May 2009

The CBMS market about to implode

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Since 2007, if not earlier, all the attention has been focused on the residential real estate troubles. But now the commercial real estate problems are about to come front and center.

In a research note today, Citigroup analysts estimated that "more than $75 billion of CMBS market capitalization has been lost" since the S&P request for comment on changes to their U.S. CMBS rating methodology was issued two days ago.

S&P noted:
Our preliminary findings indicate that approximately 25%, 60%, and 90% of the most senior tranches (by count) within the 2005, 2006, and 2007 vintages, respectively, may be downgraded.

Consumers believe in "green shoots" ... but aren't spending like it

Bloomberg reports that:

Confidence among U.S. consumers rose this month to the highest level since September, reinforcing signs that the worst recession in half a century is abating.
….
“Consumers are looking at things like the rise in stocks, they are listening to reports talking abut ‘green shoots’ and they believe it,” Chris Low, chief economist at FTN Financial in New York said in an interview with Bloomberg Television. “They believe that a recovery is coming but they don’t see it in their current job prospects.”
….
The Reuters/University of Michigan index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, rose to 69.4 in May from 63.1 the prior month.

12% of all mortgages behind in payments - what is behind these numbers?

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By now you all saw the headlines, 12 pct. are behind on mortgage or in foreclosure, but what is behind these numbers?

Firstly the foreclosures are expected to reach an all time high next year.

Now people cannot pay their mortgage simply because they lost their jobs, businesses and income.

Some facts:

The New York Times Foreclosure map (05-25-09):

foreclosure map

Obama Administration tried to Kill GM Pension Plan.

I suppose that this shouldn't be a surprise given the number of "Chicago Boys" in the Obama administration.

Washington -- General Motors Corp. won't terminate its hourly pension plan, the United Auto Workers union told its members today -- a move that could have cost retirees thousands of dollars in lost benefits.

Here Comes the Bomb - GM to file for bankruptcy on June 1st

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We all knew this was coming, but now it's official, GM to file for bankruptcy on June 1st.

General Motors Corp., the world’s largest automaker until its 77-year reign ended in 2008, plans to file for bankruptcy protection on June 1 and sell most of its assets to a new company, people familiar with the matter said.

The U.S. Treasury will provide financing for GM while the asset sale is arranged to a company formed by the government, according to a regulatory filing today. June 1 was the deadline set by the U.S. for GM to restructure outside court.

GM, which would follow Chrysler LLC into bankruptcy, plans to build a new business around assets such as the Cadillac and Chevrolet brands. The 100-year-old automaker, a victim of tumbling sales, fell short in a bid to cut debt by $44 billion by June 1.

Stocks vs. Bonds in Kondratieff Autumn vs. Winter

Andy Bebut, a/k/a Theroxylandr, has this post at his blog describing an important relationship between stocks and bonds:

Back in 2007 I was writing that during the Kondratieff Spring, Summer and Autumn Treasury bonds and stocks are trading generally in the same direction, with bonds leading. During the Winter they are trading in opposite direction.

Andy's full blog is as always well worth reading, but I wanted to elaborate on the important difference in how stocks and bonds have behaved during the last 10+ years, vs. how they behaved during the great bull market of the 1980s and 1990s.

about that deficit... IRS Tax Revenues Fall 34%

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Beyond our absurd deficit, what is more scary in this story of tax revenues falling 34% from one year ago, is that amount of money is only $138 Billion dollars. That is 34% drop off, which implies last years IRS total revenues were $405 Billion.

Think about $1 trillion. Multiple that by 12 and then see what 34% of our tax revenues in a year is. Last year's tax revenues were $405 billion. That means to just pay off $1 trillion dollars, no interest, just the principle, would have taken 2.5 years and this is before the 34% drop in tax collections. Yet the government committed to $12 trillion total in financial bail out commitments.

Oh yes, the reason IRS revenues have dropped is once again, Americans are broke and we need jobs, jobs, jobs, jobs. So here is yet another factor where everything depends upon employing the U.S. labor force.

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