It's worse than that. He pledged other real estate he owns, some of the most valuable in NYC including GM building, as collateral. It's going, going...
If you don't know GM building, it's across from Plaza Hotel. It's where FAO Schwartz used to be before they went bust. Many Fortune 500 tenants on long-term net leases. Money out the high-rise window.
The TED spread is falling another 7 basis points today to 189 basis points. It has declined 32 basis points in six days, which is a big positive. As well, the 10-year swap rate is falling to 63.7 basis points over Treasuries, which is down from 87.5 basis points over Treasuries one month ago. Gauges of credit market angst are beginning to fall meaningfully, which seems to be mostly ignored by investors so far.
Let's not overblow credit fear and understate that the credit spreads are falling meaningfully.
I also think we put in a tech bottom today, to be followed by financials in the next days. The bears had to good a going recently and it's just time for it to stop.
I suspect that some of the critical failure points in the credit system may not be where many bad loans were made, but where a few spectacularly bad loans were made. $495MM not paid, and a $5BB payment that may go unpaid . . . even with collateral, that's a major hit.
As a great man once said, "that's gonna leave a mark."
Macklowe treated himself to a $60 million apartment this year (an entire floor of the former Plaza Hotel, right across from his...or DB's...GM building). If I'm not mistaken, his most recent CRE loans were interest-only during the `teaser' period.
So in the first two days of this week there was $38.5 B in TIO injections, which will be up to $48.5 B tomorrow. $22 B is the typical very short term money coming back out on Thursday, but the rest is $10.5 B that come out a week later, and the last $16 B that come out a week after that (barring any additional auctions).
Zell left almost a billion on the table, Blackstone sold many of the assets and substantially higher prices.
Geez, you think he's gonna miss it? Really you got to leave a little something for the next guy so they'll keep doing deals with you. If you screw everybody, who is going to deal with you?
As bad as it might get in Manhattan CRE, it's nothing like the carnage you will see in Manhattan residential.
there is SO MUCH inventory in the pipeline based on prices of $1 million for a one BR, one BT condo, a lot of them built on the far east or west sides, a long walk from anything (including mass transit) except a river.
The cost of borrowing euros for two weeks is still 45 basis points higher than the ECB's benchmark financing rate. It was 9 basis points higher at the end of June.
The TED spread, or difference between what the U.S. government and banks pay for three-month loans, narrowed for a fifth day to 188 basis points, indicating an increased willingness among banks to lend. The spread was 35 basis points at the start of the year.
A reduction in the titanic stresses seen in the year end dash for cash is welcome improvement, but it is not the elimination of the underlying causes. This is pure symptomatic treatment in other words, keeping the patient from dying of a fever while the CB's take their best shot at the underlying disease...
O-Joe,
Thats one way of looking at it, the other is 1/2 Trillion worth of european liquidity injections and the TED spread is still at 189, about 40 is normal, over 200, where we just were is extraordinary, it was only 257 just after the 1987 crash.
O-Joe, I think you're addressing your comment to the wrong crowd. You need to find the blog where BB and the other heads of the CBs hang out. Apparently, they feel the need to release about a trillion dollars into the system, ex haste, to fix this non-event.
Rich -
Just sold my apartment in NYC for 20% over my asking price (2BR). Had a handful of bids at the ask that turned into a bidding war. I didnt think I was going to get even close to my asking price when I put it on the market 2 months ago. I was wrong. Have no idea where the money is coming from but my personal experience doesnt suggest softness in Manhattan - at least not right this moment for good properties. By the way, the price I got was almost 2x what I paid for it about 3 years ago. Absolutely crazy.
Thats one way of looking at it, the other is 1/2 Trillion worth of european liquidity injections and the TED spread is still at 189, about 40 is normal, over 200, where we just were is extraordinary, it was only 257 just after the 1987 crash.
Dirk van Dijk
We all know what happened after the crash in 1987.
O-Joe,
Look what happened to O-[Mack]Loe.
He made O-Payments.
Now he's going to be worth O-Dollars.
O-Noe!!
He was a little too "O".
So were his bankers....
O-Joe, I think you're addressing your comment to the wrong crowd. You need to find the blog where BB and the other heads of the CBs hang out. Apparently, they feel the need to release about a trillion dollars into the system, ex haste, to fix this non-event.
ShortCourage
This actually does show the need for a FED and abolishing the gold standard. An irrational and overblown panic like this one since July would have let to a real crisis like in 1907 under the old monetary regime. With our current regime, the economy as a whole hardly slows down, unemployment hardly budges and the stock market is just a stone's throw away from all time highs.
We truly live in a fantastic time, for which I'm really grateful. I just wish more posters could cherish it for what it is as well.
Anon 5:02 -
Not foreign money - but big money looking for a flop house in the big Apple. But almost all the backups were yuppies. Maybe one was O-Joe because they certainly were an optimistic group.
OT: I suggest a new name for the oft-called "suckers' rally".
I think a better term is 'chump jump'.
I propose it since a rally should be considered meaningful, and actually permanent. As in sports, when a team rallies, they score and you can't take that score away (unless they used steroids). Whereas the expression 'chump jump' makes one envision a bunch of chumps, jumping up to grab the dollars that are hanging by strings above them. Some may get lucky and grab one, but most will just end up being chumps.
The falling TED spread (another new harbinger acronym) is a sign that the Central Banks liquidity dump is having the desired effect -- loosing up the credit system, before the damage to the golbal economy becomes irreversible.
I disagree with O-Joe, in that the array of negative fundamentals still point to a recession -- but if the banking system can start working again, maybe we can avoid a horrible crash. A mild recession is still a possibility.
O-Joe,
Look what happened to O-[Mack]Loe.
He made O-Payments.
Now he's going to be worth O-Dollars.
O-Noe!!
He was a little too "O".
So were his bankers....
Anonymous
That made me laugh indeed - thanks for your humor. But in ernest, who makes bad economic decissions will be punished and vice-versa. Let's just put things into perspective - bankruptcies and even spectacular ones are part of a free-market economy just like accidents in an Indycar race. They slow it down initially only to accelarate even more.
Myopic Joe's xmas rally to the ATH's petered out after 11 days and is back to end of November levels, the central banks are bailing out a sinking ship with pint glasses, tech is Custer's last stand (for the mo-mo-morons) down to their last rounds.
The central banks are guaranteeing that the financials will continued to get hammered for Q1(and likely Q2) 2008. People have been deferring the pain since august and it's just gotten worse. I guess it's the only thing they can do after the horses bolted, but equities is not where to be unless you're looking for value.
I disagree with O-Joe, in that the array of negative fundamentals still point to a recession -- but if the banking system can start working again, maybe we can avoid a horrible crash. A mild recession is still a possibility.
-ck-
-CK-,
At this point nobody can tell for sure if it's going to be a mid-cycle slowdown (my currently preferred scenario) or a mild recession. I guess the difference is of almost a pure academic nature. Anyway, I think we are still rangebound in the indexes and the current credit crisis will be around until ~end of January. It's certainly not over yet, even though the development goes in the right direction.
Zell left almost a billion on the table, Blackstone sold many of the assets and substantially higher prices.
crispy&cole
I believe he had to sell all the properties together to avoid some reit tax issue. He knew they were worth more piecemeal but the taxes made it worth less....
I doubt if Sam Zell is losing much sleep over opportunity costs. My guess is he is spending more time counting the money he made than worrying about what he didn't.
Well, I live 12 miles out of Manhattan as the crow flies, in a pretty nice suburb, and there's no optimism about housing out here. It seems almost dead with at least 10-15% declines from peak.
Yep, it's mainly the yuppies who are keeping Manhattan housing afloat.
It will tank after: 1) this year' bonuses dry up; 2) the market tanks and pink slips start flying on Wall Street. Manhattan has three big employment centers left -- financial markets, media/advertising, lawyers.
My Aunt, who new him personally, said it was Harry Macklowe that convinced her that there was life after death. For anyone to be that big of a btd and prosper as he did, there had to be some re-accounting in the next world.
At this point nobody can tell for sure if it's going to be a mid-cycle slowdown (my currently preferred scenario) or a mild recession. I guess the difference is of almost a pure academic nature.
O-Joe, those are the best case scenarios -- we all hope that is the way it plays out, but the worst case scenarios are much grimmer.
The World Bank says that bank fundamentals are the worst they've been since the early 1970's -- others have said the fundamentals are the worst since 1929. We could easily slip into a deep and prolonged recession -- the worst in 20 years is very possible, and the worst since the Great Depression is not beyond the realm of possibility. If the financial system can start working again within the next few months, the worst might be avoided -- but I would not bet on avoiding a recession.
The problem is that we are at the end of the Greenspan easy credit bubble cycle -- the only bubble left is the equities market. With the Bush deficits, home equity deflation, record high energy prices, the falling dollar, fraudulent paper from Wall Street, and the financial gridlock crisis, it is hard to see how we will avoid a hard landing.
Don't forget fashion/art. My feeling is that both are probably less dependent on the FIRE sector than commonly assumed. Art and fashion will both take a hit, but the auction houses (for example) have lots of foreign buyers. The ultimate hit to these sectors depends on how global the deleveraging is.
It will tank after: 1) this year' bonuses dry up; 2) the market tanks and pink slips start flying on Wall Street. Manhattan has three big employment centers left -- financial markets, media/advertising, lawyers.
And Goldman's earnings today were the last bit of good news that the financial companies will be getting for a while.
Moody's remains concerned about servicers' overall ability to maintain and increase staffing resources, to invest in technology, and to address the challenges of the current market environment effectively.
Additional Findings
The ratio of loans that were modified or on a workout plan as a percentage of seriously delinquent loans active as of September 30th (60+ days), a meaningful barometer of the extent to which servicers are undertaking loss mitigation activity, was 24% (row 42 from the Appendix).
Only 50.9% (row 21 of the Appendix) of active borrowers were current indicating the likelihood that stronger borrowers were able to refinance and many weaker borrowers were unable to.
On average the delinquency rate for borrowers who had been current prior to reset and had not been modified
was 18.9% (row 49 of the Appendix). The remaining borrowers were either able to refinance their loans
or were less than 30 days delinquent. Two key drivers of the moderate delinquency rate are the high level of
post-reset prepayments and the limited amount of time that borrowers have been paying the higher payment.
Without a higher level of modifications, Moody's expects delinquency rates to increase for borrowers who are current at the time of reset, do not refinance, and are not modified.
O-Joe: At this point nobody can tell for sure if it's going to be a mid-cycle slowdown (my currently preferred scenario) or a mild recession. I guess the difference is of almost a pure academic nature.
Oh, right, of a pure academic nature. Just as historically low affordability is simply an academic matter. Those academics and their math and logic. Forget the numbers for a moment. Listen to my narrative of hope now...
I do believe anonymous. In Manhattan, a quality two-bedroom apartment in a nice neighborhood is still a hot commodity. There's still a lot of denial in Manhattan. Basically, a lot of people in Manhattan feel that there is only so much land and real estate to go around, and they get panicky to buy, especially in a crowd of buyers (like anonymous had). They should get out of the city more.
rcyran, great find. I was waiting for this years card....
pretty interesting topic... i'm surprised he doesnt think that the increase in spending by companies on SBO is not somewhat compensated for in a global market place. the more credit worthy and honest american companies are the more america benefits...
i'm confused why some consider all the bad news "priced in" when the S&P is just 120 points (7.7%) below its all-time high and STILL 2.5% higher than the beginning of the year.
If the S&P ends up positive on the year, I'd be shocked.
Maybe he can not repay because his cash was placed in Money Market Funds Account.
"At the end of November the average money fund rated by Standard & Poor's had 6.25% of its assets in SIVs, according to Peter Rizzo, senior director of the New York-based fund ratings group. By comparison, 1.35% of the average mutual fund's assets are in SIVs, Mr. Rizzo said."
At this point nobody can tell for sure if it's going to be a mid-cycle slowdown (my currently preferred scenario) or a mild recession. I guess the difference is of almost a pure academic nature. Anyway, I think we are still rangebound in the indexes and the current credit crisis will be around until ~end of January. It's certainly not over yet, even though the development goes in the right direction.
O-Joe
Optimistic Joe
Jeez, it's not even 30 days and you've blown out your ATH rally call? That reasoning(or some of it, anyway) is something approaching rational thought.
The credit crunch is over through the holidays and starts anew somewhere around Jan 11 when the garbage gets rolled over again.
Then the CBs will reinject so traders can make it through the MLK holiday, then a month later so they can make it though Valentine's/president's day, Easter, etc., etc.
The big problem is the big gap between Easter (March 23) and Memorial Day.
Today we learn the cost of Moral Hazard - The UK tax payers now on the hook for 100 billion dollars...gggeezz in the Northern Rock wobble.
"Taxpayers exposure to Northern Rock surged past the £50 billion mark yesterday after the Treasury extended a controversial guarantee to cover hundreds of millions of pounds of the stricken banks obligations in the wholesale markets"
And this ticks me off because it is a public company with shareholders and professional managers:
"The Treasurys enlarged guarantee, covering swaps and derivatives trades, came amid worries that ratings agencies might downgrade its debt."
CR, thanks for that post. If big CRE fish can leverage themselves into oblivion, you can bet small fish all over the city have done it too.
And to apartment anon and doubters - Manhattan has always been a very hard market to get a read on because realty companies don't participate in MLS and tend to keep actual sales data secret, so they can spin numbers any way they want. Which seems kind of insecure, now, doesn't it?
Zigurrat - I have a friend who's a fairly prominent but local real estate developer who thinks Sam Zell is just about the smartest real estate guy alive. A few years ago he gave me a private memoir that Mr. Zell had written about his family - and how they had escaped from the Nazis. It was a fascinating story - because his family traveled east - not west. Through Russia - winding up for a considerable period of time in Japan (where a few dozen Jewish families joined them - the Japanese were at war with the USA - but not with European Jews). If anyone made it into a movie - no one would ever believe it was a true story. Roby
Centro Properties Group, the owner of 700 U.S. shopping malls, slumped 76 percent Monday after the company said it was struggling to refinance debt linked to the subprime mortgage..
When Sam Zell, a Chicago real estate mogul and soon-to-be media magnate, was
a junior counselor at a Jewish summer camp, he regularly transfixed his campers
with tales of his familys escape from Nazi-occupied Poland.
The Zell family traveled through Russia and Japan, pretending to be tourists
at the Bolshoi Ballet so as not to stand out. Fred Margulies, a camper in
Zells bunk, said that the tale told after lights out was the most
memorable part of the summer, and a prototypical display of Zells
preternaturally magnetic personality.
He was a great storyteller, and he captivated us, said Margulies, today a
rabbi and businessman in Chicago.
Imagine that you are in charge of repairing the levees in the middle of Katrina and are standing at one of the breaks. Now imagine that a great big ol'bull alligator washes through the break and grabs you firmly on the backside. You now have two related but distinct problems, the latest being much more serious and immediate than the first. You will never give the levee another thought until you prise the jaws off your a$$. This is where I think the CB's are today, they must solve the interbank lending crisis before they can return to the busted credit bubble (debt pyramid). When O-Joe speaks of the credit crisis being over in mid-January, he is guessing when the alligator lets go and his estimate is as good as any.
But... the rain keeps on coming and the break is getting bigger while you were distracted and ,in the final analysis, it is Katrina (burst bubble) that will destroy much of the city (credit).
Centro in trouble as is Maguire Properties in Los Angeles, for differing reasons.
I suspect that Tishman-Speyer is sweating its acquisition of the EOP/Blackstone portfolio in Chicago and probably its acquisition of Archstone-Smith as well. I'm certain that the lenders in the Archstone acquisition (BofA and Lehman) aren't happy. They didn't sell off the debt and if they did so today, would have to take a big haircut.
Who is going to rent the apartment for $20,000 per month? Can he really get a 12% gross return on his investment? If so, then it is not a bad deal. However, I suspect he's going to be disappointed when nobody rents it for what he is asking.....
HK: You have to realize Radcliffe is a wizard so....and then there is the celebrity angle. He might take off all his clothes, as he does in Equus, the play he will be doing in New York this coming fall, and give the renters a sensational show. All for just 20 grand a month.
the building is the darling of the real estate obsessed right now, it boasts "the biggest glass windows ever" or something. (see curbed.com). Two apartments are being flipped for much more than they sold for.
I'd not be surprised if the hobbit gets a 12% gross return on his original purchase price for a while, probably 10% after expenses (management fees and so on), but in a year or two it will be more difficult to replicate that rent - either the fickle market will be wowed by some other building or the distinctly tepid bonuses given to everyone except GS staff will have sunk in.
Returns on nyc condos bought for the purposes of rental are nowhere near even 8% gross.
His money ($45 million net worth they say) is being managed by Coutts, the Queen's bankers, I saw somewhere. I suspect he has been advised unwisely, however, since he could have had a pied a terre in New York by renting for lots lots less. And buy, if he wants, when things have dropped more.
I hope he included some of his salary payments in that $7.6 billion. Anybody know where I sign up for one of these deals.
Approximately $5.0 Billion of the debt must be paid off in February.
holy mackerelowe.
What was that about swimming and wearing a bathing suit again?
It's worse than that. He pledged other real estate he owns, some of the most valuable in NYC including GM building, as collateral. It's going, going...
If you don't know GM building, it's across from Plaza Hotel. It's where FAO Schwartz used to be before they went bust. Many Fortune 500 tenants on long-term net leases. Money out the high-rise window.
ice one
Moody's Warnings on FGIC, MBIA Cast Doubt on $1.2 Trillion Debt
Moody's Warnings on FGIC, MBIA Cast Doubt on $1.2 Trillion Debt - Bloomberg.com
Is he 'avin' a laff? Is he 'avin' a laff?
YET:
The TED spread is falling another 7 basis points today to 189 basis points. It has declined 32 basis points in six days, which is a big positive. As well, the 10-year swap rate is falling to 63.7 basis points over Treasuries, which is down from 87.5 basis points over Treasuries one month ago. Gauges of credit market angst are beginning to fall meaningfully, which seems to be mostly ignored by investors so far.
Between the Hedges
Let's not overblow credit fear and understate that the credit spreads are falling meaningfully.
I also think we put in a tech bottom today, to be followed by financials in the next days. The bears had to good a going recently and it's just time for it to stop.
O-Joe
holy mackerelowe.
nice one, bacon dreamz
I suspect that some of the critical failure points in the credit system may not be where many bad loans were made, but where a few spectacularly bad loans were made. $495MM not paid, and a $5BB payment that may go unpaid . . . even with collateral, that's a major hit.
As a great man once said, "that's gonna leave a mark."
Moreover, we haven't even seen the 1st inning of the bloodletting in the Manhattan office market. First batter up, Mr. Pandit.
If only the lender had asked for proof of income....
Macklowe treated himself to a $60 million apartment this year (an entire floor of the former Plaza Hotel, right across from his...or DB's...GM building). If I'm not mistaken, his most recent CRE loans were interest-only during the `teaser' period.
How macklowe can you gowe? $5B by February, sheesh!
OT but interesting,
Term Investment Option (Treasury Slosh)
Amount.....Auction Date......Place Date.....Mature Date
$8.6 B.....13DEC2007.........17DEC2007......27DEC2007
$6.0 B.....14DEC2007.........17DEC2007......03JAN2008
$22.0 B....14DEC2007.........17DEC2007......20DEC2007
$1.9 B.....17DEC2007.........18DEC2007......27DEC2007
$10.0 B....18DEC2007.........19DEC2007......03JAN2008
So in the first two days of this week there was $38.5 B in TIO injections, which will be up to $48.5 B tomorrow. $22 B is the typical very short term money coming back out on Thursday, but the rest is $10.5 B that come out a week later, and the last $16 B that come out a week after that (barring any additional auctions).
Hope its interesting to others as well!
"I also think we put in a tech bottom today"
The NAS has done zero in 9 years!
They will renegotiate with him...too much money on the line.
Maybe he can line up at the ECB window, I hear they have 1/2 trillion to spare..
He should have borrowed more.
From now on, I'm doing what Sam Zell does. Talk about timing.
o joe,
I hate to tell you this but the big bears haven't been let out of the cage yet.
Wait until you see what a really big bear can do with a few trillion of yen carry to short.
How soon until these financial wizards start jumping out of their office windows?
Zell left almost a billion on the table, Blackstone sold many of the assets and substantially higher prices.
O-Joe -
Thats a hilarious post. Thanks for making me laugh.
Happy holidays.
Zell left almost a billion on the table, Blackstone sold many of the assets and substantially higher prices.
Geez, you think he's gonna miss it? Really you got to leave a little something for the next guy so they'll keep doing deals with you. If you screw everybody, who is going to deal with you?
As bad as it might get in Manhattan CRE, it's nothing like the carnage you will see in Manhattan residential.
there is SO MUCH inventory in the pipeline based on prices of $1 million for a one BR, one BT condo, a lot of them built on the far east or west sides, a long walk from anything (including mass transit) except a river.
"If you screw everybody, who is going to deal with you?"
Ask Goldman Sachs...
speedtheplow,
awesome reference to HBO show "Extras"...the finale was great the other night.
O Joe,
From that bear's den, Bloomberg:
Money Market Rates Tumble; Central Banks Inject Funds (Update7)
The cost of borrowing euros for two weeks is still 45 basis points higher than the ECB's benchmark financing rate. It was 9 basis points higher at the end of June.
The TED spread, or difference between what the U.S. government and banks pay for three-month loans, narrowed for a fifth day to 188 basis points, indicating an increased willingness among banks to lend. The spread was 35 basis points at the start of the year.
A reduction in the titanic stresses seen in the year end dash for cash is welcome improvement, but it is not the elimination of the underlying causes. This is pure symptomatic treatment in other words, keeping the patient from dying of a fever while the CB's take their best shot at the underlying disease...
O-Joe,
Thats one way of looking at it, the other is 1/2 Trillion worth of european liquidity injections and the TED spread is still at 189, about 40 is normal, over 200, where we just were is extraordinary, it was only 257 just after the 1987 crash.
O-Joe said, "Let's not overblow credit fear..."
O-Joe, I think you're addressing your comment to the wrong crowd. You need to find the blog where BB and the other heads of the CBs hang out. Apparently, they feel the need to release about a trillion dollars into the system, ex haste, to fix this non-event.
Short,
Yep just a little mayo for the nothingburger!
What bank or fund lent Macklowe the $7.6B?
Please tell me it's not one of the large investment banks or C?
thx in advance.
HE
The bears had to good a going recently and it's just time for it to stop.
O-Joe
That's real deep, there, O-Joe.
Real deep.
Rich -
Just sold my apartment in NYC for 20% over my asking price (2BR). Had a handful of bids at the ask that turned into a bidding war. I didnt think I was going to get even close to my asking price when I put it on the market 2 months ago. I was wrong. Have no idea where the money is coming from but my personal experience doesnt suggest softness in Manhattan - at least not right this moment for good properties. By the way, the price I got was almost 2x what I paid for it about 3 years ago. Absolutely crazy.
Thats one way of looking at it, the other is 1/2 Trillion worth of european liquidity injections and the TED spread is still at 189, about 40 is normal, over 200, where we just were is extraordinary, it was only 257 just after the 1987 crash.
Dirk van Dijk
We all know what happened after the crash in 1987.
O-Joe
I hope Deutsche Bank will be happy in their new Manhattan space.
"By the way, the price I got was almost 2x what I paid for it about 3 years ago."
Was it foreign money? Those folks have got to buy something with their dollars before it has less value than toilet paper
What nobody is gonna say it?
We're all sub-prime now.
O-Joe,
Look what happened to O-[Mack]Loe.
He made O-Payments.
Now he's going to be worth O-Dollars.
O-Noe!!
He was a little too "O".
So were his bankers....
O Joe you think some 8% below S&P all time high is enough pain, as we could not stand a 40% drop like in 1987?
O-Joe, I think you're addressing your comment to the wrong crowd. You need to find the blog where BB and the other heads of the CBs hang out. Apparently, they feel the need to release about a trillion dollars into the system, ex haste, to fix this non-event.
ShortCourage
This actually does show the need for a FED and abolishing the gold standard. An irrational and overblown panic like this one since July would have let to a real crisis like in 1907 under the old monetary regime. With our current regime, the economy as a whole hardly slows down, unemployment hardly budges and the stock market is just a stone's throw away from all time highs.
We truly live in a fantastic time, for which I'm really grateful. I just wish more posters could cherish it for what it is as well.
O-Joe
The NAS has done zero in 9 years!
next time try a Z bond.
Anon 5:02 -
Not foreign money - but big money looking for a flop house in the big Apple. But almost all the backups were yuppies. Maybe one was O-Joe because they certainly were an optimistic group.
OT: I suggest a new name for the oft-called "suckers' rally".
I think a better term is 'chump jump'.
I propose it since a rally should be considered meaningful, and actually permanent. As in sports, when a team rallies, they score and you can't take that score away (unless they used steroids). Whereas the expression 'chump jump' makes one envision a bunch of chumps, jumping up to grab the dollars that are hanging by strings above them. Some may get lucky and grab one, but most will just end up being chumps.
Chump jump. Not suckers' rally.
Chump jump.
O-Joe is a highly successful forum troll. Forum trolls measure their performance on a number of responses they can get.
Troll (Internet) - Wikipedia, the free encyclopedia
I kind of agree with O-Joe here --
The falling TED spread (another new harbinger acronym) is a sign that the Central Banks liquidity dump is having the desired effect -- loosing up the credit system, before the damage to the golbal economy becomes irreversible.
I disagree with O-Joe, in that the array of negative fundamentals still point to a recession -- but if the banking system can start working again, maybe we can avoid a horrible crash. A mild recession is still a possibility.
We truly live in a fantastic time, for which I'm really grateful. I just wish more posters could cherish it for what it is as well.
O-Joe
Chump jump.
Please do not feed the O Troll.
O-Joe,
Look what happened to O-[Mack]Loe.
He made O-Payments.
Now he's going to be worth O-Dollars.
O-Noe!!
He was a little too "O".
So were his bankers....
Anonymous
That made me laugh indeed - thanks for your humor. But in ernest, who makes bad economic decissions will be punished and vice-versa. Let's just put things into perspective - bankruptcies and even spectacular ones are part of a free-market economy just like accidents in an Indycar race. They slow it down initially only to accelarate even more.
O-Joe
Myopic Joe's xmas rally to the ATH's petered out after 11 days and is back to end of November levels, the central banks are bailing out a sinking ship with pint glasses, tech is Custer's last stand (for the mo-mo-morons) down to their last rounds.
The central banks are guaranteeing that the financials will continued to get hammered for Q1(and likely Q2) 2008. People have been deferring the pain since august and it's just gotten worse. I guess it's the only thing they can do after the horses bolted, but equities is not where to be unless you're looking for value.
I don't understand why people who are still working and contributing to their retirement accounts are happy when stock prices are high.
I disagree with O-Joe, in that the array of negative fundamentals still point to a recession -- but if the banking system can start working again, maybe we can avoid a horrible crash. A mild recession is still a possibility.
-ck-
-CK-,
At this point nobody can tell for sure if it's going to be a mid-cycle slowdown (my currently preferred scenario) or a mild recession. I guess the difference is of almost a pure academic nature. Anyway, I think we are still rangebound in the indexes and the current credit crisis will be around until ~end of January. It's certainly not over yet, even though the development goes in the right direction.
O-Joe
If you don't know GM building, it's across from Plaza Hotel.
Isn't that where the Apple Fifth Ave flagship store is located ? Perhaps Apple should should buy the place from Harry.
How should one describe people like the Macklowes?
Deadbeats, perhaps?
$50 million down, and got $7.6 Billion.
Now that's some tasty leverage. 152x
I mean...just wow.
I don't think of O-Joe as a troll. If we don't have some opposing views here, it gets to be pretty much a bear-sentiment echo chamber.
I like to hear from the O-Joes to understand who the hell is still buying stocks in this climate, with so much to lose and so little upside.
I find the back-and-forth with O-Joe and Sebastian more intersting than some of the other stuff on here lately.
Come on, afterall. If Joe Sixpack in Palookaville can't pay his mortgage, Wall Street calls him a 'deadbeat,' right?
So, why shouldn't the Macklowes be called deadbeats?
Zell left almost a billion on the table, Blackstone sold many of the assets and substantially higher prices.
crispy&cole
I believe he had to sell all the properties together to avoid some reit tax issue. He knew they were worth more piecemeal but the taxes made it worth less....
I doubt if Sam Zell is losing much sleep over opportunity costs. My guess is he is spending more time counting the money he made than worrying about what he didn't.
dotc:
"We truly live in a fantastic time, for which I'm really grateful. I just wish more posters could cherish it for what it is as well.
O-Joe
Chump jump.
dotcommunist"
That got me laughing harder than bacon's Holy Markalowe.
Cheers,
Well, I live 12 miles out of Manhattan as the crow flies, in a pretty nice suburb, and there's no optimism about housing out here. It seems almost dead with at least 10-15% declines from peak.
Yep, it's mainly the yuppies who are keeping Manhattan housing afloat.
It will tank after: 1) this year' bonuses dry up; 2) the market tanks and pink slips start flying on Wall Street. Manhattan has three big employment centers left -- financial markets, media/advertising, lawyers.
If it stays afloat, it will be the lawyers.
My Aunt, who new him personally, said it was Harry Macklowe that convinced her that there was life after death. For anyone to be that big of a btd and prosper as he did, there had to be some re-accounting in the next world.
Nades is correct - Zell couldn't sell buildings separately for tax reasons.
Wonder what next year's card will be?
Year End Gift
mp,
Deadbeat...naw, that's someone like Wimpy, hat in hand, asking for small change.
Macklowe's a thief and a con man.
Cheers,
They have more collateral and can borrow more money.
At this point nobody can tell for sure if it's going to be a mid-cycle slowdown (my currently preferred scenario) or a mild recession. I guess the difference is of almost a pure academic nature.
O-Joe, those are the best case scenarios -- we all hope that is the way it plays out, but the worst case scenarios are much grimmer.
The World Bank says that bank fundamentals are the worst they've been since the early 1970's -- others have said the fundamentals are the worst since 1929. We could easily slip into a deep and prolonged recession -- the worst in 20 years is very possible, and the worst since the Great Depression is not beyond the realm of possibility. If the financial system can start working again within the next few months, the worst might be avoided -- but I would not bet on avoiding a recession.
The problem is that we are at the end of the Greenspan easy credit bubble cycle -- the only bubble left is the equities market. With the Bush deficits, home equity deflation, record high energy prices, the falling dollar, fraudulent paper from Wall Street, and the financial gridlock crisis, it is hard to see how we will avoid a hard landing.
Rich-
Don't forget fashion/art. My feeling is that both are probably less dependent on the FIRE sector than commonly assumed. Art and fashion will both take a hit, but the auction houses (for example) have lots of foreign buyers. The ultimate hit to these sectors depends on how global the deleveraging is.
It will tank after: 1) this year' bonuses dry up; 2) the market tanks and pink slips start flying on Wall Street. Manhattan has three big employment centers left -- financial markets, media/advertising, lawyers.
And Goldman's earnings today were the last bit of good news that the financial companies will be getting for a while.
The ultimate hit to these sectors depends on how global the deleveraging is.
The deleveraging will be global.
moody's update on loss mit activity:
Moody's remains concerned about servicers' overall ability to maintain and increase staffing resources, to invest in technology, and to address the challenges of the current market environment effectively.
Additional Findings
The ratio of loans that were modified or on a workout plan as a percentage of seriously delinquent loans active as of September 30th (60+ days), a meaningful barometer of the extent to which servicers are undertaking loss mitigation activity, was 24% (row 42 from the Appendix).
Only 50.9% (row 21 of the Appendix) of active borrowers were current indicating the likelihood that stronger borrowers were able to refinance and many weaker borrowers were unable to.
On average the delinquency rate for borrowers who had been current prior to reset and had not been modified
was 18.9% (row 49 of the Appendix). The remaining borrowers were either able to refinance their loans
or were less than 30 days delinquent. Two key drivers of the moderate delinquency rate are the high level of
post-reset prepayments and the limited amount of time that borrowers have been paying the higher payment.
Without a higher level of modifications, Moody's expects delinquency rates to increase for borrowers who are current at the time of reset, do not refinance, and are not modified.
Moodys.com
The set up is just too perfect for this classic quote...
"If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem."
- J. Paul Getty
"We truly live in a fantastic time, for which I'm really grateful. I just wish more posters could cherish it for what it is as well."
I have to agree 100%
I would live much better right now if I lived above my means at the expense of my future living standard.
It's hard to argue with that.
Afterall....who lives better, someone living above their means or someone living below?
Quality of life and financial health are not synonymous.
O-Joe: At this point nobody can tell for sure if it's going to be a mid-cycle slowdown (my currently preferred scenario) or a mild recession. I guess the difference is of almost a pure academic nature.
Oh, right, of a pure academic nature. Just as historically low affordability is simply an academic matter. Those academics and their math and logic. Forget the numbers for a moment. Listen to my narrative of hope now...
He must be having some of that Bunker Hunt feeling right now: "Never risk all you have for something you don't really need."
Merrill: $500 Billion in Economy-Wide Mortgage Losses
Half a trillion here, half a trillion there, pretty soon you're talking about real money
Nemo,
So THAT's where the ECB's money went today.
Nice.
Cheers,
"By the way, the price I got was almost 2x what I paid for it about 3 years ago."
Nobody believes you
I do believe anonymous. In Manhattan, a quality two-bedroom apartment in a nice neighborhood is still a hot commodity. There's still a lot of denial in Manhattan. Basically, a lot of people in Manhattan feel that there is only so much land and real estate to go around, and they get panicky to buy, especially in a crowd of buyers (like anonymous had). They should get out of the city more.
"How soon until these financial wizards start jumping out of their office windows?"
Never. That's what numbered bank accounts are for.
Remember when Ben Stein was saying it was only going to be $10 billion in losses.
He's so cute when he does that.
"By the way, the price I got was almost 2x what I paid for it about 3 years ago."
Nobody believes you
Could've bought in an area that wasn't 100% THE HOTTEST SHIT EVER.. and I could see that tripling... maybe.. but it would be a special case.
rcyran, great find. I was waiting for this years card....
pretty interesting topic... i'm surprised he doesnt think that the increase in spending by companies on SBO is not somewhat compensated for in a global market place. the more credit worthy and honest american companies are the more america benefits...
i'm confused why some consider all the bad news "priced in" when the S&P is just 120 points (7.7%) below its all-time high and STILL 2.5% higher than the beginning of the year.
If the S&P ends up positive on the year, I'd be shocked.
Maybe he can not repay because his cash was placed in Money Market Funds Account.
"At the end of November the average money fund rated by Standard & Poor's had 6.25% of its assets in SIVs, according to Peter Rizzo, senior director of the New York-based fund ratings group. By comparison, 1.35% of the average mutual fund's assets are in SIVs, Mr. Rizzo said."
Loan fiasco leads to money fund concerns - Investment News
At this point nobody can tell for sure if it's going to be a mid-cycle slowdown (my currently preferred scenario) or a mild recession. I guess the difference is of almost a pure academic nature. Anyway, I think we are still rangebound in the indexes and the current credit crisis will be around until ~end of January. It's certainly not over yet, even though the development goes in the right direction.
O-Joe
Optimistic Joe
Jeez, it's not even 30 days and you've blown out your ATH rally call? That reasoning(or some of it, anyway) is something approaching rational thought.
The credit crunch is over through the holidays and starts anew somewhere around Jan 11 when the garbage gets rolled over again.
Then the CBs will reinject so traders can make it through the MLK holiday, then a month later so they can make it though Valentine's/president's day, Easter, etc., etc.
The big problem is the big gap between Easter (March 23) and Memorial Day.
That may be a bridge too far.
Today we learn the cost of Moral Hazard - The UK tax payers now on the hook for 100 billion dollars...gggeezz in the Northern Rock wobble.
"Taxpayers exposure to Northern Rock surged past the £50 billion mark yesterday after the Treasury extended a controversial guarantee to cover hundreds of millions of pounds of the stricken banks obligations in the wholesale markets"
And this ticks me off because it is a public company with shareholders and professional managers:
"The Treasurys enlarged guarantee, covering swaps and derivatives trades, came amid worries that ratings agencies might downgrade its debt."
Taxpayers' backing for Rock hits £50bn - Times Online
CR, thanks for that post. If big CRE fish can leverage themselves into oblivion, you can bet small fish all over the city have done it too.
And to apartment anon and doubters - Manhattan has always been a very hard market to get a read on because realty companies don't participate in MLS and tend to keep actual sales data secret, so they can spin numbers any way they want. Which seems kind of insecure, now, doesn't it?
Zigurrat - I have a friend who's a fairly prominent but local real estate developer who thinks Sam Zell is just about the smartest real estate guy alive. A few years ago he gave me a private memoir that Mr. Zell had written about his family - and how they had escaped from the Nazis. It was a fascinating story - because his family traveled east - not west. Through Russia - winding up for a considerable period of time in Japan (where a few dozen Jewish families joined them - the Japanese were at war with the USA - but not with European Jews). If anyone made it into a movie - no one would ever believe it was a true story. Roby
The better, bigger story is here:
Centro Properties Group, the owner of 700 U.S. shopping malls, slumped 76 percent Monday after the company said it was struggling to refinance debt linked to the subprime mortgage..
When Sam Zell, a Chicago real estate mogul and soon-to-be media magnate, was
a junior counselor at a Jewish summer camp, he regularly transfixed his campers
with tales of his familys escape from Nazi-occupied Poland.
The Zell family traveled through Russia and Japan, pretending to be tourists
at the Bolshoi Ballet so as not to stand out. Fred Margulies, a camper in
Zells bunk, said that the tale told after lights out was the most
memorable part of the summer, and a prototypical display of Zells
preternaturally magnetic personality.
He was a great storyteller, and he captivated us, said Margulies, today a
rabbi and businessman in Chicago.
We truly live in a fantastic time, for which I'm really grateful. I just wish more posters could cherish it for what it is as well.
O-Joe
Optimistic Joe | 12.18.07 - 5:08 pm | #
You, Barby Bush, Jenna, not-Jenna...how many do you want?
Imagine that you are in charge of repairing the levees in the middle of Katrina and are standing at one of the breaks. Now imagine that a great big ol'bull alligator washes through the break and grabs you firmly on the backside. You now have two related but distinct problems, the latest being much more serious and immediate than the first. You will never give the levee another thought until you prise the jaws off your a$$. This is where I think the CB's are today, they must solve the interbank lending crisis before they can return to the busted credit bubble (debt pyramid). When O-Joe speaks of the credit crisis being over in mid-January, he is guessing when the alligator lets go and his estimate is as good as any.
But... the rain keeps on coming and the break is getting bigger while you were distracted and ,in the final analysis, it is Katrina (burst bubble) that will destroy much of the city (credit).
I hop I don't win Tanta's worst metaphor award.
That's going to be some REO sale next year.
Question: What bank or fund lent Macklowe the $7.6B? Please tell me it's not one of the large investment banks or C?
Answer: The loan was with Deutsche Bank with a US$1.2 Billion Bridge loan from Fortress Investment Group that comes due in February.
"Harry Potter" star Daniel Radcliffe has spent $4 million on a plush New York apartment in a bid to kick-start his property portfolio.
The 18-year-old actor purchased the spacious fifth floor property in a block designed by architect Jean Nouvel, according to reports.
But Radcliffe has no plans to move in -- he will be renting out the two-bedroom apartment for $20,000 a month.
Thank God for those Brits with pounds, pound foolish, penny wise?
Centro in trouble as is Maguire Properties in Los Angeles, for differing reasons.
I suspect that Tishman-Speyer is sweating its acquisition of the EOP/Blackstone portfolio in Chicago and probably its acquisition of Archstone-Smith as well. I'm certain that the lenders in the Archstone acquisition (BofA and Lehman) aren't happy. They didn't sell off the debt and if they did so today, would have to take a big haircut.
Who is going to rent the apartment for $20,000 per month? Can he really get a 12% gross return on his investment? If so, then it is not a bad deal. However, I suspect he's going to be disappointed when nobody rents it for what he is asking.....
HK: You have to realize Radcliffe is a wizard so....and then there is the celebrity angle. He might take off all his clothes, as he does in Equus, the play he will be doing in New York this coming fall, and give the renters a sensational show. All for just 20 grand a month.
the building is the darling of the real estate obsessed right now, it boasts "the biggest glass windows ever" or something. (see curbed.com). Two apartments are being flipped for much more than they sold for.
I'd not be surprised if the hobbit gets a 12% gross return on his original purchase price for a while, probably 10% after expenses (management fees and so on), but in a year or two it will be more difficult to replicate that rent - either the fickle market will be wowed by some other building or the distinctly tepid bonuses given to everyone except GS staff will have sunk in.
Returns on nyc condos bought for the purposes of rental are nowhere near even 8% gross.
His money ($45 million net worth they say) is being managed by Coutts, the Queen's bankers, I saw somewhere. I suspect he has been advised unwisely, however, since he could have had a pied a terre in New York by renting for lots lots less. And buy, if he wants, when things have dropped more.
And on top of everything else, he has pissed off Egyptian billionaire Al Fayed:
Billionaire May Obstruct Macklowe Tower Project - WSJ.com
"stock market is just a stone's throw away from all time highs."
Are these all time highs in nominal dollars or real dollars?
Does that really matter since inflation "is contained?" Hahahaha - right!