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Merrill's Former REIT Analyst Steve Sakwa Dispenses Some Unexpected CRE Pessimism
Steve Sakwa, who we may have had some harsh words for in the past, primarily during his Merrill Lynch tenure, shares some perspectives on Commercial Real Estate. His observation:
"From a financing standpoint things are far worse; from a fundamental standpoint things are certainly getting worse."
We are happy that now, at his new employer International Strategy & Investment Group (where he presumably does not have a mandate to whisper sweet optimistic words, and upgrade every firm that ML does a follow-on offering for), Steve is finally allowed to disclose his true feelings on the space, which many have written off as a risk threat simply because "everyone knows it is the next shoe to drop." Well, that's great, but unfortunately that doesn't change the fact that it is as "contained" as Residential Real Estate was presumably contained, and continues being a massive black hole for taxpayers years now after that particular bubble has burst. Although the solution, as we all know, is merely printing a few hundred billion dollars and throwing them at the problem. Why tinker with the dollar devaluation status quo if it is (still) working so very well?
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While it is nice to see a modicum of common sense coming out of this guy (CRE being worse than 2001, way to have eyes). I'm not one to start listening to an unoriginal uninsightful koolaid drinker just because he starts acknowledging that things aren't all ok.
In his entire assesment of the CRE industry there was no mention of the folk who actually buy things from stores and where that is going. Everything focused on the ability of CRE holders to access cheap financing. But I guess in an economy that doesn't need consumers or jobs, this guy is just the analyst one wants.
"Everything focused on the ability of CRE holders to access cheap financing."
Unfortunately that IS everything (at the moment) to the CRE market. As with all short term thinkers, it's always "just get me to the next mile post and everything will be fine" naval gazing narcissistic self centered thinking that counts.
Since all anyone looking at CRE can see at this point is how do we refinance all that 5 year paper coming due over the next 2-3 years, that's all they see. You won't (no, can't is the proper word) see anything other than what you're looking for.
Interestingly, if the Fed can engineer that refinance activity, it will be considered a save in the CRE field, until the next mile marker comes into range and the panic begins once again. Insanity by any definition. But perfectly logical to those in CRE who are trying to make it from quarter to quarter.
Think of it this way. For a worker who lives paycheck to paycheck, to be worried about next year is somewhat foolish (for the worker) if there is serious doubt the worker will be able to eat next week. Stability affords the longer view and instability narrows the focus.
Not excusing it, just explaining it. Sounds like the entire stock and bond market right about now if you think about it.
>For a worker who lives paycheck to paycheck, to be worried about next year is somewhat foolish (for the worker) if there is serious doubt the worker will be able to eat next week.
All too true.
We've gone from businesses looking to maximize the "win" next quarter (and not giving a damn about the quarter after that).
To now having businesses just trying to "stick around" for another quarter... waiting for everything to "magically" go back to the way things were before (the "dodged bullet" mentality).
IDIOTS. I mean shit, if a bullet unexpectedly grazed your skull while you were walking in the woods, would you just go "whew!" and then keep on walking as if nothing happened?
This is the end result of the "nanny" state -- everyone "waiting" for Mommy/Daddy to come along and "fix" everything.
Anon,
I fear it is even worse than simply waiting for the parents to bail the kids out. While I've always felt the "markets" were a rigged game (which you played at your own peril) I now see overwhelming evidence that, with the full support and direction of the Fed, Treasury and certain "banks" and corporations, it has become a full blown criminal enterprise.
As cynical as that might sound, many would ask me why it took so long to wake up.
Just further proof (if any where needed) that the analysts "opinions" are dictated by whatever the trading floor wants the market to do
I can't help but be so frustrated with the reality (of CRE) not reflecting the market.
They say "Mr. Market always wins" but the disconnect is starting to make me doubt myself.
Trying to cover his ass for former stupid comments...so he can go back and say no I told you on such and such a date.
The Fed is having its own CRE problems.
http://www.forbes.com/feeds/afx/2009/10/07/afx6977639.html
Bernanke is the landlord of struggling strip malls across America.
If your landlord was the FED, wouldn't you:
1)Hide your personal assets
2)Declare bankrupcy
3)Default on your CRE loans that the FED holds
A forced bailout.
I can never get vids from 'clip' to work. Ever.