Situs Newswatch 9/7

Job Numbers Cool Fears of Fed Rate Hike

Cooling job growth is leading many to speculate Janet Yellen and Company will NOT raise rates at this month’s Fed meeting.

“The lower-than-expected job numbers push back the date of when the Fed will raise short-term rates,” says Ken Riggs, President of Situs RERC. “This cause for pause, which will potentially keep short-term rates low for an extended period of time, bodes well for Commercial Real Estate values and pricing.”

The August gain of 151,000 jobs was neither strong enough nor weak enough to settle the Feds’ long-running dilemma about whether the labor market can easily withstand another interest-rate increase. The unemployment rate, calculated from a separate survey of American households, was unchanged from the prior month at 4.9%.

The latest data is the last major employment measure before Fed officials meet Sept. 20-21.

“Whether the Fed decides to raise rates or not, the residential and commercial mortgage markets are increasingly driven by global bond yields,” says Steven Bean, Situs Executive Managing Director. “Since a significant portion of the G20 countries have negative or zero interest rates, the global rate environment are more impactful on interest rates charged to borrowers. As such, borrowing rates are projected to remain low into the foreseeable future – a win for the real estate market.”

The August gains marked a slowdown from the more than 270,000 jobs added in each of the prior two months, but many policy makers have long expected moderating growth. They believe the economy is nearing full employment and that employers need to add fewer jobs to absorb new entrants into the labor pool.

The figures could spark a vigorous debate between policy makers who see the economy as healthy enough to absorb a rate increase and those concerned about low inflation, middling economic growth and uncertainty from the presidential election and global turmoil.

Clinton says Trump’s Comments on Fed Show He Should Not be President

Democratic presidential candidate Hillary Clinton criticized Republican rival Donald Trump on Tuesday for making comments about the Federal Reserve’s monetary policies, which she said should be off-limits for U.S. presidents and presidential candidates.

“You should not be commenting on Fed actions when you are either running for president or you are president,” Clinton told reporters on her campaign plane. “Words have consequences. Words move markets. Words can be misinterpreted.”

Trump, who has previously accused the U.S. central bank of keeping interest rates low to help Democratic President Barack Obama, said on Monday that interest rates should change.

“They’re keeping the rates down so that everything else doesn’t go down,” Trump said in response to a reporter’s request to address a potential rate hike by the Federal Reserve in September. “We have a very false economy.”

Clinton criticized the New York real estate magnate in her second press conference in as many days.

“He should not be trying to talk up or talk down the economy, and he should not be adding the Fed to his long list of institutions and individuals that he is maligning and otherwise attacking,” she said.

read more: Reuters.

Is Your Job Safe — Driverless Cars, Trucks Coming

If Silicon Valley gets its way, it won’t be long until every vehicle in the country has nobody behind the wheel.

Almost 3 percent of all working American are drivers of some sort — more than 2 percent are truck drivers, 0.4 percent are bus drivers and 0.3 percent are cabbies and other types of drivers, according to Census Bureau occupational data. But those jobs aren’t evenly distributed across the country, and some places are going to get slammed by the automation of jobs more than others.

According to the 2014 Census data, there are more than 4.4 million Americans aged 16 and over working as drivers, and the vast majority of those are men who are categorized as “driver/sales workers and truck drivers.” In states like Wyoming and Idaho, the percent of the employed civilians working in driving jobs exceeds four percent. (The District of Columbia is the lowest by far, at only 1.6 percent).

It could be many years before vehicle automation takes those jobs. Even when driverless cars and trucks hit the road, regulators will expect them to continue to contain a human operator for the foreseeable future. But eventually, the economic endgame is to leave the drivers behind. Companies like Uber aren’t investing in driverless technology so they can continue to pay drivers.

read more: CNBC

Could the ECB Start Buying Stocks?

Central banks have become some of the biggest investors in bond markets. Now some in the financial markets think stocks should benefit more from their largess.
Some economists say the European Central Bank, which meets Thursday to decide if it should expand its current bond-buying program, should invest in equities. The reason: It is running out of bonds to buy.

A move by the ECB into equities would have big implications for Europe’s stock markets, which have been rocked by a series of shocks this year, from volatility in China to Britain’s vote to leave the European Union. The prospect of billions of euros flowing into equities could prop up prices, much as ECB bond purchases have done for debt securities. The signaling effect from the ECB’s unlimited money-printing power may also limit downturns in equities.

Stock purchases don’t appear to be on the near-term agenda. But ECB officials haven’t ruled them out, and the idea could gain steam if they continue to undershoot their 2% inflation target.
Some central banks already invest in equities. Switzerland’s central bank has accumulated over $100 billion worth of stocks, including large holdings in blue-chip U.S. companies such as Apple and Coca-Cola.

If the ECB decides to raise its stimulus by extending its current bond program, as many analysts expect, fresh questions will be raised about how it will continue to find enough bonds to buy. The bank is already purchasing €80 billion ($89.2 billion) a month of corporate and public-sector bonds to reduce interest rates across the eurozone. Its holdings of public-sector debt reached €1 trillion last week, the ECB said Monday.

read more: WSJ

Ding, Dong Is Your Home for Sale?

Swell-looking home you’ve got here. Ever think about selling it? How about to me, right now?

That is increasingly the approach the house-hungry are using in Silicon Valley, where the number of homes on the market is so small that would-be buyers are driven to desperation. Their solution: seek out homes that are, in theory at least, not for sale.

Sue Zweig grew up in this working-class community, back when people said it was for the newly wed and the nearly dead. Not long ago, when she was out walking her dog, she began to realize things were different. A woman pulled over, asked about houses for sale in the neighborhood and ended up spending 45 minutes poking around Ms. Zweig’s living room and kitchen.

Her four-bedroom house was not on the market then, and it was not on the market a year or so later when another eager buyer showed up. This time, Ms. Zweig, a nurse, and her husband, Steve Zweig, made a deal for $1.375 million, a seven-figure profit over what they had paid in 1987. They moved out of the house last year.

Buyers in Silicon Valley must be aggressive and innovative as well as well-heeled, especially as housing inventory here hits its lowest point in at least 20 years. In San Mateo County, which includes Redwood City, the number of homes for sale in August was 1,184. That is a drop of 62 percent from a decade ago, even as the population increased more than 70,000.

It is a microcosm of a growing national problem. The number of homes on the market in the United States has fallen on a year-over-year basis for the last 14 months, the National Association of Realtors says. When adjusted for population, the inventory of homes for sale is the lowest it has been since modern records started being kept in 1982.

read more: New York Times

If Trump Gets His Way, Real Estate Will Get Even More Tax Breaks

It’s hard to imagine a tax code more favorable to real estate developers than the one we already have.

Donald Trump has come up with one.

Thanks to some major loopholes in the existing tax code that treat real estate developers as a special privileged class, it’s entirely possible (even likely) that Mr. Trump pays little or no federal income tax.

But Mr. Trump’s new tax proposal doesn’t just preserve those breaks, it piles on new ones for real estate developers like Mr. Trump himself — at an estimated cost of more than $1 trillion in tax revenue over a decade.

Moreover, this doesn’t count Mr. Trump’s more general tax cuts, which deliver the biggest windfalls to the highest earners. Many real estate developers would reap further gains from those provisions if they became law.

Even conservative Republican tax experts have denounced the specific real estate measures Mr. Trump has outlined.

“If you want to create a recipe for an abusive tax shelter, take those elements and bake for 15 minutes,” said Douglas Holtz-Eakin, an economist who served as director of the Congressional Budget Office and is now president of the American Action Forum, a conservative pro-growth advocacy group. He was also an economic policy adviser to former Republican presidential candidate John McCain. “It’s a phenomenal benefit for housing and commercial real estate interests.”

read more: New York Times

US banks just recorded their most profitable quarter EVER

American banks spent the second quarter crying all the way to the, well, bank.

Despite an increasing regulatory burden and amid lackluster share performance, the industry logged record profits for the period, topping the second quarter of 2015, according to figures from SNL Financial and S&P Global Market Intelligence.

Profits for the three-month period totaled $43.6 billion, compared to the $43.01 billion in Q2 of 2015, a 1.4 percent beat. On a sequential basis, the April-to-June period topped the previous quarter by $4.56 billion, an 11.7 percent rise.

The performance comes as banks adapt to a tougher regulatory environment for risk and higher capital requirements. The Dodd-Frank reforms, which Congress developed in the wake of the 2008 financial crisis, require banks to keep more cash on hand and restrict them from engaging in trading for their own profit.

The Federal Reserve also has adopted more stringent stress-test standards. Nonetheless, all U.S.-domiciled banks passed the most recent round despite a handful of objections raised.

Also, despite a continued low-rate environment that is supposed to pressure banks’ net interest margins, the sector is still managing to roll up profits.

read more: CNBC

Mall Group Wins Aeropostale Auction With $243.3 Million Bid

A consortium led by Simon Property Group Inc. and General Growth Properties Inc. won an auction for the assets of Aeropostale Inc., with a plan to keep open at least 229 of the bankrupt teen retailer’s stores.

The bidding group will also keep the chain’s online business and licensing operation up and running, according to a statement late Thursday. The purchase price is $243.3 million plus assumption of certain debt, according to a court filing Friday.

A Manhattan bankruptcy judge must still approve the deal after reviewing the terms and any objections. A hearing on the matter has been set for Sept. 12.

“Aeropostale looks forward to closing the sale and emerging from bankruptcy with new ownership as a financially stronger company positioned to compete and succeed in an evolving retail landscape,” the New York-based company said in the statement.

The chain filed for bankruptcy in May, succumbing to competition from big-box stores, online merchants and “fast fashion” rivals. The company also accused lead lender Sycamore Partners of pushing it into Chapter 11 to buy it on the cheap. The bankruptcy judge rejected that claim and allowed the private equity firm to take part in the bidding.

“We are pleased with the outcome of the Aeropostale Inc. bankruptcy auction, which will result in the repayment of our debt while enabling the company to keep open more than 200 stores, preserve thousands of jobs and continue to serve customers,” Sycamore said through a spokesman.

read more: Bloomberg

Sorry About That: Wells Fargo to End Ads Suggesting Science Over Arts

Wells Fargo, the financial services giant immortalized in lyrics to “The Music Man,” has apologized for advertisements that seemed to suggest that teenagers should set aside their artistic dreams and choose careers in science.

The print ads, promoting a “teen financial education day” program, featured an image of a smiling young woman with the headline: “A ballerina yesterday. An engineer today.” And a young man was shown with the headline: “An actor yesterday. A botanist today.” Each picture featured the tagline, “Let’s get them ready for tomorrow.”

A number of prominent artists took to social media over the holiday weekend to voice their objections to the implicit career guidance, including the songwriter Robert Lopez (“Frozen”), the singer Josh Groban, and the actors Laura Benanti (“She Loves Me”), Alex Brightman (“School of Rock”), Michael Cerveris (“Fun Home”), Donna Lynn Champlin (“Crazy Ex-Girlfriend”), Cynthia Erivo (“The Color Purple”), Heather Headley (“Aida”), Zachary Levi (“She Loves Me”), Andy Mientus (“Smash”), Anthony Rapp (“Rent”), Alexandra Silber (“Fiddler on the Roof”), Wesley Taylor (“Smash”) and Jenna Ushkowitz (“Glee”).

read more: New York Times