The private-equity firm that has spent $5 billion on more than 30,000 distressed houses, is preparing to expand its bet on the housing recovery by lending to other landlords. read more on Bloomberg
Keywords: US Real Estate, Housing, US Housing Recovery
The Economist: Charlemagne Blog on European Politics
The Becker Posner Blog
The Circle Bastiat
Follow the latest discussion in the academic blogosphere (a service rendered by St.Louis Fed):
"This paper develops a new tax measure – the Tax Attractiveness Index – reflecting the attractiveness of a country’s tax environment and the tax planning opportuni-ties that are offered. Specifically, the Tax Attractiveness Index covers 16 different compo-nents of real-world tax systems, such as the statutory tax rate, the taxation of dividends and capital gains, withholding taxes, the existence of a group taxation regime, loss offset provi-sion, the double tax treaty network, thin capitalization rules, and controlled foreign compa-ny (CFC) rules. We develop methods to quantify each tax factor. The Tax Attractiveness Index is constructed for 100 countries over the 2005 to 2009 period. Regional clusters in the index as well as in the application of certain tax rules can be observed. The evaluation of individual countries based on the index corresponds – but is not totally identical – with the OECD’s ‘black’ respectively ‘grey’ list. By comparing the Tax Attractiveness Index with the statutory tax rate, we reveal that even high tax countries offer favorable tax condi-tions. Hence, the statutory tax rate is not a suitable proxy for a country’s tax climate in any case since countries may set other incentives to attract firms and investments."
Below is an excerpt from the paper conclusion, which explains that the statutory tax rate is not a suitable proxy for country comparisons and that special incentives have to be considered. The paper shows that also various EU countries apply aggressive special measures to attract firms. Looking at the tax attractiveness index constructed here one has to recognize that some EU countries such as The Netherlands, Ireland and more and more the UK belong to most aggressive tax jurisdictions. Furthermore, various "black lists" constructed by the OECD and specific countries could have a political element in it and might not be solely based on analytical measures.
Excerpt from paper conclusion:
"This paper develops a new tax measure – the Tax Attractiveness Index. The index co-vers 16 different tax factors, many of which have been neglected in existing tax measures so far. Hence, the Tax Attractiveness Index represents a new approach to measuring the attrac-tiveness of a country’s tax environment and the tax planning opportunities that are offered. We find that off-shore tax havens, such as Bermuda, the Bahamas, and the Cayman Islands provide very favorable tax conditions as reflected by high index values. However, certain Eu-ropean countries, such as Luxembourg, Cyprus, the Netherlands, Ireland, and Malta also achieve high index values. In further analyses, we observe regional clusters in the Tax Attrac-tiveness Index and certain tax rules. Moreover, we show that the index corresponds with the OECD lists of countries and tax regimes that are perceived as constituting harmful tax compe-tition. However, several exceptions can be noticed revealing that certain countries were re-moved from the OECD list although their tax environments did not change significantly. Fur-thermore, we find that the statutory tax rate is not a suitable proxy for a country’s tax envi-ronment in any case. In contrast, countries set incentives other than the statutory tax rate to attract firms and investments. Especially in Europe, many high tax countries offer extremely favorable tax conditions." Source: Keller, Sara; Schanz, Deborah, Measuring tax attractiveness across countries
Keywords: Taxes, Tax Attractiveness
Related: You find on the blog a table with the top 100 list
Keywords: Apple, I-Watch
..."people working and thinking about these technologies are starting to ask what these autos could mean for the city of the future. The short answer is “a lot.”
..."Imagine a city where you don’t drive in loops looking for a parking spot because your car drops you off and scoots off to some location to wait, sort of like taxi holding pens at airports."
..."Inner-city parking lots could become parks. Traffic lights could be less common because hidden sensors in cars and streets coordinate traffic."
..."That city of the future could have narrower streets because parking spots would no longer be necessary. And the air would be cleaner because people would drive less."
..."Harvard University researchers note that as much as one-third of the land in some cities is devoted to parking spots. Some city planners expect that the cost of homes will fall as more space will become available in cities. If parking on city streets is reduced and other vehicles on roadways become smaller, homes and offices will take up that space."
..."the Artificial Intelligence Laboratory at the University of Texas at Austin, imagines cities where traffic lights no longer exist but sensors direct the flow of traffic."
..."A spokesman for Audi said a fully automated car would not be available until the end of the decade. And the regulatory issues to be addressed before much of this could come true are, to put it mildly, forbidding."
..."But the pieces are starting to fall into place, at least enough to excite future-minded thinkers. Last year, Jerry Brown, the governor of California, signed legislation paving the way for driverless cars in California, making it the third state to explicitly allow the cars on the road."... Source: New York Times
"Coursera offers courses from the top universities, "for free to everyone". Current partners include Princeton University, Stanford University, University of California, Berkeley, University of Michigan-Ann Arbor, and University of Pennsylvania. The platform is designed to support millions of students on degree level units usually lasting 5 to 10 weeks."
Keywords: Online Education, Scaling up education
Online learning an effective way? NBER research says that it depends on the level of the student:
Online education, a way for schools to survive?
Schrag, Philip G. , MOOCs and Legal Education: Valuable Innovation or Looming Disaster? (June 10, 2013). Georgetown Public Law Research Paper No. 13-055. Available at SSRN: http://ssrn.com/abstract=2278261 or http://dx.doi.org/10.2139/ssrn.2278261
Selected blogs on online learning:
"This study examines the growth in private equity backed portfolio companies in the UK over the period from 1995 to 2012 using a dataset selected from the population of private and public companies in the UK including companies that received private equity backing. On the basis of real cumulative average growth rates (CAGR rolling 3 and 5 year periods), we find a consistent pattern of PE backed buyouts showing higher growth rates than non-PE backed buyouts for the first four years post buyout. Strongest increases in initial growth are displayed in respect of equity, total assets and value added. The growth rate remains positive throughout the post-buyout period for all variables except for sales and employment that become negative in year 7 post buyout. For the sub-period 2008-2011, PE backed buyouts are significant and positively associated with growth in all variables for both CAGR3 and 5 year periods, suggesting the PE backed firms’ growth has held up better than non-PE backed private companies. Board size is consistently significant and positively associated with all measures of growth, with significant and negative relationships between average director age and number of multiple directorships and all growth measures. Controlling for other factors, the extent of UK experience of PE firms is significant and positively associated with growth in value added, assets, sales, equity and employment. Foreign PE firms are significant and positively associated with growth in asset and equity but significant and negatively associated with employment growth." Source: SSRN
Keywords: LBOs, Firm Growth
"Technology tends to run in cycles. Microsoft ruled the 90’s by building essential software for enterprises. Then Apple created a new device driven marketplace in which the consumer was king. What will drive the next decade?
While these things are always hard to predict with any specificity, much of the writing is already on the wall. Humanlike, no-touch interfaces will combine with a pervasive array of sensors and intelligent back-end systems to form a new Web of Things. Computing will become truly ubiquitous.
This new era of computing will be different than anything we’ve seen before. Technology will cease to be something we turn on and off, but will become an inextricable part of not only our environment, but ourselves. It is a future that is both utopian and dystopian (depending on your perspective), in that the human experience will change dramatically." read more on Business Insider
Keywords: Technology, Technological Trends
..."My view is rising rates might slow price increases but not lead to a decline in prices (other than some seasonal declines). As far as the housing recovery (residential investment such as housing starts and new home sales), I think rising mortgage rates will have a minimal impact."
Keywords: Housing Prices, Mortgage Rates, Correlation between Housing Prices and Mortgage Rates
.."A new study accepted for publication by the Journal of Financial Economics overcomes this obstacle by focusing on the corporate tax-return data of more than 300 firms taken private by private-equity firms between 1995 and 2007. Even private companies have to file tax returns, after all.
After going private, the researchers concluded, such companies didn’t perform any better on average than they did before. Jonathan Cohn, a finance professor at the University of Texas, Austin, and one of the authors of this new study, says the agreement under which he and his fellow researchers were given access to Internal Revenue Service data prevents them from sharing data about any individual company.
Still, their conclusions reflect an average of the several hundred companies they studied and take into account return on sales, return on assets, economic value added and other performance measures.
The authors didn’t just focus on companies after they went private. They also compared the performance of such companies to a sample of other companies that were broadly similar except that they remained public. They found no difference in the operating performance of both groups.
These findings don’t mean that the average buyout firm can’t produce impressive returns. It just means that improved operating performance isn’t the source of those outsize returns.
So where do the returns come from? One example is market timing, Cohn says. Buyout firms often pick opportune times to take companies private and then sell them. Increased debt, or “leverage,” can magnify returns. And firms can realize tax savings because of increased debt-service costs.".. Source: MarketWatch
read the whole article on MarketWatch
Three common perceptions of CEO pay and corporate governance in the U.S.:
- CEOs are overpaid and their pay keeps increasing;
- CEOs are not paid for performance;
- Boards do not penalize CEOs for poor performance.
Keywords: CEO Compensation, Corporate Governance
Keywords: Pollution, Sensors
Keywords: Inflation official, Inflation real
...."Another way of looking at the data is to assume that profits are cyclical and return to the mean as a proportion of GDP; since they are currently at a post-war high relative to GDP, this implies profits (and thus dividends) will grow more slowly than GDP in the long-term.
And finally, should we assume that valuations remain unchanged? The evidence suggests that buying when the Shiller p/e is high reduces long-term returns since the ratio tends to return to the mean; see this paper from Clifford Asness of AQR. When the p/e is at its current levels, future ten-year real returns have averaged 0.9% a year.
Now one can assume that dividends will rise faster than in the past, or that profits will stay high (the workers will be crushed or the competitive laws of capitalism will be suspended), that valuations will remain above the historical norm. Things may be different this time. But these are optimistic assumptions, not the baseline."
Keywords: GDP, Price Earnings Ratio, Shiller PE
..."That’s one downside: Cheap money is hard to reverse gracefully. The larger problem is that central banks are trying to do things beyond their powers. Says Stephen Cecchetti, the chief BIS economist: “Monetary stimulus alone cannot put economies on a path to robust, self-sustaining growth, because the roots of the problem preventing such growth are not monetary.” In the annual report, he argues that low interest rates might even be counterproductive. They make it easier to finance large budget deficits and may delay needed, though unpopular, cuts"...
Keywords: Monetary Policy, Easy Money
Here is an excerpt about crisis roots in the Euro Area:
..."Recognizing the need to find new sources of growth, the United States towards the end of Jimmy Carter's term, and then under Ronald Reagan, deregulated industry and the financial sector, as did Margaret Thatcher's United Kingdom. Competition and innovation increased substantially in these countries. Greater competition, freer trade, and the adoption of new technologies, increased the demand for, and incomes of, highly skilled, talented, and educated workers doing non-routine jobs like consulting. More routine, once well-paying, jobs done by the unskilled or the moderately educated were automated or outsourced. So income inequality emerged, not primarily because of policies favoring the rich, but because the liberalized economy favored those equipped to take advantage of it.
The short-sighted political response to the anxieties of those falling behind was to ease their access to credit. Faced with little regulatory and supervisory restraint, sometimes based on the faith that private incentives worked best in this best of all worlds, the financial system overdosed on risky loans to lower middle class borrowers, aided and abetted by very low policy interest rates.
Continental Europe did not deregulate as much, and preferred to seek growth in greater economic integration. But the price for protecting workers and firms was slower growth and higher unemployment. And, while inequality did not increase as much as in the US, job prospects were terrible in the Euro periphery for the young and unemployed, who were left out of the protected system.
The advent of the euro was a seeming boon, because it reduced borrowing costs and allowed countries to create jobs through debt-financed spending. The crisis ended that spending, whether by national governments (Greece), local governments (Spain), the construction sector (Ireland and Spain), or the financial sector (Ireland). Unfortunately, spending pushed up wages, especially but not exclusively in the non-traded sectors like government and construction. Without a commensurate increase in productivity, the heavy spenders became increasingly uncompetitive and indebted and started running large trade deficits.
Of course, it did not seem at that time that countries like Spain, with its low public debt and deficits, were overspending. But as Andrew Crockett foresaw, the boom masks lending problems. Spanish government revenues were high on the back of the added activity and the additional taxes, and so spending seemed moderate. However, if spending was adjusted for the stage of the cycle, it was excessive"....
Keywords: Monetary Policy, Financial Crisis
“While financial crashes, recessions, earthquakes and other extreme events appear chaotic, Didier Sornette’s research (done at Swiss Federal Institute of Technology, Zurich) is focused on finding out whether they are, in fact, predictable. They may happen often as a surprise, he suggests, but they don’t come out of the blue: the most extreme risks (and gains) are what he calls “dragon kings” that almost always result from a visible drift toward a critical instability. In his hypothesis, this instability has measurable technical and/or socio-economical precursors. As he says: “Crises are not external shocks.”
Keywords: Financial Crisis, Forecasts, Predictions, Crisis Indicators
Keywords: Self-Driving Cars, Robots
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