News: Real Estate, Risk, Economics. Aug. 20, 2018

⇧ 9 financial problems after a natural disaster—and what you can do about them
Many people hire contractors soon after a disaster to quickly begin repairs on their home or business. Some mortgage agreements require any insurance checks to be made out to both you and the mortgage company or servicer. This may affect your ability to cash insurance checks as that company may need to approve it before you can cash the insurance check. Typically, your mortgage company or servicer will agree to release a portion of the settlement money before work begins so you can hire a contractor.
What to do: Before hiring a contractor to begin repairs, check with your insurance company and your mortgage company or servicer about how and when the insurance funds will be distributed.
⇧ In U.S., wage growth is being wiped out entirely by inflation
Know what your middle- and lower-economic tenants are already up against before raising rents.
Cost of living was up 2.9 percent from July 2017 to July 2018, the Labor Department reported Friday, an inflation rate that outstripped a 2.7 percent increase in wages over the same period. The average U.S. "real wage," a federal measure of pay that takes inflation into account, fell to $10.76 an hour last month, 2 cents down from where it was a year ago.
⇧ FedViews
Given the diminishing effects of federal fiscal stimulus over the next few years and the expected tightening of financial conditions, we project that growth will slow to just under 2% by 2020.
They're right about the slowing; but, if current trends continue, it will likely drop more than to just under 2%.
They appear to be using figures that are too high concerning what they term the natural rate of unemployment and perhaps natural interest rate (though they don't use the term).
⇧ Drones Help Fight Fires After Dark
Fighting fires with higher technology ...
⇧ Earthquake Ground Accelerations Studied to Assist Better Building Design
Putting more important things before money:
"There's no time to wait," said Beresnev, a professor of geological and atmospheric sciences at Iowa State University. "Waiting can be very expensive in terms of lives and property damage."
⇧ Toxic Algae Bloom Devastating Florida's Gulf Coast
Red tide is a natural occurrence that happens due to the presence of nutrients in the water and an organism called a dinoflagellate.
Not always. Fertilizers, such as Nitrogen and Phosphorus are proven to contribute. Pollution is also. It's quite likely that the human burning of carbon that's increasing global warming is warming the oceans and, thereby, increasing red tides too.
⇧ Do Import Tariffs Help Reduce Trade Deficits?
While we cannot predict the size of the trade deficit, what seems clear from our analysis is that import tariffs will reduce both imports and exports.
That's if the tariffs remain in place because the target country doesn't cave into the pressure to even things up more by being fair enough to satisfy the country doing the targeting. Of course, it also depends upon the relative strength of the country doing that targeting. Therefore, in the case of the US v. China, China will very likely cave sooner than later provided the US holds out long enough. Meanwhile, the US will perfect its own domestic capabilities and enhance national security (if that's one of the true motives, which I think it is).
⇧ Protectionism and the business cycle
Please note that this research focuses on "small open economies," not on the US economy. In addition, the researchers didn't weight anything for quality, but assumed less efficient domestic producers. My point is that a switch can be from low-quality imports to higher-quality domestic products produced at lower rates of unemployment.
⇧ Puerto Rico officials say all of island now has power again
⇧ AI in Building Management: Here Come the Smart Buildings
⇧ You Know Who the Tax Cuts Helped? Rich People
With so much of firms' focus on buying back stock, a key Republican prediction — that tax cuts would encourage spending on equipment and factories — has not come to fruition. ...
...
"Not only will this tax plan pay for itself, but it will pay down debt," Steven Mnuchin, the Treasury secretary, said. This statement was absurd when Mr. Mnuchin made it, but it looks even more ridiculous now. The deficit and the federal debt are growing — and at a stunning pace. ...
...
Over the coming decades, the federal debt could nearly triple as a share of the gross domestic product if Congress makes the Trump tax cut and spending increase permanent .... ...
Today, many Republicans seem to realize that the tax cut has become a political liability, which is why they aren't talking about it ahead of the November election. Even they realize that it doesn't do any of what they promised.
As I said before the cuts were even voted on, they will cause a recession. We went down the wrong road and need to turn around and take the other path.
⇧ Robot learns to build, adapt using Lego models
⇧ Hornstein-Kudlyak-Lange Non-Employment Index
... excluding discouraged workers or similar groups from the standard unemployment measure may misstate the degree to which resources in the labor market are utilized.
May?
⇧ To Date, Wildfires Are Burning 3 Times More of California Than in 2017
By this time last year, the most deadly California fires hadn't even begun.
⇧ 5 things homebuyers must know about flood insurance
Just don't confuse rain damage with flood damage. Rain damage can often be covered without flood coverage if the rain water enters the structure without first having touched the ground. As always, read the policy and be ready for various interpretations as to what it says and which jurisdictions treat the language the way you're hoping.
⇧ Indian rupee drops to all-time low against dollar as Turkish crisis hits emerging markets
⇧ 12 Reasons Why Rental Properties Are the Best Investment, by Brandon Turner
⇧ I'll Never Buy Another Multifamily Without This $75,000 Tool That Added $1.3M Value in Less Than 12 Months
Be sure you check the law on who must pay for water before figuring following in the footsteps of this article will work in your situation.
⇧ Northeast Floods Prompt More Rescues, Emergency Declaration in New York
⇧ Wildfire Updates: 6th Firefighter Dies Battling Northern California Mendocino Complex Blaze
Our forest and brush management hasn't always been the best, but the fact that our federal government is going in the totally wrong direction concerning Anthropogenic Global Warming is disastrous, reprehensible, and must be reversed.
⇧ Canada's westernmost province declares wildfires emergency
"It's across the entire province unlike last year where it was concentrated," he explained.
Then why is Canada so hellbent on adding to the problem via Canadian tar sands?
⇧ [Excellent:] The biggest [economics] policy mistake of the last decade, by Ryan Cooper
After the 2008 financial crisis, old-fashioned Keynesians offered a simple fix: Stimulate the economy. With idle capacity and unemployed workers, nations could restore economic production at essentially zero real cost. It helped the U.S. in the Great Depression and it could help the U.S. in the Great Recession too. But during and immediately after the crisis, neoliberal and conservative forces attacked the Keynesian school of thought from multiple directions. Stimulus couldn't work because of some weird debt trigger condition, or because it would cause hyperinflation, or because unemployment was "structural," or because of a "skills gap," or because of adverse demographic trends.
Well going on 10 years later, the evidence is in: The anti-Keynesian forces have been proved conclusively mistaken on every single argument. Their refusal to pick up what amounted to a multiple-trillion-dollar bill sitting on the sidewalk is the greatest mistake of economic policy analysis since 1929 at least.
...
More clues that Alesina, Ardagna, Reinhart, and Rogoff got everything wrong can be found in the real world, where the Obama administration's modest stimulus package, while too small to fix the Great Recession entirely, did make things much better. Conversely, the European countries that subjected themselves to severe austerity regimens saw their employment and production collapse, just like Keynes would have predicted. Greece, in particular, has suffered economic disaster considerably worse than the Great Depression in terms of output and unemployment.
...
As we have seen, the evidence for the Keynesian position is overwhelming. And that means the decade of pointless austerity has severely harmed the American economy — leaving us perhaps $3 trillion below the previous growth trend. Through a combination of bad faith, motivated reasoning, and sheer incompetence, austerians have directly created the problem their entire program was supposed to avoid. Goo d riddance.
⇧ This Lady Scientist Defined the Greenhouse Effect But Didn't Get the Credit, Because Sexism
There are plenty of women in real estate, insurance (risk transfer), and economics (typical focuses of this blog). Many of them deserve plenty of credit they haven't received.
I found this article inspiring.
"Eunice Foote deserves credit for being the first to recognize that certain atmospheric gases, such as carbon dioxide would absorb solar radiation and generate heat...[three] years before Tyndall's research that is conventionally credited with this discovery."
⇧ "Hothouse Earth" Co-Author: The Problem Is Neoliberal Economics
I was thinking earlier today, Wednesday, August 14, 2018, about what it would take for Donald Trump to go down in history as one of the best US Presidents, so far. Something that was on my mind is AGW and all the wildfires right now turning the Sun red here in the Puget Sound area. The smoke drifting in and sticking around does that, just as happened last year.
So, I thought to myself that Donald Trump would first have to openly admit he's been completely wrong about AGW, it's real, we must declare total war on it, and we must rush to ban carbon burning while leaving nobody behind.
It's that last part that would save him from the carbon-fuel industry and from his own more-constant followers.
If he were to do it right, there would be no reason that carbon-fuel industry executives and shareholders couldn't easily and quickly transition into providing non-AGW energy and into massive reforestation projects and management, etc.
Millions of new jobs could be created without sending anyone else to the poorhouse.
Then I saw this linked article using the same terminology: wartime footing, etc.
⇧ Interest rate vs fiscal policy stabilisation
... the case against fiscal policy as the main stabilisation tool outwith the lower bound might go as follows: it is slower to change and it cannot be delegated.
However, neither of those is correct. It can be changed instantly via automating it.
⇧ Homebuilder sentiment falls to the lowest point in almost a year as affordability becomes a bigger worry
This has been the underlying theme for years now. Only the tariffs have really changed things much.
⇧ Will Demographic Headwinds Hobble China's Economy
The rapid aging of China's population will put greater pressure on the authorities to meet the demographic transformation with a mix of higher taxes and a shift from investment spending to social spending. Managing this fiscal adjustment will be part of the country's overall challenge of sustaining high per capita growth in a government-driven economic system.
⇧ Is Investing in Defensible Space Worth It? Six Examples Point to Yes!
... fires like the Carr Fire remind us that defensible space isn't a guarantee, and as wildfire behavior continues to push preconceived boundaries, evacuation preparedness is an essential component of every community's fire adaptation work.
⇧ A New Home for $90,000? Manufactured Housing Is Making a Comeback
⇧ Trump is right: America was 'built on tariffs'
That's right.
Tariffs work if done correctly. It would be nice if we were to live in a world where the "free markets" would supply everyone with everything needed at perfectly affordable prices and where nobody took unfair advantage. We don't live in that world not because people are insufficiently capitalistic but because that world is self-contradictory and, therefore, impossible. The spirit of competition is inconsistent with the existence of a world where everyone is supplied with everything needed at perfectly affordable prices and where nobody takes unfair advantage.
⇧ The nature of talking in Turkey
... everything must be done to ensure an independent central bank."
That's the statement of German Chancellor Angela Merkel, someone looking backward rather than forward to a democratized economy.
Erdogan is, of course, incorrect; however, that's no reason to look backwards rather than providing visionary economic-proposals.
⇧ US bosses now earn 312 times the average worker's wage, figures show
... the bosses of America's largest companies got an average pay rise of 17.6% in 2017, taking home an average of $18.9m in compensation while their employees' wages stalled, rising just 0.3% over the year.
...
Last year, McDonald's boss Steve Easterbrook earned $21.7m while the McDonald's workers earned a median wage of just $7,017 — a CEO to worker pay ratio of 3,101 to one.
That's why McDonald's workers have a hard time paying rent, which stresses them out and also their landlords and property managers and firms.
⇧ "Asia Will Be the Next Source of Downside Systemic Risk for Financial Markets"
... the Fed is accelerating its QE Unwind, which has the effect that the market now has to absorb the Treasury securities that the Treasury Department is issuing, and the Treasury Department is issuing ever larger piles of them. With US yields being higher — and more attractive — they're drawing liquidity from riskier EMs.
When the US falls into a recession due to the corporate tax-cuts, stock buybacks, and the Fed's premature tightening, the contagion will be highly significant.
⇧ California Fire Risk Won't Abate Until November, U.S. Warns
The fire risk across the U.S. West will stay high through October — and for California it will last even longer.
⇧ We don't need helicopters for better monetary policy [We need helicopters permanently]
The theory is that this would be more likely to boost consumption than an increase in government spending, or a tax cut, financed by borrowing. This is because 'rational' households would know that a stimulus funded by government borrowing would eventually require the government to raise taxes to reduce the deficit back when the good times returned (the 'Ricardian equivalence' problem in the economics jargon).
However, it doesn't have to be "funded by government borrowing." It could be what's termed "money financing," meaning the central bank would simply issue the money without any debt being created. It wouldn't be inflationary, as demand would be met by supply capacity that would otherwise sit idly by waiting for demand.
Putting aside the problem that governments with sovereign central banks and currencies cannot 'go bust', this theory relies on households being able to see far in to the future and make rational decisions that optimise their welfare. The rational expectations hypothesis has been the subject of considerable criticism in the post-crisis period. Despite this, the same kind of thinking was behind standard QE. Central banks believed that if they bought up government securities from financial institutions (such as pension funds and insurance companies) and replaced them with zero-interest yielding new created money, those institutions would 'rationally' decide to invest the money in higher yielding assets like corporate bonds. In turn, this would reduce firm's borrowing costs and encourage them to invest in the real economy, stimulating growth.
That's not why QE was done. QE was done to buy banks time to ride out the toxic securities they issued and purchased.
Furthermore, Helicopter money should go mostly to those with the highest propensity to spend it on the productive economy, as in for basic necessities that stimulate more supply production. Innovation comes from the necessity to produce to meet demand.
... interest paid to central banks by governments on their debt was returned to them (as central banks were publically owned) this also helped reduce the debt.
However, it perpetuated the commercial-lending cycle, as issuing the money without requiring any repayment of capital and without requiring any interest payments, whether funneled back into the government, would have shown that governmental borrowing was never needed in the first place driving people to comprehend that democracy, rather than the commercial banking industry, could always have been the source of money for the entire economy.
In other words, we don't need a crisis to supply the money without creating any debt, interest, or higher taxes relative to the money supply actually flowing rather than being parked doing nothing but earning "passive income."
⇧ Planning Commission calls Sunset Gordon a 'blight,' moves to reopen tower
"The applicant was a bad actor, and this is correcting that," said planning commissioner Renee Dake Wilson. "Out of that process, we're getting some affordable housing... as well as a park, and housing, housing, housing."
⇧ Mortgage rates tumble as housing starts to drag down the economy
Mortgage rates follow the path of the 10-year U.S. Treasury note, which has tumbled over the past week as investors flocked to safe-haven assets in the wake of the Turkey currency crisis. Bond yields decline as prices rise.
⇧ Ten years after the crash, civil society has come a long way. But much more remains to be done
Systems change attitudes results in less 'my policy is bigger or better than yours', and more 'how can we work together to move our common agenda forward?'
Isn't that claiming that "Systems" is bigger or better?
Okay, I fully understand the sentiment intended but caution that it cuts both ways, as in that type of thinking taken too far results in way too much incrementalism and not nearly enough focus upon the highest ideal. Not focusing enough on the highest ideal always results in not enough moving of the center into the light of what is truly doable that was once thought to be impossible.
"My policy is bigger or better than yours" results in debate and improvements if not shunned. Debate on the merits. Hear the parties out to their logical conclusions. Don't simply look for common ground, as that is often the lowest common denominator falling very far short of what is truly needed.
⇧ The post-crash world: how the 2008 crisis led to our current age of extremes
It was the end of neoliberalism; it was the stupidity of the regulators; it was the inevitable decline of the West. We had to save more and spend less, or we had to be paid less and work more. Having displeased the market gods so spectacularly, we couldn't afford to do it again — couldn't afford, that is, to spend to boost demand or to have adequate public services and social security. That is the route that led us over ten years from Lehman Brothers to Donald Trump, from Fred Goodwin to austerity to Brexit.
...
... There's no point in being up to the minute if you won't be relevant. There's no jeopardy in chronicling the facts without telling the truth.
⇧ HUD files discrimination complaint against Facebook
CNBC's Seema Mody reports on the Department of Housing and Urban Development filing a complaint against Facebook for violating the Fair Housing Act by allowing landlords and home sellers to use its advertising platform to engage in housing discrimination.
The reactions in the video were surprising. Frankly, anyone looking to advertise housing who selected out protected classes on Facebook definitely engaged in illegal advertising violating the civil rights of the members of the protected classes.
Whether Facebook should have been catching the combination of selected-out protected classes in conjunction with housing advertising, I'd say it strange they didn't considering their size and age now. How far back does the complaint stem?
HUD files discrimination complaint against Facebook from CNBC.
⇧ 8 Ways to Promote Fire Safety in Your Rental Properties
Other issues that should be addressed can include but not be limited to:
• Smoking
• Candles
• Space heaters
• Overloaded electric outlets
• Unattended cooking
• Grease fires
• Closing doors and windows during a fire
• Fire alarms
• In unit fire extinguishers
• Types of fires in terms of type of fire extinguishers
• Dropping and rolling
• Smoke inhalation
• Hot vehicle exhaust systems and brush and dry grasses
• Fire retardant building materials
⇧ Spotlight on Emerging Markets and US Treasuries: Are Bonds Sending a Signal?
Make no mistake, whatever the macro-idiosyncrasies of Turkey, the key to the current turmoil that is spreading into EM generally, is Fed tightening and the strong dollar. As we have repeated ad infinitum, since 1950 there have been 13 Fed tightening cycles, 10 of them ended in recession and the others usually saw the EM blow up — such as the 1994 collapse in the Mexican peso. The Fed always tightens until something breaks. It is usually its own economy, but sometimes it is the EM's. And when the liquidity tide goes out we always find out who is swimming naked. If it hadn't been Turkey it would eventually have been someone else.
What's missing is the discussion about the corporate tax-cuts and the stock buybacks with the money rather then pumping up the real economy, which should have been the target. Trump should come to rue the day he caused the coming recession.
⇧ States with Best, Worst Home Flood Damage Disclosure Laws
"Current home owners should have a right-to-know about their property's past history of flood insurance coverage, damage claims paid, and whether there is a legal requirement to purchase flood insurance because of past owners receipt of federal disaster aid," the group said.
⇧ The Ginkgo Model of Societal Crisis
The fundamental drive (a kind of a "pump" that drives up social pressure) is the oversupply of labor, which developed after the 1970s as a result of multiple interacting factors, and more recently was made acute by technological change driving automation and robotization. Oversupply of labor is the root cause for both popular immiseration and elite over-production/intra-elite competition. Both of those factors, then, contribute to the fiscal crisis of the state, because immiserated population can't pay taxes, while the elites work to reduce the taxes on themselves.
...
... the severity of the troubles to come in the next few years to a decade is really impossible to predict. It could be as mild as the late 1960s—early 1970s, with the violent urban riots and a fairly ineffectual terrorist campaign by the Weather Underground. Or it could be as bad as the First American Civil War. Once again, a real catastrophic collapse of our society may not be highly probable, but it is much more probable than we think.
I fully understand where the author is coming from, but I disagree in part. Here's why.
The elitists are getting better and better at placating in time. It's like the "just in time" supply strategy in business popularized by Sam Walton of Walmart fame.
They will push things as far as they can in shortsightedness to grab as much of the global pie for themselves as possible and then give just in time to ward off the pitchforks and torches. Plus, they own and control the mainstream media, which has been regaining strength by virtue of extremely marginalizing dissenting voices. They'll throw money at research strategies to control the narratives. They'll also buy as many politicians as possible even if it's only to have those politicians go easy on the elitists, who will give in to demands for more for the poor and middle classes until memories fade and the elitists do it all over again. It is the historical pattern right there in plain sight.
⇧ Los Angeles considering providing attorneys to tenants facing eviction
It sure sounds like this is at least a mini-trend. It will be interesting to watch how it turns out and just how many cities follow suit.
⇧ You Should Fear the Emerging Market Debt Bubble
Nomi Prins:
... Powell's argument misses a central point. What he left out was that it was the Fed's low interest rate policy to begin with that enabled countries to borrow as much as they did.
If money is cheap around the world, higher rates absolutely matter. It appears he simply did not understand the inflows of cash, which explains why he wasn't concerned about the outflows.
Yes, but consider this. The Fed raises rates which strengthens the dollar which drives up demand for safe-haven assets, such as US Treasuries, just when the Fed is unwinding its holdings of Treasuries and while the US government still will be issuing yet more Treasuries. Also consider how the whole move supports the US Dollar as the global reserve-currency right when the US is sanctioning so many countries. I'm certainly not saying any of that is a good idea.
⇧ Empty hotels, idle boats: What happens when a Pacific island upsets China [China was opened the wrong way]
"I like Taiwan. But even Taiwanese want China now. The businessmen, they also want China. They don't care about political consequence. Think about the economics," Toribiong said.
All the problems are the result of anti-democratic capitalists opening China with zero democratic strings attached all while promising that opening China without such strings attached would result in China becoming democratic.
What's the harm? The more leverage China obtains without having to adopt democracy, the more likely it becomes that the dictator of China will force the existence of a gigantic Chinese Empire based upon the dictatorship. The business people willing now to look the other way will lose all sovereign power to the one-party, one-man dictator of China. His word will be the law for the entire Empire. All dissenters will be punished. Due process of law will not exist. Freedom of speech, freedom of religion, freedom of movement, etc., will not exist. You will have your right to vote removed whether you like it or not. Is that what you want? Are you willing to sell your freedom for fleeting money?
⇧ New premier Imran Khan pledges to restore Pakistan's economy
Khan pointed to the growing divide between the rich and poor and said he would adopt austerity measures to relieve the strain on the economy and tackle the country's foreign debt, over $95 billion.
He doesn't understand basic economics. Austerity will only make things worse. Pakistan needs to use Keynesian stimulus but without governmental borrowing.
⇧ Once prized and profitable, beachfront real estate can now be a losing proposition
For decades, affluent home buyers in search of coastal vacation property gravitated to the ocean, where real estate prices were higher but returns on investment were reliably strong. But this summer — as rising sea levels increasingly change the way people think about waterfront real estate — wealthy enclaves on both coasts are fighting the same desperate battle against erosion and rising tides.
...
A study by the Union of Concerned Scientists says that more than 300,000 homes in the United States are likely to be affected by chronic flooding within the next 30 years because of rising sea levels. The study suggests properties valued at nearly $140 billion across the country are at risk from the effects of the rise.
⇧ A bird's eye view of urban poverty and social inequality
⇧ Credit Supply and Housing Speculation
A core idea in the theory of credit and bubbles is that easier credit allows optimists with high asset valuations to aggressively buy assets, and therefore boost the price (Geanakoplos 2010, Simsek 2013). Even if optimists form a small part of the overall population, easier credit can allow this small group to have a large effect on the market. Further, if the optimists suddenly lose access to credit, the price of the asset will collapse before more pessimistic individuals can be induced to buy the asset. As a result, fluctuations in credit availability increase the amplitude of fluctuations in asset prices.
Notice the outsized negative impact of house flippers with access to too-easy credit.
⇧ The rise of interconnected devices: How to keep your cybersecurity secure [no, hardened]
You might not mind if a hacker can gain access to your salt shaker (unless you're particularly worried about cholesterol) , but if that hacker can use that connection to gain access to other devices - like a smartphone in which you also have emails, a banking app and personal photos - then that's a lot more concerning.
Yes, and if they also happen to get hold of your business data containing sensitive info on others, you could be in for a nightmare informing everyone and dealing with the fallout.