investmentwatchblog--2020-12-11--The Top U.S. Shale Gas Basin Continues To Bleed Cash

The shale revolution may have made the United States and the world ’ s largest natural gas producer , but it has failed to make the biggest U.S. shale gas drillers any richer .
Frackers in the top shale gas basin , the Appalachia , continue to bleed cash , despite the deep cuts in capital expenditures this year as a result of the plunge in gas prices in the first half of 2020 due to mild winter early in the year and depressed demand later on with the pandemic .
Nine of the biggest shale gas producers in Appalachia @ @ @ @ @ @ @ one-third compared to the same period of last year .
Despite these deep cuts , six of those drillers booked negative free cash flows in the third quarter , while the combined free cash flow of the nine firms was a negative US $ 504 million , the Institute for Energy Economics and Financial Analysis ( IEEFA ) said in an analysis last week .
In other words , gas-focused drillers continue to struggle with free cash flows , and some continue to spend beyond their means .
“ The shale revolution has @ @ @ @ @ @ @ s most prolific gas producer .
Yet in financial terms , the gas production boom has been an unmitigated financial bust , with most fracking-focused companies , including major Appalachian gas companies , regularly reporting negative free cash flows , ” IEEFA analysts Kathy Hipple , Clark Williams-Derry , and Director of Financial Analysis , Tom Sanzillo , wrote in the report .
The COVID-19 downturn , less than five years after the previous slump in the U.S. shale patch , laid bare the truth that investors had started to warn about after @ @ @ @ @ @ @ ’ and ‘ borrow to repay previous borrowings ’ is an unsustainable business model if companies want to reward investors and shareholders with better returns and maintain relatively healthy balance sheets .
Back in 2017 , even Harold Hamm warned his fellow oil and gas producers to be careful as “ drillers don ’ t want to drill themselves into oblivion.
” Some drillers , however , did just that .
In 2020 , the crisis and the low natural gas prices claimed as a prominent victim as shale gas pioneer Chesapeake Energy @ @ @ @ @ @ @ protection in June .
Analysts say this particular filing was a long time coming .
“ If I were to describe Chesapeake in one word , that word is ‘ excess ’ – excess liabilities , excess costs , excess gas in an oversupplied market , ” Alex Beeker , principal analyst on Wood Mackenzie ’ s corporate upstream team , said at the time .
The excess debt and the negative cash flows have made “ debt repayment an ongoing challenge for Appalachian gas producers , ” IEEFA said in its recent @ @ @ @ @ @ @ oil supermajors have been fleeing the Appalachia .
Shell sold in May its Appalachia shale gas assets for $ 541 million in a transaction that wouldn ’ t have caught much attention if it weren ’ t for the fact that the oil and gas major had paid nearly nine times that price when it bought the assets a decade ago .
Chevron agreed in October to sell its upstream and midstream assets in the Appalachian Basin for $ 735 million to the biggest natural gas producer in the United States , EQT @ @ @ @ @ @ @ for the Appalachian shale—and for EQT Corporation—its chief executive Toby Rice told Bloomberg in an interview last month after the deal with Chevron was announced .
Consolidation is also gaining momentum in the oil patch , with companies with healthier balance sheets looking to strengthen portfolios with value-accretive deals .
Shale-focused oil and gas firms have slashed capex by 58 percent annually to $ 5.8 billion in Q3 , the lowest level in a decade , IEEFA said in a new analysis on Tuesday , which analyzed financials at 33 listed independent U.S. @ @ @ @ @ @ @ which cut spending .
The capex cuts led to a combined free cash flow of $ 2.6 billion in Q3 , “ the strongest results since the dawn of the fracking boom , ” IEEFA said , but warned that the third-quarter free cash flow figure was not a reason to be too optimistic about U.S. shale .
“ These steep cuts suggest that the U.S. shale sector has stopped investing in its own growth , ” said Kathy Hipple , an IEEFA financial analyst and lead author of the analysis .
“ @ @ @ @ @ @ @ continue to restrain capital spending to conserve cash and stave off bankruptcy .
But these results reinforce the idea that the oil and gas industry has pulled back from investing in its future and instead has settled for managing its own decline , ” Hipple noted .

By Tsvetana Paraskova
The shale revolution may have made the United States and the world’s largest natural gas producer, but it has failed to make the biggest U.S. shale gas drillers any richer.
Frackers in the top shale gas basin, the Appalachia, continue to bleed cash, despite the deep cuts in capital expenditures this year as a result of the plunge in gas prices in the first half of 2020 due to mild winter early in the year and depressed demand later on with the pandemic.
Nine of the biggest shale gas producers in Appalachia cut their capex in Q3 by over one-third compared to the same period of last year. Despite these deep cuts, six of those drillers booked negative free cash flows in the third quarter, while the combined free cash flow of the nine firms was a negative US$504 million, the Institute for Energy Economics and Financial Analysis (IEEFA) said in an analysis last week.
In other words, gas-focused drillers continue to struggle with free cash flows, and some continue to spend beyond their means.
“The shale revolution has turned the U.S. into the world’s most prolific gas producer. Yet in financial terms, the gas production boom has been an unmitigated financial bust, with most fracking-focused companies, including major Appalachian gas companies, regularly reporting negative free cash flows,” IEEFA analysts Kathy Hipple, Clark Williams-Derry, and
Director of Financial Analysis, Tom Sanzillo, wrote in the report.
The COVID-19 downturn, less than five years after the previous slump in the U.S. shale patch, laid bare the truth that investors had started to warn about after the 2015-2016 crisis—‘borrow to drill’ and ‘borrow to repay previous borrowings’ is an unsustainable business model if companies want to reward investors and shareholders with better returns and maintain relatively healthy balance sheets.
Back in 2017, even Harold Hamm warned his fellow oil and gas producers to be careful as “drillers don’t want to drill themselves into oblivion.”
Some drillers, however, did just that.
In 2020, the crisis and the low natural gas prices claimed as a prominent victim as shale gas pioneer Chesapeake Energy, which filed for Chapter 11 bankruptcy protection in June. Analysts say this particular filing was a long time coming.
“If I were to describe Chesapeake in one word, that word is ‘excess’ – excess liabilities, excess costs, excess gas in an oversupplied market,” Alex Beeker, principal analyst on Wood Mackenzie’s corporate upstream team, said at the time.
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The excess debt and the negative cash flows have made “debt repayment an ongoing challenge for Appalachian gas producers,” IEEFA said in its recent report.
At the same time, oil supermajors have been fleeing the Appalachia.
Shell sold in May its Appalachia shale gas assets for $541 million in a transaction that wouldn’t have caught much attention if it weren’t for the fact that the oil and gas major had paid nearly nine times that price when it bought the assets a decade ago.
Chevron agreed in October to sell its upstream and midstream assets in the Appalachian Basin for $735 million to the biggest natural gas producer in the United States, EQT Corporation.
Further consolidation is the way for the Appalachian shale—and for EQT Corporation—its chief executive Toby Rice told Bloomberg in an interview last month after the deal with Chevron was announced.
Consolidation is also gaining momentum in the oil patch, with companies with healthier balance sheets looking to strengthen portfolios with value-accretive deals.
Shale-focused oil and gas firms have slashed capex by 58 percent annually to $5.8 billion in Q3, the lowest level in a decade, IEEFA said in a new analysis on Tuesday, which analyzed financials at 33 listed independent U.S. oil and gas drillers, 32 of which cut spending.
The capex cuts led to a combined free cash flow of $2.6 billion in Q3, “the strongest results since the dawn of the fracking boom,” IEEFA said, but warned that the third-quarter free cash flow figure was not a reason to be too optimistic about U.S. shale.
“These steep cuts suggest that the U.S. shale sector has stopped investing in its own growth,” said Kathy Hipple, an IEEFA financial analyst and lead author of the analysis.
“Moving forward, U.S. shale companies may continue to restrain capital spending to conserve cash and stave off bankruptcy. But these results reinforce the idea that the oil and gas industry has pulled back from investing in its future and instead has settled for managing its own decline,” Hipple noted.
By Tsvetana Paraskova for Oilprice.com


investmentwatchblog--2020-12-11--Jason Burack: The Central Bank Bond Buying Scheme (Debt Monetization) Will Only Get Worse

A few days ago Bloomberg came out with an article about how major central banks have done $ 5.6 trillion worth of QE this year .
finance.yahoo.com/news/centra… However , just this week the Bank of Japan ( BOJ ) & European Central Bank ( ECB ) announced new stimulus ( really bailout ) QE programs .
A lot of these programs are being done solely to create newly created currency units out of thin air to buy government bonds to maintain or grow the size of government .
Meanwhile , the Bank of International Settlements ( BIS ) just issued @ @ @ @ @ @ @ ” are now moving from a liquidity crisis into a solvency crisis because of the global cash flow problem .
As in there is not enough cash flow to service existing debts let along ever think of paying a lot of them off .
And yet Wall Street banks and other large banks in the EU , UK , Japan and China want to keep issuing more debt and credit !
BIS Warns Markets Are Moving To An Insolvency Phase gsiexchange.com/bis-believes-… Jason Burack is an investor , entrepreneur , financial historian , Austrian @ @ @ @ @ @ @ co-founded the startup financial education company Wall St for Main St , LLC , to try to help the people of Main Street by teaching them the knowledge , skills , research methods , and investing expertise of Wall Street .
You can also find Jason ’ s work at his blog website at www.jasonburack.com .

Wall St. For Main St., Released on 12/10/20
A few days ago Bloomberg came out with an article about how major central banks have done $5.6 trillion worth of QE this year. finance.yahoo.com/news/centra…
However, just this week the Bank of Japan (BOJ) & European Central Bank (ECB) announced new stimulus (really bailout) QE programs.
A lot of these programs are being done solely to create newly created currency units out of thin air to buy government bonds to maintain or grow the size of government.
We are primarily funded by readers. Please subscribe and donate to support us!
Meanwhile, the Bank of International Settlements (BIS) just issued a new report about how “markets” are now moving from a liquidity crisis into a solvency crisis because of the global cash flow problem. As in there is not enough cash flow to service existing debts let along ever think of paying a lot of them off. And yet Wall Street banks and other large banks in the EU, UK, Japan and China want to keep issuing more debt and credit!
BIS Warns Markets Are Moving To An Insolvency Phase gsiexchange.com/bis-believes-…
Jason Burack is an investor, entrepreneur, financial historian, Austrian School economist, and contrarian. Jason co-founded the startup financial education company Wall St for Main St, LLC, to try to help the people of Main Street by teaching them the knowledge, skills, research methods, and investing expertise of Wall Street. You can also find Jason’s work at his blog website at www.jasonburack.com.


investmentwatchblog--2020-12-11--Chart: Debt-to-GDP Continues to Rise Around the World

With vaccines slowly obtaining approval in various countries , the world may finally be on the path to overcoming the COVID-19 pandemic .
The economic situation , on the other hand , is unlikely to improve anytime soon .
Falling revenues combined with costly pandemic relief measures have increased global debt by $ 20 trillion since the third quarter of 2019 .
By the end of 2020 , economists expect global debt to reach $ 277 trillion , or 365 % of world GDP .
Today ’ s chart uses data from the Institute of International Finance ( IIF ) @ @ @ @ @ @ @ , relative to GDP , has increased the most .
Developed economies represent four of the five countries seeing the largest increases in debt-to-GDP , but looking from a more macro angle reveals that debt levels are rising at a similar pace around the world .
To put these figures into perspective , economists often use the debt-to-GDP metric , which compares a country ’ s debt to its economic output .
As the name implies , it ’ s calculated by taking a country ’ s total debts and dividing them by @ @ @ @ @ @ @ debt-to-GDP ratio suggests that a country will have little issues paying off its debts , while a high ratio can be interpreted as a sign of higher default risk .
The actual definition of a “ low ” or “ high ” ratio is quite loose , though the World Bank believes there is a threshold for government debt at 77 % of GDP .
Every percentage point beyond this threshold has been found to detract 0.017 percentage points from annual growth .
To see how COVID-19 has affected the global economy since @ @ @ @ @ @ @ a look at each sector ’ s debt as a percentage of GDP .
*Corporations that are not in the financial industry .
Source : IIF , BIS , Haver , National Sources Within developed markets , government debt-to-GDP grew by 21 percentage points compared to 11 for non-financial corporates , and 6 for households .
This is unsurprising as governments have supplied billions ( or in some cases , trillions ) of economic stimulus while also pulling in less tax revenue .
The story in emerging markets is slightly different , with @ @ @ @ @ @ @ 11 percentage points .
The sector ’ s debt is now at 104 % of GDP , making it the most highly-leveraged in the region .
Today ’ s chart boils this data down to the individual country level , allowing us to identify two outliers : Canada and Australia .
Excluding the financial sector , Canada ’ s debt-to-GDP ratio increased by nearly 80 % , the highest of any developed country .
Government borrowing surged as the Canada Emergency Response Benefit ( CERB ) , which provided struggling Canadians with roughly @ @ @ @ @ @ @ a bill of $ 60 billion over 7 months .
An increase in debt wasn ’ t the only reason for the country ’ s worsening debt-to-GDP ratios .
In Q2 2020 , Canada ’ s GDP declined at an annualized rate of 38 % , its worst three-month performance on record .
Australia was another outlier , but for a different reason ; the country ’ s household debt decreased by almost 5 % relative to GDP .
This was likely due to an early-access scheme that allowed millions of Australians to @ @ @ @ @ @ @ social security fund similar to America ’ s 401 ( k ) .
—Josh Frydenberg , Treasurer of the Commonwealth of Australia Officials have exercised caution around the prolonged use of these programs , as superannuation funds are meant to support people through retirement .
Of the 2.6 million Australians that accessed their superannuations early , 500,000 are believed to have completely emptied their accounts .
Debt-to-GDP is Set to Fall…Or is it ?
A global roll out of COVID-19 vaccines is likely to end the ongoing health crisis and allow the economy @ @ @ @ @ @ @ delays are to be expected .
Regardless , this spells good news for governments and financial institutions around the world—economic output will recover , shrinking debt-to-GDP ratios .
Whether or not borrowing will also slow down , however , is much harder to predict .
Government borrowing has been relied on to stimulate growth since 2008 , and with 75 % of Americans in favor of a second COVID-19 relief bill , public debt is likely to accumulate further .
Private sector debt is following a similar trend , with non-financial U.S. corporations @ @ @ @ @ @ @ 2020 , up from $ 6.4 trillion at the start of 2008 .
These growing debts have been manageable thanks to an extended period of low interest rates and loose monetary policy , but whether or not this is sustainable remains to be seen .

by visualcapitalist
With vaccines slowly obtaining approval in various countries, the world may finally be on the path to overcoming the COVID-19 pandemic.
The economic situation, on the other hand, is unlikely to improve anytime soon. Falling revenues combined with costly pandemic relief measures have increased global debt by $20 trillion since the third quarter of 2019. By the end of 2020, economists expect global debt to reach $277 trillion, or 365% of world GDP.
Today’s chart uses data from the Institute of International Finance (IIF) to provide an overview of where debt, relative to GDP, has increased the most.
Comparing Developed and Emerging Markets
Developed economies represent four of the five countries seeing the largest increases in debt-to-GDP, but looking from a more macro angle reveals that debt levels are rising at a similar pace around the world.
Q3 2019 ($ trillions) Q3 2020 ($ trillions) % Increase Developed markets $181.8 $196.3 8.0% Emerging markets $70.9 $76.4 7.7% Global total $252.7 $272.7 7.9%
Source: IIF, BIS, IMF, Haver, National Sources
To put these figures into perspective, economists often use the debt-to-GDP metric, which compares a country’s debt to its economic output. As the name implies, it’s calculated by taking a country’s total debts and dividing them by its annual GDP. Having a low debt-to-GDP ratio suggests that a country will have little issues paying off its debts, while a high ratio can be interpreted as a sign of higher default risk.
The actual definition of a “low” or “high” ratio is quite loose, though the World Bank believes there is a threshold for government debt at 77% of GDP. Every percentage point beyond this threshold has been found to detract 0.017 percentage points from annual growth.
Comparing Debt-to-GDP by Sector
To see how COVID-19 has affected the global economy since Q3 2019, let’s take a look at each sector’s debt as a percentage of GDP.
Households (Q3 ’19) Households (Q3 ’20) Non-financials* (Q3 ’19) Non-financials* (Q3 ’20) Government (Q3 ’19) Government (Q3 ’20) Developed markets average 72% 78% 91% 102% 110% 131% U.S. 74% 81% 75% 88% 102% 127% Euro Area 58% 61% 108% 114% 102% 115% UK 84% 88% 73% 78% 110% 130% Emerging markets average 40% 44% 93% 104% 53% 60% China 54% 60% 150% 166% 53% 63% Russia 19% 23% 78% 91% 15% 18% Global total 60% 65% 92% 103% 89% 105%
*Corporations that are not in the financial industry.
Source: IIF, BIS, Haver, National Sources
Within developed markets, government debt-to-GDP grew by 21 percentage points compared to 11 for non-financial corporates, and 6 for households. This is unsurprising as governments have supplied billions (or in some cases, trillions) of economic stimulus while also pulling in less tax revenue.
We are primarily funded by readers. Please subscribe and donate to support us!
The story in emerging markets is slightly different, with non-financial corporates experiencing the largest increase at 11 percentage points. The sector’s debt is now at 104% of GDP, making it the most highly-leveraged in the region.
Highlights from Today’s Chart
Today’s chart boils this data down to the individual country level, allowing us to identify two outliers: Canada and Australia.
Excluding the financial sector, Canada’s debt-to-GDP ratio increased by nearly 80%, the highest of any developed country. Government borrowing surged as the Canada Emergency Response Benefit (CERB), which provided struggling Canadians with roughly $1,500 a month, rang up a bill of $60 billion over 7 months.
An increase in debt wasn’t the only reason for the country’s worsening debt-to-GDP ratios. In Q2 2020, Canada’s GDP declined at an annualized rate of 38%, its worst three-month performance on record.
Australia was another outlier, but for a different reason; the country’s household debt decreased by almost 5% relative to GDP. This was likely due to an early-access scheme that allowed millions of Australians to make withdrawals from their superannuation, a social security fund similar to America’s 401(k).
We know that almost 60 per cent of those accessing their [superannuation] early have used it…to meet essential day-to-day expenses, including paying down debts.
—Josh Frydenberg, Treasurer of the Commonwealth of Australia
Officials have exercised caution around the prolonged use of these programs, as superannuation funds are meant to support people through retirement. Of the 2.6 million Australians that accessed their superannuations early, 500,000 are believed to have completely emptied their accounts.
Debt-to-GDP is Set to Fall…Or is it?
A global roll out of COVID-19 vaccines is likely to end the ongoing health crisis and allow the economy to return to pre-pandemic levels, though delays are to be expected.
Regardless, this spells good news for governments and financial institutions around the world—economic output will recover, shrinking debt-to-GDP ratios. Whether or not borrowing will also slow down, however, is much harder to predict.
Government borrowing has been relied on to stimulate growth since 2008, and with 75% of Americans in favor of a second COVID-19 relief bill, public debt is likely to accumulate further. Private sector debt is following a similar trend, with non-financial U.S. corporations owing $10.9 trillion as of Q2 2020, up from $6.4 trillion at the start of 2008.
These growing debts have been manageable thanks to an extended period of low interest rates and loose monetary policy, but whether or not this is sustainable remains to be seen.


investmentwatchblog--2020-12-11--Atlanta Fed GDPNow Q4 GDP Forecast Prints At 11.151% As U-3 Unemployment Falls To 6.7%

The US economy is improving , despite governors and mayors insisting on Covid-related economic lockdowns .
The Atlanta Fed ’ @ @ @ @ @ prints at 11.51 % as U-3 unemployment falls to 6.7 % .
Obama had enormous @ @ @ @ @ .

by confoundedinterest17
The US economy is improving, despite governors and mayors insisting on Covid-related economic lockdowns. The Atlanta Fed’s GDPNow Q4 GDP forecast prints at 11.51% as U-3 unemployment falls to 6.7%.
We are primarily funded by readers. Please subscribe and donate to support us!
Obama had enormous assistance from The Federal Reserve.


investmentwatchblog--2020-12-11--Even More Tech Firms Are Leaving Silicon Valley for Texas

Hewlett Packard Enterprise is pulling up its stakes in Silicon Valley and heading for Texas .
It ’ s not the first big tech firm to make the move , and it won ’ t be the last .
If you visit the private HP Garage museum in Palo Alto , California , you ’ ll see a plaque proclaiming it as the “ Birthplace of Silicon Valley.
” “ This garage is the birthplace of the world ’ s first high-technology region , Silicon Valley , ” the marker reads .
It names two Stanford students , William Hewlett @ @ @ @ @ @ @ 1938 began developing their first product , an audio oscillator , in this garage.
” ( The pair ’ s first customer ?
Walt Disney , who was then working on 1940 ’ s Fantasia . )
Earlier this month , Hewlett Packard Enterprise ( HPE ) —as the company is now known—announced that it would be leaving Silicon Valley for Houston , Texas , where it ’ s currently building a state-of-the-art campus .
( HPE , which makes servers and networking gear , is not to be confused with HP Inc. @ @ @ @ @ @ @ two companies were created in 2015 after the Hewlett-Packard Company split its businesses . )
It ’ s not the first tech company to relocate its headquarters from California to Texas , which by all accounts has a much more favorable business climate .
SignEasy , QuestionPro and DZS all made the move in the past 12 months .
What makes HPE ’ s decision especially notable is not just its size—the company reported $ 7.2 billion in sales in the quarter ended October 31—but also its role as one of the founding @ @ @ @ @ @ @ Snubs California .
Is Tesla Next to Come to Texas ?
I don ’ t believe HPE will be the last big tech firm to say goodbye to the Golden State and hello to the Lone Star State .
Speculation is rampant right now that Tesla may be next to make the move .
It would make sense .
Tesla CEO Elon Musk already has strong connections to Texas .
SpaceX , the entrepreneur ’ s other main venture , has a rocket production and test site facility in Boca Chica , just @ @ @ @ @ @ @ ’ s next production facility is taking place in Austin .
Once completed next year , the factory will build not just EVs—including the carmaker ’ s upcoming Cybertruck—but batteries as well .
Musk ’ s Boring Company , which specializes in tunneling and transportation infrastructure , is also reportedly eyeing the Texas capital , an emerging tech hub in its own right .
Now the world ’ s second wealthiest person , Musk moved this month from Los Angeles to Austin and brought with him his private Musk Foundation , which issues @ @ @ @ @ @ @ artificial intelligence , space exploration and more .
The move follows fellow tech entrepreneur Joe Lonsdale , cofounder of big data analytics firm Palantir Technologies .
Citing California ’ s high tax rate , Lonsdale moved his family as well as his venture firm , 8VC , from San Francisco to Austin .
Palantir , which went public in late September , also left Silicon Valley , settling on Denver .
Like Lonsdale , Musk had sharp words to share about California when he spoke to the Wall Street Journal this week , @ @ @ @ @ @ @ that has grown complacent after winning too many games .
Such teams “ tend to get a little complacent , a little entitled , and then they don ’ t win the championship anymore , ” he said , adding that California “ has been winning for a long time .
And I think they ’ re taking [ those wins ] for granted a little bit.
” I often say that money flows where it ’ s respected most , and this story bears that out .
Whereas California takes as much @ @ @ @ @ @ @ income—one of the highest rates in the U.S.—Texas is one of only seven states that does not have an income tax .
By becoming a resident of the Lone Star State , Musk is poised to save billions in taxes .
This year alone , he ’ s seen his wealth grow by an unbelievable $ 120 billion as Tesla stock has surged more than 660 % ahead of its December 21 debut in the S & P 500 Index .
But it ’ s not just the uber-wealthy who are moving to @ @ @ @ @ @ @ company SmartAsset , Texas ranked number two among states where upper-middle class families are moving .
Between 2017 and 2018 , Texas saw a net gain of 6,706 upper-middle class people , second only to Florida , which saw a whopping 18,876 people , SmartAsset reported in October .
The firm defines upper-middle class as those with incomes between $ 100,000 and $ 200,000 .
California , meanwhile , has seen a net outflow of people .
In 2019 , more than 653,000 Californians left the state while only 480,000 people became residents—resulting @ @ @ @ @ @ @ was the number one destination for those fleeing the state .
A look at housing prices helps explain why .
At $ 242,000 , the typical price of a single-family home in Texas was well below the national average as of October , according to Zillow data .
Buying a similar home in California cost you nearly three times more , with the typical asking price pushing past $ 700,000 .
If that ’ s not bad enough , the cost of doing business in California is prohibitively high .
The state ranked @ @ @ @ @ @ @ ’ s State Business Tax Climate Index for 2021 .
Only New Jersey ranked lower .
By comparison , Texas ranked number 11 .
( Wyoming topped the list , followed by South Dakota at number two and Alaska at number three . )
There ’ s a saying in Texas that you may have heard before : “ I wasn ’ t born in Texas , but I got here as fast as I could.
” It ’ s a trite expression , and it looks good on t-shirts and coffee mugs @ @ @ @ @ @ @ that .
As many of you know , I grew up in Toronto , but San Antonio has been my home for over 30 years now .
The city has also been home to U.S .
Global Investors for more than 50 years .
I wouldn ’ t have it any other way .
People are moving to the Lone Star State in droves because they can find all the amenities , culture and opportunities you might expect in places like California , at a fraction of the cost .
Companies like HPE @ @ @ @ @ @ @ recognizing the advantages that Texas offers—a low cost of living , large talent pool , exceptional infrastructure and more .

by Frank Holmes, CEO, U.S. Global Investors
Hewlett Packard Enterprise is pulling up its stakes in Silicon Valley and heading for Texas. It’s not the first big tech firm to make the move, and it won’t be the last.
If you visit the private HP Garage museum in Palo Alto, California, you’ll see a plaque proclaiming it as the “Birthplace of Silicon Valley.”
“This garage is the birthplace of the world’s first high-technology region, Silicon Valley,” the marker reads. It names two Stanford students, William Hewlett and David Packard, who “in 1938 began developing their first product, an audio oscillator, in this garage.” (The pair’s first customer? Walt Disney, who was then working on 1940’s Fantasia.)
Earlier this month, Hewlett Packard Enterprise (HPE)—as the company is now known—announced that it would be leaving Silicon Valley for Houston, Texas, where it’s currently building a state-of-the-art campus. (HPE, which makes servers and networking gear, is not to be confused with HP Inc., the laptop and printer-maker. The two companies were created in 2015 after the Hewlett-Packard Company split its businesses.)
It’s not the first tech company to relocate its headquarters from California to Texas, which by all accounts has a much more favorable business climate. SignEasy, QuestionPro and DZS all made the move in the past 12 months. What makes HPE’s decision especially notable is not just its size—the company reported $7.2 billion in sales in the quarter ended October 31—but also its role as one of the founding companies of Silicon Valley.
Elon Musk Snubs California. Is Tesla Next to Come to Texas?
I don’t believe HPE will be the last big tech firm to say goodbye to the Golden State and hello to the Lone Star State. Speculation is rampant right now that Tesla may be next to make the move.
It would make sense. Tesla CEO Elon Musk already has strong connections to Texas. SpaceX, the entrepreneur’s other main venture, has a rocket production and test site facility in Boca Chica, just south of Brownsville.
Construction on Tesla’s next production facility is taking place in Austin. Once completed next year, the factory will build not just EVs—including the carmaker’s upcoming Cybertruck—but batteries as well. Musk’s Boring Company, which specializes in tunneling and transportation infrastructure, is also reportedly eyeing the Texas capital, an emerging tech hub in its own right.
Now the world’s second wealthiest person, Musk moved this month from Los Angeles to Austin and brought with him his private Musk Foundation, which issues grants in support of renewable energy, artificial intelligence, space exploration and more.
The move follows fellow tech entrepreneur Joe Lonsdale, cofounder of big data analytics firm Palantir Technologies. Citing California’s high tax rate, Lonsdale moved his family as well as his venture firm, 8VC, from San Francisco to Austin. Palantir, which went public in late September, also left Silicon Valley, settling on Denver.
Like Lonsdale, Musk had sharp words to share about California when he spoke to the Wall Street Journal this week, likening the state to a sports team that has grown complacent after winning too many games.
Such teams “tend to get a little complacent, a little entitled, and then they don’t win the championship anymore,” he said, adding that California “has been winning for a long time. And I think they’re taking [those wins] for granted a little bit.”
Texas: No Income Tax, Big Opportunity
I often say that money flows where it’s respected most, and this story bears that out. Whereas California takes as much as 13.3% of top earners’ income—one of the highest rates in the U.S.—Texas is one of only seven states that does not have an income tax.
We are primarily funded by readers. Please subscribe and donate to support us!
By becoming a resident of the Lone Star State, Musk is poised to save billions in taxes. This year alone, he’s seen his wealth grow by an unbelievable $120 billion as Tesla stock has surged more than 660% ahead of its December 21 debut in the S&P 500 Index.
click to enlarge
But it’s not just the uber-wealthy who are moving to Texas. According to New York-based fintech company SmartAsset, Texas ranked number two among states where upper-middle class families are moving. Between 2017 and 2018, Texas saw a net gain of 6,706 upper-middle class people, second only to Florida, which saw a whopping 18,876 people, SmartAsset reported in October. The firm defines upper-middle class as those with incomes between $100,000 and $200,000.
click to enlarge
California, meanwhile, has seen a net outflow of people. In 2019, more than 653,000 Californians left the state while only 480,000 people became residents—resulting in a deficit of 173,000. Texas was the number one destination for those fleeing the state.
A look at housing prices helps explain why. At $242,000, the typical price of a single-family home in Texas was well below the national average as of October, according to Zillow data. Buying a similar home in California cost you nearly three times more, with the typical asking price pushing past $700,000.
click to enlarge
If that’s not bad enough, the cost of doing business in California is prohibitively high. The state ranked almost dead last in the Tax Foundation’s State Business Tax Climate Index for 2021. Only New Jersey ranked lower.
By comparison, Texas ranked number 11. (Wyoming topped the list, followed by South Dakota at number two and Alaska at number three.)
Thankful for Texas
There’s a saying in Texas that you may have heard before: “I wasn’t born in Texas, but I got here as fast as I could.”
It’s a trite expression, and it looks good on t-shirts and coffee mugs. But it’s more than that. As many of you know, I grew up in Toronto, but San Antonio has been my home for over 30 years now. The city has also been home to U.S. Global Investors for more than 50 years. I wouldn’t have it any other way.
People are moving to the Lone Star State in droves because they can find all the amenities, culture and opportunities you might expect in places like California, at a fraction of the cost. Companies like HPE and, potentially, Tesla are similarly recognizing the advantages that Texas offers—a low cost of living, large talent pool, exceptional infrastructure and more.


investmentwatchblog--2020-12-11--The Disturbing Link Between Police Body Cams, Public Surveillance And Fusion Centers

I didn ’ t think too much about it when news broke about a police department creating another cam-share program .
But a couple of things from a recent NBC News story about a cam-share program in Jackson , Mississippi caught my attention .
Livestreaming video surveillance to a police department is not inherently suspicious until you see who ’ s behind it .
The Jackson Police Departments ’ real-time command center or fusion center would not be possible without Fusus .
And that it where things become interesting or disturbing , depending on your views about privacy .
Fusus @ @ @ @ @ @ @ Real-Time Crime Center in the Cloud.
” Fusus combines video with real-time officer geolocator feeds using “ Pileum ” police body cameras .
According to Pileum ’ s website there are at least 5 police departments including the Jackson Police Department using Pileum ’ s body cameras .
As NBC News mentioned , “ Fusus , goes a step further than other surveillance systems by allowing police real-time access to home security systems , but does not offer or integrate with facial recognition technology.
” Police have the ability to track a person @ @ @ @ @ @ @ they are wearing , by the way they walk ( gait tracking ) and they can ID and track any vehicle .
All without a warrant .
And no one is the wiser .
“ What we ’ ll be able to do is get a location , draw a circle around it and pull up every camera within a certain radius , ” Mayor Chokwe Lumumba said .
The reasons why this should concern everyone are too numerous to mention here , but EFF does a good job of explaining it .
@ @ @ @ @ @ @ your footage to be used that way , your neighbor ’ s camera pointed at your house may still be transmitting directly to the police .
The choices you and your neighbors make as consumers should not be hijacked by police to roll out surveillance technologies.
” What most of the news stories missed is the connection being made by numerous smart devices that , when rolled into one package , present a terrifying picture of public police surveillance .
As more and more police departments purchase body cameras , the greater fear @ @ @ @ @ @ @ like Axon who allow police officers in the field to tie their footage to real-time crime centers .
From the moment you or a family member step outside , law enforcement can ID and track you .
Police Stingray ’ s that can ID and track your phone can be tied to Ring doorbell cameras which can ID and track you as you walk or drive through your neighborhood .
If you happen to pass a police officer wearing a body camera , assume the worst .
At the very least they can @ @ @ @ @ @ @ they are wearing and by how they walk .
At the worst law enforcement can use facial recognition to ID you and your family in near real-time .
Take this a step further and the picture becomes even bleaker .
From the moment you get into your vehicle , police can use license plate readers to track your every movement .
Once you enter a store parking lot a police cam-share camera can ID and track your every movement and know exactly which item [ s ] you purchased .
All without a @ @ @ @ @ @ @ Pileum , Axon , Ring Doorbell , Flock Safety etc.
, to profit from destroying everyone ’ s privacy needs to be stopped before it spirals out of control .

by mapi
I didn’t think too much about it when news broke about a police department creating another cam-share program.
After all, I have written a half dozen stories about police cam-share programs over the years, including one about DHS’s exclusive “Platinum” cam-share program in New Orleans.
“The New Orleans Police & Justice Foundation’s SafeCam NOLA program, which allows residents to register their cameras with NOPD, recently launched its “platinum” program that connects cameras to the Real-Time Crime Center. The program debuted in October, and its public launch is among 2019 budget priorities with the city’s Office of Homeland Security and Emergency Preparedness, along with the other surveillance camera expansions.”
But a couple of things from a recent NBC News story about a cam-share program in Jackson, Mississippi caught my attention.
“Strapped for cash and facing a sharp rise in homicides, city leaders here are expanding police surveillance powers to allow residents and business owners to send live feeds from many types of security cameras — including popular doorbell cameras — directly to the city’s real-time command center.”
Livestreaming video surveillance to a police department is not inherently suspicious until you see who’s behind it.
The Jackson Police Departments’ real-time command center or fusion center would not be possible without Fusus.
“The new use of this livestreaming technology by police, which is undergoing a final legal review in Jackson, is drawing interest from other small cities that don’t have the resources to build their own surveillance systems.”
“The move made Jackson, which has struggled to keep up with advances in high-tech crime-fighting, one of two dozen places in the country where police agencies inked deals this year with Fusus, a small Georgia company that aims to make it easier for American law enforcement agencies to build networks of public and private security cameras.”
And that it where things become interesting or disturbing, depending on your views about privacy.
Fusus bills itself as “RTC3 or a Real-Time Crime Center in the Cloud.” Fusus combines video with real-time officer geolocator feeds using “Pileum” police body cameras.
According to Pileum’s website there are at least 5 police departments including the Jackson Police Department using Pileum’s body cameras.
As NBC News mentioned, “Fusus, goes a step further than other surveillance systems by allowing police real-time access to home security systems, but does not offer or integrate with facial recognition technology.”
Police have the ability to track a person or person’s by the clothing they are wearing, by the way they walk (gait tracking) and they can ID and track any vehicle. All without a warrant. And no one is the wiser.
We are primarily funded by readers. Please subscribe and donate to support us!
“What we’ll be able to do is get a location, draw a circle around it and pull up every camera within a certain radius,” Mayor Chokwe Lumumba said.
The reasons why this should concern everyone are too numerous to mention here, but EFF does a good job of explaining it.
“Even if you refuse to allow your footage to be used that way, your neighbor’s camera pointed at your house may still be transmitting directly to the police. The choices you and your neighbors make as consumers should not be hijacked by police to roll out surveillance technologies.”
What most of the news stories missed is the connection being made by numerous smart devices that, when rolled into one package, present a terrifying picture of public police surveillance.
As more and more police departments purchase body cameras, the greater fear can be illustrated by Pileum and companies like Axon who allow police officers in the field to tie their footage to real-time crime centers.
From the moment you or a family member step outside, law enforcement can ID and track you. Police Stingray’s that can ID and track your phone can be tied to Ring doorbell cameras which can ID and track you as you walk or drive through your neighborhood.
If you happen to pass a police officer wearing a body camera, assume the worst. At the very least they can ID you and your family by what they are wearing and by how they walk. At the worst law enforcement can use facial recognition to ID you and your family in near real-time.
Take this a step further and the picture becomes even bleaker.
From the moment you get into your vehicle, police can use license plate readers to track your every movement. Once you enter a store parking lot a police cam-share camera can ID and track your every movement and know exactly which item[s] you purchased. All without a warrant.
Allowing companies like Fusus, Pileum, Axon, Ring Doorbell, Flock Safety etc., to profit from destroying everyone’s privacy needs to be stopped before it spirals out of control.


investmentwatchblog--2020-12-10--$100B valuation. For this. Well done Federal Reserve for fueling the next year 2000 bubble.

Airbnb was valued $ 18B in March , today at $ 150/sh it ’ s nearly worth $ 90B “ @ @ @ @ @ cut to $ 18 billion by investors .
Eight months later , Airbnb is a @ @ @ @ @ IPO day .
That works out to growth of about $ 10 billion a month @ @ @ @ @ , during a global pandemic .
Enjoy your stay .
It is the rare IPO @ @ @ @ @ ”

Airbnb and DoorDash are "mission driven companies" working to achieve "equality." Check the tape yourself. $ABNB $DASH pic.twitter.com/GCnTd7hfXj — Rudy Havenstein, Six Ways From Sunday. (@RudyHavenstein) December 10, 2020
One of the major signs of a bubble is intense buying of IPO's and increased interest in stock trading by people who normally arent involved in markets — BLACK SWAN – PISSED OFF BEAR (@RetirementRight) December 10, 2020
#Airbnb indicated to open at $150, IPO priced at $68.
Indication would imply biggest opening surge for the year, BBG says. Valuation would top $100bn if price stays >$144. With a $100bn valuation, Airbnb would be the biggest online travel company in the world. pic.twitter.com/8MzqywKgIB — Holger Zschaepitz (@Schuldensuehner) December 10, 2020
Airbnb was valued $18B in March, today at $150/sh it’s nearly worth $90B
“In March $ABNB was cut to $18 billion by investors. Eight months later, Airbnb is a $100 billion company on IPO day. That works out to growth of about $10 billion a month, for a travel company, during a global pandemic. Enjoy your stay. It is the rare IPO with history of profits.”
We are primarily funded by readers. Please subscribe and donate to support us!
$ABNB worth more than Bookings $BKNG ($87B company)
twitter.com/search?q=%24ABNB&src=cashtag_click


investmentwatchblog--2020-12-10--Doug Casey on What Happens When the Suspension on Evictions Ends

International Man : Earlier this year , CDC was able to extend its powers unprecedentedly by issuing a nationwide suspension on evictions .
What ’ s your take on how a public health agency grew to be in the position of telling property owners what they can do on their properties ?
Doug Casey : Health paranoia is an excellent method of control .
People put their health above almost everything .
I ’ m only surprised it hasn ’ t been used as a lever up until now .
It ’ s part of a trend toward mass control @ @ @ @ @ @ @ the 20th century and has been increasing exponentially over time .
First was the income tax .
If you didn ’ t comply , it was not only seen as a legal crime but also promoted as a moral sin .
The prohibition of liquor from 1919 to 1933 got under way as a moral failing and then was turned into a crime .
It ’ s the same with the prohibition of some drugs ; Nixon started that hysteria in 1971 , and it was put on steroids , so to speak @ @ @ @ @ @ @ the war on terror , especially since 2001 .
These were all promoted with both legal and moral taboos .
Everybody is supposed to line up with them shoulder to shoulder , like in one of those old socialist realism propaganda posters the Soviets and the Nazis specialized in .
The public is supposed to self-police under the supervision of the authorities , like they did in Salem in 1692 .
Public health is the current impetus for mass hysteria and paranoia .
All of these things impinge upon your right to ownership @ @ @ @ @ @ @ body , which is the primary form of property .
The public health angle is potentially the most dangerous and invasive one from the viewpoint of freedom .
Busybodies—the type of people who work for and actively support the State—always need an excuse to control others en masse .
This pandemic provides an excellent template for the future .
Wearing a mask—whether or not you want to or think it helps—isn ’ t just about virtue signaling .
It also shows whether you ’ re willing to do as you ’ re told—whether @ @ @ @ @ @ @ , as the communists like to say .
It ’ s like wearing the Party ’ s armband .
In fact , wearing a mask and social distancing in stores , bars , restaurants , and gymnasiums shouldn ’ t be up to the government .
It should be strictly up to the property owner .
Decisions that the individual makes regarding his own health are his own ; it ’ s between the individual and his doctor .
I have no problem if the owner of a bar or restaurant wants to @ @ @ @ @ @ @ not wearing a mask .
It ’ s his property .
He makes the rules .
I can go elsewhere , where it suits me better .
It ’ s an affront and an imposition on restaurateurs and storekeepers to be told what they and their guests can and can not do .
This isn ’ t , incidentally , about a technical or medical problem .
The value of wearing masks , social distancing , and obeying quarantines and lockdowns is questionable at best , as Sweden has shown .
The real @ @ @ @ @ @ @ s no moral pushback from either the public or the property owners .
People are arguing on strictly technical grounds : “ Yes , you have a right to tell me what to do , and even close my business .
But you shouldn ’ t because it ’ s not ‘ fair ’ , or your solutions aren ’ t optimal ” .
They accept the busybody ’ s premises .
The argument is over before it even begins .
Americans are truly acting like whipped dogs .
Whether the masks , @ @ @ @ @ @ @ work or not , isn ’ t the point .
My own belief is they ’ re at best of marginal value and may well be counterproductive .
But that ’ s beside the point .
The point is that it ’ s immoral and destructive for the State to tell people how to relate to each other .
As for the CDC , it ’ s just another government bureaucracy concerned with putting itself in the limelight , gaining more power , enhancing its budget , and the number of its employees—and @ @ @ @ @ @ @ insignificant swamp creature , into an international celebrity .
International Man : Currently , over 18 million Americans are currently behind on their mortgage or rent payments .
That temporary suspension on evictions ends December 31st .
What do you think will happen next ?
Doug Casey : Just as with the financial markets , the government has no alternative but to “ do something.
” They will—they have to—print more money to keep the rotten house of cards from collapsing on itself .
The Democrats have already said that they want to @ @ @ @ @ @ @ 3 trillion .
The fact that most of the last round of stimulus was either overtly wasted , went to cronies , or can ’ t be accounted for , is completely lost on them .
They recognize that unless they give a lot of money directly or indirectly to the hoi polloi , there are going to be millions of them on the streets .
Approximately 11 million renters and 4 or 5 million mortgagees are now in forbearance .
They ’ ll be kicked out of their houses and apartments come @ @ @ @ @ @ @ .
Where are those people going to go ?
If Obama had made good on his ridiculous promise about shovel-ready projects , there ’ d be a lot more bridges that they could camp out under .
But he didn ’ t .
They have a real problem on their hands .
Millions of people have been living above their means and have no savings .
At this point , if they let landlords and banks kick all those people out , a number of things will happen .
Residential property prices will @ @ @ @ @ @ @ scrambling for somewhere to live .
Lots of banks and landlords would go bust .
The longer the government kicks the can down the road , the bigger the inevitable bust will be .
The stimulus money will have to continue because Biden doesn ’ t want it all to come unglued on his watch .
The State is not only going to have to pay individuals and business owners that their idiotic policies have busted .
They ’ ll be subsidizing banks , landlords , and utility companies—because you can ’ t @ @ @ @ @ @ @ without water and electricity .
It ’ s worse than that because even if you cover the bare essentials , there ’ s no money leftover for maintenance .
There will be millions of buildings across the country suffering from deferred maintenance .
The South Bronx , East St. Louis , and Baltimore will be replicated across the country .
And no one ’ s talking about how to cover the real estate taxes due on these properties .
Many local governments are already bankrupt .
Their expenses are going way up even @ @ @ @ @ @ @ whole country has painted itself into a corner at this point .
That ’ s what happens when you adopt a collectivist economic policy , as the Soviets , the Chinese , and scores of other countries have discovered .
I ’ m not sure how they ’ re going to get out of it because the economy itself has just started to collapse .
Of course , they ’ ll print up more money because they see that as a solution when it ’ s actually a cause .
It ’ s @ @ @ @ @ @ @ Man : For the tens of millions behind on their mortgage and rent payments , will their back rent and overdue payments ever be repaid ?
Doug Casey : The government will not only have to pay the rent for the future , but it ’ s going to have to cover landlords ’ previously unpaid rent—if they don ’ t want lots of bankrupt landlords and banks .
It will lead to a guaranteed annual income , which they ’ ve been thinking about for some time .
In some cases , @ @ @ @ @ @ @ It ’ s nothing new .
Most major US cities already have significant public housing .
None of it ’ s good , but most isn ’ t as bad as Cabrini-Greene or Pruitt-Igoe .
Who knows where this daisy chain will lead ?
With all the unemployed people who can ’ t pay their rent , perhaps the government will develop something like national service .
Then there will be millions more people working for the government , doing god knows what .
It will lead to the socialization of society .
@ @ @ @ @ @ @ the pin that broke the bubble .
The Greater Depression was already in the cards .
Americans will beg the government to cure it , which is guaranteed to make it vastly worse and longer-lasting and invite some charismatic authoritarian to be their savior and take charge .
International Man : Assuming the COVID hysteria and lockdowns are behind us in 2021 , what lasting effects could we see taking place ?
Doug Casey : It ’ s going to destroy the restaurant , retail , and travel industries all at once .
@ @ @ @ @ @ @ are always failing—maybe 15 % of them annually— and new ones are starting up in normal times .
It ’ s the circle of life .
The problem is that about half of these businesses are failing all at once .
That makes it much harder to recover .
The economy is a lot like a body .
If you burn your finger , it hurts , but you ’ ll recover .
But if you suffer burns on over 50 % of your body all at once , it might kill you @ @ @ @ @ @ @ re looking at right now .
Commercial real estate is another area that is going to be devastated because a lot of people will continue working at home and prefer it over working in an office .
Who knows what ’ s going to happen to all that commercial real estate and how it ’ s going to be repurposed .
It ’ s certainly going to consume a huge amount of capital .
Another area that will change is schools .
I would have been happy to have a year off from @ @ @ @ @ @ @ would have read many more things on my own .
But today , most kids don ’ t read books .
Public school kids are lucky to absorb a few things by osmosis .
Now they ’ re mostly playing video games or are on social media—mostly doing nonproductive things on their computers at home .
I don ’ t know the effect of not being able to associate with other kids .
For most kids , it may be damaging .
On the bright side , many parents have decided that school @ @ @ @ @ @ @ started homeschooling their kids .
That ’ s generally a positive thing .
Here ’ s the important thing , we don ’ t know how long this hysteria is going to last .
People are so scared that they ’ ll be easy to control for fear of the next real or imagined virus that comes down the road .
When people are scared and don ’ t know what to do , they will want somebody to kiss it and make it better .
So , I expect we ’ re @ @ @ @ @ @ @ president in the US , whether that ’ s Kamala Harris or somebody else .
If the 2020 election was bad , the 2024 election would be worse .
Editor ’ s Note : Unfortunately most people have no idea what really happens when a government goes out of control , let alone how to prepare… The coming economic and political crisis is going to be much worse , much longer , and very different than what we ’ ve seen in the past .
That ’ s exactly why New York Times @ @ @ @ @ @ @ just released an urgent new report titled Doug Casey ’ s Top 7 Predictions for the Raging 2020s .
Click here to download the free PDF now .

Via International Man
International Man: Earlier this year, CDC was able to extend its powers unprecedentedly by issuing a nationwide suspension on evictions.
What’s your take on how a public health agency grew to be in the position of telling property owners what they can do on their properties?
Doug Casey: Health paranoia is an excellent method of control. People put their health above almost everything. I’m only surprised it hasn’t been used as a lever up until now. It’s part of a trend toward mass control that has started in earnest early in the 20th century and has been increasing exponentially over time.
First was the income tax. If you didn’t comply, it was not only seen as a legal crime but also promoted as a moral sin. The prohibition of liquor from 1919 to 1933 got under way as a moral failing and then was turned into a crime. It’s the same with the prohibition of some drugs; Nixon started that hysteria in 1971, and it was put on steroids, so to speak, by Nancy Reagan. Next came the war on terror, especially since 2001. These were all promoted with both legal and moral taboos. Everybody is supposed to line up with them shoulder to shoulder, like in one of those old socialist realism propaganda posters the Soviets and the Nazis specialized in. The public is supposed to self-police under the supervision of the authorities, like they did in Salem in 1692.
Public health is the current impetus for mass hysteria and paranoia. All of these things impinge upon your right to ownership of private property, including your own body, which is the primary form of property. The public health angle is potentially the most dangerous and invasive one from the viewpoint of freedom. Busybodies—the type of people who work for and actively support the State—always need an excuse to control others en masse. This pandemic provides an excellent template for the future.
Wearing a mask—whether or not you want to or think it helps—isn’t just about virtue signaling. It also shows whether you’re willing to do as you’re told—whether you’re “politically reliable”, as the communists like to say. It’s like wearing the Party’s armband.
In fact, wearing a mask and social distancing in stores, bars, restaurants, and gymnasiums shouldn’t be up to the government. It should be strictly up to the property owner. Decisions that the individual makes regarding his own health are his own; it’s between the individual and his doctor.
I have no problem if the owner of a bar or restaurant wants to keep me out if I’m not wearing a mask. It’s his property. He makes the rules. I can go elsewhere, where it suits me better. It’s an affront and an imposition on restaurateurs and storekeepers to be told what they and their guests can and cannot do.
This isn’t, incidentally, about a technical or medical problem. The value of wearing masks, social distancing, and obeying quarantines and lockdowns is questionable at best, as Sweden has shown. The real problem is ethical and that there’s no moral pushback from either the public or the property owners. People are arguing on strictly technical grounds: “Yes, you have a right to tell me what to do, and even close my business. But you shouldn’t because it’s not ‘fair’, or your solutions aren’t optimal”. They accept the busybody’s premises. The argument is over before it even begins. Americans are truly acting like whipped dogs.
Whether the masks, distancing, and the rest of it work or not, isn’t the point. My own belief is they’re at best of marginal value and may well be counterproductive. But that’s beside the point. The point is that it’s immoral and destructive for the State to tell people how to relate to each other.
As for the CDC, it’s just another government bureaucracy concerned with putting itself in the limelight, gaining more power, enhancing its budget, and the number of its employees—and making Fauci, a lifelong but previously insignificant swamp creature, into an international celebrity.
International Man: Currently, over 18 million Americans are currently behind on their mortgage or rent payments.
That temporary suspension on evictions ends December 31st. What do you think will happen next?
Doug Casey: Just as with the financial markets, the government has no alternative but to “do something.” They will—they have to—print more money to keep the rotten house of cards from collapsing on itself.
The Democrats have already said that they want to increase the next stimulus to over $3 trillion. The fact that most of the last round of stimulus was either overtly wasted, went to cronies, or can’t be accounted for, is completely lost on them. They recognize that unless they give a lot of money directly or indirectly to the hoi polloi, there are going to be millions of them on the streets.
Approximately 11 million renters and 4 or 5 million mortgagees are now in forbearance. They’ll be kicked out of their houses and apartments come January 1, barring a huge bailout. Where are those people going to go?
If Obama had made good on his ridiculous promise about shovel-ready projects, there’d be a lot more bridges that they could camp out under. But he didn’t. They have a real problem on their hands. Millions of people have been living above their means and have no savings. At this point, if they let landlords and banks kick all those people out, a number of things will happen. Residential property prices will collapse. Millions of people will be scrambling for somewhere to live. Lots of banks and landlords would go bust.
The longer the government kicks the can down the road, the bigger the inevitable bust will be. The stimulus money will have to continue because Biden doesn’t want it all to come unglued on his watch. The State is not only going to have to pay individuals and business owners that their idiotic policies have busted. They’ll be subsidizing banks, landlords, and utility companies—because you can’t live in a house or an apartment without water and electricity.
It’s worse than that because even if you cover the bare essentials, there’s no money leftover for maintenance. There will be millions of buildings across the country suffering from deferred maintenance. The South Bronx, East St. Louis, and Baltimore will be replicated across the country.
And no one’s talking about how to cover the real estate taxes due on these properties. Many local governments are already bankrupt. Their expenses are going way up even while their tax income collapses. The whole country has painted itself into a corner at this point. That’s what happens when you adopt a collectivist economic policy, as the Soviets, the Chinese, and scores of other countries have discovered.
We are primarily funded by readers. Please subscribe and donate to support us!
I’m not sure how they’re going to get out of it because the economy itself has just started to collapse. Of course, they’ll print up more money because they see that as a solution when it’s actually a cause. It’s going to worsen the collapse.
International Man: For the tens of millions behind on their mortgage and rent payments, will their back rent and overdue payments ever be repaid?
Doug Casey: The government will not only have to pay the rent for the future, but it’s going to have to cover landlords’ previously unpaid rent—if they don’t want lots of bankrupt landlords and banks.
It will lead to a guaranteed annual income, which they’ve been thinking about for some time. In some cases, the government will take over properties. It’s nothing new. Most major US cities already have significant public housing. None of it’s good, but most isn’t as bad as Cabrini-Greene or Pruitt-Igoe.
Who knows where this daisy chain will lead? With all the unemployed people who can’t pay their rent, perhaps the government will develop something like national service. Then there will be millions more people working for the government, doing god knows what. It will lead to the socialization of society. Remember, this COVID hysteria is just the pin that broke the bubble. The Greater Depression was already in the cards. Americans will beg the government to cure it, which is guaranteed to make it vastly worse and longer-lasting and invite some charismatic authoritarian to be their savior and take charge.
International Man: Assuming the COVID hysteria and lockdowns are behind us in 2021, what lasting effects could we see taking place?
Doug Casey: It’s going to destroy the restaurant, retail, and travel industries all at once.
Stores, restaurants, and small businesses are always failing—maybe 15% of them annually— and new ones are starting up in normal times. It’s the circle of life. The problem is that about half of these businesses are failing all at once. That makes it much harder to recover.
The economy is a lot like a body. If you burn your finger, it hurts, but you’ll recover. But if you suffer burns on over 50% of your body all at once, it might kill you. That’s what we’re looking at right now.
Commercial real estate is another area that is going to be devastated because a lot of people will continue working at home and prefer it over working in an office.
Who knows what’s going to happen to all that commercial real estate and how it’s going to be repurposed. It’s certainly going to consume a huge amount of capital.
Another area that will change is schools. I would have been happy to have a year off from school because classes bored me. I would have read many more things on my own. But today, most kids don’t read books. Public school kids are lucky to absorb a few things by osmosis.
Now they’re mostly playing video games or are on social media—mostly doing nonproductive things on their computers at home. I don’t know the effect of not being able to associate with other kids.
For most kids, it may be damaging. On the bright side, many parents have decided that school is a waste of time and have started homeschooling their kids. That’s generally a positive thing.
Here’s the important thing, we don’t know how long this hysteria is going to last. People are so scared that they’ll be easy to control for fear of the next real or imagined virus that comes down the road. When people are scared and don’t know what to do, they will want somebody to kiss it and make it better.
So, I expect we’re heading towards a genuine strong man for president in the US, whether that’s Kamala Harris or somebody else. If the 2020 election was bad, the 2024 election would be worse.
Editor’s Note: Unfortunately most people have no idea what really happens when a government goes out of control, let alone how to prepare…
The coming economic and political crisis is going to be much worse, much longer, and very different than what we’ve seen in the past.
That’s exactly why New York Times bestselling author Doug Casey and his team just released an urgent new report titled Doug Casey’s Top 7 Predictions for the Raging 2020s.
Click here to download the free PDF now.


investmentwatchblog--2020-12-10--Work From Home Threatens Commercial Real Estate Valuations

Investors hold $ 3.4T in commercial real estate debt via bonds , direct loans , and securitized loan bundles .
Core city commercial real estate valuations could decline if millions of employees work from home ( WFH ) permanently .
Most analysts assume that once virus infections are contained or ended by vaccinations , workers will flock back to cities .
The question is : will tens of thousands of workers commute to offices after buying homes in exurbs and other states ?
The following chart shows the top metro areas for migration based on USPS move data .
Information @ @ @ @ @ @ @ migration to suburbs or other regions .
A total of 238k workers have moved out of the top five urban areas since the pandemic started .
Migration to secondary regions will become permanent once workers feel comfortable , and managers see WFH productivity at pre-pandemic levels or higher .
The largest WFH segment is those workers living outside of cities and working from home but not relocating .
A survey of 238 corporations reported that 44 % of their employees work from home currently .
Understanding this historic migration requires a review of @ @ @ @ @ @ @ , we will examine six major migration events , business losses , and work style changes which are likely to impact commercial real estate values : We will start our analysis by examining the suburban boom as professionals move to less expensive regions looking for more living space .
The massive migration of professionals from cities to suburbs creates economic winners and losers .
This suburban migration will permanently shape consumer and business buying patterns for many years .
Professional moves triggered by continuing work-from-home policies are pulling forward housing sales to a @ @ @ @ @ @ @ incomes higher than pre-pandemic buyers were 25 % of all home purchasers than just 14 % of buyers in February .
Wealthy buyer demand triggered a 14.8 % jump in median home prices to $ 311,800 versus a year ago .
Professional migration is strong in major cities like New York and San Francisco , where from 11 – 15 % of all job holders have moved permanently .
For example , in the San Francisco Bay Area , professionals are moving to Arizona , Texas , Oregon , and Utah , where @ @ @ @ @ @ @ expensive .
Housing sales drive purchases in household furnishings , and appliances sales are up 13.4 % over last year .
Most buyers financed their home purchase with 20 % down payments .
So , buyers were planning their investment before the pandemic .
They pulled forward their purchase with the opportunity to keep a well-paying job and move to a less expensive area .
Sales of existing homes will begin to fall as pending home sales fell 1.1 % in October for the second consecutive month .
The pulling forward of future @ @ @ @ @ @ @ sales decline by the 1st or 2nd quarter of 2021 .
For workers who moved , they face a possible reduction in income .
As 30 % of S & P 500 executives say , they will reduce employee wages for remote workers in less expensive regions .
Today , the bottom 80 % in income have tight budgets .
So , moderate-income workers will not be entering the home market until their income recovers sufficiently to purchase a home .
WFH policies are creating ghost areas in dense office cities like San @ @ @ @ @ @ @ 1.6M workers commute into Manhattan daily .
Yet , downtown Manhattan has become a ghost town .
Kastle Systems , a building security firm , provides weekly reports of key fob check-ins for 2,681 buildings in the U.S. New York City has an average occupancy rate of just 15.9 % .
Manhattan office space for rent is at the highest level since 2003 .
Other less dense cities like Dallas have an occupancy rate of 40.3 % and Los Angeles a 33.1 % rate .
The average occupancy rate across ten cities is @ @ @ @ @ @ @ 18th .
For the nation , the occupancy rate reached a peak in the summer of 27 % and fell to last month ’ s level of 20 % .
Nine of the ten cities have declining occupancy rates .
The Squeeze Is On Commercial property companies are squeezed between mortgage and lease payments as companies delay payments and reduce office space .
U.S. banks hold $ 2Tr of property loans .
In 2008 , banks wrote off $ 110B in commercial real estate losses or 25 % of their total losses .
@ @ @ @ @ @ @ the demand/supply shock of the present recession .
If the current WFH migration shift becomes permanent or even slowly recovers , the loss in office property values alone could reach 20 – 25 % Barclays Bank estimates .
Property values for hotels and retail have fallen even further by 40 – 50 % .
However , with the announcements of vaccines , some property owners have obtained bridge loans hoping that commuters return by the end of next year .
Yet , there still considerable risk that the WFH migration may signify a @ @ @ @ @ @ @ behavior .
A permanent shift to remote work and online consumer spending will Core city small businesses report 40 – 60 % declines in sales .
Sales declines range across various small companies who depend upon commuters to buy their services or products .
Restaurants , hotels , and personal services such as hair salons , barbershops , gyms , and laundries report the most significant losses .
Adding to small business income strain is the requirement that many of these businesses close for shelter in place rules or drastically cut their operational @ @ @ @ @ @ @ restaurants had to maintain 6-foot social distancing and cut capacity to 25 – 50 % for indoor dining .
Due to soaring virus infection rates , San Francisco has ended indoor and outdoor dining allowing only meal pick up for the foreseeable future .
Each day , cities are announcing more social activity restrictions to contain the outbreak of the virus .
New York City small business revenue declined 51 % from January to November 16th of this year and continues to fall .
Note that across the U.S. , in cities like @ @ @ @ @ @ @ about 60 % , and others like New Orleans by 60 % , Washington D.C. 65 % , Detroit 45 % , and Boston 50 % .
The end of the Paycheck Protection Program ( PPP ) on July 31st has left many small businesses with mounting debt to vendors and leaseholders .
Thousands of small businesses in core cities with high rents and drastically reduced income are likely to default on commercial property owners ’ leases .
Small business chain franchisees run 55 % of all hotels and 84 % of restaurants @ @ @ @ @ @ @ 6M workers .
Ninety-six percent of franchise small businesses received PPP grants .
The grants or loans helped them to continue operating until their PPP funds ran out .
Franchisees pay rent to chain corporations who often own the local hotel or restaurant buildings .
Owner-operators squeezed by 40 – 50 % declines in revenue have been delaying rent payments to chain landlords .
There is a significant risk for city location operators that an enduring loss of commuters will force them to close .
Small businesses short on cash reserves and lacking @ @ @ @ @ @ @ or qualify for bridge loans are likely to default first .
Their defaults will send the first cash squeeze wave through commercial property holders and their banks .
In the future , thinly financed office property owners not able to handle businesses defaulting on their loan payments will begin to fold .
The first indication of a soft office space market in core cities is starting to appear .
San Francisco and New York office space prices are down 20 – 25 % from last January .
Long-term property vacancy rates will possibly @ @ @ @ @ @ @ virus containment .
But , cities like New York may continue to have 30 – 35 % vacancy rates for years to come .
With high vacancy rates , property values drop .
In the future , loans based on increased property values will go underwater and are called .
It looks like déjà vu of the subprime mortgage collapse .
Just like that crisis , JPM Chase and Goldman Sachs have securitized about $ 550B in commercial real estate debt sold to investors .
One significant difference from that crisis is that @ @ @ @ @ @ @ , even with the sub-prime market collapsing .
Plus , in 2008 , the economy was expanding , and unemployment was at 5 % .
Today , the economy is in a deep recession .
The unemployment rate is 9 – 13 % , and 20.4M workers are on continuing unemployment assistance .
Are regulators concerned about this immense risk to commercial real estate values and debt ?
Yes .
The Federal Deposit Insurance Corporation ( FDIC ) has identified 356 banks concentrated in the commercial real estate market .
Most of these @ @ @ @ @ @ @ in commercial real estate based on their loan to capital base and growth of loans .
Some core community banks are already under regulatory guidance .
With $ 60B in assets , Manhattan-based Signature Bank has 60 % of its loan portfolio in commercial real estate but has raised loan loss provisions by $ 53M in the last month .
Valley National Bank , Wayne , NJ , has $ 42B in assets with an 81 % increase over three years in its New York metro commercial real estate portfolio .
These banks @ @ @ @ @ @ @ on commercial real estate .
Eric Rosengren , President of the Federal Reserve Bank of Boston , has voiced concerns about banks bingeing on low-interest borrowing .
In recent presentations , he has warned about commercial property values being artificially “ inflated by more than a decade of ultra-easy money.
” Fed Chair Jerome Powell testified to a House committee last September that smaller banks have more exposure to the commercial real estate market and have less financial resources to deal with the stress to balance sheets .
Powell implied that the Fed @ @ @ @ @ @ @ Of concern for investors is how long it will take to see any weakness in commercial real estate markets .
In the last recession , commercial real estate losses did not peak until three years after the 2008 recession peak .
The three-year delay allowed regulators to provide liquidity to cushion the impact .
With so many real estate loans outstanding in core city centers , regulators may not have as much time to mitigate the effects .
Loan delinquencies have increased by five times to 10.2 % .
To reduce delinquencies , @ @ @ @ @ @ @ the delinquency rate down to a still-high 8.2 % .
Regulators , banks , and property owners anticipate a quick return of workers to core inner cities are safe .
How and when might workers return to city centers ?
Forecasting the number of workers who return to their offices is problematic .
It is difficult to predict due to rapidly changing work lifestyles , housing , and social trends .
There are indications of what the future may be if workers decide to leave core cities permanently .
A recent survey of @ @ @ @ @ @ @ 15 % of all workers made long term moves .
However , some executives see synergy in employees working together face to face .
There will be a push-pull between workers desiring to WFH and management .
For example , JPM Chase CEO Jamie Dimon wants all employees back at their offices when it is safe to create a ‘ creative combustion ’ environment .
Yet , other companies like Microsoft and Facebook are offering their employees the ability to WFH permanently .
We expect that cities for information services companies , that @ @ @ @ @ @ @ will opt for WFH .
For consulting companies , personal services , or event-oriented businesses , probably 75 – 80 % of workers will return .
Hard-hit businesses like hotels and restaurants are not likely to call back workers until business picks up , maybe by Q3 of 2021 .
A July survey by the Society of Human Resource Management of 283 corporations with 4.4M workers found executives expect 20 % of their employees to WFH permanently .
This about half of the current 44 % working from home .
Thus , if @ @ @ @ @ @ @ a 20 % reduction in office space requirements nationwide .
In the same survey , employers expected to bring back only 16 % of permanently laid-off workers .
Managers will look for ways to reduce office space costs by increasing the number of employees who WFH .
Executives will find WFH an excellent way to increase profit margins .
Thus , and are doing it with fewer employees overall .
The commercial office real estate market faces significant headwinds for at least the next several years .
The lengthy transition is due to @ @ @ @ @ @ @ office cultures .
Certainly , once it is safe , many workers will want to return to the office .
Plus , some managers will require them to return to the office .
An underlying concern is that the small business sector is on a financial cliff , barely holding on .
The New Jersey Federation of Small Businesses reports that 31 % of all small businesses ’ were closed either temporarily or permanently in November .
If there is long-term unemployment resulting in a drop in consumer spending , then the economy @ @ @ @ @ @ @ pre-pandemic levels .
A stimulus bill will mitigate the short-term financial squeeze for businesses and leaseholders .
But , the funding will not change the migration to WFH .
More likely , if employees feel the economy is stabilizing , they are more likely to move and request a WFH option .
A possible second wave of WFH employees looking to move will likely increase the office vacancy rate for many cities for years to come .
Thus , new moves will cause a continuing increase in vacancy rates and further devaluation of @ @ @ @ @ @ @ of The Progressive Ensign , theprogressiveensign.com/ writes from the heart of Silicon Valley , leveraging 20 years of experience as an executive at firms like HP , Genentech , Verigy , Informatica , and Okta to provide investment and economic insights .
Twitter : @ PatrickHill1677 , email : patrickhill @ theprogressiveensign.com

by Patrick Hill
“I don’t see any way of avoiding a great deal of pain in the commercial real estate market in 2021. It is almost inevitable. My friends at the Federal Reserve and FDIC are becoming increasingly uncomfortable with what’s going on in the commercial real estate world.” Cam Fine, Former President of Independent Community Bankers of America
WFH Threatens Commercial Real Estate Valuations
Investors hold $3.4T in commercial real estate debt via bonds, direct loans, and securitized loan bundles. Core city commercial real estate valuations could decline if millions of employees work from home (WFH) permanently. Most analysts assume that once virus infections are contained or ended by vaccinations, workers will flock back to cities. The question is: will tens of thousands of workers commute to offices after buying homes in exurbs and other states? The following chart shows the top metro areas for migration based on USPS move data. Information services and banking centers are hotspots of migration to suburbs or other regions. A total of 238k workers have moved out of the top five urban areas since the pandemic started.
Source: Visual Cap – 12/1/20
Migration to secondary regions will become permanent once workers feel comfortable, and managers see WFH productivity at pre-pandemic levels or higher.
The largest WFH segment is those workers living outside of cities and working from home but not relocating. A survey of 238 corporations reported that 44% of their employees work from home currently.
Understanding this historic migration requires a review of a variety of different factors. So, we will examine six major migration events, business losses, and work style changes which are likely to impact commercial real estate values:
Professionals Who WFH Buy Distant Homes City Properties Lose Value City Based Small Business Sales Decline 40 – 50% The Commercial Real Estate Unwind Regulators Are Concerned About Commercial Real Estate Debt Cities Will Have A Long Transformation
We will start our analysis by examining the suburban boom as professionals move to less expensive regions looking for more living space.
Professionals Who WFH Buy Distant Homes
The massive migration of professionals from cities to suburbs creates economic winners and losers. This suburban migration will permanently shape consumer and business buying patterns for many years.
Professional moves triggered by continuing work-from-home policies are pulling forward housing sales to a 14-year record high.
Sources: National Association of Realtors, Wall Street Journal – 11/11/20
Affluent professionals with incomes higher than pre-pandemic buyers were 25% of all home purchasers than just 14% of buyers in February. Wealthy buyer demand triggered a 14.8% jump in median home prices to $311,800 versus a year ago. Professional migration is strong in major cities like New York and San Francisco, where from 11 – 15% of all job holders have moved permanently.
For example, in the San Francisco Bay Area, professionals are moving to Arizona, Texas, Oregon, and Utah, where homes are 25 – 50% less expensive. Housing sales drive purchases in household furnishings, and appliances sales are up 13.4% over last year. Most buyers financed their home purchase with 20% down payments. So, buyers were planning their investment before the pandemic. They pulled forward their purchase with the opportunity to keep a well-paying job and move to a less expensive area. Sales of existing homes will begin to fall as pending home sales fell 1.1 % in October for the second consecutive month.
The pulling forward of future home sales will likely result in a sales decline by the 1st or 2nd quarter of 2021. For workers who moved, they face a possible reduction in income. As 30% of S & P 500 executives say, they will reduce employee wages for remote workers in less expensive regions. Today, the bottom 80% in income have tight budgets. So, moderate-income workers will not be entering the home market until their income recovers sufficiently to purchase a home.
City Properties Lose Value
WFH policies are creating ghost areas in dense office cities like San Francisco and New York. Bloomberg estimates 1.6M workers commute into Manhattan daily. Yet, downtown Manhattan has become a ghost town. Kastle Systems, a building security firm, provides weekly reports of key fob check-ins for 2,681 buildings in the U.S. New York City has an average occupancy rate of just 15.9%. Manhattan office space for rent is at the highest level since 2003.
Other less dense cities like Dallas have an occupancy rate of 40.3% and Los Angeles a 33.1% rate. The average occupancy rate across ten cities is 25.7% for the week of November 18th. For the nation, the occupancy rate reached a peak in the summer of 27% and fell to last month’s level of 20%. Nine of the ten cities have declining occupancy rates.
Source: Kastle Systems – 11/23/20
The Squeeze Is On
Commercial property companies are squeezed between mortgage and lease payments as companies delay payments and reduce office space. U.S. banks hold $2Tr of property loans. In 2008, banks wrote off $110B in commercial real estate losses or 25% of their total losses. 2008 was significantly smaller in scope than the demand/supply shock of the present recession. If the current WFH migration shift becomes permanent or even slowly recovers, the loss in office property values alone could reach 20 – 25% Barclays Bank estimates. Property values for hotels and retail have fallen even further by 40 – 50%.
However, with the announcements of vaccines, some property owners have obtained bridge loans hoping that commuters return by the end of next year. Yet, there still considerable risk that the WFH migration may signify a change in work location and consumer buying behavior. A permanent shift to remote work and online consumer spending will undermine segments of commercial real estate debt valued at $3.4T.
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City Based Small Business Sales Decline 40 – 50%
Core city small businesses report 40 – 60% declines in sales. Sales declines range across various small companies who depend upon commuters to buy their services or products. Restaurants, hotels, and personal services such as hair salons, barbershops, gyms, and laundries report the most significant losses. Adding to small business income strain is the requirement that many of these businesses close for shelter in place rules or drastically cut their operational capacity.
In most major cities, restaurants had to maintain 6-foot social distancing and cut capacity to 25 – 50% for indoor dining. Due to soaring virus infection rates, San Francisco has ended indoor and outdoor dining allowing only meal pick up for the foreseeable future. Each day, cities are announcing more social activity restrictions to contain the outbreak of the virus.
New York City small business revenue declined 51% from January to November 16th of this year and continues to fall. Note that across the U.S., in cities like San Francisco, small business revenue declined about 60%, and others like New Orleans by 60%, Washington D.C. 65%, Detroit 45%, and Boston 50%.
Source: Opportunity Insights – 11/16/20
PPP is Running Out
The end of the Paycheck Protection Program (PPP) on July 31st has left many small businesses with mounting debt to vendors and leaseholders. Thousands of small businesses in core cities with high rents and drastically reduced income are likely to default on commercial property owners’ leases. Small business chain franchisees run 55% of all hotels and 84% of restaurants. Both sectors employ a total of 6M workers. Ninety-six percent of franchise small businesses received PPP grants. The grants or loans helped them to continue operating until their PPP funds ran out. Franchisees pay rent to chain corporations who often own the local hotel or restaurant buildings. Owner-operators squeezed by 40 – 50% declines in revenue have been delaying rent payments to chain landlords. There is a significant risk for city location operators that an enduring loss of commuters will force them to close.
The Commercial Real Estate Unwind
Small businesses short on cash reserves and lacking the ability to go to bond markets or qualify for bridge loans are likely to default first. Their defaults will send the first cash squeeze wave through commercial property holders and their banks. In the future, thinly financed office property owners not able to handle businesses defaulting on their loan payments will begin to fold. The first indication of a soft office space market in core cities is starting to appear. San Francisco and New York office space prices are down 20 – 25% from last January. Long-term property vacancy rates will possibly snapback by 15 – 20% upon virus containment. But, cities like New York may continue to have 30 – 35% vacancy rates for years to come.
With high vacancy rates, property values drop. In the future, loans based on increased property values will go underwater and are called. It looks like déjà vu of the subprime mortgage collapse. Just like that crisis, JPM Chase and Goldman Sachs have securitized about $550B in commercial real estate debt sold to investors. One significant difference from that crisis is that most of the home market was solid, even with the sub-prime market collapsing. Plus, in 2008, the economy was expanding, and unemployment was at 5%. Today, the economy is in a deep recession. The unemployment rate is 9 – 13%, and 20.4M workers are on continuing unemployment assistance. Are regulators concerned about this immense risk to commercial real estate values and debt? Yes.
Regulators Are Concerned About Commercial Real Estate Debt
The Federal Deposit Insurance Corporation (FDIC) has identified 356 banks concentrated in the commercial real estate market. Most of these banks are community banks rated as concentrated in commercial real estate based on their loan to capital base and growth of loans. Some core community banks are already under regulatory guidance.
With $60B in assets, Manhattan-based Signature Bank has 60% of its loan portfolio in commercial real estate but has raised loan loss provisions by $53M in the last month. Valley National Bank, Wayne, NJ, has $42B in assets with an 81% increase over three years in its New York metro commercial real estate portfolio. These banks are leveraging low-interest rates to make bets on commercial real estate.
Eric Rosengren, President of the Federal Reserve Bank of Boston, has voiced concerns about banks bingeing on low-interest borrowing. In recent presentations, he has warned about commercial property values being artificially “inflated by more than a decade of ultra-easy money.” Fed Chair Jerome Powell testified to a House committee last September that smaller banks have more exposure to the commercial real estate market and have less financial resources to deal with the stress to balance sheets. Powell implied that the Fed would rescue community banks if necessary.
When Will Workers Return?
Of concern for investors is how long it will take to see any weakness in commercial real estate markets. In the last recession, commercial real estate losses did not peak until three years after the 2008 recession peak. The three-year delay allowed regulators to provide liquidity to cushion the impact. With so many real estate loans outstanding in core city centers, regulators may not have as much time to mitigate the effects. Loan delinquencies have increased by five times to 10.2%. To reduce delinquencies, some loans were rolled over to bring the delinquency rate down to a still-high 8.2%. Regulators, banks, and property owners anticipate a quick return of workers to core inner cities are safe. How and when might workers return to city centers?
Cities Will Have A Long Transformation
Forecasting the number of workers who return to their offices is problematic. It is difficult to predict due to rapidly changing work lifestyles, housing, and social trends. There are indications of what the future may be if workers decide to leave core cities permanently. A recent survey of the San Francisco labor market found that 15% of all workers made long term moves.
However, some executives see synergy in employees working together face to face. There will be a push-pull between workers desiring to WFH and management. For example, JPM Chase CEO Jamie Dimon wants all employees back at their offices when it is safe to create a ‘creative combustion’ environment. Yet, other companies like Microsoft and Facebook are offering their employees the ability to WFH permanently. We expect that cities for information services companies, that up to 50% of the workers will opt for WFH.
For consulting companies, personal services, or event-oriented businesses, probably 75 – 80% of workers will return. Hard-hit businesses like hotels and restaurants are not likely to call back workers until business picks up, maybe by Q3 of 2021. A July survey by the Society of Human Resource Management of 283 corporations with 4.4M workers found executives expect 20% of their employees to WFH permanently. This about half of the current 44% working from home. Thus, if 20% of employees WFH will mean a 20% reduction in office space requirements nationwide. In the same survey, employers expected to bring back only 16% of permanently laid-off workers. Managers will look for ways to reduce office space costs by increasing the number of employees who WFH. Executives will find WFH an excellent way to increase profit margins. Thus, corporations are interested in leveraging WFH culture and are doing it with fewer employees overall.
Summary – The Commercial Real Estate Market Faces Significant Headwinds
The commercial office real estate market faces significant headwinds for at least the next several years. The lengthy transition is due to companies working out their new WFH and office cultures. Certainly, once it is safe, many workers will want to return to the office. Plus, some managers will require them to return to the office. An underlying concern is that the small business sector is on a financial cliff, barely holding on. The New Jersey Federation of Small Businesses reports that 31% of all small businesses’ were closed either temporarily or permanently in November.
If there is long-term unemployment resulting in a drop in consumer spending, then the economy may take several years to return to pre-pandemic levels. A stimulus bill will mitigate the short-term financial squeeze for businesses and leaseholders. But, the funding will not change the migration to WFH. More likely, if employees feel the economy is stabilizing, they are more likely to move and request a WFH option. A possible second wave of WFH employees looking to move will likely increase the office vacancy rate for many cities for years to come. Thus, new moves will cause a continuing increase in vacancy rates and further devaluation of properties.
Patrick Hill is the Editor of The Progressive Ensign, theprogressiveensign.com/ writes from the heart of Silicon Valley, leveraging 20 years of experience as an executive at firms like HP, Genentech, Verigy, Informatica, and Okta to provide investment and economic insights. Twitter: @PatrickHill1677, email: patrickhill@theprogressiveensign.com


investmentwatchblog--2020-12-10--Core Inflation Prints At 1.6%, Taylor Rule (Rudebusch) Flips Suggesting Fed RAISES Target Rate! (REN

Core Inflation Prints At 1.6%, Taylor Rule (Rudebusch) Flips Suggesting Fed RAISES Target Rate! (RENT CPI FALLS)

November core inflation ( CPI Ex Food and Energy YoY ) remained the same as October at 1.6 % .
@ @ @ @ @ Rudebusch specification ) now suggests , a Fed Funds Target Rate of 1.66 % ( @ @ @ @ @ rate of 0.25 % ) .
This is a flip from deeply negative rates to @ @ @ @ @ other hand , US CPI Urban Consumers Owners Equivalent Rent of Residences YoY NSA fell @ @ @ @ @ Do I increase rates ?
Or keep them at 25 basis points ?
”

by confoundedinterest17
November core inflation (CPI Ex Food and Energy YoY) remained the same as October at 1.6%.
The Taylor Rule Model (Rudebusch specification) now suggests, a Fed Funds Target Rate of 1.66% (as opposed to the current rate of 0.25%). This is a flip from deeply negative rates to positive territory.
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On the other hand, US CPI Urban Consumers Owners Equivalent Rent of Residences YoY NSA fell to 2.3%.
“Do I increase rates? Or keep them at 25 basis points?”


investmentwatchblog--2020-12-10--Chinese Genetically Modified Super Soldiers – CHINA INVASION THREAT!! BEIJING CCP

People speculate on extent of China ’ s super soldier projects , and emphasize why this is such a LOOMING @ @ @ @ @ the world as China plans for WORLD DOMINATION .

Quick summary..
People speculate on extent of China’s super soldier projects, and emphasize why this is such a LOOMING THREAT for the rest of the world as China plans for WORLD DOMINATION.
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AC


investmentwatchblog--2020-12-10--TIME Magazine announces four finalists for the 2020 Person of the Year

' V Day ' in the UK as grandmother , 90 , becomes first person in the WORLD to get @ @ @ @

Who will be TIME's 2020 Person of the Year? See the shortlist t.co/QtFINK0Inu
— TODAY (@TODAYshow) December 10, 2020


investmentwatchblog--2020-12-10--Six States Have Filed a MOTION TO INTERVENE Making Them CO-PLAINTIFFS in the Texas USSC Case

The Texas Lawsuit Is On The Docket – The Supreme Court Will Determine The Fate Of The 2020 Election

Yeah, they saw the server data.
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Simple explanation:
They saw the server data. t.co/aj8f5CLmca — 🇺🇸❤✌🏼TruthSeeker✌🏼❤🇺🇸 (@SpecialKs9) December 10, 2020
h/t Whatever It Takes


investmentwatchblog--2020-12-10--Health Canada says they are well positioned to vaccinate entire population in 2021!

PENDING REGULATORY AUTHORIZATION CANADA IS WELL-POSITIONED TO IMMUNIZE 100 % OF THE POPULATION IN 2021 , SAYS HEALTH CANADA ADVERSE @ @ @ @ @ TO BE EXPECTED , AND WILL NOT NECESSARILY CHANGE THE RISK/BENEFIT PROFILE OF THE VACCINE @ @ @ @ @

PENDING REGULATORY AUTHORIZATION CANADA IS WELL-POSITIONED TO IMMUNIZE 100% OF THE POPULATION IN 2021, SAYS HEALTH CANADA
ADVERSE EVENTS FROM COVID-19 VACCINES ARE TO BE EXPECTED, AND WILL NOT NECESSARILY CHANGE THE RISK/BENEFIT PROFILE OF THE VACCINE IN QUESTION – HEALTH CANADA
— First Squawk (@FirstSquawk) December 9, 2020