Linking ≠ endorsement.
⇧ Republicans Aim to Preempt Local Democracy, Target Fracking Bans
What with the recent revelations about fracking earthquakes, drinking-water questions, and more, we think this move by the Texas Senate (to preempt municipal zoning and crime-prevention authority designed to protect municipal citizen’s health and safety in very reasonable ways) is highly undemocratic and is driven primarily by big oil and gas money rather than environmental ethics and sound risk-management.
The Texas Senate – in lockstep with the oil and gas industry, despite the continued protests of their own constituents – approved legislation this week that would make the city of Denton’s fracking ban unenforceable and preempt the ability of local communities to regulate oil and gas operations within their city limits.
⇧ California Apartment Fire Displaces Hundreds, Causes $850,000 in Damage
The cost of damage to the 44-unit building is around $700,000, including two apartments damaged by fire and three more that were impacted by water and smoke.
⇧ Woman charged with $515,000 fraud in 2 fires – Your Daily Journal – yourdailyjournal.com
State insurance investigators say Patel participated in the burning of a commercial building at 432 U.S. 1 South in December. She lied to Liberty Mutual Insurance Co, officials about the fire’s cause in order to collect more than $360,000 in insurance payments, according to authorities.
A month later, Patel is accused of burning a home at 579 U.S. 1 and making false statements in order to collect $155,000 from Allstate Insurance Co.
Insurance fraud is gambling with your freedom.
⇧ Additional monetary easing for China? | Alicia García-Herrero at Bruegel.org
…monetary binge from a heavy-loaded easing by the PBoC can only harm the Chinese economy. The key reason is that it will continue to feed leverage by Chinese agents, by artificially lowering the cost of funding, at the worst of all times, namely that of a renewed reform push. The low shadow of the FED’ recent history, namely the complacent idea of a Great Moderation right before what has ended up being the US worst financial crisis in decades should constitute an important warning signal for the PBoC in its current deliberations.
…most importantly, China’s nominal growth has nearly halved from its peak levels. Therefore, the wonderful vanishing effect on high nominal growth on debt is no longer as effective.
Notwithstanding the well-known cushions that the Chinese economy has (both in terms of international reserves but also of public assets which can be privatized), the speed and extent at which China’s has been leveraging have clearly had a toll on the economy. The clearest case is the real cost of funding, which has increased substantially lately at the same time in which China’s potential growth has been coming down. In fact, the safest asset, government bonds are already hovering 2% in real rates from negative territory in 2011. While this may still sound pretty low, we cannot forget that the Chinese economy has long been spoilt with a relatively low cost for capital, which is partly behind the excessive role of investment in China’s growth story. Furthermore, both local governments and corporations are facing a much higher funding cost than the central government. In fact, the floor for their funding cost, the benchmark lending rate, is already up to 4% in real terms (Graph 4). Furthermore, many local governments and corporations, particularly real estate developers, need to borrow in the shadow banking sector where the cost of money is much higher.
⇧ Los Angeles’s Big Plan For Pulling Out of Its Housing Crisis – Unaffordable Housing – Curbed LA
The environmentally-focused game plan hits on everything from earthquake preparation to “green jobs,” says KPCC, and also includes a housing section that focuses on stemming LA’s immense dearth in new housing, creating more units close to transit hubs, and closing the scary-large gap between rents and incomes. Sounds pretty good, but there’s a long, tricky road ahead.
⇧ Are better times coming for U.S. middle-income households? – Washington Center for Equitable Growth
…productivity growth. Here Hatzius is unsure about its future path, calling it a “wild card.” But he does cite evidence that some of the recent weakness in productivity growth is due to a lack of capital spending in recent years. This would imply that the current weakness is a result of the slow economic recovery since 2009—and that capital spending may pick up in the future.
⇧ Nobel Laureate Stiglitz: “You will have stronger growth if you reduce inequality” – Agenda – The World Economic Forum
“We used to think there was a trade-off between equality and growth. Now we see the two as complementary. You will have stronger growth if you reduce the extremes of inequality,” he said.
That was Joseph E. Stiglitz, Professor, School of International and Public Affairs (SIPA), Columbia University.
It reminds us of what we recently said Angela Merkel needs to know: “The more she helps Greece, the richer Germany will become. We guarantee it.” (https://propertypak.com/2015/05/01/news -real-estate-risk-economics-may-1-2015/# 0501152)
⇧ Transportation Emerges as Crucial to Escaping Poverty – NYTimes.com
Are your lower-income rentals near good public transportation?
The relationship between transportation and social mobility is stronger than that between mobility and several other factors, like crime, elementary-school test scores or the percentage of two-parent families in a community, said Nathaniel Hendren, a Harvard economist and one of the researchers on the study.
⇧ Joseph Stiglitz: ‘Current monetary policy is not going to work’ – The Globe and Mail
Joe Stiglitz again:
You are not going to have robust growth without adequate demand. The people at the top who have seen big income gains are saving large portions of their income, on average 35 per cent. Those at the very top are not spending their money. People at the bottom, on the other hand, have no choice. To just get by, they have to spend all their income. So, when you have this redistribution of wealth from the bottom to the top, total demand weakens and total growth weakens. This is why I’ve always said that current monetary policy is not going to work because quantitative easing is based on a variant of trickle-down economics.
Read the whole interview. It’s not that long, and it’s packed.
⇧ Borrowers Cannot Challenge Mortgage Assignments, Says Nebraska Joining Other States | Bradley Arant Boult Cummings LLP – JDSupra
This is exactly how we thought it would come down; but admittedly, we weren’t sure of the legal rationale that would be applied. No standing and the history of having made the payments make sense to us. Mind you, this doesn’t appear about the issue of fraud where the borrower is made to pay more than he or she should have had to, which would be reason to block having to pay the increased portion at the very least.
Nice mini-brief by David Roth:
Attacking sufficiency, accuracy, or validity of assignments of mortgages and deeds of trust has been among the most common strategies employed by borrowers to challenge foreclosures. Allegations regarding the status of MERS, the legal authority of the individual executing the assignment, and the timing of the assignment’s recording have all been raised and litigated in courts throughout the United States. Recently, however, the Nebraska Supreme Court joined a growing number of state courts that have rejected such arguments, citing fundamental questions about borrowers’ standing to challenge contracts in which they have no legally cognizable interest.
⇧ China cuts interest rates for third time in six months as economy sputters | Reuters
While the PBOC acknowledged the difficulties facing China’s economy, it said in its statement accompanying the announcement that it wants to strike a balance between supporting growth and deepening structural reforms.
How much longer will they have to drag this out in order to be able to call it a soft landing?
Why is the US allowing them to do it on the US’s dime (jobs and trade deficits)?
Which Americans have invested in China such that they have more interest in China’s prosperity than they do in America’s?
Why didn’t we require high standards from China for opening up trade? That would have benefited the entire planet.
⇧ Schäuble Warns of “Sudden” Greek Default | Wolf Street
Few people have managed to rise to such media adulation and then plunge from it as quickly as Varoufakis. Whatever he was trying to do, it didn’t work.
If one doesn’t know what the other was trying to do, how can the one say the other failed? It isn’t over until it’s over, and it isn’t over.
Who knows how much the current “faces” of Greece in the negotiations are consulting with Yanis Varoufakis? What he did was make clear that Greece could not afford the deal at the time. That’s still true. What’s change with the new “faces”? We have yet to hear anything that indicates that the Greek government has abandoned Yanis’s strategy, which is realism and honest talk rather than the neoliberal/Austerian ideological fears that are still coming out of Germany.
If Germany holds to its plan and Greece doesn’t shoot itself in both feet by allowing the impossible austerity to continue (which has caused a major humanitarian crisis there), then it will be Germany that will have shot itself.
There’s a great deal going on in Germany right now over 1) international industrial espionage conducted by the NSA and Germany’s BND and 2) sanctions against Russia. Ms. Merkel is more fragile than the mass media appears to want to consider.
⇧ More Apartment Investors Poised to Cash Out As Cycle Matures – CoStar Group
With per-unit prices paid for apartment units at a cyclical high, particularly for top quality assets, investors who purchased or developed multifamily communities very early in the recovery or during the recession are cashing out before a combination of rising new supply and expanding cap rates cuts into selling prices.
Both private owner and REITs have become net sellers of apartments as prices rise, particularly on high-end projects.
Well, isn’t that premature? Are interest rates really about to go up? Also, the construction of multifamily apartments still isn’t keeping up with the growth in demand.
Of course, the decision to cash out would depend upon the particular market/location and where the money could go to earn a great enough return to merit the cost of the turnover.
⇧ More Odd Behavior Leads Economists to Ask, “Has the Recovery of the US Economy Stalled?” | Economy Watch
…the economy added 591,000 jobs so far in 2015, despite a GDP that remained flat (or possibly even contracted). Thus, if the US economy is entering a “double dip” recession, it is a very odd one in which unemployment drops despite GDP contraction.
New workers are cheap. They can be cheaper than new equipment because they are seen as easier to dump to cut costs in a hurry.
We’ve seen that productivity is lower per worker. It’s been attributed to less capital investment in plant and equipment, etc.
Also, labor slack remains. Furthermore, the drop in the oil industry has taken its toll. Lastly, the stronger dollar has held down the creation of higher-paying manufacturing jobs.
⇧ Bund “tantrum” warns of future accidents | Gavyn Davies
…easing in Chinese monetary policy triggered a recovery in oil and commodity prices. Markets realised that the deflation threat had ended in most advanced economies. The sudden reversal in bunds and all of the other related asset prices where speculation had been excessive then fed on itself until last Thursday, since when it has paused.
The switchback in bond markets and the euro since late January therefore seems to have been driven mainly by investor psychology, not by economic fundamentals. In fact, the recent sharp rise in global bond yields has occurred at a time when economic activity has actually been weakening, which is highly unusual.
The bund tantrum has been only a minor event so far, but it could be a warning of the shape of things to come, and on a much larger scale.
⇧ Affordability Tears ‹ Zillow Real Estate Research
This is why it makes financial sense to construct vastly more rental units.
Recently, wages for low-income earners have been essentially flat. This has caused the share of income needed to afford a lower-tier home for lower-income residents to spike over the past several quarters, even as it has remained relatively stable over the same period for middle and high-income earners.
⇧ TPG Capital to Buy Commercial Property Broker in Mega Merger Deal – YouTube
David Bonderman’s TPG Capital has announced that it will buy commercial property broker Cushman & Wakefield for around $2 billion. The company will be merged with Bonderman’s Texas based DTZ unit, creating a real estate firm with an estimated $5.5 billion in annual revenue. TPG is said to be in advanced talks with the Agnelli family’s Italian holding company Exor S.p.A. to buy their 75% stake in the property giant. Cushman and Wakefield said the new brokerage will have over 43,000 employees. The deal is expected to close in the fourth quarter and a deal could be announced as early as next week.
⇧ Macroeconomic performance and election outcomes | Jérémie Cohen-Setton at Bruegel.org
Niall Ferguson is a darling of the libertarians. Why? Well, he spells out stats only in ways that those who don’t read countervailing sources swallow and those who know better but want to push the pro-rich ideology can echo.
Simon Wren-Lewis states it this way:
This allowed Cameron to pass off the impact of bad macro management in delaying the recovery as inevitable pain because they had to ‘clear up the mess’ left by their predecessor.
Here’s how he explains what Niall deliberately ignores:
Austerity reduces the level of output from what it otherwise might have been. In the simplest case, once we come out of recession output goes back to the level it would have been without austerity.
The huge question is, why do the common people fall for it? The answer to that is they are stuck in the mainstream media, which does the bidding of the plutocrats, just as Niall Ferguson does.
Doesn’t Niall Ferguson know that what he’s been pushing is deliberate falsehood by omission?
⇧ Millennials surpass Gen Xers as the largest generation in U.S. labor force | Pew Research Center
More than one-in-three American workers today are Millennials (adults ages 18 to 34 in 2015), and this year they surpassed Generation X to become the largest share of the American workforce, according to new Pew Research Center analysis of U.S. Census Bureau data.
Better build more apartment complexes.
⇧ Appeals Court Returns Gulf ‘Dead Zone’ Lawsuit to Judge
A federal judge who ordered the Environmental Protection Agency to take action to regulate farm runoff and other pollution blamed for the Gulf of Mexico’s annual oxygen-depleted “dead zone” must take a second crack at his ruling.
If the EPA can’t prevent this dead zone, the law should be changed so it can and must.
⇧ 5 Dead After Twisters Hit Texas, Arkansas
Emergency responders on May 11 searched through wreckage in parts of the states of Texas and Arkansas after a line of tornadoes battered several small communities, killing at least five people, including a young couple whose daughter survived.
Plus, there was plenty of property damage.
⇧ Police Looking for Arsonist Plaguing Alabama City
Investigators say they are close to finding the person or persons responsible for setting at least seven Birmingham homes on fire over the past few months.
⇧ Iowa, South Dakota Towns Assessing Tornado Damage
Residents of the tornado-ravaged Iowa and South Dakota towns are beginning to assess property damage after twisters hit on Sunday.
What a mess.
⇧ Google Says Self-Driving Vehicles Were Involved in 11 Accidents – Bloomberg Business
Are you considering being an early adopter for your landlord or real-estate management business?
Google Inc. said its self-driving vehicles have been involved in 11 minor accidents in the six years they’ve been in testing, and the automobiles were never to blame for the incidents.
We’ll all have to keep an eye on the stats going forward.
We’re confident that technology will be able to out drive human beings in terms of safety in general. It may already be the case (likely in our view).
⇧ Insurance claims surge in quake aftermath [Nepal] | Business
Insurance companies have received 6,000 earthquake-related claims as of Friday and the figure is expected to grow, the Insurance Board (IB) said on Friday. Most of the claims for compensation are related to property insurance while a few are related to accident, vehicle and life insurance.
The earthquake has damaged more than 200,000 residential houses. The devastating 7.9 magnitude earthquake has claimed more than 7,900 lives as of Friday. “Since April 25, claims have been flowing in from the insured.”
⇧ Niall Ferguson Displays His Ignorance of Economics | Beat the Press | Blogs | Publications | The Center for Economic and Policy Research
You might think this is piling on, but Niall Ferguson needs to be stopped from misleading the masses.
You have to admire Niall Ferguson. There aren’t many people who are willing to write lengthy diatribes on topics on which they seem to know next to nothing…
…the real story is the overall performance of the U.K. economy, which Ferguson somehow thinks was extraordinary. The data beg to differ….
The article gives Niall the benefit of the doubt.
Hasn’t he read the earlier critiques that point out where what he’s saying is wrong? Doesn’t he know that austerity didn’t fix things? Doesn’t he know that governments can spend more during downturns and that after enough stimulus and recovery, any increased debts can be easily managed? Doesn’t he know those things because he’s seen the history of exactly those things happening?
⇧ Calculated Risk: Research: Natural Rate of Unemployment under 5% and Falling
This estimate of slack, in combination with labor market measures such as LFP and involuntary part-time workers, may help explain why wage inflation and price inflation remain so low.
Definitely. It’s why we have been saying all along that the Fed should forget the unemployment rate and instead wait until price inflation has actually gone up to 3- 3.5% before even thinking about touching the brakes. It’s also why we’ve been calling and calling and calling for more fiscal spending on Main Street (the real economy) to increase velocity.
⇧ The Lessons for Greece’s Economy From 70 Currency Union Breakups – Bloomberg Business
The hardliners in Athens may have a point.
History suggests Greece leaving the euro wouldn’t make catastrophe inevitable, says Adam Slater, lead economist at Oxford Economics Ltd.
If Germany won’t do the right thing and back off the austerity, Greece would be very foolish to stay in and to try and then fail anyway to pay off the usurers.
⇧ Deadly new quake in Nepal adds to misery for exhausted residents – YouTube
Just as Nepal was slowly starting to recover from a devastating earthquake last month, another strong quake has struck.
At least 40 people are reported to have been killed in the latest 7.3 magnitude tremor and hundreds more have been injured.
Many buildings already weakened by last month’s tremor collapsed, adding to the misery for tens of thousands of people.
Politicians rushed for the exit of Nepal’s parliament and buildings swayed as far away as New Delhi.