Important News - Oct. 08

Fed Frets About Commercial Real Estate

With Banks Slow to Take Losses, Fears of a Residential-Bust Repeat; ‘More Pain Likely Lies Ahead’

I”n another sign that many U.S. financial institutions are inadequately protected against potential losses on commercial real-estate loans, banks with heavy exposure to such loans set aside just 38 cents in reserves during the second quarter for every $1 in bad loans, according to an analysis of regulatory filings by The Wall Street Journal. That is a sharp decline from $1.58 in reserves for every $1 in bad loans from the beginning of 2007.”

9) Region’s commercial real estate vacancies foster empty feeling

“San Diego’s office market reached the 20 percent vacancy rate for the first time in 16 years, CB Richard Ellis said yesterday in its third-quarter report on the commercial real estate market.

The rate was even worse when factoring in the sublease space available, which raised the vacancy level to 25.6 percent.”

10) Office vacancies rise, rents continue to fall

“According to real estate research firm Reis Inc, the U.S. office vacancy rate touched a five-year high in the third quarter. The national vacancy rate stood at 16.5 percent, 0.6 percentage higher than the previous quarter.”

“Rents at lowest ebb

In addition, the amount actually paid by tenants in the United States dipped 8.5 percent, which is the highest year-over-year drop since 1995.”

11) California’s Hotel Foreclosures Triple

“Atlas Hospitality Group, a commercial real estate brokerage in Irvine, Calif. specializing in hotels, reported that in the first nine months of 2009, hotel foreclosures more than tripled from 15 in 2008 to 47. Hotels in default also quadrupled to 259.”

12) Gold Prices May Rise to $1,650, James Sinclair Says

“Oct. 7 (Bloomberg) — Gold may climb to $1,650 an ounce by early 2011 on demand for an alternative investment to the dollar and other currencies, said James Sinclair, a commodity investor and the head of Tanzanian Royalty Exploration Corp.

“The carry trade has dropped the dollar as a currency of choice,” Sinclair, the chief executive office of Surrey, British Columbia-based Tanzanian Royalty, said today in an interview on Bloomberg Radio. “Gold is competition to currencies.””

13) Faces of Death: The US Dollar in Crisis (Lots of graphs)

14) Hikes in interest rate expected soon: Moody’s

“Central banks in India, China and South Korea are closely monitoring the emerging inflationary pressures on their economies and hikes in interest rates could be expected across the Asia-Pacific region after Australia raised key interest rates, says Moody’s economy.com.”

15) Carnegie Library to close four branches, merge some

9 (Minneapolis)Pensions owed to aging police and firefighters could cost taxpayers millions

City must come up with $22.7 million

16) More tax hikes everywhere (Google news search)

17) “Russia’s central bank probably bought $750 million to $1 billion as it sought to stall the ruble’s advance from the strongest level this year against the dollar, traders said.”

18) Deutsche Bank Capitulates to Cut Dollar Forecast 18%

“Oct. 7 (Bloomberg) — Deutsche Bank AG, the world’s biggest currency trader, capitulated on its dollar-euro forecast, cutting its yearend 2010 target by 18 percent amid evidence the U.S. will keep interest rates lower than other nations.

The dollar will trade at $1.40 per euro by the end of next year, after weakening to $1.55 in the first quarter, Henrik Gullberg, a foreign-exchange strategist at the bank in London, said today in an interview. The previous forecast was $1.15.”

19) Asian Nations Step In to Buoy Greenback

“SINGAPORE — Several Asian central banks appeared to intervene in the foreign-exchange market to curb the rise of their currencies, reflecting an effort to keep exporters competitive as the U.S. dollar swoons.

The apparent interventions Tuesday by South Korea, Singapore, Thailand and the Philippines — reported by currency traders, but not confirmed by authorities — came as Asian currencies soared, with some hitting 12-month highs against the dollar and exacerbating worries about the outlook for the U.S. currency among traders.”

20) “Optimism regarding the Brazilian economy has fueled an increase in flows from foreign investors,” said Miriam Tavares, foreign-exchange director at AGK Corretora de Cambio, in a telephone interview from Sao Paulo. “I expect the central bank to continue to intervene in the currency market, soaking up the excess flow and keeping the real at a range of 1.75 to 1.80 per dollar by year-end.”

21) “South African central bank Governor Tito Mboweni ditched attempts to talk down the rand last month and started buying up dollars as he looks to ease pressure on exporters reeling from a slump in demand.”

“Mboweni said on Oct. 1 he had asked Reserve Bank staff to “cream off more dollars” last month to pare the rand’s 40 percent rally against the dollar in the seven months through Sept. 30. That gain has undermined exports and fueled job losses that pushed unemployment to 23.6 percent in the second quarter, the highest of 62 countries tracked by Bloomberg.”

22) “The Bank of Israel again intervened in the forex market yesterday, buying at least $200 million in the early afternoon. Its intervention boosted the dollar’s exchange rate against the shekel to NIS 3.74, roughly unchanged from its starting rate for the day.”

23)” TORONTO (Dow Jones)–The dollar is trading at day-earlier levels against the yen Wednesday afternoon after an earlier spurt of options-related and Middle Eastern buying triggered a sharp rebound for the greenback.”

24) Santelli: Wouldn’t You Hold Secret Dollar Meetings Too? (VIDEO)…scroll down to see the video and Santelli talks at 1 1/2 minutes into this.

25) President Barack Obama is considering a mix of spending programs and tax cuts to respond to widening job losses that would amount to an additional economic stimulus without carrying that label.

26) After those 19 news items let’s just think about how well the politicians and bankers are serving us.