Month: January 2020

China’s Working Age Population | Passive Funds – AUM | Luxury Apartments In Full Swing

WSJ – Daily Shot: Caixin – China’s Working-Age Population 1/15/20

FT – Index funds break through $10tn-in-assets mark amid active exodus – Robin Wigglesworth and Alex Janiaud 1/7/20

WSJ – Aiming at Wealthy Renters, Developers Build More Luxury Apartments Than They Have in Decades – Will Parker 1/15/20

Builders are on track to finish more new apartments in 2020 than in any year since the 1980s, a new study shows, with developers across the U.S. chasing after the more affluent tenants.

An additional 371,000 new rental units are expected to hit the U.S. market this year, which is a 50% increase over the number of new units completed in 2019, according to an analysis from real-estate analytics firm RealPage.

State and local governments are grappling with how to create more rentals to combat the rising cost of housing for middle- and lower-income families. But as much as 80% of new supply this year will come from luxury developments, or what the real-estate industry calls “Class A” properties, said RealPage chief economist Greg Willett.

This year’s surge signals that projects planned around the 2015 peak of the rental market are reaching completion.

The lack of single-family houses available for sale, and the rising price to buy them, has been one major boost to the luxury rental market, Mr. Bahrami said.

And although rental supply this year is the highest in more than 30 years, the construction of single-family homes for sale is well below historic norms, sending more people in search of apartments, said Calvin Schnure, chief economist for the National Association of Real Estate Investment Trusts, a trade group.

Advertisements

Lingering Price Stagnation

What the Fed Fears: People Who Can’t Remember Rising Prices – Megumi Fujikawa 1/13/20

Figuring out the public’s expectations of future inflation—and trying to influence them—is core to any central banker’s work. Yet Japan shows how hard that becomes when many people barely grasp the concept of steadily rising prices.

“Those who were born in the 1980s and 1990s almost have no experience of inflation. So even if they were told inflation was coming, they didn’t believe it,” said Tsutomu Watanabe, a Tokyo University professor and former central banker.

A 20-year-old in Japan today has experienced average inflation of 0.1% over his or her lifetime. No wonder Bank of Japan Gov. Haruhiko Kuroda’s repeated vows to reach 2% inflation haven’t worked out.

The Federal Reserve, like the Bank of Japan, seeks 2% inflation because it sees that level as consistent with a healthy economy. U.S. inflation has held close to but below the target for years, and Fed officials are reviewing their inflation targeting framework to avoid succumbing to the low-inflation trap that has bedeviled Japan. Among the options under consideration are approaches that would more explicitly allow or even encourage inflation above 2% in hopes of lifting inflation expectations.

The problem, central bankers believe, is that low-inflation expectations can be self-fulfilling if they cause consumers to balk at higher prices and businesses to refrain from raising prices and wages.

“Inflation that runs persistently below our objective can lead to an unhealthy dynamic in which longer-term inflation expectations drift down, pulling actual inflation even lower,” Fed Chairman Jerome Powell said at a Dec. 11 news conference.

In recent years, Mr. Kuroda has pointed to research suggesting inflation expectations are adaptive: People predict future prices based on what they have seen in recent years. In practice, that means Japanese consumers have accustomed themselves to seeing everyday goods at low prices and punish any retailer that tries to raise them.

Even consumers old enough to remember inflation might not share a central banker’s 21st century perspective on it. To Messrs. Powell and Kuroda, achieving modest, steady inflation of around 2% keeps a nation away from a negative spiral of falling prices, declining wages and weak demand. But to the average person, rising prices sound like a bad deal.

Remittances | Personal Income Growth by State | Income Less Expenditures by Income Percentile

WSJ – Daily Shot: statista – Top Remittance Destinations 2018 1/10/20

WSJ – Daily Shot: BEA – US Changes in Personal Income 1/10/20

Big Picture_US Households: Half Spend More Than They Earn 1/10/20

US Net Domestic Migration Patterns

Bloomberg – Goodbye, New York, California and Illinois. Hello … Where? – Justin Fox 1/9/20

New York, California and Illinois have been hemorrhaging residents. Almost 3.2 million more people left those states for elsewhere in the U.S. than arrived from other states, from 2010 through 2019, according to population estimates released last week by the Census Bureau. Nine other states saw net out-migration of more than 100,000 people over that period, but none really came close to the big three.

Thanks to 2 million more births than deaths and 1 million newcomers from other countries, California’s population still grew by about 2 million over this period, a gain that trailed only those of Texas and Florida. New York’s population grew but only slightly, while Illinois lost an estimated 159,751 people between 2010 and 2019. Yes, these are all big states, but New York and Illinois ranked second and third in net domestic migration as percentage of 2010 population, behind only Alaska (California ranked 13th).

Where are all these people going? The Empire Center for Public Policy, a conservative Albany think tank, put together some estimates for New York based on data that the Internal Revenue Service gleans from tax returns… This inspired me (Justin Fox) to do the same for California and Illinois. Here are the Empire Center’s numbers for New York:

Domestic migration statistics are frequently cited as evidence of the failures of blue-state governance, in particular the higher taxes imposed by states that are losing lots of residents. There’s something to that — income-tax-free Florida sure is attracting a lot of affluent people from Illinois and New York, and a recent study of high-income California taxpayers concluded that a 2012 income tax increase there did in fact drive some away. But California, Illinois and New York have all experienced bigger per capita personal income gains than the nation as a whole since the beginning of 2010, and all saw taxpayers with incomes below $50,000 overrepresented among the leavers from 2011 through 2018. These departures may indicate failures of governance as well, but it’s a different set of governance failures, presumably related more to housing costs, commutes and job opportunities than taxes per se.

Australian Wildfire in Perspective

WSJ – Daily Shot: statista – Size of Recent Major Wildfires 1/6/20

Perspective on the US Shale Industry in the 2010s | Private Equity is Flush | Online Betting is on the Rise in New Jersey Train Stations

Bloomberg – Shale’s Amazing, World-Changing, Lousy Decade – Liam Denning 12/27/19

Bloomberg – Private Equity Is Starting 2020 With More Cash Than Ever Before – Melissa Karsh and Benjamin Robertson 1/1/20

Bloomberg – New Jersey Train Stations Become Draw for New York Gamblers – Christopher Palmeri 1/6/20

New Jersey has seen a surge in sports bets since the state convinced the U.S. Supreme Court to overturn a ban on such wagers in 2018. More than $4 billion in bets were placed there in 2019. But rather than going to casinos or racetracks, gamblers are making more than 80% of their bets online, often using smartphones near train stations just outside New York City. They’ve made the state the early leader.

Tobacco Users on the Decline | 2020 US Federal & State Min. Wage Rates | Most Common Job Types by County | 2019 Market Returns by Asset Class

Bloomberg: WHO – Number of Male & Female Tobacco Users 12/18/19

WSJ – Daily Shot: the Balance – 2020 Minimum Wage by US State 1/1/20

WSJ – Daily Shot: Tableau – Most Common Job Types by American County 1/2/20

WSJ – Daily Shot: Charles Schwab – 2019 Stock Relative Stock Returns 1/2/20