Linking ≠ endorsement.
⇧ How Learning Economics Makes You Antisocial – Evonomics
… time spent studying economics does have an indoctrination effect.
The problem is not only that students are exposed to such views, but that there are no “balancing” courses taught in typical American colleges, in which a different view of economics is presented. Moreover, while practically all economic classes are taught in the “neoclassical” (libertarian, self centered) viewpoint, in classes by non-economists — e.g., in social philosophy, political science, and sociology — a thousand flowers bloom such that a great variety of approaches are advanced, thereby leaving students with a cacophony of conflicting pro-social views. What is needed is a systematic pro-social economics, that combines appreciation for the common good and for others as well as for the service of self.
I fully agree.
⇧ Caixin China Services PMI Falls to Second Lowest in Decade – Bloomberg Business
Our readers are not surprised.
The private data indicate the Chinese economy’s slowdown may be spreading to services, undercutting what has become the nation’s main growth driver.
⇧ U.S. construction spending posts first decline in nearly 1-1/2 years | Reuters
This is not what a recovering economy should be doing.
Jan 4 U.S. construction spending fell for the first time in nearly 1-1/2 years in November as a drop in nonresidential investment offset an increase in housing outlays, pointing to moderate economic growth in the fourth quarter.
Construction spending slipped 0.4 percent, the first and also biggest drop since June 2014, after a downwardly revised 0.3 percent gain in October, the Commerce Department said on Monday.
The government revised construction data from January 2005 through October 2015 because of a “processing error in the tabulation of data.”
Also, the recovery has been weaker than reported all along.
Will this cause the Fed to pause?
⇧ How I’ve Used Hard Money to Grow My Real Estate Business
I wouldn’t recommend hard money to anyone who’s done less than five deals in a specific niche. There’s not a lot of room for mistakes when the terms are as unfavorable as this to the investor.
If possible, make a deal contingent upon both the loan and the purchase.
⇧ Portugal’s Bank Bail-In Sets a Dangerous Precedent – Bloomberg View
The documentation for senior debt typically stipulates that all such debt is what’s called “pari passu”; that is, all securities rank equally, and none should get preferential treatment. But by moving just five bonds off the healthy bank’s balance sheet, Portugal has destroyed the principle of equality between debt securities.
Personally, I think it’s a form of defrauding investors. Some very deep-pocketed bondholders are going to fight it very hard and may even prevail.
⇧ Bank of America Says China Passed ‘Point of No-Return’
“We judge that China’s debt situation has probably passed the point of no-return and it will be difficult to grow out of the problem,” states a report by Bank of America’s chief strategist David Cui.
Welcome to the club, David.
As I wrote before seeing it anywhere else, the Chinese leadership doesn’t know what it’s doing. They’ve improved but still don’t get it.
The answer isn’t in either central planning or neoliberalism or a balancing act between them.
The answer is democracy the likes of which the world has never seen. Forget Marx and Mao. Give the people the power for real for once. You’ll be amazed. They need real information and all of it. That’s the open secret.
Want to lead the world, really?
⇧ Mortgage applications fall 27% after earlier rate-hike rush
Mortgage rates do not follow the Fed; they follow yields on mortgage-backed bonds ….
The Fed is buying up those bonds, keeping yields relatively low (so far).
⇧ No let-up seen in rent hikes this year
Contractors must do more on-the-job skills training.
Builders are racing to keep up. They completed 232,168 units in the 100 top markets last year, the second highest total in the past 30 years and behind only the 252,348 added in 2014. But the fresh supply was well under the 300,000 apartments planned because of the labor shortage, keeping upward pressure on prices, Willett says.
Some 443,240 units are now under construction, with 311,511 slated to be completed in 2015. Yet that would temper rent increases only slightly, to 4.1%, MPF says.
⇧ Congress’ Budget Package Delivers Perks for Multifamily Investors
The budget package includes a long list of good things for apartment investors. International investors finally got some relief from the punishing Foreign Investment in Real Property Act (FIRPTA). Affordable housing investors will benefit from the extension of provisions to the federal low-income housing tax credit (LIHTC). Congress also renewed bonus depreciation, small business expensing and the New Markets Tax Credit Program, in addition to tax benefits that reward energy-efficient buildings.
⇧ 6 Real Estate Secrets You Can Learn from Flipping Houses — Real Estate 101 — Trulia Blog
… inspections are essential to understanding the difference between a cosmetic fixer-upper and a serious rehab.
Oh, and the guy in the suit should also have a hardhat on.
…lower cap rates are shaping market activity, favoring larger firms like Blackstone or Starwood that can use their size to achieve economies of scale.
⇧ Public investment efficiency and growth | VOX, CEPR’s Policy Portal
Andrew Berg, Andrea F Presbitero, and Luis-Felipe Zanna:
… the merits of additional public investment spending in a particular case will depend on the marginal product of the resulting capital, efficiency, the cost of financing, the ‘fiscal space’, and more generally the discretionary effects of taxation required to finance the investment, the prospects for and costs of required operations and maintenance, and the risks of debt distress, among other factors.
With a debt-free currency, that paragraph would read as follows:
“The merits of additional public investment spending in a particular case will depend on the marginal product of the resulting capital, efficiency, and the prospects for and costs of required operations and maintenance, among other factors.”
To avoid inflation or deflation, the “product of the resulting capital” would need to be part of the money-supply/velocity equation. That’s were taxes would come in: to reduce too much supply relative to resulting productivity. But further planned and desired growth could absorb what would otherwise need to be taxed away.
⇧ A New Report Sheds Light on the Sad State of Suburban Office Parks – CityLab
… turning definitely-suburban office parks into urban-like, albeit still isolated, office “cities.” (It is worth noting that many of these projects involve extensive rezoning efforts.) A facility in the community of Edina, Minnesota, is in the midst of transforming from sprawling office center into what one local developer called “not your father’s or mother’s office park.” In practice, that means linking the park to 15 miles of bike trails, big box store-free retail, and green space. Other struggling office parks are talking farmers markets, hotels, and housing.
It’s a village?
⇧ Rent is rising in 2016 – The Open Door by Lennar
Using rental data from the U.S. Department of Housing and Urban Development and wage data from the U.S. Bureau of Labor Statistics, RealtyTrac predicts that buying will be a more affordable option than renting in 58 percent of markets, but that rents will outpace wage growth in 57 percent of markets.
⇧ Why Your Rent Is Rising in 2016 – CityLab
Now that the Federal Reserve is raising interest rates, the costs of home ownership are beginning to rise, if slowly. Advice to buy now may be sound, but it can’t sit that well with people in truly unaffordable housing markets. Or for people for whom a 3-percent down payment is a tricky proposition given slowly rising wages. Or for people whose student debt or shaky credit is keeping them out of the buyers’ bracket. For too many renters, home ownership still looks like an unattainable winners’ bracket.
⇧ Here’s What Architects See in Homes of the Future – Real Time Economics – WSJ
The five big trends they identified:
1. Disaster-resistant designs
2. Healthy building materials
3. Smart-home automation
… young people aren’t necessarily especially keen on such gadgets ….
4. Designs catering to an aging population
5. Energy-efficient design
⇧ Arctic’s oldest ice each week since 1990 – YouTube
Time lapse of the relative age of Arctic sea ice from week to week since 1990. The oldest ice (9 or more years old) is white. Seasonal ice is darkest blue. Old ice drifts out of the Arctic through the Fram Strait (east of Greenland), but in recent years, it has also been melting as it drifts into the southernmost waters of the Beaufort Sea (north of western Canada and Alaska). Video produced by the Climate.gov team, based on data provided by Mark Tschudi, University of Colorado-Boulder.
What that doesn’t mention is that it’s the thickest ice, so the total mass of ice has gone down dramatically not just in width (or air-surface area) but also in depth below sea level. The less ice below the water’s surface, the warmer the water, which causes more melting and less freezing, etc.
⇧ Inflation Now Guiding Light on Fed’s No-Hurry Rate Rise Path – Bloomberg Business
“For some members, the risks attending their inflation forecasts remained considerable,” the minutes said. “Among those risks was the possibility that additional downward shocks to prices of oil and other commodities or a sustained rise in the exchange value of the dollar could delay or diminish the expected upturn in inflation.”
Even further strength in the labor market, where the 5 percent jobless rate is almost at Fed officials’ definition of full employment, “might not prove sufficient to offset the downward pressures from global dis-inflationary forces,” a couple of officials worried.
Payroll processor ADP said Wednesday that companies added 257,000 jobs in December, the most in a year. Construction companies added 24,000 jobs, while retailers and shipping firms added 38,000.
The figures suggest that employers are still hiring at a healthy pace, even as overseas economic weakness and the strong dollar have hit U.S. manufacturing. Factories added just 2,000 jobs last month, ADP said.
The Fed doesn’t use ADP for data but rather the BLS.
⇧ The Ehang 184 is a single-passenger drone that transports people (yes, people) at 11,000 feet | PCWorld
It’s very logical. I was wondering when I’d see them. I am now wondering how loud it is inside and out. The blades sure could be a safety issue. Anyway, this technology for transporting people has to start somewhere.
… the people at Ehang, a Guangzhou, China-based drone company, say the Ehang 184 Autonomous Aerial Vehicle (AAV) is entirely real—however turbulent its legal airspace may be. In a somewhat absurd nutshell, the Ehang 184 AAV is a 142-horsepower “personal flying vehicle” that can transport a single human being from Point A to Point B at an altitude of more than 11,000 feet.
⇧ Is the whole theory of secular stagnation a hoax? – Telegraph
It could equally be said that the chief cause of surging debt ratios in Italy, Spain, France, Portugal, Finland and most of the eurozone from 2011 to 2014 was sheer policy error, the deflationary hammer blow of fiscal austerity and tight money at the same time. It led to a rising debt burden on a base of stagnant nominal GDP. The “denominator effect” automatically sent debt ratios spiralling upwards.
Money and debt contracts are social conventions. They can be torn up, or reinvented. When we go into the next global downturn – perhaps in 2017 – we may have to resort to an entirely different form of QE. The next step is to print money to fund state spending directly, and probably behind capital constraints in a less “globalized” world.
There Ambrose goes again, sounding progressive.