KeNo's Housing and Economic Portal: Tuesday August 31 Housing and Economic stories

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Stock Swing Still Baffles, Ominously - (www.nytimes.com) It sounds like “Wall Street” meets “The X-Files.” The stock market mysteriously plunges 600 points — and then, more mysteriously, recovers within minutes. Over the next few weeks, analysts at Nanex, an obscure data company in the suburbs of Chicago, examine trading charts from the day and are stunned to find some oddly compelling shapes and patterns in the data. To the Nanex analysts, these are crop circles of the financial kind, containing clues to the mystery of what happened in the markets on May 6 and what might have caused the still-unexplained flash crash. The charts — which are visual representations of bid prices, ask prices, order sizes and other trading activity — are inspiring many theories on Wall Street, some of them based on hard-nosed financial analysis and others of the black-helicopter variety. To some people, like Eric Scott Hunsader, the founder of Nanex, they suggest that the specialized computers responsible for so much of today’s stock trading simply overloaded the exchanges. He and others are tempted to go further, hypothesizing that the bizarre patterns might have been the result of a Wall Street version of cyberwarfare. They say high-speed traders could have been trying to outwit one another’s computers with blizzards of buy and sell orders that were never meant to be filled. These superfast traders might even have been trying to clog exchanges to outflank other investors. Jeffrey Donovan, a Nanex developer, first noticed the apparent anomalies. “Something is not right,” he said as he reviewed the charts.

Facing Budget Gaps, Cities Sell Parking, Airports, Zoo - (online.wsj.com) Cities and states across the nation are selling and leasing everything from airports to zoos—a fire sale that could help plug budget holes now but worsen their financial woes over the long run. California is looking to shed state office buildings. Milwaukee has proposed selling its water supply; in Chicago and New Haven, Conn., it's parking meters. In Louisiana and Georgia, airports are up for grabs. About 35 deals now are in the pipeline in the U.S., according to research by Royal Bank of Scotland's RBS Global Banking & Markets. Those assets have a market value of about $45 billion—more than ten times the $4 billion or so two years ago, estimates Dana Levenson, head of infrastructure banking at RBS. Hundreds more deals are being considered, analysts say. The deals illustrate the increasingly tight financial squeeze gripping communities. Many are using asset sales to balance budgets ravaged by declines in tax revenues and unfunded pensions. In recent congressional testimony, billionaire investor Warren Buffett said he worried about how municipalities will pay for public workers' retirement and health benefits and suggested that the federal government may ultimately be compelled to bail out states.

(Desperate) Bankers Pitch 100-Year Bonds - (online.wsj.com) Bond investors are buying almost anything the market throws at them. Now some bankers want to put those appetites to a full test. They have begun sounding out investors about 100-year bonds. Such long-term bonds are considered some of the most exotic available because they are issued only by the strongest companies—those that are expected to be around a century from now. Hundred-year bonds were in vogue in the mid 1990s and early 2000s, when a few dozen companies issued them. Most were bought in 1993, 1996 and 1997. But they remained relatively rare because companies have to pay a premium over 30-year bonds, typically the longest-dated asset. With interest rates now at some of their lowest levels in history, some companies are tempted to press for longer-dated paper, knowing that demand for corporate bonds is outstripping supply. Such bonds won't pay off their principal until 2110, a date so far that the people doing today's buying and selling will all be dead. The risk is that over the next century, interest rates will rise to a level that diminishes the value of the century bond. Given the vagaries of any market over 100 years, that is a near certainty.

Housing Fades as a Means to Build Wealth, Analysts Say - (www.nytimes.com) Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg. The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming. More than likely, that era is gone for good. “There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”

LA unveils $578M school, costliest in the nation - (news.yahoo.com/s/ap) Next month's opening of the Robert F. Kennedy Community Schools will be auspicious for a reason other than its both storied and infamous history as the former Ambassador Hotel, where the Democratic presidential contender was assassinated in 1968. With an eye-popping price tag of $578 million, it will mark the inauguration of the nation's most expensive public school ever. "New buildings are nice, but when they're run by the same people who've given us a 50 percent dropout rate, they're a big waste of taxpayer money," said Ben Austin, executive director of Parent Revolution who sits on the California Board of Education. "Parents aren't fooled." The RFK complex follows on the heels of two other LA schools among the nation's costliest — the $377 million Edward R. Roybal Learning Center, which opened in 2008, and the $232 million Visual and Performing Arts High School that debuted in 2009. The pricey schools have come during a sensitive period for the nation's second-largest school system: Nearly 3,000 teachers have been laid off over the past two years, the academic year and programs have been slashed. The district also faces a $640 million shortfall and some schools persistently rank among the nation's lowest performing. Los Angeles is not alone, however, in building big. Some of the most expensive schools are found in low-performing districts — New York City has a $235 million campus; New Brunswick, N.J., opened a $185 million high school in January.