Tuesday, November 30, 2010

Updates

Just two quick updates to two recent Seattle stories:

Turns out the homeless schizophrenic murderer of an innocent man with an axe which took place last Monday in downtown Seattle was the SECOND murder in two days for this street person.  Police now say he killed another man with his axe the previous day.  If anything this conclusion makes my call for a crackdown on the mobs of street people now crowding the avenues, parks, and alleys of Seattle more powerful.  Something major needs to be done----NOW.  By the way, the media is now reporting the innocent man carrying groceries home from the market who wound up with an axe buried in his head TWELVE TIMES was brutally murdered in front of a pack of school children waiting for a bus.

And it also turns out that Seattle Mayor Mike McGinn's proposed location for a PERMANENT homeless encampment (read that as "tent city") for 150 homeless men and women has a problem.  The site is contaminated with toxic waste.  Despite the fact the site is on a State of Washington cleanup list, the Mayor has claimed not knowing about the chemical contamination when he proposed the location.  Make you wonder who was doing the due diligence down at City Hall.

Welcome to Seattle.

Wednesday, November 24, 2010

Seattle Homeless Man Murders Stranger with Axe

I have been warning the City of Seattle in this blog for MONTHS that the so-called "homeless" problem is growing and getting worse.  To be blunt, it isn't the street people who need help.  It's the average working people and residents of the city who need protection from the growing throngs of mentally ill, drug addicted, and violent people who live on the city's streets and bring crime and mayhem with them.

This week brings clear evidence to a situation spiraling out of control.

On Monday afternoon in downtown Seattle, a 26-year old homeless man with a long history of violence, schizophrenia, and other mental disorders attacked and murdered a random stranger, a 58-year old man walking on a sidewalk.  For no reason and after no confrontation, the killer buried a pick-axe (the kind that mountain climbers use) into his victim's head TWELVE times.  Click on the link above and read the actual police report.  An innocent man walking on the street carrying groceries is killed for no reason by a mentally ill homeless man.  The murderer has been arrested many times before over violence but released so he could remain homeless on the streets of Seattle.

Just a day earlier than this murder, yet another homeless person stabbed a man multiple times while the victim was waiting for a bus.  Ironically, this is very near the spot where Seattle Mayor Mike McGinn wants to build a permanent homeless encampment for 150 men and within spitting distance of Seattle's football and baseball stadiums.

Back on Monday, the same day as the axe murder, yet another mentally ill Seattle man was killed by police for refusing to put down a handgun.  I hope these Seattle SWAT officers have better luck than the last officer involved in a deadly force incident.  In that case, a Seattle police officer shot and killed an alcoholic homeless man with a woodcarver's knife who refused orders to put it down.  This officer is now in the midst of a serious legal battle with not only the city but the Feds that have begun to look at the case for Federal civil rights violations.

I could mention how a mentally ill homeless man tried to kidnap a baby from a woman at a major Seattle city park last week too but why?  Just another reason for suburbanites to avoid the city like the plague.

The idea of letting THOUSANDS of drug addicts, alcoholics, mental patients, runaways, prostitutes, street criminals, drug dealers, and other assorted miscreants roam the city at will creating mayhem is a disgrace and a public safety nightmare.  This week brought us Seattle residents an attempted baby kidnapping, multiple stabbings, yet another police killing, and now the gruesome murder of an innocent man by an axe-wielding lunatic.

No wonder Seattle real estate prices continue to fall.  Common sense rules, eh?

Friday, November 19, 2010

General Motors Initial Public Offering

I have followed the General Motors IPO with great interest given my long history with the company.

The IPO price was way too high.  The Chinese government bought 1% of the company for $500 million and got a super sweet deal subsidized by U.S. taxpayers.  So even at this artificially low price, GM is worth $50 billion, just about what U.S. taxpayers have put into the company.

The IPO price was $33 and raised about $22 billion in total.

I think the price of GM common will be less than $10 a share in a year's time.  I'm not the only person who feels that way either.  Here is a United Auto Worker's union representative officially saying the same thing.

My sources on Wall Street and in Washington, D.C. tell me that this IPO was oversubscribed because of intense pressure from the Obama Administration which is eager to get back some of the $49.5 billion that U.S. taxpayers spent saving GM.  Treasury and the White House twisted arms and are now taking credit for the smooth IPO and the high volume of sales.

Is General Motors REALLY the stock of the future, the one you REALLY want to buy for your investment portfolio?  Do you know people eager to rush out and buy a new Buick or Cadillac because GM is now a public company again?  The company is riding on the success of the new Chevy Volt, the Green Car of the Year, praying that people will want to buy them.  I'm skeptical.  It's really just another hybrid with a whopping pricetag, but we will see.  I wish the sales force luck.

Given its vital ties to the UAW and organized labor in general, the Obama Administration had to do something politically to save GM.  It spent nearly $50 billion, just about the same price that the Chinese just paid.  I doubt the taxpayers of the United States are ever going to get their money back on this rescue.  The fate of GM would have been better decided by an experienced bankruptcy court judge rather than the U.S. Treasury but that is another story.

Tuesday, November 16, 2010

China Stops Real Estate Loans

I read with great interest on how China is attempting to prevent a real estate bubble (or at least quickly pop a small one) by restricting new loans for real estate development.

This is, of course, in contrast to Mr. Bernanke's new QE policy that is trying to stimulate another bubble into being with near zero interest rates and massive liquidity.

Interesting how both nations react to real estate bubbles, yes?

Friday, November 12, 2010

China's Instant Hotel



I read with great interest the recent impressive accomplishment of how the Chinese built a 15-story hotel in just six days.  This well produced video of the construction (incorrectly labeled in my opinion) is really fun to watch.

This super fast construction is an AMAZING accomplishment.  The people of Changsa and all the engineers, builders, and workers involved should be proud.  Pulling something like this off is an exceptional achievement.

The first thought I had when I read of this idea was how there might not be a real substantial market worldwide for "instant" hotels, but this engineering and construction techniques could be used in disaster situations to provide housing for refugees and displaced people.  Think post Hurricane Katrina or in Haiti  after the earthquake.  Forget about tent cities.  You literally could build real ones, block upon block, in just weeks.

This type of construction and development is not just green.  It's SUPER GREEN, environmentally friendly to the core.  Little waste.

Ladies and gentlemen, this is the future.  The Chinese have another gold mine on their hands.  Kudos.  My advice is find a way to invest with them in this model of development.

Wednesday, November 10, 2010

Bernanke Defends His Stimulus

Federal Reserve Chairman Ben Bernanke has been everywhere defending his recent $600 billion stimulus effort but the world is not buying what he is selling.

Virtually every major economic power in the world has condemned the idea of essentially printing money to finance U.S. debt obligations.  China, Japan, Russia, Brazil, India, Germany, and even Luxembourg have publicly expressed their reservations.  We can only imagine what they are saying PRIVATELY to Bernanke and, even more importantly, to each other.

As part of his charm offensive, Bernanke told students from Jacksonville University that his idea was "not inflationary" because it did not increase the total money supply.  Even his audience did not believe him.

With this decision, Mr. Bernanke has crossed the Rubicon, an economic point of no return.  He may claim that QE II, his nickname for his new scheme, is limited but we know that QE III, IV, V, and XXVIII are on the way.  Read this analysis on how our Fed is complicating the foreign policy of the United States.

It's far too easy to monetize debt.  Think if you could pay off your mortgage and credit card bills with money freshly printed in your basement.  You think China holds far too much in U.S. credit obligations?  Just make them worth less by devaluing the dollar.  Want to give people Social Security benefit and pension payment increases but not really pay for them?  Just monetize the obligation.  You just give them a dollar worth 94 cents.

Mr. Bernanke's Orwellian doublespeak makes no sense to virtually everyone, foreign and domestic.  The problem with the U.S. economy is not a lack of liquidity or high interest rates.  It's uncertainty over taxes, regulation, and the future of the country.  Jimmy Carter's state of malaise has returned.  $600 billion more is not going to drive interest rates lower or add much to national spending.  This policy only angers our allies at the very time where the world economy is fragile and everyone needs to cooperate.  Mr. Bernanke's "novel" action (as he called it) only makes people less sure about the U.S. economy.  Why throw the Hail Mary pass at this time, right now?  What does the Fed know and isn't telling?

Inflation is not a friend of real estate investors and Bernanke's plan is risking hyperinflation.  You do the math.  Inflation is great if you are a borrower but awful if you hold cash.  If anything, QE II encourages spending over investment and short-term thinking over long-term planning.  Bernanke says the Fed can withdraw liquidity at precisely the right time to prevent inflation.  HUH???  Remember this is the very same Bernanke that just days before he was nominated by President Bush to be Fed Chairman testified before Congress there was no real estate bubble and none would ever pop.

That was on October 27, 2005.  Read his comments and how ridiculously wrong he was.  Sorry, I don't trust his judgment anymore.

Tuesday, November 9, 2010

Seattle Announces Permanent Homeless Encampment Site

Seattle Mayor Mike McGinn (that's him in the picture) has announced he wants to put a PERMANENT homeless tent encampment in the SODO district of Seattle, the place most people around the country know as the home of the Seattle Mariner and Seahawks.  See those big stadiums at our home games?  Qwest and Safeco Fields?  That's SODO.

The Mayor's preferred location for this permanent 150 person tent city is known to locals as the site of the old Sunny Jim peanut butter factory, a long abandoned building that, ironically, was burned to the ground just two months ago by a homeless man with a camping stove.  The mayor proposes spending $220,000 to clear the city-owned land and put in some basic amenities like a meal house and plumbing.

Of course none of the residents or businesses in the area want upwards of 150 homeless men and women camping out in their neighborhood.  The objections are obvious.  Yes, there is some NIMBY here but the real objection is that this site is PERMANENT.  Neighbors do not want even temporary encampments.  Read an excellent analysis of what Seattle's current shelters are like here.  Despite all the politically correct hype, these tent cities are just what you think they are.

But there is strong logic in the Mayor's choice of location.  I love site analysis and this location makes for a great case study in real estate master planning.

The proposed site is isolated.  Unlike many of the other proposed locations on the Mayor's shortlist, this one is not in a populated area.  The location is zoned industrial, with many warehouses, dealerships, metal shops, and such.  There are many fewer neighbors to upset with your choice of location.  Plus you would think the most jobs available would be in the city's most industrial area.

The site is on a major highway with ample public transportation in every direction.  Some of the other locations, like in West Seattle, were isolated.  If you don't own a car, you couldn't ask for a more central location to catch a bus or train.

The current site is a burned out shell building.  Something has to go there and the city owns the lot.

The problem isn't with the location, it's with the idea of a permanent tent city.

I have lived in downtown Seattle for more than six years and the city's homeless population is simply out of control.  The simple fact the city does not address in its housing solution is that most of Seattle's transients are not from Seattle.  They are from every place BUT Seattle.  The city is filled with transients, runaways, prostitutes, alcoholics, mental patients, and assorted street criminals from every city in Washington State, plus Oregon, California, Idaho, Montana, and Colorado.  New numbers just flood in given the permissive and ultra-liberal culture and politics of the Mayor's office. 

The City of Seattle could build a 1,000 tent encampment and it would be overwhelmed with numbers in a month.

In my mind there is a huge difference between helping someone get off the streets and enabling a person to keep living there.  Providing indoor beds is preferable to tent cities in the winter.  The idea of a permanent squatters camp or whatever you want to call it is not only futile but damaging.  It injures the reputation of a city.  There are better options that make more sense.

Please think about this, Mr. McGinn.

Friday, November 5, 2010

Fremont Bridge Seattle



The Fremont Bridge in Seattle is one of the city's most well known landmarks.

It is also one of the city's biggest headaches for motorists, pedestrians, and bicyclists.

Built in 1917, this drawbridge is the busiest one in the United States and one of the most busy in the entire world, going up and down more than THIRTY FIVE times a day. Given the fact that the bridge does not operate during rush hours or much at night, the span has to be raised and lowered sometimes two or three times per hour. Often the boat traffic under the bridge is a single yacht or sailboat.

The video I took and put up on YouTube is a real time illustration of how long the average wait is for the bridge to go up and down. On this day I was out of a car and walking around so I could take in the view, which I will admit is extraordinary. But at over SEVEN MINUTES you get a sense of how annoying and boring the wait at the bridge can be when you are in a hurry and there is no other way over the Fremont Cut to Lake Union.

I love historic properties and the Fremont Bridge is on the National Register of Historic Places and is also a city landmark and personally, it is very cool to watch the mechanisms of the bridge work. By the way, those gears and motors have to be maintained and replaced from time to time, costing $41 million the last time they were overhauled in 2006. A great deal of money for an antique toy.

The real estate implications here for me are obvious. How many business deals, condo purchases, and other transactions were aborted by people stuck in traffic at the Fremont Bridge? I love the quirky charm of Fremont, an artsy part of Seattle known mostly for its giant bronze statue of Vladimir Lenin which sets the spirit of the neighborhood which calls itself "The Center of the Universe."  But I would not want to live or work there because of the daily inconvenience of this bridge. There is just no other realistic way of getting around it and over it sometimes takes awhile as my video shows.

The policy question here is obvious. Does a modern city really want its neighborhoods connected by a century old relic no matter how charming it truly is?

The bridge is going nowhere. I would probably protest myself if the the city wanted to remove it. But the simple question remains. Isn't there a better way to cross a 502 feet wide ditch filled with water?

Wednesday, November 3, 2010

Election Night Results

Of all the commentary, prognostications, analysis, speechmaking, and sundry verbiage, the best words of last night came from the new Senator-Elect Rand Paul from the Great State of Kentucky.

His victory speech was eloquent and earthshaking.  The status quo in Washington is dead, and perhaps Big Government has been mortally wounded.


I wish Mr. Paul and all the new Republicans much success in the days ahead.  They will need all the fortitude and courage they can muster because the Old Guard is still in charge and like the dinosaurs they are these blind behemoths are unaware of how little people get crushed in their wake.

Today, Federal Reserve Chairman Ben Bernanke announced the Fed will start buying $75 billion of long-term U.S. debt PER MONTH until June 2011 for a total of $600 billion.  Even the mainstream media has realized this is a disastrous policy.

But also notice when, on what day, or more precisely after what day, does Bernanke announce it.

Tuesday, November 2, 2010

Helicopter Ben Bernanke

Critics of Federal Reserve Chairman Ben Bernanke (like me) offer refer to him as "Helicopter" Ben.

Here's why.

Read his speech before the National Economists Club on November 21, 2002 and why he got the nickname.

This speech is even more relevant today than it was almost ten years ago.  The subject of his talk was deflation and even today Bernanke is fighting the wrong paper dragon.  He's risking hyperinflation through his extremely easy money policies while losing sleep over deflating asset values which rose to extreme and unsustainable levels in the first place.  In other words, the current situation is more a market correction in asset values rather than a classic monetary deflation.

His speech is filled with choice gems of illogic.  Here's a great one widely quoted:

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.  (emphasis added)

So where does the "Helicopter" idea come from?

It actually comes from Milton Friedman who joked that the U.S. government could solve deflation by just throwing cash out of a helicopter.  Friedman ridiculed this idea.  Bernanke in his speech embraced the very notion of curing deflation by simply printing more money.

Ben Bernanke is a nice man, I'm sure.  But he is one of the most incompetent Fed Chairman in the history of the Fed, a truly profound statement given the assorted parade of hacks and bozos that have occupied the office since 1913.  Don't believe me.  Read his speech.

Monday, November 1, 2010

Personal Income Falls

U.S. personal income fell once again in September, which seemed to come as a huge shock for the legions of EMPLOYED government economists in Washington, something that is no surprise at all for the full 20% of the U.S. population that is either unemployed or struggling with part time work that does not pay all the bills.

Every segment of the U.S. population is suffering through this tepid recovery, the worst since the Great Depression.  Take, for example, recent college graduates who are looking for their first real jobs in the worst employment market since 1993.

Of course, U.S. personal income is falling.  And it will continue to fall, or rise without consequence, until the U.S. GDP growth rate exceeds 5%.  What is the current growth rate?  Last quarter it was a dismal 1.7% which is not enough to cover even new college graduates and immigrants let alone the TENS OF MILLIONS still seeking employment.

To make matters worse, the U.S. real estate market, normally an engine of GDP growth, is actually now working as a brake on it, draining away resources and retarding growth.

There will be no increases in residential rents in the United States until personal income rises and rises strongly.  Same is true about property values.  Home prices are still falling in most markets and will continue to do so until people (1) have full time jobs; (2) that are reliable; (3) their personal income is rising; and (4) they feel confident enough again to buy properties for personal use and investment.

This isn't going to happen anytime before 2013.  I have predicted this in this blog before.  And even this date is unsure given the bizarre and dangerous rumblings out of Washington.  For example, Fed Chairman Ben Bernanke is going to begin yet another $500 billion or so charge against the Fed's balance sheet this week when he starts buying bonds to "stimulate" the economy, move that even The New York Times is questioning as not the greatest idea.

Given Helicopter Ben's track record, a housing price rebound in 2014 may become optimistic.