Sunday, June 27, 2010
Public finances: Can pay, won't pay | The Economist
Public finances: Can pay, won't pay | The EconomistThis article from The Economist compares and contrasts deadbeat American states, such as Illinois, with deadbeat nations like Greece. Thanks to Doug Selby for the link (and for the picture of the rattlsnake he dispatched today on his ranch).
FT.com / US / Economy & Fed - US state budget crises threaten social fabric
FT.com / US / Economy & Fed - US state budget crises threaten social fabric
This is from the Financial Times, a publication not given to panic or exaggeration.
This is from the Financial Times, a publication not given to panic or exaggeration.
RealClearMarkets - Is Illinois the New California?
RealClearMarkets - Is Illinois the New California?
As of Monday, the credit default swap spread for Illinois general obligation bonds climbed to 313 basis points for a five-year contract -- meaning a bondholder must pay over 3% of the bond's face value per year to be insured against default.
That's a higher price than for all but seven sovereign entities tracked by CMA, and slightly higher than California, whose five-year CDS spread sits at 293. Investors rate Illinois's debt as slightly riskier than Iceland's or Latvia's, but not quite as big a gamble as Iraq's.
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This is an essay by Josh Barrow that was cited in a Chicago Tribune editorial (one of many) pointing out that the State of Illinois is in a terrifying downward financial spiral that places it, in terms of the risk of defaulting on its public debt, worse than Portugal and California, and just below Dubai and Iraq. The data on government probability of default can be found here. What I find disturbing--above and beyond the desperate situation this state is in--is the la-de-da attitude that prevails everywhere in elite circles except the editorial board of the Trib. The public can't be bothered, of course. When I bring this up in conversation with anybody I feel like one of those scientists in the movies who keep ranting about how Planet X is going to crash into the earth, and people just say, "Yeah, sure, but how about the Cubs?"
And of course, California is on it's own path to perdition, but as the Barrow article notes, California's public pension plans are not as badly underfunded as those in Illinois. Here's a taste from the Barrow article about how bad this is: Illinois's pension funding irresponsibility may come home to roost soon. Joshua Rauh, a professor at Northwestern University, estimates that the state's pension funds will run out of money in 2018 at the current funding pace. "He estimates the plans' total funding gap at $219 billion -- a liability that dwarfs the $117 billion in bonds outstanding from the state and localities within it."
That's $219 BILLION DOLLARS.
As of Monday, the credit default swap spread for Illinois general obligation bonds climbed to 313 basis points for a five-year contract -- meaning a bondholder must pay over 3% of the bond's face value per year to be insured against default.
That's a higher price than for all but seven sovereign entities tracked by CMA, and slightly higher than California, whose five-year CDS spread sits at 293. Investors rate Illinois's debt as slightly riskier than Iceland's or Latvia's, but not quite as big a gamble as Iraq's.
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This is an essay by Josh Barrow that was cited in a Chicago Tribune editorial (one of many) pointing out that the State of Illinois is in a terrifying downward financial spiral that places it, in terms of the risk of defaulting on its public debt, worse than Portugal and California, and just below Dubai and Iraq. The data on government probability of default can be found here. What I find disturbing--above and beyond the desperate situation this state is in--is the la-de-da attitude that prevails everywhere in elite circles except the editorial board of the Trib. The public can't be bothered, of course. When I bring this up in conversation with anybody I feel like one of those scientists in the movies who keep ranting about how Planet X is going to crash into the earth, and people just say, "Yeah, sure, but how about the Cubs?"
And of course, California is on it's own path to perdition, but as the Barrow article notes, California's public pension plans are not as badly underfunded as those in Illinois. Here's a taste from the Barrow article about how bad this is: Illinois's pension funding irresponsibility may come home to roost soon. Joshua Rauh, a professor at Northwestern University, estimates that the state's pension funds will run out of money in 2018 at the current funding pace. "He estimates the plans' total funding gap at $219 billion -- a liability that dwarfs the $117 billion in bonds outstanding from the state and localities within it."
That's $219 BILLION DOLLARS.
Tiny prefab units promote eco-friendly building
Tiny prefab units promote eco-friendly buildingZeta Communities will construct the housing for the 22-unit developments, planned for parking lots in Berkeley and San Francisco. The projects will feature tiny living spaces - 310- to 340 square-foot studios - and no parking. Instead, they will include a car-sharing space.
The proposed four-story projects are the first foray into prefabricated housing for East Bay developer Patrick Kennedy of Panoramic Interests.
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/05/18/BUCG1DEGD3.DTL&type=realestate#ixzz0s4KnkW7R
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How lovely. A 310 square foot condo with no parking. And all for only $200-$275K.
The proposed four-story projects are the first foray into prefabricated housing for East Bay developer Patrick Kennedy of Panoramic Interests.
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/05/18/BUCG1DEGD3.DTL&type=realestate#ixzz0s4KnkW7R
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How lovely. A 310 square foot condo with no parking. And all for only $200-$275K.
On The Commons
On The CommonsOn The Commons turns 10 years old this month. Our special guest is Evan McKenzie as we celebrate 10 years and kick off a brand new season of On The Commons.
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Give it a listen and post a comment telling us all what you think...
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Give it a listen and post a comment telling us all what you think...
Breezy summer reading about associations just a click away - chicagotribune.com
Breezy summer reading about associations just a click away - chicagotribune.com
privatopia.blogspot.com: The Privatopia Papers runs headlines and links to news stories about dreary financial reports, dubious legislation and homeowner associations behaving badly. Attorney Evan McKenzie, a political science professor at the University of Illinois at Chicago, offers snarky commentary along with explanations of the finer points of law and governance.
Get the Chicago Tribune delivered to your home for only $1 a week >>
In one post, a Baltimore association proposed DNA-testing of its resident dogs to determine which owners aren't cleaning up after their pooches. McKenzie assured his readers the story was not something invented by The Onion, a satirical news source.
"It is no longer possible to parody the antics of homeowner association boards because no matter how absurd the concept you come up with, they have all ready exceeded it," he wrote.
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Thanks to Pam McKuen for including this blog among the cool summer readings on HOAs. She gets my vote for most knowledgeable journalist on this subject (and not because of this article!) Hey--am I snarky? I thought I was just realistic...
privatopia.blogspot.com: The Privatopia Papers runs headlines and links to news stories about dreary financial reports, dubious legislation and homeowner associations behaving badly. Attorney Evan McKenzie, a political science professor at the University of Illinois at Chicago, offers snarky commentary along with explanations of the finer points of law and governance.
Get the Chicago Tribune delivered to your home for only $1 a week >>
In one post, a Baltimore association proposed DNA-testing of its resident dogs to determine which owners aren't cleaning up after their pooches. McKenzie assured his readers the story was not something invented by The Onion, a satirical news source.
"It is no longer possible to parody the antics of homeowner association boards because no matter how absurd the concept you come up with, they have all ready exceeded it," he wrote.
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Thanks to Pam McKuen for including this blog among the cool summer readings on HOAs. She gets my vote for most knowledgeable journalist on this subject (and not because of this article!) Hey--am I snarky? I thought I was just realistic...
Saturday, June 26, 2010
Lawmakers to talk about severing Lake Michigan from Mississippi River to halt carp - chicagotribune.com
Lawmakers to talk about severing Lake Michigan from Mississippi River to halt carp - chicagotribune.comA century ago, reversing the Chicago River and building a complex system of channels to steer sewage away from Lake Michigan was considered one of the great engineering feats in world history.
As concerns mount about Asian carp, momentum is building to re-engineer Chicago's waterways to allow for the passage of boats and ships, but not harmful invasive species.
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Reversing the direction of the Chicago River was one of the greatest engineering feats in American history, considering it was done between 1889 and 1900. Now, with every Illinois government insolvent, from the state down to the local mosquito abatement district, the plans are being proposed to do something equally grandiose. And all because of a fish. Last time at least it was because of...well, never mind.
Some California fire departments billing after accidents - Sacramento Living - Sacramento Food and Wine, Home, Health | Sacramento Bee
Some California fire departments billing after accidents - Sacramento Living - Sacramento Food and Wine, Home, Health | Sacramento Bee
More than two dozen fire agencies, struggling for ways to boost sagging budgets, have begun tallying service charges at crash sites and sending bills to drivers or their insurance companies.
Is a pumper truck called to the scene? That'll be $400. Traffic cones and flares needed? Another $20. An incident commander to oversee? That's $75 an hour.
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As I was saying on "On the Commons" today, local governments are clever about finding ways to make up for lost revenues. Whenever state legislatures and voters try to make them cut back, they find new way to raise money. CIDs, which are now the lowest level of local government, are one of those fiscal tools used by cities and counties. People who think that CIDs will replace local governments are missing the big picture--CIDs are the lowest and most vulnerable level of local government. Their supposedly "private" nature is just a legal fiction that allows them to get away with things public governments can't do.
More than two dozen fire agencies, struggling for ways to boost sagging budgets, have begun tallying service charges at crash sites and sending bills to drivers or their insurance companies.
Is a pumper truck called to the scene? That'll be $400. Traffic cones and flares needed? Another $20. An incident commander to oversee? That's $75 an hour.
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As I was saying on "On the Commons" today, local governments are clever about finding ways to make up for lost revenues. Whenever state legislatures and voters try to make them cut back, they find new way to raise money. CIDs, which are now the lowest level of local government, are one of those fiscal tools used by cities and counties. People who think that CIDs will replace local governments are missing the big picture--CIDs are the lowest and most vulnerable level of local government. Their supposedly "private" nature is just a legal fiction that allows them to get away with things public governments can't do.
Durbin asks Obama to appoint carp czar - Chicago Breaking News
Durbin asks Obama to appoint carp czar - Chicago Breaking News As concerns mount about the presence of Asian carp near Lake Michigan, U.S. Sen. Dick Durbin today urged President Obama to appoint a carp czar to oversee efforts to keep the invasive species out of the Great Lakes.
"We need to have one person who coordinates the efforts of the federal, state and local agencies that are doing everything they can to keep the Asian carp out of Lake Michigan," Durbin said during a news conference at the Shedd Aquarium. "We believe it's absolutely essential."
Durbin was responding to the discovery of a bighead carp, a variety of Asian carp, during routine sampling this week in Lake Calumet, just six miles from Lake Michigan. Standing beside environmental advocates who have championed closing Chicago-area locks as a way to prevent carp from entering Lake Michigan, Durbin called the finding a possible "game changer" and said "we have to take it very seriously."
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Durbin wants a czar so the President will have ultimate control over what happens to Illinois shipping in the Chicago River. He has been trying to prevent anybody from interfering with the status quo--an obviously ineffective system that is allowing the carp to move up the river toward Lake Michigan. Durbin thinks Obama will look out for the local economic interests, which are substantial. Durbin is afraid the Supreme Court or even Congress (imagine them actually solving a problem!) will effectively close the canal and river system down to prevent these nasty carp from wrecking Lake Michigan and then the rest of the Great Lakes.
The Supreme Court refused to rule on this twice in the last term. Big mistake, in my opinion. These Asian carp are a destructive invasive species. We were looking at them yesterday in the Shedd Aquarium in Chicago. Weird things, with eyes below the midline of their bodies--constantly sucking in water and eating the plankton. They grow at an incredible rate and if they kill the bottom of the food chain, the Great Lakes will never be the same.
Court Upholds St. Louis’s Attempt to Suppress Eminent Domain Protest Mural | Institute for Justice: Litigating for Liberty
Court Upholds St. Louis’s Attempt to Suppress Eminent Domain Protest Mural | Institute for Justice: Litigating for LibertyArlington, Va.—The right of free speech suffered a blow today when a federal court upheld St. Louis’s attempt to suppress activist Jim Roos’s mural protesting the city’s abuse of its eminent domain power.
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Thanks to Mystery Reader for this link to the Institute for Justice website (the property rights law firm), where you can read about the battle over Jim Roos's "End Eminent Domain Abuse" mural. The struggle over municipal use of the eminent domain power looks like a lasting issue. There are several areas where property rights activists, and many citizens, want reform.
First, there is the issue of what constitutes a taking. There are what we call "regulatory takings," where the city doesn't actually condemn the land and pay you for it, and instead they just pass regulations that restrict your use of the land so heavily that it loses much of its value, and for all practical purposes the city might just as well have taken it from you--without paying for it.
Second, there is the the Kelo v. City of New London issue: what are the limits of the "public use" condition in the due process clause? The Kelo decision upheld the right to take property from one private party and practically give it to another private party (in that case, Pfizer Corporation) in order to enhance tax revenues and stimulate economic development, even though there was no public use. Most states passed reform legislation to limit that sort of taking, but UIC Political Science graduate student Tom Kelly wrote a dynamite dissertation showing that this legislation has been ineffective (I was on his committee).
Third, what kinds of property interests can be taken? Does it have to be physical property, or can intangible property interests be "taken" and thus require compensation?
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Thanks to Mystery Reader for this link to the Institute for Justice website (the property rights law firm), where you can read about the battle over Jim Roos's "End Eminent Domain Abuse" mural. The struggle over municipal use of the eminent domain power looks like a lasting issue. There are several areas where property rights activists, and many citizens, want reform.
First, there is the issue of what constitutes a taking. There are what we call "regulatory takings," where the city doesn't actually condemn the land and pay you for it, and instead they just pass regulations that restrict your use of the land so heavily that it loses much of its value, and for all practical purposes the city might just as well have taken it from you--without paying for it.
Second, there is the the Kelo v. City of New London issue: what are the limits of the "public use" condition in the due process clause? The Kelo decision upheld the right to take property from one private party and practically give it to another private party (in that case, Pfizer Corporation) in order to enhance tax revenues and stimulate economic development, even though there was no public use. Most states passed reform legislation to limit that sort of taking, but UIC Political Science graduate student Tom Kelly wrote a dynamite dissertation showing that this legislation has been ineffective (I was on his committee).
Third, what kinds of property interests can be taken? Does it have to be physical property, or can intangible property interests be "taken" and thus require compensation?
Stone Oak resident claims HOA harassment over porch gate to protect autistic son | kens5.com | San Antonio News, Weather, Sports, Traffic, Entertainment, Video and Photos
Stone Oak resident claims HOA harassment over porch gate to protect autistic son Christa says Luke would run out of the house and into the street just about every day. He came close to being run over by a car on a few occasions.
So Christa says she decided to do something about it. The Colquhouns filed an application with the Panther Creek at Stone Oak Homeowners Association asking to build the gate.
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And, she says, the HOA let 60 days go by without responding, so they built the gate. And then somebody complained to the HOA, who demanded that she remove it, complete with the usual threats of litigation.
Thanks to Fred Pilot for another example of the kind of thing that, according to the industry, hardly ever happens.
So Christa says she decided to do something about it. The Colquhouns filed an application with the Panther Creek at Stone Oak Homeowners Association asking to build the gate.
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And, she says, the HOA let 60 days go by without responding, so they built the gate. And then somebody complained to the HOA, who demanded that she remove it, complete with the usual threats of litigation.
Thanks to Fred Pilot for another example of the kind of thing that, according to the industry, hardly ever happens.
China's Desert Ghost City Shows Property `Madness' Persists - Bloomberg
China's Desert Ghost City Shows Property `Madness' Persists - BloombergInvestors are stockpiling empty apartments because there are few alternative investments, undermining government efforts to deflate a property bubble, said Patrick Chovanec, an associate professor at Tsinghua University in Beijing.
“Money is being dumped into property because there are no alternatives,” said Chovanec, adviser and former vice president of the Hong Kong venture capital firm Asia Mezzanine Capital Group. “Policy makers are nibbling around the edges of the core problem.”
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A bursting real estate bubble in China? That would be interesting.
“Money is being dumped into property because there are no alternatives,” said Chovanec, adviser and former vice president of the Hong Kong venture capital firm Asia Mezzanine Capital Group. “Policy makers are nibbling around the edges of the core problem.”
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A bursting real estate bubble in China? That would be interesting.
Thursday, June 24, 2010
Wednesday, June 23, 2010
New-home sales plunge 33 pct with tax credits gone - Yahoo! Finance
New-home sales plunge 33 pct with tax credits gone - Yahoo! Finance
Sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer receive government tax credits.
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The smoke and mirrors economic policy is collapsing.
Sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer receive government tax credits.
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The smoke and mirrors economic policy is collapsing.
Maywood, CA Plans To Disband ALL City Services
Maywood, CA Plans To Disband ALL City Services The small city of Maywood south of downtown Los Angeles plans to lay off almost all its employees, disband its police department and contract municipal operations to a neighboring city.
Facing a budget deficit of at least $450,000 and unable to get insurance because of a history of lawsuits, many involving the police department, the Maywood City Council said Monday night it had no choice but to adopt the plan.
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The article says this is "unprecedented" in California.
Facing a budget deficit of at least $450,000 and unable to get insurance because of a history of lawsuits, many involving the police department, the Maywood City Council said Monday night it had no choice but to adopt the plan.
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The article says this is "unprecedented" in California.
Wednesday, June 16, 2010
Housing Starts Drop in May; Producer Prices Dip - WSJ.com
Housing Starts Drop in May; Producer Prices Dip - WSJ.comU.S. home construction plunged in May as builders remained cautious about sales prospects absent government support programs for the housing sector.
Housing starts dropped 10% the month after the government ended its tax-credit program for home buyers, to a seasonally adjusted annual rate of 593,000. Permits for new construction also declined, the Commerce Department said Wednesday. Single-family housing starts slid by 17.2% to an annual rate of 468,000, the lowest level in a year.
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Isn't it clear by now that this all this federal "stimulus" spending is a failure? Short term gain followed by bust, and more debt accumulated that has to be paid off. Where does it end? Apparently the White House doesn't get it. Now they say that we need to take another $50 billion out of the deep end of the pool and pour it into the shallow end to bail out state and local governments. And after that runs out, then what?
Housing starts dropped 10% the month after the government ended its tax-credit program for home buyers, to a seasonally adjusted annual rate of 593,000. Permits for new construction also declined, the Commerce Department said Wednesday. Single-family housing starts slid by 17.2% to an annual rate of 468,000, the lowest level in a year.
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Isn't it clear by now that this all this federal "stimulus" spending is a failure? Short term gain followed by bust, and more debt accumulated that has to be paid off. Where does it end? Apparently the White House doesn't get it. Now they say that we need to take another $50 billion out of the deep end of the pool and pour it into the shallow end to bail out state and local governments. And after that runs out, then what?
UPDATE 2-Fannie Mae, Freddie Mac to delist shares on NYSE | Reuters
UPDATE 2-Fannie Mae, Freddie Mac to delist shares on NYSE | ReutersJune 16 (Reuters) - Fannie Mae (FNM.N) and Freddie Mac (FRE.N), the largest U.S. home funding companies, will delist their shares on the New York Stock Exchange after failing to meet minimum trading price requirements, the companies' regulator said on Wednesday.
The companies, each taken under government control in September 2008, said they no longer met NYSE listing standards and that shares would trade in the over-the-counter market.
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This housing recovery is just rocketing along.
The companies, each taken under government control in September 2008, said they no longer met NYSE listing standards and that shares would trade in the over-the-counter market.
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This housing recovery is just rocketing along.
Thursday, June 10, 2010
FDIC's Bair questions housing tax breaks - Street Sweep: Fortune's Wall Street Blog
FDIC's Bair questions housing tax breaks - Street Sweep: Fortune's Wall Street BlogBair took aim at federal tax deductions for mortgage interest, local property taxes, and capital gains on house sales (in certain circumstances). She said these taxpayer subsidies for homeowners, taken together, "are about three times the size of all rental subsidies and tax incentives combined."
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Why don't we just put all our money in a paper bag and send it to President Obama to do with as he sees fit?
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Why don't we just put all our money in a paper bag and send it to President Obama to do with as he sees fit?
the-housing-market-recession-is-not-over: Personal Finance News from Yahoo! Finance
the-housing-market-recession-is-not-over: Personal Finance News from Yahoo! FinanceIn a presentation to the National Association of Real Estate Editors in Austin, Texas, last week, Stan Humphries, Zillow.com's chief economist, pointed to four myths he said consumers are latching on to as they try to make sense of recent housing statistics.
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Myths, says he:
1. the housing recession is over
2. after markets hit bottom, prices will rebound to boom levels
3. the worst of the foreclosure mess is behind us
4. the tax credits saved the housing market
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Myths, says he:
1. the housing recession is over
2. after markets hit bottom, prices will rebound to boom levels
3. the worst of the foreclosure mess is behind us
4. the tax credits saved the housing market
Friday, May 28, 2010
New Home Sales Set to Plunge in Former Bubble Markets (Update1) - Bloomberg.com
New Home Sales Set to Plunge in Former Bubble Markets (Update1) - Bloomberg.comNew home sales in Phoenix and Las Vegas, two U.S. markets hardest hit by foreclosures, are set to plunge as a federal tax credit for homebuying expires, according to data from real estate researcher Metrostudy.
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Possibly an infusion of mud and golf balls would help.
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Possibly an infusion of mud and golf balls would help.
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