thehousingbubble@gmail.com
Blog

Parallels Between The Current Washout And Past Waves Of Foreign Investment That Ended In Heavy Financial Wreckage

A report from the Wall Street Journal. “A strong appetite among foreign investors for office buildings, apartments, malls and other real estate has in part fueled the long-running bull market in U.S. commercial property. Now, amid a maturing property market cycle and rising uncertainties in geopolitics and the global economy, foreign investors have sold more U.S. commercial real estate than they bought in a quarter for the first time since 2013.”

“‘For someone looking out three to five years, their investments may not be worth as much as they are today,’ said Matt Posthuma, a partner in Ropes & Gray’s asset management practice. ‘That’s the fear.'”

From Crain’s New York Business. “Shanghai Municipal Investment Group isn’t concerned about its local real estate projects, ones that might keep other developers lying awake at night. The firm has an ownership stake in Central Park Tower, a 1,550-foot-tall condominium that’s just about to top out on West 57th Street, and it recently finished building a luxury apartment tower at 138 E. 50th St., where it has yet to sell a single unit.”

“‘I don’t worry about it,’ said Edward Martin, the vice chairman of the $75 billion Chinese government–owned fund’s U.S. arm, referring to the moribund market for upper-tier apartments. Martin didn’t have the same optimism about recouping the millions of dollars his firm invested in another recent deal where the die has already been cast. SMI and a partner sold a majority interest in July in a condo development site at 520 Fifth Ave., taking a roughly $65 million loss on the $270 million the pair paid for the property four years ago, according to city property records—a heavy loss that is a foreboding of potentially more write-offs to come.”

“‘I don’t want to talk about that,’ Martin said, cutting the conversation short.”

“But SMI is far from alone. Lately, a growing list of foreign real estate investors, after pouring billions of dollars into major New York City real estate purchases in recent years, have found themselves in a similar financial predicament. Several made ill-timed bets on the city’s condo market—a sector that has swamped investors at home and abroad. Foreign firms, however, have appeared to take some of the steepest losses.”

“Two separate foreclosure proceedings recently were begun at 125 Greenwich St., an 88-story apartment tower in Lower Manhattan that is being built by a partnership between Italian firm Bizzi & Partners Development, Chinese investment company Cindat Capital Management and domestic concerns including real estate executive Howard Lorber of New York.”

“Sales were so poor at the recently completed luxury condo tower 53 W. 53rd St. that Pontiac Land Group, a real estate investment firm in Singapore that built the spire with Goldman Sachs and Hines, quarreled with its partners over who had the power to set prices for the multimillion-dollar units. Only a little more than 30% of the building’s 145 apartments have been sold, four years after sales began at the 950-foot-tall building.”

“‘Some of the most troubled projects in the market right now appear to have foreign sponsors,’ said Jonathan Miller, CEO of Miller Samuel, a residential appraisal and analytics firm. ‘Many of them came in late in the cycle, paid huge sums and now have a lot of apartments to sell in a market that is saturated with product. It’s going to be difficult to capture profits on these deals.'”

“Some observers draw parallels between the current washout and past waves of foreign investment that ended in heavy financial wreckage. The Japanese famously bought up major real estate assets in the city in the late 1980s, only to sell several of them at substantial losses a few years later during the recession of the early 1990s. One similarity between then and now is the way foreign buyers rushed into the city’s property market, paying peak values just as it was cresting.”

“‘The market definitely hit its peak in 2015 and has been falling ever since across property types,’ said Bob Knakal, JLL’s New York–area chairman of investment sales.”

From National Mortgage News on New York. “Extell Development, facing an Aug. 30 maturity for a construction loan on a Lower East Side tower — the biggest newly built tower in Manhattan by number of condos — signed an agreement for a new loan on the property, using the unsold units in the 815-apartment project as collateral.”

“The New York-based developer secured a $553.5 million ‘inventory loan’ for the One Manhattan Square project, according to filings made this week with the Tel Aviv Stock Exchange, where it sells debt to Israeli investors. Extell also obtained a mezzanine loan of $138.2 million. The funds allow the builder additional time to find buyers for its One Manhattan Square units, which the company began marketing almost four years ago.”

“‘Extell is not in the business of holding units for a very long time, and this was probably not their original business plan,’ said commercial real estate attorney Joshua Stein, who is not involved in the financing deal. ‘When a developer gets a condo-inventory loan, it means the original plan didn’t work out the way it was expected and they’re obtaining new financing that better matches the sales horizon.'”

“New York’s luxury developers who financed projects during a more optimistic era for high-end condos are now bumping up against loan maturities in a slowing market, with a shortage of buyers to make good on rosy repayment projections. Rather than slash prices to move inventory and meet sales milestones included in their loans, builders such as Extell are finding temporary financing solutions so they can live to sell another day.”

Related Posts
This Post Has 102 Comments

  1. ‘Some observers draw parallels between the current washout and past waves of foreign investment that ended in heavy financial wreckage. The Japanese famously bought up major real estate assets in the city in the late 1980s, only to sell several of them at substantial losses a few years later’

    It’s here, now and already happened. The difference is that this bubble is several magnitudes larger.

  2. ‘Extell Development, facing an Aug. 30 maturity for a construction loan on a Lower East Side tower — the biggest newly built tower in Manhattan by number of condos — signed an agreement for a new loan on the property, using the unsold units in the 815-apartment project as collateral’

    Extell has been borrowing money for 4 years to stall the inevitable. This is a perfect example of Yellen bucks going to money heaven. The Crain’s article reveals these idiots are getting stomped on practically everything they bought. Remember the recent article about the Chinese guy from Anbang Insurance (in prison for 17 years now) riding in elevators, point to NY buildings and saying “I want that one, and that one”.

  3. Of course, HBB readers knew this would happen years ago:

    February 8, 2017

    “New York City is still the No. 1 destination for foreign capital in the world, according to this year’s AFIRE rankings, but it is no longer an environment in which foreign money — particularly from China — will buy anything in the market at any price. This year, China has clamped down on outbound foreign investment, and firms caught flouting the new laws will be punished harshly, China First Capital CEO Peter Fuhrman said. While most New Yorkers in commercial real estate are aware of the capital slowdown, Fuhrman said they are probably not taking it seriously enough.”

    “‘I have the perception that the full weight and severity of these capital controls hadn’t been fully felt here,’ Fuhrman said. ‘It’d be fair to say that the Chinese central government dropped a financial bomb on its businesses.’”

    “One of the Chinese government’s chief concerns when instituting the investment restrictions, Fuhrman said, is over outbound investors getting fleeced while paying record-breaking prices. ‘A concern of Chinese regulators is their investors have been really bad buyers,’ Fuhrman said. ‘This can sadly be seen more and more in the larger real estate deals they have done. What they are extremely concerned about is just about every acquisition the Chinese have made, is they have overpaid severely and foolishly, and that has spurred a loss of a lot of Chinese sovereign wealth.’”

    http://thehousingbubbleblog.com/?p=9989

      1. “dumb.borrowed.money.”

        “Afterall, borrowed money is dumb.”

        “When you combine ignorance and leverage, you get some pretty interesting results.” – Warren Buffett.

        Dumb borrowed money = Easy money.

        One merely has to position himself correctly.

        1. “When you combine ignorance and leverage, you get some pretty interesting results.” – Warren Buffett.

          Yep! Then it’s time to sit back with the popcorn.

    2. I’m still grateful that the Chinese bought up condos in New York, and not entire towns in the Midwest or northern New England or Texas or anywhere else that has arable land and potable water.

      1. Yes airboxes with little intrinsic value were the best way for the US to get our Yellen Bux back. However we got junk for the bux, but the Chinese got a socialist Mayor so we win the fight on points.

  4. “‘The market definitely hit its peak in 2015 and has been falling ever since across property types,’ said Bob Knakal, JLL’s New York–area chairman of investment sales.”

    Wait cratering since 2015?!? DAMN you TRUMP, Trade War, and BREXIT!!!!

    1. That’s right. The bubble popped years ago. And I said it at the time.

      I also said this would be the result prior to the peak. That’s what the “experts” got wrong. Remember the safe deposit boxes in the sky? How safe are they now?

      So how did I know? Motivation. It was purely speculative, and not just a little nutty. The HBB got it right, years before this well paid “industry” had a clue. I’ve never been to these places and didn’t need to have been there to see what was going on.

      1. Now that we have a mania pop larger than the Japanese foolishness of the 80’s, let’s review how to know how to see it.

        Irrational behavior. Second homes and airboxes are irrational. You can stay in a hotel or resort for a fraction of the cost. Chinese buying thousands of shacks in Irvine or the bay area, for example, and leaving them empty is irrational behavior. What is their real motivation? Sell to a greater fool. But the REIC/media will try to tell you crazy talk is sane. That people who just threw billions of dollars into the fire were savvy, investors even! And it extends to the lending side. Who lends the idiots at Extell hundreds of millions more when they clearly are just plain dumb? Irrational people, again apparently in Israel. Chasing yields down to negative (remember opportunity costs, etc) is irrational too. That’s what I saw in the apartment biz back in 2014. None of this is new to readers here. You have been warned.

        1. “Chasing yields down to negative (remember opportunity costs, etc) is irrational too. ”

          I hadn’t even considered what negative interest rates do to opportunity costs.

          We really do live in Clown World.

        2. In a time of record stock market highs and full employment, how did we do a complete 180 and go from raising rates to cutting rates and the expectation of negative rates? Something reeks big time with this, and I have a sneaking suspicion it’s to do with all the wealthy, connected people moving the goal posts to make sure their errant kicks go through.

          1. Because much of the stock market boom has been caused by companies borrowing money at very low interest rates to buy back their own stock. Once they can’t do that anymore, it all unwinds in a hurry. Unless the central banks step in as a buyer of last resort, which I suspect they are already doing. And there are still over 90 million people out of the work force. Unemployment is so low because they stopped counting those people.

        3. “Chasing yields down to negative…”

          – The financialization of America. FIRE sector driving the eCONomy. Banking cartel strip-mining everything. No value add, only taking from the productive sectors. Manufacturing and organic growth replaced by financialization and artificial, (temporary) prosperity. Enabled by unlimited debt growth via the Fed and fiat money.

          This has never ended well as shown by history. Reference: John Law and the Mississippi Bubble (just one example of many).

        4. I have been warned… to do what? 99% what you’re posting about I couldn’t do even if I wanted to. The only thing I could remotely aspire to is to take out a negative interest rate mortgage to buy a million-dollar beach house in Rehoboth.

          1. I have been warned… to do what? 99% what you’re posting about I couldn’t do even if I wanted to.

            Sure you could double down if you wanted to. I don’t think you can get a negative interest rate yet on a speculative second house investment though just now.

          2. Oops yeah, I forgot. Almost every week I get a solicitation in the mail for HELOCs or cash-out refis. One offered me up to $70K. Of course they all had interest rates higher than what I’m paying now, and every single one of them re-starts the 30-year clock. No thanks. My one financial goal is a paid-off house by the time I retire and I intend to stick to that.

  6. Market$
    Negative Intere$t Rate$ Threaten the Financial $ystem

    Markets may need to be rebuilt on a new set of a$$umption$, but we don’t know what those should be or how they would work.

    By Jim Bianco |Bloomberg | September 3, 2019

    To understand why, let’s start with the existing fractional reserve banking system, which is more than a century old. For every dollar that goes into a bank, some set amount (usually about 10%) must go into a reserve account to be overseen by the central bank. The rest is either lent out or used to buy securities.

    In other words, the fractional reserve banking system is leveraged to interest rates. This works when rates are positive. Loans are made and securities bought because they will generate income for the bank. In a negative rate environment, the bank must pay to hold loans and securities. In other words, banks would be punished for providing credit, which is the lifeblood of an economy.

    Bloomberg OpinionWelcome, calicoanalytics
    LIVE NOW
    Boris Johnson Addresses U.K. Parliament

    Bloomberg
    Opinion

    relates to Ohio’s Great Chinese Power Conspiracy Theory
    Ohio’s Great Chinese Power Conspiracy Theory

    relates to Fund Pre-K for Those Who Need It Most
    Fund Pre-K for Those Who Need It Most
    relates to A Prisoner Swap With Russia Tests Ukraine’s President
    A Prisoner Swap With Russia Tests Ukraine’s President
    relates to The Misguided War Against Corporate Profits
    The Misguided War Against Corporate Profits
    relates to Not All Economists Are Corporate Shills
    Not All Economists Are Corporate Shills
    relates to One Year On, How Has That Anonymous Op-Ed Held Up?
    One Year On, How Has That Anonymous Op-Ed Held Up?
    relates to How Brexit Blew Up Britain’s Constitution
    How Brexit Blew Up Britain’s Constitution
    relates to Israel Has Little to Fear from Iran
    Israel Has Little to Fear from Iran
    relates to EU Nationals Can’t Trust Brexiters on Migration
    EU Nationals Can’t Trust Brexiters on Migration
    relates to Australia Needs to Update Lesson From the `Banana Republic’ Years
    Australia Needs to Update Lesson From the `Banana Republic’…
    relates to Ohio’s Great Chinese Power Conspiracy Theory
    Ohio’s Great Chinese Power Conspiracy Theory

    relates to Fund Pre-K for Those Who Need It Most
    Fund Pre-K for Those Who Need It Most
    relates to A Prisoner Swap With Russia Tests Ukraine’s President
    A Prisoner Swap With Russia Tests Ukraine’s President
    relates to The Misguided War Against Corporate Profits
    The Misguided War Against Corporate Profits
    relates to Not All Economists Are Corporate Shills
    Not All Economists Are Corporate Shills
    relates to One Year On, How Has That Anonymous Op-Ed Held Up?
    One Year On, How Has That Anonymous Op-Ed Held Up?
    relates to How Brexit Blew Up Britain’s Constitution
    How Brexit Blew Up Britain’s Constitution
    relates to Israel Has Little to Fear from Iran
    Israel Has Little to Fear from Iran
    relates to EU Nationals Can’t Trust Brexiters on Migration
    EU Nationals Can’t Trust Brexiters on Migration
    relates to Australia Needs to Update Lesson From the `Banana Republic’ Years
    Australia Needs to Update Lesson From the `Banana Republic’…
    relates to Ohio’s Great Chinese Power Conspiracy Theory
    Ohio’s Great Chinese Power Conspiracy Theory

    relates to Fund Pre-K for Those Who Need It Most
    Fund Pre-K for Those Who Need It Most
    relates to A Prisoner Swap With Russia Tests Ukraine’s President
    A Prisoner Swap With Russia Tests Ukraine’s President
    relates to The Misguided War Against Corporate Profits
    The Misguided War Against Corporate Profits
    relates to Not All Economists Are Corporate Shills
    Not All Economists Are Corporate Shills
    relates to One Year On, How Has That Anonymous Op-Ed Held Up?
    One Year On, How Has That Anonymous Op-Ed Held Up?
    relates to How Brexit Blew Up Britain’s Constitution
    How Brexit Blew Up Britain’s Constitution
    relates to Israel Has Little to Fear from Iran
    Israel Has Little to Fear from Iran
    relates to EU Nationals Can’t Trust Brexiters on Migration
    EU Nationals Can’t Trust Brexiters on Migration
    relates to Australia Needs to Update Lesson From the `Banana Republic’ Years
    Australia Needs to Update Lesson From the `Banana Republic’…
    Markets
    Negative Interest Rates Threaten the Financial System
    Markets may need to be rebuilt on a new set of assumptions, but we don’t know what those should be or how they would work.

    By Jim Bianco
    September 3, 2019, 2:00 AM PDT
    Negative rates in the U.S. would have profound implications for markets.
    Negative rates in the U.S. would have profound implications for markets. Photographer: Drew Angerer/Getty Images
    Jim Bianco is the President and founder of Bianco Research, a provider of data-driven insights into the global economy and financial markets. He may have a stake in the areas he writes about.
    Read more opinion
    COMMENTS
    LISTEN TO ARTICLE
    4:08
    SHARE THIS ARTICLE
    Share
    Tweet
    Post
    Email
    In this article
    0651388D
    PETER SCHNEIDER
    Private Company
    EUR
    Euro Spot
    1.0973EUR+0.0003+0.0273%
    Former Federal Reserve Chairman Alan Greenspan recently said he wouldn’t be surprised if yields on U.S. bonds turned negative and if they do, it wouldn’t be “that big a of a deal.” That seems to be a sentiment widely held in central banking circles these days, but it’s wrong. Negative interest rates represent a threat to the financial system.

    To understand why, let’s start with the existing fractional reserve banking system, which is more than a century old. For every dollar that goes into a bank, some set amount (usually about 10%) must go into a reserve account to be overseen by the central bank. The rest is either lent out or used to buy securities.

    In other words, the fractional reserve banking system is leveraged to interest rates. This works when rates are positive. Loans are made and securities bought because they will generate income for the bank. In a negative rate environment, the bank must pay to hold loans and securities. In other words, banks would be punished for providing credit, which is the lifeblood of an economy. As German bankers recently explained to the European Central Bank:

    We already have a devastating interest rate situation today, the end of which is unforeseeable,” Peter Schneider, who represents public-sector savings banks in the southern German state of Baden-Wuerttemberg, said on Wednesday. “If the ECB aggravates this course, that would hit not only the entire financial sector hard, but especially savers.

    And to make matters worse, the German government is considering outlawing negative deposit rates. In a negative rate world, forcing rates on short-dated debt to zero would keep the yield curve permanently inverted. The fractional reserve banking system cannot operate properly in this environment.

    Valuation model$ are another area of finance that need to be tweaked in a negative rate environment. Nobel prizes have been awarded to economists that developed concepts such as the efficient frontier, the Capital Asset Pricing Model and the Black-Scholes option pricing model. But when a negative value is assumed for the risk-free rate in these types of models, fair value results shoot off toward infinity. With trillions of securities and derivatives dependent on these models, valuation is critical.

    In a similar vein, pen$ion$ use a discount interest rate to determine if they are properly funded. If one plugs in a negative interest rate as the discount rate, all pensions would technically be underfunded. The only pensions that would be properly funded would be those with assets exceeding expected liabilities. No pension is set up this way. Negative rates on fixed-income securities also means there is no way pension funds can ever generate enough income to meet their obligations.

  7. So NYC luxury condos are impacted by the currency controls out of China.

    What about specific cities – which were even more dependent. Article from 2015:

    —-

    And here was the stunner in question: “We are seeing more globalization as Southern California has become a destination for international buyers,” said Mark Hughes, chief operating officer with First Team Real Estate, covering the Southern California market. “Eighty percent of new construction in Irvine last year was sold to Chinese buyers. International buyers are driving home prices up and sometimes out of reach for many local residents.”

    You read that right, a whopping 80% of all new housing in Irvine was bought by Chinese.

    Which prompted some follow up reading. This is what we found:

    California is the most popular U.S. destination for Chinese real estate buyers, according to Juwai.com, a Hong Kong-based property search engine.
    Chinese bought 32% of homes sold to foreign buyers in California, double the share sold to Canadians, according to an April 2014 survey by the California Association of Realtors. About 70 percent of international buyers pay cash, the survey showed.
    Buyers from Greater China, including people from Hong Kong and Taiwan, spent $22 billion on U.S. homes in the first quarter of 2014, up 72 percent from the same period in 2013 and more than any other nationality, the National Association of Realtors said yesterday in its annual report on foreign home purchases. That’s 24 cents of every dollar spent by international homebuyers, according to the survey of 3,547 real estate agents.
    “A lot of people are trying to hedge against a generally bearish outlook for the Chinese economy,” Hanemann said in a telephone interview. “Buying real estate overseas has been in the past limited to a relatively small group of wealthy individuals and sometimes government officials. But it’s become a much bigger trend, involving affluent middle-class people.”
    Affluent being the key word: Chinese buyers paid a median of $523,148 per transaction, compared with a U.S. median price of $199,575 for existing-home sales. While Canadians bought more houses than the Chinese, they spent less — a median of $212,500 per residence, for a total of $13.8 billion.

    1. “You read that right, a whopping 80% of all new housing in Irvine was bought by Chinese.”

      I just read the Irvine is 41% Asian. I wonder if that was a factor. Of course, many, if not most of the Asians in Irvine are probably non Chinese or ABC’s who don’t speak Mandarin or Cantonese. Plus nearby Monterrey Park is almost 70% Asian, yet it doesn’t seem to attract as many foreign buyers.

      So why Irvine and not Newport Beach or Mission Viejo? Did Irvine have more “flip appeal”?

        1. I have no idea if Irvine public schools are any good, but given its economic demographics I suppose they would be better than average.

          Irvine does have a very strong UMC cookie cutter look to it. Maybe that’s what brings them in. Also, the article mention it was new construction they were buying, so maybe builders are adding features that appeal to mainland Chinese. Blingy things. floor plans, who knows?

          1. Blingy things. floor plans, who knows?

            Belief that the “value” will only go up, and more than the next place.

      2. “…So why Irvine and not Newport Beach or Mission Viejo?…”

        A major factor for many years has been Irvine High School which is one of the toughest and top rated high schools in the country.

        Also, Irvine High and UCI campus is within walk distance if family lives in [Irvine] Turtle Rock.

        Also, Turtle Rock area has for at least the last 10 years attracted some major speculation. I believe many/most of the buyers are Chinese. IMO, many of these purchases are tied to money laundering.

  8. Plea$e vote for me Argentina! … or …
    What happen$ in Argentina, $tays in Argentina!

    Argentina Announces 35% Minimum Wage Boo$t After Pe$o Rout

    By Carolina Millan|Bloomberg | September 3, 2019

    The government is rai$ing salarie$ on the eve of election$

    On Sunday the government announced capital control$ in an effort to contain the country’s e$calating financial cri$is. Argentina’s Eurobonds fell, while the peso strengthened in the wake of the announcement.

    The move comes after the peso dropped over 20% as opposition candidate Alberto Fernandez trounced President Mauricio Macri in an Aug. 11 primary election that indicates he’s likely win the top job in October. Following the peso collapse, cabinet members announced a series of measures aimed at softening the blow to Argentines, including tax break$, bonu$es and price freeze$. The currency collap$e is likely to further fuel inflation, which is already running at over 50% a year.

    The International Monetary Fund, which is currently analyzing whether to pay out the next tranche of its $56 billion loan to the country, said that it is studying the details of the measures.

    2. Elysium. The Cloud People and us.

      Takeaways? What are the chances that the Could People will try to pull out all of the stops to avoid deflation and what will that mean for ‘us’?

      1. “what will that mean for ‘us’?”

        Assuming they can pull it off (and that’s a big if), it means that if you own assets you will benefit, and if you don’t you’ll be boned as shelter will become even more unaffordable.

    3. FRom a website called cadreDOTcom

      Why Should You Care About an Opportunity Zone?
      Choose Opportunity Zones and you can:
      Re-invest any form of capital gains.
      Defer your taxes on your original capital gain until the end of 2026.
      Reduce your taxes by up to 15% when you invest in an Qualified Opportunity Fund for at least 7 years.
      Completely eliminate the tax on new capital gains from your Qualified Opportunity Fund investment after the 10-year mark.

    4. That is a fantastic article. I read it last week. Very on the money in my opinion too. The apartment complex we are selling is in an opportunity zone and it will go for top dollar. It’s class A luxury. The TCJA was really good for high end property.

  10. “The firm has an ownership stake in Central Park Tower, a 1,550-foot-tall condominium”

    Do these condos come equipped with parachutes, in case you need to evacuate fast?

    Of course not. No one is actually supposed to live in those sky boxes.

    1. Imagine if there’s a fire, the elevators are shut down and you have to dash down up to 95 flights of stairs, jostling with countless others, hoping the building won’t pull a WTC and collapse while you’re still inside.

      1. Did you say ‘pull’? As long as Larry Silverstein doesn’t own the building you are probably safe.

      2. figured I’d keep a large silver serving tray & ride it down the stairs in an emergency. . . all 95 floors

        like grandpa greystoke

    2. No joke, if I were to live in one of these places I would have a very long knotted rope stashed away in my closet or under my bed.

      1. I wonder if escape pods could be designed? I suppose there would have to be a way to safely launch them, plus the sky could get congested quickly.

        But since no one will actually live in those megabuck flats, except for maybe an occasional visit, a viable escape plan is irrelevant. There will probably be more people at one of the tower’s restaurants than in all the apartments combined on any given day.

          1. inconvenient

            Less inconvenient than falling to your death and going splat. A vision from 9-11 that’s hard to forget.

  12. Subsidize My Electric Car, Please

    Auto makers want Congress to expand this gift to the affluent

    ‘The great myth of political subsidies for business is that they will help an industry get started and then go away. We’ll soon see if Congress can for once live up to its temporary promise and block the emerging effort to continue subsidizing the affluent to buy electric cars.’

    ‘Wyoming Republican John Barrasso is circulating a letter asking Senate Leader Mitch McConnell to reject an expansion or extension of the electric-vehicle tax credit. The federal government currently provides a $7,500 consumer tax break for an auto maker’s first 200,000 cars. The tax credit then drops by half for EVs sold over the next six months, and by half again for another six months. It then disappears.’

    ‘Washington has been underwriting EVs for nearly 30 years, which is a long time for an infant industry. The current EV handout was part of the 2009 Obama “stimulus,” and its backers promised it would be temporary. But Tesla and General Motors hit 200,000 in sales last year, and Nissan, Ford and Toyota are well on their way. With the phaseout approaching, auto makers and environmental groups are now begging Congress for an extension.’

    ‘They’re floating a bill from car-state Senators Debbie Stabenow (D., Mich.) and Lamar Alexander (R., Tenn.) that would extend a $7,000 buyer tax credit for another 400,000 cars once auto makers hit the 200,000 limit. An Ernst & Young study estimates the expansion would cost taxpayers nearly $16 billion over the next decade.’

    ‘It’s hard to imagine a more blatant income transfer for the well-to-do. Electric cars are significantly more expensive than the average vehicle, with a starting price of around $36,000. A recent Congressional Research Service study found that nearly 80% of the credits were claimed by households with adjusted gross income of more than $100,000. Sales data show that about half of all electric vehicle sales occur in one state—California.’

    https://www.wsj.com/articles/subsidize-my-electric-car-please-11567459952

      1. rolling bbq death trap you say!?

        hmmm. wonder if I could trade an XBox One X to a high school kid to program one to drive itself over to the ex’s abode as an anonymous “gift”

        (asking for a friend)

    4. In my opinion the reason you have car state senators joining forced to try to extend the tax credit is because GM and Tesla have almost exhausted their credits, but VW, Toyota, Hyundai, Kia, and Honda haven’t even used hardly any. And now that VW is ramping up EV sales, it will mean that next year foreign EV sales will have a $7500 advantage over domestic ones.

        1. “So the best answer is to stop subsidizing anyone and just kill the credit.”

          We can’t do that, that’s like free market capitalism!

          /sarc

          1. As long as gas and diesel are getting a free pass for the pollution coming out of their tailpipes, EVs should be subsidized to level the playing field. As it stands now, the negative externalities of pollution aren’t being captured at all. Free market capitalism breaks down in the tragedy of commons when agents are allowed to pollute water, air, soil, etc. for short term profit but do not bear the cost of their actions (e.g. they are pushed off to others). That is when regulation needs to step in and/or incentives. The EV incentive has largely worked and primed the pump for the transition away from gas cars. EV sales in the US are strong and are getting stronger every month. The only bottleneck is the lack of compelling offerings. The credit is effectively gone for Tesla because they sell so much now.

            Even in one of the reddest states in the union (Utah), both sides of the aisle understand the problem of pollution:

            Utahans Want and Need Clean Car Standards

            “According to a new report released by Consumer Reports, if EPA and NHTSA move forward with their rollback, American consumers stand to lose about $460 billion in fuel savings in the coming years. In Utah, drivers have saved $270 million to date due to the current standards, and if they remain in place, the average Utah household will be $3,050 richer by 2030. Rolling these standards back would undermine local economies by pulling these savings right out of the pockets of Utahns.”

            “In addition to economic benefits, clean car standards also reduce pollution that drives climate change and threatens the health of Utah families. As Utahns know, the Salt Lake City region suffers from some of the worst air pollution in the country due in no small part to carbon pollution.”

          3. Until we build many more nukes no pollution is lost,

            Hormesis: any process in a cell or organism that exhibits a biphasic response to exposure to increasing amounts of a substance or condition.

            Tailpipe emissions in rural areas with low population density = not a big deal

            Tailpipe emissions in urban areas with high density = gassing your own population (asthma, COPD, autism, strokes, heart attacks, miscarriages, etc).

            Minute amount of lead in water = not health hazard

            High amount of lead in water = brain damage

        2. “So the best answer is to stop subsidizing anyone and just kill the credit.”
          American Farmer$ will bee a grabbin’ their gubbermint’$ all.U$A taxpayer$ $ubsidized pitchfork$.

          1. Farm subsidies last year were $25 Billion. This year DJT has given an additional $16 Billion on top of that. The max EV subsidy last year on all sold would have been about $2.5 Billion. So if we are going to get up in arms about subsidies, we should look at farmers, not EV drivers. Farmers are getting easily 10x-15x the subsidies of EVs on an annual basis and they are recurring every single year. EV subsidies phase out.

          2. subsidies

            Subsidies to farmers is or should be to promote our food security. Subsidies to Tesla promote folly and waste.

      1. ABQDan posted that article yesterday. Norway isn’t distorting the market, they are correcting the market by taxing the negative externalities of pollution (e.g. NOx, CO2, etc.). Norway is a model of what the US should be doing if oil lobbyists weren’t in control of politicians.

        Air pollution
        Cars produce numerous harmful air pollutants in their exhaust such as Nitrogen oxides, particulate matter, low atmospheric ozone (indirectly) and in the case of leaded fuel, lead. Those pollutants are known to cause various respiratory and other health issues and cars are among the leading cause of smog in modern developed world cities. External costs which can arise from using cars and trucks in everyday life are of different kinds (covering also material costs such as damages to buildings and materials), but health costs are the most common. In this case cars might cause cardiovascular and respiratory diseases. Such costs have to be paid by the society as a whole. [5]

        “There is quite high number of available studies on the methodology of air pollution costs as well as applications of these methods. The CE Delft study (CE Delft; Infras; Fraunhofer ISI, 2011) considers the following cost elements:[6] • Health effects: The aspiration of air transport emissions increases the risk of respiratory and cardiovascular diseases (caused mainly by carbon monoxide, nitrogen oxides and hydrocarbons). In more detail CO reduces oxygen in the bloodstream causing breathing difficulty, NOx (that reacts with form ozone) affects asthmatics and visibility. [7] • Building and material damages: soiling of building and corrosive processes caused by acidifying pollutants • Crop losses • acidification and eutrophication.”

        https://en.wikipedia.org/wiki/Externalities_of_automobiles

    6. the electric-vehicle tax credit.

      The whole industry is a taxpayer and duped investor money grab, for something that wouldn’t fly on its own.

    1. Not so, it was expected in the commons. Here’s how I understand the situation. If the law passes directing Johnson to ask for an extension, major names in the EU have said in the past 24 hours they ain’t gonna grant it. It will simply make a no-deal Brexit highly likely. Which is excellent news cuz Johnson has favored a May deal sans the backstop. And if another election is called, rebel Tories will have been deselected so off they go. Plus the Brexit Party swings into the picture, and Brits know this Corbyn guy is nuttier that crazy Bernie. The game’s afoot, as Holmes would say.

      1. It is worth noting that the MSM will do its utmost to make Boris J look like he will fail. That he made them foam at the mouth pretty much shows that he has the winning hand.

      2. Interesting. Thank you for providing an interpretation of events that cuts through the media optics.

        Markets must be on the brink of panic if a no deal Brexit seems likely.

        1. “Market$ must be on the brink of panic if a no deal Brexit seems likely”

          Chao$!, chao$!, chao$!

          Eye like$ it, eye love$ it, eye’$ want $more$ of it!

          < 55 day$ to go!

          " Long.live.thee.Queen.of.Scots! "

          1. Politic$ & Policy
            How Brexit Blew Up Britain’s Constitution
            Boris Johnson is looking less like a traditional conservative and more like a revolutionary in his gamble$ over Brexit.

            By Therese Raphael | Bloomberg |September 3, 201

            It may be that an electoral majority, if he could secure one, would allow normal parliamentary service to resume as well as Brexit to be delivered. And yet once conventions are broken and power is exercised, it becomes impossible to unlearn those strategies or leave such tools untouched. Should Johnson lose his gamble, another leader will likely seize on the precedents he has set. If he wins, we might as well refer to him as President Johnson. It’s unlikely that Britain’s constitutional balance will be what it was.

            Johnson is a big-C Conservative, but these aren’t the moves of one who seeks to preserve an existing order, or change it through accepted process, which would be the hallmarks of true conservatism. He is, as Gardner has it, “aggressively asserting the power of central government over all other institutions — over parliament, over the courts, over the public itself.”

            Can a conservative be a revolutionary really? Former U.S. Secretary of State Henry Kissinger wrote in his book Diplomacy that under the right conditions, the combination can be devastatingly effective, at least for a time:

            What is a revolutionary? If the answer to that question were without ambiguity, few revolutionaries would ever succeed. For revolutionaries almost always start from a position of inferior strength. They prevail because the established order is unable to grasp its own vulnerability. This is especially true when the revolutionary challenge emerges not with a march on the Bastille but in conservative garb. Few institutions have defenses against those who evoke the expectation that they will preserve them.

            He was speaking of Otto von Bismarck – a figure much admired by Johnson’s closest adviser, Dominic Cummings. But he might have been talking about Britain circa 2019.

        1. Really? Brexit is far better than being told what to do and how to do it by the Huns, which is how the EU works.

          1. Eye don’t think Great.Britannica will really mi$$ all the “Troubles” they’ve had with their cousin$, Ireland & $cotland.

          3. Li$ten to whom every ya want boo.rand$, awe$ome opportunitie$ abound iffin’ ya know$ where to look.

            (Besides, Thee.Brit$ weren’t alway$ benevolent to to “thee.wee.people’s” $ubjugated under “their.charge”)

          4. The EU is pretty much the 4th Reich. It is a government who pretty much doesn’t have to abide by anything the citizens of various nations may decide from a democratic standpoint.

        2. Beauty come$ in many form$$$!:

          No Lotu$, No Jaguar’$, No Range Rover$ … $ad.

          Lotu$ rise$ from the dead with a 2,000-horsepower electric $ports car

          MarketWatch |Published: Sept 3, 2019 |
          By Jurica Dujmovic

          The $2.1 million Evija is the first Lotus model since China’$ Geely took control of the British car company

          The Lotus Evija, meaning “the living one” or “the first in existence,” is one of the most beautiful cars I’ve ever seen. It’s the first British hypercar and the first electric vehicle (EV) built by Lotus of Hethel, England.

          Evija, pronounced “eh-vai-jah,” is unlike any other car. Its curves and “porous” design make not only for interesting visuals, but also for an outstanding aerodynamic profile. Instead of slicing the air as it speeds, as other cars do, the Evija was designed to encourage air flow through openings in its chassis.

          That increases the car’s efficiency and stability while being propelled by four electric motors pushing almost 2,000 horsepower combined, enabling it to reach a top speed of 217 miles per hour. Lotus hasn’t tested this number yet, but according to the company, the car can accelerate from 0-60 mph in less than 3 seconds. That alone could give Tesla’s TSLA, +0.28% Model S a run for its money when the numbers come in. (Tesla claims its upcoming new Roadster goes 0-60 in 1.9 seconds. Remember, also, that Tesla’s first car, the original Roadster, was a heavily modified Lotus Elise.) Lotus claims the Evija can reach 186 mph in less than 9 seconds, which is “better than any other direct competitor,” the company says.

          Lotus’ hypercar should be able to reach 250 miles before its 70 kilowatt-hour (kWh) battery runs out of juice. Recharging up to 80% of the battery’s capacity at an 800-volt, 350 kW, Level 3 fast charger will take 12 minutes, while you’d need to wait additional six minutes for a full charge.

  15. I think it’s over. We all happen to be home today, so I was telling everyone to keep away from the windows 🤣
    I take it all back. I’m glad I’m a renter.
    My neighbor is, right now in the middle of the day, arguing with people on NextDoor about guns. All someone did was post that since Walmart is discontinuing carrying ammo, maybe people would like to stock up.
    Anyway, the conversation is deteriorating, and I’m even more freaked out by her than I was before. This is the second time in a NextDoor post that she’s mentioned her CCW and once again, implied that she will shoot someone if she deems it necessary. She also said her great-grandmother killed herself with a gun. She’s nuts – I know from personal experience.
    I hope my idiot cats haven’t left any tootsie rolls in her yard lately – I’m pretty sure I’m definitely in her hit parade top ten.

    1. I’ve seen some loony posts on NextDoor, from both ends of the spectrum. The latest one was interesting. So a black bear with cubs wandered into town the other day. The Wildlife people came and for whatever reason they had to kill the mother, most likely because it was aggressive. Unfortunate, but sometimes it can’t be avoided. A mountain lion came into town also recently. It was trapped and relocated, because it still showed fear of humans.

      Anyway, this one guy went off the deep end about how evil we are and that we have no right to kill wildlife. Never mind that every effort is made to trap and relocate first.

      I mostly use NextDoor to get or give referrals. I don’t use it as a soapbox.

    2. Guns and anger are a bad combination. Did you see that a guy pulled a gun on a Popeye’s cashier because they ran out of their new chicken sandwich? Sheesh.

      1. No, but not surprised. I read an article recently about abuse of FF workers being the norm and that managers tell them they have to put up with it. Disgraceful. When I was in the restaurant biz, one time a woman whipped a fork right at our bartender’s head. I was so furious I felt like I was having a stroke and threw her and her friend right out. That was a shocker because it was 11 AM on weekday and they both looked like they were dressed for church.

  17. Politic$ & Policy
    How Brexit Blew Up Britain’s Constitution
    Boris Johnson is looking less like a traditional conservative and more like a revolutionary in his gamble$ over Brexit.

    By Therese Raphael | Bloomberg |September 3, 201

    It may be that an electoral majority, if he could secure one, would allow normal parliamentary service to resume as well as Brexit to be delivered. And yet once conventions are broken and power is exercised, it becomes impossible to unlearn those strategies or leave such tools untouched. Should Johnson lose his gamble, another leader will likely seize on the precedents he has set. If he wins, we might as well refer to him as President Johnson. It’s unlikely that Britain’s constitutional balance will be what it was.

    Johnson is a big-C Conservative, but these aren’t the moves of one who seeks to preserve an existing order, or change it through accepted process, which would be the hallmarks of true conservatism. He is, as Gardner has it, “aggressively asserting the power of central government over all other institutions — over parliament, over the courts, over the public itself.”

    Can a conservative be a revolutionary really? Former U.S. Secretary of State Henry Kissinger wrote in his book Diplomacy that under the right conditions, the combination can be devastatingly effective, at least for a time:

    What is a revolutionary? If the answer to that question were without ambiguity, few revolutionaries would ever succeed. For revolutionaries almost always start from a position of inferior strength. They prevail because the established order is unable to grasp its own vulnerability. This is especially true when the revolutionary challenge emerges not with a march on the Bastille but in conservative garb. Few institutions have defenses against those who evoke the expectation that they will preserve them.

    He was speaking of Otto von Bismarck – a figure much admired by Johnson’s closest adviser, Dominic Cummings. But he might have been talking about Britain circa 2019.

  18. Disgrace: Seventh Illegal Immigrant Arrested for Rape in Anti-ICE County Since Late July

    Guy Benson
    Posted: Sep 03, 2019

    Last time we checked in on progressive Montgomery County, Maryland, four illegal immigrants had been arrested on rape charges since Democratic politicians imposed new rules in late July that hampered local officials’ ability to cooperate with ICE. The federal agency warned that this act of political signaling would put innocent people’s well being at risk, an admonition that has been tragically vindicated on numerous occasions since. Two of the aforementioned rape suspects, both in their 20’s, had been taken into custody for allegedly repeatedly raping an 11-year-old girl. One of those suspects had been ignoring a final immigration removal notice since 2016, while his accomplice had re-entered the country following a previous deportation.

    Montgomery County Democrats who chose to make a show out of “standing up” to President Trump have merely put their own constituents in greater danger, and the details of several of these awful stories underscore the reality that the border is hardly secure. The Democratic Party writ large is increasingly moving toward a stance of effective open borders (see here and here), with their momentum toward decriminalizing illegal crossings and ostentatious objections to basic interior enforcement. In an effort to keep up with his Left flank, Democratic frontrunner Joe Biden recently embraced a new escalation in the open borders sweepstakes, apparently calling for border detention centers to be shut down completely:

    https://townhall.com/tipsheet/guybenson/2019/09/03/disgrace-number-of-illegal-immigrants-arrested-for-rape-in-antiice-county-rises-to-seven-since-late-july-n2552495

Comments are closed.