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Much Of The Developed World Prints Today, But Where's The Wealth? Real Value Of Risk Assets Continue To Plunge!

Reggie Middleton's picture




 

Yesterday, I posted The Difference Between Money and Wealth and Why You Can Easily Print One But Must Actually Create The Other, and as if on cue, global inkjet nozzles 'round the world started whizzing - to wit:

Why such rampant printing? The whole world's afraid Europe's impending implosion will engulf global economies. They very well shoud be, this was quite evident 3 years ago (Pan-European sovereign debt crisis) and the can kicking is nearing the end of its useful cycle... ECB's Draghi: We See Now a Weakening of Growth in Whole Euro Area

Here's the secret that BoomBustBlog subscribers know yet seems to be lost on much of the European powers that be: cutting rates and printing will absolutely NOT prevent the nuclear winter in Real Assets. Since loans behind real assets are anywhere between a vast chunk and the majority of bank loans, when this thing goes the European banking system goes with it. This will manifest itself stateside (see sidebox), but the Europeans will get hit harder, at least initially... The reason? Well, it doesn't really matter how low interest rates are - if banks don't lend, borrows will not gain access to capital. Banks are too weak and skittish to lend despite "so-called" record profits, billions in bonuses and compensation, and trillions in bailouts. I repeat, and I repeat again, the only solution is to let the insolvent fail.

The REIT analysis referred to in the chart can be found here forsubscribers (the property by property valuations are for Professional/Institutional subscribers only):

I have just revisited the performance of this company (last update was at least a quarter ago). If my paid subscribers recall, we valued the company at rougly 10% of its current market price (see File Icon Cashflows and Debt Preliminary Analysis), with a variety of scenarios to be played out that may affect said valuation. This was based on valuation of key properties of the company, which together accounted 78% of the total portfolio in value terms.

Since then the company has released its full year 2012 results and 1Q2012 quarterly performance. There is no visible improvement in the performance of the company. The company is struggling to handle massive leverage, industry average defying LTVs, proportionately large debt liabilities coming due - the bulk of which is expected to face the music sometime in 2012 in view of upcoming liabilities of over nearly $700 million during the remainder of the year.

Reference the quite informative post from which the graphics below were excerpted: Watch As Near Free Money To Banks Fails To Prevent Nuclear Winter For European CRE

Slide21Slide21

image035

 So are there any concrete examples of all of this Reggie style pontification? If course there is. Do you see that chart above where the tiny country of the Netherlands is one of the largest per capita contributors to these bailouts? Well, you don't think all of the expenditure (to be) is free do you? Here are some screenshots of a prominent Dutch property company, on its way down the tubes - subscribers reference (click here to subscribe):

image040image040 

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Fastforward to today, and NIEUWE STEEN INVESTMENTS N.V. - NSI (one of our shortlisted REIT) suffered the most due to revaluation of their Dutch office portfolio. It therefore witnessed 26% decline in last 4 months.

NSI

NSI is simply a microcosm of what's to come for many larger real asset investors. I have warned that the Dutch, with what many consider to be a strong and relatively stable economy, was not immune to the European contagion, reference Are The Ultra Conservative Dutch Immune To Pan-European Economic Contagion...

 

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Thu, 07/05/2012 - 14:38 | 2589718 Racer
Racer's picture

And the real value of money in your pocket continues to fall as well... because of engineered inflation in all the things you need

Tue, 10/30/2012 - 14:05 | 2932060 smartmil
smartmil's picture

Now lean over the hand basin, tilt your head to one side – note that one ear should be facing straight down to the floor, keep your chin tucked towards your chest, open your mouth (you will breathe through it) and insert the spout of the netipot into your raised nostril. Gently tip, breathing calmly through your mouth.

Thu, 07/05/2012 - 14:16 | 2589636 Widowmaker
Widowmaker's picture

Reggie, you are wasting your time.

Wealth is physical and physical only.  Not some conjured up pixie dust commentary based on the system of hope and change you sell to paid subscribers.

Thu, 07/05/2012 - 14:03 | 2589608 Jack Sheet
Jack Sheet's picture

"paid subscribers" --- sounds like a goid deal ! How much do I get?

Thu, 07/05/2012 - 12:21 | 2589204 boeing747
boeing747's picture

Global central banks are goldbugs' best friends.

Investers front-running central banks are worst enemies of central banks.

 

Thu, 07/05/2012 - 10:54 | 2588872 sockratte
sockratte's picture

obviously they chose way number 3. i mean, what are they waiting for since lehman, the whole of europe?

Thu, 07/05/2012 - 10:46 | 2588817 ATG
ATG's picture

http://en.wikipedia.org/wiki/Irving_Fisher

 

EQ, EUD, PM's, TNX all headed South despite rate cuts. (for the rest of the summer?). We'll know more toward the close today...

 6:10 AM - 5 Jul 12 via web · Details http://richcash8tradeblog.blogspot.com/
Thu, 07/05/2012 - 10:44 | 2588808 Snakeeyes
Snakeeyes's picture

Despite "Central Banks Gone Wild!," Spain and Italy yields spiked and the Gyro fell.

Getting the feeling that it is really out of their hands?

http://confoundedinterest.wordpress.com/2012/07/05/central-banks-gone-wild-yet-spainitaly-see-higher-sovereign-yields/

Thu, 07/05/2012 - 10:42 | 2588794 boogerbently
boogerbently's picture

SPAM

Don't "contribute" if you can't "contribute" ALL the information.

Thu, 07/05/2012 - 14:38 | 2589719 peter4805
peter4805's picture

+1

I agree

Thu, 07/05/2012 - 10:41 | 2588787 geno-econ
geno-econ's picture

Sell RE,  Buy Dutch Tulip Futures

Do NOT follow this link or you will be banned from the site!