After 2 days of scaring the wits out of anyone, including me, I thought that I'd review some of the additional possible trigger events for a stock market collapse that do NOT include eclipses or full moons.
Not in any particular order, these are all potential dangers for the stock market meltdown that I've written about over the past couple of days.
1. Military conflict in the Middle East
Without re-iterating why this situation is so dangerous, you can read some of the latest developments here http://markostake.blogspot.com/2010/06/showdown-with-iran-looms-closer.html.
2. Either a major default or a complete disintegration of the Euro-Zone.
For some recent information, try this piece on the countries' out-of-control budget deficits http://markostake.blogspot.com/2010/05/euro-zone-budget-deficits-go-parabolic.html.
3. A key state, county, or city default.
For more information, you can read the lastest here http://markostake.blogspot.com/2010/07/50-states-50-budget-nightmares.html.
4. Or, the inability of the United States, as a whole, to pay its debts.
For more information on this mess: http://markostake.blogspot.com/2010/05/us-budget-deficit-continues-to-spiral.html.
5. A trade war with China.
Read about it here http://markostake.blogspot.com/2010/06/us-sino-trade-frictions-intensify.html.
6. An inevitable and growing shortage of oil.
Yes, "Peak Oil" is not a myth. Don't believe me? Read this: http://markostake.blogspot.com/2010/05/peak-oil-update.html.
7. Intensifying problems in our financial system, most notably, the banking sector. http://markostake.blogspot.com/2010/05/banking-sector-problems-accelerate.html. Obama's most ill-advised new financial reform bill will only make things worse! http://markostake.blogspot.com/2010/06/obamas-latest-folly-financial-reform.html.
8. The commercial real estate sector (not to mention residential).
You can read about that here http://markostake.blogspot.com/2010/04/commercial-real-estate-losses-next-shoe.html.
If you've read this far, let me leave one more for you to ponder: The American Empire is on its last legs. This is a long one, but well worth reading to put everything above in historical context. http://markostake.blogspot.com/2010/06/12-steps-of-empire.html.
Now a truism that a lot of folks hold onto, is the notion that it's darkest before the dawn. Trust me, we will soon know dark!
Marko's Take
Showing posts with label commercial real estate collapse. Show all posts
Showing posts with label commercial real estate collapse. Show all posts
Thursday, July 8, 2010
Wednesday, April 14, 2010
Commercial Real Estate Losses: The Next Shoe To Drop
The U.S. economy ought to be thought of as a millipede. It keeps dropping so many shoes, that it must have 1,000 feet! The latest bad news, and not really factored into the unraveling fabric of the global economy, is the ongoing crash in commercial real estate.
The latest victim is none other than Morgan Stanley, or more accurately, the firm's clients, whose investments in one of its commercial real estate funds, have just learned that their $8.8 billion investment has now suffered a loss of a mind-numbing $5.4 billion dollars!
That would likely make it the largest loss in the history of private-equity real-estate investing. Over the past 20 years, Morgan Stanley's real-estate unit was one of the biggest buyers of property around the world, initiating $174 billion in transactions since 1991. The firm's unfortunate clients include pension funds, college endowments and foreign investors. The losses came from investments in properties such as the European Central Bank's Frankfurt headquarters, a big development project in Tokyo and InterContinental hotels across Europe.
The soured investments, made by the Msref VI International Fund, continue to be a sore spot for Morgan Stanley, as it tries to extricate itself from complex deals around the world. In many cases, the company can't walk away from the poor investments because the fund made billions of dollars in guarantees.
The struggling Msref VI fund once projected a 22.1% average annual return on its commercial-real-estate deals around the world. It would appear safe to say that those projections won't be met (sarcasm intentional!).
During boom times, the fund generated fat fees for various segments of the bank. In 2007 alone, Morgan Stanley grabbed $104 million in acquisition fees, $22 million in fund-management fees, $13 million in financing fees, $36 million in real-estate-management fees and $21 million in financial-advisory fees, according to fund documents reviewed by the Wall Street Journal. The firm has not offered to disgorge those fees, but I'm sure they will put investors interests ahead of their own (sarcasm intentional!).
In South Korea, Msref VI projects a complete loss of its $350 million investment in an office building called Seoul Square, according to fund documents. An investor group, led by Msref VI, acquired it in 2007 for $1 billion — the highest price ever paid for a Seoul office building. The fund would prefer to walk away from the deal, but can't before making good on $91 million in renovations, guaranteed interest payments and other obligations.
Market analysis by the Congressional Oversight Panel (COP), which monitors the government’s Troubled Asset Relief Program (TARP), shows that $1.4 trillion in loans made over the last decade for retail properties, office space, industrial facilities, hotels and apartments will reach the end of their terms and require refinancing between 2011 and 2014.
The analysis forecasts that aggregate losses from defaults on commercial real estate loans maturing in the next few years could go as high as $300 billion, threatening to topple nearly 3,000 community banks nationwide.
The COP says community banks, rather than large Wall Street institutions, face the greatest risk of insolvency due to mounting commercial real estate (CRE) loan losses. According to federal guidelines, 2,988 banks nationwide are classified as having a “CRE Concentration.”
Another day, another disaster. These dropping shoes need to be used to kick the Washington cabal's behinds. Instead, the global financial community is made to suffer.
Marko's Take
Our latest YouTube video on the Legality Of The Personal Income Tax is now posted. You can access it here (http://www.youtube.com/markostaketv#p/u/0/1TInKnCIikg).
The latest victim is none other than Morgan Stanley, or more accurately, the firm's clients, whose investments in one of its commercial real estate funds, have just learned that their $8.8 billion investment has now suffered a loss of a mind-numbing $5.4 billion dollars!
That would likely make it the largest loss in the history of private-equity real-estate investing. Over the past 20 years, Morgan Stanley's real-estate unit was one of the biggest buyers of property around the world, initiating $174 billion in transactions since 1991. The firm's unfortunate clients include pension funds, college endowments and foreign investors. The losses came from investments in properties such as the European Central Bank's Frankfurt headquarters, a big development project in Tokyo and InterContinental hotels across Europe.
The soured investments, made by the Msref VI International Fund, continue to be a sore spot for Morgan Stanley, as it tries to extricate itself from complex deals around the world. In many cases, the company can't walk away from the poor investments because the fund made billions of dollars in guarantees.
The struggling Msref VI fund once projected a 22.1% average annual return on its commercial-real-estate deals around the world. It would appear safe to say that those projections won't be met (sarcasm intentional!).
During boom times, the fund generated fat fees for various segments of the bank. In 2007 alone, Morgan Stanley grabbed $104 million in acquisition fees, $22 million in fund-management fees, $13 million in financing fees, $36 million in real-estate-management fees and $21 million in financial-advisory fees, according to fund documents reviewed by the Wall Street Journal. The firm has not offered to disgorge those fees, but I'm sure they will put investors interests ahead of their own (sarcasm intentional!).
In South Korea, Msref VI projects a complete loss of its $350 million investment in an office building called Seoul Square, according to fund documents. An investor group, led by Msref VI, acquired it in 2007 for $1 billion — the highest price ever paid for a Seoul office building. The fund would prefer to walk away from the deal, but can't before making good on $91 million in renovations, guaranteed interest payments and other obligations.
Market analysis by the Congressional Oversight Panel (COP), which monitors the government’s Troubled Asset Relief Program (TARP), shows that $1.4 trillion in loans made over the last decade for retail properties, office space, industrial facilities, hotels and apartments will reach the end of their terms and require refinancing between 2011 and 2014.
The analysis forecasts that aggregate losses from defaults on commercial real estate loans maturing in the next few years could go as high as $300 billion, threatening to topple nearly 3,000 community banks nationwide.
The COP says community banks, rather than large Wall Street institutions, face the greatest risk of insolvency due to mounting commercial real estate (CRE) loan losses. According to federal guidelines, 2,988 banks nationwide are classified as having a “CRE Concentration.”
Another day, another disaster. These dropping shoes need to be used to kick the Washington cabal's behinds. Instead, the global financial community is made to suffer.
Marko's Take
Our latest YouTube video on the Legality Of The Personal Income Tax is now posted. You can access it here (http://www.youtube.com/markostaketv#p/u/0/1TInKnCIikg).
Wednesday, February 24, 2010
Banks Leading The Economy Off The Cliff!
It's awfully hard to like banks. Let's face it: they charge us absurd rates on credit cards, are unwilling to lend to even the best of credits and pay themselves ever so handsomely despite being at the forefront of the economic debacle known as 2008-2009. Leading bankers themselves are smug, out-of-touch with America and in cahoots with the Administration. It's hard not to want to see them fail miserably!
Unfortunately, we NEED healthy banks. We NEED good banks. No economy can prosper without a healthy financial sector. And sadly, we don't have one. In fact, the banking sector is quietly deteriorating further despite all the machinations of the Federal Reserve (FED). The trend is downright alarming AND ominous!
The number of problem banks in the US continued to soar in last year’s fourth quarter, hitting their highest level since 1993, according to a regulatory report released on Tuesday(http://www.ft.com/cms/s/0/334b89dc-2097-11df-9775-00144feab49a.html).
The findings by the Federal Deposit Insurance Corp. (FDIC) suggest that, although the US economy is on the mend, the financial industry, bedevilled by souring residential and commercial real estate loans, will take longer to recover.
The FDIC said 702 banks were considered troubled at the end of 2009, up from 552 three months earlier. Problem assets totalled $402.8 bilion in the final period, compared with $345.9 billion in the third quarter. By contrast, Lehman Brothers listed $639 billion in assets at the time of its bankruptcy filing in September 2008.
No longer confined to Wall Street, the financial crisis has cascaded over to regional and community banks that are feeling a disproportionate amount of the pain. “The great recession has very much become a Main Street problem,” said Richard Brown, the FDIC’s chief economist.
Loan losses jumped for the 12th consecutive quarter to total $53 billion, an increase of 37% over the year-ago period. On an annualized basis the rate of losses accounted for in the quarter was the highest in more than two decades.
Losses rose in all significant categories, including residential mortgage loans and credit card debt. One of the fastest growing categories for uncollectable debt was commercial real estate.
Bank lending, the lifeblood of the U.S. economy, is falling at a record pace. U.S. banks last year posted their sharpest decline in lending since 1942, suggesting that the industry's continued slide is making it harder for the economy to recover (http://online.wsj.com/article/SB10001424052748704188104575083332005461558.html?mod=djemTEW_h).
While top-tier banks are recovering at a faster clip, the rest of the industry is still suffering, according to a quarterly report from the FDIC. Banks fighting for survival, especially those plagued by losses on commercial real estate, are less willing to extend loans, siphoning credit from businesses and consumers.
Besides registering their biggest full-year decline in total loans outstanding in 67 years, U.S. banks set a number of grim milestones. According to the FDIC, the number of U.S. banks at risk of failing hit a 16-year high at 702. More than 5% of all loans were at least three months past due, the highest level recorded in the 26 years the data has been collected! And the problems are expected to last through 2010!
The struggling U.S. banking industry remains a problem for policy makers eager for banks to lend again. Lawmakers on Capitol Hill and administration officials have pushed banks to lend, particularly in light of the billions in taxpayer aid injected into the financial industry over the past two years. Banking groups and their members counter that they're under pressure from regulators to be more prudent and that demand from struggling consumers and businesses isn't there.
Some small-business owners say they could expand if they could just get a loan. Nick Sachs, president of Homewatch CareGivers Cincinnati-Metro, says he's been asking banks for a loan of $150,000 to $250,000 since 2008. He says his home-health-care franchise could hire 20 to 30 aides and even one or two office assistants.
Most surveys suggest a combination of factors are at play. A January survey by the FED of senior loan officers showed banks have slowed their efforts to tighten lending standards, but have not backed off the more stringent loan terms they put in place over the past two years. The same report, however, also showed that demand for loans from businesses and consumers continues to fall.
Bankers, on the other hand, say creditworthy borrowers are hard to come by. Fifth Third Bancorp recently extended a $3.5 million line of credit to Chicago-based One Hope United after the state of Illinois, beset by a budget crisis, delayed payments to the child-and-family-services provider.
Clearly, we have a so-called "vicious circle" problem. The poor condition of borrowers coupled with the poor condition of the economy are making it tougher for banks to lend. The unwillingness of banks to lend, on the other hand, is contributing to the poor economy and resulting poor credit-worthiness of potential borrowers. Sadly, before anyone in Washington, D. C., figures this out, we'll be well on our way into the Second Dip of the Double-Dip Hyper-Inflationary Depression.
Disagree? Think I'm being unfair to Bankers? TAKE ME ON!
Marko's Take
Our second episode on You Tube is now up. You can see it by clicking here: http://www.youtube.com/markostaketv.com. Hope you like it! We will have episodes weekly for the forseeable future!
Unfortunately, we NEED healthy banks. We NEED good banks. No economy can prosper without a healthy financial sector. And sadly, we don't have one. In fact, the banking sector is quietly deteriorating further despite all the machinations of the Federal Reserve (FED). The trend is downright alarming AND ominous!
The number of problem banks in the US continued to soar in last year’s fourth quarter, hitting their highest level since 1993, according to a regulatory report released on Tuesday(http://www.ft.com/cms/s/0/334b89dc-2097-11df-9775-00144feab49a.html).
The findings by the Federal Deposit Insurance Corp. (FDIC) suggest that, although the US economy is on the mend, the financial industry, bedevilled by souring residential and commercial real estate loans, will take longer to recover.
The FDIC said 702 banks were considered troubled at the end of 2009, up from 552 three months earlier. Problem assets totalled $402.8 bilion in the final period, compared with $345.9 billion in the third quarter. By contrast, Lehman Brothers listed $639 billion in assets at the time of its bankruptcy filing in September 2008.
No longer confined to Wall Street, the financial crisis has cascaded over to regional and community banks that are feeling a disproportionate amount of the pain. “The great recession has very much become a Main Street problem,” said Richard Brown, the FDIC’s chief economist.
Loan losses jumped for the 12th consecutive quarter to total $53 billion, an increase of 37% over the year-ago period. On an annualized basis the rate of losses accounted for in the quarter was the highest in more than two decades.
Losses rose in all significant categories, including residential mortgage loans and credit card debt. One of the fastest growing categories for uncollectable debt was commercial real estate.
Bank lending, the lifeblood of the U.S. economy, is falling at a record pace. U.S. banks last year posted their sharpest decline in lending since 1942, suggesting that the industry's continued slide is making it harder for the economy to recover (http://online.wsj.com/article/SB10001424052748704188104575083332005461558.html?mod=djemTEW_h).
While top-tier banks are recovering at a faster clip, the rest of the industry is still suffering, according to a quarterly report from the FDIC. Banks fighting for survival, especially those plagued by losses on commercial real estate, are less willing to extend loans, siphoning credit from businesses and consumers.
Besides registering their biggest full-year decline in total loans outstanding in 67 years, U.S. banks set a number of grim milestones. According to the FDIC, the number of U.S. banks at risk of failing hit a 16-year high at 702. More than 5% of all loans were at least three months past due, the highest level recorded in the 26 years the data has been collected! And the problems are expected to last through 2010!
The struggling U.S. banking industry remains a problem for policy makers eager for banks to lend again. Lawmakers on Capitol Hill and administration officials have pushed banks to lend, particularly in light of the billions in taxpayer aid injected into the financial industry over the past two years. Banking groups and their members counter that they're under pressure from regulators to be more prudent and that demand from struggling consumers and businesses isn't there.
Some small-business owners say they could expand if they could just get a loan. Nick Sachs, president of Homewatch CareGivers Cincinnati-Metro, says he's been asking banks for a loan of $150,000 to $250,000 since 2008. He says his home-health-care franchise could hire 20 to 30 aides and even one or two office assistants.
Most surveys suggest a combination of factors are at play. A January survey by the FED of senior loan officers showed banks have slowed their efforts to tighten lending standards, but have not backed off the more stringent loan terms they put in place over the past two years. The same report, however, also showed that demand for loans from businesses and consumers continues to fall.
Bankers, on the other hand, say creditworthy borrowers are hard to come by. Fifth Third Bancorp recently extended a $3.5 million line of credit to Chicago-based One Hope United after the state of Illinois, beset by a budget crisis, delayed payments to the child-and-family-services provider.
Clearly, we have a so-called "vicious circle" problem. The poor condition of borrowers coupled with the poor condition of the economy are making it tougher for banks to lend. The unwillingness of banks to lend, on the other hand, is contributing to the poor economy and resulting poor credit-worthiness of potential borrowers. Sadly, before anyone in Washington, D. C., figures this out, we'll be well on our way into the Second Dip of the Double-Dip Hyper-Inflationary Depression.
Disagree? Think I'm being unfair to Bankers? TAKE ME ON!
Marko's Take
Our second episode on You Tube is now up. You can see it by clicking here: http://www.youtube.com/markostaketv.com. Hope you like it! We will have episodes weekly for the forseeable future!
Monday, January 25, 2010
Is California Real Estate Recovering?
It appears to be. A slew of statistics are showing signs that the poster child for real estate devastation, California, is finally showing signs of returning to life.
Some recently released statistics provide a compelling case that things in The Golden State are getting much better. According to the California Association Of Realtors (CAR), inventories of unsold, previously owned homes shrank to a five-year low in December.
The supply of unsold inventory shrank from 5.6 months a year ago to the current number of 3.8 months. More importantly, December's number is substantially lower than the peak of 16.6 months in January 2008. The current number is equivalent to that last seen in 2005 - during the mania in real estate. By comparison the trough was about 1.5 months recorded in 2004.
Note: this does NOT mean I am calling for a renewed mania.
The median price of an existing single-family home has risen 8.4% from one year ago to $306,000, making December the 10th straight month-over-month increase.
As to Southern California, sales were up 16.4% from November and 12% from December of last year, according to MDA Data Quick, a San Diego-based firm which tracks real estate trends from public property records.
December sales figures were the highest for that month since 2006. MDA Data Quick's methodology compares like month to like month as opposed to "seasonally adjusting" numbers. Despite the increase in sales, they remain 11% BELOW the average for a December as compiled over the last 22 years.
Nationally, the picture is not nearly so rosy. Today, the National Association of Realtors (NAR), reported that sales had FALLEN to a "seasonally adjusted" rate of 5.45 million in December from 6.54 million in November. The median sales price was $178,300 - up 1.5% from one year ago. This was the first yearly gain since August 2007.
My call for a bottom in RESIDENTIAL real estate has generated some heat in the past. I'm ready for ya!
TAKE ME ON!
Marko's Take
P.S. According to the latest vote tallies, it appears that Ben Bernanke WILL be approved for a second term.
I'll cover the implications of a second Bernanke term in the near future as new developments unfold.
Some recently released statistics provide a compelling case that things in The Golden State are getting much better. According to the California Association Of Realtors (CAR), inventories of unsold, previously owned homes shrank to a five-year low in December.
The supply of unsold inventory shrank from 5.6 months a year ago to the current number of 3.8 months. More importantly, December's number is substantially lower than the peak of 16.6 months in January 2008. The current number is equivalent to that last seen in 2005 - during the mania in real estate. By comparison the trough was about 1.5 months recorded in 2004.
Note: this does NOT mean I am calling for a renewed mania.
The median price of an existing single-family home has risen 8.4% from one year ago to $306,000, making December the 10th straight month-over-month increase.
As to Southern California, sales were up 16.4% from November and 12% from December of last year, according to MDA Data Quick, a San Diego-based firm which tracks real estate trends from public property records.
December sales figures were the highest for that month since 2006. MDA Data Quick's methodology compares like month to like month as opposed to "seasonally adjusting" numbers. Despite the increase in sales, they remain 11% BELOW the average for a December as compiled over the last 22 years.
Nationally, the picture is not nearly so rosy. Today, the National Association of Realtors (NAR), reported that sales had FALLEN to a "seasonally adjusted" rate of 5.45 million in December from 6.54 million in November. The median sales price was $178,300 - up 1.5% from one year ago. This was the first yearly gain since August 2007.
My call for a bottom in RESIDENTIAL real estate has generated some heat in the past. I'm ready for ya!
TAKE ME ON!
Marko's Take
P.S. According to the latest vote tallies, it appears that Ben Bernanke WILL be approved for a second term.
I'll cover the implications of a second Bernanke term in the near future as new developments unfold.
Saturday, January 16, 2010
10 For 10: 10 Predictions For 2010
Every pundit puts out an annual list of what to look for in the upcoming year. Most do so in either late December or very early January. It's now this pundit's turn to give his "Take".
In no particular order of importance, I expect to see the following:
1. The economy, currently in "recovery" mode, will start to sputter by no later than the middle of the second quarter, and will cascade lower into the end of the year (http://markostake.blogspot.com/2009/12/recovery-recession-or-depression.html).
2. Residential home prices wll RISE through 2010 (http://markostake.blogspot.com/2010/01/bottom-in-real-estate.html).
3. Commercial real estate collapses, led by closures of strip malls and the failure of small businesses (http://markostake.blogspot.com/2009/11/small-business-failures-leading.html).
4. Stocks RISE in 2011 (http://markostake.blogspot.com/2010/01/why-does-stock-market-act-like.html).
5. Republicans take the House and the Senate.
6. Interest rates will remain low throughout the year (http://markostake.blogspot.com/2010/01/have-any-interest-in-future-direction.html).
7. Some version of a "Windfall Profits Tax" gets enacted on oil companies.
8. Obamacare does NOT pass in anything close to its current form, unless via executive mandate (http://markostake.blogspot.com/2009/12/obamacare-part-1-whos-fer-it-whos-agin.html), (http://markostake.blogspot.com/2009/12/obamacare-part-2-when-us-gets-involved.html),
(http://markostake.blogspot.com/2009/12/obamacare-part-3-economic-reality.html).
9. Shortages of necessities such as food, water, gasoline and other staples will lead to unprecedented civil disobedience and riots.
10. Gold will reach something in the order of $5,000 and Silver $250 per ounce by the end of the year or early 2011.
11. I will make an 11th prediction: The U.S. Dollar will be virtually, if not entirely relegated to second-tier status.
As you can tell from the 11th prediction, at least one of my forecasts came true. I did indeed make an 11th prediction!
You didn't think I'd take a chance on going 0 for 10 did you?
Thanks for reading! If you have some predictions of your own or think I missed mentioning one, you know what to do: TAKE ME ON!
Marko's Take
In no particular order of importance, I expect to see the following:
1. The economy, currently in "recovery" mode, will start to sputter by no later than the middle of the second quarter, and will cascade lower into the end of the year (http://markostake.blogspot.com/2009/12/recovery-recession-or-depression.html).
2. Residential home prices wll RISE through 2010 (http://markostake.blogspot.com/2010/01/bottom-in-real-estate.html).
3. Commercial real estate collapses, led by closures of strip malls and the failure of small businesses (http://markostake.blogspot.com/2009/11/small-business-failures-leading.html).
4. Stocks RISE in 2011 (http://markostake.blogspot.com/2010/01/why-does-stock-market-act-like.html).
5. Republicans take the House and the Senate.
6. Interest rates will remain low throughout the year (http://markostake.blogspot.com/2010/01/have-any-interest-in-future-direction.html).
7. Some version of a "Windfall Profits Tax" gets enacted on oil companies.
8. Obamacare does NOT pass in anything close to its current form, unless via executive mandate (http://markostake.blogspot.com/2009/12/obamacare-part-1-whos-fer-it-whos-agin.html), (http://markostake.blogspot.com/2009/12/obamacare-part-2-when-us-gets-involved.html),
(http://markostake.blogspot.com/2009/12/obamacare-part-3-economic-reality.html).
9. Shortages of necessities such as food, water, gasoline and other staples will lead to unprecedented civil disobedience and riots.
10. Gold will reach something in the order of $5,000 and Silver $250 per ounce by the end of the year or early 2011.
11. I will make an 11th prediction: The U.S. Dollar will be virtually, if not entirely relegated to second-tier status.
As you can tell from the 11th prediction, at least one of my forecasts came true. I did indeed make an 11th prediction!
You didn't think I'd take a chance on going 0 for 10 did you?
Thanks for reading! If you have some predictions of your own or think I missed mentioning one, you know what to do: TAKE ME ON!
Marko's Take
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