Ronald is concerned about the next shoe to drop in the credit market, commercial real estate. From the Economist:
But its [GENERAL GROWTH PROPERTIES (GGP)] failure still sends two shock waves. First, by including several properties that back commercial mortgage-backed securities (CMBS) in its Chapter 11 filing, GGP has unnerved investors who expect such assets to be ringfenced in a bankruptcy.
The second shock wave is that GGP’s bankruptcy underlines a pervasive refinancing risk for the industry. Foresight Analytics, a research firm, reckons that $594 billion of commercial mortgages will mature in America alone between 2009 and 2011. Many of these borrowers will have a big problem when their loans mature.
Steve notes that the Fed expanded the TALF program to include commercial mortgages. From Bloomberg:
The Federal Reserve expanded its $1 trillion program to finance the purchase of assets clogging bank balance sheets to include securities backed by commercial mortgages last month. Spreads on the debt have narrowed 3.63 percentage points since the Fed said it would include the debt.RW: The govenrment has alluded to expanding the program, but that has not become official. The most recent Fed TALF Terms and Conditions sheet indicates that the program is still related to ABS backed by student, auto, and credit card loans. With TALF's anemic start, investors expect CMBS to be included in the TALF program soon and likely the reason why the market is shifting.
Steve also provides an nice article about the IMF. From The Atlantic:
ECr at the Trading Well and Living blog sent me a descriptive testimony about the [past] excesses on Wall Street. From The Independent:
Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.
It was pretty clear what The Market didn’t like. It didn’t like being closely watched. It didn’t like rules that governed its behaviour. It didn’t like goods produced in First-World countries or workers who made high wages, with the notable exception of financial sector employees. This last point bothered me especially.James McCusker at the HeraldNet describes a ponzi scheme in his article Ponzi schemes can be elusive:
The schemes are named after Charles Ponzi, who immigrated to America and brought with him an irrepressible dream -- first, of getting rich, then of getting rich quick. His financial scam, launched from a Boston office in 1920, operated on a grand scale -- seeking and receiving immense amounts of media coverage that made him a celebrity. Offering a return of 50 percent in 90 days, he accepted funds from investors who believed they were participating in arbitrage transactions -- swapping international reply coupons for postage stamps.Happy Reading. Rebecca Wilder