From a small northwestern observatory…

Finance and economics generally focused on real estate

Posts Tagged ‘Washington Post

An important story on trade

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Alexis Crow, who leads the geopolitical investing practice at Price Waterhouse Coopers, has a stunningly important article on trade in today’s Washington Post.  I recommend you read it here.  In short, Trump’s trade war misses a very important point — the U.S. economy has matured from manufactured goods to services, and actually runs a net surplus of such services to the rest of the world.

As she notes, “Providing services is the heartbeat of America’s new economic growth, including IT and communications services, logistics, warehousing, leisure, hospitality, health care, business and legal services.“. She goes on to note that wealth created by America’s trading partners — China, Japan, etc. — translates into purchase of American services, including travel, media, IT, logistics, and entertainment.  By 2026, fully 81% of American jobs will be in such service areas, and our trade surplus in these areas is already nearly $300 Billion per year.

Written by johnkilpatrick

April 11, 2018 at 11:55 am

A quick note about maps

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My expertise (such that it is) lives in the universe of Finance and Economics, but I tend to specialize in the real estate arena. That means, I spend a lot of time looking at maps. (Somewhat ironically, my main hobbies — flying and boating — also require a lot of map work. Go figure….)

With that in mind, someone sent me a link to a great piece in the Washington Post called 40 Maps That Explain the World. Click on it yourself. The maps are somewhat interactive (you can expand them for detail, and there are cross-post to other articles and explanations). The maps are extremely thought-provoking, and some take a bit of time to fully comprehend.

If THAT wasn’t enough, apparently other writers are starting to compile their own “40 Maps” lists. One of the better ones, albeit somewhat more U.S. centric, comes from the website, and is called 40 Maps That Will Help You Make Sense of the World. Whether they do or not is still up in the air, but they do make for fun reading.

Written by johnkilpatrick

August 23, 2013 at 4:22 pm

“5 Economic Trends to be Thankful For”

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First, I hope everyone had a great Thanksgiving! For those of you who in countries that don’t share our festival of thanks, I hope you had a great Thursday!

Kuddos to Neil Irwin, writing in the Washington Post yesterday.  I agree 100% with his list, and wanted to reproduce it here:

1.  Household debt is way down.  Neil lists this as his first item, but I would suggest it has plusses and minuses to it.  On the plus column, we really WERE over-debted as a society.  On the minus side, changes household debt carries with it complex implications for the consumption side of GDP, as well as corporate investment (see my prior blog post) and even trade relationships.  Nonetheless, this is, on net, a good thing.

2.  The cost of servicing that debt is way down — as Neil points out, from 14% of disposable income in 2007 to 10.7% today.   Of course, remember that one person’s interest EXPENSE is another person’s interest INCOME.  Nonetheless, this constitutes a significant wealth transfer from people who HAVE money back to people who NEED TO BORROW money.

3.  Electricity and natural gas prices are falling.  It’s hard to find a downside to this one.  From last year, consumer natural gas prices are down 8.4%, and electric rates are down 1.2%.  I would add to Neil’s analysis that more of this money is staying at home — the U.S. is well on its way to being import-neutral on energy.  Of course, this has some geopolitical implications, which we’ll deal with on another day.

4.  Businesses aren’t firing people.  While unemployment remains high at 7.9%, at least the arrows are pointed in the right direction.

5.  Housing is dramatically more affordable.  Neil points out that in 2006, the typical homebuyer faced a payment equal to 41% of the average wage of a private-sector worker.  Today that’s 26%.  This is a combination of both lower house prices (which proportionally lowers down payment requirements) and lower mortgage interest rates.

Congrats to Neil Irwin and the Washington Post for an insightful and timely article!

Written by johnkilpatrick

November 23, 2012 at 9:33 am

October 10 — Update #1

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It’s a rainy Sunday here in the ‘burbs of the Emerald City, and I have a LITTLE bit of time to catch up on things. First thingie on my mind is the somewhat back-page article in many newspapers recently about Bank of America forstalling the foreclosure process until they get the legality of certain title problems straightened out. The Washington Post syndicate had a pretty good article by Brady Dennis and Ariana Eunjung Cha on Thursday that was carried widely, including by our local Seattle Times and the Mortgage Bankers Association.

Recall that home ownership and mortgage lending (or specifically, the act of pledging a home as collateral in a lending transaction) is LEGALLY a state-governed issues. The Federal government regulates banking and the lending process, but the actual pledging of a home (or any real estate, for that matter) is strictly a state issue (subject, of course, to certain Federal oversight.) Thus, if a nationwide lender like Bank of America (or Countrywide, which it bought) wants to make loans across the U.S., it still has to get permission in each and every state in which it does business, and the lending process needs to be tailored to each state’s peculiar laws.

As it happens, property ownership had a somewhat different emphasis from one state to the next. In South Carolina, where I used to live (and for that matter, in about half the states), foreclosing on a home is a very difficult process. The lender has to go to court and prove that the mortgage is in default, and further prove that the lender has the right to foreclose. In those states, the foreclosure process simply cannot proceed without a judge’s orders. In other states (my current home of Washington, for example), the process is much easier and does not require a judge.

The distinction is less important than the fact that there is a variance in processes among the states. When you are BofA (or Wells, or Chase, or any big lender), you want to bundle the loans together and sell them as pools. The pool actually WANTS loans from different parts of the country, to benefit from diversification. To facilitate this, and to make mortgage pools fungible and tradeable, the various lenders started subscribing to a service about 10 years ago called the Mortgage Electronic Registry Service (MERS), in Reston, VA. MERS separates the “real estate pledge” (that’s what the mortgage actually is) from the promissory note (which is what investors actually want to buy). In theory, MERS wouldn’t be an issue in an individual loan unless that loan went into foreclosure.

Now, in any given mortgage pool, even in GOOD years, a few of the loans will go into foreclosure. Fortunately enough, in “good” years, there are enough foreclosure buyers out there to keep the mortgage pool solvent, and no one really cares if every “i” wasn’t dotted and every “t” wasn’t crossed in the process.

But… sigh… these are anything but normal or GOOD times, and apparently bankers are churning ou the foreclosure doc’s so fast they’re getting carpel-tunnel from filling out paperwork. Guess what? If the mortgages were made slopily in the first place (as many were), and if the mortgage-note bifurcation was handled too rapidly (as most apparently were) and if the foreclosure applications are coming out of the bank like a firehose, then… well, remember that about half of the states require a judge to sign off on each and every foreclosure, right? And judges just HATE sloppy paperwork, right?

With THAT in mind, the foreclosure process is quickly grinding to a halt. In some states, the courts have ruled that MERS does not have a valid standing to initiate foreclosure proceedings. Class action suits have been filed in California and Nevada, no doubt with more to follow. The nightmare scenario for banks is that not only are foreclosures invalid because of sloppy paperwork (let’s don’t forget the sloppy underwriting that got us in this mess in the first place) but also one might argue that any foreclosure initiated in the past 10 years is also invalid. Thus, if you lost your house at the leading edge of this mess, two years ago, assuming the statute of limitations is still in effect, you may have a case.

Sadly, the vast majority of these foreclosurse are probably valid, albeit that may be difficult to substantiate with the sloppy paperwork. Homeowners who can’t make their payments anymore need closure so they can move on with their lives. Lenders (and mortgage pool investors) need to get assets redeployed. Neighborhoods with boarded up homes need families living in those homes again, whether they are homeowners (who frequently buy “fixer-upper” foreclosures) or renters. The system is not served at all by dragging this process out.

On the other hand, we constantly teach students that one of the strengths of the western economy is the rule of law. Contracts mean something, and badly drawn or poorly executed contracts cannot have the same legal standing as good ones. To allow such in the name of expediency puts us pretty far down the slippery slope.

I’ll be following this story. This is a complicated story, and newspapers, sadly, end up putting complex stuff on the back pages. This issue, however, deserves some front page attention.

EDIT #1 —

Since I wrote this, published a very good synopsis of the problem.

Written by johnkilpatrick

October 10, 2010 at 10:39 am