The rise of rentership
The rise of rentership in the US, and the decline of home ownership.
In the post-bust climate, renting has emerged as a much more economically efficient way to pay for housing. A one-year lease represents a far less onerous financial obligation than a 30-year mortgage. It's difficult to get into too much financial trouble as a renter. The homeownership rate has fallen from its peak in 2006 to 65.4% today. The foreclosure crisis, which has caused millions of Americans to turn over homes to lenders, is responsible for much of this decline. What's more, given the weak labor market and higher lending standards, more Americans today have a difficult time scraping together the required down payments.
For an increasing number of Americans, though, it simply makes more sense to rent these days. According to Moody's, by late 2011 it was cheaper to rent than to own in 72% of American metropolitan areas, up from 54% a decade ago. And the more people who do it, the more socially acceptable and desirable it becomes. The decline in the ownership rate means that about three million more households rent today than did at the height of the bubble.
It's tempting to view the rise of rentership as an economic step backward. Renters can't build up equity, and they have less control over their living standards than owners. Renting is generally seen as something you do when you've failed as a homeowner or are not yet ready to be one. But I'd argue the rise of rentership is a sign of a system adapting—albeit too slowly—to new realities.
The U.S. economy needs the dynamism that renting enables as much as—if not more than—it needs the stability that ownership engenders. In the current economy, there are vast gulfs between the employment pictures in different regions and states, from 12% unemployment in Nevada to 3% unemployment in North Dakota. But a steelworker in Buffalo, or an underemployed construction worker in Las Vegas, can't easily take his skills to where they are needed in North Dakota or Wyoming if he's underwater on his mortgage. Economists, in fact, have found that there is frequently a correlation between persistently high local unemployment rates and high levels of homeownership.
What the Chinese Want
WSJ essay on tastes of Chinese:
Apple has taken China by storm. A Starbucks can be found on practically every major street corner in coastal cities and beyond. From Nike to Buick to Siemens, Chinese consumers actively prefer Western brands over their domestic competitors. The rise of microbloggers, the popularity of rock bands with names like Hutong Fist and Catcher in the Rye, and even the newfound popularity of Christmas all seem to point toward a growing Westernization.
But don't be deceived by appearances. Consumers in China aren't becoming "Western." They are increasingly modern and international, but they remain distinctly Chinese. If I've learned anything from my 20 years working as an advertising executive in China, it is that successful Western brands craft their message here to be "global," not "foreign"—so that they can become vessels of Chinese culture.
Understanding China's consumer culture is a good starting point for understanding the nation itself, as it races toward superpower status. Though the country's economy and society are evolving rapidly, the underlying cultural blueprint has remained more or less constant for thousands of years. China is a Confucian society, a quixotic combination of top-down patriarchy and bottom-up social mobility. Citizens are driven by an ever-present conflict between standing out and fitting in, between ambition and regimentation. In Chinese society, individuals have no identity apart from obligations to, and acknowledgment by, others. The clan and nation are the eternal pillars of identity. Western individualism—the idea of defining oneself independent of society—doesn't exist.
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To win a following among Chinese buyers, brands have to follow three rules. First and most important, products that are consumed in public, directly or indirectly, command huge price premiums relative to goods used in private…The second rule is that the benefits of a product should be external, not internal. Even for luxury goods, celebrating individualism—with familiar Western notions like "what I want" and "how I feel"—doesn't work in China…The last rule for positioning a brand in China is that products must address the need to navigate the crosscurrents of ambition and regimentation, of standing out while fitting in. Men want to succeed without violating the rules of the game, which is why wealthier individuals prefer Audis or BMWs over flashy Maseratis.
4 potential endings for Greece
1. Exit;
2. Repudiate;
3. Renegotiate;
4. Repent.
This is such a good case for game theorists to analyze. If Greece were to chose option #1 or #2, it's suicide.
A debate on whether now is best time to own your first house
A nice debate.
Eric Lascelles of RBC Global Asset Management argues now is the best time to buy your first house, because interest rate is at historical low, house price has declined 34% from the 2006 peak, and owning a house has become relatively more attractive to renting in recent years.
Gary Shilling is on the other side. He predicts further fall of house price by as much as 20%, due to excessive inventory. If taking into account of the hidden inventory (people chose to hold up because the current offer is too low), and future foreclosure, he argues, the situation is even worse. He also cited Bob Shiller's research that showed in the past, when housing bubble burst, it tended to overshoot on the downside. We haven't seen that yet.
My personal view is that it's a good time to buy your first house if you really love the location, and you have no plan to move to another place, say, in the next 5 years. I would still stay away from using house as an investment.
gender wage gap or hour gap?
Kay Hymowitz, fellow at Manhattan Institute, argues on Wall Street Journal that much of gender wage gap can be explained by the difference of hours worked by men and women. In other words, men earn more than women because they work longer hours. This is especially true when a child is born – most women, even the most educated, choose to stay home or work as part-time.
Most people have heard that full-time working American women earn only 77 cents for every dollar earned by men. Yet these numbers don’t take into account the actual number of hours worked. And it turns out that women work fewer hours than men.
The Labor Department defines full-time as 35 hours a week or more, and the “or more” is far more likely to refer to male workers than to female ones. According to the department, almost 55% of workers logging more than 35 hours a week are men. In 2007, 25% of men working full-time jobs had workweeks of 41 or more hours, compared with 14% of female full-time workers. In other words, the famous gender-wage gap is to a considerable degree a gender-hours gap.
The main reason that women spend less time at work than men—and that women are unlikely to be the richer sex—is obvious: children. Today, childless 20-something women do earn more than their male peers. But most are likely to cut back their hours after they have kids, giving men the hours, and income, advantage.
One study by the American Association for University Women looked at women who graduated from college in 1992-93 and found that 23% of those who had become mothers were out of the workforce in 2003; another 17% were working part-time. Fewer than 2% of fathers fell into those categories. Another study, of M.B.A. graduates from Chicago’s Booth School, discovered that only half of women with children were working full-time 10 years after graduation, compared with 95% of men.
Women, in fact, make up two-thirds of America’s part-time workforce. A just-released report from the New York Federal Reserve has even found that “opting-out” by midcareer college-educated wives, especially those with wealthy husbands, has been increasing over the past 20 years.
China got a “deficit”
These days, the word "surplus" is often associated with China. China runs a huge surplus on its international trade. As a result, it also holds the world's largest foreign exchange reserves, at staggering $3.3 trillion (as of April 2012). With its fast growing economy, everything seems to run in China's favor. Not completely. As Joseph Nye Jr. explains below, China runs a soft power deficit.
China is spending billions of dollars to increase its soft power. Its aid programs to Africa and Latin America are not limited by the institutional or human rights concerns that constrain Western aid. The Chinese style emphasizes high-profile gestures, such as building stadiums. Meanwhile, the elaborately staged 2008 Beijing Olympics enhanced China's reputation abroad, and the 2010 Shanghai Expo attracted more than 70 million visitors.
China has also created several hundred Confucius Institutes around the world to teach its language and culture. The enrollment of foreign students in China increased to 240,000 last year from just 36,000 a decade ago, and China Radio International now broadcasts in English around the clock. In 2009-10, Beijing invested $8.9 billion in external publicity work, including 24-hour cable news channels.
But for all its efforts, China has had a limited return on its investment. A recent BBC poll shows that opinions of China's influence are positive in much of Africa and Latin America, but predominantly negative in the United States, everywhere in Europe, as well as in India, Japan and South Korea.
Great powers try to use culture and narrative to create soft power that promotes their national interests, but it's not an easy sell when the message is inconsistent with their domestic realities. As I told the university students, in an Information Age in which credibility is the scarcest resource, the best propaganda is not propaganda.
The 2008 Olympics was a success abroad, but shortly afterward China's domestic crackdown on human rights activists undercut its soft-power gains. The Shanghai Expo was also a great success, but it was followed by the jailing of Nobel Peace Laureate Liu Xiaobo. His empty chair at the Oslo ceremony was a powerful symbol. And for all the efforts to turn Xinhua and China Central Television into competitors for CNN and the BBC, there is little international audience for brittle propaganda.
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Pang Zhongying, a former Chinese diplomat who teaches at Renmin University, says this reflects "a poverty of thought" in China today. When Zhang Yimou, the acclaimed director, was asked why his films were always set in the past, he replied that films about contemporary China would be "neutered by the censors."
I read the students a recent statement by Ai Weiwei, the acclaimed Chinese artist who's suffered from state harassment. He warned that censorship is undermining creativity. "It's putting this nation behind in the world's competition in the coming decades. You can't create generations just to labor at [electronics manufacturer] Foxconn. Everyone wants an iPhone but it would be impossible to design an iPhone in China because it's not a product; it's an understanding of human nature."
Jamie Dimon May 10 surprise conference call
Link to the conference call, in which you will learn more details about JPM's $2 billion loss resulted from their credit bet.