Cannabis Business Thriving Amid Pandemic

Many businesses have been struggling during the pandemic, but the cannabis industry is not one of them. Cannabis businesses were deemed essential and therefore have been working throughout the stay-at-home orders. And their business has been booming. One need only look at California’s state tax revenues to see it, as those from cannabis businesses have doubled in Q3 2020 compared to Q3 2019, jumping from $171 million to $371 million. The president of the Long Beach Cannabis Association, Adam Hijazi, has witnessed multiple first-time buyers every single day.

Of course, it’s entirely possible that this growth is despite the pandemic and not because of it. It’s only been three years since recreational cannabis was legalized. There’s still plenty of room for the industry to grow, and more businesses are opening each year. The legal cannabis business is so fresh that the illicit market still accounts for a large portion of cannabis sales. The Long Beach Economic Development and Finance Committee is even considering making starting a legal cannabis business easier to encourage this highly profitable new market.

Photo by Kimzy Nanney on Unsplash

More: https://lbbusinessjournal.com/state-cannabis-tax-revenue-doubles-amid-pandemic

Is a Lunar Colony in Our Future?

The European Space Agency (ESA) has partnered with British metallurgy company Metalysis on a project that could potentially assist in enabling life on our Moon. Much of the oxygen present on the Moon is trapped inside of rock dust, primarily regolith. Metalysis has already been using a process to extract minerals from Earth rocks in their metal production, which happens to have oxygen as a byproduct. They believe a similar process can be used on lunar regolith to extract the oxygen, this time with the minerals as byproduct. The minerals can still be useful, too, as they can be used by 3D printers to build construction material.

In order to make this process ready for use on the Moon, it’s going to need to be less energy-intensive, since there isn’t as much energy available on the Moon as there is on Earth. Metalysis is working in conjunction with the ESA to rework their process with the express purpose of oxygen extraction from lunar regolith in mind. They believe that a more streamlined process with one specific purpose can be more energy efficient. There are also plans to reduce the size of the extraction chamber, which is currently about the size of a washing machine, so that it can be more easily transported to the Moon.

Photo by NASA on Unsplash

More: https://www.esa.int/Science_Exploration/Human_and_Robotic_Exploration/Turning_Moon_dust_into_oxygen

The Alternative to Mortgage Forbearance

Currently, approximately 4 million homeowners in the US are in forbearance, which means that the lender has agreed to delay foreclosure on a property. Many others are delinquent in their payments and will be suffering the consequences when the foreclosure moratorium ends in February 2021. It may be too late for some of these people, but if you act quickly enough, you may be able to avoid the most serious of complications by utilizing a strategic default, also known as voluntary foreclosure or, more colloquially, the “jingle mail” strategy.

In a strategic default, the homeowner voluntarily initiates a foreclosure on their home in exchange for avoiding responsibility for some of the debt owed. When this happens, the homeowner is not responsible for what is called nonrecourse debt, which includes a mortgage funding the purchase or construction of an owner-occupied residence with no more than four units, as well as credit sales in which debt is secured solely by the sale of real estate. Even if the debt is recourse debt, the mortgage holder may or may not be able to pursue the homeowner for the loss. Be aware, however, that there are some drawbacks to a strategic default. It comes with a significant drop to one’s credit score, which can make securing new loans and finding a new home more difficult.

Photo by Felix Mittermeier on Unsplash

More: https://journal.firsttuesday.us/the-jingle-mail-strategy/75030/

How Does GDP Reflect Economic Health?

GDP, or Gross Domestic Product, is defined as the total final value of all goods and services produced, and is one of the most frequently used indicators of economic health. But how much does it actually tell you, and how can that information be used? For the most part, GDP is simply a broad overview of a state’s economic health, and tells little about how the residents of that state are doing. There are, however, strong correlations that enable the direction of change in GDP to be a good indicator of the direction of change in fiscal wellbeing of the people, even if the exact value of GDP is largely irrelevant for that purpose.

This is because the interplay of GDP, employment, and home sales volume tends to form a continuous economic cycle. If more new homes are sold, this directly increases GDP, which is generally followed by an increase in employment with a delay of usually about a year. In turn, increased employment means more people are able to afford to buy homes, thereby increasing home sales volume and continuing the cycle. Any one factor increasing can trigger the cycle to begin, and it also works in the negative, so a decrease in any triggers a decrease in the next. Of course, as with any economic cycle, certain events can cause it to derail — for example, unusually high sales prices can result in inflated GDP numbers without increased sales volume. It is also important to note that GDP includes only new products, which means that reselling homes doesn’t increase GDP, and with construction being as slow as it is, a great many home sales are resales.

Despite their limitations, GDP growth and decline numbers are still useful for big picture assessments. But if you really want a good idea of the local economy in a region, the most important statistic to look at is employment. Other statistics that directly affect peoples’ lives are also valuable, such as home sales volume as well as home prices.

Photo by Matthew Lancaster on Unsplash

More: https://journal.firsttuesday.us/the-interplay-between-home-sales-volume-gdp-and-employment/34485/

Renters and Homeowners Alike Unsure of Their Economic Security

As of September, California had lost about 1.5 million jobs in the prior 12 months, resulting in many people falling behind in house payments. This includes both renters and homeowners with a mortgage, who are both reporting various degrees of certainty about their ability to pay. Of those renters who are still paying rent despite the moratorium on evictions, about 48% don’t have high confidence in their ability to pay next month. Less than 70% of homeowners think they can pay their mortgage.

All this uncertainty is leading to a very static market. Buyers simply don’t have the income to purchase a home. Sellers are raising prices to recoup some of their losses, or just not listing right now. A stimulus package isn’t going to be enough to solve this problem — the people need more confidence before they will want to buy or sell. This means we need job recovery. While the unemployment rate may make it appear as though the situation isn’t dire, that’s largely because of the manner in which unemployment is calculated. Those who aren’t actively looking — as many are not currently during the pandemic — aren’t included in unemployment numbers, as they have dropped out of the labor force (See this article for more information about the labor force participation rate and its connection to unemployment: https://www.beachchatter.com/2020/11/23/understanding-labor-force-participation/). We’re not likely to see a recovery until 2023 at the earliest at the current rate.

Photo by Sandy Millar on Unsplash

More: https://journal.firsttuesday.us/over-one-half-of-renters-one-third-of-homeowners-arent-sure-they-can-pay-next-months-housing-payment/74941/

Most Younger Generations Still Can’t Afford to Buy

Many would-be homeowners in the Millennial and Gen Z generations are going to need to wait. Despite the fact that some who wished to buy are instead renting, apartment vacancies are on the rise as 27.7 million have moved back in with parents or other relatives, if they ever left home at all. The good news is that this number is dropping, but only the luckiest of them will be able to snatch an opportunity in the coming months amid heavy competition.

11% of renters were excited to make the transition to homeownership in the beginning of 2020, but the COVID-19 pandemic and the recession squashed those dreams for many of them. Those who experienced income loss as a result of the pandemic are twice as likely to have trouble with paying bills, rent, or mortgage, or need to withdraw savings or retirement or borrow from friends or family. That isn’t the whole of the problem, though: California has been lacking affordable housing for decades as a result of mere population growth, an issue that was only accelerated by the recession and lockdowns, which have slowed or halted construction.

Photo by Georg Bommeli on Unsplash

More: https://journal.firsttuesday.us/homeownership-remains-elusive-for-young-adults-amid-recession/74939/

Understanding Labor Force Participation

Labor force participation (LFP) and unemployment may seem like direct inverses of one another, but that isn’t the case. LFP measures the percent of employed people plus the percent of unemployed people actively seeking employment. Those who are unable to work or have chosen to leave the workforce are not included in LFP, and in fact such people aren’t even included in the unemployment count. This includes many people affected by the COVID-19 pandemic who either can’t work from home or have decided that continued employment isn’t worth the risk of infection. This has actually decreased the unemployment rate, but not because people are getting their jobs back, rather because a smaller percent of people are under consideration for employment. The California LFP has been roughly 2% below the US total for nearly two decades, with a few exceptional years. They most certainly are not static, though, as both have been trending downward, with the first half of 2020 demonstrating a steep decline before partially recovering.

Photo by Kemal Kozbaev on Unsplash

More: https://journal.firsttuesday.us/the-labor-force-participation-rate-continues-to-shrink-with-poor-implications-for-real-estate/74804/

LA County Tightens COVID-19 Restrictions


The number of COVID-19 cases spiked dramatically in November, spurring LA County to increase safeguarding measures, effective tomorrow, November 20th. The number of customers at any time can be no more than 50% maximum outdoor capacity at outdoor restaurants, breweries, wineries, cardrooms, outdoor mini-golf, go-karts, and batting cages. This number is 25% at businesses permitted to operate indoors, such as retail stores, offices, and personal care services. In addition, restaurants, breweries, wineries, bars, and all other non-essential retail establishments must close from 10:00 p.m. to 6:00 a.m. At personal care service locations, both staff and customers must wear a mask at all times, disallowing services that would require the mask to be removed, and these establishments cannot serve food or drinks. The maximum number of people at outdoor gatherings is 15, with a limit of 3 households. LA County has also established potential future guidelines that will be implemented if the number of cases or hospitalizations increases beyond certain levels

Photo by Bill Oxford on Unsplash

More: https://covid19.lacounty.gov/covid19-news/los-angeles-county-to-implement-tighter-safeguards-and-restrictions-to-curb-covid-19-spread/

CFPB Plans to Replace Debt-To-Income Requirement

The Consumer Financial Protection Bureau (CFPB) is planning to make some changes aimed at widening the accessibility of mortgage loans by allowing lenders more freedom in determining a borrower’s ability to repay. Currently, one of the requirements for a qualified mortgage (QM), the loan type preferred by both lenders and consumers, is a debt-to-income ratio of no more than 43%. This criterion is designed to be an indicator of the borrower’s ability to repay. However, there are other methods of determining this that can broaden the range of QMs. The CFPB’s solution is to compare the loan’s annual percentage rate (APR) to the average prime offer rate (APOR). Because a borrower with a high DTI would likely also have a high APR compared to APOR, DTI considerations are still indirectly included, but there will also be people with a high DTI but low risk of default that are able to get a good APR to APOR ratio and therefore successfully get a QM loan.

Photo by Igal Ness on Unsplash

More: https://journal.firsttuesday.us/cfpb-sets-crosshairs-on-dti-requirements-for-new-qm-criteria/74918/

2021 Tax Rate Information Now Available

The IRS released the new numbers for 2021’s tax rates in October. The lowest individual bracket has shifted from $9,875 or less to $9,950 or less, and the highest went from $518,400 or more to 523,600 or more. The majority of people will fall in the second or third bracket, up to $40,425 or $86,375. The standard deduction has increased by $100, to $12,500. Also going up are the capital gains tax rates and alternative minimum tax (AMT) exemption and phaseout thresholds. See this article for information about those amounts, as well as amounts for married couples filing jointly: https://journal.firsttuesday.us/irs-announces-new-tax-rates-for-2021/74936/

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