the lead indicator

What Do Goldilocks And The Economy Have In Common?

chandan silo for web

The inflation hawks were sent packing again last month when reports showed prices falling. The latest Economist poll of forecasters pegs inflation below 2 percent until at least 2015. That’s not far removed from the local view. As part of its expectation-setting exercise, the Fed sees its preferred measure—the personal consumption expenditures price index—holding below 2 percent now and over the long run. Read More

the lead indicator

Tax It All or Don’t Tax at All

chandan silo for web

The Senate has taken up the Marketplace Fairness Act, which would upend the overlong tax holiday for Internet commerce.

It’s not that online purchases have been tax-free. Unless you are in one of the few jurisdictions with no sales tax, your opportunity for a good-citizenship declaration of online purchases comes every April 15. Predictably, only a tiny share of American taxpayers seizes the chance. Read More

the lead indicator

A Bridge Too Far: It Isn’t a Lack of Funding Keeping Infrastructure From Being Built

chandan silo for web

Ask someone if there’s a problem with American infrastructure and there’s a good chance he’ll point at the nearest bridge.

It needn’t be a grand structure. As a generation of Wharton alumni will confirm, crossing the Schuylkill by way of the modest South Street overpass was a risky proposition until just a few years ago. In its dying days, the bridge was closed to heavy vehicles but open to daredevil and presumably light-footed Penn students. The long-deferred move to replace the 1923 bascule bridge began in 2008, which happened to coincide with city engineers’ declaration it would not survive another winter. Read More

the lead indicator

Is Office Space a Thing of the Past?

chandan silo for web

Is the office obsolete?

The argument has been going on since before the Internet, when its antecedents were limited to connecting university research labs to the Department of Defense. The adoption of new technologies may afford smaller server rooms and fewer filing cabinets, but the location of people dominates everything else when it comes to office space utilization. At least on the margins, the data show we are using less office space for every employee. We cannot assume that reflects the impact of technology, but it’s not an unreasonable hypothesis. Read More

the lead indicator

Price Stability, the Real Estate Hedge and the Federal Debt

chandan silo for web

The Federal Reserve dropped a lead foot on monetary policy in late 2008 and intends to keep it there until you or someone you know finds a job.

If you’re reading The Commercial Observer, odds are you’re gainfully employed. The Fed’s attention is elsewhere, fixed on the more than 12 million Americans still lollygagging in the labor statistics. Price stability is the other half of the Fed’s mandate, but for now, employment is the larger challenge. Read More

the lead indicator

Greetings From Athens

Sam Chandan.

I am writing this week’s column from above the Atlantic, en route to Athens for a firsthand update on the euro zone’s recalcitrant mortal threat. By the skin of its teeth, the Greek Parliament approved new and deeply divisive austerity measures last week. There have been howls of protest in the streets and from the left-leaning opposition. But if the vote had gone against Prime Minister Antonis Samaras, the entire program of support from the European Central Bank and the International Monetary Fund would have imploded, driving Greece from the common currency and threatening the cohesion of the monetary union.

Efforts to keep the euro zone intact may be well-intentioned, but the halfhearted approach of partial and temporary measures that has dominated other alternatives has only succeeded in magnifying the downside costs and delaying recovery. Europe has done itself a disservice in not acting decisively. With a lesson for the United States, that paralysis is proving a greater threat to long-term prosperity than the sovereign debt crisis itself. Read More

the lead indicator

Wreckonomics: Hurricane Sandy and Real Estate Risk Management

Sam Chandan.

For most New Yorkers, life is resuming its normal routine following last week’s hurricane. With power largely restored and subways again crossing the East River, the most immediate obstacles to the city’s proper functioning have been removed. In Staten Island and across a huge swath of New Jersey, things have not been so easy.

Rebuilding will continue long after the hurricane has receded from public memory, even longer if partisanship succeeds in debasing FEMA.

For all its human costs, the economics of a hurricane are uncomplicated. During the event and in its immediate aftermath, the stock of wealth is reduced and productive activity comes to a standstill. As activity resumes, resources are quickly deployed to return wealth to its initial level. Recovery spending rises in proportion to the destructiveness of the initial event. The local purse is rarely adequate to the task. An external agent socializes the costs. Read More

the lead indicator

Risks to Global Economy Rise

chandan silo for web

With the presidential election front and center, developments on the global stage have taken a backseat in much of the press and in the public consciousness. While our attention is focused on the domestic issue of the moment, challenges in Europe, Asia and the Middle East remain. Whether as a result of crushing debt burdens or the uncertain direction of regime change, conditions in many parts of the world are inhospitable to business investment, at least for the present. That carries implications for the U.S. economy and real estate capital markets.

In its most recent World Economic Outlook report, released earlier this month, the International Monetary Fund stressed that threats to global growth remain pervasive. From the vantage point of the IMF leadership, the downside risks to real economic activity seem greater now than in April or last September. The major threats are the European debt crisis and the unresolved fiscal cliff in the United States. Read More

the lead indicator

The Real Talk About Data Manipulation

chandan silo for web

Last Friday’s jobs update showed the national unemployment rate slipped to 7.8 percent in September, the lowest level since the end of 2008. That result prompted former General Electric CEO Jack Welch to posit the Bureau of Labor Statistics numbers – the penultimate release in advance of the November election – had been doctored in the president’s favor.

Erstwhile responsible Senator John McCain gave indirect support to Mr. Welch’s musings saying, as part of a CNBC discussion of WARN Act violations, that he “would not put anything past this administration.” Congressman Allen West added, “Chicago style politics is at work here.” News of the data conspiracy has spread quickly across the Twitterverse. In the age of information, fact, fiction and baseless speculation are each accorded the same courtesy.

As it turns out, attempts to manipulate the jobs data for political advantage have at least one historic precedent. Under President Nixon, the White House compiled a list of Jews working at the Bureau of Labor Statistics. Nixon believed this group might be adjusting data in an effort to undermine his position. Read More

the lead indicator

Apartment Financing Costs Will Rise

chandan silo for web

The cost of financing apartment acquisitions and refinancing maturing apartment debt fell to its lowest levels on record in the second quarter.

Nationally, long-term fixed-rate mortgages carried an average interest rate of just 4 percent, down almost 100 basis points from a year earlier. Underwritten loan-to-value ratios were relatively unchanged, but lower debt yields captured lenders’ readiness to push further against every dollar of in-place cash flow. Read More

Lead Indicator

What Does Romney’s Veep Selection Mean for the Country? Everything.

Sam Chandan.

Economists rejoice.

In selecting Representative Paul Ryan as his running mate, Gov. Mitt Romney has framed the 2012 election squarely in terms of jobs, the economy and the need for budget reform. He has also sharpened the contrast between our choices come November. If elected officials were ideologues as bold as their candidate personas, a Ryan vice presidency would enact a more radical revision of American government than we have yet seen. It is a less intrusive government, at least in terms of dollars and economic distortions, and one that makes divisive distinctions between perceived dependence and the virtues of self-reliance. Read More

the lead indicator

Even as UK Hosts Olympics, Favorable Rhetoric from Across Pond Not Enough

Sam Chandan.

At least for a moment, investors seemed oblivious to the economy’s latest flirtation with misfortune.

Rising to their highest levels since May, equities spiked last week in spite of discomfiting readings on corporate earnings and economic growth.

The rebound in stock markets belies that, as recently as last Wednesday, Treasury yields were exploring impossible lows on speculation of renewed Fed intervention. Read More

Lead Indicator

Uncle Sam I Am: America’s Favorite Allegory Flexes Its Muscles in the Latest Issue of The Economist, But is Economic Prosperity Really So Close?

Blitt - Chandan

The cover of last Friday’s The Economist bears an image of Uncle Sam.

That is not unusual in itself, since he is one of the magazine’s most consistent allegories. In his most current incarnation, however, he departs significantly from Uncle Sam Wilson of Troy and from the Uncle Sam imagined by J.M. Flagg for his 1917 war recruitment poster. In keeping with a more contemporary sartorial standard, the updated version has lost his familiar coat. He is now shirtless and buffer than any economist you are likely to encounter. As wide as his guns, the title above him reads “comeback kid,” implying a rebounding recovery.

Is the Economy on the Rebound? Or is it Reinvention? Read More