Juggling Dynamite

Earth to ‘hot’ realty markets:  China’s international realty flows are slowing.

In January China enacted new rules preventing its citizens from borrowing the foreign capital allowance of others, and further limiting the uses for which capital can be exchanged to foreign currencies.  Real estate is not one of them.  More restrictions on money supply are expected shortly and the effects are already being noted in China’s foreign reserve ratios that rebounded to a 7 month high in May. Indiscriminate buying in previously hot realty markets has noticeably slowed in the process.

While money laundering and cash banking in foreign properties may have justified unreasonable prices for many Chinese buyers, it is all the highly levered, domestic buyers who were speculating along for the ride, which are now set up for a rude awakening.

See:  China’s massive international realty spree is now officially dead:

Real estate markets that saw locals scramble to cash in on foreign buyers are now noticeably cooler. Toronto is seeing new listings hit an all-time high, coupled with a massive dip in sales. New Zealanders that were complaining about a “flood” of Mainland Chinese buyers, are now complaining about the market cooling faster than expected. Australia’s leading property analyst is now telling people to prepare for a 10% drop in prices soon. The one place that’s bucking the trend is Vancouver, where locals are still convinced that Mainland buyers are somehow buying – but not showing up in any significant statistics. Good luck with that Vancouver!

Stanford alum Charles Bovet, MS ’14, Civil and Environmental Engineering, shares the work he is doing to build energy-efficient homes with nearly zero waste.

“The bigger the problem, the bigger the opportunity.” This is one of the reasons Charles Bovet chose to study civil engineering at Stanford and then go to work in residential construction. There are enormous opportunities to improve this industry, specifically from an energy-efficiency perspective, and his team is doing just that.  Bovet and his team recently finished construction of a clean, renewable energy home for Mark Jacobson, Stanford professor of civil and environmental engineering. The home uses no gas; it’s purely electric, and the electricity used is generated primarily by sunlight.  Here is a direct video link.

In related news, the overwhelming business case for green tech is undeniable too.  See: Walmart’s ‘ah ha’moment on climate change:

A joint report published by the World Wildlife Fund and CDP, finds U.S. businesses that commit to annually cutting their carbon emissions can collectively reap as much as $190 billion in savings from reduced energy bills, increased productivity and other associated benefits…Another study found that companies devoted to sustainability efforts are reporting significantly higher mean sales growth, return on assets, profit before taxation, and cash flows from operations compared to sustainability slackers.

In a slow growth global economy, green business is booming.

There are several key factors that have contributed to the financial fragility of the masses and our economy today.  First, is that over the past 30 years, globalization and technology have helped to reduce the number of middle class jobs available domestically. Less jobs and superfluous workers, have led to stagnate incomes for most. At the same time, living expenses for critical services that are domestically-produced like education, medical services, child-care, housing and fresh food have all strongly outpaced income gains.

Today a middle-class lifestyle in America (ie., comfortable housing, transportation, food, health care and one family vacation a year), is estimated to require about 130k of annual household income for a family of 4. The median US household income however–at 50k a year–is less than half the funds needed.  In Canada, estimates of ‘middle class’ expenses vary in the range of 50-100k a year (see: Just who are the middle-class). According to the latest 2014 Statscan census, the median Canadian household income was $78,870.

To plug spending deficits over the past 3 decades, families have increasingly added debt.  American households now owe a record $12.7 trillion and Canadians $2 trillion, as of Q1 2017.  Not only does servicing this debt further diminish disposable cash flow, but it also keeps people from building up net savings from their income.

Not surprisingly then, most households have insufficient retirement savings and about half say that they have no emergency savings to draw on and would have trouble coming up with $2k if needed within the next 30 days.

This leads to the last key contributor in this problem. Being over-indebted, under-saved and cash flow-deficient, renders the masses vulnerable to a financial industry that has queered rules and policies in its favor, while extracting hundreds of billions for itself –selling debt, transactions and products (under the guise of ‘advice’)–to an increasingly desperate and largely financially illiterate public.

In the end, individuals play a leading role in their own poor financial outcomes.  Often going with impossible ‘have your cake and eat it too’ promises and products, rather than math-based, rational plans and personal discipline.

One of the first steps to better outcomes is to openly admit financial facts in a world of facades.  As hard as it may seem, doing otherwise is self-destructive, often repeatedly.

As Neal Gabler points out in this recent PBS segment:  “Financial illiterates pay a heavy price for their illiteracy.”

Could you come up with $2,000 in 30 days if you had to? As many as 40 percent of American families can’t, despite the improving economy. Among them is Neal Gabler, who is frequently broke despite his successful career as a writer. As part of a collaboration between The Atlantic and the PBS NewsHour, Judy Woodruff looks at why Gabler and so many other Americans are struggling with savings. Here is a direct video link.