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CMBS Delinquency YoY Change: 585%
Compliments of RealPoint, whice has provided this useful monthly report publicly, readers can enjoy for themselves the full effect of an economy shooting green on all cylinders. One can hope that RealPoint, which was recently selected for TALF rating-backstop purposes as an NRSRO, will parlay the knowledge contained herein into a fair and balanced assesment of all CMBS tranches that sellout firms S&P and Moody's undoubetdly deem to be a solid AAA+.
The charts speak for themselves.
hat tip David
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yesterdays 200%
Just the impetus for S&P infinity.
As I recall from a recent article in the Wall Street Journal, Standard & Poor's downgraded certain tranches of some CMBS to approx. BBB from AAA+ and then changed the rating back to AAA+ approximately one week later.
Is this type of drastic rating change and reversal within such a short time period common?
http://www.zerohedge.com/article/sp-commits-professional-suicide-ratings-round-trip-underlying-cre-remains-toxic-garbage
actually, I really do recall your piece on this one TD. In fact, I think I read it on ZH first and saw it in the wsj later that day or next. I was flabbergasted and my ml broker (he's a pretty good bond guy, knows his stuff, loves ZH) could not believe it.
by the way, you must be slacking again....the 2Y10Y spread is wider than...well, you know. how about getting off your lazy butt and get a piece or two going pronto on the ~ quarter trillion treasury action this week. Please be nice though cuz we got visitors in D.C., okay?
Hey, I know this is off topic, but I can't stand it anymore. Green shoots=parachutes. Not seedlings. Just like in Bastogne. Except money bags dropped from above. Compliments of cargo-master Bernanke.
Death from above
or better yet
Money from above
Airborne!
Rangers Lead The Way!
All the Way
82nd Airborne
Now I now, why they were called green 'shoots'. They shot all long-term investors in the foot...
Cheers to anyone who pulled the trigger on some short positions the past week or so, you're a better (wo)man than I.
Tempted to double-down on SRS; so so tempting.
60% BGZ since last Tuesday. Was stinging for a bit but not any more.
Once all the anti-short rules are created or enforced (when is the uptick rule coming?),we will start to get all the real bad news and the S&P will .........go much higher?
A wise man said to me during the bail out that the US is now a Banana Republic....seems about right.
At this rate, "they" will make BUYING mandatory. When you file your taxes, the IRS will calculate how much stock you should have bought according to your taxable income, and any amount under that level, you'll get a stiff penalty.
Less the bananas though.
yet REIT's have been on a roll in the equity market...
makes sense as the recession is now over.
next....
Dennis Kneale... yes you Dennis... we know you are covertly reading this... is this consistent with your "recession is over" prophecy... looks like a lot of contraction still to come.
That is a really interesting report. Required reading for anyone interested in the topic, and with lots of good details. Thanks for highlighting it!
CMBS is just part of the story. most CRE loans were underwritten and held on the books at your local community bank made at 85% LTVs against hyper-inflated collateral (now worth 50% less). some research i have read claims $1t commercial mortgages are maturing and need to be refi'd between now and 2012, something like 70% are unsecuritized on the books at local banks.. the grim reaper is outside their door
when local banks fail, then everyone will know its a depression, give it four to 12 months...
Mine will fail at the end of August. There's no way they can raise the capital that the Fed is requiring. Bye bye nice, old, community bank. Hello mega(fees)-bank.
Watch prime rmbs go there too; similar vertical trendlines.
ha ha, red shoots.
You have to put things in perspective Tyler.
What goes up must come down.
That goes for home prices....but also delinquency rates.
Did you see housing sales?
Anyways. I read your very informative analysis on the deflation/inflation on your "The End of the End of the Recession" post.
However, I must and will most humbly disagree. If you look at inflation in terms of the money supply than we are experiencing the impregnation of inflation (more money in circulation = higher prices). It is quite apparent we are experienced deflation in terms of credit collapsing but as we all know this was not a crisis of liquidity, it was a crisis of credit. We are also feeling the effect of China hording commodities.
IB's have been restored due to the tax payer purse. It is quite evident if there are further problems they will be recapitalized.
I am long term. Horrible at day trading. I see the long term being an inflationary problem with no economic growth.
I guess...hyperstagflationary?
I dunno though, I'm a 24 year old pizza delivery boy so what do I know?...seriously pizza delivery boy
For some strange reason, I believe you.
Hey, I didn't order anchovies!?
quite apparent we are experienced deflation
Sorry. Should have been "we have"
Been a long night
credit is money, and now there is a lot less of credit, so less money supply, read Mike "Mish" Shedlock's blog lately? very much like ZH powerpoint, he is a big time seeing deflation and was predicted it long ago. He does not discount dollar could collaspe and does not say inflation will never happen, but says govt just can't keep up to loss of credit
This is the Pizza delivery guy -
"credit is money"
And no. Credit is not money. Credit is trust.
Credit is trust. YEP. So, we have deflation in credit as money(trillions) and a crashing dollar as deflation in trustworthyness(bond auctions)
Pizza delivery guy here-
A crashing dollar is inflationary.
Correct, a run on the currency will be hyperinflationary.
"And no. Credit is not money. Credit is trust."
I've been involved in several online shoving matches about this. I agree with you; credit is NOT money. Consider the store of value function of money: How can store of value be created out of thin air at 10:1 in a fractional reserve banking system? It's not possible unless we suspend disbelief, which frankly is what a fiat currency system is all about anyway. This explains why savers NEVER save cash; cash depreciates, forcing us to chase higher yielding 'investments'. This means that even fiat money itself isn't money.
OK, I'm started now. The whole fucking monetary system is built on a lie. Does anyone really wonder why it's unsustainable, and acting so? Next rant: the myth of the "risk-free rate of return", on which the entire global investment paradigm is (falsely) based. The Chinese have finally realized that the risk-free rate of return ain't so risk free. All you MBAs, time to re-risk everything, because it's all based on Treasuries, isn't it?
Phew; I feel better.
"He does not discount dollar could collaspe and does not say inflation will never happen, but says govt just can't keep up to loss of credit"
I challenged him on this a long time ago. He flat out replied to one of my posts on his blog that there would be no U.S. default. Shedlock cannot think outside the box. Shedlock, like Denninger, is a great reporter, but not a great thinker. Way too conventional, way too much faith in the status quo. Both of them consider any hyperinflation scenario to be "tinfoil". They always use the "inflation/deflation" paradigm to discount it, as if hyperinflation is just really bad inflation. Of course, it's not.
Pizza Boy. You mentioned the housing numbers, did you also read the follow on that the median house price dropped -5.8%? My read is that in order to move those houses for the 11% gain, they had to steeply discount the prices. Additionally, last month we were hovering in the low 900's and the 10 yr bond rate was below 3.5 on average which gave a fairly decent Interest rate for mortgages. The problem now is with this rally on BS earnings (no topline growth overall...) is that the 10 yr rate is now at 3.7ish% and is rising. Moreover, you have builders complaining about how their new houses are being aprraised at less value than a comparable brand new foreclosed house can fetch on the market. Hmmm...thats pretty funny to me. If the foreclosed newly constructed home will only fetch a certain price WHO GIVES A DAMN HOW MUCH IT COST YOU TO BUILD IT! STOP BUILDING THE HOUSES YOU IGNORANT ASS's! This is one of the silliest things I have heard of. Moreover, oil popping AGAIN like it did means that during the 2nd biggest shopping season of the year (Back to School vs. Christmas Holiday) consumers are getting hit again in the pocketbook with high gas prices thus lowering the amount og money they can buy even more. I am expecting to see horrific back to school number retail sales. THAT will be the straw and the CRE crisis and the existential understanding that the consumer IS NOT COMING BACK ANY TIME SOON because of the official and the actual unemployed can not BUY if they do not have a job. These folks on the news channels (Dennis Kneale/Jim Cramer you are a fucking idiots) can't understand the depth of this depression as they focus on everything (China, earnings from companies that primarily do business outside US, and companies that do WELL do to the recessionary environ) but THE CONSUMER. Once the consumer is understood to be crushed and is not going to come back...the market will crash like it never has done before. Bank holidays anyone???
-As Always Your Humble Servant,
Silence Dogood
E-mail: silencedogood001 at gmail.com
Twitter: http://twitter.com/silence_dogood1
Folks, hyperinflation? That needs a velocity of money and the velocity is neutral or decreasing. Money needs to be SPENT by the consumer for prices to rise substantially. Whats sad is that prices WILL rise a little due to higher energy and commodity costs YET the consumers pay will drop and hours work dropped. I hear inflation and the only thing I think of is a psychological ploy to try to suck money into the markets. STAGFLATION is what we are facing at the worse....and deflation is even worse yet and that looks more likely. CPI and PPI will drop when bans on Energy and Commodity speculation are enacted.
-As Always Your Humble Servant,
Silence Dogood
E-mail: silencedogood001 at gmail.com
Twitter: http://twitter.com/silence_dogood1
Even the Philly Fed reports compression of margins as commodities costs are being absorbed at the producer level.
As for velocity of money, outside of Wall Street there simply isn't any.
"Folks, hyperinflation? That needs a velocity of money and the velocity is neutral or decreasing. Money needs to be SPENT by the consumer for prices to rise substantially."
Is that you, Mish? This B-school discussion of monetary velocity harkens back to the conventional inflation/deflation debate, which is much too confining since it all takes place within the confines of traditional monetarist thinking. Traditional monetarist thinking begins from the premise that monetarism works, so it discounts failure events. For hyperinflation to occur, velocity in the traditional sense is not required; the trigger could (will?) be a simple loss of confidence in the currency, and that is the event whose 'velocity' will shock most. We are one black swan, or any one of quite a number of knowns, away from it right now.
Tell it to Iceland, or Argentina. Call Iceland on the phone and tell them about monetary velocity theory.
Gangrene shoots
I never cease to be amazed at the market's valuation.
Nothing will change until the system is allowed to crash.
I'm patiently waiting for the next leg down, 1930 style.
Well at least it didn't double from May- that's better than expected.
Is there a website anywhere that is tracking ongoing reports of the S&P components as earnings are released? The S&P site has tweaked their P/E spreadsheets to now call for $45 earnings in 2009, which would be P/E = 17 for the mid 900's of the index. The two issues are 17 is not a benign number. It's where the S&P P/E was at the top in 2007. The other issue is $45. Q1 was $10.11 and that was Operating Earnings. The As Reported earnings are a disaster and the 2009 P/E won't come close to even 17. Things like INTC's $1+ Billion EU fine can't be tossed out of As Reported. Anyway, is there an ongoing tracker of S&P reports?
More like black holes that swallow green money....going going gone. And just when we could make a little cold cash on the downward move to soften the blow of lost housing wealth, lost jobs, lower incomes, now we will be shut of markets by manipulation..argggg
Another example of poor analysis that you clowns on here suck up like a Hoover...
TD is using $ values for CMBS delinquency % increase. This is so riddled with errors you should get fired. Before 2005 the size of the CMBS universe was much smaller, as between 2005 and 2007 about half of all CMBS was created, and thus as these vintages naturally season, there would be an increase in the $ amount defaulting even if the default rate remained the same. Comparing a delinquent $ amount from a year ago to $ amounts today (as the 2005/2007 vintages admittedly crumble) could only serve as an attention grabbing one liner header exaggerating what’s going on, and shock those who don’t know what they are talking about.
It didn't stay the same though, read the actual numbers. The reduction in outstanding balance doesn't cover the total increase, though admittedly the effect does exacerbate the headline number
Plus.. the collapse in the size of the market is as much a problem as the default rate.
I am not talking about reduction of outstanding balance. Reduction of outstanding balance does affect these numbers some, and also effects deliq% numbers, but in todays world its noise. and the lack of new issuance would skew the numbers higher also, as there is no low deliq new issue loans to weight down the delq numbers.
I am talking about volume of CMBS new issuance which ballooned in 2005/2006/2007. Since the volume is weighted towards those more current vinatges, as they season under even normal default rate assumptions then naturally the $ notional amount of defaulted loans will increase even if the default rate is nothing different than in older vintages because the total amount available to default is now so much more.
Perhaps Tyler can post the YoY increase in delinquencies. Although the number will not be 500 it will be very bad.
The values do matter with respect to losses that have YET TO BE written down. That is especially true if, as you contend, half of CMBS was created between 2005 and 2007.
If he did YoY increase in deliq%, while still poor, at least it would be more apples to apples and take into account the changing cmbs volume. However, it would still be another poor way to look at performance change. For example going from 0.1% to 0.2% dlq would appear the same as going from 4% to 8% dlq, and yet the latter would be much more concerning change to me)
It's a fucken green shoot ok! Consensus was forecasting 623.5579615% and it's come in at 585%! Buy you fools, buy. The second derivative never lies!
Yet CMBX is...way up? The world is upside down, I tell you!
http://www.markit.com/en/products/data/indices/structured-finance-indice...?
Its not upside down, you are just looking at a lagging indicator.
If you think you can trade a product based on a lagging indicator like commercial RE delinquencies and make money because you and Tyler are the only two guys on the planet who know deliquency rates will continue to go higher,...you will lose a lot of money that way. The CMBX trade is way ahead of you.
There was an article in the local print media here about vacancy rates in a local commercial / office park. Currently over 1,000,000 sq ft vacant, expected to increase to more than 2,000,000 in six months for a net vacancy rate of 35%. Lease / Avaliable signs are everywhere.