2023 is shaping up to be a tough year for the CRE and Housing markets as interest rates remain elevated. When I think of the pension funds that own CMBS debt I shudder. Pension funds that invested in alternative asset classes over the past 20 years will have to mark down their books for the … Continue reading 2023 Won’t Be Pretty For CRE & Housing
There will be more equity market fallout. Historically, equity markets haven't found a bottom while the Fed is in a tightening cycle. I see the NASDAQ index falling to 9,000 during Q1 2023 as: 1.) the Fed tightens further; 2.) weak 2023 earnings guidance is provided on Q4 EPS calls; and 3.) global recession combine … Continue reading Equities Have A Tough 2023 Ahead
Given higher interest rates some Private Equity deals have been executed with 100% equity. This means Private Equity firms will become more valuation sensitive in order to generate higher returns. In months and years past PE firms would use minimal equity (subscription loans were popular), when executing transactions. Minimizing the equity component would goose PE … Continue reading Further Downward Pressure On Equities
The Fed has created more zombie companies than any zombie apocalypse. The late great George Romero has nothing on the Fed. We are praying, crossing fingers and toes that the Fed will end QE and not support Government-led corporate bailouts with its money printing ability. Wishful thinking? Maybe. However, if nobody pushes back on the … Continue reading Allow Zombie Companies To Fail & Sanity To Return To The Markets
Prepare for equity dilution and layoffs as companies roll over cheap maturing debt at higher rates. Companies have been living off of ultra-low interest rates since 2008. Many companies got addicted to 14 years of ultra-low rates and abused the reality by taking on enormous sums of debt, primarily to buy back stock in order … Continue reading Rolling Over Corporate Debt At Higher Rates
It appears we were correct several weeks ago when we wrote that the Fed will maintain elevated interest rates for longer than markets expect. What are the repercussions for business? A persistently higher interest rate environment will expose hidden zombie companies much like the dry Paluxy River bed in Texas recently exposed dinosaur tracks. However, … Continue reading Higher Interest Rates & Growth
The percentage of domestic banks that have tightened credit standards for auto loans has ticked up into positive territory (1.9%), for the first time since Q4 2020. This figure was negative from Q1 2021 through Q2 2022. Net Percentage of Domestic Banks Tightening Standards for Auto Loans: Click HERE for detail.
It sure feels as though we are in a recession: Weak reports from retailers such as Amazon (AMZN) and Target (TGT, twice in Target's case).Soft retail numbers HERE.Low consumer confidence HERE.Atlanta Fed's new GDPNow estimate (as of June 15th), is zero percent Real GDP for Q2.Depleted personal savings (chart below).Even Johnny Come Latelys like Guggenheim's … Continue reading A Recession Won’t Cure Inflation Anytime Soon
The New York Fed released its quarterly report on Household Debt and Credit this past week. Consumer strength is waning, not gaining. Loan delinquencies and foreclosures are up across auto loans and mortgage debt which is primarily where debt expansion has occurred in prior months. There are a number of charts between pages 3-40 that … Continue reading Consumer Strength Is Waning
Over the past several months we have written that the new economic normal means a target CPI in the 3-4% range and muted Real GDP in the 0-2% range. Interest rates can't go back to the Volcker days as Treasury would not be able to refinance its debt at double-digit rates. We could however see … Continue reading What Will The “New Normal” Look Like?