. The economy hasn’t performed as well as it hoped, and the government has raised less tax revenue than it expected to.
Well, that’s what happens when you cut spending in a downturn.
⇧ The Best and Worst Places to Grow Up: How Your Area Compares – NYTimes.com
… five factors associated with strong upward mobility: less segregation by income and race, lower levels of income inequality, better schools, lower rates of violent crime, and a larger share of two-parent households.
Rentals in such places will do better too.
⇧ After Shocking Fundraising Totals, Bernie Sanders Defends European-Style Socialism [?] | naked capitalism
So, the big (US Presidential) political season is truly upon us now.
Fiscally, as our readers know full well, we lean what’s termed far-left (in US terms).
Bernie Sanders is defending “socialism,” but we take clear exception to his application of the term “democratic socialism” in the video below.
He, along with many, many others, have simply been using the term incorrectly. Sweden is definitely not a democratic-socialist state. It is, however, somewhat social democratic, which really means that it is a decidedly mixed economy with a relatively strong welfare-state aspect.
It is social democracy, not democratic socialism, that Bernie Sanders is apparently running on.
A further clarification is as follows. Unlike social democracy, democratic socialism contains no private sector. It is not a mixed economy of some capitalism and some public ownership.
We don’t want to get into the horse-race aspects of the video. That said, we do agree that it would be a mistake to underestimate Senator Sanders. Any competition against him for the Democratic nomination will have its hands full debating him, especially on the domestic economic front.
Also, it should be remembered that the word “socialism” is not a dirty word amongst the youth today the way it used to be. They know what deregulation and securitization did to the US economy. They know that those who clamored for such deregulation were libertarian-capitalist leaners. They know that had there been no such financial deregulation of Wall Street, there would not have been a Great Recession, which is a depression in many parts of the world.
Bernie Sanders talks with ABC about his presidential campaign agenda.
⇧ End of the migrant miracle: China at the Lewis Turning Point – YouTube
This is a large part of why we’ve been pessimistic about China’s prospects for meeting their 7% target.
Giving benefits regardless of a worker’s location within the country does make perfect sense; but even if they were to do that, would it be enough? We think not.
A great deal of what is happening in China is heading toward neoliberal capitalism and away from “Socialism with Chinese Characteristics.” (https://en.wikipedia.org/wiki/Socialism _with_Chinese_characteristics) What that means to us is that the Chinese leadership really doesn’t have a steady rudder aiming at a clearly defined goal. Without those things, we see China running into unexpected troubles, just the way the neoliberalism in the West has done.
That is not to say that we welcomed “Socialism with Chinese Characteristics.” We didn’t. We also think it’s a misnomer. It’s really been a period of social democracy without multiparty democracy, which itself is an oxymoron. We may be fiscal leftists, but we aren’t Marxists. We don’t like one-party dictatorships, which is what China has. It’s undemocratic. We are for democracy, provided it is a fully informed electorate (which we don’t see anywhere in the world at present, though there are efforts in that regard).
Anyway, the video is informative because the demographics are actual.
China’s labour force is shrinking, and the flow of workers migrating from farm to factory is dwindling. The end of surplus labour has profound implications for the Chinese economy.
⇧ Greek austerity as punishment and concept of oil market death – YouTube
Good show, however, Warren Buffet is mistaken that we’ve had helicopter money. Helicopter money falls on non-bankers too. His lack of understanding about the difference between the monetary and the fiscal is readily apparent. (See: https://www.investopedia.com/terms/h/hel icopter-drop.asp)
⇧ The Future of Worldwide Income Distribution – YouTube
These projections assume a fairly steady state. For one, apocalyptic military confrontations would alter things a great deal. If we don’t get a handle on the environmental crises around the planet, the trend line won’t be sustained either. Lastly, there could be a huge change of heart concerning the current monetary, economic, and financial systems. We could undergo radical ideological shifts, hopefully for the better.
The debate about income distribution has focused on the trend of rising inequality in the United States and other advanced economies. Worldwide, however, income distribution is becoming more equal. This video presents new evidence derived from surveys of households worldwide, which projects equality to improve further in the next 20 years. The main factor in that trend is strong growth raising hundreds of millions of people from poverty to the middle class or to affluence in China, India, sub-Saharan Africa, and other parts of the developing world. The reduction in global inequality will reshape the size and location of global consumption of goods and services. Unprecedented opportunities for businesses and investors lie ahead. But there will also be challenges posed by rising pressures on infrastructure, natural resources, the environment, and the global climate.
⇧ How Do I Screen Tenants in Low End Rentals? [#AskBP 011] – YouTube
Credit score at 600, evictions not allowed, income-to-rent ratio 33%:
In this episode of the #AskBP Podcast, learn how screening tenants can change slightly depending on the kind of property you are screening for. You’ll learn the screening processes Brandon is willing to compromise on, and the few that he absolutely won’t! If you rent to tenants in the “sub-$800 per month” rental market, this is a can’t-miss episode!
What do you think?
How about how long the person has been employed and what are his or her prospects for remaining so?
As for evictions, one might want to take into consideration how long ago the eviction occurred and the circumstances.
Lastly, did Brandon fail to do property inspections in a timely manner? This was apparently a recent eviction.
We recommend routine inspections for maintenance and safety reasons among others. The more problems, the more frequent the inspections should be concerning the given tenant. Are annual inspections enough in general?
⇧ Q&A: Leveraging Debt vs. Building Equity for a New Investor – YouTube
Ilyce Glink gives good advice.
On this edition of Big Money Real Estate, I answer a question from a new real estate investor. He wants to know whether he should continue building equity in his first investment property or go further into debt in order to secure a second investment property. Watch this video to find out.
⇧ Insuring for Disaster – NYTimes.com
Jeffrey Sachs makes the case for global, catastrophic coverage.
NATURAL disasters like the devastating earthquake in Nepal constitute a highly uncertain but quantifiable risk. No one can say for sure when a major earthquake will strike. But the fault lines are known. We need a new global system of disaster insurance, akin to how homeowners guard against calamity.
The premiums would be very high. The cost to upgrade areas to safer standards would be very high.
Frankly, what we need is a new economic system that includes risk and cost sharing.
Could upgrading Nepal be part of the global GDP and a win-win for humanity? Absolutely.
What’s holding it back? The people who create the money don’t do it for the sake of everyone but for their own sake.
With higher global GDP, there would be no inflation if the increase in currency were to match that higher GDP perfectly, which could easily be done.
⇧ Supply-Side Social Insurance Simply Doesn’t Work | The Fiscal Times
The capital stock can be divided into three parts, privately owned physical capital, government owned physical capital (i.e. public capital or infrastructure), and human capital. It is not enough to simply focus on the private physical capital as supply-siders typically do, public capital and human capital must also be part of our growth strategy.
Unfortunately, those who claim to be supply-siders have been a key reason why we have underinvested in our infrastructure for the past few decades, and they have also failed to recognize the human capital building aspects of social insurance programs, particularly for children. …
You’d almost think that all the supply-side rhetoric is really a cover for tax cuts for wealthy constituents rather than a reflection of true concern about our children and our economic future.
“You’d almost think …”? No, not almost. We definitely think it.
What they care about is that they don’t make large enough consolidated profits concerning all the programs, no matter how great the programs. They want everything privatized regardless of whether the outcomes would be worse for the population as a whole. All that matters is the size of the privatizers’ take.
⇧ Dani Rodrik’s weblog: The War of Trade Models
Wonkish, even if there’s not much math: Dani Rodrik:
There is an interesting debate going on in Europe about the likely consequences of the TTIP (Transatlantic Trade and Investment Partnership). Much of the real debate is (or should be) about the proposed Investor-State dispute resolution (ISDS) and the desirability of regulatory harmonization when nations have different preferences about how these regulations should be designed. But there is also a fascinating numbers game going on, with alternative quantitative estimates deployed by pro- and anti-TTIP groups.
⇧ Fed’s Evans Continues to Advocate for Early-2016 Rate Increase – Real Time Economics – WSJ
“There is no prescribed timeline that must be adhered to, and no preset script to follow, other than that we should let economic conditions and risks to the outlook be our guides,” Mr. Evans said. “I see significant risks, but few benefits, to increasing interest rates prematurely,” he said.
We see only risks and no benefits to increasing interest rates prematurely.
⇧ Would More Government Debt Help the U.S. Economy? | BlackRock Blog | Global Market Intelligence
Historically, there has been no correlation between government borrowing and gross domestic product (GDP) growth. In other words, debt-fueled government spending hasn’t been associated with faster growth. To my mind, the onus is on those arguing for more debt to draw a clear path between further borrowing and economic growth.
Well, here’s Frank J. Lysy, former “Chief Economist and Director of the Economics and Policy Group of the Multilateral Investment Guarantee Agency (MIGA)”: “An Increase in Government Spending Can Reduce the Debt to GDP Ratio: Econ 101” (https://aneconomicsense.com/2013/08/29/ an-increase-in-government-spending-can-r educe-the-debt-to-gdp-ratio-econ-101/).
That probably doesn’t satisfy Russ’s requirements. What should satisfy him is that the fiscal stimulus worked. The problem with it is that it was way too small.
Coupling the actual results of the stimulus with Frank Lysy’s points results in a strong case for enough fiscal stimulus to take up all the unemployment slack and drive inflation to 2%.
⇧ Turnkey Properties: The New Millennial Investment – US News
As the economy improved, and financial arrested development started to end, some 20- to 30-somethings have started to invest in real estate, but not in the traditional sense.
Many have turned to turnkey properties, which offer the opportunity to become a homeowner while adding another revenue stream to an investment portfolio.
The article does discuss the pitfalls. What it doesn’t mention (but likely assumes you understand) is that the turnkey company is making a profit by getting the property ready, which is something the investor could do if the investor is capable and has the time to do the work or hire a contractor to do it. Also, many turnkey companies will manage the property for a fee, but many investors do their own managing to increase their profits. Of course, experience and knowledge all matter.
One other aspect is that long-distance absentee owners can find it exceedingly difficult if the management company goes under.
⇧ Fears for real estate jobs amid cyclical downturn in China | South China Morning Post
The following is telling.
Cai has more than doubled Shimao’s annual contracted sales revenues to more than 70 billion yuan during her stay. However, as growth in the industry is now expected to slow down after breakneck expansion in the past decade, almost all Chinese developers, including her company, are cutting back on construction this year and many have lowered their sales target to single-digit increases from previous years’ annual goal of 20 to 30 per cent.
⇧ Fracking Chemicals Detected in Pennsylvania Drinking Water, Study Says | TIME
Environmental scientists have detected chemical compounds used for hydraulic fracturing, or fracking, in the drinking water of three Pennsylvania households, according to a new study.