Weil on Finance: Florida Land Boom
Good morning, Viewfinders. Here is a look at some of my breakfast reading today.
Money-market funds live to threaten the financial system again
Great column today by Floyd Norris of the New York Times about the remarkable ability of money-market funds to preserve “the best of all regulatory worlds: no capital requirements, no reserves, no fees for deposit insurance and a belief by their customers that they were at least as safe as banks.” He quotes former Fed Chairman Paul Volcker, who summed up the problem well. “They either have to be banks or mutual funds,” Volcker told him in an interview. “If they are banks, promising to pay at par on demand, they should be regulated like banks. If they are mutual funds, they should be regulated like mutual funds.”
The downside of total Fed dominance of the financial markets
Mish Shedlock, a widely followed economics blogger, shared an interesting exchange he had with Steen Jakobsen, chief economist at Saxo Bank in Denmark, who wrote this in response to this week’s Federal Open Market Committee statement: “The whole financial market is now `government controlled’ -– Price discovery has been reduced close to ZERO -– as even the term-premium (expected rate expectations) is ignored and considered invalid by Fed and its merry men.” Shedlock’s response: “I agree 100% (for now). But will `control’ last forever? If you think it will, then why did we have a housing and stock market crash?”
Here’s what the Fed has done to South Florida real estate
The boom-bust cycle is back to boom again. Remember, South Florida was one of the areas worst hit by the housing crash. From the Sun-Sentinel of Fort Lauderdale: “Broward County's red-hot housing market is expected to cool off, but it hasn't happened yet. The county's median price in August was $270,500, a 26 percent increase from a year ago, the Greater Fort Lauderdale Realtors said Thursday. It was the ninth consecutive month that the median jumped by more than 20 percent.” This seems to be the sort of thing the Fed wants, but can a one-year 26 percent rise in home prices really be a healthy thing?
Mossberg and Swisher cutting ties with Dow Jones
It’s the end of the road for Dow Jones & Co. and AllThingsD, the technology-news website run by Kara Swisher and Wall Street Journal tech columnist Walt Mossberg. The company isn’t renewing its contract with the venture, and Mossberg is leaving the paper. The Journal reported that the two are in negotiations with investors and other media companies, including Comcast’s NBCUniversal, for their next deal. Knowing the success they have had in building AllThingsD over the years, I’m guessing it will be more lucrative than the one they’re leaving behind.
Who benefits most from U.S. economic policies?
Americans seem to have this pretty well figured out. From an article by Pew Research Center: “The public sees clear winners and losers as a result of the government’s economic policies following the recession that began in 2008. In the public’s view, the beneficiaries of these policies are large banks and financial institutions, large corporations and wealthy people, according to a survey conducted earlier this month. Sizable majorities say government policies have helped all three at least a fair amount -- 69 percent say that about large banks and financial institutions, 67 percent large corporations and 59 percent wealthy people. Meanwhile, fewer than a third say policies implemented by the government following the recession have helped the poor, middle class and small businesses.”
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)
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