Under Water
Insurance
Florida’s recent history could be told two different ways. One version would sing the state’s praises for attracting millions of new residents while populations in other big states declined. The state unemployment rate is below three percent. Its housing market is hot, despite climbing interest rates. Indeed, one notable presidential candidate is so confident in his state’s public image he’s branding his campaign around it.
The other version of the Florida story is the kind we tell around here. Despite Florida’s good-on-paper numbers, its housing market is a ticking time bomb being swept under the rug by elected officials. The state’s open contempt for climate change leads to few protections for its vulnerable coastlines and the people who keep building and repairing the houses along them. Any time a disaster hits - and they’re going to hit harder, and more frequently - the state borrows more money to prop up its insurers.
Florida is not alone in this predicament - Louisiana, with less resources and slower growth preventing it from papering over massive insurance losses with new property taxes, is borrowing hundreds of millions to cover its state-backed insurer:
“We’re currently in the midst of an insurance crisis,” Louisiana Insurance Commissioner Jim Donelon said at a recent news briefing. The crisis is “largely as a result of hurricane activity in our state the last couple of years,” he said.
Gulf states prone to suffering more extreme weather events as human emissions rapidly warm the planet are running up against a problem - how do they insure homes when they’re likely to be damaged every couple years by a serious storm?
Insurance, as a business, functions by assessing risk, and charging more for riskier coverage. Any teenager who’s applied for car insurance understands these market forces. What about homeowners and developers who insist on building expensive homes in the path of storms? Well:
Property insurance rates in Florida are predicted to jump at least 40 percent in 2023, according to the Insurance Information Institute.
[…]
“Right now, Floridians pay arguably the highest average premium in the U.S.,” he said.
Friedlander said the average Florida homeowner is paying $4,231 for their property insurance, which is nearly triple the national rate of $1,544.
Orleans Parish is facing an 82% increase, on average, in Citizens homeowners’ insurance premiums for 2023. So, that same $3,714 premium could easily exceed $6,700 if it’s renewed this year.
That sound you hear is capitalism doing its thing. Some well-off homeowners in parts of Florida may be able to stomach property insurance bills that cost almost as much as their mortgages, but it won’t be tenable for many people who moved down to the Sunshine or Pelican states for the nice weather.
Private insurers are fleeing states where the effects of climate change have become so severe and predictable it no longer makes sense to do business there. The state-backed insurers left behind have no choice but to borrow huge sums against state budgets (paid for by taxpayers!) and raise rates to compensate.
Nor is this problem limited to Gulf states. People in the arid climes of California may face similar problems due to a different flavor of recurring disaster:
State Farm has stopped accepting homeowner insurance applications in California, citing the growing risk from catastrophes like wildfires and the rising cost to rebuild.
As Hamilton Nolan points out, there are two possible futures for us as a country. We can socialize the impacts of climate change on those who choose to live in flood- and fire-prone areas, shoveling federal funds to backstop the massive yearly rebuilding costs, or we can leave those people at the mercy of the free market. Florida and Louisiana are run by politicians who are philosophically opposed to socialism while loading their populace up with more debt to bail out the privileged few along the coastlines. California, the sunny technocratic utopia, will have to come up with new strategies to meet its obligations.
What these states could do is use climate engineering to build protection for their shores and forests - it could also help preserve those beautiful beaches and parks the tourists come to visit. They could stop allowing agriculture to siphon billions of gallons of water from ecosystems to grow almonds, or clearcutting natural forests to build pastures, farms, and orchards. If the most vulnerable states took climate change really seriously they could probably blunt the severity of storms five, ten, or twenty years from now. But they won’t, because grappling with climate change is a big, hard problem with complicated solutions, and state politics is hopelessly myopic. The real question is when these head-in-sand policies also becomes unaffordable.
Water
Speaking of, a tentative deal was reached last week to reduce the amount of water states in the Southwest pull from the Colorado River. Of the 1.9 trillion gallons used each year, guess what came out on top?
The majority of the water in the Colorado River basin — more than one trillion gallons — is used to grow feed for livestock, connecting the region’s water crisis to how much dairy and meat we eat.
More than half the water we siphon out of the Colorado basin is used to grow food to feed animals. Not even humans! Our food, clothing, and other crops only account for 448 billion gallons of water. Which is still more than all the water used by humans and businesses for drinking, bathrooms, et cetera. Datapoints worth remembering the next time someone scolds you for taking an extra long shower.
It is popular in some circles - the same ones who are taking all our water - to point out how expensive it is to grow lab meat. But it’s also ‘expensive’ to grow natural meat:
To put it in perspective, it could take more than 38 gallons of water, by some estimates, to produce one quarter-pound beef patty. That includes the water to grow all the feed like alfalfa and hay that the cattle themselves eat. In comparison, you need about five gallons of water to get the same amount of protein from tofu.
Thirty-seven percent of all the water from the Colorado basin goes towards grass and hay for livestock. The reason this ‘cost’ is not factored into the steaks or burgers we buy at the grocery store is the states don’t pay for all that water. Meanwhile, Lake Mead was so precariously low before this year’s rainstorms human remains were washing up everywhere.
Listen, I am not advocating for the elimination of the meat industry - though we’ve talked a lot about how its poorly and often dangerously run and causes significant damage to the planet and society. Lab meat and other acceptable alternatives are still a ways off. Convincing a nation of carnivores to change its habits could take years, if it’s even possible. But when we think about water usage, and the toll our lifestyle decisions take on the environment, it’s important to keep things in context. Our country’s obsession with plentiful, affordable meat and vegetables is literally sucking parts of the planet dry, and we don’t yet know what the long term effects will be. Conservation half-measures like the new deal are a start, but they’re nowhere near enough to stop the ongoing depletion of water resources in the west.
SPACs
Usually, when we talk about SPACs around these parts, we’re talking about Donald Trump’s inexplicable failure to take his sort-of-a-media-company public. What we haven’t talked about was who made all the money during the SPAC boom of the last two or so years:
Executives and early investors in companies that went public via special-purpose acquisition companies sold shares worth $22 billion through well-timed trades, profiting before share prices collapsed.
Not too surprising, given the structure of a SPAC. Insiders and early investors can acquire stock at $10. Once a SPAC shell acquires a company, shares in the SPAC can spike due to investor excitement, or whatever. Because many SPACs are not typical IPOs and often do not prevent executives and insiders from selling stock right away, those people can cash in during the initial hype cycle.
Should founders and investors have a right to cash out of a business they spent years building? Sure, of course. What if your company is, I don’t know, a fake electric truck start-up? Congrats, you can cash out a few hundred mil, though you might also go to jail. The problem with all of this is, stock trading is not zero sum, and retail or institutional investors are left on the other side of these bad trades, and they are often quite bad:
Companies that went public this way have lost more than $100 billion in market value. At least 12 have filed for bankruptcy and more than 100 are running low on cash, battered by higher interest rates and rising costs.
Over a hundred SPACs out of nearly five hundred the WSJ analyzed are struggling or kaput. Meanwhile, insiders cashed out massive sums while draining those companies of needed cash:
Of those with sales, insiders at 12 companies cumulatively sold shares worth at least $500 million. Insiders at about 80% of the 232 companies sold shares valued at less than $100 million, the Journal’s analysis shows. On average, insiders sold about $22 million of shares each.
One big problem with SPACs is the companies they merged with had to do little disclosure, which is how you ended up with Nikola. So it’s no surprise the only people who profited from this financial trick to circumvent the due diligence of an IPO were well-placed insiders who could see into the company’s financials and sell massive chunks of stock into markets at favorable prices.
For what it’s worth, the SPAC boom has cooled due to a combination of increased regulatory scrutiny, some folks being criminally charged, and interest rate increases drying up the loose capital that fueled these bad deals. But the dozens of insiders walking away with billions aren’t worried, though they may end up giving some of it back in the inevitable shareholder lawsuits. Propping up the companies they looted will be someone else’s responsibility.
Ken Paxton
Ken! It’s been awhile, buddy. Last we talked, you’d secured another term and managed to get the securities fraud charges against you kicked down the road yet again. Actually, come to think of it, whatever happened to the whistleblower charges your staff brought against you back in 2020 accusing you of corruption? How’s that going?
In painstaking and methodical detail in a rare public forum, four investigators for the House General Investigating Committee testified that they believe Paxton broke numerous state laws, misspent office funds and misused his power to benefit a friend and political donor.
A few notable things Paxton (allegedly) did:
Helped a real estate developer friend avoid foreclosures on his properties.
Hired outside attorneys to cover up crimes (allegedly) done by said friend.
Fired whistleblowers who filed complaints against him for corruption.
Used public funds to settle the whistleblower lawsuit.
Had his developer friend hire his mistress so she could live closer to him in Austin.
Pretty corrupt! And, in a rather stunning development, ol’ Ken got himself impeached by the Texas House, making him the third such scoundrel in the state’s history. He lost the vote 121-23, a resounding rebuke for his yearslong pattern of corrupt behavior.
How much of a scumbag do you need to be to get impeached by three quarters of the Texas state legislature? The same people gleefully propping up all the awful shit Greg Abbott and Dan Patrick are doing? Come on, man!
Writing a newsletter that occasionally features the worst people in American politics is typically quite unfulfilling since, as we’ve discussed at length, it is rare for any of them to suffer any consequences for their actions. But! Once in awhile one of them does enough crimes and pisses off enough people to get impeached and (at least temporarily) removed from office. And that’s a good day.
Short Cons
Slate - “And car dealers are not only one of the richest demographics in the United States. They’re also one of the most organized political factions—a conservative imperium giving millions of dollars to politicians at local, state, and national levels.”
TheCity - “In order to avoid litigation that could have forced a sale of the home in which they were living, Thomas and her husband wound up paying Doran and his two co-investors $235,000 to buy the share the Doran operation had picked up from the estranged sibling for $65,000.”
American Prospect - “Li’s paper, “Regulatory Capture’s Third Face of Power,” features a refreshingly blunt series of quotes from anonymous tech lobbyists, explaining how they infiltrate the minds of trade professionals.”
The Maine Monitor - “Maine’s standards for these facilities are more robust than those in some other states, long-term care advocates say. But given the significant shift of beds for seniors from nursing homes to residential care, advocates say that those regulations are inadequate and in urgent need of updating and tightening.”
ProPublica - “But a chorus of experts told ProPublica that the federal government’s decision to provide unconditional payments for vascular procedures — and then not pay attention to what happened — is a prime example of what’s wrong with the American health care system.”
Guardian - “Environmental groups, clean energy businesses and others have long raised concerns about claims made around carbon neutrality, carbon offsets, “natural” gas, “renewable natural gas”, plastic’s recyclability, organic labeling and vague terms that imply environmental responsibility but have no definition.”
POLITICO - “Whatever the logic — more parking, a planned visitor center with actual bathrooms in an old bank building next door — this piece of GOP history now sits across from a vape shop, near a car dealership, a Culver’s restaurant and a sewage treatment plant.”
FAIR - “That’s why corporate media have hit on a simple trick: If you want people to think that a country resistant to US leadership is a festering doomscape, just underexpose the hell out of your photographs.”
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