CRE Contagion
Ian Reynolds
Investing and Trading | Capital Markets | Macroeconomics| Bitcoin & Decentralised Finance | Helping to Find the Money Flow | Commentator | Speaker
Breaking: US Stocks and Dollar Surge on NFP Report
Breaking: China Downdraft
Breaking: Trump Vs Obama
Trump promises "largest domestic deportation operation in American history" within moments of his inauguration.
Breaking: The United States and Britain launched strikes against 36 Houthi targets in Yemen?
The United States and Britain launched strikes against 36 Houthi targets in Yemen on Saturday, in the second day of major U.S. operations against Iran-linked groups following a deadly attack on American troops last weekend
Commercial Real Estate Woes Go Global
The US CRE issues are starting to impact the global economy and banking system.
Commercial real estate problems have a habit of not being published. Partly because property is completely unregulated and partly because the first seller sparks a collapse so don't tell anyone. Remember the GFC.
That's why the stories leak out via X
Aozora Bank Ltd, Japan, share Price Daily
Back in the US, Community Bank NY, who bought insolvent Signature Bank a mere 10 months ago share price is collapsing too.
New York Community Bank Share Price Daily
The FED's recent announcement of the closing of the Bank Term Funding Program (BTFP) and the re-opening of our old friend the Discount Window, means that insolvent banks problems will be made public, or at least easier to find.
Apparently the stigma of being so illiquid that you have to tap the Discount Window, will be disguised by forcing every bank to tap the Discount Window every so often ! Total madness !
The BTFP was brought in with the bank collapses in March 2023. The rapid increase in interest rates found some banks unhedged and with a big haircut on US Treasury Bonds. Through this program the FED has very kindly bought the bonds off the banks at par.
However, turns out that government bonds were just one problem for regional US banks. They're heavily invested in US CRE loans, as too are US pension funds - see here for Calstrs and others using leverage to fund their cashflow requirements because they don't want to take the loss on unprofitable CRE investments.
Remember what happened to Liz Truss.
FED Presser 31 January 2024
Comrade Powell pushed back yet again on interest rate cuts after the FOMC meeting Tuesday and Wednesday, and the NFP release above, that he knew anyway, supports higher for long but the terminal rate is in.
Market participants were surprised that the QT program continues.
So overall no rate cuts immediately, let's wait for inflation to get to 2% and meanwhile we're reducing our balance sheet.
After a small recalculation the markets decided that yet again they were correct and central banks wrong.
Higher for longer means bigger, quicker rate cuts as the FED - pied piper, followed by the children ECB BoE etc, drives the economy off the cliff. That's what the stock markets are telling us, but once the cuts happen it's too late.
Quarterly Refunding Announcement Results
Reduction in issuance required sparked a rally in bonds but?
34 US$ Trillion in debt and possibly a US$ 3T budget deficit. Let's see how the auctions on Tuesday, Wednesday and Thursday go.
In The Background
In Case You Missed It
China trying to stop a stock market rout after massive capital outflows and a disintegrated real estate sector.
Yet the IMF is uber bullish
The Bank of England keeps rates steady but flags hikes still possible
Europe still struggling?
Australia
That drop in December is the worst seasonally adjusted monthly result in the four-decade history of the retail sales data outside of two months in 2020 (COVID) and July 2000 (the introduction of the GST, when many prices went up 10% literally overnight).
Australia CPI QoQ Q4 2023 still on the right course but still some way to go.
RBA meeting is on Tuesday this week and we're not expecting any policy changes.
This Week's Important Economic Indicators [London time]
Key Economic Releases: https://suberia.capital/economic-indicators-by-country
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Navigating through the complexities of these economic indicators reminds me of what Heraclitus said - The only constant in life is change. Embracing adaptability and insight can turn challenges into opportunities. Keep exploring, growing, and sharing your insights. ????#EconomicGrowth #ChangeIsGood