johnthebears

Blockbuster Chinese June Loan Growth: Is the Final Stock Surge Ahead?

Total agreement with author and first comment.

Question, EEM and FXI were on the verge of rolling over... until the big rally the last few days. Will that happen this fall or deferred to next year?

REIT Liquidity Update: Still Not in Great Shape

All well and good, but it would be great to see what you thing the bottom line is..... after saying all that! Will the REITs ever mark to market?

So what is your forcast for IYR?

Jan 1 2010? July 1, 2010 and Jan 1, 2011?

Just how long will it take for IYR to reach previous highs?

Tuesday Outlook: Commodities, Global Markets

Dave, I agree with your short of IYR, takes more than one day to make a market, the best is yet to come for the shorts. I even own $5 puts in IYR and EEM that expire in 2010. Unfortunately for me the "irrational bull trap" keeps hanging on and my time-value keeps going down.

A word of warning to those in the SRS and FXP camp...

Note how SRS was once $200 and now only $20?

Think about it, as IYR plays around in a trading range SRS keeps dropping due to basic math. SRS keeps ratcheting downward rather than returning back toward $200. Now look at how big the factor would be required to get back to 200. Do the math, you will learn a lot from the exercise.

So, for your protection.... I suggest you always keep a tight stop-loss order when you own SRS. The next day after a 7-12% run up, SRS always drops back with a thud. Be ready to buy or sell in the last 15 minutes. Nothing else during the day seems to matter. Never buy a double short unless you are prepared to trade often. The math factor will kill you. So keep the cash register ringing in your ears with nearly daily profits! I wish I had been smarter sooner.

When you plot on the same graph (using Yahoo charts) FXI, EEM, FTSE, GDAXI, n225 and S&P you will see the same pattern developing, world wide. Further decline is in the cards pointing back to a test of Dow 6400.

Seems the developing markets are coming to realize they cannot buy enough of their own stuff to make up for what US, Europe and Japan are not buying. No amount of stimulus can make up that difference. I understand that EEM is trading about a 40 PE! I have also come to realize that the crossing of the 50 and 200 day moving averages provide a very clear buy and sell signal for short term investors.

Thanks for all your work Dave, you are special.

Thursday Outlook: Commodities, Global Markets

It is so amazing how journalist spin the recovery story, shading the truth, trying to find anything positive to talk about, just because they have a deadline to report "something." I remember many years ago Nixon tried to talk up the economy, hoping that "good feelings" will translate into a better economy and ending the recession. It did not work. "Good feelings" don't cut it when reality of the market place sets in. Like du, gas and interest rates are rising oh well, there are lots of "green shoots" in the pasture. Problem is they are on the back 40, and nobody is working in those fields.

Just when things look "back to normal" the bear wakes up again!

Mortgages Are Blowing Wider Again

Is anybody keeping track of the massive issuance of stock by companies all over the world during the March market bubble? Lots of suckers are going to be holding the bag in my opinion. Those misguided investments will make the next up-cycle more difficult to achieve. Too many think that this a V shape correction, rather than a very long L L L L L L L L L! That is why the FED is asking for more capital for the banks... the worse case calls for $600 billion in new capital, not just the $74 billion discussed in the media. You cannot talk your way into a feel good recovery without a bad hangover.

Commercial Real Estate Market May Soon Bulldoze Green Shoots

It is amazing to me that IYR continues to hang in there in spite of falling rents and values! It would appear that mark- to- market accounting for commercial real estate will be delayed indefinitely, with dividends paid out of stock sales to new investors at many REITs.

Do you think REIT investors will catch on in time to save their hide?

One Trillion Dollar Commercial Real Estate Time Bomb Now Ticking

Thanks for your comment REITbull

You have a point about historical cost vs market value accounting, but I still wonder if they ever adjust to market value?

Dividends are being cut for many REIT's which is vital to stock value in addition to dilution risk. How do you see IYR share price by end of 2009?

How do you see stress test and lack of available bank funds for refinancing loans impacting REIT values? This factor caused GGP to take bankruptcy a couple of months ago. GGP was second largest shopping center owner in country.

Look forward seeing your comments.
John

One Trillion Dollar Commercial Real Estate Time Bomb Now Ticking

Bear Market Rally or a new Bull?

Too soon to say for most folks. Remember that there have always been cheerleaders in the stands making lots of noise to influence the folks, only to see them all sit down with a fumble and a touchdown for the bears.

In my opinion, the big question concerning the stress test is will Treasury or OCC win the day regarding transparency? It was the currency folks that prevented state governments from going after predatory lending... saying that was the job of the Washington to control the banks. (32 closed this year to date)

Some mention has been made of "OFF BALANCE SHEET ITEMS" in the press, but the subject is immediately dropped. No one knows what they don't know!

When life insurance and other kinds of companies are included with banks supported by TARP, you have to wonder what is next to hit the fan in addition to commercial real estate.

Remember "Enron" 2001, largest bankruptcy ever? That was due to "OFF BALANCE SHEET ITEMS" that investors and regulators did not know about.

I think the delay in releasing the stress test is due to concern about what "off balance sheet items" need to be revealed to the public in addition to correct valuations of commercial mortgages. When do they have to adjust capitalization rates and NOI to reflect current conditions?

I would appreciate hearing comments by others that can calm my fears. For now, I think that the other shoe is about to drop for the banks.... then more collapse of commercial real estate and REIT's with falling occupancy, rents and income, leading to major commercial foreclosures comparable to the housing foreclosures we have heard so much about.

If I am right about this, look for a Dow of 4000 before the end of 2009!

In my judgment there is at least a 60% probability of major global depression coming in the next 5 years. China will do better than most countries, but US, Europe, S America, Japan are all vulnerable to the same prolonged downturn, in spite of the cheerleaders comments in the press to calm our fears. Truth will out.

I began with the question of bear market rally or new bull market. Obvious from the above and Tyler's great article, I think the current trend is a bear market rally that will trap a lot more small investors before the next big drop. A earlier writer suggested September for the next big drop, but if the "off balance sheet items" are taken into account along with appropriate capitalization rates for commercial loan values, the drop could begin just after the announcement of the results of the test. I suggest taking profits Monday and dollar cost average over the next 2 years in small, mid and large cap index funds. No need to be in a big hurry to lose money!

Tyler suggested that current L/V ratios are currently less than 70%? Is that info also from D bank? When did that standard come into being? The building highlighted had a 100% loan. I am afraid that those properties are far too numerous, based only on the supposed strength of the borrower.

I look for typical cap rates to exceed 12% for average commercial property (and 20% for rural commercial properties) divided into much lower NOI as a result of rent concessions and higher vacancy. This suggest that 50% reductions of average "appraisal valuations" from what would have been previously assumed as value in 2007.

3-4% cap rates were common for top tier locations and new quality buildings in 2007. Those could easily climb to 8-9% at the bottom of this market, based on experience in the 1982 recession.

So when do the REIT's reflect true appraised value rather than the dream values REIT managers have been relying on Mr. "REITbull"? Will this be part of the stress test? How will they continue paying those high promised dividends? Will they pay if with additional stock sales to new investors in a Ponzi scheme?

In mid 2007, a friend gave me his market news letter that suggested a 20,000 Dow, up from 14,000 by the end of the year!

I told him that 8,000 was more likely. We haven't been able to talk about it since then! I now believe we will be lucky to stop at 4,000 in a depression, and it may be 2020 before recovery to 14,000. Sorry to ruin your day.

Lumber's Decline Likely Means Predictions of Housing Bottom Were Premature

Harry Tuttle got it right...

"The Chinese strategy is concentrated in investment and infrastructure which at some point require a return. So, unless global demand picks up, they could end up with a lot of spare capacity and nothing more.

Interestingly enough, the rally in commodities is two-tiered. Those commodities with large liquid future contracts, like oil and copper, have outperfomed like other commodities. This indicates speculative buying ahead of the Chinese, just like in the 2005-2007 period."

It looks to me like the Chinese market (FXI) ( ^ssec) is headed for another bubble, like in 2006-2007 with all of the excess lending by the banks to support their markets and capacity growth. They are hoping to sell enough within China to replace the USA and Europe! Chinese folks know how to save money, and I doubt that they have visa cards to finance all their desires.

I understand that housing peaked in 1928 and it was not until 1954 that the housing index came back to a comparable level. With over $50 Trillion dollars loss of equity world wide, It is hard to see how this housing market can turn around any faster. Why would there be any major surge in new homes when there is such a large inventory available at much lower prices than current construction cost? Does not make sense to me.

Bear Market Rally Getting Some Leadership?

Bear Market Rally or a new Bull?

Too soon to say.

Remember that there have always been cheerleaders in the stands making lots of noise to influence the folks, only to see them all sit down with a fumble or two and a few touchdowns for the bears. (this includes presidents, fed and treasury officials etc)

In my opinion, the big question concerning the stress test is will Treasury or OCC win the day regarding transparency? It was the Comptroller of the Currency folks that prevented state governments from going after predatory lending... saying that was the job of the Washington! It appears that Treasury may have the final say this time, but OCC is putting up a fight.

Some mention has been made in the press of "OFF BALANCE SHEET ITEMS" but the subject is immediately dropped with no explaination of what they are or effect those items might have.

When life insurance and other kinds of companies are included with banks supported by TARP, you have to wonder what is next to hit the fan.

Remember ENRON, largest bankruptcy ever? That was due to "OFF BALANCE SHEET ITEMS" that investors and regulators did not know about. (they have now closed 32 banks this year)

I think the delay in releasing the stress test is due to concern about what "off balance sheet items" need to be revealed to the public.

I would appreciate hearing comments by others that can calm my fears. For now, I think that the other shoe is about to drop for the banks.... then more collapse of commercial real estate and REIT's with falling occupancy, rents and income, leading to major commercial foreclosures and bank failures, comparable to the housing foreclosures we have heard so much about.

If I am right about this, look for a Dow of 4000 before the end of 2009! Pray that I am wrong, but what if I am not?

Commercial Real Estate Problems Continue Piling Up

You are right on.

Commercial Real Estate Time Bomb Ticking for REITs

Thanks for your charts and analysis. I agree that SRS $27.50 is due to explode as IYR falls back to $20.

Inflation, Deflation and the U.S.-China Relationship

I am short FXI and EEM with January 2010 puts and believe the China economy is in decline, much as Japan. I see no way for consumption to replace export industries, with rising unemployment.

I see the military growing bigger and stronger, reaching further around the globe. I am depressed with the US and World economy and can trust only in my faith in God. No one anywhere is smart enough to fix this mess and there is not enough money anywhere in the world to replace what we lost at 40:1 lending and inflating of asset values all over the world.

I would appreciate your insight into the condition of China's commercial real estate. Are loans based on a reasonable valuation premise or power of the borrower? Are banks as stressed as they are everywhere else in the world?

Thany you Thomas for your article.

Friday Outlook: Commodities, Global Markets

David: Are you sure the Constitution required that there be 435 congressmen and 50 senators to RUIN the country?

I have no idea how to implement this suggestion, but who ever could do it would sure get my vote. John

Friday Outlook: Commodities, Global Markets

When a company falls on difficult times, one of the things that seems to happen is they reduce their staff and workers.. The remaining workers must find ways to continue to do a good job or risk that their job would be eliminated as well.

Wall street, and the media normally congratulate the CEO for making this type of "tough decision", and his board of directors gives him a big bonus.

Our government should not be immune from similar risks.

*Therefore:*

Reduce the House of Representatives from the current 435 members to 218 members.

Reduce Senate members from 100 to 50 (one per State).

Then, reduce their staff by 25%.

Accomplish this over the next 8 years(two steps/two elections) and of course this would require some redistricting.

Some Yearly Monetary Gains Include:

* $44,108,400 for elimination of base pay for congress.. (267 members X $165,200 pay/member/ yr.)

* $97,175,000 for elimination of their staff. (estimate $1.3 Million in staff per each member of the House, and $3 Million in staff per each member of the Senate every year)

* $240,294 for the reduction in remaining staff by 25%.

* $7,500,000,000 reduction in pork barrel ear-marks each year. (those members whose jobs are gone. Current estimates for total government pork earmarks are at $15 Billion/yr)

* The remaining representatives would need to work smarter and improve efficiencies. It might even be in their best interests to work together for the good of our country!

We may also expect that smaller committees might lead to a more efficient resolution of issues as well. It might even be easier to keep track of what your representative is doing..

Congress has more tools available to do their jobs than it had back in 1911 when he current number of representatives was established. (telephone, computers, cell phones to name a few)

*Note:*

Congress did not hesitate to head home when it was a holiday, when the nation needed a real fix to the economic problems.. Also, we have 3 senators that have not been doing their jobs for the past 18+ months (on the campaign trail) and still they all have been accepting full pay. These facts alone support a reduction in senators & congress.

*** Summary of opportunity per YEAR:

$44,108,400 reduction of congress members.

$282,100,000 for elimination of the reduced house member staff.

$150,000,000 for elimination of reduced senate member staff.

$59,675,000 for 25% reduction of staff for remaining house members.

$37,500,000 for 25% reduction of staff for remaining senate members.

$7,500,000,000 reduction in pork added to bills by the reduction of congress members.

$8,073,383,400 per year,

estimated total savings. (that's 8-BILLION just to start!)

That is hope and Change I can believe IN Big Time!

Big business does these types of cuts all the time. If Congresspersons were required to serve 20, 25 or 30 years (like everyone else) in order to collect retirement benefits, tax payers could save a bundle.

Now they get full retirement after serving only ONE term.. IF you are happy with how Congress spends our taxes keep on doing as we are.

I think it is time for real change. In the meantime, my observation from all the wonderful charts provided by Mr. Fry suggest long term down lines as reflected by the MACD charts on everything, including commodities.

Did you notice that Russia is about to default in a major way today?