The Hidden Costs of Property Taxes: A Tale of Two Houses

From Art Laffer:  

Since the housing bubble peak of 2006-2008: 

•  2.8% Ohio property tax rate: owners of Dr. Art Laffer's childhood home have paid approximately $125,000 in property taxes while their home appreciated by $75,000. 
•  0.6% Nashville property tax rate: paid $250,000 in property taxes while his current house appreciated in value by $2 million. 

The causality is hard to disentangle from the correlation: 

• it could be that unattractive states adopt high taxes, and/or
• that high taxes make states unattractive, and/or 
• that high taxes are correlated with some other factor (Democratic control?) that causes states to become unattractive. 

 Regardless,

BOTTOM LINE: before buying a house, especially one in a high tax state, look ahead and reason back.

Why is rent control failing in Scotland?

 From the Financial Times:

...levelling up secretary Michael Gove said in Edinburgh: “The history of rent controls and rent freezes is that they lead to a reduction in supply overall and they end up hurting the poorest most.”  

In other words, if you impose price ceilings below the equilibrium price, you get shortages.

HT:  Justin K.

Shopify makes visible the hidden cost of meetings

From the High Lantern Group:

When the Shopify COO grew tired of pointless, time-draining meetings, he launched a calculator embedded in everyone’s calendars. It displays the “cost” of every meeting with three or more people...A typical 30 minute endeavor with three employees can run from $700 up to $1,600. Adding an executive — like Chief Operating Officer Kaz Nejatian, who built the program during a company-wide hack day — can shoot the cost above $2,000…

“No one at Shopify would expense a $500 dinner,” Nejatian said in an interview. “But lots and lots of people spend way more than that in meetings without ever making a decision. The goal of this thing is to show you that time is money. If you have to spend it, you think about it.”

Risk premium for stocks near all time low

WSJ reports:  

The gap between the earnings yield of the S&P 500 and the yield on the 10-year U.S. government bond dropped to around 1.1 percentage point last week, its narrowest since 2002.

And here is the reason:

Bond yields haven’t risen as much, but stocks have taken flight—lifted by investors’ growing optimism about the economy.

In other words, investors are investing as if stocks are only slightly more risky than bonds.  If they change their minds, and think that stocks are more risky than bonds, stock prices will fall which will raise the expected return of investing in stocks or bond prices will rise which will decrease the bond yield, and bring the equity risk premium back up, closer to its mean.

This isn't the first time that the equity risk premium has fallen, See earlier posts to see past instances of this, like in 2008, when Vandy Treasurer Bill Spitz's advised:

• Avoid Riskier assets 
• Stick with quality 
• Be skeptical of the rush to alternatives 
• Moderate return expectations 
• Borrow now if you are a marginal credit

But unlike 2008, the Shiller CAPE (cyclically adjusted price to earnings ratio, a measure of value) is not as high, though twice its long run mean of 16.  

DISCLAIMER:  if I really knew what was going to happen, I wouldn't be teaching school.

Strategist Jim Bradford, RIP

Anyone attending a faculty meeting at a business school would be struck by the irony that those who teach management do it so poorly.  But Dean Jim Bradford (obituary) was different.  Not only had he successfully managed two public companies, and overseen several others as a board member, but he knew how to develop a successful strategy.

When Jim was appointed Dean, he did what he always did when he took over an organization, "first thing you do is grab the checkbook."  Then he combed through the accounting data.  What he saw was an organization with huge fixed costs and declining demand for its flagship product.  But he also noticed that other programs, like the Executive MBA, had small incremental costs.  So he bought better faculty to strengthen the brand, and then expanded the school's portfolio of degrees (Masters of Accountancy, Masters in Finance, Masters of Management in Healthcare) to take advantage of the Vanderbilt brand.  The results have been impressive: as the school moved up in the rankings, revenue and giving have increased faster than costs.

Thank you Jim, and rest in peace.  

Nurses wages falling

WSJ:

DEMAND INCREASED DURING PANDEMIC:  Nurses willing to pack up and travel to a new hot spot every few months earned as much as $10,000 a week at the height of the pandemic to fill in a shortage of medical staff. The economics of nursing was further thrown out of whack by federal subsidies, which allowed hospitals to pay distorted wages, briefly creating a new class of highly paid nurses. ...

PANDEMIC ENDED AND PRICE FELL:  Brian Tanquilut, an analyst at Jefferies, sees weekly pay for temporary nurses dropping about 15% more to the low $3,000’s a week, helping to improve the bottom line at hospital groups. While a far cry from the peak, it won’t go back to how it used to be either because of what Tanquilut and other industry watchers see as a structural shift in the market.

BUT LONG RUN SUPPLY OF TRAVEL NURSES MAY INCREASE:  Some travel nurses have discovered they like the flexibility and better wages that come along with traveling. Cross Country CEO John Martins said in a recent conference that the work-from-home culture means nurses can more easily bring their remote-working spouses along with them. He estimated the market will grow from 40,000 travel nurses in 2018 to 80,000 in 2023.

PollEverywhere Ch2: the "Optimism Gap"

QUESTION: on a scale of 1 (disagree) to 7 (agree), rate your reaction to this statement, "Although things are getting better for me, for society they are getting worse."

 DEBRIEF:   

• Animated graphs from Hans Rosling, documenting worldwide changes in: prejudice, spending, literacy, inequality, life expectancy, income, environment (including CO2), child mortality, and democracy. 
• Open Democracy

Can we improve education in Nashville?

Although test scores are up, only one in four Nashville Public School third-graders is reading at or above grade level. 

Randomized controlled trials tell us that charter schools, school choice, and teacher incentives improve student outcomes (links). 

I think that Alice Rolli is the only one who has a chance of making these kinds of improvements. 

 

Why are DEI exec's being laid off?

Demand has Fallen:

Diversity, equity and inclusion—or DEI—jobs were put in the crosshairs after many companies started re-examining their executive ranks during the tech sector’s shake out last fall. Some chief diversity officers say their work is facing additional scrutiny since the Supreme Court struck down affirmative action in college admissions and companies brace for potential legal challenges. DEI work has also become a political target.

The number of CDO searches is down 75% in the past year, says Jason Hanold, chief executive of Hanold Associates Executive Search, which works with Fortune 100 companies to recruit HR and DEI executives, among other roles. Demand is the lowest he has seen in his 30 years of recruiting.

Old people will reshape the world

Good graphics [GO TO THE PAGE!] from the NYTimes shows that the EU and China will have a bunch of old people, but not enough working age adults to support them.   

• By 2050, people age 65 and older will make up nearly 40 percent of the population in some parts of East Asia and Europe. That’s almost twice the share of older adults in Florida, America’s retirement capital.
• Africa is where all the working age adults are, but ... "If large numbers of young adults don’t have access to jobs or education, widespread youth unemployment can even threaten stability as frustrated young people turn to criminal or armed groups for better opportunities."
• Slightly higher fertility rates and more immigration mean the United States and Australia, for example, will be younger than most other rich countries in 2050

WARNING:  

things many wealthier countries take for granted — like pensions, retirement ages and strict immigration policies — will need overhauls to be sustainable.