Another Housing Bubble?

By: Dr. Lynn Reaser
With housing prices rising at a double-digit pace, such as in San Diego, along with multiple bids, the housing market is starting to look a little frothy.  Are we headed for another bubble?

For now, the housing market is still in its early stages of recovery.  A slowly healing job market, a dramatic improvement in affordability due to lower home prices and interest rates, and a shift in the economics toward ownership versus renting have boosted demand.  Meanwhile, inventories of homes for sale are being constrained by the reluctance of homeowners to put their homes on the market along with a still low level of new homebuilding.

Another bubble could certainly develop within a few years, particularly if the Federal Reserve is too slow in withdrawing its aggressive easing and in raising interest rates.

Although we usually say, “never again”, housing will probably always be vulnerable to cycles, especially in California.

Image Credit: http://www.sdhomedatabase.com/home/

Work Which Expresses Our Faith

By: Randy Ataide

One of the unique things about our work at the FBEI is that we have such a diversity of projects to tackle, relationships to build, and deadlines to meet. Over the past years, we have tackled a dizzying array of tasks, some small, some big but nearly all interesting. We are grateful to the many clients, supporters, advocates, partners and stakeholders who have assisted us in this work.

On Tuesday May 28th, at the Jacobs and Cushman San Diego Food Bank, we had the privilege of presenting the original research report San Diego’s Food Bank Population: Profile, Analysis, and Solutions. Original field research done by PLNU undergraduate and MBA students, ably led by FBEI Manager Emily Gallentine and FBEI Business & Economic Research Associate Dieter Mauerman and research assistant Mark Undesser, met with Food Bank clients as they waited in line at their particular distribution site. Thirteen sites were visited and well over 500 clients were talked to in several languages. This work succeeded in providing Chief Economist Lynn Reaser the necessary data to “put a face on hunger.”

The work of the San Diego Food Bank is mind boggling. At a 152 regional distribution sites, in 2012 they distributed nearly 18,000,000 pounds of food representing approximately 14,000 meals! They serve about 350,000 San Diegans per month and the study has unequivocally demonstrated that those with hunger in our midst are seniors, children, military families, and often single or two income households. This means that the issues of underemployment and/or low wages are primary drivers of hunger in San Diego.

Speaking for all of us at the FBEI, we are hard pressed to think of a more important issue than one of hunger among the citizens in our community. This has not just been an economic project but one of high personal and professional interest for all who worked on the study. And this interest furthers some of the core values of PLNU, namely:

The stewardship of resources – We are caretakers of all that has been entrusted to the University (people, facilities, money, and knowledge). We are to use these resources in a way that reflects the purposes of God and protects the goodness of God’s creation.

Service as an expression of faith – We are stewards, not owners, of our time, talent, and selves. Part of our call as Christians is to serve the world, working to better the condition of humankind both locally and globally.

This project has been an expression of our own faith at the FBEI, and I think shows how PLNU’s faculty, staff, students and alums are an absolutely unique and indispensable resource for our community. We invite you each to take the time to read the study and to also consider getting involved in supporting the Food Bank or any other group or organization that will help to feed our community. Let’s make San Diego an even greater place for all!

To read the complete study please click here.

Assessing the Federal Reserve Board’s Chairman

Q:  Is Federal Reserve Board Chairman Ben Bernanke running the “most inappropriate monetary policy in history,” as claimed by a noted Wall Street hedge fund manager?

A noted Wall Street hedge fund manager recently severely criticized Federal Reserve Board Chairman, Ben Bernanke, for running the “most inappropriate monetary policy in history”.  Is this an accurate description or far from the mark?

Chairman Bernanke has led the Federal Reserve through an extremely difficult period and helped prevent a U.S. and global financial meltdown.  The current path of extraordinarily low interest rates and swelling the Fed’s balance sheet at a rate of $1 trillion a year does mark unchartered territory.  It entails sizable risks, including another asset price bubble or higher inflation down the road.  Scaling back or ending these policies could be disruptive to both markets and the economy, but such policies cannot be sustained.

Mr. Bernanke’s rating in history will ultimately depend on the Fed’s exit strategy and how it implements that strategy.

Image Credit: http://www.thebcobserver.com/2010/02/23/dollar-gains-against-euro/

San Diego Exports—A Potential to Be Realized

By: Dr. Lynn Reaser

President Obama set a goal in his State of the Union speech in early 2010 to double U.S. exports in five years.  Although U.S. exports have displayed considerable strength, San Diego has lagged behind.  A recent study conducted by the Brookings Institute severely criticized our region for its shortcomings.

Although San Diego does face constraints from both its seaport and airport facilities, our region holds enormous promise for exports.  San Diego has great potential for exporting agricultural products, manufactured goods, and services in the period ahead.  Mexico’s manufacturing renaissance affords San Diego firms an exemplary opportunity to export various parts and components.  San Diego merchants can also benefit from rising incomes in Mexico and the preference for cross-border shopping. 

Our exports of produce and consumer goods should find receptive markets in the growing Asian economies.  High-tech electronics, medical equipment, pharmaceuticals, sporting goods, and other products hold bright export prospects.  Finally, the strength of our tourism, higher education, software development, and engineering talents can boost San Diego’s important service exports.

Perhaps the biggest road block to realizing our export potential lies in the reluctance of many small and midsize firms to tackle markets away from home.  But those fears should be overcome as exports provide enormous promise for ongoing growth.

Image Credit: http://www.kpbs.org/news/2013/may/13/san-diego-could-be-exporting-more-brookings-instit/

FBEI Commencement Farewell: Part 2 – A Landmark for a New Chapter

By Dr. Lynn Reaser

May 4, Graduation Day at PLNU, of 2013 will forever be burnished in my mind as a glorious day but also as one of some regret.  I am so proud of Cathy Gallagher on completing her BA, of Dieter Mauerman with his MBA, the 60 MBAS, James Garcia, and the others earning their degrees.

I had anxiously anticipated being part of the academic procession and hugging all of my students and friends on that wonderful day.  But, alas, God had other plans and I remained in the hospital until late that day.  Please know, however, that my heart and spirit were with all of the students that day and I pictured them vividly in my mind.

It has been only a short while that I have been teaching an MBA class at PLNU but it has been such a joy to see students embrace the power of economics and how it provides a prism to help view the world.  I treasure my students and my colleagues as dear friends and hope those friendships will continue throughout our lives.

And so, although May  4, 2013, was a bittersweet day for me, much more importantly, it was a landmark for our students as they begin new chapters in their lives.  I am so very proud of all of them and only offer whatever I can do to support them and their followers in the future.

Image Credit: 2013 PLNU Commencement by Marcus Emerson

FBEI Commencement Farewell: Part 1 – “It was a very good day!”

By Randy Ataide

This past Saturday May 4 was a day that dawned cool and gray but as events unfolded rich clouds were punctuated by blasts of warm sun. But the weather was really the least important thing of this date, as it was the 2013 commencement ceremonies for PLNU!

I have reflected several times in past blogs of my mixed feelings of commencement day—the fulfillment of so much work, effort and commitment by young people towards a personal goal of a college degree brings to family and friends great pride and joy in the celebration of a goal now achieved. It is fun to participate in some small way in this journey for both our undergraduates and our MBA’s. But the closing of this chapter of life, a season at PLNU now completed as the graduates now focus on other people, places and things, often to the far corners of the earth, inevitably brings a touch of sadness and pain even in the midst of celebration.

But it was a very good day at PLNU! With my teaching now focused only upon MBA’s, greeting my last group of undergraduate entrepreneur students I have taught this past year was very rewarding, as I thought back to the hundreds of students who have taken BUS 382 and 486 from me since in the years 2006-2012. And this year, the enormous group of over 60 PLNU MBA’s successfully finishing our rigorous program undoubtedly gives any of us associated with the MBA fulfillment (if not some exhaustion as well!) Joined by other programs and majors from PLNU’s several campuses provided a jolt of energy to the day at each of the three ceremonies.

There is even more to celebrate. For our own Institute office, the great accomplishment of our Director Cathy Gallagher achieving her B.A. in Business Administration only serves to burnish her outstanding business credentials, and our Economic Researcher Dieter Mauerman joined the ranks of PLNU MBA’s, class of 2013. With Lynn Reaser and I each serving as teacher and advisor to them, and Emily Gallentine as chief encourager, our team celebrates together in their milestones. Institute student employee James Garcia also earned his B.A. in Business Administration, and we wished him “bon voyage” as he embarks on his new quests in life.

Long ago, Winston Churchill uttered a short phrase which seems to fit the day as well anything else:

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

So congratulations to all. Yes indeed, it was a very good day!

Image Credit: 2013 PLNU Commencement by Marcus Emerson

Taxes on Internet Transactions–A Loophole We Should Lose?

By: Dr. Lynn Reaser

The Senate has moved to require that local sales taxes be levied on internet transactions.  Is this a good idea?

The answer is “yes”.  First, it represents good fiscal policy by broadening the tax base.  In California, for example, the state is dependent on personal income taxes for about 70% of its revenue.  Personal income taxes are subject to wide cyclical swings.  Second, it recognizes the major shifts in technology and consumer tastes to purchasing over the Internet.  Third, it levels the playing field and reduces the tax bias currently directed against brick and mortar stores.

Spending constraint remains vital but should not stand in the way of making the tax code more fair and rational.

Photo from: crimeprevention.rutgers.edu

Gold Prices Plummet—Cause for Alarm?

 By: Dr. Lynn Reaser

Gold prices have suddenly plunged by 30% from the high reached in September.  What does this mean and should we be alarmed?

Gold prices are subject to violent price swings because of the influence of commodity traders and hedge funds.  Some of the recent decline reflects concern that China’s economy might slow abruptly.  While the Chinese economy is unlikely to grow at the double-digit pace of recent years, substantial growth of around 8% per year is still likely.  Some of the drop in gold prices also reflects a lessening of concerns about U.S. and global inflation.  Hopefully, the Federal Reserve and other monetary authorities will be able to maintain that trust.

Gold is often sought as a refuge driven by fear.  We should be more concerned if gold prices were skyrocketing.

Image Credit:
http://spectrum.ieee.org/nanoclast/biomedical/devices/gold-nanoparticles-offer-nontoxic-treatment-for-eradicating-lymphoma

Brain Mapping—A New Course for San Diego

President Obama has proposed a major initiative to map the inner workings of the brain. Funding supported by public and private sources could amount to $1 billion or more over a span of a decade. San Diego could both contribute in a major way to this effort and be a prime beneficiary.

The region already possesses some of the leading neuroscientists and institutions that are likely to be driving forces behind the undertaking and could develop it into a major cluster for the area’s economy. The Salk Institute and Qualcomm, for example, will be pivotal players in a public private partnership. Although tangible benefits could take many years to achieve, the ultimate benefits in finding cures for problems ranging from Alzheimer’s and Parkinson’s disease to autism and schizophrenia could be enormous.

This effort should also be pursued in collaboration with the other regional research efforts in brain chemistry, physiology, and pharmacology. It will be a difficult and complex task, but we are certainly up to the challenge.

Image Credit:
http://assisted-living.benchmarkseniorliving.com/new-scan-may-help-detect-alzheimers-earlier/

New Problems Bubbling in the Housing Market?

By: Dr. Lynn Reaser

At the peak of the last housing boom, people’s homes became their personal piggy banks.  Enticed by zero or low down payments, they tapped home equity loans to finance all types of consumer spending.  The good times were indeed very good for many but came to an unhappy end with many losing their homes to foreclosure.

Home equity loans are beginning to come back.  Are we at risk of seeing a repeat of the last cycle?

The answer is, unfortunately, yes.  Too often we fail to learn from history.  The housing market is still in its early stages of recovery and many homeowners are still “under water” with their unpaid mortgage balance exceeding what their home is worth.  However, further increases in home prices and a gradual relaxing of lending standards could cause more people to again tap their homes as a source of credit.  They may well take on debt burdens that could be problematic as interest rates rise, incomes fail to keep pace with debt servicing obligations, or home prices fall back. 

Caution and prudence are good watchwords.

Image Credit:
http://www.stimulrealty.com/home-mortgage-loans-from-the-fha-some-helpful-points/