Housing, Income Inequality Overshadow Tesla CEO’s Tweet

Elon Musk

Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk has problems with the accuracy of a Bloomberg article on income disparity and rent controls.  He prefers coffee to juice.

Difficulty making ends meet

As affordable housing in San Francisco migrates out of the reach of its residents, and protests in front of Google corporate buses that ferry the fortunate few driving up real estate prices from the city to their jobs in Silicon Valley, a Bloomberg article considered the fate of Virgina Velencia.

Using Musk as a literary foil for the 1%, the Bloomberg article profiles Velencia, a $12 per hour cafeteria employee in Tesla Motors Inc (NASDAQ:TSLA)’s sprawling Palo Alto headquarters.  A single mother, Velencia is struggling to keep her subsidized rent apartment in the area, and claims to feed Musk at their Tesla Motors Inc (NASDAQ:TSLA) headquarters.  Musk, while avoiding the touchy topic of income inequality in the region, instead focuses on Velencia’s comments on his morning habits.  “Bloomberg article today also has oddly false details,” Musk Tweeted, in a “Let them eat cake” moment. “I don’t eat breakfast at Tesla and drink coffee, not juice.”

Article tackles major topics

Velencia has been fighting eviction from her one bedroom apartment.  “It seems like they just don’t want us here,” she says with desperation around her. She is not alone.  The report notes housing affordability is an issue in both high and low cost markets. After nearly 5 million US residents lost their houses to foreclosure since 2008, demand for leased housing has swelled across the board. The report cited research from Axiometrics Inc. noting that rents have risen 16% in the previous 5 years.  US rents are expected to continue to outpace housing price gains, with rents rising 4.2% nationally in 2014 while housing prices are likely to gain 2.7%, according to a Fannie Mae National Housing Survey.

In rent controlled areas, a rise in rents can lead to a landlord’s increased attempts to remove tenants who locked in inexpensive living quarters. This often occurs after a new apartment owner acquires the property, the report noted, citing Jeffrey Langbaum, a Skillman, New Jersey-based Bloomberg Industries analyst who covers real estate investment trusts.  “Landlords can use evictions as a means of getting below-market rent tenants out in order to increase rents to market,” he was quoted as saying. For instance, in Woodland Park, where Velencia lives, the market value for renting a one bedroom apartment is nearly $500 per month more than her $1,064 monthly rent payment.

Growing economy does not lift all boats

As the US economy gains steam, it showers wealth on some while often leaving the most vulnerable, those without special skills or education, in the cold.  But amidst growing tide of populism that embraces the issues of income inequality and affordable housing, some big city mayors tend to work to find solutions – and use these issues in their election campaigns. New York City Mayor Bill de Blasio was elected on a platform of reducing income inequality while improving affordable housing.  Boston Mayor Martin Walsh has made moves to improve affordability in his city, as has Portland Mayor Charlie Hales, who recently proposed spending $20 million to improve housing affordability in his west coast city.



About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com