Posts tagged New York
The Problem With Democracy
Jan 15th
The poor Venezuelans. But that’s the problem with democracy. Everyone gets what the majority of voters deserve. They voted for Chavez. Now, they have to pay for it.
The lawfully elected (insofar as these things are ever lawful) government of Venezuela cut the value of its currency in half. That was only a week or so ago. Then, there was “chaos” in the streets, according to press reports. “Inflation fear grips nation,” says The Washington Post story.
In response, Venezuelans are on a buying spree.
“What can the citizen do, but conclude that his money is best spent on a toaster [that] he really doesn’t need,” said the mayor of Caracas.
Señor Chavez has only done what Señor Bernanke and Señor Geithner have done, too. They have all so confused the situation that ordinary people have no way of knowing what to think…and no way of protecting themselves, other than by doing something stupid.
But wait…there’s more…
Now, the press is reporting that Caracas faces “rolling blackouts.”
Well, isn’t that just like dunderheaded government? Energy rich Venezuela is running out of juice. Good work, central planners!
How long will it be before New York runs out of power, too? Or Los Angeles? We don’t know…but give the feds a chance. They’ll make a mess of things; count on it.
The Problem With Democracy originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a “uniquely refreshing” perspective on the global economy, investing, and today’s markets.
Special Deal for Labor Unions in Health Care Bill
Jan 15th
The labor unions have been fighting the Senate health care bill for some time now–specifically, the provision that levies high taxes on “Cadillac” plans that exceed certain maximums. That was expected to be a sticking point in the negotiations between the Senate and the House, but as Samuel Johnson once said, “the prospect of being hanged focuses the mind wonderfully.” With the potential loss of their 60 vote majority lurking ahead, they can’t dawdle on the details; it’s time to haul in their lente and festina like hell.
And so it looks like they may have reached a deal sooner than otherwise expected: unions get a special two-year exclusion from the tax.
Presumably, the unions plan to go back and get their exclusion extended every few years. Otherwise, the deal doesn’t make much sense. The ostensible reason for the respite is to allow them to renegotiate new collective bargaining agreements, but in these inflationary times, how many collective bargaining agreements last longer than three years? I could be wrong about that, but unless I am, 2013 is plenty far enough away for most of the unions in question to negotiate better contracts.
Giving them an extra two years seems like acknowledging that they can’t negotiate better contracts, a situation that won’t really change very much after the recession is over for many of the unions in question. Moreover, trading wage gains for less generous health benefits arguably gets very complicated for unions with multi-employer plans. Not least because the workers will not be feuding with insurance plans over claim denial, but with the unions themselves.
The next question is: where do they make up the lost money? There are three obvious places left: use some part of the “millionaire’s tax” that the House bill imposed; beef up the scope of the “automatic” cost cuts; or slash provider reimbursements even further. The former is problematic because it hits New York and California’s powerful delegations the hardest. And as far as I can tell the trend has been towards weakening, rather than strengthening, the automatic cost cutting authority. So I expect there will be some enhancement to the “productivity indexing” for provider payments, and/or a new special tax on one or more classes of provider.
Of course, they could just eat the concession; they have wiggle room in the CBO estimates. But I doubt they will. For one thing, they will probably have to make other concessions that eat up the wiggle room. For another, they like making each bill more deficit-busting than the last; I fully expect whatever monstrosity emerges from this quasi-conference will have a CBO score even better than the final Senate bill. So they’ll probably be looking to make up the money somewhere.
This may backfire. If you think that the Nebraska deal was unpopular, just wait until the administration announces higher taxes on everyone but its friends in the labor movement. We may see if the popularity of the health care bill still has room to fall.
Update: The more I think about this, the more I think it’s a huge mistake. Support for unions is at a record low, and the GM deal has already made people think that the Democrats are doing sweetheart deals for Big Labor with our money. Republicans will have a field day.
Jamie Dimon Says They Didn’t Model Massive House Price Collapse
Jan 15th
Kevin Drum is shocked to find Jamie Dimon admitting that they weren’t modeling a total collapse in house prices. I’m shocked to find that Kevin is shocked. That’s pretty much the standard explanation–at least, a partial one–for why lenders became willing to take on so much risk. Massive house price depreciation had pretty much dropped out of their models, which mostly focused on prepayment risk.
This is not quite as crazy as it sounds. For one thing, Kevin has truncated the quote a little bit; the version I read has Dimon saying “We didn’t stress test housing prices going down by 40%.” America had not had a sustained national decline in residential housing prices since the Great Depression. So while local banks might need to model the risk of substantial price depreciation, banks glomming together national pools of mortgages figured this wasn’t such a big problem–as long as you didn’t think we were going to have another Great Depression. And most regulators, commentators, economists, bankers, and ordinary folks thought we weren’t going to have another Great Depression.
Indeed, we didn’t. It turned out to be a sufficient, but not necessary condition for a collapse in housing prices.
Even if they had put housing price implosion in their models, where would they have gotten the data to fine-tune their models? It’s not enough to say, “We should model a broad national decline in house prices;” you need some values for how many people will default when house prices fall. The last time we had such a national collapse, mortgages were relatively short term debt instruments that didn’t self-amortize. We’ve had local bubbles since in places like New York and California. But New York is definitely a bad model–it’s a city mostly of renters in which co-ops frequently demand down payments of 25-50%, or even all cash. California might have been better, but unlike a lot of places, it’s a non-recourse state. And so on. How well could Dimon have hoped to build a nationwide model off of a few local jurisdictions?
That’s not to excuse the bankers for not trying; some allowance for the risk of a broad price decline would have been better than none. But I’m not sure that it would have done much to alter their lending habits. Going on historical data, the risk of a huge price drop within the average lifetime of a mortgage (which is less than ten years), would normally have been very small, and would have shown up in any probability-weighted model as a fairly trivial adjustment compared to the large risk that the mortgages in the pool would be refinanced. By the time it was obvious that the risk of a broadly falling market was very great, the bubble was about to pop of its own accord. Indeed, even without such a model, Dimon pulled out of subprime, because he didn’t need a spreadsheet to tell him that it was going to turn into a disaster.
The Bank of New York Mellon Is Undervalued
Jan 15th
Filed under: Bank of New York (BK), Stocks to Buy
The Bank Of New York Mellon’s (BK) stock has meandered since the April 6, 2009 buy call at a price of $28.16. With most other stocks, that would be a concern, but given the bank’s track record, I’m obviously reiterating my buy rating.
Founded by Alexander Hamilton, The Bank of New York provides services that enable institutions and individuals to move and manage their financial assets in more than 100 markets globally. The core of BK’s business, custodial services, is doing just fine, with more than $16 trillion in assets under custody.
Continue reading The Bank of New York Mellon Is Undervalued
The Bank of New York Mellon Is Undervalued originally appeared on BloggingStocks on Thu, 14 Jan 2010 17:30:00 EST. Please see our terms for use of feeds.
JPMorgan Earnings Preview: Expectations High but Down from Q3
Jan 15th
Filed under: Earnings reports, Forecasts, JPMorgan Chase (JPM)
JPMorgan Chase & Co. (JPM), whose CEO testified before Congress this week, is scheduled to discuss its fourth-quarter 2009 financial results in a conference call Friday, Jan. 15, at 9:00 AM (ET). You can catch the live webcast of the call on the company’s website.
During the three months that ended in December, JPMorgan completed the integration of Chase and Washing Mutual banks and declared a quarterly dividend. Analysts surveyed by Thomson Reuters are looking for this New York-based financial giant to report that earnings rose 88.7% from a year ago to $0.62 per share, though that is 24.4% lower than in the third quarter. Fourth-quarter revenue is expected to total $27.0 billion, up 56.9% from a year ago, but down from $28.8 billion in the previous quarter.
Continue reading JPMorgan Earnings Preview: Expectations High but Down from Q3
JPMorgan Earnings Preview: Expectations High but Down from Q3 originally appeared on BloggingStocks on Thu, 14 Jan 2010 15:00:00 EST. Please see our terms for use of feeds.
Hotel Foreclosure Watch: The Four Seasons Turns Cold in Dallas
Jan 15th
- Dallas Four Seasons’ Web site
It looks like the gamble taken by commercial-property owner BentleyForbes Holdings LLC last October in defaulting on its mortgage on the Four Seasons Dallas might not pay off. The lenders who hold the 431-room hotel’s mortgage filed this week to foreclose.
BentleyForbes skipped its October payment on the Four Season’s $183 million securitized mortgage in a bid to get the mortgage’s special servicer, CWCapital Asset Management, to revise the loan’s terms. In doing so, BentleyForbes explained that the hotel’s cash flows no longer covered its $10.9 million of annual interest payments.
This week, U.S. Bank, acting on behalf of the mortgage holder, filed a notice with the Dallas County Clerk’s Office to foreclose on the property, according to Foreclosure Listing Service Inc., a foreclosure-research company. A CWCapital representative didn’t return calls seeking comment.
A lawyer representing BentleyForbes said the owner has “demonstrated its good faith and continued commitment” to the hotel with a $60 million renovation of the property in the past two years.
“The filing of the foreclosure posting is something that BentleyForbes was expecting as it is a standard administrative process required by lenders,” attorney Stephen Meister said in a statement. “Regardless, BentleyForbes remains in proactive discussions with its lenders at the Four Seasons Dallas and is committed to working out a successful financial structure.”
Closely held BentleyForbes, based in Los Angeles, owns several office complexes and hotels across the U.S. It bought the Four Seasons in the Dallas suburb of Irving, Texas, in 2006. The hotel is known nationally as the site of the PGA’s annual EDS Byron Nelson Championship golf tournament.
The Four Seasons Dallas is one of several hotels carrying the Four Seasons brand to run into mortgage difficulty. Millennium Partners LLC, owner of the Four Seasons San Francisco, went delinquent last summer on the hotel’s $90 million securitized mortgage in a bid to get revised terms. Neither Millennium nor the special servicer on the loan, Cerberus Capital Management LP’s LNR Partners Inc., returned calls seeking comment.
Beanie Baby tycoon Ty Warner’s Ty Warner Hotels and Resorts is attempting to get an extension of the due date on its $345 million securitized mortgage on four resorts, including the New York Four Seasons. He had difficulty obtaining an extension beyond the loan’s Jan. 9 due date because the properties weren’t generating enough cash flow to meet the loan’s threshold for qualifying for the extension.
Now, Mr. Warner and the special servicer overseeing the mortgage are in a forbearance pact in which the servicer has pledged not to foreclose as the two sides try to hammer out a long-term extension, according to a person familiar with the talks. A representative of Mr. Warner’s hotel company didn’t return calls seeking comment.
The End of Extend and Pretend
Jan 15th
Attention REIT investors! The commercial real estate is a disaster-in-the-making – both for property investors and for the thousands of American banks that are carrying outsized exposure to commercial borrowers.
Commercial real estate borrowers and their lenders face a mountain of debt maturities over the next few years. And re-financing this debt will be next to impossible, thanks to soaring vacancy rates and plummeting property values. “Zombie buildings” are popping up all over the place, according to Crain’s New York Business.
“Virtually all the assets bought between ’05 and ’07 cannot be refinanced today without a significant capital infusion,” says Shawn Mobley, executive vice-president at real estate firm Grubb & Ellis Co. “These buildings need to be recapitalized to get back in the business of being active real estate.”
Unfortunately, these “zombie buildings” can’t compete for new tenants because they lack the money to cover brokers’ commissions and interior office reconstruction. The number of zombie buildings in the Chicago area is likely to grow in 2010, according to a forecast by Grubb & Ellis. For landlords, the trend means even top-quality office properties are likely to divide themselves into “haves” and “have-nots,” with the latter seeing their vacancy rates worsen because of the lack of financing.
We’ll see many more zombie buildings emerge in 2010.
Many REIT investors seem to have grown complacent about the risks in the commercial real estate market. These investors seem to believe that banks will simply roll over underwater loans once they reach maturity, in the hopes that a future rebound in property values will catapult these loans back into solvency. This phenomenon is known as “extend and pretend.”
The “extend and pretend” strategy did not work for Japan’s banking system, and it won’t work for the US either. It won’t work because it will lead to a two-tiered commercial property market. In one tier, we’ll see property owners with affordable mortgages cut rents to fill their vacancies. In the other tier, we’ll see property owners and lenders hoping for a return to bubble values, and maintaining a high-mortgage, high-rent strategy.
Property owners in the high-rent tier may be making payments on their underwater mortgage for now. But once the low-rent tier starts winning all of the scarce leasing activity, vacancies in the high-rent, high-mortgage tier will accelerate and property-level cash flow will fall dramatically.
In other words, just because a mortgage happens to be performing now does not mean it will be viable in the long run. As commercial landlords with negative mark-to-market equity watch their tenants flee, they will stop making mortgage payments and surrender their properties to the lenders. Thus, sooner or later, commercial real estate will find its way down to the prices that would attract new investors and speculators. This process is known as “price discovery.”
By rolling over the maturing bubble-vintage loans made to underwater, but cash-flowing properties, the banking system (if allowed to do so by its regulators) would establish an artificially high price floor. Such industry-wide collusion would slow – but not prevent – the slide toward real-world pricing – the kind that would attract new investment.
But even if the process of price discovery in real estate is delayed by “extend and pretend” at banks, some measure of price discovery will come from the liquidation of properties that collateralize commercial mortgage-backed securities (CMBS). In these securities, when the underlying properties default on mortgages, the holders of the senior CMBS tranches usually push for liquidation. This means that junior tranche holders get wiped out, but losses to the senior tranches are minimized. The senior tranche holders have neither the patience nor the risk tolerance to hope for a rebound in property values. They just want their principal back as soon as possible.
One way or another, commercial real estate prices will fall toward their real-world prices…which are clearly below the “pretend” prices that most banks are using today.
Therefore, my outlook for REITs remains very bearish. Many REIT investors seem to believe that “extend and pretend” is a viable strategy for the over-levered commercial real estate sector. I do not.
REITs, despite facing the toughest fundamental outlook in the history of the asset class, are trading at valuations typical of market peaks. Citigroup’s REIT team, in a recent research note, estimates that the REITs it follows are trading for 18 times estimated 2010 cash flow and a 7.2% implied cap rate. This is expensive in ANY market environment. Investors speculating in REITs at today’s high valuations give themselves no margin of safety.
Citigroup’s estimated 2010 cash flow for its REIT coverage universe assumes a strong rebound in demand for commercial space, which I do not expect. Demand will remain below supply for years, forcing REIT landlords to cut the asking price for rents on vacant space.
The REIT sector has already “priced in” the typical sharp post-WWII inventory-led economic recovery. But I expect a very tepid, narrow recovery with a “double dip” recession by late 2010. The current “recovery” is not typical. It is merely a stimulus-induced bounce in the midst of what will likely wind up as a decade-long deleveraging, downscaling economy.
So all that’s necessary for a 40% decline in the REIT index is for net operating income to fall 20% to 30% (through a combination of falling rents, rising tenant defaults, and higher interest rates on new CRE mortgages), and cap rates to increase by 200 to 300 basis points – just slightly above the long-term average. A slow economy could easily produce such an outcome…if not much worse.
The UltraShort Real Estate ProShares (NYSE:SRS) is an aggressive way to bet against the REIT sector. This stock has performed very poorly during the last several months, as REIT shares have soared to the heavens. But I think it makes sense to be holding SRS now, because REIT valuations are high, and fundamentals will remain terrible, no matter how successfully real estate lenders manage to “extend and pretend.”
Sell REITs.
Until next time,
Dan Amoss
for The Daily Reckoning
The End of Extend and Pretend originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a “uniquely refreshing” perspective on the global economy, investing, and today’s markets.
Kodak Alleges Patent Infringement by Apple, Research in Motion
Jan 14th
Filed under: Law, Apple Inc (AAPL), Research in Motion (RIMM), Eastman Kodak (EK), Options
Eastman Kodak (EK) is grabbing headlines after the film firm filed a complaint with the U.S. International Trade Commission (ITC), alleging that Apple’s (AAPL) iPhone and Research In Motion Limited’s (RIMM) BlackBerry camera phones infringe on Kodak’s patents. Kodak is asking the ITC to block Apple and RIMM from importing the offending devices.
Additionally, the iconic photography company filed two suits against Apple in the U.S. District Court for the Western District of New York. Kodak is claiming infringement of patents “related to digital cameras and certain computer processes.”
Continue reading Kodak Alleges Patent Infringement by Apple, Research in Motion
Kodak Alleges Patent Infringement by Apple, Research in Motion originally appeared on BloggingStocks on Thu, 14 Jan 2010 12:40:00 EST. Please see our terms for use of feeds.
Deceptively Low December Retail Sales
Jan 14th
Today, we’re chock-full-o-stuff to look for, starting with a European Central Bank (ECB) meeting. And throughout the morning, here in the US, there’ll be even more “stuff” to look for, like retail sales. And since it’s a Thursday, the Weekly Initial Jobless Claims will also print. The Fed’s Beige Book printed yesterday afternoon, and we’ve got that to discuss this morning, too… So, let’s get this Tub Thumpin’ Thursday going, eh?
Front and center this morning… The Australian Jobs report printed yesterday afternoon, and it looks like we’ll be able to put another mark in the “pro” column for an Aussie rate hike in February. Here’s the skinny… Australian employment soared for a fourth straight month, as jobs created were three times more than economists estimated! The total number of jobs created was 35,200, and the jobless rate fell to 5.5% (from 5.6%).
So… The economists – or “experts,” if you will – got this one completely wrong… Their estimate for created jobs was to be 10,000… This is very strong employment growth for Australia, and once again places the spotlight on the Aussie dollar (AUD) as one of the best yielding currencies with a prospect of even higher yields as soon as February!
OK… This report doesn’t “seal the deal” in any shape or form, but it does “nudge” the Reserve Bank of Australia (RBA) in that general direction, for sure!
Traders took notice, right away, and began buying Aussie dollars, pushing them past 93-cents on the night…
The interest rate spread/yield differential between the US and Australia really was put up on top of the desk and asked to dance when US Fed Head, Dudley, said that short-term interest rates may remain low for at least six months and “possibly for as long as two years”!
Hmmm… Dudley said that it all “depended on how the economy develops”… WOW! A new Mr. Obvious! You mean, the Fed is going to react to how the economy develops? WOW, what a novel idea!
OK… I’m sorry I got carried away there… But since he mentioned it, we might as well take a look at the Fed’s Beige Book that printed yesterday afternoon…
The Fed’s Beige Book, which is a report on the pulse of the economy from each Fed region, showed that while the economy is slightly better, it continues to operate below capacity, or in their words… “The economy continues to operate at ‘low levels.’”
The Fed Heads also noted that holiday spending in 2009 was “slightly better than in 2008, but still far below 2007 levels… In fact, it was added that the 2009 improvement was so small it did not really represent a shift in trend.
OK… So, we have December retail sales printing this morning! Front and center, retail sales are expected to rise for this period, by 0.5% – a moderate rise, and one that’s disappointing, I would think, when talking about the month of December! And off quite a bit from November’s rise of 1.3%.
Now… I read a great description of what was going on in that 1.3% gain in retail sales from November, and thought it would be good to share… A lion’s share of the increase reflected a price-related 6.0% surge in gasoline station receipts. As well, the earlier-reported rise in unit motor vehicle sales was reflected in a 1.6% increase in sales at auto dealerships. Excluding these two components, retail sales rose a relatively robust 0.6%…
OK, it’s safe to come back now… We’ll also see the Weekly Initial Jobless Claims, which will remain above 400,000, for sure…
As I said above, the European Central Bank (ECB) is meeting as I type my fat fingers to the bone…
The ECB will keep rates steady Eddie this morning, but will probably announce more stimulus removal… Recall that last week I told you how the ECB had already removed a large chunk of stimulus, while the Fed continues to supply the monetary candy to the US economy…
The euro (EUR) spent yesterday going back and forth, above and below the 1.45 figure… This morning, the single unit has already been above 1.45 and now it’s back below that figure! There’s just no conviction to take the single unit much higher, right now… And that’s because there’s nothing coming from the ECB… That will change this morning, hopefully!
The boys and girls over at Government Sachs, er… I mean Goldman Sachs believe the euro will remain supported by its status as the dollar’s sole rival for currency diversification by central banks… “Given the Eurozone is pretty stable overall, although not overly attractive either, swings in dollar sentiment will likely be reflected in the extremely deep and liquid euro/dollar cross.”
Yesterday, I did a video and talked about why the euro, even with all the problems in Greece, Spain, Italy, etc. is far more valuable than the dollar… I noted all sorts of things, but said, “The euro’s problems can’t be as bad as those in the US with California, New York, Michigan, Illinois, etc.” Then later in the day, it was announced that Standard & Poor’s (S&P) cut California’s credit rating for the second time in less than a year. Now… That’s going to be a problem for the state of California, when it comes time to issue Municipal bonds, given the rating cut… It will make it more expensive to the issuer, for sure!
OK… I came in this morning, and turned on the TVs… And on one of them there was a discussion about foreclosures in the US. There was a guy from RealtyTrac – the people that count the beans in the housing sector – who was talking about how there had been 300,000 plus foreclosures in December… Now that’s rotten! Foreclosing on someone in December? That’s cold, Willis! OK, I digress; let’s see what else RealtyTrac had to say… How’s this for size? Nearly 3 million households received at least one foreclosure notice in 2009… That’s one in every 45 homes that were in default… That’s a 21% increase over 2008.
I understand that there are so many foreclosures that some are delayed simply because there are delays in processing delinquent loans!
OK… Now… You have to understand that this is something I find disgusting – people losing their homes… But… You can go back to 2006, when I was banging the drum and saying there was a housing bubble… I can remember talking to some home loan guys back then, and telling them about the housing bubble, and them telling me that I was Loony Toons!
The reason I talk about this is to illustrate the problems the Fed will have in removing stimulus… And… Add to all this the fact that there are still millions of loans that will re-set later this year into next year… If the Fed moves rates higher, those loans will be at a huge risk of default.
Let’s talk about something else… Yeah, right here, right now, we can talk about Brazilian retail sales, which printed this morning… Brazilian retail sales soared 8.7% in November versus the previous year… OK, let me take you back to December, when I wrote about how traders in Brazil were trading on thoughts that holiday sales would be brisk… I said then that all this confirms domestic demand… So, if November’s retail sales were this strong, one can only imagine December’s bounty!
One has to believe that the Brazilian Central Bank (BCB) will have to entertain thoughts about raising interest rates soon, given this strong domestic demand… I’m going to go out on the limb here, and say that the BCB will raise rates by the end of April… Probably 50 BPS (1/2%). So, go ahead and mark it down, and see if I nailed it, or fell on my face…
I have to say that I’m impressed by the Brazilian Sovereign Wealth Fund’s ability to move the real (BRL) weaker. They’ve been in the markets buying dollars by the truckload, and pushing the real weaker. Hmmm… Think about this for a minute… The government announces a Sovereign Wealth Fund that will buy dollars… And the BCB is probably about ready to raise rates, which would make the real more attractive. You don’t think these two opposite pulling forces on the real were done as a package deal by the government, do you? Nah… That couldn’t happen… NOT! I personally believe that the government knew the economy was soaring and that they would have to raise interest rates aggressively at some time in the near future, so why not introduce a way to keep the real from soaring at the same time? Pretty darn smart on their part… But then, what happens when the Wealth Fund runs out of money?
Gold found a way to add about $5 to its figure, yesterday… (It’s given back $4 this morning, though! UGH!) I saw a headline story on gold the other day shoot across the Bloomie, that said… “Gold may increase to $5,000”… I laughed out loud and said, these claims by people are crazy! I mean, I could say, “Gold may increase to $10,000”… Either way, it’s just a guess, folks… That’s all these people are doing – guessing… And… Probably attempting to get rid of their inventory! HA!
The thing I always come back to when talking about gold at $2,000, $3,000, $5,000, whatever is this… For gold holders, $2,000 gold or whatever price, would be nice… But stop for a minute and think about that… Think about what the economy must look like if gold is at $2,000 or above… That’s a scary sight right there, folks.
To recap… The currencies traded in a very tight range yesterday, with gold adding $5. The ECB meets today, with no rate movement expected, but maybe an announcement of more stimulus removal. US retail sales hold the key to the markets today, and US foreclosures were 21% higher in 2009 than 2008! UGH!
Deceptively Low December Retail Sales originally appeared in the Daily Reckoning. The Daily Reckoning, a FREE daily e-letter, offers a “uniquely refreshing” perspective on the global economy, investing, and today’s markets.
The Morning Leverage: Caveat Emptor
Jan 14th
Mike Lucas for Dow JonesIn this morning’s media roundup:
News: Oaktree Capital is near a deal to take over SGD Group, which makes perfume bottles for the likes of Chanel and Dior, from current equity owners Cognetas and Sagard, the Financial Times reports. Let’s hope the takeover also decreases the number of lenders SGD has – they currently number 70 banks, the FT said. Yikes.
In other fashion designer-related news, a New York court has ruled in favor of designer Joseph Abboud, who had been entangled in a legal dispute with JA Apparel Corp., owner of the Joseph Abboud trademark, over whether or not he could use his name in marketing a new line of apparel. JA Apparel is owned by J.W. Childs Associates LP. Here’s the Wall Street Journal story.
American Capital Ltd. unit European Capital is making some progress of its own on exits. LBO Wire has the details on three such, which generated EUR66.8 million of proceeds for ECAS.
The SEC has named the heads of five new specialized units. The one that deals with asset management firms, including private equity and hedge funds, will be headed by Bruce Karpati and Robert Kaplan. The WSJ has the details. And here’s some insight on what it could mean for the increasingly frequent insider cases involving deals with private equity backing.
California Public Employees’ Retirement System will release several trees worth of documents today on the payments made to middlemen by investment managers seeking to do business with the pension fund. In a walk-up, the WSJ has details on one such middleman.
Analysis: New York Times reporter Andrew Ross Sorkin writes of the tiff between Phil Angelides and Lloyd Blankfein at bank hearings yesterday: “The exchange was particularly revealing because it laid bare an essential truth about the Wall Street ethos: if there’s a buyer — no matter how sophisticated — there’s always a seller.” In other words, caveat emptor, buyout firms. Caveat emptor.
Just for fun: NPR asks whether the TV show “The Office” should be used in HR training.
Swiss Cheese Recovery, More Holes Than Cheese
Jan 14th
Inquiring minds are reading the “Good News” from the Fed’s Beige Book today.
Reports from the twelve Federal Reserve Districts indicated that while economic activity remains at a low level, conditions have improved modestly further, and those improvements are broader geographically than in the last report.
Highlights
- Consumer spending: The recent 2009 holiday season was modestly greater than in 2008 for eight Districts, although as retailers in the Philadelphia and San Francisco Districts noted, 2008 sales were so low compared with 2007, that the relatively small 2009 gains did not represent a significant shift in trend.
- Nonfinancial Services: Districts reporting on nonfinancial services generally indicated an upward trend in activity, although in some areas reports were mixed.
- Manufacturing: Manufacturing activity has improved since the last report in six Districts.
- Residential: Homes sales increased toward the end of 2009 in most Federal Reserve Districts, except San Francisco, where demand for housing has been steady, and Kansas City, where residential real estate activity has eased since the last Beige Book. In New York, Richmond, and Atlanta, residential real estate activity was described as mixed across areas of the District. In the Atlanta District, existing home sales increased, but new home sales decreased. In all Districts, sales of lower-priced homes tended to increase proportionately more than sales of higher-priced homes, due at least in part to the first-time buyer federal tax credit, according to real estate contacts. In several Districts real estate contacts reported that the original expiration date for the credit boosted sales in November and led to a more than usual slowdown in sales in December.
- Nonresidential: Nonresidential real estate conditions remained soft in nearly all Districts. New York, Philadelphia, Kansas City, and San Francisco reported further weakening in demand for commercial and industrial space.
- Employment, Wages, and Prices: Labor market conditions remained soft in most Federal Reserve Districts, although New York reported a modest pickup in hiring and St. Louis reported that several service-sector firms in that District recently announced plans to hire new workers.
- Loan Demand: Loan demand continued to decline or remained weak in most Districts. St. Louis, Kansas City, Dallas, and San Francisco noted general declines or soft loan demand. New York reported declining demand for all types of loans except residential mortgages for which demand has been steady. Philadelphia reported continuing declines for all categories of credit. Cleveland noted declining demand for business loans and underutilization of commercial credit lines.
- Credit Conditions: A number of Districts reported that credit quality continued to deteriorate. Financial institutions in the New York District reported ongoing increases in delinquencies for all types of loans. Banks in the Philadelphia District reported that delinquencies and defaults continued to rise for all types of loans, although less sharply than at the time of the previous Beige Book. Cleveland received reports of steady consumer credit quality but high and rising commercial loan delinquencies. Kansas City noted year-over-year declines in credit quality among financial institutions in the District, and Dallas and San Francisco reported continued deterioration at financial institutions in their Districts.
27 Million Unemployed or Underemployed
In the latest jobs report (see Jobs Contract 24th Straight Month) there were 15.3 million unemployed, 2.5 million marginally attached workers (those who want a job but did not look in the last 4 weeks), and another 9.2 million part-time workers who want a full time jobs but do not have one. Add that up and you have 27 million unemployed or underemployed workers.
Credit Conditions and Jobs: Where the Rubber Meets the Road
The Fed can say there is modest improvement but imagine telling that to 27 million people out of work and wanting a job, many to discouraged to even look. Furthermore, the 27 million count does not include those with Master’s Degrees working at Pizza Hut or Walmart because it is the only work can get. How many are underemployed with huge salary cuts are not included in any official count? 5 million? 10 million? Higher?
Moreover, until job conditions improve, credit conditions will continue to deteriorate, banks will not lend, and businesses will not hire.
Take another look at the Beige Book paragraphs above on nonresidential, employment, loan demand, and credit conditions and ask yourself “what kind of recovery is this?”
Yes, I know some of those are “lagging” indicators. How lagging is the question now?
The Swiss Cheese Recovery
If Congress sloshes around enough money and the Fed holds rates lows enough some of that money will be spent and GDP will rise. But if you tell 27 Million People who want full time employment and do not have it, that the recovery is improving, they are likely to ask “On what planet?”
Trillions of dollars of taxpayer money has been wasted and all we have to show for it is a meager 2.2% GDP. Most of that GDP improvement came from additional stimulus efforts via cash for clunkers and an improvement in low-end housing prices thanks to huge tax credits. Both housing and autos are destined to die on the vine. There is no lasting pent-up demand.
Spending money we do not have, borrowed into existence on the backs of future taxpayers, can never produce a recovery. The current improvement in economic conditions is simply an illusion, like Swiss cheese without the cheese. Take away the stimulus cheese all you have is holes. That unfortunately is the true state of this recovery.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Upbeat Beige Book Fails to Turn Dollar Positive
Jan 14th
The U.S. Dollar finished lower after a choppy trading session. Even upbeat Beige Book data failed to stimulate buying interest in the Dollar. The Greenback traded higher last night after Germany announced that its economy had shrunk more than expected in 2009. Hawkish comments from Federal Reserve Bank of Philadelphia President Plosser also triggered a rise in the Dollar.
The Dollar could not hold its earlier strength and broke sharply lower ahead of the New York opening before mounting a strong recovery in the Cash Dollar Index to 77.03. Increased demand for higher yielding assets was the theme today.
This afternoon’s Beige Book confirmed the improvements in the U.S. economy but offered no solid evidence that the Fed is getting ready to raise interest rates sooner than expected.
Will Phil Angelides, Heather Murren et al Really Make A Difference?
Jan 14th
It was an interesting first day for the financial crisis inquiry commission. But beyond the rhetorical fireworks and “gotcha” moments, will the Commission ultimately make a difference?
- St. Johns Uinversity
- Michael Perino
Deal Journal asked Michael Perino, a law professor at St. John’s University, for some insight. Perino is writing a book about hearings from 1933 , which looked at the causes of the Great Depression. The hearings, which were led by former New York prosecutor Ferdinand Pecora, are credited with sparking wide-ranging reform including the Glass-Steagall Act and the creation of the Securities & Exchange Commission.
The key to Pecora’s success: “You have to do your homework,’’ said Perino. “One of the things that separated Pecora is that he reviewed all the unglamorous documents. It is very easy for people to duck and weave unless the person asking the questions can pin them down.”
Perino was teaching class this morning and didn’t see the hearings in Washington. But he suspects that the 2010 commission will only be able to make a difference if it can uncover new ground about the roots of last year’s crisis. That is a tall order considering the numerous investigations – both governmental and journalistic –that have already been launched into the Great Panic of 2008.
Still, the public remains angry about Wall Street’s ability to profit so soon after it brought the financial system to its knees. That has emboldened politicians to take aim at Wall Street and propose some onerous restrictions. But whether or not, Washington will be able to pass a long term financial overhaul remains to be seen.
Pecora was able to harness the populist anger of the Great Depression, which was cresting during his hearings, some four years after the market crash of 1929. How did he do it? Using his subpoena power, Pecora was able to blow open some of Wall Street’s darkest secrets. One of the biggest: Chase Bank chief executive Albert Wiggins was found to be shorting his own company’s stock at the same time he was rallying shareholders and employees to the bank’s side. (The crisis commission also has subpoena power)
Pecora’s exposure of Wall Street transgressions shocked the public and created momentum for financial reform that couldn’t be stopped by opponents in Congress or the financial industry.
“Bankers were seen as models of rectitude and lived by a code beyond the moral of marketplace,’’ said Perino, whose book is due out in October. “Pecora showed that this image was completely wrong.”
But is today’s public still capable of being shocked by Wall Street’s sins?
The crisis commission’s success may depend on it.
Text Of Edolphus Towns Subpoena To NY Fed
Jan 14th
The following are the items demanded by Edolphus Towns and the House Committee on Oversight and Government Reform from the Federal Reserve. We, for one, can not wait to see what ends up being dug up, seeing how the New York Fed has blatantly “forgotten” about our FOIA request for release of precisely the same data.
All documents in the possession, custody, or control of the Federal Reserve Bank of New York, relating to AIG credit default swap counterparty payments, the decision to compensate AIGs credit default swap counterparties at par, and public disclosure of the counterparty payments, including:
- Emails, phone logs, and meeting notes of the following people: Timothy Geithner, Stephen Friedman, Thomas Baxter, and Sarah Dahlgren;
- Term sheets, including drafts, relating to AIG’s payments to its CDS counterparties; and
- Emails, phone logs, and meeting notes relating to public disclosure of AIG’s payments to its CDS counterparties, including disclosure to the SEC.
We are particularly happy that Goldman director Stephen Friedman has been implicated in this subpoena: perhaps we will finally be able to get some definitive evidence of wrongdoing by the Fixed Income sales and trading monopolist, in addition to the metric tons of circumstantial evidence of ongoing wrongdoing already presented.
S&P Downgrades California To Third World Country Status
Jan 14th
Ok, S&P actually downgraded California to A-. And since developing countries have some of the best balance sheets around, maybe the title is especially unfair to those countries.
The reason?
The budget situation remains horrible.
Due to uncertain assumptions of major portions of the budget, S&P said the state’s credit is more susceptible to adverse economic developments.
As a result, it lowered its ratings on the state’s $63.9 billion of general obligation debt by one notch to A-, which is four notches into investment grade. That is the lowest such rating for any state in the U.S. California also has a negative outlook, meaning future downgrades aren’t out of the question.
And while the budget proposal includes efforts to make some structural improvement to the state’s projected fiscal imbalance, S&P said it does so by assuming what it considers to be “significant increases in federal reimbursements and funding and reduced federal spending mandates–provisions over which the state lacks singular or direct authority.” It also requires voter approval of two ballot measures to allow the redirection of $1 billion in funds presently earmarked pursuant to two prior election results.
Bonus: Now see the real state of collapsing state revenues — >
Join the conversation about this story »
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Mixing it Up Down at the SEC
Jan 14th
The Securities and Exchange Commission has been keen this year on ramping up its metabolism in the hopes of getting ahead of large frauds before they happen.
How will they do that? The WSJ’s Kara Scannell provides the following report:
Wednesday, SEC Enforcement Director Robert Khuzami rolled out a major hallmark of his plan to remake the division by naming new chiefs to run five specialized units representing high priority areas and a head of its tips and complaints office. (Click here for a link to a Wednesday WSJ story on the topic.)
Khuzami also announced new law enforcement bait to lure company insiders to come forward early to aid in investigations.
On that front, Khuzami is plucking from the U.S. Attorney’s playbook – his alma mater – by creating a template for deferred prosecution agreements whereby the SEC will agree to forgo an enforcement action against a cooperator if the cooperator agrees to certain prohibitions during a set period of time, and also non-prosecution agreements, where the agency declines to file charges.
The idea is to gain the early assistance of corporate insiders. But with the heavy hand of the Justice Department also looming in the shadows of some investigations, defense lawyers say they’re likely going to seek similar assurance with federal prosecutors first.
In any event, here’s a rundown of the legal beagles who will head the SEC’s new units:
Daniel Hawke, head of the Philadelphia office, will run the market abuse unit, which will focus on insider-trading and market manipulation cases. Hawke is well-regarded internally and during his tenure as head of the Philly office brought major cases of insider trading and involving municipal securities.
Kenneth Lench will run the structured and new products unit, which will focus on derivatives and newly-developed products. Lench worked on the auction-rate securities cases that resulted in UBS, Citigroup and other large financial institutions agreeing to repay customers whose funds were tied up in the ill-liquid assets.
Cheryl Scarboro is in charge of the foreign bribery unit. Scarboro is an agency veteran who has run the agency’s foreign corrupt practices working group for the past few years.
Elaine Greenberg, a veteran of the Philadelphia office, will run the municipal securities unit. Her office has taken the lead in many municipal securities cases, including a wide-ranging investigation into bid rigging by financial institutions to win advisor jobs for city and states.
Bruce Karpati and Robert Kaplan are teaming up to run the asset management group, which will focus on hedge funds, investment advisers and private equity firms. Karpati has run the SEC’s hedge fund working group out of New York, while Kaplan has been involved in high-profile cases, including a insider trading ring involving former Morgan Stanley executives.
Another unit, called market intelligence, will assume the responsibilities of the internet enforcement unit and add on new duties, such as handling tips and referrals. Thomas Sporkin, a senior lawyer in the internet group, and son of former SEC enforcement director and federal judge Stanley Sporkin, will lead that office.
In Defense Of Secrecy; Three Prong Attack On The Fed; Selective Myopia
Jan 13th
The Fed is pulling out all stops to defend its secrets, including publishing self-serving mathematical gibberish. Please consider the St. Louis Fed article on the Social Cost of Transparency.
Unless you are an academic wonk, you will be stymied by pages that look like this …
There are 24 pages of such nonsense with titles like
- 2.2 Private Information and Full Commitment
- 2.3 Private Information and Limited Commitment
- 3.2.1 Decision Making in the Day
- 3.2.2 Decision Making at Night
- 3.2.4 A No-News Economy
Just for good measure here is the page describing 3.2.4 A No-News Economy
The article culminates with …
For an asset economy then, the prescription of “full transparency” is not generally warranted.
Approaching the problem under the premise that fuller transparency is always desirable may not be the right place to start.
Hiding Behind Empirical Formulas
The problem is Bernanke places his complete faith in such gibberish, so much so that he has lost all sense of real world action by real people. The result is that in spite of his PhD, he could not see a housing bubble that was obvious to anyone using a single ounce of common sense.
Moreover, had Bernanke simply opened his eyes instead of relying on a poor interpretation of an already fatally flawed Taylor Rule, the credit/housing bubble would not have gotten as big as it did, and we might not be discussing the above ridiculous mathematical formulas that supposedly show us the Fed needs to be secretive.
For more on Bernanke’s love affair with the Taylor Rule (even though Taylor Disputes Bernanke on its usage), please see Taylor, NY Times, Dean Baker Call Out Bernanke.
Appeals Court To Hear Bloomberg’s Freedom of Information Suit
Bloomberg has been in a battle with the Fed for two years over the Fed’s “unprecedented and highly controversial use” of public money. In August it “won” the lawsuit but the Fed has appealed.
Please consider Federal Reserve Seeks to Protect U.S. Bailout Secrets.
The U.S. Court of Appeals in Manhattan will decide whether the Fed must release records of the unprecedented $2 trillion U.S. loan program launched after the 2008 collapse of Lehman Brothers Holdings Inc. In August, a federal judge ordered that the information be released, responding to a request by Bloomberg LP, the parent of Bloomberg News.Bloomberg argues that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money. Banks and the Fed warn that bailed-out lenders may be hurt if the documents are made public, causing a run or a sell-off by investors. Disclosure may hamstring the Fed’s ability to deal with another crisis, they also argued. The lower court agreed with Bloomberg.
The ruling by the three-judge appeals panel may not come for months and is unlikely to be the final word. The loser may seek a rehearing or appeal to the full appeals court and eventually petition the U.S. Supreme Court, said Anne Weismann, chief lawyer for Citizens for Responsibility and Ethics, a Washington advocacy group that supports Bloomberg’s lawsuit.
In her Aug. 24 ruling, U.S. District Judge Loretta Preska in New York said loan records are covered by FOIA and rejected the Fed’s claim that their disclosure might harm banks and shareholders. An exception to the statute that protects trade secrets and privileged or confidential financial data didn’t apply because there’s no proof banks would suffer, she said.
The central bank “speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed,” Preska, the chief judge of the Manhattan federal court, said in her 47-page ruling. “Conjecture, without evidence of imminent harm, simply fails to meet the board’s burden” of proof.
By the time the documents are released, the information may be useless, or not. Regardless, the battle is worth fighting just over the principles of the matter.
Fed Faces Subpoena Over AIG bailout
On Tuesday I commented on House Plans To Subpoena Geithner Over AIG Decisions
APRep. Edolphus Towns, D-N.Y., said Tuesday he will subpoena the New York Fed for documents related to the bailout of failed insurer American International Group Inc.
Towns chairs the House Oversight and Government Reform Committee. The committee is investigating deals that diverted billions of AIG bailout dollars to banks including Goldman Sachs Group Inc.
The committee has been investigating e-mails from New York Fed lawyers telling AIG not to disclose details about the deal. The e-mails were released last week by California Rep. Darrell Issa., the committee’s top Republican.
Issa asked Towns to subpoena the New York Fed after the Fed blocked a separate request for documents.
Audit The Fed
Of course we cannot forget Ron Paul’s Audit The Fed measure that has passed the house. These measures show just how angry everyone is over the Fed.
The Fed has increased that anger and resentment by pointing the finger at everyone else. For details, please see Ben Bernanke Looks In Mirror, Sees Barney Frank.
Three Front Attack
- Appeals Court To Hear Bloomberg’s Freedom of Information Suit
- Fed Faces Subpoena Over AIG bailout
- Audit The Fed
The more the Fed squirms in secrecy and denial, the more public resentment builds. The more public resentment builds, the more likely the Senate will go along with “audit the Fed”.
What’s In The Fed’s Balance Sheet?
The Fed’s balance sheet (better thought of as a diaper or a garbage dump), is not only smelly, it is bulging bigger by the day.
We have a right to know what the Fed is doing, what the assets it is holding are worth, and what arrangements it might have illegally made with AIG or others.
Yesterday the Washington Post reported Federal Reserve earned $45 billion in 2009.
I have a few questions.
Really?!
- Does that count the $185 billion the NY Fed crammed down taxpayers throats over AIG?
- Does that count the real cost of any of its other inane off-balance-sheet recommendations approved by Congress at taxpayer expense?
- Does that include a marked-to-market accounting of Mortgage Backed Securities on its balance sheet?
- Does that include a marked-to-market accounting of anything other than specific items the Fed wanted marked-to-market?
The Fed conveniently ignores all of its recommendations that cost taxpayers hundreds of billions of dollars, some done illegally, and then has the self-serving, selective-myopia gall to talk about “gains”.
Bloomberg argues that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money. Anyone thinking clearly has to agree.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
IDVN, time to get more aggressive
Jan 13th
IDVN, Time to get more aggressive
Do your own DD, trust no one, verify everything, believe nothing, assume nothing,trust no one. We own the stock and will buy more. We are not paid. We are not investment advisors. Assume all ideas will lose money. (Not really on the last one, but we just want you to know, all investments entail risk!)
IDVN, growing/expanding, time to be more aggressive? Its better to be a bit early at the party, then late. If the time to buy in NOT now, its getting really really close.
For a long time, IDVN was essentially a one man operation. The CEO, Joseph Riccelli, was THE company, doing everything including packing and shipping. Now, we are entering a whole new phase in the growth for our company!
Please read the news………My comments are in bold and underlined.
Once again, the product(s) is exciting and unique and gaining traction. Soon, the areas of distribution will be almost all States and Canada!
The time to get more aggressive is now!
Innovative Designs Shows 53% Comp Sales Increase in December 2009
Companies:
Innovative Designs Inc.
Press Release Source: Innovative Designs, Inc. On Wednesday January 13, 2010, 7:00 am EST
PITTSBURGH, PA–(Marketwire – 01/13/10) – Innovative Designs, Inc. (OTC.BB:IVDN – News) Arctic Armor? revenues for December 2009 exceeded $333,000.00. This is an approximate comp increase of 53% over December 2008 where sales were approximately $217,500.00…..***Yes, I recognize this seems somewhat small, but please remember, that this is JUST the beginning***,… The increase can be attributed to the continual addition of new retailers across the country, repeated fill-in orders from existing accounts, and 2 new distributors located in New York and Minnesota………….***Repeat orders are the life blood of all small companies. It shows that those that sell the product value it enough to keep ordering more***… Innovative Designs, Inc. CEO Joseph Riccelli commented, “We are pleased with the revenue growth we are seeing from month to month. We are very close to signing a few major agreements that will only enhance our revenues going forward. We have been contacted by a very reputable sales agency that wants to represent our products in 22 states from Maine to Florida. We will also be meeting with a major Canadian retailer that is interested in carrying our Arctic Armor line across Canada in its 200 stores.”…….***The last 2 sentences says it all. More distributors, more outlets! The growth will now be in the 100% range and then some***.
The Company
Innovative Designs, Inc. manufactures the Arctic Armor? Line, hunting apparel, swimwear, wind shirts, jackets, and the multi-function “All in One” under the “i.d.i.gear” label featuring INSULTEX?. INSULTEX? is the thinnest, lightest and warmest insulator in the market today. For more information, please visit http://www.idigear.com.
U.S.’s Infrastructure: Hardly Ready for the 21st Century
Jan 13th
Filed under: Other issues
One aspect of American life that has to change is the scattershot quality of the U.S.’s infrastructure.
New York Times (NYT) Columnist Thomas Friedman has written and spoken about it often, and he offers many illuminating observations on conditions in Western Europe and in Asia, given his many travels.
Friedman has written about how the U.S. — despite being the strongest, most dynamic, and technologically advanced economy in the world — nevertheless has managed to tolerate sub-standard infrastructure conditions (such as too small airports), compared to our Asian and European neighbors. Anyone who has flown into New York’s John F. Kennedy or La Guardia airports (as I frequently do) can attest to the need to upgrade these transportation facilities, and many others.
Continue reading U.S.’s Infrastructure: Hardly Ready for the 21st Century
U.S.’s Infrastructure: Hardly Ready for the 21st Century originally appeared on BloggingStocks on Wed, 13 Jan 2010 10:30:00 EST. Please see our terms for use of feeds.
Commercial Real Estate News: BofA’s Real-Estate Banking Profits, Europe’s Year of Reckoning
Jan 13th
Our look at the day’s top real estate stories from the Wall Street Journal and across the country. Today brings a wealth of CRE stories (warning: many are subscriber-only).
Bank of America’s Secret of Success: Real-Estate Banking (WSJ): Bank of America Corp.’s shotgun marriage to Merrill Lynch & Co. has produced plenty of ill will, and big profits in real-estate investment banking. The Charlotte, N.C., bank blew away the competition last year in the business of underwriting stock offerings by commercial real-estate firms.
Big Chinese Firms Take to Skyline (WSJ): What is being billed as the world’s most energy-efficient skyscraper is being built here in the center of one of China’s smoggiest cities by state-owned China National Tobacco Co. It is the latest example of a new trend in China’s burgeoning commercial-property market: State-owned businesses in industries as disparate as insurance and tobacco are emerging as developers, putting up the cash to build some of the most eye-catching skyscrapers in the world.
Year of Reckoning for Commercial Lenders in Europe? (WSJ): Opportunistic investors are hoping that 2010 will be the year that European lenders begin biting the bullet and accepting losses to get distressed commercial real-estate assets off their books.
Plots & Ploys (WSJ): Public Storage’s big ‘oops,’ Morgan Stanely hires real-estate veteran, some brokerages have split off from Colliers.
Bonus Time for Manhattan Real-Estate Brokers (WSJ): While public outrage looms over Wall Street’s 2009 bonuses, potentially record payouts expected in coming weeks, New York’s real-estate community is outright giddy. Local brokers said the money will help stabilize the nation’s quirkiest sales market by boosting sales, particularly in the $2 million to $5 million range, and restoring confidence.
Mayflower Looks to Restructure Debt (WSJ): The Renaissance Mayflower, an 85-year-old institution in Washington, is seeking some relief on its $200 million securitized mortgage. The restructuring effort by owner Rockwood Capital LLC is a sign that real-estate investments are running into problems even in relatively healthy markets.
Tax Benefit Propels KB Home to a Profit (WSJ): KB Home swung to a profit for its fiscal fourth quarter because of tax benefit. While revenue fell 27%, the builder said cancellations slowed.
