Is The Sucker’s Rally Over?
Readers suggested a topic on the housing markets turn. “Is this going to work ? ‘Starwood Property Trust Inc. (STWD) said it will spin off its single-family rental-home unit into a real estate investment trust headed by Waypoint Real Estate Group’s management division, which is being acquired in the deal. Shares of three publicly traded single-family rental REITs — American Homes 4 Rent, the largest publicly traded house REIT with 20,000 homes, American Residential Properties Inc. and Silver Bay Realty Trust Corp. — are trading below their initial prices.”
“‘Our bet here is that the public market is wrong,’ said Starwood Property Chairman Barry Sternlicht. ‘Long-term we can create in-scale, lasting assets in the public market that will pay a current yield higher than those of other REITs and will have home price appreciation at least equivalent to that in other commercial real estate.’”
“Waypoint has ‘techno wizards’ who have developed systems to value properties being considered for acquisition and manage them more efficiently than Starwood’s current set-up, which relies on outside companies, Sternlicht said. ‘I knew to go to Florida and I knew more or less where we wanted to go,’ Sternlicht said. Waypoint ‘can tell me what street I should buy in Orlando.’”
A reply, “Got ‘SUCKER’ written all over it. It’ll work for financial advisers who have the elderly and pension funds among their accounts. They’ll market it as a new avant-guard investment that can only go up. Then they’ll charge their transaction fees and wait for it to tank. It will be found that the Techno-Wizards made a minor miscalculation.”
One said, “Maybe, just maybe, the largest expansion of credit in history is running out of steam. ‘QE’ is soaking up dodgy debt, not creating a new credit expansion. It is to soften the blow. The blow is still going to land.”
“It looks like this year’s ‘obsolete commercial conversion to luxury rentals’ is a colossal flop in backwater NY. The old grain warehouse conversion was completed over the summer and opened for business with fanfare. $1,000/mo. units. My barber told me today that two units are rented out. There must be over 40 in the place. Going to be hard to match that to the business plan I’m guessing.”
“Is the sucker’s rally over?”
The media has become an echo chamber on housing. Even Bloomberg as recently as yesterday.
You know what is going on. You know what to do. The spiral is accelerating.
I dumped my REIT holdings a couple of days back. The chart one of the HBB regulars posted on Halloween suggested the current position of the REIT industry resembles a car at the top of the hill on the world’s largest roller coaster.
I thought it was still going uphill, and was only half as high as the recent peak?
Whac, what did you sell? I ask because I bought CLNY when it dropped below $20 during the gov shutdown. 7% yield seemed attractive.
Those REITs and hedge funds sure aren’t going to be buying up hose overpriced newly built houses in Phoenix. They abandoned this market when prices rose back at the beginning of the year.
I think they can still appear to cash flow that stock even at Section 8 rental prices because they got in low in many places. And they could currently sell it for a small profit. They won’t be able to do so in a few more months.
‘The financial instrument that became Public Enemy No. 1 during the housing crisis is back with a new set of stripes, as private-equity giant Blackstone shops a new rent-backed security based partly on the cash flow from Tampa Bay homes. The average home included in the security is more than 25 years old, with three or more bedrooms and a pre-rehabilitation price of $149,000, ratings reports show. The average Blackstone-owned home in Tampa Bay, Lakeland and Sarasota cost $17,000 to renovate.’
‘At least one agency, Fitch Ratings, has pushed back, saying the securities were too untested and vulnerable to variables like maintenance costs or property taxes to warrant the stellar ranking.’
“While some participants have the financial wherewithal to withstand declining rents or rising costs,” the agency said, “none have yet fully demonstrated their commitment to this asset class, which may leave investors shouldering a disproportionate amount of the risks should the operators’ motivations and abilities become compromised.”
http://www.tampabay.com/news/business/realestate/tampa-bay-homes-included-in-blackstones-first-rental-backed-security-deal/2150115
‘The first security bond ever backed by rental income from single-family homes includes 38 houses in Sarasota and Bradenton that are worth an estimated $6.1 million. The local properties are among 3,207 residential rentals across the U.S. that have been packaged by investment goliath Blackstone Group LP as part of the first bond offering of its kind.’
‘But many analysts see the new rental security as a dangerous proposition — and an evolution of the type of risky Wall Street investing that helped push the country into the Great Recession. ‘Investors should be very wary of these new funds,’ said Jack McCabe, a Florida real estate analyst. ‘Some of these could be profitable, but quite a few will also be losers. Many of the hedge funds, including Blackstone, really overpaid this year for their properties. There’s no way at some of those prices that they’ll get a positive rental cash flow or break even on the back-end when they sell.’
‘With expectations that the market will appreciate further, investors are then likely to sell the houses when values rise in a couple more years.’
‘The acquisitions began last fall as bargains from foreclosure auctions, but as housing supply dwindled, these funds have since turned to Realtors, flippers and even homebuilders to find rentals. The Herald-Tribune’s analysis also shows these companies, in some cases, have paid up to 300 percent above market norms to snatch a property that fits their model.’
http://www.heraldtribune.com/article/20131101/ARTICLE/131109984?p=all&tc=pgall
Here’s what I’ve been asking; why do this? Why have an IPO, or sell bonds? Just collect the rent and pay all the investors. These deals just slice the pie thinner. Some might say, ‘they’re raising money to buy more.’ But it is widely reported that these companies are slowing down purchases. And if they were really profitable, they could easily raise the more money from the original group of investors.
This is just a form of selling off what they bought.
“Why have an IPO, or sell bonds.”
The big money won’t be made from the rentals, the big money will be made by selling stock and bonds that are backed by the rentals.
‘With expectations that the market will appreciate further, investors are then likely to sell the houses when values rise in a couple more years.’
+1. They don’t wanna _hold_ ‘em themselves—they want to repackage and flip it to some dumb-money pension fund.
Unless there is a lack of fools to buy the crappy stocks and bonds. Then the happy days are gone, gone, gone. Fed agencies have been supporting almost all mortgages now for years, which has left a lot of air under house prices. There is only one way to conclude that rents will hold or go up, and that is to ignore the decades of overbuilding.
Take the profit, sell off the risk.
It’s really simple, the hedge fund manager has maximized his “2+20%” profits, by overpaying for comps. Now’s the time to unload the junk on a new bunch of suckers, and start the cycle over with the next fraud.
‘overpaying for comps. Now’s the time to unload’
There’s one thing that stinks about this; where’s the media? The Herald Tribune has done the best reporting on this. But what about the Wall Street Journal? Can they not research purchases and see a pattern of overpaying? Purposefully pushing prices up? Heck, what kind of “investor” does that?
When I first read about Blackstone out bidding people who were using loans to purchase, I knew something was wrong. If you have cash, you should be using that to bargain for a lower price, not higher.
My take is that if you have cash, you should not compete with cheap borrowed money. You should go where borrowed money can’t. If they were using their cash to buy bulk foreclosures at a deep discount, that might have made sense.
You should go where borrowed money can’t.
That makes great sense—but where exactly _is_ that?? I haven’t been able to find anywhere that cash can go and dumb borrowed money can’t…
‘buy bulk foreclosures at a deep discount’
Yeah, whatever happened to that myth? A few years ago I looked into it and found it wasn’t happening much. The funds are buying new houses and flips!
You know where the borrowed money can’t buy? A house that can’t qualify for a loan.
A house that can’t qualify for a loan.
Ah—great point. That would work, as long as you are up for the associated work and potential challenges and surprises.
“I haven’t been able to find anywhere that cash can go and dumb borrowed money can’t…”
I have. It’s called “Craigslist.” I can quickly buy things from people who are desperate to sell, and sell them for profit very easily. I will refrain from actually sharing the details, but it is nothing to make 30% on one item.
Flipping items on Craigslist doesn’t seem likely to be a good use of my time…
Seems like it is unlikely to be profitable for low-value items; and what high-value items are there on CL other than cars?
Are you a curbstoner, USoCPaB?
Jewelry.
“Flipping items on Craigslist doesn’t seem likely to be a good use of my time…
Seems like it is unlikely to be profitable for low-value items; and what high-value items are there on CL other than cars?”
Great for you. I’m very happy to hear you feel that way, and I wish all people did because it just means more money for me.
I have found a small niche which I work in, and I will leave it at that. The only “work” I really put into it is the time spent finding a purchase which meets my criteria, which I enjoy, and then driving to make the deal. Understanding the product is crucial, and I have specific knowledge of what I am purchasing. I suppose I make money off of 1) The seller’s need for cash 2) the seller’s lack of understanding of the market for their product, and 3) arbitrage.
“It’s really simple, the hedge fund manager has maximized his “2+20%” profits, by overpaying for comps.”
I would not be surprised if Larry Fink, Jamie Dimon, Ben Bernanke, Timothy “foam the runway” Geithner, etc. actually concocted this scheme. They probably sat at a round table and discussed how they could actually “make” housing prices go higher.
Again, do the math on this– If you own ten homes in an area, and over pay for one, pushing the comps up, in hedge fund compensation, you get to keep 20% of the new profits on all 11 properties. Thats equal to more than the price you paid for the last one. You couldn’t make this up, it’s crazy what Wall street has sold to public pensions, and other gullible investors.
Pump and Dump, Baby! Pump and Dump! And to all you Dumb@ss Losers: Snap ‘em up Boys! Snap ‘em up!!
“The Herald-Tribune’ analysis also show these companies, in some cases, have paid up to 300 percent above market norms to snach a property that fits their model.”
And they did this with OTHER PEOPLE’S MONEY!
And while doing this they got to extract a lot of hefty fees. (But they deserve these fees because they are Techno-Wizards!)
Lol. I love this blog.
many analysts see the new rental security as a dangerous proposition ??
Well, I am no analyst but I sure see it as dangerous….I think I get their gig…They will have large professional management companies running the show or form them themselves in the general location of the housing units…
Renting single family homes vs apartments are two different animals…To say that single family homes are management intensive as compared to an apartment complex is a gross understatement.. Operating cost for a single family home far exceeds that of apartments..
What I suspect they are “selling” is the idea that there is built in “equity” due to the heavy discounts on the front end…Problem is you don’t “realize those gains (if real) until the property is sold…
You also have the logistics of a sale…Its complicated with a leased house…Not so with a leased apartment…Most buyers want to “occupy” a single family home…Investors buy apartments…
Personally, I would not invest in these offerings…I think its a mine-field of potential problems…
This could be the high-water mark. These investor groups have been the most visible element for the housing “recovery.” Now these offerings may be seen like the sale of Golden West.
‘At the height of the housing boom in 2006, Wachovia acquired mortgage lender Golden West in a move that the Company assured investors would solidify Wachovia’s position as a leading mortgage lender without changing the Company’s commitment to originating high-credit-quality mortgages.’
‘In truth, Golden West was a high-risk subprime lender whose flagship pay option adjustable-rate mortgage loans (known as “Option ARMs” or “Pick-A-Pay” loans) were among the most toxic loans being peddled to borrowers, and through its acquisition of Golden West, Wachovia acquired a portfolio of more than $120 billion in Pick-A-Pay loans.’
http://securities.stanford.edu/1044/WC09_01/
‘At the height of the housing boom in 2006, Wachovia acquired mortgage lender Golden West in a move that the Company assured investors would solidify Wachovia’s position as a leading mortgage lender
I am still grinning on the inside, now 7 years later(!), over the fact that we were crystal clear here on the HBB about what idiots the banks were for pursuing the Countrywide and Golden West acquisitions right at the peak of the bubble. They were time-bombs, just waiting to explode…
Awesome.
Golden West was sold in 2006 for $24 billion to Wachovia Bank and the acquisition was completed in October 2006. [3]
The Sandlers owned about 10% of the company at the time of the sale, making their share of the sale price worth about $2.4 billion. Of this the Sandlers gave $1.3 billion to the Sandler Foundation.[4]
Sandler Foundation was formed in 1991 by Herb Sandler and Marion Sandler.
Sandler Foundation’s mission is to be a catalyst to strengthen the progressive infrastructure, expose corruption and abuse, advocate for vulnerable and exploited people and environments, and advance scientific research in neglected areas.
As of December 31, 2012, Sandler Foundation had made charitable grants exceeding $600 million, with the majority of the funds distributed since 2006.
The Foundation has established Guiding Principles for Grants, summarizing its operating philosophy. Herb Sandler discusses the foundation’s approach to philanthropy at GiveSmart.org.
Sandler Foundation’s mission is to be a catalyst to strengthen the progressive infrastructure, expose corruption and abuse, advocate for vulnerable and exploited people and environments, and advance scientific research in neglected areas.
Wow, AMAZING find, dj!!!
That’s awesome—in a disgustingly, shockingly ironic sort of way.
“expose corruption”??? Those dollars came straight _from_ fraud, corruption, and exploiting vulnerable people.
I almost can’t imagine more irony that that.
If it is the “high water mark”, not so high as the last high water mark, then look out below.
http://www.oftwominds.com/blogaug06/post-bubble-symmetry.html
If it is the “high water mark”, not so high as the last high water mark, then look out below.
It sure hasn’t looked much like symmetry thus far…
I still remember the banking relationship manager telling us how we should be pushing these “pick a pay” mortgages, and what a good deal they were for our clients. I’m proud that I called “BS” on this to her face!
‘With expectations that the market will appreciate further, investors are then likely to sell the houses when values rise in a couple more years.’
How can these big investors even sell a property, if they have already securitized and sold off the rental stream from it??
Speaking of which, does the original purchaser still own the property (e.g. appreciation), but with all maintenance costs being borne by the rental-bond-holder? If so, maybe that is their real play here: no-risk appreciation.
Speaking of which, does the original purchaser still own the property
I ask, in part, because they are describing these as rental bonds, not simply REITs. If they were securitizing RE in the “traditional” way, wouldn’t they just call these beasts REITs as well?
They can do anything they want as long as it is written into the contract.
And there is another interesting risk that hasn’t been mentioned yet. Political risk. Landlord tenant law is often very favorable to the landlords, because they are mostly local and mostly wealthier than the tenants (or at least they were on average over the past 40 or 50 years). If a large number of people in a town or city are renting from a REIT landlord that doesn’t fix the sink or clean up the mold or whatever, then what is to prevent those tenants from organizing, electing a few of their own into local office and setting up much stricter rules for maintenance of SF rentals for large landlords? Nothing except ennui, and a couple of hundred people in crappy houses with asthmatic kids and no working toilets get really angry, really quickly.
Did I mention that cub reporters at the local newspapers LOVE this stuff. Investigative reports about sick kids and people who lose their jobs because they can’t take a shower without running water get them jobs at bigger, better papers.
It will take a while to play out. But play out it will. Where is that popcorn?
“Political risk.”
Good point. For instance, what if it dawns on the masses that many of these New Age landlords are oligarchs from abroad? Wouldn’t it make sense to tax them to the hilt?
My prediction might come through they will sell these homes to the Chinese who psychically force people out if they dont pay rent. screw American law! politics yeah!
Speaking of political risk that real estate investors might fail to anticipate, if this works out well in the UK, I’m wondering whether it might also work here in America?
Tax on foreign property owners to burst London’s bubble
George Osborne considers new tax on foreign property owners in Britain instead of a mansion tax.
By Anna White, Enterprise and property correspondent
1:33PM GMT 31 Oct 2013
Prestigious London property locations include Sandalwood Mansions, where the residence above is available at £1,999,995.
The Chancellor is considering imposing a new tax on wealthy foreigners who own property in Britain, instead of introducing a tax on all mansions.
It is understood that Mr Osborne could be preparing to announce a capital gains tax on the sale of second homes in the UK that are owned by overseas investors as early as the Autumn Statement in December.
The policy would address concerns that there is a price bubble in the housing market around London and the South East, which has been created by foreign buyers from countries such as Russia and Greece.
If introduced, the legislation would also close a loophole that has allowed thousands of wealthy non–resident British expatriates to sell second properties in the UK without paying tax on their profits from the sale.
Mr Osborne has come under repeated pressure from the property industry to clarify his position on the introduction of a mansion tax amid fears that such a fee on homes worth more than £2m would trigger an exodus of foreign investors from the UK market.
…
And there is another interesting risk that hasn’t been mentioned yet. Political risk.
GREAT point, polly!
Where is that popcorn?
Unfortunately, I think Neil took it with him when he got full and left…
Many of the hedge funds, including Blackstone, really overpaid this year for their properties. There’s no way at some of those prices that they’ll get a positive rental cash flow or break even on the back-end when they sell.’
Yea they bid up home prices with others money
“At least one agency, Fitch Ratings, has pushed back, saying the securities were too untested and vulnerable to variables like maintenance costs or property taxes to warrant the stellar ranking.”
+1 Hurricane insurance also exerts downward pressure on resale values.
Blackstone was snapping up houses long before I heard of rental-backed securities. In fact, the first time I heard mention of RBS was here on HBB, in one of Polly’s posts. It was barely a year ago that I saw an MSM article that they were “working on” RBS. Those funds originally were just large-scale flippers, treating houses and renters like a liquid stock. It was only after the bubblet began to pop did they have to scurry to create RBS to try to recoup their capital costs.
No matter. RBS never had the historical security that MBS had. In fact, if RBS had any potential for ROI, someone would have created them decades ago. Nobody is going to buy these things if they do even a modicum of due diligence, for the reasons stated by McCabe. Fitch has already thrown Blackstone under the bus, and others will follow.
Couldn’t happen to a nicer private equity group.
‘Long-term we can create in-scale, lasting assets in the public market that will pay a current yield higher than those of other REITs and will have home price appreciation at least equivalent to that in other commercial real estate.’
Sounds like a scam.
“…you should have x amount of dollars rolling in by the end of this year.”
“‘QE’ is soaking up dodgy debt, not creating a new credit expansion. It is to soften the blow. The blow is still going to land.”
I believe the term is foaming the runway for the banks.
With the blood of Main Street.
Someone else spotted that quote.
Sounds like you are buying into a time share, updated version. Money will be in property management and write offs and fleecing the public. The good property will slowly be transferred out off the mix to the insiders.
Money will be in property management and write offs and fleecing the public. The good property will slowly be transferred out off the mix to the insiders.
Betting that you are correct on both counts. The first is probably the biggest issue—the left hand decides how much to pay the right hand for management, right?
True or false: If ever-rising housing prices are due to a return of the bubble, not fundamentals, then they are indicative of a loss, not economic growth.
Is it safe to assume the conforming loan limits will revert to pre-bubble norms relative to rents and incomes as home prices continue falling in coastal California?
Here is a stark reminder on where this episode in financial history ultimately leads:
California Home Prices Decline 41% on Foreclosures
By Daniel Taub - March 25, 2009 13:10 EDT
March 25 (Bloomberg) — California home prices dropped 41 percent last month from a year earlier, more than double the U.S. decline, as surging foreclosures drove down values, the state Association of Realtors said today.
The median price for an existing, single-family detached home in California sank to $247,590 in February from $418,260 a year earlier, the Los Angeles-based group said in a statement. The U.S. median price fell 16 percent during the same period, the second-biggest drop on record, according to the National Association of Realtors.
Home prices have been falling since their 2006 peak, pushed down by rising foreclosures blamed for the U.S. credit crisis. California, the most populous state, has one of the highest rates of foreclosure, according to RealtyTrac Inc., an Irvine, California-based seller of real estate data. Lenders usually sell foreclosed properties at a discount, dragging down the median price, so it doesn’t necessarily reflect the value of most homes, the California Association of Realtors report said.
“The median, for all its imperfections, tells a really interesting tale right now,” Andrew LePage, an analyst at research firm MDA DataQuick, said in an interview. “It tells you what is and what is not selling. What’s selling right now is foreclosures.”
…
Please remind me once again why federal taxpayers in Flyover Country are forced to help pay the insurance premiums on the value of mortgages used to finance home purchases by California millionaires? It makes no sense to me.
Fannie and Freddie to lower conforming loan limits
October 25, 2013
Edward DeMarco, acting director of the Federal Housing Finance Agency, told Zillow and the Bipartisan Policy Center yesterday that Fannie Mae and Freddie Mac (Enterprises) will be reducing the maximum size of loans that the Enterprises guarantee.
Since the FHFA announces conforming loan limits in November, this will be coming shortly. Currently the lowest conforming loan limit is $417,000 with some high cost areas like California, New York, Washington D.C. and others having higher limits. DeMarco said that FHFA will follow its current November schedule but will give further information at that time about potential reductions in the size of loans going forward. “We expect to give market participants at least six months’ notice of any change,” stated DeMarco.
…
How did “affordable housing” come to mean “federally guaranteed financing for millionaire home purchases”?
MORTGAGE BUYERS COULD BE PUSHED INTO JUMBO LAND
By U-T San Diego 12:01 a.m. Nov. 3, 2013
Should you be concerned that the maximum loan amount you’ll be able to obtain through the biggest players in the mortgage industry — Fannie Mae and Freddie Mac — might be cut sometime next spring? You just might.
That’s because mortgage applicants who no longer qualify under the revised limits will be forced to shop in the so-called jumbo arena, where minimum credit scores and financial reserve requirements tend to be tougher and down payments heftier than in the conventional space dominated by Fannie and Freddie.
You might also have to settle for an adjustable-rate mortgage rather than a fixed-rate. Or you might end up in a situation where you need a higher-rate “piggyback” second mortgage in order to afford the down payment on the first mortgage deal you’re offered.
Here’s a quick overview of what could push eligible loan amounts downward and what that may mean for thousands of buyers across the country who abruptly find themselves in jumbo land.
At a recent meeting in Washington, Edward DeMarco, acting director of the agency that oversees Fannie and Freddie in conservatorship, said he is seriously considering reducing loan maximums as part of a strategy to reduce federal involvement in the mortgage market.
Though he offered no specifics on dollar amounts, industry analysts say the maximum Fannie-Freddie loan size could drop from the current $417,000 to $400,000 in most parts of the country, and from $625,500 to $600,000 in designated high-cost areas such as coastal California, metropolitan Washington, D.C., New York City and its suburbs, parts of New Jersey, Massachusetts, New Hampshire, Colorado, Idaho, Wyoming and North Carolina. The decreased limits could be announced this month and take effect as early as May.
…
i missed out on hotel condos- guess I’m now missing on grain storage condos……….rats
This morning I took a look at a long time series some financial economists (Fama and French — maybe you heard of them?) used to proxy the so-called “risk-free rate” back to 1926 or so. Two things jump out of a simple time series plot of the data:
1) Since early 2009, the “risk-free rate” in the U.S. has been roughly zero, and stayed there.
2) The last time this happened over any period of time in the U.S. was the entire period from 1933-1948.
I’m not sure of the implications of the above for where the U.S. economy goes over the next decade; for instance, if the stock market keeps hitting record highs and housing prices keep going up, perhaps the super-low risk free rate is of no consequence whatever?
But then I recall the words of Alan Greenspan and resume worrying:
2) The last time this happened over any period of time in the U.S. was the entire period from 1933-1948.
Somehow, I was thinking that the Fed had raised rates somewhat a few years into the GD. Is that not true?
I thought that was part of the case behind BB’s “Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again” mea culpa to Friedman.
“I was thinking that the Fed had raised rates somewhat a few years into the GD. Is that not true?”
There was a tiny increase at some point, but basically the risk-free rate (and presumably, risk premiums) remained flush against zero from roughly 1933-1048.
1933-1948 (sorry about the typo…I was in a hurry!)
Nov. 3, 2013, 8:29 a.m. EST
Stock investors are flush, nervous, looking for clues
Revenue is key as profits top low bars; Tesla, Priceline, Disney ahead
By Wallace Witkowski, MarketWatch
SAN FRANCISCO (MarketWatch) — Stock investors are sitting fat, happy—and nervous.
With indexes near records and equity funds swelling, professional stock-pickers have been warning the rally has to take a breather. Corporate earnings, including nearly 80 in the week ahead from S&P 500 members like Priceline.com and Whole Foods Market, may determine whether a pullback happens, and how severe it is.
But forget profits. These have been low-balled so often by company executives that Wall Street is on the hunt for less adulterated measures of corporate health. Try looking at sales.
“Investors have and should at this stage in the business cycle pay attention to revenue numbers,” said Brad Sorensen, director of market and sector research at Charles Schwab. “Revenue numbers over the past quarter or two have been more important than they have been over the past decade.”
…
‘Nearly one in four San Diego County families is functionally poor, even though the federal government’s official source on the topic — the U.S. Census Bureau — says only 14.9 percent of households live below the poverty line.’
‘A recent study by Public Policy Institute of California reconsidered the definition of poverty by accounting for two factors not included in the official measure: regional cost-of-living variations and the benefits of government-subsidy programs.’
‘The study demonstrating a higher real-world poverty rate than federal government data suggests comes amid an increasingly loud conversation about the regional economy’s mix of employment opportunities, and whether they present a real opportunity for families to support themselves.’
‘In Los Angeles, PPIC’s measure says 26.9 percent of households are in poverty, compared with 18.2 percent officially. Orange County’s poverty level increases from 12.8 percent officially to 24.3 percent by PPIC’s count. San Francisco County goes from 12.8 percent to 23.4 percent.’
http://voiceofsandiego.org/2013/11/01/san-diegos-real-poverty-rate/
Those stuck at or below the poverty line can do better over towards San Ysidro, but sympathies are fewer there too. One must still get up early and do something productive. The biggest problem I saw in southern California was that Mexicans were willing to work harder than the average Joe, so developing a skill set was the only way up.
‘The Economist’s annual Buttonwood Gathering was this week. But The Economist’s American Finance editor Tom Easton stole the show Wednesday afternoon when he declared that he had recently moved to the U.S. from China, but “didn’t leave a state-run economy.”
‘Easton discusses this provocative claim in the accompanying video and provides a list below of issues – beyond “obvious” areas such as interest rates and health care – where the influence of the U.S. government cannot be avoided.’
“Everyone talks about how all-pervasive the Chinese economy and government is inside of it,” he says. The Chinese government “directs capital, controls the banking system and the ‘highlands’ of important industries. I’m still in China when I came back to America.”
‘In the cover story of The Economist this week, Easton examines the growth of corporate structures such as MLPs (master limited partnerships), REITs (real estate investment trusts), and BDCs (business development companies), which he says are a direct response to the government’s heavy hand. As in China, he says, this “grey market” in America is more dynamic than the state-sponsored arena.’
“China and America really are on the same page now,” he says. “In both cases, to stay free you have to lobby too. It’s not a rule of law, really, it’s a rule of trying to influence influential people to get preferential terms so you can make an economy work.”
http://finance.yahoo.com/blogs/daily-ticker/america-state-run-economy-just-china-economist-easton-143743553.html
“China and America really are on the same page now,”
Got symbiosis?