Marvin Josephson (1927 to 2022)

Family lore has it that during a conversation between Debbie and a good friend known for bluntness, when talk turned to my given name, this friend immediately blurted out the question, "Is he Black or Jewish?" 

Evidently, Marvin goes against type for a Chinese American boy.

My given name came about because this person, Marvin Josephson, took it upon himself to sponsor my dad for permanent residency after getting to know dad as the hard working elevator operator at his co-op who was working his way through graduate studies at St John’s.  Without this grand mitzvah, I would have grown up in Taiwan. 

And, he was a Cornellian.  Rest In Peace, Marvin.

Yellow Peril Alert: NBA owners have more than $10 billion invested in China

How worried should we be about ESPN's report that NBA owners have invested over $10B in China?  This is clearly a sizable nominal amount, but how should we react?  Let's perform a back-of-the-envelope assessment to see if this level of exposure to China is cause for the concern that ESPN is clearly intimating.

With the given $10B as the numerator, let's determine the denominator, or total value, for the objective function, starting with the value of the National Basketball Association as asset.  The total value of all NBA franchises is $77.5B, according to Sportico.  Given that the article focuses on NBA owners who may have far greater assets than just their teams, we find that the cumulative net worths of just the ten wealthiest NBA owners is $180.2B, per Sportsbrief.com.  To round out the net worths of the remaining 20 owners, the majority of whom are billionaires, let's use a SWAG of $220B.

By this calculation, $10B accounts for 4.5% of the NBA owners' net worth in aggregate.

Since each owner is a high net worth global investor, let's investigate recommended investment allocation to the Chinese economy.  Let's evaluate three alternatives:

1. By share of total GDP: China is currently the second largest economy in the world, accounting for 18.62% of the total global Gross Domestic Product on a purchase-power-parity basis.  
2. By MSCI ACWI Index: This is MSCI's flagship global equity index that covers approximately 85% of the global investable equity opportunity set.  As of April 2022, China represented 3.47% of the total exposure.
3. Portfolio manager recommendation: In 3Q21, Blackrock recommended allocation to Chinese assets “two to three times” that of diversified global portfolios such as MSCI's index.  This would result in a range of 7-10%.

BlackRock is presently reviewing that call given recent macro circumstance, but 4.5% is well below the previously recommended 7-10% range.  Given that Joe Tsai's stake in Alibaba alone accounts for up to 45% of the $10B, one may even suggest that the owners of the other 29 NBA teams may be underweight in their exposure to the second largest economy in the world. 

The point: While there are certainly complications around specific investments, casting aspersions on the NBA owners’ $10B exposure to China by nominal value alone is jingoistic and devoid of perspective.

Asian-Pacific American History Month at Cornell: Campus partners spotlight

As part of Cornell's celebration of Asian-Pacific American History Month, I had the honor of moderating a conversation by leaders of two amazing campus partners -- Professor Christine Balance and Dr. Nancy Martinsen -- to discuss how their programs have helped raise the profile of the Asian/Asian American experience, becoming part of the academic and cultural fabric of the University

Christine is Associate Professor and Director of the Asian Alumni Studies Program, the first such program amongst the Ivies that will be celebrating its thirty-fifth anniversary in the coming 2022-23 academic year.  Nancy is the Kent G. Sheng '78 Associate Dean of Students and Director of the Asian and Asian American Center. 

Why investing in women is just good business

A change.org petition from Cornell Female Founders and Funders...

"We propose the following commitments that college endowments can pursue as part of the quest to further support a more diverse set of women and BIPOC founders and funders by June 2022:

• College endowments should transparently share the amount of funding going to women and BIPOC funders
• College endowments should formulate a strategy released by June 2022 for investing in emerging women and BIPOC fund managers

As students, faculty, staff, and alumni, we can pioneer this opportunity. As Cornellians, let’s lead this initiative."

David Swenson once wrote that endowments have "a time horizon measured in centuries." 

Let's ponder the multi-generational impact of backing a cohort that "typically invest a higher proportion of their earnings in their families and communities." (source: OECD)

The ultimate desktop appraisal FAQ?

Desktop appraisal... the very name is an artifact -- highlighting the distance the real estate tech/proptech sector needs to close on the innovation front.  The related matter of appraisal modernization is a real and pressing concern, even beyond the Biden Administration's a task force to develop the Property Appaisal and Valuation Equity Plan (PAVE).  The average age of appraisers is 50, a cohort that is 63.6% male who also happen to make over 50% more than female counterparts.  Such disparities make it hard to defend when stories of disparate outcomes crop up -- like how "Wells Fargo Rejected Half its Black Applicants in Mortgage Refinancing Boom."

But I digress, for desktop appraisals, or as I call it "collective intelligence (human/machine) real estate valuations" can drive more transparent, objective appraisals.  As you can readily conclude from my preferred term, I'm no branding expert, so for now, here's the "ultimate desktop appraisal FAQ"

Covid vaccines, beneficiaries of "advances in technology, data mining, and data modeling."

Retort to the mounds of misinformation around Covid vaccines by the inimitable Scott Galloway.

"...But the swiftness with which the vaccines have been developed is less a reflection of haste than of commitment, resources, and new technology.

As of mid-December, scientists had published 74,000 papers related to a virus that nobody had heard of 12 months earlier. Nearly one-third of all scientific researchers around the world have dropped their prior projects to work on Covid-related matters. As Ed Yong recently described in the Atlantic, this pivot is far beyond any historical precedent and will have profound effects on the scientific community for years to come.

The speed of clinical trials can also be attributed to the virus’s very virulence, as it takes so little time for the control group to suffer a statistically significant number of infections. Johnson & Johnson recently cut the size of its Phase 3 trial because infection rates are so high in the U.S.

We moved fast because we had to, and because we could. These vaccines benefited enormously from advances in technology, data mining, and data modeling.

The technology behind the Pfizer and Moderna vaccines, which has been in development for decades, also enabled the shots to reach us quickly. Their novel deployment of messenger RNA should also quell a common concern about vaccines: that they inject a modified form of the virus itself into the recipient. Instead, mRNA vaccines provide the “instructions” our immune system needs to identify and defeat the pathogen. They do not alter the DNA in our cells. (If my scientific expertise is not reassuring on this point, vaccines based on traditional approaches are also in development.)

Still, though, I hear friends and colleagues say, “Even if the risk is tiny, why take it? I’m not at risk from Covid.” But the risk of suffering serious health effects from the disease, even for younger people in good health, is real. In July, the death rate among adults 25-44 was almost 50% higher than in July 2019 — that’s an additional 5,000 deaths attributed to Covid, among younger people, in just one month. Even among survivors, the virus has been shown to cause long-term neurological and cardiac harm in 10% of victims. Yes, the risk is small. But it’s far greater than the risk presented by the vaccine.

Whatever the risk to ourselves, however, we don’t take vaccines only to protect ourselves. We take them to protect everyone, to avoid becoming a fiber in the web."

The Asian/Asian-American experience at Cornell: An oral history

Bringing together Asian alumni spanning eight decades was a singular treat.  I am at awe with their experiences.  Through their stories, we clearly see how the Asian experience has both benefited from, and has been a beneficiary to, the overall Cornell community.  I'm reminded of a National Geographic piece on Taiwan from the early 1950's that casually equated a local farmer's chances of visiting the United States with a trip to the moon.  We've come a long way, have so much opportunity in front of us... "high above Cayuga's waters..."

US Census Bureau construction permit data

My post on the bull run of Texas housing construction permits prompted a dive into U.S. Census Bureau permit data from the past quarter century.

OVERALL CONSTRUCTION PERMIT TRENDS

1. The housing crisis hangover has been a very long one as we just surpassed the annual construction permit volume from 1995 this past year.
2. If not for the rise of multifamily permits, we'd still be in a hole. Unit permits for 5+ builds accounted for over a third of all permits for the past eight years, up from around a fifth pre-crisis.

SHARE OF PERMITS BY REGION

Three U.S. Census Bureau regions have seen the most change in share of housing construction permits over the past quarter century:

1. East North Central (Illinois, Indiana, Michigan, Ohio, Wisconsin) has been nearly halved;
2. West South Central (Arkansas, Louisiana, Oklahoma, Texas) has powered ahead; and
3. Mid Atlantic (New Jersey, New York, Pennsylvania) has gained materially.

TOTAL PERMITS BY TOP STATES

The top states' share of permits has steadily increased since 1995, rising from under a quarter to over a third of total construction permits. Texas alone accounted for 15% of permits in 2019.

Does Boston's bad weather drive out-migration?

A peek into the other side of the trends in population migration... Boston

1. Even though Massachusetts is the fastest growing Northeastern state, it's growth over the past decade has lagged the national average by 150 bps
2. Boston would have lost population if not for international migration

Luc Schuster of The Boston Foundation: "We are losing some residents to other parts of the country with strong economies and better weather - which is one of the factors, certainly - and cheaper housing."

The Missing Middle...

National Association of Home Builders about the Missing Middle has a chart that shows a stunning drop in 2-4 unit multifamily permits in the late 2000's. It bears mention that all housing permits plummeted during that period. Fortunately a relative representation of the same data set does indeed show a sustained reduction in share of 2-4 unit permits over the period.

Unfortunately, we lack a complete picture of Accessory Dwelling Unit impact to this Missing Middle housing stock since the U.S. Census Bureau only tracks ADUs that are new structures. Given that Freddie Mac estimates a total 1.4mm ADUs and the general trend towards promoting this configuration, missing middle seems to be an uncannily apt description of the situation.

The Economist: The case for more state spending on R&D

The Economist: “It will take time for new ideas to have big effects. And in a world of 24-hour media, it will be hard to sweep unavoidable stories of wasted money and failed projects under the carpet—however inevitable, even welcome, some sorts of failure may be. But at a time when the need to boost innovation has never been greater, politicians may conclude that rebooting the innovation system is worth the risk.”

A full reading requires the repurposing of Winston Churchill’s quip about democracy: “State-funded R&D is the worst form of R&D, except for all the others."

More signs of the "K" - Manhattan edition

Curbed: "It Looks Like the Rich Aren’t Abandoning New York After All" ...meanwhile, the jury's still out on the lower 60%

Why does El Camino Real in the Peninsula look like it's stuck in the 1970s?

"According to UrbanFootprint’s analysis of El Camino Real, this lone corridor (between Daly City and San Jose) could theoretically accommodate more than 300,000 new units if the road was upzoned to allow residential development and its parking lots and big-box stores became low-rise apartment complexes."

California's aggregate building permits between 2010 and 2019 fell nearly 600k short of Texas' total despite having a population over a third higher.

ESG as part of executive compensation

“In 2021, Apple is adding an ESG “bonus modifier” to its cash incentive program which can swing the total bonus payout by 10% — executing on ESG goals can increase the bonus by 10%, while failing to hit ESG targets could cost Apple’s top brass a bonus reduction of the same amount.”

Housing supply continue to drop

 Redfin: New listings fell 3%, the first annual decline since July even as pending sales were up 35%

Housing permits booming in Texas

While the aggregate US single-family housing construction permits is struggling to get back to the 100 (Jan ‘20 level), the Texas component is nearing 180. And remember that Texas has an outsized share of permits, accounting for roughly 15% total.

NYT: They Can’t Leave the Bay Area Fast Enough

"But the migration from the Bay Area appears real. Residential rents in San Francisco are down 27% from a year ago, and the office vacancy rate has spiked to 16.7%, a number not seen in a decade."

Manhattan by comparison saw rents drop 17% from a year ago and and has a 13% office vacancy rate. Double-clicking on the latter approximately a quarter of Manhattan's office vacancy were in the form of subleases compared to half in San Francisco.

First Community Bank of Tennessee buys mortgage lender

$814mm First Community Bank of Tennessee buys A Mortgage Boutique. One side made a very smart decision - not sure which... 

Causes and implication of the pandemic increase in house prices

Harvard Joint Center for Housing Studies fellow Don Layton's excellent summary of the state of play in pandemic-era US residential housing. Key point, don't expect a replay of the Great Recession with its Ownership Society hangover from binging via loose lending standards and the use of “house as piggy bank” which led to a foreclosure crisis and 1-in-4 homes being underwater. We will surely face headwinds in the days ahead, but gross pattern-matching will not provide the right insights.

Highest annual appreciation of Purchase-Only FHFA API since 2004-5

FHFA House Price Index (HPI) Monthly Report: “The 12-month gain of 10.2% in October is the highest annual appreciation observed since the 2004- 2005 period. Extremely low mortgage rates and a limited supply of homes for sale continue to propel price gains. The data do not yet reflect renewals of some local and state COVID-19 restrictions.”

This index is derived from data on mortgages conforming to Fannie Mae and Freddie Mac limits.

U.S. home prices hit 14-year high in October

"The S&P CoreLogic Case-Shiller index covering home prices of all nine U.S. census divisions, reported an 8.4% increase in October from a year ago. The National Index is now up 24.5% from its former high in July 2006."

Many reasons, but the one provided by the guy overseeing the index, that “it’s likely COVID-19 has pushed buyers to move from urban apartments to suburban homes” is one of the less plausible ones since the we have yet to see undisputed data supporting thesis of a secular bum rush out of the cities (ex-NYC).

“The National Index is now up 24.5% from its former high in July 2006.” — This daunting stat translates to a slightly less almighty CAGR of roughly 1.6%

NYT: The Real Estate Collapse of 2020

 The median Manhattan rent of $2,776 this past November was down 12.7% year over year, exceeding “the biggest price drop during the Great Recession, when prices fell nearly 10 percent,” while the suburbs witnessed 20%+ growth in median sale prices. Looking forward, however, the number of new signed contracts in NYC’s urban centers have been on an upswing while the suburbs are reverting to long-run norms.

As ever, The New York Times seems to have forgotten that land mass west of the Hudson in its reporting, where “sales of luxury homes skyrocketed 101.6% year over year.”

Redfin: Luxury Home Sales Surge a Record 61%

“The 49 most populous U.S. metropolitan areas all experienced at least double-digit growth in luxury-home sales during the three months ending Nov. 30. The biggest jump was in Newark, NJ, where sales of luxury homes skyrocketed 101.6% year over year.”

As we head into the second calendar year of this pandemic-fueled housing bull run, we seem to have encountered two word pairs that likely have not entered our collective consciousness in a single sentence in well over fifty years - “Newark, NJ” and “luxury homes.”

In all seriousness, the Northern NJ market has been a key beneficiary of the one major evidence-rich migration story of 2020, the once-in-a-generation outflow of residents from NYC that have also tilted definitively toward the upper end of housing stock. Despite my sophomoric attempt at humor, kudos to Redfin for illustrating the dispersion of trends across the housing stratifications.

Thoma Bravo acquires RealPage

Thoma Bravo acquires RealPage, Inc. for $10.2 billion. The pace of proptech transformation is quickening.

Going to Texas...

After losing his Tennessee bid for the US Congress, Davy Crockett was quoted as saying to his constituents, 

"Y’all can go to hell and I will go to Texas"

In this epoch, middle-aged aged tech pioneers seem to be adopting this mindset. Another week and Oracle, one more tech giant with its hypergrowth phase a distant memory, has announced its HQ move to Texas. 

Will these moves catalyze a new manner of collaboration across the Red-Blue divide, with Texas and California, in essence, holding joint custody of a growing number of major corporations?

Akin to divorces, one hopes that a spirit of cooperation, however uncomfortable, will arise after dawning realization of the futility of antagonism and games of one-upmanship. The fate of both states will be inextricably connected for the foreseeable future.

Mortgage originations "on pace for best year ever"

While we are ending 2020 with mortgage originations “on pace for best year ever” (https://lnkd.in/grd-epN) turbocharged by refinance volume, should we be concerned by the increasing disparity in Fannie Mae home purchase sentiment between those who already are homeowners and those renters looking to get into home ownership? The latter category have been harder hit by the economic ravages associated with pandemic and have been sitting on the sidelines during this housing value bull market. 

Door #1: The HPSI disparity between cohorts must converge for a long term sustainable purchase mortgage market, or

Door #2: We have nice single family rental unit for you...

Realtor.com top housing markets

What to make of a year-over-year comparison of the top housing markets as published by realtor.com? 

• The 2021 list is composed of seven 2mm+ population markets, with the rest at under 1mm... Boise, Harrisburg, Oxnard
• The prior year’s list OTOH had zero in the 2mm+ category and only four in 1mm-2mm tranche... Winston-Salem, Memphis, Rochester, Tucson
• Within regions, there’s a flight to mass... Denver > Colorado Springs, Charlotte > Winston-Salem/Charleston/Columbia
• Even with Elon Musk’s emigration to #TechSAS, no one needs to worry if the last person leaving California will be turning off the light
• Only one market shows up in both lists... Boise

Despite the mounds of breathless anecdotes about discontinuous mobility, the real action is in the larger established markets, as consumers take the leap into home ownership, existing ones trade up and others incrementally fan out within the metro areas in search of space and affordability.

M2 soaring...

The M2 grew by $3.5Tr since early March. In other words, nearly one in five of all US dollars were created during the period. By comparison, the supply expanded by less than $1.0Tr during the Great Recession. (Source: Federal Reserve Bank of St Louis)

Buy now pay later

“The (buy now, pay later) movement has left banks puzzled.” Clear example of the incumbents lacking customer empathy. By enabling the tracking of spending in terms of set cash flow, BNPL provides consumers a level of simplicity and real control to counter the complexity and illusory control of open ended credit cards.

Data is the oil... residential real estate edition

"In recent years, as finance has computerised and algorithms have come to dominate markets, data has evolved from being a byproduct of transactions to 'the lifeblood of finance'" (quote by Audrey Costabile Blater PhD of Aite Group)

Buried in nearly every piece on this matter is mention of the Ellie Mae purchase by Intercontinental Exchange which may seem a bit dissonant, but residential mortgages provide some of the richest and most sizable, long duration data sets around, one that's barely being leveraged when compared to adjacent financial sectors, and generally at a remove. This may be attributable to the cloistered nature of the US mortgage market, a $10Tr+ cul-de-sac in the financial markets.

But, don't fret. The Black Fleet of exogenous disruption is at the mouth of this sector's Edo Bay.

The myth of GSE release

“(FHFA) Director Calabria seems more interested in crippling the GSEs operationally than making a release from government control truly possible.”

Christopher Whalen may be indulging in a bit of psycho-analysis, but if you take Grover Norquist’s quip about getting government “to the size where we can drown it in the bathtub,” and substitute the object of affection with Fannie Mae/Freddie Mac, you’re likely close to the good director’s world view.

Disparate outcomes of loan deferral/forbearance programs

The Wall Street Journal highlights the disparate outcome of loan deferral programs set out by the Cares Act, which have been "of greater benefit to homeowners and college graduates, many of whom entered the recession in relatively good financial shape. Lower-income workers, who are more likely to rent and to not have a college degree, saw less benefit."

In a fractal turn within mortgages, one sees a marked divergence in impact, with the Federal Housing Administration and U.S. Department of Veterans Affairs loans having 2.6x higher rate of forbearance than the generally better credit Fannie Mae and Freddie Mac loans. (Source: Black Knight McDash Analytics)

Hoboken’s Jack Silbert is unapologetically himself

Great piece about my one-of-a-kind high school and college classmate Jack Silbert #resilience