Lead Story…. As the cost of living in closed access coastal cities continues to rise, we’re seeing people go overboard in an attempt to find a way to live in a desirable city at an affordable cost. First, it was micro apartment units, next came the Google employees living in the back of a truck on the Google campus in Mountain View. Now a company called PodShare is offering something called Pod-Based Community living which is basically a hostel made up of small living pods that can be rented by the day, week or month at a relatively low rate and convert from sleeping space at night to shared work space during the day. It sounds horrible. Before you laugh, there are already three of these things up and running in Los Angeles as I write this and they are planning approximately 50 more. This sounds about appealing as living in an MRI machine. Then again, I guess there aren’t that many options available for entry level or freelance workers who want to live in expensive cities.
Minimum Wage Rage: California recently passed a state-wide minimum wage bill that mandates that the minimum wage rises to $15/hour over a period of time. This might not be a big deal to cities with vibrant economies like San Francisco but even some liberal economists are concerned about the impact on poorer inland cities like Bakersfield and Fresno. See Also: Low and moderate income workers are in denial about the risk of robots taking over their jobs and it’s going to happen sooner than many believe.
Miss-allocation: Chamath Palihapitiya is one of Silicon Valley’s great success stories. The former Sri Lankan refugee was a key early employee at Facebook and went on to become one the Valley’s most successful venture capitalists. He did an interview recently with Vanity Fair and basically summed up everything wrong about Silicon Valley (and frankly the rest of the economy) in one passage:
“I think we’re in a phase where we’re realizing that the people who have been allocating capital thus far have done a horrendous job. Most people’s inherent reaction is to make sure they never lose their job, and so they become risk-averse. I think what we’ve had is a handful of investors who have extreme vision who make great investments in things that are amazing businesses: Facebook, Google, Uber. And then everybody else reacts to that success by trying to do the thing that most approximates the thing that’s working. As a result, most of those businesses are fundamentally not good, they’re poorly run, and they never should have been invested in in the first place. But the capital came in because the person who had control of the capital was able to justify it intellectually to themselves versus something else that could have become the next Facebook or Google.”
The rest of the interview isn’t too long and is very much worth the read since it’s relevant to pretty much every industry.
Virtuous Cycle? Demand from Millennials who are waiting longer than ever to get married and have kids has driven a huge apartment boom. Can it last as a large portion of the much-analyzed generation ages into it’s mid-30s?
Storm Clouds: Most high priced markets are enduring a painful housing shortage. New York and Miami are not. Both cities are showing signs of a glut in the luxury condo space with a deluge of new, expensive units hitting the market just as foreign buyers are pulling their wallets back. Developers in both cities are reporting much slower sales and offering large incentives. The problem, especially in NY is that the starting prices of these units are in the millions and will never be affordable but a glut at the high end could push prices down elsewhere….
When NIMBY’s Attack: The City of Lafayette has found itself at the middle of the Bay Area’s battle over housing. Last year a developer proposed building a 315 unit apartment project on a 22 unit parcel zoned for high density housing. Despite the conforming zoning, the city shot down the request when NIMBY’s showed up in droves to oppose the project. The developer returned with a proposal for 44 single family homes with accompanying amenities that was subsequently approved by the council as a compromise. However, nothing has been built so far. An affordable housing group is suing the city for not approving the apartment project, saying that the city broke state law by not approving the project even though it conformed to the existing zoning. At the same time, a NIMBY group is suing the city saying that nothing should be built on the site at all due to excessive traffic, environmental impacts and lost open space. And then we wonder why nothing is affordable near the coast in California…… (h/t Steve Reilly)
Downward Spiral: Despite taking desperate measures, Japan hasn’t been able to pull out of it’s decades-long economic tailspin and negative interest rates are giving it’s central bank major headaches. The country is also facing a highly unusual problem: an elderly crime wave. Unable to make ends meet, Japanese pensioners are turning to crime and they aren’t doing it to survive off of stolen goods. They are however committing crimes so that they can go to jail where at least you get shelter and three meals a day. Seriously. Needless to say, this is incredibly sad.
Hot Mess: It’s virtually impossible for the Lakers to become a bigger train wreck than they already are. Players taping and releasing private conversations isn’t going to help.
Bad Move: Nike could have kept NBA mega star Steph Curry on it’s payroll for a measly $4MM per year. They passed…and couldn’t even pronounce his name correctly in their pitch meeting. He’s now the league MVP, the most marketable player in the league and worth as much as $14 billion in value to rival Under Armour for putting their footwear line on the map.
Chart of the Day
Expensive Mistake: A North Carolina man was recently pulled over for a traffic violation and subsequently arrested and put in custody when the cops ran his license. His crime? Not returning a VHS copy of Freddie Got Fingered that he rented in 2001 from a video store that has long since gone out of business. Spending money to rent a bad Tom Green movie is a crime. However, not returning a now-worthless VHS to a long-out-of-business story shouldn’t be.
Jacked: Meet the 78-year old gym-rat grandma who can dead-lift more than you can.
Court Room Etiquette: A freak who dresses as Spider Man in Times Square was recently arrested for getting in a fight with tourists who declined to tip him. He showed up in court in his full Spider Man costume. The judge was not amused.
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