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CMBS: The next buzz-word bingo term that could effect us all.

steve.foote

By steve.foote
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Joel

Joel

Posted
Posted
This will be significant.

 

Fixed. The powers that be, preferably with minimal government intervention, need to cultivate a market for refinancing at least the loans that are worthy, which is most of them. Right now, there is no such market. There is still some time before the first major wave of maturities. I hope a sensible solution materializes.

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Lawman

Lawman

Posted
Posted

Steve,

 

Have you been living in a cave the past year.. :S

 

 

These problems are no longer problems..We simply print more money now and give it to those who need it...

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steve.foote

steve.foote

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Joel, thanks for the 'fix.' I didn't want to be that bold, but you are right about it's significance. The glimmer-of-a-hope recovery that we are being told is happening right now is very frail if it exists at all. A sudden downturn in the commercial sector would scoop out the second trough of the double-dip recession projected by many economist's. It will be interesting to see if we've learned anything since the last go-around.

 

Billy, I don't think they can print much more $$$ without blowing up the governments only currently-reliable source of revenue (bond sales) at the same time. The major bond holders have already staked out their position and are unlikely to be much more flexible with the Treasury. Printing money in this atmosphere risks moving the 'printer' from the creative-financing column to the criminal column. Again, it'll be interesting to see how it plays out.

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russell_bynum

russell_bynum

Posted
Posted

I'm sure our friends in DC will figure it out...they're a smart bunch. If you want proof, just look at how well Social Security is doing.

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Lawman

Lawman

Posted
Posted

Billy, I don't think they can print much more $$$ without blowing up the governments only currently-reliable source of revenue (bond sales) at the same time. The major bond holders have already staked out their position and are unlikely to be much more flexible with the Treasury.

 

 

No No No...Where have you been? That's the OLD way of doing it..Things have really CHANGED..Now if China doesn't want the Treasury's bonds because of too much risk then our on Federal Reserve buys them..

 

 

"Question: How does the Fed “create” money out of nothing?

 

Answer: It is a four-step process. But first a word on bonds. Bonds are simply promises to pay — or government IOUs. People buy bonds to get a secure rate of interest. At the end of the term of the bond, the government repays the principal, plus interest (if not paid periodically), and the bond is destroyed. There are trillions of dollars worth of these bonds at present. Now here is the Fed moneymaking process:

 

Step 1. The Fed Open Market Committee approves the purchase of U.S. Bonds on the open market.

 

Step 2. The bonds are purchased by the New York Fed Bank from whomever is offering them for sale on the open market.

 

Step 3. The Fed pays for the bonds with electronic credits to the seller’s bank, which in turn credits the seller’s bank account. These credits are based on nothing tangible. The Fed just creates them.

 

Step 4. The banks use these deposits as reserves. Most banks may loan out ten times (10x) the amount of their reserves to new borrowers, all at interest.

 

In this way, a Fed purchase of, say a million dollars worth of bonds, gets turned into over 10 million dollars in bank deposits. The Fed, in effect, creates 10% of this totally new money and the banks create the other 90%.

 

This also explains why the Fed consistently holds about 10% of the total US Treasury bonds. It had to buy those (with accounts or Fed notes the Fed simply created) from the public in order to provide the base for the rest of the money the private banks then get to create, most of which eventually winds up being used to purchase Treasury bonds, thus supplying Congress with the borrowed money to pay for its expenditures.

 

Due to a number of important exceptions to the 10% reserve ratio, some loans require less than 10% reserves, and many no (0%) reserves, making it possible for banks to create many times more than ten times the money they have in “reserve”. Due to these exceptions from the 10% reserve requirement, the Fed creates only a little under 2% of the total US money supply, while private banks create the other 98%.

 

To reduce the amount of money in the economy, the process is just reversed — the Fed sells bonds to the public, and money flows out of the purchaser’s local bank. Loans must be reduced by ten times the amount of the sale. So a Fed sale of a million dollars in bonds, results in 10 million dollars less money in the economy."

 

 

and the best part is by law the Fed's business is all kept secret..Ron Paul has a bill in Congress now that is gaining a lot of support that would require the Fed to submit to an audit...Haven't you noticed the sweat beading up on Helicopter Ben's forehead lately???

 

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BFish

BFish

Posted
Posted
http://online.wsj.com/article/SB125167422962070925.html

 

This could be significant. I've been working with quite a few commercial contractors lately, and they are all very concerned about a significant downturn in commercial realestate and construction. The third and fourth quarters are the ones to watch.

 

concerned about a commercial downturn! it's here and we're in it. from building to leasing it is very slow. spicket shut off at 6/30, literally. ironically the residential market is showing signs of life.

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vizhip

vizhip

Posted
Posted
The glimmer-of-a-hope recovery that we are being told is happening right now is very frail if it exists at all. A sudden downturn in the commercial sector would scoop out the second trough of the double-dip recession projected by many economist's. It will be interesting to see if we've learned anything since the last go-around.

 

The company that I am contracted to was holding its own until about a month ago... now they are beginning to cut the budget a bit to stay above water... The problem is that their clients are having tough times, and thus it translates back to them...

 

As for learning anything since the last go-around... well... based upon what we are hearing from Washington (even with them on a break), I kind of doubt it...

 

Which reminds me... I need to find out where Congressman's Price townhall is going to be tomorrow evening... should be interesting...

 

Regards -

-Bob

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Ken H.

Ken H.

Posted
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Oh yeah, ‘this’ isn’t over by a long shot. A commercial real estate bust is still in the works, late-2009 to early 2010 time frame in my mind, and then the Alt-A market starts to reset in mid-2010. Which by most estimates is 10 - 15X bigger than the sub-primes.

 

Hold on – the ride’s just gettin’ started.

 

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Mike O

Mike O

Posted
Posted
Ron Paul has a bill in Congress now that is gaining a lot of support that would require the Fed to submit to an audit...Haven't you noticed the sweat beading up on Helicopter Ben's forehead lately???

 

The one candidate I contributed to in this past election. I'll be looking for this bill. Thanks for passing that along.

 

Mike O

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steve.foote

steve.foote

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If you're just catching up to this, your information sources are way behind the curve.

 

Read up at ZH.

 

John and Billy,

 

It's all about timing. Timing is everything. Most of the US population knows more about the death of Michael Jackson then the current financial mess which affects us all. The average ‘Joe’ really doesn’t understand what is happening and, frankly, really isn’t interested in learning. So things, which are “on the radar” more than two or three months out, are as believable to them as time travel, and as interesting as root canal.

 

So, why bother posting this particular story now? Simple, it’s time. It’s about to unfold.

 

Now, here is the crux of the biscuit (a little throw in from Frank Zappa). Hypothetically, if I were someone close to retirement, who lost a s^&t load of investment portfolio during the market crash last year, and if I were still invested, and I just rode the phenomenal market rally of the last five months, and got back some of that lost wealth – I’d consider lifting a line from Steve Miller and, “Take the money and run.”

 

Nobody has a crystal ball, but the numbers just aren’t lining up to support a recovery at this time. As always, YMMV. :)

 

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John Ranalletta

John Ranalletta

Posted
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I tend to agree. Anyone fully invested in the market who feels a little tremble should assume the trapdoor is about to open, but that's just my opinion.

 

Recently, during the market's big up days, as much as 25% of the volume was concentrated in 4-5 zombie stocks, e.g. CITI, CIT and the GSAs.

 

How can zombies lead the market higher? On Zerohedge: insider selling is now at a 30 multiple to insider buying. Who'd know best?

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Lawman

Lawman

Posted
Posted
If you're just catching up to this, your information sources are way behind the curve.

 

Read up at ZH.

 

John and Billy,

 

 

I were someone close to retirement, who lost a s^&t load of investment portfolio during the market crash last year, and if I were still invested, and I just rode the phenomenal market rally of the last five months, and got back some of that lost wealth – I’d consider lifting a line from Steve Miller and, “Take the money and run.”

 

 

 

Nobody has a crystal ball, but the numbers just aren’t lining up to support a recovery at this time. As always, YMMV. :)

 

Agreed...but my greatest concern is not the economy..It's not even the inevitable decline in our standard of living

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John Ranalletta

John Ranalletta

Posted
Posted

That's too big to worry about. All politics (and economics) are local. Make sure your boat is water tight and pray for rain. There's plenty 'o opportunity on the horizon, though it's a bit far off.

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smiller

smiller

Posted
Posted
Hypothetically, if I were someone close to retirement, who lost a s^&t load of investment portfolio during the market crash last year, and if I were still invested, and I just rode the phenomenal market rally of the last five months, and got back some of that lost wealth – I’d consider lifting a line from Steve Miller and, “Take the money and run.”

And if you listened to most of the comments here at the time you wouldn't have been invested in the phenomenal market rally of the last five months... :Wink:

 

Maybe this time one should get out, I don't know... got another coin to flip?

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John Ranalletta

John Ranalletta

Posted
Posted

That's right, Seth, but that makes every investor a "market timer" not an investor.

 

Personally, I'm thinking the "market" is a rigged game. Recent disclosures about HFT, especially GS' co-located servers and software that can front run big orders and "see" orders is not surprising.

 

Here's a take.

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David

David

Posted
Posted
Hypothetically, if I were someone close to retirement, who lost a s^&t load of investment portfolio during the market crash last year, and if I were still invested, and I just rode the phenomenal market rally of the last five months, and got back some of that lost wealth – I’d consider lifting a line from Steve Miller and, “Take the money and run.”

And if you listened to most of the comments here at the time you wouldn't have been invested in the phenomenal market rally of the last five months... :Wink:

 

Maybe this time one should get out, I don't know... got another coin to flip?

 

I haven't made a single adjustment to my portfolio since this appeared on the horizon and don't plan to in the near future.

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steve.foote

steve.foote

Posted
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Posted
concerned about a commercial downturn! it's here and we're in it. from building to leasing it is very slow. spicket shut off at 6/30, literally. ironically the residential market is showing signs of life.

 

Brian, Savannah has successfully bypassed all of the economic downturns since I moved here in 1988. We have long considered ourselves recession-proof. But, not this time.

 

Most of my commercial construction contractor's maintain a comfortable six-plus month buffer of work. Those buffers are now down to six weeks or less. The larger companies are laying off as they contract and the smaller ones are closing up, a new phenomenom for us.

 

We still have on-going construction, but it's all wrap-up work. There is very little new work being started and everyone is moving to the "sit on their wallet" position. Even though occupancy of leased space is still pretty solid, the property owners are quite afraid - especially those leveraged. And, finally, the banks are still getting hammered. Our community banks, who underwrote much of our seemingly endless local growth, are sustaining losses which amplify by the day.

 

It's a very new experience for our area.

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John Ranalletta

John Ranalletta

Posted
Posted
That's right, Seth, but that makes every investor a "market timer" not an investor.

My point exactly.

I'm not in the market, per se, because I have little to zero control once the money is sent off - just like most investors.

 

I am still astounded when I talk to friends who lost big last year because they did not have portfolio insurance in place and who feel better this year having regained some of their losses; yet, they still have no insurance in place.

 

These are the same folks who buy homeowners, auto and life insurance.

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BFish

BFish

Posted
Posted

the backlog you describe is common to our area as well. the exception, soon, should be pavers, bridge contractors and those positively impacted by the stimulus bill.

 

nice to read your thought provoking prose again my friend.

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