To review: Over the past 5 years, we have witnessed rpoblems develop and than expand in mortgages, credit card receivables, auto loans, and related vehicvles (RVs, Boats, Motorcycles)

The latest headache: Commercial Loans:

U.S. banks have been charging off soured commercial mortgages at the fastest pace in nearly 20 years, according to an analysis by The Wall Street Journal. At that rate, losses on loans used to finance offices, shopping malls, hotels, apartments and other commercial property could reach about $30 billion by the end of 2009.

The losses by regional banks on their commercial real-estate loans will be among the most watched details as thousands of banks report second-quarter results over the next two weeks. Many of the most troubled banks have heavy exposure to commercial real estate. So far, 57 banks have failed this year.

The $30 billion estimate is based on financial reports filed by more than 8,000 banks for the first quarter. The trend continued as a handful of major banks reported second-quarter results, including Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Bank of America Corp. Regional banks tend to have higher exposure to commercial real estate than these big financial institutions.

Given the cutback in consumer spending and the number of failing retail outlets, this should comes as no surprise. Core Retail sales have been awful, making new lows — no greenshoots here.  I’ll see if I can dig up a good chart on this later . . .

>

cali-comm-re-48136830See also:
Commercial brokers are swimming in empty space
Roger Vincent
Los Angeles Times, July 19, 2009

http://www.latimes.com/business/la-fi-cover-brokers19-2009jul19,0,2255936.story

Source:
Commercial Loans Failing at Rapid Pace
LINGLING WEI and MAURICE TAMMAN
WSJ, July 20, 2009

http://online.wsj.com/article/SB124804759792663783.html

Category: Credit

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

88 Responses to “Next Headache: Failing Commercial Loans”

  1. CapitalistCanuck says:

    dead hobo pointed this out in another thread:

    “Goldman Sachs just raised its 2009 year end S&P target to 1060″
    http://www.zerohedge.com/article/goldman-starting-offload-prop-positions

    Cute, very cute. I recall Goldman upgrading oil last month ahead of the July 4th long weekend right around $67 when it looked like the rally was petering out, it was good for another $5 pop to the upside before breaking down to under $60 a barrel 2 weeks later.

    This call couldn’t have come at a better time. Just when the rally looked like it was losing steam, Goldman comes in with an upgrade to save the day!

  2. Bruce N Tennessee says:

    Oh, Barry, the answer is right in front of you.

    “Rent to own”!

    Same idea Obama has for the residential housing market, this will work for CRE!

    Pleassssseeee…save the applause.

  3. Andy T says:

    “…losses on loans used to finance offices, shopping malls, hotels, apartments and other commercial property could reach about $30 billion by the end of 2009.”

    Anyone else think this is an amusingly small sounding number in the context of all that we’ve seen?

  4. karen says:

    Even CA’s budget deficit seems like a small number to me now, so Andy, I commiserate.

  5. The Curmudgeon says:

    $30 billion, $30 schmillion…it’s all just the imaginations of our collectively deranged psyche that thinks money means something because the government says it does.

    We’ve got past the depressive stage of our cycle. Now is time for the manic.

  6. manhattanguy says:

    As noted in the Special report on Texas in the July 4th Economist edition. California’s current problem stems from high taxes and excessive regulation (thanks to flip from Republican to Democratic control in part thanks to rapid immigration). This route has bankrupted California and is prompting a net 100,000 people to leave each year. CA and NY has seen net outflows and Texas has seen net inflows in the last few years.

    I am not surprised at all.

  7. manhattanguy says:

    Market seems to be putting a double top today. I hope I am right.

    Buying $DUG, Dollar and shorting Financials.

  8. leftback says:

    Andy, it’s less amusing when you think of the value of the debt (CMBS) and equity (REITs) instruments that are based on the underlying assets, and the degree of leverage involved. I suspect $30B is a soft estimate.

    Even this Robomarket thinks SPX 950 is Kryptonite. Take a bow, those who called for a Monday head fake…..
    Perhaps Goldman will raise their EoY target to 1100 if the bulls can’t get it up again?

    Bernanke exit talk should put a bid under the $ and Treasuries tomorrow.

  9. Aeolus says:

    What’s probably more frightening is the glut of every type of building in some markets, like, say California, and what that implies for jobs.

    Too much housing inventory, too much retail, too much commercial, too much industrial, too many hotels.

    After the current crop of buildings that have been in the works for years have been completed, there will be virtually no new construction of any type in California. The state’s even raiding the affordable housing funds and the gas tax money from local government so that no subsidized housing will be started, and no potholes will be fixed. No new government buildings because every government is broke, and the state can’t sell bonds. Even hospital and medical office construction is freezing up once current projects are completed. A local expansion by Kaiser has been scaled back and postponed.

    Essentially no construction jobs in California, other than a few road projects and a couple hundred million in weatherization from the stimulus, and no prospects for demand for new building until the current stuff is absorbed and government revenues recover.

    If there’s anything that is going to keep California from spiraling into a full-fledged depression with a continuing economic contraction and 25% U6 unemployment, I don’t know what it is.

  10. I-Man says:

    $30 Billion is “the under.”

  11. Bruce N Tennessee says:

    Pretty busy in the salt mine today…but here is one thing I thought about over the w/e..

    This is the cumulative chart of seasonally adjusted and non-SA unemployment claims since 2008. Lay an eyeball on this for a second. If you noted, the number last week was 667k, nsa.

    http://www.ows.doleta.gov/unemploy/wkclaims/report.asp

    This is the highest since 2/7/09…and is 100k higher than June.

    We saw the reasoning for the seasonally adjusted number…what is the reason for the spike in the “real” number?

    Ideas?

  12. Bruce N Tennessee says:

    Sorry, I see you have to put the dates in…as Pooh would say,” Oh, bother..”

  13. leftback says:

    LB is watching the € and hoping that it has topped out here, as a trip above 1.4350 or so would not only constitute a break out to the upside for risk, but would also cause intestinal discomfort to many bears. Added to oil and gold shorts again early today on the morning drop in the $.

  14. Andy T says:

    LB. agreed on the Euro…it’s sort of tricky one…ever Forex trader out there has been observing this supposed triangle take shape….if this is a triangle, then it should be ripping higher right now because it has clearly busted out of the downward slope line. In other words it should be displaying a lot “vim and vigor” and while it’s stronger, it’s not “impressively” strong as should be the case with a triangle breakout….at least not yet I guess….I’m sidelined on the Euro for now…

    in re: 30 bn. True, true….It wouldn’t be the 2000′s if every bit of capital wasn’t levered 30-50:1….

  15. leftback says:

    LB is looking at the silver chart and thinking there is a good short coming. (Hat tip: ben22 for this one).

  16. constantnormal says:

    @lb — waddya think of the notion that oil prices are being gamed again this summer, based on all the noise about the world being awash in oil, with no place to store it, and yet the prices showing a bit of stickiness toward the $60-$70/bbl area, instead of heading soth toward the $20-$30/bbl level?

    My guess is that you either believe the whole gaming of the oil markets is an urban legend, or else you think that the party is about to come to a screeching halt. Or maybe you just see the dollar collapsing and taking the games to an entirely different playing field …

  17. constantnormal says:

    Question for all — WHEN WILL DELEVERAGING BEGIN?

  18. manhattanguy says:

    Oil trade is over in my opinion. If oil breaks last week low of $58, $DUG will be a great trade for rest of the summer.

  19. leftback says:

    @constant: First, the fundamentals support maybe $30-40 oil. The current spot price reflects $ and yen hedging, possibly with leverage, and will collapse, just like last year.

    Second, The consumer deleveraging has begun at the bottom end, just look at the savings rate. It is taking some time for other segments of the economy to catch up. Advanta’s default rate is astonishing. Small businesses are unable to get loans, are using their credit cards and are REALLY HURTING, guess many in the depression states (CA, NV, MI, FL) have been hanging in there for a recovery that is simply not going to materialize:

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aPilD2Deb2bg

  20. Andy T says:

    constantnormal Says:
    July 20th, 2009 at 11:52 am
    Question for all — WHEN WILL DELEVERAGING BEGIN?
    ~~~~~~~~~~~~~~~~~~
    Well. It cant’ really begin until the debt comes due and then is defaulted on….

    Federal Reserve has increased base money by 800bn, but banks primary reserves have gone up by an equal amount, so that’s how banks are deleveraging….they’re hoarding primary reserves and they’ve also written off quite a bit of bad loans.

    Households are deleveraging in a similar way, by dramatically increasing their savings and curtailing spending…saving money in order to pay off loans due in the future.

    The net affect of all this will be a complete reset of GDP at a much lower level….

  21. cvienne says:

    @Andy T

    “The net affect of all this will be a complete reset of GDP at a much lower level.”

    Agreed…Do you have a reset number in mind? And if so, how much does that effect the budget items that were passed back in March…

    My paper napkin tells me that you’re looking at AT LEAST 800 bn added to the deficit based on shortfalls (and that’s NOT including whether they tack something on for HC or Cap&Trade)…

  22. CapitalistCanuck says:

    @constantnormal

    De-leveraging is happening and we can observe that in various forms ie: credit contraction and write
    downs which are happening at a fast pace. Debt repayment is happening at a much slower pace. Interest rates are still very low allowing debtors to refi while keeping the principle debt the same. This allows many to keep current on payments or at-least until unemployment runs out uhhh… I mean until the economy gets better.

    What this means for the market:

    We are stuck between a rock and hard place, too much optimism about a recovery and inflation talk rears it’s ugly head and rates begin to creep up putting a ceiling on equities. Just look what at happened when the 10year hit 4% and 30 hit 5% Inflows to bond funds jumped up. If we are to go higher, then we have to crawl up the classic “wall of worry” and I believe there is enough skepticism out there that we can take this market a bit higher without hitting the ceiling. Look we are up 8% in about 5 days and nearing the top yet t-bills are no where near the peak in June.

  23. constantnormal says:

    And yet, looking at the stock markets since the lb bottom in March, it’s been “onward and upward”.
    This is where the “when” part of my question comes in …

  24. constantnormal says:

    And in anticipation the the “the stock market is unrelated to the economy” arguments, when deleveraging DOES finally land with both feet (and not dainty little steps as we have seen to date), we will see very large yields in the debt markets which will suck money from the stock markets. And that’s why I want to know WHEN. I need for some 100% perfect prognosticator to ring the sell bell. Maybe smoke-writing in the sky, words like “surrender constantnormal”.

  25. leftback says:

    There are so many institutions (pension funds, charities, endowments, states, municipalities) and individuals (small biz owners, real estate specs, and many real estate “professionals”) that are close to broke now and/or will no longer be able to rollover or issue new debt. In order to raise cash for ongoing activities they will need to sell assets. As usual, the most liquid assets go first: stocks, high yield bonds, then it is on to the cars, boats, office furniture, furs and jewelry, and finally the real estate.

    “And that’s why I want to know WHEN”

    The Hunt for Red October™ is usually a good bet. Alternatively, whenever Blankfiend is short.

  26. cvienne says:

    @cn

    I don’t want to be your chosen prognosticator, but let’s put it this way…

    Last week we had 3 2.5% – 3% “up” days…

    So let’s say at 945 you tack on 3 more 3% “up” days over then next, WHENEVER…You’re up to 1,032…

    In any case, it was amusing to me that GS put a 1,060 call on the S&P today…So BFD…I want to “call up” another 10-12% on a market that even by Rosenburg’s BEST estimate ($50 2010 earnings), at a 14x multiple would put you at 700?????

    10-12% up on “fumes” versus 25% down “fundamentals” (and that’s if they DON’T put a panic premium on it, and/or if there is a liquidity squeeze)…

    I don’t even think there’s anything “sinister” about the 1,060 call…Sounds more to me like the GS crowd simply wants to go on vacation, let the JUNIOR VARSITY clown around between 956 and wherever until Labor Day, then come back and put the hammer down…

    JMO

  27. cvienne says:

    note…3% up days rarely, IF EVER happen during bull markets…

    We’ve had, what? about a DOZEN since March?

  28. cvienne says:

    @LB

    does that look like a “buy at any price” action in the TLT today since noon?

  29. CapitalistCanuck says:

    @constantnormal

    As with everything there is never any clear sign, which makes timing the market difficult. However, you should pay close attention to bond and currency markets for clues.

    We still have quite a few challenges ahead of us. US still has lots of debt to raise and every bond auction is becoming an event. States and Muni’s are being to crack under the weight of budget deficits and short-falls in tax-receipts. They made commitments to spend on the basis of higher home prices and higher tax revenues and it didn’t pan out. I’ve read that states/municipalities have been using bailout money to bridge budget deficits instead of spending it on projects/investments to create jobs. Basically, it’s far from over, still lots of fallout and the Governments only hope is to SLOW the rate of decline to allow banks to write-down losses over a longer period of time instead of all at once. Eventually, everything returns to the mean and the market will reflect that…

  30. ben22 says:

    thinking we start to roll-over some later this week back to the low 900′s. Tomorrow could be the start, some big names reporting, perhaps the BTE has been priced in, thinking a few things look overbot.

  31. cvienne says:

    Thread title…

    Next headache…failing commercial loans

    Market Reaction…

    Next head(f)ache…IYR continues to rise

  32. ben22 says:

    @constant,

    fwiw if you were looking for the WHEN just watch the $US every single day and wait for this final leg down in it. It’s been about the best WHEN indicator of an upcoming turn in direction for stocks for at least the last year.

  33. leftback says:

    @CV: I just noted that to a friend. 10-yr at 3.70% brought out a lot of buyers this morning.

    Perhaps a clue there, as CC notes above, the bond and currency markets usually get the message first.
    We are pretty much fixated on EUR:JPY again and don’t see € > 1.43.

    “GS crowd simply wants to go on vacation, let the JUNIOR VARSITY clown around ”

    No need. Just let the computers run it up and down for a month or so, while the JV receive training in bonus calculation, conspicuous consumption and substance utilization in the Hamptons.

  34. cvienne says:

    @LB

    “10-yr at 3.70% brought out a lot of buyers this morning”

    It took a 4 handle to get that kind of buying interest before…hmmmmm

  35. I-Man says:

    Re: SPX

    Here’s my chain:

    Step 1: 928

    Step 2: 910

    Step 3: 870

    I’d say 928 and 910 get tested this week. I’m not really looking for 928 to hold, but think its a sure bet that we test 910… no predictions on what happens then.

    We’ll see about Step 3.

  36. cvienne says:

    @LB

    It could also be that a number of Dems are now hedging on the HC issue (& pricetag)…

    Big O was waxing real confident about a week ago about getting that through by the August recess…I think it has been one of the main reason the long bond & dollar have been so weak recently…

    With some Dems “iffy” about that (articles that I was reading over the weekend), I feel many would feel more confortable owning govvies…

  37. I-Man says:

    Somebody’s feeling more comfy about owning govies today… thats for sure.

  38. ben22 says:

    while I think we dip later this week the market upside looks stronger now to me than before so I’m feeling pretty confident that after the dip you can snag some sso and ride it up to a new high in the S&P for a trade and I’d be short silver after the bounce it is having here is over. After the earnings reporting season comes closer to an end all the earnings “beats” should drum up an entire chorus of the 3rd quarter recovery calls and given where sentiment is right now I think it could have the ability to move the markets even higher still. For every two bulls there still seem to be two bears. I think the banks are going to start to really show how weak they still are in the next 3-4 months and that’s when the fun will begin again.

    A headline for everyone that is short and hanging on in Prechter’s latest:

    The Bounce is Aging, But the Depression is Young

  39. DL says:

    Article (co-authored by John Taylor) on the complexity of mortgage-backed securites:

    http://online.wsj.com/article/SB124804469056163533.html

  40. ben22 says:

    @cvienne,

    I’ve generally stayed away from any and all political discussion here as well as the debate about helthcare, mainly because I don’t have anything intelligent to offer on either subject, but imho, there isn’t a snowball’s chance in hell that BO pushed through any sort of HC anything before the August recess.

  41. CapitalistCanuck says:

    I-Man,

    I too am expecting a pull-back, but we are in-reach of making new highs and with Apple reporting tomorrow it could definitely be the fuel to take us up another leg before anyone realizes and looks down. Although a part of me thinks they may just disappoint, the 3GS was no big deal and Dell already warned PC sales were slow….

  42. CapitalistCanuck says:

    @ben22

    Been short here since 930 but sold some July $26-27 puts that expired worthless so I generated some cash flow. I will hang on to this short and look to sell puts into the weakness as a hedge and cover them on strength. I have a bias to the down side and would just prefer to hedge my bets.

  43. leftback says:

    Tsys and TIPS are suddenly selling like popsicles in August … anyone got a whisper out there?
    LB also noted even this morning that C and BAC were trading like bacon sandwiches in Golders Green.

    BTW, CV, after 4.5 days, England beat Australia to take a 1-0 lead in the 5-match series.

  44. cvienne says:

    @ben22

    “I think the banks are going to start to really show how weak they still are in the next 3-4 months and that’s when the fun will begin again”

    One dynamic shift that’s going to start to take place pretty soon is that the YOY estimates (Q308 vs. 09, & Q408 vs. 09) are going to become more difficult…

    For all intents & purposes, last years Q3 & Q4 numbers were horrendous (thus, easy to beat this year, even if just by ‘cost cutting’)…No such advantage going forward…The markets are going to have to start anticipating this (say – 6 months ahead)…So by September, when they’re trying to forecast March 2010 numbers, things may not look so hot…

    Furthermore, the 2010 budgets will start coming out and when it is seen that orders will be minimal, well, I’d hate to be in Mr. Market up around 1,000…

  45. Onlooker from Troy says:

    ben

    I’ll look to dump my shorts on a dip as I find your argument for more upside to be compelling. I’ve had a very hard time coming to understand this as the cognitive dissonance is very strong and tough to deal with. But it’s apparent that many are willing to delude themselves, others are willing to ride the momentum, and more will finally just have to jump in before this thing comes down.

    You’ve probably seen this:
    http://online.barrons.com/article/SB124786958807060397.html#mod=BOL_hpp_dc

    More of the same theme.

  46. cvienne says:

    @ben22

    “there isn’t a snowball’s chance in hell that BO pushed through any sort of HC anything before the August recess.”

    I’m mostly staying away from the issue myself, but last week I sure read a number of comments from Big O about getting this through…I’ve always considered it somewhat of a “non-starter” (if only for the “how are we going to pay for it” argument), but I’ve learned over the past year that the government is capable of doing just about anything…

    anyway, bottom line…

    Big O jawboning HC = dollar & govvies sell off
    Some Dems hedge about the “cost” = govvies rally (dollar not yet following though)

  47. DL says:

    ben22 @ 1:55

    “…I don’t have anything intelligent to offer on [the subject of health care]”.

    Perhaps you do.

    Simple yes/no question: we spend 17% of GDP on health care. Do you want to see that number go higher, or lower?

  48. leftback says:

    @Onlooker: LB is thinking that for every wader who takes the plunge, someone else is putting on warm clothes… BR has stated a few times that 950-1000 would be a “break even” number for some people. Price anchoring.

    Treasuries almost always rally when Congress is in recess. True fact.

  49. cvienne says:

    @LB

    “Treasuries almost always rally when Congress is in recess. True fact.”

    LOL
    Kinda like…The VISA balance remains stable while the wife is in her Pilates class…

  50. ben22 says:

    DL,

    This is a perfect example, I don’t know what the “right” % of GDP spending should be on healthcare. My answer of course would be lower but maybe that isn’t the right response, or maybe lower doesn’t equal better.

    I also realize this issue isn’t really just about cutting costs, there are political reasons behind this move as well, whenever they are involved it’s never so simple as “we are doing this to lower everyone’s costs”

  51. cvienne says:

    @ben22

    Apologies ben,

    On HC I was just trying to make an analysis on the yield on the 10 year, and I unwittingly got you pulled into a political debate on HC (which neither you nor I are into discussing at this time)…

  52. leftback says:

    C is being sold in chunks today. Someone was listening to The Whale on CNBC this morning.

    “The VISA balance remains stable while the wife is in her Pilates class”

    LOL. No wife. Hence no balance.

  53. ben22 says:

    Onlooker,

    Months ago I remember reading a Hussman article where in so many words he said: I’m smart enough to see the current trend so I’ve got to deal with it and be long when I really know I shouldn’t be. I think we all really understand what he meant now. One thing that has kept me, for the most part (minus my two SRS failures and this recent bath in FXP), on the right side of the trade these past few months, and not constantly with a headache over why we keep moving up and why I’m not in, have been Prechter’s comments on the phsychology of Primary Wave 2 rallies like this. Clearly this market isn’t about fundamentals, I find it better to pay attention to the sentiment and what people are grasping on to.

    An example:

    I saw an interview this morning that made me laugh but reveals the current mindset of so many money managers this one from the RBS market strategies chief on CNBC. One comment he made was that: a nation of savers (he literally said this when describing the US so right away this is someone that doesn’t understand the debt problem) has turned into renters when it comes to stocks and that we are all just now chasing performance and trying to be traders and he’d like to see more stock “owners” in the coming months. He went on to discuss many of the talking points of those that I tend to laugh at lately, such as his argument that there was a “lot of money on the sidelines”, that the market was pricing in a second half recovery and stocks move up before the end of every recessions, etc. etc.

    Now, as crazy, or misplaced as some of his arguments may be, I do not find this to be the time to get entirely short just yet. As insane as it may be I really think we are going to see 4 digits on the S&P before this comes to an end, not including numbers after the decimal, lol.

  54. ben22 says:

    @cvienne,

    No worries man, I just won’t say anything else about it, I’ve been good enough to keep my hands off the keyboard in the past when it was brought up, I’ll stick to the market and a few other things here and there and leave it to the politcal experts on TBP to hash that out.

  55. I-Man says:

    While we’re on the topic of balances…

    Chase got nothing on I-Man now… 100% paid off as of today.

    I almost got misty eyed thinking of all the ridiculous bar tabs that card took on during my school days… and to think that card was for “education expenses”… :)

    Take that for reinflation, Federales! Not on my dime. Viva the savings rate!

  56. Thor says:

    Late start today – long drive in from PS. Vegas was fun, will write about my impressions in a more appropriate thread when I see one.

    Couple things -

    Manhattan – Couple corrections – It’s important to look at the total tax rate when you’re quoting the “California has the highest overall tax rate”. That depends on what rate you’re looking at – business, property, sales, income, car, booze, smokes. My uncle lives in Oregon, He pays no sales tax, but he pays substantially more in property tax than I do down in CA. California is indeed high in taxes, but again, it’s important to look at everything in it’s proper context.

    Your 100,000 per year number also needs to be taken in context. We are not losing 100,000 people a year in California. We are losing 100,000 more people moving to other states than are currently moving to CA from other states. Our population continues to explode due to both a higher immigrant birthrate and international migration. Population growth-wise, California as a state has turned into New York City.

    Aeolus -
    There will still be construction in the state because much of the public (school’s, housing redevelopment) has already been paid for by bond issuance. LA county is still on track to build 18 new schools in the district with money already in the bank – these plans are still on track – a very large high school was just finished not far from my home. Also, the Hollywood redevelopment plan has not been canceled. The city bought (again, with bonds)
    several tracts of historic bungalow’s and are turning them into affordable housing – again, this is still going on, several in my neighborhood are almost finished. I’m not saying things aren’t going to suck moving forward, especially with housing, but we’re most definitely “not building anything” – any of the posters who live here can tell you that ;-)

  57. WaveCatcher says:

    Institutional investors are underweight in equities due to the bear market.

    Over the next weeks and months, look for these portfolio managers to sell bonds (and cash) and buy equities to bring their portfolios back towards their targeted asset allocations.

    This macro dynamic could carry this rally farther than anybody expects.

  58. manhattanguy says:

    @Thor: I was referring to an article I read on The Economist magazine.

    Also the article stated that CA’s problem stems from high taxes but NEVER “highest overall tax rate”. Read the statement in its entirety before making comments. You can read the article online on their site.

  59. Thor says:

    Cvienne and Ben – Re: HC. I’m with both of you, although my lack of any valuable input has clearly not caused me to keep my mouth shut. Heard an interesting point of view on NPR this weekend. That when talking about the cost of HC, this is about the only important piece of a large budgetary item that is reported with costs over 10 years. The commentator was saying that it was dishonest for both government officials as well as the MSM to be reporting it this way. Many people tend to read the headline and assume HC reform is going to cost 1 trillion a year, rather than 100 billion. The example he used was; “If you reported to the American people that the budget for the pentagon was going to be 47 trillion dollars, support for military spending might not be so high”

  60. karen says:

    LB, no balance in your life, no doubt.. that comment almost didn’t deserve a retort.

  61. Onlooker from Troy says:

    Thor

    No doubt there’s still more building going on in CA on the public dime. Unfortunately it’s all just more debt that adds to (or was already added to) the unsustainable levels. Ugh

  62. Onlooker from Troy says:

    manhattanguy

    That Economist article is just adding to the hubris of Texans. They’ll over do it while thinking they’re immune, just as they did with the oil biz. Ain’t human nature grand!? ;)

  63. leftback says:

    The first recession is “over” according to many economists. Of course a +0.1% Q3 GDP would mean it is “over”.
    Meanwhile the second recession could start any day, Q4 for example.

    CRE is now declining at a rate of 8% per MONTH, down 28% this year so far:
    http://zerohedge.blogspot.com/2009/07/no-green-shoots-for-moodys-real-index.html

    Pretty soon, we’ll be hearing that this CRE problem is “contained”.
    Wonder if we’ll ever find out who “borrowed” all the IYR?

  64. I-Man says:

    Who’s making noise in AAPL today? Little dumpage going on it appears…

  65. Thor says:

    Manhattanguy – I’ve already read the article last week, thanks. I’m an avid reader of The Economist and have been for years. Unfortunately the article you refer to is a joke, it is both sloppily written and poorly researched.

  66. manhattanguy says:

    Onlooker: Agree, but I think CA will continue to bleed as it continues to struggle financially.

    There is plenty of data to prove that people are fleeing Golden state. The Economist article is not incorrect. Here is another one.

    http://www.washingtonexaminer.com/opinion/California_-here-we-come_-7906062-49536842.html

  67. ben22 says:

    LB,

    I’ve already heard two people make that claim in the last two weeks, that CRE is contained. You would think these people would have learned the lesson last year in the risk of making such a statement but I guess not, then again, there are still lots of monkey’s out there screaming about a housing bottom as well.

  68. karen says:

    I-Man, if you look at a weekly chart, the selling in aapl is nothing.. interesting:

    Apple target raised to $170 at RBC ahead of earnings Thursday
    8:22 AM ET 7/20/09 | Briefing.com

    RBC raises their AAPL tgt to $170 from $165 as they expect a Q3 beat on steady Macs and iPods and stronger iPhones, they expect $8.3 bln (up 11% Y/Y), above street ($8.2 bln). GAAP EPS expected at $1.27, above street ($1.16) and guidance. They expect GMs at 35.5% above 33% guidance on higher iPhone mix. Conservative Q4 Guidance is expected at $8.7-8.8 bln rev, 2-3% below street ($9.0 bln); actual Q4 revenues expected higher on strong GAAP iPhone rev. EPS guidance expected at $1.00-$1.07, below street ($1.29); Actual Q4 GMs may be 33-35%, on higher iPhone mix. They expect steady 2.2 mln Macs (0% Q/Q) sold and strong iPhone 3GS upgrades.

  69. ben22 says:

    all,

    AAPL is sort of interesting but isn’t anyone else watching CAT with me? I am really interested to see what those numbers look like for them. Will also be looking for clues of nonsense in the Chinese numbers that have been coming out lately, CAT should help tell some of the story.

  70. I-Man says:

    karen,
    respectfully,

    if you look at any intraday move in the context of a weekly chart, its nothing…

    Just pointing out something and asking a question, not trying to spit in the face of any AAPL longs.

  71. Thor says:

    Manhattanguy – The important wording in the editorial you sent is “Between 2005 and 2007, 2.14 million Californians moved to other states, while only 1.44 million people from elsewhere moved to the Golden State”
    Note – there is no mention of either immigration or birth rates. Our population growth for 2007 and 2008 was 1.1% – it will likely fall below 1% for 2009.

  72. karen says:

    wow on CAT… more evidence the spx is headed to 1000.

  73. manhattanguy says:

    @Thor: just read the other link I sent for more evidence. Otherwise continue to live in denial.

  74. ben22 says:

    Given the Goldman Call today I figured I’d include this, little past mid year report card but I never saw BR put anything like this up at the end of June and I’m into holding people accountable that make television recs:

    I bet most would have really laughed at most of these on Jan 1, let along 3/6, now they might not look so bad, however, 12/31 is a long way away.

    From Bespoke Jan. 2009
    Strategists’ 2009 S&P 500 Price Targets

    UBS David Bianco 09 Target: 1,300 08 target: 1,700
    Deutsche Bank Binky Chadha 09 Target: 1,140 08 target 1,650
    Goldman David Kostin 09 Target: 1,100 08 target 1,675
    Strategas Jason Trennert 09 Target 1,100 08 target 1,640
    JPM Thomas Lee 09 Target 1,100 08 target 1,590
    Credit Suisse Andrew Garthwaite 09 target 1,050 08 target 1,650
    Citi Tobias Levkovich 09 target 1,000 08 target 1,675
    HSBC Kevin Gardiner 09 target 1,000 08 target 1,700
    Morgan Stanley Abhijit Chakrabortti 09 target 975 08 target 1,525
    Merrill Lynch Richard Bernstein 09 target 975 08 target 1,525
    Barclays Barry Knapp 09 target 874 08 target 1,630 (this was Lehman’s target for 2008)

  75. ben22 says:

    wow on CAT… more evidence the spx is headed to 1000.

    Yeah, I was thinking the same thing, I’ve been watching the stock all day long and though this afternoon, and then typed it above, we are going to 1k.

  76. ben22 says:

    just took a glance at all the companies comping out tomorrow and man it is a loaded day. Going to be a fun Tuesday boys and girls.

  77. ben22 says:

    actually, I take that back, tomorrow could be really boring with all the action happening Wed-Fri. in any event we are getting a ton of numbers this week and after the huge rally last week I’m thinking it’s time for a breather.

  78. Aeolus says:

    @Thor

    There will still be construction in the state because much of the public (school’s, housing redevelopment) has already been paid for by bond issuance. LA county is still on track to build 18 new schools in the district with money already in the bank – these plans are still on track – a very large high school was just finished not far from my home. Also, the Hollywood redevelopment plan has not been canceled. The city bought (again, with bonds) several tracts of historic bungalow’s and are turning them into affordable housing – again, this is still going on, several in my neighborhood are almost finished. I’m not saying things aren’t going to suck moving forward, especially with housing, but we’re most definitely “not building anything” – any of the posters who live here can tell you that.

    Even the public building projects will be few and far between, unless they already have the bond money sitting in the bank. The state’s latest plan is to suck 1.7 billion from redevelopment agencies, so you won’t see more redevelopment projects starting.

    The Big Five are currently discussing three proposals related to redevelopment funds. The combined hit is $1.7 billion.

    * A two-year $350 million annual redevelopment agency (RDA) funding seizure.
    * A one-year $1 billion ERAF transfer for FY 2009-10. Under this proposal, agencies could borrow from existing balances in their low- and moderate-income housing funds. Agencies that do not or could not make their Educations Revenue Augmentation Fund (ERAF) payments would have to suspend all activities and begin setting aside 30 percent of tax increment for housing. Agencies making the payments would receive a one-year extension on their redevelopment plan limits for receiving tax increment

    Schools have less need for new classrooms if they can’t pay teachers to fill them.

    Cities , counties, and special agencies are facing a 2 billion dollar tax grab from their property tax revenue, which will severely restrict their ability to do anything until this “loan” is repaid in three years.

    In addition, the state is gonna take 1.7 billion in gas tax revenues over two years from local government that would have gone towards transportation projects.

    Anything that requires issuing new state bonds, even ones that have been authorized might be in jeopardy, as the bond rating agencies seem to be treating everything in California as junk, and they seemed to have upped their rhetoric since CalPers started suing them.

    As far as I can see from my vantage point in Socal is the completion of existing projects where it is cheaper to finish them than to cancel them.

    While “no construction” is a stretch of hyperbole, even government construction is going to go in the tank once current projects are finished.

  79. Thor says:

    Aeolus – I agree, moving forward it’s going to be a mess. We saw the same thing after the .com boom up in SF. There were dozens of high-rises built up through the 90′s and into the early years of the new millennium. City was completely restored, The Embarcadero was turned into a bay-side promenade, new baseball stadium built, new library. Many of those project took until mid-way through the last downturn to finish but new projects weren’t begun until well into the last bubble.

  80. Thor says:

    City restored should have said City Hall . . . .

  81. cvienne says:

    @ben22

    “Given the Goldman Call today I figured I’d include this, little past mid year report card but I never saw BR put anything like this up at the end of June and I’m into holding people accountable that make television recs:”

    I’m beginning to think that to be an ANALYST all you need is to have is a ruler and a crayon…

    Take the 11/07 high…Draw a straight line through the 5/08 high and that line points to 1072 on the SPX on December 31, 2009…

    So basically none of these clown give a whiff about fundamentals, they’re happy to let computers trade stocks for them so as to draw nice geometric patterns…

    What a joke…(of course, I’m not even going to TRY trading AGAINST that joke except in small pieces until its fully played out)…

  82. cvienne says:

    10/07

  83. CapitalistCanuck says:

    Another big rally on light volume. I suppose that does not matter anymore. What’s up is down and down is up. Sounds like my trading account. LOL

  84. leftback says:

    @CC: All the hallmarks of a bear market rally driven by short covering and executed by robots.

  85. I-Man says:

    “The waiting is the hardest part.”

    For real, just show me the money already! If we’re going to really get going on the next leg of this “rally”… lets do it with some volume!!! I’ll be happy to take some losses on these shorts, participate in the upside, and move on.

    Enough of this pussyfooting around with engineered, pretty little intraday triangle patterns, with no real meat behind them. Enough of this teetering on the brink indecision crap. We need to see some real buying by the bulls, or some real shorting by the bears… otherwise I’m going to go crazy watching this shit everyday.

    If we’re going to break out, lets do it with some juice, and I’ll go back to my little cave, suck it up, stop hating on GS, and get long this POS. But not until I see some conviction. Until then, I aint doing shit.

    Really… the waiting… it blows.

    I think both the bulls and the bears are feeling this right now. The bulls not so much due to the fact we’re up like 6 days in a row, I’m sure they’re loving it… but gotta be feeling a bit nervous and anxious for a big move.

  86. hopeImwrong says:

    Don’t miss out on the new stock market bubble.

  87. I-Man says:

    Dont miss out on the hot air coming out of the balloon.

  88. Christopher says:

    “I don’t even think there’s anything “sinister” about the 1,060 call…Sounds more to me like the GS crowd simply wants to go on vacation, let the JUNIOR VARSITY clown around between 956 and wherever until Labor Day, then come back and put the hammer down…”

    Heh….I agree.
    A long passed uncle used to tell me, “Summer is for baseball.”
    It’s the only sport w/o a spread.
    ;)