Is This The Worst Ever Yet?

In this publication\u27s last issue, John Williams and the author determined that the 2008 recession was the least worst of the recessions of the past forty years. Now, the author says, we are in the second-worst recessionary period of the last forty years, and it is worsening fast. But do not bet against the U.S. economy, he cautions. Entrepreneurs are still out there, and with a modicum of political leadership and stable economic policy, we will get through this stronger than ever. Realistically, we cannot save everyone, but in the Chapter 11 limbo, companies can try to reconstitute themselves; special bailouts do nothing but redistribute income according to political clout. Losers must lose if winners are to prosper. If one or more of the Hopeless Three (U.S. auto manufacturers) goes bankrupt, their competitors\u27 sales will rise; their operating margins will improve, allowing them to avoid financial distress and expand output and employment domestically. As with wildebeest in the Masai Mara, death is essential to life. People knew that leverage could be risky. Debt is wonderful on the upside, but remorseless on the downside. This lesson will hopefully be remembered for a new generation

How We Got to the Credit Crisis

The current capital market credit crisis was perpetrated by a confluence of factors, including a potent period of fear winning over greed; a near collapse of due diligence in the credit markets (a.k.a., more money than brains); a mismatch of short-term capital and long-term liabilities (and subsequent margin calls); and a critical error made by the Fed in setting monetary policy. As a result, credit markets will gradually rebalance over the next twelve months, as greed re-harnesses fear. However, the overall U.S. economy will continue to thrive in 2008, due in large part to government spending

Evaluating the Decision to Own Corporate Real Estate

The traditional decision analysis currently used by most corporations to decide whether to own or lease their operating real estate is fundamentally flawed, resulting in much more corporate-owned commercial property than is economically justified. Most firms currently lease space if the present value of future rent is less than the present value of the cost of self-ownership, net of depreciation benefits and expected property appreciation. However, the correct model for the own-versus-lease decision must compare the present value of profits the corporation expects if they lease, with the present value of expected profits if they decide to own real estate

How Should Commercial Real Estate Be Priced?

When it comes to real estate pricing, most investors revert to the cap rate because it\u27s simple, and it\u27s the norm of the industry. But a correlation analysis indicates that cap rates have been largely unresponsive to alternative rates of return available to investors, with the exception of BBB bonds, over most of the past 25 years. Other pricing tools such as the Capital Asset Pricing Model; a comparative analysis with assets of similar credit risk; and the Gordon Dividend Growth Model provide much more elegant, yet still simple, alternatives to evaluating real estate pricing

Is This the Worst Ever?

Every time the U.S. economy slows, pundits claim that it is the worst recession ever and will drag on much longer than past recessions. These claims are frequently made when it is not even a recession, or after the recession is over and the economy is in the early stages of a recovery. The recession of 2008 is no different. By comparing 15 macroeconomic indicators in 2008 to the same metrics during the previous six recessions, the authors show that the Great Capital Strike of 2008 is so far the mildest economic downturn of the last forty years

The Impacts of Borrowing Constraints on Homeownership

This paper utilizes micro data to directly quantify the impact of mortgage underwriting criteria on individual homeownership propensities. To determine whether a family is constrained by these criteria, the optimal home purchase price is estimated. The results indicate that wealth and income constraints both reduce homeownership propensities, with a stronger impact for wealth constraints. Mortgage market innovations of the early 1980s seem to have reduced these effects. The research indicates, however, that even in well-developed capital markets, the presence of borrowing constraints adversely affects homeownership propensities

Migration and job change: a multinomial logit approach

While unable to copy/paste the abstract, the paper examines the relative importance of job search and housing demand along with exploring the extent of equilibrium and disequilibrium in migration and job change

Human migration: theoretical and empirical results

I am unable to copy/paste a rather lengthy abstract, but the paper provides a detailed theoretical model of human migration which is then tested using a discrete choice probit model

Human migration: theoretical and empirical results

I am unable to copy/paste a rather lengthy abstract, but the paper provides a detailed theoretical model of human migration which is then tested using a discrete choice probit model