If Only Your 401(k) Was in the NFL

Trillions of dollars of nominal global wealth have been wiped out in the current bear market for stocks and bonds. But, as this Bloomberg item notes, there’s at least one major exception to the asset-price declines: pro sports franchises. For reasons Gerry Smith describes here–and others such as Mike Ozanian and his crew at Forbes have long chronicled–the valuations of even poorly performing (and managed) clubs continue to escalate. In an age when inequalities are immediately suspect, this ought to raise hackles, because owning a team is definitely a rich guy thing. Yet as many (including myself) have been noting for years, municipal and state governments often fall over themselves to extend more inducements (subsidies) to these same sports barons to locate their wares in those sponsoring jurisdictions. At its root, this is a bread-and-circuses syndrome very much implicating the local populations but also the chorus of marketers (including supposedly neutral news media) that lend themselves to the endless promotion. Maybe, as redistribution (not to mention reparations) becomes an everyday talking point among the political class, a certain sector of rank and privilege might attract attention that, for once, it doesn’t seek.

Price of Practicing Journalism Is a Narrow ‘Social’ Window

Yesterday (9/8/22) I attended a panel discussion at the International Press Institute’s “World Congress” on the escalating dangers to journalists, including social-media assaults. The group at Columbia University included Washington Post editor Sally Buzbee and others from international publications, and none was too sure how to combat what all agreed were increasingly organized attempts to intimidate a free press. Newsrooms have long had to handle potentially-violent cranks–one reason most stopped allowing easy public access–but today’s online threats and various personal invasions, including doxxing, have taken on a more sinister cast. They especially seem targeted at women. It’s apparent that social media is a particular vulnerability, and yet, as this summer article from the UK’s Media Gazette explores, those platforms also are thought a necessary way of reaching and expanding audiences. The New York panel could only conclude that enhanced training of staff (freelancers, too?) to avoid undue exposure, and bullet-proofing of coverage against bogus claims of “fake news,” are the most ready remedies. Surely anyone entering hard-news reporting or commentary needs to reconsider any past or present appearances online and limit them to what is their public, professional face. This is a sacrifice, if you can call it that, as basic as not receiving gratuities through their work–part of the calling of journalism.

A Yen to Visit Japan? But Wait

Tourism has taken off again in Southeast Asia, post-pandemic, offering economic relief in particular to Thailand. But it remains stricken in nervous Japan, where Covid rates have recently spiked. Japan has bumped up the total admissions to 50,000 daily and broadened the entry beyond tour groups, but is still requiring individual visas from the U.S. and other countries where it previously waived the requirement. This is an especially vexing policy when the yen has fallen to a 24-year low against the American dollar, providing an opportunity to visit a normally very costly destination at reasonable expense. (That’s largely because Tokyo’s central bank is keeping interest rates low when other countries are tightening to contain inflation.) Always venturesome Australians are also frustrated by the travel limits, as this report from their major broadcaster suggests. The quirky Japanese attitude toward foreign blights has long been a characteristic (a charm?), leading to a bizarre hosting of the Olympics last year, and overall wealth leaves the nation able to remain stand-offish, even at great cost to some industries. At least the domestic population is not subject to tyrannical lockdowns, as in China.

Maybe the NY Times Is Enough for Its Ilk

The New York Times must be self-conscious about covering, as it does in this piece today, the seeming troubles of the Washington Post. That’s because the two media giants are essentially selling a similar product–international news and opinion aimed at an established if left-of-center audience. Thus they are direct rivals. This article’s target is Fred Ryan, whom owner Jeff Bezos put in charge of the Post, with the suggestion that his short-sightedness is partly responsible for the company’s drift since 2020 into loss-making. (The Times frequently boasts of its own robust results.) No doubt there are many causes of whatever ails the Post, but unmentioned here is the likelihood that the target audience has grown more reluctant to spend as much time, and money, on media that aren’t fundamentally painting a different picture. Since 2020, many a Post subscriber may have decided that the Times (which of course has a big Washington bureau and national political staff) will suit them well enough. Whereas the Wall Street Journal, which is still growing, offers a distinct focus on business and a right-of-center commentary section, the Post is just second fiddle. A version of this challenge is faced by other ambitious “newspapers” such as the Los Angeles Times–if the New York Times with its sweeping geographic reach can offer coverage and punditry that satisfies the regionalist in you, why add another course that tastes much the same?

Climate Push Has But Marginal Utility for Economics

Another Zeitgeist piece from the New York Times today denigrates traditional economics, which is to say the price mechanism for allocating resources. This time, it’s about climate and carbon, and the target of sorts is Nobel laureate William Nordhaus, long a favorite among left-of-center economists. Nordhaus, you see, early on proposed a carbon tax to discourage use of fossil fuels. That’s still the method most favored by market-oriented advocates of a greenhouse-gas policy, though it hasn’t mustered a political majority in the U.S. because it would make the middle class (and everybody else) pay more for gasoline and energy-based products. But now activists on the climate front have dismissed such an approach as merely fiddling at the edges when emergency measures are necessary. Grants and loans for alternative energy were instead the thrust of the big Biden-Manchin compromise spending package just passed. And it sounds like more regulatory measures are just around the corner. Heather Boushey, a redistributionist who has the climate file on the White House Council of Economic Advisers, “says the field is learning that simply tinkering with prices won’t be enough as the climate nears catastrophic tipping points,” the Times reports. “So much of economics is about marginal changes,” she is quoted directly. “With climate, that no longer makes sense, because you have these systemic risks.” Sorry, Dr. Nordhaus and all you other dismal (and “marginal”) scientists, Washington has serious work to do.

Money Master of the Virtues, RIP

John Train was known to his largest audience through years of writing on investing and investors, most notably in his 1980 book, “The Money Masters.” But as anyone at closer range to John soon appreciated, it was Mammon who served this man’s insatiable curiosity. On subjects far and wide, he was interested and interesting, a fount of learned annotations delivered lightly. His well-lived life ended this month at his summer home in Maine at age 94.

It was there in the year 2000 that I visited him for a Forbes Magazine article on his new Civil Courage Prize. It annually and internationally honors, as he put it, “steadfast resistance to evil at great personal risk.” The accolade since has reached into many corners of the world, as John’s travels and certainly his knowledge did. My trip back then combined, as John so often did, the consequential with the playful. While skippering me around his nearby waters on break, the septuagenarian drew a scold from the harbormaster for his illicit speed.

I had edited John’s submissions at the Wall Street Journal in the 1980s–not there writing on equities but on his ranging topical inquiries. These preceded digital search, but one I recall was an inside account–told from an everyman’s vantage–of one of the aircraft carriers that was part of the Reagan buildup. John’s interest in military affairs was reflected in his multiyear sponsorship of a yearly appearance by the U.S. service chiefs at the Council on Foreign Relations in New York.

John had conservative political instincts but liked to follow many an investigative trail (the Italian Mafia was a longtime interest) and to hear a range of views. These were voiced in symposia he’d host at his Manhattan townhouse or at a floating dinner salon he developed out of a consortium of wine-investing pals. The price of admission was to try to feed John with new information.

He never lost his touch for the markets–investment counseling was his vocation. Sometimes he gave away good advice. Over a meal soon after the dot-com crash, with my portfolio bruised, I asked for a few studier stocks. One he suggested was Automatic Data Processing, an unsexy listing with a steady dividend. It’s risen many fold and is my second-largest holding.

John also favored his friends at the holidays with his latest booklet of sayings, snippets or historical artifacts. One I’ve kept handy is “Rules of Engagement In War and Life.” Mao and Churchill are in there, Talleyrand and Satchell Paige. But also, in this one, are plenty of thoughts from “–J.T.” The first is an introductory caution: “Things change, so many of these notions are contradictory: life is like that.” This product of Groton and Harvard had seen much since those earliest days at the Paris Review in 1953.

This entry epitomizes the author–I can hear him saying it: “Don’t give quick answers to hard questions. ‘La nuit porte conseil,’ say the French: Contemplate a situation overnight.”

John’s ready erudition might have have been overbearing were it not for the frequent accompanying twinkle. “The greatest of the gift of the gods is a cheerful temperament,” read a J.T. Rule of Engagement. So true. And this: “Aging, keep active.” A good man of his word he was.

Aug. 24, 2022 (Photo from Forbes, by David McLain/Aurora)

Across the Peconic, It’s Not Just a Wine Story

Most of my reporting on the recent history of land preservation on the East End of Long Island has dealt with the South Fork, or “The Hamptons.” But on the other side of Peconic Bay, similar if somewhat later stories could be told. This item from Patch spotlights one man’s efforts in New Suffolk that began in 1982, when just as on the waterfront to the south, condominium and commercial development loomed. Although the North Fork today is experiencing a crush of popularity and glamorous winery investment that disturbs some locals, its hamlets could never have sustained their mostly bucolic character without activists such as Joe McKay. Except for the town of Riverhead, which has plunged ahead with buildout of its western corridor, most localities on both forks of the East End have grown protective of their past–under constant pressure from green lobbies, if not their own citizenry.

North Fork Waterfront Preservation ‘Pioneer’ Feted | North Fork, NY Patch

Another Supply Factor in Home Sales: Who Can Broker the Deal?

America’s latest bout of realty mania may finally be dying down, as home prices and particularly sales volumes decline after a rise of interest rates. With mortgage payments more costly, and expectations of equity appreciation diminishing, the fees charged by brokers may become a rub again. Five percent off the top, a typical full transaction commission, shouldn’t escape so much notice when prices aren’t rising by double digits each year.

This brings us to one of America’s biggest and most Apple Pie guilds, the residential real-estate sales trade. A few friends or family members may be part of it. The common term is Realtor, although as the capital letter suggests, that is a membership subset of the 3 million Americans who hold state-issued licenses to sell homes. But the Realtors are a big enough subset—roughly half, and likely the most active–to provide a data window into a field that otherwise might be difficult to track.

And the National Association of Realtors latest survey finds that 2021 was a banner year, with median gross income rising 25% (off a lesser dip in 2020, when Covid lockdowns hit early in the year). If $54,430 was the midway point among the 9,220 who self-reported to the questionnaire randomly sent to 176,494 Realtors, one might guess that the better sellers skewed well north of that. And the Realtors said they could have done even better with more to sell.

What if, instead, there were more realty agents competing to do the selling? Does the supply and price of brokerage help shape the real-estate market, or is that market (as this realty consultant and surely many Realtors believe) determined solely by buyers and sellers, leaving the sales professionals simply (and fairly!) to divide a fixed pie?

Occupational licensing covers a quarter of the American workforce. Such a barrier to entry is justified as a protection against physical or financial hazard to others. In residential real estate, the handling of what is usually the biggest household investment would seem to call for a professional floor. Unclear, however, is how high that training and testing standard needs to be, and how much consumers effectively must pay for it. To put the previous paragraph’s question another way: Was the 2021 bounty a notorious rent capture, or just a cyclical blowout?

State licensure data over recent years paints a general picture of a market calling the shots:  In the 22 jurisdictions I could see, the salesperson ranks varied widely and in tandem with the economy (big drops around the 2008-09 financial crash, for instance). Brokers, a more credentialed and usually senior status, show less variance and, even in the most recent bullish years, less growth. This may be related to changes in the selling-firm organizations, to “teams” built around one or two notable brokers.  Overall, there’s considerable apparent capacity for expansion—Realtor membership in fact was up 50% over the 8 latest years.

Sure, obtaining a license requires instructional time, and renewing that license every couple of years or so can be an administrative chore, but so many people manage this—even part-timers who may not sell anything in a given year—that it’s hard to argue that transactions are being lost for want of agents.

Yet that is what a recent academic paper does, with respect to at least one state.  Bobby W. Chung, economist at St. Bonaventure University in New York, found in a paper published this spring in Labour Economics that a tightening of Illinois’ license requirements in 2011 decidedly cut into sales. And, perhaps more significant to the core justification for licensure, his data suggest that more “qualified” sales personnel did not lead to fewer reported abuses of consumers.

Chung noted that the 2011 Illinois revision “was a rare occasion both new entrants and existing practitioners” by ending the salesperson classification and requiring broker license as a first step, while also specifying that no broker could work independently without upgrading to a “managing broker” classification.  As a result, after a grace period, salespeople declined from 50,000 to zero, while the broker licenses rose by only 10,000 and managing brokers amounted to 20,000.  Hence, a net loss of 20,000 in real-estate sales.

Building on a 1979 study that linked restrictive licensing to property-vacancy durations, Chung concluded, “There was a significant reduction in home sales on average, implying that the decreased agent availability had an immediate consequence on consumers.” And, there was this labor-market effect: “I find that female and novice agents are more likely not to renew the license after the policy.” The new strictures required fees and doubled the training time, some of it at inflexible hours of the day.

Chung’s analysis of disciplinary actions in Illinois real-estate sales, extending five years beyond the reforms, “does not indicate strong evidence of reducing misconduct,” although he cautions that because of statistical challenges in building a multi-state comparison set, “the quality effect warrants further discussions.”  This and other work does suggest that factors other than simply adding more training time are more critical to shaping broker ethics.

A minimal competency in transaction procedure and law is desirable in housing sales. The state can certify this, as of course can employment by a brokerage or mentoring in the now-popular sales teams.. Just as is true with a paralegal or physician’s assistant, however, there are many tasks vital to sales that could be performed by someone short of full professional licensure. (Indeed, in states like New York, it is rare for a home deal to close without buyer and seller having a full-fledged lawyer present, on top of the broker and with a separate escrow officer.)

At bottom, does it matter to homebuyers (and sellers) how constrained the supply of sales agents is? Yes, it is possible for abrupt and onerous legislation to affect a state’s experience. But, over a national range, the “heat” of property markets themselves seems to regulate the sales ranks pretty well.  And the mixed record so far of discount- brokerage options—some involving algorithmic transaction models, such as Opendoor—leads to doubt about how many consumers cared about breaking the 5% commission mold anyway.

But most of America has had successive generations of barely-interrupted home price appreciation. A sustained bear market might change this picture, and give regulation scholars like Bobby Chung more to reckon with.

When Pine Barrens Were Cleared for Walmart

I’m reminded it’s been 25 years this summer since this article in the New York Times caught the inception of a “regional shopping center” on the Long Island Expressway approach to the Hamptons. The center, such as it is, finally is coming together, based on my drive-by tour a few months ago. A huge Walmart has opened, and on the parking lot periphery, new residential developments are finished or soon will be. Most appear to be townhomes or condominiums. These might begin to answer the scarcity of “affordable” living situations on the South Fork 10-plus miles beyond, but because they have no easy transit connections, they can only add to the “trade parade” of workers creeping their way east each morning. Maybe the residents will find work in the pod of activity that developer Wilbur Breslin has brought to this previously wooded section of Pine Barrens, whose 100,000 acres atop a key aquifer were the subject of a preservationist political battle in the decades leading up to this land clearing. (An adjoining parcel had been flattened 20 years before for a short-lived horse racing track.) Although technically outside of the Peconic Bay region, where a property-transaction tax since 1999 has bought up land to preclude such buildouts, Breslin’s “The Boulevard” will be leaving its mark for decades to come, probably the last major commercial complex plus subdivisions on approach to the Hamptons.

Argentines Live Off of Mattress Money

Hyperinflation caused by venal government is a commonplace in backward nations, especially those terrorized by war or ruthless rulers. When the affliction approaches in established or “civilized” countries, it can be of special significance to those of us blessed with better experiences. This weekend’s New York Times story from Buenos Aires describes how ordinary businesspeople and others function after a series of left-wing populists in power have debauched the local peso to the point where only the use of U.S. dollars–wads of them–has made transactions possible. Unfortunately, crypto currencies haven’t (yet?) evolved to where they can be useful substitutes. Same with gold after it was no longer minted into common coins. Therefore, a “hard” currency such as the dollar becomes a next best–indeed it has proven a stopgap in desperate situations such as Zimbabwe a dozen years ago (it’s desperation time there again, it seems.) As a historical reminder, Argentina in the early years of the 20th century was one of the 10 wealthiest nations in the world. Germany before Weimar-cum-Hitler was a respectable society. So, destructive inflation can happen nearly everywhere. It is unfolding, in earlier stages but worrisomely, in a couple of NATO members with strongmen in charge: Turkey and Hungary. A functioning monetary system has to be able to override political or potentate interference in order to maintain trust, and once there’s a breakdown, it’s hard to go back to normal lives.