Wednesday, April 29, 2009

You Can Bet H1N1 Affects Real Estate & The Economy

From The World Health Organization, the public health division of the United Nations, in Geneva, Switzerland:
29 April 2009 -- The situation continues to evolve rapidly. As of 18:00 GMT, 29 April 2009, nine countries have officially reported 148 cases of swine influenza A/H1N1 infection. The United States Government has reported 91 laboratory confirmed human cases, with one death. Mexico has reported 26 confirmed human cases of infection including seven deaths.

The following countries have reported laboratory confirmed cases with no deaths - Austria (1), Canada (13), Germany (3), Israel (2), New Zealand (3), Spain (4) and the United Kingdom (5).

Further information on the situation will be available on the WHO website on a regular basis.

WHO advises no restriction of regular travel or closure of borders. It is considered prudent for people who are ill to delay international travel and for people developing symptoms following international travel to seek medical attention, in line with guidance from national authorities.

There is also no risk of infection from this virus from consumption of well-cooked pork and pork products. Individuals are advised to wash hands thoroughly with soap and water on a regular basis and should seek medical attention if they develop any symptoms of influenza-like illness.
Notice that the focus continues to be on sensible precaution, attention, prevention... This is not an emergency declaration.

However if things rise to the level of a global crisis, I doubt we will hear many more figures or warnings. Once the barn doors are wide open......

Monday, April 20, 2009

More Gloom Than Doom: Commercial Real Estate

In a general review article this morning by Dees Stribling in, the headline is "Economic Update - Commercial RE on the Edge?" That's a bit, well more than a bit, hyperbolic, particularly from a Texas vantage point.

There is much handwringing in the financial press about the near future of commercial real estate, which so far has fared okay compared to the residential sector. Notes Stribling:

The idea that commercial real estate might be the next big thing to implode--which is all too familiar within the commercial real estate industry--is finally getting some mainstream attention. On Saturday, speaking at a conference at Vanderbilt University, Atlanta Federal Reserve Bank president Dennis Lockhart said that "on our watch list this year, as a risk to the (U.S. economic) outlook, is continuing worsening in the commercial real estate sector."

Oh my. An economist mentioned commercial real estate as something they will watch this year. And it generates a doom and gloom headline. This is a classic Soros investing tactic: identify when everyone else is wrong, then do the opposite of what they're doing. So if there is more fear in the commercial sector than is warranted (and that requires some analysis with horsepower), then investors will find some good opportunities, particularly in markets and submarkets where the fear or "gloom" may be particularly unjustified. I see those all around me where I live and write.

So watch those barometers.

Take this paragraph from the same article:

Whatever else commercial real estate will be in the near- to medium term, it certainly won't see the investment volume of recent years, not only in the United States but almost everywhere in the world. According to Real Capital Analytics, about 1,000 buildings valued at $47 billion traded hands worldwide in the first quarter of 2009, a small fraction--about 16 percent--of the volume during the same period in 2007.

Did you catch that? Only 16% of last year! Yeah, but there were still about 1,000 buildings valued at $47 billion in this past quarter sold. Last I thought about it, $47 billion is still a lot of money. Certainly it's enough for nimble and aggressive investors and brokers with buying power -- and in the right markets such as Houston.

CDS's Strike Again: Screwing Up Bankruptcy

In Felix Salmon's excellent economics blog for Reuters (kudos for a positive indication of adaptation to new media by Reuters), Salmon points out how Credit Default Swaps (the unregulated "insurance" policies investors could take from swindlers believing they were protecting various investments, swindlers who never had the capital to begin with to pay out the claim if it happened and statutorily not subject to any regulatory oversight), anyway these CDS's after bringing capitalism to its knees are now complicating what would be a normal process of pre-bankruptcy negotiation with debt-holders who can normally be wiped out in a normal bankruptcy process. But finance and economics are anything but normal these days.

The problem now? As Salmon points out, bondholders in troubled corporations also hold these CDS insurance policies and some of their insurers are able to pay out. So what's the incentive for these bondholders to negotiate completely with the troubled entity whose bonds they hold if bankruptcy itself could actually lead to a higher payout than offered in pre-bankruptcy negotiations?

Let’s say that I buy $1 million of bonds. In order to protect my downside, I buy $600,000 of credit protection: if the issuer goes bust, I get $600,000, and a healthy 60% recovery value. I don’t want the issuer to go bust — I’d much rather the bonds continued to perform, and to be worth $1 million. But at least I can’t lose more than $400,000 in the event of default.

The issuer then gets into serious difficulties, and the bonds start trading at 25 cents on the dollar: my $1 million of bonds are now worth just $250,000 on the open market. The distressed issuer then seeks to avoid bankruptcy by entering into negotiations with its bondholders. “If we default and are forced into bankruptcy,” they say, “then bondholders will end up collecting no more than 20 cents on the dollar in a liquidation. But if you agree to a restructuring which keeps us out of the bankruptcy court, we can get you a good 45 cents on the dollar in value.”

Normally, bondholders would be well disposed to such an offer. But in this case, I might think twice. If the restructuring doesn’t count as an event of default for the purposes of the CDS contract, then I might end up with just 45 cents on the dollar — $450,000 — if I agree to the company’s plan. If I just let it go bust, on the other hand, I get $600,000.* And so I have an incentive to opt for the more economically-destructive option.

See that? Bondholders with good CDS policies have "an economic incentive to opt for the more economically destructive option." This is definitely something to watch. Oh, a caveat from Salmon - the example actually is worse...
*Update: Hemant, in the comments, points out that I actually get $700,000, not $600,000: I get $600,000 from the hedged portion, and also another $100,000 (25% of $400,000) from the unhedged portion.

I do not agree with Salmon's analysis after his example as to what should and should not happen. But in a response that I normally criticize when it comes from others, my only one is that I don't know enough at this point to offer an alternative.

But when you see mainstream media interviewing regular "Janes and Johns" on the street, just bear in mind how subtle and how very complex this entire economic and Wall St mess really really is.

Saturday, April 11, 2009

A Brief History of Tea Parties & Taxes

I like to read good blogs as much as I like to write my own. This morning I ran across a post by a user named "Science Teacher By Trade" about the proper understanding of the establishment of federal taxes in the United States by George Washington (The Whiskey Rebellion) following the Revolutionary War. This is a very good recap of that moment in history.

History often has a way of becoming mere folklore over years until the truth of what actually happened is twisted beyond recognition many times. That effect is what creates the space for allegations of "revisionist history" particularly when an accurate recounting of history runs counter to how the folklore has evolved. Consider this phenomenon a quirk of evolutionary psychology in the modern paradigm

Anyway, some truth about the founders and taxes:
The first assumption to dispel is that our "Founding Fathers" were resolutely opposed to taxes, and that the Boston Tea Party was due to this opposition. This is true to a limited extent. Following the Glorious Revolution, parliament established a declaration or Bill of Rights. Among these rights was that reserving the ability to Tax for parliament alone. Since parliament was an elective and representative body, this implied that legitimate taxation was restricted to citizens with representation. This wouldn’t become an issue in the Americas for several decades. Following the French and Indian War, Britain was left with a standing army, something it had not really dealt with before. Because of a sense that it was necessary to continue to protect the colonies, as well as the benefits of maintaining an army to restrain French aggression, it was decided to maintain a large force in the Colonies.

This meant that funds had to be found to not only pay for the extremely expensive war that had just been fought, but also to pay for the standing army in the Colonies. Naturally, parliament decided that it only made sense to use taxation to pay for this, and it seemed to follow that since the colonies were benefiting from having an Army for their defense, as well as a war fought partially for their benefit, that they should pay for a large share of the expenses.

This presumption had two problems: first, it assumed that the colonists would perceive the troops as guarantors of security, rather than occupiers. Second, it violated the idea that taxes were linked to representation. In response, mutterings of anger began in the colonies. To be fair, much of the anger was simply due to the fact that taxes were going up to pay for troops that most people did not feel were necessary, especially since the colonies had voluntarily raised their own internal taxes for the war, and had never been fully reimbursed. As resentment strengthened, however, the colonists began to examine their conceptions of natural laws and rights. Ultimately they would realize that fundamentally, the new taxes violated their rights because they had no representation in parliament.

There would be ongoing protests in the future, many which would echo the mob violence of the Boston Tea Party. Curiously, due to a variety of factors, the Boston Tea Party would have no hint of simple anger at increased prices due to taxes. At this point in time, the East India Company had long been competing with Dutch smugglers for the tea imports market in the colonies. Recent acts of parliament had actually made it possible for the East India Company to import tea into the colonies for less than the smugglers were charging. Unhappily, there was a tax attached to these imports that the colonists refused to pay, even though the overall price was less. Due to opposition to the right to impose this tax, the colonists either forced the authorized resellers of tea to resign, or forced the ships importing the tea to return to England without offloading their cargo.

Finally, in Boston the Governor refused to let the ships bearing tea leave until they had paid the tax on the tea they carried. Since this would have forced the company to take a loss (paying the duty without selling the tea,) the ship captains refused to leave, although hostile colonists would not permit their cargo to be unloaded and sold. After a rowdy meeting led by Sam Adams, a large group of men raided the ships and dumped the tea overboard, declaring they would destroy the goods before they paid a tax on them.

Since price was not the issue, clearly the Boston Tea Party was not about paying extra money: it was almost exclusively about taxation without representation, combined with a dose of drunken mob violence. It still became a symbol of valiant resistance to tyranny, especially in American folklore, and would otherwise lose much of its meaning in terms of the specific grievances of the participants.

If more proof is needed that the founding fathers did not oppose taxation per se, but instead just taxation without representation, we can look at our most famous leader of the period: George Washington. In 1794, while Washington was president, an outraged group rebelled against what they perceived as an unfair tax on whiskey (meant to pay down debts from the Revolutionary War.) In response, Washington ordered the rebels appear in federal court, and summoned an army of militia of more than 12,000 men to suppress the rebellion. Whups! By today’s standards, conservatives would apparently be calling old Washington a fascist/socialist enemy of the United States. (Just for the record, Abe Lincoln also presided over tax increases. In fact, the first income tax was progressive and enacted during his administration. Such socialists, our best loved presidents!)

So much for the founding fathers being anti-tax. ...

Friday, April 10, 2009

From An Executive Producer of Cesar Millan

Okay, so rule #1 about blogging: most non-professional bloggers such as myself are not journalists. We don't have time to fact-check everything or chase down all the articles we link to, etc. Blogging is sort of a citizen sport, more about commentary and opinion than reporting. Nonetheless we have a moral obligation to try at least to be accurate.

My last post took Cesar Millan and his program to task for focusing too much on domination and not enough on the nuances of psychology -- I suppose when you have a weekly show to do, it can get kind of formulaic and frankly that's what I think of the show.

So a web savvy or surfing producer of the show emailed me earlier a long email in their defense, and that's fine, frankly I didn't read it closely but I will try to paste in some of the main points below to help round out the discussion, and lord knows I appreciate the time she took to defend her work and respect that she did so.

I sincerely regret not knowing that the lawsuit mentioned in the previous post was apparently settled in 2007 according to the producer, and I trust her. And I have neither the time nor the interest to research it further - but in the era of Google, you dear reader already have everything you need if you should so choose to do so yourself.

Frankly I'm already bored with this post. So without further adieu, here is I suppose a legitimate email from an executive producer of Cesar Millan's The Dog Whisperer. I told her I would post a follow up including snippets of her email but also that I stand by my post and my opinion, and I do. She was polite in her response. Now to follow through.

We placed our success rate (that is, long-term dog rehab success) at about 80% based on that book, which only covered the first three seasons. We are now filming our 6th season and have had even more impressive successes, primarily because we have been able to do more long-term follow-ups and repeat visits with cases, which we weren't able to do because of budgetary reasons back when we began Season 1.

Not only is the show real, the crew likes to call it "the only REAL reality show on television." Nothing -absolutely nothing - is pre-scripted. Cesar knows nothing (or only a bare minimum of facts) about any case before he goes on the consultation. Cesar won't repeat any of his actions for the camera (as is SOP, even in documentary work) because he says, "Dogs don't understand 'take 2'. He is there for the dog, 100%, and not the cameras - much to the frustration of the crew, but we've learned to adapt to each other over the past several years. ...

I'm not sure the defense above really answers the thrust of my criticism sufficiently, however I do recognize there are many angles to a complicated endeavor like producing a weekly show such as this. I accept results will be at best mixed, and to what degree exactly I don't know, and Ms. Peltier doesn't address fully (nor should she). I know what I know, she knows what she knows, and anyone reading this can think for themselves. More:

[The Humane Society] spent time on the set with us, and now are among our biggest supporters. In fact, they just collaborated with us on a powerful show about rescuing and rehabilitating puppy mill dogs. Ask the representatives of the prominent animal advocacy group Last Chance for Animals, or our thousands and thousands of friends and supporters in the Animal Rescue Community across the United States. Ask Martin Deeley, head of the IACP. You can even ask Ian Dunbar, the grandaddy of "positive reinforcement" training, who has met with Cesar personally (though I don't believe he's been on the set), and found that they share many more commonalities than differences.
Fair enough, I don't know about any of this, but I have no reason to distrust Ms. Peltier. And finally:
Finally, an FYI: the Flody Suarez lawsuit to which you referred was amicably settled in 2007. A read-through of the court records will show that although Cesar was named in the suit, the incident happened on his property only. Cesar was not even present when the incident occurred, but had loaned use of his treadmills to an accquaintance - a trainer not even associated with him. That was back in the day when Cesar would naively do favors for anyone who'd ever done him a favor. Unfortunately, celebrity attracts lawsuits and he has since learned the hard way not to be so blindly generous.

In short, you may or may not agree with Cesar's methods, which he himself asserts are just "options" for rehabilitation - but I assure you, the show itself is indeed "legitimate."

Sincerely yours,
Melissa Jo Peltier
Co-Chair, MPH Entertainment, Inc.

Well again I do sincerely regret not knowing that the lawsuit had been settled, and in my defense (although I don't have much of one on this point), I did say "If true..." I know, I know. I regret not knowing it had been settled (and no I haven't verified that either, I'm hungry, my dog needs to play, I don't really care).

As for the facts of what the lawsuit alleged, it makes no difference when it comes to the thrust of my commentary about the over-use of dominance I have witnessed on the program, my informed commentary about pit bulls (the point I care about the most), nor my notes about using a pinch collar.

The Smoke of Cesar Millan

Well it is a very encouraging sign for the real estate market that I have been positively too busy to blog in recent days. I miss it. Today I post a response to a friend who asked about whether Cesar Millan's "Dog Whisperer" show is legitimate. It is not.

Most alarming is the lawsuit in California Superior Court against Millan's training center by a producer of "8 Simple Rules" (John Ritter's final series).

From the news article:
Hours after dropping the dog off at the facility, Suarez claimed a worker called to inform him the animal had been rushed to a veterinarian. He later found the dog "bleeding from his mouth and nose, in an oxygen tent gasping for breath and with severe bruising to his back inner thighs," the lawsuit claims.

The facility's workers allegedly placed a choke collar on the dog, pulled him onto a treadmill and forced him to "overwork." Suarez says he spent at least $25,000 on medical bills and the dog must undergo more surgeries for damage to his esophagus.
If true, that is unconscionable and Millan should be forced out of his show to clean up his center and techniques. My response to my friend's question is below. Many friends recall I volunteered in the Behavioral Unit of the Animal Rescue League of Boston, where I adopted my 7-year-old neutered pit bull, Tank, and also where I am a member of The President's Council.

There are many better "Whisperers" out there. Do a search on Amazon and find the other popular behaviorists - particularly "The Other End of the Leash" by Patricia McConnell.

Positive dog training is a superior method. Dominance will be part of any behavioral practice because obviously dogs are pack-oriented and just want to know what their role is, what their job is, trust they will be fed and cared for, etc. Much of Millan's basic work is not unique to him. What is unique is his over-insistence on and use of forced domination. As guests of his show will tell you behind the scenes, the show often gets its video of a dog in a good moment but Millan rarely solves any problem.

It's sort of like that fraud John Edward, the purported psychic who communicates with the dead, and the mother of all such fraudsters, James van Praagh (currently a producer of a fictional program I like, "The Ghost Whisperer"). At least he's doing obvious fiction now.

Remember Edward's show (van Praagh had a short-lived show, too) where he just did cold readings on his studio audience? Well eventually it came out from attendees that they actually would film his studio sessions for up to 6 hours just to produce 22 minutes of footage. Now his TV specials heavily rely on a reading of a celebrity or lengthy narratives about a subject - which leaves only a few minutes for his "reading" - and nobody knows how long a session actually lasted and how many things he got wrong.

Millan's show is much of the same. I would call it entertainment, but his show is documentary-style and it misleads his audience, often to the detriment of their dogs. That's morally unacceptable.

Millan likes to parade his pit bulls on the show, but it just plays into the breed stereotype as if it gives him credibility. Nothing could be further from the truth. The truth is that any behaviorist / trainer worth their salt can tame a pack of pit bulls - they're the most trusting, smart, loyal, human-loving breed there is.

It's why fighters exploit them - the dogs aren't vicious - they're just trying to please their human. It's why the Michael Vicks of the world and punks like him stand right next to the dog in a fight to egg the dog on during the fight and doesn't get bitten -- by either of the fighting dogs. If the pit bull shows any instability, it gets put down -- that's always been the history of the breed. You think scumbag dog fighters want to work with unstable and unpredictable dogs? They fight dogs for the money (and the blood).

Point of order - I find pinch collars to be very effective in communicating with a dog on a leash. If used effectively, with a sudden light jerk but not sustained, it can make the dog pay attention and obey better. But it takes super human strength to choke a large dog with a pinch collar -- and despite their appearance, pinch collars are not "sharp" -- the ends of the links are dull.

Pinch collars actually cause less "strangling" than conventional collars because the "quick jerk" method helps snap a dog into attention and compliance, which is safer for the dog when on a leash. Pinch collars are better than "gentle leader" collars which seek to better control a dog's muzzle, which don't work and dogs hate them. (Pinch collars should always be stainless steel and of the highest quality, only purchased from reputable trainers.)

Any sustained pulling on a collar no matter the type and no matter from which end of the leash -- it's a bad thing and must be stopped. You can't just throw a strong dog on a leash -- dogs require leash training so they know what to do.

When dogs understand what to do and what's expected, and if the dog trusts they benefit from obeying, they are all too happy to do it.

Dog psychology is not rocket science. Dog psychology intersected with the foibles of human psychology -- now that's a little more complicated and causes most of the problems.