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What is the Hume-Cantillon Effect?
At this point you may have realized that inflation works against you to make you poorer but did you know inflation works to the advantage of certain groups of people? In fact, the negative effects of inflation are not evenly distributed. Some people are positioned to profit from inflation at the expense of others. For most people, inflation will erode their standard of living.
The Cantillon effect refers to the uneven distribution of the burden of inflation, and surprisingly the benefits for some people. It states that when money is printed out of thin air, as the United States government is prone to do, the initial recipients of this new money, usually the banks and the government, benefit the most because the price levels in the economy has not fully adjusted to the influx of new dollars flooding it. Who is burdened the most by an increased supply of money I like to refer as money printing? It is working class people like you and me who receive the new money last. We face higher prices for goods and services before our incomes have increased accordingly, adjusting to inflation. If you are like most people, your wages and income will probably not fully increase at the rate of inflation even over a longer period of time, and in this way, you suffer two-fold. First, your money has reduced purchasing power as the price level in the economy rises. Second, your earnings never fully catch up to the increased price levels leaving you poorer overall.
For this reason, it is not enough to slow down the rate of inflation. Your wages must catch up to the increased price level. Because a lot of people’s incomes do not catch up, they continue to suffer the effects of inflation long after it has cooled.
I do not think it is much of a stress to say that, for many people, we are poorer and have a low standard of living post covid due to how expensive everything has gotten. Just look at the housing market. According to Redfin, American homebuyers need to earn about $115,000 a year in order to be able to afford the cost of the typical U.S. home. As of 2023, the average salary in the USA, according to Forbes, is $59,428
It is for these reasons, and many others, that I state that inflation hurts the most vulnerable parts of society the most while benefiting the government and banking system the most.
We can combine the Cantillon effect with the work of 18th century Scottish philosopher David Hume who proposed that an increase in the money supply would lead to a proportional increase in price, rather than magically creating economy activity as some people naively believe. In life and economics, a decision for one thing is often a decision against another thing. The benefits the government derives from money printing comes at the cost of its citizens and people who invested in government debt and other low interest-bearing investment instruments.
Together, the Hume-Cantillon effect states that the price level will increase to meet

Can a company cut your pay?
You may be wondering if it is legal for your employer to reduce your pay or your hours. I think the answer to this question will surprise you.
Did you know that in the US you can be legally fired for any reason at any time? In fact, the employer does not even need a reason to fire you.
In most of the United States, employment is at-will which means the employer can terminate any employee at any time and for any reason.
Companies may cut pay or hours for a variety of reasons. Perhaps they are trying to avoid layoffs. However, they may actively be trying to get employees to quit so they do not have to pay unemployment benefits.
While you think your employment contract protects you from your employer decreasing your pay, the truth is that you most likely did not even sign a contract. Rather, you probably just signed an offer letter. Usually, when a company offers a salary and benefits, this constitutes an offer rather than a contract. Companies often try to avoid making binding promises to employees. While they may hire you at a certain salary or wage, there is no commitment to keep you at that rate. However, the law does require an employer to inform you if they are going to cut your pay. Workers with collective bargaining agreements are shielded from pay cuts, but you would likely need to be involved in a labor union for this to pertain to you. Another way for you to be shielded from pay cuts is if you have a written employment contract, but this is unlikely unless you are highly compensated or work in management, perhaps as an executive.
Another alternative for a company looking to reduce an employees pay is to just fire and rehire them at a lower rate.
The only real rule when it comes to compensation is that they cannot retroactively reduce your pay. What you earned in the past, is yours to keep but going forward, your pay can be cut.
In some states, if your compensation is reduced and you quit, this may constitute ground for receiving employment benefits. However, you should do your research. Every state is different. Some states make it very difficult to collect unemployment benefits. Also, as I have experienced first hand, employers may lie to the unemployment office or misrepresent material facts to try and invalidate your unemployment benefit claim.
Unfortunately, if your company reduces your pay, you do not have much recourse. Most of the time, when a company is doing something you disagree with, your only options are to either deal with it or to quit. If you are unhappy with how you are treated at work, I would suggest you update your resume and start applying for other jobs. Many people stay at low paying job or toxic workplaces too long when they could go out into the job market and find something much better. I think you will find that there are many opportunities out there just waiting for you. Try and be optimistic, and why not apply to a few jobs this week and see where those applications lead you?

Beneficiary forms can override your will
If you assume your will is your final word on what happens to your assets when you die, they may end up going to an ex-spouse or caught up in a lengthy court battle. This issue is becoming more pronounced as Americans juggle multiple retirement, insurance, and bank accounts.
When you sign up for a 401(k) plan at work, you will be asked to name beneficiaries. These are the people that will inherit your account if you pass away. Usually you will name a primary beneficiary who is your first choice to receive the assets, but you also may name contingent beneficiaries who are essentially backup if the primary beneficiary dies before you do. You should take this very seriously or else the 401(k) will end up in probate court which can be expensive and slow. Even if you do have a will, naming 401(k) beneficiaries makes the inheritance process much quicker and less expensive.
You could write volumes about nightmare beneficiary situations. A spouse for less than a year can end up with the entire retirement plan instead of the participant’s underage child. People will put former friends from decades ago on beneficiary forms and forget about both the forms and the friends.
Plans often have a hierarchy that omits partners, friends, and other relatives in favor of spouses, children, parents, and siblings.
There are documents that can override wills including beneficiary forms for retirement accounts, life insurance, and some bank and brokerage accounts.
401K
Married spouses are automatically entitled to the 401k money of their spouse unless they formally waive it. This waiver must be notarized.
IRA
Most IRAs allow you to name someone other than your spouse as your beneficiary without getting a waiver from your spouse. However, if you live in a community-property state like California or Texas, you will need a waiver.
Insurance Accounts
If you obtained insurance through your workplace, then the employer plan documents dictate the payout terms. If you purchased the insurance independently of your workplace, the insurance company rules will determine where they money goes.
Tips:
I have a few tips for you.
Take beneficiary designations seriously. Include details about your beneficiaries including date of birth and Social Security number.
Update your beneficiary forms after life events like marriage, divorce, or the birth of children. While some states have laws that automatically revoke the designation upon divorce, some do not.
Copies of beneficiary forms should be kept with your other estate planning documents to avoid institutions like banks losing the paperwork which results in costly court battles.
Send duplicate beneficiary forms to the bank, brokerage house, or insurance company and ask for one back with a stamp showing it was received.
Check your online accounts to make sure any changes are reflected online.
Make sure your beneficiaries are aware of, and can easily find, your beneficiary designations. A sizea

Return to office policies are not working
Return to office rates are at there highest level since the onset of the pandemic. Despite this, office attendance is barely half of what it was in 2019. Company’s measures to get workers into the office have largely proven ineffective.
This fall, there is the potential for a resurgence of COVID cases doubled with a weakening economy that could depress office attendance. While I think the threat of a fall COVID wave may be overstated, I have mixed feelings about the general state of the US economy and its trajectory. I don’t think anyone truly understands what is occurring in the USA economy. There are a great number of mixed signals and Americans are somewhat pessimistic about the economy.
Blue chip companies are vowing to fill their workspaces as they commit to get tougher on employees that do not show up to the office. Meta has threatened disciplinary action. Despite these tougher policies, the return to office rate has not budged much.
Most employees go into the office during the middle of the week, with most people being out Monday and Friday. In Chicago, we have seen office attendance rates over 66% on certain days, but less than 30% on Friday. This range is about 25% to 65% in New York City. Kastle Systems puts the average rate at about 50.4% across the ten US cities it tracks.
The average national office vacancy rate rose to 19.2% last quarter. This is just below the historical record of 19.3% in 1991 according to Moody’s Analytics.
Part of the reason for low office attendance could be lax enforcement.
We are seeing a homelessness crisis across much of the country concentrated in urban centers. 90% of the members of the Seattle Metropolitan Chamber of Commerce said that the city could not recover until homelessness and crime was addressed. Crime and homelessness is reducing office attendance.
Spending cuts to government services and transportation are also weighing on office attendance. It is common to have long periods of time between transit trains in Chicago. Long wait times for trains and buses are occurring through many large cities. A long commute makes the work day that much longer and more of a pain.
Business will have more leverage to enforce office mandates if the economy weakens. Many people, including myself, have been amazed at how resilient and seemingly bulletproof the economy has been. However, I just did a video on the increasing amount of spending and credit card debt consumers are piling on. I have concerns that the average American is overextending themselves.
The flip side of a weak economy is that it reduces demand for companies to rent office space.
City and business leaders are increasingly turning to the federal government for help. There are lobbying efforts occurring to incentivize businesses to rent office space in cities. However, the chances of legislation is low.
On a personal note, I greatly enjoy working from home and I know this view is shared by a great

Americans are spending like there is no tomorrow
Americans are spending big despite facing mostly depleted pandemic savings, a cooling labor market, and high interest rates and inflation.
The primary driver of United States economic growth is household spending. This remains robust as Americans spent 5.8% more than last August. This rate well outstrips the inflation rate of 4%.
Households that made at least one large purchase in the last four months increased from 57% last year to 64% this year which is the highest rate since August 2015 according to the New York Federal Reserve Bank.
The experience economy is booming. Delta Air Lines had record revenue in the second quarter. Ticketmaster sold over 295 million event tickets in the first half of 2023 which represents an 18% YoY. Ally Bank allows customers to create different savings buckets for different goals. There are over 1.5x as many buckets for experience orientated things like travel and fun in contrast to longer term planning.
Americans currently have a record amount of credit card debt. It totals over $1 trillion. The states with the highest credit debt are Connecticut, New York, and New Jersey. All three have average credit card debt of over $9,000.
While it is common for consumers to put short-term needs and goals above long term goals, the current circumstances are different in a number of ways. Americans are spending on once in a lifetime experiences due in part because of fears they may not have the opportunity to experience them later. People fear regretting not doing things like taking an overseas vacation or splurging on a big ticket purchase.
An article in the WSJ mentions one may who spent $1,600 on a Taylor Swift Eras Tour ticket and then about $3,500 on a bachelor party. A family of three spent $10,000 on a 10 night vacation in Hawaii at a 4-star resort. Another man lowered his retirement contribution so he could spend $7,000 on an Alaskan cruise. Then there is the story of a family that sold their home to travel the country with their two children.
Many consumers have given up the idea of ever owning a house. I’ve seen a lot of people discussing the idea of never being able to own a house, but I also think the idea of never being able to retire will also gain traction in the mind of many consumers in the years that come as people face economic uncertainty and high inflation and interest rates. Despite what politicians say, consumers remain frustrated about inflation. While it is true that inflation has fallen sharply in the past year, many Americans are deeply unhappy about the economy and often cite inflation as the primary reason. Prices for many things are well above their pre-pandemic price levels. The fact is that even though the inflation rate has come down, prices remain elevated and that weighs against consumer confidence.
Works Cited:
https://www.wsj.com/economy/consumers/americans-are-still-spending-like-theres-no-tomorrow-6a1d307?mod=hp_lead_pos1
https://www.

The Pepsi pivot from health foods back to chips and soda
While consumers will tell you they want to eat healthier, what they actually want to do is eat potato chips.
Pepsi has been gradually making snacks and drinks more healthy by lowering sodium, saturated fat, and sugar in its products, all without consumers noticing.
At Pepsi, there is a sensory panel composed of 10 professional food tasters that meet several times a week to sample PepsiCo’s latest attempts at healthier junk food.
Pepsi has been trying to reduce the sodium content of Lay’s potato chips without consumers noticing. Approaches to this include new salt crystals, salt substitutes, different potato varieties, and different combinations of herbs and spices. However, similar efforts to cut sodium at Campbells soup ended up with the company reversing their efforts. While I think consumers may note the calorie content of a bag of Doritos, I’m not sure they are looking at things like sodium or fat content.
The previous CEO, Indra Nooyi, tried to shift the snacks and soda portfolio toward healthier offerings like Naked Juice, Sabra hummus, and KeVita kombucha. Product launches that had little success included TrueNorth nuts, midcalorie Pepsi Next and Müller Quaker yogurt.
The current CEO, Laguarta, has increased the marketing budget, built new manufacturing for salty snacks, expanded the energy drink business, and increase R&D into new snack variations like mini Doritos and Cheetos Mac and Cheese.
PepsiCo’s annual revenue rose by 34% between 2018 and 2022, to $86 billion, though in some categories its market share has slipped.
Pepsi was doing zero based budgeting which required managers to justify their expenses annually. The result was that the company was underinvesting in North American snacks business.
When Pepsi reported earnings in July, the results showed strong growth in both sales and profits despite price increases and increased advertising expenses. Consumers seem willing to pay up more for snacks and sodas. Revenue increased more than 10% in the last quarter. North American snacks increased 14%. The North American beverage unit increased 10%.
Works Cited:
https://www.wsj.com/articles/pepsi-pep-q2-earnings-report-2023-2f9d2b0
https://www.wsj.com/articles/pepsi-lays-doritos-soda-sugar-fat-salt-health-62047e07?mod=saved_content
https://www.wsj.com/articles/twinkies-doritos-trix-snacks-get-tiny-80f1fb1d?mod=article_inline
Tags:
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Student Loan Repayment: What is Biden’s SAVE plan?
The Saving on a Valuable Education plan, or SAVE, is a new income-driven repayment plan in which monthly loan payments take into account family size and discretionary income. More than 4 million people have enrolled so far.
Many income driven repayment plans have resulted in borrowers paying more interest and for longer.
SAVE calculates discretionary income above 225% of the federal poverty level versus previous regulations at 150%. Therefore, more income is protected.
There is also a 12 month on ramp period when missed payments will not impact your credit score or result in a loan default.
If your ultimate goal is loan forgiveness, do not take the on-ramp because this will not count towards your forgiveness threshold.
Loan balances will not grow due to unpaid interest with SAVE. Borrowers will not be charged any additional interest than what their payment covers.
SAVE will accelerate the path to loan forgiveness as long as borrowers make their payments on time. After 10 years, the remaining debt balance will be wiped out. For those with loan balances of $12,000 and less. Otherwise, the forgiveness period will increase by one year for everything additional $1,000 borrowed. So someone with a loan balance of $13,000 will take 11 years, $14,000 will take 12 years, and $15,000 will take 13 years to reach loan forgiveness. However, the maximum number of years in repayment is capped at 20 to 25 years depending on if it is for an undergraduate or graduate degree.
If you are enrolled in a REPAYE plan, a previous type of IDR, you will automatically be rolled over into the SAVE plan.
Works Cited:
https://www.wsj.com/personal-finance/student-loan-save-repayment-plan-95b256a7?mod=lead_feature_below_a_pos1
Tags:
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Top 10 Hottest Cities according to Realtor.com
Mortgage rates have remained between 6 to 7% which has put a lot of pressure on house affordability because the monthly mortgage payments has soared. Prospective homeowners are flocking to both affordable markets and markets that are close to large cities.
The most buyer demand is occurring in affordable Midwest markets and well-located Northeast markets that offer both convenience and value. These homes tend to be larger than the US average. Despite how hot these markets are, home prices are at or below the US median.
I think the story here is that affordable housing markets are becoming more popular as prospective homeowners are pushed out of unaffordable areas. Another possible trend that is occurring is that high earning households are relocating to the suburbs of large cities for a better quality of life which corresponds to house affordability.
10) Ballwin Missouri: Ballwin is approximately 20 miles west of downtown St. Louis and has an economy that is a mix of retail, healthcare, and other businesses. Residents can commute to St. Louis for both work and education.
9) Pittsford, New York: You will find Pittsford in the Finger Lake region of New York state just south of Rochester. It has a good school system. There are a lot of outdoor recreational opportunities. Residents may opt to work in Rochester.
8) Norwalk, Connecticut: Norwalk is about 40 miles northwest of NYC. Employment opportunities include finance, healthcare, technology, and manufacturing. There are highway and rail connection to the city. This could be a good choice for someone that wants to commute to NYC.
7) Trenton, Michigan: Situated 20 miles southwest of downtown Detroit, along the Detroit River, there are a lot of employment and recreational opportunities. There are several large manufacturing operations. The median household income is $78,000 versus the US average of $70,000. This could be a good city for working class families.
6) Highland, Indiana is about 27 miles southeast of downtown Chicago. One of my teachers used to joke that northwest Indiana is just a suburb of Chicago. This would be a good choice for someone that wants Indiana state government over Illinois so they can enjoy less taxes. You can take the highway to Chicago to commute for work or play.
5) Nazareth, Pennsylvania: Nazareth is 65 miles west of NYC and 60 miles north of Philadelphia. This might be a good city if you can do remote work and only have to show up to the office in NYC or Philadelphia a few times a month. This is going to be a small town with limited local opportunities including a textile plant, a guitar company, and cement manufacturing.
4) Andover, Massachusetts: Andover is a suburb of Boston and features good schools and scenery. It is 20 miles north of Boston. It has an excellent college prep school and a rich history that dates back to the 17th century.
3) Ridgewood, New Jersey: Ridgewood is 20 miles northwest of Manhattan. Y

2023 Cruise Industry Update
Cruise tourism is expected to exceed pre-pandemic passenger volumes by 6%. This contrasts with the rate of overall international tourism which is only 80 – 95% of 2019. In fact, cruises continue to be one of the fasters growing sectors of tourism.
The world’s largest cruise port operator, Global Ports Holdings, reported nearly twice as many passengers for the three months from April through June, leading to a quarterly revenue increase of 60%.
There appears to be clear enthusiasm for cruising by the public. Current global cruise capacity is ~644,000 and is expected to increase 19% to 746,000 in 2028. Some estimates put the number of cruise passengers at 40 million per year by the end of 2027.
Younger generations are driving demand for tourism.
88% of Millennials and 86% of Gen-X travelers who have cruised before say they plan to cruise again.
77% of Millennials and 73% of Gen-X express interest in cruising.
Younger cruise travelers are more likely to turn to travel advisors to book their cruises than older generations.
Younger cruise travelers are also traveling with older generations. Multi-generational cruise travel looks set to increase.
Cruise lines are offering shorter and longer cruise itineraries to attract first time guests. Despite adding both short and long voyages, there is more demand for longer cruises, especially among repeat cruise guests.
The Big Three Cruise Lines
The share prices of the big three cruise lines are up big this year. Carnival is up over 90%, Royal Caribbean has doubled, and Norwegian Cruise Line is up almost 40%.
Royal Caribbean experienced record-breaking demand for its new flagship Icon of the Seas which is slated to set sail later this year. The ship can host more than 5,600 guests across 6 waterslides, 7 pools, 19 floors, and over 40 bars and restaurants.
The decade from 2010 to 2019 led to Carnival Corporation making over $24 billion in operating profits, $3.3 billion of which in 2019 alone. The cruise line almost went bankrupt during the first three years of Covid-19.
Despite a surge in revenue, Carnival Corporation reported an operating loss of $4.4 billion in 2022. The company faces significant operating expenses. For example, Fuel alone was $2.2 billion in 2022.
Trends
Solo cruises travel is on the rise as more single-cabin capacity is being added to new ships. Existing ships are being retrofitted for solo travelers.
There is a focus on being environmentally friendly. LNG is being emphasized as a transitional fueld as new fuel and propulsion technology is explored. LNG is the cleanest fueld available at scale, and is becoming more readily available.
The Carribeean remainds the top destination for cruise travelers followed by Europe, Alaska, and the West Coast of North America.
If we look at this visual you see average guest age on the X-axis, and average length of days in the y axis. It appears that cruises in asia are shorter and attract a younger crowd. Australia, Ne

The Traditional TV model in 60 seconds
You have the companies that make the shows and stick the shows on the channels. These are called programmers and Disney is an example of a programmer. Programmers make money in two ways. One way is to get the cable companies, called Multi-channel video programming distributor, to pay them to put their channels in the cable bundles. This is called carriage. They are carrying the channels. The second way is to sell advertising.
Cable companies make money by charging subscriptions to their customers for the cable bundles. They also get a small amount of the advertising slots. The traditional cable business is a gold time. Customer pay for both the things they want and don’t want. In addition, customers then have to sit through advertising.
While watching cable, you may have noticed a mix of both national advertisements and local advertisements. This mix of different ads is because some ad spots are controlled by the network while others are controlled by the local cable company.
Cable is the cash cow for the television industry. They use money from cable to produce new shows that they can put on the streaming services. Cable is effectively subsidizing streaming.
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The Cable TV Endgame is Here: Disney vs. Charter Communications
The ~$200 billion TV industry is starting to crumble as the foundation laid by a decades long alliance of programmers and distributors begins to give way.
Over the past decade, ~42 million US households have abandoned traditional pay TV plans. Most of these households gave up on live television entirely. The cable-TV industry thrived for decades based on the model of charging users for more channels than they could possibly watch. The cable providers then paid out a portion of the fees to channels they carried. Entertainment giants steadily began demanding larger fees for their channels, which drove up the price of cable further, and resulted in more consumers cutting the cord. Contrast this with the relatively low price of a service like Netflix. At this point, I would argue the main selling point of the traditional cable TV package is live sports, but now both ESPN+ and Peacock have exclusive NFL games on their platforms this season.
Disney’s fight with the nation’s number 2 pay TV provider, Charter Communications could represent the endgame for cable TV as we know it. Charter has almost as many pay TV subscribers as the number 1 pay TV provider, Comcast.
Charter’s cable service is called “Spectrum. This latest feud has left 15 million customers of Charter’s Spectrum cable service without access to Disney’s ESPN and other channels. Charter has suggested it may exit the pay-tv business entirely. This is a threat they may very well make good one and I am going to tell you why shortly.
There is an existential threat for Charter that its customers will walk away from it during the standoff with Disney and not return. However, Disney is also losing access to millions of households too. Disney makes a significant amount of revenue from cable, especially for ESPN which is about 75% of what it is charging for given how expensive the rights for sports are. Cable is the cash cow for the television industry, and specifically entertainment programmers like Disney. They use money from cable to produce new shows that they can put on the streaming services. Cable is effectively subsidizing streaming. Consumers are rapidly cutting the cord and abandoning cable TV at an accelerating pace. This, in part, is enabled by companies like Disney, Warner Bros. Discovery, and Paramount Global which have made high value cable content available through their streaming services.
These companies are trying to strike a balance that is all but impossible: allowing cable tv to somehow wobble along so they can turn around and plow those profits into streaming services which are currently losing billions of dollars a year collectively. Said another way, they are trying to keep milking the legacy cable-TV as long as possible to prompt up unprofitable streaming business until it can become profitable. The balancing act is to not kill the cable TV model entirely because that money is needed to keep supporting strea

Real Estate Paradox: High interest rates but also high prices
Can you guess the thing that American report they want the most out of life? It is homeownership.
This is lies at the heart of the American dream. However, the American dream has rarely ever been this hard to attain. Prospective homeowners face a triple threat of high prices, costly mortgages, and low housing supply. This had led to a feeling in the country that home ownership is unaffordable and there is little sign of this changing in the future.
Housing is usually some of the most sensitive sectors to interest rates. However, economics has never been so convoluted as today.
After the Federal Reserve went on the offensive against interest rates, mortgage rates soared from 3% to 7% in less than two years. The mortgage payment for the median home doubled from roughly 14% of monthly income in 2020 to nearly 29% in June. This is the highest rate since 1985.
What is perplexing is that the jump in mortgage rates has not led in turn to a decline in house prices. While home prices dipped briefly when interest rates began to rise, they rebounded to record highs shortly thereafter. This rebound seems to be gaining strength. When you annualize second quarter home prices, they rose at a pace of 15%.
The American property market has approximately $2 trillion in sales annually. Some regions are flourishing while others are contracting. The CEO of one of the biggest homebuilders, Toll Brothers, said that “there are still buyers out there. They have very few options.”
While there has been a decrease in demand for homes, this has been offset by a decrease in supply.
The 30 year fixed mortgage is something unheard of in most of the world but it is viewed as a constitutional right in America. This is enabled by Fannie Mae and Freddie Mac, two government backed firms, buying mortgages from lenders and securitizing them. Long term fixed rate mortgages allow American to buy homes. However, these long term rates are now an impediment. People with low mortgage rates effectively have golden handcuffs that prevent them from selling their properties because they would lose their favorable loans. Redfin estimates that 82% of homeowners have mortgage rates below 5%.
You would think that the decline in real estate transactions would hurt the economy, but that does not seem to be the case. American homeowners, refusing to give up their mortgage loans, have resorted to fixing up their current homes. This has been further reinforced by remote work. Remodeling expenditures increased 40% from 2019 to nearly $570bn in 2022.
Many people have decided to build new homes rather than purchase an existing home. This is partly because new construction is more readily available than existing homes. In fact, newly built homes account for nearly one-third of active listings this year.
Homebuilders have been offering incentives to buyers including the ability to “buy down” as much as 1.5% on mortgage rates by paying a on

What is a land bank?
Many former industrial hubs are facing trends of vacancy and abandonment.
Land banks acquire properties that may be tax-delinquent, foreclosed, or distressed. Land banks acquire title to distressed properties and seek to solve the issues that prevent the property from selling in the private market.
Land banks are intended to resolve blight, vacancy, and property abandonment through acquiring distressed properties and either returning them to productive use, or temporary holding and maintaining them. They can improve the overall condition of the community through acquiring, holding, managing, and sometimes developing vacant, abandoned, or underutilized properties.
Typically land banks are public entities created by local government. They may be part of an existing entities like a redevelopment authority, a housing department, or a planning department.
There are more than 300 land banks and land banking programs in the United States. Statewide land banks exist in Michigan, Ohio, Georgia, Pennsylvania, and New York.
Distressed or problematic properties destabilize neighborhoods, create fire and safety hazards, decrease property values, and drain local tax dollars. Many of these properties were rejected by the private market.
The Cook County land bank has around 860 vacant lots in Chicago and is acquiring an additional 1,000.
What special powers do land banks typically have?
1. Acquire property sometimes at low or not cost through tax foreclosure proceedings.
2. Hold title in a tax exempt way
3. Extinguish back taxes
4. Clear title and expedite the process of clearing the title.
5. Consolidate and assembly properties into the portfolio of a single agency or department
6. Streamline the transfer or sale process of properties to the private sector. At times, the sale of properties may be at a below market price in order to attract buyers that align with the goals of the land bank.
7. Lease properties for temporary use
A land bank is not intended to compete with the private market as it deals with properties that the private market has rejected. Most vacant and abandoned properties have serious legal and financial barriers that make them unattractive to private buyers. An example of this may be years of accumulated back taxes that can exceed the market value of the property. In this case, you can see how no rational buyer would pay for a property where the liabilities exceed the market value. Another example is the extensive repairs abandoned properties often require. Again, repairs, or entirely replacing the house, could exceed the market value. A land bank could acquire the property, tear down the house, and sell the vacant lot in this example, sparing the buyer the expense.
Works Cited:
https://communityprogress.org/resources/land-banks/lb-faq/
https://communityprogress.org/resources/land-banks/national-land-bank-map/
https://communityprogress.org/wp-content/uploads/2022/08/RVP-NLBN-22.pdf
Tags:
detroit land bank, land ban

6 reasons you should be maxing your HSA contributions
1. Triple Tax Advantage: contributions to your HAS are tax-deductible which means they reduce your taxable income. The money in your HAS grows tax-free. Withdrawals for qualified medical expenses are tax-free.
2. Retirement Fund: HSAs can function as retirement savings tools. Money that you do not spend on medical expenses can be invested into the stock market and grow significantly over time. Your HSA funds can take advantage of the magic of compound growth in the market which can lead to substantial savings and investment growth. After you reach the age of 65, you can withdraw the funds for non-medical expenses without penalty, but you will have to pay income tax like how a traditional IRA works.
3. Emergency Fund: Your HSA can act like an emergency fund for unexpected medical expenses. By maximizing your contributions, you can have a substantial financial cushion of medical expenses. Health care costs can be substantial and will most likely only increase in price and frequency as you age. It is prudent to start contributing money towards your HSA now, so the money can grow in the stock market, and provide for future medical expenses in the future.
4. Employer Contributions: If your employer is contributing to your HSA, you should max your contributions to take full advantage of employer contributions. Employer contributions are part of your overall benefits and compensation package. It is effectively free money if you fulfill your end of the bargain: contributing to your HSA.
5. Flexibility: HSAs have a great degree of flexibility in how you can use the funds including deductibles, co-pays, prescriptions, dental care, and even certain things at the store if they are medical related.
6. Portability: Your HSA is portable which means it is not tied to your job or insurance plan. You can keep your HSA funds when you switched jobs or insurance providers.
You should note that HSAs have contribution limits set by the IRS. For 2023, the annual contribution limit for individuals with self-only coverage is $3,750, and for those with family coverage, it's $7,500.
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The Visa and MasterCard Duopoly
Did you know that when you pay with your credit card, approximately 2% to 3% of that entire amount goes back to the bank that issued your card? This is called the interchange fee or swipe fee. Some of that money is paid out to cardholders in the form of rewards like cash back or airline miles. Another piece of the interchange fee is paid to payment networks like Visa and Mastercard.
Did you notice that I said “card issuing bank?” Visa and Mastercard to not issue cards directly to the public but Discover and American Express do. The card issuing bank actually issue the Visa and Mastercard credit cards to customers. Visa is larger than Mastercard in terms of transactions, purchase volume, and cards in circulation. It really doesn’t matter much whether you have Visa or Mastercard. What matters is the bank issuing the card. The bank determines interest rates, fees, and rewards. The only time it really does matter whether you have Visa or Mastercard is when you go to a merchant like Costco, that only accepts one and not the other.
The interchange fee helps compensate the card-issuing bank for various costs associated with providing credit card and debit card services such as fraud protection, customer service, and card issuance. Did you know you have more consumer protection with a credit card than a debt card? If you can be responsible with your credit card and pay off the balance, you should be doing all your transactions on your credit card rather than your debit card.
US merchants paid $93 billion in Visa and Mastercard credit card fees last year.
The companies have an operating profit of more than 50%.
The combined operating profit of Visa and Mastercard has grown 40x in less than two decades to more than $31 billion last year.
Most retailers have very slim profit margins. What people do not realize is that businesses expenses, whether they result from shoplifting, or in this case, credit card fees, are in turn based on to the consumer. However, most merchants will charge you the same amount whether you pay with a credit card or cash. Therefore, there is a transfer of money from people that pay with cash to people that pay with credit cards.
Visa and Mastercard have both announced they plan to increase fees paid by retailers.
Works Cited:
https://www.investopedia.com/articles/personal-finance/020215/visa-vs-mastercard-there-difference.asp
https://www.wsj.com/articles/the-credit-card-fees-merchants-hate-banks-love-and-consumers-pay-11592731800?mod=article_inline
https://www.wsj.com/finance/visa-mastercard-prepare-to-raise-credit-card-fees-ed779be1?utm_source=chartr&utm_medium=newsletter&utm_campaign=chartr_20230901
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August Jobs Report
Nonfarm payrolls increased by 187,000 in August versus estimate of 170,000.
The unemployment rate jumped to 3.8% versus 3.5% in July.
Average hours worked was 34.4 hours.
Labor force participation rate: 62.8%. Highest level since before covid.
Unemployment is rising because of an overall expansion in the labor force not a net decrease in jobs. There are more people looking for jobs for whatever reason. People that were sitting out of the workforce are entering the workforce again. This could be that households need more members earning income to make ends meet. There are more people seeking jobs and fewer people finding them. Unemployment is up because the participation rate increased. There was a net increase in jobs.
My suggestion would be to keep your work performance up and do your best to keep your job. It doesn’t hurt to start applying for some jobs. It will help you gauge the job market in your area and for your profession.
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Grayscale Wins in Court! SEC is “arbitrary and capricious”.
Grayscale sued the SEC last year after its application for a bitcoin ETF was denied.
The SEC has been ordered to reconsider Grayscale Investments’ application to launch a bitcoin ETF after a federal appeals court ruling on August 29th. Coinbase stock rose 14%. The Grayscale Bitcoin Trust (ticker: GBTC) is up over 18% as of now.
Circuit Judge Neomi Rao wrote on behalf of the court composed of three judges, two of whom were appointed by democrats. “The denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products.” She is referring to the SEC approving bitcoin future ETFs.
This is just another setback for the SEC led by Gary Gensler. The opinion of this channel is that Mr. Gensler is arbitrary and refuses to work with the business sector. This man characterizes everything wrong with government bureaucracy.
Works Cited:
https://www.wsj.com/finance/regulation/grayscale-wins-lawsuit-against-sec-over-bitcoin-etf-1b305cfa?mod=hp_lead_pos4
Tags:
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12% of homeowners in the US do not purchase homeowners’ insurance
Half of those that do not have homeowners' insurance have an annual household income of less than $40,000.
Most mortgage lenders require borrowers to have home insurance, so the people forgoing it often own their homes outright. Those that do have mortgages and don’t purchase insurance will often see their lender buy lender-placed insurance for their property which is generally more expensive.
In some cases, insurers are not renewing policies because of the increased risk of severe damage. Owners may not want state-run insurance policies because they charge a higher premium and offer less coverage.
However, it is the opinion of this channel that a large part of the rise of insurance prices is due to inflation of materials, labor, and just about every construction input for building a house.
While I think most people are fine with not forcing homeowners to purchase insurance, the issue is government assistance is used to bail these people out after a massive natural disaster.
Works Cited:
https://www.wsj.com/personal-finance/americans-are-bailing-on-their-home-insurance-e3395515?mod=hp_lead_pos2
Tags:
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Disney stock is at its lowest price since 2014
We are going to explore the headwinds that Disney is facing, and why I think it is a high risk company that is going to continue to face significant challenges going forward.
Disney is a bloated conglomerate that has grown too large and unwieldy to manage.
Disney can be understood as two businesses:
1) Disney Media and Entertainment Distribution (DMED)
2) Disney Parks, Experiences and Products (DPEP)
Disney has significant problems across all its businesses. Linear-TV is in decline. Streaming is a complicated industry, and not as profitable as everyone once thought. The film / studio unit is underperforming. While the parks have had some degree of success, they are not as successful as you would think given that we are past covid.
While most of Disney’s revenues come from media and entertainment, most of the profits come from parks, cruises, and products. If they can address profitability in media, that may be enough to change the direction of the company as a whole. However, I’m not sure there is a scenario where the traditional TV segment becomes significantly more profitable.
Disney is losing money because it is overpaying and underdelivering movies while many movie theaters are going out of business.
Disney hasn’t paid a dividend since 2019.
The Price-to-earnings ratio is still very high. It is about 70 currently versus Netflix at 44,
Movies:
The budgets for films are too high, and the quality is mixed. Everyone from Netflix, DreamWorks, and Sony are running circles around Disney in terms of animation. For example Puss in Boots did much better than Lightyear. The success of the Mario movie shows there is still a market for animation in movie theaters.
ESPN:
ESPN overpaid for sports.
ESPN must still pay the NFL, NBA, and other sports leagues despite cable cutting because of their current contractual agreements. ESPN, and the model as a whole, can not support the leagues’ lofty ambitions and demands any longer.
The deals ESPN made were atrocious and it will take time for them to expire and renegotiate them.
Carriage fees are another significant issue that deserve an entire video in their own right, especially how they pertain to Disney.
Streaming:
Disney spend too much money on content including FOX assets.
There are rumors that Disney will cut its investment into Disney+.
Disney may find some success in licensing its content to other streaming services.
Theme Parks:
Going to a Disney park is a once in a lifetime experience. Once you have done it, and are out a lot of money, and maybe didn’t have the best experience, you are not likely to go back.
There is only so much profit the theme parks can generate.
While I think we all agree that there are is still a lot of attendance at the parks, I would argue the quality has declined. Talking to a coworker that took his family to the Orlando park, I could not believe how much money he spent at Disney. Disney is competing against Universal Orlando which has been adding new attractions, has cheaper ticket prices, and is cheaper.
Television:
There was a time when television and parks were the main profit drivers. Now, television is losing money each quarter, and so is the movie business. Disney+ is also not earning large margins.
I do not really see any prospects for growth. In addition, the overall business model is risky. Just a few bad films can sink the profitability of the media division.
Conclusion:
In conclusion, there are numerous issues with Disney as a company including earnings and financial performance, market trends and competition, especially regarding animation, its debt load, which you could make an argument the company will not have a lot of difficulty servicing, but is significant nonetheless, management issues, valuation and dividend concerns, and quality issues especially with its films. I think Disney could continue to go lower and I just do not see any films that I’m excited for from them or a coherent argument for a turn around.
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New York City’s Airbnb Crackdown
Starting September 5th, New York City officials are going to begin enforcing rules on short term rental stays more aggressively. Hosts of short-term rentals are going to be required to register with the city and meet certain requirements. Hosts must have a Class B status to provide short-term rental stays.
New rules include restricting a host from renting out an entire apartment or home. They also must be present during guests’ short term stay. Airbnb is blocking future dates for bookings and hosts are removing listings.
There are 38,500 Airbnb listings in New York City. Starting September 5th, the city will know which hosts have not registered, and they will likely impose penalties.
Dallas, Philadelphia, and New Orleans have based restrictions on short-term rentals.
Short-term rentals are generally cheaper than hotels.
Less than half of Airbnb’s New York City listings are in Manhattan. In fact, 37% of them are in Brooklyn, an area that has less hotel options in some areas.
At the end of the day, we are talking about private property. Many hosts rely on the extra income to pay their mortgages and continue to live in their homes. Some hosts rent out their homes when they are traveling for work. Many visitors are families who can’t afford to pay for multiple hotel rooms.
Cities blame Airbnb for the lack of affordable housing. However, I would argue that this is the result of restrictive zoning.
Overly restrictive and complex regulation by local government is burdensome and causes abnormalities in the market. Consider how expensive it is to do construction and develop residential projects in the city.
Both Airbnb and hosts are saying that the NYC rules make is near impossible to register for Class B status required to do short-term rentals. The city is facing a staffing shortage. City bureaucracy is infamously slow, but now it is all but grinding to a fault. As of July 25, the city received 1,632 host registrations, yet only 141 have been approved, according to Airbnb.
Even legal Airbnb’s have little chance of being approved by the city in a timely manner. The city is not actually interested in regulating short term rentals. They want to make it impossible for them to operate all together.
I believe this is a misguided effort by the city to increase affordably housing at the expense of visitors. However, I do not see the city address rent controlled apartments. Instead, they are shifting the blame and targeting short-term rentals. This also could be a play by the city to increase hotel occupancy rates.
At the end of the day, you have to follow the money. The city hotels are furious at Airbnb. The city has lost a lot of hotel tax revenue. In San Francisco you are seeing hotels missing mortgage payments. In addition, you have unions associated with hotels and hospitality that are lobbying the city government to target and crack down on Airbnb.
Also, consider how Mayor Eric Adams has signed contracts for hundre

Why is Warren Buffet buying homebuilders?
Berkshire Hathaway spent over $800 million on three homebuilders: D.R. Horton, NVR, and Lennar Class B
You would think that with the high interest rate environment, home builders would be getting slammed. This is not the case. They are booming.
I believe that Buffet is speculating that will be high demand for new homes because people with existing homes are locked into low mortgage rates and wont’ sell the house they are in. This is a golden handcuff situation. A golden handcuff is a financial incentive that causes someone to be handcuffed to a situation for a period of time.
We have a situation where there is low housing inventory and a lot of demand for housing at the same time. I believe shows Buffet is expecting a soft economic landing and/or mild recession. I believe this shows that Buffet has confidence that the market will be relatively fine.
An interesting thing to ponder is what happens to the age demographics of the United States. You have an aging population of boomers that will pass away at some point. What will happen to those homes? Well, I’m going to argue that there is already such a shortage of housing inventory, and then you also have immigration bringing new demand for housing. I think the housing market is going to stay strong despite price pressure.
Another thing to think about is all the housing demand in built up areas, that are zoned for single family. This is going to prevent new housing supply coming onto the market. What if we get a situation where we have housing oversupply in some parts of the country, and housing shortages in more urban areas. At this point, I would assume the market would work out the supply and price issue and reach some type of equilibrium. The mechanism for this would be people realizing how high their rent is in New York City and California and going to the South or the Midwest. We have seen this dynamic already.
Another interesting thing happening in the market is people not selling their homes when they move out, but rather renting them out. We have seen how fast home prices have climbed. By renting out your house, you can still benefit from increasing house prices, while also bringing in rent income that can help pay the mortgage. I understand a lot of people do not want to be landlords.
To wrap things up, Warren Buffet is obviously bullish on the housing market, and the USA economy in general. However, the housing market is complex, there are a lot of things going on including interest rates, demographics, and geography. My grandmother was a realtor and she would always tell me “People will always need a place to live.”
Works Cited:
https://apnews.com/article/berkshire-hathaway-warren-buffett-portfolio-investments-fcb74a2ee0aaf61a9416e96c51983892
Tags:
real estate, real estate market, housing market, real estate crash, real estate market today, housing market crash, housing market 2023, real estate investing, stock market, real estate market

S&P ETFs: VOO vs SPY
You may see a lot of people talking or recommending Vanguard S&P 500 (VOO) ETF. This may have you wondering why this is so much more discussed than SPY. Today, I’m going to tell you why I prefer VOO over SPY.
The most important difference is the expense ratio. The expense ratio is the percentage of the fund that the managers take to pay for expenses and their wages. Historically there is no correlation between high fee and high return. SPY expense ratio is 0.09%. VOO expense ratio is 0.03%. While the difference is only 0.06%, that will eat into your returns over a long time horizon or if you have a substantial amount invested. However, depending on which brokerage you invest in, there may be added cost to buying VOO which would offset the savings you would gain. We are not going to go into the math today, as this video is intended to be a beginner video to emphasize why expense ratios matter. When you invest consistently over 30 years, and reach $1 million over those three decades, the difference is going to be about $10,000. Now, you can argue this is insignificant. This brings me to the real crux of what this video is really about.
The takeaway is that expense ratios matter. SPY and VOO should have the exact same performance. The difference in the return is what you are paying for the expense ratio. While these are both ultra-low expense ratio ETFs, not all the investments you could choose are. You can argue the difference between SPY and VOO is negligible, and it sort of is.
I would argue that expense ratios matter even when we are talking about hundredths of a percent. They really matter when we are talking half or a whole of a percent.
Tip: Never buy a fund with an expense ratio higher than 0.5%. The lower the better. You are throwing money away as it's impossible to pick a fund using skill that will beat an index tracker over the long term.
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India and women in the workforce
In most countries, as their economies develop, more women enter the workforce. This is a pattern that repeated in China, Japan, and South Korea. Upon reaching a certain level of wealth, developed economies than began to experience a decrease in female labor participation as women have the option to stay at home or pursue higher education.
India’s female labor participation rate hit its peak in 2000 at 31%. Last year, it was 24%. It is among the 12 lowest in the world. However, India never truly hit the level of industrialization and modernization in the three countries I mentioned. India has yet to climb out of the ranks of lower middle-income countries. The GDP per capita in India is one fifth of China’s. So this begs the question: why have women withdrawn from the work place in the last two decades in India?
Government officials in India will argue that the data is not valid because the rate does not fully capture women involved in unpaid domestic work like collecting firewood, cooking, and tutoring. They would argue this constitutes productive work. While this is indeed productive, I would argue that we are talking about women that are employed outside of the household, contributing income to the household.
India has made great strides. The female literacy rate has increased from 54.2% in 2001 to 70.3% in 2022. Education is valued in women and increases their marriage prospects in India.
The Indian female participation rate of 31% contrasts with other countries. Bangladesh has a rate of 38% last year versus 28% in 2000. In fact, the GDP per capita surpassed India in 2019. This may be partly due to looser labor laws which have allowed aggressive factory expansion, as well as a lack of strong caste rules that encourage social conformity.
Economists attribute this to weak job creation and a deeply conservative culture.
India added zero net new job in the past decade even though it is the world’s fastest growing major economy.
Increasing the female labor-force participation rate would lead to huge increases in GDP.
There are only 38 million women in paid employed in India last year versus almost ten times as many men at 368 million.
In parts of India, jobs are in short supply. Many jobs disappeared during the pandemic and never returned.
The biggest employer in India is agriculture. Jobs in this sector has disappeared in recent decades as the industry becomes more mechanized. Despite this, I believe India needs to continue to modernize its agriculture, despite worker displacement. I would argue that India needs to shift its emphasis to manufacturing, especially in coastal cities where it should also upgrade its infrastructure. The world is looking for manufacturing alternatives to China.
There are a lot of opportunities currently as companies look to de-risk from China and add manufacturing capacity in countries in Asia that are more hospitable to the west. We’ve previously discussed the need for India to upg

Why are there so many vacant lots if we are having a housing crisis?
Vacant lots may have back taxes, unpaid water bill, and other hurdles associated with them which makes them unattractive for development.
There are tens of thousands of empty residential lots in Chicago, Detroit, Pittsburgh, and elsewhere.
Cities are trying to remove legal and government obstacles to developing vacant lots.
Vacant lots depress property values and property tax revenue, as well as attract crime.
Former industrial hubs have led to declining populations and job losses in big-cities.
Out of date government policies further exacerbated the decline of cities and lead the housing market to further deteriorate.
Two elements lead to a downward housing spiral:
1. Laws to resolve unpaid tax bills are cumbersome and make vacant lots unattractive to developers.
2. Cheap tax assessment on vacant lots encourage owners to keep them off the market.
Detroit
The population of Detroit has fallen by two-thirds since the 1950s. There are 30,000 neglected vacant lots in Detroit that are held by owners that pay almost no taxes. An additional 63,000 vacant lots are held by the Detroit land bank. Therefore, in total, you have 93,000 vacant lots.
Detroit officials want to triple property-tax rates on vacant land while simultaneously reducing rates for homeowners by an average of 30%. There is no city tax reform that is going to fix a problem that widespread. The truth is that if there was demand for Detroit housing, you would see all sorts of unsavory real estate developers and businessman coming in and gobbling up the lots. We need to be honest that Detroit was mismanaged for decades. City government should have seen the writing on the wall the industry and manufacturing was leaving the United States for very reasons including NAFTA. The vacant lot problem in Detroit will only be solved when demand increases for residential properties.
Pittsburg:
Pittsburg is considering measures to transfer 13,000 city-owned lots and vacant properties to a municipal land bank, and then into the hands of developers and nonprofits. From what I’ve read, there is squabbling because people are concerned that luxury apartments and condos will be built. However, given the population of Pittsburg has halved since its peak in the 1950s, I do not think beggars can be choosers. Pittsburg is facing major challenges, and any developed on vacant lots is good development in my book. We’ve previously discussed whether luxury residences actually help decrease housing costs. Basically, these residences are adding supply to the high end part of the spectrum, without adding supply to the middle part of the spectrum. The issue is that it is not profitable to build low end apartments and condos, so people are largely stuck with older buildings unless the government is willing to heavily subsidize the development.
Chicago:
The population of Chicago has fallen by about a quarter since the 1950s. The city currently

Are celebrities and the wealthy profiting from the Maui devastation?
Many people in Maui are concerned that Wall Street, resorts, and other wealthy individuals like Oprah will take advantage of the devastation to enrich themselves and further their business interests. The island of Maui is already having a cost of living crisis. This will probably be made worse from unsavory people buying up property and land at a discount to build resorts and expensive houses. The people that have lived their entire lives on the island may be forced out by the rising cost of living.
Oprah Winfrey currently owns about 2,000 acres of land on Maui. When most other cameras were turned away, Oprah and her crew were allowed access to community members. It would be one thing if Oprah showed up without a camera, but she brought an entire camera crew to film what she was doing.
What follows is a lot of speculation, but I think the past shows that some of this may materialize.
The wealth of someone like Oprah contrasts sharply with the challenges residents of Maui face. The State of Hawaii has lotteries for affordable housing which is the only way a lot of residents can get an affordable place to live.
Another concern regarding Oprah, is that she and other celebrities will use their status to appear like they are on the side of the average resident when they are in fact trying to enrich themselves from the misfortune of other people. Mark Zuckerberg acquired land in Hawaii with a reacquisition firm posing as families to purchase individual lots from sellers. These sellers thought they were selling to families, not a billionaire who was trying to aggregate land into a giant land plot.
Oprah has a questionable history. She was friends with, and was involved with, Harvey Weinstein. She also led to the rise of Dr. Phil and Dr. Oz. In addition, her African schools for girls have been accused of sex abuse and some people claim she played a part in covering things up.
In addition, homeowners’ insurance rates are sure to spike in Hawaii given the widespread devastation.
I would argue we are seeing celebrities and the wealthy gobble up land in Hawaii, often at the expense of people that are experiencing the worst events of their life. Hawaii should be a place that everyone can enjoy. I fear we are watching more and more land being purchased, consolidated, and controlled by billionaires. One of the largest issues is the use of deception and manipulation to acquire land and make billionaires even wealthier.
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