by Calculated Risk on 7/23/2009 07:14:00 PM

Another preview for BFF ...

From Bloomberg: Lubert-Adler Said to Mull Bid for Chicago’s Corus Bankshares

Lubert-Adler Partners LP, the Philadelphia-based private-equity firm, is among at least four investors weighing bids for Corus Bankshares Inc. ... The Federal Deposit Insurance Corp. has indicated that the bank ... may be seized as soon as Aug. 6, the people said.

It is just a matter of when ...

by Calculated Risk on 7/23/2009 06:07:00 PM

Note: Credit Default Swap (CDS) is an insurance contract for a credit instrument. A naked CDS is when someone buys insurance for an underlying asset that they do not own (like buying fire insurance on a neighbor's house). A put option on a stock is somewhat similar - and you don't have to own the stock to buy the put, but the exchange sets the liquidity rules for traders. And that is probably what will happen with CDS: My guess is non-exchange naked CDS trading will be banned.

From Bloomberg: ‘Naked’ Default Swaps May Be Banned in House Bill

“The question of banning naked credit-default swaps is on the table,” Frank, a Massachusetts Democrat, said during an interview on Bloomberg Television today. The legislative proposal will be released next week, Frank said.
...
“Frank has indicated to me he wants a total ban on naked credit default swaps,” [House Agriculture Committee Chairman Collin] Peterson said in a statement through a spokesman today. “While the Agriculture Committee had concerns about this proposal when we considered it in February, I am inclined to support it because I would rather err on the side of caution when it comes to these instruments.”

Credit-default swaps do “perform a useful function” in the economy, Frank said, and there may be “alternatives to banning naked credit-default swaps” if most derivatives are moved to a regulated exchange.

“If we can get rules where almost every derivative is traded on an exchange, and those that aren’t because they are just too unique” are backed by extra capital, he said, “then that may do it.”
...
Geithner said that while comprehensive oversight is needed, a ban would be inappropriate.

by Calculated Risk on 7/23/2009 03:56:00 PM

From Jonathan Weil at Bloomberg: Accountants Gain Courage to Stand Up to Bankers (ht James, Michael)

The scope of the FASB’s initiative, which has received almost no attention in the press, is massive. All financial assets would have to be recorded at fair value on the balance sheet each quarter, under the board’s tentative plan.

This would mean an end to asset classifications such as held for investment, held to maturity and held for sale, along with their differing balance-sheet treatments. Most loans, for example, probably would be presented on the balance sheet at cost, with a line item below showing accumulated change in fair value, and then a net fair-value figure below that. For lenders, rule changes could mean faster recognition of loan losses, resulting in lower earnings and book values.

I'll believe it when I see it!

And on how this would apply to CIT:

[CIT] said in a footnote to its last annual report that its loans as of Dec. 31 were worth $8.3 billion less than its balance sheet showed. The difference was greater than CIT’s reported shareholder equity. That tells you the company probably was insolvent months ago, only its book value didn’t show it.

And for those looking for a market graph:

Click on graph for larger image in new window.

This 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.

by Calculated Risk on 7/23/2009 02:02:00 PM

Here is a comparison of the Moody's / Real Capital Analytics CRE price index and the Case-Shiller composite 20 index.

Notes: Beware of the "Real" in the title - this index is not inflation adjusted - that is the name of the company (an unfortunate choice for a price index). Moody's CRE price index is a repeat sales index like Case-Shiller.

Click on graph for larger image in new window.

CRE prices only go back to December 2000.

The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).

This shows residential leading CRE (although we usually talk about residential investment leading CRE investment, but in this case also for prices), and this also shows that prices tend to fall faster for CRE than for residential.

There has been some discussion recently of the “de-stickification” of house prices in areas of heavy foreclosure activity. Price behavior for foreclosure resales is probably similar to CRE because there is no emotional attachment to the property. But prices in bubble areas like coastal California, with little foreclosure activity, will probably exhibit more stickiness and decline, in real terms, over a longer period than the high foreclosure areas.

by Calculated Risk on 7/23/2009 12:30:00 PM

From HotelNewsNow.com: STR reports US performance for week ending 18 July 2009

In year-over-year measurements, the industry’s occupancy fell 8.9 percent to end the week at 66.2 percent. Average daily rate dropped 9.4 percent to finish the week at US$97.33. Revenue per available room for the week decreased 17.5 percent to finish at US$64.41.

Although the occupancy rate was off 8.9 percent compared to last year, the occupancy rate is off about 13 percent compared to the same week in 2006 and 2007. This is a multi-year slump ...

Click on graph for larger image in new window.

This graph shows the YoY change in the occupancy rate (3 week trailing average).

The three week average is off 8.0% from the same period in 2008.

The average daily rate is down 9.4%, and RevPAR is off 17.5% from the same week last year.

Note: Business travel is off much more than leisure travel - so the summer months will probably not be as weak as other times of the year. September will be a real test for business travel.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com