Ivanhoe Set to Begin Production at World’s Second-Largest Copper Project

In the past three or four months, you may have noticed a plethora of headlines proclaiming the “death” of big U.S. cities such as New York, Chicago and Seattle. To paraphrase Mark Twain, these reports may be greatly exaggerated. However, there’s no denying that many urban city-dwellers—a great number of them high-income—are either relocating into the suburbs or strongly considering it, due to the double-whammy of the coronavirus and historic social unrest.

This latent “exodus,” as some are already calling it, may end up being among the biggest in U.S. history, or at least the biggest since the “white flight” of the 1950s and 60s. According to real estate brokerage firm Redfin, a record 27.4 percent of homebuyers sought to move out of their metro areas in the second quarter, with New York City, San Francisco, Los Angeles and Washington, D.C., seeing the highest net outflows.

The implications of this exodus will be felt not just by apartment tenants and city managers but also, potentially, municipal bond investors. The COVID-19 pandemic has led to an enormous loss of tax revenue for cities and states, and combined with the monumental cost of repairing damages sustained during summer-month riots, municipalities could be facing a $1 trillion budget shortfall. (I’ll have more to say on muni bonds later.)

Costliest Demonstrations in U.S. History

It’s now being estimated that the nationwide protests and riots that were sparked by the May 25 death of George Floyd in Minneapolis, Minnesota, may collectively be the costliest in U.S. history. According to Axios’ reporting of data compiled by Property Claim Services (PCS), the demonstrations across 20 states will cost the insurance industry between $1 billion and $2 billion. Adjusted for inflation, that may be an even greater cost than the demonstrations that took place in Los Angeles following the 1992 acquittal of police officers involved in the Rodney King case.

Costliest U.S. Riots and Civil Disorders Causing Insured Losses to the Insurance Industry
Dates Location Dollars 2020 Dollars
May 26 - June 8, 2020 20 States Across U.S. $1-2B $1-2B
Apr. 29 - May 4, 1992 Los Angeles, CA $775m $1.42B
Aug. 11-17, 1965 Los Angeles, CA $44M $357M
Jul. 23, 1967 Detroit, MI $42M $322M
May 17-19, 1980 Miami, Fl $65M $204M
Apr. 4-9, 1968 Washington, DC $24M $179M
Jul. 13-14, 1977 New York, NY $28M $118M
Jul. 12. 1967 Newark, NJ $15M $115M
Apr. 6-9, 1968 Baltimore, MD $14M $104M
Apr. 4-11, 1968 Chicago, IL $13M $97M
Source: Axios, Property Claim Services (PCS), U.S. Global Investors

In Minneapolis and St. Paul, where this year’s riots began, as many as 1,500 businesses were heavily damaged, and demolition costs have skyrocketed so incredibly high that large sections of the Twin Cities are left with “scorched buildings and piles of rubble that will linger for months,” according to Minnesota’s Star Tribune.

Violence and crime are top of mind among many people looking to move out of cities. The free-market think tank Manhattan Institute found that nearly half of high-income New Yorkers who were seeking to relocate cited crime as a contributing factor. At 47 percent, that was the number two reason for moving, number one being cost of living (69 percent).

High income new yorkers seeking to relocate outside the city point to rising cost of living
click to enlarge

The number of empty Manhattan apartments rose to a record 15,025 in August, up more than 166 percent from the same month in 2019, according to the Elliman Report. This brought the borough’s vacancy rate up to 5.1 percent, the highest in the report’s 14-year history. Movers in New York City are reportedly so busy right now, they’re having to turn people away.

Respondents to the Manhattan Institute’s survey aren’t overreacting over crime. Gun-related homicides across the U.S. are on track to be the worst since 1999. This past July was Chicago’s deadliest month in 28 years.