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  • Archive for the 'Oregonia' Category

    Smashing Pumpkins in 2018 and 1991

    Posted by Carl from Chicago on 27th August 2018 (All posts by )

    The Smashing Pumpkins came to Portland on Saturday, August 25th at the Moda Center (the arena where the Portland Trail Blazers play). It was a good show and the sound was excellent (we recently saw a show at the Veterans Arena adjacent to the Moda Center and the sound was so terrible we walked out half-way through the show).

    They played the hits – most of the show was based on their first few albums – Gish, Siamese Dream, and Mellon Collie and the Infinite Sadness, and a bit of their next two.  There wasn’t a lot of their most recent work – the local paper described the show as “Give the Gen X’ers What They Want”.

    The whole band was there except for original bassist D’Arcy.  Like (nearly) everyone else, I had my story of when I ran into the Smashing Pumpkins back in Chicago – James Iha and D’Arcy were behind me in line at Best Buy purchasing CD’s a long time ago.

    While I love the Smashing Pumpkins unconditionally, I can see how Billy Corgan’s “woe is me” routine would be grating.  He had a bad childhood and it was highlighted from the very first song “Disarm” where he had pictures of himself as a child with annotations and they weren’t happy, for sure.

    Posted in Music, Oregonia | 5 Comments »

    West Coast Real Estate Starts to Turn

    Posted by Carl from Chicago on 26th July 2018 (All posts by )

    When I moved to the West coast I noted that prices were generally high relative to incomes.  It is well documented elsewhere that San Francisco area housing prices are very high and Seattle has been skyrocketing as well.  In Portland, housing isn’t as costly as Seattle or San Francisco but is very high relative to the local job market, particularly within the city limits and in the nicer areas.  A condo in “the Pearl” in Portland (a local high rise market) is 2-3 times what I’d pay for a comparable unit in my former River North area in Chicago.

    From an economic perspective, the income tax changes passed in late 2017, particularly the virtual elimination of the State and Local Tax deduction (SALT) for high earner households, along with continuing reductions in the mortgage interest deduction, should have had an immediate, negative impact on house prices in high tax states such as Oregon and California.  I didn’t see these effects, but changes in the housing market take a long time to appear, because many transactions are already under way and sellers will hang on in the market rather than taking a perceived “hit” to the value that they expect to receive.

    It looks like the market, in Portland at least, has crested and is (likely) to proceed in a downward direction.  From an article in Bloomberg titled “The US Housing Market Looks Headed for Its Worst Slowdown in Years

    Dustin Miller, an agent with Windermere Realty Trust in Portland, said he’s trying to manage sellers’ expectations, something he hasn’t had to do since the end of the last housing boom. One customer, a baby boomer moving to a new home across the state, expected to have buyers fighting over her house. She got one bid, below her asking price.  “Buyers want to shop and take some time, as opposed to having to rush and throw offers in,” Miller said. “It’s the market correcting itself. At some point, you hit a peak of momentum, and then things level off.”

    The real estate agent refers to this as moving from a ‘peak’ to ‘leveling off’ and we will see if this moves to a prolonged rout, like we had back in 2008-9.  It will also be interesting to see if real estate in high tax states doesn’t bounce back as fast as real estate in states with lower tax rates, but we won’t be able to see the net effect of this for many years (and it is but one variable among a sea of variables).

    I have a semi-sad theory about this – I don’t think folks understand the impact of the changes in tax laws until they file their taxes.  Whether due to complexity (it is hard to model just a couple of variables in a tax program unless you know what you are doing) or a lack of financial acumen, I believe that after 2018 taxes are filed in the middle of 2019 you will start to see more of a “wealth effect” as home owners start to realize the potentially large impact of the changes to the SALT deduction.

    As I look out my window in Portland I hope that they complete the high rise buildings that they are working on, and don’t break ground on new ones.  We used to look at partially completed buildings for many years in Chicago after the 2008-9 crisis, until they finally completed them up to 5 years later.

    Cross posted at LITGM

    Posted in Oregonia, Real Estate, Taxes | 21 Comments »

    Seismic Upgrade, Moral Hazard and Gentrification

    Posted by Carl from Chicago on 21st April 2018 (All posts by )

    While there has not been a recent major earthquake in the Pacific Northwest, research has proven that the area is seismically active. Building codes were established to withstand earthquake damage and new buildings have been held to this higher standard. However, there is a substantial portion of the commercial and residential buildings which have not been retrofitted to date. This cool interactive map shows earthquake risk in Portland based on the age of construction… and the pervasive color “red” is bad.

    While wood frame houses may fare reasonably well in an earthquake, the highest risk buildings are large structures made of brick. The term for these sorts of buildings in Portland is “unreinforced masonry” or URM for short. They are the buildings that give Portland all of its “character” like classic old apartment buildings and multi-use commercial and residential structures. Many schools, churches and community centers also fit in this classification. This article estimates that it would cost $4.6B to retrofit the remaining URM buildings in Portland. They also note that at the current rate of upgrades, it would take 100 years to complete the effort.

    I read a different local article and an engineer put it most pithily

    The value of an URM building is zero

    I do see some building owners “biting the bullet” and doing a seismic upgrade. When I look out the window of my building I can see many of the older buildings that gabapentinoral have been upgraded in this manner, and many that have not. Here is a construction notification for a nearby 5 story masonry building that is being retrofitted.

    There are two threads here that are most interesting to me:

    1. How do owners of apartment buildings, where residents will most certainly be at higher risk of death during an earthquake, sleep at night? They talk about the costs of retrofitting as if it is an abstract event; but not doing so creates an economic externality of human misery that apparently they value very little if at all

    2. Any mandate the city or region employs on URM will almost certainly drive gentrification because owners will have to invest in higher cost apartments and in turn raise rents; ironically, the city’s mandates on re-use and burden of oversight rules will make the future rent increases even more burdensome

    The likeliest solution is some sort of “muddling along” in the near term. For valuable commercial and high rise residential locations, the inevitable commercial upgrades will drive the URM upgrades. For apartment buildings, the future is much dimmer, because if you are a landlord owning an URM building, you can’t raise and invest the money if your local competitors are just going to “accept” the URM risk (on behalf of their residents, ironically). In fact, it makes no sense at all to invest anything more than the cosmetic minimum in these URM buildings, which will move them down the road of being slums at some point in the future.

    Cross posted at LITGM

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    Posted in Architecture, Business, Oregonia | 10 Comments »

    Disruption – The Weed Market in Oregon

    Posted by Carl from Chicago on 20th April 2018 (All posts by )

    Oregon allows recreational marijuana. Originally, there were laws limiting growers to local Oregon companies (when it was a medical marijuana industry) which were effectively eliminated when the transition was made to recreational usage (allowing out of state funding). There was also a relatively small local market for growing cannabis.

    Dispensaries cropped up everywhere, even in seemingly small, out of the way tourist towns with only a few hundred souls. It seems that you can’t go far without seeing the “green cross” that symbolizes a marijuana dispensary. Unlike other states, Oregon apparently allowed anyone who met basic criteria to open a “weed store”.

    While it surprised many of the locals who curated their wares and made custom strains of local cannabis, the free market reared its head and drove down prices on effectively undifferentiated product and storefronts. From the local WWeek newspaper:

    A gram of weed was selling for less than the price of a glass of wine… we have standard grams on the shelf at $4… before we didn’t see a gram below $8… Wholesale sun-grown weed fell from $1500 a pound last summer to as low as $700 by mid-October.

    As a result of this, there is significant consolidation in the market as smaller growers either bow out or are bought up and dispensaries are being purchased by large groups (often vertically integrated with growers) at fire-sale prices.

    (the) Oregon cannabis industry is a bleak scene: small businesses laying off employees and shrinking operations. Farms shuttering.

    One farm profiled in the article went into growing weed with the expectation of selling at $1500 a pound; when they finally had to liquidate most of their crop at a weed auction, they only received $100 a pound.

    The entire Oregon recreational cannabis industry has played out exactly as you would expect in a market with few barriers to entry and a relatively undifferentiated commodity:

    1. Suppliers rush in to take advantage of high prices for crops, turning what was originally a weed shortage (and resulting scarce supply) into a huge spike in supply which in turn drove down wholesale prices to almost nothing on the margin

    2. Retailers who have little or no differentiation are being driven out of business by low profits or being forced to run at a loss

    For me the interesting part of this is not the plain execution of basic market economics (in an industry with low barriers to entry, prices will drive down to near marginal cost of the most efficient operator), but in what that means to “adjacent” industries. For example, if a gram of (high quality) weed is the price of a single glass of wine (actually a lot less at $4… that is probably 1/3 of the price of a glass of decent wine at a standard restaurant), will customers switch from beer or wine to cannabis? From an economic perspective (cost / buzz) this would be a relatively clear-cut choice. Over time economists should chart the impact of low cannabis prices on both prices and consumption in adjacent alcohol industries.

    Cross posted at LITGM

    Posted in Business, Economics & Finance, Oregonia | 30 Comments »

    Apple Pay for Better Security

    Posted by Carl from Chicago on 11th October 2017 (All posts by )

    Over the last year I’ve had several opportunities to drive to remote parts of Oregon. Often we stop by a local grocery / convenience store to pick up groceries or a snack. These stores are small and often with a single check out lane and a very quaint atmosphere of old-time store goods.

    A bit of fun for me is to walk up to the credit card reader which usually has the icon for near field connectivity (NFC) and I surreptitiously use my Apple Watch with Apple Pay enabled to quickly pay for groceries without taking out my credit card. The cashier gets flummoxed and wonders what happened, and I show them my Apple Watch with my card image and they laugh.

    What is sad is that Apple Pay works “out of the box” at most of these remote grocery stores but it doesn’t work at many of the large retailers in the city. Instead of encouraging Apple Pay or similar google technologies, the retailers want to control the experience and the data and so they turn off this feature. You have the unfortunate alternative of putting your credit card in the chip reader and waiting for 5-10 seconds which slows the line for the whole process. Worse than the inconvenience is the fact that Apple Pay is much more secure than any card reader – Apple Pay doesn’t provide your “real” credit card to the store, instead it uses a “token” for the transaction.
    Read the rest of this entry »

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    Posted in Business, Economics & Finance, Oregonia, Tech | 11 Comments »

    Electric Six at Dante’s In Portland

    Posted by Carl from Chicago on 17th June 2017 (All posts by )

    Last night I went to see one of my favorite bands, Electric Six, at Dante’s in Portland on Burnside Avenue. They played a fun show and the band sounded great (my ears are still ringing). Here is their iconic singer “Dick Valentine” on stage. The band delivers hilarious onstage banter and are highly recommended. The crowd at Dante’s was also great and everyone seemed to be in good spirits.

    Read the rest of this entry »

    Posted in Music, Oregonia | 2 Comments »

    Yngwie F’ing Malmsteen

    Posted by Carl from Chicago on 27th May 2017 (All posts by )

    When I was in high school Yngwie Malmsteen hit the metal scene like a hurricane. That was back in the day when you would have long and furious arguments about who was the “best” guitarist (remember, we didn’t have the internet and had to fill our time with something other than social media). When Yngwie emerged the term “shredding” became the norm and Yngwie was the apex of that style of guitar playing – almost the photo that you would put adjacent to that term in the dictionary.

    His debut album “Rising Force” was a classic in that genre – mostly instrumental and filled with probably just about the recommended dose of Yngwie for most non die-hard fans. The hand raising his iconic guitar above the fire is the image of Yngwie that jumps into my mind first and foremost.
    Read the rest of this entry »

    Posted in Music, Oregonia | 3 Comments »

    Planning for Failure

    Posted by Carl from Chicago on 23rd May 2017 (All posts by )

    When I worked in the power industry everyone understood that the cost of a power outage was high, but it was impossible to put a precise value on it. There is the reputational damage, the specific costs of payouts to businesses and residences that are impacted (depending on your jurisdiction), the cost of restoring service (typically it is “all hands” in terms of available personnel and equipment), and finally the loss of trust by your all-important regulator when you come back later and ask for an inevitable price increase for your customers.

    The other, more subtle, cost of outages is the fact that businesses and residents must plan for unreliable power sources, and invest in backup generation which includes fuel, testing, etc… I would call this “planning for failure”. Over time, this also causes businesses to consider exiting the grid entirely in one form or another when they are large and capable enough, causing the remaining fixed costs to be borne by the remaining customers.

    Here in Portland right now we are dealing with a major outage, as a fire caused a power outage to over 2000 customers downtown near the Pearl district. This isn’t 2000 customers… most of these meters are large businesses and buildings and not individual houses. In practical terms, the downtown Target is probably closed, Powell’s bookstore (a major tourist attraction) is closed, and many, many other smaller businesses and restaurants. It would be similar to a power outage taking out most of River North in Chicago where I used to live.

    Luckily I live in a building with a backup generator, and they have fuel for 3 days, so we likely will be unaffected. That’s what you get when you pay more for a recently built class A apartment rather than an older vintage walkup. But many, many folks are going to be impacted by this (it was over 90 degrees yesterday) and many restaurants are going to have to throw out their food on top of losing a couple of days’ worth of customers.

    As we re-think electricity and the grid entirely it is important to consider reliability in the equation. I believe that many individuals and businesses just take power for granted until it isn’t there anymore. This challenge will likely be exacerbated by renewables and solar power… in this outage it is a distribution system failure, but intermittent generation of power is another variable in the reliability equation.

    Cross posted at LITGM

    Posted in Energy & Power Generation, Oregonia | 20 Comments »

    Disruption – Liquor

    Posted by Carl from Chicago on 14th April 2017 (All posts by )

    “Disruption” is a word usually reserved for hyped sectors of the economy like technology and “Uber” is the ubiquitous example that even a child would recognize. However, there are other components of the economy ripe for disruption, especially those that are heavily regulated, which generally causes significant distortions, monopolistic behavior, regulatory capture, high prices, and a lack of innovation.

    The liquor industry is a heavily regulated industry, with layers of distributors and obscure rules which enforce local monopolies, entrench incumbents (often with inferior products), and provide many opportunities for the government to extract tax income and solicit donations from favored groups. Typically liquor uses a “three tier” system, where there is a producer, a distributor, and a retail outlet (a store or a bar). This is a system ripe for disruption.

    Alongside this archaic regulated system (which works for the benefits of the government and the local monopolies), there was a multi-decade process of concentration within the liquor industry, as local beer manufacturers were bought up by massive multinationals, culminating in the InBev company which controls a huge chunk (28%) of world-wide beer sales. If it wasn’t for the craft beer counter-revolution (see below), the epic consolidation of the liquor industry would have gone on indefinitely, bringing out “innovations” like Bud Light Lime.

    Some of the components of the disruption of liquor in Oregon include:
    1) Craft breweries or brewpubs which brew their own beer (and cider) and can sell it onsite
    2) Distilleries able to make their own spirits and sell themselves out of their facility
    3) New technologies such as Growlers or Crowlers which enable customers to fill directly from a keg into a re-usable container and take the beer home to drink
    4) This is all in addition to the vast wineries (seemingly everywhere) that can sell directly and even ship to many states

    Craft Breweries:

    Portland and Oregon have been leaders in the craft beer movement, enabled by laws (passed against the political power of the beer distributors) which allowed for the brewpubs to sell their own alcohol.
    This article describes how the modern brewery was instituted in Oregon.The “beer culture” is everywhere, with 116 breweries within an hour of Portland, as evidenced by the cover of this recent magazine I picked up. Here is a link to the magazine online.

    Read the rest of this entry »

    Posted in Economics & Finance, Oregonia | 11 Comments »

    US Infrastructure Will Be Broken Forever

    Posted by Carl from Chicago on 11th March 2017 (All posts by )

    Recently I visited Cathedral Park in Portland, which lies beneath the St. Johns Bridge.  The St. Johns Bridge is a magnificent structure, built in 1931, during the height of the depression.

    Portland is a city of bridges.  These bridges were mostly built long ago, when construction projects were feasible in terms of costs and delivery time frames were measured in years, not decades (when approvals, funding, environmental contingencies, etc… are factored in).

    Today the Portland metropolitan area, which includes large Washington communities north of the city, faces severe constraints on traffic and there is widespread local agreement that commute times are growing longer and in some instances intolerable.  I know individuals in Chicago, LA or NYC that would laugh at commute times that aren’t 2+ hours but that is little consolation to the locals who previously had been able to drive around the metro area with relative ease.

    Many of these bridges need to be replaced for multiple reasons – the Pacific Northwest is an earthquake zone and most of these bridges are not built to survive a quake, traffic on the bridges is soaring and causing delays throughout the system because they function as bottlenecks, and frankly bridges cannot last forever without collapsing.

    And yet… it will never happen.  I am confident that we won’t be able to raise the billions that it will take to build these bridges and lawsuits and environmentalists would create innumerable roadblocks (with accompanying cost increases and delays) so that even difficult projects will become impossible. There is an utter breakdown in funding, public will, solid execution, and all the fundamental components that make infrastructure possible.  While China has built giant, soaring cities, we can’t even replace bridges and roads built 100 years ago.
    Read the rest of this entry »

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    Posted in Economics & Finance, Oregonia, Transportation | 54 Comments »

    Evergreen Aviation Museum- Spruce Goose

    Posted by Carl from Chicago on 16th December 2016 (All posts by )

    Near Portland there is a great aviation and military museum called the “Evergreen Aviation and Space Museum“. I highly recommend that you visit this campus, which includes an IMAX theater, if you ever visit Oregon.

    The highlight is the “Spruce Goose“, the immense wooden plane designed and built by Howard Hughes which resides inside the facility. It is fantastic that the museum was built at a large enough scale to keep this plane indoors else it would likely soon be lost to the elements.

    Read the rest of this entry »

    Posted in Aviation, Oregonia | 5 Comments »

    Portland Winter Weather

    Posted by Carl from Chicago on 15th December 2016 (All posts by )

    Recently I re-located to Portland, Oregon. While Portland has a reputation as a rainy, gloomy place, we had a great April through November, with lovely and mostly sunny weather. In December, however, things have taken a turn for the worse.

    I grew up in the Midwest where it snows all the time. The difference, however, is that we salt our roads and plow them with vigor. This wikipedia article shows the “salt belt” of states that use this method; Oregon is not one of them.

    While snowfalls are infrequent in Portland (some parts of Oregon see immense snowfalls… like this town and anywhere near Crater Lake) we have already had 2 “major” snowfalls that snarled traffic to an inordinate degree – the city ceases to function and everyone stays home when they heed the weather warnings (if they turn out to be accurate). On Wednesday, however, the snowfall and ice occurred during the evening rush hour and caused chaos with hundreds of abandoned cars litering the streets and highways. Commutes that would take 20 minutes could take 4 or more hours; many (including myself) went on foot.

    Streets were still icy and treacherous a day later, since the temperature remains below freezing. Cars that drive were generally either all-wheel drive, trucks, or used chains. I had to buy a pair of chains for my Jetta for $85 but I hope to never need to use them.
    Read the rest of this entry »

    Posted in Oregonia | 15 Comments »

    Portland “Riots”

    Posted by Carl from Chicago on 12th November 2016 (All posts by )

    Recently I moved to Portland, Oregon. Portland is a very clean and safe city, albeit one with a lot of homeless people allowed to camp out on the street. Crime here is miniscule by the standards of Chicago – rather than seeing murders every day (with multiple murders and shootings compressed into one story since it isn’t “news”), you can actually see leading news stories about a guy who got his bike stolen, with a picture of the thief from a security camera.

    Now Portland is in the national news for a different reason. After the election, protestors have been taking to the streets. I was in a cab back from the airport Thursday night and my twenty minute ride became a 1 1/2 hour ride since the protestors were blocking bridges and highways. It was a bit unnerving because you were just sitting in traffic with no information and it could go on indefinitely.

    The protestors have been walking through neighborhoods and shopping areas and blocking bridges and the police have mostly left them alone. They did break business windows in an area less than a mile from where I live such as this Bank of America ATM bank branch. They set a couple of fires in dumpsters too. But generally they were pretty calm and the police followed them and didn’t bust their heads, Chicago-style.
    Read the rest of this entry »

    Posted in Civil Society, Current Events, Oregonia, Politics | 27 Comments »