- Wonder why: JPMorgan plans to keep pay roughly flat from last year (Reuters) - maybe this: Charles Schwab Warns "We Are In A Manipulated Market"
- Democrats overturn filibuster rule, increasing Obama’s power (FT)
- Day JFK Died We Traded Through Tears as NYSE Shut (BBG)
- When even dictators snub Obama - Afghanistan rejects U.S. call for quick security deal (Reuters)
- Obama Plunges in Investor Poll as Stocks Make New Highs (BBG)
- Iran, six powers struggle to overcome snags in nuclear talks (Reuters)
- Derision for China’s ‘rejuvenation index’ (FT)
- Bottom is in: Paulson Said to Inform Clients He Won’t Add More to Gold (BBG)
- German business sentiment rebounds strongly (WSJ)
- WTO on verge of global trade pact (FT)
"Preservation of Capital" is much more important than any other strategy in the marketplace and this has been demonstrated time and time again over the centuries. Gold, since ancient times, has served four functions. The first is for jewelry and this is a subject for lunch at the Four Seasons. This is not where we are dining today. The three other functions of gold are a replacement for a currency, an asset that rises in value in times of inflation and an asset that becomes more valuable when Fear is hard upon the market place. It is then a matter of viewpoint where you think we are now but given the sell-off in gold, the possibility of a dark horse or two beginning to trot after the German elections or the fantasy numbers pumped out of China becoming unmasked; gold is an interesting option these days. But there is potentially another 'trade'...
Am I a great investor? No, not yet. To paraphrase Ernest Hemingway’s “Jake” in The Sun Also Rises, “wouldn’t it be pretty to think so?” But the thinking so and the reality are often miles apart. When looking in the mirror, the average human sees a six-plus or a seven reflection on a scale of one to ten. The big nose or weak chin is masked by brighter eyes or near picture perfect teeth. And when the public is consulted, the vocal compliments as opposed to the near silent/ whispered critiques are taken as a supermajority vote for good looks. So it is with investing, or any career that is exposed to the public eye. The brickbats come via the blogs and ambitious competitors, but the roses dominate one’s mental and even physical scrapbook. In addition to hope, it is how we survive day-to-day. We look at the man or woman in the mirror and see an image that is as distorted from reality as the one in a circus fun zone.
It appears the Cypriots (or more clearly the European leaders) do not appreciate the extent to which Russia has propped up the local economy. “When the Russians leave who is going to stay at the Four Seasons for $500 a night? Angela Merkel?” one wealthy Russian asks rhetorically, as The FT reports, they are receiving a deluge of overseas phone calls from helpful Swiss bankers looking to swoop up the deposit transfers. "The locals should understand: as soon as the money leaves, the people who go to restaurants, buy cars and buy property leave too. The Cypriots’ means of living will disappear," and there are signs that the locals are getting how drastic this situation is, as a large billboard has sprung up at Larnaca Airport with a Russian flag and the words "Brat’ya ne predaite nas!" - "Brothers, don’t betray us!" Many Russian businessmen appear to have one foot out of the door already and are considering whih jurisdiction to move to as they await to see if Medvedev follows through on his threat to dismantle the double tax treaty with Cyprus.
- Tunisian opposition politician shot dead, protests erupt (Reuters)
- China says extremely concerned after latest North Korea threats (Reuters)
- Postal Service to cut Saturday mail to trim costs (AP)
- Debt Rise Colors Budget Talks (WSJ)
- Obama proposes short-term budget fix, Republicans swiftly object (Reuters)
- S&P Analyst Joked of Bringing Down the House Before Crash (BBG)
- Dell’s Bigger Challenge Ahead in Turnaround After Buyout (BBG)
- Some of the Mark Carney Gloss Is Coming Off (WSJ)
- Japan Official Says BOJ Tools Sufficient as Shake-Up Looms (BBG)
- S&P Lawsuit Undermined by SEC Rules That Impede Competition (BBG)
- Heavy Clashes Erupt in Syrian Capital (WSJ)
If you want to send a roomful of 100 wealth managers into an icy chill, have Russell Napier address them. Napier’s presentation, “Deflation in an Age of Fiat Currency,” is thought-provoking, and the precise polar opposite of investing as usual. US stock markets aren’t cheap, not by a long chalk. Napier, like us, favors the 10-year cyclically adjusted price / earnings ratio, or CAPE, as the best metric to assess the affordability of the market. At around 21, the US market’s CAPE is near the top end of its historic range. The S&P 500 stock index currently trades at a level of around 1400. Napier believes it will reach its bear market nadir at around 450, driven by a loss of faith in US Treasury bonds, and in the dollar, by foreigners.
- Obama and Romney Deadlocked, Polls Show (WSJ)
- NYC Commuter Week Faces Uncharted Ground as Storm Brews (Bloomberg)
- New York region struggles to move on a week after Sandy (Reuters)
- Europe's Bank Reviews Collateral (WSJ)
- Less circuses to pay for the bread? Time Warner Cable misses on falling demand (Reuters)
- Spanish unemployment total jumps by 128,242 as recession continues to take its toll on economy (Independent)
- Goldman Sachs Partner List Drops 31 Since February, Filing Shows (Bloomberg)
- China's mission impossible - a date for Hu's military handover (Reuters)
- German-Iranian trade booming (Jerusalem Post)
- Russia supplying arms to Syria under old contracts: Lavrov (Reuters)
- Russia endorses Egyptian-led regional group on Syria (Reuters)
- Election Winner Must Win Over Wall Street (Bloomberg)
- On Google, a Political Mystery That's All Numbers (WSJ)
- Richard Koo: explain to Americans why $22 trillion in debt in 4 years is good for them.. or something (FT)
In the next days Greece will present her magic tricks at court and while the Dukes and Barons cheer in the wings it will be up to the Red Queen, this would be the bearer of the Holstein emblem, to decide if the tricks performed are worth the cost. There is a very good chance of the hand wave of dismissal here and then the theatrical event of the season, “Off with their Heads,” will begin. Then the savant of Madrid will be allowed in to show his wares claiming they are all of silk but coarse wool is closer to the truth. The money, if it comes, will be provided by the EFSF by the way because the ESM is not yet in existence. Then the plan is to transfer the loan to the ESM which will be senior to the holders of the Spanish sovereign debt. So this morning you must rush out and by the debt of Spain. You love to be subjugated; you delight in the masochism of the whip. Losing money is what you live for and why you breathe. Oh no; this is not you? Well then; maybe better not.
- Europe focus of global May Day labour protests (BBC)
- Occupy movement's May Day turnout seen as test for its future (Reuters)
- BofA to Cut From Elite Ranks, will fire 2000 (WSJ)
- Man Group Has $1 Billion Outflows; Shares Slide on Cash Concern (Bloomberg)
- Obama Fails to Stem Middle-Class Slide He Blamed on Bush (Bloomberg)
- Berlin insists on eurozone austerity (FT)
- This must be really good for AMZN's 1.5% operating profit margins: Microsoft muscles in on ebooks (FT)
- Ohio Union Fight Shakes Up Race (WSJ)
- How to Lose $7.8 Billion and Still Be Top of the Rich List (WSJ)
- Hollande Seen Bowing to Debt Crisis in Socialists’ Balancing Act (Bloomberg)
- BP profit falls as Gulf spill costs still weigh (Reuters)
- Only the cattle cars are missing: Greece opens detention camp for immigrants as election looms (Reuters)
- China really wants that Iran oil - China mulls guarantees for ships carrying Iran oil (Reuters)
- U.S. eyes testy China talks, Chen backer expects Chinese decision (Reuters, FT)
- Possible arsenic poisoning probed in death of coroner's official (LA Times)
- Europe’s Anti-Austerity Calls Mount as Elections Near (Bloomberg)
- Law firm Dewey dumps executive; talks with rival end (Reuters)
- Greek bank appeals for fresh equity (FT)
- Banks seek to put pressure on small rivals (FT)
- Obama falls short of meteoric expectations abroad (Reuters)
An evil plan to raise the prices of Thin Mints while no one is looking. If you can’t trust the Girl Scouts, who can you trust? In this deflationary environment, companies are loathe to raise prices. Food companies are especially hard hit, with many commodities like wheat, corn, sugar, soybeans, and coffee up 50%-300% in a year. Any attempt to pass these costs on to consumers is punished severely. Who will betray me next? The US government? The Department of the Treasury? The Federal Reserve?
- Asian stocks advance to 16-month high on US manufacturing, commodities.
- Brazilian stocks closed at a 20-mt high on a raft of positive economic data at home.
- Crude-oil futures jumped to a 15-mt high on colder weather, economic optimism.
- Euro zone's mfg sector purchasing managers' index rose to a 21-mt high in Dec.
- US manufacturing expanded in December at the fastest pace in more than 3 years.
- US Treasury plans to sell $16 billion in four-week bills on Tuesday.
- Agricultural Bank of China plans to raise $22B via dual listing in Shanghai, Hong Kong.
Continuing our series of impending Commercial Real Estate debacles, today we focus on CMBX 3 (H1 2007 transactions). As Fitch disclosed on Friday, the November delinquency rate across CMBS increased by 43 bps to 4.29%, while more than double, 9.16% of the entire Fitch universe, was in special servicing. Of this CMBX 3 (together with 4) hold the brunt of the collapse in CRE. Of the 25 deals in CMBX 3, those performing the worst as of the latest remittance report were:
- COMM 06-C8, with 18.3% of all deals delinquent or in special servicing ($680.4 million of $3.7 billion total)
- CSMC 07-C1, with 16.5% of all deals delinquent or in special servicing ($552.3 million of $3.3 billion total)
- LBUBS 07-C1, with 15.6% of all deals delinquent or in special servicing(576.4 million of $3.7 billion total)
And highlighted below are the properties most indicative of the CRE collapse within CMBX 3, and in CRE in general. Once again, this is merely a sample with many other properties already in foreclosure and/or delinquency.
How bad will the luxury hotel market get? Well,,, Pretty bad. All of those BS, "better than expected" earnings surprises off of severely lowered estimates stem not from top line revenue gains or economic progress, but from hacking jobs and cost cutting. Ya' think those Four Seasons', et. al. hyper-luxury executive suites are included in those cuts somewhere??? Here are all of those pretty graphs and interconnected hyperlinks to help tell the story...
The CRE crunch continues claiming victims, with the latest being the Four Seasons Hotel in New York. And while Stuyvesant Town is some dinky little project somewhere on the East side of New York (or so prevailing thought runs), which few care if it goes belly up or not, the fat cats that frequent the opulent hotel on 58th street next to the brothel, pardon, gentlemen's club, which is Tao in all but name, may be a little more concerned about this one. In addition to the Four Seasons, three other luxury hotels, which back a loan sent to a special servicer 10 days ago include the Four Seasons Biltmore Resort in Montecito, the ritzy Las Ventanas in Cabo, the destination of many a banker closing dinner, and the San Ysidro Ranch in Montecito.