KeNo's Housing and Economic Portal: Sunday January 3 Housing and Economic stories

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TOP STORIES:

CA public pension real estate investments down 49% in year - (www.lansner.freedomblogging.com) CalPERS real estate down 49% in year. CalPERS lost big on NY apartments. State worker pension giant CalPERS got this ugly report from its financial consultants on its real estate bets in its most recent quarterly report …

· Real estate losses equaled a -30.1% return during the quarter and a - 48.7% return in the year ended June 30. Ten-year profits were still +4.4%.

· CalPERS owned real estate worth $13.4 billion at June 30, a decline of $4.2 billion or 24% from the previous quarter and an $8.6 billion or 39% decline from a year ago. Real estate is 6.9% of CalPERS assets, below target allocation of 10.0%.

· Reports says: “The performance in the real estate portfolio has been deteriorated by four primary factors. First, capital markets have had significant impact on real estate property valuations. Second, the macro-economy continues to go through a downturn which has had an impact on rents. The final two factors are related to the exposure in the CalPERS real estate portfolio to non-stabilized assets with higher amounts of leverage. These final two factors have exacerbated the recent underperformance to the benchmark as non-stabilized assets provide less income to insulate valuation declines and increased leverage magnifies returns in upward and downward market cycles.”

· Also, “Other factors negatively impacting returns included a relatively large proportion of non- stabilized and non-income producing properties and high levels of leverage utilized in CalPERS real estate portfolio relative to the benchmark.”

· Consultants PCA expects “fundamentals, and therefore the performance, of the real estate portfolio to continue to deteriorate over the next 12 months and potentially longer. Persistently weak economic conditions, the absence of a functioning commercial mortgage origination/re-financing market and negative leverage are likely to erode income streams and total returns.”

Raffle winner sells $1.2 million house for actual value of $650,000 - (www.washingtonpost.com) A Colorado woman who won a $1.2 million home in Edgewater in a $50-a-ticket raffle in January has sold the property to a Severna Park church at a bargain-basement price. "Hooray, finally!" said Karen McHale, 47, who lives in a home she built with her husband in the mountains west of Denver and never intended to move to the mid-Atlantic. "I tell you, that was a giant rock around my neck." McHale said she bought two raffle tickets last year as a contribution to an Annapolis-based charity that was co-sponsoring the contest. The raffle venture came about when a mortgage broker teamed up with We Care and Friends, which helps at-risk youths, to sell his home. A week after one of those tickets was chosen as the winner, McHale lost her job as a chemical engineer. Eager to sell the home before Dec. 31 to avoid paying about $300,000 in 2009 income taxes, she put it on the market in March for $799,000. When no one bit, McHale dropped the price to $749,000 in May. A dozen prospective buyers asked after the property; no one submitted an offer. McHale's husband, who works in construction, spent a week at the house in June, painting its 40 interior doors, hooking up a dishwasher and doing other last touches. Two buyers made offers in September; both deals fell through. Meanwhile, the six-bedroom, 4 1/2 -bath windfall, despite sitting empty, was accompanied by a hefty monthly bill: $600 to $800 in utilities and homeowner's insurance. McHale finally sealed a $650,000 deal last month with Unity By the Bay, a church that has outgrown its quarters in a Severna Park strip mall. The church paid $450,000 in cash, McHale said, and she made a tax-deductible contribution of the additional $200,000 to stem the flow of her winnings to the IRS. "We are all just so grateful to Karen McHale for her donation. The congregation is ecstatic," said board member Carol Kerr. "We have wanted to have our own building, but everything seemed so out of reach, pricewise, that we just haven't been able to make it happen."

Bernanke Told to Fess Up, Renounce Flawed Greenspan Doctrine - (www.bloomberg.com) Federal Reserve Chairman Ben S. Bernanke delivered the wrong speech this week at the Economic Club of Washington. The correct script appears in “How Markets Fail,” an admirably lucid account of how “utopian economics” drove us to disaster. “In an ideal world, Ben Bernanke would give a speech acknowledging the Fed’s failures and blunders in which he was complicit, and pledge to return the Fed to its traditional role,” writes the author, John Cassidy of the New Yorker. This is a book about how flawed ideas, and the people who promoted them, tipped us into the worst financial crisis since the Great Depression. It’s high time, Cassidy says, for the Fed to repudiate the Greenspan Doctrine, the former Fed chief’s argument that modern markets -- so efficient, so rational -- can be counted on to disperse risk and police themselves. There was no point in trying to prick asset bubbles, Alan Greenspan argued, because they can’t be detected until they burst. The chances of Bernanke giving that speech are as low as the Fed Funds rate today: effectively zero. If U.S. senators are sincere about fixing the Fed, they should oblige him to read this book before confirming his second term. “How Markets Fail” is three books in one. The first traces the rise of free-market theory, taking us from Adam Smith’s invisible hand (and highly visible nose) through Friedrich Hayek’s description of price signals as a “system of telecommunications” and on to Greenspan’s bubbles.

"Spend our way out": A desperate thing to say - (www.theautomaticearth.blogspot.com) Ilargi: He really said it. The nation must "continue to spend our way out of this recession". Obama presumably thinks such a thing is possible. And that in turn would seem to indicate that in his view it's been done before. But has any nation (note: what he means is "government") ever successfully spent its way out of a recession? At the very least any positive answer to that question would come dressed in question marks. For one thing, it’s much easier to see how a nation can spend its way into a recession than out of one. No matter how you twist and turn it, it’s a desperate thing to say. The "spend our way out of this recession" remark comes as part of a speech in which the president announced additional initiatives aimed at job creation. Which are necessary because what's been tried so far has all been a dismal failure, right? No, says the administration through White House Council of Economic Advisers chair Christina Romer. All the programs have been successful. Not a failure at all, we’re well on track to create the 3.5 million jobs foreseen in the February stimulus bill. And because it's been such a success, we so badly need to do more of the same. But Christina, the president said in February that the $787 billion stimulus would prevent unemployment from rising above 8%. It's over 10% now. You may call the February stimulus a success. But if it is, how would you define failure? You would have to wonder (or is that shudder to think) where the White House thinks unemployment would have been today without the $787 billion. Or, to take another point of view, what an extra $70-$150 billion, numbers currently floated, could do that $787 billion could not. Moreover, the jobs that allegedly have been added are just about all surrounded by a cloud of doubts and questions. Recovery.gov lists some 640,000 jobs created, but who believes them? Pay raises counted as saved jobs, non-existing districts that create thousands of jobs, it's a suspicious story. The latest in that line-up is the 1.5 million jobs that will be "created" to conduct the 2010 census, jobs that will last 6 months at most and then vanish again. I think we all know where to expect these numbers to pop up: in the long line of extend and pretend "successes". Like so often in politics, we’re left asking ourselves: is Christina Romer that dumb or is she that good a liar?

Attorney involved in banking mess found shot to death - (www.latimesblogs.latimes.com) Detectives look at attorney's cases, hoping to unravel shooting death outside Palos Verdes home. Detectives were trying Tuesday to sort out the mysterious death of a prominent Los Angeles attorney found fatally shot in the frontyard of his home in an affluent Palos Verdes Peninsula suburb. Jeffrey Tidus, an attorney with Baute & Tidus, a boutique civil law firm in downtown L.A., was found on the ground outside his home in Rolling Hills Estates on Monday night about 8:30 p.m. He died Tuesday morning at a hospital. Tidus was a former board member of the State Bar of California, with a host of high-profile former clients including New Century Financial, Isuzu Motors, California Federal Savings and Tokai Bank. L.A. County Sheriff’s Department officials called the death highly suspicious but stopped short of classifying it as a homicide, saying more investigation was needed. Tidus was shot once, and officials would not say whether they recovered a weapon. Tuesday afternoon, deputies scoured the neighborhood, searching in gardens and under bushes for evidence. Lt. Dave Dolson said authorities are looking into Tidus’ cases to determine if his death might be linked to his work. He also tried to assure residents that the attorney’s death appeared not be random. “I don’t think the residents of this neighborhood need to be worried,” Dolson said. “It doesn’t appear to me that it’s something random.” Neighbors said Tidus’ wife told them he went outside to get a laptop computer from his car, a Prius, but didn’t make it back after a shot rang out last night. They said they saw the laptop on the lawn, and blood was visible on the driveway. On Sugarhill Drive, a street of ranch houses valued at $1 million or more that was sprinkled with holiday decorations, Tidus was described as a friendly presence who ran marathons and often walked his dog in the area. “This is startling us here,” said Harry Petru, 71.

China executes corrupt securities trader - (www.msnbc.msn.com) China executed Tuesday the former manager of a securities company who embezzled millions of dollars — the first execution of an executive from the communist country's financial sector, state media said. Some wanted Yang Yanming kept alive so he would explain where the 65 million yuan ($9.5 million) went, news reports said. Yang refused to tell. China has also executed government officials in its long-running fight against corruption, which is a major source of anger among the country's citizens. The Beijing Evening News said Yang was the first person from a Chinese securities company to be executed. "Someone has to take responsibility in this case," the 51-year-old Yang told a court in Beijing on Tuesday. Yang served as general manager of the Beijing securities trading department of the China Great Wall Trust and Investment Corp. from 1997 to 2003.