Friday News Digest

I’ve been trying to find some time this week to finish the next draft of MoneyHall. That has been hit and miss, not only because of stuff here at Strong Towns but because my daughter, who is now nine, is suddenly in a softball league where they take practice seriously. I’ve been helping out and it seems like we are at the park now every night. Lots of fun and she is getting better, but crimps my writing time (not to mention that dad is a little more tired at night after running around in the sun for two hours). I’m close – should have an announcement in the next week or two. In the meantime, I’m going to do a speed version of the FND so I can get back at it.

Enjoy this week’s news.

  • On Tuesday I shared the #signoffailure. Someone sent me this link showing one of these signs installed on a stroad directly in front of the police station. Of course, people still speed, kind of defeating the argument that “all we need” is better enforcement. That means you are left with (a) people are just reckless deviants and we shouldn’t therefore have cars, or (b) maybe we need to take human nature into account when we design streets.

If your development can’t support the cost of full infrastructure, that’s a powerful market signal that it’s not viable.

  • You have heard me talk funding transit through value capture but maybe are a little unclear of what that means. This video describes one alternative in just sixty seconds.

  • Housing is back, or so we are supposed to believe. Here is Brainerd it is selling season and it feels again like we have more buyers than sellers, a good thing for prices. If you are one of those potential sellers, however, you may not want to dither. Charles Hugh Smith shows why, in four powerful charts, this new housing bubble is even more fragile than the last one.

The whole echo bubble is based on unsustainable extremes of interest rates, central-planning intervention and investor fantasies that the supply of greater fools will never decline. If history is any guide, rates will rise (albeit modestly), the economy's "recovery" will end in recession, the Fed's manipulation will cease having any positive returns while the unintended consequences of the Fed's unprecedented interventions will rip the heart and lungs out of the housing market.

  • We need to put some modest disclaimers on that last link, thanks to a CNBC report showing that the most expensive homes are climbing rapidly in value. The weight of evidence that the Federal Reserve’s Quantitative Easing (money printing) program has only made the rich, powerful and well-connected even more so, while harming the average saver (and that is without any significant inflation thus far) is overwhelming the theoretical case for trickle down government that all of you religious Keynesians continue to make.

Sales of the top 1 percent in San Jose are up 91 percent, while in the rest of the market sales are down over 7 percent. Even in the boom-to-bust markets that saw the biggest fall during the housing crash, the disparity is wide. Sales of Phoenix's priciest homes are up 24 percent, while the rest of the market is down nearly 16 percent.

  • The second week in a row that we need to draw attention to innovative things happening in Houston. Planners laugh at them for their rejection of otherwise-ubiquitous zoning controls, but I don’t see the outcomes there being that much different than others parts of the country – certainly not other parts of Texas – but I do hear a conversation that is now including a more sophisticated set of questions. Financial feedback loops have a way of doing that.

[I removed this video because the provider set it to auto start. I HATE that, especially if you are like me and open multiple news articles at one time only to have three or four autoplay videos. Yuck. So, if you'd like to see the video, you can click here.]

  • Despite what the Excel spreadsheets of engineers and transportation planners would suggest, vehicle miles driven continues to decline. Maybe, just maybe, cities are more complex than a linear regression analysis would suggest.

Travel on all roads and streets changed by 0.2% (0.5 billion vehicle miles) for March 2014 as compared with March 2013 (see report). However, if we factor in population growth, the civilian population-adjusted data (age 16-and-over) is at a another new post-Financial Crisis low, as is the total population-adjusted variant.

  • Here in Minnesota, Move MN – our big coalition of transportation insiders pushing for more money – is lamenting the fact that their lobbyists will get paid for another year of bad propaganda since the stealth tax they proposed as part of their “comprehensive” plan to fund less than 20% of our transportation funding deficit didn’t get approved in this legislative session. Their plan now is to “woo” business and, by business, they of course mean people with money, power and influence. It’s the circle of life.

Now, transportation advocates are planning a far bigger 2015 effort — at $6 billion, nearly that bridge-collapse call-to-arms. They are pushing hard to woo corporate figures like U.S. Bancorp CEO Richard Davis, who has worked with Gov. Mark Dayton on everything from the Minnesota Orchestra lockout to the state’s recent winning 2018 Super Bowl bid.

  • Some big news on the home front. My twin hometowns are getting its third dollar store. Think of all the jobs (being created somewhere else) and all the revenue (leaving the community). But hey….we have a local sales tax (to pay for building more infrastructure so we can get more stores like this). It’s the circle of life. (Note that the newspaper reports on the trees being removed, which is actually what people here care about most, not the fact that the financial strength of this city is being sapped by a thousand small cuts.)

The development, at 14087 Baxter Dr., was requested by Baxter Development Group. According to plans previously filed with the city, the 16 pine trees along the property boundaries on the east side of the mall will be removed.

  • A “reckless” cyclist finds herself in court this week. Her crime: believing she had a right to travel on public roadways. Why doesn’t she just get a job so she can buy a car already? Oh wait….she is biking to work….she can’t afford a car because she is choosing to spend her money on helping her family instead. This sounds quite un-American (and, sadly, that is not a joke).

  • Anytime I see a Cabela’s or a Bass Pro Shop, I know I’m in a city that is getting screwed. You don’t subsidize retail. You grow your market and un-subsidized retail will find you. It might not have the “destination” effect of a Cabela’s, but it also won’t have any of the costs, short-term and especially long-term. These are projects bureaucrats and politicians love but, in the complex system that is a local economy the size of Oklahoma City, they are a distraction today and financial millstone in the future.

Brent Bryant, the city’s economic development manager, said the chain has yet to select a site for its Oklahoma City store. Bryant’s report on the application forecasts the store will generate $40 million to $50 million in annual sales.

“It’s a performance-based incentive, based on 1.2 percent of their sales,” Bryant said. “And at the end of the day, they get incentivized on their performance. If they hit a home run, they get paid sooner. It expands our sales tax base and it reduces the potential of sales tax leakage to areas outside the city.”

  • I love the sharing economy. This article from Forbes shows why it isn’t always good to be too successful, too quickly. If you ponder it a while, it will also help you understand why centralized decision-making in an economy stifles innovation by allowing rich, powerful and connected old enterprises the resources to hold off upstarts through fees and regulation. Today’s Uber and AirBnB will inevitably become tomorrow’s major hotel chains and will then – if our current centralized economic systems persist – use their position to fight off competitors. It’s the circle of life.

“A perfect share economy network should not require any capital,” Burnham said. As competition in a given space ratchets up, the platforms should get “thinner and thinner to the point where you end up at decentralized autonomous corporation” like Bitcoin.

  • And finally, I noticed on Facebook that the entry for my hometown of Brainerd, Minnesota, had a picture of our office building. The entry is drawn from the Wikipedia entry. I was going to share that here, noting that one half-abandoned old building in the rail yard as the highlight of the community is really sad (there are some others I would have used, but so many more that would be better but were torn down), but then I noticed something quite humorous: someone has gone in and listed me as a “notable resident” right after cage fighter Brock Larson and just before indie rock drummer John Moen. I’m not an editor on Wikipedia and I really don’t fully know how it all works, but that is funny.

 

Enjoy your weekend, everyone. I’m not sure what next week is going to bring in terms of content as I’ll be in Buffalo for CNU, but check back often as there should be something. I’m going to be capturing a lot and will do what I can to share it with those of you that can’t make it.

Charles Marohn