Archive - Oct 2009

August CRE trends continued their downward trends, with a bevy of trackers of CMBS performance, Moody's, Fitch, Realpoint and TREPP seeing substantial deterioration in September. According To TREPP the August delinquency rate was up to 4.35% from 4.03. Legacy rating agencies Moody's and Fitch indicated a comparable acceleration in delinquency trends, with September 60-delinquencies at 3.64% and 3.58%, up from 3.04% and 3.23% respectively. New CRE NRSRO Realpoint had an even higher September reading at 4.15% up from 3.47% in the previous month.

When I wrote about the obvious "win-win situation" that was Cash for Clunkers this past summer, amid the fact that right now cars are back-logged, piled-up, unable to get recycled in an efficient, timely manner- South Carolina is offering $3.9 million, their share of some $300 million in federal stimulus funds from the American Recovery and Reinvestment Act being distributed as appliance rebates. Meet... "Cash for Appliances."

For the first time ever, there are as many women in the workforce as men.

Do you know why?

The big question is how will other nations respond to the symbiotic relationship between the U.S. and China? This week we saw Asian currencies declining on intervention speculation. Will we see intervention in the currency markets? I am not sure, but the current path is unsustainable and will require some sort of intervention as it poses serious risks to the global recovery.

Suspicions that the Federal Reserve System might be engaging in the direct purchase of equities in an effort to complement its monetary policy in a near-zero short term rate environment are often met with scoffs and curt dismissal. In this context, it might surprise Zero Hedge readers to learn that in 2004 Chairman Bernanke himself advocated not only the expansion of the Fed's balance sheet generally, but also the direct purchase of equities by the Federal Reserve System. Then again, it may not.

It's game over for Capmark, which is expected to file for bankruptcy within 24 hours. The firm which was formerly GMAC's commercial real estate business (Or GMAC Commercial Holding Ccapital Markets Corp in short), and had originated over $10 billion in CRE loans (by the way, did we say that CRE REITs are undervalued? if you didn't buy at least 5 shares of some multi-apartment or hotel REIT yesterday with every share of Amazon you were covering you are a bubble uninflating traitor and have to be shot for not believing in a 100x P/E), was LBOed by KKR and Goldman in 2006. Needless to say, that particular investment won't be making the next Calpers pitch book.

As the Galleon inquiry expands, we have been fairly certain that the dominoes would start falling. Whether or not one of these dominoes would be the fund that single-handedly defined the term "information arbitrage" is still anyone's guess, although as the WSJ reports today, a former employer of Stevie Cohen's until the year 2004, Richard Grodin, has received a subpoena for his trading records as part of the Galleon case. It appears that upon learning of the Feds sniffing around his 500 Fifth Avenue office, Mr. Grodin promptly shut his current hedge fund and got out of dodge.

Those who follow the meandering permutations of the Fed's balance sheet must have observed with great irony the proclamation by the NY Fed on October 19th that it is prepared to commence tightening liquidity via reverse repo operations, even as 48 short hours later later the Fed announced a new all time high in bank reserves, which for the first time ever hit a level over $1 trillion. The glaring discrepancy between these two observations has left many wondering not only about the veracity of any statements coming out of the Fed, but to consider what the best trades to front-run the Federal Reserve may be for that time when, whether it likes it or not, the NY Fed is forced (politically or otherwise) to start extracting its pound of flesh from the banking system.

Big time fraud in the Housing Tax Credit. The estimate is up to $600mm. This could be the kiss of death for this program. The backup plan relies on Fannie and Freddie. In other words, there is no plan.

President Obama isn’t kidding in his weekly radio and Internet address made Saturday morning- banks should lend to more small businesses to help spur the economy and create jobs. Obama started the weekly address telling a story, painting a glorious picture of America, not “Running on Duncan,” no, but rather running to mom-and-pop stores and local neighborhood restaurants… “tiny startups with big ideas that could revolutionize an industry, maybe even transform our economy.” Not a bad way to start a sermon.

There is some interesting new data out on how recessions affect people who come of age during distressed times. Not surpisingly, recessions can have a lasting impact on young people and literally alter the way they view the world going forward. Therefore, it makes sense for investors to understand exactly who the financial crisis will influence and what that will mean for companies and products.

I agree with Barry Eichengreen, reports of the U.S. dollar's demise are greatly exaggerated. The mighty greenback will come roaring back, perhaps sooner than you think.

~$297.7356.7 million in giant sucking sounds from the DIF.

            Bank                  DIF Loss   Assets   Loss Ratio


PR-192-2009 First Dupage Bank        $59.0   $279.0       21.15%
PR-191-2009 Riverview Community Bank $20.0   $108.0       18.52%
PR-190-2009 Bank of Elmwood         $101.1   $327.4       30.88%
PR-189-2009 Flagship National Bank   $59.0   $190.0       31.05%
PR-188-2009 Hillcrest Bank           $45.0    $83.0       54.22%
PR-187-2009 American United Bank     $44.0   $111.0       39.64%
PR-186-2009 Partners Bank            $28.6    $65.5       43.66%


Ouch                                $356.7 $1,163.9       30.65%

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