Wednesday, August 17, 2011

No Nonsense Economics: "Volatility Returns with a Vengeance"

Economist Chris Thornberg with Beacon Economics told me he was working on a piece about the recent volatility in the stock market, and I think his latest post on No Nonsense Economics is a definite must-read. If you believe, as I do, that Chris' great talent is distilling complex economic issues into plain English -- whether during a speech or in a written essay -- I think he hits of a lot of reasons for this recent volatility right on the head.

Some excerpts:

Was the downgrade unprecedented? Absolutely. Logical? Absolutely not. A bond rating is an estimate of the chance that the borrower will not pay back their debt fully and on time. To justify a downgrade, one has to show why the probability of default has increased. Has the chance of a US default increased in recent months?

As for the amount of debt itself, despite the budget battles and ongoing gap between revenues and expenditures, overall net U.S. debt is still quite low for developed nations—somewhere on the order of 68% of current GDP once the holdings by the Social Security Administration are factored out. Given low interest rates, the current cost of servicing the nation’s existing debt is less than 10% of all expenditures. There is clearly no threat of a default in the near term, even if the debt ceiling had not been raised...

Another long terms issue is the underfunding of the major social insurance programs, particularly Social Security and Medicare/Medicaid. Are they underfunded? Absolutely. But as bad as these problems are, keep in mind that this only becomes a worry if one presumes that at some point in the future the U.S. government will forego payments on existing debt in order to fund current expenditures in these programs. But such a choice won’t be made for 10 or 15 years. Its hard to see anything that has occurred in recent months would have a reasonable impact on the assessment of such choices in the future...

The slow growth in the first quarter was largely due to an unusual pullback in spending on national defense and non-residential structures—spending that bounced back in the second quarter. July’s employment report was more positive, and since then initial claims for unemployment insurance have actually fallen. The primary driver of weak consumer spending in the second quarter has also been removed: Oil prices have fallen sharply—particularly since the stock market began to fall so rapidly. And Japanese cars are again starting to move into the market. Even the housing market—the source of bad news earlier in the year—is starting to show mild signs of life. Prices have risen a bit, as have permits for new residential construction...

While the problems in many European nations are profound, only Greece and Ireland have truly been pushed to the brink of default. In Greece’s case, it is due to years of bad government. They hid the rapid pace of debt accumulation through various nefarious accounting manipulations. The economy is stagnant and uncompetitive, driven there by massive government interference as well as one of the worst corruption problems in Europe. And there is their fundamental inability to raise revenues in a nation famed for its tax avoidance. As for Ireland, none of these factors are in place. There it is only because the government agreed to use public funds to prevent the collapse of the large Irish banks. That had become so heavily involved in the property bubbles in the US and UK.

As for Spain, Portugal, and Italy there are serious problems—but none of these nations is anywhere close to the brink of default. Spain and Portugal have relatively low levels of debt relative to their GDP. Italy has a huge amount of debt, but its economy is stronger than it looks on the surface—and it has a history of being able to handle such crises at the last moment...

Click here to read this lengthy post in its entirety.


August column for Builder & Developer now online

My column for the August 2011 issue of Builder & Developer magazine is now posted online.

For this issue, entitled "Multi-Family Goes Green,"I wanted to discuss the ways in which multi-family developments, even though they're inherently greener than single-family homes, face their own set of unique challenges when building to green standards such as LEED and CalGREEN. At the same time, there are a couple of tax incentive programs which remain vastly under-utilized.

From the column:

...Fortunately, for builders and operators of multi-family projects, higher unit densities, smaller square footages and shared common areas or services make them substantially more sustainable than their single-family counterparts -- even before any green building techniques are employed. For example, a recent study funded by the EPA found that a typical apartment uses 38% less energy than a green single-family home. For those households looking to move from a typical single-family home in a far-flung suburb to a green multi-family building adjacent to mass transit options, the energy savings could exceed 70%...


To read the entire column, click here.

To read the entire August 2011 issue in digital format, click here.

Is Your PR Strategy Up to Date?

Over the past few months – and as a result of the spokesperson role I played with Hanley Wood Market Intelligence prior to founding MetroIntelligence – our team has also been slowly expanding more into offering public relations services for our clients. To jump-start this initiative, we decided to partner with ICON Imaging PR in Los Angeles, which was founded in 1997 by news veterans Sharon and Bob Jimenez, and leverages their deep local and national connections in real estate, politics and entertainment. The blog WestLALand is one of first efforts together.

Consequently, I wanted to review some of the ways in which companies are now reaching out to the media, the community, and their customers. From the perspective of Sharon, especially, a former Emmy-winning reporter who has worked with everyone from local real estate developers and independent film producers to state senators and even a two-time Presidential candidate, she would certainly agree that the PR world of today is a far different animal than it was even ten years ago.

Certainly the PR vehicle which continues to morph and evolve the most is that of social media, centered primarily around Facebook (and perhaps Google+), Twitter, YouTube and, for professional networking, LinkedIn. According to Sharon, when she was put in charge of making Rep. Dennis Kucinich a household name back in 2003, it was by leveraging nascent social networking platforms that the campaign was able to raise $10 million online – in large part because they could publish the candidate’s entire platform for potential supporters to see.

By the 2008 election cycle, the rise of Facebook, YouTube and blogging platforms gave rise to campaign-supported operatives who would continue to win debate points long after the actual broadcast had finished. Indeed, it was largely due to the pioneering efforts of the 2004 election that a young and ambitious junior Senator from Illinois named Barack Obama was able to harness the Internet’s power to gather both funds and volunteers, thereby bypassing not only traditional means of building support, but shunting aside presumed Democratic front-runner Hillary Clinton in the process.

Today, however, although social media is becoming a clear priority among U.S. companies, the building industry remains somewhat disjointed. Whereas Lennar has clearly made strides across the social media spectrum – to the point of setting up separate Facebook, Twitter and YouTube accounts for multiple divisions – some other large builders make little or no mention of their social media efforts even on the home pages of their own Web sites. At the same time, while company blogs remain largely nonexistent, useful mobile applications directing buyers to active projects continue to proliferate.

In theory, an active online campaign would position a builder as a thought leader to foster discussions on the economic, environmental and political policies which directly impact housing. If your goal is to get buyers to agree that a new home can offer superior energy efficiency and design, why not let them come to that conclusion on their own? Instead, more often than not, these pages are used to repurpose print ads and to discuss current promotions, which can often have the opposite effect on an ad-weary public.

In addition, having an attentive point person assigned to social media on a regular basis can solve minor problems while demonstrating that the company is serious about having a two-way conversation. For example, when a new buyer of a Shea Homes model complained about signage across the street which needed to be taken down from a sold-out community, it was gone almost immediately – much to the delight of the Facebook member. One can only imagine the positive network effect that single action may have on future sales – and at a very low cost.

Some tips:

  • Use social media to position your company as a thought leader.
  • Cross-promote all of your social media efforts as much as possible.
  • Blogs can provide more flexibility than traditional social networking platforms such as Facebook, Twitter or YouTube.
  • Assign an internal or external point person to ensure that your social media efforts are updated regularly.

Thursday, August 4, 2011

Beacon Economics launches new non-blog feature

Beacon Economics, an important client and partner to MetroIntelligence, has recently launched a new feature called 'No Nonsense Economics.' Written in the inimitable stylings of Beacon founder Chris Thornberg and other analysts, they insist it is 'not a blog.' Fine, so let's call it the 'non-blog.' Whatever the nomenclature, the purpose of the new feature is to provide 'independent analysis that helps interpret the numbers and the noise of the 24-hour news cycle.'

Here's the first post about the purpose of the new feature:

No Nonsense Economics is a new feature from Beacon Economics where you can read new and regular insights from Founding Partner Christopher Thornberg, as well as from other Beacon analysts and guest authors, about what is happening in today's economy.

Not a blog,
No Nonsense Economics will be a place where our experts can deliver timely comment on major developments in the economy from important data releases to legislation and public policies to long and short-term trends.

We titled this No Nonsense Economics because that is what we intend to give you - independent analysis that helps interpret the numbers and the noise of the 24-hour news cycle. We hope our insights will help you to understand the up, down, and sideway movements of the economy... and even assist you in making better decisions...

For other posts from No Nonsense Economics, click here.

Monday, August 1, 2011

November 3, 2011: Riverside/San Bernardino Economic Forecast Conference

Save the date: Thursday, November 3rd at the Riverside Convention Center!

Join MetroIntelligence, Beacon Economics and the University of California at Riverside's School of Business Administration for the 2011 Riverside/San Bernardino Economic Forecast Conference. Come hear some of the state's most reputable forecasters deliver a new outlook for the U.S., California, and Inland Southern California economies. Full program details coming soon.

Special discount available through MetroIntelligence: Use discount code metroie to save $25 on registration.

Click here to register.

Conference attendees will receive the following:

  • 2011 Riverside-San Bernardino Economic Forecast Book - a data-packed analysis of the region's economic indicators
  • Sections on residential and commercial real estate authored by MetroIntelligence Principal Patrick Duffy
  • Quarterly updates to the forecast for one full year
  • Chance to interact with forecasters and speakers
  • Prime networking opportunity
  • Breakfast buffet
  • Hosted self-parking
Special discount available through MetroIntelligence: Use discount code metroie to save $25 on registration.

Click here to register.

San Diego Economic Forecast Conference

Save the date: Tuesday, September 20th at the Hilton San Diego Bayfront in downtown San Diego!

Join MetroIntelligence and Beacon Economics for the 4th annual San Diego Economic Forecast Conference, presented with the generous sponsorship of Silvergate Bank. Come hear some of the state's most reputable forecasters deliver a new outlook for the U.S., California, and San Diego economies. Full program details coming soon.

Get answers to the following questions:

  • What's around the corner for the U.S., California, and San Diego economies?
  • How will the slow down in the national economy affect San Diego's recovery?
  • Battles over the re-regulation of Wall Street are heightening in Washington. What sort of regulations are being proposed? How will they affect the banking and financial industry?
  • Can proposed regulations really prevent a repeat of the abuses that occurred prior to the 2008/09 recession? Or do they miss the mark completely?
  • Will regulation help or hurt businesses ability to acquire new capital? Are there dangerous unintended consequences?
Special discount available through MetroIntelligence: Use discount code metrosd to save $30 on registration.

Click here to register.


Conference attendees will receive the following:
  • 2011 San Diego Economic Forecast Book - a data-packed analysis of the region's economic indicators
  • Sections on residential and commercial real estate authored by MetroIntelligence Principal Patrick Duffy
  • Quarterly updates to the forecast for one full year
  • Chance to interact with forecasters and speakers
  • Prime networking opportunity
  • Breakfast buffet
  • Hosted self-parking
Special discount available through MetroIntelligence: Use discount code metrosd to save $30 on registration.

Click here to register.