Category: The Economy and Current Affairs

NY AG Schneiderman and OWS finally convince Obama to go after banksters. Via TBP Blog

Elected attorney general in November 2010, Schneiderman discovered upon taking office that the Obama administration was avidly promoting a proposed settlement among five mega-lenders… In return.. the feds and the state AGs would grant the banks immunity for not just any further robo-signing misdeeds but for all illegal conduct that had led to the 2008 collapse… the banks would be free and clear of any state or federal prosecution for these offenses. Indeed, with no agency of government able to bring legal action, there would be no serious investigation of whether and how the banks broke the law.

“We have to get accountability,” Schneiderman told me this week. “We have to get substantial relief for homeowners and investors. And we have to get the story told clearly and factually, so the history doesn’t get rewritten. If you listen to the presidential debates, you hear the same supply-side and deregulatory nonsense that got us into this crisis. If we don’t uncover the facts and put them out there, it will happen again.”

See the whole article here: The man who shaped Obama’s drive to hold banks accountable

Zero Bound Interest Rates, The Zirp Dimension, Stagflation and #Multifamily

Zero interest rates and apartment building investment.

First my condolences to Bill Gross on the loss of his brother-in-law. Reading his piece in PIMCO’s latest Investment Outlook it is clear that the world’s biggest bond manager is running out of places to generate returns for their investors and by extension this applies to all income investors, especially retired people trying to live on interest income. For those would like to retire soon you may have to delay that decision for “an extended period’ as Edward Harrison over at Credit Writedowns put it in Permanent Zero and Personal Interest Income.

Gross’ points out that the Fed’s zero interest rate policy (ZIRP) which they have just announced to maintain through 2014 and their defacto though opaque continuation of quantitative easing (QE2.5 as he tweeted it) threaten to take us into another dimension where their policies have the opposite effect of their intentions.

“Much like the laws of physics change from the world of Newtonian large objects to the world of quantum Einsteinian dynamics, so too might low interest rates at the zero-bound reorient previously held models that justified the stimulative effects of lower and lower yields on asset prices and the real economy.” – Bill Gross

His bullet points:

  • ​ Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside.
  • Most short to intermediate Treasury yields are dangerously close to the zero-bound which imply limited potential room, if any, for price appreciation.
  • We can’t put $100 trillion of credit in a system-wide mattress, but we can move in that direction by delevering and refusing to extend maturities and duration.

For more views on this and Europe too see also Entering the Debt Dimension from Phil’s Picks on the Phil’s Stock World Blog.

What does this mean for Multifamily?

The Zirp Dimension leads to Stagflation where economic growth remains anemic yet prices on essential Continue reading Zero Bound Interest Rates, The Zirp Dimension, Stagflation and #Multifamily

Whodunit? Great books on the causes and solutions to the Financial Collapse

A year ago for Christmas I received a Kindle eReader (thank you Tammy!) and it has greatly accelerated my consumption of books. One of the subjects that I dove (continued to dive) into was the causes of the financial collapse. The conditions that contributed to our undoing, how we get out of our ongoing mess and the steps that should be taken to prevent a repeat are vitally important to our future as well as to our children and their children.

Learning from History

I have written about this myself since 2008 (see here and here for instance) and have read a number of books on the subject (see my Whodunit list down to the right on this page under Learning From History) that I thought covered fairly well the breadth of the subject and helped me refine my understanding. However I was humbled last night by a blog post on The Baseline Scenario that linked to Reading About the Financial Crisis: A 21-Book Review by Andrew Lo, a truly epic undertaking that is well worth reading on its own.

The causes are Continue reading Whodunit? Great books on the causes and solutions to the Financial Collapse

Find the freight trains in your life and get on them instead of in front of them.- Barry Sternlicht Video via @Michael_MBA

Great advice from Barry Sternlicht plus much, much more on real estate, investment, capital, leadership, opportunity, Europe, China while speaking at the Schack real estate conference. He is one very smart guy while being personable and humble, a  rare but valuable combination. Reminds me a bit of my virtual mentor Tom Barrack, and not just because of the haircut! Barry even mentions wanting to learn how to surf, something Tom could definitely help with.

Here’s the link to the video: Barry Sternlicht at Schack RE Conference For more great video from the conference Continue reading Find the freight trains in your life and get on them instead of in front of them.- Barry Sternlicht Video via @Michael_MBA

Portland unemployment drops to lowest in 3 yrs. Good for #Multifamily Via @hfo_apt_brokers

The Oregonian reports data from the state employment department about the Portland-area’s unemployment level falling to 8.6 percent, its lowest in three years.

Meanwhile, most people are still unaware of a report issued last month by the Oregon Employment Department forecasting an 18 percent increase in employment statewide in the coming decade. See the post here: http://bit.ly/yxMb1y

Thanks to Greg Frick at HFO in PDX

Multifamily rental construction definitely the brightest sector in housing market.

See the Housing Wire piece here:

Seattle Apartment Building Investment Cycle peaking or just taking a breather?

In his Q4 report on the Seattle multifamily market ARA’s Jim Claeys says:

Vacancies and Concessions UP

Absorption and Rents DOWN

New Construction Pipeline UP 140% from year ago

Also Home and Condo Sales UP 41, 70% respectively

Sounds kind of like the cycle is moving to the next phase doesn’t it? See the whole article here: This may be a good time for developers to reassess their projections

Mauldin: Mayan Calander predicts end of Europe… not world. Whew, good thing we’ll be ok- or not

Gallows humor for sure. The article is the best explanation of Europe’s predicament in layman’s terms I’ve read. See the article here: The End of Europe?

Hoisington Quarterly Review and Outlook “Recession in 2012”.

Housington Investment Management runs about $4B in fixed income institutional money so they pay very close attention to the economy, government as well as fiscal and monetary policy. In fact Dr. Lacy Hunt, co-author of the report, is one of Mauldin’s most highly regarded economists. Here’s the exec sum (see the whole article at http://bit.ly/wM9DIY):

High Debt Leads to Recession

As the U.S. economy enters 2012, the gross government debt to GDP ratio stands near 100% (Chart 1). Nominal GDP in the fourth quarter was an estimated $15.3 trillion, approximately equal to debt outstanding by the federal government. In an exhaustive historical study of high debt level economies around the world, (National Bureau of Economic Research Working Paper No. 15639 of January 2010, Growth in the Time of Debt), Professors Kenneth Rogoff and Carmen Reinhart [Again with those two!] econometrically demonstrated that when a country’s gross government debt rises above 90% of GDP, “the median growth rates fall by one percent, and Continue reading Hoisington Quarterly Review and Outlook “Recession in 2012”.