[RE]

De wisdum of de markeet.

is !!

"Wisdom of the Market" is one of the Fundamental Axioms repeated by the True Believers of Capitalism.  No matter how many times it is demonstrably clear that the market has no wisdom at all, the line is repeated as a mantra.  Any problems that crop up are never because the market is stupid, but because of "regulation" and "goobermint interference".  Resistance is Futile.  You will be assimilated.

RE

[RE]

Hard as it is to believe, it sounds like the affordable housing problem is even worse in Oz than in the FSoA.  I guess the Wisdom of the Market doesn't apply to Real Estate. 

https://www.bbc.com/news/world-australia-67723760

The year the Australian Dream died

RE

[RE]

The collapse of the commercial RE sector is beginning to hit the banks, which so far claim to have sufficient reserves to cover their losses.  Given the fact that occupancy rates are down to about 50% and a couple of office towers were sold recently at 50% off firesale prices, I find this hard to believe.  Even covering 10% losses out of capital structure is enough to make a bank insolvent.  All they are covering here are losses on notes due this year, not taking the haircut on the full valu of the property, except in the cases where the full building is sold off, which isn't happening that much, relative to the total size of the market.   So while they can absorb the losses this year, without a magical rebound in the market next year,, they'll have to do it all over again.

This may in large part be the reason for the push by many CEOs for the return to the workplace and less work from home.  Work from home made many of those office spaces unnecessary.   Not only the banks take the loss on these properties, so do the lease holders.  If they don't get people back into those offices, they can't unload their leases.

This looks like a slow motion version of what happened to residential RE when the Adjustable Rate Mortgages reset 2006-7.  That took a few months to balloon up, this could take a couple of years.  Same general outcome though, the TBTF banks will need a bailout...again.  Problem is the interest rates are much higher now so printing funny money is much more expensive.

Don't be fooled by the headline, this isn't just a German bank problem.  As goes Deutchebank, so goes Credite Suisse and JP Morgan Chase.

https://www.cnn.com/2024/02/07/business/pbb-bad-loans-real-estate-crisis/index.html

German bank braces for wave of bad loans in 'greatest real estate crisis since the financial crisis'

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[K-Dog]

For sure, your article is about US commercial real estate a German bank has trouble with. This came out two hours ago, Yellen said yesterday:

These factors will "put a lot of stress on the owners of these properties," Yellen said, speaking before the House Committee on Financial Services Tuesday.  She cited an increase in interest rates and the higher vacancy rates resulting from a shift to hybrid and remote work—as well as a swath of commercial real estate loans that will soon come due.

A place for foreigners to park money has been US commercial real estate.  I think it is part of back door citizenship.  I could be wrong.  Back door citizenship might only apply to the homes being bought on all sides of me.

Anyhoo, the bubble bursts.  Only while things grew could the banks do well.  Now Yellen is yellin again for more socialism for the rich.

I call for the other kind.

[RE]

Now Yellen is yellin again for more socialism for the rich.

As always, privatize the profits, socialize the losses.

RE

[RE]

A place for foreigners to park money has been US commercial real estate.  I think it is part of back door citizenship.  I could be wrong.  Back door citizenship might only apply to the homes being bought on all sides of me.

Commercial RE has long been considered a rock solid investment class that would only increase in value, therefore considered low risk.  It's a part of every big bank's capital structure.  Has nothing to do with citizenship at all, these are all international banks that operate all over the world.

The rich Chinese are buying RE around you because their own RE market is in the toilet and they are trying to park their money in safe overseas investments open to them.  Residential RE is in that class.  If it wasn't for the Chinese money, the whole western property market would collapse.  It will anyway of course.  The Chinese have a poor record investing in RE.  They Buy High, Sell Worthless. lol.

RE

[K-Dog]

The rich Chinese are buying RE around you because their own RE market is in the toilet and they are trying to park their money in safe overseas investments open to them.  Residential RE is in that class.  If it wasn't for the Chinese money, the whole western property market would collapse.  It will anyway of course.  The Chinese have a poor record investing in RE.  They Buy High, Sell Worthless. lol.

RE

I helped one of them cut down a tree a couple of years ago unsolicited when I saw he obviously did not know how to use a chain saw.  It was obvious he considered me a madman for helping a stranger.  He still lives across the street.  I have not seen him since.

[RE]

Well, perhaps not Slo-Mo after all.  The C-Word has already hit the MSM.  CONTAGION.

The reason I put up the story about the German bank was because of a simple rule.  When CEOs and Fed Chairmen make reassuring public statements that there's nothing to worry about and the problems can be contained, you immediately know for sure it's time to start worrying and it definitely can't be contained. lol.

Now it becomes a question of which of the systemically important banks will be the first domino to fall and need a bailout.  Deutchebank seems like a good candidate.  Issue is the German economy is already on the rocks and it's difficult to see how they can pull off the same kind of bazooka with the Euro as Da Fed did with the Dollar in 2008 to bailout DBank.  Without a bailout though, Dbank going down is like Lehman, except an order of magnitude worse.

The stock market should be fun the next couple of days.

https://fortune.com/europe/2024/02/07/commercial-real-estate-german-bank-deutsche-pfandbriefbank/

'Greatest real estate crisis since the financial crisis': German bank alerts the market on exposure to commercial real estate

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[monsta666]

Deutschebank are a strategically important bank in the EU. They are too big to fail and will be bailed out if it comes to that. The only thing that makes this harder is the Germans are not in direct control of the EU central bank so any bailout will be more convoluted. However, despite its weaknesses the German economy is the heart of the EU. Germany cannot be allowed to fail.

I still maintain that the real acid test will come when oil supply starts going down year-by-year significantly and prices rise because of it. Can the EU and by extension the global economy survive? Now I know the peripheral economies will suffer first but there is only so much supply loss that can occur before the failures begin to manifest in the core economies. How long will it be for that to happen is the big question...

[RE]

Deutschebank are a strategically important bank in the EU. They are too big to fail and will be bailed out if it comes to that. The only thing that makes this harder is the Germans are not in direct control of the EU central bank so any bailout will be more convoluted.

Convoluted is a major understatement.  The Dollar has a 1:1 correspondence with USTs.  The Euro on the other hand is backed by the bonds of all the countries that use it, not just Germany.  I can't see France for instance selling bonds to prop up a German bank.  So Germany has to sell all the bonds, but the German economy and Tax base isn't as big as the FSoA.  You need the whole European Union to have that much economic power.

Even if they do manage enough bond sales to cover the losses, the Euro will crater against the dollar by at least 20%, probably more.  Energy and Food, anything priced in dollars will go through the roof.

There is no exit here.  If they can keep this one together, they really are the smartest guys in the room.

RE

[RE]

Add Germany to the FSoA, UK, China, Canada & Oz as another one sinking into the collapsing RE Black Hole of Debt.

How is it that all these countries with different goobermints can be having exactly the same problems?  Simple, because they all use the same banking system with the same faulty assumptions all trading securities around on the same international markets on Wall St, the City of London, Hong Kong and Tokyo.  All the RE all over the globe has been artificially propped up in value by low interest rates, and it's all overinflated asset valuations that need to drop by 50% or more before it would even be close to correct for a normal correction.  As it is, with so many now in trouble at the same time, everyone will be looking to sell, and WTF is going to buy?  That is a recipe for a complete crash and frozen market.  None of the TBTF banks could handle that kind of capital devaluation, and no Goobermint could bailout all of them together.

This is the accident waiting to happen at the moment, and you can sense the tension in all the articles trying to downplay it and spin that it can be contained.  Can it?  Can the Smartest Guys in the Room pull another rabbit out of their hats?   Tick, Tock...

https://www.ft.com/content/dd396d80-9626-48c6-b276-a1ea4e5f6fad

The German property collapse is happening in residential too

RE

[RE]

They keep repeating the Mantras "manageable", "can be contained", "no contagion",  "not as bad as 2008".    Does anyone else here sense the desperation in these reports and pronouncements?  Property values are dropping like a rock,landlords are walking away from buildings, interest rates are up, and there's still a couple of $TRILLION$ in debt coming due by 2025.  Why do I have trouble buying this hopium?

There is a silver lining to this though.  Due to $400B or so in fines the courts have dropped on Trumpovetsky, he's probably going to have to sell at least one of his skyscrapers in NY into this sinking market.  His assets were inflated to even give him a purported net worth of around $2B.  The price he might get on a sale could very well be less than 50% what they are assessed at.  That could cause a reavaluation of all his holdings, which could end with his liabilities exceeding the assets and the banks might call in the loans.  Can you spell BANKRUPTCY?     Currently his GoFundMe page isn't even covering the accumulating interest on the penalties.

Hope he has a good stash socked away in offshore accounts.  lol.

https://www.dawn.com/news/1815175/echoes-of-the-2008-financial-crisis

Echoes of the 2008 Financial Crisis

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[K-Dog]

The land of unearned riches.  It could not go on forever.  The only property anybody should be able to own is their private residence.  If some useless eaters are in distress it is nothing to be concerned about.

Shunning labor is the conventional evidence of wealth and the mark of social standing.

In Ponzi America having wealth depends on everyone else having wealth.  Most everyone has borrowed wealth and is actually in debt.  Debt is something Americans aspired to.  I will pretend to have wealth if you do.  As long as we all pretend it is 'all good'.  And fuck everybody else who can't pretend to have shit.

But now payments due exceed accounts received.  As it should be.

[RE]

Shades of 2008, not just the Commercial RE market is having problems, the housing market isn't doing so great either.  Not as bad as the sudden collapse of the sub-prime mortgage market of LIAR and NINJA loans that hit at the end of 2007 and brought down Lehman, but a steady increase in foreclosures as affordability drops and interest rates stay high.  So far,the numbers say we're not in a recession, the question is if that will hold up through the 3rd quarter and the POTUS election?  It still boggles my mind that voters will have to choose between two octogenarian imbeciles so corrupt they make Latin American dictators look honest, and at least some of them will show up at the polls to vote.  Very sad.

https://www.foxbusiness.com/economy/home-foreclosures-are-soaring-nationwide-rising-fastest-these-states

Home foreclosures are soaring nationwide – and rising fastest in these 5 states

RE

[K-Dog]

The typical salary required nationwide for home ownership up to $106,500 — a stunning 61% increase from the $59,000 required just four years ago, according to Zillow.

That from your article.  But people won't scream for the American Dream or make a scene before poverty makes them lean and mean.  By then it will be too late.  If it isn't already!

Everybody in America seems fine with a rentier economy. Most people think they will have a chance to do a little exploiting on there own before the tent comes down on this circus.

$106,500 a year is $51 an hour.  Twice the average American wage.

And you have some idiots making less than 60K a year thinking that raising the minimum wage will hurt their families.