Lots of noise, that's for sure. Nice video on credit spreads, Noah. A couple thoughts on TED: bonds over treasuries have embedded swap spreads (so not just corp credit) and TED may become less reliable as Libor gets phased to SOFR. Some others to watch: HYG - a liquid, pure credit spread & LQDH - investment grade corp bond index hedged for rates and a good sentiment gauge.
I'm kind of aghast at what happened today. Not because I couldn't conceive of the Feds statement staunching the market slide, but I can't really think of anything which would justify a record setting point gain.
we live in a world where global central banks are suppressing volatility big time. 13% selloff in 7 days + talk of coordinated stimulus = huge bounce back and short covering rally. These types of moves usually happen in bull markets, not bear markets. I certainly dont agree with the moral hazard the fed and global, CBs created, but they are in this mess forever now with no choice. They have to keep it going or risk something worse than 2008/2009
Record ups and downs continue daily. Someone is making tons of money here. But I think this type of volatility is bad for Real Estate because buyers tend to move to the sidelines to sit and wait under uncertainty.
Today should be interesting. Dow Futures tripped circuit breaker down yesterday even though Fed slashed rates to near zero. So market should open down huge, but who knows where we will end up by the time the closing bell rings?
It was ugly. Liquidation happening, i wonder what funds are shutting down right now. Treasuries didnt rally as much as I would think, and Gold made an amazing comeback. im trying to focus on every aspect of this, great learning environment..I just registered www.creditspreadalert.com lol - not even kidding
I am going to preface this with a "please don't be mean, I really don't 'get' most of this discussion of markets:" Why are people liquidating? Why can't people just shelter in place? Isn't this all gambling at this point? And with respect to Manhattan real estate, I feel like that it is a rich person's game to begin with such that it is relatively impervious (meaning no foreclosures) to all this stuff. Those I know who have taken their properties off the market can hang on to them indefinitely; the swings in Manhattan real estate are indeed high, and what turned me against "trickle down" economics (I was trained by Libertarian economists) was the realization that when you give rich people tax breaks, all that does is drive up the price of high end real estate. Rich people are still paying those who maintain their properties minimum wage (if even that - many just do "under the table" for whatever the market will bear), but the properties themselves can have multi-million-dollar price swings within twelve months. We weathered 2008 just fine by not touching anything; we plan on doing the same now.
Firstly, I don't think we weathered 2008 by "not touching anything." There was a $780 billion Wall Street bailout as well as the Fed buying trillions of $ of Mortgage Backed Securities when no one else would touch them.
While not country wide, certainly in NYC the people who owned the apartments they lived in has shifted from the rich all the way down to people who probably couldn't really afford to do that. I think the percent of people who do own has some correlation to the same way as the percentage of people who own stock has exploded.
Certainly in older "stuffy" Coops the Boards insulate the Coop from foreclosures by having stiff cash requirements, post closing equity, financial review, etc but there are still plenty that don't as well as all Condos. I don't think many who take out 90% financing and paying PMI as a penalty are doing it for other reasons than they have to.
In terms of foreclosures we haven't seen much activity because the market has mostly been going up and the one big hiccup we saw was short lived. But after the effects of Black Monday finally kicked in we saw lots of foreclosures in the early 1990s. There were weeks where I was analyzing 50 to 100 units to formulate a what our maximum bid would be at the foreclosure auction. This gives a flavor of what was going on at that time:
As far as "why are people liquidating?" I think it is all about risk. People take bigger and bigger risks until they stop getting away with them, and then when they see actual negative consequences and they panic and run. Then the cycle starts over again with them going from totally risk averse and then building up their confidence again to the point where they are taking stupid risks and then things blow up again. Wall Street firms have been notorious for getting rid of tons of people whenever there is a market crash because they didn't want people around who actually had experience with "the market c doesn't always go up."
So, yes, this is all gambling now (look at how even the "extremely smart money" got taken by WeWork) which is all fun and games until the roulette wheel comes up double zero and everyone's chips get raked off the table.
MCR - When I talk about liquidation and credit events on this forum, Im talking about the front lines of the credit markets, the repo markets, the short term financing markets - the cogs that make the engine go. The plumbing so to speak of the machine. We just saw massive, and I mean massive, fed monetary action to provide liquidity and backstop those markets. Now the Commercial Paper market needs more, and they will get it. All of this is to contain and mitigate a credit event, that could occur with a liquidity dry up. So the fed basically said, ok, lets take the huge credit event risk off the table and make sure we add oil to the cogs that make the global machine work. Without that, everything else collapses behind it. So that had to happen.
Now, personal and small/mid size corporations liquidating - This will be interesting. I guess the question is, how bad do you need the money? This is when those that have to sell, continue to sell and hit the bid whereever it may be. If I was seller today with the luxury of not having to sell right now, I would strongly consider taking my property off the market. How will govts make good on the people here? How will govt fiscal policy protect those that cant work, taking paycuts, fired, small companies, mid side companies, etc etc, how will the bridge the gap to get to the other side here? Thats the question - I think handouts are coming, question is how much and to who and is it enough to bridge the gap. It will get worse before it gets better, but I also think in 6 months from now, we got a handle of the curve of this thing, which is what health officials are hoping for right. This is where American ingenuity and innovation, especially those scientists working on vaccine and treatment, will hopefully shine through. Outside of the virus/health questions, next question is, are we at peak fear yet for this and what is the duration of this social/economic shutdown
Buyers today who are pricing in these risks and getting their lower bids hit, in long run (think 3-5 years please), I think they will be happy with their purchase levels.
yeah, credit markets are blown out and liquidations happening..treasury yields rising, gold falling, mass hysteria, dogs and cats living together...sorry, had to add a comic element here. Bill Ackman was well, sobering to listen to.