Page 4 of 4 CREDIT BUBBLE BULLETIN Hoping there's hope
Commentary and weekly watch by Doug Noland
most in Queens, where the median cost of apartments and one- to three-family
homes fell 17% to $400,000 ... In the Bronx, prices declined almost 12% to
$389,000; in Brooklyn, they dropped 11% to $500,000; and on Staten Island they
fell 8.2% to $390,000 ... In Manhattan, third-quarter apartment transactions
fell 24% to 2,654 from a year earlier and the number of apartments on the
market increased to 7,003 ... "
October 7 - Bloomberg (David M. Levitt): "The vacancy rate for top-class New
York City office space rose to 7.7% in the third quarter, a 43% jump from the
same period last year, as Wall Street firms laid off workers ... Manhattan's
financial services
industry had rented one out of every three square feet of space in the US 's
most expensive office market until this year ... "
October 6 - Bloomberg (Hui-yong Yu): "Vacancies at US neighborhood and
community shopping centers reached a 14-year high in the third quarter, rising
to 8.4%, as the credit crisis and slowing economy took a toll on retailers,
Reis Inc. said."
October 6 - Bloomberg (Peter S. Green): "The vacancy rate for US rental
apartment buildings rose to 6.1% in the third quarter as a dropoff in mortgage
lending and stagnant wages deterred people from buying homes, Reis Inc.
reported."
October 6 - Wall Street Journal (Kris Hudson): "Vacancy rates at US malls and
shopping centers continued their steep rise in the third quarter as slumping
sales forced retailers to close stores. Malls are seeing their highest vacancy
rate since 2001 ... Until recently, most commercial landlords had struggled
with the financing drought, but the so-called 'fundamentals' of their
properties - vacancy rate, rent and expenses - remained healthy. Now that is
changing."
Speculator Watch
October 7 - Bloomberg (Gillian Wee): "Hedge funds worldwide in September
recorded their biggest drop since August 1998 ... The HFRI Weighted Composite
Index fell 4.68% in September, marking the fourth consecutive monthly decline
and extending the loss this year to 9.41%, according to ... Hedge Fund Research
Inc."
October 6 - Fortune (Roddy Boyd): "September was the worst month on record for
hedge fund performance, but for one legendary player what's going on in the
markets now must seem like its coming straight from the gates of hell. Tontine
Associates, a $10 billion Greenwich-based fund, told investors ... it expected
to show a 2008 loss through Sept. 30 of 65%... Tontine builds large,
concentrated positions in companies ... "
October 6 - Bloomberg (Warren Giles): "Julius Baer Holding AG, Switzerland's
biggest independent money manager for the wealthy, dropped the most in at least
19 years in Swiss trading amid speculation the bank's US asset management
business GAM may lose client funds ... 'GAM is the most obvious concern,' said
Christian Stark, an analyst at Credit Agricole ... 'They have a relatively
heavy US investor base and if those hedge funds are selling, that would have an
effect.'"
October 6 - Bloomberg (Katherine Burton): "Lancelot Investment Management LLC,
a hedge-fund firm in Northbrook, Illinois, lent about $1 billion to a company
whose former chief executive officer has been arrested amid allegations he ran
a fraudulent investment scheme. The loans to Petters Group Worldwide and
affiliates represented 'nearly all' of the assets managed by Lancelot ... "
October 8 - Bloomberg (Saijel Kishan): "Citadel Investment Group LLC, the $17
billion investment firm run by Ken Griffin, had the credit outlook for two of
its hedge funds lowered by S&P. The ratings firm revised its outlook for
... Citadel's Kensington Global Strategies Fund Ltd. and Citadel Wellington LLC
to 'negative' from 'stable.'"
October 9 - Bloomberg (Tom Cahill): "Drake Management LLC, F&C Asset
Management Plc and New Star Asset Management Ltd. all closed funds today, as a
cull in the $1.9 trillion hedge-fund industry accelerates after the worst
performance in a decade. Drake ... was closing three funds that once ran about
$2 billion."
Fiscal Watch
October 8 - Dow Jones (Corey Boles): "Evidence of the US federal government's
weakening finances continued to mount with a total budget deficit of $438
billion in fiscal 2008, up sharply from the $162 billion deficit in fiscal 2007
... CBO estimates that the federal budget will be $45 billion in surplus in
September, $68 billion less than the $113 billion surplus recorded in September
2007. This is primarily due to lower net corporate income tax receipts, which
fell by almost 30% to around $22 billion ... Federal government spending on
programs other than defense, social security, medicare and medicaid increased
by around 12% to $911 billion, the CBO said."
October 6 - Bloomberg (Bob Ivry): "The Federal Housing Administration has grown
so large that by the end of the year it will guarantee mortgages for three in
10 US borrowers, many of whom have bad credit or loans that required no
verification of income. Congress wants FHA to do more. The Hope for Homeowners
program ... authorizes the agency ... to guarantee up to $300 billion of
30-year, fixed rate home loans for struggling borrowers over the next three
years. 'FHA has completely replaced subprime and Alt-A,' said Olson ... who now
runs Wholesale Access Mortgage Research & Consulting Inc ... ."
Muni Watch
October 7 - Bloomberg (Jerry Hart): "US states need federal financial
assistance to cope with diminishing access to credit and widening budget
deficits, a report by the Center on Budget and Policy Priorities says. Congress
should consider aid similar to the $20 billion in Medicaid-payment assistance
and grants to states authorized in the last recession, Nick Johnson, an analyst
at the ... research group, wrote ... 'States are facing the same problem faced
by millions of businesses across the country - tightening credit markets,'
wrote Johnson ... 'The Treasury or Federal Reserve may have to serve as the
lender of last resort ... At least 15 states have new budget gaps, Johnson
wrote, and 29 have cut spending, used reserves or raised revenue to balance
budgets for this fiscal year. More reductions in services or higher taxes are
likely in coming weeks, he said."
October 6 - Bloomberg (Adam L. Cataldo): "Interest on weekly municipal
auction-rate bonds rose to 8.08%, the highest on record, exceeding the peak
reached after the market collapsed in February."
October 8 - Bloomberg (Michael McDonald): "The Massachusetts state pension fund
lost $8 billion so far this year, a 15% drop in assets under management that
wiped out about two years of gains. The fund ... had $45.7 billion in assets as
of Sept. 30, down from $53.7 billion at the beginning of the year ... 'Almost
every asset class is negative,' said Michael Travaglini, executive director of
the investment trust."
New York Watch
October 10 - Bloomberg (David Mildenberg and Mike Ramsey): "Capital One
Financial Corp., the lender that raised $200 million last month to cover future
losses, will end financing of auto dealers' inventories in New Jersey and New
York by the end of this month, a spokesman said."
California Watch
October 8 - Bloomberg (Michael B. Marois): "California's two-week-old budget is
already suffering from a $3 billion shortfall, as the state prepares to ask the
near-paralyzed municipal bond market for a short-term loan next week to pay its
bills ... Schwarzenegger signed a $143 billion budget Sept. 23, ending an
85-day stalemate with lawmakers over how to close a $15 billion deficit in the
fiscal year that began July 1 ... The governor's office today said tax revenue
for September was $814 million less than forecast. That would amount to a $3
billion shortfall by end of the fiscal year on June 30."
October 7 - Market News International (Chris H. Sieroty): "California's economy
is nearing a financial crisis intensified by the credit crunch. The state is
several weeks away from running out of money and would normally generate
interim financing by issuing revenue anticipation notes to meet any short-term
deficit until tax revenues arrive later in the fiscal year. But access to the
credit markets has been severely curtailed in recent weeks."
October 6 - Bloomberg (Michael B. Marois): "California may have to turn to
foreign investors to raise the cash it needs to pay bills if the
financial-market rescue plan doesn't end a credit squeeze that has stalled
tax-exempt bond sales."
October 8 - Bloomberg (Jeremy R. Cooke): "California wants to sell $4 billion
of short-term notes next week to avert a potential cash shortage, seeking
demand from individual investors, as states struggle to obtain financing, State
Treasurer Bill Lockyer said. 'The credit markets are so impossibly frozen at
this moment, we are still a little nervous about that ... We're hoping in this
state with the pool of investors that we have here that we can convince a lot
of people to purchase these individually.'"
Crude Liquidity Watch
October 5 - Bloomberg (Matthew Brown): "Saudi Arabia's M3 money supply growth,
an indicator of future inflation, accelerated to 22% in August from 21% in
July."
Doug Noland is a market strategist for the Prudent Bear Funds.
(Republished with permission from PrudentBear.com.
Copyright 2005-2008 David W Tice & Associates. All rights reserved.)
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