You can find more eager talk about "hitting a bottom" or "what a bottom looks like" on real estate sites recently than on porno sites.
Calculated Risk analyzes the latest bottom caller in Housing: Another Day, Another WSJ Bottom Call.
The analysis is interesting, but the question is academic. Real estate prices historically track inflation. It's not like stocks. Stock prices historically grow faster than inflation. They're also more volatile and more liquid. Timing the stock market, if you could do it, could make you rich quickly. Real estate on the other hand does not give you daily price updates, is more difficult to buy and sell, and typically stays around the same inflation-adjusted price.
After the current real estate market anomaly unwinds, prices will return to historical levels, and people will think about real estate ups and downs about as much as people thought about them during the tech bubble. "Oh, real estate prices outpaced inflation by 1% this year. What do I care?"
You will know the market anomaly is over because prices will be their historical parity with rents. Real estate investors will plan to make money on their properties' cash flow rather than by speculating on price volatility.
This focus on bottoms only serves people who sell real estate or provide financing for real estate. They argue that real estate will be the engine of growth in the next economic cycle because they want to make a bailout (or series of small bailout measures) more politically palatable.
Thursday, May 8, 2008
Tuesday, April 29, 2008
Fuel Costs: All Candidates Pander Except for Obama
Democrats Divided Over Gas Tax Break
I use a bicycle for my transportation. I can only get my $30 worth of benefit from this if I decide to go on a car trip. The more fuel you burn, the more you save.
McCain and Clinton both support a gas tax holiday, but Clinton takes it even a step further. She wants to increases taxes on oil company earnings. The problem in question is we're consuming more oil than we're extracting. Clinton's proposed solutions increase consumption and discourage oil extraction. Clinton's energy policy gimmicks couldn't be any stupider if she tried. I guess she's trying to exploit people's ambivalence in which they love the product but hate the people who provide it.
The only good thing about these pandering proposals is they won't really do much. The tax holiday wouldn't cost that much. Demand for gasoline is inelastic enough that consumption won't really increase significantly. Her proposal to tax oil companies' profits more than other companies', if somehow a significant tax increase passed, would cause oil prices to rise further and hasten the transition to other energy sources. I don't think that's the intention. She's probably proposing just a token tax, not enough really to affect after tax earnings and depress the share price.
Obama correctly identifies that we need a plan to reduce our oil use. The gimmicks are all about symbolism. Clinton and McCain using symbolism to show they're willing to pander, while Obama shows a willingness to talk about the larger problem. I do not support any candidate for president, but on this one non-issue, Obama is the only one showing the leadership I would expect from a president.
Senator Hillary Rodham Clinton lined up with Senator John McCain, the presumptive Republican nominee for president, in endorsing a plan to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for the summer travel season. But Senator Barack Obama, Mrs. Clinton’s Democratic rival, spoke out firmly against the proposal, saying it would save consumers little and do nothing to curtail oil consumption and imports.A gas tax holiday is blatant pandering. It encourages the very activity that is the problem: consuming fuel. If we want to offset people's increased energy costs, why not give people their $30 (estimated benefit to the average motorist) regardless of whether they use fuel?
While Mr. Obama’s view is shared by environmentalists and many independent energy analysts, his position allowed Mrs. Clinton to draw a contrast with her opponent in appealing to the hard-hit middle-class families and older Americans who have proven to be the bedrock of her support. She has accused Mr. Obama of being out of touch with ordinary Americans who are struggling to meet their mortgages and gas up their cars and trucks.
I use a bicycle for my transportation. I can only get my $30 worth of benefit from this if I decide to go on a car trip. The more fuel you burn, the more you save.
McCain and Clinton both support a gas tax holiday, but Clinton takes it even a step further. She wants to increases taxes on oil company earnings. The problem in question is we're consuming more oil than we're extracting. Clinton's proposed solutions increase consumption and discourage oil extraction. Clinton's energy policy gimmicks couldn't be any stupider if she tried. I guess she's trying to exploit people's ambivalence in which they love the product but hate the people who provide it.
The only good thing about these pandering proposals is they won't really do much. The tax holiday wouldn't cost that much. Demand for gasoline is inelastic enough that consumption won't really increase significantly. Her proposal to tax oil companies' profits more than other companies', if somehow a significant tax increase passed, would cause oil prices to rise further and hasten the transition to other energy sources. I don't think that's the intention. She's probably proposing just a token tax, not enough really to affect after tax earnings and depress the share price.
Obama correctly identifies that we need a plan to reduce our oil use. The gimmicks are all about symbolism. Clinton and McCain using symbolism to show they're willing to pander, while Obama shows a willingness to talk about the larger problem. I do not support any candidate for president, but on this one non-issue, Obama is the only one showing the leadership I would expect from a president.
Monday, April 28, 2008
Local Moms Ask for a Play Area in the Mall
My wife and I are expecting a baby. This article caught my wife's eye.
Local Mom Petitions For East Towne Mall Play Area
What are local dads doing while their wives are petitioning for a play area in the mall? No dads were interviewed for the article.
We get commentary from mothers:
One of the biggest concerns I have regarding the safety of my baby is exposure to consumerism, especially before they're old enough to have think critically. There is no way I would consider it safe to have my child hanging out in a shopping center play area. I know my child will pick up some elements of his world view from the marketing of consumer products. It's important for me to minimize this.
Another comment from the article:
It strikes me that one reason we created the commons, things owned by all members of society, is so we don't have to hope a private land owner creates the space we want. It's unfortunate that these petitioners feel like a private shopping center is their public commons.
The article also touched a nerve because having a baby has shown me that sexism isn't something that disappeared in the 70s. I can't imagine local dads petitioning the mall for a play area. (Info on the petition is at momsinmadison.com, not dadsinmadison.com.) People ask me how my career is going, but they don't ask me if I'm enjoying shopping for baby products. And if they did, I think it would acceptable, maybe even expected, for me to say I think most of the marketing surrounding baby products is rubbish. Expectations are different for my wife.
This is a tough issue because there's nothing inherently wrong with asking a shopping center to add a play area. There's nothing wrong with the petitioners being female. Sexism is not yet history, though, so we need to be careful what we imply in articles like this.
Local Mom Petitions For East Towne Mall Play Area
What are local dads doing while their wives are petitioning for a play area in the mall? No dads were interviewed for the article.
We get commentary from mothers:
Moms like me feel it's very important for our kids to have a safe place to play and relax.Madison is known for its parks. It's not like there aren't places you can take kids to play.
One of the biggest concerns I have regarding the safety of my baby is exposure to consumerism, especially before they're old enough to have think critically. There is no way I would consider it safe to have my child hanging out in a shopping center play area. I know my child will pick up some elements of his world view from the marketing of consumer products. It's important for me to minimize this.
Another comment from the article:
It would save me gas money because I drive to West Towne for this.It would save even more money on gas and consumer products to visit the nearest public park instead of a shopping center.
It strikes me that one reason we created the commons, things owned by all members of society, is so we don't have to hope a private land owner creates the space we want. It's unfortunate that these petitioners feel like a private shopping center is their public commons.
The article also touched a nerve because having a baby has shown me that sexism isn't something that disappeared in the 70s. I can't imagine local dads petitioning the mall for a play area. (Info on the petition is at momsinmadison.com, not dadsinmadison.com.) People ask me how my career is going, but they don't ask me if I'm enjoying shopping for baby products. And if they did, I think it would acceptable, maybe even expected, for me to say I think most of the marketing surrounding baby products is rubbish. Expectations are different for my wife.
This is a tough issue because there's nothing inherently wrong with asking a shopping center to add a play area. There's nothing wrong with the petitioners being female. Sexism is not yet history, though, so we need to be careful what we imply in articles like this.
Thursday, April 24, 2008
EISA Institutes Efficiency Requirements for AC Power Adapters
I just received an e-mail from a vendor about new efficiency requirements for adapter power supplies. The new requirements are part of Energy Independence and Security Act (EISA) of 2007.
Many consumer electronics products use a wall adapter to convert the high voltage AC that comes from a power outlet into something the product can use. These are almost always optimized for low cost and not for efficiency.
I am glad to see the government has made a good decision on a somewhat esoteric issue.
It's one of many tiny steps necessary to increase efficiency so that we can meet the difficult goal of increasing GDP while decreasing carbon emissions.
Many consumer electronics products use a wall adapter to convert the high voltage AC that comes from a power outlet into something the product can use. These are almost always optimized for low cost and not for efficiency.
I am glad to see the government has made a good decision on a somewhat esoteric issue.
It's one of many tiny steps necessary to increase efficiency so that we can meet the difficult goal of increasing GDP while decreasing carbon emissions.
Wednesday, April 23, 2008
The Real Estate Bust Continues
From the Wall Street Journal: Yale’s Shiller: U.S. Housing Slump May Exceed Great Depression
Some people think that because real estate prices have fallen it means that the bust is over. It certainly is not. For it to be over, prices have to return to parity with rents. We are moving in that direction but are not there yet. I suspect the value/rent ratio will overshoot below historical averages just as it overshoot above averages on the way up.
In addition to the value/rent ratio decreasing, rents are depressed by the increase in housing units without a corresponding increase in people needing housing.
Two other factors complicate the real estate market
Inflation hurts bondholders, but it won't hurt holders of mortgage backed bonds very much, because the value of their bonds decreased along with the value of the real estate collateralizing them.
But what about the Treasury? It's yield is low thanks to a flight to quality. If my inflation prediction holds true, however, we might see the Treasury yield rise significantly.
The politicians running for president are calling for new programs and no new taxes on the middle class. If borrowing becomes more expensive, that won't be an option.
Yale University economist Robert Shiller, pioneer of Standard & Poor’s/Case-Shiller home-price index, said there’s a good chance housing prices will fall further than the 30% drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15% since their peak in 2006, he said.
Some people think that because real estate prices have fallen it means that the bust is over. It certainly is not. For it to be over, prices have to return to parity with rents. We are moving in that direction but are not there yet. I suspect the value/rent ratio will overshoot below historical averages just as it overshoot above averages on the way up.
In addition to the value/rent ratio decreasing, rents are depressed by the increase in housing units without a corresponding increase in people needing housing.
Two other factors complicate the real estate market
- There are ghost neighborhoods of empty housing units all in the same area. Their existence may affect the market more than the same number of empty units mixed randomly with occupied housing.
- In some states the laws prevent banks from collecting the deficit balance if a foreclosed house does not cover the loan. There has been a lot of speculation, often self-serving speculation on the part of people who made the loans, that could cause large numbers of foreclosures among people who are fully capable of paying their bills.
Inflation hurts bondholders, but it won't hurt holders of mortgage backed bonds very much, because the value of their bonds decreased along with the value of the real estate collateralizing them.
But what about the Treasury? It's yield is low thanks to a flight to quality. If my inflation prediction holds true, however, we might see the Treasury yield rise significantly.
The politicians running for president are calling for new programs and no new taxes on the middle class. If borrowing becomes more expensive, that won't be an option.
Less Driving Is the Answer to Drunk Driving
According to The Capital Times, Wisconsin has the worst rate of drunk driving in the US. That's unfortunate, but not surprising for Wisconsin.
In the long-run, the best approach to this problem is less driving. We have designed our cities around cars. Many people feel the need to operate a car every day. There is bound to be a percentage of them who are tired, sick, eating, on drugs (such as alcohol), or talking on the phone.
We can and should attempt to stop people from engaging in this distracted driving. The more aggressive we get with enforcement, though, the harder it is to respect people's freedom.
The long-term solution is to give people other transportation options so they can eat, be tired, talk on the phone, take drugs, or whatever they want without it being anybody's business but their own.
In the long-run, the best approach to this problem is less driving. We have designed our cities around cars. Many people feel the need to operate a car every day. There is bound to be a percentage of them who are tired, sick, eating, on drugs (such as alcohol), or talking on the phone.
We can and should attempt to stop people from engaging in this distracted driving. The more aggressive we get with enforcement, though, the harder it is to respect people's freedom.
The long-term solution is to give people other transportation options so they can eat, be tired, talk on the phone, take drugs, or whatever they want without it being anybody's business but their own.
Unitarian Universalist Values Are Becoming More Common
According to a the Capital Times, a controversial religious scholar, Marcus Borg, is coming to town this weekend.
The article says he believes in "intellectual quests" instead of "creeds" and draws on Christianity as a source of inspiration without taking it literally. He sounds like he could belong to a Unitarian Universalist (UU) congregation.
UU values are becoming more common all the time.
For some, he represents the worst heresies of liberal Christianity, wrapped up in the notion that he questions rather than accepts traditional understandings of God and Jesus.
The article says he believes in "intellectual quests" instead of "creeds" and draws on Christianity as a source of inspiration without taking it literally. He sounds like he could belong to a Unitarian Universalist (UU) congregation.
UU values are becoming more common all the time.
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