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.

Plans for Yaphank Mall Put Builder Under Fire (Published 1997)

Article on controversy over plan by developer Wilbur P Breslin to build long-planned Brookhaven Town Center regional shopping mall in Long Island pine barrens; environmentalists are working to save nesting birds and box turtles as land is cleared; photos (M)

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.

Think 9% Inflation Is Bad? Try 90%.

With the world grappling with rising prices, a tour through Argentina reveals that years of inflation can give rise to a truly bizarre economy.

No Red Side in Congress When It Comes to China

In speaking to small audiences in Chinese Asia where I formerly made business trips, I’d sometimes note that whatever qualms they had about White House policy toward Beijing, they’d best consider where Congress would take things. This was true, for instance, during the early stages of President Trump’s trade war. A distant observer might have thought that Democrats would oppose Trump on that, as on most issues. But that was never the case–rare congressional bipartisanship exists on Communist China: opposed. And this definitely extends to support of beleaguered Taiwan, as Nancy Pelosi’s just concluded visit showed. She received nearly unanimous support on Capitol Hill, as this Axios dispatch indicates. A deep animus toward the one-party state existed even before Xi Jinping’s hardening of relations with the U.S., and is all the more pronounced now. Sober scholars, cautious admirals and practical businesspeople may counsel a measured approach to confronting the rising red power, but in America’s theatrical legislative branch, there is only true blue on this front. Xi and his lieutenants ought to be aware of this, even if they missed my talk.

McConnell, 25 Senate Republicans say they support Pelosi’s Taiwan trip

“This travel is consistent with the United States’ One China policy to which we are committed,” the group said.

Borrowers Aren’t Being Bounced from Their Homes

Among the many stopgap subsidies that governments instituted during the pandemic was a freeze on home-loan foreclosures. When the federal barrier was lifted last year (various state measures carried their own expirations) we read and heard much wailing about a wave of mortgage holders who would be cast out onto the streets. Well, the latest data this month (for the first half of 2022) from ATTOM, the go-to source, shows this is not (yet?) occurring. Naturally, there’s a big leap from a year earlier, when the foreclosure limits were still in place, but the totals are less than in early 2020 and considerably below pre-Covid 2019, when the economy was really perking along. So is the crisis still coming? Some outlets keep screaming about it, citing the same data source from earlier in 2022. And yes, the economy is entering more volatile times, with spending pinched by inflation and interest rates rising, but nearly everybody willing to work has a job and unless the bar charts reverse, we’re going to continue to see subdued foreclosure activity. Indeed, that’s what we should expect after a window of exceedingly low mortgage (including re-fi) rates, and an end to many of the subprime lending practices in the housing market that brought on trouble a decade or so ago.  The only holdover from that earlier period, as ATTOM’s release notes, are extraordinarily long stretches to complete foreclosure—a deterrent to new mortgage availability.  The lesson so far seems to be that most people find ways to adapt when markets are allowed to clear and political cushions are removed.

Increased Foreclosure Activity in First Six Months of 2022 Approaches Pre-Covid Levels

ATTOM’s Midyear 2022 U.S. Foreclosure Market Report shows that foreclosures are up 153% from a year ago but down 1% from two years ago.

An Ode to the Op-ed Sweetener

Back in the 1980s, when the Wall Street Journal was still exclusively a print product, my little team in the op-ed department formalized the near-daily placement of a short, usually humorous or poignant, article at the bottom of the section. Because of the position on the layer cake, we called those pieces the “tertiary” and gave them an italicized headline. The point was to supply the reader a bit of relief from the weighty and sometimes denunciatory material above. We often selected over-the-transom submissions, slices of American life with wry or true observations on the human condition. We found and favored some wonderful writers, including Joe Queenan, back when he still did $250 piecework. I am reminded of this when, in the WSJ’s mix, I still read such regular tertiaries–the one today is about an old-school plumber. (The Journal’s letters section also plucks such gems.) Especially in these times, benign treatment of our challenges and compatriots has a place amid all the moral lectures. Too many of the opinion sites or sections seem to lack this–the New York Times just christened its latest iteration and I still see little of the light touch. Please, serve a treat with each meal.

Opinion | Finding a Good Plumber Is a Heavy Lift

Bill Poland, 83, is one of the few I know who answer the phone.

Green Living: Cows Are Coming Home

This correspondent at Unherd tries to separate the current Dutch farming protest over nitrogen restrictions from more sweeping global pushback against climate and other environmental strictures. Sure, there’s generally a more localized context to every “global” story. But it’s nonetheless true that what are being presented as planetary urgencies are beginning to impinge on large numbers of people, especially at this time of fuel and food crises in so many lands. The fact is that gains on pollution in the past few decades were greatly made from engineering tweaks that made the vehicles, appliances and industrial processes of modern societies much more efficiently clean and therefore recaptured much of the cost of legislation before it was imposed on the public. Now we are reaching a point when living standards–or at least, chosen ways of life–must bend if green science is to be applied through mandates. This will not just be an American political crucible.

Why Dutch farmers are revolting

An agricultural uprising is shaking the Netherlands

On the Trail of Hamptons Preservation

The year 2022 is triggering public anniversary memories on the East End of Long Island, some of which go back  50 years to significant developments that changed Suffolk County such as the abrupt completion of the Long Island Expressway and the birth of the resource-preservationist outfit known back then as the Group for America’s South Fork. (There’s also a major commercial half-century occasion.) It’s an opportunity as well to review the role that nature-trail enthusiasts have played over that time in securing stretches of that precious landscape—a short world away from the famous Hamptons beach dunes–for public access.

Surely the early 1970s were a watershed time for what had been a largely rural and often sleepy place, its beauty the secret of a precious few. Other periods of ferment followed, but they were staggered by economic cycles. A misconception born of recent boom times is that the Hamptons (and now the North Fork) have been in constant rapid development since those days in the ‘70s. But away from the beachfront, the property market fell into the doldrums multiple times, usually in line with equities or Wall Street bonuses. As late as 1993, New York’s governor was convening a task force for sustainable economic development on the East End.

Arguably, those lulls could have afforded more groundwork for containing the severe growth pangs that afflict the East End today.  But it’s the nature of things that preservation activity responds to each development push. And a common impetus behind such reactions has been the maintaining of riding and hiking trails that were a feature of the South Fork since long before it became a summer (now all-year) escape for the wealthy.

Which brings me to another anniversary in 2022, the 25th of the Friends of the Long Pond Greenbelt (in Bridgehampton). The Friends not only are celebrating their milestone but are rousing opposition to a PSEG utility plan to drill for underground power lines across the greenbelt, amid its most familiar coastal-plain ponds. The  reason for the grid enhancement? More electricity demand in bustling East Hampton.

The Long Pond Greenbelt is best known for its walking and nature trails, especially along a stretch below Sag Harbor. The support group, whose founding goes back to one of the Hamptons’ great wealth spurts in the late 1990s, commemorates what took years of ad hoc efforts to assemble. These acquisitions largely preceded the creation of the East End’s Community Preservation Fund (CPF), a tax-derived kitty for buying up land from development nowadays. It helped, in piecing together the greenbelt, that an abandoned trunk line of the Long Island Rail Road, which used to connect Bridgehampton to Sag Harbor, is a spine for the northern stretch. But the 1,100-acre greenbelt actually extends well south of its namesake to Poxabogue Pond, where earlier conservation moves were needed to ward off housing in favor of county parkland, and to Sagg Swamp, a Nature Conservancy protectorate since the 1970s.  Sagg Pond, at 92 acres, stretches below this point nearly to the Atlantic Ocean.

In nearly all of this belt, walking is the only active use. (On the water, there’s a bit of fishing and kayaking.) This is also the case for most of the preserved public land to the west and east of the LongPond Greenbelt, in the towns of Southampton and East Hampton. Look at planning maps, and a surprisingly vast amount of the South Fork is green—as in, restricted from development. Not surprisingly, you can connect the existence of this green to two organizations, the Trails Preservation Societies of the two towns. 

In both cases, it was horseback riding along the old backwoods paths that got the movements started.  That’s because, with private residences beginning to create a land grid a half century ago, it was the longer pokes of the riders that felt hemmed in first. Lee Dion, the founding trails president in East Hampton, told me in correspondence earlier this year that “when I first came to EH in 1965, I could ride my horse 25 miles throughout the Northwest area [of town] without the need to ride alongside of a paved road. I needed to cross over some, but it never was necessary to ride alongside. That quickly changed. Most of the land was in private ownership and development became serious. By the late ‘70s you could barely go a mile without the need to ride alongside a road.” And dirt paths were being paved for new homes.

Dion’s new group, formed in 1980, worked with George Sid Miller Jr., a town planning official from an old landowning family, to maintain a lattice of trails stretching for miles into East Hampton’s woods and bayfront. Meanwhile, to the west, Dai Dayton, a horsewoman from another pioneer clan, was similarly staking public claim to pathways deep into Southampton town’s woods. She recalls a first official success in the stretch between Sagaponack and Sag Harbor, as it began to be built out in the mid-1980s. Dayton, who is president of the Long Pond Greenbelt Friends, remains active as well with the Southampton Trails Preservation group (disclosure: I recently became its treasurer).

Horses are still found occasionally on some trails, but they’re not an easy ride in today’s suburbanized Hamptons. So two legs are now the usual mode of giddy-up, with bicycles sometimes used, legally or otherwise. (Always-illegal motorized cycles are a more frequent and baleful presence—there is little town policing.)

Aided by a political shift in town toward land preservation in the early 1980s, East Hampton’s trails society by 1985 was sketching out the eastern legs of what would become the Paumanok Path, a walking trail that extends 125 miles from the town of Brookhaven on the west to Montauk Point at the end.  It’s become the crowning achievement of eastern Suffolk County’s nature lobby. (An East Hampton portion of the route was named after George Sid Miller, who died in 1984.) The politics in Southampton were still in flux when the Southampton TPS was formed in 1986, but the town’s controversial approval  of the Red Creek Ridge subdivision west of the Shinnecock Canal in the late 1980s included dedication of a large chunk of open space that the trails group seized on in 1990 to open five miles of Paumanok and other paths.  This area, close to the Peconic Bay Estuary, opens into the vast Long Island Pine Barrens to the west. Both the estuary and the barrens, laced with trails, were major development concerns and the focus of pitched planning battles in the years before 2000.

The trails groups maintain most of the South Fork’s hundreds of miles of pathways out of their own resources, coordinating with the two towns. In some cases they partner with the county or state, or the Nature Conservancy or Peconic Land Trust.  Also in the loop is the Long Island Greenbelt Trail Conference, which dates to 1978. All parties continue to look for additional open-space connections. The CPF tax, which collects at least a hundred million dollars a year from real-estate sales, provides heft that the early organizers could only have dreamed of. But even a funding infusion cannot protect against tree blight, such is occurring along many trails today. The photo above, from a hilly stretch of the Paumanok Path near Southampton’s recycling center (once the town dump), shows the state of many pitch pines.

I should note that there is another active use of much of this now-vast preserved acreage: hunting. It is legal in various forms—primarily for deer and ducks—in the colder-weather months. This happens to be the favored time for many hikers because the virus-ridden ticks are mostly dormant, and there’s an uneasy peace between the two outdoorsy sets. The noise of the kills, and the potential for mishaps or encountering  a bloodied animal carcass, can be a spoiler for some hikers. (The spare fisherman is less of a rub.)  But it must be said that the hunters, unlike most hikers, pony up for usage through licenses.

To summarize, then:  Whenever things have gotten too “hot” in the Hamptons, a countervailing push for preservation has managed to keep much open space for the locals. Volunteer organizations such as trails societies have been vital in maintaining those retreats. No history of the area is complete without their piece of it.