Commercial Real Estate
Objective analysis, or media spin to gauge popular reaction to Plan Z? Whatever it is, today's staff lead article in the English section of Spiegel has a piece that will likely raise more than a few eyebrows: "The common currency union was supposed to benefit the economy of the entire European Union. Now that the euro is struggling, however, it is bringing growth down with it. Germany's economy, once seemingly immune to the crisis, is now facing mounting difficulties."
For the past six months we have extensively discussed the topics of asset depletion, aging and encumbrance in Europe - a theme that has become quite poignant in recent days, culminating with the ECB once again been "forced" to expand the universe of eligible collateral confirming that credible, money-good European assets have all but run out. We have also argued that a key culprit for this asset quality deterioration has been none other than central banks, whose ruinous ZIRP policies have forced companies to hoard cash, but not to reinvest in their businesses and renew their asset bases, in the form of CapEx spending, but merely to have dry powder to hand out as dividends in order to retain shareholders who now demand substantial dividend sweeteners in a time when stocks are the new "fixed income." Yet while historically we have focused on Europe whose plight is more than anything a result of dwindling cash inflows from declining assets even as cash outflow producing liabilities stay the same or increase, the "asset" problem is starting to shift to the US. And as everyone who has taken finance knows, when CapEx goes, revenues promptly follow. Needless to say, at a time when still near record corporate revenues and profit margins are all that is supporting the US stock market from joining its global brethren in tumbling, this will soon be a very popular point of discussion in the mainstream media... in about 3-6 months.
The long anticipated downgrade of the recently bailed out Spanish banking sector has arrived. Moody's just brought the hammer down on 28 Spanish banks. Also apparently in Spain banks are now more stable than the country: "The ratings of both Banco Santander and Santander Consumer Finance are one notch higher than the sovereign's rating, due to the high degree of geographical diversification of their balance sheet and income sources, and a manageable level of direct exposure to Spanish sovereign debt relative to their Tier 1 capital, including under stress scenarios. All the rest of the affected banks' standalone ratings are now at or below Spain's Baa3 rating." Can Spain borrow from Santander then? They don't need the ECB.
Here We Go: Moody's Downgrade Is Out - Morgan Stanley Cut Only 2 Notches, To Face $6.8 Billion In Collateral CallsSubmitted by Tyler Durden on 06/21/2012 17:26 -0400
Here we come:
- MOODY'S CUTS 4 FIRMS BY 1 NOTCH
- MOODY'S CUTS 10 FIRMS' RATINGS BY 2 NOTCHES
- MOODY'S CUTS 1 FIRM BY 3 NOTCHES
- MORGAN STANLEY L-T SR DEBT CUT TO Baa1 FROM A2 BY MOODY'S
- MOODY'S CUTS MORGAN STANLEY 2 LEVELS, HAD SEEN UP TO 3
- MORGAN STANLEY OUTLOOK NEGATIVE BY MOODY'S
- MORGAN STANLEY S-T RATING CUT TO P-2 FROM P-1 BY MOODY'S
- BANK OF AMERICA L-T SR DEBT CUT TO Baa2 BY MOODY'S;OUTLOOK NEG
So the reason for the delay were last minute negotiations, most certainly involving extensive monetary explanations, by Morgan Stanley's Gorman (potentially with Moody's investor Warren Buffett on the call) to get only a two notch downgrade. And Wall Street wins again.
While we await the Moody's downgrade of the Spanish banking system, which we can only attribute to a lack of outsourced Indian talent, since three banks are now rated higher than the sovereign, Moody's decided to give a little present to our Dutch readers by downgrading 5 of their biggest banks: Rabobank Nederland, (2 notches to A2) for ING Bank N.V., (2 notches to A2) for ABN AMRO Bank N.V. (2 notches to A2), and for LeasePlan Corporation N.V. (2 notches to Baa2). The long-term debt and deposit ratings for SNS Bank N.V. were downgraded by one notch to Baa2. And yes, this means that the US banks (looking at your Margin Stanley) are likely next.
As Many Have Predicted for Years
First Moody's cut the most prominent Austrian banks, and now it is Germany's turn, if not that of the most undercapitalized German bank yet: "The ongoing rating review for Deutsche Bank AG and its subsidiaries will be concluded together with the reviews for other global firms with large capital markets operations." Punchline: "Frankfurt am Main, June 06, 2012 -- Moody's Investors Service has today taken various rating actions on seven German banks and their subsidiaries, as well as one German subsidiary of a foreign group. As a result, the long-term debt and deposit ratings for six groups and one German subsidiary of a foreign group have declined by one notch, while the ratings for one group were confirmed. Moody's also downgraded the long-term debt and deposit ratings for several subsidiaries of these groups, by up to three notches. At the same time, the short-term ratings for three groups as well as one German subsidiary of a foreign group have been downgraded by one notch, triggered by the long-term rating downgrades."
Everyone's worried about EU soveriegn debt. Once all of that rapidly depreciated real estate collapses mortgages that have been leveraged 30x, you'll really see the meaning of AUSTERITY! I'm trying to make it very clear to you people, you ain't seen nothing yet!!!
We finally get to continue what we started in 2008. Becuase the TPTB insisted on kicking the can down the road, the resulting pain will be excruciatingly devastating versus simply horrible! Alas, once you get you short positions/puts/futures in before the inevitably ill-informed short ban, money can still be made.
Facebooking The Chinese Wall: A Step-By-Step Guide On How To Build An Unassailable Case Against Muppet Manipulators!!!Submitted by Reggie Middleton on 05/24/2012 12:12 -0400
For anyone who can't see the "WHY" or "HOW" in a Muppet Manipulators suit, re: Facebook IPO, here's a step by step guide comparing my research to that of the top 4 underwriters showing exactly what they did wrong & how everyone is ignoring it
Today's MSM headlines pre-filtered for the frontrunning defense fund :-) Caution! Those allergic to real, unbiased analysis should move on...
They call their clients muppets, they lose their clients massive amounts of money, they get preferential government treatment and get paid billions in bonuses at the same time they accept trillions in bailout aid. Exactly why not a class actiion FB suit again?
As was leaked earlier today, so it would be:
- MOODY'S CUTS 16 SPANISH BANKS AND SANTANDER UK PLC
- MOODY'S CUTS 1 TO 3 LEVELS L-T RATINGS OF 16 SPANISH BANKS
- MOODY'S DOWNGRADES SPANISH BANKS; RATINGS CARRY NEGATIVE
In summary, the highest Moodys rating for any Spanish bank as of this point is A3. But luckily the other "rumor" of a bank run at Bankia was completely untrue, at least according to Spanish economic ministry officials, so there is no need to worry: it is all under control. The Banko de Espana said so.
"The US recovery must overcome the European divorce and the China slowdown in order for the US to grow more than 2%" is how JPMorgan's Michael Cembalest describes the reality of an un-decoupled world. There is some divergence as while the US economy if only growing at 2.0% and regional manufacturing surveys have rolled over, other economic indicators (JOLTS, railcar loadings, even select housing markets) are picking up. His point being that these trends will need to coalesce into more household spending (not just on cars) and capital spending in order for the US growth to grow more than 2%. For that to happen, some clarity may be needed on both the “2013 fiscal cliff’ and the “long term entitlement bomb”, which unfortunately calls for opposing fiscal measures to mitigate them. It will be hard for the world to grow if China depends on Europe which depends on China which depends on the US which depends on China and Europe. It’s an odd market: in the US, 98% of the S&P 500’s cumulative 27% return since January 2010 occurred either during corporate earnings season, or right after QE programs. The rest of the time, the S&P 500 is flat, since the economic news has not been that good.
As the economy slows, demand for jobs are about to increase, right? After all, it must be true, they just said it in the news!!!