Landmark Links November 18th – Hiding in Plain Sight

hiding

Lead Story….  There are two types of correct forecasts.  The first type is the broken clock forecast.  It consists of someone predicting the same thing over and over again, and being mostly wrong and occasionally correct.  Nobel laureate Paul Samuelson’s “The stock market has forecast nine of the last five recessions” quote comes to mind as do all of the folks that have been telling us that “interest rates have nowhere to go but up” since 2009. Taking advice from anyone who makes these types of predictions is useless at best and possibly detrimental.  The second type of prediction is data based and not subject to the author’s biases.  There are very few people who can pull this sort of clear minded analysis off.  Bill McBride of Calculated Risk comes to mind as does reigning bond king Jeff Gundlach of DoubleLine Capital.  Today I want to focus on Gundlach who has correctly predicted every presidential election result since 1972.  What made this year unique even by Gundlach’s standards is that he predicted that:

  1. Trump would win the election back in January BEFORE the presidential primaries even began.
  2. The 10-Year Treasury would yield over 2% by year end back in January when Treasuries yielded a paltry 1.35%.

Today, I want to focus on Gundlach and why he got both of these forecasts right when so many others were incorrect.  Robert Huebscher of Advisor Perspectives published a post earlier this week called How Gundlach Predicted Trump’s Victory  I’m going to post it in it’s entirety today since it contains a lot of terrific insight on Gundlach’s methodology as well as some valuable commentary about where we are headed next:

How Gundlach Predicted Trump’s Victory

Hillary Clinton was a uniquely bad candidate, he said, because of her failure to beat President Obama in 2008, followed by her problems with the email server and a “basic lack of honesty.”

Why did Trump win? Gundlach said that people felt abandoned by the economy, with the median worker having suffered low or negative wage growth since 1973. This came while the top 5% realized a 51% real increase in their purchasing power. He said that the corresponding increase for the top .01% was so large it would have “blown the scale” of his graph.

“The ownership of wealth has shifted,” Gundlach said. “But those trends are about to reverse.” Gundlach said that wealth inequality will decrease.

A big contributor to Clinton’s defeat was the release of the Obamacare data on November 1, Gundlach said, which showed a “massive” increase in premiums. He said that those responsible for scheduling that release must have expected a great piece of news, not the negative “shock” it actually delivered.

Gundlach commented on what the election result means for the markets and specifically how investors should position their bond portfolios.

The markets are confused

“The markets remain completely confused as to what will be the trend direction from the election,” he said.

As evidence of that confusion, he said he was struck by the many pundits who called for a crash and global depression following Trump’s victory; many of them, Gundlach said, now claim Trump is great for stocks.

Trump does not have a “magic wand” to offer instantaneous improvement for the economy, Gundlach said. Investors should expect a bumpy ride while Trump strives to deliver on his promises, he said.

Gundlach has been warning against a rise in interest rates. He turned negative in July, when the 10-year bond was yielding 1.35%; it is now just over 2%.

An interest rate rise will not be positive for the economy or the housing market, he said. Monthly mortgage payments are already up 15%, he said, and could go up 20-25% relative to their mid-year levels. Median rents have been “skyrocketing” and renters have had a “horrible decade,” Gundlach said; those benefits in the housing market have accrued to homeowners.

“That is not positive for the psyche of the middle class,” he said.

Nor will Trump’s victory be positive for consumer spending in the short term, according to Gundlach. Trump’s supporters are not economically in a position to spend.

Gundlach warned against overanalyzing the effects of Trump’s ascendency. Since 1988, the same institutions have been in place, he said, with politics dominated by the Bushes, Clintons and Obama. “The trends of the past 28 years cannot be relied upon,” he said.

Gundlach was emphatic about one group of stocks. He said to “avoid the FANGs in a big way” – Facebook, Amazon, Netflix and Google. “It is not a good idea to bet on ideas whose trends are correlated to things that won’t continue,” he said, especially since the market had priced a Clinton victory into the prices of those stocks. Instead, he said to overweight financials, materials and industrials “for the quarters to come.”

Silicon Valley put a lot of money behind Clinton, he said. The irony is that Trump would have lost if not for Twitter, according to Gundlach.

“The people who hate Trump the most were responsible for his winning the election,” he said.

The recession and inflation forecast

Gundlach said the probability of a recession has increased based on his indicator, which measures the unemployment rate relative to its historical moving average. But he did not say a recession is imminent.

He was more focused on the prospects for higher inflation.

Inflation measures, including hourly earnings, the core CPI and core PCE, have “bottomed out,” he said. They are all moving higher, as well as the internet-based Pricestats inflation gauge. In July, the market was predicting 1% inflation “forever,” Gundlach said; now it is saying that outcome is impossible, and inflation will likely be above 2.5% by April.

As a result, Gundlach said he has liked TIPS since September. In the Flexible fund, he said every Treasury bond was a nominal bond at mid-year; now 100% of its Treasury holdings are TIPS. Over the same time, he said, the Core fund went from having 0% to 30% of its Treasury holdings in TIPS.

Where rates are heading and will the EU will break up

Gundlach offered a number of forecasts across the asset-class spectrum, as well as a prediction for the future of the European Union.

Crude oil could find its way to $60/barrel, he said, and it will be hard for it to drop below $40. From oil’s low January at $26/barrel, it may have a 100% price increase.

Gundlach is “somewhat neutral” on gold over the short term and not as positive on it as he was at year end. He advocated “paring back” gold holdings.

He said he was positive on the dollar from 2011 until mid-2015. Now he is positive again, and said the dollar will “move to higher levels.” The dollar has been a leading indicator of Treasury rates, according to Gundlach. With the dollar at a high level, he advised against buying bonds until the 10-year Treasury reaches 2.30% or 2.35%.

But he said he has “relaxed” the “negative sentiment” he had on interest rates in July. He said he is less likely to forecast higher rates now, but is not predicting an instantaneous reversal of yields to the downside.

“The 10-year yield is higher than its average the past five years,” he said. “This is not my definition of a bull market.”

Has said that the 10-year yield could be 6% in five years, but this is not necessarily negative for bond funds. It depends, he said, on how those funds are positioned and the path that rates take to get to a higher level. Some funds, he said, will do fine reinvesting their coupons at progressively higher rates.

The cash flows from bonds go up when prices go down, he said, whereas when stocks drop in price it is because of unfavorable earnings or economic news, which can lead to dividend cuts.

“There are a lot of reasons to be less negative on Treasury bonds than we were four months ago,” he said.

Virtually all other sectors of the bond market are “on the rich side,” Gundlach said, including mortgages, CMBS, corporate bonds (including junk bonds), leveraged loans, emerging markets and municipals. He said the worst thing to own are 30-year corporate bonds.

If you want to own fixed income, he said to “play it in Treasury bonds.”

At the end of the question-and-answer period, he was asked whether he expects another Brexit event and whether the Eurozone would collapse.

There will be another exit, he said, but he doesn’t know which country it will be.

“There is never one cockroach,” Gundlach said.

Jeff Gundlach has proven time and again that he is not a broken clock.  Ignore at your own risk.

Economy

Overshoot?  Has the post election bond sell off that led to higher interest rates gone too far?

Blinded: Paul Krugman’s election night tweets and blog posts are just the latest example of why political bias & business cycle analysis NEVER  mix.

Welcome to the 21st Century: US Manufacturing is about to get more high tech but still has a ways to go.

Trouble: US consumers are increasingly defaulting on loans made online.  It seems that startups that aimed to revolutionize the banking industry underestimated the risks involved in consumer lending.  Color me shocked.

Commercial

Evolution: Co-working company WeWork which has soared to a $17 billion valuation by leasing space from landlords and then renting it out at a higher price.  However, newcomers in the space look a lot more like hotel operators where landlords pay co-working operators a fee and keep most of the profits, reducing the operators risk profile.

Residential

The Tax Man Cometh: Vancouver, BC seems hellbent on cratering their housing market.  Earlier this year they introduced a 15% surcharge on home purchases by foreign buyers that drove transactions off a cliff.  Apparently, that wasn’t enough because now they are adding a new tax of C$10,000 a year that will be charged to homeowners who let their homes sit vacant.  Those who lie about whether their property is occupied or not will be fined C$10,000 a day, or $7,425, U.S.  In related news, Seattle is looking really, really good to a lot of foreign buyers right about now.   See Also: Why the world’s largest real estate binge is coming to a city near you.  And: As markets waver, the rich are parking money in luxury homes.

Exodus: Data analysis firm CoreLogic found that for every new home buyer coming into California, another three are selling their homes and moving somewhere less expensive as we’ve effectively priced out the middle class through restricting development.

No Privacy: Bathrooms with a view (for both you and potentially your neighbors) are a  hot feature for luxury condo units.

Profiles

Flying High: Drones are evolving from military to business tools and the potential market could be massive.  FYI, the graphics in the linked report from Goldman Sachs are incredible.

Yuge Infographic of the Day

Millennial Home Buyers

WTF

Dirty Money: A Royal Canadian Mint employee (allegedly) smuggled $140k of gold and sumggled it out by shoving it where the sun don’t shine.

Ramen Rampage: An ex con was arrested for domestic battery after striking his live-in boyfriend with a cup of ramen noodles, because Florida.

Mug Shot Competition: Former Oregon football player arrested for theft and a man who was terrifying El Segundo with a turbo charged air horn are locked in a fierce battle for Mugshot of the Week.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links November 18th – Hiding in Plain Sight

Landmark Links October 21 – Dense Hypocrisy

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Lead Story… There is little that I enjoy more than reading (or writing) about the hypocrisy of self-important celebrities.  However, one of my primary rules for writing this blog is to avoid politics – unless it’s land use politics (or water politics).  As such, I haven’t had the opportunity to write much about celebrity hypocrisy, despite frequent gnawing temptation to do so.  Today’s blog will be different.

At this point in his career, Leonardo DiCaprio is almost as well known for his environmental activism as he is for his acting, or, for that matter the number of supermodels that he’s slept with.  This is despite the fact that his anti-fossil fuel stance is frequently juxtaposed against his high-rolling lifestyle of flying around the world on carbon-spewing private jets and spending his vacations on yachts rented or borrowed from oil sheikhs, all of which is evidenced by his massive carbon footprint.    However, the above examples may not even be his most egregious examples of hypocrisy since they only deal with his individual actions and lifestyle.  His views on land use politics are far more disturbing and far more destructive from an environmental prospective.

So, now we come to the land use part of this story.  It’s not a controversial notion that the best thing that a city can do to cut down on pollution is build more density in it’s core as higher density in urban centers leads to less automobile use, which leads to less carbon emissions.  If residents are located closer together, there is less need to transport people and goods over further distances.  Therefore energy use is reduced, as well as water usage for that matter since higher density typically means less large lawns to water.  This is roughly as objectionable as someone making an argument that water is wet or that orange juice tastes like oranges.  So, imagine my surprise (end sarcasm here) when I recently read a story on Curbed LA about how self-styled environmental crusader Leonard DiCaprio (among other celebrity “activists”) had signed onto an anti-development campaign known as the Neighborhood Integrity Initiative demanding the following:  From Curbed LA  (emphasis mine):

(1) Direct officials to halt amendment of the City’s General Plan in small bits and pieces for individual real estate developer projects, and

(2) Require the City Planning Commission to systematically review and update the City’s community plans and make all zoning code provisions and projects consistent with the City’s General Plan, and

(3) Place City employees directly in charge of preparation of environmental review of major development projects, and

(4) For a limited time, impose a construction moratorium for projects approved by the City that increased some types of density until officials can complete review and update of community plans or 24 months, whichever occurs first.

This list of demands was presented to Mayor Eric Garcetti.  The group claims that they have enough signatures to get their measure on the ballot should Garcetti not submit to their demands.  This is NIMBYism, plain and simple.  There is just no other way to describe it  From Curbed LA (emphasis mine):

So, quite literally, the single best thing that a city can do for the planet is locate destinations—houses, jobs, grocery stores, schools—closer together so its residents expend less time, less money, and fewer fossil fuels traveling among them.

That’s how LA needs to think about density—as a long-term solution for climate change that will also deliver short-term social and economic benefits.

The problem with anti-density campaigns is that their boosters aren’t thinking about our city in a way that looks beyond what they see on their own block today.

Santa Monica’s anti-density measure, LV, is the most troubling, as it would require a citywide vote to approve any new structure over 32 feet. This would make it politically (and economically) difficult to erect buildings more than two stories tall in a prohibitively expensive city that already has limited room to grow, pushing workers farther and farther away from their jobs.

Again, as stated previously, the fact that increasing density in urban cores is good for the environment is not particularly controversial, nor is it an issue opposed by those on either the right or the left….until it happens near when they live.  In this case, it’s a matter of wealthy hypocrites who claim to be environmentalists trying to stop development because it happens to inconvenience their lifestyle a bit, despite the fact that the development would have a substantial positive impact on the environment that they claim to care so much about.  Again, from Curbed LA (emphasis mine):

Restricting building height and planning for cars goes against everything that environmental leaders and sustainability experts have been saying for decades: If you’re erecting a multi-use structure in a dense, transit-accessible neighborhood with centralized freight delivery systems, the environmental impact of that structure is lessened significantly over time.

Building a two-story building surrounded by a city-mandated parking lot on an extra wide street is not the worst thing you could do for the planet. The worst thing you could do for the planet is codify this kind of development into the land use and planning policies of your city to make building anything else impossible.

That’s why many cities and states are incentivizing dense, transit-accessible development as part of a larger climate-friendly mandate to not only decrease emissions, but also improve public health, clean the air, and slash energy costs.

My broader point here is that you can’t have it both ways.  This isn’t an issue where there is a credible case that increasing density in urban cores isn’t better for the environment than doing the opposite: incentivizing sprawl by making it impossible to build in urban areas.  You can’t be an environmental advocate only when it suits your personal interests and expect not to get called out on your hypocrisy, especially when you stake out as hard-line of a position as DiCaprio has.

Economy

Watching the Horizon: According to Bloomberg, odds are that the next financial crisis will come from depressed lenders, shadow banks or China.

Conscientious Uncoupling: How a massive surge in divorce rates in couples over 50 years old is forcing people to work longer and putting retirements at risk.

Commercial

Rise of the Machines: Industrial robots are driving some major changes in both warehouse design and workforce composition.

Residential

History Lesson: The New York Times published a fairly balanced history of the story behind the prop 13 tax revolt and it’s consequences.

Bad Rap: Luxury condos and apartments get a bad rap when it comes to the increasing cost of housing when restrictive zoning is more often the real culprit.

The Missing Middle: By continuing to focus primarily on housing prices in San Francisco and NY, the media is missing a bigger story – rentals are becoming un-affordable nation-wide for middle class families.

Profiles

What’s the Story?  HGTV has achieved something incredible: a bunch of hit shows with no serialized narrative drama that is the hallmark of the modern successful series.

Video Of the Day: Meet Rox Zee, the Boise State football team’s kickoff tee fetching Labrador Retriever.  In related news, I think that I just became a Boise State fan.

Troll So Hard: Twitter’s infamous army of anonymous trolls played a roll in Salesforce passing on offering to acquire the troubled social media platform.

Farm to Cart: Target is experimenting with so-called vertical farms where produce is grown in-store.

Chart of the Day

WTF

Political Metaphor: A Hillary Clinton tour bus was busted dumping human waste down a storm drain in an Atlanta suburb, resulting in a hazmat team getting dispatched to the site.  If you’ve ever seen National Lampoon’s Christmas Vacation, you are aware that this can end really, really terribly.  On a personal note, I can’t wait for this election season to end.

Revealing Protest: Porn actors (I never understood why they are all called stars) are picketing on the streets in Hollywood to protest a ballot proposition which would impose mandatory condom use for any adult video filmed in the state.  Los Angeles passed a similar law in 2012 that decimated the adult industry, causing permits to plunge from 480 in the year it was passed to just 25 last year.

Pack a Day: Meet Azalea, the chain smoking chimp who has become the star of North Korea’s new national zoo in Pyongyang.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links October 21 – Dense Hypocrisy

Landmark Links August 5th – Suicide Pact

Niagra Falls

Lead Story… Vancouver is about to tank it’s residential real estate market after they instituted an astronomical 15% tax on real estate purchases by foreigners.  The worst part may be that existing contracts were not grandfathered in to the new law.  This led to a near-shutdown of the BC land registration system as realtors worked overtime to close before the tax took effect.  Going forward, many of the escrows that didn’t close are likely to fall out as the tax proceeds will exceed released deposits by a substantial amount in some cases.  The impact of such a tax will have massive and chaotic impact as it reverberates through the greater Vancouver market and could become a text book example of the old saying: “be careful what you ask for because you just might get it.” (h/t Darren Fancher) See Also: How Chinese billionaires fueled the epic Vancouver real estate boom.  As a point of reference for just how hot the Vancouver real estate market has been, this picture is worth more than 1,000 words:

Vancouver housing prices

Economy

Aging in Place: Americans over 65 (and increasingly over 75 as well) are staying in the work force well into their retirement years and it’s often about more than just cash flow.  Contra: Aging  US population is hurting both productivity and workforce growth as baby boomers retire.

Bass Ackwards: The best paid CEOs run some of the worst performing companies.

Commercial

Bad Optics: At it’s best, the EB-5 Visa Program, which allows qualified, wealthy foreigners to obtain a green card in exchange for investing $500k or more in a job creating enterprise is a win-win for both investors and developers.  However, the program hasn’t been without controversy and new allegations of developers defrauding foreign investors are not going to help.

Taking Matters Into Their Own Hands: Facebook pledged to build at least 1,500 apartment units for the general public (not including housing for FB employees) in Silicon Valley.  The social media giant is becoming an apartment developer in an attempt to generate support for it’s expansion plans, which call for an adding 6,500 new employees in an already dramatically under-supplied Bay Area market.

Let’s Make a Deal: As new apartments flood the downtown LA market, landlords are increasingly offering rent concessions that were nowhere to be found up to recently.

Residential

Chilled: The Manhattan luxury condo glut has led to an ice-cold land market on the formerly red-hot island.

Water, Water Everywhere…: It’s a seller’s housing market but almost no one is selling primarily because it’s hard to find a replacement house, leading to tight inventory.  See Also: Home ownership is now at a 5-decade low.

Profiles

Crash Proof: How driverless cars could threaten insurers’ earnings.

Lurking in the Shadows: Auction house Sothebys is becoming a player in the shadow banking space.

Podcast of the Day: Malcolm Gladwell’s latest Revisionist History podcast is about the true story behind uncontrolled acceleration accusations leveled against Toyota in 2009 that led to a 10 million car recall and $1 billion fine.  The real story is fascinating – Toyota was a scapegoat – and should be a must-listen for anyone who gets behind the wheel.

Chart of the Day

WTF

Roaming Charges: Japanese Olympic gymnast Kohei Uchimura, the defending gold medalist in the men’s all-around competition got hit with a $5,000 phone bill (which his carrier later agreed to reduce substantially) due to the fact that he: 1) Apparently has a Pokemon Go addiction and 2) Didn’t bother to disable the roaming feature on his cell phone while in Brazil. To make matters worse, he had a 0% chance of actually capturing a Pokemon as the game has not yet been released in Brazil.  That’s a painful hit to the wallet but this also feels like a great endorsement opportunity.

Getting Kids Involved in the Political Process: Mayor Anthony Silva of Stockton, CA was recently arrested and charged with providing alcohol to minors at a youth camp that he runs because, well, Stockton.

You Gonna Smoke That? A man from Orlando Florida was recently arrested when police mistook his Krispy Kreme doughnut for meth.  There’s a great cops and doughnuts joke in there somewhere (h/t Chris Gomez-Ortigoza).

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links August 5th – Suicide Pact

Landmark Links June 28th – Tank Commander

Byron-Scott-Driving-The-Lakers-Tank

Lead Story…  We spend a lot of time talking about the San Francisco housing markets and rightfully so: it’s a microcosm of all that is wrong with restrictive zoning in closed access US cities and the poster child for NIMBY obstructionism.  As such, San Francisco has managed to overshadow another North American market that is incredibly expensive and getting worse: Vancouver, BC  Year-over year, Vancouver’s benchmark housing index is up 30% to just under $900k while single family detached house prices increased a whopping 40% to $1.374MM (in US dollars) in a city where median household income is around $67k in US dollars – San Francisco is in the $82k range.  So how does an MSA with such a low median household income (one of the lowest of major Canadian cities) end up with a median home price that is among the highest? 1) Massive levels of housing demand from wealthy foreign investors, especially from China; and 2) Highly restrictive zoning that makes it difficult to add enough housing units to satisfy  that demand.  One critical distinction between SF and Vancouver is that much of Vancouver’s foreign purchases appear to be for investment purposes only while SF real estate has clearly benefited from the tech boom and it’s highly compensated workforce.  This, combined with the inability to build enough new units for residents, is leaving Vancouver with empty units that transact for nosebleed prices.  The increase in value was so extreme last year that at least one mathematician estimated that the rising land value of single family homes accounted for more than the entire employment income in the City of Vancouver and now over 90% of detached houses there are worth over $1MM.

Foreign buyers have come under increasing scrutiny of late for the impact that they are having on the worlds most expensive real estate markets.  Some of it is justified.  For example, the US Treasury department now requires that title insurance companies report the people behind shell companies on all-cash purchases over a certain level in NY and Miami in order to curtail money laundering.  Others like Great Britain, which increased the stamp duty on second home purchases by 3% and raised taxes on more expensive homes in an effort to drive down demand.  Few places though, have considered responding as harshly as Vancouver, which is considering a tax on vacant homes.    From the South China Morning Post:

Vancouver’s mayor Gregor Robertson says he is considering the introduction of a tax on empty homes, amid a roiling debate in the city about the role of Chinese money and offshore investors in North America’s most unaffordable real estate market.

In an interview with Bloomberg TV on Tuesday, Robertson said he was “looking at new regulation and a carrot-and-stick approach to making sure that houses aren’t empty in Vancouver,” including a tax on vacant homes. “If you’re not using your property – either living in it or renting it out – then you have to pay more tax. Because effectively it’s a business holding, and should be taxed accordingly.”

There is a very substantial difference between adding to transaction costs or requiring ownership disclosures, as the US and Britain are doing and what Vancouver’s mayor proposed here.  The steps taken by the US and Britain either increase transaction costs or regulatory paperwork in an effort to slow demand from a certain buying segment.  The Vancouver proposal takes a very different approach: it would actually increase the holding cost of foreign-owned (but unoccupied) real estate by imposing a different tax structure.  This isn’t limited to the purchase transaction, instead its a recurring annual cost.  More from the South China Morning Post:

A tax targeting vacant properties was proposed by dozens of economists in January.The BC Housing Affordability Fund, which has been pitched to both the City and British Columbia provincial government, would impose a 1.5 per cent annual tax (based on home price) on owners who either left homes vacant or had “limited economic or social ties to Canada”.

BCHAF proponent Tom Davidoff, an economist at the University of British Columbia, said it was unclear if Robertson’s remarks on Tuesday referred to his group’s proposal. “We talked to the city and they gave us a good listen,” he said.

“I would hope that any vacancy tax would cover the bigger issue here which is not paying taxes here and not being a landlord [either],” said Davidoff, whose group’s proposal would also tax people who under-utilised properties as a “pied-a-terre”, and those whose primary breadwinner paid little or no income tax in Canada – so-called “astronaut families”.

This strikes me as the quickest way to cause an exodus of foreign capital from a given real estate market because, unlike the US and British solutions, it would not just apply to new purchases.  It is also rife with the potential for unintended consequences.  For example, who is to say if a property is under-utilized?  Who actually gets to make that distinction and is there a hard and fast rule that could be applied.  If you were a foreign (or domestic for that matter) investor or homeowner who had a house there and you knew that costs were about to go up a proposed 1.5% a year based on home price (not unsubstantial on a million dollar home) would you hang around to see how it was implemented?  This type of tax could send foreign investors rushing towards the exit before a glut of supply hits the market as investors seek friendlier locales in which to invest.  At least it appears as if cooler heads are prevailing at the provincial and national level.  Again from the South China Morning Post:

Both Canadian Prime Minister Justin Trudeau and BC Premier Christy Clark have said they worry that taking steps to curtail foreign ownership in Vancouver could imperil the equity of existing owners.

I hope that Prime Minister Trudeau and Premier Clark’s logic prevails as this would be an incredibly dumb way to tank a real estate market and the collateral economic damage done to existing homeowners would be all too real.  In all of the talk about how to bring Vancover’s prices under control, it seems as if no one (or at least very few people) are proposing a real solution: relaxing restrictive zoning codes so that more units could be built to meet demand.  Ultimately, that’s the only way to avoid what some are now calling a bubble.  Rather, we get more of the same convoluted restrictions, subsidies and taxes that don’t solve the actual problem and often do more harm than good.  The Vancouver mayor’s proposal is a tanking strategy that would make even the shittiest NBA team blush. Let’s that American cities with a large number of foreign investors don’t follow the example.

Economy

Tailwind: Per Calculated Risk, the largest population cohorts in the US are now 20-24 and 25-29 which is positive for the economy in general and housing in particular as young people begin to form households.

Brexit Breakdown: By now you probably know that UK residents voted to leave the EU, sending stock prices down the toilet around the globe and spurring demand for safe haven assets like treasuries and gold.  The betting markets got this one dead wrong as did pollsters and most government officials.  Despite the crazy market response, nothing will really change from a trade standpoint in the near-term and there is already a movement underway to try to reverse the referendum.  Either way, nothing is going to happen until this fall when British PM David Cameron resigns.  Here’s a quick roundup of what people far more knowledgeable than I are saying:

Tyler Cowen on why the Brexit happened and what it means.

George Soros on the future of Europe and why it might have more issues than Britain.

Gabriel Roth on why the actual Brexit might not ever actually happen

The BBC on the high likelihood of another Scottish independence vote as a result of the Brexit outcome.

See Also: S&P and Fitch downgrade UK credit rating.

Best House on a Bad Block: The US economy looks likely to weather the Brexit storm even if it puts the Fed on hold for a while longer.

Commercial

 

Winner, Winner, Chicken Dinner: How US REITs could benefit from the Brexit.

Residential

Scraping the Bottom: Brexit panic has pushed interest rates to record lows and mortgage rates are following and they could be headed even lower.

Profiles

Trade of the Century: The story of how George Soros’ Quantum Fund made trade of the century by breaking the British pound is especially fascinating today in light of recent world events.

Green Monsters: Avocado theft is on the rise.

Please Make it Stop: Enough with the stupid Millennial surveys already.

Chart of the Day

The US Demographic Tailwind

Population: Largest 5-Year Cohorts by Year
Largest
Cohorts
2010 2015 2020 2030
1 45 to 49 years 20 to 24 years 25 to 29 years 35 to 39 years
2 50 to 54 years 25 to 29 years 30 to 34 years 40 to 44 years
3 15 to 19 years 50 to 54 years 35 to 39 years 30 to 34 years
4 20 to 24 years 55 to 59 years Under 5 years 25 to 29 years
5 25 to 29 years 30 to 34 years 55 to 59 years 5 to 9 years
6 40 to 44 years 15 to 19 years 20 to 24 years 10 to 14 years
7 10 to 14 years 45 to 49 years 5 to 9 years Under 5 years
8 5 to 9 years 10 to 14 years 60 to 64 years 15 to 19 years
9 Under 5 years 5 to 9 years 15 to 19 years 20 to 24 years
10 35 to 39 years 35 to 39 years 10 to 14 years 45 to 49 years
11 30 to 34 years 40 to 44 years 50 to 54 years 50 to 54 years

Source: Calculated Risk

WTF

Video of the Day / Attempted Darwin Award:  It’s exceedingly rare that an attempted Darwin Award gets caught on video.  This past weekend, two morons attempted to surf a 20 + foot swell at The Wedge in Newport Beach on a rental jet ski despite being warned repeatedly by lifeguards to stay away.  It went horribly wrong with the jet ski ending up on top of the Newport Jetty before nearly sinking while getting swept out to sea as Newport’s lifeguards and local Wedge veterans saved the riders from their own epic stupidity.  No word on whether or not they got their deposit back.  Looks like it’s time to add some more chlorine to the gene pool.

Can You Spot the Irony? A man named Ronald McDonald was shot outside a Sonic in New York.

I’d Rather Eat My Shoe: Burger King recently introduced something called Mac N’ Cheetos.  The race to the bottom for the American fast food industry continues with no end in sight.

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Landmark Links June 28th – Tank Commander