Commercial property trends in Los Angeles

Here is a very inspiring video from Allen Matkins relating to Los Angeles Real Estate Markets. They have also released some data relating to California construction. I think there are some opportunities and some risks currently in the Los Angeles market.

The short term opportunities are the downtown revitalization for property owners in this area. I have walked the streets and the change in appearance is palpable, (although I can still read the words “hourly rates” on some of the older hotels. But hey, they are making steps in the right direction. It’s a great opportunity for owners agents such as designers, contractors and real estate pro’s.

The long term I’m not completely sold on, and of course I have to offer some contention for the sake of balance. Los Angeles has a few tough issues. If I were holding real estate or serving customers in Los Angeles county exclusively I would be proactive in diversifying my reliance on the area for a few reasons. Los Angeles is tied with Detroit for population migration according to bloomberg. But there are large inflows of immigrants as EM economies have pushed hot money investments in local real estate. As we have seen previously with Japan, a foreign deflationary situation can reverse this trend sometimes very quickly. The unemployment rate is going down but its not low by any means. There is also the rising cost of pensions and city expenses billions are unfunded and are guaranteed by taxpayers. The cities international status and geography in relation to trade is a very big plus so for the time being everything is looking very rosy.

I think Los Angeles is in a period of recovery but the voting base continues to push less qualified candidates(In my humble opinion) into office and this trend will likely continue. I would consider diversifying my project between another nearby county to help reduce exposure to bad politics and the associated taxes that inevitably follow.

 

 

 

The value of Bitcoin

bitTo use a basic standard when considering laws makes sense in the following ways. People are naturally good and most people are doing mostly right in their lives. Some people are demented or just get too greedy or angry. If you can admit the fact that most people are susceptible to some mistakes it seems only fair to not impose you mistakes on someone else and their mistakes on you. In essence every action should be voluntary. Passing a law per se is the opposite of voluntarism though and we do need laws.  The basic tenants of such laws is the need to focus on assuring parties agree to do that which they have agreed and also to protect parties from encroachment in it’s many forms.
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News From The San Francisco Federal Reserve

View the full document here. Mark Speigel from the San Francisco Fed details his optimistic opinions.

 

A few points to balance his views…

“Third-quarter GDP growth was revised upwards to 4.1% “

“Inflation remains below the Federal Open Market Committee’s (FOMC) longer-run goal of 2%”

Does this mean anything to anyone? I haven’t checked recently but considering they change the metric for calculating GDP and inflation as often as they change underwear it’s hard to value these numbers.

 

Shadowstats.com has some alternate metrics which were used by the government in the past. The include some very important data like food, fuel and home prices. As you can see they vary a lot from the governments reporting.

 

 

 

“The Committee will add to its holdings of mortgage-backed securities at a pace of $35 billion a month rather than $40 billion a month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion a month rather than $45 billion per month. The statement noted that asset purchases are not on a preset course. The Committee also indicated that it now anticipates that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that unemployment declines below 6.5%. “

 

It’s been a weird experiment to watch the monetary powers that be muddle through the economic crisis testing their footing as they step forward. But the language above is clear is day…they will attempt to withdraw QE unless a problem comes up.

Those potential problems could be the following;

1) Fall in real estate values due to higher interest rate

2) Higher interest rates for corporate bonds (more retail stores closing unprofitable locations)

3) Reversal of stock market prices

4) Gridlock in the derivatives markets

5) Reduction in Government spending

 

I could go on and on but these are the big starters which would kick off another recession. I do believe however that they will reverse course and begin printing money as required to offset any of these issues. Which is good in the short term because we can see business as usual but bad in the long term as the economy becomes brittle and weak.

 

Minimum Wage California

The minimum wage hike is not a huge problem in itself. Its a problem of government and voter psychology. The real scary part of the minimum wage hike is the lack of planning.

We all know the problem  with minimum wage hikes. They don’t solve any real problems in employee wages because either $8 or $10 an hour you are still poor as can be.

They also lead us away from the real solutions of lower taxes, less regulations and increased opportunity. Maybe next year we should just raise it too $25 dollars an hour. Then we could all get really rich!