And if the drunk was already stumbling along the tightrope, a reduction in CRE will push him over the edge; the unforseen thing was the SIV balancing rod being taken away inbetween.
VLADIMIR:
(leafing through recent earnings reports). I'm beginning to come round to that opinion. All my life I've tried to put it from me, saying Vladimir, be reasonable, you haven't yet tried everything. And I resumed the struggle. (He broods, musing on the struggle. Turning to Estragon.) So there you are again.
Just need an associate in Australia and CR will go on posting 24/7. Mulling over all the doom and gloom about the future whilst incarcerated by the conflagration, I realized that all I really need is a DSL and CR. Thank you CR and Tanta.
Adding CRE to Housing decline may have a significant effect on employment next year. So far, jobless claims have risen 2% in annual terms. Not bat after the housing mess. The time we see claims rising above 350.000 may come soon. Rigth now the 4wma is 316.500
Calpers land quandary
Published: October 25 2007 09:40 | Last updated: October 25 2007 09:40
California pension fund Calpers assumed the ground beneath its feet was a safe place to park some of its $250bn of assets. The fund has invested billions of dollars in land and residential housing projects over the past 15 years, often within its home state. Those projects earned Calpers some of its highest returns before the US housing market hit a wall. But the fund now has hundreds of millions of dollars tied up in US land banks which are struggling to deal with undeveloped acreage home builders no longer want.
Calpers helped start the land banking business during the housing slump of 1991 and 1992, when it gave five investing partners $75m each to fund residential property development. Its portfolio has since grown significantly. Calpers reported $1.12bn of investments in ventures managed by leading land banks Hearthstone, IHP and MacFarlane, as of March 31.
Land banks use their investors capital to buy up land and sell it on to builders as needed. Builders, in turn, pay deposits to secure these land options. Much of the business is built around relationships but when the Titanic starts to sink, those get tossed out the portholes. Land banks are now stuck with huge tracts of land that have lost significant value. Thanks to the illiquid markets continuing slide, and a lack of bidders, the losses will be difficult to quantify much like the problems faced by subprime lenders.
As the largest US pension fund, Calpers has the financial wherewithal to sit tight and wait for a recovery. It is already reorganising its real estate operations, and aims to invest half of its real estate portfolio, currently 8.2 percent of total assets, overseas. But as nervous Wall Street lenders toughen their terms for lending to residential developers, Calpers should brace itself for further erosion of its land holdings.
I'm in commercial and industrial construction in the upper midwest and from what I see 7% is an underestimate of how far commercial construction will fall. 7% or more is here now, looking at the low level of bidding activity to the end of the year (even taking into account yearly cycle).
The bright lights remaining are health care (how long will insurance continue to support that?), energy, and industrial commodity sector.
Neal makes an excellent point.
Health care has been the legs of this economy- but unless reform takes place- problems could cause that sector to crash land.
Energy and commodities until something happens in Asia. Oil however is going to diminish in its reserves in coming years- so unless an alternative is found fast (unlikely) It will continue to probably rise.
That should work out OK. Come the downhill side of the oil production curve, subsistence farming on tranches of Calpers' land banks might look pretty good to California pensioners.
Turmoil in the market for debt backed by commercial mortgages is hitting some private equity deals hard, raising financing costs and eroding the profitability of buy-outs that depend on cash flows from real estate.
Carlyle Groups planned $6.3bn purchase of US nursing home operator Manor Care is among the deals to have been caught in a swift downdraft in the commercial mortgage-backed securities market.
This was supposed to be a slam dunk, right? After all, aging boomers need someone to look after them, the gummint will cough up to foot the bill eventually. Similar to dryfly's LBO'd manufacturing facilities, the bottom line was, worst comes to worst, who really cares what goes on in those places? Slash the expenses (the "care" part of for-profit health care), and flip it quick. Not this time, I guess.
"Did Calpers buy high to sell low or bought low, sold some high and has a bunch that can be still sold for a profit."
It is already reorganising its real estate operations, and aims to invest half of its real estate portfolio, currently 8.2 percent of total assets, overseas.
Retail commercial develpment will continue for a while, as we are quickly becoming a restaurant/strip mall economy. Once that bubblet reaches critical mass, it will pop, and construction will stop.
Office space is severely overbuilt. The only "tenants" many of these buildings will see are temporary residents - those displaced by the loss of their homes by loss of employment, foreclosure on a white elephant home, or natural disaster. There won't be a dime to be made on new office construction for at least 10 years.
That leaves us with industrial construction. We don't do much of that anymore.
I'm not a doom and gloomer, I'm not a pessimist, and I'm not a bear.
If you're financially sound, reasonably prudent, and not prone to intellectual dishonesty, boom times are coming.
Healthcare is on its last legs. The number of people without insurance is causing the price of insurance to increase. This of course causes more people not to have insurance. Our hospital went from record earnings of 10 million a month to losses withen 2 months this year. Our indigenent care tripled in the last 8 months and is increasing like Phoenix RE in 2005. Don't depend on healthcare for long. There will be plenty of jobs but the pay will have to drop. This is especially true for the doctors and adminastration..
These "mark-to-model" valuations have proven to be fantasies -- or at least wishful thinking -- when compared with the price at which anyone will actually buy the stuff. Merrill's write-downs of mortgage-heavy CDOs suggest they are valuing them at 60 cents to 70 cents on the dollar. Meanwhile, some market players reckon they might not change hands for more than 40 cents.
For as long as this valuation gap remains, there is a chance Wall Street will have to take more hits. Subprime problems could worsen and, even if they don't, some banks' valuations of such assets still could be a half-real and half-imaginary chimera. This isn't something banks can be sure of putting behind them in a single quarter.
"Neal makes an excellent point.
Health care has been the legs of this economy- but unless reform takes place- problems could cause that sector to crash land.'
Counting Medicare and Medicaid payments, veteran's benefits and other programs, government pays a huge amount of the total health care bill, and will continue to.
On the one hand, that creates a kind of floor that other industries don't have; the feds will always be there, pumping out money. On the other hand,this means that the health care industry is essentially federal subsidized: so that the "legs" of this economy, as you refer to it, don't represent real economic growth.
In a new report to be issued today, the Joint Economic Committee of Congress predicts about two million foreclosures by the end of next year on homes purchased with subprime mortgages. That estimate is far higher than the Bush administrations prediction in September of 500,000 foreclosures, which in itself would be a tidal wave compared with recent years. Congressional aides provided details of the report yesterday to The New York Times.
The Joint Economic Committee estimates that the lost of real estate wealth just from foreclosures on subprime loans will be about $71 billion. An additional $32 billion would be lost because foreclosed homes tend to drive down the prices of other houses in the neighborhood.
Those figures would cause a decline of $917 million in lost property tax revenue to state and local governments, which will also have to spend more on policing neighborhoods with vacant homes. The states most likely to be hard hit fall into two categories: those where prices had been rising fastest, like California and Florida, and Midwest states with weak economies, like Michigan and Ohio, where people with low or moderate incomes made heavy use of subprime loans to become homeowners and consolidate debts.
On the one hand, that creates a kind of floor that other industries don't have; the feds will always be there, pumping out money. On the other hand,this means that the health care industry is essentially federal subsidized: so that the "legs" of this economy, as you refer to it, don't represent real economic growth.
Whether public or private... output is 'real economic growth'.
The point is that particular output (health care) is still 'consumption' whether essential or not... and if we are going to consume today means we either (1) saved previously ha, ha, (2) take it out of some other pot of consumption or (3) go even deeper into debt.
Put me down for door number three... and that means the dollar weakens even more.
I don't know how many times I have to go there but until we start producing goods & services OTHERS consume to reverse the CA deficit... we're going to see the dollar get weaker.
Its almost like gravity... you can bitch about falling down but don't blame gravity.
Economics is all about how we choose to allocate our physical and human resources. There's no real shortage of either. We have lots of human working time and knowledge, and lots of physical resources (at least here in the US). Living standards at all levels of society are such that they would have been unimaginable to people even just a hundred years ago.
Regarding health care, consider that the reason Helen Keller was deaf and blind was that she had suffered a strep infection, which in the age of here youth could not be treated, despite the fact that her parents were sufficiently wealthy to hire a highly talented full-time tutor for her.
It is instructive to tour the USS Constitution in Boston Harbor, then drive down to Fall River, tour the USS Massachusetts, and contemplate what the differences you see mean in terms of a little over 120 years of technical advance. Then think about how primitive the Massachusetts is in terms of today's technology.
We've and abundance of time and resources -- all this action is about how we will choose to employ them.
And why is it that liberals have a hissy fit every time reform of our flourishing malpractice industry is proposed?
Nil | 10.25.07 - 10:06 am | #
The cost to the industry due to malpractice awards is negligible. Don't forget - the vast majority of these awards were made by juries of YOUR peers. Why is it that man-in-the-street conservatives consistantly vote against their own best interests?
Time is relative and so is the standard of living.
That same old tired argument of then versus now which ignores this relativistic nature of all things will never capture and present an accurate picture of reality.
"And why is it that liberals have a hissy fit every time reform of our flourishing malpractice industry is proposed?"
Our state, the last in the nation to come up with a budget, raided the state mandated medical malpractice fund-to the tune of $250M-in order to make up a budget shortfall.
The pace of U.S. commercial-construction activity ... is showing signs of slowing and will drop next year for the first time since the early part of the decade ...
Crunch will slow construction
Construction spending will continue to drop in 2008 on tighter lending practices: McGraw-Hill.
October 25 2007: 11:06 AM EDT
NEW YORK (AP) -- McGraw-Hill Construction, a unit of McGraw-Hill Cos., said Thursday it expects a 2 percent decline in construction spending in 2008 due to tighter lending standards and weaker job growth.
McGraw-Hill Construction estimates construction spending will drop 2 percent to $614 billion in 2008, after an 8 percent decline estimated for 2007.
...
But that would be hypocritical dryfly! We all know businesses, particularly true blue flag waving AMERICAN businesses, are always straight shooters. Just ask Dubya. Now there was a paragon of American business ethic.
The article is a little confusing. The 10% down in SFT is a starts number for Commercial properties (office, retail, warehouse, hotels) which represents about 1 billion sft overall. Institutional properties (school, healthcare, government) represent about 0.5 billion sft and are forecast to be up 2%. The 10% down is revised from 9% down in the Q2 forecast. So I think most of this story is that McGraw-Hill is presenting at a conference in Washington today.
Speaking of CALPERS, here is the next tidal wave to hit -- underfunded pension and health benefits. Especially state and local government. Many pension / health care benefit plans are still seriously underfunded (and getting worse over time) and have been at the forefront of making very risky bets with the plan trust funds in a desperate attempt to catch up. Now that they may be seeing some real losses on those risky bets and now that they will have to fall back on the more traditional, and far lower yielding investments, we may soon see some real stress in this area.
And if the drunk was already stumbling along the tightrope, a reduction in CRE will push him over the edge; the unforseen thing was the SIV balancing rod being taken away inbetween.
ESTRAGON:
(giving up again). Nothing to be done.
VLADIMIR:
(leafing through recent earnings reports). I'm beginning to come round to that opinion. All my life I've tried to put it from me, saying Vladimir, be reasonable, you haven't yet tried everything. And I resumed the struggle. (He broods, musing on the struggle. Turning to Estragon.) So there you are again.
I want to see the light leave your eyes! - Lord Voldemort
The Bank of England's financial stability report, released today, also raises concerns about CRE in the UK.
Bank of England|Publications|News|2007|?????, 25 October 2007
Who could have seen it coming.
Just need an associate in Australia and CR will go on posting 24/7. Mulling over all the doom and gloom about the future whilst incarcerated by the conflagration, I realized that all I really need is a DSL and CR. Thank you CR and Tanta.
Who could have seen it coming.
Knock me over with a feather.
Fraud, rumor, and the economic tipping point.
Treasuries are telling us that we have an underlying problem that inevitably will be dealt with.
Adding CRE to Housing decline may have a significant effect on employment next year. So far, jobless claims have risen 2% in annual terms. Not bat after the housing mess. The time we see claims rising above 350.000 may come soon. Rigth now the 4wma is 316.500
Anyone see that the Dollar is at fresh lows today?...
Oh thats right It's good for Exports...Nothing to see here...literally.
If commercial construction is going down 7%, what does that say about capital investment accounts of our corporations?
Calpers land quandary
Published: October 25 2007 09:40 | Last updated: October 25 2007 09:40
California pension fund Calpers assumed the ground beneath its feet was a safe place to park some of its $250bn of assets. The fund has invested billions of dollars in land and residential housing projects over the past 15 years, often within its home state. Those projects earned Calpers some of its highest returns before the US housing market hit a wall. But the fund now has hundreds of millions of dollars tied up in US land banks which are struggling to deal with undeveloped acreage home builders no longer want.
Calpers helped start the land banking business during the housing slump of 1991 and 1992, when it gave five investing partners $75m each to fund residential property development. Its portfolio has since grown significantly. Calpers reported $1.12bn of investments in ventures managed by leading land banks Hearthstone, IHP and MacFarlane, as of March 31.
Land banks use their investors capital to buy up land and sell it on to builders as needed. Builders, in turn, pay deposits to secure these land options. Much of the business is built around relationships but when the Titanic starts to sink, those get tossed out the portholes. Land banks are now stuck with huge tracts of land that have lost significant value. Thanks to the illiquid markets continuing slide, and a lack of bidders, the losses will be difficult to quantify much like the problems faced by subprime lenders.
As the largest US pension fund, Calpers has the financial wherewithal to sit tight and wait for a recovery. It is already reorganising its real estate operations, and aims to invest half of its real estate portfolio, currently 8.2 percent of total assets, overseas. But as nervous Wall Street lenders toughen their terms for lending to residential developers, Calpers should brace itself for further erosion of its land holdings.
FT.com / Lex / Finance & governance - Calpers’ land quandary
Isn't taxpayer guaranteed OPM great? You lucky folks out in CA:-O
7% would be a VERY sharp decline. That is not a mild prediction.
Who could have seen it coming?
Suprise! Suprise! Suprise!
Where's Sgt. Carter when we need him?
Hmmm depends on what Calpers bought the land for. Maybe it got land cheap. Maybe Calpers got all kinds of options now expired to fill the kitty.
Wonder if a pension fund pays tax on the land.
Did Calpers buy high to sell low or bought low, sold some high and has a bunch that can be still sold for a profit.
Need more info for decision.
--
Commercial Construction is a lagging indicator.
Jas
I'm in commercial and industrial construction in the upper midwest and from what I see 7% is an underestimate of how far commercial construction will fall. 7% or more is here now, looking at the low level of bidding activity to the end of the year (even taking into account yearly cycle).
The bright lights remaining are health care (how long will insurance continue to support that?), energy, and industrial commodity sector.
Another marker-another "surprise" drop in durable good orders.
I think this is a world-wide event. Half the planet has been on a building boom.
I think the peak will occur sometime between now and the summer olympics, and that then there will be a definitely world-wide drop-off.
Neal makes an excellent point.
Health care has been the legs of this economy- but unless reform takes place- problems could cause that sector to crash land.
Energy and commodities until something happens in Asia. Oil however is going to diminish in its reserves in coming years- so unless an alternative is found fast (unlikely) It will continue to probably rise.
BBC NEWS | Business | Big fall in prices of some flats
Well vader,
at least some of CalPERS RE investments were recent so I'd say "Buy high, sell low applies...
CALPERS WILL INVEST IN NEWHALL RANCH STATE PENSION FUND INKS DEAL TO SINK MONEY INTO 21,000-HOME PROJECT. - Free Online Library
Re Calpers land quandary,
That should work out OK. Come the downhill side of the oil production curve, subsistence farming on tranches of Calpers' land banks might look pretty good to California pensioners.
Long mules,
Oops,
I'm not Leslie anymore, that's left over from the picture caption contest.
Well, combining "health care" with "easy profits" still depends on "loose leverage", perhaps:
Ill wind hits Carlyle healthcare deal
Turmoil in the market for debt backed by commercial mortgages is hitting some private equity deals hard, raising financing costs and eroding the profitability of buy-outs that depend on cash flows from real estate.
Carlyle Groups planned $6.3bn purchase of US nursing home operator Manor Care is among the deals to have been caught in a swift downdraft in the commercial mortgage-backed securities market.
This was supposed to be a slam dunk, right? After all, aging boomers need someone to look after them, the gummint will cough up to foot the bill eventually. Similar to dryfly's LBO'd manufacturing facilities, the bottom line was, worst comes to worst, who really cares what goes on in those places? Slash the expenses (the "care" part of for-profit health care), and flip it quick. Not this time, I guess.
"Did Calpers buy high to sell low or bought low, sold some high and has a bunch that can be still sold for a profit."
It is already reorganising its real estate operations, and aims to invest half of its real estate portfolio, currently 8.2 percent of total assets, overseas.
Ummmmmmmmm What do you think?
"Commercial construction may slow."
May slow?
Commercial development will stop.
Retail commercial develpment will continue for a while, as we are quickly becoming a restaurant/strip mall economy. Once that bubblet reaches critical mass, it will pop, and construction will stop.
Office space is severely overbuilt. The only "tenants" many of these buildings will see are temporary residents - those displaced by the loss of their homes by loss of employment, foreclosure on a white elephant home, or natural disaster. There won't be a dime to be made on new office construction for at least 10 years.
That leaves us with industrial construction. We don't do much of that anymore.
I'm not a doom and gloomer, I'm not a pessimist, and I'm not a bear.
If you're financially sound, reasonably prudent, and not prone to intellectual dishonesty, boom times are coming.
Let the okay times roll!
Healthcare is on its last legs. The number of people without insurance is causing the price of insurance to increase. This of course causes more people not to have insurance. Our hospital went from record earnings of 10 million a month to losses withen 2 months this year. Our indigenent care tripled in the last 8 months and is increasing like Phoenix RE in 2005. Don't depend on healthcare for long. There will be plenty of jobs but the pay will have to drop. This is especially true for the doctors and adminastration..
Is this the point where Economic Ground Proximity Warning System says:
"TERRAIN TERRAIN PULL-UP!"
The control board must be by now a sea of blinking reds and cacophony of sirens.
I wonder if folks in the Bankers Banker Dome smoke cigerettes with dollar signs on the filters?????
Hank Reardo
barneyone: "shut that alarm off." famous last words.
These "mark-to-model" valuations have proven to be fantasies -- or at least wishful thinking -- when compared with the price at which anyone will actually buy the stuff. Merrill's write-downs of mortgage-heavy CDOs suggest they are valuing them at 60 cents to 70 cents on the dollar. Meanwhile, some market players reckon they might not change hands for more than 40 cents.
For as long as this valuation gap remains, there is a chance Wall Street will have to take more hits. Subprime problems could worsen and, even if they don't, some banks' valuations of such assets still could be a half-real and half-imaginary chimera. This isn't something banks can be sure of putting behind them in a single quarter.
Implausible Deniability? - WSJ.com
"Neal makes an excellent point.
Health care has been the legs of this economy- but unless reform takes place- problems could cause that sector to crash land.'
Counting Medicare and Medicaid payments, veteran's benefits and other programs, government pays a huge amount of the total health care bill, and will continue to.
On the one hand, that creates a kind of floor that other industries don't have; the feds will always be there, pumping out money. On the other hand,this means that the health care industry is essentially federal subsidized: so that the "legs" of this economy, as you refer to it, don't represent real economic growth.
In a new report to be issued today, the Joint Economic Committee of Congress predicts about two million foreclosures by the end of next year on homes purchased with subprime mortgages. That estimate is far higher than the Bush administrations prediction in September of 500,000 foreclosures, which in itself would be a tidal wave compared with recent years. Congressional aides provided details of the report yesterday to The New York Times.
The Joint Economic Committee estimates that the lost of real estate wealth just from foreclosures on subprime loans will be about $71 billion. An additional $32 billion would be lost because foreclosed homes tend to drive down the prices of other houses in the neighborhood.
Those figures would cause a decline of $917 million in lost property tax revenue to state and local governments, which will also have to spend more on policing neighborhoods with vacant homes. The states most likely to be hard hit fall into two categories: those where prices had been rising fastest, like California and Florida, and Midwest states with weak economies, like Michigan and Ohio, where people with low or moderate incomes made heavy use of subprime loans to become homeowners and consolidate debts.
Broader Losses From Mortgages - NY Times
Hank Reardo
On the one hand, that creates a kind of floor that other industries don't have; the feds will always be there, pumping out money. On the other hand,this means that the health care industry is essentially federal subsidized: so that the "legs" of this economy, as you refer to it, don't represent real economic growth.
Whether public or private... output is 'real economic growth'.
The point is that particular output (health care) is still 'consumption' whether essential or not... and if we are going to consume today means we either (1) saved previously ha, ha, (2) take it out of some other pot of consumption or (3) go even deeper into debt.
Put me down for door number three... and that means the dollar weakens even more.
I don't know how many times I have to go there but until we start producing goods & services OTHERS consume to reverse the CA deficit... we're going to see the dollar get weaker.
Its almost like gravity... you can bitch about falling down but don't blame gravity.
Economics is all about how we choose to allocate our physical and human resources. There's no real shortage of either. We have lots of human working time and knowledge, and lots of physical resources (at least here in the US). Living standards at all levels of society are such that they would have been unimaginable to people even just a hundred years ago.
Regarding health care, consider that the reason Helen Keller was deaf and blind was that she had suffered a strep infection, which in the age of here youth could not be treated, despite the fact that her parents were sufficiently wealthy to hire a highly talented full-time tutor for her.
It is instructive to tour the USS Constitution in Boston Harbor, then drive down to Fall River, tour the USS Massachusetts, and contemplate what the differences you see mean in terms of a little over 120 years of technical advance. Then think about how primitive the Massachusetts is in terms of today's technology.
We've and abundance of time and resources -- all this action is about how we will choose to employ them.
And why is it that liberals have a hissy fit every time reform of our flourishing malpractice industry is proposed?
And why is it that liberals have a hissy fit every time reform of our flourishing malpractice industry is proposed?
Nil | 10.25.07 - 10:06 am | #
The cost to the industry due to malpractice awards is negligible. Don't forget - the vast majority of these awards were made by juries of YOUR peers. Why is it that man-in-the-street conservatives consistantly vote against their own best interests?
Time is relative and so is the standard of living.
That same old tired argument of then versus now which ignores this relativistic nature of all things will never capture and present an accurate picture of reality.
"And why is it that liberals have a hissy fit every time reform of our flourishing malpractice industry is proposed?"
Our state, the last in the nation to come up with a budget, raided the state mandated medical malpractice fund-to the tune of $250M-in order to make up a budget shortfall.
correction: $200M
Not to speak of the strains placed on our hospital systems by the hordes of illegals so dear to the liberal heart.
Minor correction:
The pace of U.S. commercial-construction activity ... is showing signs of slowing and will drop next year for the first time since the early part of the decade ...
This is so easy!
Business, financial, personal finance news - CNNMoney.com
Crunch will slow construction
Construction spending will continue to drop in 2008 on tighter lending practices: McGraw-Hill.
October 25 2007: 11:06 AM EDT
NEW YORK (AP) -- McGraw-Hill Construction, a unit of McGraw-Hill Cos., said Thursday it expects a 2 percent decline in construction spending in 2008 due to tighter lending standards and weaker job growth.
McGraw-Hill Construction estimates construction spending will drop 2 percent to $614 billion in 2008, after an 8 percent decline estimated for 2007.
...
Nil can you back up with numbers the stuff your saying? If not then please find another place to blow off steam.
Not to speak of the strains placed on our hospital systems by the hordes of illegals so dear to the liberal heart.
More dear to the bottom lines of businesses using their 'illegal labor' I should think.
Nil can you back up with numbers the stuff your saying? If not then please find another place to blow off steam.
'Cause he's a troll and that's what trolls do.
But that would be hypocritical dryfly! We all know businesses, particularly true blue flag waving AMERICAN businesses, are always straight shooters. Just ask Dubya. Now there was a paragon of American business ethic.
The article is a little confusing. The 10% down in SFT is a starts number for Commercial properties (office, retail, warehouse, hotels) which represents about 1 billion sft overall. Institutional properties (school, healthcare, government) represent about 0.5 billion sft and are forecast to be up 2%. The 10% down is revised from 9% down in the Q2 forecast. So I think most of this story is that McGraw-Hill is presenting at a conference in Washington today.
You want proof that most illegals don't have medical insurance? How droll.
Speaking of CALPERS, here is the next tidal wave to hit -- underfunded pension and health benefits. Especially state and local government. Many pension / health care benefit plans are still seriously underfunded (and getting worse over time) and have been at the forefront of making very risky bets with the plan trust funds in a desperate attempt to catch up. Now that they may be seeing some real losses on those risky bets and now that they will have to fall back on the more traditional, and far lower yielding investments, we may soon see some real stress in this area.