Russian Investor Buys Silicon Valley Mansion for $100 Million.

Original Post: http://blogs.wsj.com/developments/2011/03/30/russian-investor-buys-silicon-valley-mansion-for-100-million/
By Juliet Chung for WSJ.com march 30, 2011.

Google Earth

A satellite view of the home purchased by Russian venture capitalist and entrepreneur Yuri Milner.

Russian investor Yuri Milner has bought a French chateau-style mansion in Silicon Valley for $100 million, according to a person familiar with the deal. The deal is among the most expensive to have occurred for a U.S. single-family home.

The Los Altos Hills mansion runs more than 30,000 square feet and was completed around 2008, according to an architect who helped design the home. Mr. Milner, who heads Digital Sky Technologies, whose investments include Facebook Inc., Groupon Inc. and Zynga Inc., bought the mansion through a limited-liability company. The home was not on the market, according to people familiar with the deal. Mr. Milner has no immediate plans to move into the home, a spokesman said. The sale was previously reported by the website TechCrunch; it and other outlets had reported the sale at $70 or $75 million.

The symmetrical limestone mansion with San Francisco Bay views was inspired by 18th-century French chateaux; the design process began around 2001, according to architect William Hablinski, who designed the home with his then-partner Richard Manion. “There wasn’t a real budget,” Mr. Hablinski said of the home, which has a ballroom, home theater, wine cellar and indoor pool. Public records put the house at about 25,500 square feet with a 2009 completion date.

The sellers are Fred Chan and his wife, Annie, who owned via a limited partnership. According to published reports, Mr. Chan founded Fremont-based ESS Technology, which designs and markets audio and video products for consumer markets, according to the company website. They have been involved with condominium developments in Hawaii and have an educational foundation, according to published reports. The Chans accepted a $50 million note on the house, according to Loren Goldman of First American Title, who reviewed documents related to the deal for the Journal.

Bloomberg News

Yuri Milner

The south wing of the house has family rooms and bedroom suites, according to the architects’ websites. There’s also a tennis court and outdoor pool, and photos show a loggia and details like chandeliers and a frieze around a skylight in the entryway. The clients planned to use the estate as their primary home and traveled to Asia and Europe to acquire specific items for the house, Mr. Hablinski said, adding that he never knew what the final cost of the home was.


Catherine Marcus of Sotheby’s International Realty and Ken Deleon of Keller Williams Realty were involved in the deal.

Few deals are known to rival that struck by the Chans and Mr. Milner, domestically at least. In 2007, investor Ron Baron paid $103 million in East Hampton, N.Y.—for 40 acres of vacant land. In 2008, an investment company linked to Russian fertilizer billionaire Dmitry Rybolovlev paid $95 million for an estate owned by Donald Trump in Palm Beach, Fla.; Mr. Trump had been asking $125 million. Former Global Crossing chairman Gary Winnick in about 2000 acquired a Los Angeles estate in the Bel-Air neighborhood in a complex deal involving money and property for more than $90 million.

In Hawaii, the Chans own a 5.4-acre oceanfront estate on Oahu for which they were recently asking $80 million; the property, first developed by industrialist Henry Kaiser, is not currently listed. The Chans declined to comment through a representative.

–Sarah Tilton contributed to this article.

Mortgage Servicers Resist But Cut Debts .

Original Post: http://online.wsj.com/article/SB10001424052748703576204576226980831330892.html?mod=WSJ_RealEstate_LeftTopNews
By RUTH SIMON And NICK TIMIRAOS march 28, 2011

U.S. banks are resisting efforts by state attorneys general to force them to cut the amounts owed by some borrowers facing foreclosure. Yet mortgage companies already have reduced home-loan balances for more than 100,000 borrowers.

How much larger the number will grow is likely to be at the center of negotiations this week aimed at reaching a settlement to the nationwide investigation of mortgage-servicing practices.

Officials from Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc.'s GMAC unit have been summoned to Washington for a Wednesday meeting with state attorneys general and at least three U.S. agencies, according to people familiar with the situation.

It will be the first faceoff since the five companies, the largest home-loan servicers in the U.S., got a 27-page "term sheet" earlier this month from state attorneys general that would require the servicers to consider more borrowers for principal write-downs.

In addition, some of the financial penalties resulting from any settlement are "very likely" to be used for reductions in loan balances for certain borrowers, said Iowa Attorney General Tom Miller, who is spearheading the 50-state investigation. Even among state officials, there are disagreements as to whether shrinking loan balances is a good idea.

The "term sheet's principal reduction proposals may actually foster an unintended 'moral hazard' that rewards those who simply choose not to pay their mortgage," the Florida, South Carolina, Texas and Virginia attorney generals wrote in a March 22 letter to Mr. Miller.

The chief executives of Bank of America and Wells Fargo have questioned the fairness of writing down loans, while claiming the costs could be enormous if widespread principal reductions are triggered by a settlement.

Speculation that "we want everybody 'underwater' to receive a principal reduction is not true," Mr. Miller said in an interview, though lopping off thousands of dollars from what a borrower owes on a mortgage "has been underutilized as a tool." An underwater borrower is one who owes more on a property than it is worth.

This month's proposal by state attorneys general would require banks to reduce loan balances for some borrowers if a modification that includes a principal reduction would provide a better long-term return than foreclosure or a loan modification that simply cuts the borrower's interest rate or extends the loan's life.

Loan balances would be trimmed over a three-year period, but only if borrowers made steady payments.

Some loan servicers under investigation by state and federal officials already are slicing loan balances on a very narrow basis. In 2009 and 2010, Wells Fargo forgave a total of $3.8 billion in principal—or an average of $51,000 per loan—for roughly 73,000 borrowers whose mortgages are owned by the San Francisco bank.

Bloomberg News

Bank of America says it had offered loan modifications to more than 127,000 borrowers as of December

Bank of America, based in Charlotte, N.C., had offered loan modifications to more than 127,000 borrowers as of December as part of its previous settlement with state attorneys general over alleged predatory lending by Countrywide Financial Corp., which it bought in 2008. An estimated 35,000 of those offers included a principal reduction.

Officials at Bank of America and Wells Fargo said the two banks are comfortable reducing loan balances for certain borrowers, but oppose broad-based cuts. One reason: Some borrowers could stop making payments to get their debt reduced.

A recent study by Columbia University economists concluded that Countrywide's relative delinquency rate "increased substantially...during the months immediately after the public announcement" of the 2008 ­settlement.

"It's certainly something to be worried about, but you can't point to this and say, 'Well, we can't do any modifications,' " said Christopher J. Mayer, one of the study's authors.

Most loan-modification programs have focused on temporarily reducing interest rates and extending loan terms.

Principal reductions have gotten more attention recently because so many borrowers owe more than their homes are worth.

At the end of 2010, nearly 11.1 million borrowers, or nearly 23.1% of those with mortgages, were underwater, according to CoreLogic Inc. The tepid nature of the housing recovery suggests many borrowers could remain underwater for years.

Supporters of principal reduction say borrowers who receive such cuts are less likely to redefault.

"Principal write-downs are much more likely to create a loan that is sustainable over the long-term," said Massachusetts Attorney General Martha Coakley, who has made principal reductions a component of four predatory lending settlements.

A study last year by the Federal Reserve Bank of New York found that loan modifications with principal reductions are far more likely to succeed than those that simply reduce interest rates.

According to mortgage servicer Ocwen Financial Corp., 17% of its borrowers who got a principal reduction were behind on their payments again six months later, compared with 20% of those with a modification that reduced payments but not the loan balance.

Over the past year, Ocwen has cut balances on more than 16,000 loans, representing 22% of its modifications.

"We found that it's essential to include principal reduction in our modification arsenal to be able to address the negative equity problem," said Paul Koches, Ocwen executive vice president. In February, Ocwen rolled out a program that will spread principal reductions over three years and let mortgage investors share in any subsequent increase in value when a home is sold.

Some mortgage companies say principal reductions are best used when borrowers are deeply underwater. PennyMac Loan Services LLC will consider reducing principal if the borrower is likely to remain underwater even after three or four years of loan payments, said Steve Bailey, chief servicing officer for PennyMac, which has used principal reduction in 58% of its modifications.

—Dan Fitzpatrick contributed to this article.

Write to Ruth Simon at ruth.simon@wsj.com and Nick Timiraos at nick.timiraos@wsj.com

Million-Dollar Homes Face More Audits.

Original Post: http://blogs.smartmoney.com/tax/2011/03/25/million-dollar-homes-face-more-audits/
By Arden Dale  March 25, 2011, 3:12 PM

Some people who owe more than $1 million on their homes are coming under the microscope at the Internal Revenue Service over how much of their mortgage interest they can deduct on their tax returns.

The number of taxpayers involved could be in the tens of thousands because in some parts of the country, many homes sell for more than $1 million and even a buyer who puts down 20% or 30% may need to borrow. The amount of interest at stake is substantial, in some cases as much as $50,000 to $60,000 on a $1.1 million mortgage.

The IRS didn’t comment, but the scrutiny follows a period of confusion by taxpayers, advisers and even some IRS agents about how much interest can be deducted, based on what kind of debt the homeowner holds. Tax rules distinguish between two kinds of home debt. There is home acquisition debt, which is a loan used to acquire, construct or substantially improve a qualified home, and is secured by the home. Then there is home equity debt, which is any other kind of loan that is also secured by the home.

Some tax advisers were telling clients it was acceptable to deduct all interest on a single mortgage of up to $1.1 million. Others contended that the limit for mortgages was $1 million, but they could also deduct interest on another $100,000 in a home equity loan, according to Melissa Labant, tax technical manager at the American Institute of Certified Public Accountants.

IRS guidance last June helped set the rules straight. The agency said acquisition loans over $1 million may also qualify as home equity indebtedness. Now, says Labant, it is clear the taxpayer can deduct interest on the full $1.1 million, even if he has only one loan. The development, she adds, is “good news for taxpayers.”

The rules can get “particularly complex for a mere mortal” when various refinancings get thrown into the mix, and the taxpayer owns several homes, say a house in upstate New York and a condominium in New York, according to David A. Lifson, a certified public accountant at Crowe Horwath LLP in New York, who has clients caught up in these mini-audits. In past six months, he says, the Internal Revenue Service has notified many people that it is looking at their mortgage interest write-offs.

Tax rules generally allow deductions on a first and second home, but not a third or more.

Readers, have you been confused by how much of a deduction you can take?

Tablet Wars: iPad Vs. the World

Original Post: http://www.cnbc.com/id/42133166/

Published: Saturday, 19 Mar 2011 11:41 AM ET  By: Chris Morris Special to CNBC.com

Getty Images

Black and white versions of the new iPad 2.

There's no doubt that Apple's latest iteration of the iPad is a hit with consumers. Day one sales are estimated at 500,000 or above and people are still lining up outside their nearest Apple store to get their hands on one.

But the iPad 2 is entering a much different world than its predecessor. And while Apple still holds a commanding market share position, it may be in for a much tougher fight this time around.

Competitors have had an opportunity to examine Apple's [AAPL 339.19 -2.01 (-0.59%) ] weaknesses with the original iPad—and the new features of the current model were hardly a surprise to anyone. Google, meanwhile, released Android 3.0 in February, the first of its mobile operating systems that was built specifically for tablet computers.

"We're really just seeing the cutting edge of the emergence of truly competitive products to the iPad," says Rhoda Alexander, an analyst with IHS iSuppli "And arguably, it's not a true head-to-head comparison at this point because of price.

The Motorola Xoom won widespread acclaim at this year's Consumer Electronics Show and was touted as a potentially formidable competitor to the iPad, but when the prices were announced, that buzz took a hit. $799 for an unsubsidized version (the truest comparison to an iPad's pricing) was dubbed prohibitively expensive – and consumers have so far basically ignored the device.

The problem with that comparison is it was pitting a single product against Apple's six versions of the iPad. While people remember the $499 price of the stripped down version, they rarely think about the high-end $829 model.

"Apple was priced strategically in that it has an entry level product at $499," says Alexander, who expects a second wave of less expensive tablets from several manufacturers in the back half of this year. "[That] is an absolutely critical price point for the consumer. Part of the difficulty with the iPad 2 coming in is now there's iPad 1 for $399 out there, so now you have a lower barrier that companies are battling."

Android Tablets - The Strongest Rival to iPad

Eric Bleeker, Analyst at The Motley Fool says Apple still has the edge with the iPad 2. But he thinks the Android system poses the greatest threat to Apple.

That's not stopping a new wave of competition from coming. Samsung, which had marginal (at best) success with its first Galaxy Tab line recently introduced a new model, with a larger screen and using Android 3.0, and is also expected to unveil a new 8.9-inch addition at the 2011 CTIA Wireless convention this week.

HTC is also readying its first entry in the space, with details and a carrier partner likely to be named at CTIA. (The grapevine suggests it will use the company's EVO product line name.) And, come June, Asus will release its Eee Pad MeMO, which blends the tablet with the smart phone.

The big guns will come from HP, which is readying its TouchPad tablet for a summer release, and Research in Motion's Playbook, which is hoping to capitalized on that company's close relationship with businesses through its Blackberry smart phone.

For any of those tablets to succeed, though, they need to find a way to overcome consumer's natural tendency to follow the buzz. Apple set the standard with the iPad and those long lines tend to create demand even among fence sitters.

The company also has the advantage when it comes to content. Beyond Apple's ties with the music, film and television industries, the wide variety of programs in the app store far outstrip what's available for other tablets so far.

"You might be competing head to head on hardware, but it's not [an even battle] when you look at programs," says Alexander.

Gartner expects total tablet shipments to top 55 million by the end of the year and 100 million by the end of 2012. So while it’s still likely to be a fight for second place for a while, there's still good reason for tablet manufacturers to move forward.

A Multi-Million Dollar Penthouse Overlooking NY

Former technology research executive Gideon Gartner is offering his five-bedroom penthouse on the Upper West Side for $29.5 million. The lavish apartment combines three units and offers panoramic views of New York City.

Why Home Buyers Can't Evaluate Real Estate Agents

Original Post: http://realestate.aol.com/blog/2011/03/22/why-home-buyers-cant-evaluate-real-estate-agents/

By Rob Hahn Posted Mar 22nd 2011 9:44AM

What do home buyers expect from a real estate agent? The answers might surprise you, and go a long way to explain the reasons why buyers are ultimately disappointed with the one they pick.

An interesting result from the good people at the National Association of Realtors from their survey of home buyers on what it is that consumers value in a Realtor: Honesty and integrity. Knowledge of purchase process. Responsiveness. And so on.

These all sound like wonderful things to want in the professional you're hiring to help you spend the most you've ever spent on anything, if you're in the 99.999 percent of the population who doesn't own a private jet.

But there are some odd things about this survey and its results.

Of the nine skills/qualities listed, over 79 percent rated eight of them as "Very Important," while only 40 percent rated tech skills as "Very Important." I find that bizarre. What's more bizarre, though, is that only 85 percent of respondents rated communication skills as Very Important.

Judging by these results, it seems to me that the survey question probably asked, "Rate the following skills and qualities of a real estate agent from Not Important to Very Important." Clearly, people weren't asked to rank these qualities in order of importance, as that would not result in four of the qualities scoring above 90 percent. So... who the hell are the 15 percent of  people who thought communication skills were not very important? Are there that many people walking around saying, "Hey, it's okay if my agent mumbles on the phone and writes nonsensical emails"? According to the results above, one out of four single male buyers couldn't care less if their real estate agent has no people skills and has the manners of a Taliban enforcer attending a Women's Rights Rally. Really?

But there is a more fundamental problem, and one that actually impacts the consumer experience.

Assuming you do think things like honesty and integrity are Very Important to you... how exactly would you know if your agent has them?

It isn't as if people -- even if they're Realtors -- walk around with signs around their necks saying, "I'm not really honest all the time, and my integrity is somewhat shaky." Until you work with someone for a while, go through some ups and downs, and have reason to verify that the person is in fact honest and has integrity, how could you tell?

Professional services are full of these problems, which I call the "Great Lover" problem after an illustration by Marty Neumeier. Someone comes up to you and claims, "I'm a great lover." Is there some way of knowing whether he or she is right or wrong, short of going to bed and experiencing it for yourself? Lawyers say they're competent -- but short of having them handle a case for you, how could you tell? Doctors might tell you they have great judgment under pressure of a crisis in the operating room, but how would you know? References from past clients (or lovers) help, as does diplomas, degrees, credentials ("Black Belt Lover, Third Degree"), but all of those are substitutes for personal knowledge, which only comes from working with that professional.

For real estate transactions, the problem is compounded by lack of experience of the consumer. Most people buy or sell a house once every seven years on average. If you buy your first home at 30 (which is sort of on the early side), you're ready for retirement by the time you've had your fifth transaction. During that same period, you may have dealt with a doctor hundreds of times.

Consider some of these "Very Important" skills and qualities. "Knowledge of the purchase process" is one. If you've never bought a house before (as I strongly think would be the case for single men and women), how in the world are you going to be able to evaluate how much your real estate agent knows or doesn't know about the purchase process? Exactly what part of the process will you able to step in and say, "Hey, wait a minute - you're not doing that right"?

What about knowledge of the real estate market? If you, a random consumer, know more about the real estate market than your real estate agent who does this day in and day out, why on earth would you (a) hire her, and (b) not work as a real estate agent yourself? It's like my saying that a heart surgeon's "Knowledge of the cardiopulmonary system" is Very Important to me, except for the fact that I don't know jack about the cardiopulmonary system and would have to take whatever Doctor House has to tell me at face value.

This is the reason why I don't believe various consumer ratings of real estate agents have much value at all, even when it comes from past clients. They simply lack any basis to form judgments about the quality of service they received. Sure, they can tell me things about basic customer service issues, like Responsiveness or Communication Skills. But unless they've been actually ripped off, defrauded, or caught their agents in a baldfaced lie, they're going to assume that the agent was honest and had integrity. And unless they are real estate professionals themselves, there's no basis on which they can evaluate an agent's knowledge, negotiation skills, or transaction management skills.

In fact, something that experienced real estate agents talk about all the time is the fact that the opposite is more likely to be true: that consumers think the agent who put forth heroic efforts on their behalf is awesome, even though that heroic effort was necessary because the agent screwed something up badly, while smooth, trouble-free transactions make them think the agent was lazy or didn't negotiate hard enough, even though the reason why everything went so smoothly was due to the agent being a master at her craft.

So consumer reviews of real estate agents is not particularly meaningful. You know what would be meaningful though? Real estate agent reviews of other real estate agents. I, for one, would like to see what qualities and skills Realtors think are important, ranked in order of importance, and then see them rate each other on it after each transaction.

Of course, I would also like to have Steve Jobs leave his fortune to my favorite charity: The Rob Hahn Foundation for Education (Of Rob Hahn's Children)....

Organize Your Small Spaces with These New Products

As more Americans live in smaller homes or are forced to move in with family and friends, they need ways to fit more stuff in less space. These products, on display at the International Home & Housewares Show in Chicago, can help. Amy Hoak reports.

News Hub: Kitchen Becomes The New Living Room

A growing number of homeowners and kitchen designers are transforming the kitchen into a living and entertaining space. Anjali Athavaley has details.

More Borrowers Are Opting for Adjustable-Rate Mortgages

Original Post: http://www.nytimes.com/2011/03/20/realestate/20Mortgages.html?ref=realestate

The New York Times

 

By LYNNLEY BROWNING for NYT.com Published: March 17, 2011

In the years since the financial crisis, adjustable-rate mortgages, or ARMs, with their low initial interest rates that changed over time, have been considered riskier than fixed-rate loans and shunned by most buyers. But these days more people are being persuaded to give the loans a try.

This time around, lenders are rolling out more conservative ARM products — without the gimmicky extra-low “teaser” rates that adjust every six months, or the “pick-a-pay” and “option” features that allow borrowers to pay less than the monthly interest, only to be hit with a huge bill down the road.

Those ARMs were hallmarks of the subprime mortgage boom that fueled the soaring rate of mortgage defaults and home foreclosures nationwide.

“An adjustable now is basically a prime product,” said Michael Moskowitz, the president of Equity Now, a lender in New York. “There’s definitely a comeback in their popularity.”

Bank of America, for example, had nearly twice as many ARM transactions last month as it did a year ago, according to Terry H. Francisco, a spokesman, and ARMs now account for 10 percent of all its home loans.

Mortgage brokers and lenders say the loans most in demand are the “5/1” and “7/1,” in which the initial interest rate is fixed for the first five or seven years — after which many homeowners typically think about selling or refinancing anyway — then adjusted annually at a capped rate toward a maximum level.

In contrast to fixed-rate loans, whose interest rates never change, ARMs start out at one rate and then adjust typically once a year at a capped rate, often two percentage points, based on changes in the interest-rate indexes to which they are tied. The adjusted rates can go up or down, and the total increase over the life of the loan is capped.

According to Stephen Habetz, the vice president of DRB Mortgage, the lending division of Darien Rowayton Bank in Darien, Conn., the maximum caps are around 6 percent above the initial rate. Bankrate.com said the initial rate for a 5/1 ARM in the New York area averaged 4.04 percent as of Wednesday, compared with 3.74 percent nationally. For 7/1 ARMs, the average was 4.74 percent, versus 4.10 percent.

Starting rates are usually one to one and a half percentage points below those of 30-year fixed-rate loans.

But one catch is that getting an ARM may now be harder.

Last summer Fannie Mae, the government buyer of home loans, said lenders must qualify borrowers on either the initial rate plus two percentage points, or on the full index rate to which the initial rate is tied, whichever is greater.

Back in 1994, ARMs were used for around 70 percent of all home purchases, according to a study by the Federal Reserve Bank of New York released in December. By early 2009, after the onset of the financial crisis, the share had fallen to 2.3 percent, the study showed, but as of April 2010, it had climbed to about 4 percent.

Freddie Mac, another government-buyer of loans, said in January that it expected the share of ARMs for home purchases to rise to 9 percent this year.

Among those borrowers choosing adjustable-rate mortgages are buyers of property costing more than the $729,750 limit at which Fannie Mae and Freddie Mac will buy back loans from lenders, said Mary Boudreau, the owner of Penfield Financial, a mortgage broker in Fairfield, Conn. (Without the government buyback, fewer lenders are willing to make these “jumbo” loans, which carry interest rates one or two points above those of conventional loans. The Fannie and Freddie limit is set to drop to $625,500 in October.)

With an ARM, the savings can be significant. Sean Bowler, a loan officer at DRB Mortgage, said someone borrowing $500,000 with a 5/1 ARM at 3.5 percent would save $42,507 in the first five years, before it adjusts, compared with a 30-year fixed-rate loan of 5.25 percent. A 7/1 ARM at 4.125 would save $38,330 over the first seven years.

A version of this article appeared in print on March 20, 2011, on page RE9 of the New York edition.

Resort Heads for Bankruptcy

Original Post: http://online.wsj.com/article/SB10001424052748704396504576204753672587020.html?mod=WSJ_RealEstate_MIDDLETopNews

By MIKE SPECTOR and KRIS HUDSON for wsj.com

Owners of Viceroy Plan Deal That Would Transfer Caribbean Property to Real-Estate Mogul

Viceroy Hotel Group

The 166-room Viceroy plans to file for bankruptcy protection and then ask a U.S. judge to approve an auction in Anguilla.

The owners of the Viceroy resort on the Caribbean island of Anguilla are preparing to put the posh getaway into bankruptcy court in a deal that would hand the hotel suites and villas to real-estate mogul Barry Sternlicht's Starwood Capital, people familiar with the matter said.

The Viceroy, owned by a partnership of Viceroy Hotels & Resorts and Lubert-Adler Real Estate Funds, plans to file for Chapter 11 bankruptcy protection in Delaware as soon as Thursday, these people said. Starwood, the resort's largest secured creditor, would then aim to take over the Viceroy, which has hosted celebrities such as Paul McCartney, Ellen DeGeneres, John Mayer and Sandra Bullock.

The Viceroy's current owners got a $358 million mortgage from Citigroup Inc. in 2006 with a goal of attracting rich vacationers to luxurious amenities that included personal pools for each villa. The developers described it as an "exquisite rendition of the residential resort concept" on Anguilla.

But bad weather, labor difficulties and other construction problems caused the first part of the Viceroy to open more than a year behind schedule, in August 2009. The delay, in turn, allowed many villa buyers to refuse to close their purchases. Now, the developers have a completed resort valued at less than the debt owed on it.

Enter Mr. Sternlicht, who has a plan to save the Viceroy through a complex maneuver that straddles both U.S. and Anguillan law. The laws of 36-square-mile Anguilla won't allow Starwood, which purchased the Viceroy's mortgage at a steep discount in October, to foreclose on the resort. Instead, the 166-room Viceroy plans to file for bankruptcy protection and then ask a U.S. judge to approve an auction in Anguilla, which will be open to all comers.

Viceroy Hotels would continue to manage the resort under Starwood's ownership, the people said, though the current owners' investments would likely be wiped out.

A deal by Mr. Sternlicht would add to his recent distressed real-estate acquisition spree, including the purchase of construction lender Corus Bankshares and its string of properties in cities from Los Angeles to Miami. His goal in Anguilla: grab the finished getaway on the cheap and dot the resort with improvements such as a business-meeting center and an expanded spa.

The resort's current owners spent $550 million to finish the project, leaving only modest improvement chores for Mr. Sternlicht.

In all, the buyers, most of them from the U.S., put down some $50 million in deposits since 2004 to purchase 68 of the Viceroy's 134 villas. Those deposits were spent on construction, a common practice in the Caribbean.

To spur buyers to close their long-idled purchases, Starwood plans to reduce prices on some of the units, many of which are outfitted in marble, overlooking the beach. The villas and condominiums were first sold at $600,000 to $6.5 million. Nightly rates for the resort's 32 hotel rooms range from $899 to $15,000, depending on the size of the suite and time of season.

Some buyers earlier decided they want out. At least three—New Jersey couple Gary and Florence Black and investor Michael Hirtenstein—sued in U.S. District Court in New York to negate their purchase contracts and recoup their deposits. Viceroy Hotels is contesting the lawsuits.

Buyers who wish to back out will join a pool of unsecured creditors, and would likely get only partial recoveries.

Mr. Sternlicht already has invested about $12 million into the property and obsessively monitored the resort. Just weeks before a sold-out period around Christmas, he purchased eight blenders that the resort's bar lacked. He also bought Kinects for Xbox 360 game consoles to install in rooms, and sent trainers to the island to teach yoga classes.

Law firm Akin Gump Strauss Hauer & Feld is advising Viceroy. DLA Piper is advising Starwood.

Write to Mike Spector at mike.spector@wsj.com and Kris Hudson at kris.hudson@wsj.com

Spring Realty Check

CNBC's Diana Olick takes a look at why investors are looking to take money out of the market and into real estate. in Boston, REITs are reaping big rewards from consumers looking to rent rather than risk buying.

GOP Set to Begin Chipping Away at Mortgage Giants .

Original Post: http://online.wsj.com/article/SB10001424052748703327404576195101304444260.html?mod=WSJ_RealEstate_LeftTopNews

By NICK TIMIRAOS for WSJ.com,  MARCH 14, 2011

Republican lawmakers are preparing this week to introduce a series of legislative proposals to gradually reduce the role of Fannie Mae and Freddie Mac.


The effort represents a tactical shift from the comprehensive approach for a speedier wind-down of the mortgage-finance giants that Republicans backed during last year's negotiations on the Dodd-Frank Act.

Reuters

Rep. Scott Garrett, (R., N.J.), wants a new tack on Fannie and Freddie.


That legislation would have started cutting the government's ties to the mortgage giants or begin winding them down in two years. The bill's sponsor, Rep. Jeb Hensarling (R., Texas), has said he still plans to reintroduce his legislation later this year, and leading House Republicans say they are still committed to the goal of winding down Fannie and Freddie and handing their role over to the private sector.


The decision to take a piecemeal approach with individual bills reflects the challenge in forging a political consensus—even among Republicans—around overhauling the nation's housing-finance infrastructure. And as the housing market continues to be vulnerable, deep caution greets any proposal that might pass on higher borrowing costs to consumers.


If Republicans advance individual bills, that could offer more opportunities for cooperation with the White House than if they advance a single bill outlining a more immediate wind-down of Fannie and Freddie.


Rep. Scott Garrett (R., N.J.), who heads the House subcommittee on capital markets, plans to unveil some of those bills on Tuesday. One measure would accelerate the wind-down of the firms' combined $1.5 trillion mortgage portfolios, which are already set to decline by 10% annually. Other bills would eliminate the firms' federal affordable-housing goals and gradually raise the guarantee fees that Fannie and Freddie charge lenders, a decision now made by the firms and their federal regulator.


Some of these ideas were embraced by the White House in its "white paper" released last month.on the future of housing finance For example, the White House advocated raising guarantee fees to help bring private capital back to the mortgage market. The Obama administration has said it hopes to have legislation addressing Fannie and Freddie within the next two years, but it hasn't provided a more specific timetable for any overhaul.


The moves also come amid a long-standing political fight. Democrats faced heavy criticism last year from Republicans for excluding Fannie Mae and Freddie Mac from their sweeping financial-regulatory overhaul. Now, with Republicans controlling the House of Representatives, Democrats are tagging that position as posturing.


"The Republicans have pretended for a while that they knew what to do," said Rep. Barney Frank (D., Mass.). "Now that they have to govern, they're not sure." Mr. Frank says the Republican leadership "doesn't have the votes" for a more immediate overhaul. In a statement, a spokesman for Mr. Garrett said he is committed to "protecting taxpayers and getting private capital off the sidelines."


Republicans say individual bills have a better chance at forcing the Democratic-led Senate to take up Fannie and Freddie. GOP lawmakers say they're concerned the impetus for overhaul could weaken as the housing market settles out and the memory of Fannie and Freddie's collapse fades. That view was echoed by Treasury Secretary Timothy Geithner at a hearing earlierthis month.


"What we're trying to do as a team here is figure out the best strategy to get the ball moving," said Rep. Randy Neugebauer (R., Texas). One key question is whether "you can get a comprehensive bill passed," he said. "Part of being in leadership is making sure when you bring policy ideas forward, that you've got the ... votes to pass it."


Last month's White House proposal called for gradually phasing out Fannie and Freddie and offered three options for what might follow them. The first option, which is supported by many conservative Republicans, would provide no loan guarantees to protect mortgage investors beyond those made by existing agencies such as the Federal Housing Administration.


The second option would create some type of government backstop that would kick in only in market emergencies. The third would create new federal loan guarantees to replace some of the roles played by Fannie and Freddie and enjoys support from a cross section of consumer groups and the real-estate and banking industries. Many Democrats, and some Republicans, have indicated their preference for such a model.


Winding down Fannie and Freddie will be tricky: They guarantee around $5 trillion of mortgages and, together with federal agencies, are responsible for backing around nine in 10 new mortgages. Any of the options are likely to raise borrowing costs, and that could make lawmakers reluctant to taking action now given the fragility of the housing market, says Brian Gardner, a policy analyst at Keefe Bruyette & Woods. He says there's little chance that Congress and the White House will agree on a bill before the 2012 election.


Republicans have argued that a fully private mortgage market will leave taxpayers less exposed to mortgage losses. "There's more market discipline in the system," said Mr. Neugebauer. "People are going to be paying more attention to the underlying mortgages."


Others say the risks assumed by Fannie and Freddie could simply move into the federally-insured banking sector or federal loan agencies and that taxpayers would still be exposed to losses in a crisis. "It looks like it's a more private solution, but it may not be in the end," Mr. Geithner said at a House hearing earlier this month.


Write to Nick Timiraos at nick.timiraos@wsj.com

Apple Ipad 2 vs. Motorola Xoom: Which Wins As A Business Tool?

Original Post: http://blogs.forbes.com/marcwebertobias/2011/03/14/apple-ipad-2-vs-motorola-xoom-which-wins-as-a-business-tool/
by Marc Weber Tobias -the Travelgeek- for Forbes.com Mar. 14 2011 - 1:31 pm

If you are a Travelgeek you either have or are considering one of the latest tablet computers. A lot has been written on this topic, so my focus is on the utility and value of these devices for the pro business traveler. Is it worth the investment?


Before the iPad or the new iPad2, manufacturers attempts at a tablet PC were a dismal failure. The original tablets were too heavy, too slow, the displays were hard to read in portrait mode, and they had poor battery life. While the concept was obviously a good one; the execution in terms of hardware and software was seriously lacking. That all changed with advances in technology and the debut of the iPad, which was a sleek, light, hand held computer with a brilliant display. It was everything the original PC tablet tried to be, and more.

In the past year, the tablet market has begun to mature and bring forth serious contenders to the iPad. On February 24, 2011 Motorola released its much-touted Xoom, which is the latest and perhaps the most sophisticated entrant into the tablet wars. It is so elegant and advanced that it won a well-deserved design award at CES in January. A tablet has become the “thing” to have. Do you really need one? Read on.

The Tablet concept

The iPad 2 and the Xoom, side by side. The iPad is thinner than the Xoom but has a slightly smaller screen than its rival.

The iPad 2 and the Xoom, side by side. The iPad is thinner than the Xoom but has a slightly smaller screen than its rival.

I exploit technology to help me to stay connected wherever I am in the world. I am out of the U.S. a great deal of the time and thus heavily rely on communications-related techno-tools. Of course, I bought the iPad 3G when it was first released in May, 2010. There is no question that anything Apple makes is incredibly well designed and engineered, and reeks of imagination. They have figured out how to integrate technology with the latest electronics, combined with sleek plastic and metals to make addictive products that have shaped America and the world during the past thirty years.

Apple’s ability to develop and market revolutionary technology does not, however, mean that these devices are the best choice for business travelers. While apple can take credit for “the tablet,’ there is now serious competition, both from a technical and ergonometric perspective, which may cause many business adapters to look beyond the high technology seductiveness of these products and carefully consider their real utility for getting work done. As the “new” adage goes, ‘all that glitters in the tech world may not be the same gold for everyone.”

The iPod and iPhone clearly set the standard in the industry for mp3 music players and then Smartphones. The iPhone even eclipsed the Blackberry for much of the consumer market. The RIM device had been the gold standard until Apple created the first real Smartphone. But then came the iPad with communications capabilities; a big brother to the iPhone, but with without the actual phone.

America is built on a combination of technology, inventiveness, and clever design, so it was inevitable that the iPad success would spawn perhaps a hundred other tablets in a broad price range and configurations. They are the logical extension of Netbooks, which were the rage prior to the introduction of the tablet. For me, I dismissed Netbooks as a gimmick and a fad because I reasoned very quickly that my full-featured 12” laptop weighed the same and had far more functionality. Weight, size, computing power and communications capabilities for me were the critical factors. Netbooks were marginal in their attributes as a business and travel tool.

While the iPad has been an incredibly successful product, I continue to ask myself “what is it?” After almost a year, I have a better answer, but the real question is if I really need it or any other tablet-like device, versus my smart phone. While iPad 2 sales this past weekend exceeded those of the iPad, I suspect that the buyers were, for the most part, not business users. An examination of the Piper Jaffray stats may tend to support this theory.

In this article, I will explore why you may want to invest in and use a tablet computer for a variety of functions as a professional business traveler. Forget all the hype by Apple, Samsung, Blackberry and Motorola about why these are “magical and revolutionary products” or similar claims. The real questions to ask are “what will it do for me, and is it worth the money?” More importantly, you might want to consider just how much clutter it will add to your travel bag, and what do you have to do to make it work the way you need it to in order to justify its investment.

The iPad and Xoom tablets sell for between $500 and $800, based upon configuration and service contracts with the various carriers. So, they are not exactly an inexpensive device, but depending upon your application, may be well worth the expenditure in terms of productivity and enjoyment.

My main focus in choosing which gizmos to carry when I travel, (either domestically or internationally) is their utility, first and foremost. As I am detailing in my travel-technology-security book, virtually all of my techno-tools must enhance my ability to communicate, organize, receive information, and allow me to be more productive. If added benefits are derived, such as for entertainment or leisure, that is a bonus but not the prime reason for adopting any technology, gizmo, operating system, or program. Price is only one factor and rarely determines whether I add a new tech-tool to my arsenal.

A year after purchasing my iPad I am still assessing its true utility in my world. Apple started a revolution with their tablet and created an entire new personal mode of computing. Ironically, there are now many knock-offs of the concept and some like the Xoom are incredibly powerful devices. But the most important question still remains: do you really need the thing?

The Tablet: what is it?

A tablet computer is a smaller version of your laptop without a hard keyboard. They have a slower processor, less internal memory, smaller screen, and less powerful operating system. While you can perform most of the same basic functions as your laptop, they are obviously a scaled-down version. Most are designed for very specific and mobile-related tasks: email, reading documents, web browsing, movies, games, watching videos, listening to music, reading books and a number of other applications.

Tablets run on their own operating systems, with thousands of applications to do just about anything. But the OS that runs on a PC for either Windows or Mac is not the same as for your tablet. In reality, most tablets are little more than a Smartphone with a large screen and longer operating time because of the size of the battery. But they can be a lot more than a Smartphone as well.

I identify four tiers of mobile computing and telecommunications devices: Smartphones, Netbooks, tablets, and notebook computers. If you dismiss Netbooks as a short-lived fad, you are left with three types of devices which share many of the same characteristics and capabilities, but are fine-tuned to specific applications. Most “real” tablets today are running at least 1Ghz or dual-core processors, as are the their smaller Smartphone counterparts, so they are very fast and have incredible capabilities.

Operating systems

The organization of the Settings menu is different than the Apple iPad and may be more logical

There are three primary operating systems to choose from: Apple, Android, and Blackberry. Windows also has a tablet but it is not yet in the mainstream and has not been considered for this article. The main competition is between Apple and Android (Google). In my view, Android will ultimately win the operating systems war, but for the consumer, it is really largely irrelevant and one of personal preference. Apple and Android perform essentially the same tasks: how they are organized and executed spells the difference between the systems and devices.

Why do I believe that Android will prevail? It is because almost all of our lives are now wrapped around Google and its incredible data search and access capabilities. Apple, in my view, cannot compete with what Google can offer to Smartphone and tablet users: an amazing array of instant information from anywhere in the world which has been integrated into the functionality of a tablet or Smartphone through its Android operating system.

Android has been adopted by scores of hardware manufacturers for Smartphones and tablets. It is a maturing platform and has already surpassed Apple as to implementation around the world. That is not to diminish the capabilities of the iPhone or iPad, nor its 100,000+ applications that are available, or its incredible hardware. But the Apple OS for tablets is limited to one hardware manufacturer.

The organization of the Settings menu is different than the Apple iPad and may be more logical.

For organization and options, I prefer Android, but they both accomplish almost the same results, just in different ways. My Xoom seems to run faster than the iPad 2, and has a dual-core processor that runs Honeycomb 3.0, the latest Google-Android operating system which is specifically optimized for a tablet. The graphical user interface is very cool and extremely easy to use, but so is Apple, so it is personal preference as to which you are more comfortable with. The new iPad has a 1Ghz processor, but the clock speed has been slowed down to avoid excessive temperatures.

If you are presently utilizing an Apple for your computer or phone, then you may want to stick with what you know, and buy an iPad. The same rule applies for the Android. When I travel, I have a Droid-x, an Android Pro dual-mode phone, and a Samsung Nexus S for use with local SIM cards. The Xoom runs on Android so everything is compatible between my phones and tablet. The neat thing is that once you buy an application, either on Apple or Android, you can download it to all devices. This is another reason not to switch operating systems between phones and tablets.

I dislike the strict controls that Apple has placed on its applications, lack of access to internal memory within the iPad, failure to implement Flash Video, and the requirement that everything be routed through iTunes. I understand the logic in such controls, and to some extent this approach may provide for a more secure and reliable operating environment for the consumer. But I also like the capabilities of Android over both Apple and Blackberry as to versatility and options. Android is an open system and allows more flexibility but may require more expertise. If the operating system is “rooted” which means gaining access at the programming level, then the device can be totally controlled, Apps can be run that are outside of the Android market, and the tablet can perform really neat functions.

The Apple operating system, at least initially, is much more intuitive than Android. To demonstrate this, I just bought my mother a Verizon iPhone. In a later article, I will explore the use of smart phones for the elderly. My mom is totally non-technical but has figured out how to use her iPhone (which is no small feat). I don’t think she would have the same comfort level with Android, either in a phone or tablet.

For ten years, I was a confirmed Blackberry user (and addict) on two different mobile networks. Last summer, when the Motorola Droid-x was introduced, I switched after having suffered through almost two years of the Blackberry Storm nightmare Part I and II, and the constant denials by Research in Motion that there were any problems with the device. Just for the record, my Droids do everything that my Blackberries did, only faster, better, easier, and more reliably. Once you use a smart phone with a four-inch screen, you will never go back to anything smaller, especially the mini-display on most Blackberries. And then if you start using a tablet, with a ten-inch display, you have reached technical nirvana.

I came to realize that Blackberry produces a great mobile email machine; making it work as a smart phone was almost an afterthought. As innovative as the folks at RIM may be, and even with their new Version 6 operating system and Torch-modified version of the Storm, the phones are still primarily for corporate and personal email. For me, the rest is trying to make something of a device that works best for integrated email. I don’t think that its devices are as smart or as capable as the Droid or iPhone.

Xoom v. iPad: hardware and software

The Xoom has a great 10.1” display at a 1280 x 800 resolution. It is brilliant, and slightly larger than the iPad’s 1024 x 768, although the reality is that both are excellent. I tested each displays in bright sunlight, side by side, and there is little difference. Physically, both devices are about the same size when in their protective cases, although the new iPad is much thinner than the Xoom. (Quick aside: I have a forty-year history with Motorola, which essentially invented cellular and its core technology in the seventies. My experience began when Marty Cooper, senior Motorola VP and the father of cellular, wrote the forward for my Police Communications textbook in 1973. So I’m glad to see Motorola back from the abyss of lost market share and the Iridium satellite disaster in the 1990s. It has clearly got its act together with the Droid platform, new phones and the Xoom tablet.)

The pixel density is slightly better on the Xoom display, reportedly at 149.45 PPI versus the iPad at 132 PPI. There appears to be a little less eye-strain with the Xoom display in portrait mode as compared to the iPad.

The Xoom is a CDMA + WiFi device. The iPad has GSM + WiFi and CDMA + WiFi models. That means the iPad can be used anywhere in the world on GSM networks; the CDMA version will only work in those countries that utilize CDMA, which are about forty in number. CDMA is not the predominant international protocol and has really poor coverage except in limited geographic areas. International roaming is possible on CDMA, but it is nothing like GSM. Verizon, which has the best coverage in the United States, is a CDMA network which is the reason that Apple introduced the iPad CDMA version.

The Xoom will not function on any system other than Verizon, unless Motorola reaches a deal with Sprint, which is also a CDMA carrier. In contrast, the iPad GSM version will operate on T-Mobile and AT&T in the U.S. and virtually everywhere internationally. All tablets have Wifi, so in some respects the choice of wireless carrier does not matter if you understand how to optimize connectivity. The new iPad is not a 4G device, which may be a definite negative. There is some talk that an Apple Pro tablet may be released with the iPhone 5, but at this point, this is speculative. Although the Xoom (with a free hardware and software upgrade) will operate on the 4G LTE network later this year, Verizon did not know when the upgrade would be available.

The Xoom has the capability for 32GB of internal memory for use as a backup drive, to store video or images, or any other files. Just plug into the micro-USB port and you can do what you like, just like any other external hard drive. In the future, it will be expandable to another 32GB of Micro-SD memory when the device is upgraded to 4G. While the iPad also has up to 64GB internal memory, I cannot use it except through iTunes, which is really limiting and prevents you from storing many kinds of data on the device. The bottom line: you cannot realistically use the iPad as an external hard drive.

External Bluetooth keyboards are available for both devices. This allows for the tablet to be used for an email machine or browser with a minimum of weight. Each unit, with case and keyboard, weigh in at about one and a half pounds. This is not a bad alternative to a laptop for limited use. Battery life on both the iPad and Xoom appear to be about the same, around ten hours, but this is also dependent on several factors, including display brightness, which draws the most current. Again, both devices are about equal for battery life if communications services are turned off. In suspend mode, both devices will stay alive for several weeks without a recharge.

The charging system for the Xoom is non-standard and employs a tiny coaxial-type connector with a 12VDC input. This is convenient for vehicle charging, but requires you to carry a separate and unique charger. I would imagine that Kensington will make a power supply tip to be available sometime in the future for the Xoom, just like the iPad. Apple devices are standardized with one charging connector and five-volt system, which is compatible with all USB power supplies. The Motorola Zoom is not compatible with USB supplies. All of my devices run on mini or micro-USB, so this is a definite disadvantage. I try to standardize everything on one connector type so I don’t have to carry multiple power adapters.

There are two internal cameras on the Xoom; a 5mp rear-facing, and a lower resolution front-facing one for video chat. The iPad 2 has the same configuration. Front-facing cameras will allow for video conferencing on both devices. Presently, the iPad allows video communications by using its “Face time” or Skype application between iPads and iPhones and desktops. Video conferencing software will be available from Skype to support enhanced communications services on 4G for the Xoom in the near future, but presently there is no software to allow video chat on Skype; only on Google Talk.

Ports, Controls, and audio

Controls on the Xoom and iPad are about equal. Each has volume up and down and escape/on/off. There are four primary ports on the Xoom: micro-USB, HDMI out, and audio in/out for a headphone or earphone/microphone combination for VoIP calls, and power. There are two speakers and stereo audio channels for excellent sound rendition. The iPad only supports single channel audio and one speaker.

Chirs Perra is a technician for the Apple dealer in Sioux Falls, South Dakota. He spoke about the iPad 2 with Marc Tobias the day after its release

Chirs Perra is a technician for the Apple dealer in Sioux Falls, South Dakota. He spoke about the iPad 2 with Marc Tobias the day after its release.

Special thanks to I interviewed Chris Perra, a technician at MacPros, the local Apple store in Sioux Falls. We discussed the attributes of the iPad 2.

Conclusion

The Motorola Xoom and the Apple iPad are very similar with regard to basic hardware design and functionality. Where they differ is in display size and definition, operating systems, frequency bands (CDMA v. GSM) and their capability for international roaming. Most significantly, the Xoom will allow 4G high-speed connections, where it appears the iPad will not. The real distinction between different tablets is with the applications they will run, and how they do it.

In Part II, I will discuss how I use my tablets and their real utility.

A European's Warning to America

The perils of following us toward greater regulation, higher taxes and centralized power.
Text By DANIEL HANNAN

On a U.S. talk-radio show recently, I was asked what I thought about the notion that Barack Obama had been born in Kenya. "Pah!" I replied. "Your president was plainly born in Brussels."

American conservatives have struggled to press the president's policies into a meaningful narrative. Is he a socialist? No, at least not in the sense of wanting the state to own key industries. Is he a straightforward New Deal big spender, in the model of FDR and LBJ? Not exactly.

My guess is that, if anything, Obama would verbalize his ideology using the same vocabulary that Eurocrats do. He would say he wants a fairer America, a more tolerant America, a less arrogant America, a more engaged America. When you prize away the cliché, what these phrases amount to are higher taxes, less patriotism, a bigger role for state bureaucracies, and a transfer of sovereignty to global institutions.

He is not pursuing a set of random initiatives but a program of comprehensive Europeanization: European health care, European welfare, European carbon taxes, European day care, European college education, even a European foreign policy, based on engagement with supranational technocracies, nuclear disarmament and a reluctance to deploy forces overseas.

No previous president has offered such uncritical support for European integration. On his very first trip to Europe as president, Mr. Obama declared, "In my view, there is no Old Europe or New Europe. There is a united Europe."

Barbara Kelley

I don't doubt the sincerity of those Americans who want to copy the European model. A few may be snobs who wear their euro-enthusiasm as a badge of sophistication. But most genuinely believe that making their country less American and more like the rest of the world would make it more comfortable and peaceable.

All right, growth would be slower, but the quality of life might improve. All right, taxes would be higher, but workers need no longer fear sickness or unemployment. All right, the U.S. would no longer be the world's superpower, but perhaps that would make it more popular. Is a European future truly so terrible?

Yes. I have been an elected member of the European Parliament for 11 years. I have seen firsthand what the European political model means.

The critical difference between the American and European unions has to do with the location of power. The U.S. was founded on what we might loosely call the Jeffersonian ideal: the notion that decisions should be taken as closely as possible to the people they affect. The European Union was based on precisely the opposite ideal. Article One of its foundational treaty commits its nations to establish "an ever-closer union."

From that distinction, much follows. The U.S. has evolved a series of unique institutions designed to limit the power of the state: recall mechanisms, ballot initiatives, balanced budget rules, open primaries, localism, states' rights, term limits, the direct election of public officials from the sheriff to the school board. The EU places supreme power in the hands of 27 unelected Commissioners invulnerable to public opinion.

The will of the people is generally seen by Eurocrats as an obstacle to overcome, not a reason to change direction. When France, the Netherlands and Ireland voted against the European Constitution, the referendum results were swatted aside and the document adopted regardless. For, in Brussels, the ruling doctrine—that the nation-state must be transcended—is seen as more important than freedom, democracy or the rule of law.

This doctrine has had several malign consequences. For example, it has made the assimilation of immigrants far more difficult. Whereas the U.S. is based around the idea that anyone who buys into American values can become American, the EU clings to the notion that national identities are anachronistic and dangerous. Unsurprisingly, some newcomers, finding their adopted countries scorned, have turned to other, less apologetic identities.

The single worst aspect of Europeanization is its impact on the economy. Many Americans, and many Europeans, have a collective memory of how Europe managed to combine economic growth with social justice. Like most folk memories, the idea of a European economic miracle has some basis in fact. Between 1945 and 1974, Western Europe did outperform the U.S. Europe happened to enjoy perfect conditions for rapid growth. Infrastructure had been destroyed during the war, but an educated, industrious and disciplined work force remained.

Human nature being what it is, few European leaders attributed their success to the fact that they were recovering from an artificial low. They convinced themselves, rather, that they were responsible for their countries' growth rates. Their genius, they thought, lay in having hit upon a European "third way" between the excesses of American capitalism and the totalitarianism of Soviet communism.

We can now see where that road leads: to burgeoning bureaucracy, more spending, higher taxes, slower growth and rising unemployment. But an entire political class has grown up believing not just in the economic superiority of euro-corporatism but in its moral superiority. After all, if the American system were better—if people could thrive without government supervision—there would be less need for politicians. As Upton Sinclair once observed, "It is difficult to get a man to understand something when his job depends on not understanding it."

Nonetheless, the economic data are pitilessly clear. For the past 40 years, Europeans have fallen further and further behind Americans in their standard of living. Europe also has become accustomed to a high level of structural unemployment. Only now, as the U.S. applies a European-style economic strategy based on fiscal stimulus, nationalization, bailouts, quantitative easing and the regulation of private-sector remuneration, has the rate of unemployment in the U.S. leaped to European levels.

Why is a European politician urging America to avoid Europeanization? As a Briton, I see the American republic as a repository of our traditional freedoms. The doctrines rooted in the common law, in the Magna Carta, and in the Bill of Rights found their fullest and most sublime expression in the old courthouse of Philadelphia. Britain, as a result of its unhappy membership in the European Union, has now surrendered a large part of its birthright. But our freedoms live on in America.

Which brings me to my country's present tragedy. The fears that the American patriot leaders had about a Hanoverian tyranny were exaggerated. The United Kingdom did not develop into an absolutist state. Power continued to pass from the Crown to the House of Commons.

Until now. Nearly two and a half centuries after the Declaration of Independence, the grievances it adumbrated are belatedly coming true. Colossal sums are being commandeered by the government in order to fund bailouts and nationalizations without any proper parliamentary authorization. Legislation happens increasingly through what are called standing orders, a device that allows ministers to make laws without parliamentary consent—often for the purpose of implementing EU standards.

How aptly the British people might today apply the ringing phrases of the Declaration of Independence against their own rulers, who have "combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws."

So you can imagine how I feel when I see the U.S. making the same mistakes that Britain has made: expanding its government, regulating private commerce, centralizing its jurisdiction, breaking the link between taxation and representation, abandoning its sovereignty.

You deserve better, cousins. And we expect better.

Mr. Hannan is a member of the European Parliament. This essay is adapted from the Encounter Books Broadside, "Why America Must Not Follow Europe."

For Housing Values, Is Bigger Better?

Original Post: http://online.wsj.com/article/SB10001424052748703597804576194772974777088.html?mod=WSJ_RealEstate_LeftTopNews

By JUNE FLETCHER


Q. I have been thinking about downsizing my home to save money. But I'm wondering if that's smart from an investment standpoint. Will a smaller house hold its value as well as a larger one?

--Montclair, N.J.

A. If the small house is in the same general vicinity as the larger one, probably not. That's because, all other things being equal, people will almost always equate size with status. Moreover, as the effects of the economic downturn linger on, spare bedrooms become more critical as unemployed adult children move back into the family home, perhaps joined by grandparents whose 401(k)s have shrunk.

In fact, the downturn already seems to have hurt the value of smaller homes relative to larger ones. Leesburg, Va., economic consultant Tom Lawler pointed out in his March 10 market commentary that "as has been the case since at least the end of last year's homebuyer tax credit, the prices of smaller homes showed more weakness than the prices of larger homes."

Smaller homes also start out at a relative disadvantage to larger ones because they often cost more per square foot. That's because every house needs certain high-ticket items, like a heating, air conditioning and ventilation system, at least one bathroom and a kitchen. As a house gets bigger, the incremental cost for these pricey items lessens.

However, when it comes to value, size isn't the only consideration. Shape matters too. Because a single-story house requires a bigger roof and foundation than a multistory one with the same square footage, it usually will cost more per square foot. The quality of materials, height of walls, level of trim, number and shape of windows and difficulty of construction all factor in, too. So it's possible for a jewel-box rambler with coffered or vaulted ceilings, bow or bay windows, top-of-the-line kitchen and tumbled marble floors to be more expensive than a big boxy Colonial nearby with only builder-grade fixtures and finishes.

And, of course, many external factors also impact the value of a home, including lot size; the age of the community and its amenities, like neighborhood tennis courts and swimming pools; views; proximity to urban attractions and public transportation; and even landscaping.

How important all of these things is largely a matter of personal taste, as well as what stage you've reached in life. So don't get too hung up on cost-per-square-foot comparisons. Let your lifestyle and your budget dictate the type of home you live in.

However, if you only are considering new homes, keep in mind that they are expected to shrink in the near future, as builders scramble to compete with cheap foreclosures. A recent survey of 238 builders and designers by the National Association of Home Builders showed that 74% expect new homes to be smaller by 2015, with homes averaging 2,152 square feet or about 10% less than those built in 2010.

Write to June Fletcher at fletcher.june@gmail.com

Kitchen Designs That Make Home Cooking Fun

The recession prompted Americans to cook at home more to save money, but they may continue to do so even as the economy improves. That could change the look of our kitchens. Amy Hoak reports on the latest trends from the International Builders' Show.

Why 2011 May Be the End of the Housing Crash

Simon Constable explains to Kelsey Hubbard how rising affordability of housing will be a key to a turnaround. Plus how to invest in housing without buying a home.

Seven Ways to Beat Inflation

Original Post: http://blogs.forbes.com/baldwin/2011/03/01/seven-ways-to-beat-inflation/
William Baldwin Mar. 1 2011 - 8:40 am for Forbes.com

Non-fiat money; image via Wikipedia

The cost of living could double over the next decade or two. What are you going to do about it?


If you are young and still in the workforce, your best defense is your talent. Wages tend to keep up with inflation, at least over long periods. If you are retired, you’ve got only your balance sheet to lean on.

In this report I’ll look at seven strategic moves for combating the Consumer Price Index. Companion pieces will take up fixed-income investing (with six inflation-fighting ideas) and how to own commodities (five ways).

In all, there are 18 inflation fighters you should know about. That doesn’t mean you should adopt them all. Some are too speculative or expensive for everyday use. One, in the commodity section, goes in the category of Downright Stupid.

Inflation is, deservedly, retirees’ second biggest source of anxiety (after health). They are old enough to remember the 1970s, when the prices of everything went through the roof. Everything except bonds, that is. Bond portfolios were massacred.

It’s something I think about every day. I own a lot of bonds.

Officially, inflation is quite tame at the moment, which is how the Federal Reserve justifies its printing press (now running off fiat money at the rate of $20,000 a second). Chairman Ben S. Bernanke reassures us that prices aren’t going up much, if you don’t count food or energy.

This reminds me of a classic remark from a long since diselected mayor of Washington, D.C.: Our crime rate isn’t all that bad, he said, if you don’t count the murders.

Here are seven strategies for beating inflation. In all likelihood, you already have some of these in place. You don’t have to be terrified by the CPI.

Own real estate

Over long periods, home prices more than keep up with the price of living. The real price gain (appreciation net of inflation) has averaged something like 1% a year over the past century.

The suburban home I grew up in appreciated at a 6% annual rate between the time my parents bought it in 1953 and its recent sale. This, despite the recent real estate crash and despite the fact that the house was poorly maintained. After inflation: 3% a year.

The housing crash isn’t quite over, but I think we’re pretty close to a bottom. I’m pretty confident that if the CPI triples in the next 20 years, home prices will at least triple.

Your strategy here, if you just retired, would be to postpone downsizing. It’s a reasonable alternative to more-complicated inflation fighting strategies, especially if you have other reasons for staying put.

Own stocks

A stock is a share in a business that probably owns at least some hard assets and has some prospects for increasing its prices as the dollar falls in value.

To be sure, a surge in inflation can hurt stocks for a while. Stocks got killed after the 1973 Arab oil embargo sent the CPI on an upward spiral. But over long periods, stocks beat inflation. Over the past century they have earned 6% a year, above and beyond inflation, when you include dividends.

Owning shares enabled investors to survive inflation in Brazil and Mexico. It has enabled U.S. investors to survive the Great Inflation that began in 1971, when the dollar was unhinged from gold. Since then prices have more than quintupled. Nonetheless, U.S. stocks have delivered a real annual total return in the past 40 years near their 6% long-run average.

At the moment, U.S. stocks are richly priced in relation to corporate earnings, so I expect only 5% a year, net of inflation, over the next 40 years. Still, stocks’ resilience to CPI creep makes them an important part of a retiree’s portfolio.

Put at least a third of your investable assets in equities. Put in more if you don’t own a home. Put in more if you have enough slack in your budget to tolerate some wild swings in your net worth.

The cheap, easy way to own stocks is through an exchange traded fund or open-end mutual fund tracking an index. Index funds for the S&P 500 cost 0.1% of assets per year, or thereabouts.

Own resource funds

You get a concentrated dose of inflation hedging by owning shares in companies that dig stuff out of the ground.

The T. Rowe Price New Era Fund has delivered handsome returns over the past decade by owning resource sector companies like Schlumberger, Cameron International and Freeport-McMoran Copper & Gold. This fund is very affordable, at a fee of 0.67% of assets annually.

Cheaper still, but without the active management, are two exchange traded funds from Vanguard, covering the materials and energy sectors. The portfolio of the materials fund (ticker: VAW) starts with Freeport-McMoran, Du Pont and Dow. The energy ETF (ticker: VDE) has Exxon Mobil, Schlumberger and Chevron as its largest positions. Both of these funds cost 0.24% annually.

If you are putting in $100,000 or more, you can get either of these Vanguard sector funds in the open end (mutual fund) format. The open end funds have no sales loads but penalize short-term holders with a 2% redemption fee. The expense ratio is the same.

Whatever their net worth, investors desiring Vanguard sector funds in their taxable accounts are better off with the ETFs. You can trade in and out of an ETF as often as you like, incurring only your online brokerage fee ($9 or less) and a bid/ask spread (a few pennies a share). With this flexibility you can harvest tax losses.

Vanguard also has a Precious Metals fund. This one is not available as an ETF. It has one of those sanctimonious redemption fees that get in the way of loss harvesting.

Own resource stocks

You don’t have to pay a fund company to hold stocks for you. Hold them yourself. You’ll eliminate that management fee. Instead of putting $100,000 into a fund, copycat ten of its positions at $10,000 each. Savings: $240 to $670 a year.

Your transaction costs for à la carte investing won’t be much higher than for the ETFs, and indeed may be a bit lower. Shares of big companies like Exxon trade at narrower bid/ask spreads than do the ETFs that hold them.

Include in your mix energy, fertilizer, gold and timber companies. For gold exposure, Newmont Mining is the obvious choice, but you’ll find some intriguing, if flaky, alternatives by taking a peek at Vanguard’s Precious Metals sector fund.

Weyerhaeuser is the big timber holder. It is now converting into a real estate investment trust in order to eliminate corporate taxes.

Buy REITs

Apart from some timber companies (see preceding paragraph), the REIT industry consists primarily of landlords. REITs own office buildings, malls, apartments, warehouses and storage cubicles. The inflation hedge: Landlords jack up rents to match the cost of living.

Tread lightly here. REIT prices have doubled in the past two years. That means your dividend yield is half what it was. It also means that, even if your dividend keeps up with the cost of living, your share price will struggle to do so.

Delay Social Security

Are you (a) in good health and (b) financially comfortable? If so, then it may make sense for you to delay starting your Social Security payments. By doing so you earn a fatter monthly check, and this check is inflation-protected.

Whether it’s best to start drawing at 62 or 66 or 70 is a complicated question. Often, it makes sense in a two-earner couple for one member to start at 66 and the other at 70. Read more about the strategy here.

I’ll add one point to the usual actuarial analysis. Social Security is a bankrupt Ponzi scheme. One way to make it more solvent would be to reduce the inflation escalator for prosperous retirees. This outcome is not highly likely, but it’s more likely than any reform that involves confiscating benefits already paid.

By not taking $100,000 in benefits from 66 to 69 you buy an inflation-indexed annuity starting at age 70. You thought you were buying a CPI-indexed supplemental annuity. After you start collecting it turns into a CPI-1% indexed supplemental annuity. You might have been better off taking the 100K and investing in the stock market.

In short, if you are on the fence, and you are what President Obama considers rich, start at 66 rather than 70.

Owe money

If you are retired, your mortgage should be paid off. But if you are younger it may make sense to owe money. To the extent you owe money you get a windfall from unexpected inflation. That’s because you pay off your creditor with cheapened dollars.

Suppose you are 40 and owe $500,000 on your fixed-rate mortgage. And suppose you have $500,000 in a tax-sheltered retirement account, invested in Ginnie Mae funds. In these circumstances, you can sleep at night. Inflation can’t hurt you very much.

Why? A run-up in inflation will raise interest rates and that will cause your Ginnie Maes to lose value. But it will also, over time, make your home’s value higher than it would otherwise have been, while your mortgage debt remains frozen. So you’ll wind up with more home equity than you otherwise would have had.

I’m not advocating willy-nilly borrowing, only a holistic approach to your balance sheet. If you are young and mortgage heavy, you are not as vulnerable to inflation as you may think. You can lighten up on the timber and gold stocks.