Brian McMorris

General Growth Properties: One Last Look

Thanks REITBull. This one worked out for me. It pays to stick with your convictions, though it has been tough at times doing that the past 18 months.

Banks Run Out of Options in General Growth Properties

I was hoping Todd would post something on GGP the past week. I have gone ahead and done so. I offer my opinions and current position on GGP at SeekingAlpha:

seekingalpha.com/artic...

Gold as a Hedge, Not an Investment

Bundee....you make a lot of good points and use facts, not emotoinal uninformed opinion. Good for you! This makes for a more interesting debate.

I agree with most of what you say. The economics of gold extraction are the reason why I think $1000 is probably the new price floor. I made that point in my post. This is exactly the same case for oil, as you correctly point out. There is lots of oil in the world, but it is increasingly expensive to produce. Nat gas is the same. Horizontal drilling in shale for formations that are just a few feet deep and quickly depeleted, is very expensive and raises the break-even point.

But you missed my point on the backing for the dollar. The aggregate assets of the USA are not the $140B you reference. I don't even know what the Treasury bothers with that. What is meant by the expression "full faith...." is the assets owned by all the citizens of America. All those assets are taxable to citizens, so back the currency of the government. If the $140B in Reserve were all the US had to show for its assets, it would already be bankrupt, don't you think? But as long as the govt can tax its citizens (themselves "assets" in the sense they produce income that can be taxed), enough to cover interest costs it has the ability to create tradeable money without incurring hyperinflation. Creating money in the modern era is just a way of liquifying the value of assets. But it will be a sad day if all the assets of America are surfeit to our national debt. I am all for fiscal discipline, of which our current govt (and the one before, for that matter) has little.

On Nov 17 09:05 PM Bundee wrote:

> Gold is like any other mineral: it can be discovered and mined at
> a given cost. As gold continues higher (for now), mining companies
> will step up their exploration and mine development projects. It
> is just the same as for oil, copper or phosphates.
>
> ...The most productive mines in the world, South African Gold Mines,
> have been declining in production, they went from 1,000 tonnes a
> year in 1970 to 238 tonnes this year, I doubt new supply will pick
> up the slack either short term or long term. China has ended exports
> of gold from its mines, The cost of gold exploration, the reluctance
> of banks and lenders to loan to miners to explore for gold, the 20
> years of the gold bear market reducing the demand and number of trained
> geologists who can find gold deposits, environmental laws, Environmental
> NIMBY movements around the world all work to prevent new mines from
> opening at a rate to replace the mines that shut down.
> ......................
> Once supply is cranked back up (from 30 years of increasing neglect),
> supply will exceed demand and the price for gold will decline. I
> did not write about this in the body of my article, but I appreciate
> your prompt for this.
>
> ….New mines will be opened, no doubt, but not as fast as can be expected.
> You don’t just blast a hole in the ground and viola, new mine. Miners
> must be hired, trucks must be rented or bought, tracks and mining
> cars must be obtained, the mineral itself must be found in core drilling
> which is not an easy or cheap undertaking, all these things and financial
> backing must be obtained before the first nugget of gold is extracted
> from the earth.
>
> If pulling mineral wealth out of the ground were so easy then why
> isn’t crude oil going down in price with the ease of extracting the
> plentiful supply?
> .......................
=

Why the Stock Market Should Crash

Joe, you and the other gloom-and-doomers, should try harder to understand the difference between government expenditures and liquidification of markets. The recovery to this point has been driven by monetary stimulus. This stimulus has no cost to taxpayers or the government. It is a balance sheet maneuver to take illiquid assets and convert them to liquid assets that can flow through the economy. This stimulation is potentially inflationary, but is no future burden on taxpayers. And the entire point of this type of liquification is to create some counter deflation that we call reflation. The authorities can take out the liquidity whenever desired just by selling the accumulated assets back into the market, once it is safe to do so. They can also leave in the liquidty as long as desired. There is no cost. So, this idea that "when the government spending stops, the whole thing comes down like a house of cards", is fatally (for the bears) flawed.

As for the type of stimulation that has a taxpayer impact, that is fiscal stimulus. That stimulus has been a disaster (and usually is). But only $700B was allotted for that stimulus and most of that has not been spent (the TARP funds have been or will be returned, so they don't count). Unfortunately, politicians get to dictate how fiscal stimulus is applied, which is the primary problem with it. Rather than doing something needed, permanent and good, like rebuilding our broken down water and highway systems, or fixing the electric grid so we can convert to solar power, the yoyos in DC are applying the funds to more inefficient government services (ObamaCare anyone?) and/or pet projects that do not add permanent economic value to this country.


On Nov 18 12:30 PM Joe Snow wrote:

> I have to agree. Whatever improvement in economic activity there
> is exists only due to government spending. Once the spending stops,
> the whole thing comes down like a house of cards. The only way to
> keep it going is to keep spending but that leaves us with a huge
> debt and higher taxes so less money will be available to fuel a real
> recovery.

Why the Stock Market Should Crash

Myopic, "drinking the kool-aid"; "purely-liquidity-driven" (and what bull market has not been?) these are the favorite words / terms of the bearish types that can't think for themselves but must fall back on tired phrases that were first trotted out 12 months ago.


On Nov 18 04:00 PM Wayne A. Corbitt wrote:

> Brian,
>
> Your myopic view is what will fuel the next leg down. Profits rose
> 'surprisingly' because of CUTS, not increases in revenue. Job losses

Why the Stock Market Should Crash

Earth to Charles Hugh Smith: Have you been asleep for the past 18 months? Apparently. Let me fill you in.

We had a crash last year following the collapse of Lehman Brothers. Earlier in 2008, the government successfully orchestrated the dissolution of Bear Stearns by moving its assets to JP Morgan for pennies on the dollar. In mid-summer, Fannie Mae and Freddie Mac were essentially put into receivership, again, in a way that was not too disruptive to the markets and economy.

But then the "moral hazard" crowd ramped up their vocal chords and convinced Federal types to just let the next bank fail. There was genuine concern that if we didn't let businesses fail, then everyone would jus take for granted the government would save the day. So, they let Lehman fail without even a hint of assistance. Big Mistake!

This little miscalculation got the snowball started and by the middle of October the markets and economy were in freefall. All lending was frozen and the world was on the verge of a complete economic collapse.

But then sounder minds prevailed and central bankers were able to bring the economy out of a fatal dive by applying monetary stimulus (very effectively) and fiscal stimulus (not very effective as politicians played games). The end of the first quarter 2009 saw a surprising recovery in profits and from there, the economy has gone one way: UP!

So, I don't know what rock you have been hiding under, but everything you wrote is yesterday's news. The markets don't trade on past news, but on forward news. Understand that, and you have the secret to financial success.

No Reason to Panic over General Growth Properties' Decline

I don't normally like these deals, either. But considering that Bill Ackman owns / controls over 20% of the shares and is on the Board, he must have signed off on this. If the deal is good enough for him, it is good enough for me. After all, we are talking very small numbers for what is at stake. Every $1 of increase in the stock price is worth $330M to shareholders.


On Oct 29 09:51 PM User 35537 wrote:

> Nothing to worry about?
>
> "Those bonus pools are in addition to another $15.2 million of bonuses
> that General Growth executives can receive based on how much creditors
> recoup in the bankruptcy case."
>
> I'm not sure why shareholders should be comforted by a reward offered
> by Creditors with shareholder money for Creditor recovery?

No Reason to Panic over General Growth Properties' Decline

Well 6 MOves, if you waited, you were rewarded. Big pop in GGP today with a very positive earnings announcement. Hope you were on board for the ride.


On Nov 02 04:13 PM 6 Moves Ahead wrote:

> When are 3rd Quarter results expected? I thought maybe we would see
> this info by week's end.

Banks Run Out of Options in General Growth Properties

Hey David...did you see the GGP earnings reports last night? (11/17?) It looks pretty good. 91 cents / share FFO (cash flow) which puts the company at a multiple of less than 2x of FFO, ridiculously low. Performance is better than Q3 2008 and the outlook is positive. GGP has lots of room to the upside as retail comes back and the questions over their mortgages are cleared by the court.

So, you are hanging your thesis on a hope that the courts will for some reason decide to punish GGP and allow the lenders to steal their properties at some low-ball price? Why would the courts do that? Don't you think a judge would like to be seen as part of the economic solution rather than part of the problem? At least that is what your post suggested. And you invest this way? On a wing and a prayer?

Your entire argument is about lenders being "steaming mad" and that "1. I'd be appealing, and 2. I'd play hardball to the extreme. I'd bring in my own appraiser and get a value for the single entity that was stupid low and then I'd go after the entire property plus claims on any other asset that comes out of BK. And I'd refuse to negotiate from that position"

I take it you are not a professional investor. Those sentiments would get you fired and/or lose your clients a bunch of money. And how do you plan to "refuse to negotiate from that position" of some extreme low-ball bid. If the court orders it, would you then be prepared to go to jail for contempt of court?

Try using logic rather than emotion (anger) when discussing investing strategy. It works much better to invest with fact and data, rather than anger.


On Nov 06 08:11 PM davidbdc wrote:

> While I wish you well with your investment, I'm not convinced that
> the equity holders are going to win in this case.
>
> I still firmly believe that there are properties in BK that shouldn't
> be since they were set up as seperate entities. Those lenders have
> However, as I said good luck with your bet on GGP.

Banks Run Out of Options in General Growth Properties

Todd, Good earnings and revenue news from GGP last night has propelled the stock much higher ($6.19 as I write). Will you be doing a review of their 10Q filing? If not, I can get to it this weekend.

Gold as a Hedge, Not an Investment

No, I am not dismissing that fact. And in fact, I would welcome any foreign company wanting to buy "our" businesses.

I don't know about you, but I am no nationalist. Based on our willingness to buy imported goods as a nation, few of us are. We are a free country.and anyone who wants to come here with some money and buy up our assets is welcome to do so. Again, that is what is meant on the dollar where it says "backed by the full faith and credit of the United States". That means you can use dollars to buy a part of America.

And this is what makes America and its economy great. And it is why America will continue to hold the world's reserve currency.

And no, those dollars moving back to America WILL NOT cause inflation. Inflation = too many units of currency chasing too few goods. But America has a lot of assets to sell that apparently no one wants. That is why we are in an asset deflation. We WANT people to bring their money back to buy those deflated assets. That is called reflation and is exactly what the Fed is trying to orchestrate.

Try to think outside the box that other gold bugs have put you in.

On Nov 16 07:57 PM The Recusant wrote:

> Are you dismissing the fact that all those U.S. dollars and debt
> denominated in dollars held by foreign banks and companies MUST someday
> come back to the U.S.? Foreign countries and companies will use their
> U.S. dollars to buy up the U.S. businesses and physical assets to
> deplete their reserves of our devaluing currency. It is that massive
> amount of dollars flowing back into the country that will cause the
> inflation. Regardless if dollars are destroyed internally by mortgage
> or credit card defaults, there exists much more government debt out
> there in the world that needs to be feared. In such a scenario, which
> would you rather hold, dollars or gold?

Gold as a Hedge, Not an Investment

Right on Bobby!! Free Cash Flow is the name of the game. Last I checked, gold doesn't generate ANYTHING, and it is not even a claim on the productive assets of a country. Its value is completely subjective and prone to whim (though it sure catches the fancy of some of those who frequent SA).


On Nov 16 01:47 PM bobbybutte wrote:

> as a person who has become financially independent SOLELY from allocating
> capital let me add some things here
>
> Large cap multinationals are a much better hedge against a falling
> dollar than gold
>
> The power of the reinvested dividends and the low price of most multinationals
> are better and provides cash flow
>
> in 1990 Gold was 400 dollars and Coke was 5 dollars to today gold
> is up 180% and Coke is up over 1100%
>
> and the last 7 years of dividends ecxeeds the total profit and gold
>
>
> and you receive better tax preference

Gold as a Hedge, Not an Investment

BTW... the virulence with which my logical / reasonable, and well-researched posts are attacked tells me that my thesis is correct. It is the fringe element that comes out of the woodwork in any speculative bubble and defends their position emotionally that causes the bubble to continue to inflate.

I have pushed against the real estate zealots in the 2003 to 2007 period and the internet maniacs in the 1996-2000 period and it is always the same sound and fury. Your derogatory statements just reinforce the correctness of my position. Good luck to you! I hope you get out the door in time.

Gold as a Hedge, Not an Investment

ManAbout....you have some learning to do. Any currency is based on the assets that underwrite the currency. This is what is meant by "backed by the full faith and credit of the United States". This is a phrase that means the aggregate assets (the reason it means this is the inherent ability of a government to tax its people, but don't get me started on that subject).

A printing press without the underwriting of assets is what happens in Zimbabwe or Agentina, and why they are such bad examples of what happens with fiat currency. My point, and it might be too subtle for many, is that when there is a massive deflation that increases the value of the currency, as in the current asset deflation, then to revalue the assets back to where they were, requires more units of that currency to come into existence. It is pretty basic math. It is the commutative principle to be precise.

The only argument that is valid is whether or not that currency in the form of printed dollars (electronic book entries, really) can be taken out of circulation as debt replaces the currency. Again, another subtelty is that all the debt that was destroyed in 2008 was in fact, currency.

I don't doubt that gold will run a bit as the speculation cranks up. I just don't believe it will stick, any more than it did in 1980. I don't think it will fall back to $250, but I do think it will fall back towards $1000 once more supply comes on line to satisfy all the demand by speculators and central banks. That is why for those who want to exploit this trend, buy stock of the people who supply the miners (sell the picks and shovels). My choice is Fluor (FLR).


On Nov 16 12:20 PM ManAboutDallas wrote:

> The scariest part of this is that you really seem to believe it.
>
> The US$ is still the world's reserve currency because the U.S. still,
> for the moment anyway, holds The World's Biggest Gun Barrel. If it
> didn't, the US$'s status as the world's "reserve currency" would
> have ended on August 15th, 1971. The US$ is "indexed" to other currencies
> because, as yet, no other nation/s has/have decided to call the U.S.'s
> bluff. As you may have noticed, there is a growing rumble of discontent
> over this paradigm, and the bluff is close to being called.

Gold as a Hedge, Not an Investment

The Wise know they are Foolish, and the Foolish think they are Wise.


On Nov 16 10:33 AM ManAboutDallas wrote:

> Yet another educated fool, deluded by others ( Roubini, Minksy, et
> all ), who knows the price of everything and the value of nothing.