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cashinmattress

The Cbms Market About To Implode

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The CBMS market about to implode

Since 2007, if not earlier, all the attention has been focused on the residential real estate troubles. But now the commercial real estate problems are about to come front and center.

In a research note today, Citigroup analysts estimated that "more than $75 billion of CMBS market capitalization has been lost" since the S&P request for comment on changes to their U.S. CMBS rating methodology was issued two days ago.

S&P noted:

Our preliminary findings indicate that approximately 25%, 60%, and 90% of the most senior tranches (by count) within the 2005, 2006, and 2007 vintages, respectively, may be downgraded.

60% and 90% writedowns are HUGE! That will involve hundreds of billions of dollars and the losses will be spread throughout the securities market. It could forced dozens of banks into insolvency.

Citi also noted that this will impact the CMBS legacy TALF announced last week by the Fed. According to Citi the "S&P changes could impact nearly 40% of the triple-A TALF eligible universe" and they expect the Fed to change their criteria.

The Fed won't buy non-AAA rated securities. Thus the banks won't be able to pass along the losses to the taxpayer...unless the Fed decides to buy worthless securities as well.

And of course we will see the same here.

And we get all this talk of 'green shoots' by our resident numpties...

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Not sure that the UK is as vulnerable re: commercial property.

I remember Jim Kunstler put up a bar chart of square ft retail space per head for the USA and other western countries, and the US had something like 20-30 times the amount of retail as the UK.

Not that we won't see some pain here - but the US was excessive.

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UK commercial property sector under severe pressure

A number of experts have stepped forward to suggest that the UK commercial property sector is under severe pressure and there is a significant risk of bankruptcies and financial problems over the next couple of years. One of the areas which have been hit is the shopping centre sector which has suffered a knock on effect from failing retail companies and falling rents.

This prediction of problems within the UK commercial property sector will come as no surprise to those who follow this particular investment market. The vast majority of companies have for some time operated with fairly high debt levels covered by rental agreements and rental income. However, the ferocity of the UK recession and the speed with which companies have fallen foul of banks has surprised many. As a consequence the margin between a healthy property company and one which is struggling is only very slim.

The problem for UK commercial property investors is the fact that so much property has been put up for sale that it will take a significant amount of time for this to work its way through the system. As a consequence, it seems highly likely that UK commercial property prices will continue to fall for some time to come and property companies will continue to struggle.

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UK Commercial property has been well goosed for a couple of years now.

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UK retail sales are apparently UP 2.4 YoY.

I dont get how with £80 billion taken out of play by MEW, and people actually paying down mortgages, and without high employment, credit cards pushed on everyone and falling wages, all this is possible.

It seems even in recession the consumerist stampede is unstoppable. Anything less than 10% growth in retail is seen as bad. It makes me sick.

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S&P noted:

Our preliminary findings indicate that approximately 25%, 60%, and 90% of the most senior tranches (by count) within the 2005, 2006, and 2007 vintages, respectively, may be downgraded.

60% and 90% writedowns are HUGE! That will involve hundreds of billions of dollars and the losses will be spread throughout the securities market. It could forced dozens of banks into insolvency.

something of a non sequitur? i read it as 90% of, not 90% off

either way, it's like the Blackpool Tower collapsing on a stoat, as opposed to the Eiffel Tower falling on a weasel, in terms of scale

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UK retail sales are apparently UP 2.4 YoY.

I dont get how with £80 billion taken out of play by MEW, and people actually paying down mortgages, and without high employment, credit cards pushed on everyone and falling wages, all this is possible.

It seems even in recession the consumerist stampede is unstoppable. Anything less than 10% growth in retail is seen as bad. It makes me sick.

Maybe it's the people on tracker mortgages who have been given a payment 'holiday' and are using half of it to pay down their mortgage and the other half on extra spending. Or just fck it, spend the lot.

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UK retail sales are apparently UP 2.4 YoY.

I dont get how with £80 billion taken out of play by MEW, and people actually paying down mortgages, and without high employment, credit cards pushed on everyone and falling wages, all this is possible.

It seems even in recession the consumerist stampede is unstoppable. Anything less than 10% growth in retail is seen as bad. It makes me sick.

Short term juiced up economy at the expense of medium an long term. Reckless monetary policy both the cause and effect.

Inflation,

Lower savings / investments / pension contributions,

Diversion of other funds / savings into expenditure.

Some foreigners buying up some trinkets, cars from the block thanks to the collapse of the value of sterling which is itself was purposely drilled down with interest rate cuts and printing money.

Edited by OnlyMe

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