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One of the great advantages of being in my seat now versus the one I sat in while I was on the buy-side is that I have the opportunity to position myself at the hub of an exclusive research network – our own.

Many buy-side analysts and portfolio managers often share their research findings/anecdotes with our team real-time. Given that we don’t have a prop desk or run our own fund on the other side of client trades, I tend to get better information than I used to get.

Here’s a great note from one of Boston’s star senior buy-side analysts about how state finance really works.

Thanks again for all of your research contributions. We appreciate every one of them.



Unedited –


I have been looking at a house in Boston suburb, but realized that close to 1 acre of the 1.3 acres is on wetlands or restricted land.  So I went to town hall and had a # of eye opening discussions.   

First I went to Conservation and learned that the assessed value was already using a 5% discount b/c of the restrictions on the land, so I wouldn’t be able to get a tax break.    Then I went to the people that do assessments, and confirmed the assessed value of the house is $1.15 mm, while the asking price for the house is $850k.  (only 1 house in this town has ever sold for more than $1 mm).   This house has been on the market for 4-weeks with no bids.  I asked how soon I could get the assessed value lowered for tax purposes if I paid 25% less than assessed value.  I learned an interesting thing.  She said “the sale prices is not necessarily a good indicator of fair value”.  I said “really, what is a better indicator of fair value?”   She wasn’t sure, but said sometime people are forced to sell.  I asked if there were ever times when sale prices were higher than fair b/c of a price bubble caused by low interest rates.  She looked cross eyed.  I knew I’d gone too far. 

I conceded her argument and asked when could we evaluate the assessed value.  Evidently the assessed value is calculated once per  year and is based on comparable home sales 2 years ago.  The tax payments are made monthly, so the payments in for the Sept and Dec qtr are based on theoretical value – which they calculate by increasing the previous run rate 2%.  I asked – so basically you assume home values go up ever year.  She said “yes, but we don’t want to pass the whole increase through right away, so that’s why we only apply a 2% increase.”  I then said – “so you assume home values go up more than 2% every year”…. She agreed.

I went to tax collectors department and got the tax payments the house has made in the last 2 yrs.  I said, “If I buy this house for 25% less than the assessed value, don’t you think I’ll be paying lower taxes in a few years?”   She said, “no, probably not, because if the value were to actually fall, they’d just have to increase the tax rate because the town’s budget is dependent on those tax dollars.”

I couldn’t believe it.  I know I wasn’t dealing with the most educated people – but the assumption is still prices go up every year.  What is going to happen in 2 years when we are using comps that show falling market values?   Many states are already insolvent and it is only going to get worse, or they jack up tax rates and those overlevered families get squeezed out.  Am I missing something??? I know the market can rise and fall 80% a number of times in the next few years, but with this secular challenge…. How do we not keep moving lower?