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A housing crisis in China would look nothing like what"s happening in the US — it could wipe out entire families instead of one generation

Evergrande's debt woes have put China's enormous housing market — which accounts for 29% of the country's GDP — on edge. China's housing crisis won't be a generational crisis — it'll be a familial one.Xinhua News Agency / Contributor / Getty Images Comparing the state of the housing market in the world's two biggest economies reveals two different breeds of crisis. In the US, millennials are getting screwed by and priced out of the housing market. In China, it won't be a generation that bears the brunt of a crisis — instead, a housing market fallout would create intergenerational, familial crises. It's not a great time to be a millennial trying to buy a home.Millennials are supposed to be in their prime homebuying years right now, but instead, they're priced out of urban markets and facing the prospect of renting forever."Due to the soaring housing prices in urban areas, millennials in general cannot afford to purchase a property, which has become a global phenomenon," Chunling Li, a prominent Chinese sociologist, wrote in an October 2020 paper called "Children of the reform and opening-up: China's new generation and new era of development," published in the Journal of Chinese Sociology.Housing markets all over the world are seeing some version of this crisis, but comparing the current state of the housing market in the world's two biggest economies reveals two different breeds of crisis. While the US housing crisis is shouldered primarily by one generation, China's potential housing crisis will be felt across multiple generations within the same family. And as China contends with the potential default of Evergrande — one of the country's largest property developers — a housing crisis looms ever closer on the horizon.America's housing crisis: A generation bears the bruntIn the US, millennials are getting squarely hammered when it comes to finances, and nowhere is that more apparent than in the housing market. They're facing down their second housing crisis in 12 years.Per Apartment List's 2021 Homeownership report, 47.9% of US millennials are now homeowners. That's up from three years ago, but it's still lagging behind other generations: At age 30, 42% of millennials were homeowners, while 48% of Gen Xers and 51% of baby boomers were homeowners by the same age.This lag is, in large part, because of rising housing prices. Soaring home costs in the US have meant that millennials buying their first home in the US in 2008 paid 39% more than their baby boomer counterparts did 40 years earlier.But they're also getting screwed by the availability of homes — whether or not they can actually make a purchase. As Insider's Hillary Hoffower reported earlier this year, the pandemic, an undersupply of homes, and a lumber shortage created a perfect storm for potential homebuyers in the US. Daryl Fairweather, the chief economist at Redfin, told Hoffower that there are just not enough homes in the US for millennials, America's largest generation, to buy.What all of this has compounded into is a generation that owns fewer homes, proportionally, than previous generations did at their age; paid more for those homes, if they were able to buy at all; and now are struggling to accumulate wealth because they haven't been able to build equity through homeownership.A Minneapolis home.Bruce Bisping/Star Tribune via Getty ImagesChina's housing crisis: Everyone — and their family — is implicatedHomeownership rates in China are high.More than 90% of households are homeowners, according to a January research paper on homeownership in China from the National Center for Biotechnology Information. The US, for comparison, has a 65% homeownership rate.And it doesn't stop with one home: More than 20% of homeowners in China own more than one home.But the down payment on your first property in China is high, at 30-40%, said Dr. Xin Sun, a senior lecturer in Chinese and East Asian Business at King's College London. On additional properties purchased as investments, the down payment is even higher, at 50-60%.In her October 2020 paper, Li, the sociologist, examined how China's "new generation" — those born in the 1980s and 1990s — grew up in an era of reform. Li's research included how China's millennials study, spend, and save — and how they buy homes. Because housing prices have soared in the past two decades, she wrote, most millennials have had to turn to personal lending networks in order to buy a home. "In China, most of the millennial generation have to seek financial support from parents to purchase a house (or apartment) so as to start a family," Li wrote.Sun further explained how government policies have created this pattern of intrafamilial lending: "Increasingly, the government has adopted more and more restrictive limits to market loans, towards how much money you can borrow from banks to buy properties, especially for the second and third homes." As a result, he said, people borrow money heavily from family members to make their down payments.That's why, in a worst-case housing-market scenario in China, it's not a generation that would get wiped out, Sun said: It's families."Chinese families are not as separate as in the Western world, which means that for any generation to buy a property in China, it probably needs to collect money from all the family members," Sun said. "For example, for younger generations who buy properties in big cities, they need savings from the banks of mom and dad, and even the grandparents."That means that if there were an issue in the housing market — say, a massive real-estate developer with $300 billion in debt, missed bond repayment deadlines, and strong signs of contagion risk — what would be triggered wouldn't be a wave of bank defaults. It would be a wave of personal bankruptcies spreading from individuals back to their families.The issue is of particularly grave concern because real estate accounts for a huge part of China's economy and a huge part of household wealth. The sector accounts for 29% of China's GDP (housing accounts for about 15-18% of America's GDP). And according to Moody's estimates, 70-80% of Chinese household assets are tied to real estate, CNBC reported in August.A wealth divide drawn along geographical linesExperts say Evergrande is simply too big to for the government to ignore, and expect Beijing to intervene in a controlled implosion of the company. And while Beijing is expected to prioritize homebuyers when it manages the bankruptcy (largely to maintain social stability), there will still be people who pay the price of Evergrande's mismanaged and outsized, $300 billion debt load.The differences in how families stand to be affected in China are largely drawn among wealth lines, experts said.Households that own only one home are thought to face the greatest risk."People who own one home, because of high prices and low income, they have some risk," Li Gan, professor of economics at Texas A&M University and the director of the Survey and Research Center for China Household Finance at Chengdu's Southwestern University of Finance and Economics, previously told me. "For many of them, their down payment is borrowed from friends, from relatives — not from banks.""The people who come from lower- and middle-income families, and those who bought properties more recently, they are exposed to higher risks because of the combination of lower income, lower family wealth, and higher prices they paid," Sun said.The wealth divide also echoes along geographical divides. While more than 83% of married millennials from urban families own property, less than 27% of married millennials from rural families own theirs, Li wrote.What this adds up to, Li wrote, is that "the intergenerational transmission of wealth inequality is increasingly exacerbated, creating an ever-widening gap between the young people from urban families and those from rural families."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 25th, 2021

Transcript: Edwin Conway

   The transcript from this week’s, MiB: Edwin Conway, BlackRock Alternative Investors, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS:… Read More The post Transcript: Edwin Conway appeared first on The Big Picture.    The transcript from this week’s, MiB: Edwin Conway, BlackRock Alternative Investors, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, man, I have an extra special guest. Edwin Conway runs all of alternatives for BlackRocks. His title is Global Head of Alternative Investors and he covers everything from structured credit to real estate hedge funds to you name it. The group runs over $300 billion and he has been a driving force into making this a substantial portion of Blackrock’s $9 trillion in total assets. The opportunity set that exists for alternatives even for a firm like Blackrock that specializes in public markets is potentially huge and Blackrock wants a big piece of it. I found this conversation to be absolutely fascinating and I think you will also. So with no further ado, my conversation with Blackrock’s Head of Alternatives, Edwin Conway. MALE VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. RITHOLTZ: My extra special guest this week is Edwin Conway. He is the Global Head of Blackrock’s Alternative Investors which runs about $300 billion in assets. He is a team of over 1,100 professionals to help him manage those assets. Blackrock’s Global alternatives include businesses that cover real estate infrastructure, hedge funds private equity, and credit. He is a senior managing director for BlackRock. Edwin Conway, welcome to Bloomberg. EDWIN CONWAY, GLOBAL HEAD OF ALTERNATIVE INVESTORS, BLACKROCK: Barry, thank you for having me. RITHOLTZ: So, you’ve been in the financial services industry for a long time. You were at Credit Suisse and Blackstone and now you’re at BlackRock. Tell us what the process was like breaking into the industry? CONWAY: It’s an interesting on, Barry. I grew up in a very small town in the middle of Ireland. And the breakthrough to the industry was one of more coincident as opposed to purpose. I enjoyed the game of rugby for many years and through an introduction while at the University, in University College Dublin in Ireland, had a chance to play rugby at a quite a – quite a decent level and get to know people that were across the industry. It was really through and internship and the suggestion, I’ve given my focus on business and financing things that the financial services sector may be a great place to traverse and get to know. And literally through rugby connections, been part of a good school, I had an opportunity to really understand what the service sector, in many respects, could provide to clients and became absolutely intrigued with it. And what – was it my primary ambition in life to be in the financial services sector? I can definitively say no, but through the circumstance of a game that I love to play and be part of, I was introduced to, through an internship, and actually fell in love with it. RITHOLTZ: Quite interesting. And alternative investments at Blackrock almost seems like a contradiction in terms. Most of us tend to think of Blackrock as the giant $9 trillion public markets firm best known for ETFs and indices. Alternatives seems to be one of the fastest-growing groups within the firm. This was $50 billion just a few years ago, it’s now over 300 billion. How has this become such a fast-growing part of BlackRock? CONWAY: When you look at the various facets which you introduced at the start, Barry, we’ve actually been an alternatives – will be of 30 years now. Now, the scale, as you know, which you can operate on the beta side of business, far surpasses that on the alpha side. For us, throughout the years, this was very much about how can we deliver investment excellence to our clients and performance? Therefore, going an opportunity somewhere else to explore an alpha opportunity in alternatives. And I think being so connected to our clients understanding, that this pivots was absolutely taking place at only 30 years ago but in a very pronounced way today, you know, we continue to invest in this business to support those ambitions. They’re clearly seeing this as the world of going through a tremendous amount of transformation and with some of the challenges, quite frankly, in the traditional asset classes, being able to leverage at BlackRock, the Blackrock muscle to really explore these alpha opportunities across the various alternative asset classes that in our mind wasn’t imperative. And the imperative, really, is from the firm’s perspective and if you look at our purpose, it’s to serve the client. So the need was coming from them. The necessity to have alternatives and their whole portfolio was very – was very much growing in prominence. And it’s taken us 30 years to build this journey and I think, Barry, quite frankly, we’re far from being done. As you look at the industry, the demand is going to continue to grow. So, I think you could expect to see from us a continued investment in the space because we don’t believe you can live without alternatives in today’s world. RITHOLTZ: That’s really – that’s really interesting. So let’s dive a little deeper into the product strategy for alternatives which you are responsible for at BlackRock. Our audiences is filled with potential investors. Tell them a little bit about what that strategy is. CONWAY: So we’re – I think as you mentioned, we’re in excess of 300 billion today and when we started this business, it was less about building a moat around private equity or real estate. I think Larry Fink’s and Rob Kapito’s vision was how do we build a platform to allow us to be relevant to our clients across the various alternative asset classes but also within the – within the confines of what they are permitted to do on a year-by-year basis. So, to always be relevant irrespective of where they are in their journey from respect of liabilities, demand for liquidity, demand for returns, so we took a different approach. I think, Barry, to most, it was around how do we scale into the business across, like you said, real estate equity and debt, infrastructure equity and debt. I mean, we think of that as the real assets platform of our business. Then you take our private equity capabilities both in primary investing, secondary et cetera, and then you have private credits and a very significant hedge fund platforms. So we think all of these have a real role and depending on clients liquidities and risk appetite, our goal was, to over the years, really build in to this to allow ourselves for this challenging needs that our clients have. I think as an industry, right, and over the many years alternatives have been in existence, this is been about return enhancement initially. I think, fundamentally, the changes around the receptivity to the role of alternatives in a client’s portfolio has really changed. So, we’ve watched it, Barry, from this is we’re in the pursuit of a very total return or absolute return type of an objective to now resilience in our portfolio, yield an income. And so things that probably weren’t perceived as valuable in the past because the traditional asset classes were playing a more profound role, alternatives have stepped up in – in many respects in the need to provide more than just total return. So, we’re taking the approach of how do you have a more holistic approach to this? How do we really build a global multi-alternatives capability and try to partner and I think that’s the important work for us. Try to partner with our clients in a way that we can deliver that outperformance but delivered in a way that probably our clients haven’t been used to in this industry before. Because unfortunately, as we know, it has had its challenges with regard to secrecy, transparency, and so many other aspects. We need to help the industry mature. And really that was our ambition. Put our client’s needs first, build around that and really be relevant in all aspects of what we’re doing or trying to accomplish on behalf of the people that they support and represent. RITHOLTZ: So, we’ll talk a little bit about transparency and secrecy and those sorts of things later. But right now, I have to ask what I guess is kind of an obvious question. This growth that you’ve achieved within Blackrock for nonpublic asset allocation within a portfolio, what is this coming at expense of? Are these dollars that are being moved from public assets into private assets or you just competing with other private investors? CONWAY: It’s really both. What – what you are seeing from our clients – if I take a step back, today, the institutional client community and you think about the – the retirement conundrum we’re all facing around the world. It’s such an awful challenge when you think how ill-prepared people are for that eventual stepping back from the workplace and then you know longevity is your friend, but can also be a very, very difficult thing to obviously live with if you’re not prepared for retirement. The typical pension plan today are allocating about 25 percent to 28 percent in alternatives. Predominantly private market. What they’re telling us is that’s increasing quite substantially going forward. But you know, the funding for that alpha pursue for that diversification and that yield is coming from fixed-income assets. It’s coming from equity assets. So there’s a real rebalancing that’s been taking place over the past number of years. And quite frankly, the evolution, and I think the innovation that’s taken place particularly in the past 10 years, alternatives has been really profound. So the days where you just invest in any global funds still exist. But now you can concentrate your efforts on sector exposure, industry exposures, geographic exposures, and I think the – the menu of things our clients can now have access to has just been so greatly enhanced at and the benefit is that but I think in some – in some respects, Barry, the next question is with all of those choices, how do you build the right portfolio for our client’s needs knowing that each one of our client’s needs are different? So, I would say it absolutely coming from the public side. We’re very thankful. Those that had a multiyear journey with us in the public side are now allocating capital to is now the private side to because I do think the – the industry given that change, given that it evolution and given the complexity of these private assets, our clients are looking to, quite frankly, do more with fewer managers because of the complexion of the industry and complexity that comes with it. RITHOLTZ: Quite – quite interesting. (UNKNOWN): And attention RIA’s. Are your clients asking for crypto? At interactive brokers, advisers can now offer crypto to their clients and you could trade stocks, options, futures currencies, bonds and more from the same platform. Commissions on crypto are just 12-18 basis points with no hidden spreads or markups and there are no ticket charges, custody fees, minimums platform or reporting fees. Learn more at IBKR.com/RIA crypto. RITHOLTZ: And I – it’s pretty easy to see why large institutions might be rotating away from things like treasuries or tips because there’s just no yield there. Are you seeing inflows coming in from the public equity side also? The markets put together a pretty good string of years. CONWAY: Yes. It absolutely has. And many respects, I think, we’ve had a multiyear where there was big questions around the alpha that can be generated, for example, from active equities? The question was active or passive? I think what we’ve all realized is that at times when volatility introduces itself which is frequent even independent of what’s been done from a fiscal and monetary standpoint, that these Alpha speaking strategies on the traditional side still make a lot of sense. And so, as we think about what – what’s happening here, the transition of assets from both passive and active strategies to alternative, it – it’s really to create better balance. It’s not that there’s – there’s a lack of relevance anymore in the public side. It’s just quite frankly the growth of the private asset base has grown so substantially. I moved, Barry, to the U.S. in 1998. And it’s interesting, when you look back at 1998 to today, you start to recognize the equity markets and what was available to invest in. The number of investable opportunities has shrunk by 40 plus percent which that compression is extraordinarily high. But yet you’ve seen, obviously, the equity markets grow in stature and significance and prominence but you’re having more concentration risk with some of the big public entities. The converse is true, though on the – on the private side. There’s this explosion of enterprise and innovation, employment creation, and then I believe opportunities has been real. So, I look at the public side, the investable universe is measured in the thousands and the private side is measured in the millions. RITHOLTZ: Wow. CONWAY: And I think part of the – part of the part of the thing our clients are not struggling with but what we’re really recognizing with – with enterprises staying private for longer, if not forever, and with his growth of the opportunities that open debt and equity in the private market side, you really can’t forgo this opportunity. It has to be part of your going forward concerns and asset allocation. And I think this is why we’re seeing that transformation. And it’s not because equities on fixed income just aren’t relevant anymore. They’re very relevant but they’re relevant now in a total portfolio or a whole portfolio context beside alternatives. RITHOLTZ: So, let’s discuss this opportunity set of alternatives where you guys at Blackrock scene demand what sectors and from what sorts of clients? Is this demand increasing? CONWAY: We’re very fortunate, Barry. Today, there isn’t a single piece of our business within – within Blackrock alternatives that isn’t growing. And quite frankly too, it’s really up to us to deliver on the investment objectives that are set forth for those clients. I think in the back of strong absolute and relative performance, thankfully, our clients look to us to – to help them as – as they think about what they’re doing and as they’re exploring more in the alternatives areas. So, as you know, certainly, the private equity and real estate allocations are quite mature in many of our client’s portfolios but they’ve been around for many decades. I think that the areas where we’re seeing – that’s called an outside demand and opportunity set, just but virtue of the small allocations on a relative basis that exist today is really around infrastructure, Barry, and its around private credits. So, to caveat that, I think all of the areas are certainly growing, and thankfully, for us that’s true. We’re looking at clients who we believe are underinvested, we believe they’re underinvested in those asset classes infrastructure both debt and equity and in private credit. And as you think about why that is, the attributes that they bring to our client is really important and in a world where your correlation and understanding those correlations is important that these are definitely diversifying assets. In a world where you’re seeing trillions of dollars, quite frankly, you’re providing little to no or even there’s negative yield. Those short falls are real and people need yield than need income. These assets tend to provide that. So the diversification, it comes from these assets. The yield can come from these assets and because of the immaturity of the asset classes, independence of the capital is flowing in, we still consider them relatively white space. You’re not crowded out. There’s much room for development in the market and with our client’s portfolios. And to us, that’s exciting because it presents opportunities. So, at the highest level, they’re the areas where I believe are most underdeveloped in our clients. RITHOLTZ: So let’s talk about both of those areas. We’ll talk about structured credit in a few minutes. I think everybody kind of understands what – what that is. What – when you see infrastructure as a sector, how does that show up as an investment are – and obviously, I have infrastructure on the brink because we’re recording this not too long after the giant infrastructure bill has been passed, tell us a little bit about what alternative investments in infrastructure looks like? CONWAY: Yes. It’s really in its infancy and what the underlying investments look like. I think traditionally, you would consider it as – and part of the bill that has just been announced, roads, bridges, airports. Some of these hard assets, some of the core infrastructure investments that have been around for actually some time. The interesting thing is the industry has evolved so much and put the need for infrastructure. It’s so great across both developed and emerging economies. It’s become something that if done the right way, the attributes we just spoke of can really have a very strong effect on our client’s portfolios. So, beyond the core that we just mentioned, well, we’ve seen a tremendous demand as a result of this energy transition. You’re really seeing a spike in activity and the necessity transition industry to cleaner technologies, a movement, not away completely from fossil fuel but integrating new types of clean energy. And as a result, you’ve seen a lot of demand on a global basis for wind and solar. And quite frankly, that’s why even us at BlackRock, albeit, 10-12 years ago, we really established a capability there to help with that transition to think about how do we use these technologies, solar panels, wind farms, to generate clean forms of energy for utilities where in some cases they’re mandated to procure this type of this type of – this type of power. And when you think about pre-contracting with utilities for long duration, that to me spells, Barry, good risk mitigation and management and ability to get access to clean forms of energy that throw off yield that can be very complementary to your traditional asset classes but for very long periods of time. And so, the benefits for us of these – these assets is that they are long in duration, they are yield enhancing, they’re definitely diversifying. And so, for us, where – we’ve got about, let’s call this 280 assets around the world that we’re managing that literally generate this – this clean electricity. I think to give the relevance of how much, I believe today, it’s enough to power the country of Spain. RITHOLTZ: Wow. CONWAY: And that’s really that’s really changing. So you’re seeing governments – so from a policy standpoint, you’re seeing governments really embracing new forms of energy, transitioning out of bunker fuels, for example, you know, burning diesels which really spew omissions into the – into the into the environment. But it’s really around modernizing for the future. So, developed and emerging economies alike, want to retain capital. They want to attract new capital and by having the proper infrastructure to support industry, it’s a really, really important thing. Now, on the back of that too, one things we’ve learned from COVID is that the necessity to really bring e-commerce into how you conduct your business is so important and I think from the theme of digitalization within infrastructure to is a huge part. So, it’s not just the energy transition that you’re seeing, it’s not just roads and bridges, but by allowing businesses to connect to a global consumer, allowing children be educated from home, allowing experiences that expand geographies and boundaries in a digital form is so important not just for commerce but in so many other aspects. And so, you think about cable, fiber optics, if you think about all the other things even outside of power, that enable us to conduct commerce to educate, there are many examples where, Barry, you can build resilience into your portfolio because that need is not measured in years. Actually, the shortfall of capital is measured in the trillions so which means this is – this is a multi-decade opportunity set from our vantage point and one of which our clients should really avail of. RITHOLTZ: Quite interesting. And I mentioned in passing, structured credit, tell us a little bit about what that opportunity looks like. I think of this as a space that is too big for local banks but too small for Wall Street to finance. Is that an oversimplification? What is going on in that space. CONWAY: I probably couldn’t have set it better, Barry. It’s – if we go back to just the even the investable universe, in the tens of thousands of companies, just if we take North America that are private, that have great leadership that really have strategic vision under – at the – in some cases, at the start of their growth lifecycles are even if they maintain, they have a very credible and viable business for the future they still need capital. And you’re absolutely right. With the retreat of the banks from the space to various regulations that have come after the global financial crisis, you’re seeing the asset managers in many respects working behalf of our clients both wealth and institutional becoming the new lenders of choice. And – and when we – when we think about that opportunity set, that is really understanding the client’s desire for risk or something maybe in a lower risk side from middle-market lending or midmarket enterprises where you can support that organization through its growth cycle all the way to some higher-yielding, obviously, with more risk assets on the opportunistic or even the special situations side. But it – it expands many things. And going back of the commentary around the evolution of the space, private credit today and what you can do has changed so profoundly, it expands the liquidity spectrum, it expands the risk spectrum. And the great news is, with the number of companies both here and abroad, the opportunities that is – it’s being enriched every single day. And were certainly seeing, particularly going back to the question are some of these assets coming from the traditional side, the public side. When we think of private credit, you are seeing private credit now been incorporated in fixed-income allocations. This is a – it’s a yelling asset. This is – these are debt instruments, these are structures that we’re creating. We’re trying to flexible and dynamic with these clients. But it really is an area where we think – it really is still at its – at its infancy relevant to where it can potentially be. RITHOLTZ: That’s really quite – quite interesting. (UNKNOWN): It’s Rob Riggle. I’m hosting Season 2 of the iHeart radio podcast, Veterans You Should Know. You may know me as the comedic actor from my work in the Hangover, Stepbrothers or 21 Jump Street. But before Hollywood, I was a United States Marine Corps officer for 23 years. For this Veterans Day, I’ll be sitting down with those who proudly served in the Armed Forces to hear about the lessons they’ve learned, the obstacles they’ve overcome, and the life-changing impact of their service. Through this four-part series, we’ll hear the inspiring journeys of these veterans and how they took those values during their time of service and apply them to transition out of the military and into civilian life. Listen to Veterans You Should Know on the iHeart radio app, Apple Podcast or wherever you get your podcast. RITHOLTZ: Let’s stick with that concept of money rotating away from fixed income. I have to imagine clients are starved for yields. So what are the popular substitutes for this? Is it primarily structured credit? Is it real estate? How do you respond to an institution that says, hey, I’m not getting any sort of realistic coupon on my bonds, I need a substitute? CONWAY: Yes. It’s all of those in many respects. And I think to the role, even around now a time where people have questions around inflation, how do substitute this yield efficiency or certainly make up for that shortfall, how do you think about a world where increasingly seeing inflation, not of the transitory thing it feels certainly quasi-permanent. These are a lot of questions we’re getting. And certainly, real estate is an is important part of how they think about inflation protection, how client think about yield, but quite frankly too, we’ve – we’ve gone through something none of us really had thought about a global pandemic. And as I think about real estate, just how you allocate to the sector, what was very heavily influenced with retail assets, high street, our shopping behaviors and habits have changed. We all occupied offices for obviously many, many years pre the pandemic. The shape of how we operate and how we do that has changed. So, I think some of the underlying investment – investments have changed where you’ve seen heavily weighted towards office space to leisure, travel in the past. Actually, now using a rotation in some respects out of those, just given some of the uncertainties around what the future holds as we come – come through a really difficult time. But the great thing about this sector is between senior living, between student housing, between logistics and so many other parts, there are ways in real estate to capture where there’s – where there’s demand. So still a robust opportunity set and it – and we do think it can absolutely be yield enhancing. We mentioned infrastructure. Even if you think about – and we mention OECD and non-OECD, emerging and developed, when I think about Asia, in particular, just as a subset of the world in which we’re living in, that is a $2.6 trillion alternative market today growing at a 15 percent CAGR. And quite frankly, the old-growth is driven by the large economic growth in the region. So, even from a regional perspective, if we pivot, it houses 57 percent of the world’s population and yet delivers 47 percent of the world’s economic growth. So, think of that and then with regard to infrastructure and goes back to that, this is truly a global phenomenon. So if we just even take that sector, Barry, you’ll realize that the way to maintain that type of growth, to attract capital, to keep capital, it really requires an investment of significant amount of money to be able to sustain that. And when you have 42 million people in a APAC migrating to cities in the year going back to digitalization, that’s an important thing. So, when I say we’re so much at the infancy in infrastructure, I really mean it. It can be water, it can be sewer systems, it can be digital, it can be roads, there’s so much to this. And then even down to the regional perspective, it’s a – it’s a need that doesn’t just exist in the U.S. So, for these assets, this tend to be long in duration. There’s both equity and debt. And on the debt side, quite frankly, very few outside of our insurance clients and their general account are taking advantage of the debt opportunity. And – and as we both know, to finance these projects that are becoming more plentiful every single day, across the world, including like, I said, in APAC in scale, there’s an opportunity in both sides. And I think that’s where the acid mix change happen. It’s recognizing that the attributes of these assets can have a role, the attributes of these assets can potentially replace some of these traditional assets and I think you’re going to see it grow. So, infrastructure to us, it’s really equity and debt. And then on the credit side, like I mentioned, again, too, it’s a very, very big and growing market. And certainly, the biggest area today from our vantage point is middle-market lending from a scale opportunity standpoint. So, we think much more to come in all of those spaces. RITHOLTZ: Really interesting. And let’s just stay with the concept of public versus private. That line is kind of getting blurred and the secondary markets is liquidity coming to, for lack of a better phrase, pre-public equities, tells little bit about that space. Is that an area that is ripe for growth for BlackRock? CONWAY: Yes. We absolutely think it is and you’re absolutely correct. The secondary market is – has grown quite substantial. If you even look at just the private equity secondary market and what will transact this year, I think it will be potentially in excess of 100 billion. And that’s what were clear, not to mention what will be visible and what will be analyzed. And that speaks to me what’s really happening and the innovation that we mentioned earlier. It’s no longer about just primary exposure. It’s secondary exposure. When we see all sort of interest and co-investment opportunities as well, I think the available sources of alpha and the flexibility you can now have, albeit if directed and advised, I believe the right way, Barry, can be very helpful and in the portfolio. So, your pre-IPO, it is a big part of actually what we do and we think about growth equity. There is – it’s a significant amount of capital following that space. Now, from our vantage point, as one of the largest investors in the public equity market and now obviously one of the largest investors and they in the private side, the bridge between – between private to public – there’s a real need. IPOs are not going away. And I think smart, informed capital to help with this journey, this journey is really – is really a necessity and a need. RITHOLTZ: So let’s talk a little bit about this recent restructuring. You are first named Global Head of Blackrock Alternative Investors in April 2019, the entire alternatives business was restructured, tell us a little bit about how that restructuring is going? CONWAY: Continues to go really well, Barry. When you look at the flow of acid from our clients, I think, hopefully, that’s speaks to the performance we’ve been generating. I joined the firm, as you know, albeit, 11 years ago and being very close to the alternative franchise as a critical thing for me and running the institutional platform. To me, when you watched this migration of asset towards alternatives, it was obviously very evident for decades now that this is a critical leg of the stool as our clients are thinking about their portfolios. We’re continuing to innovate. We’re continuing to invest, and thankfully, we’re continuing to deliver strong performance. We’re growing at about high double digits on an annual basis but we’re trying to purposeful too around where that growth is coming from. I think the reality is when you look at the competitive universe, I think the last number I saw, it was about 38,000 alternative asset managers out there today, obviously, coming from hedge funds all the way to private credits and private equity. So, competition is real and I do think the outcomes for our clients are starting to really grow. Unfortunately, some – in some cases, obviously, very good, and in some cases, actually not great. So our focus, Barry, is really much on how can we deliver performance, how can we be a partner? And I think we been rewarded with a trust and the faith our clients have in us because they’re seeing something different, I think, from us. Now, the scale of the business that you mentioned earlier really gives us tentacles into the market that I believe allows us to access what I think is the new alpha which is in many respects, given the heft of competition sourcing and originating new investments is certainly harder but for us, sitting in or having alternative team, sitting in 50 offices around the world, really investing in the markets because that – the market they grew up with and have relationships within, I think this network value that we have is something that’s quite special. And I think in the world that’s becoming increasingly competitive, we’re going to continue to use and harness that network value to pursue opportunities. And thankfully, as a result of the partnership we’ve been pursuing with her clients, like, we’ve – we’re certainly looking for opportunities and investments in our funds. But because of the brand, I think because of the successes, opportunities seeks us as much as we seek opportunity and that has been something that we look at an ongoing basis and feel very privileged to actually have that inbound flow as well. RITHOLTZ: Really quite interesting. There was a quote of yours I found while doing some prep for this conversation that I have to have you expand on. Quote, “The relationship between Blackrock’s alternative capabilities and wealth firms marked a large opportunity for growth in the coming years.” This was back in 2019. So, the first part of the question is, was your expectations correct? Did you – did you see the sort of growth you were hoping for? And more broadly, how large of an opportunity is alternatives, not just for BlackRock but for the entire investment industry? CONWAY: Yes. It’s been very much an institutional opportunity set up until now. And there’s so much to be done, still, to really democratize alternatives and we certainly joke around making alternatives less alternative. Actually, even the nomenclature we use and how we describe it doesn’t kind of make sense anymore. It’s such a core – an important allocation to our clients, Barry, that just calling it alternative seems wrong. Just about the institutional clients. It ranges, I think, as I mentioned on our – some of our more conservative clients which would be pension plans which really have liquidity needs on a monthly basis because of the liabilities they have to think about. At about 25 plus percent in private markets, to endowments, foundations, family offices, going to 50 percent plus. So, it’s a really important part and has been for now many years the institutional client ph communities outcomes. I think the thing that we, as an industry, have to change is alternatives has to be for the many, not for the few. And quite frankly, it’s been for the few. And as we talked about some of the attributes and the important attributes of these asset classes to think that those who have been less fortunate in their careers can’t access, things they can enrich their future retirement outcomes, to me, is a failing. And we have to address that. That comes from regulation changes, it comes from structuring of new products, it comes from education and it comes from this knowledge transmission where clients in the wealth segment can understand the role of alternatives and the context of what can do as they invest in equities and fixed income too. And we think that’s a big shortfall. So, the journey today, just to give you a sense, as we look at her clients in Europe on the wealth side, on average, as you look from what we would call the credited investors all the way through to more ultra-high-net worth individuals, their allocation to alternatives, we believe, stands at around two to three percent of their total portfolio. In the U.S., we believe it stands at three to five. So, most of those intermediaries, we speak to our partners who were more supporting and serving the wealth channel. They have certainly an ambition to help their clients grow that to 20 percent and potentially beyond that. So, when I look at that gap of let’s call it two to three to 20 percent in a market that just given the explosion in wealth around the world, I think the last numbers I saw, this is a $65 trillion market. RITHOLTZ: Wow. CONWAY: That speaks to the shortfall relative to the ambition. And how’s it been going? We have a number of things and capabilities we’ve set up to allow for this market to experience, hopefully, private equity, hedge funds, credit, and an infrastructure in ways they haven’t in the past. We’ve done this in the U.S., we’re doing it now in Europe, but I will say, Barry, this is still very much at the start of the journey. Wealth is a really important part of our future given our business, quite, frankly is 90 plus percent institutional today, but we’re looking to change that by, hopefully, democratizing these asset classes and making it so much more accessible in that of the past. RITHOLTZ: So, we hinted at this before but I’m going to ask the question outright, how significant is interest rates to client’s risk appetites, how much of the current low rate environment are driving people to move chunks of their assets from fixed income to alternatives? CONWAY: It’s really significant, Barry. I think the transition of these portfolios is quite profound, So you – and I think the unfortunate thing in some respects as this transition happens that you’re introducing new variables and new risks. The reason I say it’s unfortunate and that I think as an industry, this goes back to the education around the assets you own, understanding the role, understanding the various outcomes. I think it’s so incredibly important and that this the time where complete transparency is needed. And quite frankly, we’re investing capital that’s not ours. As an industry, we’re investing our client’s assets and they need to know exactly the underlying investments. And in good and bad times, how would those assets behave? So certainly, interest rates are driving a flow of capital away from these traditional assets, fixed-income, and absolutely in towards real estate, infrastructure, private creditors, et cetera, in the pursuit of this – this yield. But I do – I do think one of the things that’s critically important for the institutional channel, not just the wealth which are newer entrants is this transmission of education, of data because that’s how I think you build a better balanced portfolio and that’s a – that’s a real conundrum, I think, that the industry is facing and certainly your clients too. RITHOLTZ: Quite interesting. So let’s talk a little bit about the differences between investing in the private side versus the public markets, the most obvious one has to be the illiquidity. When you buy stocks or bonds, you get a print every microsecond, every tick, but most of these investments are only marked quarterly or annually, what does this illiquidity do when you’re interacting with clients? How do you – how do you discuss this with them in and how do perceive some of the challenges of illiquid investments? CONWAY: Over the – over the past number of decades, I think our clients have largely held too much liquidity in their portfolios. Like, so what we are finding is the ability to take on illiquidity risk. And obviously, in pursuit of that premium above, the traditional markets, I mean, I think the sentiment they are is it an absolute right one. That transition towards private market exposure, we think is an important one just given the return objectives, the majority of our clients’ need but then also again, most importantly now, with geo policy, with uncertainty, with interest rate uncertainty, inflation uncertainty, I mean, the – going back to the resilience point, the characteristics now by introducing these assets into the mix is important. And I think that’s – that point is maybe what I’ll expand on. As were talking to clients, using the Aladdin systems, and as you know, we bought eFront technologies, albeit a couple of years ago, by allowing, I think, great data and technology to help our clients understand these assets and the context of how they should own them relative to other liquidity needs, their risk tolerances, and the return expectations are really trying to use tech and data to provide a better understanding and comprehension of the outcomes. And as we continue to introduce these concepts and these approaches, by the way, that there is, as you know, so used to in the traditional side, it – it gives them more comfort around what they should and can expect. And that, to me, is a really important part of what we’re doing. So, we’ve released recently new technology to the wealth sector because, quite frankly, we mentioned it before, the 60-40 portfolio is a thing of the past. And that introduction of about 20 percent into alternatives, we applaud our partners who are – who are suggesting that to their clients. We think it’s something they have to do. What we’re doing to support that is really bringing thought leadership, education, but also portfolio construction techniques and data to bear in that conversation. And this goes back to – it’s no longer an alternative, right? This is a core allocation so the comprehension of what it is you own, the behavior of the asset in good and bad times is so necessary. And that’s become a very big thing with regard to our activities, Barry, because your clients are looking to understand better when you’re talking about assets that are very complex in their nature. RITHOLTZ: So, 60-40 is now 50-30-20, something along those lines? CONWAY: Yes. RITHOLTZ: Really, really intriguing. So, what are clients really looking for these days? We talked about yield. Are they also looking for downside protection on the equity side or inflation hedges you hinted at? How broad are the demands of clients in the alternative space? CONWAY: Yes. It ranges the gamut. And even – we didn’t speak to even hedge funds, we’ve had differing levels of interest in the hedge fund world for years and I, quite frankly, think some degree of disappointment too, Barry, with regard to the alpha, the returns that were produced relevant to the cost. RITHOLTZ: It’s a tough space to say the very least exactly. CONWAY: Exactly right. But when you start to see volatility introducing itself, you can really see where skill plays a critical factor. So, we are absolutely seeing, in the hedge fund, a resurgence of interest and demand by virtue of those who really have honed in on their scale, who have demonstrated an up-and-down markets and ability to protect and preserve capital, but importantly, in a low uncorrelated way build attractive risk-adjusted returns. We’re starting to see more activity there again too. I think with an alternatives, you’ve really seen a predominant demand coming from privates. These private markets, like a set of growths so extraordinarily fast and the opportunities that is rich, the reality too on the public side which is where our hedge funds operate, they continue to, in large part, do a really good job. The issue with our industry now with these 38,000 managers is how do you distill all the information? How do you think about your needs as a client and pick a manager who can deliver the outcomes? And just to give you a sense, the difference now between a top-performing private equity manager, a top quartile versus the bottom quartile, the difference can be measured in tens of percent. RITHOLTZ: Wow. CONWAY: Whereas if you look at the public equity side, for example, a large cap manager, top quartile versus bottom quartile is measured in hundreds of basis points. So, there is definitely a world that has started where the outcomes our clients will experience can be great as they pursue yield, as they pursue diversification, inflation protection, et cetera. I think the caveat that I would say is outcomes can vary greatly. So manager underwriting and the importance of it now, I think, really is this something to pay attention to because if you do have that bottom performing at the bottom quartile manager, it will affect your outcomes, obviously. And that’s what we collectively have to face. RITHOLTZ: So, let’s talk a little bit about real estate. There are a couple of different areas of investment on the private side. Rent to own was a very large one and we’ve seen some lesser by the flip algo-driven approaches. Tell us what Blackrock is doing in the real estate space and how many different approaches are you bringing to bear on this? CONWAY: Yes, we think it’s both equity and debt. Again, no different to the infrastructure side, these projects need to be financed. But on the – as you think about the sectors in which you can avail of the opportunity, you’ve no doubt heard a lot and I mentioned earlier this demand for logistics facilities. The explosion of shopping online and having, until we obviously have the supply chain disruption, an ability to have nearly immediate satisfaction because the delivery of the good to your home has become so readily available. It’s a very different consumer experience. So the explosion and the need for logistics facilities to support this type of behavior of the consumer is really an area that will continue to be of great interest too. And then you think about the transformation of business and you think about the aging world. Unfortunately, you can look at various economies where our populations are decreasing. And quite frankly, we’re getting older. And so, were you’re thinking of the context of that senior living facilities, it becomes a really important part, not just as part of the healthcare solution that come with it, but also from living as well. So, single-family, multifamily, opportunities continue to be something that the world looks at because there is really the shortfall of available properties for people to live in. And as the communities evolve to support the growing age of the population, tremendous opportunity there too. But we won’t give up on office space. It really isn’t going away. Now, if you even think about our younger generation here in BlackRock, they love being in New York, they love being in London, they love being in Hong Kong. So, the shape and the footprint may change slightly. But the necessity to be in the major financial centers, it still exists. But how we weighed the risks has definitely changed, certainly, for the – for the short-term and medium-term future. But real estate continues to be, Barry, a critical part of how we express our thought around the investment opportunity set. But clients largely do this themselves too. The direct investing from the clients is quite significant because they too see this as still as a rich investment ground, albeit, one that has changed quite a bit as a result of COVID. RITHOLTZ: Well, I’m fascinated by the real estate issue especially having seen some massive construction take place in cities pre-pandemic, look over in Manhattan at Hudson Yards and look at what’s taking place in London, not just the center of London but all – but all around it and I’m forced to admit the future is going to look somewhat different than the past with some hybrid combination of collaborative work in the office and remote work from home when it’s convenient, that sort of suggests that we now have an excess of capacity in office space. Do you see it that way or is this just something that we’re going to grow into and just the nature of working in offices is changing but offices are not going away? CONWAY: Yes. I do think there’s – it’s a very valid point and that in certain cities, you will see access, in others we just don’t, Barry. And quite frankly, as a firm, too, as you know, we have adopted flexibility with our teams that were very fortunate. The technologies in which we created at BlackRock has just become such an amazing enabler, not just to help us as we mention manage the portfolios, help us a better portfolio construction, understand risks, but also to communicate with our clients. I think we’ve all witnessed and experienced a way to have connectivity that allows them to believe that commerce can exist beyond the boundaries of one building. However, I do look at our property portfolios and even the things that we’re doing. Rent collections still being extraordinarily high, occupancy now getting back up to pre-pandemic levels, not in all cities, but in many of the major ones that have reopened. And certainly, the demand for people to just socialize, that the demand for human connectivity is really high. It’s palpable, right? We see it here too. The smiles on people’s faces, they’re back in the office, conversing together, innovating together. When people were feeling unsafe, unquestionably, I think the question marks around the role of office space was really brought to bear. But as were coming through this, as you’ve seen vaccine rates change, as you’ve seen the infection rates fall, as you’ve seen confidence grow, the return to work is really happening and return to work to office work is really happening, albeit, now with degrees of flexibility. So, going back to the – I do believe in certain areas. You’re seeing a surplus. But in many areas you’re absolutely seeing a deficit and the reason I say that, Barry, is we are seeing occupancy in certain building at such a high level. And frankly, the demand for more space being so high, it’s uneven and this goes back to then where do you invest our client’s capital, making sense of those trends, predicting where you will see resilience versus stress and building that into the portfolio of consequences as you – as you better risk manage and mitigate. RITHOLTZ: Very interesting. And so, we are seeing this transition across a lot of different segments of investing, are you seeing any products that were or – or investing styles that was once thought of as primarily institutional that are sort of working their way towards the retail side of things? Meaning going from institutional to accredited to mom-and-pop investors? CONWAY: Well, certainly, in the past, private equity was really an asset class for institutional investors. And I think that’s – that has changed in a very profound way. I mentioned earlier are the regulation has become a more adaptive, but we also have heard, in many respects, in providing this access. And I think the perception of owning and be part of this illiquid investment opportunity set was hard to stomach because many didn’t understand the attributes and what it could bring and I think we’ve been trying to solve for that and what you’re seeing now with – with regulators, understanding that the difference between if we take it quite simply as DD versus DC, the differences between the options you as a participant in a retirement plan are so vastly different that – and I think there’s a broad recognition now that there needs to be more equity with regard to what happens there. And private equity been a really established part of the alternatives marketplace was once, I think, really believed to be an institutional asset class, but albeit now has become much more accessible to wealth. We’ve seen it by structuring activities in Europe working with the regulators. Now, we’re able to provide private equity exposure to clients across the continent and really getting access to what was historically very much an institutional asset class. And I do think the receptivity is extraordinarily high just throughout people’s careers, they have seen wealth been created as a result of engineering a great outcome with great management teams integrate business. And I do believe the receptivity towards private equity is high as an example. In the U.S., too, working with the various intermediaries and being able to wrap now private equity in a ’40 Act fund, for example, is possible. And by being able to deliver that to the many as opposed to the few, we think has been a very good success story. And I think, obviously, appreciated by our clients as well. So, I would look at that were seeing across private equity as well as private credit and quite frankly infrastructure accuracy. You’re seeing now regulation that’s becoming more appreciative of these asset classes, you’re seeing a more – a greater level of openness and willingness to allow for these assets to be part of many people’s experiences across their investment portfolio. And now, with innovation around structures, as an industry, were able to wrap these investments in a way that our clients can really access them. So, think across the board, it probably speaks the innovation that’s happening but I do think that accessibility has changed in a very significant way. But you’ve really seen it happen in private equity first and now that’s expanding across these various other asset classes. RITHOLTZ: Quite intriguing. I know I only have you for a relatively limited period of time, so let’s jump to our favorite questions that we ask all of our guests. Starting with tell us what you’ve been streaming these days. Give us your favorite Netflix or Amazon Prime shows. CONWAY: That is an interesting question, Barry. I don’t a hell of a lot of TV, I got to tell you. I am – I keep busy with three wonderful children and a beautiful wife and between the sports activities. When I do watch TV, I have to tell you I’m addicted to sports and having – I may have mentioned earlier, growing up playing rugby which is not the most common sport in the U.S., I stream nonstop the Six Nations that happens in Europe where Ireland is one of those six nations that compete against each other on an annual basis. Right now, they’re playing a lot of sites that are touring for the southern hemisphere. And to me, the free times I have is either enjoying golf or really enjoying rugby because I think it’s an extraordinary sport. Obviously, very physical, but very enjoyable to watch. And that, that truly is my passion outside of family. RITHOLTZ: Interesting stuff. Tell us a bit about your mentors, who helped to shape your early career? CONWAY: Well, it even goes back to some of the aspects of sports. Playing on a team and being on a field where you’re working together, there’s a strategy involved with that. Now, I used to really appreciate how we approach playing in the All-Ireland League. How we thought about our opponents, how we thought about the structure, how we thought about each individual with on the rugby field and the team having a role. They’re all different but your role. And actually, even starting from an early age, Barry, thinking about, I don’t know, it’s sports but how to build a great team with those various skills, perspective, that can be a really, really powerful combination when done well. And certainly, from an early age, that allowed me to appreciate that – actually, in the work environment, it’s not too different. You surround yourself with just really great people that have high integrity that are empathetic and have a degree of humility that when working together, good things can happen. And I will say, it really started at sports. But I think of today and even in BlackRock, how Larry Fink thinks about the world and I think Larry, truly, is a visionary. And then Rob Kapito who really helps lead the charge across our various businesses. Speaking and conversing with them on a daily basis, getting their perspectives, trying to get inside your head and thinking about the world from their vantage point. To me, it’s a huge thing about my ongoing personal career and development and I really enjoy those moments because I think what you recognize is independent of how much you think you know, there’s so much more to know. And this journey is an ever evolving one where you have to appreciate that you’ll never know everything and you need to be a student every single day. So, I’d probably cite those, Barry, as certainly the two most important mentors in my life today, professionally and personally quite frankly. RITHOLTZ: Really. Very interesting. Let’s talk about what you’re reading these days. Tell us about some of your favorite books and what you’re reading currently? CONWAY: Barry, what I love to read, I love to read history, believe it or not. From a very small country that seems to have exported many, many people, love to understand the history of Ireland. So, there’s so many books. And having three children that have been born in the U.S. and my wife is a New Yorker, trying to help them understand some of their history and what made them what they are. I love delving into Irish history and how the country had moments of greatness and moments of tremendous struggle. Outside of that, I really don’t enjoy science fiction or any of these books. I love reading, you name any paper and any magazine on a daily basis. Unfortunately, I wake at about 4:30, 5 o’clock every day. I spent my first two hours of the day just consuming as much information as possible. I enjoy it. But it’s all – it’s really investment-related magazines, not books. It’s every paper that you could possibly imagine, Barry, and I just – I have a great appreciation for certainly trying to be a student of the world because that’s what we’re operating in an I find it just a very interesting avenue to get an appreciation to for the, not just the opportunities, but the challenges we’re collectively facing as a society but also as a business. RITHOLTZ: I’m with you on that mass consumption of investing-related news. It sounds like you and I have the same a morning routine. Let’s talk about of what sort of advice you would give to a recent college graduate who was interested in a career of alternative investments? CONWAY: Well, the industry has – it’s just gone through such extraordinary growth and the difference, when I’ve started versus today, the career opportunity set has changed so much. And I think I try to remind anyone of our analysts who come into each one of our annual classes, right, as we bring in the new recruits. I think about how talented they are for us, Barry, and how privileged we all are to be in this industry and work for the clients that we do. It’s just such an honor to do that. But I kind of – I try to remind them of that. At the end of the day, whether you’re supporting an institution, that institution is the face of many people in the background and alternatives has really now become such an important part of their experience and we talked about earlier just this challenge of retirement, if we do a good job, these institutions that support the many, they can have, hopefully, a retirement that involves dignity and they can have an ability to do things they so wanted to do as they work so hard over their lives. Getting that that personal connection and allowing for those newbies to understand that that’s the effect that you can have, an alternatives whether it’s private equity, real estate, infrastructure, private credit, hedge funds, all of these now, with the scale at which they’re operating at can allow for a great career. But my advice to them is always don’t forget your career is supporting other people. And that comes directly to how we intersect with wealth channel, it comes indirectly as a result of the institutions. And it’s such a privilege to do that. I didn’t envision when I grew up, as I mentioned, my first job, milking cows and back in a small town in the middle of Ireland that I would be one day leading an alternatives business within BlackRock. I see that as a great privilege. So, for those who are joining afresh, hopefully, try to remind them that it is for all of us and show up with empathy, dignity, compassion, and do the best you can, and hopefully, these people be sure will serve them well. RITHOLTZ: And our final question, what you know about the world of alternative investing today you wish you knew 25 years or so ago when you were first getting started? CONWAY: I think if we had invested much more heavily as an industry in technology, we would not be in the position we are today. And I say that, Barry, from a number of aspects. I mentioned in this shortfall of information our clients are dealing with today. They’re making choices to divest from one asset class to invest in another. To do that and do that effectively, they need great transparency, they needed real-time in many respects, it can’t be just a quarterly line basis. And if we had been better prepared as an industry to provide the technology and the data to help our clients really appreciate what it is they own, how we’re managing the assets on their behalf, I think they would be so much better served. I think we’re very fortunate at this firm to have built a business on the back of technology for albeit 30 plus years and were investing over $1 billion a year in technology as I’m sure you know. But we need to see more of that in the industry. So, the client experience is so important, stop, let’s demystify alternatives. It’s not that alternative. Let’s provide education and data and it’s become so large relative to other asset classes, the need to support, to educate, and transmit information, not data, information, so our client understand it, is at a paramount now. And I think it certainly as an industry, things have to change there. If I knew how big the growth would have been and how prominent these asset classes were becoming, I would oppose so much harder on that front 30 years ago. RITHOLTZ: Thank you, Edwin, for being so generous with your time. We’ve been speaking with Edwin Conway. He is the head of Blackrock Investor Alternatives Group. If you enjoy this conversation, please check out all of our prior discussions. You can find those at iTunes, Spotify, wherever you get your podcast at. We love your comments, feedback and suggestions. Write to us at MIB podcast@Bloomberg.net. You can sign up for my daily reads at ritholtz.com. Check out my weekly column at Bloomberg.com/opinion. Follow me on Twitter, @ritholtz. I would be remiss if I did not thank the crack team that helps put these conversations together each week. Mohammed ph is my audio engineer. Paris Wald is my producer, Michael Batnick is my head of research, Atika Valbrun is our project manager. I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio.   ~~~   The post Transcript: Edwin Conway appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureNov 22nd, 2021

As Real Estate Changes, NAR’s Shannon McGahn Is Always Trying to Stay a Step Ahead

Real estate is a dynamic industry and one that’s only true constant is change. This has been evident to anyone who’s been following the industry since at least The Great Recession. And certainly the pandemic has reinforced that idea. The industry has seen moments of extreme lows and, now, extreme highs. Often, some of this […] The post As Real Estate Changes, NAR’s Shannon McGahn Is Always Trying to Stay a Step Ahead appeared first on RISMedia. Real estate is a dynamic industry and one that’s only true constant is change. This has been evident to anyone who’s been following the industry since at least The Great Recession. And certainly the pandemic has reinforced that idea. The industry has seen moments of extreme lows and, now, extreme highs. Often, some of this ebb and flow in real estate is impacted by public policy. It serves as a steward that can ensure stability in the market. And behind that policy are individuals like Shannon McGahn, chief advocacy officer at the National Association of REALTORS® (NAR). Given the weight of her role, and so much happening in real estate, and Washington D.C., we thought it would be a good time to catch up with her and learn more about what she and her team at NAR have been up to, and what critical pieces of policy real estate professionals should be monitoring. Caysey Welton: First, tell us about your role as chief advocacy officer—both from a high level and on a day-to-day basis. Shannon McGahn: The advocacy group supports the policies and the policymakers who support our members and the real estate industry, which is a pillar of the American economy. Taking over the chief advocacy officer position during the middle of a pandemic was not an experience that came with any playbook. Advocacy is about real relationships, not virtual ones. Usually, the chief advocacy officer would count steps running through the halls of Congress. But so far, day-to-day life relies more on Zooming around Congress. The challenges of the pandemic wreaked havoc on the Congressional calendar, with massive relief bills passing one after another. Add in a power change in government, and 2021 was not for the weary in Washington. Thankfully, NAR has an impressive team of leaders to help drive the association’s advocacy efforts. Bryan Greene leads the policy team. He came to us from HUD, where he served as the longtime director of fair housing. This team has faced an enormous task with a new administration and congressional majority eager to enact widespread change. Bryan and his team monitor policies coming out of the executive branch, proposing changes and new directions. Joe Harris and Helen Devlin, both seasoned NAR and Washington pros, lead congressional advocacy. Their team educates lawmakers and advocates for the entire industry, including consumers. On top of this work at the federal level, perhaps our most significant focus is state and local association engagement. We work on everything from local ballot initiatives to community grants to ensure our members are active at all levels. CW: How has a role like yours changed within the organization, and what initiatives have you introduced since taking on the role? SM: Under CEO Bob Goldberg’s leadership, we took on a mission to modernize advocacy with a renewed focus on cultivating relationships both within our organization and externally—with policymakers, industry partners, and state and local associations. This modernization has paid off in ways that we could never have imagined as the pandemic overtook the agenda at all levels of government. Without our established relationships and decades of educating elected officials, we could not have navigated these past two years as well as we did. And we did it all virtually—from our living rooms and basements and even a few hands-free Zoom sessions in the car, which gave me a new appreciation for how excited my dogs get to go for a ride! Our new advocacy structure also relies on a team of political representatives that travel the country speaking with REALTORS®, GADs, AEs and communications directors at all levels. And our legislative and policy representatives use that information to take their message directly to elected officials. The lines of communication are more open than ever. There is no such thing as a federal issue versus a state or local issue. If it impacts one of us, it impacts all of us. Collaboration at all levels is essential to our overall success. Our advocacy operation is effective, bipartisan and truly the envy of Washington. CW: What makes NAR’s advocacy team so unique from other trade associations? SM: There is no other trade association in Washington like NAR for one reason: our members. We don’t represent an industry; we represent 1.5 million individuals. They are thoughtful, civically engaged and pillars of their communities. It is an army that equals the populations of San Diego or the state of Hawaii. We are also the largest bipartisan trade organization in America. We live “REALTOR® Party purple.” The roots of our advocacy successes are the REALTOR® Party model that is issue-focused, not party-focused. Power comes and goes for political parties, but our issues stay front and center. We have friends in all political corners in times of need and normalcy. CW: You’re approaching a year on the job, so what would you consider your biggest wins thus far? SM: In all, six COVID relief bills passed between March 2020 and March 2021, and NAR had its imprint on each one. We helped secure an array of benefits to ensure the health and economic wellbeing of REALTORS® during the pandemic. The self-employed, independent contractors and sole proprietors were all eligible for new federal benefits, which was unprecedented. Many REALTORS®, mostly small business owners, could access Pandemic Unemployment Assistance, Paycheck Protection Program loans, Economic Injury Disaster Loans, and paid sick and family leave. As lockdowns swept the country, we leveraged every relationship and resource to get real estate deemed an essential service in jurisdictions nationwide. It was a messy process, but we got it done. As the pandemic entered a second calendar year, NAR helped secure nearly $50 billion in rental assistance in two separate bills to cover up to a year-and-a-half of combined back and future rent for struggling tenants and small housing providers. And we supported a legal fight on the CDC eviction ban that ended up before the Supreme Court, where a favorable ruling helped protect property rights now and in the future. Real estate makes up one-fifth of the entire U.S. economy, so our industry and NAR played a big part in the nation’s economic resilience. There is now clear evidence that the rescue measures and programs we fought so hard for were vital to our country’s economic health. CW: From your perspective, in terms of policy, what do you see as the most significant challenges or threats for your association members and how are you addressing it/them? SM: Congress is debating President Biden’s Build Back Better plan that, if enacted, would provide a historic investment in the country’s social safety net. Some of the earlier tax proposals to pay for the plan could have devastated the real estate sector. We built our advocacy operation for crossroads moments like these and worked to educate lawmakers on these tax issues for more than a year. Our FPCs contacted every member of the tax-writing committees in the House and Senate in a targeted Call for Action. When President Biden released the long-awaited bill framework in October, the most feared taxes and limits on real estate investment were not included. It contained no 1031 like-kind exchange limits, no capital gains tax increases, no change in step-up in basis, no tax on unrealized capital gains, no increased estate tax, no carried interest provisions and no 199A deduction limits. It was a positive development for consumers, property owners and the real estate economy. We also feared lawmakers would strip affordable housing provisions from the bill as they worked to narrow the legislation. Affordable housing is a key NAR priority and the key to unlocking prosperity for millions of Americans currently excluded from the American Dream. This investment is critical for closing the racial homeownership gap and addressing income disparity.  It opens up homeownership for first-generation and first-time buyers. We continued to press both publicly and privately for these provisions. Bob Goldberg joined other housing leaders and members of Congress at the U.S. Capitol for a press conference calling for affordable housing provisions in the final bill. And just days later, the new framework included $150 billion for affordable housing. A key member of Congress said it was because of NAR’s support. Under the agreement, public housing and rental assistance would get funding boosts.  The plan would also create more than one million new affordable rental and single-family homes and invest in down-payment assistance. The exclusion of harmful real estate investment taxes and the inclusion of affordable housing provisions in the bill are a testament to the effectiveness of our education campaign in Washington. CW: Without speculating too much, are there any policy issues that could become potentially problematic for real estate? SM: Like many other sectors of the economy, supply issues are also hitting real estate.  But the pandemic isn’t the only reason. The housing shortage existed before the pandemic—and will exist long afterward. NAR commissioned a study by Rosen Consulting Group earlier this year and found the U.S. is short about six million residential housing units. Those hit hardest are the middle class, millennials and first-time and first-generation homebuyers. It is fair to say the housing supply shortage rises to the level of a crisis.  Without a coordinated, national effort, the housing shortage will persist. We need it all: affordable, market-rate, single-family and multifamily housing. Builders would need to exceed the long-term historical average pace of 1.5 million units a year to shrink the supply deficit. Even at 2.1 million units a year, near the level reached in 2005, it would take a decade to close the gap. A package of policy responses is needed to increase the housing supply. Solutions include funding affordable housing construction, preserving and expanding tax incentives to renovate distressed properties, converting unused commercial space to residential, and incentives for zoning reform. Addressing the housing shortage isn’t just good for real estate. It is good for the economy. Expanding new-home construction to more than two million units a year for ten years would create 2.8 million new jobs and generate more than $400 billion in economic activity. CW: Likewise, are there any new policies recently enacted, or that you’re advocating for, that real estate professionals should be aware of and embrace? SM: On Oct. 1, FEMA’s new flood insurance pricing system, Risk Rating 2.0, went into effect for new policies. NAR spent nearly a decade working with FEMA on this new system that prices each home individually and more accurately using modern technologies, standards and science. So far, we see a few very high-risk, high-value properties with higher NFIP premiums under the new system. But homeowners need to know the true cost to insure these properties so they can make informed decisions. Many other policyholders, especially those with lower-value homes, will see decreases. Too often, under the old system, low-value properties were subsidizing high-value properties. Risk Rating 2.0 is a win for consumers. The previous 50-year-old system simply could not stay the way it was. Caysey Welton is RISMedia’s content director. Email him your real estate news ideas to cwelton@rismedia.com. The post As Real Estate Changes, NAR’s Shannon McGahn Is Always Trying to Stay a Step Ahead appeared first on RISMedia......»»

Category: realestateSource: rismediaNov 16th, 2021

Year-End Outlook: Labor Could Spark ‘Transformational’ Changes

Editor’s Note: RISMedia’s Year-End Outlook series provides an in-depth analysis of the housing market’s leading indicators for economic health, and showcases expert insights on what’s to come in 2022. Dolly Parton might still be plugging away at a nine to five, and BTO might still catch the 8:15 train into the city, but for most […] The post Year-End Outlook: Labor Could Spark ‘Transformational’ Changes appeared first on RISMedia. Editor’s Note: RISMedia’s Year-End Outlook series provides an in-depth analysis of the housing market’s leading indicators for economic health, and showcases expert insights on what’s to come in 2022. Dolly Parton might still be plugging away at a nine to five, and BTO might still catch the 8:15 train into the city, but for most of the country, the traditional machinations of labor have changed. Besides the well-documented shifts to remote in many industries, rising wages and a rapidly evolving outlook on what work fundamentally should look like appears to be altering the entire labor economy as people quit their jobs in droves and companies scramble to accommodate new priorities and philosophies. Many pundits have sought to quickly or succinctly sum up all these changes, or attribute new attitudes to a single event or ideology, but the reality is that the future of labor—both short- and long-term—remains deeply uncertain, and the causes and effects of a shifting labor economy have not been parsed out. Despite the lack of answers to these fundamental questions, economists and experts that spoke to RISMedia say that there is still plenty that stakeholders—especially in the real estate industry—need to keep an eye on. Jake Vigdor, an employment and education economist currently working for the University of Washington, says shifts caused by the new labor market are likely to manifest both in philosophical as well as geographic shifts. “There was this period of time last year when people were saying, ‘San Francisco is going to die,’ or ‘New York City is going to die,’’’ he says. “I don’t think that’s really the case. If you’re thinking about where the transactions are going to be growing over the next year or so, that’s going to be hard to forecast.” Work-from-home trends and labor shifts have indicated a broad geographic diffusal of population, specifically high-earning and younger families, Vigdor adds. Though it is far too early to say for certain exactly how and to what extent these changes will take hold, likely they will affect more immediate and lasting change than other more widely watched metrics. In October, unemployment overall fell from 4.8% to 4.6%, and the economy has steadily added more jobs through the last few months. But this progress belies some deeper issues that are not going away anytime soon. Greg Reed is a labor economist specializing in real estate and urban land at the University of Wisconsin in Madison. He says the big job numbers often touted by media outlets and the federal government are less important than many other underlying factors. Barriers that are preventing people from re-entering the workforce—unaffordable or unavailable child care, wages, health care and discrimination—threaten both short-term recovery and the overall stability of the economy. “I’m honestly more concerned down the road for those people who are really looking for jobs and really wanted to work and had to work, but because of COVID or for whatever reason—ageism, sexism, you just add what ‘ism’ to it—weren’t able to find jobs during COVID,” Reed says. And they may still need to find something. What’s going to happen to them longer term?” “There’s some disruption here that’s going to have some structural impact,” he adds. The sector that most immediately affects real estate, at least right now, is the home construction industry. A new report from the Home Builders Institute (HBI) estimated that the country needs to add 2.2 million more jobs between now and 2024 to keep up with demand, and currently is looking at a deficit of 300,000 to 400,000 laborers. Ed Brady is the CEO of HBI, and he warns that this worker shortage both preceded and will likely persist past the broader labor crunch. “I think it‘s been at kind of a crisis level for a while, pre-pandemic and post-pandemic, and even during the pandemic—as you know we remained essential, and so building and developing were still moving forward,” he says. “We’re losing a lot more than we’re bringing in.” The Next 12 Months Policy changes are certain to have broad and disparate impacts on the job market. Many companies have yet to set long-term or permanent work-from-home rules, while the federal government has the chance to impact jobs through immigration policy, vaccine mandates or through a stalled federal bill that could begin addressing child care shortages and adding infrastructure- or climate-focused jobs. Regardless of the progress on these things in Washington, Vigdor says he still sees relative strength in the labor market’s recovery, with expectations that there is no immediate danger of a collapse or recession. “Our risk of heading into some sort of recession with mass unemployment is pretty low right now,” he says. But the most optimistic projections, looking at a return to pre-pandemic levels and modes, is much less realistic according to Vigdor, as American workers have indicated they are not willing to accept the old ways of doing things and recovery efforts still have a long way to go. “The economy over the next year or so—it will be kind of like cleaning up your house after a big party,” he says. “The place is a giant mess, and you look at it and you say, ‘Oh man.’” “Eventually you’ll get it all cleaned up, but…it could take a year or more,” he adds. “All of this stuff will eventually get worked out, but it’s not going to be quick.” There are also more fundamental issues, many of which preceded the pandemic, which will hamper a return to goals set by the Fed or other metrics of a healthy economy. These include everything from a lack of child care to health care costs to immigration restrictions. “We still have a lot of parents who are having trouble getting child care,” Vigdor says. “And another one is immigration…just talking about people who have visas, legal immigrants to the United States—that’s hundreds of thousands of new workers every year in an ordinary year— and that has basically ground to a halt.” A lack of incoming refugees, who are essential workers in many sectors, Vigdor says, is also styming economic growth and contributing to labor issues. Immigration affects every job sector, he adds, from the highest paying tech jobs all the way down to farm work. Many problems have also disproportionately affected people of color and women, with unemployment for Black and Hispanic workers staying stagnant in the most recent job report, even as overall unemployment fell. According to Reed, these issues will specifically dampen the real estate market in ways that go beyond finding construction workers to build houses. Commercial projects will stall if companies cannot find people to clean or maintain the property, appliances for new homes will sit in warehouses with no one to deliver them and apartment complexes will halt expansions if they don’t have staff to serve tenants or provide other on-site services. “It just seems like it’s permeating a lot, a lot of components of life,” Reed reflects. “It throws the sequencing off on so many different levels. And it just increases the uncertainty, and no one likes uncertainty.” Vigdor also worries that this labor shortage is unique in that it has affected nearly every region and sector equally—something that is rare historically in the U.S. He also points out that removing supplemental unemployment benefits and returning students to school full time did almost nothing to alleviate the labor shortage, indicating that the shortage is more than just a blip that will resolve itself as the virus fades, and will instead require more investment from companies and policymakers. Wages, Geography and Education To address a lack of carpenters, contractors, foremen, plumbers and electricians who build and rehab the homes necessary to keep the real estate industry growing, the answer must start with education, according to Brady. “Investing in schools, investing in pre-apprenticeship education…is one step. The country has to invest in that,” he says. “We can immediately change the dialogue in the secondary schools that you’re not ‘alternative’ if you’re going into the trades. It’s a first path, it’s not an alternative path, and we need to change that perception.” Trade jobs are especially hard to fill quickly, Brady argues, because experience is so important. A carpenter fresh out of school might take twice or three times as long to put up a house as one with 15 years of experience. Even if the country begins bringing in enough materials at cheap enough prices to begin alleviating the pressure of housing shortages, Brady claims the market will still be bottlenecked without enough skilled labor. “Productivity, I contend, as long as we’re not investing in younger people…I think it’s going to get worse before it gets better. That’s why we have to invest in it now for the future,” he says. The recent HBI report found that about half of construction workers in the trades make more than the median annual income in the country. But likely the industry will need to continue raising wages to attract more workers, according to Vigdor, as workers have more choices and negotiating power in their jobs than any time in recent memory. “Finding the carpentry crews and the masonry crews…if you’re having a tougher time finding that workforce, it’s going to lead to a slow down in new inventory,” he says. Reed says that every industry right now needs to understand that businesses will have to invest more in paying their workers if they want to compete—or even stay open. “There needs to be a wake-up call that in order to not only attract, but also retain that talent, they’re going to have to pay more,” he says. On the positive side for real estate, an increase in wages for lower-paying jobs could elevate some number of families, from renters just scraping by to prospective homebuyers. Federal programs offering down payment assistance and increasing affordability in housing could bolster that trend, according to Vigdor. “Some of these traditionally lower-incomes households, they’re getting bigger and steadier paychecks. That could lead to a situation where your markets for things like starter homes…there could be some renewed interest there,” he says. This scenario depends on how inflation continues—if wages and incomes can keep up with that metric—and also if the current levels of growth will continue long term (Reed says he believes they will). “I think the marketplace is speaking loud and clear, and I don’t see wages flipping notably from the higher levels they are now meeting,” Reed contends. “I can’t tell you the number of people who have said, ‘Why would I take a job at $10 an hour?’” A trend like this could create a relative explosion of buyers in the starter home price range, especially in marginal markets, Vigdor predicts. While coastal and expensive suburban areas would not see much change, various semi-rural areas outside bigger metros, and smaller cities spread across the Midwest and South, could quickly heat up in terms of real estate. At the same time, an entirely separate trend could also vastly alter the geography of work—and real estate. Big tech companies are currently diffusing their physical presence broadly across the country to match workers’ preferences, Vigdor says, which was something that started well before the pandemic. Distributing your workforce and offices as a tech company actually makes more sense than having huge central space-age complexes, he posits, and many companies had already begun spreading out before the pandemic. If Amazon, Facebook or Google end up bringing most workers back in person, Vigdor says the likely path will not be a return to the original offices but rather an expansion of satellite locations to dozens of places beyond large headquarters in Silicon Valley, New York or Austin, allowing people to live in disparate locations while still having a physical office somewhat accessible if need be. “It’s not going to be the thing that brings Gary, Indiana back or anything like that,” he cautions. “These relocations are people moving from really expensive places, to other somewhat cheaper but still desirable locations. So that’s going to affect the real estate markets.” These cities could be places in the Midwest or Sun Belt that have already seen tremendous growth during the pandemic, or they could affect areas that have yet to see that kind of attention, Vigdor says. This “decentralizing” is specifically unpredictable and will depend on the kind of amenities workers value, and where companies can find favorable conditions as far as taxes and other preferences. Other factors, like cities that have universities focused on specific cutting-edge research like robotics or AI will also draw some of these companies, Vigdor says. “The stuff is happening, and it’s been happening for quite some time. That will be an interesting thing to see,” he says. Again, what exactly the ramifications of these individual trends might be remains hard to predict. All of them have the potential to snowball and cause a domino effect that begins to alter behaviors in various other silos or sectors. But as labor appears to be evolving on a fundamental level post-pandemic, there is a distinct likelihood that the next several months will see some transformational changes in work. “Wall Street loves to see regular, consistent numbers on jobs reports,” Reed says. “I’m a little more concerned about those longer-term implications.” Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas to jwilliams@rismedia.com. The post Year-End Outlook: Labor Could Spark ‘Transformational’ Changes appeared first on RISMedia......»»

Category: realestateSource: rismediaNov 10th, 2021

Interview With Jared Bernstein From CNBC’s WEC Summit Today

Following is the unofficial transcript of a CNBC interview with White House Council of Economic Advisers Member Jared Bernstein at CNBC’s WEC Summit, which took place today, Wednesday, November 3rd. Q3 2021 hedge fund letters, conferences and more Interview With Jared Bernstein TYLER MATHISEN: But first, President Biden campaigned on issues very important to US […] Following is the unofficial transcript of a CNBC interview with White House Council of Economic Advisers Member Jared Bernstein at CNBC’s WEC Summit, which took place today, Wednesday, November 3rd. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Interview With Jared Bernstein TYLER MATHISEN: But first, President Biden campaigned on issues very important to US workers. And as the stripped down Build Back Better plan snakes its way through Congress, what can employers expect from the White House? Jared Bernstein is a member of the White House Council of Economic Advisers and your interview right now is CNBC Senior White House Correspondent, Kayla Tausche. Kayla? KAYLA TAUSCHE: Tyler, thank you and our thanks to Jared Bernstein for joining us as well. Jared, let's kick it off by talking specifically about where the White House sees the labor market right now. The US still has not regained about 5 million jobs since before the pandemic and yet workers are quitting their jobs at stunning rates. So, tell us what policies is the White House considering to either get employees and employers to create new jobs and to help them retain the workers that they have? JARED BERNSTEIN: Well, that's a great question to start us off and I'm very happy to see you and appreciative to have this opportunity. Probably the first place to start is the historical pace of job gains since President Biden took office. 600,000 jobs per month, almost 5 million jobs added since he got here. Unemployment claims now finally back down to where they were before the pandemic took hold and over 10 million job openings, another historic record. The unemployment rate at 4.8%. CBO, the Congressional Budget Office, in their pre pandemic forecast before we had the rescue plan in place, believed it was going to be many years from now before the unemployment rate fell below 5%. So I think there's just it's not at all controversial to argue that the labor market is strong, adding jobs at an historical clip, and that the fingerprints of the rescue plan, particularly shots in arms and checks in pockets helping families and businesses get to the other side of the crisis is instrumental in that regard also had positive wage growth, acceleration particularly in in sectors with strong labor demand. So, I think we're gonna continue to pull folks into a, into a strong job market. TAUSCHE: And while those programs that you mentioned Jared they did go a long way in putting money in people's pockets, there has also been this added specter of inflation during that time. And if you just look at the data over the last year from the Bureau of Labor Statistics, inflation is up 5.5% roughly over the last year. In the same time, average hourly wages are down close to 1%. So do companies just simply need to pay more to workers and in some cases, a lot more to get them in these jobs? BERNSTEIN: Well there has been considerable increase in wage offers, and by the way, we see that significantly in some sectors with very strong labor demand like leisure, hospitality restaurants, but also among newly hired workers. That's an interesting finding out of the Atlanta Fed, but let's unpack your question. It's so important. The President has consistently stated that he is very much aware of the constraints on family budgets when inflationary pressures are upon the economy and you're right, they are and they are very much intimately I would say inseparably connected to the pandemic and to the supply constraints that are a result of the pandemic. By the way, a very good way to look at this in my view probably somewhat underappreciated, is simply look at the inflation rates of every other advanced economy. They're also highly elevated. One of the drivers there by the way is, is motor vehicles and that has a lot to do once again with supply chain constraints related to the virus and, and the semiconductor issue they're in. Now in terms of real wages, if you actually look at the last few months, not year over year, which was what you were citing perfectly legitimate site by the way Kayla, that's a that's, that's a true stat. But if you look more narrowly at the recent months, whether it's the employment cost index or average pay in the establishment survey, you actually see that beating inflation. You see, you see wages, beating inflation for low wage workers, which is interesting, and that's important because of the strong labor demand story I've been telling. I think just completing this part of our analysis I'm certainly willing to talk about it more if you like. If you look at where we and every other forecaster including the Federal Reserve believe these dynamics are headed, it's for continued tightness in the labor market, the employment rate continuing to fall, wage pressures continuing to be strong and inflation to come down. So, every forecast including our own, has wages, wages beating prices once the supply constraints ameliorate. TAUSCHE: So, Jared, if you think that wage growth is actually stronger than some of this data lets on than what intangibles are missing? What do companies need to be offering their workers to entice them to take some of these jobs and what can the government provide to fill in some of those gaps? BERNSTEIN: Yeah, let me start, that’s another great question. Let me start with the second part of that question because it feeds right into of course what we're focusing on right now which is passing landmark transformative legislation both in terms of the Build Back Better plan and the infrastructure plan. I think this is so important for the audience of folks that we're talking to today both in terms of infrastructure, productivity, efficiency, getting goods to market, kind of greasing the skids of commerce, but also in terms of diversity. I know we have a lot of diversity officers in the, in the room. We are talking about the most transformative investment in children and caregiving in generations and this helps create a pathway toward it's one of the reasons why other advanced economies who have more affordable and accessible childcare have higher participation rates in the labor market, especially for women and especially for, for moms. We're talking about an investment that could provide 35 million families help through expanding the child tax credit and allow middle-income families to pay no more than 7% of their income on childcare. Again, critical pathway into the labor market. TAUSCHE: But Jared— BERNSTEIN: Sorry. TAUSCHE: No doubt, no doubt that would certainly go a long way but that is if it gets passed and right now, the path to doing so is unclear at best. I'm wondering if you could, if you could handicap for us exactly when you think we could see some of these pieces of legislation get passed and how you think they will change between now and then? BERNSTEIN: Sure. I'll get to that in a sec. I do want to go to the first part of your question though, particularly given our audience today, which what can employers do? Well, I think one of the important things is, is happening already which is employers particularly in the lower wage sectors are boosting wage offers so they're paying attention to price signals and I think that, that's something we kind of expect in this, in this sort of a labor market and that's happening. One of the areas that's important to me as someone who's done labor economics for a lot of years is, is not just the wage side of the compensation package and not even just the benefit side either though that's of course very important, but the scheduling side as well. I think to the extent that employers can help workers with tricky scheduling in an economy that has so many challenges for working families. Challenges that as I just said I think we helped to meet with our, with our reconciliation plan. I think that's really helpful. I like this idea of scheduling banks where essentially the employer tells a group of workers, I'm not gonna micromanage your schedule. It's up to you to make sure you have somebody there, those scheduling banks have actually had a good track record. In terms of the progress, look, this is, you know, this couldn't be a higher. Sorry. I don't think I've talked this much today yet so let me just get a glass, a sip of water. You know, this couldn't be a higher priority for this President and we are making progress toward the goal. Look, you know me Kayla, I'm gonna, I'm an economic, I'm an economic policymaker. I'm not the political force here and I've commented on, you know, CNBC for many years on the economics of this policy without I think, thankfully through the viewers getting deep into the political process. What I can say is that the President and our team have been working extremely hard to get the different factions of the party to support the plan and they've been making real progress. I’m hearing congressional leadership and it's up to them in terms of the timing of these votes making very positive sounds in terms of progress towards, towards the legislative goal line. TAUSCHE: There have been some very high-profile proponents of pieces of this package, I'm thinking namely about paid leave which has now entered back into at least the House draft of this package. I'm wondering where you are getting calls from did Meghan the Duchess of Sussex call you directly in addition to members of the hill to try and get this— BERNSTEIN: Yeah, we talk all the time. No, I did not from her. If she wants to call me, please do so, Meg. But no, I've talked to actually lots of different members from all sides. Remember, I've been in this swamp for, you know, two and a half decades or something like that. So I've been working with members really of both parties, mostly these but ours too, for so many years and we have great conversations and I have heard from the progressives, I've heard from the moderates, I've heard from the folks where climate is their, is their major concern. I had a great conversation, it was a private one so I'm not going to name names, with, with a, with a senator about housing policy. We have 150 billion of highly important progressive supply side adding housing policies in this plan that hasn't gotten enough attention and that's, that's on the docket, too. In terms of paid family leave, yes, I mean not well, I've heard from members but when I joined President Biden and the campaign, this was one of the first things he talked about and so we're gonna continue to fight for this, glad to hear the movement you mentioned in the House but he's not going to give up on this. That's how important he believes it is to working families. He knows personally what it's like to try to balance work and family and how important family and paid leave is to that equation. TAUSCHE: I want to pivot slightly Jared because these labor shortages are happening at a time when also employers are facing the prospect of mandates coming from the government. First it was a mandate to have individuals wear masks, face masks in certain scenarios and now a mandate for private employers with more than 100 employees to have their employees be vaccinated or be subject to a testing regime and there have been some industry organizations that have been asking the administration to delay some of these requirements because they're worried about mass resignations. And I'm wondering if a delay is something that you think has merit, if you are considering it and what you would tell some of those organizations. BERNSTEIN: Well, let me start from the economics like I always like to do then get into the more granular policy. So, I put something up on my Twitter feed the other day that was a very simple graphic. All it showed was the trajectory of the Delta caseloads, I’m sorry, the COVID caseloads, the ups and downs and of course, the most recent up and down in the Delta variant which is down about 60% off its peak from the summer and next to each hump in that trajectory, I plot I just wrote down the GDP growth rate which in the first half of this year was 6.5% on an annualized basis as you know, that is rocket fuel GDP growth and helped us build the strongest GDP recovery among the advanced economies. Last I checked we were the only one whose level of GDP is back to its pre pandemic peak. Now in the third quarter of course, GDP came in at 2% and that was the quarter where you saw that curve tick up. Now, we have forecasts for the fourth quarter where as I just mentioned, the curve is coming down again the caseload curve, and those forecasts are for 4.5% to 6%. So, the connection between a strong economy and vaccinations and the trajectory of the caseload is extremely clear to me and in fact, quite elastic. It happens very quickly. And that of course is the motivation— TAUSCHE: So are you suggesting— BERNSTEIN: Behind the vaccination program. Go ahead. TAUSCHE: So you’re suggesting that a company who is not requiring its employees to get vaccinated is sacrificing its own revenue growth in short? BERNSTEIN: You know, I would never assume to speak for an individual company. Many of them are going to face a very different outlook but I can tell you from the perspective of economic analysis that I've just shared with you and I've looked at really almost every important variable I can find, yeah, that does certainly make the case that vaccines and economic progress, strong growth, revenue growth, income growth, wage growth, jobs, GDP, industrial production, every variable I look at seems highly and positively elastic to these wiggles in the, in the caseloads. So that is, you know, that's certainly the implication of what we're seeing. TAUSCHE: And Jared you know well within the government the mandate of getting the country to full employment falls squarely to the Federal Reserve. Chair Jay Powell is speaking right now, there are several open seats on the Fed and there have, there's been some concern that the Fed has been hamstrung, has not been able to pursue some of its own priorities because of a lack of some of those chairs being filled at the Board of Governors and I'm wondering what you can say about how soon we could see some of those chairs being filled and how that will impact the trajectory for labor policy over the next few months. BERNSTEIN: Well, let me say two things about that. First thing is I'm not going to say anything about that. When I was a chin stroking pundit on CNBC, I would flap my gums and play chin music all day on a question like this, but now those kinds of things from where I sit now, those kinds of answers can move markets and certainly don't want to do that. Now, you heard the President yesterday, I think it was yesterday, maybe the day before, talking about how he's engaged in this process and will continue to be so until he names nominees, candidates but that's all I'm going to say about that. But I did want to say one other thing you know again from this perch, we don't comment on monetary policy. But one thing I did notice was that if you look at the market reaction to the Fed’s announcement that they just made about tapering, it was a very different reaction than you saw with the taper tantrum back a few years ago. And that is a sign of I'm not talking about any particular fed or any particular personnel, just from the perspective of what we as economists can learn about, not just monetary policy, but I think policy in general. That's a sign of forward guidance being used effectively to communicate actions in ways that participants understand what's coming and that's something that President Biden has tried to do on the fiscal side as well. TAUSCHE: Well, we will see if and when we get that announcement from the President for now. Jared, we appreciate your time and your perspective from the executive branch on the outlook for jobs and employment in this country and I'm sure we will speak to you soon. Jared Bernstein. BERNSTEIN: Hope so. Thank you. TAUSCHE: From the Council of Economic Advisers. Tyler. Updated on Nov 3, 2021, 5:31 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 3rd, 2021

Year-End Outlook: Real Estate Braces for Inflation, Supply Chain Disruptions

Editor’s Note: RISMedia’s Year-End Outlook series provides an in-depth analysis of the housing market’s leading indicators for economic health, and showcases expert insights on what’s to come in 2022. Inflation is not normal right now—that is something no one is disputing. Core inflation was up 4% year-over-year last month, double what the Federal Reserve has […] The post Year-End Outlook: Real Estate Braces for Inflation, Supply Chain Disruptions appeared first on RISMedia. Editor’s Note: RISMedia’s Year-End Outlook series provides an in-depth analysis of the housing market’s leading indicators for economic health, and showcases expert insights on what’s to come in 2022. Inflation is not normal right now—that is something no one is disputing. Core inflation was up 4% year-over-year last month, double what the Federal Reserve has set as a target, and overall inflation hit an alarming 5.4% in September. Essential items like groceries, energy and rent have all spiked, causing concern across broad swaths of the economy. Though many pundits have disputed the Fed’s assertion that this inflation is “transitory,” economists and other experts who spoke to RISMedia predicted that barring catastrophic, unforeseen new developments or a significant regression in the fight against the pandemic, the current path of inflation will not immediately upend the real estate industry—though inventory issues make take some time to resolve and broader policy shifts could have long-term ramifications for housing. “I expect demand to remain strong,” says Nadia Evangelou, senior economist for the National Association of REALTORS® (NAR). “We expect to be at normal levels .” Amid a world-wide supply chain crunch and a historically hot housing market, the sharp rise in inflation is actually not even one of the biggest concerns for real estate professionals going forward. Delays in building new homes—something only partially attributable to inflation and the supply chain—is likely to have a larger impact and last longer, the economists say, even if the Fed misses its goal of 2% inflation by the middle of next year. Fed Chair Jerome Powell has indicated that the central bank will begin tapering its bond purchases starting as early as this year and could start raising interest rates if inflation remains at a concerning level, with more clarity expected following the board’s next meeting on Nov. 3. Matthew Gardner, chief economist for Seattle-based independent brokerage Windermere, says that the top-level data and inflation numbers are actually not offering an appropriate, contextual picture of what is going on. He adds that rather than looking at year-over-year numbers, using an annualized comparison to February of 2020—before the onset of the pandemic—can give a more accurate reading of current inflation concerns. “It is kind of silly to look at year-over-year comparisons because they’re not informative. And they’re not informative because, look at where we were last year,” he says. “If you go back to February of last year, the compounded annual growth rate is not 4%, it’s 3%.” “So that’s better, but it’s still not good,” he admits. If you subtract one of the most extreme outliers in price increases—namely used cars which have risen close to 30%—you can get the inflation rate down to about 2.2%. “Really not terrible,” he says. This angle might help reassure people who are worried that the country is on track for any kind of runaway hyper-inflation. But there are still many questions and uncertainties that will need to be resolved in the months ahead. Jeff Cohen is an economist and professor at the University of Connecticut. He says he is less convinced that inflation will simply return to the extremely stable pattern it has held over the last decade even once supply chain and pandemic disruptions are resolved—something that optimistically could happen by the end of next year. “That doesn’t mean it’s going to be gone forever,” he warns. The Fed’s plan is far from set in stone, Cohen says, and any prediction they have made publicly or any policy that is implemented could easily be dropped depending on the month-to-month progress of the economy and the pandemic. One of his biggest concerns is the rising cost of rentals, Cohen says, which he predicts will either continue their sharp increases seen over the last couple months or at best, flatten out. Pressure on the rental markets caused by competition and the market power of institutional investors will not be solved without policy shifts and big investments in affordable housing, according to Cohen. “I don’t see them going down in the near future, just because there is a national shortage of affordable housing,” he says. From a broader numbers standpoint, Gardner says he is slightly less optimistic about inflation compared to the Fed’s broad predictions (he advises the Philadelphia branch of the bank), predicting that core inflation will peak around 5% in the first quarter of next year and not reach the target of 2% or 2.5% until the end of 2022. This is not likely to deeply affect the real estate market, though, as even a moderate increase in interest rates will fail to dampen demand for homes. The resilience of the real estate market against even significant inflationary growth can be attributed both to the fundamental principle that real estate investment is a hedge against inflation, Gardner says, along with the particular (and unprecedented) current market conditions. Brooke Dalzell is the vice president of Minute Mortgage in Arizona. She says inflation does not so far seem to be influencing people one way or another and the demand for mortgages remains red-hot. The anticipation that the Fed will begin tapering bond purchases and increasing interest rates is also not causing any significant alarm among consumers, with refinances down but new mortgages holding steady. “From a purchase standpoint, I would say we are relatively stable,” she says. “People may see inflation rise so they may cut down on spending, but as far as mortgages—the only real relationship we see is between inflation and interest rates.” The Mortgage Bankers Association has predicted that the 30-year fixed mortgage rate will hit 4% by the end of 2022 based on strong economic growth and the Fed’s plans. Dalzell says that no one can know for certain exactly where the rate will fall, but even significant increases likely will not fully stymie demand for homes. “I think the real question will be how long will inflation stay where it’s at,” she says. Evangelou says she believes part of the reason demand will slow but not falter despite the effects of inflation is the current demographic of homebuyers, who are both inelastic and zealous in their desire for homes. “Millenials are the largest cohort of homebuyers…they have all these lifestyle needs,” she says. Even in the incredibly competitive (and often over-priced) market for buyers, millennials were still buying homes, according to Evangelou, and will remain eager to do so regardless of things like mortgage rate and the price of gas and cars—at least within reason. Matt Cohen is a real estate agent for Brown Harris Stevens, focused mostly on the luxury market in New York City. He says that in his market, many upper-middle-class families have been saving money and remain eager to flex their buying power as other luxury goods remain scarce. “They can’t spend money because things are sold out, or it’s going to take a year for it to come back, or furniture is eight months delayed,” he says. “The one thing that people can do even if there is low inventory is buy real estate.” Though the New York City luxury market might differ from much of the country, from that perspective of consumer confidence, Gardner agrees that inflation is unlikely to dissuade too many potential homebuyers. “Rising inflation is unlikely to offset demand given the expectation that mortgage rates are going to rise, and people just want to lock in that historically low rate if they haven’t already. The impacts are going to be felt in the new construction arena because of price,” he says. Construction and Hyperinflation If Fed policy and pandemic recovery is successful at calming the rate of inflation, that does not necessarily mean some of the pains that real estate is going through will be alleviated. The underlying cause—pandemic disruptions and specifically, a global supply chain meltdown—are not going to be solved on Wall Street or by the Fed. Some people have worried that the economy is on track for a scenario like what was seen in the late 1970s and early 80s, where the country reached double-digit “hyperinflation” sparked by an oil crisis and wartime spending. According to Gardner, the current situation is essentially nothing like that one. “There’s all manner of things that are different,” he says. “People see this and think we’re going back there again, and we’re not.” A large portion of the products, components and commodities that are squeezing prices higher have relatively short-term fixes, Gardner says. Either through corrections to the supply chain issues, or as other pandemic-related disruptions normalize, everything from computer chips to vegetables will start reaching stores or factories in (relatively) short order. This is in contrast to the late 1970s when the United States was heavily dependent on foreign oil and took a very different approach at the policy level. At the same time, Gardner says supply-chain issues are not going to be solved overnight, and even when they are, it might not immediately bring housing inventory to a level that can meet demand, which has been the most persistent problem of the last year or so for real estate. Labor shortages, regulatory fees, land costs and risk management are all going to hamper attempts by builders to put up enough homes to meet demand, according to Gardner, even if the price of lumber and other construction materials normalize. “There’s certainly a lot of impediments,” he says. The U.S. is at least 200,000 workers short in the home-building industry, he says. At the same time, a little-known census metric that measures the number of homes currently under construction (separate from “housing starts,” which have been down nearly the entire pandemic) is actually on the rise, which Gardner says could indicate the industry is maybe more on track to catch up in inventory. “So there’s a lot of different nuances to it. But simply speaking we’re still not building enough to meet demographically driven demand,” he admits. “I think there’s still a lot of pent-up demand that is still waiting on the sidelines.” Cohen says a recent drop in lumber prices can be seen as a “bright spot,” but warns that another very unpredictable and volatile metric on the rise—fuel costs—could quickly tighten pressure on builders even as other burdens are lifted. He also warns that acquiring land in certain markets, particularly in the west and northeast where the cost of land has always been extremely high and relatively inelastic, will prevent those areas from meeting demand—at least with traditional single-family homes. Likely builders will begin replacing traditional starter homes with multi-unit townhouses, condos or cluster developments, Cohen posits, which many local governments have facilitated by relaxing zoning restrictions. This is already happening in New England and can definitely help alleviate the housing crisis, he promises, but also creates problems of its own. “So that might be one way to resolve the supply issue in some ways, but not for the people who are looking for the starter home,” he says. “You can’t get into a bidding war like that , where the house is worth $500,000 but someone is offering $1.1 million because they’re just going to use the land to build a tremendous amount of units and then sell each one for $500,000.” Another new practice that is becoming more common due to supply shortages is people buying homes that have yet to be constructed—sometimes that haven’t even begun construction. Dalzell says she has seen that scenario become much more common in her market in Arizona, and Gardner says rising inflation—even short-lived inflation—could quickly create chaos for people involved in those transactions. “If my costs go up , I’m going to pass that directly on to you,” Gardner says. “I don’t know anyone that will want to buy a home when he’s not sure what the price is going to be.” Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas to jwilliams@rismedia.com. The post Year-End Outlook: Real Estate Braces for Inflation, Supply Chain Disruptions appeared first on RISMedia......»»

Category: realestateSource: rismediaOct 29th, 2021

Transcript: Soraya Darabi

     The transcript from this week’s, MiB: Soraya Darabi, TMV, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This… Read More The post Transcript: Soraya Darabi appeared first on The Big Picture.      The transcript from this week’s, MiB: Soraya Darabi, TMV, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have an extra special guest. Her name is Soraya Darabi. She is a venture capital and impact investor who has an absolutely fascinating background working for, first with the New York Times Social Media Group then with a startup that eventually gets purchased by OpenTable, and then becoming a venture investor that focuses on women and people of color-led startups which is not merely a way to, quote-unquote, “do good” but it’s a broad area that is wildly underserved by the venture community and therefore is very inefficient. Meaning, there’s a lot of upside in this. You can both do well and do good by investing in these areas. I found this to be absolutely fascinating and I think you will also, if you’re at all interested in entrepreneurship, social media startups, deal flow, how funds identify who they want to invest in, what it’s like to actually experience an exit as an entrepreneur, I think you’ll find this to be quite fascinating. So with no further ado, my conversation with TMV’s Soraya Darabi. VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. My special guest this week is Soraya Darabi. She is the Co-Founder and General Partner of TMV, a venture capital firm that has had a number of that exits despite being relatively young, 65 percent of TMV’s startups are led by women or people of color. Previously, she was the cofounder of Foodspotting, an app named App of the Year by Apple and Wire that was eventually purchased by OpenTable. Soraya Darabi, welcome to Bloomberg. SORAYA DARABI; GENERAL PARTNER & FOUNDER; TMV: My goodness, Barry, thank you for having me. RITHOLTZ: I’ve been looking forward to this conversation since our previous discussion. We were on a Zoom call with a number of people discussing blockchain and crypto when it was really quite fascinating and I thought you had such an unusual and interesting background, I thought you would make a perfect guest for the show. Let’s start with your Manager of Digital Partnerships and Social Media at the “New York Times” when social media was really just ramping up. Tell us about what that was like. Tell us what you did in the late aughts at The Times. DARABI: Absolutely. I was fresh faced out of a university. I had recently graduated with mostly a journalism concentration from Georgetown and did a small stint in Condé Nast right around the time they acquired Reddit for what will soon be nothing because Reddit’s expecting to IPO at around 15 billion. And that experience at Reddit really offered me a deep understanding of convergence, what was happening to digital media properties as they partnered for the first time when nascent but scaling social media platforms. And so the “New York Times” generously offered me a role that was originally called manager of buzz marketing. I think that’s what they called social media in 2006 and then that eventually evolved into manager of digital partnerships and social media which, in essence, meant that we were aiming to be the first media property in the world to partner with companies that are household names today but back in the they were fairly unbalanced to Facebook and Twitters, of course, but also platforms that really took off for a while and then plateaued potentially. The Tumblers of the world. And it was responsibility to understand how we could effectively generate an understanding of the burgeoning demographics of this platform and how we could potentially bring income into The Times for working with them, but more importantly have a journalist that could authentically represent themselves on new media. And so, that was a really wonderful role to have directly out of University and then introduce me to folks with whom I still work today. DARABI: That’s quite interesting. So when you’re looking at a lot of these companies, you mentioned Facebook and Twitter and Tumbler, how do you know if something’s going to be a Facebook or a MySpace, so Twitter or a Tumbler, what’s going to survive or not, when you’re cutting deals with these companies on behalf of The Times, are you thinking in terms of hey, who’s going to stick around, wasn’t that much earlier that the dot-com implosion took place prior to you starting with The Times? DARABI: It’s true, although I don’t remember the dot-com implosion. So, maybe that naivete helped because all I had was enthusiasm, unbridled enthusiasm for these new companies and I operated then and now still with a beta approach to business. Testing out new platforms and trying to track the data, what’s scaling, what velocity is this platform scaling and can we hitch a ride on the rochet ship if they will so allow. But a lot of our partnerships then and now, as an investor, are predicated upon relationships. And so, as most, I think terrific investors that I listen to, who I listen to in your show, at least, will talk to you about the importance of believing and the founder and the founder’s vision and that was the case back then and remains the case today. RITHOLTZ: So, when you were at The Times, your tenure there very much overlapped the great financial crisis. You’re looking at social media, how did that manifest the world of social media when it looked like the world of finance was imploding at that time? DARABI: Well, it was a very interesting time. I remember having, quite literally, 30-second meetings with Sorkin as he would run upstairs to my floor, in the eighth floor, to talk about a deal book app that we wanted to launch and then he’d ran back down to his desk to do much more important work, I think, and — between the financial crisis to the world. So, 30-second meetings aside, it was considered to be, in some ways, a great awakening for the Web 2.0 era as the economy was bottoming out, like a recession, it also offered a really interesting opportunity for entrepreneurs, many of whom had just been laid off or we’re looking at this as a sizeable moment to begin to work on a side hustle or a life pursuit. And so, there’s — it’s unsettling, of course, any recession or any great awakening, but lemonade-lemons, when the opening door closing, there was a — there was a true opportunity as well for social media founders, founders focusing on convergence in any industry, really, many of which are predicated in New York. But again, tinkering on an idea that could ultimately become quite powerful because if you’re in the earliest stage of the riskiest asset class, big venture, there’s always going to be seed funding for a great founder with a great idea. And so, I think some of the smartest people I’d ever met in my life, I met at the onset of the aftermath of that particular era in time. RITHOLTZ: So you mentioned side hustle. Let’s talk a little bit about Foodspotting which is described as a visual geolocal guide to dishes instead of restaurants which sounds appealing to me. And it was named App of the Year by both Apple and Wired. How do you go from working at a giant organization like The Times to a startup with you and a cofounder and a handful of other coders working with you? DARABI: Well, five to six nights a week after my day job at the “New York Times,” I would go to networking events with technologists and entrepreneurs after hours. I saw that a priority to be able to partner from the earliest infancy with interesting companies for that media entity. I need to at least know who these founders were in New York and Silicon Valley. And so, without a true agenda other than keen curiosity to learn what this business were all about, I would go to New York tech meetup which Scott Heiferman of meetup.com who’s now in charge LP in my fund would create. And back then, the New York Tech Meetup was fewer than 40 people. I believe it’s been the tens of thousands now. RITHOLTZ: Wow, that’s … DARABI: In New York City alone. And so, it was there that I met some really brilliant people. And in particular, a gentleman my age who’s building a cloud-computing company that was essentially arbitraging AWS to repopulate consumer-facing cloud data services for enterprises, B2B2C play. And we all thought it would be Dropbox. The company ultimately wasn’t, but I will tell you the people with whom I worked with that startup because I left the “New York Times” to join that startup, to this day remain some of the most successful people in Silicon Valley and Alley. And actually, one of those persons is a partner at our firm now, Darshan. He was the cofounder of that particular company which is called drop.io. but I stayed there very quickly. I was there for about six months. But at that startup, I observed how a young person my age could build a business, raise VC, he was the son of a VC and so he was exceptionally attuned to the changing landscape of venture and how to position the company so that it would be attractive to the RREs of the world and then the DFJs. And I … RITHOLTZ: Define those for us. RREs and BFJs. DARABI: Sorry. Still, today, very relevant and very successful venture capital firms. And in particular, they were backing a lot of the most interesting ideas in Web 2.0 era when I joined this particular startup in 2010. Well, that startup was acquired by Facebook and I often say, no, thanks to me. But the mafia that left that particular startup continues to this day to coinvest with one another and help one another’s ideas to exceed. And it was there that I began to build the confidence, I think, that I really needed to explore my own entrepreneurial ideas or to help accelerate ideas. And Foodspotting was a company that I was advising while at that particular startup, that was really taking off. This was in the early days of when Instagram was still in beta and we observed that the most commonly posted photos on Instagram were of food. And so, by following that lead, we basically built an app as well that activity that continues to take place every single day. I still see food photos on Twitter every time I open up my stream. And decided to match that with an algorithm that showed folks wherever they were in the world, say in Greece, that might want spanakopita or if I’m in Japan, Okinawa, we help people to discover not just the Michelin-rated restaurants or the most popular local hunt in New York but rather what’s the dish that they should be ordering. And then the app was extremely good was populating beautiful photos of that particular dish and then mirroring them with accredited reviews from the Zagats of the world but also popular celebrity shots like Marcus Samuelsson in New York. And that’s why we took off because it was a cult-beloved app of its time back when there were only three geolocation apps in the iTunes apparently store. It was we and Twitter and Foursquare. So, there was a first-mover advantage. Looking back in hindsight, I think we sold that company too soon. OpenTable bought the business. A year and a half later, Priceline bought OpenTable. Both were generous liquidity events for the founders that enabled us to become angel investors. But sometimes I wish that that app still existed today because I could see it being still incredibly handy in my day-to-day life. RITHOLTZ: To say the least. So did you have to raise money for Foodspotting or did you just bootstrapped it and how did that experience compare with what that exit was like? DARABI: We did. We raised from tremendous investors like Aydin Senkut of Felicis Ventures whom I think of as being one of the best angel investors of the world. He was on the board. But we didn’t raise that much capital before the business is ultimately sold and what I learned in some of those early conversations, I would say, that may have ultimately led to LOIs and term sheets was that so much of M&As about wining and dining and as a young person, particularly for me, you and I discussed before the show, Barry, we’re both from New York, I’m not from a business-oriented family to say the least. My mom’s an academic, my father was a cab driver in New York City. And so, there are certain elements of this game, raising venture and ultimately trying to exit your company, that you don’t learn from a business book. And I think navigating that as a young person was complicated if I had to speak economically. RITHOLTZ: Quite fascinating. What is purposeful change? DARABI: Well, the world purpose, I suppose, especially in the VC game could come across as somewhat of a cliché. But we try to be as specific as possible when we allude to the impact that our investment could potentially make. And so, specifically, we invest in five verticals at our early stage New York City-based venture fund. We invest in what we call the care economy, just companies making all forms of care, elder care to pet care to health care, more accessible and equitable. We invest in financial inclusion. So this is a spin on fintech. These are companies enabling wealth creation, education, and most importantly literacy for all, that I think is really important to democratization of finance. We invest in the future of work which are companies creating better outcomes for workers and employees alike. We invest in the future of work which are companies creating better outcomes for workers and employers alike. We invest in purpose as it pertains to transportation. So, not immediately intuitive but companies creating transparency and efficiency around global supply chain and mobility. I’m going to talk about why we pick that category in a bit. And sustainability. So, tech-enabled sustainable solutions. These are companies optimizing for sustainability from process to product. With these five verticals combined, we have a subspecies which is that diverse founders and diverse employee bases and diverse cap table. It is not charity, it’s simply good for business. And so, in addition to being hyper specific about the impact in which we invest, we also make it a priority and a mandate at our firm to invest in the way the world truly look. And when we say that on our website, we link to census data. And so, we invest in man and women equally. We invest in diverse founders, almost all of the time. And we track this with data and precious to make sure that our investments reflect not just one zip code in California but rather America at large. RITHOLTZ: And you have described this as non-obvious founders. Tell us a little bit about that phrase. DARABI: Well, not obvious is a term you hear a lot when you go out to Silicon Valley. And I don’t know, I think it was coined by a well-known early PayPal employee turned billionaire turned investor who actually have a conference centered around non-obvious ideas. And I love the phrase. I love thinking about investment PC that are contrary because we have a contrary point of view, contrarian point of view, you often have outlier results because if you’re right, you’re taking the risk and your capturing the reward. When you’re investing in non-obvious founders, it should be that is the exact same outcome. And so, it almost sort of befuddled me as a person with a hard to pronounce name in Silicon Valley, why it was that we’re an industry that prides itself on investing in innovation and groundbreaking ideas and the next frontier of X, Y, and Z and yet all of those founders in which we were investing, collectively, tended to kind of look the same. They were coming from the same schools and the same types of families. And so, to me, there was nothing innovative at all about backing that Wharton, PSB, HBS guy who is second or third-generation finance. And what really excites me about venture is capturing a moment in time that’s young but also the energy is palpable around not only the idea in which the founder is building but the categories of which they’re tackling and that sounded big. I’ll be a little bit more speficic. And so, at TMV, we tried to see things before they’re even coming around the bend. For instance, we were early investors in a company called Cityblock Health which is offering best in class health care specifically for low income Americans. So they focus on the most vulnerable population which are underserved with health care and they’re offering them best in class health care access at affordable pricing because it’s predominantly covered through a payer relationship. And this company is so powerful to us for three reasons because it’s not simply offering health care to the elite. It’s democratizing access to care which I think is absolutely necessary in term out for success of any kind. We thought this was profoundly interesting because the population which they serve is also incredibly diverse. And so when you look at that investment over, say, a comparable company, I won’t name names, that offers for-profit health care, out-of-pocket, you can see why this is an opportunity that excites us as impact investors but we don’t see the diversity of the team it’s impact. We actually see that as their unfair advantage because they are accessing a population authentically that others might ignore. RITHOLTZ: Let me see if I understand this correctly. When you talk about non-obvious find — founders and spaces like this, what I’m hearing from you is you’re looking at areas where the market has been very inefficient with how it allocates capital … DARABI: Yes. RITHOLTZ: … that these areas are just overlooked and ignored, hey, if you want to go on to silicon valley and compete with everybody else and pay up for what looks like the same old startup, maybe it will successful and maybe it won’t, that’s hypercompetitive and hyper efficient, these are areas that are just overlooked and there is — this is more than just do-goodery for lack of a better word. There are genuine economic opportunities here with lots of potential upside. DARABI: Absolutely. So, my business partner and I, she and I found each other 20 years ago as undergrads at Georgetown but we went in to business after she was successful and being one of the only women in the world to take a shipping business public with her family, and we got together and we said we have a really unique access, she and I. And the first SPV that we collaborated on back in 2016 was a young business at the time, started by two women, that was focused on medical apparel predominantly for nurses. Now it’s nurses and doctors. And they were offering a solution to make medical apparel, so scrubs, more comfortable and more fashionable for nurses. I happen to have nurses and doctors in my family so doing due diligence for this business is relatively simple. I called my aunt who’s a nurse practitioner, a nurse her life, and she said, absolutely. When you’re working in a uniform at the hospital, you want something comfortable with extra pockets that makes you look and feel good. The VCs that they spoke to at the time, and they’ve been very public about this, in the beginning, anyway, were less excited because they correlated this particular business for the fashion company. But if you look back at our original memo which I saved, it says, FIGS, now public on the New York Stock Exchange is a utility business. It’s a uniform company that can verticalize beyond just medical apparel. And so, we helped value that company at 15 million back in 2016. And this year, in 2021, they went public at a $7 billion market cap. RITHOLTZ: Wow. DARABI: And so, what is particularly exciting for us going back to that conversation on non-obvious founders is that particular business, FIGS, was the first company in history to have two female co-founders go public. And when we think of success at TMV, we don’t just think about financial success and IRR and cash on cash return for our LPs, of course we think about that. But we also think who are we cheerleading and with whom do we want to go into business. I went to the story on the other side of the fence that we want to help and we measure non-obvious not just based on gender or race because I think that’s a little too precise in some ways. Sometimes, for us non-obvious, is around geography, I would say. I’m calling you from Athens, as you know, and in Greece, yesterday, I got together with a fund manager. I’m lucky enough to be an LP in her fund and she was talking about the average size of a seed round in Silicon Valley these days, hovering around 30 million. And I was scratching my head because at our fund, TMV, we don’t see that. We’re investing in Baltimore, Maryland, and in Austin, Texas and the average price for us to invest in the seed round is closer to 5 million or 6 million. And so, we actually can capture larger ownership of the pie early on and then develop a very close-knit relationship with these founders but might not be as networked in the Valley where there’s 30 VC funds to everyone that exist in Austin, Texas. RITHOLTZ: Right. DARABI: And so, yes, I think you’re right to say that it’s about inefficiencies in market but also just around — about being persistent and looking where others are not. RITHOLTZ: That’s quite intriguing. Your team is female-led. You have a portfolio of companies that’s about 65 percent women and people of color. Tell us how you go about finding these non-obvious startups? DARABI: It’s a good question. TMV celebrates its five-year anniversary this year. So the way we go about funding companies now is a bit different than the way we began five years ago. Now, it’s systematic. We collectively, as a partnership, there are many of us take over 50 calls a month with Tier 1 venture capital firms that have known us for a while like the work that we do, believe in our value-add because the partnership comprised of four more operators. So, we really roll up our sleeves to help. And when you’ve invested at this firms, enough time, they will write to you and say I found a company that’s a little too early for us, for XYZ reason, but it resonates and I think it might be for you. So we found some of our best deals that way. But other times, we found our deal flow through building our own communities. And so, when I first started visit as an EM, an emerging manager of a VC firm. And roughly 30 percent of LP capital goes to EM each year but that’s sort of an outsized percentage because when you think about the w-fix-solve (ph) addition capital, taking 1.3 billion of that pie, then you recognize the definition of emerging manager might need to change a bit. So, when I was starting as an EM, I recognize that the landscape wasn’t necessarily leveled. If you weren’t, what’s called the spinout, somebody that has spent a few years at a traditional established blue-chip firm, then it’s harder to develop and cultivate relationships with institutional LPs who will give you a shot even though the data absolutely points to there being a real opportunity in capturing lightning in a bottle if you find a right EM with the right idea in the right market conditions which is certainly what we’re in right now. And so, I decided to start a network specifically tailored around helping women fund managers, connecting one another and it began as a WhatsApp group and a weekly Google Meet that has now blown into something that requires a lot of dedicated time. And so we’re hiring an executive director for this group. They’re called Transact Global, 250 women ex-fund managers globally, from Hong Kong, to Luxembourg, to Venezuela, Canada, Nigeria, you name it. There are women fund managers in our group and we have one of the most active deal flow channels in the world. And so two of our TMV deals over the last year, a fintech combatting student debt and helping young Americans save for retirement at the same time, as an example, came from this WhatsApp deal flow channel. So, I think creating the community, being the change, so to speak, has been incredibly effective for us a proprietary deal flow mechanism. And then last but not least, I think that having some sort of media presence really has helped. And so, I’ve hosted a podcast and I’ve worked on building up what I think to be a fairly organic Twitter following over the years and we surprise ourselves by getting some really exceptional founders cold pitching us on LinkedIn and on Twitter because we make ourselves available as next gen EMs. So, that’s a sort of long-winded answer to your question. But it’s not the traditional means by any means. RITHOLTZ: To say the least. Are you — the companies you’re investing in, are they — and I’ll try and keep this simple for people who are not all that well-versed in the world of venture, is it seed stage, is it the A round, the B round? How far into their growth process do you put money in? DARABI: So it is a predominantly seed fund. We call our investments core investments. So, these are checks that average, 1 and 1.5 million. So for about 1.25 million, on average, we’re capturing 10-15% of a cap payable. And in this area, that’s called a seed round. It will probably be called a Series A 10 years ago. RITHOLTZ: Right. DARABI: And then we follow on through the Series A and it max around, I think, our pro rata at the B. So, our goal via Series B is to have, on average, 10% by the cap. And then we give ourselves a little bit of wiggle room with our modeling. We take mars and moonshot investments with smaller checks so we call these initial interest checks. And initial interest means I’m interested but your idea is still audacious, they won’t prove itself out for three or four years or to be very honest, we weren’t the first to get into this cap or you’re picking Sequoia over us, so we understand but let’s see if we can just promise you a bit of value add to edge our way into your business. RITHOLTZ: Right. DARABI: And oftentimes, when you speak as a former founder yourself with a high level of compassion and you promise with integrity that you’re going to work very hard for that company, they will increase the size of their round and they will carve out space for you. And so, we do those types of investments rarely, 10 times, in any given portfolio. But what’s interesting in looking back at some of our outliers from found one, it came from those initial interest checks. So that’s our model in a nutshell. We’re pretty transparent about it. What we like about this model is that it doesn’t make us tigers, we’re off the board by the B, so we’re still owning enough of the cap table to be a meaningful presence in the founder’s lives and in their business and it allows us to feel like we’re not spraying and praying. RITHOLTZ: Spraying and praying is an amusing term but I’m kind of intrigued by the fact that we use to call it smart money but you’re really describing it as value-added capital when a founder takes money from TMV, they’re getting more than just a check, they’re getting the involvement from entrepreneurs who have been through the process from startup to capital raise to exit, tell us a li bit about how that works its way into the deals you end up doing, who you look at, and what the sort of deal flow you see is like. DARABI: Well, years ago, I had the pleasure of meeting a world-class advertiser and I was at his incredibly fancy office down in Wall Street, his ad agency. And he described to me with pride how he basically bartered his marketing services for one percent of a unicorn. And he was sort of showing off of it about how, from very little time and effort, a few months, he walked away with a relatively large portion of a business. And I thought, yes, that’s clever. But for the founder, they gave up too much of their business too soon. RITHOLTZ: Right. DARABI: And I came up with an idea that I floated by Marina back in the day where our original for TMV Fund I began with the slide marketing as the future of venture and venture is the future of marketing. Meaning, it’s a VC fund where the position itself more like an ad agency but rather than charging for its services, it’s go-to-market services. You offer them free of charge but then you were paid in equity and you could quantify the value that you were offering to these businesses. And back then, people laughed us even though all around New York City, ad agencies were really doing incredible work and benefiting from the startups in that ecosystem. And so, we sort of changed the positioning a bit. And now, we say to our LPs and to our founders, your both clients of our firm. So, we do think of ourselves as an agency. But one set of our marketplace, you have LPs and what they want is crystal clear. The value that they derive from us is through a community and connectivity and co-investment and that’s it. It’s pretty kind of dry. Call me up once a year where you have an exceptional opportunity. Let me invest alongside you. Invite me to dinners four times a year, give me some information and a point of view that I can’t get elsewhere. Thank you for your time. And I love that. It’s a great relationship to have with incredibly smart people. It’s cut and dry but it’s so different. What founders want is something more like family. They want a VC on their board that they can turn to during critical moments. Two a.m. on a Saturday is not an uncommon time for me to get a text message from a founder saying what do I do. So what they want is more like 24/7 services for a period of time. And they want to know when that relationship should start and finish. So it’s sort of the Montessori approach to venture. We’re going to tell them what we’re going to tell them. Tell them what they’re telling them. Tell them what we told them. We say to founders with a reverse pitch deck. So we pitch them as they’re pitching us. Here’s what we promise to deliver for you for the first — each of the 24 months of your infancy and then we promise you we’ll mostly get lost. You can come back to use when your business is growing if you want to do it tender and we’ll operate an SPV for you for you or if you simply want advice, we’re never going to ignore you but our specialty, our black belt, if you will, Barry, is in those first 24 months of your business, that go-to-market. And so, we staffed up TMV to include, well, it’s punching above our weight but the cofounder of an exceptionally successful consumer marketing business, a gross marketer, a recruiter who helps one of our portfolio companies hire 40 of their earliest employees. We have a PR woman. You’ve met Viyash (ph), she’s exceptional with whom, I don’t know, how we would function sometimes because she’s constantly writing and re-editing press releases for the founders with which we work. And then Anna, our copywriter who came from IAC and Sean, our creative director, used to be the design director for Rolling Stone, and I can go on and on. So, some firms called us a platform team but we call it the go-to-market team. And then we promise a set number of hours for ever company that we invest into. RITHOLTZ: That’s … DARABI: And then the results — go ahead. RITHOLTZ: No, that’s just — I’m completely fascinated by that. But I have to ask maybe this is an obvious question or maybe it’s not, so you — you sound very much like a non-traditional venture capital firm. DARABI: Yes. RITHOLTZ: Who are your limited partners, who are your clients, and what motivates them to be involved with TMV because it sounds so different than what has been a pretty standard model in the world of venture, one that’s been tremendous successful for the top-tier firms? DARABI: Our LP set is crafted with intention. And so, 50% of our investors are institutional. This concludes institutional-sized family offices and family offices in a multibillions. We work with three major banks, Fortune 500 banks. We work with a couple of corporate Fortune 500 as investors or LPs and a couple of fund to funds. So that’s really run of the mill. But 50 percent of our investors and that’s why I’m in Athens today are family offices, global family offices, that I think are reinventing with ventures like, to look like in the future because wealth has never been greater globally. There’s a trillion dollars of assets that are passing to the hands of one generation to the next and what’s super interesting to me, as a woman, is that historically, a lot of that asset transferred was from father to son, but actually, for the first time in history, over 50 percent, so 51% of those asset inheritors are actually women. And so, as my business partner could tell because she herself is a next gen, in prior generations, women were encouraged to go into the philanthropic or nonprofit side of the family business … RITHOLTZ: Right. DARABI: And the sons were expected to take over the business or the family office and all of that is completely turned around in the last 10 years. And so, my anchor investor is actually a young woman. She’s under the age of 35. There’s a little bit of our firm that’s in the rocks because we’re not playing by the same rules that the establishment has played by. But certainly, we’re posturing ourselves to be able to grow in to a blue-chip firm which is why we want to maintain that balance, so 50 percent institutional and 50 percent, I would call it bespoke capital. And so, the LPs that are bespoke, we work at an Australian family office and Venezuelan family office and the Chilean family office and the Mexican family office and so on. For those family offices, we come to them, we invite them to events in New York City, we give them personalized introductions to our founders and we get on the phone with them. Whenever they’d like, we host Zooms. We call them the future of everything series. They can learn from us. And we get to know them as human beings and I think that there’s a reason why two thirds of our Fund I LPs converted over into Fund II because they like that level of access, it’s what the modern LP is really looking for. RITHOLTZ: Let’s talk a little bit about some of the areas that you find intriguing. What sectors are really capturing your attention these days? What are you most excited about? DARABI: Well, Barry, I’m most excited about five categories for which we’ve been investing for quite some time, but they’re really being accelerated due to the 2020 pandemic and a looming recession. And so, we’re particularly fascinated by not just health care investing as has been called in the past but rather the care economy. I’m not a huge fan of the term femtech, it always sounds like fembot to me. But care as it pertains to women alone is a multitrillion dollar opportunity. And so, when we think of the care economy, we think of health care, pet care, elder care, community care, personal care as it pertains to young people, old people, men, women, children, we bifurcate and we look for interesting opportunities that don’t exist because they’ve been undercapitalized, undervalued for so long. Case in point, we were early investors Kindbody, a reproductive health care company focused on women who want to preserve their fertility because if you look at 2010 census data, you can see that the data has been there for some time that women, in particular, were delaying marriage and childbirth and there are a lot of world-famous economists who will tell you this, the global population will decline because we’re aging and we’re not necessarily having as many children as we would have in the past plus it’s expensive. And so, we saw that as investors as a really interesting opportunity and jumped on the chance to ask Gina Bartasi who’s incredible when she came to us with a way to make fertility preservation plus expenses. So she followed the B2C playbook and she started with the mobile clinic that helps women freeze their eggs extensively. That company has gone on to raise hundreds — pardon me — and that company is now valued in the hundreds of million and for us, it was as simple as following our intuition as women fund managers, we know what our peers are thinking about because we talk to them all the time and I think the fact that we’re bringing a new perspective to venture means that we’re also bringing a new perspective to what has previously been called femtech. We invest in financial inclusion. Everyone in the world that’s investing fintech, the self-directed financial mobile apps are always going to be capitalized especially in a post Robin Hood era but we’re specifically interested in the democratization of access to financial information and we’re specifically interested in student debt and alleviating student debt in America because not only is it going to be one of the greatest challenges our generation will have to overcome, but it’s also prohibiting us from living out the American dream, $1.7 trillion of student debt in America that needs to be alleviated. And then we’re interested in the future of work, and long have been, that certainly was very much accelerated during the pandemic but we’ve been investing in the 1099 and remote work for quite some time. And so, really proud to have been the first check into a company called Bravely which is an HR chatbot that helps employees inside of a company chat a anonymously with HR representatives outside of that company, that’s 1099. That issue is like DEI, an inclusion and upward mobility and culture setting and what to do when you’re all of a sudden working for home. So that’s an example of a future of work business. And then in the tech-enabled sustainable solutions category, it’s a mouthful, let’s call that sustainability, we are proud to have been early investors of a company called Ridwell, out of Seattle Washington, focused on not just private — privatized recycling but upcycling and reconnaissance. Where are our things going when we recycle them? For me, it always been a pretty big question. And so, Ridwell allows you to re and upcycle things that are hard to get rid of out of your home like children’s eyeglasses and paints and battery, single-use plastic. And it shows you where those things are going which I think is super cool and there’s good reason why it has one of the highest NPS scores, Net Promoter Scores, of any company I’ve ever worked with. People are craving this kind of modern solution. And last but not least, we invest in transportation and part because of the unfair advantage my partner, Marina, brings to TMV as she comes from a maritime family. And so, we can pile it, transportation technology, within her own ecosystem. That’s pretty great. But also, because we’re just fascinated by the fact that 90 percent of the world commodities move on ship and the biggest contributor to emissions in the world outside of corporate is coming from transportation. SO, if we can sort of figure out this industry, we can solve a lot of the problems that our generation are inheriting. Now, these categories might sound massive and we do consider ourselves a generalist firm but we stick to five-course sectors that we truly believe in and we give ourselves room to kick out a sector or to add a new one with any given new fund. For the most part, we haven’t needed to because this remain the categories that are not only most appealing to us as investors but I think paramount to our generation. RITHOLTZ: That’s really intriguing. Give us an example of moonshot or what you called earlier, a Mars shot technology or a company that can really be a gamechanger but may not pay off for quite a while. DARABI: We’ve just backed a company that is focusing on food science. Gosh, I can’t give away too much because they haven’t truly launched in the U.S. But maybe I’ll kind of allude to it. They use crushed produce, like, crush potato skins to make plastic but biodegrades. And so, it’s a Mars shot because it’s a materials business and it’s a food science business rolled off into both the CPG business and an enterprise business. This particular material can wrap itself around industrial pellets. Even though it’s audacious, it’s not really a Mars shot when you think about the way the world is headed. Everybody wants to figure out how do we consume less plastic and recycle plastic better. And so, if there are new materials out there that will not only disintegrate but also, in some ways, feed the environment, it will be a no-brainer and then if you add to the equation the fact that it could be maybe not less expensive but of comparable pricing to the alternative, I can’t think of a company in the world that wouldn’t switch to this solution. RITHOLTZ: Right. So this is plastic that you don’t throw away. You just toss in the garden and it becomes compost? DARABI: Yes, exactly. Exactly. It should help your garden grow. So, yes, so that’s what I would call a Mars shot in some ways. But in other ways, it’s just common sense, right? RITHOLTZ: So let’s talk a little bit about your investment vehicles. You guys run, I want to make sure I get this right, two funds and three vehicles, is that right? DARABI: We have two funds. They’re both considered micro funds because they’re both under 100 million and then we operate in parallel for SPVs that are relatively evergreen and they serve as opportunistic investments to continue to double down on our winners. RITHOLTZ: SPV is special purpose investment … DARABI: Vehicles. Yes. RITHOLTZ: Right. DARABI: And the PE world, they’re called sidecars. RITHOLTZ: That’s really interesting. So how do these gets structured? Does everything look very similar when you have a fund? How quickly do you deploy the capital and typically how long you locked for or investors locked up for? DARABI: Well investors are usually in private equity are VC funds locked up for 10 years. That’s not usual. We have shown liquidity faster, certainly, for Fund I. It’s well in the black and it’s only five years old less, four and a half years old. So, how do we make money? We charge standard fees, 2 on 20 is the rubric of it, we operate by. And then lesser fees for sidecars or direct investments. So that’s kind of how we stay on business. When you think about an emerging manager starting their first fund, management fees are certainly not so we can live a lavish rock and roll life on a $10 million fund with a two percent management fee, we’re talking about 200K for the entire business to operate. RITHOLTZ: Wow. DARABI: So Marina and I, not only anchored our first fund with their own capital but we didn’t pay ourselves for four years. It’s not glamorous. I mean, there’s some friends of mine that thing the venture capital life is glam and it is if you’re on Sand Hill Road. But if you’re an EM, it’s a lot more like a startup where you’re burning the midnight oil, you are bartering favors with your friends, and you are begging the smartest people you know to take a chance on you to invite you on to their cap table. But it somehow works out because we do put in that extra effort, I think, the metrics, certainly for Fund I have shown us that we’re in this for the long haul now. RITHOLTZ: So your fund 1 and Fund 2, are there any plans of launching Fund III? DARABI: Yes. I think that given the proof points between Fund I and Fund II and a conversation that my partner and I recently had, five years out, are we in this? Do we love this? We do. OK. This is our life’s work. So you can see larger and more demonstrable sized funds but not in an outsized way, not just because we can raise more capital now but because we want to build out a partnership and the kind of culture that we always dreamed of working for back when we were employees, so we have a very diverse set of colleagues with whom we couldn’t operate and we’ll be adding to the partnership in the next two or three years which is really exciting to say. So, yes, the TMV will be around for a while. RITHOLTZ: That’s really interesting. I want to ask you the question I ask any venture capitalist that I interview. Tell us about your best and worst investments and what did you pass on that perhaps you wish you didn’t? DARABI: Gosh. The FOMO list is so long and so embarrassing. Let me start with what I passed on that I regret. Well, I don’t know she really would have invited me to invest, but certainly, I had a wonderful conversation a peer from high school, Katrina Lake, when she was in beta mode for Stitch Fix. I think she was still at HBS at the time or had just recently graduated from Harvard. When Katrina and I had coffee in Minneapolis were we went to high school and she was telling me about the Netflix for clothing that she was building and certainly I regret not really picking up on the clues that she was offering in that conversation. Stitch Fix had an incredible IPO and I’m a proud shareholder today. And similarly, when my friend for starting Cloudflare which luckily they did bring me in to pre-IPO and I’m grateful for that, but when they were starting Cloudflare, I really should have jumped on that moment or when my buddy Ryan Graves whom I still chat with pretty frequently was starting out Uber in beta with Travis and Garrett, that’s another opportunity that I definitely missed. I was in Ireland when the Series A term sheet assigned. So there’s such a long laundry list of namedropped, namedropped, missed, missed, missed. But in terms of what I’m proud of, I’d say far more. I don’t like Sophie’s Choice. I don’t like to cherry pick the certain investments to just brag about them. But we’ve talked about someone to call today, I’d rather kind of shine a light — look at my track record, right? There’s a large realized IRR that I’m very proud of. But more on the opportunity of the companies that we more recently backed that prevent damages (ph) of CRM for oncology patient that help them navigate through the most strenuous time of their life. And by doing so, get better access to health care. And we get to wrote that check a couple of months ago. But already, it’s becoming a company that I couldn’t be more excited about because if they execute the way I think Shirley and Victor will, that has the power to help so many people in a profound way, not just in the Silicon Valley cliché way of this could change the world but this could actually help people receive better care. So, yes, I’m proud of having been an early investor in the Caspers of the world. Certainly, we’re all getting better sleep. There’s no shame there. But I’m really excited now today at investing in financial inclusion in the care economy and so on. RITHOLTZ: And let’s talk a little bit about impactful companies. Is there any different when you’re making a seed stage investment in a potentially impactful company versus traditional startup investing? DARABI: Well, pre-seed and seed investing isn’t a science and it’s certainly not a science that anyone has perfected. There are people who are incredibly good at it because they have a combination of luck and access. But if you’re a disciplined investor in any asset class and I talk to my friends who run hedge funds and work for hedge funds about 10 bets that they take a day and I think that’s a lot trickier than what I do because our do due diligence process, on average, takes an entire quarter of the year. We’re not making that many investments each year. So even though it sounds sort of fruity, when you look at a Y Combinator Demo Day, Y Comb is the biggest accelerator in Silicon Valley and they produce over 300 companies, three or four times a year. When you look at the outsized valuations coming out of Y Comb, it’s easy to think that starting company is as simple as sort of downloading a company in a Box Excel and running with it. But from where we sit, we’re scorching the earth for really compelling ideas in areas that have yet to converge and we’re looking for businesses that may have never pitched the VC before. Maybe they’re not even seeking capital. Maybe it’s a company that isn’t so interested in raising a penny eventually because they don’t need to. They’re profitable from day one. Those are the companies that we find most exciting because as former operators, we know how to appeal to them and then we also know how to work with them. RITHOLTZ: That’s really interesting. Before I get to my favorite question, let me just throw you’re a curveball, tell me a little bit about Business Schooled, the podcast you hosted for quite a while. DARABI: So, Synchrony, Sync, came to me a few years ago with a very compelling and exciting opportunity to host a podcast with them that allowed me a fortunate opportunity to travel the country and I went to just under a dozen cities to meet with founders who have persevered past their startup phase. And what I loved about the concept of business school is that the cities that I hosted were really focused on founders who didn’t have access to VC capital, they put money on credit card. So I took SBA loans or asked friends and family to give them starter capital and then they made their business work through trying times and when you pass the five-year mark for any business, I’m passing it right now for TMV, there’s a moment of reflection where you can say, wow, I did it. it’s incredibly difficult to be a startup founder, more than 60 percent of companies fail and probably for good reason. And so, yes, I hosted business school, Seasons 2 and 3 and potentially there will be more seasons and I’m very proud of the fact that at one point we cracked the top 20 business podcasts and people seem to be really entertained through these conversations with insightful founders who are vulnerable with me about what it was like to build their business and I like to think they were vulnerable because I have a good amount of compassion for the experience of being founder and also because I’m a New Yorker and I just like to talk. RITHOLTZ: You’re also a founder so there’s going to be some empathy that’s genuine. You went through what they’re going through. DARABI: Exactly. Exactly. And so, what you do, Barry, is quite similar. You’re — you host an exceptionally successful business podcast and you’re also an allocator. You know that it’s interesting to do both because I think that being an investor is a lot like being a journalist. In both professions, you won’t succeed unless you are constantly curious and if you are having conversations to listen more than you speak. DARABI: Well, I’ll let you in on a little secret since it’s so late in the podcast and fewer people will be hearing this, the people I invite on the show are essentially just conversations I want to have. If other people come along and listen, that’s fantastic. But honestly, it’s for an audience of one, namely me, the reason I wanted to have you on is because I’m intrigued by the world of venture and alternatives and impact. I think it’s safe to say that a lot of people have been somewhat disappointed in the results of ESG investing and impact investing that for — it’s captured a lot more mindshare than it has captured capital although we’re seeing signs that’s starting to shift. But then the real question becomes, all right, so I’m investing less in oil companies and more in other companies that just happen to consume fossil fuels, what’s the genuine impact of my ESG investing? It feels like it’s sort of de minimis whereas what you do really feels like it has a major impact for people who are interested in having their capital make a positive difference. DARABI: Thank you for saying that. And I will return the compliment by saying that I really enjoyed getting to know you on our one key economist Zoom and I think that you’re right. I think that ESG investing, certainly in the public markets has had diminished returns historically because the definition has been so bizarre and so all over the place. RITHOLTZ: Right. DARABI: And I read incredible books from people like Antony Bugg-Levine who helps coin the term the Rockefeller Foundation, who originally coined the term you read about, mortgage, IRR and IRS plus measurement and it’s so hard to have just standardization of what it means to be an impact investor and so it can be bothered but we bother. Rather, we kind of come up with our own subjective point of view of the world and we say what does impact mean to us? Certainly, it means not investing in sin stocks but then those sin stocks have to begin somewhere, has to begin with an idea that somebody had once upon a time. And so, whether we are investing in the way the world should look from our perspective. And with that in mind, it doesn’t have to be impact by your grandpa’s VC, it can be impact from modern generation but simply things that behave differently. Some folks with their dollars. People often say, well, my ESG portfolio is underperforming. But then if you dig in to the specifics, are you investing in Tesla? It’s not a pretty good year. Did you back Beyond Meat? Had a great year. And so, when you kind of redefine the public market not by a sleeve and a bank’s version of a portfolio, but rather by company that you think are making demonstrable change in the world, then you can walk away, realizing had I only invested in these companies that are purpose driven, I would have had outsized returns and that’s what we’re trying to deliver on at TMV. That’s the promise. RITHOLTZ: Really, really very, very intriguing. I know I only have you for a few minutes so let’s jump to my favorite questions that I ask all of our guests starting with tell us what you’re streaming these days. Give us your favorite, Netflix, Amazon Prime, or any podcast that are keeping you entertained during the pandemic. DARABI: Well, my family has been binging on 100 Foot Wave on HBO Max which is the story of big wave surfer Garrett McNamara who is constantly surfing the world’s largest waves and I’m fascinated by people who have a mission that’s sort of bigger than success or fame but they’re driven by something and part of that something is curiosity and part of it is insanity. And so not only is it visually stunning to kind of watch these big wave surfers in Portugal, but it’s also a mind trip. What motivates them to get out of bed every day and potentially risk their lives doing something so dangerous and so bananas but also at the same time so brave and heroic. So, highly recommend. I am listening to too many podcasts. I listen to, I don’t know, a stream of things. I’m a Kara Swisher fan, Ezra Klein fan, so they’re both part of the “New York Times” these days. And of course, your podcast, Barry. RITHOLTZ: Well, thank you so much. Well, thank you so much. Let’s talk a little bit about who your early mentors were and who helped shape you career? DARABI: It’s going to sound ungrateful but I don’t think, in like a post lean in definition of the word, I ever truly had a mentor or a sponsor. Now, having said that, I’ve had people who really looked at for me and been incredibly gracious with their time and capital. And so, I would absolutely like to acknowledge that first and foremost. I think about how generous Adam Grant has been with his time and his investments for TMV in Fund I and Fund II and he’s a best-selling author and worked on highest-rated business school professor. So shout out to Adam, if he’s listening or Beth Comstock, the former Vice Chair of GE who has been instrumental in my career for about a decade and a half now. And she is also really leaning in to the TMV portfolio and has become a patient of Parsley Health, an early investment of ours and also an official adviser to the business. So, people like Adam and Beth certainly come to mind. But I don’t know, I just — I’m not sure mentors really exist outside of corporate America anymore and part of the reason why we started Transact Global is to kind of foster the concept of the peer mentor, people who are going through the same thing as you at the same time and allowing that hive mentality with an abundance mentality to catalyze people to kind of go further and faster. RITHOLTZ: Let’s talk about some of your favorite books and what you might reading right now. DARABI: OK, so in the biz book world, because I know your listeners as craving, I’m a big fan of “Negotiation Genius.” I took a crash course with one of the authors, Max Bazerman at the Kennedy School and it was illuminating. I mean, he’s one of the most captivating professors I’ve ever had the pleasure of hearing lecture and this book has really helped me understand the concept of the ZOPA, the Zone of Possible Agreement, and how to really negotiate well. And then for Adam whom I just referenced, of all of his incredible books, my favorite is Give and Take because I try to operate with that approach of business. Give more than you take and maybe in the short term, you’ll feel depleted but in the long term, karma pays off. But mostly, Barry, I read fiction. I think the most interesting people in the world or at least the most entertaining at dinner parties are all avoid readers of fiction and history. So I recently reread, for instance, all of my favorite short stories from college, from Dostoyevsky’s “A Gentle Creature” to “Drown” Junot Diaz. “Passing” by Nella Larsen, “The Diamond as Big as the Ritz” by Fitzgerald. Those are some of my very favorite stories of all time. And my retirement dream is to write a book of short stories. RITHOLTZ: Really, really quite intriguing. Are they all available in a single collection or these just, going back to your favorites and just plowing through them for fun? DARABI: Those are just going back to my favorites. I try to re-read “Passing” every few years which is somehow seems to be more and more relevant as I get older and Junot Diaz has become so incredibly famous when I first read “Drown” about 20 years ago which is an original collection of short stories that broadened my perspective of why it’s important to think about a broader definition of America, I guess. And, yes, no, that’s just — that was just sort of off the top of my head as the offering of a few stories that I really love, no collection. RITHOLTZ: That’s a good collection. And we’re down to our final two questions. What sort of advice would you give to a recent college grad who was interested in a career in either venture capital or entrepreneurship? DARABI: Venture capital or entrepreneurship. Well, I would say, learn as early as possible how to trust your gut. So, this could mean a myriad of things. As an entrepreneur, it could mean under the halo effect of an institution, university or high school or maybe having a comfortable day job, tinker with ideas, get feedback on that idea, don’t be afraid of looking or sounding dumb and build that peer network that I described. People who are rooting you on and are also insatiably curious about wonky things. And I would say that for venture capital, similar play on the same theme, but whether it’s putting small amounts of money into new concept, blockchain investing, or whether it’s meeting with entrepreneurs and saying maybe I only have $3,000 save up but I believe in you enough to bet amongst friends in Brooklyn on your concept if you’ll have me as an investor. So, play with your own money because what it’s really teaching you in return is how to follow instincts and to base pattern recognition off your own judgement. And if you do that early on, overtime, these all become datapoints that you can point to and these are lessons that you can glean while not taking the risk of portfolio management. So, I guess the real advice to your listeners is more action, please. RITHOLTZ: Really very, very intriguing. And our final question, what do you know about the world of venture investing today that you wish you knew 15 or 20 years ago when you first getting started? DARABI: Twenty years ago, I was a bit of a Pollyanna and I thought every wonderful idea that simply is built by smart people and has timed the market correctly will work out. And I will say that I’m slightly more jaded today because of the capital structure that is systematically allowing the biggest firms in the world to kind of eat up a generous portion of, let’s call it the LP pie, which leaves less capital available to the young upstart VC firms, and of course I’m biased because I run one, that are taking outsized risks on those non-obvious ideas that we referenced. And so, what I wish for the future is that institutional capital kind of reprioritizes what it’s looking for. And in addition to having a bottom line of reliable and demonstrable return on any given investment, there are new standards put into play saying we want to make sure that a portion of our portfolio goes to diverse managers. Because in turn, we recognize that they are three times more likely to invest in diverse founders or we believe in impact investing can be broader than the ESG definitely of a decade ago, so we’re coming up with our own way to measure on sustainability or what impact means to us. And if they go through those exercises which I know is hard because, certainly, I’m not trying to add work to anyone’s plate, I do think that the results will more than make up for it. RITHOLTZ: Quite intriguing. Thank you, Soraya, for being so generous with your time. We have been speaking with Soraya Darabi who is the Co-Founder and General Partner at TMV Investments. If you enjoy this conversation, well, be sure and check out any of the prior 376 conversations we’ve had before. You can find those at iTunes or Spotify, wherever you buy your favorite podcast. We love your comments, feedback, and suggestions. Write to us at MIB podcast@bloomberg.net. You can sign up for my daily reads at ritholtz.com. Check out my weekly column at bloomberg.com/opinion. Follow me on Twitter @ritholtz. I would be remiss if I did not thank the crack team that helps me put these conversations together each week. Tim Harrow is my audio engineer. Paris Walt (ph) is my producer. Atika Valbrun is our project manager, Michael Batnick is my head of research. I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio.   ~~~     The post Transcript: Soraya Darabi appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureOct 20th, 2021

China has at least 65 million empty homes - enough to house the entire population of France. It offers a glimpse into the country"s massive housing market problem.

In the US and Japan, abandoned homes have earned cities the titles of "ghost towns." But China's are different - they're not abandoned, just empty. Unfinished buildings and vacant streets in Xiangluo Bay. Yujiapu & Xiangluo Bay, a new central business district under construction in Tianjin, was been expected to be China's Manhattan. Now it's a Ghost city. Zhang Peng / Contributor / Getty Images One-fifth of the homes in China - at least 65 million units - are empty. That means there's enough empty real estate in the country to house the entire population of France. China's ghost cities are a sprawling testament to its reliance on real estate as a driver of economic growth, and in its belief in the sector as a safe investment. See more stories on Insider's business page. If you drive an hour or two outside of Shanghai or Beijing, you'll find something odd. The cities are still tall, and they're still modern. They're also, generally, in good condition. But unlike their bustling, Tier 1-city counterparts, they're basically empty.These are China's "ghost cities."Their existence has been well-documented. In one prominent example, CBS' 60 Minutes ran a 2013 segment on China's ghost towns that opened with correspondent Lesley Stahl on a major road at rush hour with barely a car in sight.But as China's real-estate market has risen to the forefront of the global conversation with Evergrande's $300 billion debt looming large, so, too, have ghost towns become a renewed source of interest. While they're a testament to China's reliance on real estate as a driver of economic growth and in its belief in the sector as a safe investment, their exact quantity is hard to define.Li Gan is a professor of economics at Texas A&M University and the director of the Survey and Research Center for China Household Finance at Chengdu's Southwestern University of Finance and Economics. He's also considered one of the top experts on China's housing market. When I asked him how many ghost towns there are in China, he didn't have an answer."I don't know if there's any definition of 'ghost town,'" he said. "So I don't know if there's any number." What are China's ghost towns?The most famous of China's ghost towns may be Ordos New Town, also known as Kangbashi, in Inner Mongolia.The city was designed to house one million people, a number that was later scaled back to 300,000, Insider's Melia Robinson previously reported. But as of 2016, a mere 100,000 people lived in it. Kangbashi eventually managed to lure in residents after China moved some of its top schools into the city, prompting students and their families to follow suit, Nikkei reported earlier this year.In 2015, photographer Kai Caemmerer traveled to China to explore ghost cities. His photos showcase endless rows of high-rises with barely any indication of human life. They're photos, in fact, that might remind people of what locked-down cities around the world looked like during the pandemic.These unoccupied units constitute a significant portion of China's enormous housing market, which is twice the size of the US residential market and hit $52 trillion in value in 2019. Data from the most recently published China Household Finance Survey, which Gan runs, shows that 21% of homes - some 65 million homes - were vacant as of 2017, The Wall Street Journal reported.That means there are enough empty units in China to house the entire population of France.But unlike parts of the US and Japan, where unoccupied homes in various states of abandonment and decay have earned cities and regions the titles of "ghost towns," China's are different. They're not abandoned - they're just unoccupied.As Gan put it, these ghost cities are "a unique China phenomenon." The empty street in Kangbashi district, Ordos city, Inner Mongolia, on Feb. 16, 2017. A large number of new style buildings were built, but many were suspended due to lack of continuous financial support. South China Morning Post / Contributor How did China end up with all this empty real estate?The first thing to understand about China's ghost cities is that these are not cities in states of disrepair. Instead, they are full of new builds that were bought as investments. They're also a symptom of mismatched supply and demand."These homes being empty means they are sold out to investors and buyers, but not occupied by either the owners or renter," Dr. Xin Sun, a senior lecturer in Chinese and East Asian Business at King's College London, told Insider.On the supply side, Sun said, the government gets big sales revenue from leasing out land to developers. "This gives the government very strong incentive to encourage development instead of limiting it," he said.Every year, China starts building 15 million new homes - five times as many as the US and Europe combined, the Economist reported in January.In addition to the government promoting development and driving supply up, there's the matter of China's urbanization rate. As of 2020, 61% of China's population lives in cities, up from 35.8% of its population 20 years earlier, data from the World Bank shows. However, Gan said there are flaws in China's urbanization rate metrics, one of which is tied to reclassified areas. When rural areas are reclassified as urban, the people in those areas already have houses. So while they never moved, and won't need a new place to live, they still contribute to the urbanization rate, he said."Part of the problem is that China overestimated its urbanization rate - how many people would want to move from rural to urban areas," Gan said.A culture of real-estate investmentOn the demand side, the general upward trend of house prices has spawned huge demand for second and third properties, Sun said."Within two decades, house prices have grown multiple times in many places, including major cities," Sun said. "Most people in China haven't experienced a substantial real-estate bubble burst like what the US experienced in 2008 or Japan in the 1990s.""This leads to a strong popular belief that real estate is the best way to preserve and generate wealth," Sun said. "And this stimulates the demand for buying additional properties."Homeownership rates in China are high: More than 90% of households are homeowners, according to a January research paper on homeownership in China from the National Center for Biotechnology Information. More than 20% of homeowners in China own more than one home. The US, for comparison, has a 65% homeownership rate. Real-estate holdings also account for an outsized proportion of household wealth in China: 70% of household assets - far higher than what you'd find in western economies - are held in real estate.However - and this is where the mismatch comes into play - demand for units has been affected by a series of factors, said Bernard Aw, an economist overseeing Asia Pacific for Coface. Amongst these factors is the increasing unaffordability of homes, an aging population, and slowing population growth. Aw pointed to China's 2020 census, which recorded the slowest population growth since the 1970s."They built an oversupply, and then they sold it," Gan said. "And that's why you see the vacancies." Residential buildings in which only few people actually living in Kangbashi district, Ordos city, Inner Mongolia, on Feb. 16, 2017. South China Morning Post / Contributor While the Evergrande crisis looms, China has ways of mitigating risk - including stopping home salesEvergrande has more than 1,300 developments spread across 280 cities in China, which collectively house more than 12 million people, its website states. As Insider's Matthew Loh recently reported, that means more people live in Evergrande properties than in entire countries, like Greece, Portugal, or Sweden.But Evergrande also has $300 billion in debt, making it the most indebted company in the world; it has 1.6 million undelivered apartments hanging in the balance; and it keeps missing its bond payments.Despite the enormity of both Evergrande's scale and debt, the developer accounts for a fraction of China's housing woes. "Evergrande is linked to the vacancy problem, but you cannot blame them for it," Gan said. "Their market share in China is still small.""They're both part of a big problem," Gan added, pointing to Evergrande and the vacancy rate. An aerial view from a drone of the Evergrande City on September 24,2021 in Wuhan, Hubei Province, China. Getty Images In 2017, Bloomberg described Beijing's nightmare scenario as one in which people rush to sell off their second properties if cracks in the market appear, thereby sending prices on a downward spiral. When I asked Gan if this is the scenario currently unfolding in China, he said it's not - but not because there aren't cracks in the market.Instead, the government is making it so difficult to complete a sale that it's dissuading homeowners from selling, Gan said."China can stop a transaction. The government can change the number of years you have to own a home. Or if prices are too low, the government won't give you a certificate of sale," Gan said. "That is what's happening now.""You won't see the price drop substantially, but you will see the transaction volume drop massively," he added. "They'll stop the sale. By doing that, they can prevent the look of a massive price drop. They can prevent the crash."This very move - suppressing home sales - stands to hurt those who need to sell their homes to access cash, Gan said. "Real estate is a massive chunk of peoples' wealth," he said. "If they need that wealth for education, or health problems, or retirement, the liquidity sellers will suffer."Gan stressed that the stopping of sales is not directly, or singularly, linked to Evergrande's debt crisis: "This was happening before Evergrande became evident," he said.Heightened contagion fearsIn addition to liquidity sellers, households who own only one home face the greatest risk, the experts said."People who own one home, because of high prices and low income, they have some risk. For many of them, their down payment is borrowed from friends, from relatives - not from banks," Gan said.It's a different story for well-off families with money invested in second and third properties, Sun said: "The risk of default for these families is relatively low unless a massive, unprecedented economic crisis leads to massive unemployment.""But aside from that worst-case scenario, the risk of default is relatively low," Sun added. On a broader scale, Evergrande poses a contagion risk to the entire Chinese economy. Experts say Evergrande's debt problems could affect other property developers in China and potentially create a whole new wave of defaults. Just last week, Chinese property developer Fantasia missed a $206 million repayment deadline. And a leaked letter from September 2020 shows the company's debts are tied to at least 128 banks, Reuters reported.Another very real danger is that the Evergrande crisis stands to change China's perception of real estate as a safe investment, Sun said. Given that the real estate sector makes up 29% of the country's GDP, a softening of trust could send shockwaves through the Chinese economy. "The government is heavily reliant on households continuing to invest in real estate. So if the bubble bursts, it will inevitably compromise peoples' confidence in real estate and undermine their perception of real estate as the best way to preserve and generate wealth," Sun said. "That means a slowdown in real estate will cause a deterioration of economic growth and government finance."Read the original article on Business Insider.....»»

Category: worldSource: nytOct 14th, 2021

The Upshots Of The New Housing Bubble Fiasco

The Upshots Of The New Housing Bubble Fiasco Authored by MN Gordon via EconomicPrism.com, “The free market for all intents and purposes is dead in America.” - Senator Jim Bunning, September 19, 2008 House Prices Go Vertical The epic housing bubble and bust in the mid-to-late-2000s was dreadfully disruptive for many Americans.  Some never recovered.  Now the central planners have done it again… On Tuesday, the Federal Housing Finance Agency (FHFA) released its U.S. House Price Index (HPI) for September.  According to the FHFA HPI, U.S. house prices rose 18.5 percent from the third quarter of 2020 to the third quarter of 2021. By comparison, consumer prices have increased 6.2 from a year ago.  That’s running hot!  But 6.2 percent consumer price inflation is nothing.  House prices have inflated nearly 3 times as much over this same period. Here in the Los Angeles Basin, for example, things are so out of whack you have to be rich to afford a 1,200 square foot fixer upper in a modest area.  Yet the clever fellows in Washington have just the solution. Massive house price inflation has prompted the FHFA, and the government sponsored enterprises (GSEs) it regulates, Fannie Mae and Freddie Mac, to jack up the limits of government backed loans to nearly a million bucks in some areas. Specifically, the baseline conforming loan limit for 2022 will be $647,000, up nearly $100,000 from last year.  In higher cost areas, conforming loans are 150 percent of baseline – or $970,800.  What gives? If you recall, ultra-low interest rates courtesy of the Federal Reserve following the dot com bubble and bust provided the initial gas for the 2000s housing bubble.  However, the housing bubble was really inflated by Fannie Mae and Freddie Mac.  The GSEs relaxed lending standards and, thus, funneled a seemingly endless supply of credit to the mortgage market. The stated objective of these GSEs was to make housing affordable for Americans.  But their efforts did the exact opposite. The GSEs puffed up the housing bubble to a place where average Americans had no hope of ever being able to afford a place of their own.  Then, when the pool of suckers dried up, about the time rampant fraud and abuse cracked the credit market, people got destroyed. If you also recall, it wasn’t until credit markets froze over like the Alaskan tundra in late 2008 that the Fed first executed the radical monetary policies of quantitative easing (QE).  To be clear, QE had nothing to do with the last housing bubble; ultra-low interest rates and GSE intervention did the trick on their own.  QE came after. But now, in the current housing bubble incarnation, the Fed’s been buying $40 billion in mortgage backed securities per month since June 2020.  Is there any question why house prices have gone vertical over this time? The Fed is now tapering back its mortgage and treasury purchases.  This comes too little too late.  And with Fannie Mae and Freddie Mac now jacking up their conforming loan limits, house prices could really jump off the charts. We’ll have more on the current intervention efforts of these GSEs in just a moment.  But first, to fully appreciate what they are up to, we must revisit the not too distant past… Socialized Losses A moral hazard is the idea that a person or party shielded from risk will behave differently than if they were fully exposed to the risk.  A person who has automobile theft insurance, for instance, may be less careful about securing their car because the financial consequence of a stolen car would be endured by the insurance company. Financial bail-outs, of both lenders and borrowers, by governments, central bankers, or other institutions, produce moral hazards; they encourage risky lending and risky speculation in the future because borrowers and lenders believe they will not carry the full burden of losses. Do you remember the Savings and Loan crisis of the 1980s? The U.S. Government picked up the tab –  about $125 billion (a hefty amount at the time) – when over 1,000 savings and loan institutions failed.  What you may not know is the seeds of crisis were propagated by Franklin Delano Roosevelt during the Great Depression when he established the Federal Deposit Insurance Company (FDIC) and the Federal Saving and Loan Insurance Company (FSLIC). From then on, borrowers and bank lenders no longer had concern for losses – for they would be covered by the government.  The Savings and Loan crisis confirmed this, and further propagated the moral hazard culminating in the subprime lending meltdown. Obama’s big bank bailout of 2008-09 socialized the losses.  Then the Fed’s QE and ultra-low interest rates furthered the moral hazard.  These are now the origins of the current housing and mortgage market bubble…and future bust. By guaranteeing mortgage securities up to nearly $1 million in some areas the government encourages risky lending by banks and speculation by investors.  Banks are less prudent about who they loan money to because the loans will be securitized and sold to investors.  Similarly, investors speculate on these securities because they are guaranteed by the government. Once again, the government is promoting a “heads, I win…tails, you lose” milieu where banks and investors reap big profits taking on big risks and where the losses are socialized by tax payers.  It also sets the stage for massive grift… The Anatomy of a Swindler FDR – the thirty-second U.S. President – was responsible for setting up Fannie Mae.  But another FDR – Franklin Delano Raines – was responsible for running it into the ground. The son of a Seattle janitor, FDR grew up knowing what it was like to have not.  He concluded at a young age it was better to have. Yet it was while mixing with Ivy Leaguers at Harvard University and Harvard Law School where he really refined his thinking.  He came to believe the government should be responsible for supplying the have nots with tax payer sponsored philanthropy. FDR came out of school with the wide eyed ambition of a lab rat.  He was determined to sniff out his way to wealth…and once and for all, find that ever illusive cheese at the end of the maze. The first corner he peered around smelled remarkably prospective.  But he came up empty.  Three years in the Carter Administration didn’t offer the compensation he’d dreamed of. To have was better, remember.  The next corner FDR peered around was much more lucrative.  He did an 11 year stint at an investment bank. But it was in 1991 when FDR got his big break.  For it was then that he became Fannie Mae’s Vice Chairman.  And it was then that he garnered hands on access to muck with the lives of millions.  Still, he wasn’t quite sure how to go about it. To learn such tips and tricks, FDR studied one of the true masters of our time…Bill Clinton.  From 1996 to 1998, he was the Clinton Administration’s Director of the U.S. Office of Management and Budget.  There he discovered you must have a vision…a mission…a delusion that is so grand and so absurd, the world will love you for it. One evening, in the autumn of 1997, it came to him in a flash.  Staring deep into the pot of his chicken soup, just as it approached boil, he hallucinated an image of a house.  Suddenly a small part of the grey matter of his brain opened up… For where Hoover had foreseen a chicken in every pot and a car in every garage, FDR now foresaw much, much more.  A chicken and a car were not good enough.  In FDR’s world, everyone should also get a house with a pot to cook the chicken in and a garage to park the car in.  And he knew just how to give it to them. Yet best of all, FDR also knew he could become remarkably rich pawning houses to the downtrodden.  So in 1999, he returned to Fannie Mae as CEO and got to work on his master plan… Fraudulent Earnings Statements It was a pretty simple four point plan… If low interest rates make housing more affordable, then even lower interest rates make housing even more affordable. So, too, if 20 percent down put housing out of reach for some, then 10 percent down was better. And zero percent down was optimal. Similarly, if a borrower’s credit score doesn’t meet the requisite credit standard, just relax the standard. And lastly, if a borrower’s income is too low to qualify for a loan, just let them state what ever income it is that they must have to get the loan. With the ground rules in place by 1999, FDR began the pilot program that would ultimately ruin the finances of the western world.  It involved issuing bank loans to low to moderate income earners, and to ease credit requirements on loans that Fannie Mae purchased from banks. FDR promoted the program stating that it would allow consumers who were, “A notch below what our current underwriting has required,” get a home. Here’s how it worked… Banks made loans to people to buy houses they really couldn’t afford.  Fannie Mae bought the bad loans and bundled them together with good ones as mortgage backed securities.  Wall Street then bought these mortgage backed securities, rated them AAA, and then sold them the world over…taking a nice cut for their services. FDR had a heavy hand in the action too.  By overstating earnings, and shifting losses, he pocketed the large bonuses a janitor’s son could only dream of.  According to a September 19, 2008 article by Jonah Goldberg, titled, Washington Brewed the Poison, FDR “…made $52 million of his $90 million compensation package thanks in part to fraudulent earnings statements.” Efforts to reform the scheme were stopped by the Democrats in Congress, who weren’t ready to give up the gravy train of money that flowed from Fannie Mae to their campaigns.   “Barack Obama, the Senate’s second-greatest recipient of donations from Fannie and Freddie after [Christopher] Dodd, did nothing.” Now, just 13 years later, Fannie Mae and Freddie Mac are at it again… Here We Go Again On June 23, 2021, in Collins v. Yellen, the Supreme Court decided the President could remove the FHFA director without cause.  The next day, President Biden replaced Trump’s director of the FHFA, Mark Calabria, with a temporary appointment. FHFA, as noted above, regulates government-backed housing lenders Fannie Mae and Freddie Mac.  Prior to getting his pink slip, Calabria had been working to reduce the harm these GSEs could do to the economy. Biden’s replacement immediately reversed course, reinstituting the social engineering policies that brought down the housing market in 2008.  Acting Director Sandra Thomas: “There is a widespread lack of affordable housing and access to credit, especially in communities of color.  It is FHFA’s duty through our regulated entities to ensure that all Americans have equal access to safe, decent, and affordable housing.”  One could mistake these words for those of Franklin Delano Raines.  Certainly, the madness it fosters will be Raines like.  The Wall Street Journal reports: “The problem the [Biden] administration sees is that housing and rental prices are too high.  The fact that the administration’s own policies have caused an inflationary trend in housing along with food, energy and gasoline, among others, is no deterrent. “[…] the administration wants people who would otherwise rent to become homeowners.  These young families would take on the risk and the burden of a mortgage, which the government—through Fannie Mae and Freddie Mac—will make much cheaper.  Investors, of course, will buy these risky mortgages from Fannie and Freddie because they are backed by the government.  “Here we go again.  The only difference between what the administration is proposing, and what brought about the 2008 financial crisis is that the economy is already in an inflationary period, induced by the administration’s other policies.  This will make homeownership even riskier.  In addition, Fannie and Freddie will be buying mortgages of up to $1 million, instead of $450,000. “But the government’s lower underwriting standards drive down standards for private lenders, too.  Banks and other mortgage lenders—if they want to stay in the business—have to offer their mortgages on similar terms.  People who own homes then dive into the market to take advantage of the low down payments, and housing prices rise even faster. This encourages cash-out mortgages, in which homeowners reduce the equity in their homes, sometimes to buy a boat.  “The process goes on for years until prices are so high that sales growth falls and homeowners can’t sell their homes to pay off their mortgages.  Housing prices then collapse, mortgages go unpaid.  Banks, other lenders, and even Fannie and Freddie incur losses and another financial crisis begins.” But wait, there’s more… The Upshots of the New Housing Bubble Fiasco House prices are already in bubble territory in many places across the county.  At these prices, who’s buying? Wall Street.  Pension funds.  BlackRock Inc.  And many, many others… Institutional investors have securitized the residential real estate market.  Hundreds of firms are competing with regular house buyers.  They’re also bidding up house prices. Invitation Homes, for example, is a publicly traded company that was spun off from BlackRock in 2017.  Invitation Homes gets billion dollar loans at interest rates around 1.4 percent – about half the rate of what regular house buyers get.  Often times they just pay in cash. According to a recent SEC disclosure, Invitation Homes’ portfolio of houses is worth $16 billion.  The company collects about $1.9 billion in rent per year.  Thus it takes only about eight years of rental payments to pay back a typical house that Invitation Homes has bought. Invitation Homes now owns over 80,000 rental houses and has a market capitalization of $24.6 billion.  The company has deep pockets.  Regular house buyers cannot compete. No doubt, this is an ugly situation.  The ugliness hasn’t been created by institutional investors.  They’re merely scratching for yield in a world where capital markets have been destroyed by the Fed.  Of course, there’s no situation that’s too ugly for Washington to not make even uglier. According to a recent White House fact sheet: “As supply constraints have intensified, large investors have stepped up their real-estate purchases, including of single-family homes in urban and suburban areas. […].  Large investor purchases of single-family homes and conversion into rental properties speeds the transition of neighborhoods from homeownership to rental and drives up home prices for lower cost homes, making it harder for aspiring first-time and first-generation home buyers, among others, to buy a home. […] “President Biden is committed to using every tool available in government to produce more affordable housing supply as quickly as possible, and to make supply available to families in need of affordable, quality housing – rather than to large investors.” This logic validates FHFA jacking up the limits for conforming loans.  Indeed, the clever fellows in Washington want to make housing more affordable by allowing more and more people to take on massive subsidized mortgages.  The logic makes perfect sense…so long as you have the intelligence of a box of rocks. We all know where this goes.  We all know where this leads. First time house buyers, competing with institutional investors, will use the government’s relaxed lending standards to chase prices higher and higher.  Then, once the mortgage market is sufficiently riddled with fraud and corruption and tens of millions of Americans are tied into loans they cannot repay, the impossible will happen… House prices will go down! …along with the hopes and dreams of those that got sucked into this wickedness. Sandra Thomas will be flummoxed.  Congress will socialize the losses once again.  And populace rage will be channeled into some new Occupy Wall Street movement.  Then things will really get ugly. These – and many more – are the upshots of the new housing bubble fiasco. Tyler Durden Sat, 12/04/2021 - 09:20.....»»

Category: smallbizSource: nyt20 hr. 16 min. ago

2021: The Legislative Year in Review

After throwing out the legislative playbook just weeks into 2020 due to the pandemic, it was back to full steam ahead for our advocacy goals this year. And 2021 was not for the weary in Washington. The year began with a sixth major COVID relief bill, the American Rescue Plan. The bill continued policies supported […] The post 2021: The Legislative Year in Review appeared first on RISMedia. After throwing out the legislative playbook just weeks into 2020 due to the pandemic, it was back to full steam ahead for our advocacy goals this year. And 2021 was not for the weary in Washington. The year began with a sixth major COVID relief bill, the American Rescue Plan. The bill continued policies supported by the National Association of REALTORS® (NAR) that protected our members’ health and economic well-being, including benefits for sole proprietors, the self-employed, small business owners and independent contractors. The bill also included new measures like aid for state and local governments, expanded child tax credits and another $21 billion in rental assistance. Congress spent most of the year debating President Biden’s Build Back Better infrastructure plans. In November, a traditional public works bill became law, filled with longtime NAR priorities like investments in roads, bridges, ports, airports, roadways and a historic $65 billion for broadband. At the time of this writing, a second social spending infrastructure plan is advancing in Congress. Some of the earliest tax proposals to pay for this plan could have devastated the real estate sector, which makes up nearly one-fifth of the entire economy. We worked to educate lawmakers on these tax issues for more than a year. When House leaders finally unveiled the bill in October, it did not include the most-feared taxes and limits on real estate investment. It contained no 1031 like-kind exchange limits, no capital gains tax increases, no change in step-up in basis, no tax on unrealized capital gains, no increased estate tax, no carried interest provisions and no 199A deduction limits. But it did include SALT relief. Also included, a robust investment in affordable housing, which is critical to opening up homeownership for first-generation and first-time buyers. NAR CEO Bob Goldberg joined other housing leaders and members of Congress at the U.S. Capitol for a press conference in support of these affordable housing measures. While Bob headed to the Capitol, NAR President Charlie Oppler headed to the White House with other business leaders to meet with President Biden on the debt ceiling.  The very next day, Congress struck a deal to avoid a catastrophic default. Another major focus of our advocacy efforts has been addressing the housing supply shortage. Earlier this year, NAR released a landmark report that confirmed that the shortage of 6 million units is a crisis that will take a “once-in-a-generation” policy response. The media cited our report far and wide, garnering millions of impressions. And it also impressed lawmakers to act. Our policy recommendations began making appearances in infrastructure plans. It was also a standout year for NAR’s Community Outreach Programs, as 263 state and local REALTOR® associations received support for advocacy efforts in 2021. There are success stories nationwide. A Fair Housing Grant helped the Birmingham Association of REALTORS® highlight fair housing issues at a hybrid summit. The Fredericksburg Area Association of REALTORS® used a smart growth poll to create a regional growth and housing action plan. And in northern Idaho, a Placemaking Grant helped the Selkirk Association of REALTORS® support the development of an ADA-compliant trail. We have other regulatory and legislative accomplishments this year as well, like work protecting independent contractor status and progress on remote online notarization—too many to list in this space. There is no other trade association in Washington like NAR for one reason: our members. We don’t represent an industry; we represent 1.5 million individuals. They are thoughtful, engaged pillars of their communities. Our advocacy operation is successful because of them. It is bipartisan and issue focused. Our members played a vital role in the nation’s economic resilience this year and will help lead our economy in the years to come. Shannon McGahn is chief advocacy officer for the National Association of REALTORS®. The post 2021: The Legislative Year in Review appeared first on RISMedia......»»

Category: realestateSource: rismediaDec 1st, 2021

Powell, Yellen Weigh In On Omicron, Debt Ceiling During Senate CARES Act Testimony

Powell, Yellen Weigh In On Omicron, Debt Ceiling During Senate CARES Act Testimony With the new year just weeks away, Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell will testify before the Senate Banking Committee on Tuesday, part of routine testimony required by the CARES act. Just two weeks ago, investors could be forgiven for writing off Tuesday's testimony as a likely snoozefest now that Powell has been nominated for his second term as Fed chairman. But over the last week, the emergence of the omicron variant has (according to some) thrown the recovery timeline out of whack. After the release of Powell's prepared remarks last night, markets eagerly priced in a more dovish outlook at the Fed. But hours later, warnings from Moderna CEO Stephane Bancel sent markets back into turmoil, as investors struggled to decide who to trust more: the "science" (ie trial data which haven't yet been gathered or released), or the authoritative executives who have been talking their book this entire time (whether the market realizes that or not is unclear). In yet another indication of just how confused Wall Street has become, Deutsche Bank described Powell's prepared testimony as "hawkish", an assessment that we (and plenty of investors, judging by the market reaction) would strongly disagree with. Although DB specifies that the only hawkish aspects of Powell's statement pertained to inflation. We would agree with DB that nobody cares much about the pair's prepared remarks. The "real fireworks" - as DB put it - will likely land during the Q&A, where Powell and Yellen will be grilled by Senators of both parties. Fed Chair Powell set to appear before the Senate Banking Committee at 15:00 London time, where he may well be asked about whether the Fed plans to accelerate the tapering of their asset purchases although it’s hard to believe he’ll go too far with any guidance with the Omicron uncertainty. The Chair’s brief planned testimony was published on the Fed’s website last night. It struck a slightly more hawkish tone on inflation, noting that the Fed’s forecast was for elevated inflation to persist well into next year and recognition that high inflation imposes burdens on those least able to handle them. On omicron, the testimony predictably stated it posed risks that could slow the economy’s progress, but tellingly on the inflation front, it could intensify supply chain disruptions. The real fireworks will almost certainly come in the question and answer portion of the testimony. Keep in mind: regardless of what Moderna CEO Bancel says, only a tiny minority on Wall Street actually expect omicron to be a major issue a few weeks from now. In other news, concerns about the next debt ceiling fight, which will kick into high gear in the coming days, is already creating kinks in the US Treasury Bill Curve. But that still presents some difficulties for the central bank as it weighs whether to continue tapering asset purchases, as well as what it should signal regarding the pace of rate hikes. Read Yellen's prepared remarks, released Tuesday morning: Chairman Brown, Ranking Member Toomey, members of the Committee: It is a pleasure to testify today. November has been a very significant month for our economy, and Congress is a large part of the reason why. Our economy has needed updated roads, ports, and broadband networks for many years now, and I am very grateful that on the night of November 5, members of both parties came together to pass the largest infrastructure package in American history. November 5th, it turned out, was a particularly consequential day because earlier that morning we received a very favorable jobs report– 531,000 jobs added. It’s never wise to make too much of one piece of economic data, but in this case, it was an addition to a mounting body of evidence that points to a clear conclusion: Our economic recovery is on track. We’re averaging half a million new jobs per month since January. GDP now exceeds its pre-pandemic levels. Our unemployment rate is at its lowest level since the start of the pandemic, and our economy is on pace to reach full employment two years faster than the Congressional Budget Office had estimated. Of course, the progress of our economic recovery can’t be separated from our progress against the pandemic, and I know that we’re all following the news about the Omicron variant. As the President said yesterday, we’re still waiting for more data, but what remains true is that our best protection against the virus is the vaccine. People should get vaccinated and boosted. At this point, I am confident that our recovery remains strong and is even quite remarkable when put it in context. We should not forget that last winter, there was a risk that our economy was going to slip into a prolonged recession, and there is an alternate reality where, right now, millions more people cannot find a job or are losing the roofs over their heads. It’s clear that what has separated us from that counterfactual are the bold relief measures Congress has enacted during the crisis: the CARES Act, the Consolidated Appropriations Act, and the American Rescue Plan Act. And it is not just the passage of these laws that has made the difference, but their effective implementation. Treasury, as you know, was tasked with administering a large portion of the relief funds provided by Congress under those bills. During our last quarterly hearing, I spoke extensively about the state and local relief program, but I wanted to update you on some other measures. First, the American Rescue Plan’s expanded Child Tax Credit has been sent out every month since July, putting about $77 billion in the pockets of families of more than 61 million children. Families are using these funds for essential needs like food, and in fact, according to the Census Bureau, food insecurity among families with children dropped 24 percent after the July payments, which is a profound economic and moral victory for the country. Meanwhile, the Emergency Rental Assistance Program has significantly expanded, providing muchneeded assistance to over 2 million households. This assistance has helped keep eviction rates below prepandemic levels. This month, we also released guidelines for the $10 billion State Small Business Credit Initiative program, which will provide targeted lending and investments that will help small businesses grow and create well-paying jobs. As consequential as November was, December promises to be more so. There are two decisions facing Congress that could send our economy in very different directions. The first is the debt limit. I cannot overstate how critical it is that Congress address this issue. America must pay its bills on time and in full. If we do not, we will eviscerate our current recovery. In a matter of days, the majority of Americans would suffer financial pain as critical payments, like Social Security checks and military paychecks, would not reach their bank accounts, and that would likely be followed by a deep recession. The second action involves the Build Back Better legislation. I applaud the House for passing the bill and am hopeful that the Senate will soon follow. Build Back Better is the right economic decision for many reasons. It will, for example, end the childcare crisis in this country, letting parents return to work. These investments, we expect, will lead to a GDP increase over the long-term without increasing the national debt or deficit by a dollar. In fact, the offsets in these bills mean they actually reduce annual deficits over time. Thanks to your work, we’ve ensured that America will recover from this pandemic. Now, with this bill, we have the chance to ensure America thrives in a post-pandemic world. With that, I’m happy to take your questions. And readers can find Powell's prepared remarks, first released last night, below: Chairman Brown, Ranking Member Toomey, and other members of the Committee, thank you for the opportunity to testify today. The economy has continued to strengthen. The rise in Delta variant cases temporarily slowed progress this past summer, restraining previously rapid growth in household and business spending, intensifying supply chain disruptions, and, in some cases, keeping people from returning to work or looking for a job. Fiscal and monetary policy and the healthy financial positions of households and businesses continue to support aggregate demand. Recent data suggest that the post-September decline in cases corresponded to a pickup in economic growth. Gross domestic product appears on track to grow about 5 percent in 2021, the fastest pace in many years. As with overall economic activity, conditions in the labor market have continued to improve. The Delta variant contributed to slower job growth this summer, as factors related to the pandemic, such as caregiving needs and fears of the virus, kept some people out of the labor force despite strong demand for workers. Nonetheless, October saw job growth of 531,000, and the unemployment rate fell to 4.6 percent, indicating a rebound in the pace of labor market improvement. There is still ground to cover to reach maximum employment for both employment and labor force participation, and we expect progress to continue. The economic downturn has not fallen equally, and those least able to shoulder the burden have been the hardest hit. In particular, despite progress, joblessness continues to fall disproportionately on African Americans and Hispanics. Pandemic-related supply and demand imbalances have contributed to notable price increases in some areas. Supply chain problems have made it difficult for producers to meet strong demand, particularly for goods. Increases in energy prices and rents are also pushing inflation upward. As a result, overall inflation is running well above our 2 percent longer-run goal, with the price index for personal consumption expenditures up 5 percent over the 12 months ending in October. Most forecasters, including at the Fed, continue to expect that inflation will move down significantly over the next year as supply and demand imbalances abate. It is difficult to predict the persistence and effects of supply constraints, but it now appears that factors pushing inflation upward will linger well into next year. In addition, with the rapid improvement in the labor market, slack is diminishing, and wages are rising at a brisk pace. We understand that high inflation imposes significant burdens, especially on those less able to meet the higher costs of essentials like food, housing, and transportation. We are committed to our price-stability goal. We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched. The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation. Greater concerns about the virus could reduce people's willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions. To conclude, we understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We at the Fed will do everything we can to support a full recovery in employment and achieve our price-stability goal. Thank you. I look forward to your questions. The big question now: will Powell sound dovish, or hawkish, under questioning? What's more, investors should be on the lookout for Yellen's comments on the debt ceiling - particularly anything she says about the timing for when the Treasury might run out of funds. Tyler Durden Tue, 11/30/2021 - 09:56.....»»

Category: blogSource: zerohedgeNov 30th, 2021

Watch Live: Powell, Yellen Weigh In On Omicron, Debt Ceiling During Senate CARES Act Testimony

Watch Live: Powell, Yellen Weigh In On Omicron, Debt Ceiling During Senate CARES Act Testimony With the new year just weeks away, Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell will testify before the Senate Banking Committee on Tuesday, part of routine testimony required by the CARES act. Just two weeks ago, investors could be forgiven for writing off Tuesday's testimony as a likely snoozefest now that Powell has been nominated for his second term as Fed chairman. But over the last week, the emergence of the omicron variant has (according to some) thrown the recovery timeline out of whack. After the release of Powell's prepared remarks last night, markets eagerly priced in a more dovish outlook at the Fed. But hours later, warnings from Moderna CEO Stephane Bancel sent markets back into turmoil, as investors struggled to decide who to trust more: the "science" (ie trial data which haven't yet been gathered or released), or the authoritative executives who have been talking their book this entire time (whether the market realizes that or not is unclear). In yet another indication of just how confused Wall Street has become, Deutsche Bank described Powell's prepared testimony as "hawkish", an assessment that we (and plenty of investors, judging by the market reaction) would strongly disagree with. Although DB specifies that the only hawkish aspects of Powell's statement pertained to inflation. We would agree with DB that nobody cares much about the pair's prepared remarks. The "real fireworks" - as DB put it - will likely land during the Q&A, where Powell and Yellen will be grilled by Senators of both parties. Fed Chair Powell set to appear before the Senate Banking Committee at 15:00 London time, where he may well be asked about whether the Fed plans to accelerate the tapering of their asset purchases although it’s hard to believe he’ll go too far with any guidance with the Omicron uncertainty. The Chair’s brief planned testimony was published on the Fed’s website last night. It struck a slightly more hawkish tone on inflation, noting that the Fed’s forecast was for elevated inflation to persist well into next year and recognition that high inflation imposes burdens on those least able to handle them. On omicron, the testimony predictably stated it posed risks that could slow the economy’s progress, but tellingly on the inflation front, it could intensify supply chain disruptions. The real fireworks will almost certainly come in the question and answer portion of the testimony. Keep in mind: regardless of what Moderna CEO Bancel says, only a tiny minority on Wall Street actually expect omicron to be a major issue a few weeks from now. In other news, concerns about the next debt ceiling fight, which will kick into high gear in the coming days, is already creating kinks in the US Treasury Bill Curve. But that still presents some difficulties for the central bank as it weighs whether to continue tapering asset purchases, as well as what it should signal regarding the pace of rate hikes. Read Yellen's prepared remarks, released Tuesday morning: Chairman Brown, Ranking Member Toomey, members of the Committee: It is a pleasure to testify today. November has been a very significant month for our economy, and Congress is a large part of the reason why. Our economy has needed updated roads, ports, and broadband networks for many years now, and I am very grateful that on the night of November 5, members of both parties came together to pass the largest infrastructure package in American history. November 5th, it turned out, was a particularly consequential day because earlier that morning we received a very favorable jobs report– 531,000 jobs added. It’s never wise to make too much of one piece of economic data, but in this case, it was an addition to a mounting body of evidence that points to a clear conclusion: Our economic recovery is on track. We’re averaging half a million new jobs per month since January. GDP now exceeds its pre-pandemic levels. Our unemployment rate is at its lowest level since the start of the pandemic, and our economy is on pace to reach full employment two years faster than the Congressional Budget Office had estimated. Of course, the progress of our economic recovery can’t be separated from our progress against the pandemic, and I know that we’re all following the news about the Omicron variant. As the President said yesterday, we’re still waiting for more data, but what remains true is that our best protection against the virus is the vaccine. People should get vaccinated and boosted. At this point, I am confident that our recovery remains strong and is even quite remarkable when put it in context. We should not forget that last winter, there was a risk that our economy was going to slip into a prolonged recession, and there is an alternate reality where, right now, millions more people cannot find a job or are losing the roofs over their heads. It’s clear that what has separated us from that counterfactual are the bold relief measures Congress has enacted during the crisis: the CARES Act, the Consolidated Appropriations Act, and the American Rescue Plan Act. And it is not just the passage of these laws that has made the difference, but their effective implementation. Treasury, as you know, was tasked with administering a large portion of the relief funds provided by Congress under those bills. During our last quarterly hearing, I spoke extensively about the state and local relief program, but I wanted to update you on some other measures. First, the American Rescue Plan’s expanded Child Tax Credit has been sent out every month since July, putting about $77 billion in the pockets of families of more than 61 million children. Families are using these funds for essential needs like food, and in fact, according to the Census Bureau, food insecurity among families with children dropped 24 percent after the July payments, which is a profound economic and moral victory for the country. Meanwhile, the Emergency Rental Assistance Program has significantly expanded, providing muchneeded assistance to over 2 million households. This assistance has helped keep eviction rates below prepandemic levels. This month, we also released guidelines for the $10 billion State Small Business Credit Initiative program, which will provide targeted lending and investments that will help small businesses grow and create well-paying jobs. As consequential as November was, December promises to be more so. There are two decisions facing Congress that could send our economy in very different directions. The first is the debt limit. I cannot overstate how critical it is that Congress address this issue. America must pay its bills on time and in full. If we do not, we will eviscerate our current recovery. In a matter of days, the majority of Americans would suffer financial pain as critical payments, like Social Security checks and military paychecks, would not reach their bank accounts, and that would likely be followed by a deep recession. The second action involves the Build Back Better legislation. I applaud the House for passing the bill and am hopeful that the Senate will soon follow. Build Back Better is the right economic decision for many reasons. It will, for example, end the childcare crisis in this country, letting parents return to work. These investments, we expect, will lead to a GDP increase over the long-term without increasing the national debt or deficit by a dollar. In fact, the offsets in these bills mean they actually reduce annual deficits over time. Thanks to your work, we’ve ensured that America will recover from this pandemic. Now, with this bill, we have the chance to ensure America thrives in a post-pandemic world. With that, I’m happy to take your questions. And readers can find Powell's prepared remarks, first released last night, below: Chairman Brown, Ranking Member Toomey, and other members of the Committee, thank you for the opportunity to testify today. The economy has continued to strengthen. The rise in Delta variant cases temporarily slowed progress this past summer, restraining previously rapid growth in household and business spending, intensifying supply chain disruptions, and, in some cases, keeping people from returning to work or looking for a job. Fiscal and monetary policy and the healthy financial positions of households and businesses continue to support aggregate demand. Recent data suggest that the post-September decline in cases corresponded to a pickup in economic growth. Gross domestic product appears on track to grow about 5 percent in 2021, the fastest pace in many years. As with overall economic activity, conditions in the labor market have continued to improve. The Delta variant contributed to slower job growth this summer, as factors related to the pandemic, such as caregiving needs and fears of the virus, kept some people out of the labor force despite strong demand for workers. Nonetheless, October saw job growth of 531,000, and the unemployment rate fell to 4.6 percent, indicating a rebound in the pace of labor market improvement. There is still ground to cover to reach maximum employment for both employment and labor force participation, and we expect progress to continue. The economic downturn has not fallen equally, and those least able to shoulder the burden have been the hardest hit. In particular, despite progress, joblessness continues to fall disproportionately on African Americans and Hispanics. Pandemic-related supply and demand imbalances have contributed to notable price increases in some areas. Supply chain problems have made it difficult for producers to meet strong demand, particularly for goods. Increases in energy prices and rents are also pushing inflation upward. As a result, overall inflation is running well above our 2 percent longer-run goal, with the price index for personal consumption expenditures up 5 percent over the 12 months ending in October. Most forecasters, including at the Fed, continue to expect that inflation will move down significantly over the next year as supply and demand imbalances abate. It is difficult to predict the persistence and effects of supply constraints, but it now appears that factors pushing inflation upward will linger well into next year. In addition, with the rapid improvement in the labor market, slack is diminishing, and wages are rising at a brisk pace. We understand that high inflation imposes significant burdens, especially on those less able to meet the higher costs of essentials like food, housing, and transportation. We are committed to our price-stability goal. We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched. The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation. Greater concerns about the virus could reduce people's willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions. To conclude, we understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We at the Fed will do everything we can to support a full recovery in employment and achieve our price-stability goal. Thank you. I look forward to your questions. The big question now: will Powell sound dovish, or hawkish, under questioning? What's more, investors should be on the lookout for Yellen's comments on the debt ceiling - particularly anything she says about the timing for when the Treasury might run out of funds. Tyler Durden Tue, 11/30/2021 - 09:56.....»»

Category: blogSource: zerohedgeNov 30th, 2021

Transcript: Steve Fradkin

     The transcript from this week’s, MiB: Steve Fradkin Northern Trust, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ RITHOLTZ: This week on the podcast… Read More The post Transcript: Steve Fradkin appeared first on The Big Picture.      The transcript from this week’s, MiB: Steve Fradkin Northern Trust, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ RITHOLTZ: This week on the podcast I have a special guest. His name is Steve Fradkin, and he runs one of the larger pools of assets that you probably had no idea about. He is the President of Northern Trust Wealth Management. They run over $350 billion in client assets. They serve some of the wealthiest families in America. One in five wealthy families actually has assets with Northern Trust. They have something like 20 percent of the Forbes 400, just a very interesting perspective on how to manage through periods of uncertainty, changing tax laws, rising inflation. Also, it’s really interesting perspectives. It’s less about predicting the future, Steve tells us, then thinking in terms of planning and probabilities. And I think that was really interesting advice. He — he is about as knowledgeable as anybody is going to get in the – both wealth management business and ultra-high net worth management business. I found the conversation really intriguing, and I think you will also. So, with no further ado, my interview of Steve Fradkin of Northern Trust. VOICE-OVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. RITHOLTZ: My special guest this week is Steve Fradkin. He is the President of Northern Trust Wealth Management. Running about $355 billion in assets, they serve about one in five of the wealthiest families in America. Previously, Steve ran the Corporate and Institutional Services. He was Head of International Business for Northern Trust, as well as the firm’s Chief Financial Officer. Steve Fradkin, welcome to Bloomberg. FIRRMA Thank you, Barry. Great to be here. RITHOLTZ: So, you spent your entire career at Northern Trust having joined in — in 1985. How do you make the leap from really CFO to President which, to me, I think of President I think of someone who’s running like a CEO, running a — a division? What were the challenges of that transition? FRADKIN: Well, it’s a great question and, you know, careers are mysterious experiences. The — the bigger mystery really, Barry, was the move to CFO. So I joined Northern Trust as a youngster, didn’t know what I wanted to do, worked my way through a variety of entry-level jobs, ultimately culminating at that point in running our growing international business, and loving it, traveling the world to clients in Asia, Europe, the Middle East, Africa, South America, you know, really fun and interesting stuff, and was asked, at that point, to serve as CFO, which was the unnatural job. Was not a controller, was not a treasurer, and so serving as CFO of a large public company was — shall we say traumatic when they asked. But did that for six years, including through the global financial crisis. And it was, at that point, I went back to doing what I normally do, which is running businesses. I ran our Corporate and Institutional Services business, and then after that Wealth Management. So — so it wasn’t so much going from CFO to wealth management as it was ending up as CFO, if you will, by accident from my point of view. RITHOLTZ: Really interesting. So — so you guys had a pretty good year in 2020. How did that carry over to this year? Is it just more of the same? What were the big success stories relative to all those challenges we soar last year? Well, you know, it’s — it’s really an interesting phenomenon, and it shows you the – in some ways, the unpredictability of what can happen. You know, if you think about COVID-19 and its impact in 2020, and if I said to you, you know, look here’s what’s going to happen, we’re — we’re going to go as a society not just Northern Trust from, you know, we all come in and we work and so forth and so on. And one day, on about the same day worldwide, everyone’s going to start working from home facetiously. What — what do you think is going to happen to the markets? I think most people have said, well, first of all, it could never happen that way. It’s not going to be true that people in Sydney, and London, and New York, and Sao Paulo are all going to be, you know, as much as one can working from home. That’s just impossible. And second of all is that where to happen on a sustained basis. Well, gee, you know, the economy is going to crater because no baseball games, no concerts, no – you know, less use of restaurants, et cetera, et cetera. I don’t think people would have said, you know, the markets would do as well as they’ve done. So look, it’s been an incredible journey. Northern Trust has navigated exceptionally well through it last year and continues to perform well today. And there are a variety of factors in that. But each and every day has been a navigation because we’re still not out of the pandemic and we’re still operating in a hybrid mode. And, you know, balancing safety of our partners, our — our employees, and the needs of our clients is a — a daily — a juggling act that we’re still working through and I suspect will be working through for a while longer here. RITHOLTZ: We’re going to talk a little more about how you guys manage doing the pandemic in a bit, but I want to stay with the success of Northern Trust. You’re one of the biggest ultra-high net worth investment managers. But relative to your size, you guys kind of fly under the radar. Why is that? FRADKIN: Well, you know, it’s — it’s an interesting question, Barry. The – so in terms of size, we’re in the top 20 banks in the country as measured by our balance sheet. But really the — the better marker of our size is the assets that we manage and the assets that we administer for clients. And we’re a very quiet company. We don’t do lots of big acquisitions. We do the same thing today that we’ve been doing since 1889, serving the same clientele, and so we’re a very focused institution. A little over half our profits come from the provision of services to wealthy families in America and around the world. And the other half come from essentially providing the same services, but to large global institutional investors, serving wealth funds, pension funds and the like. And so, we’re a quiet company that has been extraordinarily successful and consistently so for many, many years. So, we’re proud of what we’ve got, but we — we — we — we fly under the radar scream — screen intentionally to just keep a low profile and stay focused on our clients. RITHOLTZ: And — and that would make sense given the nature of your clients who are less Instagram stars and more quiet wealth. Is that a — is that a fair way to describe it? FRADKIN: Yeah. Today, we serve little over 30 percent of the Forbes 400 wealthiest Americans and, obviously, many other affluent families. And interestingly, Barry, you know, sometimes people think of Northern Trust in its wealth management business as focusing on — or serving multigenerational well-healed, you know, families. And that’s true, we certainly serve many of those. But there are many entrepreneurs in Silicon Valley, in New York, in Miami, in Dallas, in — all over the country and all over the world. And if there’s one thing I’ve learned in being here is that wealth is created in a lot of mysterious ways. And so, your — your reference to Instagram and so forth, I would say our clients are definitely low profile, but where they create their wealth emanates from every segment of the economy. It’s really a — a fascinating part of the privilege of being in this — this kind of role. RITHOLTZ: Let’s stay with that because I was just involved in a conversation recently about the amount of wealth that has been created over the past couple of decades. Wherever you look, especially in the United States, it seems that people are coming up with new ideas, new technologies, new just even business processes that if you go back to the 90’s, I don’t think people could have imagined the sort of things that are generating the massive amounts of wealth that we’ve seen. And — and I’m not even talking about NFTs or things like that, I mean, businesses with clients that are just doing tens of millions of dollars of — of revenue a year. FRADKIN: Well, I think the — the fascinating thing that I think we see is that wealth can be created in a lot of different ways. And I — and I think you’re right that as the world has sped up, the wealth creation has sped up, too. You know, to caricature it, it used to be you would start a business in your garage in Louisiana and, overtime, you would, you know, build a vacuum cleaner, whatever it happened to be. And you would start selling it from a store and, you know, it would — you know, you — you’d have a second store. And — and the next thing you know, you have a — a — a big business that you never envisioned having, and you could sell that company and — and create tremendous amount of wealth. Today, that phenomenon still absolutely happens, but it also happens with the power of the Internet that the pace at which companies in some industries can grow and accelerate has — has really multiplied. So, wealth creation, in some instances, is still a slow laborious step-by-step process. But in others, I don’t want to say it’s overnight, but it happens a lot faster with digitalization in the — the pace at which the world moves today. So, we — we see both phenomena, and that’s part of the fun and excitement of the American economy. And this certainly happens elsewhere in the world as well. RITHOLTZ: Quite interesting. So, let’s talk about how you guys had to operate during the lockdown. You mentioned this earlier. What were you doing when, you know, it became clear the country was shutting down in March of 2020? FRADKIN: It’s a great question, Barry. Well, we started like many other institutions with the safety of our clients and the safety of our employees. And it all happened relatively quickly in terms of shutting down offices to the bare minimum, getting people home, and making sure that they could function effectively from home. And if you go back to — and — and, by the way, we have 20,000 employees worldwide, so we were doing the same thing in Manila, in the Philippines as we were doing in London, as we were doing in Dublin, as we were doing in Houston, as we were doing in Las Vegas. And so I want you to think about the operational, and logistical, and infrastructural needs of pretty much all at the same time trying to get people out of the office, enable them to function effectively from home, still be able to serve our clients, and all the family and other issues that people were wrestling with. So, I would say the beginning of the pandemic was stressful. You know, we were working 24/7 trying to make sure that technology worked and people could still get cash and all those things. It has gotten to a much better, you know, I’ll call it normalcy in a strange sort of way. But the early days of the pandemic were — were challenging. We navigated through well, but it’s certainly not something that anyone had anticipated. RITHOLTZ: Really quite interesting. So, I’m assuming you guys have your offices, more or less, reopened. What are you going to do going forward? Is it going to be a hybrid model or is everyone back in the office or people working from home? FRADKIN: Our offices are open and — and really to different extents in different geographies, you know, which makes sense. The — the infection rates, hospitalization rates, all the metrics that we track are very different in different cities and countries around the globe. You know, in terms of where it goes in the future, I think the future of work and how people work is forever changed. You know, we always had a pretty flexible workforce and the ability to work from home and, you know, people’s — people’s lives and — personal lives and business lives had crossed over long ago that, as an employer, we had to be flexible. I think that’s going to be even more so coming out of the pandemic. People have gotten used to it. The technology has gotten better. Client expectations are different. And so, I think we will be in a — you know, what we — what we think of today as a hybrid model will be a normal model tomorrow. And that doesn’t mean everyone will work from home, but it certainly means a lot more flexibility for employees to inevitably juggle the — the conflicting needs of family and work life. And we’re well prepared for that. (COMMERCIAL BREAK) RITHOLTZ: So as investors, COVID was pretty much an exogenous shock. It — it came out the left field. How did the whole COVID crash and recovery compare to past crises, whether it’s 9/11 or dot-com implosion or the great financial crisis? How do you — how do you wrap your head around this one compared to ones from — from recent past? FRADKIN: You know, it’s — it’s a great question. And I think, Barry, my perspective would be that we often call events like the COVID-19 pandemic tail events or once in a lifetime events. And in some ways, they are and, in some ways, they aren’t. If — if I think about it through the prism of my career experience, we had the crash of October 1987. We’ve seen the collapses of things like Enron and WorldCom. We’ve seen September 11th. We’ve seen Bear Stearns go down. We had the global financial crisis of 2008 and, of course, the pandemic. And each time we call it a tail event, but at some point, we have to admit that there are a lot of tails. So, I want to take you back just to compare and contrast COVID-19 with 2008. I’ll give you this example. I want you to imagine it’s the end of 2007, and you’re presenting the 2008 plan for Northern Trust to our board. And you go to the board and you say, “Look, we expect our revenues to do this and our expenses to do that, and so forth and so on.” And one of the board members raises his or her hand and he says — he or she says, “Barry, that’s — that’s terrific. Sounds like a great plan for 2008.” But I — I — I just want to get your perspective. What happens if Bear Stearns collapses, Freddie, Fannie, Washington Mutual, Wachovia, Merrill Lynch, you know, et cetera, et cetera, Lehman? You know, the whole thing collapses in 2008. How will we perform? I think you’d — you know, I — I think if you had been CFO at that time, you would have said, “Well, you know, that’s just — that’s never going to happen,” but it did. And Northern Trust navigated through that exceptionally well. Not unscarred, but exceptionally well. If you take — if you fast forward from that paradigm to COVID-19, it’s very similar. You know, if — if we had been talking to our board the year before and put forward our plan, I think our board would have said, “Well, okay, you know, that sounds like a great plan. What happens if there’s a global pandemic in every office from which we operate is going to be shut down or substantially shut down? Everyone’s got to work from home on the same day globally.” And, by the way, it’s going to be for a year and a half or more. I’m quite confident you or we would have said, well, that — you know, that’s just not — you know, I don’t know what we’ll do. That’s not going to happen, but it did. And so, I think the — the lesson from these crises is that while they’re different every time, they happen a lot. And so, we have to think about our approach to business, our approach to research, our approach to preparing for the unanticipatable. And as I say, each — each of your examples, September 11th, and COVID, and 2008 are different, but they were all — they all featured substantial disruption, substantial unanticipatable disruption. And at Northern Trust and every other company around the world, you have to be prepared to be agile and adapt quickly. And — and that’s what we’ve been able to do pretty consistently over our 130 plus years of experience. RITHOLTZ: So, given that history and the fact that a big chunk of your clients are ultra-high net worth, how do you think about managing assets compared to what — I don’t know, let’s use the phrase “mass affluent,” that typical approach. Is this more about preserving wealth and it is striking at rich. These folks are, after all, already fairly wealthy. How does this specific demographic change and challenge the way you manage assets for them? FRADKIN: Well, I think, look, wherever one sits on the spectrum of wealth, they generally want to optimize their returns over time. And people have different risk preferences as you would expect. So to caricature it, if you come from nothing and you’ve done exceptionally well financially, you may — not always, but you may have a predisposition to have a stronger defensive component to your portfolio because you don’t want to end up back where you were. You know what it’s like not to have money, you have it, and you want to be defensive. On the other hand, there are people who whether they came from nothing or not, they’ve had tremendous success. They’ve seen the power of capitalism, and they want to not only do as well as they can, but keep going. So, we see things through the eyes of our clients across the continuum. What I would say is people in the ultra net — ultra-high net worth space, at least from my point of view, it’s not so much about they’re more defensive or more offensive. They have more flexibility for choice. They can be defensive because they’ve, you know, so to speak, got more than enough or they can lean in and be more aggressive because they have a bigger cushion than the rest of us. And our clientele is all ends of that spectrum. There’s no — the — the — the notion that some people have, well, once someone’s made a certain amount of money they’re — they’re just trying to preserve it. There are certainly clients that — that exhibit that behavior, but there are an equal number who want to optimize it and aren’t in a completely defensive mindset. So, it depends on the personality type. RITHOLTZ: Very interesting. One of the clichés of the industry is three generations from, you know, short tales to short tales, referring that generational wealth very often gets — I don’t want to say wasted, but frittered away irresponsibly or recklessly. Some people take too much risk. How do you manage around that? Do you — do you ever have families coming to you and say, “Hey, we want to leave money to the next generation, but we want to make sure they get it and that it’s not just, you know, Ferraris and — and weekends in Vegas.” FRADKIN: Yes, all the time. Again, every family is different. Every client is different but, you know, one thing to — one thing that I think is a little bit unfair in — in — not by you, but in the characterization that you refer to is this notion, well, you know, by the third generation it is, you know, frittered away. I think you — you have to remember a couple things. First, when — when we say it’s frittered away, the comparison point is often to someone who did the extraordinary. So if I started from nothing and created $1 billion — $1 billion of wealth, it’s a little unfair to say my kids or my grandkids, you know, they’re not as smart as I am because, you know, they didn’t do it, too. You know, People who have created extraordinary wealth have done so, by definition, it’s — it’s extraordinary, and it’s not reasonable. Even if you have bright, talented, you know, high-functioning kids, it’s not reasonable to assume that each generation is just going to — you know, mom made $1 billion. Mom’s kid made $2 billion and — and mom’s grandkid made — made $4 billion. You know, it’s — mathematically, that’s not a reasonable probability. That’s sad. There is definitely an art to optimizing wealth through the generations. And, of course, it starts in the home and how you raise kids and values and, you know, what you demand of them or not. But a lot of our clients do a great job of trying to steward their wealth, trying to educate their kids, trying to make use of family governance to — to help everyone understand how things work for the family. And so, each client is different, but as with most things, the more you put into it, the more you’re likely to get out of it. And for those who believe it’s an important responsibility to steward that wealth, pass it to future generations, educate those generations, make them or trying to help them be important members of society, they tend to get better outcomes than the rest of us. It’s a — it’s a very — it’s, you know, raising kids and money are two challenging vectors, but we see some great examples of people stewarding wealth through multiple generations not just the — the founder, so to speak. RITHOLTZ: Quite interesting. Let’s talk a little bit about what you call Goals Driven Wealth Management. Start out with what — what exactly is that. FRADKIN: Sure. Goals Driven Wealth Management at Northern Trust is the framework that — that we’ve devised to build personalized wealth plans for clients and it focuses on helping them achieve their individual goals with confidence. It provides a big picture of their wealth and transparent steps on how to manage and optimize wealth over time. So, Barry, one way to think about it is — and I’m being a little bit facetious, but just to make the point, it used to be in this industry that the starting point for how money might be managed was a function of your outlook on the market. You think equities are going to go up, et cetera, so you allocate more to equities. Goals Driven Wealth Management comes at investing through a different lens. The starting point is not so much our call on the markets though that will be important at some point. Our starting point in Goals Driven is what are you and your family trying to accomplish. Once we understand what you’re trying to accomplish and the assets you need to accomplish it, we can, in effect, back in to how to deploy those assets — in stocks, bonds, other asset classes — to give you the best probability of achieving your life goals over time. So, it’s really just a different starting point for how to think about creating an asset allocation that is most effective for you and your family. RITHOLTZ: So, let’s talk about that framework. And again, the question comes back, how different is it for the ultra-high net worth than for the merely wealthy or — or is there a lot of overlapping between the two different types of planning? FRADKIN: The process is really the same no matter where you are on the wealth spectrum. You and your family have goals, and whether you have $1 million, $100 million, $1 billion, $10 billion or whatever the number is, you have something you want to achieve over time. You plan to live to age 90 or 100. This is what you need to live in the style to which you want to be accustomed, and we do a variety of work to figure out, first of all, are you asset-sufficient, meaning under reasonable scenarios, do I have enough if I steward it effectively to live my life the way I want to live it over time? And that happens whether you have, you know — again, whatever the number is, $500,000 or $10 million. The difference, Barry, comes in with the flexibility and options that you have as you create more wealth. So, the starting point is the same: understand your goals, understand your needs, and let’s figure out an asset allocation to give you the best chance to get there. What becomes different for people in the ultra-high net worth space relative to the rest of us is that they can take advantage of more planning techniques. They can take advantage of more techniques to optimize philanthropy. They can take advantage of gifting to future generations and so forth, and so the process is the same. But as you accumulate more money, in general, you have more flexibility on some other things you can do. The ultra-high net worth also have more investment optionality. They have the ability to invest in asset classes like private equity hedge fund and so forth where they may have to trade off some liquidity for a period of time. Those of us who are lower on the spectrum may not be able to endure that in a down market. Those who have more wealth can — can oftentimes weather that storm more. So, the process is the same, but you get more flexibility as your wealth grows. (COMMERCIAL BREAK) RITHOLTZ: We’re going to talk more of about alternative investments in a little bit. I want to stick with a couple of interesting things I read in some Northern Trust research. One of the things that I kind of knew, but I didn’t realize it was this intense was the number of clients you see relocating to new states. It’s been a record volume. Some of that is pandemic related, some of it predates the pandemic. How does that challenge the planning process? How different is it from state-to-state when it comes to things like tax planning? You mentioned trust. You mentioned philanthropic issues. What happens when somebody picks up from one state and relocates to another state? FRADKIN: Yeah, it’s an interesting question. Look, clients relocating has always been with us. If you look at Northern Trust history, we are headquartered in Chicago in the middle of the United States. It’s cold here in the winter, lovely city, but it does get rather cold at wintertime. And often times, as people age and, you know, their kids finish school and so forth, they opt for better environments in the wintertime, so they may want to be in Florida or Arizona or Texas or California. So, one phenomenon we’ve always seen is migration from state-to-state. That phenomenon is also impacted by state tax rates, by state tax considerations. And so, both, because of the pandemic and for tax reasons and lifestyle reasons, were continuing to see movement across state lines. And so, you know, I think the — the message to urban planners is taxes do matter to people. It’s not necessarily the only factor, but even affluent people will think through where do they want to be, where do they want to live, what environment to they want to be in, and what’s the tax impact for their clients. And that phenomenon is — is alive and well. It’s always been there, but it — it does seem to be important as different states consider different policies, if you will. People — residents make their choices, and so it’s — it’s — it’s a phenomenon that’s very much at the front of mind for many of our clients. RITHOLTZ: Interesting. You mentioned taxes. There was a new administration came to town this year, and the expectations are there will be some sort of change in tax policy, potentially including increases in capital gains and increases in estate taxes and, in some cases, fairly substantial increases. How do you plan around that? And since nothing is known for certain in advance what an administration is — is going to do, how do you make decisions in — in the face of that uncertainty? FRADKIN: Yeah, I think our starting point on behalf of our clients is to prepare rather than predict. So, let me give you an example that — that you referred to. The newly proposed tax law change would change the lifetime gift and estate tax exemption amount from $11.7 million down to $5 million. And what this means for people that built up substantial wealth is that if the proposal goes forward as — as offered, you have until the end of this year if you want to make a gift to your heirs of — if you can afford to and if you want to, make a gift of $11.7 million. And again, I can’t tell you whether this will happen. But if we just think about the financial impact here, if you have enough capacity to do that and you choose to do it, you can take $11.7 million out of your estate today, get it to your kids, grandkids, whoever it happens to be tax-free as opposed to, on January 1st, if the law goes forward only as — as offered, you can only do $5 million. And what that means is the difference between — sorry to get, you know, numbers all over — but the difference between 11.7 and five, which is $6.7 million will be taxed, you know, when you die at a — at a high rate. And so we have literally thousands of clients all across the country and each one we’re working with individually to evaluate what’s their financial circumstance, what do they want to do, do they want to make the gift. And by the way, this — this — this tax law change may or may not happen, so people have to make a choice without knowing for sure whether it’s going to happen. I think the bottom line though is people are looking at this carefully. They’re studying it and they’re trying to prepare and make judgments about what might happen and what’s best for their individual circumstance. But tax law changes matter and — and we are in the business of helping our clients figure out what’s the best choice for them with the information that we have. RITHOLTZ: Quite, quite interesting. So, we talked a little bit about alternatives earlier. Let’s address that a bit. There seems to be a growing appetite for all manner of — of alternative investments given that stocks and bonds are all a little bit pricey. Let’s start with private equity. What — what sort of demand is there from your clients for private equity. And — and how do you guys respond to the question of potentially better returns in exchange for far less liquidity? FRADKIN: Sure. Look, investment has become much more granular over the decades and again, just to be facetious, you know, large-cap stocks versus high quality bonds, you know, 40 years ago. Today, clients think in terms of small-cap, mid-cap, large-cap, value, international, emerging markets, private equity, and thousands of flavors of private equity; hedge fund the same thing. So, in the quest for optimizing returns, clients and their professional money managers, Northern Trust included, have searched for different asset classes to combine together to give people the best chance to — to achieve their objectives. Private equity clearly has been in the aggregate — there are winners and losers in private equity, but has been a asset class that has done well for many. There are tradeoffs with private equity, particularly in terms of liquidity. But I would say amongst our clientele, the appetite for private equity and private equity, as a more normalized asset class, continues to grow. It’s not the right asset class for every client, but for clients who have the capacity, the risk tolerance and so forth, it — it definitely can play an important role in a client’s portfolio. And increasingly, we’re seeing more use of private equity today than we did say 10 years ago. RITHOLTZ: What about venture capital or hedge funds, two totally different entities from both each other in private equity, what’s the demand like for those products? FRADKIN: Demand exists for venture capital and for hedge funds as well. Again, the devil is in the detail, not all hedge funds are created equally. The — the — the fees that they charge, the performance that they’ve delivered can differ substantially, but there is again this same notion of I want to diversify my portfolio. I want a — a range of options and so-called alternative investments. Whether you call it private equity, venture capital, hedge funds seem to continue to be growing in appeal to our clientele. RITHOLTZ: What about crypto and things like blockchain and Ethereum? There seems to be a lot of real interest in the space. Are — are you finding your client bases crypto-curious? FRADKIN: I would say the demand for crypto is more muted amongst our clientele than some of what you read in the public press. And that doesn’t mean we have examples of clients who have invested in crypto and done exceptionally well in a right time. But I would say, in general, if I had to caricature it, I would say that crypto is still an evolving asset class that is misunderstood by many. And I think most are treating it carefully. And the ones that are making crypto investments are viewing it more as a — more as a roll of the dice than a rational analytical view of what crypto is trading at today and what it’s going to trade it tomorrow. They view it as a bit of a roll the dice. They may jump in a little bit, but they understand that what goes up can also go down. So, I would say amongst our clientele overall, crypto is still not widely in use. RITHOLTZ: So, we mentioned briefly the market is certainly pricier than it was five or 10 years ago. How do you manage around stocks and bonds neither of which are inexpensive? FRADKIN: Yeah, look, I think for many of our clients, the market does go up, the market got does go down. And one of the great features of our — the goals-driven methodology that we use for clients is that we build a portfolio such that after a lot of analytical work to evaluate their goals and so forth that enables them to endure and not have to sell in a down market. We — we create something that’s called a portfolio reserve. I would liken it to the moat around your castle. Some people like a wide deep moat, some people need a narrower and less deep mode, but think of that as a high-quality fixed income. If the stock market goes down, your — your bonds are still fine. You can still pay your mortgage. Life is good. You can wait until the market goes up or — or returns to normal. So, the one thing we know on behalf of our clients is markets go up and down, and so you have to plan and prepare for that. And so, it’s very difficult to know. You know, again using the COVID-19 example, I think they’re a lot of people who might have argued the markets are going to crash, you know, everyone’s working from home and we can’t get the essentials, and people don’t want to go to the grocery store, and yet the market went up dramatically. So, we try and take a long-stewarded view and help our clients plan and prepare themselves so that when the market does go down, they can get through and — and not have to take adverse steps and sell in dire circumstance. And that’s been very helpful for our clients. RITHOLTZ: So, in terms of forward return expectations, does that — and historically low-bond yields, high equity prices tend to suggest low returns going forward, does that work its way into the planning process or is that really more of an academic theory? FRADKIN: No, it absolutely works its way into the planning process because our starting point is what needs does a client have over the near-term for financial resources. We — we got to make sure they can buy their groceries, and pay their mortgage, and we have to deploy assets against those goals. But once, in working with a client, we figured out the right mix of assets to — to enable them to — to afford those goals over a reasonable period of time, we then have to deploy the rest of the portfolio toward so-called risk assets, equities, private equity, hedge funds, venture — whatever the asset class. And in so doing, we have to bring our judgment about risk and return expectations for each of those asset classes. So, our view of asset classes and what they’re likely to bring over the relatively short-term is still an important part of the process. RITHOLTZ: So, what do you tell investors who say, “You know, I’m really not happy with my muni bond portfolio. It’s barely thrown off two or 2.5 percent.” Investors are always seen to be looking for more yield. How do you respond to that group of clients? FRADKIN: Yeah, I think it — my — our response is really you have to remember what you’re trying to do with that muni bond portfolio. No one is saying it’s a great high returning asset class, but that’s not its role. Its role is to be — I’m making this up, Barry, but generally, the role of that muni bond portfolio is to provide you with certainty, security, confidence, and not have to worry about the other part of your portfolio, let’s just call that equities gyrating up and down. So, of course, people want their muni bonds or their high-quality fixed income to return as much as it can, and it’s our job to try and help people achieve that. But I think you always have to come back to what role is this trying to play. And for most clients, it’s trying to play a role of stability, and reliability, and consistency, and that’s the paramount feature. And in providing that consistency and — and stability and predictability, they give up a little bit of return on that asset class, but they’re trying to get that elsewhere with their equities, private equity, and so forth. So, you had — you had discussed previously, hey, you know, it’s up to us to make the most of a low rate environment. What does that mean? Get — how does one make the most of a low rate environment? FRADKIN: Well, I think, you know, low — low rates create — low interest rates create challenges and opportunities. Maybe two simple ways to think about it are, one, on the challenge side, if you’re living on a fixed income as assets reprice to — and you’re reliant on bonds — your bonds to provide income, the lower rates make the yield on those bonds lower, and so that’s bad from, you know, how much cash flow I have to — to fill my needs. The flipside to that is that when rates are very low, if you want to, if it’s appropriate, if it’s thoughtfully done, you can use credit rather than liquidating stocks to — you know, if you want to buy a new toy, so to speak, a boat, whatever it happens to be, one way to do that is to sell stocks in your portfolio and buy the — you know, whatever it is you want to buy. Another way is to let those stocks keep working on your behalf and, because rates are so low, take advantage of credit. Take a loan, buy that boat and — or whatever it happens to be and pay it back over time. So low interest rates, you know, how can have different conflicting phenomenon, opportunities on the credit side and headwinds on the bond investment site. RITHOLTZ: So — so how do you incorporate all this inflation chatter to — to your planning? We’ve started to see rates tick up the 10-year as — as recording this just about 1.5 percent. And I know there’s an irony in saying that rates are all the way up to 1.5 percent, which historically is incredibly low. How do you figure inflation into your modeling and — and thinking about the future? FRADKIN: Yeah, well, we use multi-scenario modeling. The — the reality is no one knows and so you have to, you know, the — the prognosticators will — will have a view. Some — some believe inflation is here and is going to continue. Others argue it’s so-called transitory. And the truth is we don’t know. We’ll — we’ll find that out tomorrow, so to speak. And so as we work through planning with our clients, we generally are running multiple scenarios, low inflation, medium inflation, high inflation. And we’re trying — as we — as we help clients make decisions, we’re trying to make the best judgment we can at a given point in time. But that’s why you — you really have to — be you have to plan for multiple scenarios and bring agility to your process because we don’t know whether the stock market is going up or down. We don’t know whether inflation will be higher or lower. We have a view. We can have probabilities. But as we’ve seen, whether it was with 2008 or COVID, we — everyone can be wrong. And so, you have to plan and adapt and leave yourself a buffer for when you are wrong, and hopefully it’s not — not catastrophic. RITHOLTZ: So, I know I only have you for a little bit of time. Let me jump to my favorite questions that I ask all of my guests, starting with tell us what you’re streaming these days, what’s keeping you entertained at home, either on Netflix or Amazon Prime or — or wherever. FRADKIN: Well, I’ve — I’ve been working hard so I — I can’t say I’ve — I’ve made great use of Netflix. But what I have just started and this will show you, Barry, how far behind I am is I’ve just started Ted Lasso. So I’m behind the rest of the world, but that’s what I’m on right now. RITHOLTZ: All right. Well, well, you’ll — I could tell you this much, you will enjoy it and — and enjoy catching up with us. What about mentors? Who helped to shape your career? FRADKIN: You know, I’ve had a lot of mentors at Northern Trust over the years, people who were senior to me and people who weren’t, but I learned from everyone. I think when I think about mentors, for me, it’s less about people with whom I work and maybe it’s my interest in history. But I try and learn from people who have overcome insurmountable odds, the Mahatma Gandhis, the Martin Luther Kings, the Winston Churchills, the Vaclav Havels, the Abraham Lincoln. And there’s so much wisdom that I see in people like that because they really faced incredible circumstances and worked through them generally to good outcomes. And so there — those great thinkers are probably the people I’ve learned the most from as I wouldn’t call them mentors to me, but I’ve certainly read about all of them and — and learned a lot from each of them. RITHOLTZ: Let’s talk about books. What are you reading right now and what — what are some of your favorites? FRADKIN: You know, I think in keeping with that theme of mentors over periods of time that interest me, I’ve really enjoyed “The Splendid and the Vile” by Eric Larson, which is about Churchill and the blitz of World War II. And — and again, it — it helps you — it helps me to see just how dire the circumstances were and what he and others had to navigate through. The other book that I’ve dusted off recently, I read some time ago, but I think in view of the pandemic, it seemed interesting to me was “The Hot Zone” by Richard Preston, which has nothing to do with the pandemic, but there are parallels to what we’re dealing with, and it was sort of a gripping — a gripping book if you have time for a good read. RITHOLTZ: Sounds interesting. What sort of advice would you give to a recent college grad who is interested in a career in either investment management or finance? FRADKIN: Yeah, I think, Barry, I’d offer a — a — a couple of themes on this. And I — I don’t know that I narrowed these themes to an interest in investments or finance, although I think they do overlap. But I’d start by saying, it probably be easiest place to get my view there would be to go to YouTube and I — I gave a commencement address at the University of Illinois Chicago and tried to formulate those themes for — for young people. But a — but a few that come to mind at least through my lens are comfort is the enemy of accomplishment. If you want to be the best you can be, you can never be satisfied with where you are. You’ve got to push, push, push and make yourself better each and every day in everything you touch. I think a couple of the other themes that would come to me would be in — in the same vein, we see this in Northern Trust all the time. Excellence is not a part-time job. For people who want to be excellent, who want to do the best job for our clients and our shareholders, you can’t be excellent only when it’s convenient, only when you want to do it or only when you feel like it. You’ve — you’ve got to — excellence is an all-in phenomenon. And then probably the — the — the last thing that comes to my mind is persevere beyond your accomplishments. It’s not what you did yesterday, it’s — you can be proud of what you’ve accomplished. But again, you want to be better going forward. And so be proud of who you are, be proud of your grades, and your — your school, and your degrees, and all that sort of stuff, but those are what you did, you know, two years ago, five years ago, 10 years ago whatever it happens to be, keep pushing forward to be the best you can be. So, persevere beyond your accomplishments. RITHOLTZ: And our final question, what do you know about the world of investing today you wish you knew 35 years ago when you were first starting with Northern Trust? FRADKIN: That is a long list, Barry, but I think what I would say is you don’t have to be right on everything and sometimes being right is more about luck and timing than it is about specific analytical acumen. Uninspiring choices in a bull market can turn out just fine, and well-reasoned ideas in a down market can turn out to be not so good. So, get the direction right more often than not and you’ll be just fine. RITHOLTZ: Really good advice. Thank you, Steve, for being so generous with your time. We’ve been speaking with Steve Fradkin. He is the President of Northern Trust Wealth Management. If you enjoy this conversation, well, be sure and check out any of the other 388 prior discussions we’ve had over the past seven years. You can find those wherever you normally find your favorite podcast, iTunes, Spotify, wherever. We love your comments, feedback, and suggestions. Write to us at mibpodcast@bloomberg.net. You can sign up for my daily suggested reading list at ritholtz.com. Check out my regular column at bloomberg.com/opinion. Follow me on Twitter @ritholtz. I would be remiss if I did not thank the crack that helps put these conversations together each week. Paris Wald is my Producer. Michael Batnick is my Head of Research. Atika Valbrun is our Project Manager. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.   ~~~   The post Transcript: Steve Fradkin appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureNov 29th, 2021

Shorewest, REALTORS® Celebrates 75 Years of Relationship Building

Organizations that have been part of the fold of real estate for several decades understand how the tides change, bringing everything from volatile economies and housing crashes to surprisingly resilient markets that can withstand even a worldwide health crisis. It’s no surprise, then, that Shorewest, REALTORS®, now celebrating its 75th year in business, is more […] The post Shorewest, REALTORS® Celebrates 75 Years of Relationship Building appeared first on RISMedia. Organizations that have been part of the fold of real estate for several decades understand how the tides change, bringing everything from volatile economies and housing crashes to surprisingly resilient markets that can withstand even a worldwide health crisis. It’s no surprise, then, that Shorewest, REALTORS®, now celebrating its 75th year in business, is more prepared than most to withstand these fluctuations. In fact, the brokerage navigated murky waters in the 80s, when sky-high interest rates slowed the markets down to a crawl. Out of that stumbling block, however, emerged an opportunity for growth. “We decided to help our buyers by securing blocks of funds to use for mortgages to purchase homes,” Joe Horning, president of Shorewest, REALTORS®, tells RISMedia. “This is how we founded Wisconsin Mortgage in 1983.” In today’s market, inventory poses the biggest challenge, according to Joe Horning. But again, the organization sees the opportunity before the obstacle. While there isn’t enough supply to satisfy the buyer pool, the brokerage can continue investing in agents that can then help educate potential buyers about how they can achieve their dream of homeownership regardless of the strained market. “Our greatest opportunity is new agents. In the first nine months of 2021, we enrolled 600 students into our real estate school,” he says. Part of being prepared for the unknown means providing agents and staff with the tools they’ll need in order to tackle all types of markets. According to Joe Horning, while the brokerage does provide the necessary tech they can leverage in all situations, the key has always been, and continues to be, relationships—and that’s what helps differentiate the firm. “We continue to develop the tools and technologies that are most effective in supporting our team and their clients,” says Joe Horning. “However, in the end, real estate is still a relationship business. It fundamentally comes down to taking care of our clients and helping them achieve their goals. If we continue to focus on that core value, we will be successful for another 75 years.” Looking back at the founding of the brokerage, the company notes that if John A. Horning were here today, he would not only be proud to see his dream continue for 75 years and three generations later, but he would also be humbled. John A. Horning started Wauwatosa Realty in 1946 out of an office in his home with a simple vision and philosophy that set the foundation for the powerful culture Shorewest, REALTORS® lives and breathes today: provide clients with exemplary customer service that extends beyond the transaction, as well as innovative marketing and personal recognition. He looked to instill a familial relationship with each employee and customer, imparting Midwestern values of hard work and dedication. After seven months, John A. Horning opened the first of many offices at 7602 Harwood Avenue in Wauwatosa, quickly outgrowing his initial space. During his first year in business, Horning sold $500,000 and served 40 families. From there, the brokerage opened more offices and continued expanding the business, with second-generation John E. and Donald F. Horning, son and nephew of John A. Horning, opening Heritage Title Services, Wisconsin Mortgage Corporation, the Real Estate Institute, Home Closing and Relocation divisions. The Wauwatosa name reached a crossroads in 1997, as leadership embraced the explosive growth, which eventually led to the founding of Shorewest, REALTORS®. In 2002, Joe and John P. Horning, sons of John E., became the third generation of leadership, following in their grandfather’s footsteps. “Shorewest, REALTORS® is the only major company in our market that has been in business for 75 years and has remained independent,” says Joe Horning. “We credit this to attracting and growing the best people in the business along with our ability to innovate and lead over the years. In Wisconsin, we were the first company to develop a website, the first to open a real estate school, and the first to offer full service to our clients.” Seventy-five years in, the celebrated brokerage and its family of companies— Wisconsin Mortgage Corporation, Heritage Title Services, Shorewest Insurance and My-Dwelling—now support over 1,400 team members who serve neighborhoods throughout Wisconsin to help people realize the American Dream of homeownership and give back to the community through a proprietary charity, Christmas Is for Kids. “You don’t make it to 75 years without innovating and providing the best support for your team and their clients,” says Joe Horning. Liz Dominguez is RISMedia’s senior online editor. Email her your real estate news ideas to lizd@rismedia.com. The post Shorewest, REALTORS® Celebrates 75 Years of Relationship Building appeared first on RISMedia......»»

Category: realestateSource: rismediaNov 29th, 2021

A President Betrayed by Bureaucrats: Scott Atlas Exposes The Real COVID Disaster

A President Betrayed by Bureaucrats: Scott Atlas Exposes The Real COVID Disaster Authored by Jeffrey Tucker via The Brownstone Institute, I’m a voracious reader of Covid books but nothing could have prepared me for Scott Atlas’s A Plague Upon Our House, a full and mind-blowing account of the famed scientist’s personal experience with the Covid era and a luridly detailed account of his time at the White House. The book is hot fire, from page one to the last, and will permanently affect your view of not only this pandemic and the policy response but also the workings of public health in general.  Atlas’s book has exposed a scandal for the ages. It is enormously valuable because it fully blows up what seems to be an emerging fake story involving a supposedly Covid-denying president who did nothing vs. heroic scientists in the White House who urged compulsory mitigating measures consistent with prevailing scientific opinion. Not one word of that is true. Atlas’s book, I hope, makes it impossible to tell such tall tales without embarrassment.  Anyone who tells you this fictional story (including Deborah Birx) deserves to have this highly credible treatise tossed in his direction. The book is about the war between real science (and genuine public health), with Atlas as the voice for reason both before and during his time in the White House, vs. the enactment of brutal policies that never stood any chance of controlling the virus while causing tremendous damage to the people, to human liberty, to children in particular, but also to billions of people around the world.  For the reader, the author is our proxy, a reasonable and blunt man trapped in a world of lies, duplicity, backstabbing, opportunism, and fake science. He did his best but could not prevail against a powerful machine that cares nothing for facts, much less outcomes.  If you have heretofore believed that science drives pandemic public policy, this book will shock you. Atlas’s recounting of the unbearably poor thinking on the part of government-based “infectious disease experts” will make your jaw drop (thinking, for example, of Birx’s off-the-cuff theorizing about the relationship between masking and controlling case spreads).  Throughout the book, Atlas points to the enormous cost of the machinery of lockdowns, the preferred method of Anthony Fauci and Deborah Birx: missed cancer screenings, missed surgeries, nearly two years of educational losses, bankrupted small business, depression and drug overdoses, overall citizen demoralization, violations of religious freedom, all while public health massively neglected the actual at-risk population in long-term care facilities. Essentially, they were willing to dismantle everything we called civilization in the name of bludgeoning one pathogen without regard to the consequences.  The fake science of population-wide “models” drove policy instead of following the known information about risk profiles. “The one unusual feature of this virus was the fact that children had an extraordinarily low risk,” writes Atlas. “Yet this positive and reassuring news was never emphasized. Instead, with total disregard of the evidence of selective risk consistent with other respiratory viruses, public health officials recommended draconian isolation of everyone.” “Restrictions on liberty were also destructive by inflaming class distinctions with their differential impact,” he writes, “exposing essential workers, sacrificing low-income families and kids, destroying single-parent homes, and eviscerating small businesses, while at the same time large companies were bailed out, elites worked from home with barely an interruption, and the ultra-rich got richer, leveraging their bully pulpit to demonize and cancel those who challenged their preferred policy options.” In the midst of continued chaos, in August 2020, Atlas was called by Trump to help, not as a political appointee, not as a PR man for Trump, not as a DC fixer but as the only person who in nearly a year of unfolding catastrophe had a health-policy focus. He made it clear from the outset that he would only say what he believed to be true; Trump agreed that this was precisely what he wanted and needed. Trump got an earful and gradually came around to a more rational view than that which caused him to wreck the American economy and society with his own hands and against his own instincts.  In Task Force meetings, Atlas was the only person who showed up with studies and on-the-ground information as opposed to mere charts of infections easily downloadable from popular websites. “A bigger surprise was that Fauci did not present scientific research on the pandemic to the group that I witnessed. Likewise, I never heard him speak about his own critical analysis of any published research studies. This was stunning to me. Aside from intermittent status updates about clinical trial enrollments, Fauci served the Task Force by offering an occasional comment or update on vaccine trial participant totals, mostly when the VP would turn to him and ask.” When Atlas spoke up, it was almost always to contradict Fauci/Birx but he received no backing during meetings, only to have many people in attendance later congratulate him for speaking out. Still, he did, by virtue of private meetings, have a convert in Trump himself, but by then it was too late: not even Trump could prevail against the wicked machine he had permissioned into operation.  It’s a Mr. Smith Goes to Washington story but applied to matters of public health. From the outset of this disease panic, policy came to be dictated by two government bureaucrats (Fauci and Birx) who, for some reason, were confident in their control over media, bureaucracies, and White House messaging, despite every attempt by the president, Atlas, and a few others to get them to pay attention to the actual science about which Fauci/Birx knew and care little.  When Atlas would raise doubts about Birx, Jared Kushner would repeatedly assure him that “she is 100% MAGA.” Yet we know for certain that this is not true. We know from a different book on the subject that she only took the position with the anticipation that Trump would lose the presidency in the November election. That’s hardly a surprise; it’s the bias expected from a career bureaucrat working for a deep-state institution. Fortunately, we now have this book to set the record straight. It gives every reader an inside look at the workings of a system that wrecked our lives. If the book finally declines to offer an explanation for the hell that was visited upon us – every day we still ask the question why? – it does provide an accounting of the who, when, where, and what. Tragically, too many scientists, media figures, and intellectuals in general went along. Atlas’s account shows exactly what they signed up to defend, and it’s not pretty.  The cliche that kept coming to mind as I read is “breath of fresh air.” That metaphor describes the book perfectly: blessed relief from relentless propaganda. Imagine yourself trapped in an elevator with stultifying air in a building that is on fire and the smoke gradually seeps in from above. Someone is in there with you and he keeps assuring you that everything is fine, when it is obviously not.  That’s a pretty good description of how I felt from March 12, 2020 and onward. That was the day that President Trump spoke to the nation and announced that there would be no more travel from Europe. The tone in his voice was spooky. It was obvious that more was coming. He had clearly fallen sway to extremely bad advice, perhaps he was willing to push lockdowns as a plan to deal with a respiratory virus that was already widespread in the US from perhaps 5 to 6 months earlier.  It was the day that the darkness descended. A day later (March 13), the HHS distributed its lockdown plans for the nation. That weekend, Trump met for many hours with Anthony Fauci, Deborah Birx, son-in-law Jared Kushner, and only a few others. He came around to the idea of shutting down the American economy for two weeks. He presided over the calamitous March 16, 2020, press conference, at which Trump promised to beat the virus through general lockdowns.  Of course he had no power to do that directly but he could urge it to happen, all under the completely delusional promise that doing so would solve the virus problem. Two weeks later, the same gang persuaded him to extend the lockdowns.  Trump went along with the advice because it was the only advice he was fed at the time. They made it appear that the only choice that Trump had – if he wanted to beat the virus – was to wage war on his own policies that were pushing for a stronger, healthier economy. After surviving two impeachment attempts, and beating back years of hate from a nearly united media afflicted by severe derangement syndrome, Trump was finally hornswoggled.  Atlas writes: “On this highly important criterion of presidential management—taking responsibility to fully take charge of policy coming from the White House—I believe the president made a massive error in judgment. Against his own gut feeling, he delegated authority to medical bureaucrats, and then he failed to correct that mistake.” The truly tragic fact that both Republicans and Democrats do not want spoken about is that this whole calamity is that did indeed begin with Trump’s decision. On this point, Atlas writes: Yes, the president initially had gone along with the lockdowns proposed by Fauci and Birx, the “fifteen days to slow the spread,” even though he had serious misgivings. But I still believe the reason that he kept repeating his one question—“Do you agree with the initial shutdown?”—whenever he asked questions about the pandemic was precisely because he still had misgivings about it. Large parts of the narrative are devoted to explaining precisely how and to what extent Trump had been betrayed. “They had convinced him to do exactly the opposite of what he would naturally do in any other circumstance,” Atlas writes, that is  “to disregard his own common sense and allow grossly incorrect policy advice to prevail…. This president, widely known for his signature “You’re fired!” declaration, was misled by his closest political intimates. All for fear of what was inevitable anyway—skewering from an already hostile media. And on top of that tragic misjudgment, the election was lost anyway. So much for political strategists.” There are so many valuable parts to the story that I cannot possibly recount them all. The language is brilliant, e.g. he calls the media “the most despicable group of unprincipled liars one could ever imagine.” He proves that assertion in page after page of shocking lies and distortions, mostly driven by political goals.  I was particularly struck by his chapter on testing, mainly because that whole racket mystified me throughout. From the outset, the CDC bungled the testing part of the pandemic story, attempting to keep the tests and process centralized in DC at the very time when the entire nation was in panic. Once that was finally fixed, months too late, mass and indiscriminate PCR testing became the desiderata of success within the White House. The problem was not just with the testing method: “Fragments of dead virus hang around and can generate a positive test for many weeks or months, even though one is not generally contagious after two weeks. Moreover, PCR is extremely sensitive. It detects minute quantities of virus that do not transmit infection…. Even the New York Times wrote in August that 90 percent or more of positive PCR tests falsely implied that someone was contagious. Sadly, during my entire time at the White House, this crucial fact would never even be addressed by anyone other than me at the Task Force meetings, let alone because for any public recommendation, even after I distributed data proving this critical point.” The other problem is the wide assumption that more testing (however inaccurate) of whomever, whenever was always better. This model of maximizing tests seemed like a leftover from the HIV/AIDS crisis in which tracing was mostly useless in practice but at least made some sense in theory. For a widespread and mostly wild respiratory disease transmitted the way a cold virus is transmitted, this method was hopeless from the beginning. It became nothing but make work for tracing bureaucrats and testing enterprises that in the end only provided a fake metric of “success” that served to spread public panic.  Early on, Fauci had clearly said that there was no reason to get tested if you had no symptoms. Later, that common-sense outlook was thrown out the window and replaced with an agenda to test as many people as possible regardless of risk and regardless of symptoms. The resulting data enabled Fauci/Birx to keep everyone in a constant state of alarm. More test positivity to them implied only one thing: more lockdowns. Businesses needed to close harder, we all needed to mask harder, schools needed to stay closed longer, and travel needed to be ever more restricted. That assumption became so entrenched that not even the president’s own wishes (which had changed from Spring to Summer) made any difference.  Atlas’s first job, then, was to challenge this whole indiscriminate testing agenda. To his mind, testing needed to be about more than accumulating endless amounts of data, much of it without meaning; instead, testing should be directed toward a public-health goal. The people who needed tests were the vulnerable populations, particularly those in nursing homes, with the goal of saving lives among those who were actually threatened with severe outcomes. This push to test, contact trace, and quarantine anyone and everyone regardless of known risk was a huge distraction, and also caused huge disruption in schooling and enterprise.  To fix it meant changing the CDC guidelines. Atlas’s story of attempting to do that is eye-opening. He wrestled with every manner of bureaucrat and managed to get new guidelines written, only to find that they had been mysteriously reverted to the old guidelines one week later. He caught the “error” and insisted that his version prevail. Once they were issued by the CDC, the national press was all over it, with the story that the White House was pressuring the scientists at the CDC in terrible ways. After a week-long media storm, the guidelines changed yet again. All of Atlas’s work was made null.  Talk about discouraging! It was also Atlas’s first full experience in dealing with deep-state machinations. It was this way throughout the lockdown period, a machinery in place to implement, encourage, and enforce endless restrictions but no one person in particular was there to take responsibility for the policies or the outcomes, even as the ostensible head of state (Trump) was on record both publicly and privately opposing the policies that no one could seem to stop.  As an example of this, Atlas tells the story of bringing some massively important scientists to the White House to speak with Trump: Martin Kulldorff, Jay Bhattacharya, Joseph Ladapo, and Cody Meissner. People around the president thought the idea was great. But somehow the meeting kept being delayed. Again and again. When it finally went ahead, the schedulers only allowed for 5 minutes. But once they met with Trump himself, the president had other ideas and prolonged the meeting for an hour and a half, asking the scientists all kinds of questions about viruses, policy, the initial lockdowns, the risks to individuals, and so on.  The president was so impressed with their views and knowledge – what a dramatic change that must have been for him – that he invited filming to be done plus pictures to be taken. He wanted to make it a big public splash. It never happened. Literally. White House press somehow got the message that this meeting never happened. The first anyone will have known about it other than White House employees is from Atlas’s book.  Two months later, Atlas was instrumental in bringing in not only two of those scientists but also the famed Sunetra Gupta of Oxford. They met with the HHS secretary but this meeting too was buried in the press. No dissent was allowed. The bureaucrats were in charge, regardless of the wishes of the president.  Another case in point was during Trump’s own bout with Covid in early October. Atlas was nearly sure that he would be fine but he was forbidden from talking to the press. The entire White House communications office was frozen for four days, with no one speaking to the press. This was against Trump’s own wishes. This left the media to speculate that he was on his deathbed, so when he came back to the White House and announced that Covid is not to be feared, it was a shock to the nation. From my own point of view, this was truly Trump’s finest moment. To learn of the internal machinations happening behind the scenes is pretty shocking.  I can’t possibly cover the wealth of material in this book, and I expect this brief review to be one of several that I write. I do have a few disagreements. First, I think the author is too uncritical toward Operation Warp Speed and doesn’t really address how the vaccines were wildly oversold, to say nothing of growing concerns about safety, which were not addressed in the trials. Second, he seems to approve of Trump’s March 12th travel restrictions, which struck me as brutal and pointless, and the real beginning of the unfolding disaster. Third, Atlas inadvertently seems to perpetuate the distortion that Trump recommended ingesting bleach during a press conference. I know that this was all over the papers. But I’ve read the transcript of that press conference several times and find nothing like this. Trump actually makes clear that he was speaking about cleaning surfaces. This might be yet another case of outright media lies.  All that aside, this book reveals everything about the insanity of 2020 and 2021, years in which good sense, good science, historical precedent, human rights, and concerns for human liberty were all thrown into the trash, not just in the US but all over the world. Atlas summarizes the big picture: “in considering all the surprising events that unfolded in this past year, two in particular stand out. I have been shocked at the enormous power of government officials to unilaterally decree a sudden and severe shutdown of society—to simply close businesses and schools by edict, restrict personal movements, mandate behavior, regulate interactions with our family members, and eliminate our most basic freedoms, without any defined end and with little accountability.” Atlas is correct that “the management of this pandemic has left a stain on many of America’s once noble institutions, including our elite universities, research institutes and journals, and public health agencies. Earning it back will not be easy.”  Internationally, we have Sweden as an example of a country that (mostly) kept its sanity. Domestically, we have South Dakota as an example of a place that stayed open, preserving freedom throughout. And thanks in large part to Atlas’s behind-the-scenes work, we have the example of Florida, whose governor did care about the actual science and ended up preserving freedom in the state even as the elderly population there experienced the greatest possible protection from the virus.  We all owe Atlas an enormous debt of gratitude, for it was he who persuaded the Florida governor to choose the path of focussed protection as advocated by the Great Barrington Declaration, which Atlas cites as the “single document that will go down as one of the most important publications in the pandemic, as it lent undeniable credibility to focused protection and provided courage to thousands of additional medical scientists and public health leaders to come forward.” Atlas experienced the slings, arrows, and worse. The media and the bureaucrats tried to shut him up, shut him down, and body bag him professionally and personally. Cancelled, meaning removed from the roster of functional, dignified human beings. Even colleagues at Stanford University joined in the lynch mob, much to their disgrace. And yet this book is that of a man who has prevailed against them. In that sense, this book is easily the most crucial first-person account we have so far. It is gripping, revealing, devastating for the lockdowners and their vaccine-mandating successors, and a true classic that will stand the test of time. It’s simply not possible to write the history of this disaster without a close examination of this erudite first-hand account.  Tyler Durden Sun, 11/28/2021 - 12:30.....»»

Category: blogSource: zerohedgeNov 28th, 2021

GreenWood Investors 3Q21 Commentary: Defense, Offense & Conviction

GreenWood Investors commentary for the third quarter ended September 2021, titled, “Defense, Offense & Conviction.” Q3 2021 hedge fund letters, conferences and more When Defense Misfires “Offense wins games. Defense wins championships.” This past quarter, much of my curiosity has been focused on the differences between offense and defense. Given I’ve spent little time watching […] GreenWood Investors commentary for the third quarter ended September 2021, titled, “Defense, Offense & Conviction.” if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more When Defense Misfires “Offense wins games. Defense wins championships.” This past quarter, much of my curiosity has been focused on the differences between offense and defense. Given I’ve spent little time watching team sports, it’s been an interesting exploration. As my mind was occupied by defining an offensive playbook for our two coinvestments, we took our eyes off the ball of our protective, defense-oriented portfolio activities. The performance in the quarter was impacted by a 4% headwind generated by one particular short, which was the primary reason our fund underperformed indices in the quarter. While it was a painful lesson, we immediately evolved our short process in order to prevent our defensive measures from ever hurting our performance to such an extent going forward. Cutting to the chase, the performance in the quarter for the Global Micro Fund was -7.7% net (+30.5% YTD), and this compares to our benchmark MSCI ACWI index returning -1.1% in the quarter (+11.5% YTD). Without any FX headwinds, euro-denominated Luxembourg fund returned -3.3% net (+39.4% YTD). Separate account composites had similar returns, as Global Micro strategy returned -8.1% net (+15.0% YTD) and our longest-running and long-only Traditional accounts returned -6.8% net (16.5% YTD). The Builders Fund I returned -5.2% net in the quarter (+84.5% YTD) driven partially by foreign exchange. Builders Fund II, which was launched in the quarter, returned +3.0% net (+3.0% YTD). Aside from the one short mentioned, our returns were also impacted by corrections at Superdry PLC (LON:SDRY) and Peloton Interactive Inc (NASDAQ:PTON), each taking away roughly 2% from our performance in the quarter. They are both experiencing very different situations right now in the aftermath of Covid, but both are pressing their offense strategies with increased vigor. We remain undeterred with Superdry despite popular skepticism on the brand’s turnaround. Such perspectives look mismatched with a reinvigorated influencer strategy targeting a whole new generation, which have just driven same-store-sales to positive territory on a two-year stack. This is ahead of a pivotal autumn-winter season, when its jackets, coats and sweaters have traditionally shined. Having missed last winter due to Covid, we are excited to see the new product resonate with an entirely new base of consumers. We recently followed the Chairman and CEO’s insider buys, and purchased more shares on weakness. We continue to be encouraged by the progress made; and for a slightly longer discussion on where our thoughts are on Superdry, click here to see a tweet thread. Peloton has experienced a round trip of home workout demand back to pre-covid levels. Thus, while it is launching new products and new geographies, and retains an industry-leading engaged base of 6.2 million exercisers with low monthly subscription churn, this position will have to return to old fashioned marketing to continue on its path towards its incredibly ambitious goal of impacting 100 million users’s fitness routines every month.. With its customer satisfaction, as measured by the Net Promotor Score, remaining one of the highest, if not the highest, in the world, we would not bet against this heavily engaged cult of growing endorphin-filled users. We believe the company still has a very significant market opportunity to both attack and define. Revisiting The Defense Playbook “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” Warren Buffett Stretching the offense and defense analogies over to investing, this past year has rewarded risk-taking (offensive) strategies, particularly those that are furthest out on the risk curve. But over the long-term, value-oriented investing wins the championship. That means taking a conservative underwriting approach to investment opportunities and maintaining a defensive posture when everyone else is doing the opposite. In our opinion, that also means running a short book, which allow us to remain opportunistic in periods of greater stress. It is not a good time to be reducing a defensive posture, in our opinion. Over the first 11 years of GreenWood’s existence, we have almost never been idea-constrained. Rather, we have been only constrained by the capacity we have to analyze the large opportunity set. That has typically meant, aside from the earliest years, we have had minimal cash left over. Given we have gravitated towards misunderstood assets and areas neglected by robotic index funds, not only does this portfolio tend to not carry a large cash balance, but it has exhibited more volatility than an index. Accordingly, carrying a short book is essential for us to be able to remain opportunistic in periods of stress. And quite frankly, our defense track record could use some improvement. While this defensive posture paid off in 2008, 2011, and 2018, we had few opportunistic shorts going into 2016 and 2020, right when we needed them. I’m personally committed to improving on that 3-2 market defense track record. I’m also committed to lowering any significant portfolio tilt towards specific factors, as our fundamental research capabilities are not able to be matched on a macroeconomic scale. There are too many factors and estimates to know anything on a large scale with any degree of certainty. For us, conviction is the most important function of an asset manager. It was with that intention we have been carrying a full short book ever since late 2020. And that short book largely paid off over the first half of this year, as the current environment has proved to be fertile in finding over-valued, value-less businesses. In fact, most of these shorts underperformed the market so quickly and so dramatically, that short book turnover caused Chris and I to run on a faster and faster treadmill throughout this year. When we found the short that ended up causing us so much pain in the quarter, it sounded too good to be true. It was a perfect offset to some of our chunkier portfolio factor exposures, but even more, it became clear this was not only a terrible business model, but it was likely a fraud. As Chris and I dug further into the business, there was a never-ending string of yarn that we kept pulling, and the more we pulled, the more damning the evidence was on the founder, company and target markets. In that excited process, we failed to appreciate the risk posed by the meme-trading phenomenon, in the assumption that an Italian company was unlikely to get caught up in the retail trading frenzy that has generated so many distortions elsewhere. Bypassing that debate proved to be our mistake, as the less liquid nature of the stock meant that it was more easily manipulated higher for a few months. As it was getting squeezed, I took action to eliminate that portfolio risk, even knowing that the stock would eventually go to zero. And in the wake of that experience, we also exited other shorts that had largely run their course, but that posed some possible retail trading risk. In our post-mortems, that are published on our investors-only research area, we identified one of the problems we were trying to solve for was the treadmill we found ourselves on. Because each piece of incremental evidence made it more and more compelling, we actually didn’t pause to have a proper bull-bear debate, which is what we have done for every other position. We had put too much pressure on ourselves to maintain a timely short book, and in many ways that papered over the obvious truth that the borrow was hard to obtain and liquidity was not accommodative. We revised our ranking framework to ensure there is a significantly higher bar for less liquid shorts in the future. Furthermore, we decided that any “gaps” in needed short exposure would more easily be filled immediately with index funds that could directly help offset some of the chunkier factor risks to our portfolio, namely European value stocks. We don’t intend to hold these index hedges forever, but believe it will help take pressure off of us to prematurely add new shorts to the portfolio. We have a lot of candidates in the backlog, but we are determined to ensure that we get the timing right as opposed to just the company thesis and factor exposure. At their core, our defensive moves should first do no harm. This analogy mirrors perhaps the most quoted Buffett lesson about rule number one, noted above. In that vein, our current short portfolio is comprised of large, liquid index constituents with very low short interests, cheap borrows, and are largely well-loved. Similar to most of our short positions in the past, they also have mounting liabilities as decades of unconscious behaviors or corruption have eroded the core values of the businesses. We recently published our research on two newer positions on our investor-only research site. These shorts have multiple catalysts over the next few quarters, that we believe, will cause both a material impact to their financials while also possibly downgrading the market’s behavioral narrative. More Conscious Than ESG “Sustainability is built into our business model. If we are focused on the long term, there is no conflict between profitability and the interests of stakeholders. If you are focused on the short term, there is. It’s that simple!” Sir Martin Sorrell Most importantly, these two businesses that we are short have some deeply unconscious features. While each case is different, this means that we’ve found evidence of corruption or deliberate sales of defective or toxic products for decades prior to being discontinued. All of these behaviors are only now catching up to these companies and present material downside risks to these businesses that have historically been run for short-term profit maximization as opposed to long-term value creation or innovation. These are the kinds of companies that are causing the ESG movement to gain major traction around the world. But while we applaud action being taken on protecting the environment, the ESG movement is not solving the root of the problem. The movement is addressing the symptoms rather than the causes. In a white paper that I can’t wait to publish, we’ll show evidence that the fundamental issue facing business today is one of unaccountable agents seeking immediate gratification. There’s a lack of ownership and accountability in a market that continues to outsource much of the “ratings” to agents. Large funds managed by agents with no skin in the game are relying on ratings agencies, also with no skin in the game, to dictate qualitative criteria that often don’t tie to value creation, but rather liability minimization. And that is important, but not sufficient on its own. It is defense without the offense. Or sometimes, it’s all marketing covering up flimsy foundations. Owners or founders exhibit more long-term, conscious capitalist behavior. They generally don’t give quarterly profit guidance, and instead prefer to focus on their customer satisfaction and employee morale. They invest more in their own businesses rather than paying that capital out to shareholders or to acquisition targets. Great shareholder returns are the result of a highly conscious business model, not the goal in and of itself. Exhibit 1: Builders Have Happier Customers & More Engaged Employees Source: GreenWood Investors, OO = owner operators, DC = dual share class structures, S&P = S&P 1200 Global Index But what does it mean actually to be conscious? That’s the subject that Anil Seth seeks to answer in his latest work, Being You. In seeking to demystify the mystery of consciousness, he discusses the most robust model that has been put forward for understanding and measuring how conscious an organism is. Integration information theory (IIT) postulates that consciousness is measured by the degree to which information is integrated into a system or action. Seth explains, “This underpins the main claim of the theory, which is that a system is conscious to the extent that its whole generates more information than its parts.” This concept struck me, as it has many direct parallels to well-worn concepts in investing. Of course it makes sense that the more conscious an organization is, the better it is at integrating information into action. But what really struck me here is that using this IIT framework- an organization is only conscious if the whole is greater than the sum of its parts. To me this infers that if the parts of a business don’t come together to produce something more powerful or valuable than the sum of those individual units, segments or components, the business is not a conscious business. Seth later explained how conscious perceptions are largely built from best guesses and confidence. A key insight of Bayesian inference is that perception is largely a function of updating beliefs about the world based on the precision and reliability of new information. Our minds seek to eliminate prediction errors everywhere and all the time, and we do so by converging our beliefs to the level of conviction we have in the information. In this age of ubiquitous and free information, we differentiate ourselves by the level of conviction we have in the quality and reliability of the insights we have. Conviction is the key. And as Seth later demonstrated, such insights are virtually worthless if not paired with action. This echoes the sentiment that Warren Buffett expressed in talking about getting fat pitches in one’s career, and that one must “swing big,” as they don’t happen very often. This is indeed why we are “swinging big” with Coinvestment II, as this is one of the fattest pitches we’ve ever been thrown. Moving From Defense to Offense “High expectations are the key to everything.” -Sam Walton As my mind was more occupied with offensive capital allocation strategies in the quarter, this pairing of action with insight particularly spoke to me, highly conscious offense playbook strategies are rare. Instead the norm is that most offensive actions are typically made from a defensive motive, and are not based on novel insights. As I wrote in last year’s fourth quarter letter, we endeavor to only get involved in turnaround situations where we either have a board presence, or where a founder or owner operates the business. In our view, these managers have been more resilient in defending their businesses from adversity. Simply put, they cannot just give up and move on. As Covid ripped through the world and economies, far too many managers decided to give up. In the depths of the Covid crisis, at the Presidential inauguration ceremony, National Youth Poet Laureate Amanda Gorman articulated rather eloquently that, “Your optimism will never be as powerful as it is in that exact moment when you want to give it up.” Founders are inherently optimistic, and they don’t give up. In exploring the differences between defense and offense, I’ve come to realize that it is even more important to have an owner-oriented management culture when moving from defense to offense. Defense is inherently reactive, reacting to “known knowns” or “known unknowns.” Reactions are easier than proaction. Traditional boards are typically very good at liability minimization. But as important as liability reduction is, these actions do not create value. New business and invention is inherently venturing into the unknown, seeing what others don’t, and pursuing the path untravelled. It comes naturally to a founder or owner, whose authorship imbues the business with the optimistic, entrepreneurial impulse that often started it in the first place. As my friend Bill Carey has articulated, most managers compensated via stock options act more like stock brokers as opposed to owners. Similar to brokers, their time horizons have shrunk considerably. They are simply rent-seeking for a short period of time. And as my friend Chris Mayer likes to say, “no one washes a rental.” Our research on the differences in the behaviors of owner operators and these renters, shows these renters are not very good at offense strategies either. They are very good at competitive reactions, cost cutting and margin optimization. These are important, just as any defense strategy is, but they typically fail to create any lasting value. The value that is captured from these tools generally only lasts as long as the brief period in which the manager’s stock options vest. Given 70-90% of mergers and acquisitions fail, and stock repurchases have taken a notably pro-cyclical, buy-high, sell-low, history, these renters have a typically poor track record in value-creating initiatives and capital deployment. This short-term rental behavior often results in mediocre outcomes. As the late great Sergio Marchionne regularly reminded, “mediocrity is not worth the trip.” Marchionne acted like an owner even before he was one. And he created so much value that his net worth neared $1 billion when he shuffled off this mortal coil. While much of that was indeed generated by options that he exercised, such options were struck at twice and three times the level at which he came in to rescue Fiat in 2004. His package inspired the design of CTT’s options package for top and first level managers. Sergio was very good at seeing things others didn’t. He and his venerable team of managers, to whom he dedicated so much of his energy, were very good at transforming ignored products and assets into gold. Of particular note, Jeep grew from just over 2%of the market in the US to just under 6% when he passed- and it became a truly global brand. He invented Ferrari’s Icona series, which made the irregular limited edition profits part of the regular P&L of the brand without diluting the exclusivity of such models. He and parent holding company Exor have continued to provide much of the inspiration behind our activities with both coinvestments. We endeavor to replicate their divide & conquer strategy, which allowed the Fiat Group to become stronger as stand-alone Fiat-Chrysler (now Stellantis), Ferrari, CNH, and soon to be Iveco Group. Just as Sergio advised the few believers throughout his career, investors will be “owning multiple pieces of paper” as the journey unfolds. In hindsight, we can all agree on the value creation prowess of him and his team. But we easily forget that for most of his career, he was faced mostly by skeptics and doubters. He was not afraid to look dumb. In his own words, “A lot of what I do is challenge assumptions . . . which often looks like you are asking stupid questions.” Being entrepreneurial, by definition, means taking the path untraveled, and heading into the unknown with daring boldness. Offense playbooks, by design, must take competition by surprise. Coming from a humble place with brands and companies that were ridiculed by competitors, when Sergio put medium-term plans out to the market, they were not timid. He would always aim higher than anyone, especially his competitors, believed he and his team could reach. And while not every target was always achieved, the formidable results speak for themselves. This past earnings season, as Twitter was the only social media company to deliver on guidance while also confirming the quarter ahead to be at least as good, the stock sold off materially as its monetizable daily active user (MDAU) targets in the medium-term were called into question. While founder Jack Dorsey is clearly unafraid to look foolish to the public, or even in front of congress, he also manages multiple businesses at the same time. Competitors openly make fun of him. But his team is exceptionally loyal to him, and they have set out very ambitious targets for themselves over the next few years. The recent sell-off in Twitter shares was like deja vu all over again, as I reminisced about the Fiat capital markets day in 2014, fittingly on Twitter in this tweet thread. With its product and revenue servers rebuilt, it can now innovate and launch new ad formats faster than ever before. We look forward to the Twitter team pressing its offense strategy as a major peer loses focus on its core business. Into The Unknown “Action is inseparable from perception. Perception and action are so tightly coupled that they determined and define each other. Every action alters perception by changing the incoming sensory data, and every perception is the way it is in order to help guide action. There is simply no point to perception in the absence of action.” Anil Seth, Being You What does it mean to move into offense? One thing very clear to us, is that it has to be a dynamic and reflexive approach. It cannot be built into a three or five year plan and remain fixed over that duration. As Anil Seth’s work on consciousness explains, a highly conscious being is constantly ingesting and integrating information, evolving actions based on reliability, precision and conviction. As capital-markets focused investors, we believe one of the highest values we can provide to our companies is information that can be integrated into their offense and defense playbooks. Thanks to our collaborative approach, we get nearly daily recommendations and thoughts from our investors with new information, new case studies, and new suggestions on how to continue iterating. One of the biggest differentiations between good and great investments, that is often overlooked, is the value added by good capital allocation- be it with a very well-done merger, opportunistic buyback or even more, venture-style investments that are almost in no one’s “model” or perception. Small acquisitions that bring new tools and managers can often upgrade the business model. As Clayton Christensen suggested in The Big Idea: The New M&A Playbook, these are often the most overlooked investments. But during the quarter, when posed with the question of how to best allocate capital over the long term, I found myself tongue tied. For it’s a dynamic and reflexive question to ask. It’s easy to see what to do right now, and where to build in the next few years. But sound capital allocation is a function of the opportunities that present themselves. It is also about creating new possibilities, particular ones that competitors don’t see. At CTT, with defensive, problem-solving actions becoming less of a focus, attention can now turn to offense. What that looks like in the near term, at least to me, should be continued progress and convergence on the strategy to become the Shopify of Iberia. With Portugal e-commerce order frequency at very small fractions of neighboring Spain, we believe it is CTT’s responsibility to make itself the most convenient and most cost effective way of conducting commerce. Through more parcel lockers, better digital tools, while maintaining or improving on best-in-class quality of service, we believe much of the responsibility to make online the most convenient commerce channel in Portugal will fall on CTT’s shoulders. Going further with online shop enabling, more cost effective payments tools, and an integrated fulfillment offer, that continues through to returns and customer service, it has every tool it needs to enable this digital transition. This convergence is happening at the same time EU recovery stimulus dollars will be directed towards digitalizing the economy. Case studies like Kaspi, which started as a bank, evolved into a payments company, then launched an e-commerce marketplace and then further expanded into logistics, provide more inspiration than any company in the logistics industry. This reminds me of Google’s earliest days, when its managers encouraged their teams to ignore the traditional competitors and instead go where other competitors hadn’t dared to venture- into the unknown. We believe CTT has greater competitive advantages than some “new economy” companies playing throughout the same e-commerce value chain, often trading at significantly higher valuation multiples. Whether we’re talking about fulfillment services, parcel lockers, or alternative purchase financing, it’s the customer relationship that differentiates and builds competitive advantages. That is why one of the first priorities of the new management was to improve customer satisfaction. And while some analysts that cover the company still use traditional methods to frame the opportunity, the shareholder base has largely transitioned away from income-oriented investors. More like-minded shareholders, aligned with management, can enable the team to build something truly great. Building Great Companies “The urgency of doing. Knowing is not enough; we must apply. Being willing is not enough; we must do.” DaVinci What started for us as an approach to separate the bank from the industrial company, and achieve a sum of parts valuation, has been upgraded to that of building a great compound machine. As Exor articulated in 2019, its purpose to “build great companies,” is an aspirational philosophy for us. While we certainly aren’t doing the building here, perhaps through setting the right strategic priorities, incentives, and providing timely and right information, we can assist in the build underway. Exor has provided an exemplary model of how to enable its teams to build greater value by dividing, conquering, and then often later combining with more synergistic peers. Just like Anil Seth described, the whole must be greater than the sum of the parts in a highly conscious organization. When a company’s sum of the parts is greater than the total, the organization is not conscious, and therefor not capable of adding material value. Just as Exor has executed masterfully in its portfolio companies over the past decade, the path forward is one of both dividing and one of conquering. Extending the business and commerce services that CTT provides is a natural offense-oriented positioning that further reinforces the strength of the whole. But there are other parts of this organization that aren’t adding as much to the sum total- those can, and should be separated to pursue their own offense playbooks in a more focused and agile manner. Such an approach goes well beyond ESG, and it goes well beyond most other broker-oriented management teams. It is a highly conscious capitalist approach, aligned with long term value creation and sustainability. And that process should result in considerable returns as an effect, not as a goal. As owner operators’ short, medium, and long term benchmark outperformance demonstrates, this strong alignment between management and ownership is a championship-winning combination. Exhibit 2: Owner Operators’ Stock Index Outperformance Source: GreenWood Investors In the months ahead, we anticipate thoroughly engaging with the management and board of the target at the Builders Fund II. This company is mirroring CTT’s current posture, in that it is in the process of finishing nearly a decade of defense-oriented actions. After years of strategic actions focused on fixing problematic areas, contracts or business dynamics, most of these reactive or defensive actions are increasingly passing into the rearview mirror. It is entering a new phase of life in a position to also divide and conquer, and it has exceptional assets. With both coinvestments representing a substantial portion of our net exposure, we move forward with conviction. While this quarter was a lesson that we, nor our companies, can lose sight of a strong defense strategy, we are increasingly looking forward to our portfolio pressing offense strategies moving forward. Committed to deliver, Steven Wood, CFA GreenWood Investors Updated on Nov 24, 2021, 4:37 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 24th, 2021

Buying a House Feels Impossible These Days. Here Are 6 Innovative Paths to Homeownership

A dozen Grade-A eggs will run you about $0.40 more than they did a year ago, and you’ll have to fork over $0.66 more for a pound of ground beef. At the gas pump, a gallon of unleaded is now $1.23 higher than it was in 2020. But few year-over-year price increases compare to what’s… A dozen Grade-A eggs will run you about $0.40 more than they did a year ago, and you’ll have to fork over $0.66 more for a pound of ground beef. At the gas pump, a gallon of unleaded is now $1.23 higher than it was in 2020. But few year-over-year price increases compare to what’s happened to the American housing market. The sale price of a median home in the U.S. has ballooned by more than $67,000 in the past year, according to the Federal Reserve Bank of St. Louis — surging from just under $338,000 to nearly $405,000. There’s lots of reasons for this. In the past year, a combination of low interest rates and COVID-19, which forced tens of millions of people to work from home, fueled demand for houses. Longtime renters began looking to buy a place with more space, while those who were already homeowners began looking for secondary vacation residences. (Mortgage applications for second homes spiked 84% between January of 2020 and 2021.) [time-brightcove not-tgx=”true”] That jump in demand was compounded by a nationwide slump in housing supply—the result of both nationwide labor shortages and disruptions in the supply chain of crucial building materials, like copper and lumber. These recent issues have been exacerbated by lags in new housing construction over the past twenty years, according to a June report from the National Association of Realtors. The end result is that millions of American families across the income spectrum are now effectively locked out of homeownership. The problem is particularly acute for young people and people of color. The homeownership rate among millennials, ages 25-34, is 8 percentage points lower than it was for both baby boomers and Gen Xers in the same age cohort. Black homeownership, meanwhile, remains at just 45%—30% lower than that of white families and nearly unchanged since 1968, when overt housing discrimination was outlawed. It’s more than just a housing dilemma. Since home ownership remains the best way for an average family to accrue wealth over a lifetime, it’s a prosperity issue, too. Homeowners in the U.S. have, on average, forty times more wealth than renters, according to a September 2020 report from the Federal Reserve. In light of this crisis in home ownership, here are six ways that communities and companies around the country are legislating and innovating to help Americans buy a house. 1. A narrow case study in reparations for Black families Like most cities in the U.S., Evanston, Illinois has a long history of racist housing laws. For decades, Black residents were segregated into poor neighborhoods where occupancy rates were estimated to be 150% and some units lacked crucial amenities, like heating. While hundreds of vacant homes were available in more desirable parts of town, landlords and real estate agents explicitly barred Black families from renting them, and banks blocked Black families from financing. “Owners and agents of vacant property plan to prevent the negroes from spreading from their own quarters,” a 1918 Evanston News-Index article read. Housing segregation fueled wealth inequality: Black families in Evanston earn $46,000 less than their white counterparts on average. Former Evanston Alderman Robin Rue Simmons sought to address that sordid history. While in office in 2019, she created the first-ever taxpayer-backed reparations fund in a U.S. city. It sets aside $10 million in revenue, raised by the city’s tax on recreational marijuana, over a 10-year period. The first $400,000 out of that reserve will go to victims of racial housing discrimination and their descendants, divided up into $25,000 grants which can be used this year for down-payments on new homes, mortgage payments or renovations on existing homes. That initial $400,000 will hardly solve the problem. There are more than 12,000 Black residents in Evanston and the initial outlay will provide just 16 households with funding. But, Simmons argues, “it’s better than zero”—and the program also sets a key precedent. In the years since Evanston stood up its reparations fund, several other locales, including Detroit, Michigan and Amherst, Massachusetts, have voted to explore or start similar programs. “If you think of any significant, transformative national or federal legislation, it started with localities and grassroots efforts organizing and pushing their local leaders,” Simmons says. “This is no exception.” 2. Community Land Trusts: Buying the home but not the land The most unique part of the two-story home in Winooski, Vermont that Sarah and husband Colin Robinson bought for $172,000 in 2008 wasn’t its quaint terrace garden or the funky bunk-room upstairs. It was the fact that the Robinsons didn’t own the land that it was built on. That’s because the house is part of what’s known as a community land trust (CLT)—a non-profit, community-controlled collection of properties. The first CLT in the U.S. was created in Albany Georgia in 1969. Now there are more than 220 nationwide, offering more than 12,000 homes total. While the particular rules of each CLT are a little different, the idea is the same: aspiring homeowners share the cost of purchasing a house with the CLT, which owns the land the home is built on. When the homeowner sells, he or she returns a share of the appreciation with the CLT. Champlain Housing Trust—the CLT that helped the Robinsons become homeowners—is the largest in the country, with 636 properties in the Burlington area. Under its rules, the purchase price of an average home is offset by about 30%, and upon selling, the homeowner keeps a quarter of the home’s appreciation price, plus the cost of any major renovations invested into the property. The average Champlain Housing Trust member keeps their home for 7.5 years and walks away $25,000 richer—money that they can then put toward purchasing more expensive homes on the regular market. A 2010 Urban Institute analysis of Champlain Housing Trust, founded in 1984, found that 68% of those who left CLT went on to purchase market-rate homes. The Robinsons are a model of how it’s supposed to work. When they sold their first, CLT home in 2014, they walked away with $40,000 in equity, which they rolled into the purchase of their second home on the regular market. “We were able to bring that money with us, and that was really what made it possible,” says Sarah. “It really changed the trajectory of our lives.” 3. Zoning overhaul: Ending de-facto redlining Nowhere in the country is the racial housing gap wider than in Minneapolis, Minnesota, where more than 70% of white families own, compared to just 20% of Black families, according to a 2021 Urban Institute report. One big reason for this disparity is an insufficient supply of affordable homes: the state is 40,000 housing units short of demand, according to a Minnesota Housing Finance Agency estimate. Restrictive zoning rules built on decades of discriminatory policies worsen this shortage. After the federal government outlawed explicit racial housing discrimination in the 1960s, local lawmakers scrambled to bolster different regulations—namely single-family zoning ordinances that would maintain the homogeneousness of their neighborhoods. Under those rules, construction companies were banned from building anything other than standalone homes—including more affordable row homes, condominiums, duplexes, triplexes—in most upscale neighborhoods, which had the effect of pricing Black and brown families out of the market. Lisa Bender, president of Minneapolis’ City Council, argues that changing those rules is “the very bare minimum first thing” that policymakers can do “to fix centuries of racial exclusion.” In 2018, she spearheaded a City Council effort to rescind regulations reserving 70% of the city’s residential land for single-family zoning—a move that could effectively triple the housing supply in some Minneapolis neighborhoods by prompting construction of new, more cost-efficient multi-family units. The rule change went into effect in 2020. Portland, Oregon and the entire state of California have since enacted policies that effectively end single-family zoning too. Most Popular from TIME 4. 3D printing: Construction meets environmentalism and efficiency Jason Ballard, who grew up in an oil-soaked East Texas town, was always interested in environmental sustainability. But it wasn’t until college that he realized the best way he could explore environmentalism was not by becoming a biologist, but by becoming a builder. “Buildings are the number one user of energy. Construction is the number one producer of waste,” he says, adding that construction is also one of the top users of water behind agriculture. In 2017, he cofounded ICON, a construction technologies company that builds affordable, structurally sound, environmentally resilient single-family homes using a 3D printing method that creates far less waste than traditional building processes. While the startup is just getting off the ground—its first four homes sold this year—its cost of construction appears to be 10-30% less than traditional builders, thanks largely to reductions in labor and supply needs. In October, ICON announced a project to use its technology to break ground on 100 homes in the Austin area in 2022, creating the largest community of 3D-printed homes to date. Ballard predicts costs will continue to decrease as ICON automates more components of the construction process. The method also has the potential to be unbelievably speedy. While constructing an average American home the normal way takes 7.7 months, according to a 2018 U.S. Census Bureau survey, a Boston-based 3D printing construction company, Apis Cor, says it can make a move-in ready three-bedroom, two-bath in less than a month. Illustration by Wenjia Tang for TIME 5. Modular housing: building houses like Henry Ford built cars There’s no way that Sara and Jon Comiskey, both in their mid-20s, would have been able to afford a house in the Buena Vista area of Colorado, where median home prices hover around $515,000, if it wasn’t for a start-up called Fading West. In 2016, Fading West began building homes that were constructed off-site, in a factory, streamlining the production in the same way that manufacturers build cars. Workers complete most components of a house—house siding, flooring, and walls—at scale, then attach them to a foundation on site. Final features, like garages and porches, are added once the home is at its final resting place, says Fading West founder Charlie Chupp. “You wouldn’t build a Camry in someone’s driveway,” he says. Why do it for a house? Chupp says his company’s lean production model reduces waste by eliminating weather-related damage to materials like is typical during outdoor construction, requires fewer skilled laborers, and significantly reduces the time required to make a home. “With 100 people on a traditional system, you might be able to build between 100 and 150 homes a year,” he says. “We think we can do between 600 and 700 homes a year.” There are downsides. The need to transport the house components from factory to foundation curtails how large the end-product can be, and the standardization of the process means homeowners must accept limited design options. Customers get two cabinet choices, three tile options, three window sizes, and one color carpet. “We offer a standard quartz countertop in any color you want,” Chupp jokes, “as long as it’s white.” But Chupp also offers something that many other real estate developers don’t: affordability. He estimates his off-site produced houses are at least 25% cheaper than comparable models in the area. In April 2021, the Comiskeys bought a 900-square-foot Fading West townhouse in Buena Vista for $240,000. 6. Divvy: A fresh take on rent-to-own Adena Hefets grew up listening to her parents’ stories of how difficult it was for them to purchase a home in the early 1980s. As an immigrant from Israel, her dad didn’t have an established credit score and so couldn’t get a mortgage. Eventually, her family was able to buy a seller-financed home—a rare home-buying mechanism where a seller allows a buyer to pay for a home in increments, rather than making mortgage payments to a bank. In 2017, Hefets started Divvy, a tech company, that offers prospective homebuyers a very similar model. Divvy purchases homes on the open-market and covers closing costs, taxes, insurance and repairs in exchange for the client paying monthly rent that is approximately 10-25% more than what they would pay for comparable rentals in the area. The differential goes toward equity in the home. The client can then buy back the home with the equity they accrued through paying the rent, or cash out the equity at the end of their lease. It’s not a universal solution. Divvy requires that buyers have moderate credit scores and clients must be able to pay above market-rate rents. But in the last five years, the company has entered partnerships with thousands of families, roughly 47% of whom end up purchasing their home back from Divvy. LaCresa Hooks, who works as an accountant, couldn’t find a traditional mortgage because she was working as a short-term contractor. In October 2020, she signed a lease with Divvy and less than a year later, she’d bought back her 3-bedroom, 2-bath Georgia home with bank financing thanks to the equity she accrued. Now, she looks forward to something most people loathe: Paying her mortgage. “I’m building something now,” she says. “With rent, you aren’t building anything. You’re just paying your landlord and that’s it for the next 30 days.”.....»»

Category: topSource: timeNov 22nd, 2021

Inside Frances Haugen’s Decision to Take on Facebook

Blowing the whistle against a multibillion-dollar tech company is no small feat Frances Haugen is in the back of a Paris taxi, waving a piece of sushi in the air. The cab is on the way to a Hilton hotel, where this November afternoon she is due to meet with the French digital economy minister. The Eiffel Tower appears briefly through the window, piercing a late-fall haze. Haugen is wolfing down lunch on the go, while recalling an episode from her childhood. The teacher of her gifted and talented class used to play a game where she would read to the other children the first letter of a word from the dictionary and its definition. Haugen and her classmates would compete, in teams, to guess the word. “At some point, my classmates convinced the teacher that it was unfair to put me on either team, because whichever team had me was going to win and so I should have to compete against the whole class,” she says. [time-brightcove not-tgx=”true”] Did she win? “I did win,” she says with a level of satisfaction that quickly fades to indignation. “And so imagine! That makes kids hate you!” She pops an edamame into her mouth with a flourish. “I look back and I’m like, That was a bad idea.” She tells the story not to draw attention to her precociousness—although it does do that—but to share the lesson it taught her. “This shows you how badly some educators understand psychology,” she says. While some have described the Facebook whistle-blower as an activist, Haugen says she sees herself as an educator. To her mind, an important part of her mission is driving home a message in a way that resonates with people, a skill she has spent years honing. Photograph by Christopher Anderson—Magnum Photos for TIME It is the penultimate day of a grueling three-week tour of Europe, during which Haugen has cast herself in the role of educator in front of the U.K. and E.U. Parliaments, regulators and one tech conference crowd. Haugen says she wanted to cross the Atlantic to offer her advice to lawmakers putting the final touches on new regulations that take aim at the outsize influence of large social media companies. The new U.K. and E.U. laws have the potential to force Facebook and its competitors to open up their algorithms to public scrutiny, and face large fines if they fail to address problematic impacts of their platforms. European lawmakers and regulators “have been on this journey a little longer” than their U.S. counterparts, Haugen says diplomatically. “My goal was to support lawmakers as they think through these issues.” Beginning in late summer, Haugen, 37, disclosed tens of thousands of pages of internal Facebook documents to Congress and the Securities and Exchange Commission (SEC). The documents were the basis of a series of articles in the Wall Street Journal that sparked a reckoning in September over what the company knew about how it contributed to harms ranging from its impact on teens’ mental health and the extent of misinformation on its platforms, to human traffickers’ open use of its services. The documents paint a picture of a company that is often aware of the harms to which it contributes—but is either unwilling or unable to act against them. Haugen’s disclosures set Facebook stock on a downward trajectory, formed the basis for eight new whistle-blower complaints to the SEC and have prompted lawmakers around the world to intensify their calls for regulation of the company. Facundo Arrizabalaga—EPA/EFE/ShutterstockHaugen leaves the Houses of Parliament in London on Oct. 25 after giving evidence to U.K. lawmakers. Facebook has rejected Haugen’s claims that it puts profits before safety, and says it spends $5 billion per year on keeping its platforms safe. “As a company, we have every commercial and moral incentive to give the maximum number of people as much of a positive experience as possible on our apps,” a spokesperson said in a statement. Although many insiders have blown the whistle on Facebook before, nobody has left the company with the breadth of material that Haugen shared. And among legions of critics in politics, academia and media, no single person has been as effective as Haugen in bringing public attention to Facebook’s negative impacts. When Haugen decided to blow the whistle against Facebook late last year, the company employed more than 58,000 people. Many had access to the documents that she would eventually pass to authorities. Why did it take so long for somebody to do what she did? Read More: How Facebook Forced a Reckoning by Shutting Down the Team That Put People Ahead of Profits One answer is that blowing the whistle against a multibillion-dollar tech company requires a particular combination of skills, personality traits and circumstances. In Haugen’s case, it took one near-death experience, a lost friend, several crushed hopes, a cryptocurrency bet that came good and months in counsel with a priest who also happens to be her mother. Haugen’s atypical personality, glittering academic background, strong moral convictions, robust support networks and self-confidence also helped. Hers is the story of how all these factors came together—some by chance, some by design—to create a watershed moment in corporate responsibility, human communication and democracy. When debate coach Scott Wunn first met a 16-year-old Haugen at Iowa City West High School, she had already been on the team for two years, after finishing junior high a year early. He was an English teacher who had been headhunted to be the debate team’s new coach. The school took this kind of extracurricular activity seriously, and so did the young girl with the blond hair. In their first exchange, Wunn remembers Haugen grilling him about whether he would take coaching as seriously as his other duties. “I could tell from that moment she was very serious about debate,” says Wunn, who is now the executive director of the National Speech and Debate Association. “When we ran tournaments, she was the student who stayed the latest, who made sure that all of the students on the team were organized. Everything that you can imagine, Frances would do.” Haugen specialized in a form of debate that specifically asked students to weigh the morality of every issue, and by her senior year, she had become one of the top 25 debaters in the country in her field. “Frances was a math whiz, and she loved political science,” Wunn says. In competitive debate, you don’t get to decide which side of the issue you argue for. But Haugen had a strong moral compass, and when she was put in a position where she had to argue for something she disagreed with, she didn’t lean back on “flash in the pan” theatrics, her former coach remembers. Instead, she would dig deeper to find evidence for an argument she could make that wouldn’t compromise her values. “Her moral convictions were strong enough, even at that age, that she wouldn’t try to manipulate the evidence such that it would go against her morality,” Wunn says. When Haugen got to college, she realized she needed to master another form of communication. “Because my parents were both professors, I was used to having dinner-table conversations where, like, someone would have read an interesting article that day, and would basically do a five-minute presentation,” she says. “And so I got to college, and I had no idea how to make small talk.” Today, Haugen is talkative and relaxed. She’s in a good mood because she got to “sleep in” until 8:30 a.m.—later than most other days on her European tour, she says. At one point, she asks if I’ve seen the TV series Archer and momentarily breaks into a song from the animated sitcom. After graduating from Olin College of Engineering—where, beyond the art of conversation, she studied the science of computer engineering—Haugen moved to Silicon Valley. During a stint at Google, she helped write the code for Secret Agent Cupid, the precursor to popular dating app Hinge. She took time off to undertake an M.B.A. at Harvard, a rarity for software engineers in Silicon Valley and something she would later credit with helping her diagnose some of the organizational flaws within Facebook. But in 2014, while back at Google, Haugen’s trajectory was knocked off course. Haugen has celiac disease, a condition that means her immune system attacks her own tissues if she eats gluten. (Hence the sushi.) She “did not take it seriously enough” in her 20s, she says. After repeated trips to the hospital, doctors eventually realized she had a blood clot in her leg that had been there for anywhere between 18 months and two years. Her leg turned purple, and she ended up in the hospital for over a month. There she had an allergic reaction to a drug and nearly bled to death. She suffered nerve damage in her hands and feet, a condition known as neuropathy, from which she still suffers today. “I think it really changes your priorities when you’ve almost died,” Haugen says. “Everything that I had defined myself [by] before, I basically lost.” She was used to being the wunderkind who could achieve anything. Now, she needed help cooking her meals. “My recovery made me feel much more powerful, because I rebuilt my body,” she says. “I think the part that informed my journey was: You have to accept when you whistle-blow like this that you could lose everything. You could lose your money, you could lose your freedom, you could alienate everyone who cares about you. There’s all these things that could happen to you. Once you overcome your fear of death, anything is possible. I think it gave me the freedom to say: Do I want to follow my conscience?” Once Haugen was out of the hospital, she moved back into her apartment but struggled with daily tasks. She hired a friend to assist her part time. “I became really close friends with him because he was so committed to my getting better,” she says. But over the course of six months, in the run-up to the 2016 U.S. presidential election, she says, “I just lost him” to online misinformation. He seemed to believe conspiracy theories, like the idea that George Soros runs the world economy. “At some point, I realized I couldn’t reach him,” she says. Soon Haugen was physically recovering, and she began to consider re-entering the workforce. She spent stints at Yelp and Pinterest as a successful product manager working on algorithms. Then, in 2018, a Facebook recruiter contacted her. She told him that she would take the job only if she could work on tackling misinformation in Facebook’s “integrity” operation, the arm of the company focused on keeping the platform and its users safe. “I took that job because losing my friend was just incredibly painful, and I didn’t want anyone else to feel that pain,” she says. Her optimism that she could make a change from inside lasted about two months. Haugen’s first assignment involved helping manage a project to tackle misinformation in places where the company didn’t have any third-party fact-checkers. Everybody on her team was a new hire, and she didn’t have the data scientists she needed. “I went to the engineering manager, and I said, ‘This is the inappropriate team to work on this,’” she recalls. “He said, ‘You shouldn’t be so negative.’” The pattern repeated itself, she says. “I raised a lot of concerns in the first three months, and my concerns were always discounted by my manager and other people who had been at the company for longer.” Before long, her entire team was shifted away from working on international misinformation in some of Facebook’s most vulnerable markets to working on the 2020 U.S. election, she says. The documents Haugen would later disclose to authorities showed that in 2020, Facebook spent 3.2 million hours tackling misinformation, although just 13% of that time was spent on content from outside the U.S., the Journal reported. Facebook’s spokesperson said in a statement that the company has “dedicated teams with expertise in human rights, hate speech and misinformation” working in at-risk countries. “We dedicate resources to these countries, including those without fact-checking programs, and have been since before, during and after the 2020 U.S. elections, and this work continues today.” Read More: Why Some People See More Disturbing Content on Facebook Than Others, According to Leaked Documents Haugen said that her time working on misinformation in foreign countries made her deeply concerned about the impact of Facebook abroad. “I became concerned with India even in the first two weeks I was in the company,” she says. Many people who were accessing the Internet for the first time in places like India, Haugen realized after reading research on the topic, did not even consider the possibility that something they had read online might be false or misleading. “From that moment on, I was like, Oh, there is a huge sleeping dragon at Facebook,” she says. “We are advancing the Internet to other countries far faster than it happened in, say, the U.S.,” she says, noting that people in the U.S. have had time to build up a “cultural muscle” of skepticism toward online content. “And I worry about the gap [until] that information immune system forms.” In February 2020, Haugen sent a text message to her parents asking if she could come and live with them in Iowa when the pandemic hit. Her mother Alice Haugen recalls wondering what pandemic she was talking about, but agreed. “She had made a spreadsheet with a simple exponential growth model that tried to guess when San Francisco would be shut down,” Alice says. A little later, Frances asked if she could send some food ahead of her. Soon, large Costco boxes started arriving at the house. “She was trying to bring in six months of food for five people, because she was afraid that the supply lines might break down,” Alice says. “Our living room became a small grocery store.” After quarantining for 10 days upon arrival, the younger Haugen settled into lockdown life with her parents, continuing her work for Facebook remotely. “We shared meals, and every day we would have conversations,” Alice says. She recalled her daughter voicing specific concerns about Facebook’s impact in Ethiopia, where ethnic violence was playing out on—and in some cases being amplified by—Facebook’s platforms. On Nov. 9, Facebook said it had been investing in safety measures in Ethiopia for more than two years, including activating algorithms to down-rank potentially inflammatory content in several languages in response to escalating violence there. Haugen acknowledges the work, saying she wants to give “credit where credit is due,” but claims the social network was too late to intervene with safety measures in Ethiopia and other parts of the world. “The idea that they don’t even turn those knobs on until people are getting shot is completely unacceptable,” she says. “The reality right now is that Facebook is not willing to invest the level of resources that would allow it to intervene sooner.” A Facebook spokesperson defended the prioritization system in its statement, saying that the company has long-term strategies to “mitigate the impacts of harmful offline events in the countries we deem most at risk … while still protecting freedom of expression and other human rights principles.” What Haugen saw was happening in nations like Ethiopia and India would clarify her opinions about “engagement-based ranking”—the system within Facebook more commonly known as “the algorithm”—that chooses which posts, out of thousands of options, to rank at the top of users’ feeds. Haugen’s central argument is that human nature means this system is doomed to amplify the worst in us. “One of the things that has been well documented in psychology research is that the more times a human is exposed to something, the more they like it, and the more they believe it’s true,” she says. “One of the most dangerous things about engagement-based ranking is that it is much easier to inspire someone to hate than it is to compassion or empathy. Given that you have a system that hyperamplifies the most extreme content, you’re going to see people who get exposed over and over again to the idea that [for example] it’s O.K. to be violent to Muslims. And that destabilizes societies.” In the run-up to the 2020 U.S. election, according to media reports, some initiatives proposed by Facebook’s integrity teams to tackle misinformation and other problems were killed or watered down by executives on the policy side of the company, who are responsible both for setting the platform’s rules and lobbying governments on Facebook’s behalf. Facebook spokespeople have said in response that the interventions were part of the company’s commitment to nuanced policymaking that balanced freedom of speech with safety. Haugen’s time at business school taught her to view the problem differently: Facebook was a company that prioritized growth over the safety of its users. “Organizational structure is a wonky topic, but it matters,” Haugen says. Inside the company, she says, she observed the effect of these repeated interventions on the integrity team. “People make decisions on what projects to work on, or advance, or give more resources to, based on what they believe is the chance for success,” she says. “I think there were many projects that could be content-neutral—that didn’t involve us choosing what are good or bad ideas, but instead are about making the platform safe—that never got greenlit, because if you’ve seen other things like that fail, you don’t even try them.” Being with her parents, particularly her mother, who left a career as a professor to become an Episcopal priest, helped Haugen become comfortable with the idea she might one day have to go public. “I was learning all these horrific things about Facebook, and it was really tearing me up inside,” she says. “The thing that really hurts most whistle-blowers is: whistle-blowers live with secrets that impact the lives of other people. And they feel like they have no way of resolving them. And so instead of being destroyed by learning these things, I got to talk to my mother … If you’re having a crisis of conscience, where you’re trying to figure out a path that you can live with, having someone you can agonize to, over and over again, is the ultimate amenity.” Haugen didn’t decide to blow the whistle until December 2020, by which point she was back in San Francisco. The final straw came when Facebook dissolved Haugen’s former team, civic integrity, whose leader had asked employees to take an oath to put the public good before Facebook’s private interest. (Facebook denies that it dissolved the team, saying instead that members were spread out across the company to amplify its influence.) Haugen and many of her former colleagues felt betrayed. But her mother’s counsel had mentally prepared her. “It meant that when that moment happened, I was actually in a pretty good place,” Haugen says. “I wasn’t in a place of crisis like many whistle-blowers are.” Read More: Why Facebook Employees ‘Deprioritized’ a Misinformation Fix In March, Haugen moved to Puerto Rico, in part for the warm weather, which she says helps with her neuropathy pain. Another factor was the island’s cryptocurrency community, which has burgeoned because of the U.S. territory’s lack of capital gains taxes. In October, she told the New York Times that she had bought into crypto “at the right time,” implying that she had a financial buffer that allowed her to whistle-blow comfortably. Haugen’s detractors have pointed to the irony of her calling for tech companies to do their social duty, while living in a U.S. territory with a high rate of poverty that is increasingly being used as a tax haven. Some have also pointed out that Haugen is not entirely independent: she has received support from Luminate, a philanthropic organization pushing for progressive Big Tech reform in Europe and the U.S., and which is backed by the billionaire founder of eBay, Pierre Omidyar. Luminate paid Haugen’s expenses on her trip to Europe and helped organize meetings with senior officials. Omidyar has also donated to Whistleblower Aid, the nonprofit legal organization that is now representing Haugen pro bono. Luminate says it entered into a relationship with Haugen only after she went public with her disclosures. Haugen resigned from Facebook in May this year, after being told by the human-resources team that she could not work remotely from a U.S. territory. The news accelerated the secret project that she had decided to begin after seeing her old team disbanded. To collect the documents she would later disclose, Haugen trawled Facebook’s internal employee forum, Workplace. She traced the careers of integrity colleagues she admired—many of whom had left the company in frustration—gathering slide decks, research briefs and policy proposals they had worked on, as well as other documents she came across. Read more: Facebook Will Not Fix Itself While collecting the documents, she had flashbacks to her teenage years preparing folders of evidence for debates. “I was like, Wow, this is just like debate camp!” she recalls. “When I was 16 and doing that, I had no idea that it would be useful in this way in the future.” Jabin Botsford—Getty ImagesHaugen testifies on Oct. 5 before the U.S. Senate Committee on Commerce, Science and Transportation. In her Senate testimony in early October, Haugen suggested a federal agency should be set up to oversee social media algorithms so that “someone like me could do a tour of duty” after working at a company like Facebook. But moving to Washington, D.C., to serve at such an agency has no appeal, she says. “I am happy to be one of the people consulted by that agency,” she says. “But I have a life I really like in Puerto Rico.” Now that her tour of Europe is over, Haugen has had a chance to think about what comes next. Over an encrypted phone call from Puerto Rico a few days after we met in Paris, she says she would like to help build a grassroots movement to help young people push back against the harms caused by social media companies. In this new task, as seems to be the case with everything in Haugen’s life, she wants to try to leverage the power of education. “I am fully aware that a 19-year-old talking to a 16-year-old will be more effective than me talking to that 16-year-old,” she tells me. “There is a real opportunity for young people to flex their political muscles and demand accountability.” I ask if she has a message to send to young people reading this. “Hmm,” she says, followed by a long pause. “In every era, humans invent technologies that run away from themselves,” she says. “It’s very easy to look at some of these tech platforms and feel like they are too big, too abstract and too amorphous to influence in any way. But the reality is there are lots of things we can do. And the reason they haven’t done them is because it makes the companies less profitable. Not unprofitable, just less profitable. And no company has the right to subsidize their profits with your health. Ironically, Haugen gives partial credit to one of her managers at Facebook for inspiring her thought process around blowing the whistle. After struggling with a problem for a week without asking for help, she missed a deadline. When she explained why, the manager told her he was disappointed that she had hidden that she was having difficulty, she says. “He said, ‘We solve problems together; we don’t solve them alone,’” she says. Never one to miss a teaching opportunity, she continues, “Part of why I came forward is I believe Facebook has been struggling alone. They’ve been hiding how much they’re struggling. And the reality is, we solve problems together, we don’t solve them alone.” ShutterstockFacebook CEO Mark Zuckerberg recently announced the company was rebranding as Meta. It’s a philosophy that Haugen sees as the basis for how social media platforms should deal with societal issues going forward. In late October, Facebook Inc. (which owns Facebook, Whats App and Instagram) changed its name to Meta, a nod to its ambition to build the next generation of online experiences. In a late-October speech, CEO Mark Zuckerberg said he believed the “Metaverse”—its new proposal to build a virtual universe—would fundamentally reshape how humans interact with technology. Haugen says she is concerned the Metaverse will isolate people rather than bring them together: “I believe any tech with that much influence deserves public oversight.” But hers is also a belief system that allows for a path toward redemption. That friend she lost to misinformation? His story has a happy ending. “I learned later that he met a nice girl and he had gone back to church,” Haugen says, adding that he no longer believes in conspiracy theories. “It gives me a lot of hope that we can recover as individuals and as a society. But it involves us connecting with people.” —With reporting by Leslie Dickstein and Nik Popli.....»»

Category: topSource: timeNov 22nd, 2021

Millennials, Remote Work Are Upending Cities—What It Means for Real Estate

Location is, and has always been, everything in real estate. The truism that where a property sits must be its most important characteristic remains undisputed. But what is location, really? What does it mean to homebuyers, and what are the consequences when changes come? The truth is, street layouts, public transportation systems, commuting routes, open […] The post Millennials, Remote Work Are Upending Cities—What It Means for Real Estate appeared first on RISMedia. Location is, and has always been, everything in real estate. The truism that where a property sits must be its most important characteristic remains undisputed. But what is location, really? What does it mean to homebuyers, and what are the consequences when changes come? The truth is, street layouts, public transportation systems, commuting routes, open space, walking paths, restaurants or shopping, parks, schools and scenic views are malleable both in how they are valued and how they come to be. While location might seem like a relatively static feature when talking about properties, shifting priorities from policymakers as well as evolving consumer preferences can quickly cool off a hot neighborhood or revitalize a lagging market. Both these processes are happening all the time, but the current shift is maybe more dramatic and moving more rapidly than at any time in recent memory as Americans completely reevaluate exactly where they want to live—and why. Dr. Sam Chandan is a professor at NYU and Academic Dean of the school’s Schack Institute of Real Estate. He says a multitude of changes are manifesting now that could impact both city planning and real estate for decades to come. “Millennials are not necessarily looking for something that looks like Levittown,” says Chandan, referring to the hyper-planned suburban Long Island community that is often cited as a model of postwar housing philosophy. “It’s not sort of a ‘Leave it to Beaver’ scenario.” With people born in the 1980s and 1990s becoming the largest segment of homebuyers, understanding that demographic’s needs and preferences is a holy grail for real estate professionals. But how is that information guiding the growth of towns and cities, and what does it mean for the housing market? Chandan says that like most things real-estate related, the answers are always going to be local. But as the temporary supply constraints currently preventing the housing market from reaching its full potential fade, Chandan predicts that areas that allow higher densities through zoning reforms and follow a more centralized, community-oriented plan of development will be best positioned to capitalize and grow. “We’re talking about wanting to be in easy reach of a set of cultural and social amenities, and I think that is quite different from what we would have seen as the profile of a comparably-aged young family 30 years ago,” he says. Waiting on the World to Change Manhattan Beach nestles in the southwest corner of Los Angeles. The median sale price for a home exceeds $2 million, according to U.S. census data, with a mostly white and Asian population in a county that is almost 45% Hispanic. Most residential areas are composed of close-set, adobe-roofed single-family constructions on narrow streets, bisected with a commercial thoroughfare that feeds into the city’s bustling beach-adjacent downtown—a spread of health food stores, cafes and boutique retail shopping pressed right up against the water. Kristi Ramirez-Knowles is a team leader for Your Home Sold Guaranteed Realty and a long-time Manhattan Beach resident, though she works in many of the surrounding southwest LA cities. In an area that is historically resistant to change, COVID has potentially provided a kick-start for generational changes in living preferences. “Now, post COVID—though we’re still in COVID—we still have a mix. We still have people that are willing to go almost anywhere,” she says. “ it’s a safe community.” Woburn, Massachusetts is a sprawling suburb about 25 minutes outside of Boston. It can trace its European colonization back to the mid 1600s, and is now characterized by its rustic winding streets and big colonials with plenty of forested areas and parks filling the margins. The town offers a wider range of price points, from $150,000 ranch fixer-uppers to a handful of multi-million-dollar estates. Eileen Dohtery is a ninth-generation resident of Woburn with 40 years of real estate experience, currently working for Lamacchia Realty. She says even as homebuyer preferences have evolved rapidly, change in policy and infrastructure often creeps up more gradually. “ are beside themselves because there’s so much development—if anything they’d like to restrict it and make it less per acre,” she says. Dan Forsman is President & CEO of Berkshire Hathaway HomeServices Georgia Properties. Overseeing the Atlanta region, he says dozens of thriving suburbs—many of which were originally vacation or resort communities—have begun “revitalization” efforts to begin serving changing needs and desires of longer-term residents. “Eclectic, farm to table restaurants—people are looking for that, access to that, and looking to where they can get that when they’re away from what I call ‘white noise,’” he says. Though these three disparate regions will certainly evolve along different lines at a more granular level, Chandan says that broadly the narrative of mass migration to different states or cities is overblown. People—especially young people—are looking to live within or near traditional metros like New York or Boston, but specifically for towns that can offer them a specific index of amenities. “What the data actually tells us is the dominant trend is greater dispersion in the metropolitan area,” he says. “They’re able to sort of optimize in a way that also accounts for all these other things that they care about.” What’s My Age Again? One of the most direct methods of addressing these needs is “upzoning” to allow for more density around what Chandan describes as the “quasi-urban core” of smaller towns and suburban cities. This has proved effective in combating land scarcity, affordability and transportation access, and often allows for developments of mid-rise condo complexes, townhomes or repurposed mixed-used construction that previously might have been disallowed or heavily regulated. These changes are also becoming more politically viable in many places as a new generation arrives—a generation that is more comfortable with diversity and living close to others, according to Chandan. In Woburn, this is only partly true, as Dohtery says she has observed some attitudes changing while others have not—starting with acceptance of racial diversity. “In the older parts of the center…it was more mixed nationalities. The older people wouldn’t walk down there. Younger people are that much more liberal, they don’t care, they like it. That’s where you see changing,” she reflects. In recent years there has been a big push to tear down old buildings in Woburn’s centuries-old central hub, putting up some multifamily living units and opening restaurants and retail stores. Doherty herself owns a multi-family home right in the city center, where her niece currently lives with some younger roommates. “They absolutely love being there, they walk downtown—literally in their backyard—to a different restaurant every night,” she laughs. At the other extreme, some neighborhoods in towns abutting Woburn can only be reached by unpaved, pothole-ridden streets—not because the town cannot afford to fix or pave them, but because people who live there have lobbied against it, according to Doherty. The idea, she says, is to discourage anyone who doesn’t live there from even driving past, keeping noise and nuisance to an absolute minimum. “That’s old Yankee money,” Doherty says. “It keeps the people out of their neighborhood.” Some of these folks are likely fighting a losing battle if they’re hoping to prevent development to that extreme (Doherty is currently involved with a 147-unit townhome development in Woburn). While resistance from locals can certainly slow down the evolution of a city, eventually both policymakers and developers are going to find ways to meet consumers with what they want. One thing that is changing in Los Angeles is at least a partial removal of one of the biggest barriers there: commuting. In the past, Ramirez-Knowles says she would tell potential homebuyers to rent a hotel for a night near a neighborhood they were considering and see if they could endure the level traffic and smog on a day’s commute before deciding to live there. But now with remote work, as well as a renewed emphasis on transportation and now-ubiquitous electric cars, Ramirez-Knowles says that areas that used to be defined by their freeway access and distance to business centers are trying to become self-sustaining. “So many millennials are doing a lot of their jobs—-they can work from home,” she says. “They don’t want to get out and drive. It’s important for them to walk or if they have to drive, drive a very short distance.” That is not to say that traffic does not matter anymore—commuters still end up driving as much as four hours a day to go a handful of miles cross-town, Ramirez-Knowles says. But areas that have more space, better views and nice schools are now options for many more families who do not have to worry about prohibitively lengthy drives. Another offset of the millennial lifestyle and work-from-home opportunities that is influencing city layouts is loneliness. Starting with the pandemic isolation, Ramirez-Knowles says people began seeking out “community amenities” where they could at least encounter another friendly (even mask-wearing) face. That has continued as people who work from home have limited excuses to just get outside, meet neighbors and learn about their town. “They want to be able to go walk their dogs, walk with their kids, get outside and get vitamin D,” she says. “You’re not getting out very much…you need places to go walk, you need a walkway—a green belt, if you will—a park, a pier.” In the Atlanta area, several towns are realizing that they can provide a lot more for their changing communities, according to Forsman. People who have second homes in the suburbs are spending more and more time away from the white noise of their working lives, he says, and are beginning to look for the same amenities in these areas as they have in their primary homes. Though this trend is hardly analogous to what is happening in Woburn or Los Angeles, the effect is the same: cities are re-developing downtowns and shifting the kind of access and amenities they provide. “They’ve had a face lift and an upgrade, because people aren’t going to malls the way they used to,” Forsman says. This applies even to areas in the north that historically have been made up of mostly seasonal resort towns in the mountains. As flexible work allows residents to spend more time here, businesses move in to provide more grocery shopping, entertainment and year-round services, which in turn draws even more people to make those towns their permanent—or semi-permanent—homes. Stop, Collaborate and Listen There are many other barriers and unintended consequences stemming from the types of changes happening right now as well, he adds. Cities that are too successful with these tactics will quickly see the price of land and homes balloon, slowing real estate growth and creating more racial and economic segregation. In places like Woburn, there is also the possibility of political backlash, and policymakers must balance the often-powerful backlash from residents and other stakeholders who fear loss of so-called community character or outsides. Real estate professionals can make a big difference in these situations. Doherty says that as a longtime resident she is trusted by even the most stalwart Woburnites and can navigate the complicated landscape of local politics and land use laws, where trust and experience make all the difference. Doherty speaks of being contacted by a local politician one time, who invited her to attend a campaign event emphasizing that she was maybe the most well-known public figure in the area. “I said to him, ‘I have to go, I sold you your house!’” she laughs. In Woburn, developments, zoning tweaks and infrastructure investments happen gradually, and becomes much easier with any local support, according to Doherty, with projects eeking through the approval process one by one. On the other side of the country, Ramirez-Knowles says the overpricing and lack of homes has pushed people to settle in areas where the schools or neighborhoods maybe aren’t what they had originally hoped for. Developers are building brand new, more affordable condos inland in cities that haven’t historically been “family friendly” like Torrance and Gardena, and people are snatching them up, she says. “I would say that’s attracting families even though the school district may not be that great. I think it’s the appeal of brand new and something they can afford,” she posits. Many of these units are selling out before they are even framed, she adds, during the current inventory crunch. If cities approve the kind of housing units people are looking for— which Ramirez-Knowles describes as narrow, multi-floored condo communities with built-in recreation centers, pools and gyms—even more business investment and development often follows. The result of all this movement and new development, of offering wider varieties of housing types and densities in different parts of a given city creates demographic diversity, according to Chandan. A place that can accommodate young and old, wealthy and lower income folks, families and retirees is much healthier for everyone, and especially for the real estate market. Though convincing some people of these benefits will be difficult—and sometimes impossible— Chandan argues that even those who prefer their “Leave it to Beaver” lifestyle will eventually benefit from this type of change. “The person who is a young family right now in a two or three-bedroom rental unit in that quasi-urban core—in five years, that person is a potential buyer for your home,” Chandan says. Jesse Williams is RISMedia’s associate online editor. Please email him your real estate news ideas to jwilliams@rismedia.com. The post Millennials, Remote Work Are Upending Cities—What It Means for Real Estate appeared first on RISMedia......»»

Category: realestateSource: rismediaNov 22nd, 2021

It"s Begun – Get Ready To Pay Much Higher Prices For Meat From Now On

It's Begun – Get Ready To Pay Much Higher Prices For Meat From Now On Authored by Michael Snyder via TheMostImportantNews.com, The era of cheap meat is over.  For those that are carnivores, that is really bad news.  For decades, Americans have been able to count on the fact that there would always be mountains of very inexpensive meat at the local grocery store, but now those days are gone and they aren’t coming back.  As I was writing this introductory paragraph, it struck me that what is happening to meat prices actually parallels what I wrote about yesterday.  Just as the left doesn’t want us to use traditional forms of energy because they believe that doing so is “bad” for the climate, so they also detest that a lot of us like to eat a lot of meat because the production of meat causes levels of certain greenhouse gases to rise.  Sometimes we joke about the methane that comes from “cow farts”, but radicals on the left take this stuff deadly seriously.  And at the same time that gasoline prices are soaring into the stratosphere, the exact same thing is happening to meat prices.  In fact, we just learned that the price of beef in the U.S. has risen more than 20 percent since last October… Behind unleaded gasoline, beef prices have risen the most on the Consumer Price Index (CPI) since October 2020, rising 20.1% in the past year, according to the Bureau of Labor Statistics. An increase of over 20 percent in one year is deeply alarming. Unfortunately, it isn’t just the price of beef that is soaring.  Tyson Foods just released some new numbers which show that beef, pork and chicken prices are all rising dramatically… The biggest meat company by sales in the United States has announced significant price rises for the fourth quarter, as the impact of the highest inflation for 30 years continues to be felt. Tyson Foods, based in Springdale, Arkansas, announced on Monday that chicken prices rose 19 percent during its fiscal fourth quarter, while beef and pork prices jumped 33 percent and 38 percent, respectively. During the early portion of this crisis, Tyson Foods was reluctant to pass increasing costs along to consumers, but now we are being informed that they don’t intend to make the same mistake again… Stewart Glendinning, the chief financial officer of Tyson Foods, said that they have been slow to increase their prices, in line with inflation, but are now making up for the delay. ‘We expect to take continued pricing actions to ensure that any inflationary cost increases that our business incurs are passed along,’ he said, on the company’s quarterly earnings call. Sadly, this is just the beginning.  The price of meat is only going to go higher from here, and eventually it will get to a point where meat prices become exceedingly painful. Of course there are many that would argue that we are already there. As food prices continue to climb, those that help the needy are going to have a much more difficult time trying to do so. For example, the Salvation Army is projecting that it will need 50 percent more funding than last year as it feeds more Americans than ever before… The Salvation Army is planning to serve more meals than in 2020’s record year, and will need around 50% more funding to meet the buoyed demand, Hodder said. He expects rental and utilities assistance to lead the pack of requested aid. “We’re fearful of what we’re calling ‘pandemic poverty,’” Hodder said. The price of gasoline continues to shoot up as well. On Tuesday, the average price of gasoline in California set a new record high for the third day in a row… Gas prices in California have broken a new record with an average price tag of $4.687 for a regular gallon as of Tuesday morning, according to the American Automobile Association. It was the third day in a row the state has recorded record breaking prices as Monday’s average gas price was $4.682 and Sunday’s was $4.676 which broke the previous state record of $4.671 in October 2012. Needless to say, the price of gasoline is quite a bit higher than that in certain urban areas. In downtown Los Angeles, one unfortunate motorist ended up paying more than six dollars a gallon on Monday… Brian Sproule squinted against the sun on Monday as he examined the price board at a Chevron station in downtown Los Angeles, where a regular gallon of gas was $6.05. Sproule, 37, is a mobile notary who spends much of his time in his car. He said he’s used to spending about $40 to fill his tank, but by the time he capped off his Hyundai Elantra, the meter displayed a whopping $71.59. Can you imagine paying that much for gasoline? Don’t think that it can’t happen where you live.  Eventually, everyone in the entire country will be seeing such prices. As “Bidenflation” makes headlines day after day, U.S. consumers are becoming increasingly pessimistic.  Just check out the latest consumer confidence number released by the University of Michigan… The University of Michigan’s consumer sentiment index fell to 66.8 in November – down sharply from the October reading of 71.7 and well below economists’ forecast for a reading of 72.4. “Consumer sentiment fell in early November to its lowest level in a decade due to an escalating inflation rate and the growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation,” Richard Curtin, the survey’s chief economist, said in a statement. Americans haven’t been this negative about the economy in a really long time. And it is becoming increasingly clear that things are going to get even worse in the months ahead.  Our leaders continue to promise that they will make progress on the problems that we are facing, but those problems just keep on escalating.  In fact, the number of giant container ships waiting off the coast of southern California just hit another new record high… On Friday and Monday, yet another record was set for the number of container ships stuck at anchor or in holding patterns off the ports: 83. The average wait time at anchor for ships arriving in Los Angeles hit yet another fresh peak on Tuesday: 16.9 days. That really surprises me. Despite all of the national attention, and despite the fact that the Biden administration has gotten directly involved, the nightmare at the ports in southern California just continues to intensify. If we can’t even figure out how to get stuff unloaded and moved across the country in a timely manner, what hope do we have of properly addressing our more complex economic problems? As our economy is shaken by crisis after crisis, millions upon millions of families all over the nation are deeply suffering. But of course not everyone is doing badly these days.  It turns out that the vaccine manufacturers are laughing all the way to the bank… The People’s Vaccine Alliance (PVA), an international non-profit working to close the global vaccine disparity, analyzed the earnings reports of Pfizer, BioNTech and Moderna and found that the companies will make a combined $34 billion in profit this year. When broken down, that is $93.5 million a day, $65,000 a minute and more than $1,000 every second of profit. When I look at those numbers, they literally make me want to vomit. The greed that we are witnessing has reached a level that is absolutely breathtaking. But this is what happens when the moral foundation of a society completely collapses. In about a month and a half, 2021 will be over and 2022 will be here. 2021 has been bad, but I believe that 2022 will be even worse. So I would encourage you to make preparations for a very rough year, because the days ahead are not going to be pretty. *  *  * It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon. Tyler Durden Wed, 11/17/2021 - 17:40.....»»

Category: personnelSource: nytNov 17th, 2021

"A World Gone Mad": Upscale LA Neighborhood Wrestles With Worsening Homeless Crisis

'A World Gone Mad': Upscale LA Neighborhood Wrestles With Worsening Homeless Crisis Authored by Jamie Joseph via The Epoch Times, Abbott Kinney Boulevard is a picture-perfect hidden gem in the Venice neighborhood of Los Angeles, known for its boutique shops and locally-owned dining joints. The mile-long strip sings to the tune of upper-middle-class patrons who come to Venice Beach to soak in its peculiar rhythm. The neighborhood’s tight-knit community of homeowners who have lived in the area for decades are proud to reside in this unique nook of town. A woman walks down a sidewalk passing a homeless encampment in Venice, Calif., on Nov. 10, 2021. (John Fredricks/The Epoch Times) But over the last year, the community within this stretch of Venice grew even closer over a common frustration: the growing homeless encampments. The issue is not new to Los Angeles as a whole, which has more than 41,000 people living on its streets, according to the latest homeless count, with more than 66,000 homeless people countywide. A forecast by the Economic Roundtable estimates that number could reach nearly 90,000 by the year 2023. Venice has approximately 2,000 people living unhoused, making it the second largest congregant of homeless people in the city after Skid Row in downtown Los Angeles. Drugs, needles, trash, violence, fires, and encampments have become all too common to the Venice community. They say their pleas for help often fall on deaf ears when it comes to their city leaders, while tourists, homeowners, workers, and other homeless people have become victims to random assaults by a more violent crowd of transients. “It’s a world gone mad,” Venice resident Deborah Keaton told The Epoch Times. “It’s our own making too. I’m a liberal, a Democrat, and we voted for these measures that decriminalize a lot of this behavior, and so there’s no repercussions for these guys.” A man smokes a cigarette in a homeless RV encampment in Venice, Calif., on Nov. 10, 2021. (John Fredricks/The Epoch Times) When Keaton steps outside her home on North Venice Blvd. between Abbott Kinney and Electric Ave., her reality is not the white-picket fence experience she bought into 30 years ago when she purchased her home. An encampment, including a handful of parked RVs, has popped up adjacent to her house, making hers the closest house to the neighborhood’s new hot spot for crime and drug dealing. The transients living inside the RVs play loud music all day and night, she said. She filed a police report against the apparent ringleader of the RV encampment, Brandon Washington, because she says he approached her gate and allegedly made threats against her family. “He rang the bell, and he was wasted, and he said to me: ‘I just need to know all the evil people, is your husband evil? Because I need to kill your husband,’” Keaton said. “It was scary.” She captured the entire interaction on her Ring doorbell camera. “There’s no repercussions for these guys, and they can’t be held and they know it. A lot of these guys have been arrested 400 times,” she said. Neighbors allege Washington—who often appears to be on drugs—has prostituted women in the RVs, in addition to dealing methamphetamine to other homeless people. Keaton said in the summer a woman was hiding in her backyard, because she said Washington was “pimping her out.” These stories have become all too common in Venice. Ansar El Muhammad, who goes by “Brother Stan” in Venice, knows the plight of Washington all too well. About 20 years ago, Washington was in Muhammad’s niece’s wedding. Both were born and raised in Venice and ran in the same circles. “Even though everybody is up in arms about this, these are human beings,” Muhammad told The Epoch Times. “Brandon’s a good guy, it’s the drugs that are doing that to him. So, I understand the neighbors’ perspective.” Muhammad has become somewhat of a neighborhood protector, taking matters into his own hands. He runs H.E.L.P.E.R Foundation, a gang intervention coalition serving the Venice and Mar Vista neighborhoods. Venice neighbors say they trust him so much they call him first when there’s a safety or noise issue. The homeless trust him, too, so he is able to keep the peace. Most of the vagrants in Venice are involved in some element of gang activity, even if they are not officially part of a set, he said. Drug addiction is also rampant among the homeless, making it more difficult for them to accept resources. “So, for my friend over here, what do I do? I build rapport, I have to wait for him to say ‘Stan, I’m ready,’” he said. Other outreach workers across the county have told The Epoch Times the same thing—contact must be repeatedly made before some people accept help. Pat, an unsheltered resident in Venice Beach, told The Epoch Times earlier this year there should be more solutions by city leaders to encourage special rehab programs that would “give people a sense of accountability.” “There’s got to be a way, a path forward from sleeping on the pavement to eventually having a place. But I think all of the energy to give that path forward should come from the person in that situation,” he said. Neighbors Criticize Local Policies The Los Angeles Sheriff’s Department Homeless Outreach and Services Team (LASD HOST) conducted a cleanup of the sidewalk surrounding the RVs on Sept. 8 and 9, but Keaton said they won’t enforce any measures that would force the RVs to move. She fears the trash will pile up again and attract additional criminal activity. “The LAPD says they can’t enforce it because it comes down from the mayor’s office, but according to the Sheriff’s Department, the LAPD are not supposed to take orders from the mayor’s office—but that’s the deal,” Keaton said. Venice Neighborhood Council Board member Soledad Ursua told The Epoch Times the RVs receive citations, but a homeless service provider in the area allegedly pays for the tickets. Ursua said the pandemic also changed the homeless situation by encouraging transients to move to new residential areas in the city near commercial areas. “This is different because there’s people who are totally selling drugs, they’re doing drugs, and it’s outside a residence,” Ursua said. “I’ve had to clean up human feces in my carport three times,” she added. During the summer, HOST conducted a massive cleanup and outreach effort on the Venice boardwalk. Los Angeles Sheriff Alex Villanueva deployed deputies to the area while media reports slammed city leaders for not addressing the issue. Encampment fires were at an all time high: more than 54 percent of all fires in Los Angeles were caused by encampments this year, the Los Angeles Fire Department reported. The neighborhood experienced a sharp uptick in crime during the summer, too, according to statistics provided to the Venice Neighborhood Council by LAPD Capt. Steve Embrich. Year-to-date numbers showed that robberies nearly tripled since the same period last year. Homeless-related robberies were up 260 percent, homeless-related assaults with a deadly weapon were up 118 percent, property crimes and area burglaries were up 85 percent, and grand theft auto was up 74 percent. “We’ve been inundated with calls, with concerns, with images from the news, from people picking up the phone, emailing, sending us letters, about what’s going on in Venice,” Villanueva told reporters during a press conference inside the Hall of Justice on June 23. “And that is a microcosm of what’s going on throughout the entire county of Los Angeles.” Los Angeles Councilmember Mike Bonin—who was also a local advocate for defunding the LAPD—countered Villanueva’s efforts and asked the Los Angeles Homeless and Poverty Committee to shift $5 million in budgeted aid to fund housing programs in his district. Those funds were sent to the St. Joseph Center to conduct outreach on the boardwalk. However, some tents have started popping back up on the boardwalk, with residents saying many homeless individuals have just been moved around. An unhoused member of the Venice community, Butch Say, believes most homeless people in Venice don’t want the help. Say, who described himself as a traveling nomad, told The Epoch Times during the boardwalk cleanup that most of them prefer to live on the street. “They go, ‘No, I love it out here. Nobody tells me what to do, and I run around in my underwear,” he said. “You know, whatever. They’re crazy. What can I say? It’s Venice.” Not a ‘Housing’ Problem While Los Angeles dealt with a homeless crisis prior to the COVID-19 pandemic, city restrictions may have exacerbated the problem. Curfew on tents in public were rolled back and sanitation crews were cut to mitigate the spread of the virus. Other city codes were suspended, too. As a result, many homeless people—mostly addicts—flocked to the beach. In a previous interview with The Epoch Times, local bar owner Luis Perez said Venice always had a quirky community of homeless individuals, but they were largely artists and entertainers. They weren’t addicts. He said he saw homeless individuals being bussed in and dropped off on the boardwalk. As state and city leaders peddle the state-sanctioned “housing first” model, which suggests the solution to homelessness lies within building more affordable housing units, Venice Beach natives have a different perspective. “A lot of them don’t want housing. See, this is the issue—they put all this money in here for housing, but there’s less than 5 percent of this population across the city that want it. They say ‘to hell with housing,’” Muhammad said. “You know why? Because they’re addicts.” California Governor Gavin Newsom speaks with reporters at a VA facility in Brentwood, Calif., on Nov, 10, 2021. (John Fredricks/The Epoch Times) On Nov. 10, Gov. Gavin Newsom visited West Los Angeles VA Medical Center. During the press conference, Newsom told reporters that $22 billion in funds is being invested to address “the issue of affordability, housing, and homelessness, to support these efforts all across the state of California.” “Yes, I see what you see, yes I’m mindful of what is happening, but I’m also more optimistic than I’ve ever been. We are seeing progress,” he said. But residents say they look around, and the problem seems to be getting worse. “I voted for Proposition HHH. I [would] be the first one to say I want a solution. And honestly, I would probably vote for another one if I thought the money was going to be correctly spent,” said Venice Neighborhood Council Board member Robert Thibodeau. “But the thing is, where’s the light on the ground solutions? Where’s the FEMA style response, the striking sort of immediate solutions that you would have with [Hurricane] Katrina, because to me, this is Katrina.” Local business owners—the heartbeat of Venice—have been speaking out, too. Klaus Moeller, co-owner of Ben & Jerry’s on the boardwalk, told The Epoch Times in an email during the summer that “this is not a local homeless problem.” “This is a problem about out-of-state transients and drug dealers/users moving in because they can act without repercussions,” he said. Moeller added his employees have been attacked by transients on the boardwalk. Neighbors also criticized Proposition HHH, a $1.2 billion bond passed in 2016 by Angelenos to build 10,000 supportive housing units. As of February, the city controller discovered only 489 of the bond-funded units were ready for occupancy. Because of the lack of supportive housing, a number of tiny home villages have popped up across the county as lower-cost alternative for interim housing. However, some residents say they won’t make much of a difference. “They wouldn’t move indoors. It’s not a housing crisis—it’s an addiction crisis,” Los Angeles native and new Venice resident, Kate Linden, told The Epoch Times. Linden said she emails Lt. Geff Deedrick—who leads the HOST efforts—weekly letting him know what’s going on. But the HOST team can only come in when they are given orders. Previously, Lt. Deedrick told The Epoch Times: “The HOST team provides that guardian mentality, so you can have a safe space for those discussions, but that’s where the policy makers and executives and those things, we leave that to them; we deploy at the direction of the sheriff.” A deputy from the Los Angeles Sheriff’s Department speaks to a homeless man sitting in front of his encampment in Venice, Calif., on June 8, 2021. (John Fredricks/The Epoch Times) Residents Launch Recall Campaign Many Venice neighbors who originally voted in Councilmember Bonin to represent them in the 11th district, like Keaton, are pulling back their support. Earlier this year, a recall campaign was launched, and on Nov. 10, petitioners collected enough signatures to move forward in the recall election process. They blame Bonin for the increased homelessness and lack of enforcement on street camping that they say brings gang activity into the neighborhood. On Oct. 22, the Los Angeles City Council voted to ban encampments in 54 specified areas, with Bonin and Councilmember Nithya Raman the only two dissenting votes. Thibodeau said Bonin’s views are on the “radical fringe,” that aligns with special interest groups and far-left activists. Thibodeau, who identifies as a centrist, said he’s sent dozens of emails to Bonin’s office with no response. “The sad thing is lot of this has happened because of a higher level of tolerance in the community and a compassion in the community—we’ve been abused, because we’re compassionate people,” Thibodeau told The Epoch Times. “He will not enforce [camping restrictions] in his district. So, now what, he’s in charge of policing too?” During a city council meeting last month, Bonin voted not to enforce a ban on camping due to a lack of prior street engagement to notify the homeless. But according to city documents (pdf), the cost of signage and outreach would cost as much as $2 million. “There was an agreement about street engagements, and I think we need to live by that part as well,” Bonin said. “I am certain that a lot of work has been done, but it still isn’t to the level of what we committed to as a body. And I’m concerned about us losing the commitment to the street engagement strategy and not making sure that it is adequately resourced.” Adding to the residents’ frustrations, the LAPD has their hands tied due to the city’s catch-and-release policies. Homeless people who commit crimes are often back on the streets within hours if they refuse services. Thibodeau said he believes Bonin is transforming Venice into a “containment zone” by not enforcing any anti-camping ordinances. Meanwhile, Bonin is planning several large supportive housing developments in Venice Beach and Mar Vista. Bonin and Los Angeles Mayor Eric Garcetti also championed A Bridge Housing supportive units in Venice for $8 million that came out of Prop. HHH funds. Residents say most of the homeless who reside in the shelter are “dual residents,” meaning they have a bed in the shelter as well as a tent on the street. “There are no new planned facilities in Pacific Palisades. Brentwood happens to have the VA but nowhere else in Brentwood … so we’re making a Containment Zone here like Skid Row,” he said. As far as the sidewalk on N. Venice Boulevard taken over by RVs and tents, Thibodeau said, “Living next to this stuff is very draining.” He said he’s thinking about organizing street protests to address the issue. Councilmember Bonin’s office did not respond to a request for comment by press deadline. Tyler Durden Sun, 11/14/2021 - 22:00.....»»

Category: blogSource: zerohedgeNov 14th, 2021