Buying a home in California slid further out of reach for many residents in 2023, especially in larger metropolitan areas, according to a recent Harvard University housing study.
The report found some of the highest disparity between wages and housing prices in Northern California.
According to the report released June 20, the Silicon Valley cities of San Jose, Sunnyvale, and Santa Clara had a median home sales price 11 times higher than the area’s average annual wage of nearly $113,000 in 2023.
Median home sales prices are determined by finding the midpoint of all sales, where half sold for more and half for less.
The same was found at the coast in Santa Cruz and Watsonville, where 2023 housing prices were also 11 times higher than the average yearly wage of almost $68,000.
In Los Angeles County and Anaheim—in Orange County—the median home sales price was about 10 times more than the average wage of $98,200.
Further south in San Diego and Carlsbad, housing reached nearly nine times more than the average wage of $76,000 last year.
“Both homeowners and renters are struggling with high housing costs,” the authors of the report, called “The State of the Nation’s Housing 2024” wrote in its summary.
Millions of potential homebuyers across the U.S. have been priced out of the market by rising home prices and interest rates. The cost of owning a home is also increasing as insurance and property taxes continue to rise, according to the report.
And single-family home construction is likely limited by ongoing development hurdles and high construction costs, among other restrictions.
California has taken several steps in the past few years, though, to try to make owning a home easier.
San Francisco on Feb. 23, 2023. (John Fredricks/The Epoch Times)
State officials have relaxed permitting and environmental review requirements to make projects easier, quicker, and cheaper to build.
The state also rezoned land owned by religious institutions and colleges in 2023 to enable affordable housing development, resulting in 171,000 new developable acres.
California is also offering a new grant program that provides low-income earners with $40,000 in pre-construction costs, as well as down payments in the amount of 20 percent—up to $150,000—for some first-time homebuyers.
Still, the country is facing sharp price increases for rent and housing that started during the COVID-19 pandemic, according to Dan McCue, a senior research associate and one of the lead authors of the report.
Prices for homes nationwide are up 46 percent, and rental prices have jumped 26 percent since 2022, Mr. McCue said in a press conference on the report June 20.
“Not only are prices high, but they’re rising once again,” he said. “It’s really adding insult to injury.”
High-rise buildings in downtown San Diego, Calif., on Oct. 4, 2023. (John Fredricks/The Epoch Times)
The number of houses on the market nationally is about 30 percent below those available before the pandemic, Mr. McCue added.
Part of the reason for the shortage can be attributed to homeowners who are staying put and not selling while interest rates remain around 7 percent, he said. The combination of high prices and high interest rates has driven housing inventory to its lowest point in 20 years, he said.
Rental growth has also slowed because rents have remained high after the pandemic. Such is a problem for the record number of renters—over 12 million nationally—who pay more than half of their income on housing, which is most common among middle- and low-income earners, according to Mr. McCue.
Rising home insurance costs, which have gone up about 35 percent, are also hurting low-income homeowners, according to the report.
“We are also concerned that homeownership is increasingly out of reach for all but the highest income households,” Mr. McCue said.
“Access to homeownership has really been cut off in over half of the cities.”
The demand for rentals and single-family homes, however, continues to grow, with 1.7 million more households in the U.S. in 2023, according to the report.
Mr. McCue said he expects Gen Z, the generation that is now 12 to 27 years old, has added 8 million more households over the past four years.
Immigration has also put pressure on available housing.
“It’s a big increase, and it’s really propping up demand,” he said.
The year was 1882 and the speaker at the University of Paris, Sorbonne, was the essayist and historian Ernest Renan. His topic: “What Is a Nation?” The thesis rocked the continent and the world. What he called for, in essence, was nations by choice not by force.
I know that it is hard for us today to imagine that the words of any academic intellectual could or would have that impact but times were different. People in those days took intellectuals seriously, probably because they existed and earned their reputations.
Renan listed five markers of what could be considered a nation: heredity, geography, language, race, and religion/culture. All are potentially coercive, and tempted states with the power to grab people out of their lives and cultures and draft them into some grand project. This, he said, was inconsistent with liberalism as understood in the 19th century, which revolved around the freedom of choice.
The only kind of nationalism that is conscionable is that which calls for a regular plebiscite, the consent of the people. Nations are self-organizing, not created from without but from within. They can only be assembled by the consent of the governed.
Why should this even matter so much at the time? The 1880s were a time of dramatic change for the world in politics. The old multinational monarchies were dying out. The Papal states were slipping away under the pressure of the demand for political independence. The Spanish Empire was long gone and the Holy Roman Empire was a fading memory except to populate fashionable cocktail parties with personages of past prestige. The British Empire was already receding. The ethos of democracy was winning the day the world over.
There was an urgent need to decide some standard by which political independence was recognized as legitimate, without hurling the world into chaos and war. Renan’s goal was to provide such a standard.
A few decades later, this became supremely important following the catastrophe of the Great War. The multinational monarchies met their final doom and it fell to the world community to decide what nations are and could be.
In the end, and tragically, it was left to the victors in the war to decide. That meant leaving it to a deeply unpopular U.S. President Woodrow Wilson, who only held office due to a split in the Republican Party that swept him into office in 1912. He barely won reelection in 1916 but following the Great War, it fell to his office to determine which European nations would be granted legitimacy. He knew almost nothing about the topic, which left it to the lobbying of European leaders to explain the lay of the land to him.
The results were obviously imperfect. Together with the rough terms of peace with the Versailles Treaty, the defeated foes were left with huge debts and an incentive to inflate, and a seething political anger that intensified over the decades. The result was the most dreaded outcome of all: a second world war.
In any case, Renan’s template for the good kind of nationalism dominated after the Great War. All responsible intellectuals saw nationalism as a path to peace and freedom in a war-torn continent. To form one’s nation by consent was seen as an extension of freedom. Wilson called this “self-determination” and mostly people agreed that this was the ideal. This kind of nationalism was regarded as the best post-monarchical model for liberal international relations.
My own top intellectual influence is the Austrian economist Ludwig von Mises. His 1919 book was “Nation, State, and Economy.” In his view, language (speech) was the best basis to define nationhood. It’s hard for Americans to understand this since it would seem to put us in one nation with England and Australia. At the time, however, this theory made sense in a European context. Think of the strange and unsustainable amalgams of Yugoslavia or Czechoslovakia; a language-centered nationalism could have predicted their demise.
Mises himself was Austrian, of Jewish heritage, and was thinking in those terms.
If a group was united in language, he argued, it was a viable nation. And this is a good path to peace.
“The nationality principle above all bears no sword against members of other nations,” he wrote. “It is directed in tyrannos. Therefore, above all, there is also no opposition between national and citizen-of-the-world attitudes. The idea of freedom is both national and cosmopolitan. It is revolutionary, for it wants to abolish all rule incompatible with its principles, but it is also pacifistic. What basis for war could there still be, once all peoples had been set free? Political liberalism concurs on that point with economic liberalism, which proclaims the solidarity of interests among peoples.”
It’s fascinating to read that passage in light of what came after. As it turns out, a different form of nationalism was rising in Germany from 1923 and onwards. It absolutely bore a sword. It took the idea of race and ran with it, postulating that the German nation should extend to everyone of “Aryan” race, purging territories of groups that fall outside that designation. In this, the rise of German nationalism drew on race studies of the late 19th century, and trampled all over both Renan’s postulates and Mises’s hopes for the future of nationalism.
What makes for fascinating reading is Mises’s own 1944 wartime history of the rise of the Nazis. His book “Omnipotent Government” offered a diametrically opposed view of nationalism. In chapter after chapter, he shredded the racial view of political community, condemned all forms of imperialism, and blasted militarism based on nationalistic ambitions. Clearly, his attitudes had changed in light of events. The Second World War caused him to turn against the ideology of nationalism, treating it as potentially aggressive and the enemy rather than the friend of freedom.
The purpose in recounting this history is simply to say that there is not one correct view of nationalism. It depends on the historical and political context and the cultural and political assumptions behind nationalist feelings.
After the end of the Cold War, many had hoped that the United States would return to its roots as a peaceful commercial Republic, doing as George Washington said: trading with all and making political alliances with no one, being a light unto all nations while staying out of the internal affairs of foreign nations. This view was widely held on the left and right. However, many in power had different views. They wanted to deploy the newly earned status as the world’s only superpower to become the globe’s policeman, with war after war, intervening in every border dispute or otherwise.
It was in those days that my own attitudes on nationalism shifted. On matters of political organization, nationalism struck me as mostly benign. But on matters of race and migration, globalism seemed to me to be the right answer. Yes, I was a product of my times and did not know it.
What I and others had not seen coming was something different, the rise of globalist institutions—built from both public and private monies—that had every intention of trampling on sovereign rights, not only of the domestic political community but also on foreign peoples.
This new globalism was never more on display than in the pandemic policy response, which the World Health Organization urged every nation to adopt the strategies and tactics of the Chinese Communist Party (CCP) in China, locking citizens in their homes and attempting to protect health through use of extreme force. All nations in the world adopted this tactic, save only a few, and this approach wrecked economies, destabilized political systems, and demoralized people of the world. If nothing else, this experience highlighted the dangers of globalist ideology.
Here we are nearly a century and a half after Renan’s Sorbonne lecture and still grappling with the great question of nationalism. We do have experience to draw on. We know now that nationalism can be a check on globalist power, exactly as Mises imagined it after the Great War, but we are also aware of the dangers associated with chauvinism and imperialism in the name of nation building too, as Mises also mapped out.
For now, I’m inclined to have a warmer view toward the nationalist temperament if only to guard against the real and present threat of a globalist ruling class imposing rules on the entire planet, creating a regime for the world over which national political systems have no influence. This danger is real and all around us.
For now, the urge to reassert national sovereignty—whether in the form of American patriotism or European skepticism toward the European Union—strikes me as a necessary frame of mind to get us back to the fundamental principle of freedom itself.
In theory, the path toward freedom seems easy: human rights, governments that are limited to strict functions only, and diplomacy over war. In practice, this ambition ends up taking a circuitous route. It was true in the last century and it is true in ours as well.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Diversity, Equity and Inclusion efforts in the United States military are ineffective, a new Arizona State University study suggests.
The study done by the university’s Center for American Institutions argued that there is an emphasis on training new soldiers about social issues like “unconscious bias” and “intersectionality” in a way the center says runs contrary to typical American ideals. The study examined DEI plans in different sectors of the military, including DEI office staffing and education at academies like West Point.
“The massive DEI bureaucracy, its training and its pseudo-scientific assessments are at best distractions that absorb valuable time and resources,” the executive summary states. “At worst they communicate the opposite of the military ethos: e.g. that individual demographic differences come before team and mission.”
Donald Critchlow, the director of the center, wrote in the studies introduction that it was focused on looking at the influence of Critical Race Theory in the United States Armed Forces training.
“The Commission on Civic Education in the Military began as a project to review civic education in the military. Our research team did not expect to find Critical Race Theory so embedded and pervasive. Diversity, Equity, and Inclusion programs are found throughout the U.S. Armed Forces and our service academies,” Critchlow wrote. “This year long study documents just how pervasive these training programs are in our Armed Forces and Service Academies and that DEI extends well beyond just formal training programs in the military and service academies.”
“The Founders of our nation understood and feared a politicized military. History had shown them that a politicized army easily became the tool of tyranny. The Armed Forces of the United States has proudly upheld this long tradition of separating mission from politics,” he continued.
In terms of recommendations, the study suggests that DEI office’s be completely scrapped, but said it may be politically unlikely for the time being.
“The surest way to eliminate the concerning trends we have identified, and the growth of race and sex-based scapegoating and stereotyping in the U.S. military, is to altogether end the DEI bureaucracy there,” the study states. “However, until such a time as the executive or legislative branches of the government choose to end the DEI bureaucracy in our federal agencies and military, we are left to advocate the pursuit of alternative avenues that may affect positive change despite existing policies.”
They also suggested that the military prioritize civic education with a focus on “America’s commitment to freedom and opportunity.”
The study comes as some branches of the military continue to struggle with recruiting new service members.
Senators Strike Deal To Ban Stock Trading By Members Of Congress
A bipartisan group of senators including Josh Hawley (R-MO) on Wednesday came to an agreement on a renewed effort to ban members of Congress from trading stock.
It’s official.
For the first time ever, a group of Senators have announced a deal to ban congress members from trading stocks
— Nancy Pelosi Stock Tracker ♟ (@PelosiTracker_) July 10, 2024
“Congress should not be here to make a buck,” Hawley said during a Wednesday press conference on Capitol Hill. “There is no reason why members of Congress ought to be profiting off of the information that only they get.”
Senator Josh Hawley:
“There is no reason that Congress ought to be profiting off of information that only they get”
We track politicians’ portfolios.
Several members have already made millions of dollars in the stock market in 2024. pic.twitter.com/vyETY8Cy1d
The group’s proposal will be the first to actually receive formal consideration by a Senate committee – the Homeland Security & Governmental Affairs Committee, on July 24.
The effort, an amendment to an existing stock trading ban, would immediately forbid members of Congress, the president, and the vice president, from purchasing stocks and other covered investments – and would give lawmakers 90 days to liquidate current stocks.
Sens. Hawley, Jon Ossoff, D-Ga., Jeff Merkley, D-Or., and Gary Peters, D-Mi. negotiated and announced the new details.
If passed, the bill would also prohibit lawmakers’ spouses and dependent children from trading stocks, beginning March 2027. Also starting that year, the U.S. president, vice president and all members of Congress would have to divest from any covered investments. –CNBC
Penalties for violating the ban would be the greater amount of either their monthly salary, or 10% of the value of each covered asset in violation.
In 2021, Ossoff introduced a ban and put his own stock portfolio in a blind trust to lead as an example. The effort gained traction following revelations that several senators made very profitable trades in as the Covid-19 pandemic unfolded, when members of Congress were receiving classified briefings warning of how disastrous the virus could be for the US economy.
Several insider trading investigations were launched by the FBI – but, surprise! no criminal charges resulted.
Then in 2022 the effort gained more steam after notorious inside trader Nancy Pelosi voiced her opposition – labeling it a misguided effort to prevent lawmakers from participating in the “free market economy.”
The video that started it all
Pelosi being asked about buying pre-IPO Visa $V shares while serving as Speaker of the House pic.twitter.com/vR99cgePst
— Nancy Pelosi Stock Tracker ♟ (@PelosiTracker_) July 9, 2024
I have previously written how President Joe Biden is the most anti-free speech president since John Adams. For his part, Biden has continued to double down on his anti-free speech policies with the appointment of figures who have long supported bans and other speech controls. The latest such appointment is Andy Volosky, who was made deputy director of platforms for the White House’s Office of Digital Strategy.
Volosky has been outspoken in support of banning former president Donald Trump from social media platforms.
In my new book, The Indispensable Right: Free Speech in an Age of Rage, I lay out the chilling comparisons between the Adams and Biden Administrations in the crackdown of free speech. For Adams, that led to defeat in 1800 when Jefferson ran in part on restoring free speech. To my surprise, Trump and his fellow challengers in this election have not made free speech a central issue to force Biden to defend the massive censorship system supported by his Administration.
The public does not support censorship.
This is a movement that originated in higher education and has been pushed by the political and media establishment, not the voters.
Volosky will now help direct digital strategies for the White House.
He previously praised the banning of Trump, asking “What took them so long?” in a 2021 blog post.
In Volosky’s blog post, titled “A New, and Hopefully Welcome, Standard,” he warned that:
“Twitter still allows the accounts of various world leaders, governments, and spokespeople, who use Twitter for what one can only describe as propaganda as cover for autocracy, to continue to use their platform.”
He praised how Democrats have “long advocated for regulating the [social media] platforms” and emphasized how active social media users like himself and others can “keep the platforms honest.”
He added that
“we can play a role in keeping the platforms honest and improving the positive role of social in people’s lives…It’s past time for the platforms to take content moderation and user safety seriously; as social media professionals, we should be ready and eager to make that happen, and we hope that [banning Trump] can be a small step in getting that ball rolling.”
Again, with the White House doubling down on censorship, Trump and others need to force him to defend his overwhelmingly anti-free speech record.
One way to describe the recent action in tech stocks (and Mag7 in particular) is one constant, unyielding meltup triggered by a short and gamma squeeze, record stock buybacks and FOMO among the momentum-chasing retail. Another way is to paraphrase what BofA’s derivatives team called it in its latest Equity Volatility note (available to pro subs in the usual place): unprecedented fragility.
As BofA’s Benjamin Bowler writes, large cap tech continues to exhibit fragile price action, as last week saw positive delivery numbers from Tesla power it to a ~25% return in 3 days, which included a 10.2% 1-day rally (4x its trailing 1m realized vol). However, with the move on this known catalyst being twice as large as the straddle cost last week, options drastically underpriced the fragility risk.
This occurrence is not an isolated one, and was only the most recent outlier move in large cap tech, with the likes of Apple, Oracle and Alphabet recently seeing close to their most extreme 1d vol-adjusted moves over the last 5 years.
As BofA further notes, earnings moves in tech within the largest 50 S&P stocks have been more extreme than straddle costs over 60% of the time this year so far, especially so since May (with 8 of 10 earnings straddles breaking even).
This continuation of unstable price action underscores a key observation that the bank’s generally cautious derivatives team has made in recent weeks: single stock fragility is rising, particularly around earnings & other events that provide some degree of forward guidance (see Volatility suggests AI isn’t a bubble…yet and 18-Jun-24 GEVI). Indeed, as the next chart shows, the average magnitude of fragility events in the largest stocks of the S&P is currently at its most extreme since 1992, which means the instability of single-stock dynamics is off the charts and once the current meltup fizzles, the hangover will be brutal.
Aside from this, and despite the repeated signs of fragility, options markets – particularly in large cap tech – continue to underprice fragility risk going into events. In the case of Tesla last week, its move on Tuesday (02-Jul-24) alone was almost twice as big as the cost of its straddles on the day prior to announcement (which was a pre-telegraphed catalyst).
More generally, as noted above, tech companies in the Top 50 largest stocks of the S&P have realized bigger moves on earnings than the cost of their respective weekly straddles more than 60% of the time this year, with the 10 largest tech companies seeing this hit rate reach 70%. These realized moves have been particularly extreme since May this year, with 8 out of 10 moves being larger than the straddle cost.
Hence, as the next earnings season approaches, and given the tendency to underprice risk, BofA’s derivatives desk is urging clients to use options directionally to navigate single stock risk over coming weeks. The combination of a rise in idiosyncratic risk and the highest large cap stock fragility in 30+ years makes using the limited risk and asymmetric profile of optionality especially prudent, in BofA’s view.
More in the full BofA’s note available to pro subs.
There will be no reckoning among Democrats and their media lapdogs regarding their years-long effort to hide President Biden’s mental decline. No one will lose their job, preciselybecause they were doing their job – spinning false narratives to keep the left in power.
And, let there be no doubt, they will keep doing it. The current focus on Biden’s unfitness will last only until Democrats determine whether or not they can force him out. That effort won’t be easy. Biden is an empty suit with a boundless ego – he truly believes he is a modern-day FDR. Withdrawing because you’re not “all there” would be deeply humiliating.
If it becomes clear Joe won’t go, the party and its propaganda outlets will quickly pivot. Discussions of his physical and mental capacities will be shoved down the memory hole. His continuing gaffes and incoherence will be largely ignored, cast as boring facts that are already “baked in the cake”: Voters know about his limits so what’s the point of harping on them? Late night comics such as Steven Colbert and Jimmy Kimmel will probably try to make his ramblings kind of lovable – Joe says the darndest things. If Biden bows out, his replacement will be cast as the second coming of well, Jesus Christ, offering a path to salvation for an imperiled land.
Whether the candidate is Joe Biden or someone else, the goal will be to make the Democrat standard-bearer disappear from the race. When he or she is mentioned at all, it will be to cast the Biden administration’s unpopular record as one of high achievement. Look at all that the president and the Democrats have accomplished for the American people.
News coverage, instead, will seek to make the contest about Donald Trump’s fitness for office. Policy differences not involving abortion will be buried in the avalanche of personal attacks. New York Times White House correspondent Peter Baker signaled the pivot last Friday when he wrote:
One party has a candidate who is really old and showing it. The other has a candidate who is a convicted felon, adjudicated sexual abuser, business fraudster and self-described aspiring dictator for a day. And also really old. One party wants to replace its candidate. The other does not.
That same day, PBS “NewsHour” host Amna Nawaz characterized Trump as “an antidemocratic candidate with authoritarian tendencies, who is now newly empowered by that Supreme Court immunity ruling.”
With all her signature nuance, MSNBC host Joy Reid succinctly expressed the establishment mindset going forward: “If it’s Biden in a coma, I’m going to vote for Biden in a coma … to keep Hitler out of the White House.”
Even as Biden’s behavior suggests Reid is close to getting her wish, the next four months will be filled with fan-flaming screeds about fascism, Christian nationalism, white supremacy, Jan. 6, and dubious felony convictions. Trump’s hyperbole will be cast as despicable lies while the press ignores Biden’s insistence on repeating long-debunked talking points. Note that Biden’s opening line of the debate – probably his most prepared and rehearsed line of the night – contained two whoppers as he claimed he inherited an economy “in freefall” and that all Trump did in response to COVID was tell people to “inject a little bleach in your arm.” He also repeated the lie that Trump had praised neo-Nazis who marched at Charlottesville – tellingly “Meet the Press” host Kristen Welker branded Trump a liar for correcting Biden about this.
In fairness, we’ve heard this all before – and Trump is still leading the race. The attacks on him have been so vicious and unhinged for so long that it is easy to overlook the truly astounding fact that the man is still standing. Part of this is due to his remarkable toughness; part is due to the out-of-touch incompetence of his foes. They still don’t see that they have overplayed their hand, offering risible caricatures instead of critiques.
Democrats and their propaganda outlets still have power within their own liberal echo chambers, but they can no longer have the trust of the broader public. Most Americans dismiss their bogus narratives, including their longstanding insistence that Biden was at the top of his game. No one can be surprised by his cognitive issues, especially those in government and the media who have observed him up close for years. After interviewing him for a few hours nine months ago, Special Counsel Robert Hur concluded the president was an “elderly man with a poor memory.” The debate simply forced the media to acknowledge what most Americans could see at a greater distance.
It is a sign of the establishment’s cynicism that their only concern is that Biden might not have the capacity to run a winning campaign, not that he is probably unfit to execute the far more demanding and consequential duties of commander in chief.
The real mystery going forward: What other tricks do Democrats and the establishment media have up their sleeves to turn things around? Having already thrown the kitchen sink at Trump, it is hard to imagine that some new narrative about his evil nature will sway undecided voters.
Things could get very dark if they double down on lawfare – don’t be surprised if the Biden-donor judge in New York sentences Trump to jail in the Stormy Daniels case, or if state courts change how and when people can vote.
The pivot is coming and its intent will be clear: to help the Democrats win by any means necessary. Fortunately, we still live in a democracy and the people, not the power brokers, will have the final say.
NVDA and TSLA dominating the options trading… and all 0-DTE!
Source: Bloomberg
Which levitated MAG7 stocks for the 7th straight day (10 of last 11 days)…
Source: Bloomberg
And that is all that is needed to lift the Nasdaq and S&P (and everything else by association). Late in the day, everything just went vertical… because!!
The S&P 500 is now almost 15% above its 200DMA – quite a stretch…
Source: Bloomberg
…ahead of tomorrow’s CPI print event risk, realized vol is near record lows (10d with a 5 handle) and very short-dated vol (across the CPI print) is near 16…
Source: Bloomberg
Rate-cut expectations continue to rise as Powell said nothing hawkish… which is therefore dovish?
Source: Bloomberg
Treasury yields are down very modestly on the day 1-2bps with a very modest long-end outperformance…
Source: Bloomberg
The dollar index slipped back to Monday’s lows…
Source: Bloomberg
Gold rallied early on but gave some back in the US session…
Source: Bloomberg
Oil prices surged back above $82.50 (WTI) after the official inventory data…
Source: Bloomberg
Bitcoin rallied back above its 200DMA 58,818 but was slammed back down again…
Source: Bloomberg
Finally, President Biden’s odds of being the Democratic Party nominee plunged again today…
Source: Bloomberg
…do traders know something about tomorrow’s solo press conference gauntlet?
A California judge handed Elon Musk a win in a lawsuit filed over the mass firing of staff at Twitter after he took over the social media platform in October 2022.
Mr. Musk and X Corp. (Twitter was rebranded as X in July 2023) were accused of violating provisions of the federal Employee Retirement Income Security Act (ERISA) by allegedly misleading employees about whether he’d honor a severance plan “at least as favorable” as one developed by prior Twitter management, leading some staff to stay at the company longer than they otherwise would have and getting less severance pay than they expected when they were let go.
The class-action lawsuit, which was brought by Courtney McMillian, who oversaw Twitter’s benefits programs, sought at least $500 million in allegedly owed severance pay to some 6,000 laid-off employees.
In a July 9 order, U.S. District Judge Tina Thompson in San Francisco dismissed the complaint against Mr. Musk, arguing that the employees’ claims weren’t covered under ERISA rules in part because the company notified staff after Mr. Musk took over the company that any laid-off staffers would get lower payouts under a new plan.
“Communications were made by Defendants showing that the named Plaintiffs would no longer have access to the earlier plan, which was discontinued or modified greatly,” the judge wrote.
Another factor weighing in favor of dismissal was that the plaintiffs failed to show that the severance plan Mr. Musk promised after taking the company over broke any provisions of ERISA, which sets rules for benefit plans.
“All of Plaintiffs’ claims in their operative complaint require the plan to be governed by ERISA. As such, the complaint fails to state sufficient facts to survive a Motion to Dismiss,” reads the judge’s order.
The judge gave the plaintiffs 21 days to file an amended complaint that states claims to severance pay based on the plans that were in effect after Mr. Musk took over the social media platform.
Requests for comment sent to attorneys representing Mr. Musk and Ms. McMillian were not immediately returned.
Ms. McMillian’s original complaint claimed that under Twitter’s 2019 severance plan, developed by prior management, most workers were promised two months of their base pay plus one week of pay for each full year of service if they were laid off.
Senior employees like Ms. McMillian were promised six months of base pay, plus one week for each full year of experience, according to the complaint.
However, after Mr. Musk took over, laid-off workers were given at most one month of severance and two months’ worth of pay, according to Ms. McMillian’s complaint, which alleged that this was a “fraction” of the $500 million to which laid-off employees were entitled.
Following a round of mass layoffs, Mr. Musk said in a post on Twitter in November 2022 that staff would receive three months’ worth of pay, which he said was 50 percent more than required by law.
Still In The “First Or Second Innings” Of CRE Tower Storm
While politics and geopolitics dominate the headlines—whether it’s Joe Bien’s mumbling and stumbling or the risks of World War III in Eastern Europe, the Middle East, or the South China Sea—many seem to overlook the ongoing commercial real estate crash in the US. This CRE downturn is set to worsen as remote and hybrid work models drastically reduce demand for traditional office towers.
Bloomberg cited data from the Mortgage Bankers Association, reminding us that banks will face a $1 trillion maturity wall of CRE loans at the end of this year. This only means more bank failures are ahead because of the bad property debt held on balance sheets.
“Compared with the Savings & Loans crisis and 2008, we’re still in the first or second innings” when it comes to distressed CRE assets, said Rebel Cole, a finance professor at Florida Atlantic University who advises Oaktree Capital Management, adding, “There’s a tsunami coming and the waters are pulling out from the beach.”
In a recent note, John Brady, global head of real estate at Oaktree, explained, “We could be on the precipice of one of the most significant real estate distressed investment cycles of the last 40 years.”
Brady said that “unloved” CRE space will present opportunities for bottom fishing: “Few asset classes are as unloved as commercial real estate and thus we believe there are few better places to find exceptional bargains.”
Data from Preqin show private equity firms are building war chests as the CRE storm is expected to worsen, allowing them to bargain hunt. About 64% of the $400 billion of dry powder on the sidelines is intended for CRE investments across North America, the highest share in two decades.
The percentage of office CMBS loans that are 30+ days delinquent just hit a decade high.
Meanwhile, Pimco expects more regional bank failures due to bad property debt. Adding to this, a recent Oaktree report indicates the number of banks that could fail if CRE prices fell just 20% from peaks would exceed 2008.
Charles McGrath, an associate vice president at Preqin, pointed out that higher borrowing costs for longer indicate a decline in dry powder on the sidelines. He said there are signs of a “sharp decline in fundraising and transactions.”
