Real Estate, The Economy, and News

Friday, September 11, 2015

Rising Insurance Costs in High Fire-Risk Areas

When a home is purchased with a mortgage, using a loan from a bank, the bank will always require the homeowner to get insurance in order to make sure their investment is protected to some extent. Insurance, while a necessity, can be a costly addition to one's monthly or yearly bills. Since an insurance company wants to stay in business, it charges higher rates to provide insurance to individuals in high-risk areas: flood zones, fire zones, earthquake centers, etc, so that it will have the money to pay off claims involving fixing or rebuilding of affected properties. For people like John Stoffan in Samantha Masunaga's L.A. Times article, the costs of fire insurance in drought-parched California make the state almost too costly to bear.

The Stoffan family, whose Northern California home survived various wildfires around Yosemite National Park throughout the years, is finding that their insurance rates may actually be the reason they finally jump ship. The house itself, as well as the county in which it is situated, are considered to be "high-risk" for insurance companies. Even after having installed fire-resistant plants, developed "buffer zones" of areas without any plants surrounding the property, and created holding areas to keep thousands of gallons of water on hand, insurance companies have doubled rated in the past year.

The past four years of dry conditions have made things worse for those living near large forests. The combination of summer temperature and lack of water can turn a forest into a raging wildfire with the merest spark. Because of this risk, home-owners like the Stoffans, no matter how many preventative measures they take, are stuck between a rock and a hard place. They need insurance to have a mortgage to own a home, yet the insurance rates are unaffordable and getting worse. What is their alternative?

While all are hoping for a good winter to break California's dry spell, many are considering moving out of the area altogether. Others have found more creative options to reduce their insurance costs. Some people, like Alpine's Mollie Jacques, have been able to find significant discounts by using insurance companies based in other cities. For Jacques, her choice to switch to an insurance company 100 miles from her home saves her over $700 per year. Some homeowners have even been refused insurance completely and have been forced to use the California Fair Plan Association to have some, albeit limited, coverage.

Communities are coming together in these fire-prone areas to try to make their homes and surrounding land as safe as possible. Since insurance companies determine rates through statistics involving fire department preparedness, water supplies, and availability of emergency communication. With the help of the California Fire Safe Council, a nonprofit organization, such communities are able to purchase wood chippers and other machinery to help clear dry brush and other flammable material. The more prepared a community becomes for a wildfire, the better rates insurance companies will provide. It comes down to economics. Insurance companies will charge a lot of money for taking on a huge financial risk. The more you lower that risk for the insurance company, the less money they will require you to pay.

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Friday, September 4, 2015

Drought Conditions Prevent Ability to Store Sustainable Energy

For companies like Southern California Edison, the drought is taking its toll on their sources of sustainable energy. When water stored in artificial lakes high in the mountains is released, it flows down to turn hydroelectric turbines and convert the water's kinetic energy into electrical energy for use by consumers. This system only works when the water is available for use. Because of the drought, water levels have dropped so far that the hydroelectric system has been put on hold for the time being. According to Ivan Penn, in his L.A. Times article, the hydroelectric power is not the only source of power being lost due to depleted water reserves.

Renewable resources are those that are considered to be constant in nature, that will always be available on Earth. Sunlight, wind, and water are some examples of such resources. You may ask, “Why is water considered 'renewable' if a drought can reduce the amount available?" This is due to the fact that, while a drought reduces the availability of water in specific parts of the world, the amount of water available throughout the entire world remains relatively constant.

As more and more research comes out showing the negative effects that coal and fossil fuels have on the environment, as well as the rapidly diminishing supplies of such resources, both government agencies and private corporations search for a more sustainable alternative. Wind and solar energy seem to provide the greatest return on investment, to the extent that many homeowners have installed their own solar panels to harness the Sun's natural power for themselves. Unfortunately, power companies have yet to find a way to store excess energy. Just as blackouts and power reductions can be caused by too little power being produced, too much power can overload the power grid and damage everything connected to it.

Edison has a system that, in non-drought times, would be quite effective in storing excess energy for later use. when the water has flowed down the mountain and through th3e turbines, it ends up in another manmade lake. When their solar panels and wind turbines collect more energy than can be used by consumers, the excess energy is used rather than given away at negative prices. The energy is used to power pumps that bring the water back up the mountain and stored back in the starting lake. In this way, "energy" can be stored, though not in the classical sense. Since energy can only be converted, not created or destroyed, the excess energy is converted from electrical to mechanical (pumps) to potential (water on top of the mountain). Then, when the energy is needed again, the water is released from the lake and the potential energy becomes kinetic, then electrical once again.

At nighttime, stored energy is needed to make up for the fact that no solar energy is being collected. While Edison's energy storage system, of course, has loss associated with it, since all processes lose some energy as heat, it is better than the alternative in which excess energy is given away to competing companies in order to prevent overloading of the power grid. However, drought conditions have everyone at a loss. How else can the energy be stored in an economical, efficient, and environmentally-friendly manner?

As Penn points out, it's not as if we can control Sun or wind on command. Renewable energy sources are great and have become more utilitarian and widely used in recent years, but it seems that the most effective use of researchers' time would be to find a better way to store the energy. If renewable, sustainable energy can be stored and easily accessed, then there would be little reason to use fossil fuels and other degradative materials as energy sources. As such, solar, wind, and hydroelectric power are arguably the best and cheapest energy sources, but they can only live up to their true potential if scientists find an effective way to store the excess.

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Friday, August 21, 2015

Devaluation of the Yuan Affects California's Economy

To shopping centers throughout the Southland, busloads of Chinese tourists are a necessary and regularly expected source of income. Especially in summer months, some places like the Beverly Center get an average of 70 such buses per month, full of tourists ready to spend. Shan Li, Samantha Masunaga, and Andrew Khouri wrote recently in their L.A. Times article about how recent devaluation of the Chinese yuan could have positive and negative effects on various California businesses.

Where 2.2 million Chinese tourists to the U.S. spent nearly $24 billion in 2014, 12.6% more than in 2013, many expect that such spending will likely slow down in the coming months. Up until recently, tourists found that their money would stretch much further on brand-name products in California than in China, but as the yuan loses value, that is beginning to change. Furthermore, even as a decrease in tourism hurts stores and shopping centers, it also affects sales on a larger scale. For certain luxury brands, like Coach, a decrease in sales to tourists leads to a decrease in earning, which causes stock prices to fall.

The current economic trifecta in China (slowing of the economy, devaluation of the currency, and a crackdown on political corruption) has led tourists to become more careful with their spending, according to Li, Masunaga, and Khouri. However, they point out that while the yuan loss in value hurts local retailers, it can actually be quite helpful for importers. For U.S. businesses that import Chinese products, the devaluation of the yuan means that the dollar stretches much further than it did before. Since importers will take advantage of this situation and increase purchasing, experts predict that California's ports will get plenty of use in the coming months. This will help to provide jobs for dockworkers, truck drivers, and warehouse workers.

Unfortunately for exporters, such positive outcomes are not likely. They are expected to suffer far more than local businesses due to the fact that import taxes in China can range as high as 20 to 30%.
Some tourists who come to the U.S. regularly anyway to visit family or send their children to summer camp may continue shopping in the U.S. for such luxury goods, but it wouldn't make economic sense for Chinese companies to continue importing American goods when the value of the yuan is so far outweighed by the value of the dollar. Costs would be much higher, especially on top of the exorbitant import taxes, and so it would be unlikely that American exporters would find business improving while the yuan's devaluation continues.

As Louis Glickman once said, "The best investment on Earth is earth." Analysts expect that as the yuan's value continues to plunge, Chinese investors will slow down the purchase of American products and focus on American real estate. Since the dollar remains relatively steady, many such investors will prefer to "park" their money in a building, rather than hold onto the quickly-devaluing cash. The increasing prevalence of property investment could help to dull the effects of the reduction in retail. However, economists warn that China's economy is connected to our own. If China's economy starts to fail, then that won't be good news for the U.S.

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Friday, August 7, 2015

Changes to FCC Regulations May Help Reduce Robocalls

The National Do Not Call Registry, run jointly by the Federal Communications Commission and the Federal Trade Commission, was designed to be a way for consumers to avoid sales calls. Unfortunately, due to new technologies, so-called telemarketers have found ways to go around As Jim Puzzanghera discusses in his L.A. Times article, most people dislike receiving annoying and commonly fraudulent phone calls on a daily basis, which is why the FCC has proposed new regulations that could help consumers only receive the calls that they want.

The agencies receive about 150,000 complaints per month about robocalls, but there's not much they can do about it. Once your number is on the Do Not Call Registry, telemarketers are, in theory, not allowed to call you. However, as witnessed by many on the list, these calls still come through. By using internet-based phone numbers or routing calls through other countries, telemarketers are able to circumvent the law and contact those on the Do Not Call list. Until recently, consumers had to tell callers, in writing, that they no longer wish to receive sales calls. Under the new regulations, the calls can be stopped by asking the telemarketer "in any reasonable way at any time" to stop.

In addition to making it easier for consumers to stop sales calls on their end, the FCC's changed regulations will allow and encourage telephone providers to offer robocall-blocking tools to their customers. While robocalls can be annoying to those receiving them, they can also be costly. Some calls and texts rack up charges on a monthly phone bill. Many times, phone providers keep a significant portion of the fees charged by such third-party message services, a practice that has led companies like Verizon and Sprint to court in recent months. If the calls and texts were blocked in the first place, such charges would not be an issue.

Under the new rules, even if a company had previously received written permission from the owner of a phone number to make sales calls, the robocaller has to stop immediately once they find out that the phone number has changed ownership. In this way, the new owner will not have to be bothered by calls that were authorized by a previous owner. The new rules, however, apply to certain companies and not to others. For example, computerized calls from banks or hospitals are allowed if they are designed to help the consumer. Calls about possible fraudulent activity on a credit card or about medication refills are not considered"robocalls" in the classical sense by the FCC.

While law enforcement is working toward catching illegal telemarketers and putting a stop to some of the sales calls. the FCC believe that the most sensible way to stop the calls is directly at the source. If phone providers were to offer to their customers the variety of new services available to block such calls, consumers could at least avoid calls from the most notorious telemarketers. Some lawmakers worry that the new regulations could be harmful in that they prevent surveys and demographics studies from being performed on the general public. On the other hand, many consumers find survey-takers to be just as annoying as telemarketers. Altogether, these regulations could be a way to give consumers what they want. Stopping illegal calls and making consumers happy are the top responsibilities of the National Do Not Call Registry, and these new laws may help them fulfill their purpose.

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Friday, July 31, 2015

How to Build, Maintain, and Repair Credit

Credit is a necessity in this day and age. Without a good credit score, it can be almost impossible to get a loan, buy a car, or purchase a house. But what can you do if you have little to no credit? How can you get started? Well, according to David Lazarus, in his L.A. Times article, stepping into the world of credit scores and debt payments may not be as difficult as it seems.

Lazarus' sources show that over half of all American consumers have subprime credit scores. 26 million consumers have no data on file with credit companies and 19 million have information that is so outdated that it is almost useless by lenders. These Americans are unlikely to get a loan at all, and if offered, the rate on the loan will be much higher than those provided to others with better records. Lazarus focuses on two main problems: an inability to begin establishing credit and difficulty improving a low score.

There are a few types of loans that are designed to help new borrowers to start to build credit. A credit score is based on borrowing money and paying it back. So, the easiest way to establish credit is by getting a credit card from a store or a bank and using it. The key to the card is to use, not overuse. Build credit by having a balance on the credit card and paying off the balance on time each month. In this way, a lender can see that their money is in good hands. In general, when a lender gives you money, it is because you have a history of on-time payments. In fact, some credit reporting companies such as Experian and Equifax consider monthly rent payments in calculating a credit score.

After you have shown that you can handle a credit card, other loan options, such as "credit builder loans" are available, Such loans, which tend to be less than $1,000, are offered by credit unions as another path by which borrowers can show that they can be trusted. This type of loan is very interesting in that it is based specifically around building credit, rather than providing a borrower with needed money. With a credit builder loan, a designated amount of money is locked in a savings account by the lender. When the last payment has come in from the borrower, the money is released. While it would be just as easy for someone to save up their money by putting a designated amount aside each month, this "loan" allows a saver to build their credit score in the process.

As for those who have already borrowed more money than they can pay back, Lazarus assures them that all is not lost. However, do not let it get so bad that debt collectors come calling. Once the collectors show up, a mark on your file appears that will stay for up to 7 years, affecting your credit score and ability to get a loan. To avoid collection agencies, you can try working out a payment plan with your lender. Contact your creditor immediately if you think you will be behind on your payments.

If your score has already taken a hit, recovering can be difficult, but not impossible. Lazarus suggests that the first step is to get a copy of your credit report and begin paying off outstanding debts. As you pay off more debts, potential lenders tend to trust you more and more. After 7 years, the black mark on your record will disappear, which will bring your score up, but what can you do in the meantime? The best thing you can do, according to Lazarus, is just get your finances in order and avoid accruing more debts. Other than that, he assures those with bad credit that with enough time and good financial planning, things will get better.

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Monday, July 20, 2015

Foreign Purchases of Some American Businesses Face Government Examination

7/20/15 - The Committee on Foreign Investment, an agency through the United States Treasury Department, is responsible for deciding whether to approve or deny any attempted purchase of an American company by a company based in another country. Some such buy-outs are simple and easily approved. Others, like the purchase of Micron Technology Inc., as discussed by James F. Peltz, in his L.A. Times article, require much more discussion and consideration.

The Committee on Foreign Investment only tends to take issue with purchases when they may affect national security. For example, in 2005, a major Chinese oil company called CNOOC Ltd. made an offer of $18.5 billion to purchase Unocal Corp., a California-based oil company. Politicians took issue with this proposed buy-out because they feared that foreign ownership of the American oil provider could possibly cause major problems for the future of American energy security. Eventually, due to complaints and protests regarding the deal, CNOOC Ltd. decided to retract its offer.

More recently, another Chinese company, Tsinghua Unigroup Ltd., has reportedly been preparing a $23 billion offer for the purchase of Micron Technology Inc., a major manufacturer of dynamic random-access memory chips. While Micron claims that no offer has been received yet, Peltz’s sources believe that the deal may not go through anyway, even without interference from the Committee on Foreign Investment. Micron’s stock prices in December were at $36 per share, and while those prices have dropped throughout the year, analysts still believe that the expected offer of $21 per share will not be enough to convince Micron to sell.

Were such an offer proposed by Tsinghua Unigroup and accepted by Micron, it is unlikely that the sale would be approved without a struggle. The Committee on Foreign Investment would have to come up with some pretty compelling reasons to grant approval for a state-owned Chinese country to gain control of one of the only major American producers of memory chips, found in so many devices from smartphones to personal computers. Memory chips are everywhere, in the public sector and in the government, and the change in ownership could pose a security risk, especially after the large number of recent cyber-attacks that have been traced back to China.

Having spent over $200 billion, last year alone, on importing integrated circuits, China, like other Asian countries, wants to become more independent and work on developing its own network of memory chip production, rather than continuing to purchase from America and other countries. Unfortunately for them, they will probably not achieve this goal through a purchase of Micron. Between the Department of Defense’s responsibility to protect national security and Micron’s high stock prices, it is more than likely that this Micron deal will end the same way as Unocal Corp.’s did.

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Friday, June 5, 2015

Developments in Desalination Technology Have Huge Benefits for California

6/5/15 - With the water shortage in California reaching frightening levels, private companies and governmental entities alike are searching for a solution. Desalination, while not a complete solution to the problem, may help to lessen the effects of the drought and provide more fresh water for public consumption. Through a process called reverse osmosis, desalination plants remove salt and other impurities from ocean water, thereby converting it to freshwater. Tony Perry’s article in the L.A. Times looks into the pros and cons of desalination on the environment and the economy.

San Diego County, referred to as “the Silicon Valley of desalination,” is a major hub of water reuse as well as the birthplace of commercial reverse osmosis. Over 3,000 workers are employed by dozens of companies to construct the membranes required for the desalination process. For the members of the International Desalination Association World Congress, a large point of interest in San Diego County is a $1 billion desalination plant currently being constructed in Carlsbad. This plant, the largest in the Western Hemisphere, is being designed with help from Israeli experts in the field, who plan to remain involved with the plant after it has been completed.

San Diego County officials hope that an upcoming tour of the Carlsbad plant by the International Desalination Association will help to dispel some of the concerns raised by critics of desalination. Environmentalists fear the damage that desalination can cause to the oceans and surrounding ecosystems. The water intake systems can kill fish, and the highly concentrated brine left over after the removal of fresh water from the seawater can cause pollution. However, Poseidon Water, the company in charge of building the plant, claims that they have a way of reducing fish kills and have a plan to dilute brine before disposal, thereby reducing environmental issues.

Energy efficiency can be a big problem for many desalination plants. The entire process requires a large amount of energy to pump water, perform the reverse osmosis, and purify the liquid. The Carlsbad plant is being built at the Encina Power Station and, by using the same water intake system, energy usage can be reduced significantly. Many newly developed technologies are helping desalination plants to become more efficient and even helping reduce costs. Although the cost of water from the plant will be higher (prices are expected to rise on average by $5 per month), San Diego officials still feel that the trade-off is worth it, since this water will be unaffected by droughts throughout the rest of the state.

The San Diego County Water Authority has already promised to buy the Carlsbad plant’s water for the next 30 years, with a goal of having desalination provide over 7% of total water consumed within the next 5 years. Other desalination plants have been proposed, but between lawsuits and getting permits from the federal government, it is not likely that such plans will reach fruition anytime soon. While desalination plants have some environmental and economic drawbacks, Perry concludes that they pose the greatest chance for California to regain control over its water supplies. After all, the Pacific Ocean is a source of water that has little risk of running out.

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