Investment: Residential vs. Non-Residential
Submitted by
CalculatedRisk on Wed, 09/10/2008 - 5:55pm (191 comments)
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first ?
oh yeah !
hattrick !
Why the exclusion of power and petroleum? Paucity of available data or just the (justifiable) conclusion that there's been no significant infrastructure growth?
Just curious.
CR thanks for putting this together I always wanted to see them next to each other but never had the mental fortitude to do it...
Is there any chance that some land development for residential construction makes it in to the commercial side?
Some where residential gets counted as commercial. Maybe that was just construction & development loans?
......
pm, I left them out because they distort the data during periods of high (and low) energy prices. I don't expect a huge pullback in Power and Petroleum investment any time soon (oil at $100 per barrel is plenty high).
Sure, if oil falls all the way to $60 or less, we might see less investment in those areas - but then the lower oil will be a positive elsewhere.
Best Wishes.
Is there any chance that some land development for residential construction makes it in to the commercial side?
I had a similar question. How does a residential development that has gone belly up before construction get factored?
ades, sometimes Construction and Development C&D is mixed with CRE (the Fed does this) and that makes people think CRE is worse off than it really is. C&D problems are mostly in residential right now ...
There was clear over investment in malls and hotels (and offices) - and I've written about this before. But I know some people are thinking the bust will be similar in impact to the residential bust. Nope. If non-residential investment declined as much (in percent of GDP) as residential, there would be ZERO investment!! Not going to happen.
Best Wishes.
Do you have a view as to why CMBX seems to forecast severe losses?
ot Asia down. No likey Lehman.
Two Russian strategic bombers landed in Venezuela on Wednesday as part of military maneuvers...
Yahoo! 404 - Page Not Found
CR,
You say; "If non-residential investment declined as much (in percent of GDP) as residential, there would be ZERO investment..."
The chart is noisy but RRE seems to trend around 4.5% of GDP and is currently 3.5%. It looks like CRE trends around 2.5%. A 1% of GDP drop would still leave CRE expenditures at 1.5%. A fully possible number in my opinion.
Of course the bigger problem in the CRE space was not the construction but the flipping of office buildings. Any idea on where prices will go? Will pricess fall wnought to put a bigger than expected dent in office building construction?
CR, thanks.
My San Diego commercial construction view on the street is that its bad. I work in estimating for a large GC and my brother is at a similar company.
Its bad and its getting worse. Prices are getting chopped. Unit prices outside of mechanical / plumbing / electrical & steel are cliff diving.
Public jobs are bidding underneath the Engineers Estimate. Something that never ever happened when times were booming. They use to come in 2x the EE.
Layoffs have started too...
Its all totally anecdotal and I see (agree with) why you say it will be much smaller but its these damn multipliers we cant seem to shake!
.......
I think there's a flaw in the logic of CR's chart and thinking.
True demand for residential investment is driven by a combination of population growth and affordability.
True demand for non-residential investment is driven primarily by the sustained rate of GDP growth. In the 1980s and 1990s, the economy was growing by a little over 3% real on average and the supply of non-residential investment about matched demand. But if you factor out all the statistical distortions, real GDP has probably only been growing by about 1-2% since 2000 and may be at that rate or below for up to a decade more in the future. That rate of economic growth can't sustain a supply of new non-residential investment equal to 2-3% of GDP. There's vast overcapacity now in CRE, and it will take years to work it off.
I call a fairly sharp drop in CR's blue line down to about 1.5% of GDP, and staying there for at least 4-5 years. That would start to resemble the red line drop.
so does this data include condos as RE or CRE? From where I sit in Denver there seems to be a glut of unfinished condos that I wonder whether sold or speculative (nor going to sell). I believe this is a monumental problem in all major markets that has not been sorted out.
It's pretty simple. Commercial real estate is invested, and guided predominantly by professionals.
Residential on the other hand,,, we all know who's making the decisions in that sector.
U.S. financial institutions are using stock swaps and intricate loan transactions to help foreign investors avoid paying billions of dollars in taxes on dividends paid by U.S. companies, according to a Senate report to be released on Thursday.
The report by the U.S. Senate Homeland Security subcommittee on permanent investigations said investment bankers use phrases like "dividend enhancement," "yield enhancement" and "dividend uplift" to market an array of transactions "whose major purpose is to enable non-U.S. persons to dodge payment of U.S. taxes on stock dividends."
"There is no business purpose other than avoiding taxes," Levin told reporters at a briefing on Wednesday. "The IRS ought to go after that, they ought to go after that heavily, they have not."
The report provided case studies of transactions by six financial institutions: Lehman Brothers Holdings Inc, Morgan Stanley, Deutsche Bank AG, UBS AG, Merrill Lynch & Co Inc and Citigroup Inc
Senate report says dividend taxes being dodged
| Reuters
Greed, greed and more greed.
rich,
Again totally anecdotal the GC I work for does 1.5B a year in revenue. Never built a condo, built about 50 office buildings in 20 years, mostly large campuses for owners, never built a dam, bridge or road...
There are tons of things that include construction, office buildings and speculative construction is a finite portion of commercial construction.
.........
"dividend enhancement," "yield enhancement" and "dividend uplift"
Greed, greed and more greed.
Anonymous
I f'in hate it whan Jas is right... It really irks me.....
..............
CR,
"here was clear over investment in malls and hotels (and offices) - and I've written about this before. But I know some people are thinking the bust will be similar in impact to the residential bust. Nope. If non-residential investment declined as much (in percent of GDP) as residential, there would be ZERO investment!! Not going to happen."
Really? There's so much CRE out this way, and Pasadena, and Santa Monica, and OC etc...IRVINE...I don't have your confidence.
Cheers,
ades,
"There are tons of things that include construction, office buildings and speculative construction is a finite portion of commercial construction."
When were the the Empire State and Chrystler buildings completed...and when were their occupancy rate even close to 90%.
You research...I know.
Cheers,
CRE is never going to go to zero. At worst there will be lots of work converting vacant retail and escrow and title and broker offices to something useful.
The ES was started right after the beginning of the depression I think.
My point is if you take an E&R magazine and look at the top 50 contractors in the US. I dont have the total value but I'd bet that that would be 80% of total revenues.
I'd say of that 50 general contractors 10 would have more than 25% of there revenue from developer or speculative financing.
The remainder will be much smaller...
..........
E&R = ENR opps....
safe as condos, condos are included in RE.
Misean, it will go to zero in some places. I can't believe some of the areas of SoCal. But these are national numbers.
Best to all.
Respectfully disagree. CRE should bottom this cycle at less than 1% of GDP. That is a 50% haicut from the peak.
Given current tight lending standards, only stuff in the pipeline is being funded.
Agree it will be less than residential but hurtful none the less.
The key question in my mind isn't so much the level of construction but the destruction of the lease base.
CAP rates need to be back to 8 to 12 percent to pay all costs in.
Just a thought.
Well, if the ultrabears are correct and we're about to become truly poor, it's not just there's an oversupply of new retail space.... but we won't need a great deal of the retail space already in use.
At the hole-in-the-wall video store I patronize, it's now official: Tuesday and Wednesday, "Dollar Rental Days," are now the busiest days of the week. They beat Friday and Saturday nights by far.
Retail businesses that survive will cater to this demographic -- or to the wealthy. There may not be much in between.
CR,
Do they separate the data? I just looked but couldn't even get to the info you found.
I thought I remembered seeing it once upon a time. Anyway it would show that the percent of construction that is subject to risk is relatively small compared to total construction. Roads, bridges, airports, hospitals, major improvements et. al.
........
CR: What percentage of commercial property is owned free and clear? My hunch is that it is much smaller than in the residential world.
I'm still curious about how you feed yourself and the little risks. This is a full time job for you right? And tipjar brings in about $1000/yr?
Is this taboo? Has it been answered before?
I agree that CRE isn't that big compared to RRE, maybe the equivilent of one car in the entire trainwreck.
However, CRE usually involves much bigger bets, and the risks often aren't diversified very well. I expect CRE to be involved in quite a few bank failures, especially smaller banks. I'm not sure what FDIC will do with all its strip malls.
"But those looking for a collapse in CRE investment of the same size as the current residential investment bust are wrong."
I agree up to a point. when has to take into account the fact that the residential side ran up so far that on the downside the resulting crash could hurt through less hedge funds, banks and mortgage brokers renting space. then we have to take into account the fact that a record portion of our economy is based on consumer spending. if a residential collapse causes job loses that impacts commercial which cause more job loses and we enter a spiral.
we have a consumer bubble of historic proportions. that's not good for malls. in the 1980s and 1990s we could count on a rising stock market and a generally rising economy to absorb excess capacity. I don't see the same happening going forward as we are heavily indebted. maybe with a weak dollar that won't be true for the manufacturing space.
Uncle Billy Debunked: I was pretty sure CR was retired, no?
Maybe a more interesting question: have these two measures every fallen at the same time for a year or more? In absolute terms, not as % of GDP.
seems like the lenders were doin 70% LTV on hotels.
OT, the Dems are starting the push for another "Stimulus Package". Please, if you disagree with this (inflationary madness), call_your representative in_ DC, whether he or she is Dem or Rep.
These guys have really got to chill and take a breather. They don't even have a clue what their doing.
Panicking and doing something just for the sake of being seen as doing something is a really, really, bad strategy.
{chirp} {chirp}
butter: As little as a couple of months ago I personally witnessed wells fargo do 95% on an $4 Million office building in los angeles. Two loans, to two different llc's that differed in spelling by a letter or two.
oob: I never got that impression. Tanta maybe, but CR?
Southern Nevada's construction industry continued to slow from the feverish pace of the past five years, Jeremy Aguero of business consulting firm Applied Analysis said in a second-quarter report for the Associated General Contractors' local chapter.
Even with unprecedented construction activity on the Strip, construction employment dropped 9.1 percent in the past 12 months to 95,600. Office and retail vacancy rates are at their highest levels in two decades, leaving many planned projects delayed or canceled altogether.
From: Key Southern Nevada indicators inch higher - Business - ReviewJournal.com
I was thinking the USG would start public work/infrastructure projects. Well, right now many states have shut down road construction projects because federal funds are not being delivered as planned. To the tune of $8B+ ...
I think commercial is going to tank.
Off topic, but satisfying.
SEC requires B of A to accept the return of 4.5 billion in ars.
Expired
CR,
"Misean, it will go to zero in some places. I can't believe some of the areas of SoCal. But these are national numbers."
Understood. Copy that.
Cheers,
Well, Alaska may have had a bridge to nowhere but my county just built a city bypass to no where.
The bypass originates at a state highway and was supposed to bridge I- 30 to go north of town and connect into another mega complex.
They forgot to get funding for the overpass on the interstate. Ooops.
The bypass dead ends on both sides of a major east west U.S. interstate highway.
Point being, states and local governments have no money and increased tax levies are out of the question.
The new Feds must fund infrastructure over the next 10 years at least.
"Stimulus Package"
Yummy yummy, new Ipods out, gotta have, gotta have.
dp writes:
“Is there any chance that some land development for residential construction makes it in to the commercial side?”
I have seen many projects that were started as residential converted to CRE. They are still re-zoning all kinds of land from RRE to CRE all over Metro ATL to help the builders.
I can only speak for my area, but there is way too much CRE that has been built over the last 5 years and still ongoing that is sitting empty.
OT:
Question writes:
"What would be the economic warning signs of an impending dollar collapse?"
A 3 day DJI drop of 1000 points to down around 10k, combined with a 200 point flight to quality drop in 10 year TNX yields, from today's 36.41 to below 34.00, along with a continued oil index / XOI drop to 1100, might start to convince me as a foreign investor that the spectacular, 10 year old, Fed-led, U.S. reflation is a failed pack of lies and false statistics, and that the danse macabre of the currencies has begun.
This is a fun blog when the children are in bed.
Past CRE busts were usually confined to 'hot' areas of the economy much like previous housing bubbles.
It seems to be nation wide this time.
'Where two people gather in my name, I will provide a Starbucks.'
CRE trails residential by at least 18 to 24 months. It is observable in the data.
Within 4 blocks of my city house there is a Wa Moo, Watch over ya, Bank of Merica, and under construction, Wells Foggo.
This is in addition to branches of two well run local banks.
Again, point being, we are over banked, over stored, over officed and just plain overed.
Unlike previous CRE busts, the old stuff can still attract tenants at reduced prices. It is the new stuff that is losing or cannot attract tenants.
Japanese came back after sushi & saki to resume their selling.
China is a train wreck. Asai funds are in liquidation mode, like commodities with all the momentum players fleeing.
CR gunna agree w/ you here.
But, I do think malls/shopping centers are way over built and this will be the Archilles point of pain.
I expect rents to drop quite a lot putting strain on REITS and those involved in the physical upkeep and mall owners.
Simply put consumers will pull back. Sales per/sq/foot wont justify a retail presence in some places and leases will set to expire/cancelled. This along w/ the expected BKs will be interesting to watch.
haven't heard much from P Schiff or J Rogers lately. Wonder why?
Those guys are both delusional.
Ross writes:
...Within 4 blocks of my city house there is a Wa Moo, Watch over ya, Bank of Merica, and under construction, Wells Foggo...
Yeah..what's with all the bank offices? We got 'em up the ying-yang around these parts. They are mostly rather extravagant buildings located in prime commercial locations. What happens when they have no tenants? With the way things are going I 'spose they would make nice secure condos...
Vote whore ?
[Republican presidential candidate John McCain has pushed strongly for increased offshore drilling, while the Democratic presidential contender, Barack Obama, changed his stance to support limited drilling.]
House Democrats unveil bill to end drilling ban
| Reuters
Ross writes:
This is a fun blog when the children are in bed.
we're in bed but not asleep
just keeping quiet listening to mommy and daddy make all that noise
I also noticed three new Title Max locations within a two-mile radius. One was built on a prime CRE corner where a Citgo gas station was torn down and replaced with a Title Max in 3 months. I knew the owner of the Citgo and he paid a million six for the corner lot. Must be a whole lot of money in titles these days!
Global securities firms and investment banks can no longer count on the securitization deals that have kept them profitable in recent years,'' said Yuuki Sakurai, a Tokyo-based general manager at Fukoku Mutual Life Insurance Co., which manages about $54 billion.There're no investors willing to buy securitized products.''
Late last night while we were all agog, old lady Google lit a lantern on the blog, and when the dow kicked it over we blinked our eyes and said, they'll be a hot time in the old town tonight o/`
Tribune blames Google for damaging news story - MarketWatch
"It's pretty simple. Commercial real estate is invested, and guided predominantly by professionals."
Do you mean like the professionals at Lehman? I heard they're getting AWESOME quotes for unloading their CRMBS.
I think CR might be wrong about CRE.
Look at current CAP rates (industrial, retail, etc...)and you can see that either rents need to drastically rise, or prices need to drastically fall.
Just a couple of anecdotes:
Was speaking to a commercial broker in North LA county who had multiple new industrial condos that were selling for $129/sqft. last year. He said the owners would be happy to get $99/sqft. now. Said something about construction loans coming due...
Was speaking to a CRE owner/investor who has retail properties in San Fernando Valley. Was easily leasing for $1.60/sqft. NNN last year, says he would be happy to fill current vacancies at $1.00/sqft.
It doesn't look good for CRE. Maybe it won't be as bad as residential, but it will still be bad...for owners that is.
CR, have I been banned or has this become a police blog?
The only way I can read or post comments is to go through an anonymizer in Germany.
Conjure Bag wants to know why the soap box got kicked out from under him.
We await your reply.
"the Dems are starting the push for another "Stimulus Package"."
Might have to buy some oil if that happens as that's the only brake on this whole damn system.
Asia has been following/lagging NY for months, but being down 1.5 to 3% tonight after a nothingburger U.S. close, and being down another prior night, puts them on the Leaderboard.
Rogers' 5 years of commodity fame may be ending and his long interview today with Lucy - oops - Betty Liu, carefully avoided addressing the unfolding worldwide asset and commodity deflation.
Schiff probably realizes we're at a major turning point and is probably reassessing his approach.
My feeling is that the BS we've been through is about to walk, and Mr. Market is about to talk.
Yesterday the volume was about 11 billion shares, and the Bubbleheads were talking liquidation. What happened to liquidation today.
Best answer gets a bottle of Val-U-Rite vodka from behind the bar.
My feeling is that the BS we've been through is about to walk, and Mr. Market is about to talk.
Agreed, but we probably have different ideas on the BS time frame and what Mr. Market will say...
So, you are going to fade Jim Rogers?
Mr. Shiff I have not a clue but he seems to have called thismess for the last few years.
Bout ready to reload my stuff boat again.
Leftys Liquors and Lubricants writes:
Yesterday the volume was about 11 billion shares, and the Bubbleheads were talking liquidation. What happened to liquidation today.
Pump monkeys broke in through the skylight started drinking the Val-U-Rite to celebrate before the close.
Not sure I agree with you. Too few data points to make an argument here.
The low cap rates, agressive financing and over building in some sectors don't auger well for CRE. Throw in a lack or really an absence of refinaning for maturing CRE loans and it doesn't look all that rosy.
Hedgies are losing their grip on squeezing the shorts by buying these dips, and we're finally going to see a 150 proof buyer's vacuum, with liquidation for everyone, on me, from my Lefty gift bottle.
cogent comment by yves smith over at naked capitalism
hat click (tm mock turtle) yves..."fed pushing on a string"
"Once upon a time, when faced with a market meltdown the Fed would have pumped a wad of cash nto the market and it would have been good for a rally of a couple or three hundred points. Today the Fed added a whopping $16.75 billion, and not much happened. ItÂ’s not a good sign. The Federal government is pulling out all the stops here, but if the FCBs are no longer playing ball, it wonÂ’t matter. The game will be over. Tomorrow night weÂ’ll find out whether the FCBs have taken their ball and
gone home, or whether they are still in the game."
"Tomorrow night weÂ’ll find out whether the FCBs have taken their ball and gone home, or whether they are still in the game."
All your balls are belonging to us.
Mall near me went down for several years and was torn down about 2 years ago. Big box Target,Walmart and Home depot there now but Burlington Coat Factory is building a HUGE store there.It's a bad area and I would bet years off my life that its not going to make it.
OT: So now that the Lehman/WaMu gangbang is over who's up next? I don't mean regionals or local lenders - I mean big banks?
I've got my money on Wachovia followed by Citi. Any other thoughts?
mp, saw the post. i doubt he's doing that. sh*t i've perhaps detracted from value and i can still send'm in....
.........
rob Dawg
YouTube - All Your Base Are Belong To Us
take off every zig
Dear CalculatedRisk, I am quite sure you are wrong when you say "Those looking for a collapse in CRE investment of the same size as the current residential investment bust are wrong..."
While there was no mortgage bubble propping up CRE, there was a much larger long term bubble propping up the "consumer infrastructure" model, which is highly wasteful, predicated on shopoholic consumer behavior, and is (IMO) dead as a duck. There is a shift in consumer sentiment towards frugality as you might expect in a deflationary environment. This sentiment shift will be deep and not be quickly undone.
A wide variety of retail commercial ventures, from restaurants to shopping malls to chain retailers, are going to be taking an enormous leg down on a multi-decade super cycle. This will be superimposed on the usual pattern of CRE busts following RRE busts.
Here yah'll, I have a song in my heart:
It Wasn't God Who Made Honky Tonk Angels
YouTube -
All that money that was made is being slowly siphoned off. Soon, the banks will get caught in the same death spiral.
And then it will be the end for them.
If you are quiet, you can hear their balance sheets groan under the weight.
It reminds me of every church service I've ever had the pleasure of attending...begging for alms. Selling that same nonsense to the beggars and sucking them dry.
"All your balls are belonging to us."
What you say! (checks balls)
Has anyone seen Mick Jagger in drag before? This is God's plan.
YouTube -
Heartbreak USA
YouTube - Kitty Wells (Heartbreak USA)
What is so terribly interesting to me is the almost complete lethergy of the man on the street. So far at least.
I suppose that there will be an inflection point. I confess I do not know when this will be.
This is an epochal time. One does not get to witness the complete breakdown of a financial system perhaps in ones lifetime.
Personally I wondered what took so long but I guess excesses need a generation to exhibit an unavoidable extreme.
The banks and I Banks are broken toys. Money will continue to go to its highest and best use but I fear the lever is cracked and will not hold.
I do not argue for a 30's style depression. The composition of life has changed. I remember my Grandfather telling me that prices really did not go down in the 30's. Gold went from $20 to $35 an ounce but paper cash was scarce. Loans were hard to get but families got by with help from each other.
We do not need a gold standard to right the system. Gold was just a discipline that we all pretended to adhire to for maybe 100 years. As far as I'm concerned, we could have a moon rock system.
The key is discipline.
As I am typing this, the sex commercials are airing. ExtenZes pills and a message from Trojan for a battery operated teaser for women.
We are going to get a praetorian guard. Make no mistake. It is impossible to vote in honest men to administer and enforce our laws.
What a tasteless gruel have we cooked for ourselves and children.
History will not judge us well nor should it.
Skwerls is sleeping and so should I be.
mp- Wow! I think I've read everything you've published for the last month and I would think that it's some mistake. If FFDIC had a hard time I'd know it was TPTB with a Cease and Desist.
Uncle Billy- Hit that "About" button next to "Home" just under the banner head.
Ross,
Re: "lethargy of the man in the street". Indirectly, speaking from a pyschological point of view, that might help explain why Lehman might be "allowed" to fold, and WaMu is "allowed" to limp along for quite a while.
From the J6P perspective..."What the f's a 'Lehman'?"...whereas, were WaMu go TU..."hey, that's MY bank!!!" Cuts a bit closer to home, no?
Just speculation on my part....leaving all the high finance out of it.
Seems to me the current lease base is dwindling in front of our eyes. Speculative CRE investing may not have occurred like in Dallas, or other cities in the past, but we are losing businesses everyday. Also, how does apartment CRE fit into the equation? I heard on CNBC that the bulk of apt loans are backed by f/f, and will likely change.
http://www.baltimoresun.com/business/nationworld/wire/sns-ap-berkshire-deposit-insurance,0,4681131.story
Any thoughts?
CR, I'm not that smart, but I think you're focusing on the wrong metrics. What matters to the financial system is the price at which these CRE developments sell. You're focused primarily on the supply side, but I believe the demand side is where destruction lies. How many companies (particularly retailers) do you know that are expanding right now? There is a glut of retail, hotel, and soon to be office space. And businesses are paring back operations and laying off employees. So demand is arguably going to pull back to 2003 levels or lower, with an extra 5 years of construction on the market! It really doesn't matter how far construction slows. Demand is disappearing at a rate that I've never witnessed before.
Remember, this is the first consumer driven recession we've seen in the past 30 or so years. And it will be devestating to retailers that have overextended operations, as well as the commercial REITs that have layed the infrastructure to support the largest consumer credit bubble in history.
sd: but his posts are just so virile and fecund. I can't help visualizing him as a young man, especially when he's traipsing up and down mountains every other weekend.
Plus I am just so jaded now that it's really hard for me to accept that anyone would put this much effort into a financial blog just for kicks and tips.
Ross,
Maybe you should stop watching the Playboy channel... are you sure those are commercials?
guess u missed that shadowy pic he posted of himself in yellowstone...
uh, they should build some quality year round condos up there.
The extenze and other male enhancement products fit nicely into our sense of national impotence. They must be cleaning up.
Re: mp
Noticed you went quiet.
Went through looking at your latest posts.
Bove on WaMu:
OT regarding Palin billing per diem to AK.
Quote from Paulsen in Saturday July 12 WSJ.
Wells Fargo Write Down:
Link to a Kenneth Rogoff article from The Guardian.
Housing: It's about prices...
Middle class destruction is risk of housing prices way "undershooting".
Numerous Comments in WaMu MOU.
There was a rather inappropriate description of the destruction that Paulsen is doing with his bazooka but when I looked again it was either not your quote or had been scrubbed from the halo-memory.
Regardless, I don't think this is a police blog... unless you are like Keyser Soze and CR has discovered you're a multiplepersonality of Sebastion...
The Shanghai Composite Index has fallen through 2100 and continues to drop.
I continue to predict that China is going to come apart at the seams, as did the USSR and its Eastern European satellites.
One factor in this will be the decline in US consumer spending as the US saving rate "reverts to the mean" to its historical average of over 8% and overshoots beyond, wiping out jobs in retail and distribution -- as job loss cuts consumption farther, this will be self-reinforcing. The impact on Asia's export-dependent economies -- China's in particular -- will be severe. The fallout from this, combined with that from collapsing Chinese stock and real estate bubbles, will hasten the disintegration.
As China starts coming undone, it will be progressively less able to export, and will have less in dollar earnings to lend back to the US. This will further exacerbate the US financial system's problems.
With fewer cheap Chinese goods to sell, the need for all the retail space and distribution centers built in recent years will inexorably decline.
butter, remind me... did he look 30's or 40's?
ow that i think of it, does it count as CRE if u get a loan to raise elk on land to harvest their antlers and sell them to the asian market as aphrodisiacs? there was a bubble in that recently...
Uncle Billy,
We meet again, how weird, what are you doing up so late? Every time I want to rate a bond, you slip away?
It was indeed a bubble. The only bubble we haven't seen yet is a bubble bubble.
billy, hold up, i'll find it...
We live in a bubble?
shadowy pic, ur guess is as good as mine:
Calculated Risk: Return from Paradise
A. Nony Mous:
I will again as well, slip away I mean. I just waited around so I could give you the tag team slap. Here's clipboard and smell-0-tester -- have at it.
Oh good grief, that's John Muir, not CR, butter.
Seriously though, I'll have the boys enhance this and then we'll know for sure. Through the fuzz, I'd say late 40's.
Please, the children want you to stay, we hardly know you and this is almost XMAS night. Please, just for the kids, think about it?
I hate to butt in on this private spy work, but did not Yoda have a pix when he went on a business trip a few months ago? As I recall, there was a photo..
Anon, I'd love to, but I got 4 hours of sleep last night... all the excitement with the collider and all. And I've got to be out the door at 6:00 a.m. tomorrow morn. So adieu fresh prince.
Yes, fare well
I’m here at Inman Real Estate Connect and am very happy to report that one of my favorite bloggers, CR, from the blog CalculatedRisk will be part of a panel tomorrow afternoon along with another great blogger, Yves Smith from NakedCapitalism. Many of my colleagues are signed up for the blogger sessions in the morning, however, I’ll be attending all the foreclosure sessions. The Palace Hotel is beautiful and elegant. Can’t wait for tomorrow, but first I shall go join the “beer for bloggers” party down the street.
so Tanta is yves? lol!
Milken Institute Global Conference 2008 - Econobloggers: Real-Time Information and Analysis From the Keyboard Next Door
thanks for the confirmatio
I better shut up now:
Yves Smith, who writes the "Naked Capitalism” blog, had ample experience on Wall Street with Goldman Sachs. She felt that there was a "real disconnect between what was being reported in the press with common sense." She stated that there "was a lot of frothiness in the market ... and the way the dots were connected were incomplete – the mortgage crisis, for example, was very 'snarkly.' In blogger language, that means unclear."
I found several pictures of CR
http://i.cdn.turner.com/v5cache/TBS/Images/Dynamic/i10/homeimprov_wilson_240x260_053020041834.jpg
http://www.wchstv.com/abc/homeimprov/earlhindman.jpg
http://i.cnn.net/cnn/2003/SHOWBIZ/12/30/obit.hindman.ap/story.hindman.jpg
CR here:
YouTube - Yoda Wisdom
FYI: kal Q lated Risk
YouTube - kal Q lated Risk
please please dont become a u tube bot
um, someone inform me how banks fund raw land development, what kind of collateral does a developer need? I know a bank wants not to have a partially sewered/watered/roaded plot of land. I'm curious. seems like a good way to use your neighbors savings via the local community bank.
in my hood they are still running loans for oil/gas development. is that counted in Commercial Loans/Industrial Loans?
gawd i 'espise u tube links
I continue to predict that China is going to come apart at the seams, as did the USSR and its Eastern European satellites.
As bearish as this site is, I think very few here realize that probably we are ALL going to come apart at the seams.
Again, I wouldn't be surprised to see world population drop by 2/3 over the next couple decades.
My Plan B is Nicaragua, where we have trustworthy friends. Possibly life would be safer there than in the US. But by the time we pull the trigger on a move to there, it'll probably be illegal to move our assets with us.
Really, where is this accelerating collapse going to stop? What if there is no bottom?
2/3 population, takes us back to 2 billion, not gonna happen.
i think the trick is to have income coming in from strong currency and live in a place where it spreads very well.
Re: please please dont become a u tube bot
Your right, I have a few too many posts these days; a few thousand here, a few thousand there, and now Im a Youtube CW bot?
about 1,910 for nakedcapitalism "doc holiday
Uh, before I turn in, where can I post this photo of cr and tanta together?
i remember tanta has a FRE umbrella, thats the hot shot photo of the day...
Ok here it is, what I think is the only real photo of CR & Tanta together (unconfirmed)
http://i537.photobucket.com/albums/ff334/UncleBillyLovesCR/steeltoedbunnyslippers.jpg
Hey, Nemo and Jillayne both saw CR in San Francisco, but nobody has seen Tanta. Altho I believe that Bacon Dreamz must know her personally.
yeah i hear they swap umbrellas
Just couldn't let me sleep couja. There's a little glitch here, maybe with the quality control at the Milken website:
Here they describe Yves Smith, blogger as head of Aurora Advisors in NY. Goldman, Mckinsey, Harvard undergrad then BSkoo.
Milken Institute Global Conference 2008 - Speaker: Yves Smith
But here they say the same things about Susan Webber (no Yves Smith to be found on the aurora site):
Aurora Advisors, Inc. - Management Consulting
Doesn't seem like this is Tanta to me (either of them) since there is no big mortgage experience in there, but the Susan/Yves issue is curious.
Once Nixon broke the connection to gold, the status of the dollar as the world's reserve currency was backed only by its vaunted GDP.
But as we are discovering to our shame, the current GNP is composed almost entirely of frippery and baubles. The goods that this country actually produces fall far short of what is required to support its extravagant lifestyle.
To sustain the rest of it, we soak up 60-70% of the rest of the world's savings.
IOW, everything is a sham. The dollar isn't even backed by a mighty engine of production anymore. And the world civilization that depends on it is a house of cards toppling slowly into the hazy mist of history.
Because as the US goes down, it takes virtually all the post-modern world with it.
The only countries that may hold their own will be those shabby places where small efforts at egalitarianism brought down US wrath on their heads. Nicaragua and Cuba will manage, I think.
Otherwise, western capitalism has poisoned every place it gained a solid foothold.
"The impact on Asia's export-dependent economies -- China's in particular -- will be severe"
Maybe you should get your facts straight before spilling this BS. For example, Japan's biggest trading partner is CHINA now, not USA.
The rest of world exports from China are about 80 percent of their total and intra-asian trading is the biggest block in that. China has been growing MORE in a year than all their yearly US exports, meaning 300-400 billion dollars. Their economy is at par with Germany and still growing fast.
Total exports from Pacific Rim countries into USA have recently been about 650 billion dollars. That is about 6-7 percent of their GDP combined.
It is the USA that is going to collapse USSR style. Little production, too much consumption, too much military spending etc etc.
Actually, it is going to be much worse since Russians were used to food shortages and frugality had been their way of life for decades. You might wanna read this:
Closing the 'Collapse Gap': the USSR was better prepared for collapse than the US | Energy Bulletin
"Closing the 'Collapse Gap': the USSR was better prepared for collapse than the US by Dmitry Orlov"
"Because as the US goes down, it takes virtually all the post-modern world with it."
Typical American exceptionalism, delusions of grandeur. It is the US and UK that will find themselves at the bottom of barrel. Nothing but empty shopping mall economies, producing relatively little.
The rest of world is going to have big recession, maybe even depression but they won't collapse.
@unirealist
This site looks at the micro events detailing the losses but if you bring up the big geo-political picture and also failure of economic globalization, it doesn't really fly here.
Not much resentment for global central banking processes here either. Lots of traders here trying to cash in on the collapse or survive by shorting the markets.
One Big Event will tip this Titanic over and there's not enough life rafts to save everyone.
Been to Costa Rica?
The reason population would drop dramatically in a global Great Depression II is from casualties of wars and starvation in the periphery and semi-periphery. The U.S. isn't in the semi-periphery yet and the dumpster diving is still good until Homeland Security locks up all the commercial garbage cans to 'maintain social order'.
<a href="http://quotes.ino.com/chart/?s=FOREX_USDJPY&v=s>USD/YEN tanking. Futures down. I'm lovin' it
(This will be another day I wished I called in sick)
One last comment; those who read my TA here know that I benchmark volume off price as my primary, most reliable tool. Price can be confirmed or denied with a quality of volume move - whether price has been hit with higher/lower volume. That untested low of July 15th (and the week) has huge volume, and up until the past 3 days the market had been running well short. But even on a weekly, it has enough volume to break and hold the July lows - which would be a monster A-B=C-D down to 1070-1050. I also hear there's a gap at 960 that needs to be filled. All right I'm outta here
OT:
Jeff Masters at Weather Underground is spot on in his tidal surge predictions. We are, by any account, more than 300 mi. from Ike and yet Sarasota Bay is running high this morning - water just now capping the seawall and we've got another two hours before local high tide.
That must be one god-awful storm.
FFDIC - everything tied down?
Storm is coming :-
Hurricane Ike, 2008 / Stormpulse / Hurricanes, severe weather, tracking, mapping
Hurricane Ike keeps Gulf production shuttered
Hurricane Ike keeps Gulf production shuttered after Gustav - Sep. 11, 2008
Burnside, St. Petersburg observed tide has been 2+ feet higher than predicted levels for about 24 hours now.
Big storm.
LEH below $5.00 ($4.99) premarket...
NYT headline:
Real estate woes spread to China.
And we still haven't heard of soon to burst bubblicious India (metro)
Rupee is forecasting trouble and down 15% this year against US
Maybe we will get CR to post a China Cliff dive...very close to breaking 2k
Been to Costa Rica?
Just curious - Can the entire US population fit in Costa Rica?
LEH 4.84....wow
In my humble opinion, China and India and most of the emerging economies are already hit and most likely will come out of this first.
China especially is driving growth, don't mistake them for a totally export driven economy as they are becoming huge consumers themselves.
Really, those that are predicting China's decline haven't really been there. Start reading or traveling more, that always helps me.
The first one now will later be last as the present will later be past.
On mp's tragic ban:
I think it's probably some kinda error, mp. I'm not banned and God knows I'm less contributive.
unirealist:
As bearish as this site is, I think very few here realize that probably we are ALL going to come apart at the seams.
Again, I wouldn't be surprised to see world population drop by 2/3 over the next couple decades.
My rough guesstimate is a 70% drop here in America, higher elsewhere.
Continuning claims through the roof
byzantine_ruins writes:
Again, I wouldn't be surprised to see world population drop by 2/3 over the next couple decades.
My rough guesstimate is a 70% drop here in America, higher elsewhere.
Seems contrary to evidence, think population will increase instead, mainly people with lower income have more kids.
Health of world's big banks improving: IIF
Yahoo! 404 - Page Not Found
Someone should tell LEH that.
WM 1.90
LEH 3.98
LEH taken out and shot!
Down 45%!
crispy&cole writes:
WM 1.90
LEH 3.98
Wow, just wow!
I think MER is next, but what do i know.
Ross the point will come when diebold crowns McCain prez and the ppl will realize what jas and i know: Democracy in the US is dead since 2 decades..
Seems contrary to evidence, think population will increase instead, mainly people with lower income have more kids.
Too much infrastructure dependence, too much ruined soil from green revolution farming techniques, too little raw material to supply the 10x greater consumer load the world's about to bear, no knowledgebase about genuine sustainability, no policy apparatus whatsoever capable of framing and carrying through an effective response.
I'd like to be wrong, but I think this looksd like a mouse colony about to implode, and the Lotka-Volterra equation is going to be the governing rule. "Prey" is "available easily exploitable natural resources", "predators" are "humanity".
People talk about the numbness of the man on the street? Must have been what it was like when the Mayans zoomed out past the productivity threshold of kitchen garden agriculture.
LEH taken out and shot!
Did they empty the clip just to be sure?
Some music to listen to today:-
YouTube - Jackson Browne Lives In the Balance
YouTube - Casino Nation - Jackson Browne
Holy kiss of death LEH.
WM 1.90
LEH 3.98
Nothing like a little ass pounding first thing in the morning to get the blood flowing.
Goldman downgrades LEH to neutral from a BUY. LMFAO!!!!!!
How can you say that CRE chases/correlates with RE...and then in the same breathe say that you don't expect that relationship to hold on the way down?
What enables that decoupling now?
I don't follow.
So what if it is have of %GDP of residential, will it not be subject to the same 50% decrease?
Will this not make a direct and forceful impact on small/mid/regional banks who have been holding on to the false sense of security that they were safe because they stayed out of RE?
When the shit hits the fan, everything correlates. And unless you have a compelling reason that I somehow missed I would expect the inter-relationships which existed on the way up to stay intact on the way down at least on a percentage basis.
crispy&cole writes:
Goldman downgrades LEH to neutral from a BUY. LMFAO!!!!!!
Ah.. Bank wars.
Goldman downgrades LEH to neutral from a BUY. LMFAO!!!!!!
LOL, Goldman must be getting ready to open a rating agency sub.
SF Chronicle starting a bank run at WM:
What happens if a major bank fails?
Only 2 banks will remain standing and stronger.... GS and JPM.
"Only 2 banks will remain standing and stronger.... GS and JPM."
And on the bond side, Pimco.
Goldman downgrades LEH to neutral from a BUY
What is their new price target?
SF Chronicle starting a bank run at WM
At least it wasn't those meddling bloggers.
WM wins regional marathon trials...
C runs next
I think $10 or so...but they downgrade after it drops 90% thanks for the great investment advice GS
Well what kind of stick save do we get this weekend? An emergency rate cut, SEC with a ban on all naked short selling , the treasury injecting capital into LEM? Stay tuned because you know it's coming.
Sheila, if you are here, please dont blame us this time...SF chronicle i
i bet making it a crime to sell!!!
last bullet left....
If LEH placed their Alt-A marks at 39, what does this do to WB with $120 billion in Alt-A exposure?
WB gonna rocket to the top of the distressed list with a bullet.
GS & JPM are NOT immune. GS has huge level 3 liabilities and JPM is the worlds biggest derivatives player. Absent the historic moves by the fed & treasury, both JPM & GS would likely be facing BK also.
Remember, Enron and Worlcom were the darlings of their industries right until they collapsed.
Anonymous writes:
..SEC with a ban on all naked short selling..
There's only one way to stop the slide.. a ban on all selling.
pakistan tried it.. these guys where ahead
)
Angry Saver writes:
Absent the historic moves by the fed & treasury
The most important caveat.
Our financial system is totally insolvent.
Radical steps will be taken. What they will be is the question.
ew thread alert
didnt the Fed make it illegal to hold gold 100 years ago?? so much for historie...
i say they will nationalize everything including savings... guess its somewhere in the Patriot Act..
Yoringe writes:
pakistan tried it.. these guys where ahead
)
That was really scary.
Broker :It's down 50 sir.
Investor: WHATT??? Time to pay the Exchange a visit!
btw everyone who thought USA becoming socialist was wrong.. its facist actual..
didnt the Fed make it illegal to hold gold 100 years ago??
FDR confiscated people's gold in the 1930s. It was ILLEGAL for people to hold gold in the U.S. (except for misc such as jewelry) until the early 1970s.
Americans should question whether they really have ANY property rights.
AlphaBeta,
You should get your facts straight -- the reason Japan does not run the kind of large deficit we do in its trade with China is that it exports to China huge quantities of high-value-added components destined for assembly into export goods.
Thus a large fraction of the Chinese trade surplus versus the US is in fact a stealth increment to the Japanese trade surplus. And another large fraction consists of exports back to Japan of goods whose value is mostly in the components originally imported from Japan.
When US imports from China drop, Chinese imports of such components will fall, and the Japanese economy will take a serious hit that will reduce its imports from China, too.
INO Futures and Commodities - Energy - RBOB CRACK SWAP Dec 2009 (NYMEX:RM.Z09) Price Chart and Quote
Crack! from zero, to 5, goin to 10
AlphaBeta wrote,
The rest of world exports from China are about 80 percent of their total and intra-asian trading is the biggest block in that. ...
Total exports from Pacific Rim countries into USA have recently been about 650 billion dollars. That is about 6-7 percent of their GDP combined.
Again, a significant fraction of inter-Asian trade is in stuff that is ultimately destined for exports to the US, as indicated, 6-7% of their GDP at $650 billion. So every $100 billion drop in US imports from Asia equates directly to a 1% hit to their GDP (in the end somewhat more after knock-on effects).
Though a one percentage point decline in GDP is not fatal, in China the decline will probably be more, and the pain will be felt most among manufacturing workers concentrated in urban areas.
My belief that China will come apart at the seams is based not on a belief that the stress from this source will cause the disintegration, but rather on a belief that it will add to the enormous strains building up there due to other factors, and accelerate the process. More straw on an already heavily laden camel's back.
It's interesting to use The Slosh Report's
interactive graphing features to view Fed activity over the last year ...
"Retail businesses that survive will cater to this demographic -- or to the wealthy. There may not be much in between."
Bob,
This situation proved to be uncomfortable for the Ancien RĂ©gime and the last Tsar.
"But those looking for a collapse in CRE investment of the same size as the current residential investment bust are wrong." CR
I haven't read most of the thread, but this is a strong, and uncharacteristically defiant statement. I disagree with you on CRE.
mp writes:
CR, have I been banned or has this become a police blog?
The only way I can read or post comments is to go through an anonymizer in Germany.
mp, are you still here? Because I'm thinking maybe conjure got a little jealous of all the time you're spending with us.
oh no, now you've sucked me into your delusions.
CR--
From your chart, it doesn't appear that commercial real estate got particularly overdone, as a % of GDP. I know you drive by see through buildings in Southern California, and that has to be unnerving, but that may not be representative.
My own annectdotal impression (FWIW) is that the retail vacancy rates are rising, but not because of empty new space. What I'm seeing a lot of is empty old space. Given the short life spans of so many small commercial businesses, there is a great deal of turnover in strip center tenants, etc. Driving around Portland, Oregon, you see empty free standing franchise structures (that ordinarily woud have been recycled into a ethnic restaurant or something), and dead tanning salons between the convenience store and the dry cleaners.
It would delight Jim Kunsler, and distress REIT cash flows, but if it's a bust, it's a bust deriving from, and not driving, a general economic slowdown.
if mp got banned before MS, I'm renouncing this blog and moving to Canada.
Hi CR
Where and when will RRE bottom as a share of GDP?
Looking at the time series we seem close with RRE Investment as a share of GDP at 3.5% in June 08 vs past bottom of 3.8% in March 67, 3.7% in March 75, 3.2% in Sept 82 and 3.3% in March 91.
The correction is the most massive we've experienced so far with the RREInv share dropping from 280bp from of 6.3% in dec 05.
It seems many past bottoms have been reached in March. Could we hence bottom in March 09 at something like 3% of GDP?
Why did bottoms happen at roughly 3.5%? Could we undershoot this time around?
It seems as well that current new homes sales as a % of the housing stocks is also at the level of past bottoms...
Thanks for your insights and comments.
Best, R.
mp, you have not been banned. I haven't banned anyone for a long long time.
Best Wishes