Archives for March 2014

A federal judge has thrown out the first fine against a commercial drone operator, as the Federal Aviation Administration struggles to regulate the fast-developing industry.
Judge Patrick Geraghty of the National Transportation Safety Board, who heard the appeal of the $10,000 FAA fine against Raphael Pirker, ruled Thursday that there was “no enforceable FAA rule” or regulation that applied to a model aircraft such as the one Pirker was flying.

The FAA issued a statement Friday saying it would appeal the ruling to the full NTSB, which has the effect of delaying the decision.
“The agency is concerned that this decision could impact the safe operation of the national airspace system and the safety of people and property on the ground,” the FAA statement said.
Brendan Schulman, a New York lawyer with Kramer, Levin, Naftalis and Frankel who represented Pirker, said the judge’s decision was important because of uncertainty about what is allowed for drones.
“I think it’s an extremely significant decision because for the first time ever we have guidance from a judge on whether the 2007 ban on commercial drone operations is legally enforceable,” Schulman said. “That’s guidance that many people in the industry have been looking for, for a long time.”
In 2012, Congress ordered the FAA to develop comprehensive regulations for drones to fly safely in the same airspace as passenger planes by September 2015.
So far the FAA has issued a roadmap for how it will develop the regulations and named six groups to test various aspects of drone safety, such as how to prevent drones from colliding with planes and how to have them land safely if they lose contact with remote pilots. But those decisions came months behind schedule.
An FAA proposal for drones weighing less than 55 pounds is expected later this year.
FAA Administrator Michael Huerta assured a House panel last month that the agency would develop its regulations in stages “with the overriding concern that we want to maximize the highest levels of safety.”
The FAA projects 7,500 drones will be flying within five years, if regulations are completed, because they can be used for flying that is too expensive or dangerous for planes or helicopters with people on board.
An industry group, the Association of Unmanned Vehicle Systems International, projects there will be 100,000 jobs generating $82 billion in economic activity in the decade after the aircraft are allowed in general airspace.
But drone regulation has been haphazard until now. FAA issues permits to hundreds of public entities on a case-by-case basis, for police to survey crime scenes from the air, firefighters to scan burning buildings and universities to conduct research. But only one commercial drone permit was issued so far, to fly in the Arctic to study wildlife.
Meanwhile, real-estate agents, moviemakers, farmers and other commercial operations are eager to use drones.
“There are countless businesses with really exciting applications and ideas for using the technology that have really been stifled from using the technology because of the bureaucratic delay and the purported ban on commercial operation,” Schulman said.
Against this backdrop, the FAA sought to fine Pirker under its regulation against operating “an aircraft in a careless or reckless manner so as to endanger the life or property of another,” which the agency argued applied to drones.
Pirker was fined for flying a Ritewing Zephyr drone Oct. 17, 2011, around the University of Virginia in Charlottesville with a camera that sent video to the ground. He was being paid by Lewis Communications for video of the campus and medical center.
Geraghty, the judge hearing the case, called applying the “careless or reckless” standard to all aircraft could lead to the “risible argument” that it applied to paper planes or a balsa glider. Previous FAA rules have exempted model planes and hobbyists.
Geraghty found that because FAA historically exempted model aircraft from its enforcement, Pirker’s drone didn’t qualify for a fine under current regulations.
Schulman said drone operators will have to consult with their lawyers about whether and how they might fly, as the FAA develops its regulations.
“The impact of the decision on any specific company or person is a matter for that company and its lawyers to evaluate,” Schulman said.
By: Bart Jansen (USA Today)
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Since the start of the Great Recession of 2008 and the Fed’s decision to inject trillions of dollars into the banking system, there has been constant talk of the US dollar losing its position as the world’s reserve currency, the position it has held since the end of WWII.  After all, our debt is huge and growing, DC is thoroughly dysfunctional, our share of the world economy is shrinking and China is increasingly pushing for a post dollarcentric financial system.  Despite all the concerns above, the dollar’s position as the reserve currency of the world is safe for a long while.
First, which currency can realistically unseat it?  The British pound is simply too small to do the job as the British economy is about 1/7^th the size of the US economy.  As for the euro, while it is large enough, there are too many structural problems including weak growth, over taxation, an inflexible central bank and the outside possibility of the collapse of the monetary union to entice many central banks to significantly increase their euro holdings.
As for the Yen, Swiss Franc or Chinese renminbi, you have got to be kidding!  With a debt to GDP ratio greater than that of Greece, Japan makes the US look downright fiscally responsible. Moreover, Japan and Switzerland are both pushing down the value of their respective currencies making them that much less appealing to hold.  Lastly, the renminbi does not freely float and there are significant foreign exchange controls in place.  As a result, it will take at least a decade before China has the necessary legal framework and deep and open financial markets that are a necessary prerequisite before the renminbi can become a credible reserve currency competitor.
Second, because of increased capital flows between nations due to increases in trade and investment, central banks have been repeatedly told by their respective governments to hold larger quantities of safe and easy-to-sell assets which can be easily liquidated in time of crisis.  As a result, total foreign reserves have nearly quadrupled in the past decade and this has dramatically increased the demand for dollars.  For example, when foreign capital suddenly flees a developing nation, it puts downward pressure on the local currency.  By selling some of its dollar holdings to purchase its own currency, a country can stabilize its currency and avoid large currency swings.  Moreover, simply holding a large supply of highly liquid foreign assets, like dollars, discourages speculation and demonstrates that a nation has the necessary reserves to pay foreign creditors for things like oil and wheat.
Lastly, with large holdings of dollars the last thing foreign nations want to do is harm the dollar as that would reduce the value of their holdings and that, in and of itself, reinforces the dominance of the dollar and thus improves its stability.  That is at least partly why for the past 15 years 60% of world foreign exchange reserves have consistently been in dollars.  Were that percentage to slowly fall to 50% over the next few decades, it would matter relatively little.
To sum up, despite lots of talk, there exists no strong competitor to the US dollar and one is unlikely to appear anytime soon.
Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at Elliot@graphsandlaughs.net. His daily 70 word economics and policy blog can be seen at econ70.com.
By: Elliot Eisenberg (GraphsandLaughs)
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The retail sector provided stable performance in 2013. Consumer spending remained steady through the year and notched a noticeable gain in the last quarter, as households’ wealth received a much-needed boost from both financial and residential housing markets. Retail sales were up 4.2 percent in 2013 compared with the prior year, driven by a 9.8 percent gain in auto sales and a 5.9 percent rise in sales of building materials.
With consumer dollars flowing into stores, demand for retail space was robust. The fourth quarter 2013 saw net absorption total 4.5 million square feet—the highest level since the fourth quarter 2007, according to Reis. Meanwhile construction of new retail proper-ties also reached a new high since the fourth quarter 2007, totaling 2.1 million square feet. However, with demand outstripping supply by a wide margin, vacancy rates declined 10 basis points in the fourth quarter. Re-tail vacancies were down 30 basis points in 2013 com-pared with 2012. Asking rents for retail spaces rose 0.4 percent in the fourth quarter, and advanced 1.4 percent for all of 2013.
With strengthening fundamentals underpinning the continued recovery in retail markets, investors maintained a measured pace of acquisitions. Sales of major properties rose 8 percent in 2013, totaling $60.8 billion, based on data from Real Capital Analytics (RCA).
A welcoming development was the broadening of investors’ appetite for risk, as capital flows moved into secondary and tertiary markets and into strip centers. Sales of strip centers and single-tenant retail buildings rose 26 percent on a yearly basis, outpacing sales of regional malls.
In another sign of improving conditions, portfolio transactions comprised a larger share of deals in 2013. Portfolio sales jumped 23 percent in 2013 from the previous year, while individual property sales declined 1 percent. Portfolio transactions were topped by Black-stone Retail’s $1.5 billion acquisitions in multiple locations, followed by Westfield Retail’s $1.4 billion in deals. On the individual side, significant transactions occurred in markets across the country, signifying broad-based interest in all tiers. The top deal was Macerich’s acquisition of the Green Acres Mall in Valley Stream, NY for $500 million. The other top deals were for Water Tower Place in Chicago, the Lloyd Center in Portland, the Hollywood & Highland Center in Los  Angeles and the Piaget Building Retail Condo Lease-hold in New York.
Investors’ shifting preference for riskier deals became more pronounced in 2013, as cap rate compression in major cities continued and smaller markets offered comparatively much better returns. The national aver-age capitalization rate for retail spaces was 7.0 percent in 2013, 20 basis points lower than 2012, according to Real Capital Analytics. In the six major markets tracked by RCA, cap rates averaged 6.3 percent, while in the rest of the markets, cap rates averaged 7.3 per-cent.
While Los Angeles and Chicago topped the list of markets by dollar volume, with $3.6 billion in transactions each, secondary markets witnessed the largest boost in investments. Ranked by growth, Cincinnati posted growth in sales of 251 percent in 2013, leading a list of cities which recorded triple-digit gains—Long Island (223%), Austin (179%), Portland (155%), Las Vegas (147%), and St. Louis (106%). In a positive development, retail investments during 2013 advanced across all markets and regions, both in terms of volume and prices.
Adding to the positive trends, outstanding retail distress declined 14 percent in 2013, to a total of $22.8 billion. Compared to the $72.1 billion in retail defaults  which occurred in the wake of the 2008-09 recession and financial crisis, the current levels are manageable, especially considering the 63 percent rates of return on distressed loans. Sales of distressed retail properties made up less than 7 percent of total volume in 2013. The CMBS sector retains the largest volume of retail distress, at $14.6 billion, followed by domestic banks,  which hold $4.0 billion.
With capital availability rising and diversifying, coupled with improving fundamentals the 2014 outlook for retail markets is positive as retail prices rise. Global consumer retail spending is expected to be stronger this year, particularly in U.S. and European markets. In addition, investors have clearly signaled that the much-expected recovery in smaller markets is well underway.
(National Association of REALTORS)
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