Monthly Archives: January 2013

Fed Officials Saw Start of Subprime Crisis in August 2007 | Cross River Real Estate

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Federal Reserve officials in August 2007 saw the beginnings of the crisis in subprime mortgages and concluded that the U.S. economy would be able to withstand it, transcripts from their 2007 meetings show.

“Well-capitalized banks and opportunistic investors will come in and fill the gap, restoring credit flows to nonfinancial businesses and to the vast majority of households that can service their debts,” Donald Kohn, then vice chairman of the board, said in Aug. 2007 according to transcripts of the Federal Open Market Committee meetings released today in Washington.

The transcripts show the committee’s slow grasp on the enormity of contagion that was to spread throughout global markets as a result of billions of dollars in low-quality housing assets that had been securitized into bonds and sold to banks and investors worldwide.

“The odds are that the market will stabilize,” Bernanke told the committee in Aug. 2007, according to the transcripts from that year. “This restrictive effect could come in various magnitudes. It could be moderate, or it could be more severe, and we are just going to have to monitor how it adjusts over time.”

Concern about capital losses from toxic mortgage securities froze interbank lending markets and prompted runs against major investment banks. The Fed and JPMorgan Chase & Co. (JPM) rescued Bear Stearns Cos. in March 2008, and Lehman Brothers Holdings Inc. collapsed into bankruptcy that September. Both Goldman Sachs Group Inc. and Morgan Stanley converted to bank holding companies to access backup funding from the discount window.

Rate Unchanged

U.S. central bankers kept their benchmark lending rate unchanged at their regularly scheduled meeting on Aug. 7, 2007, saying in their statement that “the predominant policy concern remains the risk that inflation will fail to moderate as expected.”

Fed officials did have a legitimate inflation worry in 2007. Revised data shows the personal consumption expenditures price index rising at a 3.5 percent rate for the year ending that December. The unemployment rate hit a low of 4.4 percent in March and May. Still, financial markets were beginning to unravel.

via bloomberg.com

Fracking for natural gas being powered by it, too | Bedford Hills Realtor

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HARRISBURG, Pa. (AP) — Advances in hydraulic fracturing technology have powered the American natural gas boom. And now hydraulic fracturing could be increasingly powered by the very fuel it has been so successful in coaxing up from the depths.

Oil- and gas-field companies from Pennsylvania to Texas are experimenting with converting the huge diesel pump engines that propel millions of gallons of water, sand and chemicals thousands of feet down well bores to break apart rock or tight sands and release the natural gas trapped inside.

It’s the latest way for drillers to become consumers of the product that they are making broadly available in large amounts — and extremely cheap. Production has increased so much that natural gas has flooded the market, dragging down prices and forcing companies to pull back on their plans to expand drilling while looking for new ways to use gas.

After the conversion, the engines will run on cheaper natural gas, or a blend of diesel and natural gas. That brings down costs and, theoretically, cuts down the sooty exhaust that comes from burning diesel.

“You’re going to see this spreading quite rapidly across the industry,” said Douglas E. Kuntz, president and CEO of Pennsylvania General Energy Co., based in tiny Warren, Pa. “As the technology evolves, you’ll see more companies across the country doing more natural gas fueling of this equipment.”

A number of increasingly cost-conscious oil- and gas-field companies are already using natural gas to run their trucks and drilling rigs. But what makes the conversion of the hydraulic fracturing pump engines to natural gas particularly challenging is the sheer number of engines running at once, and the amount of horsepower necessary to power the pumps.

PGE and contractor Universal Well Services, of Meadville, Pa., are converting a 16-engine pumping unit — called a “frack spread” — so that the engines will accept a blend of 70 percent natural gas and 30 percent diesel. It should be complete by May and is estimated to cost less than a quarter of what it would if it was powered by diesel alone.

Houston-based Apache Corp., one of the nation’s largest independent oil and gas exploration companies, has worked with Halliburton Co., Schlumberger Ltd. and Caterpillar Inc. to develop similar technology.

A 12-engine unit — the first full frack spread that is operating in the field, according to Apache — just completed two Granite Wash wells near Elk City, Okla. Another unit is in the process of being completed.

“Today we’ve said, ‘we’ve seen enough testing.’ We’ve decided this is how we want to frack with all of our fleets and we’re going to start with two permanent conversions,” said Mike Bahorich, Apache’s executive vice president and chief technology officer.

PGE will be able to use field gas, drawn from pipelines that connect to its nearby Marcellus Shale wells in north-central Pennsylvania, and save trips by fuel-hauling trucks. For now at least, Apache will have to truck in compressed natural gas or liquefied natural gas to run its new frack spreads, but it hopes to start using the cheaper field gas in the future, Bahorich said.

It also may provide a way for drilling companies to improve their image on environmental issues after sustaining criticism for air quality problems around gas wells and the practice of lacing hydraulic fracturing fluids with chemicals.

The U.S. Environmental Protection Agency calls reducing pollution from diesel engines one of the county’s most important air quality challenges. Diesel engines can produce large quantities of smog-forming nitrogen oxides and soot, which can cause lung and heart problems. Soot also plays a significant role in climate change, researchers say.

Saving the truck trips will improve air quality, but the size of the benefit from replacing diesel engines with natural gas is less clear, according to environmental advocates.

That’s because new diesel engines are subject to strict environmental standards and natural gas-powered engines give off only slightly less pollution, said Joe Osborne, legal director of the Pittsburgh-based Group Against Smog and Pollution.

Regardless, the economic benefit appears enormous for an industry that used more than 700 million gallons of diesel domestically in hydraulic fracturing last year, according to Apache estimates.

The cost to convert the engines is far less than the roughly $3.5 million per frack spread that Apache can save if it completes 140 planned wells in a year with the two units, Bahorich said.

For PGE and Universal, the cost of conversion and engineering will be several million dollars, said Roger Willis, Universal’s president. After that, the fuel price savings are eye-popping: A gallon of diesel fuel costs about $3.60, while equivalent amount of the natural gas blend replacement currently costs about 47 cents, Kuntz said.

PGE, which plans to drill 35 to 40 new Marcellus Shale wells in 2013 all with the natural gas-powered frack spread, expects to save 750,000 gallons of diesel a year, or 55 percent of the diesel in its fracking operations.

“Keeping this frack spread busy over the course of a year, you’ll be on the positive side in less than a year,” Kuntz said.

via news.yahoo.com

 

The Best Performing Cities in 2012: Milken Institute | Pound Ridge Real Estate

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The Milken Institute is out with its annual list of best performing cities and the results show that both tech and manufacturing are on the rise.

Unlike other “best places” lists, Milken’s report is not a quality of life survey. It does not focus on weather, number of golf courses or healthcare facilities, but rather on job and wage growth and the propensity for technological innovation.

San Jose, Calif. topped the 2012 list for large metros, jumping 5o spots from the previous year mainly because of the area’s exploding tech sector.

“The San Jose metro area continues to have the top regional innovation ecosystem,” according to Ross DeVol, chief research officer at Milken.

For every one tech job created in the San Jose metro area, five jobs are created in other sectors of the local economy. It has been more than ten years since the city was ranked #1.

Top 5 Large Performing Metros

  1. San Jose, CA
  2. Austin, TX
  3. Raleigh, NC
  4. Houston, TX
  5. Washington, D.C.

But the explosion of the technology industry is not endemic to Silicon Valley. Other cities across the country are experiencing a revitalization in the tech sector as the list above shows.

If you’re worried that another tech bubble may be brewing, DeVol says this time is different because today’s tech companies have “proven business models.”

Top 5 Small Performing Metros

  1. Logan, UT
  2. Morgantown, WV
  3. Bismarck, ND
  4. Odessa, TX
  5. Fargo, ND

The other major finding in the report is the uptick in manufacturing in cities across the country.

“A number of the major gainers were in the upper Midwest,” says DeVol. “Manufacturing in the United States has begun what I might to call a ‘mini rebirth’.”

Other findings in the report include:

  • Texas is losing its edge: While the state still going strong with 7 metros in the top 25, it has lost some of its stature due to slowing natural gas and oil production in the state.
  • Utah is rockin’ it: Both Salt Lake City and Provo are in the top 10 best performing cities for large metros.
  • New York is making a comeback: The city has experienced growth in the entertainment and technology industries.

The Milken Institue has conducted its survey since 1999. To read the report, click here.

via finance.yahoo.com

What Is Middle Class in Manhattan? | Bedford Corners Real Estate

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Even the landscape is carved up by class. From 15,000 feet up, you can stare down at subdivisions and tract houses, and America’s class lines will stare right back up at you.

Manhattan, however, is not like most places. Its 1.6 million residents hide in a forest of tall buildings, and even the city’s elite take the subway. Sure, there are obvious brand-name buildings and tony ZIP codes where the price of entry clearly demands a certain amount of wealth, but middle-class neighborhoods do not really exist in Manhattan — probably the only place in the United States where a $5.5 million condo with a teak closet and mother-of-pearl wall tile shares a block with a public housing project.

In TriBeCa, Karen Azeez feels squeezed. A fund-raising consultant, Ms. Azeez has lived in the city for more than 20 years. Her husband, a retired police sergeant, bought their one-bedroom apartment in the low $200,000 range in 1997.

“When we got here, I didn’t feel so out of place, I didn’t have this awareness of being middle class,” she said. But in the last 5 or 10 years an array of high-rises brought “uberwealthy” neighbors, she said, the kind of people who discuss winter trips to St. Barts at the dog run, and buy $700 Moncler ski jackets for their children.

Even the local restaurants give Ms. Azeez the sense that she is now living as an economic minority in her own neighborhood.

“There’s McDonald’s, Mexican and Nobu,” she said, and nothing in between.

In a city like New York, where everything is superlative, who exactly is middle class? What kind of salary are we talking about? Where does a middle-class person live? And could the relentless rise in real estate prices push the middle class to extinction?

“A lot of people are hanging on by the skin of their teeth,” said Cheryl King, an acting coach who lives and works in a combined apartment and performance space that she rents out for screenings, video shoots and workshops to help offset her own high rent.

“My niece just bought a home in Atlanta for $85,000,” she said. “I almost spend that on rent and utilities in a year. To them, making $250,000 a year is wealthy. To us, it’s maybe the upper edge of middle class.”

“It’s horrifying,” she added.

Her horror, of course, is Manhattan’s high cost of living, which has for decades shocked transplants from Kansas and elsewhere, and threatened natives with the specter of an economic apocalypse that will empty the city of all but a few hardy plutocrats.

And yet the middle class stubbornly hangs on, trading economic pain for the emotional gain of hot restaurants, the High Line and the feeling of being in the center of everything. The price tag for life’s basic necessities — everything from milk to haircuts to Lipitor to electricity, and especially housing — is more than twice the national average.

“It’s overwhelmingly housing — that’s the big distortion relative to other places,” said Frank Braconi, the chief economist in the New York City comptroller’s office. “Virtually everything costs more, but not to the degree that housing does.”

The average Manhattan apartment, at $3,973 a month, costs almost $2,800 more than the average rental nationwide. The average sale price of a home in Manhattan last year was $1.46 million, according to a recent Douglas Elliman report, while the average sale price for a new home in the United States was just under $230,000. The middle class makes up a smaller proportion of the population in New York than elsewhere in the nation. New Yorkers also live in a notably unequal place. Household incomes in Manhattan are about as evenly distributed as they are in Bolivia or Sierra Leone — the wealthiest fifth of Manhattanites make 40 times more than the lowest fifth, according to 2010 census data.

Ask people around the country, “Are you middle class?” and the answer is likely to be yes. But ask the same question in Manhattan, and people often pause in confusion, unsure exactly what you mean.

There is no single, formal definition of class status in this country. Statisticians and demographers all use slightly different methods to divvy up the great American whole into quintiles and median ranges. Complicating things, most people like to think of themselves as middle class. It feels good, after all, and more egalitarian than proclaiming yourself to be rich or poor. A $70,000 annual income is middle class for a family of four, according to the median response in a recent Pew Research Center survey, and yet people at a wide range of income levels, including those making less than $30,000 and more than $100,000 a year, said they, too, belonged to the middle.

via nytimes.com