Pluralistic: 24 Nov 2021

Originally published at: Pluralistic: 24 Nov 2021 – Pluralistic: Daily links from Cory Doctorow


Today's links



This one is really quite a complicated collage so strap in. The main image is an old engraving of a striking crowd before a factory; they are clad in bowler hats, cinch-waisted dresses, and other garments of yore, and they brandish hammers, guns, and tools. The image has been altered so that the building they are threatening now bears the logo and wordmark of Cerberus Capital. The sky behind the building has been replaced with the Spanish flag. In the bottom right corner of the image is a grinning, cute, anthropomorphized guillotine. In the top left corner of the image is a caricature of a besuited thug, brandishing a club and holding his hand out, as though demanding payment. Whew.

Spaniards fight Wall Street landlords (permalink)

One of the original sins of the modern economy was sidelining unions and social programs as a path to upward mobility and installing property speculation in their place. Converting the distribution of shelter (a human right and necessity) into a speculative asset had far-reaching consequences, and an eventual violent rupture was baked in from the start.

A path to prosperity runs through the appreciation of your family home (not through wage-gains and access to education, health-care and pensions) recruits a vast army of everyday wage-earners who will fight for any policy that pushes up real-estate values. That's true even when those policies are bad for the people who live in homes, rather than gambling on them.

For example, the more protections we have for tenants, the less the homes they live in will be worth. Even if you sell your home to someone who plans on living in it, they'll be bidding against people who might turn it into rental property, and their top offer is based on how much they think they can get from their tenants.

Rent control lowers property values. Easy eviction raises property values. Obligations on landlords to maintain their rentals lower property values. The right to extract high surcharges from tenants raises property values.

Even if you own a home, this is bad news. Remember, we swapped good wages and social supports for property speculation, which means that you will need to tap into your home's equity to pay for your health care and retirement, as well as your kids' sky-high tuition and down-payments. You and/or your kids will almost certainly become tenants in the long run, and then you'll all have to live under the abusive, tenant-hostile system you supported in the name of increasing your home's value.

https://gen.medium.com/the-rents-too-damned-high-520f958d5ec5

That's because the real action in property markets doesn't come from owner-occupiers or even people who own a second rental property – the end-game is based around Wall Street landlords, who acquire whole portfolios of homes and "securitize" the rental payments from them, turning those payments into bonds.

Wall Street doesn't have mortgages, it has corporate debt – the income from those bonds, as well as access to the capital markets and bank loans on preferential terms. That means that even though owner-occupiers and mom-and-pop landlords will go to bat for policies that benefit Wall Street landlords, Wall Street can screw over mortgage holders without hurting themselves.

That means that as it gets easier to evict tenants (because normal homeowners support loose eviction rules to protect their single largest asset), it also gets easier to evict homeowners (because Wall Street supports mortgage-default evictions so they can buy more houses for cheap).

This is where the eventual rupture comes in. Long before the majority of homeowners have had become tenants after they liquidate their homes to pay for retirement, health-care, and kids' tuition and down-payments, a sizable number of them will lose their homes to foreclosure and eviction.

That's what happened in 2008, when the whole world saw waves of foreclosure evictions, under rules that were so loose that they can only be called "fraud-tolerant." Banks – the largest banks in the world – ran foreclosure mills in which forged documents and perjury allowed them to seize homes around the world, irrespective of whether they had a legal right to do so.

That was bad enough in the USA, but the Eurozone countries that were hardest hit by the one-two punch of the housing crash and austerity really felt it. One of those countries is Spain, where the drama is still unfolding.

Spain experienced a foreclosure epidemic that dwarfed the American crisis, which allowed offshore private equity firms to snap up huge portfolios of homes. The most notorious of these is Cerberus Capital, which has inspired a popular uprising.

https://www.nytimes.com/2021/11/21/world/europe/spain-evictions-cerberus-covid.html

Cerberus sold its global investors on residential rental portfolios by promising to be hard on its tenants – minimizing its upkeep of its properties and maximizing its rental income by using eviction threats to ensure that tenants prioritized rent over other expenses.

That's a key element of all debt markets: when you invest in a share of someone's debt repayments, it doesn't merely matter whether they can sustain their payments long enough to retire those debts. What matters more is what priority they'll assign to servicing their debts – which is linked to the consequences of default. Loan-sharks know that their marks won't ever retire their debts, but they also know that if they employ terrifying arm-breakers, the marks will go to extraordinary lengths (stealing from family, embezzling, mugging strangers) to keep up payments. Likewise, investors in rental property markets know that a credible threat of eviction will prompt tenants to deprioritize adequate nutrition, health-care, child-support payments and other necessities.

https://pluralistic.net/2021/04/02/innovation-unlocks-markets/#digital-arm-breakers

Cerberus's business fortunes are inextricably linked to its ability to abuse and evict its tenants, and Spainards have had enough. In Spain, Cerberus has taken advantage of the 15% unemployment rate and loopholes in the country's eviction moratorium to throw tenants into the streets.

Historically, this would be a no-brainer: Cerberus could rely on an army of "normal" homeowners and mom-and-pop landlords to provide cover for its cruelty. But Spain was so hard-hit by the great financial crisis that there just aren't enough true believers in asset appreciation to run interference for private equity ghouls like Cerberus.

Instead, cops who show up to evict Cerberus tenants confront huge mobs of anti-eviction activists who physically interpose their bodies between the cops and the tenants, preventing evictions. These same activists systematically target empty Cerberus properties – often empty thanks to evictions – for break-and-enter squatter occupations. They've also occupied the offices of a Cerberus real-estate servicer in Barcelona.

The anti-Cerberus activists are organized under the banner of "War Against Cerberus," and they've gained sufficient notoriety that Cerberus tenants are turning to the group for assistance when their situation turns dire. Now, local and national elected officials in Spain are contemplating legislation that will make it harder for Cerberus to extract high profits from peoples' human right to shelter. For example, Barcelona is on its way to passing rent caps on properties owned by corporate landlords.

Cerberus is fighting back through the Association of Rental Housing Owners, which claims to represent mom-and-pop landlords but gets its marching orders from Wall Street landlords, who own 40,000+ properties in Spain.

But even with an astroturf group on its side, the Spanish mood is so hostile to offshore corporate landlords that they face an uphill battle. If I were them, I'd be shitting bricks, especially after the people of Berlin voted to expropriate the city's corporate landlords and put those homes in public ownership:

https://pluralistic.net/2021/08/16/die-miete-ist-zu-hoch/#assets-v-human-rights

Things are lagging in America. Democrats are fighting like mad for the SALT tax repeal, a move that means that much of the Build Back Better plan had to be scrapped. The overwhelming beneficiary of that move will be wealthy Americans, especially very wealthy Americans:

https://www.theguardian.com/commentisfree/2021/nov/22/democrats-are-pushing-tax-breaks-for-the-rich-theyll-cry-when-voters-punish-them

SALT tax repeal means a BBB that gives a tax cut to Americans earning more than $1m/year, at the expense of Medicare expansion and lower drug prices.

Of course, a SALT repeal will have an indirect effect on all house prices: the less property tax homeowners pay, the more corporate speculators will bid for houses when they go on the market. So middle-class people who liquidate their home to pay those health bills that BBB might have helped them with will see a dividend from SALT repeal.

All they have to do to realize that dividend is give up their home.



Bosch's painting 'The Conjurer,' which depicts a grinning magician amazing a group of rubes with a shell-game trick. The face of the magician has been replaced with Elon Musk's, and one of the shells on the table has been replaced with a Tesla automobile.

The Tesla-financial complex (permalink)

Elon Musk is the richest man on Earth and Tesla is worth more than a trillion dollars. What the fuck is going on? In Robin Wigglesworth's phrase: it's the Tesla-financial complex at work:

https://www.ft.com/content/17f0cd1f-e751-4ddb-b13c-ea4e685b55c0

What's a "Tesla-financial complex?" Well, Tesla is only tertiarily a car-maker (which may explain why the company is so indifferent to QA for its vehicles and the safety of its workers). Its primary product is financial instruments (its secondary product is an army of creepy cultists).

For example, Tesla mints an astounding number of carbon credits that are primarily consumed by car companies that make gas-guzzling SUVs. Without those SUVs, the company's financials would be much, much worse:

https://www.yahoo.com/now/tesla-gains-results-show-dependence-053528438.html

But that's just table-stakes. As Wigglesworth writes, the real secret to Tesla's valuation is "the swelling size and hyperactivity of Tesla 'options.'" These options create incredible volatility for Tesla and have reversed the traditional relationship between options and shares, with option prices driving up share-prices.

Tesla is the original meme-stock, and it depends on meme investors, like the redditors who follow billionaire Leo KoGuan's massive position in the company. And as with any meme-driven phenomenon, there's a procession of companies riding the fad. For example, Nikola, a fraud company that pretends to make electric trucks, is still worth $5.4b even after it had to set aside $125m to settle its fraud fines. Rivian, a company that has barely made any vehicles, is valued at $110b.

Over on Naked Capitalism, Yves Smith and her commentators do an excellent job of analyzing Wigglesworth's piece:

https://www.nakedcapitalism.com/2021/11/the-tesla-financial-complex-financial-times-details-wildly-outsized-speculation-in-tesla-options.html

Here's the kicker: "It goes without saying that Tesla is overvalued, but a stock being overvalued is no barrier to it becoming even more overvalued…At some point the gig will be up and Tesla will be valued like a car company. But don’t ask me to make book as to when."

Is Tesla really overvalued? Hell yes. Back in January, its valuation was 1600x its profitability:

https://pluralistic.net/2021/01/15/hoover-calling/#intangibles

Can Tesla increase its earnings 1600-fold and justify that valuation. Nope. The thing is, geometry has a well-known anti-Tesla bias. We can't save our cities by replacing individuals in fossil-fuel cars with individuals in EVs. When you multiply the space a car occupies by the number of cars that requires by the distance that commutes expand by when you build those roads, you end up needing even more cars.

The answer is, of course, mass transit, something Elon Musk is violently allergic to ("there’s like a bunch of random strangers, one of who might be a serial killer" -E. Musk, 2017). This despite the fact that the greatest cities in the world are places "where the rich use public transportation."

https://metropolisjapan.com/why-tokyo-works/

Musk's personal reality-distortion field might be able to gin up billions out of ethereal complex financial instruments. But cities are material things, governed by unforgiving, bullshit-resistant laws of physical space. No amount of Twitter shitposting will fit more cars into the same space.

I mean, if you're going to believe in any kind of overvalued, overhyped personal transport, it should probably be e-bikes. "City governments should purchase an electronic bicycle for every resident over the age of 15 who wants one [and] shut down a significant number of streets to be used only by bicycles."

https://www.nytimes.com/2021/11/22/opinion/free-ebikes-climate.html

(Image: Heisenberg Media and Steve Jurvetson, CC BY 2.0, modified)



This day in history (permalink)

#10yrsago Russian social media erupts as Putin apparat tries to suppress video of booing crowd https://www.bbc.com/news/world-europe-15869047

#10yrsago Canadian indigenous band declares state of emergency due to horrific conditions, government takes no notice https://www.huffpost.com/archive/ca/entry/attawapiskat-emergency_b_1104370

#10yrsago European Court of Justice: spying with national copyright censorwalls is illegal https://torrentfreak.com/european-court-isps-cant-spy-on-pirating-customers-111124/

#10yrsago Why you shouldn’t parse HTML with regexp https://stackoverflow.com/questions/1732348/regex-match-open-tags-except-xhtml-self-contained-tags/1732454#1732454

#5yrsago Daily Mail finds new depths to plumb, blames hypothetical immigrants for neo-Nazi’s murder of Labour MP https://twitter.com/i/web/status/801771576056287232

#1yrago Talking interop on EFF's podcast https://pluralistic.net/2020/11/24/zawinskiian-carcination/#comcom

#1yrago Cheap Chinese routers riddled with backdoors https://pluralistic.net/2020/11/24/zawinskiian-carcination/#jetstream

#1yrago Emailifaction is digital carcinization https://pluralistic.net/2020/11/24/zawinskiian-carcination/#carcinization

#1yrago Saudi Aramco is gushing debt https://pluralistic.net/2020/11/24/zawinskiian-carcination/#gusher



Colophon (permalink)

Today's top sources: Naked Capitalism (https://www.nakedcapitalism.com/), Kottke (https://kottke.org/).

Currently writing:

  • Spill, a Little Brother short story about pipeline protests. Yesterday's progress: 3091 words (32274 words total)
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  • A Little Brother short story about remote invigilation. PLANNING

  • A nonfiction book about excessive buyer-power in the arts, co-written with Rebecca Giblin, "The Shakedown." FINAL EDITS

  • A post-GND utopian novel, "The Lost Cause." FINISHED

  • A cyberpunk noir thriller novel, "Red Team Blues." FINISHED

Currently reading: Analogia by George Dyson.

Latest podcast: Jam To-Day (https://craphound.com/news/2021/11/21/jam-to-day/)

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Recent appearances:

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Upcoming books:

  • The Shakedown, with Rebecca Giblin, nonfiction/business/politics, Beacon Press 2022

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