Bad CRE, Rotten Home Loans, and the End of US Banking Prominence?

Reggie Middleton's picture

It's bound to happen if regulators don't stop playing hide the sausage
and don't start forcing banks to take their medicine. First, a quick
recap of the nonsense currently taking place. This post is designed to
convince banks that they are considerably better off taking their
medicine now than going on with the government endorsed plan of
pretending your not sick and risking major surgery, plus chemo and
radiation just a year or two later. My next post will be a selection of
REITs that didn't make my shortlist, followed by a new REIT report for
subscribers that will explicitly show property values of each and every
property in said REITs portfolio (and potentially the lender or
CMBS/mortgagee pool collateralized by said properties - that's right,
someone may be called out).

After dealing with European banks during my work with GGP,
I have come to the conclusion that most regional, community and even
global banks have no where near the capacity and/or expertise to
properly evaluate and value the projects/assets that they have invested
in. Well, if that is the case, this is your chance to rectify that
problem - on the cheap, at least on a relative basis. So if you are in
an appropriate position in your bank, fund or lender - read this
evidence that supports the proactive behavior of snatching the big
crumbs off the table before there is a mad dash for the micro-specs of
bread that may or may not be left if one were to wait it out while
playing "hide the sausage games". I'll give you the tools to make a
convincing argument, trust me. Here is the broader macro argument for
lenders pulling bad debt from under the REIT and CRE industry, thus
supporting a bearish thesis for said players.

First: A picture is worth a thousand words...

fasb_mark_to_market_chart.png

Instance asset gains and market value stemming from just a small tweak
of truth. Financial stocks fly, moving farther and farther from their
fundamental values.

Second: We have the obvious manipulation that is occurring in the REIT space (see Here's a Big Company Bailout by the Taxpayer That Even the Taxpayer's Missed!). Zerohedge speculates "Is Goldman Preparing To Upgrade The REIT Sector?" 

Third: We have government complicity in the purposeful opacity of the
values of the mortgage assets (see the FDIC "Prudent Commercial Real
Estate Loan Workouts" guidance issued Oct 30th, as reported by the WSJ:
Banks Hasten to Adopt New Loan Rules and the new FDIC guidance
that states performing loans "made to creditworthy borrowers" will not
require write downs "solely because the value of the underlying
collateral declined").

Fouth: We have a false sense of security that nearly everybody believes
should make us insecure, yet somehow we have those long in the markets
feelng warm and fuzzy. See You've Been Bamboozled, Hoodwinked and Lied To! Here's the Proof. What Are You Going to Do About It?.

Now, for those of you who believe that the government's "pretend and
extend" policy has any chance in hell of working, or better yet, that
we are not following in the footsteps of Japan, let's take a pictorial
trip through recent history. There are nearly no Japanese banks in the
top 20 bank category on  global basis by 2003 - NONE (save potentially
Nomura, which arguably survived in name, alone). As you can see, they
literally dominated 90% of the space in 1990!

Click to enlarge...

top_20_banks.jpg

Source: Cap Gemini Banking M&A

I want the banks that read my upcoming real estate analysis to take
heed to history. It truly does tend to repeat itself. If you are an
officer in a bank with CRE exposure, reach out to me from your work email
and I will supply you with an abbreviated copy of one of the recent
reports, gratis. This should  whet your appetite to subscribe for
more. 

Well, are we following the Japanese "Lost Path". Notwithstanding the
damning evidence of hide the truth and hide amongst lies linked to
above, ponder the following rather dated, but still quite poignant
data... 

 

housing_price_futures.jpg

Source: Nomura on Balance Sheet Recessions

Futures have corrected even farther since this graph was made. As excerpted from a previous guest post on "Animal Spirits":

First consider this chart of Japanese home prices:

Japan asset bubble us asset bubble

 

US and Japan housing bubbles

Their prices peaked in the middle of 1991 and have declined ever since. We have now seen 18 years of decline.

One may then counter that Japan is a one off case due to their poor monetary policy. Well, then what about Los Angeles?

Consider the following chart:
Note,
our bubble was bigger, stronger and longer than theirs. Ours has also
has considerably more stimulation than theirs. Yet periodically
throughout that bubble we saw seasonal upticks, and they were also
during the March-June/August time frame.

Our housing prices peaked in December 2005. Through June 2009, that's
3.5 years. Even relative to this smaller bust, we are still in the
crash phase, which is then followed by a long tail of lower prices at a
diminished rate of decline. Given our bubble was much bigger and longer
in the making, I contend this will be longer if anything, not shorter.

Notice, in some ways as of 2008, US and Japanese bank losses have been
similar. I posit the US losses will end up being much worse. Notice how
the chart below references the subprime crisis. I have always alleged,
and apparently have been proven correct, in that this is an Asset Securitization Crisis. and by definition is much broader, deeper and more intense than any subprime crisis could ever be.

  jp-us_banks_losses_are_similar.jpg

Source: IMF, Global Financial Stability Report (October 2008), p.16

Japanese asset prices literally collapsed after 1990, but several banks
remained in the Global top 20 for some years (reference the second
chart from the top of this blog post). Don't be fooled, though. If the
value of your assets plunged significantly, your equity and enterprise
value are soon to follow.

japanese_asset_prices.jpg

japanese_cumulative_losses.jpg

 Here are a few quotes from others who have studied the situation:

•Japan financial minister Watanabe: "Unlike Japan's 1990s
crisis, financial risk in the U.S. spread beyond the bank sector to the
rest of the financial system, i.e. hedge funds."

•In the May/ April 2009 issue of Foreign Affairs, Robert
Madsen, a senior fellow at MIT, pointed out that "Japan’s illness
occurred in a relatively benign international environment," with
overseas markets hungry for Japanese exports, the yen holding strong,
and the government posting a modest surplus. The U.S. is in a very
different place, Madsen writes. The U.S. deficit is skyrocketing, and
appetite for its exports is weak.
•Economist David Rosenberg at Merrill Lynch: "Japanese consumers had a
higher saving rate (13%) going into the 1990s crisis than Americans had
going into the present crisis. In the USA, there is no high savings
rate to wind down in support of consumption. It's been more than 25
years since the U.S. savings rate was anywhere close to where it was in
Japan at the onset of its multi-year real estate deflation and credit
contraction."
•Analyst Koyo Ozeki of PIMCO: "One factor that probably helped stem the
default rate on home mortgages in 1990s Japan despite the sluggishness
in the economy was the relative employment stability, thanks to the
system of lifetime employment."
[as opposed to 10%+ employment here in the states]

•Analyst Masamichi Adachi of JPMorgan: "Reliable
valuation is key to solving financial instability. A key underlying
issue through Japan's lost decade was a distrust of valuations of land
prices and NPLs. This issue applies to the current global credit
situation too, i.e. valuations of structured finance products and of
likely losses at financial institutions."
[reference the first graph at the top of this post, and then wonder why no one trusts the banks, even the banks themselves!]

•Analyst Takehiro Sato of Morgan Stanley: "During a liquidity crunch,
market players retain cash regardless of the level of interest rates
and do not supply funds to external parties during a sharp rise in
credit risk. Monetary easing alone won't expand credit or stop
collateral values from falling...However, unconventional measures (such
as nationalizing corporate debt) are still an option." [reference the
chart below]

•Central Bank of Cyprus Governor Athanasios Orphanides: "Low or zero
interest rates alone do not indicate a liquidity trap as long as there
are assets in the economy that the central bank can purchase with
money." [Bernanke read these notes!]
•Analyst David Rosenberg of Merrill Lynch: "Fiscal stimulus in 1990s
Japan was a band-aid, not a solution. All the stimulus did was prevent
an even greater decline in real GDP. As for monetary policy, aggressive
moves to boost the money supply are offset by the contraction of
private sector credit as money disappears into debt elimination.
Reflationary monetary policies are merely going to minimize
destabilizing deflation pressures." 

japanese_business_debt_paydown.jpg

So, how's it looking across the Pacific over here in the good 'ole US
of A? As excerpted from, and sourced with the assistance of RGE
Monitor...

  • National Federation of Independent Business
    (NFIB): The NFIB Index of Small Business Optimism posted a modest gain
    of 0.3 points to reach 89.1 October 2009 after remaining largely flat
    in September. Small business owners reported weak sales as the biggest
    cause of concern and a net 40% of firms reported a negative profit
    trend. Plans to increase employment remained negative in October, but
    improved over September. Firms continued to liquidate inventories in
    October. Plans for capital expenditure over the coming months fell, and
    as of October, stood 1 point above the 35 year record low reached in
    August. (National Federation of Independent Business, 11/11/09)
  • Demand
    for loans remains weak as a result of a delay in restocking and capital
    expansion plans. The net percentage of borrowers reporting tighter
    access to credit remained high at 14% in October, and firms reported
    high rejection rates. (National Federation of Independent Business,
    11/11/09)
  • Melinda Pitts, Research Economist, Federal
    Reserve Bank of Atlanta: When national employment levels were expanding
    since 1992, small firms operating with under 50 employees accounted for
    one-third of the employment growth.  While in the 2001 recession, these
    firms accounted for only 9% of job losses, in the current recession,
    they have accounted for 45% of job losses. If the financial constraints
    are a major contributor to the disproportionately large employment
    contractions for very small firms, then the post recession employment
    boost these firms typically provide may be less robust than in previous
    recoveries. (Macroblog, 10/06/09) [which portends significantly longer
    lasting unemployment than I think many are even coming close to pricing
    in]
  • According to a New York Times report on October 12,
    2009 many small businesses are struggling to get bank loans, which is
    constraining expansion plans.  While the credit squeeze from banks
    reflects risk aversion as lenders confront economic uncertainties, the
    banks say that the tight credit conditions stem from weak borrower
    performance rather than a reluctance of banks to make loans. (NYT,
    10/12/09) [exactly as experienced in Japan, seen via the chart above.
    This is exacerbated by major sources of small business loans going
    bankrupt - reference Retailers Fear Impact of a CIT Bankruptcy - washingtonpost.com and CIT Bankruptcy Filed: US Will Likely Lose $2.3 Billion, Goldman ...]
  • Dennis
    Lockhart, President, Federal Reserve Bank of Atlanta: Banks with the
    highest exposure to commercial real estate loans also happen to account
    for 40% of all loans going to small businesses. The potential impact of
    the commercial real estate problem on the broader economy remains a
    concern. Commercial real estate could be a factor that suppresses the
    economic recovery by impairing the ability of small banks to support
    the small business sector, which is critical for job creation.
    (11/10/09) 
  • William C Dunkelberg and Holly Wade:
    Financing is cited as the most important problem by only four percent
    of NFIB’s member firms. Enhancing SBA lending programs will not help as
    too many owners have no reason to borrow. "Record low percentages cite
    the current period as a good time to expand, more owners plan to reduce
    inventories than to add to them, and record low percentages plan any
    capital expenditures. In short, the demand for credit is in short
    supply and failing to understand the more major problems facing small
    business leads to bad policy." (National Federation of Independent
    Business, 11/11/09)
  • According to the October 2009
    Federal Reserve Senior Loan Officer Survey, lending standards for
    commercial and industrial loans for smaller firms (with annual sales
    less than US$50 million) continued to tighten, though at a slower pace
    as compared to July 2009. About 16% of the surveyed banks reporting
    tighter lending standards for loans to smaller businesses. 55% of
    respondent banks reported lower demand for commercial and industrial
    loans from small businesses. 44% of the surveyed banks reported weaker
    demand for commercial and industrial loans in Q3 2009, with 40% of the
    surveyed banks attributing the weakness to lower investment in plants
    or equipment.  (11/09/09)
  • Jan Hatzius, Economist, GS:
    Indicators that reflect the performance of small businesses look
    significantly weaker, like the National Federation of Independent
    Business (NFIB) small business index. The household survey of
    employment, which does not contain a small business bias unlike the establishment survey, shows an average loss of 140,000 jobs per month over the establishment survey. Standard
    economic indicators such as nonfarm payrolls, factory orders, shipments
    and the ISM extrapolate from the behavior of larger firms to the
    behavior of the aggregate economy and may be overstating economic
    activity at present.
    "Although both the economy and
    the financial markets are in much better shape than they were earlier
    this year, we are far away from a V-shaped recovery." (via the October
    13, 2009 Report: "The Small Business Slump, and Why It Matters")
  • Jan
    Hatzius, Economist, GS: The economy might have grown between 0.5 to 2
    percentage points more slowly than indicated by the advance Q3 2009
    estimate of 3.5% annualized real GDP growth, because of the inability
    of official estimates to capture the unusually poor performance of
    small firms.  Even if this is correct and shows up in the revision
    data, it could take several years.(via the November 11, 2009 Report:
    "Small Firms and GDP Measurement")
  • William C Dudley,
    President, Federal Reserve Bank of New York: “For small business
    borrowers, there are three problems. First, the fundamentals of their
    businesses have often deteriorated because of the length and severity
    of the recession—making many less creditworthy. Second, some sources of
    funding for small businesses—credit card borrowing and home equity
    loans—have dried up as banks have responded to rising credit losses in
    these areas by tightening credit standards. Third, small businesses
    have few alternative sources of funds. They are too small to borrow in
    the capital markets and the Small Business Administration programs are
    not large enough to accommodate more than a small fraction of the
    demand from this sector.” (10/05/09)
  • Apart from the
    traditional interest rate channel of monetary policy transmission, the
    effects of monetary policy are argued to work through a separate “bank
    lending channel” – the effect of policy changes on the supply of credit
    by banks. Mark Thoma, Economist’s View Blog: While large firms can
    raise credit from non-bank sources such as the issuance bonds and
    commercial paper, small businesses are dependent on bank lending for
    credit. The effect of a credit or policy shock on borrowing by large
    and small firms is thus asymmetric, and can cause small firms to
    contract activity more sharply. Tight credit conditions for small
    businesses are suggestive that the bank lending channel has been
    important in this recession. (10/13/09)

  japanese_land_vs_gdp.jpg

This really calls into question the usefulness of broad GDP reports in
anticipating asset value recovery after a land bubble bust. See "Who are ya gonna believe, the pundits or your lying eyes?" (for pictures), "Who are you going to believe, the pundits or your lying eyes, part 2" (for numbers and a very shaky video), and Boo!!! Will Halloween Scare the Market into Respecting the Fundamentals? for an idea of what needs to be cleared up in this space before we move forward.

Hey read this - Treasury Sales Smash Record - WSJ.com: Oct 30, 2009 ...
For all the concern over Washington's deficits and its $12 trillion
debt load, the US demonstrated this week that it retains the capacity
to...

Now check out the chart below and tell me if this calls anything to mind... 

japanese_spent_private_sector_savings_through_borrowing.jpg

If we do follow the path of the Japanese (and thus far I see nothing
but similarities except for where Japan was in better shape than the
US, save sume structural rigidity) one can be rest assured that their
will not be a big future in lending and fixed income products...

japanese_companies_deleverage.png

If our situation is indeed more intense than the Japanese, then it can
easily be surmised that to exist stimulus before Midterm Elections next
year will push us back into recession. Who wants to take that bet????

  japanese_fiscal_stimulus.png

 According to Nomura, although the US and Japan may be (have been)
successful in bolstering the money supply through government action,
that money acts very, very differently during a balance sheet
recession. Click to enlarge...

 m1.png m2.png
 m3.png  m4.png

  The logic behind the debasement of the dollar? According to the most
popular school of thought amongst the academics, it is unavoidable...

nomura_on_why_a_weak_dollar_in_balance_sheet_recessions.png

I will suggest congress force the three main ratings agencies to post this disclaimer everywhere their name or logo appears!!!

accountability.png

The graphic comes from the Nomura report linked above. The last line was a Reggie Middleton touch-up job Sealed.

Bankers, if you are not yet convinced it is time to take the first
mover advantage on some of those rotting CRE assets, then I don't think
you will be convinced at all. Next up, a peak at my short list of REIT
candidates rejects. Next week, I will begin rolling out the big guns for Subscribers, a complete forensic analysis of two REITs (actually, one is a refresh of a previous analysis). This is something I think the lending banks should definitely be interested in, that is if they found the content above to be of any value.


Free Research Samples and Relevant Real Estate/REIT Related Content for Subscribers

Research samples on companies in various sectors from food processors
to insurance companies to investment banks and
industrials/manufacturing - free to download. I dare you to compare this to what you get from your local brokerage house: zipResearch_Samples 11/17/2008 for examples). Show
it to them and tell them you got it from a blog! I would like all
retail and institutional investors to think long and hard about what
you are getting for your commission dollars at the big sell side banks.
As times get harder, their already conflicted analysts are being pared
back even more!

A look at the banks from an off balance sheet perspective:

    1. The Fed Believes Secrecy is in Our Best Interests. Here are Some of the Secrets
    2. Why Doesn't the Media Take a Truly Independent, Unbiased Look at the Big Banks in the US?
    3. As the markets climb on top of one big, incestuous pool of concentrated risk...
    4. Any objective review shows that the big banks are simply too big for the safety of this country
    5. The ARE trying to kick the bad mortgages down the road, here's proof!
    6. You've Been Bamboozled, Hoodwinked and Lied To! Here's the Proof. What Are You Going to Do About It?

    7. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?
    8. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 2 - JP Morgan
    9. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 3 - BAC (the bank
    10. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It? Pt 4 - Wells Fargo
    11. If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It? Pt 5 - PNC Bank
    12. A Must Read: An Independent Look into JP Morgan. This contains the "public preview" document (JPM Public Excerpt of Forensic Analysis SubscriptionJPM Public Excerpt of Forensic Analysis Subscription 2009-09-18 00:56:22 488.64 Kb), which is free to download.

 Relevant Real Estate Research: There is the venerable "GGP and the type of investigative analysis you will not get from your brokerage house":

My dated work on Macerich (subscriber only):

Below are opinion and research dating back to 2007 when many pundits were telling us the worst is over - on the residential builder side there was (these are free to download for non-subscribers):

  1. Lennar Forensic Analysis and Valuation update - 2/2009 Lennar Forensic Analysis and Valuation update - 2/2009 2009-02-23 09:12:53 485.65 Kb
  2. Voodoo, Zombies, Lennar’s Off Balance Sheet Accounting and Other Things of Mystery & Myth 
  3. Lennar Insolvent: Enron redux??? 
  4. Lennar, Voodoo & the Year of the Living Dead! 
  5. Now, a "Realistic" View of Lennar's Solvency 
  6. Bubble, Banks and Builders 
  7. Even
    as the corporate management, the treasury secretary, the Fed Chairman
    and the sell side called a bottom in 2007, 2008, and even now in 2009
    (sound familiar) - see Bubbles, Bank, & Builders - Pt IV: I can't believe this guy and Again, I say, Credibility is the key, Mr. Hovnanian.

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Rainman's picture

All graphics excellent. And the most chilling of all is the overlay of S & P performance versus M-T-M rumoured changes. I knew the realtionship timing was there, but seeing it on a chart as you present it makes me want to give up my morning eggs.

The old conniving Mobsters would be green with envy if they were alive today.

Anonymous's picture

Amazing, Reggie.

I hope some day you get invited to the Treasury for roast beef sandwiches.

Anonymous's picture

Before comparing the Japanese economy with the American economy, you should take into account that Japan has had a ageing population since 1990 and because of it, there are more houses than there are people.
In fact, I would say that Europe has a lot more to compare with Japan than America.
Second is also there nationalistic society where nobody who isn't Japanese isn't really welcom or able to do good business. While America will soon have a second language (Spanish) for all the kids to learn at school. Mandatory.

My point of view as a European :)
We are in a deeper shit than you are Americans! HAHA!
WE BEAT YOU AGAIN! ... ... we rule in playing losers...

Anonymous's picture

Before comparing the Japanese economy with the American economy, you should take into account that Japan has had a ageing population since 1990 and because of it, there are more houses than there are people.
In fact, I would say that Europe has a lot more to compare with Japan than America.
Second is also there nationalistic society where nobody who isn't Japanese isn't really welcom or able to do good business. While America will soon have a second language (Spanish) for all the kids to learn at school. Mandatory.

My point of view as a European :)
We are in a deeper shit than you are Americans! HAHA!
WE BEAT YOU AGAIN! ... ... we rule in playing losers...

Anonymous's picture

Reggie , do you support Koo's ideas how to get out of this or are you an Austrian Schooler.

Anonymous's picture

this is journalistic brilliance and should be published in an important policy journal - not crap like wsj, ft, forbes, et. al....

one ancillary question from the post is the state of small business.....are they really capable of borrowing but the banks won't lend....or is the bankster story correct that there are no worthy borrowers?....

in any event the thesis is profound - that with current practices us banking is doomed to oblivion.....i would welcome the cancer to wash away the crooked, kleptomaniacal, barbarous banksters which would shrink the malignant fire economy, yet it bodes ill in a systemic sense for the long term health of the usa economy....the only cure is an honest to goodness flush and bankrupt tsunami...

on the other hand, i very strongly believe that japan was an economic laboratory whose economy was deliberately destroyed by the rockefeller / rothschild cabal so that such practices could be later inflicted on the usa.....big events are not accidents - they are planned....if you watch the boob toob and have never worked in larger organizations you will not understand that all action takes place as planned....you will cling to your lone nut random acts of violence imbecility....central planning is the mechanism for making it happen....all nations are centrally planned...

i have written my congessshit and senator-shits from georgia that legislation fast tracking bankruptcies of banks should be made with haste....however, extend and pretend is not a real estate issue - it is all about interest rate swaps and nothing else.....as such the money center banks and irs are essential instruments of usa monetary policy.....the military industrial complex writ large...

oh what a tangled web we weave...

Anonymous's picture

Reggie,

Can you post a chart showing Japanese rents for residential real estate over the last 10, 20, or 30 years.

I bought my house in June 2008 as a home that had a stable house payment, however, the market here declined another 50%, on top of the 50% it declined before I bought the home. Needless to say I am VERY underwater (even with 20% down) and after looking at the Japanese situation I know I will not see any equity in my home during my 10 year time frame for owning it. (This is my first home and it is a 2b/1b).

What I am asking for is further information to see what the rents did, so I can make a more informed decision on a radical default.

Thank you very much for your time, and I always look forward to your posts.

Anonymous's picture

Reggie was right on in 2008 and wrong in 2009.whether his bearish views are correct in the future ,only time will tell

Reggie Middleton's picture

Actually, I have been right for about 10 years straight, and on the public blog through 2007, 2008 and the 1st quarter of 2009. This bear market rally I totally underestimated though. Don't confuse stock prices with right and wrong. If you look at the great depression graph above, you will see two very vicious bear market rallies that looked like they retraced nearly 100% of the losses. They both occurred on the way down to near 80% to 90% losses aggregate losses (I'm pulling these numbers from memory for illustrative purposes, chart the DJIA for that period to see the exact amounts for yourself). During that time, a fundamental bear would have been 100% correct for the full period. I am not a bear, I simply call things as I see them. I rode the real estate boom up from 2000 to 2005, but couldn't take the extremities of the bubbliciousness, so had to sell out. The market came apart in 2006. This foresight was not due to being smart, it came from looking at numbers and using common sense. It stemmed from my knowing that market prices are not the grand arbiter of value, but the other way around. Just like I was not wrong in seeing the real estate market fundamentally overvalued in 2005 (and I still think it is in many aspects), I don't believe I am wrong in seeing the equity market (US and others) fundamentally overvalued in 2007, 8, and 9. Time will tell.

I am a fundamental investor and to date, I have been right the vast majority of time on the fundamentals and for the most part on market prices as well. If you go through my blog, you can see where I followed the real estate boom and bust to withing 6 months to a year of the peaks and troughs) and the consequent equity and credit boom and bust.

I can't control stock prices (unfortunately, it appears that there are those who can, at least over the short to intermediate term), but history shows that the market always returns to the fundamentals.

I am sure I will have plenty of opportunity to be wrong, so let's not call it prematurely. I'd like to repeat, so I am not misunderstood. I will have plenty of opportunity to be wrong, but to date (publicly) I don't recall being wrong. I do recall market prices moving against me, but the fundamental calls were, for the most part, on point. Now, for those that believe being right or wrong is being on the right side of the market all the time, then I was wrong for two quarters straight. Then again, I don't believe that mentality can make you money as a fundamental investor, for the majority is almost always wrong, particularly approaching extemes in the boom/bust cycle. See http://boombustblog.com/20081008639/The-Great-Global-Macro-Experiment-Re...

delacroix's picture

reggie, you're a dose of sanity in a prozac world

JamesBrrando's picture

From one pimp to another.

Well Done!

Anonymous's picture

Fantastic work! I have learned so much from this blog...

dmeier's picture

Reggie,

Excellent post.

As I was putting together a presentation on my views about debt-deflation (presentation is here http://caps.fool.com/Blogs/ViewPost.aspx?bpid=284689&t=01000000000227061302) I found Richard Koo's work.

I am wrapping up reading his book "The Holy Grail of Macroeconomics." He does a great job explaining Japan's situation and the book is based many of the charts you referenced. I would highly recommend it to you and everyone else as it contains three very important frameworks to help put the current balance sheet recession in perspective:

1. How a balance sheet recession can cause aggregate demand to drop and the important of fiscal stimulus rather than monetary stimulus (Chapter 2)

2. The Yin and Yang framework of bubbles and balance sheet recessions (pg. 160) and banking crises (pg. 231).

3. His new general theory of macroeconomics (pg. 176)

As you have posted, Koo's work in this area has been extremely helpful in understanding what's happening as well as how to prepare.

Nice job!

Dave

Anonymous's picture

Reggie,

Excellent post.

As I was putting together a presentation on my views about debt-deflation (presentation is here http://caps.fool.com/Blogs/ViewPost.aspx?bpid=284689&t=01000000000227061302) I found Richard Koo's work.

I am wrapping up reading his book "The Holy Grail of Macroeconomics." He does a great job explaining Japan's situation and the book is based many of the charts you referenced. I would highly recommend it to you and everyone else as it contains three very important frameworks to help put the current balance sheet recession in perspective:

1. How a balance sheet recession can cause aggregate demand to drop and the importance of fiscal stimulus rather than monetary stimulus (Chapter 2)

2. The Yin and Yang framework of bubbles and balance sheet recessions (pg. 160) and banking crises (pg. 231).

3. His new general theory of macroeconomics (pg. 176)

As you have posted, Koo's work in this area has been extremely helpful in understanding what's happening as well as how to prepare.

Nice job!

Dave

Anonymous's picture

Your work is incredible - I know we all thank you for it.

Anonymous's picture

Reggie great work. I really appreciate it.

Bubby BankenStein's picture

Reggie,

Thank you very much for sharing your thoughtful analysis.

Your analogies and comparisons with Japan are very informative to me.

I hope those in higher authority will properly consider the perspectives you have provided.

Anonymous's picture

THANK YOU SO MUCH FOR YOUR WORK.

Anonymous's picture

Fantastic post. The country is ignoring the mortgage problem and it will be a nightmare.
Enlightenedwallstreeter.com