Evan Vitale

Accounting Professional

Evan Vitale – China Real Estate Bubble Bursting

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Finally, the Chinese real estate market seems to be stalling. It’s been a long run.

For almost 20 years, increases have occurred in construction and real estate prices across all of China. But development is starting to come back to earth as housing starts have decreased by 25 percent from a year ago.

Some economists are saying that the bubble has burst, something that could have severe economic and political implications.

The Chinese government put a series of policies in play in order to try to tame the ever-rising market. For starters, they’ve placed punitive interest rates on mortgages for second homes and a ban on buying third homes. Plus, the central bank has kept short-term interest rates well above the rate of inflation.

Not only has there been a delay in new projects – existing projects are being completed at a reduced speed as well. This has led to a slowing in both steel and cement output as well as retail sales.

Chinese economists believe that this downturn in the real estate market will most likely lead to considerable increases in nonperforming loans.

However, there is no need to worry about a shutdown such as the one that occurred in the U.S. in 2008. More than half of the homes in China were purchased over five years ago and real estate prices have doubled in that same time-frame. And Chinese families have a tendency to save – putting almost half of their income into a savings account.

Households in China have 66 percent of their assets in their homes, a much larger percentage than that of the U.S.

Evan Vitale – London’s Real Estate is Going Crazy

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An apartment overlooking Hyde Park in London recently sold for $237 million, giving a glowing example of the craziness of London’s real estate market.

The city’s housing prices have skyrocketed 18% within the last year and it has both politicians and economists worried.

The apartment, which is speculated to have been sold to a foreign buyer, is still unfinished. It is approximately 16,000 square feet. 

Londoners cite foreign buyers as a reason for this rising market price, making ridiculous investments in a market that has a high demand.

London Vs. New York City

A new report shows that over $676 billion has been invested in London real estate. This is approximately four times the amount that has been invested in New York City.

London is desirable due to a bunch of reasons — it’s vibrant culture, a growing economy and business scene, and the variety of green spaces. One aspect that is often overlooked, however, is the timezone — one which is located between Asia and the US. 

Low interest rates and aggressive government incentives have also helped with the housing boom in London. 

Dangers 

The housing market in London is a bubble waiting to burst. Economists are considering raising interest rates later this year. Rates have not risen since July 2007. 

These rapid price gains raise the chances of future debt growth. The low interest rates are no longer necessary for the London housing market. 

Evan Vitale – Rangers Suffer Tough Second-Game Loss

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Ranger's Lundqvist reaches for a save. -Evan VitaleLast night was Game 2 in the second-round playoff series between the NY Rangers and the Pittsburgh Penguins.  The Penguins won the game handily, scoring three unanswered goals, tying the best-of-7 series at one-one.  Game three will be tonight in New York.

The Rangers are currently in the middle of a grueling back to back game schedule.  Last night’s game was the fourth in six nights, and some wonder if goaltender Henrik Lundqvist is too tired to play every game.  Rangers coach Alain Vigneault says he’s fine, and intends to keep him on the ice for every minute of the playoffs.  Indeed, Lundqvist looked sharp on the ice.  What this means for the Rangers is that the Penguins offense is a formidable force.

Much of the game was spent in Rangers defense territory, with the Penguins skill on full display.  The fact that Pittsburgh only scored three goals is actually a testament to Lundqvist’s performance.  The fact that the Rangers scored none, could be a bad sign.

The Penguins took 3 major penalties in the first seven or so minutes of the game.  The Rangers, looking to take advantage of the power play only had two shots on goal.  It’s going to take a lot more to bring this team down.  Both teams are excellent, and when two teams are playing at such a high level, every moment matters.  Every play, every little thing becomes important.  The Rangers need to make sure they capitalize when they have power play opportunities.

Fans at the CONSOL Energy Center loved the game, of course.  They were galvanized by the wasted chance in the first 10 minutes, and rallied behind their team.  Rangers fans are hoping that the next few games being in NYC will give the Rangers that home ice advantage to help give them an edge.

Penguins goaltender Marc-Andre Fleury set a new Penguins record last night, with his 7th postseason shutout, the most in club history.  He collected all 22 shots on goal.  The Rangers need to make Fleury work harder.  It’s not that he had such a great game, it’s that there just weren’t enough shots on goal by the Rangers.  Analysts called the Blueshirts play sloppy, losing battles all over the ice, and offering no real pressure on offense.  Brad Richards felt that the Penguins were desperate and played harder.

On the other hand, experts are calling Lundqvist’s performance among his best all season.  Some of his stops were remarkable, particularly during the second period.  He made fifteen saves, many of which will make their way to fans best-of lists at the end of the season.

The Pittsburgh coach, Dan Byslma, is hoping to turn the victory into positive momentum.  The Rangers have a tough schedule, and he wants to use that to his advantage – “We want to make the schedule a factor.”

Evan Vitale – Reasons to File Taxes On Time

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evan vitale tax deadlineVery few of us plan not to do our taxes on time, but sometimes it happens.  To try and help motivate those of you still waiting to put pen to paper (or fingertip to keyboard), here are a few reasons why filing on time is better than putting it off until later.  Courtesy of Daily Finance.

The first reason to file taxes on time is late penalties.  There’s no better motivation than trying to keep money in your wallet.  The reason there is a monetary fine on late filing is because the filing of national taxes is so important.  There’s also been reports that the IRS will hound you harder if you fail to file on time and owe a deal of money – as opposed to those expecting to receive money back.  The fine amounts to about 5% of the taxes you owe for every month you delay, with a cap at five months.  If you’re not filing on time because you can’t pay the money you know you’ll owe – still file!  The fine is significantly less for failing to pay what taxes you owe.

The next reason is delayed reimbursement.  The longer you wait to file, the longer it will take for you to receive your return.  In essence, you’re giving the government an interest-free loan.  Better that money was in your savings account accruing money for you.

Up next is forfeiture of your refund altogether.  After a generous window of three years, any money owed to you by the government just kind of…disappears.  Whatever happens to it exactly, it no longer belongs to you.  Hope you were planning on making a donation to the IRS.

Number four – if you don’t file, the IRS is allowed to file for you!  Yes, they will estimate your taxable income and file on your behalf.  This is usually not in your best interest, since they won’t be making any deductions.  If you do receive a notice that a substitute return has been filed, along with a bill, you will still have a little time to calculate your deductions.

And the last reason is the most compelling:  You will lose your freedom.  After all the letters, requests (or even a representative sent to your door), the IRS will get serious.  This means they could automatically remove money from your wages, seize assets (think vehicles), and maybe even put a warrant out for your arrest for the federal crime of tax evasion.

There really is no valid argument for not filing your taxes on time.  So take some time over the next ten days and see it through.

Evan Vitale – Why Is Everyone Upset? Facebook & WhatsApp

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Evan Vitale facebook whatsappEveryone’s been talking about the recent acquisition of WhatsApp by Facebook, and I found a very interesting take on it from Yahoo Finance.  The writer of the article mostly concurs with general sentiment – that Facebook overpaid.  Overpaid in a major way.  But he goes on to say that the acquisition makes no strategic sense at all.

The reason is that there are a lot of these messenger apps.  WhatsApp is the biggest, but new ones come out every day.  The newer Telegram Messenger app signed up five million users yesterday.  These messenger apps all work the same, cost the same (very little to nothing), and do the same things – many even look the same, with similar colors and virtually identical layouts.  What’s more is that the content they use is merely what we’ve already entered into our address books.  If one app suddenly makes a change that you don’t like, there are plenty of options.  So the apparent value is very low – these are interchangeable, right?

So why didn’t Facebook create it’s own version of the app and simply promote it to their network, which just so happens to be the largest on earth?  For the cost of developing an app, they could have pulled off one of the biggest messenger app user bases around.  Spend some of that extra money on a mega advertising campaign worldwide.

Instead, here comes Facebook making a monstrously expensive purchase on just one player in this interchangeable, disposable market space.  There’s no sustainable revenue…in fact, the app has to remain free in order to retain their user base.  WhatsApp wasn’t a threat – they’re not an identity company, one that you give your info to for public consumption.  They simply hold an account for you to contact your own address book.  Instagram was different – there was and is a huge advertising potential upon which Facebook has already capitalized in a big way.

But does this mean that Mark Zuckerberg simply made a rash decision with not enough oversight from his board, as posited by this editorial?  Is this a simple win for WhatsApp and a necessary loss for Facebook?  Should shareholders of the social giant be upset?  Should Google be happy that they couldn’t get their hands on it?  After all, they tried buying it for $10 billion, and there are reports that they even matched the offer from Facebook.

My question is, why does anyone need to be upset?  Facebook just acquired the biggest global brand of messaging apps.  They also acquired it at a time when the future for social networking is hazy…do you want to publish your thoughts for mass consumption and be aware of the goings on of your entire social network every time you go online?  Or would you prefer to put that aside to some degree and enjoy a more intimate, meaningful interaction with those to which you’re closest?

I think Facebook is preparing for the future.  A future that might involve people looking for alternative social networking avenues for different social purposes.  After all, there’s something entirely more special about a game night with a couple friends and New Year’s Eve in Times Square.

Evan Vitale – Orlando Development and Investments

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Evan Vitale OrlandoCentral Florida and Orlando finished last year off with some promising investment sales, brand new developments, and leases.  That’s good news for the local economy, and hopefully a harbinger of more good housing/investment news to come.  There appears to be an interest in investing in the area, attracting investors who have cash and are looking for the next big moneymaker.  Investments of these sorts do more than offer a way for struggling properties to have a second chance at success.  We are seeing a boost in property values, construction jobs as a result of new developments and refurbishing, and more taxes taken in by local governments.   Biz Journal posted a list of some of the more notable closings, and I wanted to share some of that list here.

The first new condo complex in nearly ten years is going up in New Smyrna Beach.  The property is being financed by Eckell Development, who plan to break ground in just a couple months.  The plan is for a $16m condo development with nineteen units right on South Atlantic Avenue.  Units will be in the million dollar range.

Canadian companies like Highyon Shopping Center Investment Funds are getting in on the action.  This company bought the many commercial properties of Parkwood Plaza in Orlando, including a 150-thousand sq ft retail center.  Along with the purchase is included thirteen acres of land yet to be developed.  The purchase was just a little over ten million dollars.

In southeast Orlando, in Lee Vista, a 35-thousand sq ft space was leased by American Woodmark Corp.  American Builders & Contractors Supply leased a similarly sized space in Maitland, and Rite Rug leased a 25-thousand sq ft lease in southwest Orlando.  What exactly will happen with all of these properties remains to be seen, but it seems more and more like this is an exciting time to be living in Orlando.

Pine Ridge Dairy sold a 750-thousand acre plot in Fruitland Park in Lake County to the villages of Lake-Sumter, who plan on building over two-thousand residential units, a completely new neighborhood.  Adventist Health System is expanding, leasing another nearly 20-thousand sq ft of space in downtown Orlando.

One of the bigger sales of the last quarter of last year was by Cushman & Wakefield of Florida, who sold a 300-unit apartment complex in West Orlando to the Atlanta-based Carrol Organization.  The deal was over $35 million.

Here’s to some promising years in the near future!

Evan Vitale – Stimulus Program to be Reduced

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The federal reserve has decided to “taper” off the stimulus funding.  Beginning in January the Reserve will reduce the amount of bonds they have been buying from $85 billion to $75 billion each month.

Evan Vitale federal reserveThe Federal Reserve statement mentioned that the labor market conditions and the employment market could be improved with less purchase of assets each month.

Bonds that will be cut back on will be in two areas. Treasuries will receive less purchases per month (approximately $5 billion) and mortgage-backed securities will also see a $5 billion dip.

How did all of this happen?

It started with the Federal Reserve cutting their key interest rate in 2008 to nearly zero.  From there the program entered what is called “quantitative easing” also known as QE.  QE involved the Fed buying assets such as treasuries and mortgage-backed securities with hopes of lowering the interest rates for the long term.

QE was broken up into three terms which are now known as QE1, QE2, and QE3.  Of these three stages QE1 and QE2 had specific end-dates of which to judge them by.  QE3 does not have such a date but the Reserve says they are looking for “substantial” improvements for the stimulus and the job market.

The term “substantial” has been misrepresented by many members of the Federal Reserve such as Chairman Ben Bernanke.  Bernanke explained that he expected tapering to begin around towards the end of this year and stated it would stop buying bonds sometime in 2014.

Bernanke was also hoping that once the unemployment rate dropped to 7% that tapering would begin.  When it hit 7% last month there was no action however and now that tapering seems to be happening at an inopportune time.

Eric Rosengren, a Fed member, was not in favor of the tapering citing his belief that unemployment was still too high.

However the tapering effects the future is unknown and frankly up in the air. Bernanke will not be at the helm much longer to see it through as his 8 year term ends on January 31.  Janet Yellen was nominated by President Obama in October and will assume Bernanke’s old position beginning in February.