German Real Estate Mutual Funds Halt Redemptions On Write Down Plan And Redemption Scramble

Even as the market is now surging on rumors of massive pan-European bail outs (someone explain to us how a tsunami of failed banks is equity positive... or for that matter how imminent monetization is EUR positive), Bloomberg is reporting that the liquidity crisis in Europe has struck smack in the middle: after the FinMin released a draft bill to forcibly write down real estate asset holdings by 10, investors in certain mutual funds have panicked and attempted massive redemptions, which in turn forced redemption halts by these funds which likely are woefully undercapitalized to begin with. This is just the beginning of the liquidity squeeze moving from the periphery to the core. 

From Bloomberg:

"Two German real estate mutual funds with properties worth 10.5 billion euros ($13 billion) closed for redemptions yesterday after government proposals to impose an industrywide writedown of assets spooked investors. SEB Asset Management AG closed its ImmoInvest fund and KanAm Grund KAG closed Grundinvest Fonds after German Finance Minister Wolfgang Schaeuble released a draft bill May 3 that proposed to introduce a 10 percent cut in asset values.The writedown plan triggered “massive uncertainty among investors” and significant outflows, Frankfurt-based SEB said in a statement, without giving the scale of the redemptions. KanAm said it was “compelled” to halt redemptions in response to “fears of losses among investors and asset managers, resulting in those parties liquidating portfolios as a precaution.” Susanne Ludwig, a spokeswoman for the Munich-based asset manager, said outflows since May 3 totaled “hundreds of millions of euros.”

Basically what happened is that in Germany, where it appears assets are just as mismarked as in the US, the administration is finally realizing that by perpetuating accounting fraud the final result can only be catastrophic. So instead the country has decided to take marginal mark downs (10% is about 20% of what the full write downs will end up being). The result: all those who have hoped Germany would encourage accounting fraud with the same zeal that the US has, are now panicking and attempting to bail out of the abovementioned real estate funds. Which in turn prompted these funds to shutter redemptions as they are likely leveraged thru the gills and have no cash to disburse. Kinda like what will happen in the US shortly, when money market funds break the buck again. Readers will recall,  as Zero Hedge disclosed a few months ago, Money Market funds can now suspend redemptions as well.

Comments

[sumo]

Imagine if a rule like this was proposed in Spain...

VIX to 100 and beyond. Booyah.

---------------------------------------

http://www.larouchepac.com/node/13599

February 19, 2010 (LPAC)—Lyndon LaRouche has indicated that, not Greece, but the virtual British colony which is Spain, with its London-controlled Banco Santander, is the detonator to bring down the Euro system. Now, after UBS's (Union Bank of Switzerland) report yesterday that the Spanish housing market is a "Ponzi scheme," Credit Suisse has issued a 68-page report to investors which points to Spanish banks hiding their losses, especially their large mortgage and commercial real-estate losses.

...

[Mitchman]

Oops!  Contact with reality can sure be ugly.

[BlackBeard]

Well, they shouldn't expect gangbusters business after a redemption freeze that's for sure.

[merehuman]

[]

[Kataphraktos]

Steve Liesman is on CNBC saying there's no sign of dollar funding problem in Europe. Is it a coincidence that the first four letters of his name spell the word "Lies"?

[Ragnarok]

On a dark desert highway, cool wind in my hair
Warm smell of colitas, rising up through the air
Up ahead in the distance, I saw a shimmering light
My head grew heavy and my sight grew dim
I had to stop for the night
There she stood in the doorway;
I heard the mission bell
And I was thinking to myself,
?this could be heaven or this could be hell?
Then she lit up a candle and she showed me the way
There were voices down the corridor,
I thought I heard them say...

Welcome to the hotel california
Such a lovely place
Such a lovely face
Plenty of room at the hotel california
Any time of year, you can find it here

Her mind is tiffany-twisted, she got the mercedes bends
She got a lot of pretty, pretty boys, that she calls friends
How they dance in the courtyard, sweet summer sweat.
Some dance to remember, some dance to forget

So I called up the captain,
?please bring me my wine?
He said, ?we haven?t had that spirit here since nineteen sixty nine?
And still those voices are calling from far away,
Wake you up in the middle of the night
Just to hear them say...

Welcome to the hotel california
Such a lovely place
Such a lovely face
They livin? it up at the hotel california
What a nice surprise, bring your alibis

Mirrors on the ceiling,
The pink champagne on ice
And she said ?we are all just prisoners here, of our own device?
And in the master?s chambers,
They gathered for the feast
The stab it with their steely knives,
But they just can?t kill the beast

Last thing I remember, I was
Running for the door
I had to find the passage back
To the place I was before
?relax,? said the night man,
We are programmed to receive.
You can checkout any time you like,
But you can never leave!

[wang]

and this headline from February

UPDATE: Citigroup Warns Customers It May Delay Future Account Withdrawls By 7 Days

http://dailybail.com/home/update-citigroup-warns-customers-it-may-delay-...

[Recovery3000]

Good article on the core being affected, similar to cries about the risk in 2007 being only several hundred billion in subprime RBS turned into several Trillion and counting of losses in "safe" assets.

[TruthHunter]

Larouche is alive and well? Haven't heard of that weirdo in

years.  I noticed this quote that really got me:

"To put things in perspective, Spain now has as many

unsold homes as the US, even though the US is about six

times bigger"

If we have 9 years supply, whats it like in Spain?!

As WC Fields said, "Its time to take the Bull by the tail and

look the facts in the face!"

[sweet ebony diamond]

sarah palin could solve this one in a second.

[Jeff Lebowski]

Did you mistakenly think that you were on Huffington Post?

Sarah Palin has no relevance to the subject, nor can we "Fan" you for taking potshots at conservatives.

[MarketTruth]

REMEMBER FOLKS: The USA now has capital controls and you Money Market funds can be frozen out from you liquidating them.

[cymro33]

Food for thought. Patience and discipline needed. 1. Today the Treasury has an average maturity on its debt of about 5 years. That means the U.S. must roll over its debt much more frequently and is much more susceptible to rising rates.   2. In just a few years our publicly traded debt will approach $15 trillion. If interest rates just rise to their historic averages, the interest on our debt (depending on the level of economic growth and tax receipts) will absorb anywhere from 30-50% of total Federal revenue   3. Today we are being told the U.S. dollar will always be the world’s reserve currency and Treasuries will always be viewed as a safe haven by global investors. Remember how those in Washington and on Wall St. also assured investors that the subprime mortgage problem was well contained and would not bring down the housing market—much less the entire global financial system. .   4. Regardless of what those same people are saying now, these record low yields on U.S. Treasuries are unsustainable and cannot last given our massive $13 trillion national debt, $108 trillion in unfunded liabilities and the record-high $2.3 trillion Fed balance sheet. Astute investors should prepare now for the likelihood of much higher interest rates in the not too-distant future.   http://www.prudentbear.com/index.php/guestcommentaryview?art_id=10375

[brooklynlou]

Question to the cognescenti. What happens to the US markets if the EU decides to follow the American example and monetize its debt by electronically creating a trillion or so Euros?

[Buck Johnson]

Spain is trying to hide a trillion and a half problem on their books.  I don't think the EU can do what we do without it disrupting the whole Union.  You see all these countries in the Union have their own agenda, some used the Union as a way to subsidize their economies on the backs of German and French and other big economies.  Others may see this as a good time to get out of the Union, especially if they are a strong country financially.  Others are wanting a Union but without some countries, and on and on.  So printing more Euros will shoot inflation up big time in the Union and at the same time force some countries you don't want to leave to leave.  As of right now there is a liquidity problem in the EU and none of the banks and central banks trust each other.  We are at the edge of the abyss and I truly believe that this year is going to be ver bloody year financially for alot of countries on this planet.

[Grand Supercycle]

Posted May 1st - a week before the crash.

 '11,250 / 300 is an area of significant resistance and if this level can’t be breached it should signal the end of the March 2009 bear market rally - the weekly DOW chart shows an expanding wedge indicating a significant move is probable - this remains an overbought bear market rally and the uptrend could falter at any time - the VIX index continues to give bullish warnings which is bearish for equities - long term charts of key equity indexes continue to give bearish warnings and the March 2009 lows will be breached in my opinion - USD Index bullish warnings since 2009 on the weekly and monthly chart have not changed and further USD strength and thus EURO weakness is still expected '

http://www.zerohedge.com/forum/latest-market-outlook-0

http://stockmarket618.wordpress.com

[W_Cuno]

The valuations may be on the high side by 20-25%, on that i agree. Please note though that most of the german real estate mutual funds a more or less unleveraged/equity only, so i don't see the danger of a fund going bust.