Wednesday, March 31, 2010

Jay Taylor: Turning Hard Times Into Good Times

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Half of Commercial Mortgages to Be Underwater: Warren

By the end of 2010, about half of all commercial real estate mortgages will be underwater, said Elizabeth Warren, chairperson of the TARP Congressional Oversight Panel, in a wide-ranging interview on Monday.
“They are [mostly] concentrated in the mid-sized banks,” Warren told CNBC. “We now have 2,988 banks—mostly midsized, that have these dangerous concentrations in commercial real estate lending." (more)

California USA vs. Ontario Canada - Which State (Province) Is In Worse Shape? Canadian Banks vs. US Banks Comparison

Record debt levels in Ontario may translate into higher borrowing costs for Canada’s largest province relative to other regional governments.

The province’s net debt will rise to C$220 billion ($216 billion) in 2010-11, or a record 37 percent of gross domestic product, according to budget documents released yesterday. That’s almost twice as high as the debt-to-GDP ratio in British Columbia.

The province, home to 13.1 million people who account for more than a third of Canada’s economy, outlined plans to balance its budget in eight years. Standard & Poor’s last year cut the province’s credit rating on concern over escalating debt as the global recession buffeted the manufacturing industry, which accounts for almost a fifth of output. (more)

Downtown NYC Towers Empty as Best Market Falters

Downtown Manhattan, where demand for office space began to surge three years after the 9/11 terrorist attacks, is about to lose its spot as the best- performing U.S. market.

Vacancies may exceed 14 percent of the area’s 87 million square feet by late 2011, empty space that’s equivalent to four Empire State Buildings and the highest rate since 1997, according to property broker Cushman & Wakefield Inc. That doesn’t include the 4.4 million square feet of offices in two towers now under construction at the World Trade Center site. Those are scheduled for completion in 2013. (more)

Bears Are Dead Wrong? Hmmm....

Yahoo has jumped the shark with publishing "1,300" on the S&P by the end of the year, a 17% annual increase:

"The bears have been consistently wrong throughout this whole rally," Altucher tells Aaron in the accompanying clip. "If you followed the bears' advice at the bottom you'd be dead broke right now." For full disclosure, Altucher did not call the market crash in 2008. "Better to be consistently bullish than consistently bearish."

Well now that's math: 70% of the time the market is ascending, historically.

The problem is that when it declines it almost always goes down much faster than it goes up, and due to that pesky math again if you lose 50% you must get a clean double to be "back to even." (more)

NY Times: California the New Greece?

Many states have huge financial holes that could lead to a systemic crisis, experts say.

Budget deficits run into the billions of dollars in California and New York. States have taken on huge debt loads, many face shortfalls in their pension funds, and many are using accounting tricks to hide their true position.

The difficulties have faded to the background as the municipal bond market has surged. But if investors start to shy away from municipal debt, a crisis could rage at some point soon.

“If we ran into a situation where one state got into trouble, they’d be bailed out six ways from Tuesday,” Harvard economist Ken Rogoff told The New York Times. (more)

Western Civilization and the Economic Crisis: The Impoverishment of the Middle Class

The western nations of the world have built their great wealth and societies on the exploitation and plundering of the people and resources of the rest of the world. The wealth, freedom, and structures of our societies have been built on the starvation, robbery, deprivation and murder of millions upon millions of the world’s people, both historically and presently. (more)

US healthcare reform is boon for India outsourcing companies

With 22 pen strokes, President Obama signed into existence not just a historic healthcare reform law but also monumental piles of paperwork: New member registration forms. More claims. Ever-expanding databases. And on top of that, pressure to cut costs.

The bulge in administrative work may look like a nightmare to American insurance firms and government employees. But to outsourcing executives here in India, it’s heaven-sent. A number of Indian companies are already anticipating an increase in workload thanks to Obama's healthcare law. (more)

State Debt Woes Grow Too Big to Camouflage

California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.

And states are responding in sometimes desperate ways, raising concerns that they, too, could face a debt crisis.

New Hampshire was recently ordered by its State Supreme Court to put back $110 million that it took from a medical malpractice insurance pool to balance its budget. Colorado tried, so far unsuccessfully, to grab a $500 million surplus from Pinnacol Assurance, a state workers’ compensation insurer that was privatized in 2002. It wanted the money for its university system and seems likely to get a lesser amount, perhaps $200 million. (more)

Europe unlikely to join any new yuan offensive

Preparation of a U.S. Treasury report that could potentially brand China a "currency manipulator" is rekindling tensions with Beijing prior to mid-April publication and raises questions as to how broad international support will be if things turned uglier.

The saber-rattling is growing in volume since U.S. lawmakers said they were crafting proposals to allow import duties to be slapped on Chinese goods on the grounds that American jobs are being lost and Beijing must now budge.

Despite the fact that governments in Europe also believe the yuan is undervalued, giving China an unfair edge in global trade competition, there appears to be little appetite here to up the ante simply because tempers are fraying in Congress, potentially weakening the U.S. diplomatic push. (more)

Home price dip extends to 4th month

The market seems to have pulled the rug out from under housing industry hopes for a sustained early recovery.

After a five-month run-up in home prices starting last spring, prices have now fallen for four consecutive months, according to the S&P/Case-Shiller Home Price Index of 20 cities, a gauge of market values, released Tuesday.

In January, prices were down 0.4%, compared with December and have fallen 0.7% from a year earlier.

"The rebound in housing prices seen last fall is fading," said David Blitzer, chairman of the Index Committee at Standard & Poor's. "Fewer cities experienced month-to-month gains in January." (more)

Chart of the Day