Tuesday, September 16, 2014

The Train To Nowhere

We were having dinner with close friends the other night. They are an extremely successful couple, now retired, and have seen more of the world than any other person I know. They like us, have jumped on and off trains, and boats, and trains all around this world (though they have gone a lot further and to places my wife says, “in your dreams.” The surprising thing was that we all came to the conclusion that Governor Brown’s high speed train is not just a joke but insanity.

“Put the money into the regional transits, like BART,” he said. “Put it where it would make the most sense. The freeways are becoming a joke around here – make these trains work, not make it easier for folks in LA to escape.” There’s some truth to that I think.

The infrastructure of the Bay Areas rapid transit is now more than forty year old. New rail cars are being added; it will finally reach San Jose in a few years; and may extend into the eastern outlying suburbs during my lifetime. But put fifteen or twenty billion into it and real money will grow from these roots extending out into the hinterlands—just like it did forty years ago.

High-speed rail is cool. I took it from London to Milan last year. It’s a wonder. And it’s also a wonder how those European economies paid for it. Probably sold the same bonds to the Chinese the Californians are getting ready to sell. It isn’t a question of spending billions of dollars, California will do that anyway; it’s where it’s spent.

People will live where they want, and it is usually driven by costs and value and fear and traditions. They may want to live in their old neighborhood but work forty miles away; all the urban planning and silly state laws won’t change that. The basic twenty-first urban planning is done in most American cities; we are now into the fifth and six rings of outward development surrounding cities. Serving and interconnecting these rings with each other and to the old urban core are what needs to be done. Not build tracks in the middle of nowhere hoping that money will be found to connect them eventually to where the people really are. Governor Brown can create one of his fantasies and in the end it will all turn out just right. Maybe we can use it to bring water from Canada—not that’s an idea.

Stay tuned. . . . . . . . . . .

Tuesday, September 9, 2014

To Buy or Rent—Now That Is a Question

I remember when I was in my late twenties the one thing I wanted most was to own a home. My wife had always rented so she, while understanding, was somewhat ambivalent. I persisted and just after we turned thirty we bought our first home in… San Francisco. Yes, the small town on the west coast where home price are now totally and completely nuts. In fact the home we purchased in 1979 was recently sold for 11.66 times the price we paid—yes, totally insanity. (In fact, no improvements have been made to the house since we sold it in 1990, now that’s sad  on many levels.)

But we, like millions of other across the United States, have weathered the ups and downs and the vagaries of the housing marketplace and survived, and most have prospered. Much of our collective net worth is in that humble assembly of stick and stucco. Our hopeful retirement fund is not in some stack of bonds and stocks, but covered by a new composite roof. Such is the state of the financial world in the United States. Much of the rest of the world is confused by this American institution—considering that to pay rent is the norm—not home ownership.

So why aren’t home sales bursting through the roof? There are more potential buyers out there than at any time since the years following World War II. They are wealthier (or have access to family capital), they find that interest rates are incredible low (more than half what we paid in 1979), and depending on the region, reasonably priced.

Some say it’s the amount of debt that the under thirty crowd carries over from college. This may be true. Some say it’s the fear of what they and their families have just gone through during the Great Recession; this may also be true. And some say the culture has changed, ownership means being tied down, beholding to a bank and to sticks and bricks. This may also be true. My guess is it’s all of these and more.

There are changes in automobile ownership; reports are that some in the younger generation are opting out of buying a car. They rent one when they need one—other than that they take the bus or the train. For some this is a smart move—we all certainly know the costs of car ownership. In fact there is a growing trend of renting everything among the youth—thus reducing the baggage that we older types carry around with us. They may be into something here, but this also leads to not saving. And not saving leads to having little left at the end of the month and the end of the year, and most especially the start of retirement.

It is very hard to put your finger on the problem, as this Wall Street Journal article on renters pointed out yesterday. There it is stated that the real reason for not purchasing is lack of money (down payment), income, and debt. I’m shocked; in more than thirty years the reasons for not buying a home are exactly the same reasons we were faced with. Much of what happened in the Naughty Aughties when the government, banks, and builders foolishly messed with market forces and over built, over lended, and then over extended themselves and came very close to collapsing the economy, is now being averted. Steady pacing of construction, more prudent lending, more stringent controls for loan qualifications, and renting will do more to quite economic fears than any government program.

Stay tuned . . . . . . . . .

Tuesday, August 26, 2014

Earthquakes and Muggings - 2014 and 1989

As a resident of Northern California for more than forty years I have had my fair share of earthquakes. In the seventies there were the usual 3.0s that left you wondering, “Did that just happen?” Then in the early eighties there where a couple of 5.0s that made my wife’s high-rise building sway, and the old office building I was in, rain dust on the drafting tables. Last Saturday at 3:21 I was awoken by the gentle but persistent shaking of our bed – for more than 10 seconds. I knew then that something big had happened, but where I wasn’t sure. I went back to sleep thinking of the tragic affects of the famous World Series earthquake of October 17, 1989.

It’s called the Loma Prieta earthquake (west of San Jose) because of where it all started that Tuesday evening at 5:04—but to all of us at the Bay Bridge World Series it will always be call the World Series Quake. It was game 3 of the series, the first game at home. My Giants were down two games to the Oakland Athletics (5-0, 5-1). We needed this home game to even stay with the powerful Athletics who had won 99 games that season. We needed more than hope; we needed a miracle.

The Giants had just finished a bruising series with the Cubs (4-1) to win the National League Championship. The fans were in heaven—finally a World Series in San Francisco. The venue was Candlestick Park, one of the most reviled ballparks in the National League. Cold, foggy, windy, poorly located, food stunk, and attendance for some years often was at the bottom of the league. They even gave out pins if you were brave enough to stay for an extra inning game, the Croix De Candlestick.

We had, over the series with the Padres and the Cubs, met many of the fans near our seats in the deck directly above third base. Good people, smart people, baseball people. Even the weather during the previous weeks (as is often the case in San Francisco in October) was just plain great.

As the fans piled in early for the game that Tuesday evening there was a palpable feel that this would turn around tonight. We would take the three home games then show Oakland our metal when we took the series on their ball field. The ballpark was festooned with all the usual red, white, and blue bunting. Since the league takes over for all the festivities there was a certain sense in the air that we weren’t in Candlestick, just a feeling, but it was like the atmosphere was different, the field looked different. Maybe it was all the cameras, the helicopters overhead, the suits on the field – something was different.

In minutes the “Battle of the Bay” would start, for baseball fans having their team in the World Series is every birthday, Christmas, and 4th of July they’ve had all rolled into one. Bags of souvenirs and trinkets were stuffed under the seat, the first beer was half gone, and the stands were filled well beyond capacity—it was a wonder. The game was to start at 5:35 – 8:35 in New York (which was asleep, this was not a TV demographers dream match, to say the least)

Then the shaking began. First more like a push, then a roll, then another push. The silence from 65,000 fans was loud. I still remember the eeriness of it. What the hell is going on? As the shaking eased everyone knew what had just happened—except the Easterners who hadn’t a clue. The whispers rose to a full-throated conversation, the crowd was into it now. “Yeah, this is San Francisco baseball. Get the game started. Play ball!” Then the power went out, no announcements could be made, then the big lights went out, no communication with the fans in the stadium. Only those with transistors radios had an idea of what was going on, and even that was sketchy since the broadcasting from the park was compromised by the loss of power.

From the row behind us someone issued a, “No shit.” The fellow had been our eyes for the last two weeks, he had faithfully brought his small battery operated TV so we could watch replays. “The Bay Bridge bridge collapsed, the city is burning,” was his next update. Helicopters flying over the park had fanned outward to survey what had happened after the quake hit. The first shots of the collapsed portion of the Bay Bridge and the fire in the Marina district were being broadcast around the world. The word spread through the crowd – people began to move quietly and orderly to the exits. It was time to go home – the game would wait. It would not resume for ten days.

Random thoughts:
  • The young lady sitting next to me (name lost to time) informed me that when the quake hit I grabbed her thigh and left a serious bruise—I absolutely don’t remember—and I always remember grabbing women’s thighs.
  • If the earthquake had lasted as long as the 1906 earthquake (15 seconds+/- to 42 seconds) I would not be writing this missive.
  • The various TV crews working the game responded differently – Johnny Bench ran out of the booth so fast that it prompted his partner Jack Buck to say, “If he moved that fast, he’d never hit into a double play. I never saw anyone move that fast in my life.”
  • Rules for backup power and safety were rewritten for all California stadiums.
  • The Embarcadero Freeway, that cut the City of San Francisco off from the bay, was compromised and would be torn down. This was nature’s way of doing what the city government hadn’t been able to do for thirty years. The result is a spectacular new waterfront and promenade.
  • Sadly and tragically more than 60 people lost their lives – most in the collapse of the double deck freeway in Oakland. A friend’s wife had just left that section two minutes before the quake. The loss of life was less because everyone had gone home early to watch the game.
  • A new ballpark for the Giants would open in 2000, not because Candlestick failed, but because new ownership revitalized an historic franchise. The average attendance went from about 12,000 per game at Candlestick, to more than 40,000. The quake played a part in this change.

Eventually the Giants were swept by the A’s, forcing many in the Bay Area, including family members, to come to grips with their loyalties and ball cap collections.

We survived; only one small teddy bear fell off a shelf in our San Francisco home’s living room. The next few days were eerie and strange. San Francisco was essentially closed, and would slowly awaken and get back together. The cost was in the tens of billions and it would take 24 years to replace the old unsafe Bay Bridge cantilever section.

Our hearts and thoughts go out to those in Vallejo and Napa who were victims of nature’s geological adjustment. We all know it could and will happen—but it’s more like a mugging than anything else.

Stay Tuned . . . . . . . .

Thursday, August 7, 2014

Saturday, August 2, 2014

It is Becoming Electric!

BMW's i8 Concept car - hybrid (for now)
Long time readers know well my issues with electric cars, not the concept or the idea but the government’s (state and federal) tax credits and other juicy bits that help to make the car more affordable. In other words take from you to give to me. And of course the headlong rush to promote the electric car as the savior of the world has or will lead to other unintended consequences.

Most state and federal highways in the United States are paid for out of the various taxes placed on the sale of gasoline. It doesn’t take a high school math student to understand that as we sell less gas there will be less money for the roads and highway infrastructure such as bridges and tunnels. Electric cars put as much wear and tear on these facilities as gas powered vehicles—no matter what the HOV sticker on the rear bumper of the electric car says. Look for a revolution in how we fund our highways. The tax fund will decline—decisions on how to go forward will have to be made now not later. This will be a significant change to how we fund this all-important part of the American fabric. Will there be point of sale assessments? Will there be usage fees charged through internet connections with the car talking to state and federal computer (now that will be interesting)? Will there be usage assessments made at the electric meter at you house? It will get complicated before its simplified.

With the decline in gasoline demand the urban architecture of America will change. Across the American landscape, at prime highway corners, are gas stations, tens of thousands of them. Think what will happen as they disappear, what will replace them? What new architectural gem will fill this half-acre of extremely prime real estate? The corners are too small for most land uses, access is difficult (we make allowances for service stations), and clean-up is necessary. I think that housing has a chance here.

There may be the inevitable shift to replaceable batteries. These would require a location like the gas station but would allow for the quick replacement of a standardized battery pack—thus freeing the electric car from its extension cord. It is this flexibility that will allow the electric vehicle to achieve parity with gas.

There are now eleven all-electric cars available on the American market—and maybe another dozen more coming soon from GM, BMW, and the other international brands. A significant change in the overall transportation industry is coming. And it’s coming very quickly. These cars are simpler and safer. Less moving parts, no container of high explosive fuel under the rear seat, no pollution, and no having to take the car in for 3,000 mile oil changes. You know there’s a change when Ferrari is making an electric car (hybrid of course).

And when this change reaches the tipping point when there are more electric vehicles than gas vehicles on the road—what will the environmental crowd bitch about then?

Stay Tuned . . . . . . . . . .