CRE

CRE

Norway's Largest Bank Is Going Long VIX For The First Time: "We See Much More That Can Drag The Market Down"

“We see much more that can drag the market down than we see positive surprises. We can’t see where they could come from. It’s not yet like 1999 as far as valuation goes, but there are indications of a bubble. Now we’ve emptied the six shooter in all areas - the rate is zero, a lot of QE, pricing is up and growth is the same - it’s more challenging now.”

This Is The "Bubbly" Chart That Keeps The Fed's Rosengren Up At Night

 “Should a large negative shock occur, firms and households would be exposed to greater losses through their holdings of riskier assets than they would be if they were not reaching for yield.... should prevailing economic conditions change in response to a large negative economic shock, commercial real estate prices could decline relatively quickly, leading to large losses at leveraged firms.”

The US Real Estate Big Picture... A Thesis In Moral Hazard

Given central banks are all in and have no credible ideas (or credibility period), a NIRP driven speculative new housing bubble (for a population that is barely growing...hello China?) seems most likely.  If you haven't already, get busy front running the next moral hazard moonshot and then stay tuned.  Because as you read this, central bankers are already devising their next (even more destructive) "plan".

Options Traders Have Never Been More Bullish

With speculative positioning in VIX futures at record shorts (most bullish), and speculative longs in Dow and Nasdaq at or near record highs, we have one more "most hated rally" statistic to add to the pile of exuberance. The open interest in S&P 500 ETF (SPY) call options has never been higher as the last few days panic-buying leveraged long positions lifted exposure above summer 2011 highs...

"Several Participants Pointed Out The Elevated Level Of Equity Values"

"... during the discussion, several participants commented on a few developments, including potential overvaluation in the market for CRE, the elevated level of equity values relative to expected earnings, and the incentives for investors to reach for yield in an environment of continued low interest rates."

FOMC Minutes Show Fed Members Split Over July Rate-Hike, Fear Financial Risks From Low Rates

With Fed speakers attempting to jawbone the current narrative back from the uber-dovish record-high-creating Fed statement, all eyes today were glued on how hawkish the statement would be with regard 2016 hikes - few, some, or many? Since The Fed statement, GDP expectations have crashed to cycle lows but that has not seemed to stop The Fed:

  • *FED OFFICIALS SPLIT IN JULY ON WHETHER RATE HIKE NEEDED SOON
  • *A COUPLE FED OFFICIALS BACKED JULY RATE HIKE
  • *FOMC VOTERS AGREED TO WAIT FOR MORE DATA TO GAUGE ECONOMY

But perhaps most notably, several Fed officials are concerned of financial risks from too low rates.

This Has Never Happened Outside Of A Recession

The Fed's latest Senior Loan Officer Survey for July 2016 showed that banks continued to tighten standards on commercial loans in 2016 for both commercial and industrial (C&I) and commercial real estate (CRE). This was the fourth straight quarter of tighter standards: something that has never happened outside of a recession.

Domino #7: In Dramatic Twist, UK Property Fund Cuts Value Of Its Assets By 17%

Instead of suspending trading and implicitly disallowing redemptions, giant fund manager Aberdeen has forced investors in its UK Property fund to take a 17% haircut wiping hundreds of millions of dollars off its value. The fund stated that shareholders wishing to redeem will do so at a reduced price in order to reflect the current market environment and the fact that short term trading in the property market has "relatively penal consequences." Which makes us wonder - is all this post-Brexit selling because UK property prices are 20% over valued?

Bank Of England Unveils First Easing Measures After Brexit

In its first official easing act, the Financial Policy Committee lowered the countercyclical-capital buffer rate for UK exposures to zero from .5% of risk-weighted assets in a move that it said would raise the capacity for bank lending to households and businesses by as much as £150 billion. "This action reinforces the FPC’s view that all elements of the substantial capital and liquidity buffers that have been built up by banks are to be drawn on, as necessary" the committee said in a statement.

FOMC Minutes Show Cornered Fed "Likely" To Hike Rates In June, Concerned Market Underpricing Risk Of Hike

The supposedly dovish April FOMC statement - as global fears fell and turned domestically - has left bonds and bullion the winners and stocks the losers as investors lose faith in The Fed's forecast and economic promises. Today's FOMC meeting minutes suggest an increasingly cornered Fed will pull the trigger iun June with member disagreements brewing: MOST FED OFFICIALS SAW JUNE HIKE `LIKELY' IF ECONOMY WARRANTED; FED: RANGE OF VIEWS ON WHETHER DATA WOULD SUPPORT JUNE HIKE.  Of course, no matter what narrative the market perceives from these minutes, tomorrow's speeches by Dudley and Fischer (who has been conspicuously quiet recently) will likely give the biggest hint as to what happens next...