Archive - 2009 - Story

RANsquawk 7th December Morning Briefing - Stocks, Bonds, FX etc.

RANsquawk 7th December Morning Briefing - Stocks, Bonds, FX etc.

Gold prices plunged $80 or 6.5% in less than two trading sessions on the strong and unexpected indication
that the US job market was stabilizing. What was that about? So that prompted an inquiry from a client who
asked me on Friday, why the big drop in gold prices? Why indeed. Here I am reminded of two snail jokes.

Zero Hedge is nothing if not about the persistent, even dogged pursuit of unusual (even alarmingly unusual) angles of research.  When our totally uncompensated interns catch a scent wafting noxiously from the halls of power, no social secretary of any station will prevent them running down the source of the malodorous smell.  So when publicity hungry former bailout prodigy Neil Kashkari goes Kaczynski in some "off the map" corner of Nowhere, Nevada County, California, (but not quite so far that a Washington Post reporter is unable to pen a puff-piece on location or too far out of range to get Bloomberg alerts on your Blackberry, or so remote that a search for yourself on Gawker is impossible) Zero Hedge is there.

Reducing risk should be written on your dreidel because Japan is the history of the future.Not just for the United States: the whole world. There are market forces bigger than any government action in play now; and in fact, policy makers trying to save the world have cemented it. Some call it the “new normal”. I call it Japanification: the slow entropy of leverage in semi-controlled reverse. The alternative is to let it all go in one smoldering champagne supernova. But all the hyper money printing and WWII grade stimulus just falls in a financial black hole so strong that not one penny will ever escape.

Everyone is now well aware of the plight of Stuy Town, which has become a set fixture on the front page of the daily press, and is expected to default on its underlying borrowings within a few months at the most. What will happen to the controlling equity, and the tenants at the multiapartment complex, is unknown. It is no surprise that this will be yet another epic failure for the existing owner, Tishman Speyer, which after gobbling up property after property at the peak of the housing market, is all too aware that it is only a matter of time before control is wrested from it not only in the case of Stuy Town but many of its other properties.

And even though everyone "knows" the state of commercial real estate is in free fall, few have been able to pin it down to specific buildings, as property-level data is still very expensive and more often than not, proprietary. In order to bring the full degree of CRE collapse closer to home, and to provide some leads to our MSM-originating readers, we present a detailed analysis of some of the most impacted CRE properties that have yet to make headline news. For that purpose we combed through BarCap's CMBS remittance data for CMBX 4 (2007 vintage), which is broadly considered the peak year for commercial real estate deals and also the very peak of the housing bubble. We expected to find some of the juiciest CRE failures to be in this loan set. We were not disappointed.

Is this a entirely different video than the BBC seems to be reporting on, or are British politics even more full of nuance and nonsense than we have hithertofore given them (substantial) credit for?  See, it sounds to us like the Shadow Chancellor of the Exchequer, George Osborne, just suggested the elimination (or total circumvention) of loss-carry-forwards for UK banks (and foreign banks with UK offices).  That's something coming from a conservative MP, but then, anything to tie Gordon Brown (himself a former Shadow and then actual Chancellor of the Exchequer) into knots by rocking Alistar back on his heels and forcing the purse holder to look anit-populist, yes?  Actually, that's pretty impressive work for a Sunday.

We are likely to see quite a lot of mileage out of this particular bit of clip art.  True, we have managed to relegate the "Dubai crash" to the dustbin of overhyped crises, but Dubai does not seem particularly disposed to accept that as her ultimate destiny.  The Nakheel bond is but a pair of weeks from default, creditors show no sign whatsoever of any sort of negotiated restructure, much less a moratorium to which creditors could only be heard to cackle loudly.  We are certain all will, however, work out for the best.  ("Nothing to see here.  Please disperse.")

The "CRE-fail" news of the day comes from Chicago where Crains reports that Tishman Speyer has just defaulted on a major mezzanine loan, part of a $1.4 billion package of loans, in which the Federal Reserve is the the main lender via its Maiden Lane I program. Tishman-Speyer, whose 11 Chicago CRE holdings can be seen here, has allegedly defaulted on a mezz loan supporting 6 major commercial properties. The properties, 5.7 million sq. feet in total, represent roughly half of the CRE company's 12.2 million sq. feet of Chicago real estate. And while Tishman has enough of a real estate empire that this won't make a huge impact in the near term, what is notable about the portfolio is that the Fed itself is the holder of the mortgages, which it acquired as part of the Bear Stearns bailout and currently are part of the $26.4 billion in Maiden Lane I Assets. Even as this portfolio has been impaired by over $3.5 billion since inception, we fully expect the fully transparent Fed to have a public announcement as to just how much more value in ML 1 will be lost as a result of this default.

As you will no doubt be aware, a large portion of our energies here at Zero Hedge are devoted to developing new products and services for our readers. In this tradition, we are pleased today to announce a new partnership with Google.

On Wednesday Nov 25 2008, the dollar kissed its 2 year Nov 21 2007 two year anniversary low at 7450. 7450 was the 2007 year low, btw. I quickly scanned the headlines that day and sent a email memo detailing the uber-bearish headlines on the US dollar. The dollar was posting 14 yr lows in the yen. Russia was diversifying into Canadian Loonie, the Suissie rallied on news their CB would remove stimulus, the pound rallied on news the UK GDP was stronger than expected, the Aussie rallied too on news of a their reserve banks 3rd rate hike.

The Japanese posturing worked: with the yen hitting a 14 year high against the dollar, inside of 85, one short week ago, in the past 5 days the Yen staged a huge drop against the US currency, plunging by the most in over a decade, to 90.5 as of Friday close. While we are not sure what Hirohisa Fujii told Bernanke on the closed line in the past week, we do owe the boys at 33 Liberty a golf clap for managing the carry roll from the dollar to the yen with such efficacy that the stock market did not plunge. It appears the $ Plunge Enforcement Desk and the S&P Plunge Protection Desk have reached a phenomenal level of synergies.

Yields are much lower today and are trending down again despite the significant upward yield trend back then. So is this a genuine early economic recovery, or a sign that the modern stock market tends to be a capital-gain seeking momentum machine with little regard for underlying fundamentals? Yes, interest rates are low, but they were back then too, and David Rosenberg suggests most current corporate bond yields are a lot more attractive than yields of the same companies' stocks.

"We expect real GDP to grow 3% (annualized) in the fourth quarter, slow to a 1½% pace in late 2010, and then gradually reaccelerate in 2011." - Goldman Sachs Team Jan, not Team Jim

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