Macro
Real Estate Market Rhymes
Bernanke re-confirmed as Federal Reserve Chairman in a 70 to 30 vote. Will the “30″ bit undermine his authority at The Fed? I doubt it, but history will tell.
Speaking of History, we are frequently reminded that: history never repeats, but it often rhymes. I love these old market sayings, like: “so goes January, so goes the year”. Of course I never pay any attention to them (ahem). We were hearing that phrase a lot mid January, not so much now… hmmm… weird.
Speaking of rhyming, I just wanted to show this piece from Galland’s interview with Andy Miller on the potential for the commercial property market in the US – this is quite shocking and not for the faint-hearted.
US Commercial Real Estate Train Wreck
Could it be just coincidental that the government removed caps on Fannie and Freddie on a day when they hoped nobody would notice – Christmas Eve? In fact, on January 7th I wrote:
In that vein, you will have noticed the little trinket that was snuck in the tax-payers Christmas stocking by US government on Christmas Eve – which effectively gives Fannie and Freddie an open cheque-book on mortgage underwriting. A nice pass-the-buck from Fed-to-Fred continuation of mortgage obligations, if you will – who says that the Fed is politically independent? To quote the Wall Street Journal:
“The timing of this executive order giving Fannie and Freddie a blank check is no coincidence,” said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. He said the Christmas Eve announcement was designed “to prevent the general public from taking note.”
Notice, Miller sees the problems in commercial real estate being played out in exactly the same manner as they were with residential property. Well, “history never repeats…”.
Notice, he anticipates things being relatively benign in the Real Estate market until the second half of the 2010 – then things come home to roost in the latter part of the year. A bit like the January we’ve had, smooth and benign for the first part then suddenly (as if out of nowhere) a bout of volatility and the gains were lost. Well, “so goes January…”.
Incidentally, Miller may be an expert but he’s not the only man to use “commercial real estate” and “train wreck” the same sentence: US Commercial Real Estate Train Wreck – Dimon.
As its Friday I like to end with something a little less abrasive. Here is a nice visual of the countries which have owned America’s debt since 2002. Given the short time frame it’s quite incredible to see China’s rise to power (yes, owning the largest part of an indebted superpower’s debt is power – that’s the whole point).
Macro Data to Watch:
- Japanese Industrial Production came out worse than expected.
- Japanese Inflation Figures came out in line with expectations at -1.7% (correct, that’s a minus sign in front of the 1.7%)
- BoJ says Deflation will continue – you don’t say?
- Singaporean Jobs Numbers
- South Korean Industrial Production
- Spanish Jobs Numbers – currently at 17.93% unemployment.
- Canadian Industrial Production
- Canadian GDP – expected at +0.3%
- US GDP – expected at +4.7% annualized.
Markets
Not so pretty, but at least we saw a degree of orderliness in the market. Tech’s seemed to dominate, Nokia hit the cover off the ball and stock jumped 10%, Qualcomm, on the other hand, didn’t even step up to the plate and stock crashed 14% – see chart. Apple had a chunk bitten out of it too – yeah, I’m not yet a buyer of this “Tablet” thingy either.
Source: Bloomberg
Obama’s speech was fairly well received by the market, I thought – although I felt it was much more divisive than the media made out. There are many things I love Obama for, including the diplomacy and eloquence of his speech-making but this was not a bi-partisan speech, in fact, claiming it was, only makes it feel more partisan.
On the same topic: Commercial Real Estate Train Wreck. No comment would be complete without talking about China. Who thinks the best way to play China is to do everything in your power to short-sell it. But, with respect to commercial real estate, even the hardened China bulls admit, Chanos may have a point, as the Daily Reckoning quote:
The renowned short-seller, Jim Chanos, has been highlighting the credit excesses in China for months…and worrying publicly that these excesses will end badly. Chanos calls the credit-fuelled real estate bubble in China “unprecedented.” And in a recent CNBC interview, he remarked, “One fun fact I’d like to mention: Right now, for commercial real estate, there’s 30 billion square feet under construction. Not all of that will probably get finished…but to put 30 billion square feet in context, that would be a 5 foot-by-5 foot office cubicle for every man, woman and child in China.”
Hmmm… 5-foot-by-5-foot… and that’s just the commercial real estate currently under construction… hmmmm… Hey, but who knows where Chanos gets his figures from – perhaps some of it will be used for indoor bowling alleys, anyway. In any case, you make your mind up.
Chanos is right?
Chanos is wrong?
Global Stocks to Watch:
- Techs are in the headlines
- Consumer cyclicals on this pending GDP number
- Alternative Financials – the listed Hedge Fund Man Group still getting whacked.
- Autos – Toyota news on recalls is still running.
- Earnings:
- Consumer: Mattel
- Tech: Samsung, Sumitomo Electric Industries, Ricoh, Toshiba, Fujitsu,
- Telco: NTT Docomo
- Finance: Mizuho, Mizuho Trust and Banking, Resona, KBC, Fubon Financial, Daiwa Securities
- Insurance: Generali
- Resources: Chevron
- Metals: JFE, Sumitomo Metal Mining
- Engineering: NGK Insulators, Honeywell
- Power: Chubu Electric Power, Tokyo Electric Power, Kyushu Electric Power
- Transport: All Nippon Airways, Mitsui OSK
- Trading: Sumitomo Corp, Marubeni, Mitsubishi Corp
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