Financial Planning’s Darkest Hour

October 17th, 2014

When politicians disengage from fiscal responsibility, it’s easier for others to do so, too.

Written by: Don Phillips, appeared in Morningstar Advisor

  

Financial planning took center stage in the U.S. political debate this summer when vice president Joe Biden bizarrely boasted that he had no savings account and owned not a single stock nor bond. His comments were in response to Hillary Clinton’s odd attempt to bond with middle-class Americans by declaring that she and Bill were “dead broke” when they left the White House. Clinton, of course, neglected the reasons for her family’s financial distress, namely the huge legal costs incurred defending themselves against charges of dubious ethical behavior. Rather than feel shame that their elite position and legal wiliness sheltered them from the consequences of their actions—Clinton pays that issue of inequality no mind—she instead seems guilt ridden over the sizable nest egg she and Bill have built through hustle and hard work in subsequent years. So, there you have in a nutshell the current view of financial planning in American political discourse. Of two leading candidates for the next presidential election, one is embarrassed by her success, the other proud of his failure.

Biden’s comments will surely distress financial planners. Here is a man who has reaped a well-above-average salary over more than three decades in the Senate and six years in the White House, yet he has no meaningful savings, despite likely having significant subsidies for meals, entertainment, travel, and even housing. Most alarmingly, he seems to view his lack of financial discipline as a political asset, something that makes him more electable, more like the common man. But to anyone grounded in financial planning, he simply looks like someone who’s made foolish and irresponsible choices. Like Rip Van Winkle sleeping through the American Revolution, Biden has slumbered through a 17-fold rise in the stock market and the greatest bond bull market in history! His financial ineptitude perhaps sheds light on our political leaders’ inability to shave our Federal debt. As Ben Franklin said, “It is hard for an empty sack to stand upright.”

Biden’s fiscal mismanagement is irresponsible to an almost buffoonish extent, but the damage his example does cannot be laughed off. Clinton’s comments are similarly harmful, even though her actions are more dignified. Both leaders perpetuate the insidious notion that saving and investing are activities available only to the fabled 1%. They bolster the impression that the average person need not be concerned with such matters or should be embarrassed for having success in so doing. That may be a sentiment that wins elections, as it’s comforting to be told you don’t have to do the hard work of saving for the future, but it runs counter to much of what makes America great. It’s deeply troubling that our savviest political leaders see more advantage in exploiting financial ignorance than in correcting it.

John Dos Passos famously said in his kaleidoscopic trilogy, U.S.A., “all right, we are two Americas.” He was referring to matters of wealth, as the 99% movement has more recently. But wealth is mercurial. It falls on the pop star as readily as the businessman, the tech entrepreneur as the star athlete, the lawyer, or the lottery winner. It is also easily squandered. Much more enduring, and perhaps more divisive, are people’s attitudes toward money. For generations of Americans who were reared on the lessons of Franklin’s frugality, Emerson’s self-reliance, and Thoreau’s independence, Biden’s boasting of his utter dependence on the state to care for his future needs is incomprehensible, especially in light of the myriad advantages he’s had. Biden seems forged from a wholly different set of principles than those on which our country was founded and many of us were reared. I think this division is what inspires critics of the Obama administration when they awkwardly toss out charges of socialism. It’s as if we’ve split into two sects, one championing Franklin’s self-made man, the other seeking solace in Biden’s state-dependent man.

For U.S. planners, this deterioration of fiscal responsibility, as exhibited by two of our most prominent politicians, likely means more tough times ahead when it comes to curbing client attitudes and behavior. When our leaders disparage or disengage from fiscal responsibility, they make it that much more tempting for others to do so, too. Rather than embrace the financial planning movement’s efforts to strengthen the middle class by promoting thrift and investment, today’s leaders are more apt to signal that the average American need not concern themselves with saving or investing. That may comfort voters, but it lessens our national resolve and undermines the spirit on which our country was founded. More immediately, it makes the struggle against financial apathy and ignorance that planners continue to wage all the more difficult.

Jim Rogers Interview on the Fed and Global Economics

October 17th, 2014

Cover_Rogers_1-resize-300x236

Jim Rogers has made money as an investor over several decades by learning about and understanding global long-term fundamental drivers. He has been an outspoken critic of our current Federal Reserve Board policy and of government deficit spending. With the current bull market pushing six years and the historic open ended quantitative easing policy nearly finished, we thought it would be a good time to check in with Rogers, who now lives in Singapore, regarding the bull equity market, commodities and the long-term effect of this extraordinary period of central bank activity. He shares his thoughts on the global economy and offers some surprising views on potential economic and political changes.

Futures Magazine: The current bull market, which some people view as a creation of central bank policy, has been going on for more than six years without a serious correction. Is one due?

Jim Rogers: [There is] a worldwide ocean of artificial liquidity; the ocean is getting bigger all of the time. It’s the first time in recorded history that all the major central banks have been printing money. The Japanese said they would print unlimited amounts of money, Europeans said we will do whatever it takes, the English say ‘“let us in too,” the Americans—you know what they are doing. [The Fed] says it is cutting back on its purchases but in the meantime the money printing continues. The people who are getting this money are having a wonderful time; and their friends are having a wonderful time, unfortunately it is artificial and it has got to end someday. I don’t know when “some-day” is, I’m terrible at market timing in the best of times [let alone] when [we are seeing something] that never happened in world history. When it ends it is going to be a nightmare for everyone concerned except the people that get it right. Most of us will not get it right. We have had economic setbacks in America every four to six years; we are going to have them again. The one in 2008 was worse than the one in 2002 because the debt was so much higher. The debt has gone up a staggering amount since 2008. The next time it is going to be worse. I hope we all survive it. If we somehow survive the next one, then for the one after that: I doubt if anyone could survive because the debt will be so high.

To read the full interview click here!

Article written by: Daniel P. Collins for Futures Magazine (October 2014 Edition)

Economic Stress – Harsh Truths and Keys to Empowerment

October 17th, 2014

Economic Stress

Economic Stress – Harsh Truths and Keys to Empowerment encourages the reader to examine these [financial] issues in a way that could help to promote a different outlook and also enhance a person’s or family’s quality of living.

Joining me this week on Your Financial Editor is Dr. Robert M. Brown III the author of Economic Stress- You can listen live from anywhere Saturday morning at 8am on AM 930 WFMD by logging on to www.wfmd.com and clicking the “listen live” button! If you can’t tune into the show, there will be a podcast available the week following the show here.

This book that captures the personal stories of people who are facing challenges meeting their financial obligations because of job loss, not enough work, job instability or low wages and the impact this has on their well-being. Using their own words, stories of economic stress are shared in the first four chapters. These include some of the experiences of a civil engineer who wakes up swinging because of the economic stress that he is experiencing, a middle class family that lives paycheck to paycheck, a single mom who is trying to cope with the prospect of being unemployed for the first time in her career, and a highly educated professional who has not been able to find work for more than three years. The remainder of the book identifies strategies that could help a person or a family address economic stress more effectively by exploring issues such as: (1) managing bill collector demands for the mortgage, rent, car note, utilities and credit card payments by being proactive rather than reactive; (2) seeking social support and asking for help; (3) understanding how the job applicant process can work; (4) building relationships rather than networking; (5) knowing how to attract mentors and sponsors to increase the likelihood of finding employment; (6) changing your mindset to make your life better; and (7) entrepreneurship. A major question that is asked in this book is whether or not it may be time to redefine what the American Dream means in the 21st century. Is it home ownership with big salaries, and an abundance of disposable income and tangible items? Is it having a more frugal lifestyle that embraces health, greater peace of mind and autonomy? Or, is it being a part of a loving, strong, supportive family that has the capacity to endure and thrive?

About the Author:

dr-robert-m-brown-iii

Robert M. Brown III, Ph.D. is a medical sociologist whose research has become increasingly more focused on the reciprocal relationship between economic stress and health, particularly in the wake of the federal government shutdown during October 2013. He also provides expertise to state, federal and private agencies in areas which include family and community violence reduction and prevention, strengthening families, job preparedness for the 21st century workforce and health promotion. He believes that health should be viewed holistically, as a state of mental, emotional, spiritual, physical and economic well-being. Dr. Brown, a graduate of Howard University, has been a featured guest on radio and television programs around the country as well as a sought after speaker on these topics. As an educator and adjunct professor at Howard University, Dr. Brown is an advocate for students’ success in the classroom and beyond. He encourages students’ commitment to academic excellence and life-long learning. He also believes that higher education is an important tool for success in the 21st century which should be used in tandem with other skill sets to facilitate superior academic, work and life achievements.

Dr. Ivan Oransky- What you need to know about Ebola

October 10th, 2014

Tomorrow on Your Financial Editor, I will be sitting down with Dr. Ivan Oransky discussing Ebola in the United States, the flu, and Enterovirus. He will go over safety precautions people can take to stay healthy this season.

ivan-oransky

Ivan Oransky is the vice president and global editorial director of MedPage Today. He teaches medical journalism at New York University’s Science, Health, and Environmental Reporting Program, and is the vice president of the Association of Health Care Journalists.

In the past, he has been executive editor of Reuters Health, managing editor, online, of Scientific American, deputy editor of The Scientist, and editor-in-chief of the now-defunct Praxis Post. For three years,  he taught in the health and medicine track at the City University of New York’s Graduate School of Journalism.

He earned his bachelor’s at Harvard, where he was executive editor of The Harvard Crimson, and achieved his M.D. at the New York University of School of Medicine, where he held an appointment as clinical assistant professor of medicine.

 

You can listen live from anywhere Saturday morning at 8am on AM 930 WFMD by logging on to www.wfmd.com and clicking the “listen live” button! If you can’t tune into the show, there will be a podcast available the week following the show here.

Prosperity in the Age of Decline

October 3rd, 2014

A guide for protecting your wealth in an age of turbulent business cycles

prosperity in the age of Decline

In Prosperity in the Age of Decline, Brian and Alan Beaulieu—the CEO and President of the Institute for Trend Research (ITR)—offer an informed, meticulously-researched look at the future and the coming Great Depression. Drawing on ITR’s 94.7% forecast accuracy rate, the book outlines specific, actionable strategies for capitalizing on cyclical opportunities and dodging economic danger. In this important resource, the authors reveal what it will take for individual investors and business leaders to prosper as the economy heats up prior to the predicted downturn, preserve wealth in the upcoming Great Depression, and profit on the way out of the depression. The imbalances and maladjustments have a while to play out and the authors pinpoint the investment opportunities to be had in the countdown period.

The Beaulieu’s examine the major economic trends at play, such as low interest rates, burgeoning government debt, and an aging population. They discuss which trends will last and what investors should do with this knowledge in order to thrive. The book also reviews the group of leading economic indicators that most consistently achieve reliable results for predicting where the economy is headed. Designed as a useful tool for investors, the book includes a working list of key trends, describes the upside potential of each trend, and explains the potential threat stemming from a particular trend. Understanding how to capitalize on these trends and knowing how to avoid the common pitfalls are the keys to creating a solid economic future for individual investors and business leaders.

  • Contains the strategies for capitalizing on cyclical opportunities and avoiding economic dangers
  • Offers an examination of major economic trends
  • Includes information on the leading economic indicators that most reliably achieve results
  • Shows how to preserve wealth and avoid the most common investing pitfalls

This comprehensive resource offers guidelines for averting cyclical downturns and building on rising industry trends.

Alan-Beaulieu

Alan Beaulieu will be joining me this Saturday on Your Financial Editor!  You can listen live from anywhere Saturday morning 10/4 @ 8am on AM 930 WFMD by logging onto www.wfmd.com and clicking the listen live button! Can’t make it? Don’t worry, our shows are recorded and you can listen to them here the week following the interview.

About Alan Beaulieu:

One of the country’s most informed economists, Alan Beaulieu is a principal of the ITR Economics where he serves as President. Since 1990, he has been consulting with companies throughout the US, Europe, and Asia on how to forecast, plan, and increase their profits based on business cycle trend analysis. Alan is also the Senior Economic Advisor to NAW, Contributing Editor for Industry Week, and the Chief Economist for HARDI.

Alan is also co-author, along with his brother Brian, of the book MAKE YOUR MOVE,published in 2010. Alan has written numerous articles on economic analysis. He makes up to 150 appearances each year, and his keynotes and seminars have helped thousands of business owners and executives capitalize on emerging trends. Prior to joining ITR Economics, Alan was a principal in a steel fabrication company and also in a software development company.

 

How Safe is Your “Safe Money”?

October 3rd, 2014

With the equity markets setting record highs, many security conscious retirees and aspiring retirees are wisely repositioning a portion of their portfolios into “safer” types of investments in order to lock in some of their profits. It’s no secret that it’s difficult for these conservatively minded investors to find places to protect their principal while earning interest above money market funds. The choices are slim (there are only 3) and many may be wondering, how safe is my safe money?

Since “safe money” is only as safe as the company or entity backing their promise it’s worth examining exactly how does FDIC, insurance companies, and the Federal Government “guarantee” the safety of your money.

Read the rest of the article by clicking here.
This article was written by Rob Russell, a contributor for Forbes

Graduation Debt: How to manage Student Loans and Live your Life

September 26th, 2014

“As of August 2014 there was $1.2 Trillion dollars in college debt” –Forbes

Joining me this Saturday on Your Financial Editor is, author, journalist, and student debt expert, Ms. Renya Gobel You can listen live from anywhere Saturday morning 9/27 @ 8am on AM 930 WFMD by logging ontowww.wfmd.com and clicking the listen live button! Can’t make it? Don’t worry, our shows are recorded and you can listen to them here the week following the interview.

Renya Gobel

Reyna Gobel is the author of “Graduation Debt: How to Manage Student Loans and Live Your Life.” Renya is a journalist and author who has written for Forbes, U.S. News & World Report, and Mint.com. She’s been quoted by Money Magazine, Real Simple, and The Washington Post. Her financial advice appears on Wise Bread’s New Graduates Help Center. The book is divided into small, easily digestible subsections geared toward helping borrowers improve their overall financial pictures. Readers are encouraged to take action steps, so by the end of the book they will be on the road to financial stability.

Graduation Debt

Graduation Debt the 2nd Edition is updated with information that reflects the myriad changes in the student loan industry that affect students and their parents burdened with student loan debt, CliffsNotes Graduation Debt, Second Edition provides a step-by-step road map for effectively managing student loan debt and having a successful financial life.

Reyna Gobel has accumulated tens of thousands of dollars in student loans, recovered from student loan default, and set herself on a mission to help others who face a seemingly insurmountable student loan burden, with a powerful message about taking a step-by-step approach and not being overwhelmed by the sheer weight of student loan debt.

You can also visit her web site at graduationdebt.com!

Source: Amazon, graduationdebt.org

The Intolerance Behind Elizabeth Warren’s 11 Commandments of Progressivism

August 22nd, 2014

In a recent speech of which Politico claims absolutely energized the “Progressive” left, Elizabeth Warren laid out her so-called 11 Commandments of Progressivism.

In what follows, I will first give Warren’s “commandment,” and then explain how each so-called commandment cannot be implemented without official state violence and coercion. I emphasize that I am not going to use hyperbole or paint Warren in a false light. I’m sure she is a nice person when one meets her. My point is not that Warren is nice or nasty, but rather that she espouses a political economy that is based on political favors for some coupled with fierce intolerance toward many.

The 11 Commandments:

1. We believe that Wall Street needs stronger rules and tougher enforcement, and we’re willing to fight for it.

For all of the financial misconduct that we have seen from Wall Street, the problem isn’t a lack of regulation or a dearth of enforcement. No, the problem is that Wall Street is linked at the hip to the federal government and to the Federal Reserve System, which then uses Wall Street as a mechanism to pump cheap money into the system. At the same time, the state then protects Wall Street firms from the consequences that occur when investments in the financial bubbles the Fed creates fail.

Progressive Populists like Warren claim to abhor the tax-funded bailouts, but they don’t object to the inflationary actions of the Fed, nor do they call for a halt to the symbiotic relationship between Wall Street and K Street. Yes, they might complain about the relationship, but at no time has Warren or any of her ilk ever called for a severing of the ties between Washington and Wall Street.

What Warren actually is saying is this: We want the state to have an even greater role in directing investments and determining the outcomes, and when the outcomes invariably fail — as we can expect central planning to do — then we demand ever more of the same. The results may be economically disastrous, but they provide marvelous political theater.

Warren never will endorse free markets on Wall Street — and neither will Wall Street, which I believe to be instructive. Nothing would provide better discipline for the markets than free markets, but Warren is not interested in market discipline; she is interested in the markets being forced to provide outcomes that violate economic laws, and then demanding even more government coercion when disasters inevitably occur.

2. We believe in science, and that means that we have a responsibility to protect this Earth.

Warren obviously is referring to the fact that not all scientists believe we are in the middle of catastrophic global warming — and that makes her mad. In fact, it makes Warren so angry that she wants the state to intimidate scientists that don’t go along with Washington’s pre-determined “scientific” outcomes.

One does not “believe in” or “not believe in” science. Science is not — or should not be — a deity. Science is about using certain consistent methods to ascertain and test various theories about the natural world. It also is about determining probabilities for certain, repeatable events and it should never be hijacked by politicians for their own uses.

If Warren truly did “believe” in science, then she would have no objection to scientists like Roy Spencer and Judith Curry explaining in public forums — without harassment — why they believe the current fears that Warren promotes about “climate change” are overblown. You see, in real science, the “discussion” never is over. Skepticism is the very heart of the scientific method, something that the “discussion-is-over” people like Warren refuse to hear.

What Warren means is that governments should fund scientific research, and that the research should reflect what politicians like Warren want it to reflect. America’s current obesity crisis, for example, is linked directly to government bullying of scientists almost forty years ago, forcing them to accept the government’s “new” nutrition standards, including the government’s “war on fat,” which has been disastrous.

3. We believe that the Internet shouldn’t be rigged to benefit big corporations, and that means real net neutrality.

I am no expert on “net neutrality,” but I don’t think that Warren is much interested in protecting the interests and rights of ordinary individuals who use the Internet, as she remains strangely silent on illegal spying done by the CIA and NSA which does absolutely nothing to protect ordinary citizens.

4. We believe that no one should work full-time and still live in poverty, and that means raising the minimum wage.

Translation: If you are willing to work for pay that is below what the government demands you be given, then you are breaking the law. And what about those people whose productivity does not match what Warren believes the minimum wage should be? They are out of luck.

What Warren does not say is that the original purpose for imposing the minimum wage was never about getting people out of poverty. Instead, Progressives wanted to ensure that certain groups of people, blacks and Eastern Europeans living in the USA, would be priced out of the labor market. Given the unemployment rate for black teenagers in this country is at an all-time-high, one just might think that the Progressive strategy has worked very well.

It is the business owners that Warren so despises who have to foot the bill of increased labor costs, and if they cannot, then the business closes, but Warren would of course not lose a dime. Lest one thinks she has any respect for entrepreneurs and people who have invested, worked, and risked their own finances in order to start and maintain businesses, Warren has this to say, according to Progressive columnist E.J. Dionne:

“There is nobody in this country who got rich on his own,” she said. “Nobody. You built a factory out there? Good for you. But I want to be clear: You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for.” It was all part of “the underlying social contract,” she said, a phrase politicians don’t typically use.

Entrepreneurs, in Warren-speak, are social and economic parasites that should get no credit at all for anything. They just take advantage of government services and business success comes almost automatically and the entrepreneurs then extract wealth from the community via profits.

 

5. We believe that fast-food workers deserve a livable wage, and that means that when they take to the picket line, we are proud to fight alongside them.

When I was fifteen years old, I worked at a tourist attraction near Chattanooga called Rock City. No one — including the politicians — believed that I should have been making enough to live on my own. Likewise, the vast majority of fast food workers are not people trying to live independently; they are earning money to help pay for their expenses, save for college, make car payments, and the like.

First, Warren does not even understand what we mean by jobs and wages. A “job” is the application of labor to the creation of either a producer’s good or a consumer’s good. A wage is the payment given to the owner of the labor services for that particular service. It is nothing more than that.

Second, by insisting wrongly that employment is essentially a welfare scheme, Warren disconnects labor from production. To use a Marxian term, she endorses alienation as a labor doctrine in which the worker is alienated from any realities regarding his or her job. According to Warren, the job is nothing more than an income stream to the worker, with the stream having no connection at all with the value of what the worker produces.

If we were to take the reality — based upon laws of economics — of Warren’s statement, we get this: “If you are willing to work for less than what the state declares to be a ‘living wage,’ you will not be permitted to work at all, and should you seek employment without permission from the state, we will treat you like a criminal.” Unfortunately, in Warren’s new order, there would be lots of labor criminals, people working off-the-books and ultimately marginalized people turning toward the fringe occupations that the state declares to be illegal.

6. We believe that students are entitled to get an education without being crushed by debt.

Student loan burdens are becoming greater, but perhaps we need to ask why that is so instead of telling students that someone else — often someone not privileged to have had a college education — will foot their bills. If pushed hard enough, I suspect that Warren would agree with fellow leftists that college should be both tuition-free and relatively open-accessed. Furthermore, in their minds, that should be no problem. (I have spoken to enough faculty members where I teach to know that a lot of leftist Democrats believe that colleges should not charge tuition or anything else, period.)

At the very least, it would seem, Warren believes that individuals that rack up large education debts should not fully have to pay those debts, with the payments, instead, falling to the taxpayers, and even though it is quite clear that the personal “profits” from a college education tend to be privatized. Like the Wall Street firms and other crony capitalist outfits, Warren now wants an entire country in which certain politically-favored groups (and firms) find their profits privatized, but their losses socialized, and paid for by everyone else.

7. We believe that after a lifetime of work, people are entitled to retire with dignity, and that means protecting Social Security, Medicare, and pensions.

Interestingly, while shilling for increases in these things (which, as always, are covered fully by taxpayers who will be forced to supply the “dignity” to others), Warren is not willing to afford “dignity” to entrepreneurs who saved, took big risks, and took chances with their lives to provide goods and services for the benefit of consumers.

8. We believe — I can’t believe I have to say this in 2014 — we believe in equal pay for equal work.

Warren is not speaking of payment for men and women who do the same job in a market setting. In fact, there is a lot of evidence that shows that single women tend to outearn single men.

No, Warren is speaking of a term called “comparable worth,” in which government authorities determine the “equality” of jobs. Such a process is utterly politicized, so what Warren really means is that the state will determine the so-called worth of a job, and then force employers to pay accordingly.

9. We believe that equal means equal, and that’s true in marriage, it’s true in the workplace, it’s true in all of America.

If Warren meant getting the state out of the marriage business, I would support her point here. However, judging from all of her rhetoric, what she means is that everyone else should be forced to accept her definition of marriage, and anyone who does not will be fined or even arrested for holding onto dissenting views.

Warren constantly agitates for a thoroughly politicized society in which the state decides what is valuable, what is “legitimate,” and what kind of thinking should be permitted. When former Mozilla CEO Brendan Eich this year was forced out because he had contributed some money to a “man-and-woman” marriage initiative in California in 2008, it sent a clear and chilling message to workplaces everywhere in the US: the only thing that matters is politics.

It didn’t matter that Eich was a major player in helping develop the Internet and his skills will be sorely missed. No, the Elizabeth Warrens of this world care only about a person’s political views. (Maybe that is one reason Warren has expressed such hatred of successful entrepreneurs: they succeed outside of political ideology.)

10. We believe that immigration has made this country strong and vibrant, and that means reform.

Because the current immigration situation is a hot-button item that I would prefer not to touch, given I can see arguments on both sides, I only will say that Warren’s vision of unlimited immigration into an absolute welfare state would be a disaster. Warren has shown no proclivity to putting any limits on welfarism, and given her political record, I believe she sees new immigrants as a source of political support exchanged for welfare benefits.

11. And we believe that corporations are not people, that women have a right to their bodies. We will overturn Hobby Lobby and we will fight for it. We will fight for it!

The Hobby Lobby decision was quite limited, and the implications of the decision certainly did not call for the totally unhinged reaction Warren and others had. The US Supreme Court did not preventanyone from receiving birth control devices or anything else. All it said was that there were four kinds of devices or chemical compounds which abortion opponents call abortifacients that certain employers could be exempt from providing free of charge for employees.

It does not prohibit Hobby Lobby employees from purchasing those particular chemicals or devices; the decision only says that Hobby Lobby does not have to pay for them, given the religious nature of the company’s owners and the fact that it is a tightly-held corporation.

Please understand what Warren is saying: the owners of Hobby Lobby have no rights. They are not people; only those with views similar to Elizabeth Warren have rights.

Original Article can be found at: http://mises.org/daily/6841/The-Intolerance-Behind-Elizabeth-Warrens-11-Commandments-of-Progressivism

Note: The views expressed in Daily Articles on Mises.org are not necessarily those of the Mises Institute.

William Anderson is an associated scholar of the Mises Institute and teaches economics at Frostburg State University. Send him mail. See William L. Anderson’s article archives.

You can subscribe to future articles by William L. Anderson via this RSS feed.

Opinion: Foreign Investment in U.S. Real Estate Widely Under-Reported

August 22nd, 2014

Fox Business

In 2013, foreign direct investment (FDI) in U.S. commercial real estate achieved record numbers and big headlines. Chinese companies alone were reported to have invested $14 billion in the U.S. last year, more than double their total in 2012. However despite the focus on foreign investment and the splashy headlines, the media have only managed to report on the tip of the iceberg – the actual amount of foreign capital pouring into U. S. real estate is vastly underreported. Data companies such as Real Capital Analytics look primarily at deed transfers to determine transfers to foreign investors, and therefore typically miss the substantial investments by foreign investors who partner with domestic operators.

It makes sense that foreign investors are increasingly taking on domestic partners.  The benefits to foreign investors are numerous, including safe and stable returns in a strong U.S. market, the ability to leverage the expertise of a local partner who knows how to navigate extremely competitive U.S. markets such as the New York City real estate market, and often mitigates transfer taxes, property tax hikes, and higher property taxes which would likely result had the foreign investor acquired a controlling interest in a property.

For U.S. operators, partnering with a foreign investor offers greater access to capital, and the ability to move quickly in a market where timing is often the deciding factor in closing a deal. However, as more capital chases a constrained supply of commercial properties, cap rates are driven down and prices up.  Eventually local markets feel the impact, as primary markets become saturated and secondary markets attract investor interest.

An increasing number of U.S. real estate companies such as Blackstone (BX), Tishman Speyer, Brookfield (BAM) and General Growth Properties (GGP) are sending executives on frequent trips overseas – from Europe to the Middle East to Asia – in an attempt to woo potential foreign investors into becoming limited real estate partners on various projects in the United States. Significant foreign resources are being quietly invested in domestic asset and property managers as well.

While there are numerous examples of underreported foreign investment, a select few include Cindat Capital Management, which is partnering with Zeller Realty Group in the $304 million purchase of 311 South Wacker Drive in Chicago, with Cindat taking 70% of the venture. In Brooklyn, New York, Greenland Holdings of China is purchasing a 70% stake in the Atlantic Yards, a Forest City Enterprises development, for approximately $200 million. Oxford Properties, the Ontario-based investor, is partnering with the Related Companies to develop the Hudson Yards mixed-use development on Manhattan’s Far West Side. Also in Manhattan, at Time Warner Center on Columbus Circle, Abu Dhabi Investment Authority is investing alongside the Singapore Sovereign Wealth Fund and Related Companies, the lead developer of Time Warner Center, to buy Time Warner’s space for $1.3 billion, with Abu Dhabi and Singapore reported to be funding 80% of the purchase price. SOHO China purchased a 40% stake in the General Motors Building for $700 million in a deal that values the Manhattan property at approximately $3.4 billion.

Many deep-pocketed foreign investors are strategically pulling capital out of their home countries and placing funds in U.S. real estate – often in the New York City market –a strong asset class for the long term. Some financial indicators have pointed to substantial credit and real estate bubbles in the Asian markets. The unwinding of these bubbles could well lead to some sort of financial crisis in China or in regional neighbors such as Australia and Singapore — yet another reason why we are now seeing an uptick in both direct and indirect foreign investment in U.S. real estate.

Foreign investors begin with different return expectations from those of domestic real estate investment trusts, institutional owners and pension funds. Since the main goal is to invest in a perceived safe-haven market where their money will be protected, foreign investors have lower return expectations and a much longer time horizon to achieve a profit. Making a current return is sometimes a secondary goal.

Original Article can be found at: http://www.foxbusiness.com/economy-policy/2014/08/20/opinion-foreign-investment-in-us-real-estate-widely-underreported/

Jason Meister is Vice President in the Capital Markets Group at Avison Young, a firm specializing in commercial real estate services. 

The Great Escape: Health, Wealth, and the Origins of Inequality

August 22nd, 2014

The Great Escape

Only Angus Deaton’s The Great Escape has been named: One of Bloomberg/Businessweek Best Books, One of Forbes Magazine’s Best Books, Honorable Mention for PROSE Award in Economics, Association of American Publishers Shortlisted for the 2014 Spear’s Book Awards in Financial History, and  A “Best Business Book of the Year for 2013″ selected on LinkedIn.

Joining me this Saturday on Your Financial Editor is Mr. Deaton Listen from anywhere Saturday morning @ 8am on AM 930 WFMD by logging ontowww.wfmd.com and clicking the listen live button! Can’t make it? Don’t worry, our shows are recorded and you can listen to them here!

The world is a better place than it used to be. People are wealthier and healthier, and live longer lives. Yet the escapes from destitution by so many have left gaping inequalities between people and between nations. In The Great Escape, Angus Deaton–one of the foremost experts on economic development and on poverty–tells the remarkable story of how, starting 250 years ago, some parts of the world began to experience sustained progress, opening up gaps and setting the stage for today’s hugely unequal world. Deaton takes an in-depth look at the historical and ongoing patterns behind the health and wealth of nations, and he addresses what needs to be done to help those left behind.

Deaton describes vast innovations and wrenching setbacks: the successes of antibiotics, pest control, vaccinations, and clean water on the one hand, and disastrous famines and the HIV/AIDS epidemic on the other. He examines the United States, a nation that has prospered but is today experiencing slower growth and increasing inequality. He also considers how economic growth in India and China has improved the lives of more than a billion people. Deaton argues that international aid has been ineffective and even harmful. He suggests alternative efforts–including reforming incentives to drug companies and lifting trade restrictions–that will allow the developing world to bring about its own Great Escape.

Demonstrating how changes in health and living standards have transformed our lives, The Great Escape is a powerful guide to addressing the well-being of all nations.

Angus Deaton

Deaton earned his B.A., M.A., and Ph.D. at Cambridge University, in 1975 with thesis titled Models of consumer demand and their application to the United Kingdom where he was a Fellow at Fitzwilliam College and a Research Officer working with Richard Stone and Terry Barkerin the Department of Applied Economics. Deaton was a Professor of Econometrics at the University of Bristol before moving in 1983 to Princeton University, where his appointment has been suggested by John P. Lewis former Dean of WWS. He is currently the Dwight D. Eisenhower Professor of International Affairs and Professor of Economics and International Affairs at the Woodrow Wilson School and the Economics Department at Princeton.