Risky Days Are Here Again

Now that investors can put their money in athletes, bitcoin, and “motifs“, Kevin Roose declares, “the age of bullshit investments is back”:

Some of these bad ideas spring from the normal irrational exuberance that comes with an economic bounce-back, and the fact that many investors are more willing to jump into murky waters than they were in 2008. But there are other factors in play, too. The JOBS Act, for one, was a post-crisis law that was meant to make it easier for companies to raise money. … Thanks to the JOBS Act, there are now crowd-funding bazaars that make gambling in the markets as easy as picking a Spotify playlist. There’s also the newest West Coast fund-raising trend, the venture capital syndicate, which makes it possible for average shmoes with little to no market expertise to enter into highly risky investments with early stage start-ups, and which has put the sentence “Miley Cyrus could be the next big tech investor” within the realm of the possible.

Meanwhile, as Florida’s economy shows signs of recovery, Wendell Cox explains what made the state so vulnerable to the real estate crash:

Florida’s restrictive land-use policies (better known as “smart growth” or “urban containment”) helped inflate its property bubble to massive size, making its bursting all the more economically painful. Such growth policies limit urban expansion, prohibiting new housing except in small sections of already dense metropolitan areas. As Brookings Institution economist Anthony Downs argues, these policies can destroy the competitive supply of land, driving land prices up (other things being equal) as demand rises sharply in relation to supply. These higher prices get passed along to prospective homeowners in higher home costs—often made even pricier by various other regulations and fees. The rapidly escalating housing prices, in turn, create the potential for extraordinary profits for speculators—or property “flippers”—who, jumping into the real-estate market in considerable numbers, increase the excess of demand over supply, driving prices higher still, until a bubble begins to expand. It’s no surprise that markets with more restrictive land-use policies have much greater housing-price volatility, as research by economists Edward Glaeser and Joseph Gyourko has shown.