March 23, 2023

Common Sense: Economic Experts Give Predictions for 2013

To many politicians, the deal that raised taxes on the wealthy and averted the fiscal cliff was a sellout, a cop-out, a Band-Aid — in short, nothing good. And now the debt ceiling showdown is looming. So why have stock investors cheered, pushing the Standard Poor’s 500-stock index to five-year highs?

My annual survey suggests that investment experts are cautiously upbeat about the economy and the stock market (but not bonds) for 2013, even though they acknowledge that political dysfunction in Washington poses risks. The tax deal may have upset Tea Party Republicans looking for big cuts in entitlement spending and liberals demanding even bigger tax increases on the wealthy. But investors seem to be taking the long view that the warring factions did in the end reach a deal, and it amounts to a $4 trillion stimulus compared with what would have happened if Congress had done nothing. Stimulus may be a bad word in Washington, but many investors seem to believe that continued deficit spending and only a modest tax increase will be good for the economy and corporate profits, at least this year.

The experts I consulted a year ago — Bill Miller for stocks, Bill Gross for bonds and Karl E. Case for real estate — proved accurate in their predictions for 2012. So I asked them for a return engagement. I also spoke to Byron Wien, vice chairman and a senior adviser at Blackstone. Last year, Mr. Wien was one of the few pundits who was exactly right about the stock market, predicting that the S. P. 500 would close the year “over 1,400.” The index ended the year at 1,426, a gain of 13.4 percent for the year.

Bill Miller:

‘The great bond bear

market has begun’

Perhaps the biggest comeback of 2012 belongs to Mr. Miller of Legg Mason, who became a mutual fund legend by beating the S. P. 500 for 15 consecutive years, from 1991 to 2005. Then, during 2008 and the financial panic, he seemingly lost his magic touch. His fund plunged 55 percent. The Wall Street Journal, in its headline about the fund’s dismal returns, spoke of his “defeat.” And after another disappointing year in 2011, he retired as head of the Legg Mason Value Trust, the firm’s flagship fund.

But Mr. Miller kept his hand in the market, managing the much smaller Legg Mason Capital Management Opportunity Trust. When I sought him out a year ago, reasoning that even the most brilliant investors can be expected to have a few bad years, he was bullish on stocks. That proved good advice. Mr. Miller’s fund gained over 40 percent in 2012, and was the top-performing mutual fund in Morningstar’s database. How did he do it?

Mr. Miller made big bets on the battered and out-of-favor homebuilding and financial sectors, the kind of contrarian strategy that served him well for so many years. Major holdings like Pulte Homes (which gained 160 percent over the past year) and Bank of America (which nearly doubled) were some his best-performing stocks.

Mr. Miller remains optimistic about stocks for 2013, with an asterisk. When I reached him this week, he offered these predictions: “The great bond bear market has begun, starting with Treasuries, which should see years of losses as interest rates gradually normalize. Equities, which outperformed bonds in 2012, will continue to do well, driven by rising earnings, strong free cash flow, solid profit margins, low inflation and attractive valuation relative to bonds. The path of least resistance for stocks and the economy is higher. The chief risk is the dysfunctional political environment, which could derail what otherwise is a very promising outlook.”

Mr. Wien, whose long career on Wall Street included stints at Morgan Stanley and Pequot Capital, told me he’s “gloomy” about prospects in Washington. “We can’t solve our problems simply by getting the rich to pay more. We have to broaden the tax base, revise the tax code and tackle the structural problems we aren’t facing. We need to deal with entitlements. The latest deal did absolutely nothing to address that. I don’t know if democracy can solve these problems.”

Despite his success at predicting the market last year, Mr. Wien isn’t putting a number on the S. P. 500 this year, but his expectations are modest. He expects the S. P. 500 to test 1,300 at some point, which would be about a 10 percent decline from current levels, before ending the year about where it is now. “I don’t expect the stock market to do much this year,” he said. “Most analysts are forecasting returns of 10 percent or more, but I think earnings could be down for the year, which would make it hard for the market to gain that much.”

But he’s optimistic about stock markets in some other countries, especially China, where stocks lagged last year, and Japan, which has been in the doldrums for years. He’s forecasting a 20 percent gain this year for Chinese shares.

Bill Gross: ‘Ashes in our stocking’

Article source: http://www.nytimes.com/2013/01/12/business/economic-experts-give-predictions-for-2013.html?partner=rss&emc=rss

Bucks Blog: An App to Help You Find Parking On the Spot

Courtesy Parking Panda

Parking Panda, an online service that helps you find and reserve parking spaces, has added the San Francisco market to its inventory and introduced a mobile app to help you find parking on the spot.

The app makes it easier to make reservations and pay for them on the fly when you’re away from your computer, said Nick Miller, the company’s chief executive. “With the app, you can locate a space where you are and book one right near you,” he said. The app is now available for the iPhone, and will be available eventually for Android devices, too.

Parking Panda is sort of like a parking version of AirBNB, the site that helps property owners rent out spare bedrooms or vacant apartments to travelers seeking a bargain. Another similar offering is Parkatmyhouse.com, which started in Britain but is trying to expand in the United States.

Parking Panda lists both commercial lots and garages, as well as privately owned, individual parking spaces. Owners upload a description and often a photo of the lot, as well as a schedule of when it’s available. When drivers reserve a space, they enter a description of their car online. Payment is taken care of through the app (or online) by credit card, so there doesn’t have to be any interaction between the owner of the space and the driver.

The start-up was already operating in Baltimore and Washington; this week it moves into San Francisco and Oakland, Calif. and should be available soon in Philadelphia as well. The site has about 20,000 spaces that can currently be reserved through the service. (Parking Panda lists parking in other cities, like New York and Chicago, but doesn’t offer the ability to reserve spaces in advance and pay for them; you have to go there and pay in person.)

In Baltimore, Mr. Miller notes, many homeowners near the city’s football stadium list spaces on Parking Panda. “For events, even if the stadium has parking it sells out, and half the people attending can’t find parking,” he said. “So this adds additional inventory, without driving around for 45 minutes.”

But he also expects the app to be useful in areas like San Francisco’s Nob Hill neighborhood, where restaurants and bars regularly draw crowds but there is limited parking.

If you try Parking Panda, let us know about your experience.

Article source: http://bucks.blogs.nytimes.com/2012/09/17/an-app-to-help-you-find-parking-on-the-spot/?partner=rss&emc=rss

The Appraisal: Rentals Gained Favor in an Earlier Boom-and-Bust Period

“Many people had expected cooperatives to be affected by the recent slump in Wall Street, as indicated by the number of calls from bargain hunters looking for so-called distress sales,” an industry analyst at the time said. “We found that less than half a dozen apartments were offered for resale as a result of the market break.”

The analyst could have been describing the panicked freeze that settled over Manhattan after the credit crisis and the fall of Lehman Brothers in 2008, but he was not.

The year was 1929, just months after the crash. What followed was a rarity in New York real estate: a decade in which the residential property market, measured in purchase price per square foot, declined, according to an analysis of the last 100 years of Manhattan values by Jonathan Miller, president of the appraisal firm Miller Samuel. Mr. Miller looked at a representative sampling of available sales and rental data from news and market reports for Prudential Douglas Elliman, which is celebrating its centennial this year.

“People think that Wall Street is a new phenomenon and that 100 years ago it was all manufacturing, but financial services played such an important role in the economy, and especially in real estate,” Mr. Miller said, adding that analysts in the 1930s predicted that the market would recover quickly, just as many did when the most recent real estate bubble popped.

“You have this long run-up and then catastrophe strikes and everybody says, ‘Oh, it will just be a short period of time and then it will be business as usual,’ ” he said. “But it was a decade after the crash before you start to see a pickup of activity.”

According to Mr. Miller’s analysis, sales prices dropped during the 1930s to $15 per square foot, down from $46 during the boom of the 1920s and $25 in the 1910s, adjusted for inflation. Toward the end of the decade, foreclosures slowed and mortgages became more available, with banks beginning to offer 90 percent financing. Although property values have increased significantly over the years since then — reaching a high of $1,531 per square foot in the last decade — they dipped sharply again at the beginning of this one, declining to $1,070.

Dorothy Herman, president and chief executive of Prudential Douglas Elliman, said she was struck by the parallels between the boom-and-bust cycle then and now, and the role of credit.

“In that era of the Roaring ’20s, Wall Street was going great, there was easy credit and there was an emergence of creative financing instruments, to say the least, and all of those factors together created that boom,” she said. “We would never have had our boom if we hadn’t had easy credit.”

It would take nearly two decades for purchase prices to recover to their pre-Depression levels. But much like now, with banks hesitant to lend and some buildings forced to lease what they could not sell, rentals became more appealing, even to those with the means to buy. Famous tenants of that time included John D. Rockefeller Jr., who rented a 15-room apartment at 740 Park Avenue in 1936, and Walter Chrysler Jr., who took a furnished penthouse at 720 Park in 1934.

For those of more modest means, there were buildings like 230 Riverside Drive, which began offering one- to four-and-a-half room suites for rent in September 1931, according to a brochure from the era. “With “a magnificent view up, down and across the Hudson,” proximity to buses, an express subway station at 96th Street and trolleys on Broadway and “more than ample” closet space, the building, like many in that era, was marketed as offering both access to the city’s center and an escape from it.

At 25 East 83rd Street, one of the first apartment buildings in New York to have central air-conditioning — still mentioned as an enticement in a recent listing on Streeteasy.com — the appeal was an apartment building with the most up-to-date amenities. The brochure explains, in a section titled “What Air-Conditioning Means to You,” that families would have fewer colds and that housekeepers could claim victory in “the everlasting battle against New York’s dirt and grime,” adding, “The curtains you hang in October will be spandy clean in May.” At root, though, air-conditioning would provide a bulwark against the vicissitudes of city life: “If New York gets on your nerves, it means that the peace and quiet of this ultra modern apartment house will help you to relax.”

It was not just grime and noise from which apartments were meant to protect their residents; it was also the wrong kinds of people. At the Mount Vernon, an apartment complex in Queens with inset gardens, the marketing materials from that time mentioned the proximity to shopping areas, churches, schools and transit, but also that it was in “restricted Jackson Heights,” a neighborhood that barred blacks and Jews. Amid the details that occupants could expect to find, like Venetian blinds and a waterproof scenic wall covering above the bathroom tile, was the promise that “great care is taken in the choice of tenants so as to maintain the splendid character of the Mount Vernon.”

And then there were the most exclusive properties of all, like 1020 Fifth Avenue, whose penthouse was still in the hands of the family of its original buyer when it went on the market for $46.5 million the day before Lehman collapsed. It sold this summer for $26.75 million. A sales brochure that appears to be from the 1930s lists that apartment as the most costly, at $150,000; a New York Times article from 1925 reported its sale at that price to Samuel H. Kress.

But there was still something for the budget-minded: a duplex apartment with its own entrance on 83rd Street was priced at $40,000 because of its relatively small salon and second-floor space. “Here again, however,” the brochure read, “the cost as compared to equivalent space and location in a private house is amazingly low.”

Article source: http://feeds.nytimes.com/click.phdo?i=7efb2441674172a38604b529e46f86f4