
Why Are Developers Still Pouring Billions into Waterlogged Miami? - graaben
https://www.bloomberg.com/news/articles/2016-11-29/why-are-developers-still-pouring-billions-into-waterlogged-miami
======
cjlars
If you look at various financial crises throughout history, you'll see that
even amid increasingly clear evidence of problems, the status quo is
surprisingly sticky. Things move along as normal, and everything seems fine
until suddenly... they don't. In hindsight things seem obvious, but at the
time it's difficult to know if you are merely flirting with the edge, or
you've actually gone over it.

Miami real estate (and other low lying shorefront) isn't quite at that 'oh
crap' moment yet. While the evidence for CO2 driven rising sea levels is clear
to me, there are plenty of financiers from the previous generation for whom it
isn't. And even if they're wrong on global warming, they might be right on
sea-walls, pumps and other mitigation methods. The Raising of Chicago lifted
the entire city up 3-6 feet with merely 1850s technology, so it's not as if we
can't solve Miami's sea level issue with sufficient investment. The issue is
who foots the bill, how large it is, and what neighborhoods are left to the
sea.

~~~
finnh
I think it's time to do some research and figure out the appropriate short.

~~~
sulam
Before you short, read the Big Short and imagine yourself as Michael Burry.
Very often you can be short, right, and lose your pants because markets are
slow to recognize things that they are paid to ignore.

~~~
finnh
Yup. The markets can be irrational longer than you can be solvent. But there
must be some arbitrage with derivatives or something, right? =)

~~~
maxerickson
You could go long on post sea level rise oceanfront properties.

There's probably a few places where a narrow strip of land has enough of the
right slope to be a win for quite a range of sea level increases.

~~~
pixl97
And then some idiot will scam the taxpayers in to building a large seawall
miles out from your location, leaving you high, dry, and broke.

~~~
maxerickson
cjlars already brought up a similar strategy with less sensitivity to sea
level changes _and_ less sensitivity to interventions.

Maybe the best climate change hedge is investing in low carbon power
production. (incrementally) Good for the climate, benefits if things go worse
than expected.

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adevine
The answer to this question is quite simple, and the two choice sentences from
the article:

"And their time frame is what, five years? How do you reconcile those two
things: It’s a 100-year problem and a five-year investment cycle." The answer
is simply that the private equity firm does not account for the long term, but
that the city of Miami Beach will have to—soon.

And that is fundamentally what makes climate change so difficult to deal with.
The economic incentives, which only really look 5-10-15 years out, can't
respond to consequences that are 50-100 years out, and by then it's really too
late.

~~~
cr0sh
> And that is fundamentally what makes climate change so difficult to deal
> with. The economic incentives, which only really look 5-10-15 years out,
> can't respond to consequences that are 50-100 years out, and by then it's
> really too late.

On the global level (let's say 50-100 years out), do you think we as a species
are headed toward an "Easter Island" effect, where we "whistle past the
graveyard" and assume everything is "fine" \- until it isn't - and at that
point we can't do anything and have to deal with the potentially existential
consequences?

~~~
anexprogrammer
Very much so. We still have the foot hard on the gas. _We haven 't even got 10
years of business as usual._

The conversation at the moment is about power, but moves to get off fossil
are, globally, token. The conversation hasn't got to agri-business,
deforestation and meat especially beef, or population, or water. Forests are
still being felled and burnt for cattle and palm oil, new fracking is still
reported as opportunity for jobs and profit.

I'm starting to arrive at the belief that my children's best hope is being
amongst the 100m or so left.

------
xapata
Investors assume that Miami is too big to fail. The government bailed out
(most of) the financial firms in 2008. Bailing out (figuratively and
literally) flooding cities will be a popular plan when the time comes.

Just as with the housing collapse, the question will be whether the government
bailout will successfully resolve the crisis.

~~~
__derek__
Exactly. The answer is moral hazard. As long as it's possible to keep Miami
dry, post-Katrina New Orleans basically guarantees that Miami and similar will
see a massive influx of money to rebuild. Once these properties are
physically/financially underwater, the corporate bailouts effectively
guarantee that they'll be made whole-enough. Meanwhile, they get to make money
off of the buildings.

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rospaya
They're counting on the city, state and national government to bail them out
at some point. Not a literal money bailout, but a "save the citizens" campaign
to build massive dykes, move buildings or invest in pumps.

~~~
xkcd-sucks
A literal bailout in its original sense of removing out water

~~~
drcode
Relevant xkcd: [https://xkcd.com/558/](https://xkcd.com/558/)

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throwaway98237
Why is humanity still pumping unsustainable levels of greenhouse gases into
the atmosphere when all the science points to that being a road that leads to
catastrophic consequences which we can't predict?

~~~
jcranmer
What would you, personally, give up to make that happen?

~~~
Johnny555
For what it's worth, I've given up my car (I live within easy biking distance
of work), live in a small townhouse (heating costs $20/month in the winter
thanks to good insulation and neighbors eliminating heat loss to the sides). I
purchase few goods, and try to keep most things as long as possible. Most of
my entertainment/shopping is within walking/biking distance. I try to limit
waste and compost/recycle everything I can.

My electrical usage is so low that I don't think installing solar would be a
net win in carbon emissions.

Based on various calculators, my carbon footprint is about half that of a
typical American. Now can I ask for a 28% decrease in carbon emissions?

------
sbierwagen
See also: "Goodbye Miami" from 2013
[http://www.rollingstone.com/politics/news/why-the-city-of-
mi...](http://www.rollingstone.com/politics/news/why-the-city-of-miami-is-
doomed-to-drown-20130620) and "The Siege Of Miami", 2015
[http://www.newyorker.com/magazine/2015/12/21/the-siege-of-
mi...](http://www.newyorker.com/magazine/2015/12/21/the-siege-of-miami)

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cylinder
Why would developers care? They build, and they sell the units and move on.
They are not long-term holders, and they are not even using their own money.
You could tell them Miami will be nuked ten years from now and they will still
develop new properties.

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ChuckMcM
I wonder if this could be considered an opportunity. Let's say for the sake of
argument that Miami Beach will be gone 20 - 50 years, subsumed by rising sea
levels.

Can you build a structure now, while it is above sea level, that in a post sea
level rise will be really nice? First suspend the building on pylons that are
sunk all the way down to bedrock, second design it so that as an "island" it
has great access, an easy Marina attachment, a helipad on top (for example).
And then make it reasonably self contained (internal shops for transacting
supplies, and entertainment). And finally give it oil platform like stamina
against hurricanes and storms.

Sort of planning for a post apocalyptic refuge today.

~~~
roel_v
How could such a thing be financed? If your value proposition is 'I have this
apartment for sale/rent that's twice as expensive as the others, but in 20
years time you'll have dry feet' \- I'm not sure who would buy such a thing.
Preppers would move to the boondocks in Montana anyway.

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cityandtech
It will probably take a single expensive disaster to change behaviours.

~~~
johan_larson
That's my bet. Some time in the coming fifty years we will lose the first city
to rising water. There will be attempts at mitigation, but they will fail
either for lack of money or know-how. And after that we will think differently
about this problem.

It could be Miami. It's certainly low-lying enough, and big enough to count.
But it's also in the United States, which has a lot of money to throw at
problems. Some city in a poorer country would be a better bet.

~~~
pixl97
> Some time in the coming fifty years we will lose the first city to rising
> water.

We've lost cities in the past due to hurricanes (which I count as a type of
rising water).

[http://www.uh.edu/engines/epi865.htm](http://www.uh.edu/engines/epi865.htm)

Galveston would have disappeared decades ago, until they lifted it and built a
seawall. We throw a lot of money at the problem of the ocean. The issue is,
sea level rise or not, the ocean will always win unless a constant stream of
money is continually pumped into defense.

TL;DR don't live near the ocean.

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frakr
It would be interesting to know if this type of behavior would continue if the
federal government stopped subsidizing flood insurance in these areas:
[http://www.pbs.org/wgbh/frontline/article/can-femas-flood-
in...](http://www.pbs.org/wgbh/frontline/article/can-femas-flood-insurance-
program-afford-another-disaster/) I don't really understand why tax dollars
are being spent on this type of thing.

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Spooky23
A: Because lots of available capital drives dumb real estate decisions.
Always.

Real estate is unique because it's value is realized over long periods of time
and it's easy to get mortgages.

In my area, they're building massive gluts of apartments and condos. The dumb
money -- mostly smaller regional banks trying to break into commercial lending
are leading the deals, and the bigger or more sophisticated banks stay away.

That's a big reason why you have extreme boom/bust cycles, special tax rules,
etc.

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ocschwar
For the same reason why investors participate in bubbles they know are
bubbles: because they think they can get out in time.

If you can sell the last apartment in a condo tower, who cares that a day
later the rising tides rust out the elevator components?

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rm_-rf_slash
Miami speaks money; the other languages are secondary.

The wealthy very much like Miami and even if rising tides make Miami Beach
uninhabitable then at worst it's a hit to their portfolios, not a collapse of
their assets.

The party keeps going until it stops.

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at-fates-hands
Lots of talk about rising sea levels, but did anybody stop to consider it
could just be sinking?

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pklausler
What's the best way to short this impending collapse in valuations?

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jondiggsit
Because Miami is awesome?

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notadoc
Because science is part of the big science conspiracy?

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anigbrowl
There's a sucker born every minute. I could sell any property in Miami with ad
copy like 'One investment designed to make a liberal's head explode.' FEC
records for this election are going to be a goldmine for fraudsters.

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wehadfun
Because they like Miami and want to build something there.

They could put an Armani Hotel in Nashville or Indianapolis but those cities
are not cool.

~~~
VLM
A closer analogy would be New Orleans, which is already below sea level.

