Displaying items by tag: analysis

 The Winkelvoss ETF application was rejected by the SEC, and bitcoin dropped about 20% in price. I repetitively warned those that followed me that a very low risk buying opportunity will present itself should the SEC deny the ETF application. Like clockwork, instant 30% profit opp. If you were monitoring hte prices and bought in after prices started rising (almost immediately) the buy returned over $250/coin (~30%) for anyone who took my advice.

By just the 2nd full day of trading, math and reality hits SNAP stock. Last week, I posted "Goldman Sachs & Morgan Stanley Pull Off the Heist of the Decade, Bends Over Those Who Don't Read BoomBustBlog", and if that wasn't a textbook example of a guaranteed short, a clear sign of a bubble and the most demonstrable example of the Street taking advantage of clients, then I don't know what is.

After reading what is essentially Fake News about Bitcoin from Financial Times, London Business School and Credit Suisse, I have created an easy to understand metric that allows anyone to compare the risks and rewards of Bitcoin to basically any currency, commodity, stock or asset class.

Hovde has issued a reply to Ackman's second GGP presentation. These hedge funds put out more analysis than the bank analysts that follow GGP, SERIOUSLY! For those that need a recap: My responses to Ackman's presenations are CRE 2010 Overview and It was bound to happen. Reggie Middleton vs Ackman vs Hovde on GGP!

Here are the Ackman reports: Ackman's CRE presentation and  ackman_ggp122209_0 29/12/2009,14:58 1.18 Mb

This is the most recent one by Hovde: General Growth Properties - 2.pdf.

I also noted that Hovde is short Macerich. See my opinion on that company: A Granular Look Into a $6 Billion REIT: Is This the Next GGP?

Hovde has issued a reply to Ackman's second GGP presentation. These hedge funds put out more analysis than the bank analysts that follow GGP, SERIOUSLY! For those that need a recap: My responses to Ackman's presenations are CRE 2010 Overview and It was bound to happen. Reggie Middleton vs Ackman vs Hovde on GGP!

Here are the Ackman reports: Ackman's CRE presentation and  ackman_ggp122209_0 29/12/2009,14:58 1.18 Mb

This is the most recent one by Hovde: General Growth Properties - 2.pdf.

I also noted that Hovde is short Macerich. See my opinion on that company: A Granular Look Into a $6 Billion REIT: Is This the Next GGP?

Yesterday, I commented on Goldman's CMBS offering through the government's leverage program known as TALF. I was very nice and diplomatic, yet despite such I still received what I would consider, inappropriate feedback. Okay, let's take the politically correct gloves off - they never fit me anyway. This deal probably flew because Goldman Sachs underwrote it. Goldman thrives off of brand name value primarily, other than that nothing really sets them apart. Contrary to mainstream media inspired belief, they are not better than everybody else at everything. I posit, they are probably not better at anybody else at anything other than marketing and lobbying which allows them the perception of being better than everybody else and the protection from the government to get away with things other banks can't (or are afraid to try). I want to delve further into that CMBS deal I outlined yesterday   (so be sure to read through this, particularly if you're with an insurance company), but before I do let me try to dispel the Goldman myth once and for all...

Goldman is a bank, just like everybody else. They hire the same people who went to the same schools, taught by the same teachers to use the same models to do the same things as the other big banks. When Goldman hires a banker with experience, where do you think they hire them from? When Goldman loses a banker, where do you think they lose them to?

Think about it:

• Financial shares slumped, their stock fell - just like everybody else.
• The market turned on big broker/dealers, they had to run for government protection - just like everybody else.
• The market recovered, their shares recovered - just like everybody else.
• Goldman pays the vast majority of its net revenue out as compensation, not dividends! I haven't checked, but I would wager that they probably paid more than their outstanding market cap as bonuses since going public. What does this mean? It means that you are much better off working at Goldman than you are as a client or as a shareholder. Keep that in mind as we review the CMBS offering from an anecdotal perspective later on in this post.

 Their stock is fraught with risk that the sell side never bothers to analyze, which is why they are considered superstars when they have good quarters. Adjust for risk, and Goldman actually underperforms - see "Who is the Newest Riskiest Bank on the Street?" where I break it down in detail, showing Goldman as the leader in leverage, cost of capital and VaR as compared to the decrease in Risk Adjusted Return. I addressed similar points in the previous year in Goldman Sachs Snapshot: Risk vs. Reward vs. Reputations on the Street.

Goldman Sachs Equity Guidance Would Have Made You a Fortune on Lehman!

I have outran their equity analysts and asset management arm on practically every stock I covered and I have a skeleton staff. Now, to be honest, I am devoid of the massive conflicts of interests that run through that company, but that is the point! To this day, we still have institutions that buy financial widgets because Goldman told them to, regardless of the fitness or viability of said widget.

For those with short term, or worse yet, media induced brand name fever, let's rehash "Is Lehman really a lemming in disguise?" (Thursday, 21 February 2008) and Is this the Breaking of the Bear?. Then peruse Lehman rumors may be more founded than some may have us believe Tuesday, 01 April 2008 (be sure to read through the comments, its like deja vu, all over again!), Lehman stock, rumors and anti-rumors that support the rumors  Friday, 28 March 2008 and Funny CLO business at Lehman  Friday, 04 April 2008

The esteemed Goldman Sachs did not agree with my thesis on Lehman. Reference the following graph, and click it if you need to enlarge. Notice the tone, and ultimately the outright indication of a fall in the posts from February through April 2008, and cross reference with the rather rosy and optimistic guidance from the esteemed Goldman (Sachs) boys during the same time period, then... Oh yeah, Lehman filed for bankruptcy!!! 

Does anybody think that Lehman was a "one off" occurrence? Well download Blog vs. Broker Analysis - supplementary material and you will be able to track the performance of all of the big banks and broker recommendations for the year 2008 for the companies that I covered on my blog. I can save you the time it takes to read it and just tell you that it ain't all its cracked up to be. Again, I inquire as to why these companies' clients do not wise up?

Now, back to that CMBS Offering

Pray tell, educate me as to where Goldman's clients actually think they get all of their money from? Let's take that latest CMBS offering that they hawked Monday. In Reggie Middleton Personally Contragulates Goldman, but Questions How Much More Can Be Pulled Off, I blogged about the 4% (unlevered yield) Goldman was able to get for their underwriting clients (Developers Diversified Realty, a REIT that came up in another blog post of interest - "Here's a Big Company Bailout by the Taxpayer That Even the Taxpayer's Missed!"). This was actually a big win for DDR for they got access to 4% money at a time when commercial real estate is in the crapper. It was also a big win for Goldman, for they moved a big CRE/CMBS deal through a government leverage plan when such deals really haven't moved much. Was it a good deal for the institutions that Goldman peddled the securities to, though? Yet, I query further, who does Goldman really work for? To whom do they have a fiduciary duty? Is that duty to their bankers, traders, and analysts to get the biggest fees, commissions, and spreads possible? Quite possibly, since they are on track to announce record bonuses. I don't see clients putting out press releases touting record returns from dealing with Goldman! Is that duty to the share holder? Well, it doesn't look like it from a risk adjusted return perspective (see "Who is the Newest Riskiest Bank on the Street?"). Is that duty to DDR to get them the lowest rate possible? Quite possibly, for 4% is pretty damn good, and they lowered the rate due to being oversubscribed (high demand). But wait a minute, If their fiduciary duty is to DDR (or themselves), then they can't have a fiduciary duty to the insurance companies and asset managers who they are pitching these CMBS to, can they? Buyers should want a higher yield to compensate for the risk, no? The Wall Street Journal reported that this was a low risk deal. Really!!!??? Let's look deeper into that assertion from an anecdotal perspective, shall we?

In the WSJ.com article, it was stated the collateral (the mall properties) was conservative because they were occupied by discount chains where shoppers flock during hard times. Then they go on to contradict themselves by saying that occupancy is in a material downtrend:

The deal reflects the high bar the Fed has set for loans eligible for TALF financing. The 28 shopping centers in 19 states securing the bonds have stable cash flow because they often are occupied by discount retailers that tend to attract business even in a recession. For instance, one of the properties is Hamilton Marketplace, near Princeton, N.J., a 957,000-square-foot property whose tenants include Wal-Mart Stores, Lowe's, BJ's Wholesale Club and supermarket ShopRite. According to Fitch Ratings, the property has maintained an average occupancy of 96.7% since 2006 and is 95.1% occupied.

Isn't 95.1% about 151 basis points less than 96.7%? Will this downtrend continue? Will it intensify? Do you see commercial real estate getting better in the next 5 years or worse? If you wanted buyers to perceive safety, you would quote an UPTREND in occupancy, would you not?

"It's a great execution for the borrower," says Scott Simon, managing director and head of mortgage- and asset-backed securities portfolio manager at Pimco, a leading bond house. "If other real-estate investors can borrow money at that rate, it would be a real game changer for the commercial real-estate market that has been so devoid of financing."

Mr. Simon declined to comment on whether Pimco would buy any of the Diversified Realty bonds. Bids for the securities are expected to come from many mutual funds, insurance companies and other institutional investors. Firms that are considering the deal include Babson Capital Management, the investment-management unit of Massachusetts Mutual Life Insurance Co. and Principal Financial Group, according to people familiar with the matter. Babson Capital declined to comment. A representative at Principal Financial didn't respond to requests for comment.

Institutional investors are attracted to the deal because it is viewed as a low-risk investment with relatively healthy returns when compared with five-year Treasurys, which are yielding about 2%.

Well, Treasurys don't have rollover issues (at least not yet), and CMBS do. There is usually a reason for higher yield, and that is often higher risk, actual and/or perceived. I will walk through why these CMBS buyers are getting twice the yield of treasuries in a moment, as well as explaining how they are so woefully under-compensated as to be tantamount to a crime (or is it a break in fiduciary duty?)

  Investors buying the triple-A slice of the deal, totaling $323.5 million, can get an unleveraged return of about 4%, according to price information distributed to possible investors by Goldman late Friday and reviewed by The Wall Street Journal. If they finance their purchases with TALF funding, their returns can rise to about 6%.

I went into Fitch and its AAA ratings in "Reggie Middleton Personally Contragulates Goldman, but Questions How Much More Can Be Pulled Off". Anyone who believes Fitch's ratings actually mean anything should click that link scroll down to around the middle, then read tightly from a secure device. If you are carrying a pda, iphone, or notebook you may drop it from uncontrollable laughter!

The $400 million loan represents about half of the value of the underlying properties. By comparison, in the years before the financial crisis erupted in 2007, banks were willing to lend more than 70% of a property's value because the debt could be easily sold as CMBS. Even under a "stress" scenario, according to Fitch, the Developers Diversified properties would produce a cash flow of about 1.44 times what is required to service the debt. Back when credit was easy, the ratio for stress scenarios would even fall below one for many CMBS offerings. 

This is the kicker, here. Loans can't get rolled over at 70%, 65% or even 60% LTV these days, and things are getting worse, not better. See Fitch's warning (that's right, the same guys that gave those very same tranches above AAA ratings) warning that Insurers Face $23 Billion Loss on Commercial Property.

The credit crisis has driven $138 billion worth of U.S. commercial properties into default, foreclosure or debt restructuring, according to New York-based Real Capital Analytics Inc. Commercial real estate prices have plunged almost 41 percent since October 2007, the Moody’s/REAL Commercial Property Price Indices show. 

So, let's do a little simple math here. Goldman's salesman talks a good game (as the pimp) to the sweet little investor looking for yield (as the little girl just getting off the bus from a small town in the midwest looking for fame and stardom in the big city). They say, hey, I'll write these CMBS for this conservative CRE portfolio at only 50LTV. What could go wrong? This happens in October of 2007. In November of 2009, you find that your collateral is now around 89LTV (due to the 41 percent drop up to October in a rapidly decreasing asset value environment) and still dropping fast, with the LTV rapidly approaching 100, wherein you start taking guaranteed haircuts on your Fitch AAA rated (you can just imagine me cracking up in the background) tranched CMBS. Boy, those 400 measly basis points don't look like much compensation now, does it? You also see why Treasuries are yielding 2%, don't you? You are at risk of losing significant principal, for according to the WSJ article, the only deals getting done are at 50 LTV. Who the hell is going to cover that 390 point spread? You call your Goldman rep for help, but you can't reach him because he is in the Mediterranean with those TWO (that's right, not one but two) bad ass Italian chicks testing out his new Azimut 86S he just bought in a recession with YOUR commission dollars and the vig (oops, I mean spread) from your deal which is currently underwater!  

If this deal would have went down this time, next year would GS have been in breach of their fiduciary duties:  Dodd bill would make reps fiduciaries

A better question I know all of you are pondering, will this actually happen to the DDR deal? Well, let's bring back the chart of the week for the Japanese perspective from the  "Bad CRE, Rotten Home Loans, and the End of US Banking Prominence?" post.

You tell me if these CMBS aren't worth more than 4 points?

Now, don't get me wrong. I have nothing against Goldman Sachs. It does rather irk me when everybody, and I mean everybody truly believes that their sh1t doesn't stink, though. I actually have to bring my kids to school, so I will finish this post up with what it means to insurance companies who buy things such as this DDR CMBS deal from Goldman later on today or tomorrow. I'll include tidbits of what my subscribers know about the insurance industry, and I will also release some sneak peaks of the upcoming REIT research to subscribers as well.

Yesterday, I commented on Goldman's CMBS offering through the government's leverage program known as TALF. I was very nice and diplomatic, yet despite such I still received what I would consider, inappropriate feedback. Okay, let's take the politically correct gloves off - they never fit me anyway. This deal probably flew because Goldman Sachs underwrote it. Goldman thrives off of brand name value primarily, other than that nothing really sets them apart. Contrary to mainstream media inspired belief, they are not better than everybody else at everything. I posit, they are probably not better at anybody else at anything other than marketing and lobbying which allows them the perception of being better than everybody else and the protection from the government to get away with things other banks can't (or are afraid to try). I want to delve further into that CMBS deal I outlined yesterday   (so be sure to read through this, particularly if you're with an insurance company), but before I do let me try to dispel the Goldman myth once and for all...

Goldman is a bank, just like everybody else. They hire the same people who went to the same schools, taught by the same teachers to use the same models to do the same things as the other big banks. When Goldman hires a banker with experience, where do you think they hire them from? When Goldman loses a banker, where do you think they lose them to?

Think about it:

• Financial shares slumped, their stock fell - just like everybody else.
• The market turned on big broker/dealers, they had to run for government protection - just like everybody else.
• The market recovered, their shares recovered - just like everybody else.
• Goldman pays the vast majority of its net revenue out as compensation, not dividends! I haven't checked, but I would wager that they probably paid more than their outstanding market cap as bonuses since going public. What does this mean? It means that you are much better off working at Goldman than you are as a client or as a shareholder. Keep that in mind as we review the CMBS offering from an anecdotal perspective later on in this post.

 Their stock is fraught with risk that the sell side never bothers to analyze, which is why they are considered superstars when they have good quarters. Adjust for risk, and Goldman actually underperforms - see "Who is the Newest Riskiest Bank on the Street?" where I break it down in detail, showing Goldman as the leader in leverage, cost of capital and VaR as compared to the decrease in Risk Adjusted Return. I addressed similar points in the previous year in Goldman Sachs Snapshot: Risk vs. Reward vs. Reputations on the Street.

Goldman Sachs Equity Guidance Would Have Made You a Fortune on Lehman!

I have outran their equity analysts and asset management arm on practically every stock I covered and I have a skeleton staff. Now, to be honest, I am devoid of the massive conflicts of interests that run through that company, but that is the point! To this day, we still have institutions that buy financial widgets because Goldman told them to, regardless of the fitness or viability of said widget.

For those with short term, or worse yet, media induced brand name fever, let's rehash "Is Lehman really a lemming in disguise?" (Thursday, 21 February 2008) and Is this the Breaking of the Bear?. Then peruse Lehman rumors may be more founded than some may have us believe Tuesday, 01 April 2008 (be sure to read through the comments, its like deja vu, all over again!), Lehman stock, rumors and anti-rumors that support the rumors  Friday, 28 March 2008 and Funny CLO business at Lehman  Friday, 04 April 2008

The esteemed Goldman Sachs did not agree with my thesis on Lehman. Reference the following graph, and click it if you need to enlarge. Notice the tone, and ultimately the outright indication of a fall in the posts from February through April 2008, and cross reference with the rather rosy and optimistic guidance from the esteemed Goldman (Sachs) boys during the same time period, then... Oh yeah, Lehman filed for bankruptcy!!! 

Does anybody think that Lehman was a "one off" occurrence? Well download Blog vs. Broker Analysis - supplementary material and you will be able to track the performance of all of the big banks and broker recommendations for the year 2008 for the companies that I covered on my blog. I can save you the time it takes to read it and just tell you that it ain't all its cracked up to be. Again, I inquire as to why these companies' clients do not wise up?

Now, back to that CMBS Offering

Pray tell, educate me as to where Goldman's clients actually think they get all of their money from? Let's take that latest CMBS offering that they hawked Monday. In Reggie Middleton Personally Contragulates Goldman, but Questions How Much More Can Be Pulled Off, I blogged about the 4% (unlevered yield) Goldman was able to get for their underwriting clients (Developers Diversified Realty, a REIT that came up in another blog post of interest - "Here's a Big Company Bailout by the Taxpayer That Even the Taxpayer's Missed!"). This was actually a big win for DDR for they got access to 4% money at a time when commercial real estate is in the crapper. It was also a big win for Goldman, for they moved a big CRE/CMBS deal through a government leverage plan when such deals really haven't moved much. Was it a good deal for the institutions that Goldman peddled the securities to, though? Yet, I query further, who does Goldman really work for? To whom do they have a fiduciary duty? Is that duty to their bankers, traders, and analysts to get the biggest fees, commissions, and spreads possible? Quite possibly, since they are on track to announce record bonuses. I don't see clients putting out press releases touting record returns from dealing with Goldman! Is that duty to the share holder? Well, it doesn't look like it from a risk adjusted return perspective (see "Who is the Newest Riskiest Bank on the Street?"). Is that duty to DDR to get them the lowest rate possible? Quite possibly, for 4% is pretty damn good, and they lowered the rate due to being oversubscribed (high demand). But wait a minute, If their fiduciary duty is to DDR (or themselves), then they can't have a fiduciary duty to the insurance companies and asset managers who they are pitching these CMBS to, can they? Buyers should want a higher yield to compensate for the risk, no? The Wall Street Journal reported that this was a low risk deal. Really!!!??? Let's look deeper into that assertion from an anecdotal perspective, shall we?

In the WSJ.com article, it was stated the collateral (the mall properties) was conservative because they were occupied by discount chains where shoppers flock during hard times. Then they go on to contradict themselves by saying that occupancy is in a material downtrend:

The deal reflects the high bar the Fed has set for loans eligible for TALF financing. The 28 shopping centers in 19 states securing the bonds have stable cash flow because they often are occupied by discount retailers that tend to attract business even in a recession. For instance, one of the properties is Hamilton Marketplace, near Princeton, N.J., a 957,000-square-foot property whose tenants include Wal-Mart Stores, Lowe's, BJ's Wholesale Club and supermarket ShopRite. According to Fitch Ratings, the property has maintained an average occupancy of 96.7% since 2006 and is 95.1% occupied.

Isn't 95.1% about 151 basis points less than 96.7%? Will this downtrend continue? Will it intensify? Do you see commercial real estate getting better in the next 5 years or worse? If you wanted buyers to perceive safety, you would quote an UPTREND in occupancy, would you not?

"It's a great execution for the borrower," says Scott Simon, managing director and head of mortgage- and asset-backed securities portfolio manager at Pimco, a leading bond house. "If other real-estate investors can borrow money at that rate, it would be a real game changer for the commercial real-estate market that has been so devoid of financing."

Mr. Simon declined to comment on whether Pimco would buy any of the Diversified Realty bonds. Bids for the securities are expected to come from many mutual funds, insurance companies and other institutional investors. Firms that are considering the deal include Babson Capital Management, the investment-management unit of Massachusetts Mutual Life Insurance Co. and Principal Financial Group, according to people familiar with the matter. Babson Capital declined to comment. A representative at Principal Financial didn't respond to requests for comment.

Institutional investors are attracted to the deal because it is viewed as a low-risk investment with relatively healthy returns when compared with five-year Treasurys, which are yielding about 2%.

Well, Treasurys don't have rollover issues (at least not yet), and CMBS do. There is usually a reason for higher yield, and that is often higher risk, actual and/or perceived. I will walk through why these CMBS buyers are getting twice the yield of treasuries in a moment, as well as explaining how they are so woefully under-compensated as to be tantamount to a crime (or is it a break in fiduciary duty?)

  Investors buying the triple-A slice of the deal, totaling $323.5 million, can get an unleveraged return of about 4%, according to price information distributed to possible investors by Goldman late Friday and reviewed by The Wall Street Journal. If they finance their purchases with TALF funding, their returns can rise to about 6%.

I went into Fitch and its AAA ratings in "Reggie Middleton Personally Contragulates Goldman, but Questions How Much More Can Be Pulled Off". Anyone who believes Fitch's ratings actually mean anything should click that link scroll down to around the middle, then read tightly from a secure device. If you are carrying a pda, iphone, or notebook you may drop it from uncontrollable laughter!

The $400 million loan represents about half of the value of the underlying properties. By comparison, in the years before the financial crisis erupted in 2007, banks were willing to lend more than 70% of a property's value because the debt could be easily sold as CMBS. Even under a "stress" scenario, according to Fitch, the Developers Diversified properties would produce a cash flow of about 1.44 times what is required to service the debt. Back when credit was easy, the ratio for stress scenarios would even fall below one for many CMBS offerings. 

This is the kicker, here. Loans can't get rolled over at 70%, 65% or even 60% LTV these days, and things are getting worse, not better. See Fitch's warning (that's right, the same guys that gave those very same tranches above AAA ratings) warning that Insurers Face $23 Billion Loss on Commercial Property.

The credit crisis has driven $138 billion worth of U.S. commercial properties into default, foreclosure or debt restructuring, according to New York-based Real Capital Analytics Inc. Commercial real estate prices have plunged almost 41 percent since October 2007, the Moody’s/REAL Commercial Property Price Indices show. 

So, let's do a little simple math here. Goldman's salesman talks a good game (as the pimp) to the sweet little investor looking for yield (as the little girl just getting off the bus from a small town in the midwest looking for fame and stardom in the big city). They say, hey, I'll write these CMBS for this conservative CRE portfolio at only 50LTV. What could go wrong? This happens in October of 2007. In November of 2009, you find that your collateral is now around 89LTV (due to the 41 percent drop up to October in a rapidly decreasing asset value environment) and still dropping fast, with the LTV rapidly approaching 100, wherein you start taking guaranteed haircuts on your Fitch AAA rated (you can just imagine me cracking up in the background) tranched CMBS. Boy, those 400 measly basis points don't look like much compensation now, does it? You also see why Treasuries are yielding 2%, don't you? You are at risk of losing significant principal, for according to the WSJ article, the only deals getting done are at 50 LTV. Who the hell is going to cover that 390 point spread? You call your Goldman rep for help, but you can't reach him because he is in the Mediterranean with those TWO (that's right, not one but two) bad ass Italian chicks testing out his new Azimut 86S he just bought in a recession with YOUR commission dollars and the vig (oops, I mean spread) from your deal which is currently underwater!  

If this deal would have went down this time, next year would GS have been in breach of their fiduciary duties:  Dodd bill would make reps fiduciaries

A better question I know all of you are pondering, will this actually happen to the DDR deal? Well, let's bring back the chart of the week for the Japanese perspective from the  "Bad CRE, Rotten Home Loans, and the End of US Banking Prominence?" post.

You tell me if these CMBS aren't worth more than 4 points?

Now, don't get me wrong. I have nothing against Goldman Sachs. It does rather irk me when everybody, and I mean everybody truly believes that their sh1t doesn't stink, though. I actually have to bring my kids to school, so I will finish this post up with what it means to insurance companies who buy things such as this DDR CMBS deal from Goldman later on today or tomorrow. I'll include tidbits of what my subscribers know about the insurance industry, and I will also release some sneak peaks of the upcoming REIT research to subscribers as well.

The world's most handsome and charismatic blogger stands outside his beloved friends at Goldman Sachs to congratulate them on the outstanding CMBS offering made through TALF government leveraging for Developers Diversified Realty (notice the funny looks that I am getting from the women in the background, haven't they seen a handsome and charismatic blogger before??? ). I have a few questions about follow on offerings and what that may portend for REITs who are in a even better situation than DDR, but let's read up on why I walked past GS headquarters in the first place. After the article excerpted below, we will discuss some tidbits of data and info that neither Goldman nor the REIT prolific Merrill Lynch, or anyone within a bonus' throw or subway distance from 85 Broad will bother to tell you about the REITs, save that handsome and charismatic guy who dares poke fun at the "Almighty at 85"!

From WSJ.com:

Demand is expected to be strong Monday for the first sale of commercial-mortgage-backed securities under a government rescue program designed, in part, to ease the mounting stress in the commercial-property sector.

But the strong demand is partly a reflection of the conservative underwriting of the $400 million in bonds backed by 28 Developers Diversified Realty Corp. shopping centers, in terms of the quality of the assets underlying the loan and the loan amount relative to the value of the properties. [If BoomBustBloggers remember, DDR is the company which was part and parcel of what appears to be (but only if you were to really use your imagination) a "pump'em, dump'em, double tax'em" plan with Merrill Lynch/BofA, see "Here's a Big Company Bailout by the Taxpayer That Even the Taxpayer's Missed!"]  While the deal may help reopen a vital funding source for some commercial-property investors, it will likely provide little solace to owners of tens of billions of dollars of office buildings, shopping centers and other commercial real estate that are now worth less than their mortgages. [more on this in a minute]

The world's most handsome and charismatic blogger stands outside his beloved friends at Goldman Sachs to congratulate them on the outstanding CMBS offering made through TALF government leveraging for Developers Diversified Realty (notice the funny looks that I am getting from the women in the background, haven't they seen a handsome and charismatic blogger before??? ). I have a few questions about follow on offerings and what that may portend for REITs who are in a even better situation than DDR, but let's read up on why I walked past GS headquarters in the first place. After the article excerpted below, we will discuss some tidbits of data and info that neither Goldman nor the REIT prolific Merrill Lynch, or anyone within a bonus' throw or subway distance from 85 Broad will bother to tell you about the REITs, save that handsome and charismatic guy who dares poke fun at the "Almighty at 85"!

From WSJ.com:

Demand is expected to be strong Monday for the first sale of commercial-mortgage-backed securities under a government rescue program designed, in part, to ease the mounting stress in the commercial-property sector.

But the strong demand is partly a reflection of the conservative underwriting of the $400 million in bonds backed by 28 Developers Diversified Realty Corp. shopping centers, in terms of the quality of the assets underlying the loan and the loan amount relative to the value of the properties. [If BoomBustBloggers remember, DDR is the company which was part and parcel of what appears to be (but only if you were to really use your imagination) a "pump'em, dump'em, double tax'em" plan with Merrill Lynch/BofA, see "Here's a Big Company Bailout by the Taxpayer That Even the Taxpayer's Missed!"]  While the deal may help reopen a vital funding source for some commercial-property investors, it will likely provide little solace to owners of tens of billions of dollars of office buildings, shopping centers and other commercial real estate that are now worth less than their mortgages. [more on this in a minute]

The market neutral option strategies analyzed and made available for download last quarter have effectively accomplished their mission, namely allowing one to maintain a bearish position while still being able to profit from spikes in the market. In periods of uncertainty, this is the methodology that I will fall back on personally, although the directional positions are the ones that reap my windfall profits. 

The following are the updated payoff's for selected optimal strategies for rhe S&P index, GS, JPM, AXP, HOT, STI, CAT and MAC (subscribers, see the downloads section for the strategies and the forensic analysis of each company). We have computed revised breakeven points, initial cost, payoff matrix, implied volatility and option parameter for the optimal strategies selected previously. I will post these figures in detail within 24 hours, but here is the synopsis.