April 12, 2016

Distorting The Allocation Of Capital Toward Risky Endeavors

A report from MarketWatch. “The commercial real estate market is a potential asset bubble that ‘bears watching,’ said Kansas City Fed President Esther George on Thursday, pressing her case for the U.S. central bank to ’stay the course’ and gradually raise interest rates. ‘In the long run, a failure to keep interest-rate policy in line with improving fundamentals can distort the allocation of capital toward less fruitful — or perhaps excessively risky — endeavors,’ George said in a speech to an economic forum.”

“She cited prior bubbles in the stock market, housing ‘and most recently, commodity prices.’ ‘My concern for some time has been that extending monetary policy too far beyond its scope of capability risks undesirable financial, economic and political distortions,’ she said.”

The Wall Street Journal. “The apartment-rental market cooled in the first quarter, according to reports from three research companies, suggesting a six-year boom that has pushed the cost of housing to unaffordable heights in many U.S. cities might be coming to an end. Potentially most alarming to housing economists: Demand for new apartments in the first quarter was about half its typical level. The number of occupied new apartments across the country climbed by just over 20,000 units in the first quarter, compared with the five-year average of about 40,000 for the quarter, according to apartment tracker MPF Research.”

“The data suggest the bull market for apartments, which began in 2010, is on its last legs. ‘The past few years everything you touched was gold in the apartment industry, and that’s not going to be the case’ this year, said Jay Parsons, vice president for MPF Research. That’s partly because, over the next three years, developers are expected to build almost one million apartments in the U.S., more than the nearly 900,000 constructed during the previous three, according to Axiometrics.”

“‘We can’t keep building and building and building and not see weakness enter the market,’ said Ryan Severino, senior economist at REIS.”

The Pioneer Press in Minnesota. “Downtown St. Paul is undergoing a transformation. The number of housing units downtown has spiked more than 20 percent in just five years — a vast majority of it market rate. The building craze isn’t even limited to the downtown core. Many developers are expressing concern that residential properties — specifically apartments — are being overbuilt. And that the focus should be on bringing jobs downtown. ‘Someone needs to be thinking about where do we put the next office tower in downtown St. Paul, and I don’t think anybody is thinking about that,’ said Mary Bujold, president of Maxfield Research and Consulting.”

The Houston Business Journal in Texas. “Houston apartment vacancies are rising during the oil slump, according to a new report. Houston’s apartment vacancy rate in 2015 climbed to 6.2 percent, an increase of 0.4 percentage points year over year, according to Marcus and Millichap. Vacancy rates varied from submarket to submarket, ranging from a low of 4.2 percent in Brazoria County south of Houston to a high of 9.7 percent in Spring/Tomball. The brokerage attributed the city’s rising vacancy rates to the weakened job market during the oil slump and competition from new apartment projects that have flooded the market during the boom years.”

“Apartment operators have noticed more move-out notices as energy job cuts take their toll on Houston’s economy. Neal Verma, the president of Houston-based multifamily company Nova Asset Management Inc., told the Houston Business Journal several months ago that he is seeing more move-outs from his 6,000 apartment units in Houston, pushing his overall vacancy rate from 5 percent closer to 8 percent.”

The Minot Daily News in North Dakota. “The market for housing and apartments reflects the transitional time taking place in Minot. With the oil boom gradually fading into the past, and the flood recovery slogging on, the current market for housing and apartments is experiencing an increase in selection and a wider range of prices.”

“Matt Watne, president of IPM Incorporated shared that renters stand to benefit from a normalized market, too. ‘It is a renter’s market,’ Watne said. ‘Many new apartments have been built over the past several years. This, combined with a declining demand due to the drop in oil prices has created significant vacancies in Minot. Because of this, rent prices have been coming down and rental incentives are now commonplace.’”

From Biznow on Colorado. “The Denver apartment market is hot, but is it fireproof from the risk of overheating—too many apartments, not enough demand? Momentum Development principal Jeff Temple tells us there’s certainly a risk of overbuilding—at least in certain areas in the Front Range. ‘Almost all the product coming online is Class-A, and much of it’s Downtown Denver. The fourth quarter of 2015 saw a slowdown in absorption, and the beginning of concessions in many markets.’”

Bloomberg on New York. “Manhattan builder Extell Development Co. is retreating from a plan to list 38 units at its One57 tower for lease, choosing to sell them instead as demand for luxury rentals slips amid an abundance of supply. Luxury rentals are proliferating in Manhattan as buyers of pricey condos, in many cases out-of-town investors, take possession of their apartments then quickly list them for lease. The added supply is pushing down rents for the most-expensive units. The median monthly rent for a Manhattan luxury apartment — the top 10 percent of the market — fell 3.5 percent in March from a year earlier to $8,228, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report.”

“‘I would be under the assumption that they had no traction on the luxury-rental tack,’ Jonathan Miller, president of Miller Samuel said of Extell’s plan. ‘The weakest segment of the rental market is luxury rentals.’”




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216 Comments »

Comment by Mugsy
2016-04-12 02:59:49

“This, combined with a declining demand due to the drop in oil prices has created significant vacancies in Minot. Because of this, rent prices have been coming down and rental incentives are now commonplace.’”

If you’re not in the oil business or the Air Force and you’re not testing cold weather gear then there is absolutely no reason in the world to be renting or buying in Minot, North Dakota.

Comment by Jake
2016-04-12 04:33:59

From Minot to Malibu, it’s a distinction without a difference.

 
 
Comment by taxpayers
2016-04-12 03:06:51
Comment by rms
2016-04-12 06:17:22

Voter-approved ballot measures are the main driver of higher property taxes.

Comment by drumminj
2016-04-12 07:25:12

Yes, because there’s no way the city can maintain parks, or have good schools without even *more* money, so they have to float a bond.

Even though they just did the same thing last year….and will do the same again next year….

“think of the children!”

Comment by taxpayers
2016-04-12 08:00:31

all goes to pay and bennies- not the chillens
check your county budget

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Comment by MightyMike
2016-04-12 08:56:41

So the city and the county are not sending checks to children? Thanks for the information.

 
Comment by Jake
2016-04-12 09:07:51

Irrelevant.

 
Comment by oxide
2016-04-12 10:48:40

More accurately, the pay is going to the GenX chillens of the late 70’s and early 80’s. Now the pension bill for those teachers etc is due.

 
Comment by Jake
2016-04-12 11:08:15

Hey Donk

 
Comment by CalifoH20
2016-04-12 13:02:54

so true, $$ goes to pensions, not asphalt.

 
 
Comment by CalifoH20
2016-04-12 13:01:52

roads suck in Seattle, not sure how motorcyclist deal with the huge ruts in the hwy. So much traffic too.

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Comment by Prime_Is_Contained
2016-04-12 21:17:20

Pretty sure drumminj was being sarcastic…

Haven’t been on a bike in some time, but I can only think of one example when the expansion joint being poorly maintained caught me by surprise…

 
 
 
Comment by redmondjp
2016-04-12 16:41:58

I live in the Seattle area. What is being discussed is an increase in:

1) Property tax
2) Sales tax
3) Motor Vehicle Excise tax

This tax increase is permanent and will never sunset. The estimates of how much it will cost vary, but range from $200 per taxpayer to over $1000 per household (annually).

The purpose of the tax increase is to fund what is known as “Sound Transit 3″ (or ‘ST3′); voters have previously increased taxes to pay for the two previous Sound Transit voter initiatives.

This transit package will expand light rail to places farther away from the city core, at a price per mile that cannot humanly be fathomed, with completion dates in the 2040s.

Based upon Seattle voters’ track records, I am very scared that this will pass. I’m not anti-transit; just anti-wasteful spending.

Just the car-tab renewal fee portion is going to $80 per every $10K of the non-depreciated MSRP of the vehicle. Wrap your mind around that one for a minute.

Reality check: ST3 is actually going to pay for things that were promised by ST2 (but surprise surprise, they ran out of money). There is tiny print in ST3 that admits that they will need even more money to complete what they are promising to do. Can you say giant Ponzi scheme?

Comment by Apartment 401
2016-04-12 18:25:28

It’s current year.

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Comment by Ben Jones
2016-04-12 03:41:59

‘there’s certainly a risk of overbuilding—at least in certain areas in the Front Range. ‘Almost all the product coming online is Class-A, and much of it’s Downtown Denver. The fourth quarter of 2015 saw a slowdown in absorption, and the beginning of concessions in many markets’

Again, there’s a disaster ahead in the multi-family biz.

‘Arsenault was on the “Market Forecast: Where Are We in the Apartment Cycle?” panel with Mike Zoellner, CEO of Denver-based RedPeak Properties and Andrew Miller, managing principal of locally based Miller Frishman Group. “Apartments are clearly being overbuilt. There is no question of that.”

“It’s like a train wreck in slow motion,” Arsenault said.’

‘Zoellner said that the markets have mispriced risk. Because interest rates have been artificially low for so many years, institutional lenders and investors have seen apartments as an alternative to bonds, according to Zoellner.’

‘Those in the apartment market, however, have never considered the multifamily industry as a low-risk enterprise, he pointed out. He said he thinks the Denver-area apartment market is at the bottom of the 9th inning, with a lot of headwinds.’

How many of you HBBers have forgotten this:

‘Because interest rates have been artificially low for so many years’

Remember all the headlines devoted to whipping Greenspan for “keeping rates too low for too long”? It’s the same thing going on now, maybe worse.

‘institutional lenders and investors have seen apartments as an alternative to bonds’

‘distort the allocation of capital toward less fruitful — or perhaps excessively risky — endeavors’

This is how pensions come up short and life insurance doesn’t get paid.

Comment by Professor Bear
2016-04-12 03:59:54

“This is how pensions come up short and life insurance doesn’t get paid.”

I find it odd how nobody at the Fed seems aware of the connections between interminable rock-bottom interest rates, skyrocketing home prices, and massive unfunded pension liability. This isn’t rocket science, folks…just basic finance.

Comment by taxpayers
2016-04-12 05:04:13

our state is still using a 7% roi model
and dinging taxpayers hard for the shortfall

Comment by Professor Bear
2016-04-12 05:40:09

If they replaced the 7% roi assumption with a more realistic 2% roi, I guess they would have to declare insolvency?

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Comment by MightyMike
2016-04-12 06:44:07

They could just ding the taxpayers for the roughly the same amount.

 
 
Comment by rj chicago
2016-04-12 12:58:48

Same here in ILLANNOY - they have not adjusted the model for gawd near 2 decades. And adding insult to injury the pensioners take their check - head to FL where they live there for 6 mos + one day to avoid personal income tax. Rigged the system is I tell you, rigged!!!

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Comment by Professor Bear
2016-04-12 04:04:19

How many of you HBBers have forgotten this:

History has not dealt kindly with the aftermath of protracted periods of low risk premiums.

– Alan Greenspan

Comment by taxpayers
2016-04-12 05:08:50

when have we used negative interest rates?
the last time we had fed w a balance sheet like now the “exit” was WWii

Comment by Professor Bear
2016-04-12 05:41:13

I’ve always been curious about which historic episodes Greenspan had in mind when he made that observation.

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Comment by Prime_Is_Contained
2016-04-12 10:25:09

The ’60’s, maybe?

 
 
 
 
Comment by Jingle Male
2016-04-12 05:13:17

I remember in the late 1980’s the prices for apartments in northern California were hitting all time highs. Interest rates were in the 9% range and investors were buying at cap rates of 7% or so. The negative leverage ate up any cash flow so the deals were being purchased at ZERO cash flow. They were all betting on appreciation, because we all know “everyone needs a place to live”!

There was lots of new construction, changes in tax laws (excess depreciation eliminated), and then the recession started in 1990. I think we had the “stagflation” or rising costs with a declining economy.

The income/expense relationships for apartments is a very thin line, particularly with 75-80% financing. When vacancy increases 5%, rents drop 5% and costs go up 5%, suddenly you have substantial negative cash flow. Investors walked away from the properties! Nobody wants to feed the animal.

Comment by Rental Watch
2016-04-12 09:23:55

Inflation was running at 4% for most of the 80’s. People were banking on rising rents (leading to appreciation).

Comment by Jingle Male
2016-04-12 10:54:37

Yes, so many “pro forma” spreadsheets with ever rising rents leading to ever increasing values. Then reality set in…..

A lot of commercial real estate today is valued less than it was 10-year ago in 2006……in part because commercial rents are LOWER and the expenses are higher. It has been a 10-year slow motion squeeze play.

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Comment by Rental Watch
2016-04-12 16:34:45

Yes, but some of those property types now have vacancy rates where there historically was development, only the math (even with low interest rates) doesn’t yet make sense…and the squeeze is turning on the tenants as rents need to rise by a lot to justify more space being added to the market.

 
 
 
 
Comment by Combotechie
2016-04-12 07:21:56

‘Because interest rates have been artificially low for so many years’

An environment that makes cash the king, and here’s why …

Money managers need to not only earn a return for their clients they also need to earn a return for themselves (using their client’s money in order to do so).

In a high return environment this earning to two returns is easy to do, in a low return environment it is not. The high return environment that we used to have drew a lot of people into the money management business because of reasons that Willy Sutton would easily understand. This easy money environment morphed into something else and this morphing chased out a lot of money managers but it did not chase all of them out; The ones that are left (who still need to earn two returns on their client’s money) are still there, still, somehow and in someway, earning two returns on their client’s money.

They couldn’t be earning two returns on changes in fundamentals because fundamentals do not change all that much, so they must be using something else. IMO they are using changes in prices; changes in prices results in a change in values and these changes in values is what produces the returns, the two returns that these money manager need to earn, one return for their clients and one return for themselves (using money that is not theirs).

In such an environment, a casino-type environment where price changes are sought out and are chased, the risks are enormous and the rewards are few and this is the type of environment where, ultimately, cash will be king.

Comment by Combotechie
2016-04-12 07:34:56

“This is how pensions come up short and life insurance doesn’t get paid.”

This means … lots of people who were promised money will end up not getting the money they were promised, hence the will end up being short of money.

Is this a deflationary environment or what? Do people who have cash is such a cash-starved environment prevail or do they not?

 
Comment by Bluto
2016-04-12 10:56:55

Plenty of money managers do just fine whether or not the client is earning a return, they typically charge 1% annually on balances up to $500K and 0.75% on anything above that…so once they set up an IRA for a client they might make say $5-10K/year on a single account without much effort or expense even in a bad year when the client loses money.

Comment by snake charmer
2016-04-12 13:42:06

I have commented, many times, that the purpose of a retirement account is so that the person who manages your money might retire, not you.

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Comment by rms
2016-04-12 22:04:12

Possession is 9/10 of ownership.

 
 
 
 
Comment by scdave
2016-04-12 07:37:16

‘institutional lenders and investors have seen apartments as an alternative to bonds’ ??

There it is right there….

Comment by Jake
2016-04-12 07:40:41

Dumb.Borrowed.Money. is the only thing keeping this rotting garbage scow from sinking.

 
 
Comment by Rental Watch
2016-04-12 09:19:59

And unlike linking low interest rates to higher rents, there is a clear link to lower rates and overbuilding.

Lower interest rates means lower cap rates/yields. If you can build to a lower yield and still make a profit, it is easier to make a new apartment project “pencil”.

Not only that, but following the housing crash, the investment thesis behind multi-family is EASY to understand, and thus easy to pour capital into, adding to the propensity to overbuild.

 
Comment by oxide
2016-04-12 13:10:54

How well-built are all these new units in Denver? My guess is that they are good for 15-20 years, just long enough for the Millenials to outgrow their artisan coffee shops and Tindr hookups and flee to whatever city still has a few change-the-world :rolleyes: tech jobs.

Are these towers well built enough to be worth renovating 20 years from now? Or will they just be bulldozed like those powdered walls in China?

 
 
Comment by Ben Jones
2016-04-12 03:44:45

‘All those construction cranes muddling your view of the Rockies and Colorado’s bluebird skies might finally be paying off. According to Abodo.com, a multi-city apartment-finder service, the average rent in Denver has fallen by 7 percent just in the last month or so—the sixth steepest decline nationally.’

‘You don’t need to spend more than a few minutes in Denver to recognize that new apartment complexes are popping up just about everywhere, and there’s no end in sight to such construction. As these buildings come online, basic economics dictates that they’ll provide much-needed relief for cash-strapped renters. While the trend is good news for those folks, the underlying fundamentals in Denver’s overall housing market remain volatile and fragile. Hopefully this delicate balance we’ve struck between accommodating growth and keeping housing prices at relatively sane levels won’t result in yet another housing bubble.’

Comment by Professor Bear
2016-04-12 04:06:28

My sister’s Denver condo is going to take a hit.

Comment by rms
2016-04-12 06:26:07

Did she buy at the top with lots-o-leverage?

 
Comment by In Colorado
2016-04-12 06:26:15

At the lunch table yesterday the belief in “It’s different here” was strongly expressed. When I piped up and said that the Denver market crashed in 2008 and would crash again everyone rolled their eyes.

Comment by Apartment 401
2016-04-12 06:46:51

Rockstar in case you forgot, median household incomes are less than $60,000 in Denver.

It is back office, flyover, nowhere.

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Comment by In Colorado
2016-04-12 08:24:08

I haven’t forgotten, but when I tell them that, they roll their eyes even more. They think every household has two 100K+ earners like theirs do. When I remind them that their 200K+ household incomes place them in “elite” status they rebuke me and say they’re “just middle class”. Then at the end of the day they climb into their late model import luxury cars and drive home to their McMansions in Highlands Ranch.

 
Comment by Jake
2016-04-12 08:35:23

Doesn’t matter what they earn. They paid a 300% premium for a depreciating asset.

That’s their funeral. Not mine. Be thankful you’re not one of them.

 
 
Comment by snake charmer
2016-04-12 07:20:22

Our financialized economy is adept at taking cities that are attractive to young adults (Denver, Portland, Boston) and quickly exploiting the situation so that young adults can’t afford to live there.

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Comment by Jake
2016-04-12 07:21:57

“Young adults” don’t have any money anyways. It doesn’t matter where they go.

 
 
Comment by taxpayers
2016-04-12 11:25:30

Denver crashed in 86 and 91 too

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Comment by Senior Housing Analyst
2016-04-12 06:58:03

Denver, CO Housing Market Caves; Prices Sink 5% YoY As Housing Correction Gains Speed

http://www.zillow.com/denver-co-80207/home-values/

 
 
Comment by Professor Bear
2016-04-12 03:47:42

“She cited prior bubbles in the stock market, housing ‘and most recently, commodity prices.’ ‘My concern for some time has been that extending monetary policy too far beyond its scope of capability risks undesirable financial, economic and political distortions,’ she said.”

Not to mention mention the nasty crashes than invariably accompany the end of the party…

Comment by Ben Jones
2016-04-12 04:14:55

‘The drive west into Hobbs, New Mexico — a city of about 45,000 just over the line from Texas — takes you past the typical array of chain retailers and restaurants, as well as a row of newer hotels on State Highway 18. At first glance, it looks like any one of the countless similar pockets of development across the country. Except the hotels are largely empty, offering rooms at steep discounts. And traffic in general seems sparse despite all the new construction.’

‘Two years ago, when crude prices topped $100 per barrel, the boom in Hobbs was something to behold. “You couldn’t get a hotel room, and if you could get one, they’d be $250 a night,” said Mayor Sam Cobb.’

‘ The hotels along Highway 18 popped up as temporary housing for oil workers who were being bused in from around the country, but it wasn’t enough. “People were living in their cars,” the mayor recalled.’

‘Sales tax receipts for the city hit a high of $10 million a month at the end of 2014, around the time unemployment in Lea County hit a low of 3.5 percent. For retailers like Richard Martin, owner of the Martin Boot Company store on Broadway downtown, there was a steady flow of customers with money to spend. “The worst thing during the peak of the economy was that they didn’t have time to spend it,” Martin said.’

‘Now, he said, “They’ve got the time. They don’t necessarily have the money.”

‘”Normally, where a truck driver was making $100,000, now they’re down making $40,000,” said County Commissioner Gregg Fulfer, who was forced to lay off a handful of employees at his own small oil and gas company because of the downturn.’

Here’s the thing Gregg, New Mexico truck drivers don’t “normally”make 100k per year. I remember posting an article stating Carlsbad New Mexico hotel rooms were more expensive than Manhattan. And some people will say no one here saw this coming.

Comment by Blue Skye
2016-04-12 05:46:28

15 years ago our little village in Wine Country had one small hotel, about 100 years old and no more than 20 rooms. Cottage rentals and B&Bs took up the rest of the traffic. In 2006 they built a modern microtel and last year the former Chevy dealership was demolished for a gigantic particleboard hotel. This winter they have put up another giant shabby hotel on the arctic blast tip of the lake.

There has been no population growth, no new industry and no income increases here. Traffic along the wine trail is down considerably. At least these structures will not stand for a century.

Comment by Muggy
2016-04-12 18:01:06

Sidenote: when I was in high school, the founder of Microtel bought a chunk of farmland by my childhood ‘hood. He died and the abandoned land became a center for all kinds of teenage mischief.

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Comment by Bluto
2016-04-12 11:06:16

True on the truck driver pay, and have seen many articles over the last few years bemoaning the shortage of drivers…the pay is lousy so people are doing easier and less stressful work for the same money. The “driver shortage” would disappear quickly if the pay were better…

http://www.nytimes.com/2014/08/10/upshot/the-trucking-industry-needs-more-drivers-it-should-try-paying-more.html

 
 
 
Comment by Professor Bear
2016-04-12 03:52:06

“…suggesting a six-year boom that has pushed the cost of housing to unaffordable heights in many U.S. cities might be coming to an end.”

Thank God! When your household earns twice the median income for the area, yet still can’t keep up with rent increases, you can be sure there is a bubble.

Comment by The Selfish Hoarder
2016-04-12 07:22:31

Hmm…Good point! And I noticed from Melissa data that my former zip code in Phoenix has very close to the same median income as my new zip code in OC yet the average house price in my new zip code is nearly 200% higher.

Does that mean Orange County is in a severe bubble? I guess there is a premium for cooler summers, being near UC Irvine, and a hotbed of software jobs in Irvine, Lake Forest and Aliso Viejo.

My salary is on the high end for my area based on surveys on tech sites so I guess I should be happy.

Comment by CalifoH20
2016-04-12 15:03:35

Always laugh at people who say they want to live by the beach. then you ask them when is the last time they went in the water…..crickets.

Comment by Muggy
2016-04-12 18:02:12

Saturday

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Comment by The Selfish Hoarder
2016-04-12 21:07:48

…or that they prefer paying $800,000 to be on the ocean-facing side of the hills to avoid baying $300+ per month AC bills in Phoenix from May through mid-October in a $250,000 house.

Also the retirement savings in my former zip code in Phoenix is about 5% higher than my current zip code in OC.

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Comment by Ben Jones
2016-04-12 03:52:07

‘There is greater demand for rentals from people in Denver’s increasingly expensive housing market, and more demand from southern Colorado people who can’t afford houses or prefer to rent instead of buy. The situation is spurring construction activity in the Colorado Springs area, with several planned expansions of existing complexes or building of new complexes.’

‘Some complexes also are renovating to compete with newer units. Laura Nelson, executive director of the Apartment Association of Southern Colorado, said the area has added between 500 and 700 units annually since 2013.’

‘Nelson said rents, also high in Denver, have started to decrease. “It’s a market correction, because they built a lot of apartments,” she said. “Whether that will happen here, and when, is hard to say. But we can’t overbuild, because we have so many military tenants, and a deployment cycle will leave us with a lot of vacancies.”

‘Laraine Saldivar is one of the tenants fueling the trend. She moved into the Blue Dot Place on Nevada Avenue when it opened in downtown Colorado Springs at the end of January. “I looked for an apartment for a couple of months,” she said. “I looked all over town. I work downtown, so I wanted to be closer to it. But the apartments that were available were still very expensive and didn’t have the amenities.”

‘The Blue Dot Place has 33 units and 21 are occupied. Monthly rents range from $1,100 to $1,850.’

“The rent was more than I expected, but it’s the only place that provides everything I want,” Saldivar said. “The best apartments are going fast, and I think when you find something good, it’s going faster.”

Hey Laraine, have you noticed the parking lot is empty all the time?

‘It’s a market correction, because they built a lot of apartments,” she said. “Whether that will happen here, and when, is hard to say. But we can’t overbuild, because we have so many military tenants”

Wrong answer Laura, you’re already over-built. This over-building is always like a three stooges, frying-pan-hits-face thing.

Comment by Apartment 401
2016-04-12 06:07:56

There are no jobs in Colorado Springs. Half of these people spend between two to four hours a day commuting to jobz in Denver.

Comment by In Colorado
2016-04-12 06:31:03

Without the Air Force Academy, Springs would be another Pueblo.

 
Comment by Ben Jones
2016-04-12 06:35:40

And having driven there last September, I can say you never know if it’s going to be 2 or 4 hours so you have to assume the worst.

In the video I made in Colorado Springs, one thing stood out. Many of the new houses under construction had for sale signs that weren’t the builders. I would guess these are flips, and I zeroed in on them because so many had price reductions.

Comment by Apartment 401
2016-04-12 06:50:25

Crossing Monument Hill in winter conditions is the 3 hour variable.

But being able to paint the walls any color you want in your depreciating shack in Colorado Springs makes it all worth it, right?

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Comment by snake charmer
2016-04-12 07:23:33

I’ve made that drive. It was a lot closer to four hours. I’m still not sure why.

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Comment by In Colorado
2016-04-12 08:30:30

It is a frustrating drive. When the kid played youth soccer there was the occasional game in Springs. We always left very early, as you never knew how long it would take to get there. The return trip, even though it was a Saturday afternoon, was more often than not a bumper to bumper mess, especially around Monument. Getting back and forth between Ft Collins and Denver is a breeze by comparison.

 
 
 
 
 
Comment by Professor Bear
2016-04-12 04:14:42

Opinion: How negative interest rates take money out of your pocket
By Satyajit Das
Published: Apr 12, 2016 5:08 a.m. ET
Negative Thinking: Income-focused savers pay stiff price for central bankers’ failures
Negative interest rates, which central banks in several countries have implemented as a way to spur economic growth, is a radical move. In the last of a three-part series, ‘Negative Thinking,’ commentator Satyajit Das examines this policy and its risks.

Central bankers since 2008 have sought to use low interest rates to boost global economic growth and increase inflation in order to bring elevated debt levels under control.

Low rates are supposed to encourage debt-financed consumption and investment, feeding a virtuous cycle of expansion. They also increase wealth, encouraging spending. Low rates and abundant liquidity should drive inflation.

Instead, these policies since 2008 have brought the global economy a precarious stability at best, and have not created economic growth or inflation.

 
Comment by Ben Jones
2016-04-12 04:19:37

‘The median rental price in New York City’s most expensive borough dropped 2.8% to $3,300 in March from the same time a year ago. This is the first annual decline in 24 months, according to the latest report by real estate appraisal firm Miller Samuel for Douglas Elliman Real Estate.’

“The rental market is sitting within the city’s robust economy so that drives demand,” said Jonathan Miller, CEO of appraiser firm Miller Samuel. “But there has been this disconnect with the type of housing we are bringing to market and the wages that are being paid.”

Comment by Jake
2016-04-12 07:16:48

Nothing like falling rental prices in Manhattan to get the ball rolling.

Rental rates and housing prices have a long way to fall.

 
 
Comment by Ben Jones
2016-04-12 04:22:39

‘California’s fourth-largest city has transformed into a tech startup and social-media mecca that’s home to Twitter Inc., Uber Technologies Inc. and Airbnb Inc. Their highly paid workers fill the city of more than 800,000, driving housing prices to levels out of reach for even those with six-figure salaries. San Francisco’s median home value was $1.1 million and the median monthly rent was $4,547 in February, the highest among the 50 largest U.S. cities, according to Zillow data.’

“We see re-locations out of San Francisco increasingly,” said Mehul Patel, CEO at Hired Inc., a San Francisco startup that connects job seekers to employers. “If you actually factor in cost of living, there are much better places to live.”

Comment by Ben Jones
2016-04-12 04:24:58

Example

Comment by Ben Jones
2016-04-12 04:28:18

‘in·de·ci·sive
ˌindəˈsīsiv/
adjective
adjective: indecisive

1.
not settling an issue.
“these experimental results are indecisive”
synonyms: inconclusive, proving nothing, settling nothing, open, indeterminate, undecided, unsettled, borderline, indefinite, unclear, ambiguous, vague; informal up in the air
“an indecisive result”
2.
(of a person) not having or showing the ability to make decisions quickly and effectively.
synonyms: irresolute, hesitant, tentative, weak

Example

Comment by Jake
2016-04-12 04:30:55

Tripping over dust particles.

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Comment by Ben Jones
2016-04-12 04:36:53

2005

‘Presentation to the members of Parliament at the Conference on US Monetary Policy, by Janet L. Yellen, President of the Federal Reserve Bank of San Francisco, The U.S Economy and Monetary Policy: … I want to focus my remarks today on another longer-term issue, namely, the housing market … The question is: …Is there a house-price “bubble” that might collapse, and if so, what would that mean for the U.S. economy? To answer this question, let me begin by clarifying what I mean by the term “bubble.” A bubble does not just mean that prices are rising rapidly—it’s more complicated than that. Instead, a bubble means that the price of an asset—in this case, housing—is significantly higher than its fundamental value.’

‘One common way of thinking about housing’s fundamental value is to consider the ratio of housing prices to rents. … Currently, the ratio for the U.S. is higher than at any time since data became available in 1970 … Higher than normal ratios do not necessarily prove that there’s a house-price bubble. House prices could be high for some good, fundamental reasons. … Probably the most obvious candidate for a fundamental factor … is low mortgage interest rates. … While the fundamentals I’ve mentioned do play a role, the consensus seems to be that much of the unusually high price-to-rent ratio for housing remains unexplained. Moreover, with controversy over exactly why long-term interest rates have remained so low, we can’t rule out the possibility that they would rise to a more normal relationship with short-term rates, and this obviously might take some of the “oomph” out of the housing market. So, while I’m certainly not predicting anything about future house price movements, I think it’s obvious that the housing sector represents a risk to the U.S. outlook.’

‘This brings me to the debate about how monetary policy should react to unusually high prices of houses—or other assets, for that matter. … As a starting point, the issue is not whether policy should react at all; I believe there is quite general agreement that policy should be calibrated to the wealth effects of house prices on output and inflation. The debate lies in determining when, if ever, policy should be focused on deflating the asset price bubble itself. In my view, the … decision to deflate an asset price bubble rests on positive answers to three questions. First, if the bubble were to collapse on its own, would the effect on the economy be exceedingly large? Second, is it unlikely that the Fed could mitigate the consequences? Third, is monetary policy the best tool to use to deflate a house-price bubble?’

‘My answers to these questions in the shortest possible form are, “no,” “no,” and “no.” … In answer to the first question on the size of the effect, it could be large enough to feel like a good-sized bump in the road, but the economy would likely to be able to absorb the shock… In answer to the second question on timing, the spending slowdown that would ensue is likely to kick in gradually… That would give the Fed time to cushion the impact with an easier policy. In answer to the third question on whether monetary policy is the best tool to deflate a house-price bubble, … For one thing, no one can predict exactly how much tightening would be needed, or by exactly how much the bubble should be reduced. Beyond that, a tighter policy to deflate a housing bubble could impose substantial costs on other sectors of the economy that would lead to equally unwelcome imbalances. Finally, it’s possible that other strategies, such as tighter supervision or changes in financial regulation, would not only be more tailored to the problem, but also less costly to the economy. Taking all of these points into consideration, it seems that the arguments against trying to deflate a bubble outweigh those in favor of it. … But let me stress that the debate surrounding these issues is still very much alive.’

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Comment by Professor Bear
2016-04-12 04:57:53

“Probably the most obvious candidate for a fundamental factor … is low mortgage interest rates.”

Can we at least agree that abnormally-low mortgage rates and abnormally-high housing prices go hand-in-hand?

I’m not sure about the ‘fundamental factor’ story, though: Can you call it ‘fundamentals’ when the Fed and other central banks around the globe are working 24/7 to keep interest rates pinned to the mat?

 
Comment by Professor Bear
2016-04-12 05:02:10

Fall 2005 outlook:

“In answer to the second question on timing, the spending slowdown that would ensue is likely to kick in gradually… That would give the Fed time to cushion the impact with an easier policy.”

Fall 2008 outlook:

“Nobody could have seen it coming!”

 
Comment by Professor Bear
2016-04-12 05:04:06

“Beyond that, a tighter policy to deflate a housing bubble could impose substantial costs on other sectors of the economy that would lead to equally unwelcome imbalances.”

What about looser policy to reflate a bubble, which never, ever unwinds. Could that lead to equally unwelcome imbalances?

 
Comment by Oddfellow
2016-04-12 06:31:10

Finally, it’s possible that other strategies, such as tighter supervision or changes in financial regulation, would not only be more tailored to the problem, but also less costly to the economy.

Yes, it’s possible. Of course, you’d have to actually implement these “other strategies” to find out, not just discuss their possibility to excuse what you are actively doing now.

 
 
Comment by Raymond K Hessel
2016-04-12 05:32:47

The only known antidote to lunatic Keynesians running our central banks: physical gold, silver, platinum, or palladium that you buy and hold while the Fed’s debauchery of the currency manifests in hyperinflation and the loss of purchasing power. It’s even more imperative to buy precious metals before the Fed’s next big swindle on the 99%, NIRP, which is forthcoming as the Fed tries to herd skittish retail investor bagholders back into its Wall Street cronies’ rigged casino for their final fleecing.

http://www.zerohedge.com/news/2016-04-12/silver-surge-8-month-highs-hedgers-unwind

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Comment by Blue Skye
2016-04-12 05:58:23

Sounds like you’re predicting a new credit expansion, bigger and faster than the old credit expansion.

 
Comment by Raymond K Hessel
2016-04-12 06:46:21

Isn’t that what the Fed does? Must.levitate.Ponzi.market.

 
Comment by Blue Skye
2016-04-12 07:00:45

They need willing and able debt donkeys to cart the money away and blow it on something unnecessary. We keep reading about how credit based enterprises are imploding on account of over capacity and falling prices. the China Ponzi is out of gas. What do you have in mind for the next bigger Ponzi?

 
Comment by In Colorado
2016-04-12 09:11:05

If interest rates return to historical levels there will be a global domino effect of sovereign, corporate and individual debt defaults.

We have been painted into a corner.

 
Comment by Ben Jones
2016-04-12 09:36:57

‘We have been painted into a corner’

Just walk over the paint. I’m not buying this, “we have no choice but to print our way out” stuff. I was reading this morning the IMF is urging more central bank/government easing, saying what’s been done wasn’t enough to get companies to spend. China only poured a hundred years of concrete in three! All we got out of it was cites, factories, mines and oil fields we don’t need, not to mention super expensive empty condos all over the world. The money isn’t going into real sustainable economics. Everything is too distorted to work.

Here’s a scenario; this debt isn’t going to get paid back. Let the chips fall, rip off the bandage, pick your analogy. Let the markets work! We’re watching more and more of the global economy sucked into the central bank black hole balance sheet. Do you know why the central banks are fighting this tooth and nail? Power. Why not let investors in negative rate government bonds find out they’re bag-holders? That’s what they are. Sell the QE stuff. Tell Janet to get a real job.

We know what to do with over-capacity, useless resources and the like. The market will digest it and we’ll move on. Maybe we won’t be paying half our incomes in rent, but that day is coming anyway.

 
Comment by In Colorado
2016-04-12 10:48:06

Here’s a scenario; this debt isn’t going to get paid back. Let the chips fall, rip off the bandage, pick your analogy. Let the markets work!

What comes to mind is that if there is anything markets hate, it’s the unknown and we are definitely in terra incognita; which is why the PTB aren’t “ripping off the bandage”.

 
Comment by Ben Jones
2016-04-12 11:34:12

‘why the PTB aren’t “ripping off the bandage”

There are two different episodes here. There was post 2008 and now. Yellen warned of a junk bond and bio-tech bubble years ago and they laughed her off. Now those chickens have come home to roost. The Fed lady above is warning of a commercial real estate bubble. It’s already here. Apartment construction is at a 30 or 40 year high depending on how you measure it. As I said, the low rate situation has lead most of the CRE industry to charge ahead when demand is falling. There are consequences to even the status quo. I realize their choices are bad and worse, but they should have cut this off at the pass and started raising rates years ago. Institutions are betting the pensions, etc, on apartments and condos just as over-supply is appearing.

 
Comment by Ben Jones
2016-04-12 11:55:12

From last Fridays post:

Comment by Ben Jones
2016-04-08

Danielle DiMartino Booth makes an interesting point in the last link:

‘The movement between regions will be catalyzed by demographics, according to the JLL study, which notes there will be more people over the age of 55 by 2050 than there were inhabitants on earth in 1950.’

“This demographic impact will have a profound effect on real estate investment strategies with the amount of private equity capital targeting direct real estate set to increase by over 500 percent, much of it driven by increasing institutional allocations looking at higher yielding opportunities.”

‘Did you notice something implicit in JLL’s argument? It would seem lower for longer will remain the mantra for the foreseeable future, which suggests frothier markets and subpar growth will continue. The most interesting tidbit comes down to who will be doing the investing, that is private equity.’

‘As it were, private equity “dry powder” directed specifically to real estate investments rang in the New Year at record levels. There is now $231 billion in dry powder available just for properties in the United States after $107 billion was raised in 2015.’

‘For being six years into a recovery in commercial real estate, investors certainly remain enthusiastic, especially public pensions. Pensions have allocated some $207 billion to private equity funds since late 2012. Increasingly, allocations have targeted real estate funds with March of this year providing a perfect example of the merriment surrounding this asset class. Here’s a wee sampling with special notations if the real estate fund is of a particular bent:

Texas Teachers: $500 million
State of Oregon’s Pension: $300 million
Pennsylvania Public School Employers: $307 million
Ohio Workers Compensation Bureau: $125 million
State of Minnesota’s Pension: $100 million (distressed); $100 million (opportunistic)
State of Maine Pension: $50 million
State of New Jersey: $200 million (commercial)
State of Kansas: $50 million
Texas Municipal: $375 million

“Pensions’ chronic underfunding has prompted them to stretch to achieve unrealistic return targets,” New Albion Partners’ Brian Reynolds explained. Reynolds has been keeping a running tally of these allocations and is quick to point out that leverage is often needed to hit the bogeys, which are 7.5 percent or more. Bear that in mind when you consider the money being shoveled into these funds.’

‘It really comes down to size, that is, of the pension system. In the early 1980s, pension liabilities amounted to about 50 percent of gross domestic product (GDP); today they are 100 percent of GDP. “Because of their growth, their investment flows have led to asset bubbles that have generated permanent losses,” Reynolds added.’

‘Pensions flocked to hedge funds but that strategy blew up after Long Term Asset Management nearly took down the financial system. This strategy was followed by wholesale herding into commodities, which we all know ended is disaster.’

‘The catch is the rate-of-return bogeys have barely budged despite Baby Boomers moving increasingly closer to retirement suggesting some risk should be taken off the table. (Rather than keeping you in suspense, it’s nearly an impossible feat to lower return targets. Less in assumed returns means states and municipalities have to pony up more money they don’t happen to have on hand. The State of Connecticut has reached the point where it is now taking a stab at taxing Yale’s endowment in a desperate attempt to top off its underfunded pensions.)’

‘No matter how you slice it, most public pensions face a dire set of circumstances, which begs the question: Just what are they to do?’

‘Reynolds’ reply: “They have turned to the last remaining asset class with high expected rates of return – commercial real estate. It’s as simple as that.”

‘Perhaps pensioners should begin praying the JLL report pans out. With commercial real estate prices declining in January for the first time since 2010, the latest data available, and investors balking at rich valuations, it just might take a miracle to keep profitable prospects alive.’

http://thehousingbubbleblog.com/?p=9602

 
Comment by The Selfish Hoarder
2016-04-12 12:53:12

Indeed this was a good day to drive up into LA and fill a pocket with gold at my favorite coin shop. Was looking for platinum in small sizes but they were out as usual. Yamana Gold, Inc is now up at $4.12. I bought it at $1.83 thanks to RKH. Too early to sell.

This is a biannual visit to the coin store. I’ll leave them alone through Summer.

 
Comment by In Colorado
2016-04-12 14:43:08

I realize their choices are bad and worse, but they should have cut this off at the pass and started raising rates years ago.

Agreed. But they put it off, and the longer it gets put off, the more it will hurt. They won’t raise rates until their hand is forced.

 
 
Comment by Raymond K Hessel
2016-04-12 05:42:20

To me that pensive, anxious Yellen expression suggests her orders from Goldman Sachs haven’t been faxed in yet.

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Comment by phony scandals
2016-04-12 08:44:42

(of a person) not having or showing the ability to make decisions quickly and effectively.
synonyms: irresolute, hesitant, tentative, weak

“In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.”

Theodore Roosevelt

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Comment by strawman
2016-04-12 08:25:30

Now we know who Larry Summers was named after. Look at that face …

 
Comment by strawman
2016-04-12 08:26:58

(referring to 3 stooges pic above …)

 
 
Comment by CalifoH20
2016-04-12 16:29:40

Reno and Sac are getting some.

 
 
Comment by Ben Jones
2016-04-12 04:57:04

‘Manhattan office market cools with tenants hesitating on deals
Office leasing is slowing from the aggressive pace of the past two years.’

“There was not a high volume of large deals,” said Richard Persichetti, Cushman’s Northeast research director. “The year started slow because of reservations about what was going on in the stock market. Corrections in the stock market also led to some price corrections in the real estate market—that whole snowball effect, so to speak.”

Comment by Karen
2016-04-12 13:22:27

“The year started slow because of reservations about what was going on in the stock market. Corrections in the stock market also led to some price corrections in the real estate market—that whole snowball effect, so to speak.”

The best analogy I have heard for the situation our (and the world’s) economy is in is that of being on the side of a mountain just before an avalanche.

It’s like snowpack in the Alps. The snowpack (the distortions in the economy, the misallocated resources, the derivates market, the unfunded liabilities, etc.) gets larger and larger. All it takes is one little thing and the whole side of the mountain will come down and bury everything and everyone in its path.

We don’t know exactly when it will happen, but it’s coming. It’s always “a snowball effect”.

 
 
Comment by Senior Housing Analyst
2016-04-12 05:06:28

Coral Gables, FL Housing Market Implodes; Prices Crater 16% YoY As Housing Bubble Deflates

http://www.zillow.com/coral-gables-fl/home-values/

Comment by phony scandals
2016-04-12 09:08:16

Coral Gables, FL?

It’s all about the U

http://www.youtube.com/watch?v=za5wwChsCwg - 179k -

 
 
Comment by Jake
2016-04-12 05:13:44

Don’t think housing prices are massively inflated?

http://picpaste.com/pics/1a0b3da135e49a3a391b1daddd9b2cd1.1460391564.jpg

 
Comment by Raymond K Hessel
2016-04-12 05:36:53

The sheeple are going to want to know a lot more about the Fed, an unaccountable private banking cartel, after it presides over the next big market crash.

http://www.zerohedge.com/news/2016-04-11/bernankes-former-advisor-people-would-be-stunned-know-extent-which-fed-privately-own

 
Comment by Raymond K Hessel
2016-04-12 05:44:38

“Anyone who says the American economy is in decline is peddling fiction.”

– Barak Obama, 2016 SOTU address.

http://wolfstreet.com/2016/04/11/us-commercial-bankruptcies-chapter-11-soar/

 
Comment by Raymond K Hessel
Comment by Ben Jones
2016-04-12 06:25:37

‘As a reminder, One57 is where Bill Ackman paid $91.5 million in April 2015 for a condo (which he hoped to flip), just a few months before Valeant, and his fund, suffered staggering losses. Perhaps that should have been the tell.’

Comment by rj chicago
2016-04-12 08:05:45

Ben:
Ackman is most likely not the only one holding the bag on overpriced skybox - the money that flowed into NYC up to a year ago pre - panama papers had to be ill gotten gains- think of it - why would a Chicomm or a Russian or a Mid east guy spend alot - and it was alot of dough for a place they occupy maybe two weeks out of the year except to hide cash inside and LLC?
My prediction - condo sky boxes are gonna hit the market at discount rates.

Comment by Ben Jones
2016-04-12 08:52:57

One57 has already offered the unsold units in a bulk discount deal. No takers. Tried to rent, and has now given up on that.

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Comment by Prime_Is_Contained
2016-04-12 10:51:53

Sounds like we need some bankruptcy-lubricated sales to “ease” price-discovery!!

 
 
 
 
 
 
Comment by Raymond K Hessel
 
Comment by Raymond K Hessel
 
Comment by Raymond K Hessel
2016-04-12 05:54:04

Haven’t we seen this movie before? I’m pretty sure I know how it ends: with massive involuntary bailouts by taxpayers who have seen their own 401 (ks) go up in smoke.

http://www.zerohedge.com/news/2016-04-12/nomura-fires-1000-it-quits-european-equity-business-blames-extreme-volatility-and-la

 
Comment by Apartment 401
2016-04-12 06:03:17

Sierra Nevada snow won’t end California’s thirst:

http://mobile.nytimes.com/2016/04/12/science/california-snow-drought-sierra-nevada-water.html

40 million people with no water. The most impoverished state in America.

Comment by In Colorado
2016-04-12 08:47:32

I was in Santa Clara last week. The locals didn’t talk about the drought. I guess for them it’s becoming a way of life. What I did notice was more than a few houses without front lawns. This is Denver’s future as well. There is only so much fresh water in the southwest and as Denver continues to grow it too will experience water rationing and all those blue grass lawns will become a memory.

Comment by dwkunkel
2016-04-12 09:23:39

I live in Santa Clara and we took out all of our grass about 25 years ago and replaced it with landscaping that is drought tolerant. The bonus is that it requires a lot less work to maintain.

Comment by In Colorado
2016-04-12 10:41:45

How much has your “rotting shack” appreciated since you bought it? 500K? More?

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Comment by cactus
2016-04-12 10:40:41

In the west

Farmers need cheap water to grow alfalfa to ship overseas.

Home owners need to be scared into paying more for water.

No matter what their will always be a crisis

 
 
 
Comment by Senior Housing Analyst
2016-04-12 06:09:26

Falls Church, VA Housing Market Caves; Prices Plummet 7% YoY On Cratering Housing Demand

http://www.zillow.com/falls-church-va/home-values/

 
Comment by Apartment 401
2016-04-12 06:17:56

Free Sh*t Army on the march, demanding more free sh*t.

April 13: million student march for debt reduction, politicians better have some solutions:

http://m.huffpost.com/us/entry/april-13-million-student-march-for-debt-reduction-politicians-better-have-some-solutions_b_9635880.html

I paid over $40,000 for graduate school, so will I get a refund check?

Comment by taxpayers
2016-04-12 08:04:08

no
if pols cave then they’ll be yanking gold teeth etc

 
Comment by Blue Skye
2016-04-12 08:31:52

No. You paid. This is about not paying.

Comment by Puggs
2016-04-12 09:36:18

^^LOL^^ Perfect!

Yeah, tough sh*t for those of us who prepaid our cars, homes and education. No refund for YOU!

 
 
 
Comment by Apartment 401
2016-04-12 06:37:03

Indicted payday loan pioneer has fingers in Fintech companies, article excerpts:

“Hallinan, who has pleaded not guilty, is also an investor in Clarity Services Inc, a credit reporting firm that says it has data on more than half of all subprime borrowers in the US … Some of the companies now viewed as the future of finance have less savory roots in payday lending, subprime mortgages or high-pressure telephone sales.”

http://www.bloomberg.com/news/articles/2016-04-12/indicted-payday-loan-pioneer-has-fingers-in-fintech-companies

Don’t be a debt donkey and you won’t have to do business with these Shylocks.

 
Comment by Ben Jones
2016-04-12 06:41:51

‘The brokerage attributed the city’s rising vacancy rates to the weakened job market during the oil slump and competition from new apartment projects that have flooded the market during the boom years’

Houston has 30,000 new apartments on the way.

‘over the next three years, developers are expected to build almost one million apartments in the U.S., more than the nearly 900,000 constructed during the previous three, according to Axiometrics. ‘We can’t keep building and building and building and not see weakness enter the market.’

This is very interesting. I read a lot of articles on the multi-family industry and probably 95%+ of the people involved are not only bullish, they think prices and rents will rise for many years. This is after a multi-year boom!

Comment by Rental Watch
2016-04-12 09:34:19

They were building more new housing units in the Houston MSA than in the entire state of CA.

Enough said.

Yup, no overbuilding there.

Comment by Jake
2016-04-12 09:39:55

Yet TX has a small fraction of the amount California’s excess, empty and defaulted housing inventory.

Comment by Rental Watch
2016-04-12 09:44:13

^^ lol

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Comment by Jake
2016-04-12 09:48:18

You’re gyrating Rental_Fraud.

 
Comment by Ben Jones
2016-04-12 10:18:27

2015 total permits:

Texas: 173990

California: 95955

Structures with 5 units or more:

Texas: 2055

California: 1581

Units within those structures:

Texas: 66659

California: 48601

https://www.census.gov/construction/bps/txt/t2yu201512.txt

I think I got this right. A foreclosure can happen pretty quickly in Texas. There’s no loanowners bill of rights, etc. People are moving to Texas, not California.

 
Comment by In Colorado
2016-04-12 14:38:53

http://www.sandiegouniontribune.com/news/2016/jan/05/california-population-growth/

According to the article, California had a net immigration of 145K in 2015, so people are still moving there. I have no idea of why they are, then again, moving to Dallas, Houston, etc. isn’t my idea of a good time either.

 
Comment by Jake
2016-04-12 15:03:24

Problem is CA lost 1 million in the previous 9 years.

“Unprecedented Number Of Californians Left For Others States During The Last Decade”

http://www.sacbee.com/site-services/databases/article32679753.html

 
Comment by Ben Jones
2016-04-12 15:33:01

‘What I’m seeing brewing is a mild-but-noteworthy reluctance to move to California from elsewhere in the U.S.’

‘It’s not just found in van traffic reports. State demographers – tracking all moves – estimated California suffered a net loss of 61,121 people to other states in the 12 months ended July 2015, the largest outflow in four years. The state population continues to grow due to births and inflows from other countries.’

‘Back in 2012, that math showed median incomes in those six big California regions were an average 9 percent higher than what was considered sufficient to comfortably own a local median-priced home.’

‘Last year, though, median incomes in those six California markets averaged just 80 percent of the pay needed to comfortably afford to buy. That’s what a 47 percent jump in state home price since 2012 does to the wallets of California house hunters.’

http://www.pe.com/articles/california-799613-state-year.html

 
Comment by Rental Watch
2016-04-12 17:16:14

The statistic on Houston vs. CA was a few years old. Looks like CA caught up a bit.

http://journal.firsttuesday.us/golden-state-population-trends/9007/

CA added about 350k people in 2015, and built less than 100k housing units.

That isn’t enough.

They built fewer homes in 2014, but had about the same population growth.

Even worse.

They built even fewer in 2013, and had the same population growth.

Even worse.

I don’t know if the pattern still holds, but a couple of years ago, the inmigration and outmigration to/from CA was HIGHLY correlated with home prices…as prices rose, people left (big outmigration in 2006), and prices fell, people came in. Seems like the pattern holds based on 2015 outmigration being worse than the prior 4 years.

 
Comment by Jake
2016-04-12 17:27:41

Here’s what we know about CA;

-Falling population

-4.4 million excess empty and defaulted houses

-Rapidly rising crime deliberately understated

-Record levels of poverty

-Highest poverty rate in the US

 
Comment by MightyMike
2016-04-12 17:40:01

The population in California is increasing, not falling.

 
Comment by Ben Jones
2016-04-12 17:51:12

‘The population in California is increasing’

Si.

 
Comment by Apartment 401
2016-04-12 18:48:29

California is so proud of their model of creating poverty, they’ve exported it to the rest of the United States.

Forward.

 
 
 
Comment by CalifoH20
2016-04-12 16:31:49

houston smells funny

 
 
 
Comment by In Colorado
2016-04-12 06:45:18

80% of all wells in China are polluted and unsafe

http://www.theguardian.com/environment/2016/apr/12/four-fifths-of-chinas-water-from-wells-unsafe-because-of-pollution

Maybe we can ship fresh water back to them in all those empty container ships.

Comment by Blue Skye
2016-04-12 07:04:01

When my colleagues from China visit, they will not drink any water that isn’t directly from a plastic bottle.

Comment by In Colorado
2016-04-12 08:41:27

That makes me think of the scene in the movie Space Balls where Mel Brooks’ character opens a can of “Perri-air”

 
 
Comment by Jake
2016-04-12 07:07:11

At least China has water. California is ready to dry up and fall off.

 
 
Comment by Ben Jones
2016-04-12 06:47:29

‘It may be the world’s biggest traffic jam. As ports struggle to cope with a global oil glut, huge queues of supertankers have formed in some of the world’s busiest sea lanes, where some 200 million barrels of crude lies waiting to be loaded or delivered.’

‘The vessels, filled with oil worth around $7.5 billion at current market prices, would stretch for almost 40 km (25 miles) if formed up in one straight line.’

http://finance.yahoo.com/news/band-plays-global-oil-glut-130103301.html

And oil futures are in the third rally since 2014.

Comment by Jake
2016-04-12 06:55:12

A globe awash in crude oil while demand craters.

 
Comment by Combotechie
2016-04-12 07:59:11

Every ship needs to be somewhere so it might as well be at a place to unload as anywhere else.

And if somebody is paying for the storage of oil? Well, money is not being earned for shipping the stuff so it might as well be earned for storing the stuff. Not that there is much of a choice; Bills need to be paid and all that.

Off of Long Beach the ships are there, not in the port but just outside the port. It’s costly to be in the port but not to be anchored just outside the port.

Comment by Combotechie
2016-04-12 08:04:16

The ships that are anchored outside the port all have lights on them and if somebody did not know any better when he looked out to sea at night he would swear that there was an actual city out
there instead of just ocean.

 
Comment by Combotechie
Comment by rj chicago
2016-04-12 08:31:53

Combo:
I just posted 30 tankers photo off the Iran coast - where can one find satellite imagery - current as of this week - for ships - mostly oil tankers off the gulf coast and west coast ports. And how to determine if they are empty of loaded full with no ability to off load?
Just curious.

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Comment by Combotechie
2016-04-12 08:47:10

“And how to determine if they are empty of loaded full with no ability to off load?”

If the ships are sitting way down low in the water then they are loaded. If they are sitting way up on top of the water then they are not.

As I understand it, ships have three lines for measuring displacement (for measuring the tonnage that they carry) on their bows; one line for measuring tonnage carried in warm sea water (as in the tropics), one line for measuring tonnage carried in cold sea water (as in the north Atlantic) and one line for measuring tonnage carried in fresh water (such as the Great Lakes). Whatever the density of the water the ship happens to be in determines the line that is used for measuring the tonnage that the ship is carrying.

Again, this is as I understand it; I would not place any bets that depend on what I have just stated as being totally accurate.

 
Comment by Combotechie
2016-04-12 08:55:31

I used the word “lines” when I probably should have use the word “scales”.

 
Comment by Blue Skye
2016-04-12 10:02:41

“Draught marks” or “draft marks”

 
Comment by rj chicago
2016-04-12 12:54:24

Combo:
thanks - I am continuing to look for stats on the oil off load transfer capacity of say long beach terminal and what is holding these ships at anchor out in the water. I have heard the Gulf is flush with tankers at anchor off Galveston / Texas City due to similar circumstances.
The consequences of so much oil supply and decreasing demand is affecting oil price - but today it blew through 41 bucks a barrel - highest in months. What gives?

 
 
 
 
 
Comment by Professor Bear
2016-04-12 20:38:58

Think of those rallies as production stimulus which can only lead to a worse glut and more momentuous future crash…

 
Comment by Eddie89
2016-04-14 07:56:25

Wow! It just hit me! They’re doing with the oil tankers the same thing the banks are doing with all the zombie houses! They’re holding back inventory to try to push up prices!

Artificial scarcity!

Bastards!!!

 
 
Comment by Raymond K Hessel
2016-04-12 06:50:37

More currency-manipulation jawboning by Yellen’s flying monkeys. Yellen will NEVER raise interest rates unless forced to by the bond market, or unless her Goldman Sachs handlers take out massive short positions against the market, then order her to hike rates enough to cause a sharp correction or worse.

http://www.marketwatch.com/story/feds-harker-backs-delaying-another-interest-rate-hike-until-inflation-picks-up-2016-04-12

 
Comment by Jake
2016-04-12 07:06:02

Want to destroy your life? Just go out and finance a house for 15 or 30 years.

Comment by redmondjp
2016-04-12 20:45:37

Wrong, Housing Analyst. I financed my house for 30 years, then re-fi’d into a 15, and have it almost paid off (20 years total, with 3 left to go).

I’m looking forward to renting it from King County after that. No other debt.

Comment by Jake
2016-04-12 21:13:56

And you’ve got empty pockets.

 
 
 
Comment by Jake
2016-04-12 07:19:47

“US Import Prices Tumble For 20th Month In A Row As China Exports Most Deflation Since 2009″

http://www.zerohedge.com/news/2016-04-12/us-import-prices-tumble-20th-month-row-china-exports-most-deflation-2010

Remember…… Nothing accelerates the economy and creates jobs like falling prices to dramatically lower and more affordable levels. Nothing.

 
Comment by taxpayers
2016-04-12 08:02:29

remember the 4% depletion rules for retirement?
what is it now 3% or 2 ??

Comment by Combotechie
2016-04-12 08:27:10

“The four percent rule no longer applies for most retirees.”

http://www.cnbc.com/2015/04/21/the-4-percent-rule-no-longer-applies-for-most-retirees.html

 
Comment by Blue Skye
2016-04-12 08:36:33

4% will give you 20 years if it doesn’t go poof.

Comment by Prime_Is_Contained
2016-04-12 11:00:36

Shouldn’t it last roughly 25yrs at 4% and zero yields?

You’re just spending the principal, so at 0% return, the math is quite simple…

Comment by Blue Skye
2016-04-12 11:43:37

You are correct of course.

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Comment by cactus
2016-04-12 14:32:43

http://www.bankrate.com/calculators/retirement/retirement-plan-calculator.aspx

Nice graft at bottom of text shows how fast you run out of money at sub 7% a year

 
 
Comment by Jake
2016-04-12 08:18:41

From yesterday. There are no lending standards and haven’t been. Trillions have been lent into existence. All founded on nothing.

http://thehousingbubbleblog.com/?p=9573

‘A recent report by the Office of the Comptroller of the Currency, a federal agency that regulates the nation’s banks, warns that declines in mortgage underwriting standards are mirroring pre-crisis trends.

‘Underwriting standards eased at a significant number of banks for the three-year period from 2013 through 2015,’ the report said. ‘This trend reflects broad trends similar to those experienced from 2005 through 2007, before the most recent financial crisis.’ Not since 2006, it noted, have lenders taken on so much credit risk, and it says the hazard will continue to grow this year: ‘Examiners expect the level of credit risk to increase over the next 12 months.’

‘A large chunk of the risk is coming from first-time home buyers with shaky credit and so-called ‘rebound’ buyers who previously defaulted on home loans. The demand from otherwise ­uncreditworthy home buyers ‘is driving home prices up faster than incomes and inflation,’ noted ­Edward Pinto, co-director of AEI’s International Center on Housing Risk in Washington.’

‘This is especially true in hot spots like California, where subprime-mortgage lenders offering interest-only loans with no FICO-score requirements are cropping up from the ashes of Countrywide Financial, the bankrupt subprime giant.’

‘In another sign housing is overheating, home ‘flipping’ is red hot again and hitting levels not seen since just prior to the mortgage meltdown. Nationwide, almost 180,000 homes were sold and then resold last year — the highest level since 2007. In fact, according to RealtyTrac, flipping in a dozen metro areas — including New York, Los Angeles, San Diego, Miami and Jacksonville, Fla. — exceeded peaks set in 2005.’

‘Like the last bubble, this one is fueled by artificial demand from government-induced lax lending standards and accommodative interest rates set by the Federal Reserve. Today’s relaxation in mortgage-underwriting standards is largely a function of government housing-policy changes at FHA, Fannie Mae and Freddie Mac, which dominate the nation’s mortgage activity. As in the last easy-credit cycle, we are seeing ‘the promotion of policy to push firms to seek riskier products to promote growth,’ Wells Fargo Chief Economist John Silvia said.’

‘All three agencies have slashed down-payment and other requirements under pressure from Obama regulators, who include, most significantly, former Congressional Black Caucus leader and Obama appointee Mel Watt, head of the new Federal Housing Finance Agency, which now controls Fannie Mae and Freddie Mac.’

‘Last year, Fannie Mae launched a new subprime-mortgage product called HomeReady that caters to recent immigrants with weak credit and limited income. The new loan program, which offers ‘income flexibility,’ allows borrowers for the first time to bundle income from roommates and relatives to meet qualifications for income. They only have to put 3% down, and can use gifts from nonprofit groups to subsidize their down payments.’

‘There is no limit on the number of non-borrower household members who can be present on a single transaction,’ Fannie advises originators. And even then there is ’documentation flexibility,’ a frightening echo of last decade’s ‘no-doc loans.’

‘You don’t have to show personal financial independence. You can be maxed out on credit cards and even live in government-subsidized housing. Just as long as you round up enough income-earners and pool ­finances to help meet a debt-to-income ratio of up to 50%. And you don’t need good credit. ‘If the borrower’s credit score is less than the minimum credit score required,’ Fannie tells loan underwriters, ‘the lender may develop an acceptable nontraditional credit profile’ that takes into consideration timely payments on electricity bills and car insurance — and even gym dues — in lieu of payments on credit cards and loans.’

‘Under HomeReady, you can even qualify for a ‘cash-out refinance’ of your mortgage, a type of loan that led to over-leveraging and a wave of defaults during the mortgage crisis.’

‘Why would Fannie offer the same kinds of poorly underwritten loans that forced it into bankruptcy? Because HomeReady aligns ‘with our housing goals’ set by Watt, it says in its Home­Ready literature. It’s all part of a government campaign to ease access to home loans for recent Hispanic immigrants — including those living here illegally. In fact, HomeReady caters to illegal immigrants by allowing borrowers to waive Social Security documentation.’

‘Watt, who as a congressman once demanded Freddie Mac back loans for welfare recipients in his North Carolina district, has instructed Fannie and Freddie to come up with ‘alternative credit-scoring models’ to FICO and approve more home buyers. ‘We have the pedal to the metal’ on adopting a new model, Watt said.’

Comment by Puggs
2016-04-12 16:12:37

“so-called ‘rebound’ buyers who previously defaulted on home loans”

…I know 3 of these personally. 2 of them have mommy and daddy’s name on the deed.

Comment by muhFeelins
2016-04-12 18:40:22

Jingle Fraud and Rental Fraud say the loans are good.

 
 
 
Comment by Prime_Is_Contained
2016-04-12 08:19:31

Thanks, everyone, for the shock-treatment yesterday. Wife and I are currently leaning towards “no” on the offer-to-buy the family home, then waiting a couple of years and buying something that meets our needs better. We just don’t feel like we have the energy for all of the decisions required to do a major remodel or a tear-down-build at this moment in life.

One thing that I didn’t mention yesterday that is definitely a factor: my mother recently moved in with a sibling of mine, but has at various points in the past said that she might want to live with us in Seattle instead. Our current rental is definitely not sufficient for another adult plus a growing family, and between her age/mobility and the family changes, the set of constraints that we would have on a rental makes finding an appropriate one a daunting prospect. I think that’s one of the reasons that I was even considering this—that combined with the location, the view potential, and the sentimental reasons.

Comment by rj chicago
2016-04-12 08:35:38

Have you considered putting the house in an LLC - have your siblings purchase / manage the place and you rent it until such time as you want to buy them out? Just sayin…..
My siblings and I considered this when we had to move my mom out of her home of 50+ years to keep it in the family - as my wife and I were at the time - prior to her cancer diagnosis - thinking of buying the place with the views of the Rockies in a prime area of Denver - all fell apart but it was an option at the time. We did put the property in an LLC to move it out of my mom’s estate for taxing purposes rented it for a few years then sold it to a high end builder who was just foaming at the mouth to purchase.

 
Comment by taxpayers
2016-04-12 08:45:54

seattle re taxes going up over 9%
= 2% equity loss

 
Comment by Prime_Is_Contained
2016-04-12 08:46:53

BTW, Michael Viking: I didn’t quite understand your comment below; care to elaborate?

I find your case the exact opposite of Muggy’s which made sense to me.

He knows the area (lived there in his rental for some time); we know the area (wife lived there for her entire childhood). The house fits their needs; we know the house doesn’t, but it is just a matter of money to make it fit our needs.

What’s the exact opposite?

Comment by Michael Viking
2016-04-12 18:31:11

Sorry, I just meant that all of the things he was saying struck me as green flags, all of the stuff you were saying struck me as red flags. I’m too old to have the details in mind, just the feelings I had as I read each story but I’ll do my best.

You aren’t getting a deal (he was)

The amount of money you think you need to remodel your place is enormous (just your remodel cost is probably enough money to buy Muggy’s home)

You have neighbor issues that cannot be solved or are annoying to solve like viewing easements and the hope the one neighbor doesn’t build another story and block your view/light (Muggy likes his neighborhood and neighbors and doesn’t have issues).

I felt the tone of your post was that you knew it was a bad deal and wanted to be talked out if it. I felt the tone of Muggy’s was that knew he had a good deal and wanted to be talked into it…

Hope that helps!

 
 
Comment by phony scandals
2016-04-12 08:52:47

“my mother recently moved in with a sibling of mine, but has at various points in the past said that she might want to live with us in Seattle instead.”

Sounds like your mom raised some high character kids as did Tarara Boomdea’s.

Comment by Tarara Boomdea
2016-04-12 11:19:25

Aw, shucks, but I do think most people will do as much as they can for family, given the opportunity. However, every once in a while I yell at my husband and daughter that if I were the sick one, I’d be up a creek.

Comment by phony scandals
2016-04-12 15:46:17

“However, every once in a while I yell at my husband and daughter that if I were the sick one, I’d be up a creek.” :)

I love my kids and I know they love me but I wouldn’t count on them anymore than I would count on the Federal Government to take care of me if I needed it.

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Comment by Puggs
2016-04-12 16:00:02

Always, always save for a rainy decade : )

 
 
 
 
Comment by Eddie89
2016-04-14 08:04:14

@Prime_Is_Contained: If you can find a house on a big lot, maybe you could build a “granny pod”: http://www.bubbleinfo.com/2016/04/13/granny-pods/

 
 
Comment by Ben Jones
2016-04-12 08:57:26

‘It’s Never Been This Hard for Chinese Debtors to Pay Interest’

“For some firms the rising leverage is a result of lower earnings,” said Iris Pang, senior economist for greater China at Natixis SA in Hong Kong. “Many companies now need to pay their debts via new borrowings, or structure existing loans so that they can repay in a much longer maturity.”

http://www.bloomberg.com/news/articles/2016-04-11/chinese-debtors-have-never-faced-such-hard-times-paying-interest-imw6qo91?cmpid=yhoo.headline

Comment by The Central Scrutinizer
2016-04-12 21:19:09

“borrowings”

unholdings?

 
 
Comment by Rental Watch
2016-04-12 09:07:06

There was an interesting article in the WSJ yesterday talking about a survey done that was effectively trying to determine whether millennials were held back from buying homes because of student loan debt.

The article was called “Student Debt Is Holding Back Millennials? Not So Fast”

The highest percentage of people who had mortgages were from people who borrowed money for college and got a Bachelor’s+ (even higher than people who got a Bachelor’s+ and didn’t borrow for college).

The lowest percentage of people who had mortgages were those who borrowed, but never got a degree.

Lots of conclusions can be drawn (or potentially drawn) when looking at the data. There are certainly lots of other questions that would be interesting to look at after seeing the results of this survey.

However, a very difficult one to draw is that student loans are an important factor in determining whether or not a group of people are generally able to borrow money to buy a house–UNLESS you borrowed money for school, and never got any degree.

An easier one to conclude is that higher educational attainment is positively correlated with propensity to borrow money to buy a house…regardless of whether one has student loan debt.

Comment by Jake
2016-04-12 09:15:29

Suckering youngsters into pay grossly inflated prices for rapidly depreciating assets isn’t helping this;

Demand For Housing In The US Plummets To 20 Year Lows

http://2.bp.blogspot.com/-yX5B5Hn95bQ/VYC3Wr6ihBI/AAAAAAAAj7I/alOslZa-cK8/s1600/MBAJune172015.PNG

 
 
Comment by Prime_Is_Contained
2016-04-12 09:08:26

Anyone understand why Treasury yields have gotten so much lower the past few months? I thought the stock markets had recovered, and everything is looking up, up, up!!!

Treasury yields tells a different story; the 2yr is down from ~1% on 1/4/2016 to ~0.7% now, the 30yr is down from ~3% to ~2.5%.

Hmmm…

Comment by cactus
2016-04-12 14:26:35

Treasury yields tells a different story; the 2yr is down from ~1% on 1/4/2016 to ~0.7% now, the 30yr is down from ~3% to ~2.5%.”

The mailbox money running low for conservative investors.

 
 
Comment by Senior Housing Analyst
2016-04-12 09:19:04

San Diego, CA Housing Market Implodes; Prices Cave 12% YoY As Excess, Empty Housing Inventory Balloons

http://www.zillow.com/san-diego-ca-92109/home-values/

Comment by taxpayers
2016-04-12 09:53:08

Does zillow read their predictions?
Says cold ,but predicts 2,2% increase ?????

Comment by The Central Scrutinizer
2016-04-12 21:21:29

Ghosts in the machine

 
 
 
Comment by Senior Housing Analyst
2016-04-12 09:46:46

Madera County, CA Housing Market Craters; Prices Implode 8% YoY As Declines Appear Statewide

http://www.zillow.com/madera-county-ca/home-values/

 
Comment by Ben Jones
2016-04-12 10:04:50
Comment by Apartment 401
2016-04-12 10:26:01

What percentage of the adult American population cares, or even knows, about this leak and its connection to real estate?

Less than 5%? Less than 1%?

Comment by Ben Jones
2016-04-12 10:37:45

This guy says the target of the leak was adversaries of the US government. What was revealed in other reports was that the US is the destination of a bunch of money-laundering and it’s being set up in the US.

Comment by Jake
2016-04-12 11:13:32

1) Make something illegal
2) Create conduit to funnel dirty money
3) Sit back and let money accumulate
4) Swoop in and pocket the money and jail the players.

US Gov….. FunnyMoneyMarketMakers and Profiteers since 1913.

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Comment by CalifoH20
2016-04-12 16:33:50

Too complicated for Fox news to cover.

 
 
Comment by Oddfellow
2016-04-12 20:15:12

Guy spent two years in the federal pen but got $104 million from the IRS for blowing the whistle on Swiss bank tax evaders. I wonder if he sleeps well at night, or worries someone he helped bust might have him whacked. I guess 104 million buys a lot of security, and he’s on tv giving an interview, so he must not be too worried.

His point isn’t that the info is fake, it’s that the CIA/NSA could get in any law firm’s computers, but only this firm that doesn’t deal with Americans had its info exposed. I’m not so sure that proves a CIA connection the way he seems to think it does, but it’s a reasonable point to keep in mind.

 
 
Comment by taxpayers
2016-04-12 11:28:53

Any one else buying those 50 yr French bonds?

 
Comment by Jake
 
Comment by CalifoH20
2016-04-12 12:19:40

such a deal:

http://slo.craigslist.org/apa/5533881893.html

Half the price of owning!

Comment by Jake
2016-04-12 12:49:07

Last sold for $845k.

Someones underwater.

Comment by CalifoH20
2016-04-12 14:48:23

But the schools are great!

 
 
Comment by Puggs
2016-04-12 15:57:34

“Garage is for storage only”? That’s crap…I could sublease it to at least 3 peeps.

 
 
Comment by Steve in Flyover
2016-04-12 12:46:14

“House of Cards” Collapse-o-Meter

Anyone else noticing airline flight cancellations due to “lack of flight crew”?

Just got back from lunch with a couple of road warriors in the airplane business. One of them was relating how he had three flights cancelled last week due to “lack of crew”. All were trips out here in Flyover, flying on a “regional jet”.

Sources say a bunch of the kids flying the RJs have thrown in the towel in the past month or so. Have decided that they would rather make $15/hour as a car salesman or at Home Depot, instead of dealing with the road trips/BS/$15 an hour pay of being an airline pilot.

This corresponds with the “Last/Best/Final offer” recall notice that all of the local corporate pilots got from their former airline employers a month or so ago.

Add to this the giant “retention bonus” that my former boss’s F-16 pilot son just got, to stay in the USAF.

A defacto “two tier” wage scale exists, at least for now. Have military training, an ATP, and a Boeing/Airbus type rating, and you can roll in the printing press.

The -Fixr predicts the “Airline Travel Crisis” headlines will start hitting the front pages around Independence Day. Try to avoid booking any flights on regional jets.

Comment by In Colorado
2016-04-12 14:28:48

Add to this the giant “retention bonus” that my former boss’s F-16 pilot son just got, to stay in the USAF.

I have an acquaintance who was laid off from United about 10 years ago. He had come out of the Air Force and they took him back. Fast forward a few years and United asked him to come back (at lower pay, of course). He politely turned them down.

Sources say a bunch of the kids flying the RJs have thrown in the towel in the past month or so. Have decided that they would rather make $15/hour as a car salesman or at Home Depot, instead of dealing with the road trips/BS/$15 an hour pay of being an airline pilot.

Nice. A UPS/FedEx delivery van driver is paid far more than they are. Of course, those flights aren’t any cheaper than those on a slightly bigger jet.

 
 
Comment by rj chicago
2016-04-12 12:48:48

Japan is just totally trashing its elderly - this had to be predicted at some point in the calculation of banksterism - whether there 20 odd years ago or in our present turmoil in the West …. So very sad and be careful that light coming at you at the end of the tunnel just might be a freight train!!

This from Art Cashin at UBS…..Cashin’s Comments April 12, 2016:

Grandpa Goes To Jail – Willingly – The incredibly sharp-eyed Grant Williams found a disturbing new trend in Japan, which was described in an article in the FT. Here’s how the article began:
Japan’s prison system is being driven to budgetary crisis by demographics, a welfare shortfall and a new, pernicious breed of villain: the recidivist retiree. And the silver-haired crooks, say academics, are desperate to be behind bars.
Crime figures show that about 35 per cent of shoplifting offences are committed by people over 60. Within that age bracket, 40 per cent of repeat offenders have committed the same crime more than six
times.
There is good reason, concludes a report, to suspect that the shoplifting crime wave in particular represents an attempt by those convicted to end up in prison — an institution that offers free food, accommodation and healthcare.
The mathematics of recidivism are gloomily compelling for the would-be convict. Even with a frugal diet and dirt-cheap accommodation, a single Japanese retiree with minimal savings has living costs more than
25 per cent higher than the meagre basic state pension of Y780,000 ($6,900) a year, according to a study on the economics of elderly crime by Michael Newman of Tokyo-based research house Custom Products
Research.
Even the theft of a Y200 sandwich can earn a two-year prison sentence, say academics, at an Y8.4m cost to the state.
The geriatric crime wave is accelerating, and analysts note that the Japanese prison system — newly expanded and at about 70 per cent occupancy — is being prepared for decades of increases. Between
1991 and 2013, the latest year for which the Ministry of Justice publishes figures, the number of elderly inmates in jail for repeating the same offence six times has climbed 460 per cent.

If it weren’t so, so sad, it would be positively elegant. You are an elderly Japanese person who can’t get by. You are not aggressive so you want to commit a crime with no threat or hostility. So, you commit one of the most nonhostile crimes possible – shoplifting.
When the authorities insist you leave and return to poverty, your simple recourse it to repeat the same crime, may even in the same store.
Human adaptation is an absolute wonder to behold. Government planning, however, is prone to bring unintended consequences, usually of the worst order.

Comment by Steve in Flyover
2016-04-12 13:56:38

They should just take one for the team, and die already.

Pensioners get screwed by inflation and mismanagement in Japan = bad

Pensioners get screwed by inflation and mismanagement in the USA = They had it coming, selfish bas##rds.

Comment by The Central Scrutinizer
2016-04-12 15:18:42

Useless eaters!

 
 
 
Comment by cactus
2016-04-12 14:19:37

Transparent California Releases 2014 Salary Data for California State and University Employees

Average State compensation package is $110,663; Average CSU compensation is $103,864

TUSTIN — Today, TransparentCalifornia.com released previously unseen 2014 salary and benefits data for 240,531 California State and 62,540 California State University (CSU) employees.

The average compensation package for full-time, year-round California State employees was $110,663, with 91,944 employees earning at least $100,000 in total compensation. Full-time, year-round employees are defined as those receiving a base salary of equal or greater than the “annual salary minimum” associated with their position.

The highest earner was Theodore H Eliopoulos, who earned $856,543 as chief investment officer for CalPERS.

Comment by CalifoH20
2016-04-12 14:49:35

CA is doomed with it’s pension debts and double dippers.

 
 
Comment by Ben Jones
2016-04-12 15:12:53

‘Wells Fargo Misjudged the Risks of Energy Financing

“The perception was the risk was reasonably low,” Dennis Cassidy, co-head of the oil and gas practice at consulting firm AlixPartners in Dallas, said of r’eserves-based lending across the industry. “The volume and velocity of deal flow was such that it was a rubber stamp. They were not scrutinizing price assumptions and forecasts. Everyone was open for business. It was full on, full throttle.”

‘This time is different. The growth of the high-yield bond market allowed drillers to take on far more debt than in past booms, leaving them more vulnerable to default. The emergence of shale technology allowed companies to expand reserves and the loans backed by those properties.’

‘Some of those loans may now be underwater. JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley would need an additional $9 billion to cover souring oil and gas loans in the worst-case scenario, Moody’s Investors Service said in an April 7 report. Lenders could lose 21 cents on the dollar on defaulted exploration and production loans, four times more than the historical average, Moody’s said.’

‘Wells Fargo has been the top dealer of high-yield oil and gas debt, according to data compiled by Bloomberg, selling slices of junk-rated loans to regional banks throughout the U.S. as well as to financial institutions in Canada, Europe, Asia and the U.K.’

‘One example: Breitburn Energy Partners LP. Wells Fargo devoted a page of its 2014 presentation to the Los Angeles-based oil and gas producer, which had a market value of almost $2.7 billion at the time. Now it’s worth less than $120 million. The company has drawn down $1.2 billion of a $1.4 billion credit line, filings show. Wells Fargo, the lead bank, sold participation to lenders including Credit Agricole SA, ING Groep NV and Mizuho Bank Ltd.’

“The tougher standard makes it more expensive for the banks to make loans to the energy business,” said Buddy Clark, a partner with law firm Haynes & Boone in Houston. “But if the banks foreclosed now and tried to sell the properties, they’d have to take a loss. If it happens all at once, it’ll be a disaster where all of these properties come on the market at the same time.”

http://www.bloomberg.com/news/articles/2016-04-12/wells-fargo-rises-to-top-oil-bank-with-flawed-bets-on-collateral

 
Comment by AbsoluteBeginner
Comment by m2p
2016-04-12 17:33:10

Trailer Park Troubadours

“It ain’t home “til you take the wheels off”

Comment by redmondjp
2016-04-12 20:50:39

Or at least put the skirt around them.

 
 
 
Comment by AbsoluteBeginner
2016-04-12 16:14:49

I know it is wrong to use mothers as a wedge here, but can we crowd fund our retirement eventually? I am thinking that if an employer does not offer maternity leave, then the government could step in and mandate it or just send a check to the mother outright from taxpayer funds. The other possibility is this:

http://www.today.com/video/more-women-turning-to-crowdfunding-for-maternity-leave-664180291649

The cynical side of me says what the hell, why not beg online for retirement money. Or maybe a kid’s college fund, or a wedding, etc?

Comment by CalifoH20
2016-04-12 17:12:05

modern begging is these “shopping parties” from jewelry to green healthy drinks. lame MLM crud!! Mostly chicks.

Comment by AbsoluteBeginner
2016-04-12 17:44:12

It is becoming chic to use a gofundme page. I wonder if the market is saturated yet with sites that will host that benevolence for a cut of the money transferred.

 
 
Comment by Muggy
2016-04-12 18:07:22

I don’t view it as begging. When someone begs, they are disrupting your day at a time and place not of your choosing. GoFundMe is something givers can go to, and donate to things they believe in.

Comment by AbsoluteBeginner
2016-04-12 19:07:14

‘GoFundMe is something givers can go to, and donate to things they believe in.’

It all started IMHO with the SaveKaryn site ca. 2000. I just do not know what to think but it is a contextual footnote to how things are going with social media adaptation. We can outsource anything virtually. makes no difference to me, heck, the woman who is gofunding her maternity leave is just another stranger to me. I wonder now if I can raffle off my Chevy at $10 a ticket for a winning essay writer.

 
 
 
Comment by Apartment 401
2016-04-12 18:52:29

And when you’re talking about Chicago, there is a base level of corruption there that is just assumed, part of the “cost of doing business”

 
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