Swine Flu is a Non-Issue for the Masses
April 28, 2009
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It seems like a good time to be long short-term on the VIX. There are two ETN products from iPath, but I'm unsure of its operations.
The ticker symbols are VXX and VXZ
- Quotes from the Milken Conference
There is a huge disconnect between the fundamentals of commercial real estate and CRE equity prices. There are many promiment people who are amazed at it. It seems the Treasury Department and Federal Reserve will attempt to stave off the declines in CRE.
I am very negative on Simon Group Properties and most REITs in general. Here is what CEO David Simon had to say at the Milken Conference
DAVID E. SIMON, CHAIRMAN and CEO, SIMON PROPERTY GROUP (SPG.N) INC:
Asked how many of the 1,200 U.S. malls could close, he said: "It takes a long time for malls to die. I think in this environment the obsolescence will accelerate, so instead of a 10-year cycle for a mall to go bad, it's going to be one or two years if not even faster."
other key quotes from the Milken Conference....
DELOS COSGROVE, CLEVELAND CLINIC CEO:
"Obesity ... is protected by Americans with Disabilities Act, which sends -- to me -- a little bit of the wrong message about what obesity is and what it represents." (Reporting by Svea Herbst-Bayliss, Lisa Baertlein and Jim Christie, editing by Bernie Woodall, Bernard Orr)
JIM GOODNIGHT, CEO of SAS, A BUSINESS ANALYTICS COMPANY:
"There is money out there ... but you've got to prove that you don't need it."
Goodnight also said:
"You are going to see a lot of innovation ... unfortunately it is going to come from countries like India and China."
STEVE FORBES, CHAIRMAN AND CEO, FORBES INC and EDITOR-IN-CHIEF, FORBES MAGAZINE:
"One of the major causes of the bubble were blunders made by the Federal Reserve. And I hope when we emerge from this that there will be U.S. policy that encourages a strong and stable dollar."
ADRIANNE SHAPIRA, MANAGING DIRECTOR, RETAIL ANALYST, GOLDMAN, SACHS & CO:
"You really have to work very hard to pry that discretionary dollar out of the consumer's wallet."
Consumers are shifting "from aspirational to desperational. We've come off a period where people were trading up."
MOHAMED EL-ERIAN, CEO AND CO-CHIEF INVESTMENT OFFICER, PIMCO:
"We are so focused on whether the recovery will be at the end of this year or next year that we may lose sight of something more consequential. We are not going to go back to where we were before. What does the new normal look like? It is unambiguous that we are going to a new normal."
[Read More - Reuters]
- Good Ol' News
• The Next Financial Explosion: Will the government have to bail out the commercial real estate market? [thebigmoney.com]
Delinquencies in CMBS loans are already up 246 percent over this quarter last year, and analysts say they could go much higher.
• Is There a REIT Reverse Inquiry Conspiracy? [Seeking Alpha]
A good article by the alias Tyler Durden of Zero Hedge
• Pushes Citi, BofA to Increase Capital [Wall Street Journal]
Regulators have told Bank of America Corp. and Citigroup Inc. that the banks may need to raise more capital based on early results of the government's so-called stress tests of lenders, according to people familiar with the situation.
The capital shortfall amounts to billions of dollars at Bank of America, based in Charlotte, N.C., people familiar with the bank said.
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I am interested to know how Goldman Sachs and Morgan Stanley do not fall under these categories considering how levered these former investment banks are.
• Fed study puts ideal US interest rate at -5% [Financial Times]
The ideal interest rate for the US economy in current conditions would be minus 5 per cent, according to internal analysis prepared for the Federal Reserve’s last policy meeting, reports the Financial Times.
The analysis was based on a so-called Taylor-rule approach that estimates an appropriate interest rate based on unemployment and inflation.
A central bank cannot cut interest rates below zero. However, the staff research suggests the Fed should maintain unconventional policies that provide stimulus roughly equivalent to an interest rate of minus 5 per cent.
The economy continued to cliffdive in March. Comp sales in my area are indicating that April was not a shift for the better in my locale. Though, it's not indicative of the entire region or national activity I don't think we can expect things to be that much better elsewhere.
Taking this all into consideration I am starting to build the affirmation that the economy will "bottom" later this year thus joining the shared beliefs of all the pundits and snake oil salesmen. However, my view is still more realistic negative.
Things are so crappy that the second half of year 'will just so happen' to not be as bad. That is to say that that Q1 of 2009 will likely a negative four percent decline YoY but Q4 of 2009 could be flat or up to a positive two percent YoY. That's not saying much when Q4 of 2008 was as bad as it was.
Unfortunately, things aren't going to bounce from there either.
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