by Calculated Risk on 4/08/2009 12:32:00 AM

From Bloomberg: Vacancies at U.S. Retail Centers Hit 10-Year High, Reis Says

Retail vacancies at shopping centers were the highest since Reis began publishing quarterly data in 1999 and reflected a net decrease in occupied space of 8.7 million square feet, the biggest drop for a single quarter and more than the 8.65 million square feet given back during all of 2008.

Rents paid by tenants fell 1.8 percent from the previous quarter and 2.9 percent from a year ago ...

The vacancy rate at neighborhood and community shopping centers rose to 9.5 percent from 8.9 percent the previous quarter and 7.7 percent a year ago ...

Vacancies at regional malls and super-regional malls ... climbed to 7.9 percent from 7.1 percent in the fourth quarter and 5.9 percent a year earlier ...

Click on image for larger graph in new window.

This graph shows the strip mall vacancy rate since Q2 2007.

Double digits, here we come ...

More from Reuters: Vacancies soar at US strip and regional malls-Reis

Barring a significant economic change, Reis does not expect vacancies to stabilize until sometime in the middle of 2012 if an overall U.S. economic recovery appears next year.

by Calculated Risk on 4/07/2009 09:25:00 PM

The WSJ reports: Treasury Plans to Extend TARP to Life Insurers

The Treasury is expected to announce within the next several days the inclusion of life insurers that are bank holding companies or own a thrift...

This is apparently for life insurers that are bank holding companies or own a thrift. These bank holding were already eligible for TARP money.

The WSJ mentions that Prudential, Hartford, and Lincoln National have all applied.

by Calculated Risk on 4/07/2009 05:39:00 PM

From Reuters: US apartment market worsens with economy--Reis

... The national apartment vacancy rate rose to 7.2 percent in the first quarter, up 0.60 percentage points from the prior quarter and 1.1 percentage points from a year earlier ...

It was the highest vacancy rate since the first quarter of 2002. That was right before the last downturn bottomed out, but Reis expects the picture to get a lot darker as "we are arguably only at the beginning of the current downturn."

Behind the rising vacancy rate is a build-up of available apartments ...

Asking rents fell by 0.6 percent to $1,046 per month, the largest single-quarter decline since Reis began reporting quarterly performance data in 1999.

This puts more pressure on house prices, and also raises more questions about the BLS measure of "Owners' equivalent rent" (that is showing an increase).

With new supply coming online, and families doubling up, it appears rents will decline for some time. Here are some comments from BRE properties in February:

We believe we are looking at a negative rent curve for the next two years.

We believe on a composite basis, market rents in 2009 could fall between 3 and 6% from peak levels in 2008. And the rent cuts in 2010 could be deeper ...

by Calculated Risk on 4/07/2009 03:48:00 PM

More volatility ...

Dow down 2.3% (7,789)

S&P 500 down 2.4%

NASDAQ down 2.8%

Click on graph for larger image in new window.

The first graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

The second graph shows the S&P 500 since 1990.




The dashed line is the closing price today.

This puts the recent rally into perspective - the S&P is still off almost 50% from the 2007 high.

by Calculated Risk on 4/07/2009 03:25:00 PM

From Bloomberg: Manhattan Office Rents Fall Most in Quarter Century (ht Bob_in_MA)

Manhattan office rents ... dropped 6 percent from the fourth quarter to $65.01 a square foot, commercial property broker Cushman & Wakefield Inc. said in a report today. The decline is the most in records dating back to 1984 ...

“It’s gone beyond the financial firms,” Joseph Harbert, Cushman & Wakefield’s chief operating officer for the New York region, said in a telephone interview. “It’s broad across a lot of industries. ... Rents are “falling faster than they did in the last two recessions.”

Sharply falling rents. Hoocoodanode?

by Calculated Risk on 4/07/2009 02:27:00 PM

From Reuters: Source: Bank 'stress test' results delayed (ht Branden DD49)

The U.S. Treasury Department is planning to delay the release of any completed bank "stress test" results ...

The Treasury is still talking about how results of the regulatory stress tests on the 19 largest U.S. banks will be released, and may disclose them as summary results that are not institution-specific, the source said.
...
The source ... said officials do not want any test results released before the earnings season wraps up for most U.S. banks on April 24.

The original time frame was no later than the end of April, so this is still on schedule. We definitely need institution-specific results.

by Calculated Risk on 4/07/2009 12:06:00 PM

From Reuters: GM shares skid on bankruptcy preparation news

... a source familiar with the company's plans told Reuters it was in "intense" and "earnest" preparations for a possible bankruptcy filing.

Also from Reuters: U.S. carmakers at 70 percent risk of bankruptcy: Moody's

Moody's Investors Service said it still sees a 70 percent chance of bankruptcy for Detroit's automakers ... "Given the lack of progress achieved and the additional progress that will be required in the revised plans, this threat will need to be seen as credible in order to compel adequate movement on the part of stakeholders," Moody's said in a note dated Monday.

At least this story has an expiration date (another 52 days for GM, 22 days for Chrysler).

by Calculated Risk on 4/07/2009 10:53:00 AM

From MarketWatch: RBS to cut 9,000 back office jobs over two years

Royal Bank of Scotland said Tuesday that it will cut up to 9,000 back office and support jobs over the next two years ... The cuts represent 20% of the 45,000 staff employed in the bank's "group manufacturing" division, which includes back office operations, purchasing, IT and property management.

The beat goes on ...

by Calculated Risk on 4/07/2009 09:10:00 AM

Why are the PPIP loans coming from the FDIC? Apparently to avoid asking Congress for additional funds ...

Andrew Sorkin writes in the NY Times: ‘No-Risk’ Insurance at F.D.I.C.

[The F.D.I.C. is] going to be insuring 85 percent of the debt, provided by the Treasury, that private investors will use to subsidize their acquisitions of toxic assets. The program ... is the equivalent of TARP 2.0. Only this time, Congress didn’t get a chance to vote.
...
The F.D.I.C. is insuring the program, called the Public-Private Investment Program, by using a special provision in its charter that allows it to take extraordinary steps when an “emergency determination by secretary of the Treasury” is made to mitigate “systemic risk.”
...
[H]ow much does the F.D.I.C. think it might lose?

“We project no losses,” Sheila Bair, the chairwoman, told me in an interview. Zero? Really? “Our accountants have signed off on no net losses,” she said.
...
Here’s the F.D.I.C.’s explanation: It says it plans to carefully vet every loan that gets made and it will receive fees and collateral in exchange. And then there’s the safety net: If it loses money from insuring those investments, it will assess the financial industry a fee to pay the agency back.

These potentially higher fees must make a few banks nervous. And if the losses really pile up, the FDIC will be bailed out, and it will be the taxpayers on the hook.

by Calculated Risk on 4/07/2009 12:38:00 AM

There has been a request for a graph of Federal tax receipts, and I'll post something when the March numbers are released this Friday.

Tim Duy has a follow-up: More on Inflation Expectations

"Conventional wisdom of the Fed's policy describes quantitative easing as an effort to boost inflation expectations. This flows from the fact that the Fed Funds rates is at zero, therefore further decrease in the real rate can only be achieved by boosting inflation expectations. To me, however, the Fed has not committed to a program of raising inflation expectations. Instead, they are reiterating their existing commitment to a low, stable rate of inflation."

Dr. Duy argues the Fed has had some success in anchoring inflation expectations.

Click on graph for larger image in new window.

Update: Tim provides these two graphs.

The first graph shows inflation expectations based on the difference in yields between TIPs and conventional Treasury securities.

For more on using TIPs for inflation expectations, see: Inflation Expectations: How the Market Speaks

The second graph shows the median expected price change next 12 months, Univestiry of Michigan Survey of Consumers.

The data is available from the St. Louis Fed.


The futures are flat:

Bloomberg Futures.

Futures from barchart.com

And the Asian markets are generally off slightly.

Best to all.