Archive for Real estate

Banks, Financial Crisis and Capitalism

I was reading recently an article regarding the imminent bankrupcy of the emerging markets (especially the ones from Eastern Europe). The author said in his investment blog that banks are now forcing up the interest rates in those countries. The increase in the interest rates would lead to a wave of personal bankrupcies in those markets, allowing the foreign investors to buy the local assets (especially the real estate assets from those emerging markets) very cheap. The scenario would be unfolding as we speak, whilst the peak of the crisis in the Eastewrn Europe should arrive somewhere in the middle of 2010.
The fallacies of this story are many. I will not enter into the details of the cosnpiration theory which seems to hide behind this pessimistic approach to the Eastern Europe economies. I will also not discuss here the fact that it is hard for the big banks to cooperate among them. Or the bank cooperating with the big investment funds, their competitors, would be a highly unlike – ier scenario. I will just mention the recent lessons that Dubai and Greece, two sovereign countries, whose recent developments are linked tot tourism and real estate investmentst, taught us. Read more

Dubai Default Will Depress the Oil Prices

The recent news that Dubai suspended the repayment of its $59 billion debt sent shockwaves through the markets. Some shockwaves were expected, others came completely out of the blue.
In the first category there are the news of the spreads widening. In the second enter the appreciation of the yen, completely unexpected. Nobody was thinking that the panic will make the yen become what it was once – a safe haven for the investors. Yet, the yen continues to trade higher and higher.
The main resource of Dubai was the oil. And the government from Dubai has to repay somehow their debts. Even in the case of default, they must repay at least partially those bonds. It means that the Dubai sovereign funds and the Dubai asset owners must pump more oil to sell on the global market. Read more

More than 1 Million Bankrupcies in the US in 2009

zurich-altstadt-old-city-in-the-downtown-evening-september-2009-switzerland
According to a report released today by the American Bankruptcy Institute (ABI), there have been counted 1.046 million personal bankruptcies since the start of 2009. This is the highest since the first nine months of 2005 when people were rushing to file before the draconian new bankruptcy act of 2005 took effect (still better than the Victorian days of debtor prisons, but not much). Read more

IMF Reccomends Stronger Measures to Fight the Global Financial Crisis (2)

We come back to the IMF handbook published on April 2009, called “Global Financial Stability Report”. This time, we make refference to its reccomendations.

But before this, a new estimation of the IMF on the global write downs of assets. In January 2009 IMF estiamted the bad assets writing off to around $2.7 billion in the US only. In this latest report, the estimations included also other mature market-originated assets, which could increase the total write offs to around $4 billion. In other words, $4 billion of the US economy has been wiped off by the financial crisis (or will be, total until the end of 2010). Scary, isn’t it? Read more

IMF Reccomends Stronger Measures to Fight the Global Financial Crisis

imf-building-2The International Monetary Fund (IMF) has recently published a comprehensive report called “Global Financial Stability Report – Responding to the Financial Crisis and Measuring the Systemic Risk.”. The IMF paper covers the history of the recent global financial crisis, as well as the measures taken by the governments and the companies to fight against it.

The report analyzes why the financial institutions have all been hit so hard by the current financial crisis, from the pension funds to the life insurance companies. These institutions were impacted despite the fact that most of them took preventive measures to manage potential surges in the risks of their assets. The report also underlines that there is a strong retrenchment from foreign markets, which outpaces strongly the overall de-leveraging process. The sharp decline of the cross border funding actuall created the crisis in the emerging markets, whilst the re-financing needs of those markets are still very large (estimated by the IMF at $1.8 trillion in 2009). Read more

US Mortgages to Be Further Subsidized by the Government

mortgagesThe US Treasury Department is considering giving banks and investors billions of dollars in fresh incentives to modify troubled mortgages and save homeowners from foreclosure, sources familiar with official deliberations said.

Under one scenario, investors in second liens would receive a cash payment if they agree to ease the terms of troubled loans and accept a smaller return on their mortgage investment, the sources said. Read more