David Roeder writes today:

Some 46 percent of lenders believe there’s “significant overvaluation” in real estate, said the business turnaround specialists Phoenix Management Services. The firm surveyed 122 commercial lenders. “Belief in the existence of a real estate bubble appears to be gaining some momentum,” said E. Talbot Briddell, Phoenix managing director. Thirty-nine percent of the respondents disavowed belief in a bubble

Since a bubble is by definition a confidence game, it’s in big trouble if the lenders (the ones underwriting the game) begin to back away.

In other news, he also says that construction on the Kinzie Station North residential and supermarket components on the old Milwaukee Road land across/catty-corner from Blommer Chocolate should begin this fall, now that RDM Development and Jewel have cleared plans with the city. (This is remarkable only because Milwaukee, Desplaines, and Kinzie is an integral junction in my bike commute; Kinzie is a great low-traffic shortcut across River North/River West.) Jewel received TIF funds, apparently for infrastructure, a parking deck, and since it will straddle the Blue Line subway. Now that I think about it, though, the Blue Line should continue along Milwaukee Avenue’s alignment and thus under the residential block at the southeast corner of Kinzie/Desplaines, not under Jewel’s site on the southwest corner. Oh well.

Apologies for the absence: I was in Boston last weekend (photos soon) and have been putzing with a new Treo this week. Can’t figure out how to post from it yet, though.

Terry Lundgren threatens to strangle America’s retailing history with his bare hands:

Well, it looks like fewer than 100 malls are truly threatened by the merger. What I’m worried about is the forthcoming death of perhaps a dozen regional department store names — each of them with a longstanding connection to regional histories and, for Filene’s and Field’s, a strong connection to some great American stories. In fact, I’d be genuinely mad if the Field’s name were axed–I’m not even from the Midwest and moved to Chicago precisely because it seemed distant and unknown, and yet the brand still meant something to me upon my arrival. Macy’s, on the other hand, never excited me.

The newspaper accounts I’ve scanned from Chicago, Cincinnati, Minneapolis, and New York are pretty evenly split about the chance of Federated retiring Field’s, although the analysts who predict its death seem more certain. In the press conference, Lundgren left the possibility of keeping Field’s and Lord & Taylor alive after market research. On the other hand, there may not be enough ex-May stores in the Upper Midwest to permit Federated to do a full rollout of Macy’s while keeping one or two other brands around.
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Recently saw “The Take”:http://www.nfb.ca/webextension/thetake and I’m still haunted (in a sense) by the image of well-dressed girls scrounging out of a Burger King trash can. Few places have seen the fruits of industrialization vanish quite so suddenly, and most of the other cases have ended in civil war.

As “The Economist”:http://www.economist.com/surveys/displaystory.cfm?story_id=2704457 writes:

bq. Argentina is thus not a “developing country.” Uniquely, it achieved development and then lost it again. That is a haunting condition: it may help to explain why psychoanalysis and the nostalgia-ridden tango are so popular in Argentina. It is reflected, mockingly, in the fading Belle Epoque splendour of Buenos Aires.

Philip Longman, in the cover story for the current the Washington Monthly, outlines how the VA hospital system can offer better quality care, at lower costs, than any private health care provider: largely through active management of chronic illnesses, aided by extensive investments in information technology. The dramatic gains made by VA in improving care show just how deficient the rest of the US health care system is in basic, good management: think of the entire system, provide life-cycle services rather than products, etc.

The problem with this approach, he points out well into the piece, is that it isn’t replicable within the current privately funded US healthcare regime: high-capital-cost investments with long-term outcomes only make sense for single-payer, usually government, schemes like VA. (The only other US health services provider to employ so much IT is non-profit Kaiser, which is run strikingly like a government health service.)

Indeed, there are huge disincentives to change within the current pay-to-play system: since surgeons and thus doctors get paid per operation, there’s no incentive for hospitals to steer patients towards less invasive, preventive care, even when such care would cost less and result in better outcomes. Investing now in subsidizing preventive care makes little sense when the patients jump ship every few years; the investment will save money for the next guy, not for your firm.

And thus, the profit motive once again foils socially strategic investments. The market doesn’t always win.

Somehow, I had the notion that the eyeglass business — dominated as it is by small retailers — was a paragon of mass-customized flexible specialization, the post-Fordist but neo-artisanal mode of production where small, specialized firms align with one another on the fly to get the job done. (Film production, garment manufacture, and computer hardware are often cited examples of flexibly specialized industries.) Alas, that was entirely a function of the fact that I’m such a snob that I only deal with the craftsman-driven relic that is the upper end of the optician world, a world where glasses are custom jewelry, not functional medical appliances.

In a recent glasses-shopping expedition, I found that Luxottica Group, the world’s largest frame maker (everything from Ray-Ban to dozens of licensed names, from Anne Klein to Versace) and owner of Sunglass Hut and LensCrafters, had purchased Cole National — the nation’s largest vision insurer and owner of Pearle. Almost all of the luxury “brand names” featured in the chain opticians are made under license in a handful of Italian or Chinese factories owned by massive vertical conglomerates: Luxottica, Marchon, and Moulin among them.

The Tribune reports that the Civic Federation will release a report questioning an upcoming (but news-to-me) proposal by several Midwestern states to streamline sales taxes in exchange for collecting taxes on out of state (read: catalog and Internet) purchases. The end of the article points out that the micro taxes that add up to 9.75% for my takeout lunch — but 6% on an identical meal sold just 15 miles away, across the Indiana line — could fall victim to this streamlining. After all, we can’t expect every single online retailer to remember all of the thousands of sales tax rates across the US, right?

Although this might seem to be a nightmarish predicament that will result in huge revenue losses for local governments reliant on local-option sales taxes, one interesting wrinkle arises: what if this “sales tax streamlining” could result in sales tax revenue sharing? Doing so would iron out local inefficiencies, like retail sales “leaking” to lower tax jurisdictions or fiscal zoning that lures big box stores solely for the resulting sales tax revenue.

For unknown reasons, Northern Trust bank — the keeper of Jenna and Babs’ trust funds — has renamed Paul Kasriel’s weekly economics column “positive economic commentary.” The name change hasn’t at all altered its somewhat alarmist tone, particularly on the pending dollar collapse. Kasriel has pinpointed 2005 as the year when foreign central banks, as in 1973, give up on propping up the deficit-wracked dollar by sinking their own currencies with expansionary monetary policy — thereby triggering a dollar collapse, an inflation shock, and a long-term spike in interest rates.

Currently high US productivity is being sustained based on investments in education and physical capital made in the past, but unfortunately, public and personal investment in the US has plunged to Depression-level lows. Businesses are socking away cash (saving, but not investing, since the bubble dampened the market for new ventures), and the Rest of the World is buying up US capital, but personal and government spending is overwhelmingly going to prop up the US consumption machine (or towards dubious wars). “Will these SUVs, McMansions, and government spending programs allow us to grow faster in the future? If not, will we not have to suffer more of a decline in our future (or our children’s future) standard of living when we have to service our foreign debt?” To which I might add: both massive fiscal debts (the entitlement crunch, deferred infrastructure maintenance and investment) and environmental debts will come due in the 21st century. Where will we find the capital to address those needs and maintain the current consumption orgy?

Another interesting idea: since 2001, US GDP has actually declined by about 15%, if dollars are translated into gold. Gold is a more reliable long-term store of value than fiat currency; hence, its longtime popularity in politically unstable societies.

This past Sunday, I was amused to see that Starbucks had wrapped every Tribune with a wrapper with a “how to order coffee” booklet. The thing is a parody of itself, complete with detachable reference card for the paint-by-numbers (or is it Mad Libs?) set:
I’d like to have a…
[cup-leave blank if you’re getting it to go]
[decaf, number of shots and size]
[syrup, if any]
[milk and other modifiers-don’t specify a milk if you want whole milk]
[the drink itself]

The market is rarely capable of serving the best interests of a great Main Street. The recent explosion of branch banks nationwide, but particularly in New York City (and to a lesser extent here in Chicago) illustrates this: banks all like high foot traffic — more so for the advertising value, since the best billboard is one you can walk into (and extract $1.50 ATM fees from). Problem is, banks generate little foot traffic on their own.

So, one property owner maximizes his own value by kicking out the current tenant and leasing to a bank. He wins, since banks pay lots of rent.

Then, every other property owner at the corner does the same. They lose! Overall foot traffic declines, and the banks might eventually leave. (If the neighborhood doesn’t really decline, then the banks will remain a deadening influence there for decades — Lincoln/Belmont/Ashland is one good example.) In any case, the neighborhood is worse off.

One advantage malls have is that their centralized ownership can exploit synergies; they’re willing to sacrifice a little bit of revenue over here in order to get a lot more revenue over there — an unprofitable lease here (for a department store or movie theatre) can be subsidized by a wildly profitable lease over there (for a fast food joint). Main Streets under multiple ownership can’t do this, unless there’s a really aggressive manager who’s willing to strongarm folks into doing things.

Proactive management of Main Streets is one of the biggest lessons from the National Trust for Historic Preservation’s Main Street Center work.

[Originally posted at urbanphoto]

No kidding! So shouts an LA Times headline today.

“White House officials dismissed the [IMF] report [criticizing fiscal policy in the USA] as alarmist, saying President Bush had already vowed to reduce the budget deficit by half over the next five years.”

Aha. I see that the president is no longer promising, then, to eliminate the deficit (and return us back to the surpluses he promised he’d keep back in 2000) — merely to cut it in half after he’s out of office. Hmm. Strange how many of Bush’s goals fall in either 2005 or 2009, isn’t it?

[Found at TNR &c.]

Bush’s economic policies don’t sit very well with economists working for major banks, it seems. Here, economists for Bank One and Wells Fargo slam the magical mystery of unemployment and “economic growth” figures:

Economists believe the drop in the labor force masks a much higher jobless rate�perhaps as high as 9%, according to Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio.

“The decline in the unemployment rate is the most misleading aspect of this employment report,” said Mr. Chan. “It’s a sham because of how we got there�the labor force dropped precisely because more people became discouraged…”

“Despite all the hoopla, neither businesses nor potential employees have confidence in the economy. They’re not believing all the stories about a strong and healthy economy given by the economists and the government,” [Wells Fargo chief economist Sung Won] Sohn said.

From Reuters/ChicagoBusiness