i_am_the_swammi Posted July 14, 2009 Share Posted July 14, 2009 A noted investor in our hotel/condo fund emailed us yesterday in response to an email we sent out to investors in one of our real estate funds, asking them to gauge their sentiment and to give their take on what the immediate future holds. He is an exceptionally brilliant guy, and his opinions carry a lot of weight with the fund managers in our office. Essentaill, he echos what I and some others here have been saying...the worst is still likely ahead. Here are his thoughts: Although the press says the recession has bottomed out, I think we are likely in for a Double Dip Recession. Here's why: 1. Even though the subprime crisis may be showing signs of stabilizing, the Adjustable Rate Mortgage Crisis is just beginning to rear its ugly head. According to one business journalist: "The big wave of Option ARM resets has yet to come, and given the drop in home prices, refinancing won't be realistic." 2. Municipal Defaults: local towns, cities, and counties are feeling the pinch with foreclosures and tax defaults draining their coffers. And when a city goes broke, it will put their resident's property even further underwater. 3. Commercial Real Estate Collapse: The second largest chain of malls in the U.S. has already declared bankruptcy. Obligations needing refinancing in the commercial market are in the trillions. And most of them, even with positive cash flows, are as underwater as residential mortgages. As these businesses crash, they will cause even more unemployment. Keep your cash safe....and no, its still not time to be sinking money into the stock market. I still see a bottom of around 6000-6400. Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted July 14, 2009 Share Posted July 14, 2009 stop being so negative Quote Link to comment Share on other sites More sharing options...
TimC Posted July 14, 2009 Share Posted July 14, 2009 I don't have any numbers to back it up, but if I had to guess, I'd say Commercial Real Estate is going to take a much bigger hit than residential. Their are "For Lease" signs everywhere. These overbuilt strip malls are taking a beating. I'd guess 30-40% vacancy. Weirdest thing is now you're seeing Foreclosure Auction signs going up in the nicer neighborhoods. I drive by one to get to work and there have been 3 huge signs up the past month for 3 different homes. It's very surreal when you see that. This definitely ain't the ghetto. But they use nicer quality signs. Anyways, I agree with your sentiment. It will still get worse before it gets better. Quote Link to comment Share on other sites More sharing options...
i_am_the_swammi Posted July 14, 2009 Author Share Posted July 14, 2009 stop being so negative I hate being a grim reaper, but we are ecstatic at the opportunity to buy some of these failing assets at pennies on the dollar. My post was more in reference to people's cash...keep it safe, and get it out of stocks...banks are going to take a beating, and companies are going to continue to post disappointing earnings. Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted July 14, 2009 Share Posted July 14, 2009 I hate being a grim reaper, but we are ecstatic at the opportunity to buy some of these failing assets at pennies on the dollar. My post was more in reference to people's cash...keep it safe, and get it out of stocks...banks are going to take a beating, and companies are going to continue to post disappointing earnings. lol....im with you and i see it exactly this way. but when i say it, im too negative. sh1t is very bad out there. people need to realize this. just watching the evening news and hearing about green shoots is crazy. Quote Link to comment Share on other sites More sharing options...
i_am_the_swammi Posted July 14, 2009 Author Share Posted July 14, 2009 Good Read from Chief of Investments at Deutch Bank from Friday echoing the sentiments: The panelists also noted the threat posed by the approaching wave of debt maturities on commercial mortgages, as feasible refinancing options have disappeared. With a combined estimate of $700 billion in debt expected to mature in 2009 and 2010, “the commercial real estate time bomb is ticking,” said Rep. Carolyn Maloney (D-N.Y.), chair of the JEC. Quote Link to comment Share on other sites More sharing options...
Cunning Runt Posted July 14, 2009 Share Posted July 14, 2009 I'm hearing you. As some of you may or may not know, I'm a Real Estate Manager for a national retail chain. Dollar Tree Stores. We sell things for a buck (or less). Amazing what our buyers are able to get that we in turn are able to sell for a dollar. From an operational standpoint, we're having our best year ever this year as consumers look to pinch their pennies. Same store comp sales were up 9.2% in Q1 which is a huge number. From a real estate standpoint, we're still growing by leaps and bounds - gonna open or relocate approx. 350 stores this year and will do the same again next year. Our feeling is that those consumers who used to shop at even say, Wal-Mart, will continue to shop us after things turn around simply because buying things for a buck is a better deal than buying things for $1.50 or $3.00 or what have you. More importantly for what I specifically do though, we're a national credit tenant and we are getting into centers that may have been beyond our proformas in year's past because LLs are bending over backwards to get some cash flow coming in and are making deals that we couldn't have made last year at this time. I'm very fortunate to be with them as opposed to the Circuit City's of the world. No doubt. Quote Link to comment Share on other sites More sharing options...
Brentastic Posted July 14, 2009 Share Posted July 14, 2009 A few months ago I stated that my thoughts are the DOW could go as low as 1,000 in the next 3-5 years but 3,000 is probably a more likely bottom. We are not in a recession, nor is this second wave a 'double dip' recession. We are currently living in a deflationary depression. Make no mistake about it - the sh1t is going to get real ugly. Everything from real estate to the stock market to that ugly car you have in your driveway is waaaayyyy over valued. Prices need to find equilibrium and the harshest crash is yet to come. Quote Link to comment Share on other sites More sharing options...
billay Posted July 14, 2009 Share Posted July 14, 2009 A few months ago I stated that my thoughts are the DOW could go as low as 1,000 in the next 3-5 years but 3,000 is probably a more likely bottom. We are not in a recession, nor is this second wave a 'double dip' recession. We are currently living in a deflationary depression. Make no mistake about it - the sh1t is going to get real ugly. Everything from real estate to the stock market to that ugly car you have in your driveway is waaaayyyy over valued. Prices need to find equilibrium and the harshest crash is yet to come. What do you do for a living Brent? What are you basing that 1000-3000 number on, because that seems to me to be a pretty apocolyptic number to be casually suggested. Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted July 14, 2009 Share Posted July 14, 2009 What do you do for a living Brent? What are you basing that 1000-3000 number on, because that seems to me to be a pretty apocolyptic number to be casually suggested. i kinda agree. whether it should be there vs it going there are too different things. i dont think we will ever see it that low. it will be anarchy and the usg wont let it happen. imo. Quote Link to comment Share on other sites More sharing options...
Big John Posted July 14, 2009 Share Posted July 14, 2009 (edited) What do you do for a living Brent? Interviewed last month as a financial analyst Also builds databases. Edited July 14, 2009 by Big John Quote Link to comment Share on other sites More sharing options...
Brentastic Posted July 14, 2009 Share Posted July 14, 2009 (edited) What do you do for a living Brent? What are you basing that 1000-3000 number on, because that seems to me to be a pretty apocolyptic number to be casually suggested. As Big J stated, I am currently an analyst. Previously I was a day-trader of the 30 year bond. Neither of that really explains my opinion. I am really into studying the stock market and trading. I apply a theory known as the Elliott Wave principal to my stock research. It basically views the market as waves of motive or correction over time and basically patterns the social mood rather than fundamental analysis. This theory also ties in fibonacci retracement price points. I am also applying just a basic sense of common knowledge and using history to determine the present. All of these factors point to my final conclusions. Everything the government did wrong during the depression of the 1920s they are doing now. All the years of money supply manipulation by the Fed are also coming to a head. Everything that is currently happening globally as well as here in America has been outlined and predicted by Elliott Wave theorists. I am certainly not the authority figure on the market but I have always had a keen ability to see the not-so-obvious (last year's DeAngelo Williams argument is an example) and right now, the present and near future seem obvious to me. E2A: It only seems apocolyptic because what you have witnessed over the last 20 years has been such an over-valuation of everything. It's just settling back to the mean, settling back to normalcy. The bottom will also be hyperbolic (overly low) but once we bottom out, investing in equities will once again be a good move. Right now it is not. All this expansion of credit needs to deflate accross all sectors, not just housing - we have a ways to go but it's a necessary process. The Fed is the number 1 culprit in all this mess. The constant manipulation since it's inception has finally caught up to us and we are the ones who pay the price. Hopefully we can learn from this - but knowing the government, we probably won't. Edited July 14, 2009 by Brentastic Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted July 14, 2009 Share Posted July 14, 2009 http://online.wsj.com/article/SB124753066246235811.html Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted July 14, 2009 Share Posted July 14, 2009 Good Read from Chief of Investments at Deutch Bank from Friday echoing the sentiments: The panelists also noted the threat posed by the approaching wave of debt maturities on commercial mortgages, as feasible refinancing options have disappeared. With a combined estimate of $700 billion in debt expected to mature in 2009 and 2010, “the commercial real estate time bomb is ticking,” said Rep. Carolyn Maloney (D-N.Y.), chair of the JEC. even the best are getting crushed in commercial re http://www.businessinsider.com/bloodshed-i...ontinues-2009-7 Quote Link to comment Share on other sites More sharing options...
Avernus Posted July 14, 2009 Share Posted July 14, 2009 stop being so negative yeah he sounds like Dr. Doom Peter Schiff....and we don't have time for a realistic/negative point of view because that's un-American.... Quote Link to comment Share on other sites More sharing options...
Avernus Posted July 14, 2009 Share Posted July 14, 2009 (edited) this host is one of the many problems... Edited July 14, 2009 by Avernus Quote Link to comment Share on other sites More sharing options...
detlef Posted July 14, 2009 Share Posted July 14, 2009 Commercial vacancy rates here in Durham, NC have been decreasing every quarter for the last 5 and that is despite the fact that there's a ton of new spaces coming on line. Just sayin' Quote Link to comment Share on other sites More sharing options...
i_am_the_swammi Posted July 15, 2009 Author Share Posted July 15, 2009 (edited) Commercial vacancy rates here in Durham, NC have been decreasing every quarter for the last 5 and that is despite the fact that there's a ton of new spaces coming on line. Just sayin' Are you sure? Seemed odd, so I googled it. From your Business Journal in April 2009: Office building vacancy rose almost 2 percentage points, to 16.55 percent, in the first quarter, up from 14.8 percent in the fourth quarter of 2008. Negative absorption checked in at a whopping 429,360 square feet – the most space given back to the Triangle office market since Triangle Business Journal launched its quarterly SPACE survey in 1988. • Flex building vacancy rose to 14.93 percent in the first quarter from 14.21 percent the previous quarter. Absorption was negative 100,495 square feet. • Warehouse building vacancy rose to 18.07 percent, up from 16.84 percent in the previous quarter. Absorption was negative 164,927 square feet. • Retail vacancy jumped from 7.66 percent, to 8.27 percent – the highest Raleigh-Durham retail vacancy rate since 1990. Economic Tsunami in Raleigh-Durham Maybe Raleigh is dragging Durham down, but I can't imagine its so much that it offsets Durhams "declining vacancy"? Edited July 15, 2009 by i_am_the_swammi Quote Link to comment Share on other sites More sharing options...
Clubfoothead Posted July 15, 2009 Share Posted July 15, 2009 Unless yer Goldman Sachs. That seems really not comprehendable. Quote Link to comment Share on other sites More sharing options...
millerx Posted July 15, 2009 Share Posted July 15, 2009 The Mayan prophecy of 2012 Quote Link to comment Share on other sites More sharing options...
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