Timothy Geithner wants to lock in low rates for the government while he can, extending the maturity of Treasury debt to 72 months from 49, a 26-year low.
Macklowe’s Worldwide Plaza Successor wrestles towering dilemma (Bloomberg) “The partnership [that bought Macklowe's busted property] paid $370 a square foot for Worldwide Plaza, while competitors paid $1,000 a foot or more for similar buildings at the height of the five- year U.S. property boom.” That means they can drop rents to $30-$50 per sq foot from $80-$100 that was common not long ago. That’s bad for CMBS holders and banks who own the debt on busted properties, but fantastic for folks in the real economy who suddenly have much more money to spend on things besides rent. But instead of allowing price adjustments like this to happen, policymakers scream “deflation” and institute all manner of spending schemes to prop up asset prices.
CFPA clears house panel (Bloomberg) A step in the right direction.
More aid for Pakistan (Newsweek) But is the money doing any good?
Why mortgages aren’t modified (Ed Harrison)
How the current economy has affected dentists, vasectomies, guns and shark attacks (CoinbyCoin) A good video, though be careful re: his chart of “leverage,” which looks to me like excess reserves in the banking system. A better measure of the economy’s leverage is debt to gdp.
MUST READ SPEECH–Mervyn King says to break up big banks (Bank of England) The head of the UK’s central bank says we should break up big banks. This is big news since King may actually be granted the power to do so next year when a conservative government stands to win power. Unfortunately, on this side of the pond, policy makers say that while TBTF is a problem, breaking up the big banks just isn’t practical. But it’s suddenly MORE practical if England is on board. Big bank will have a harder time arbing regulators if they work together!
IRS examining 100,000+ suspicious claims for homebuyer credit (WSJ) It’s a credit, which means folks without tax liability can get cash back from the IRS. Also, “taxpayers don’t have to file their claims as part of a real-estate transaction, and can instead” file/amend their 1040 to claim the credit, making it easier to commit fraued.
Would inflation be good for stocks?
With the monetary and fiscal spigots open wide, some investors say equities are a good place to be. But David Einhorn of Greenlight Capital has warned that inflation could compress price-to-earnings multiples. A look back to history suggests his fears are warranted.
Looking out a few years, I’m as bearish as anyone, I admit. But I’m a little worried that suckers could get caught in this gold rally. A hedge-funder I spoke with at the Value Investing Congress said half of the sessions were devoted to doomsday scenarios, precious metals, etc. Today there was a keynote from Eric Sprott of Sprott Asset Mgmt. Fully 70% of his assets under management are in precious metals, silver and gold.
“We didn’t truly know the dangers of the market, because it was a dark market,” says Brooksley Born, the head of an obscure federal regulatory agency — the Commodity Futures Trading Commission (CFTC) — who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country’s key economic powerbrokers to take actions that could have helped avert the crisis. “They were totally opposed to it,” Born says. “That puzzled me. What was it that was in this market that had to be hidden?”