Wednesday, November 11, 2009

MSM is now Expert. Sharp rise in TDR prices leads to recovery in realty sector


shailesh said...

Bangalore realty sector fails to benefit from low-cost housing

“Bangalore has continued to witness a correcting trend as the investor community hasn’t quite revived activity yet,” said Aditi Vijaykar, executive director, residential services, at property advisory Cushman and Wakefield.

Interestingly, lower prices, to the tune of 25-30%, hasn’t pushed up demand in the city, both developers and analysts said. For instance, Whitefield, a suburb in east Bangalore and close to a prominent information technology (IT) hub, saw sluggish sales even after prices corrected by nearly 30%.

Bangalore also has a problem of over supply, which doesn’t bother metros such as Mumbai and Delhi. According to the Indiareit-DTZ report, there are around 51,470 residential units across 193 projects coming up in east and south Bangalore, where 66% of under-construction projects are located, which would take the total stock to 122,431 homes by 2011.

Growth corridors such as areas near the new international airport also haven’t really turned out as expected. Although most developers have picked up land parcels in the area, few projects have been launched.

shailesh said...

Budget homes beckon big boys

Mukesh Ambani is expected to make a grand announcement about his group’s foray into budget homes at the annual general meeting of Reliance Industries on November 17.

The real estate market is already abuzz with speculation that India’s most valuable company will establish low-cost housing projects on a portion of the massive land parcels it acquired in Navi Mumbai and the adjoining Raigad district for its proposed special economic zones (SEZs).

Jaithirth “Jerry” Rao, founder of IT firm MphasiS BFL that was subsequently sold to EDS for $380 million, is preparing to begin construction in the next 30 days on 2,000 apartments at a Bangalore suburb. The price tag? Less than Rs 10 lakh an apartment.

Banerjee, who claims that Tata Housing got 16,000 applications for its 1,500 Shubh Griha low-cost apartments in Boisar, says the Tata Housing model hedges its bets by combining affordable housing with low-cost projects.

Anonymous said...

listening to the teleprompter reader in that clip made me hate the clip even more...thanks for making the clip more nastier...why don't you go and teach 9th grade history

Anonymous said...

Commercial Real Estate ‘Crisis’ Looming for U.S

By David Wilson

Nov. 11 (Bloomberg) -- “A crisis of unprecedented proportions is approaching” in the U.S. commercial real-estate market, according to Randall Zisler, chief executive officer of Zisler Capital Partners LLC.

The CHART OF THE DAY displays quarterly returns on commercial property -- apartment buildings, hotels, industrial sites, offices and stores -- as compiled by the National Council of Real Estate Investment Fiduciaries. Returns were negative for the past five quarters, the longest streak since 1992.

Property prices have fallen by 30 percent to 50 percent from their peaks, Zisler estimated yesterday in a report. The plunge has wiped out the equity in most real-estate deals that relied on debt financing since 2005, he wrote.

Anonymous said...

I think this is a presentation with a twist. During the boom times, builders were building land banks and were hoarding TDR's..

Now this can be called as a TDR and land bank unwinding. They are doing this to pay taxes and settle the carry cost..which implies that real estate is actually going southwards!! and not that tdr sale is going to result in a realty boom...this is one of the first signs. So who is buying the TDR? PE firms in all probability or some other buyer who knows how to buy distressed assets at value prices..

But its interesting that the channel has either misinterpreted the TDR sale (which does not say much about their intelligence) or they have chosen to give it a spin (which does not say much about their moral standards).

Anonymous said...

It is kinda ironic that the Indians are upset about Chinese moving to India and taking jobs away from Indians:

India insists on employment visas for foreigners
26 Oct 2009, 1600 hrs IST, Karishma Julka, All foreign nationals holding business visa and working on projects or contracts in India should return to their home countries on expiry of their visas or by 31 October 2009, whichever is earlier.

Although the motive of issuing these guidelines is in the interest of huge unskilled and semi-skilled workers in India and to allow only highly skilled foreign nationals to work in India, it may cause some hardship to the companies who have foreign nationals working for them on business visas in India. Companies will have to incur additional costs in sending the foreign nationals (currently working in India) to their home countries and to apply for employment visas, so that they can return to India to complete the pending projects.

Anonymous said...

Right now, the dollar is at a 15-month low. The speculators borrow dollars. Then, it doesn’t matter what they do with them. Everything is going up against the greenback.

But that’s why our Crash Alert flag is flying. Mr. Market doesn’t like it when morons make money. We wouldn’t be at all surprised to see these carry trades go bad in a big, big way. All of a sudden, stocks…bonds…emerging markets…commodities…and even gold…could go down against the dollar. Watch out!

~ Bill Bonner
The Daily Reckoning

Anonymous said...

NEW YORK ( — The same economic pressures that pushed California to the brink of insolvency are wreaking havoc on other states, a new report has found.

And how state officials deal with their fiscal problems could reverberate across the United States, according to the Pew Center on the States’ analysis released Wednesday.

The 10 most troubled states are: Arizona, California, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin.

Other states — including Colorado, Georgia, Kentucky, New York and Hawaii — were not far behind.

The list is based on several factors, including the loss of state revenue, size of budget gaps, unemployment and foreclosure rates, poor money management practices, and state laws governing the passage of budgets.

Anonymous said...

Banks are moving quickly to restructure commercial mortgages under new U.S. guidelines that are more forgiving of battered property values and can help banks avoid bigger losses.

Citigroup Inc., regional bank Whitney Holding Corp. and other lenders around the country are planning to review loans now considered nonperforming to determine if they can be reclassified under the guidelines announced Oct. 30 by bank, thrift and credit-union regulators, according to bank executives and people familiar with the matter. The moves could help the banks absorb fewer losses on troubled real-estate loans and preserve capital.

“It’s a positive all the way around,” said James Smith, chief credit officer for National Bank of South Carolina, a unit of Synovus Financial Corp.

Matthew Anderson, partner at research firm Foresight Analytics, estimates that about two-thirds of the $800 billion in commercial real-estate loans held by banks that will mature between now and 2014 are underwater, meaning the loan amount exceeds the value of the property. The flexibility extended by regulators will apply to $110 billion to $130 billion of these loans, he said.

The guidelines are controversial, with critics accusing the U.S. government of prolonging the financial crisis by not forcing borrowers and lenders to confront inevitable problems.

Anonymous said...

AOL is fighting hard to stay relevant in the online world, but the company isn’t immune to layoffs and will ax close to 100 workers this week, according to All Things Digital. Unfortunately, those cuts are just a precursor to larger company-wide layoffs that could leave up to 1,000 staff members without jobs.

The larger layoffs will reportedly come next month, just as AOL becomes independent from Time Warner.

AOL’s revenue was down 23 percent in the third-quarter of 2009. Advertising revenue, which is supposed to be the struggling company’s strong point, fell 18 percent during the quarter.

Anonymous said...

People believe that the feds have pulled off a save…they’ve now got the economy well along on the road to recovery…the recovery is getting stronger as time goes by…and soon, the feds will begin to exit from their stimulus efforts.

The big question in most investors’ minds is this: how quickly will the feds exit? As long as they keep up their stimulus efforts, investors expect rising prices for everything but the dollar.

Those who think the feds will be able to exit quickly believe growth will come without too much inflation. Those who think the exit will come slowly expect higher rates of inflation.

Well, guess what? The whole premise is false. From top to bottom. From beginning to end. Even the air it breathes is tainted with the smell of fraud and self-delusion.

The theory behind the recovery concept is that government spending and stimulus from the Fed has a “multiplier” effect. That is, the feds spend…the money goes into the economy…and then, the private economy multiplies the spending by growth in consumption and investment of its own. If there were no multiplier effect the whole exercise would be a waste of time, because we know that government spending in itself is a cost to an economy, not a source of real wealth. Government spending, generally, is a drag on prosperity. The Soviet Union proved that. The question remains however, can extra government spending at critical moments “prime the pump” so that it is multiplied by the private sector?

Answer: no.

“Our new research,” writes economist Robert Barro in The Wall Street Journal, “shows no evidence of a Keynesian ‘multiplier’ effect…the available empirical evidence does not support the idea that spending multipliers typically exceed one, and thus spending stimulus programs will likely raise the GDP by less than the increase in government spending.”

Now, we turn to the current situation. Is there any evidence of growth beyond the government’s own stimulus efforts? From what we can see so far, again, the answer is ‘no.’

The premise of recovery/multipliers/growth/and exit is false. We want to bet against it. Tomorrow we’ll talk about how.

Real economists know that there are no secrets. You work hard. You invest carefully. You save your money. That’s the best you can do. There are no multipliers. There are no miracle cures. There are no easy exits from trouble.

That’s why the world has little use for honest economists; they tell you what you don’t want to hear. So, people turn to the phonies…the charlatans…the imposter economists who say “yes we can!”

Trouble is, they can’t.

Bill Bonner
The Daily Reckoning

shailesh said...

'Stop free slum rehabilitation'

Senior housing officials said Suresh Joshi, housing secretary in 2004 and now the chief information commissioner, had proposed a similar scheme under which builders could avail of a higher developable space as incentive. The scheme did not take off as the base floor space index (FSI) in the suburbs was not raised from 1 to 1.33. This was done in 2008.

"For example, a developer in Bandra saw no profit if he had to use the balance FSI beyond Andheri, where property rates are Rs4,000 a sq ft against Rs9,000 at Bandra," an official said. "If this scheme is implemented now, it would work well as both TDR and property rates are rising."

So I guess prices beyond Andheri are now less than 4000?

Anonymous said...

More Green Shoots!!!! See the video!!


Anonymous said...

New Rules and More Lies Hide Cancerous Commercial Real Estate Loans

MISH'S Global Economic Trend Analysis Tuesday, November 10, 2009

The guidelines, released on Friday by agencies including the Federal Deposit Insurance Corp., the Federal Reserve and the Office of the Comptroller of the Currency, provide guidance for bank examiners and financial institutions working with commercial property owners who are "experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties." Restructurings are often in the best interest of both lenders and borrowers, the guidelines point out.

The new guidelines are targeted primarily at the hundreds of billions of dollars worth of loans that are coming due that can't be refinanced largely because the value of the properties have fallen below the loan amount. In many of these situations, the properties are still generating enough income to pay debt service.

Banks have generally been keeping a lid on commercial real-estate losses by extending these mortgages upon maturity. However, that practice, billed by many industry observers as "extending and pretending," has come under criticism by some analysts and investors as it promises to put off the pains into the future.

Isn’t this a copy of what has been happening in India. The crook Banks are bailing out their real estate friends at the expense of the home buyer's life savings

How politicians are helping their Real-Estate friends through RBI by twisting the arms of Banks ?

Many developers face a debt trap, having borrowed heavily to acquire prime land and speed up development during the 2005-2007 boom. By mid-2008, most of these realtors had drummed up high debt-equity ratios of 0.8-2.0. This would have been manageable had these companies maintained a sustained cash flow. However, with negligible sales, they are in for big trouble. Many of them would have been in serious default had it not been for the Reserve Bank of India directing banks and financial institutions to help them restructure their loans.

These loans have to be ultimately paid after the rollover period; and given the current market scenario, cash flows could be worse a year later.

Anonymous said...

Looks like its either sell houses cheaper or sell your company dirt cheap...I would call that a rock and a hard place and sooner or later reality catching up...I see all this as signs of the impending panic around the corner.

shailesh said...

Long but nice research

HSBC Asian Bubble

Anonymous said...

As long as dollar will keep falling and low, the stock markets all over will keep doing good. I hope we don't see a Zimbabwe in US, with people walking to stores with $1 million bills.

Anonymous said...

Great bubble created by China Govt.

Anonymous said...

With so many too-clever-by-half folks buying gold, can a crash in the making be far off?

The Financial Times
Super-rich buy gold and sell hedge funds
By Steve Lodge
Published: November 13 2009 10:42 | Last updated: November 13 2009 10:42

The investment preferences of the world’s wealthiest families have shifted significantly in favour of gold and other commodities and away from hedge funds in the wake of the financial crisis, according to a survey of family offices and advisers of the super-rich.

Two-thirds of the 100 respondents to a survey by the Family Office Channel, a new website, said that super-rich families are now more likely to invest in gold and other commodities. They are also more interested in bond investments and in holding higher amounts of cash as part of an “instinctive retreat to ultra-safe asset classes”.

By contrast, two-thirds of respondents said the wealthiest families are less likely to invest in hedge funds and structured products – investments offering capital protection - with one in three reporting “greatly reduced” interest in these holdings.

Private equity and commercial property are also much less popular asset classes, while attitudes to residential property investment remain largely unchanged.

The findings confirm reports of a flight to safer asset classes, says the survey. Wealthy families’ risk appetites have suffered from frauds uncovered in the financial crisis as well as the poor performance of investments. More than nine out of 10 respondents said the level of trust in financial institutions and investment advisers has been hit by the Madoff and Stanford frauds.

Anonymous said...

NEW YORK ( — Two Florida banks and one in California failed Friday night, bring the 2009 national tally to 123. Regulators closed Century Bank, Federal Savings Bank in Sarasota, Fla., Orion Bank in Naples, Fla., and Pacific Coast National Bank in San Clemente, Calif.

Anonymous said...

By Ilan Moscovitz and Morgan Housel
November 13, 2009

Of the 8,195 banks in this nation, just four, JPMorgan Chase (NYSE: JPM), Citigroup (NYSE: C), Wells Fargo (NYSE: WFC), and Bank of America (NYSE: BAC) control nearly 40% of the deposits. Those four, plus Goldman Sachs (NYSE: GS), hold 97% of the industry’s notional derivative exposure.

These statistics would be hilarious if they weren’t true, and if the banks behind them didn’t have the power to manipulate vast portions of the economy. We spent the latter half of 2008 feeling the wrath of “too big to fail.” Today, banks are bigger than ever. We need to end that.

Anonymous said...

Maybe Dodd should put his friend Mozillo in charge of banking regulation?

* The Wall Street Journal
* NOVEMBER 14, 2009

White House Backs Fed Oversight Role


Senior Obama administration officials criticized a key provision of a Senate plan to overhaul the regulation of financial services, warning Friday that removing bank-oversight powers from the Federal Reserve would be a mistake.

The Fed “is the agency best equipped for the task of supervising the largest, most complex firms,” said Deputy Treasury Secretary Neal Wolin. Stripping away those powers could prevent the central bank from gathering “timely and complete information in a crisis,” he said.

Senate Banking Committee Chairman Christopher Dodd announcing a proposal to overhaul financial regulations earlier this week in Washington.

Austan Goolsbee, a member of the White House Council of Economic Advisers, said the Fed should retain a central role in supervising the banking sector and that moves to merge oversight into a single agency could cause industry “nervousness.”

The comments, made in separate appearances Friday, were the latest salvo in an increasingly high-stakes debate about the central bank’s future role.

Senate Banking Committee Chairman Christopher Dodd (D., Conn.) seeks to create a new agency to supervise all federally chartered financial institutions, taking powers away from the Fed and the Federal Deposit Insurance Corp., among other agencies. Mr. Dodd’s proposal aims to narrow the central bank’s purview so it focuses more closely on monetary policy.

“The Federal Reserve flat out failed at supervising the largest, most complex firms,” a spokeswoman for Mr. Dodd said in response to Mr. Wolin’s remarks.

Anonymous said...

Raj's firm made Rs 300 Cr by selling stake in mill

In 2005, when NTC put this mill on the block, virtually every big builder in Mumbai and Delhi had shown interest. But, instead of fierce fight that many expected, only three builders turned up when bids were opened. This had led to raised eyebrows.

Anonymous said...

BB are you around ?
can u suggest any good reasonably priced 3bhks in chembur curently.. thanks..

Anonymous said...

The Worst is yet to Come: Unemployed Americans Should Hunker Down for More Job Losses

Nouriel Roubini | Nov 15, 2009
From the Daily News:

While losing 200,000 jobs per month is better than the 700,000 jobs lost in January, current job losses still average more than the per month rate of 150,000 during the last recession.

~ The average length of unemployment is at an all time high;

~ the ratio of job applicants to vacancies is 6 to 1;

~ initial claims are down but continued claims are very high and now millions of unemployed are resorting to the exceptional extended unemployment benefits programs and are staying in them longer.

As a result of these terribly weak labor markets, we can expect weak recovery of consumption and economic growth; larger budget deficits; greater delinquencies in residential and commercial real estate and greater fall in home and commercial real estate prices; greater losses for banks and financial institutions on residential and commercial real estate mortgages, and in credit cards, auto loans and student loans and thus a greater rate of failures of banks; and greater protectionist pressures.

Anonymous said...

Chembur will increase by another 10% by April 2010. I would request you to engage at least three brokers, do your homework properly and close the deal immediately.

All the best!!!

Bindas Bhai

Anonymous said...

do you suggest any good properties ? under construciton would be better.. thanks

shailesh said...

TDR prices getting too hot for realtors

"Though TDR prices have been hiked so much, there is no sale at all due to price hike. Earlier, the developers didn't have any liquidity to buy TDRs when prices had fallen to as much as Rs 830 per sq ft. Now, as projects are selling and prices have been hiked, the TDR cartel is back," a leading TDR broker said.

Last month, when DNA Money ran a survey, TDR prices were found to be around Rs 2,545 for Bandra to Santracruz and Rs 2,300-2,400 beyond Santacruz.

"If developers enter at such high levels, then project rates are bound to go up and buyers would not have any option but to pay. I don't think at this time developers can shell out or will shell out this much as they have burnt their fingers badly," an analyst tracking the sector said, preferring anonymity.

shailesh said...

Banks bet on home loan disbursals

Mumbai: At a time when sluggish credit growth is threatening to stunt the evident overall recovery, and corporate credit is also not yet taking off, banks are making a last ditch effort to expand their loan portfolio through home loans.

Year-on-year growth in banks' total loans has slowed to single digit and was just 9.5% as of October 30 compared with 28.4% a year ago, according to the latest RBI data.

However, a sharp rise in property prices could pose a risk to the rise in home loans.
HDFC's managing director Keki Mistry feels property prices have to be reasonable for the pick-up to turn into a concrete boom. "People do not buy houses just based on interest rates," Mistry said on Monday.

Property prices have already started inching up in major metropolitan cities, and the rise has been sharper in Mumbai and New Delhi. "We are seeing some pick-up in demand for home loans. But for this demand to sustain, builders will have to maintain prices at current levels, else demand will get diluted," Punjab National Bank's chairman and managing director K R Kamath said.

Anonymous said...

By: Gene J. Koprowski Article Font Size

Asset prices have risen dramatically during the last six months, much like housing prices appreciated during the last decade, raising alarms that a crash could be coming in the equities market, writes economist Robert Samuelson.

Writing in Newsweek, Samuelson reckons that since March 9 the U.S. stock market has climbed by more than 50 percent. This is nothing short of a speculative frenzy, not based on underlying economic fundamentals, he says.

“An index of stocks for 22 emerging market countries — including Brazil, China and India — has doubled from its recent low. Oil at about $80 a barrel has increased 150 percent from its recent low of $31,” he writes.

“Gold is near an all-time high around $1,090 an ounce. Meanwhile, the dollar has dropped against many currencies. Haven't we seen this movie before?”

There now appears to be a thin line between maintaining a sound economic expansion and cultivating bubbles.

“With hindsight, lax Fed policies contributed to both the ‘tech’ bubble of the late 1990s and the recent housing bubble, though how much is debated,” writes Samuelson.

“How deftly the Fed navigates from its present policy matters for the world as well as the United States. If it's too fast, it may kill the economic recovery; if it's too slow, it may spawn bubbles — and kill the recovery.”

Around the world, economists concur.

Bloomberg News reports that Brazil’s real is now deemed overvalued, and the stock market in Brazil is soaring based on economic growth figures in China — trends that are not exactly rational.

NYU economist Nouriel Roubini has also argued that Brazil’s stock market is overheating in recent weeks.

Anonymous said...

China has now become the biggest risk to the world economy

Far from taking over as the engine of growth from an exhausted West, China is making matters worse. Its “beggar-thy-neighbour” policies continue to play havoc with global trade and risk tipping the world into a second leg of the Great Recession.

By Ambrose Evans-Pritchard
Published: 6:21PM GMT 15 Nov 2009

“The inherent problems of the international economic system have not been fully addressed,” said China’s president Hu Jintao. Indeed not. China is still exporting overcapacity to the rest of us on a grand scale, with deflationary consequences.

While some fret about liquidity-driven inflation, Justin Lin, World Bank chief economist, said the greater danger is that record levels of idle plant almost everywhere will feed a downward spiral of job cuts and corporate busts. “I’m more worried about deflation,” he said.

By holding the yuan to 6.83 to the dollar to boost exports, Beijing is dumping its unemployment abroad – “stealing American jobs”, says Nobel laureate Paul Krugman. As long as China does it, other tigers must do it too.

Western capitalists are complicit, of course. They rent cheap workers and cheap plants in Guangdong, then lobby Capitol Hill to prevent Congress doing anything about it. This is labour arbitrage.

At some point, American workers will rebel. US unemployment is already 17.5pc under the broad “U6″ gauge followed by Barack Obama. Realty Track said that 332,000 properties were foreclosed in October alone. More Americans have lost their homes this year than during the entire decade of the Great Depression. A backlog of 7m homes is awaiting likely seizure by lenders. If you are not paying attention to this political time-bomb, perhaps you should.

Anonymous said...

By Paul B. Farrell, MarketWatch

LOS ANGELES (MarketWatch) — It’s coming in 2012: Another, bigger meltdown of Wall Street’s “too-greedy-to-fail” banks. No, this is not another fanatical warning about that Dec. 21, 2012 end-of-days prediction based on the Mayan calendar, though you may well ask “Who will survive?”

Here is what’s happening: History is repeating itself. Wall Street’s soul-sickness is setting up a new meltdown. Dead ahead. Be prepared.

My track record speaks for itself. Back on March 20, 2000, my column headline read: “Next crash? Sorry, you’ll never hear it coming.” Bull’s eye: The dot-com bubble popped at 11,722. The economy collapsed. A 30-month recession. Markets lost $8 trillion. Today the market is still below that 2000 peak. Factor in inflation and Wall Street’s “too-greedy-too-fail” banks have lost about 30% of your retirement nest eggs in this decade. Incompetent? Clueless? No, Wall Street is a bunch of crooks without consciences.

Anonymous said...

By Ilan Moscovitz and Morgan Housel

Published in Investing Strategy on 16 November 2009

The US is making the same mistakes. It will all end in tears, again.

Of the 8,195 banks in the US, just four, JPMorgan Chase, Citigroup, Wells Fargo, and Bank of America control nearly 40% of the deposits. Those four, plus Goldman Sachs, hold 97% of the industry’s notional derivative exposure.

These statistics would be hilarious if they weren’t true, and if the banks behind them didn’t have the power to manipulate vast portions of the economy. We spent the latter half of 2008 feeling the wrath of “too big to fail.” Today, US banks are bigger than ever. We need to end that. Now.

It Will Happen Again

We all know the downside of “too big to fail.” They screw up; we pay the price. Yet many people (mostly bankers) still defend the practice. So rather than firing off reasons why “too big to fail” is such a menace — you already know those — we’ll refute the arguments defending it.

Start with the first argument — that post-Lehman, the problem has evaporated. JPMorgan Chase CEO Jamie Dimon, for example, recently argued that his bank wasn’t too big to fail. Wrong. JPMorgan Chase is not very likely to fail at the moment, but let’s not pretend that the eruption of its balance sheet, with more than $79 trillion in notional derivative exposure wouldn’t annihilate everything in sight.

Plus, we’ll remind you that AIG, Bear Stearns, Lehman Brothers, Citigroup, Washington Mutual, Fannie Mae, and Freddie Mac all once gave off the impression of being “not very likely to fail”, too. Overcoming the notion that last autumn’s financial crisis was a random, one-off event is perhaps the most crucial aspect of stabilizing the financial industry. Last autumn was no fluke. It will happen again.

Anonymous said...

Charlie Munger, who has mastered the English language in amazing ways, said it best:

“People really thought that giving a predatory class of people the ability to do whatever they wanted was free market enterprise. It wasn’t. It was legalized armed robbery. And it was incredibly stupid.”

Dimon, in his op-ed, suggests creating a regulatory structure able to handle the failure of megabanks, the same way the FDIC seizes and sells failed commercial banks. This sounds good in theory, but it’s seriously flawed. A pillar of the FDIC system is the ability of larger, stronger, banks to purchase and absorb failed ones. When Washington Mutual failed last year, JPMorgan was right there to scoop it up. The transition was nearly flawless and pain-free. But this was only because JPMorgan was so large that it could digest WaMu’s $307 billion in assets with relative ease.

What happens when JPMorgan, Bank of America (NYSE: BAC), or Citigroup (NYSE: C) — each with about $2 trillion in assets, and gazillions of dollars in notional derivate exposure — fails? There isn’t a single private institution in this country that could absorb a balance sheet that large — except the federal government, which is why we experienced last year’s bailouts.

Anonymous said...

Low Interest Rates: Steroids for the Stock Rally?

The “carry trade” that helps fuel this global rally is fed by super-low interest rates—and the cheap capital they create. Should investors worry?

By Ben Steverman

Nov. 16 featured two events now familiar to traders: Federal Reserve Chairman Ben Bernanke told financial markets to expect low interest rates “for an extended period.” And once again the value of the U.S. dollar slipped vs. other major currencies. Both developments were welcomed by traders who are plying the dangerous but profitable “carry trade.”

In the dollar carry trade, investors borrow money in U.S. dollars, taking advantage of very low short-term interest rates. Armed with cheap money, they buy up higher-yielding assets. Everything from Hong Kong real estate and commodities to foreign and even U.S. stocks can be driven higher by the carry trade.

Investment flows associated with it can also exacerbate the dollar’s weakness. “This kind of carry trade generates remarkable pressure on the dollar,” says Michele Gambera, chief economist at Ibbotson Associates, a subsidiary of Morningstar (MORN).

On Nov. 16, the U.S. dollar index—a measure of its strength against a basket of world currencies—lost 0.37% of its value, extending an eight-month slump. A euro is now worth almost $1.50, up sharply from $1.25 in March.

The weakening of the dollar may be good news for U.S. exporters, but it alarms the country’s foreign trading partners. Treasury Secretary Timothy Geithner heard concerns about the dollar’s strength from Asian finance ministers at last week’s Asia-Pacific Economic Cooperation forum. The dollar is also certain to be on President Barack Obama’s agenda during his first visit to China this week.

Anonymous said...

The Financial Times
Protesters lash out at Goldman
By Kevin Sieff in Washington

Published: November 16 2009 22:16 | Last updated: November 16 2009 22:16

A crowd of protesters converged on the Washington DC office of Goldman Sachs on Monday, carrying “wanted” signs bearing the face of Lloyd Blankfein, the bank’s chief executive.

About 100 demonstrators, organised by the Service Employees International Union, took turns berating the investment bank, which they called “too big to exist”.

Goldman has become the touchstone for a broader anger at banks and bonuses paid to executives, partly because it is preparing to pay large bonuses again after weathering the financial crisis better than competitors and partly because it is seen as being too close to the government.

“I’ve watched my congregants lose their homes and their jobs,” said Charlotte Dots, a reverend from Bloomington, Illinois. “All while Goldman Sachs plays our economy like a casino.”

The group hoisted a giant red squid over their heads, a reference to an article in Rolling Stone magazine, which called Goldman a “great vampire squid wrapped around the face of humanity”. On Constitution Avenue, where the company keeps a small office, several bemused tenants looked down.

Mr Blankfein became a lightning rod for criticism after he said last week that’s he’s “doing God’s work”. That comment to the Sunday Times – and analysts’ estimates that the company will pay more than $23bn in bonuses – has incited small demonstrations outside Goldman’s offices across the country. One group made their way to Mr Blankfein’s Manhattan home last week, giant squid in hand.

“Have you no decency?” Andy Stern, president of the SEIU, yelled through a megaphone on Monday. “Goldman and Blankfein seem to worship no God but the almighty dollar.”

Anonymous said...

Uh, you think this might be a problem?

Pontiac — Nearly 35 years after taxpayers spent $55.7 million building the Pontiac Silverdome and a year after a $20 million sale fell through, city officials have sold the arena once called the most desirable property in Oakland County.

The price: $583,000.


99% depreciation over 35 years, plus of course all the money poured into property taxes and maintenance.

Amit said...

BB, any opinion about investing in Saraswati chs by safal group near acharya college ? they are quoting around 7.2...

Anonymous said...

Go ahead 7200 is a great price, once the entire project is ready it will be close to double.

All the best!!

Bindas Bhai

Anonymous said...

Professor Nouriel Roubini says the job picture will get worse in 2010. Maybe bump up to 11 percent or so.

“Many of the lost jobs are gone forever, including construction jobs, finance jobs and manufacturing jobs. Recent studies suggest that a quarter of U.S. jobs are fully out-sourceable over time to other countries.

”Other measures tell the same ugly story: The average length of unemployment is at an all time high; the ratio of job applicants to vacancies is 6 to 1; initial claims are down but continued claims are very high and now millions of unemployed are resorting to the exceptional extended unemployment benefits programs and are staying in them longer.

“Based on my best judgment, it is most likely that the unemployment rate will peak close to 11% and will remain at a very high level for two years or more.”

A said...

Thanks BB, any idea about the adjoining slums though ? are they going to be cleared off as well for development, without those gone, the area isnt that great as of now..

Anonymous said...

and how about the Bholenath builders project near jhama? any idea how much he is asking now ? thanks BB, you are gr8 help..

Anonymous said...

hey anon,

thanks for the great articles on US economy. Nice summary, looks like the pain part 2 is close at hand.

Anonymous said...


any idea on a flat available in Patparganj, Madhu Vihar Society in Delhi for 8800 Rs psf.
Sounds pretty higfh to me . what do u suggest thanks,