Retail Property Has Worst Second Quarter in 30 Years

"U.S. store closings and cutbacks turned the
second quarter into the worst for strip mall owners in 30 years, as
budget-conscious consumers flocked to low-cost warehouse-style grocery
centers, according to a report by real estate research firm Reis. Strip
malls, which are usually anchored by grocery or drug stores, saw
average vacancies spike 0.5 percentage points to 8.2 percent, a level
unseen since 1995, according to the report released on Monday. Vacancies
at regional malls rose 0.4 percentage points to 6.3 percent, the
highest level since the first quarter of 2002, according to the
preliminary results."This has GGP's name written all over it. If you haven'thad the pleasure, peruse the GGP tome - GGP and the type of investigative analysis you will not get from your brokerage house. GGP is probably the most overvalued and debt laden commercial REIT that I know of.

I have been warning of this occurance since September of last year. GGP is in a vary precarious position, with signficant lease turnover in an ever increasingly soft market, recession looming and pressuring the retail mall front and vendor business models, and most importantly a collapsed credit market (see "Reggie Middleton on the Asset Securitization Crisis" latest installment) at a time when they need to refinance billions of dollars of high LTV debt ASAP.

This is another one of those analyses that you won't be able to get
from your local brokerage house, along the same vein as my last GGP
post (GGP and the type of investigative analysis you will not get from your brokerage house
). It is the stuff only available from the blogoshpere minority, or
high end buy side groups (who really tend not to share much).

I'm a private investor and I pride myself on an analytical approach
to investing. I try very hard to look at things from a scientific
perspective of risk vs. reward. It is an indomitable tenet, one that I
attempt to instill within my three children, and one which has (at
least for the last 8 years or so) has provided me with an investment
return that is multiples of the broad market. Unfortunately (or maybe
fortunately, in regards to my investment record), it is one which is
not shared by most of the analyst community and those that follow them.

This brings me to the issue of Goldman Sachs. I have been bearish
on commercial, mortgage and investment banks for over a year now, and
have made a penny or two from this outlook. In doing this, I noticed
the illogical reverance that Goldman Sachs has recieved, both from the
analytical community and the media (bolstered by the name brand talking
heads). I never did buy into it. Goldman is a fine, well run, well
respected brokerage/banks, but it is still just that. They hire the
same people, who went to the same schools to get the same education, to
use the same strategies to trade/advise on the same products in the
same markets as all of the other banks. To assert that thier shit
doesn't stink breaks from my scientific method of analysis. So, let's
take a more analytical look at the media's Golden Boys...

Thursday, 03 July 2008 01:00

CDS stands for Credit Default Suckers...

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I've been preaching about the risks the CDS market poses to the
financial system for some time now. Since the monolines faux business
model has been laid bare, we will start seeing some real action in this
arena. For those who don't want to take my anecdotal quips as gospel, I
actual go in depth through Reggie Middleton on the Asset Securitization
Crisis Series - The Next Shoe to Drop: Credit Default Swaps (CDS) and Counterparty Risk - Beware what lies beneath!. A worth read for those not familiar with the Credit Default Sucker's market.

Now, to the point of the post. UBS is in a lot of hot water these
days. Despite being eyeballs deep in rapidly disintegrating, highly
leveraged trash assets they are also often in hot water. Reference the
financial times:

In depth: UBS - Apr-01

UBS faces civil charges over securities sales - Jun-26

Below are our initial observations on Goldman Sachs as compared to its peers. I've had a burning sensation telling me that GS is grossly overvalued, but I haven't had a chance to prove it empirically. I am now diverting the resources necessary to prove or disprove this "feeling". I will keep the blog posted.