Monopoly money / reits / economist

when i read stories where someone buys assets at peak prices that are yielding less than a risk free treasury with the rational that in the future the yield will pick up for sure to make investments work i´m sure this will end ugly.

wann immer ich geschichten wie diese höre wo zu toppreisen ein wert erworben wird wo die zugrundeliegende rendite unter der risikofreier staatsanleihen liegt und winzig und allein die zukünftige positive renditeerwartung das ganze profitabel macht bin ich sicher das die geschichte übel enden wird.

i wonder why they havn´t figuered out this concept...or maybe the have..... :-)
ich wundere mich warum die noch nicht auf diese idee gekommen sind.. oder sind sie..... :-)




http://www.economist.com/finance/displaystory.cfm?story_id=8326784

The game of commercial-property investment has gone global

THE barbarians are at reception. No longer are private-equity firms attempting merely to turn round ailing industrial giants. This week, the Blackstone Group bid $36 billion, including debt, for Equity Office Properties Trust, America's biggest owner of office buildings. In nominal terms, it was the largest buy-out ever.http://immobilienblasen.blogspot.com/2006/11/reits-going-gaga-blackstone-to-buy.html#links

The deal showed that the commercial-property market remains piping hot, even as housing shivers. According to David Harris of Lehman Brothers, the Blackstone deal is just the latest “privatisation” of the American property market, a trend that has seen 22 companies worth more than $100 billion disappear from public ownership since the start of last year.

Such companies look ideal from the point of view of buy-out groups. Today's property barons can borrow against the value of the assets and use the cashflow from rental income to meet the interest payments. With property values rising fast in some sectors (the American office sector has returned 38% to date this year), they can afford to strike the deals above their stated asset value. (really?, why?, this kind of justification and calculation shows the bubblementality/wirklich ?wieso? diese art der agumentation zeigt klare tendenzen von blasenrethorik)



this is a chart of the overall reitindex (not only offices)

This Monopoly-like craze is not confined to America. Just as bonds and shares are freely traded across borders, property is now a global asset too. According to Jones Lang Lasalle, an estate agent, cross-border property investment in the first half of this year hit $290 billion, a 30% increase on the same period in 2005. International deals now comprise 44% of the volume of sales.(read this story from singapore http://immobilienblasen.blogspot.com/2006/11/singapore-singapur-private-equity.html#links )

In the process, once-obscure markets have been swept into the mainstream. In 2004-05, the new entrants into the European Union benefited from the “convergence” trend as investors took advantage of high property yields. As yields fell, the same money that chased Warsaw office buildings began looking at Sofia warehouses, betting on Bulgaria's entry into the EU in 2007.

This is really all part of the same “search for yield” that has seen investors pile into other high-income assets, such as corporate bonds and emerging-market debt. Andrew Jackson of Standard Life Investments, a British fund-management company, says office yields in China have fallen from 12-13% a couple of years ago to 8% today. The gap between yields on the highest-quality properties and the second-tier sites has narrowed everywhere. (in china you have a good chance that the rising currency will save or compensate the rentyield/zumindest kann man in china ziemlich sicher sein das die steigende währung die mietrendite aufpeppt)

Property is a hybrid asset. It offers a high yield, giving it bond-like characteristics. But like shares (and unlike bonds), investors can expect that income to grow, at least in line with inflation.

Enthusiasm for the sector waned in the 1980s and 1990s thanks to fat stockmarket returns. Pension funds, however, are now desperate to diversify from shares and bonds, and property is benefiting from the same inflows that are boosting hedge funds and commodities. The catch—and it is a serious one—is the lack of liquidity. It takes time to buy and sell a building, and recruiting and managing tenants involves a lot of hassle.

So the key to the globalisation of the property market has been the growth of the REIT, or real-estate investment trust. These are stockmarket-quoted companies that bundle together portfolios of buildings, allowing investors to buy and sell whenever they wish. REITS have existed in America for decades but in recent years they have spread into new markets, such as Japan and Hong Kong. From January they will be available in Britain.(and also germany, in germany the reits will exclude rentals/auch in deutschland. besonderheit, ausgenommen mietwohnungen)

As the market develops, investing is becoming more sophisticated. A joint venture between GFI Group, a broker, and CB Richard Ellis, an estate agent, has introduced derivatives on property indices in America, Europe and Hong Kong, allowing investors to hedge their portfolios and to bet on falling prices. (derivatives....here we go again, the maybe "false" security against declines..../schon wieder derivate die einem die evtlk. "falsche" sicherheit gegen wertverfall geben....)http://immobilienblasen.blogspot.com/search?q=derivatives

Not that prices are falling at the moment. The National Association of Real Estate Investment Trusts says its All-REITS index has quadrupled since the start of the decade. Of the 15 national markets monitored by IPD, a data provider, 12 achieved double-digit returns last year.

In the process, valuations now look toppy. Yields on the most commonly held American REITS are lower than those on treasury bonds, while prime British properties yield less than gilts. In both cases, enthusiasts say there is no need to worry since rents are set to rise, bringing the prospect of higher yields. (read this twice!!!!/doppelt lesen)

the above cahrt is from am must read about reits from mike larsonhttp://www.moneyandmarkets.com/press.asp?rls_id=433&cat_id=6
the other chart shows you the situation in london http://immobilienblasen.blogspot.com/search/label/london




Relying on prospective valuations is exactly what stockmarket investors were forced to do in the late 1990s. And it is worth recalling that previous surges of cross-border property investment (Japan in the 1980s, for instance) did not end well. But the peak in commercial property is probably at least a year away—the barbarians still have huge war chests. (i think we saw the in the us with this 36b$ buyout where some smart investors like zell bailed out/ denke in den usa hat der 36b$ buyout den paek markiert. einiger der cleversten investoren wie zell haben abkassiert)

us$ index / do fundamentals matter (in the end..) ?

the weakness in the $chart is really an importend issue. further weakness will reverse the carry trade http://immobilienblasen.blogspot.com/2006/11/boj-chief-has-yen-carry-concern-mother.html#links and force the fed to hold on longer to higher rates. one wild card are the commodities. when they will rise in the face of a weakining $ the troubles gets even uglier. the other importend point will be the demand from foreigners for all the us assets (mainly us debt / treasuries and corporate).

the market is also testing the importend bottom in the 10 years around 4,54-4,55 http://immobilienblasen.blogspot.com/2006/11/bottom-in-10-year-treasuries.html#links

die schwäche im $chart ist wirklich nicht zu unterschätzen. weitere schwäche im $ dürfte die fed dazu verleiten länger an höheren zinsen festzuhalten als evtl. angemessen. fraglich auch wie sich die rohstoffe verhalten. in der vergangenheit sind diese bei einem schwachen $ gestiegen. zusätzlich dürfte es entscheidend sein inwieweit die ausländer immer noch gewillt sind us anleihen (égal ob vom staat oder unternehmen) zu erwerben. zudem könnte sich der carry trade umkehren. http://immobilienblasen.blogspot.com/2006/11/boj-chief-has-yen-carry-concern-mother.html#links

der markt testet heute zudem die extrem wichtige markierung der 10 jahresbonds bei 4,54/4,55 http://immobilienblasen.blogspot.com/2006/11/bottom-in-10-year-treasuries.html#links

dank geht an clive maund. more long term charts http://www.clivemaund.com/article.php?art_id=1212

größer/bigger http://www.clivemaund.com/charts/usd1year261106.gif

some of the problems are:

etc.........

cartoon overbuilding

relatet to the latest numbers / passend zu den letzten daten
http://immobilienblasen.blogspot.com/2006/11/us-oct-starts-permits-much-weaker-than.html

"I remember when all this was completely undeveloped."

U.S. Oct. starts, permits much weaker than expected

can´t wait for the spin on this one.......

U.S. Oct. single-family permits fall 3.8% to 1.173

U.S. Oct. single-family starts fall 15.9% to 1.177

U.S. building permits down 28% year-over- year

U.S. housing starts down 27.4% year-over-year

U.S. Oct. starts, permits much weaker than expected

U.S. Oct. building permits fall 6.3% to 1.535mln, 9-year

U.S. Oct. housing starts fall 14.6% to 1.486 mln, 6-year low

much more details from calculatet risk ! mkae sure you see the charts!!!!!!

http://calculatedrisk.blogspot.com/2006/11/housing-starts-and-completions.html

roubini http://www.rgemonitor.com/blog/roubini/158194

paper money http://paper-money.blogspot.com/2006/11/todays-new-construction-report.html

enron acounting to keep inflation low

more examples of enron style acounting......./ mehr beispiele für kreative erhebungsmethoden

http://immobilienblasen.blogspot.com/search?q=statistik

hat tip to barry ritholtz! make sure you read the full story

http://bigpicture.typepad.com/comments/2006/11/ppi_hedonic_adj.html

plus http://housingdoom.com/ for the hint.

PPI Hedonic Adjustments

“Prices for light motor trucks fell 9.7 percent following a 3.5-percent gain in the preceding month. From October 2005 to October 2006, the index for light motor trucks dropped 12.4 percent…In accordance with usual practice, most new-model-year passenger cars and light motor trucks were introduced into the PPI in October. (See Report on Quality Changes for 2007 Model Vehicles, USDL 06-1973.)” Quality changes produce hedonic adjustments to prices. Ergo the large drop in vehicle prices is fiction. It’s the work of BLS bureaucrats, the Winston Smiths from “1984”.

The ‘quality’ or hedonic adjustment to light vehicles is $392.10/vehicle. The BLS reduced the actual costs of these vehicles by $392.10 ERV. For autos the BLS adjusted the real price $139.96 lower. So as we have maintained for years, PPI and especially CPI are constructed so that they can’t show actual inflationary changes or pressure." (emphasis added)

Trade Deficit Has Roots Here, Not in China

it sounds to me that the "tough talk" from the us to china in forcing a revaluation in the yuan is only political talk. the us should be glad that the chinese are the main force that the rates in the us are so low(buying all kinds of very low yielding bonds). will be interesting to see how the us will blame china if they stop buying the bonds ......... until that date the us is the main beneficiary.

das ganze gerede von einem stärkeren yuan ist nichts mehr als politicshes kalkül. die schuld für arbeitsplatzverluste wird auf die chinesische wöhrung abgeschoben. so wird von den eigentlichen ursachen abgelenkt. die usa sollen froh sein das die chinesen haufenweise niedrigverzinsliche bonds erwerbenn und so die zinsen niedrig halten. bin gespannt was die usa sagne wenn tatsächlich eines tages die chinesen aufhören die bonds zu kaufen..... bis dahin sind die usa klar der profiteur dieser praktiken.

more on china and trade

http://immobilienblasen.blogspot.com/2006/11/supporting-trade-contrary-investor.html#links,

http://immobilienblasen.blogspot.com/2006/08/wie-rational-ist-china-importierte.html#links

http://tinyurl.com/ycwmkh

(Bloomberg) -- The harsh reality of America's trade woes is encompassed by two prominent numbers: September's $64.3 billion trade deficit and October's 4.4 percent unemployment rate.

......, the nation is consuming far more in goods and services than it produces.

The ideal resolution of this dilemma would be for the demand for U.S. exports to rise gradually while American households increase their savings and cut spending.

Odds don't favor such a neat combination happening. And new legislation penalizing China's trade policy isn't going to help much.

The U.S. trade deficit -- which is likely to approach $800 billion this year -- isn't primarily due to the refusal of China to let the value of its currency, the yuan, rise significantly relative to the dollar. .....

Spotlight on China
In general, the Democrats have blamed China and its pegged currency for much of the loss of manufacturing jobs, .....

Executives from General Motors Corp., Ford Motor Co. and DaimlerChrysler AG met on Nov. 14 with President George W. Bush to discuss their difficulties and to complain that the Japanese government was artificially depressing the value of the yen.

Most of the attention remains on China, and it's certain there will be attempts by the new Democratic majorities in the House and Senate to press for a faster revaluation of the yuan than the roughly 5 percent that has occurred since the peg to the dollar was loosened in July 2005.

It's not that simple to create more manufacturing jobs in the U.S. Factory employment has been falling for decades, primarily because of rapid growth in productivity in manufacturing, not because of globalization.

The Numbers
Over the past two decades, Bureau of Labor Statistics figures show that manufacturing productivity doubled. As a result of that greater efficiency, U.S. factory output grew by two- thirds while the number of manufacturing jobs declined by almost one-fifth.

This year about $4.5 trillion worth of manufactured goods will be produced in the U.S. Based on trade figures for the first nine months of the year, the U.S. will import about $1.4 trillion worth of goods and export about $775 billion, making a total of $5.1 trillion available for the U.S. economy.

The $625 billion difference in goods imported and exported - - or 12 percent of the $5.1 trillion total -- is a measure of this year's likely net reliance on foreign goods production.

In other words, even with a trade deficit approaching 7 percent of gross domestic product, the U.S. reliance on imported goods isn't nearly large enough to account for the long-term decline in manufacturing employment. Instead, the culprits are the big gains in factory efficiency and the major shift in consumption toward services and away from goods.

Jobs Decline
Since there is no reason to expect those trends to change, there is no reason to expect the number of factory jobs to stop declining.

.....Making the yuan more expensive in dollar terms would only affect the cost of the value added to a manufactured product in China. In many instances, Chinese exports include a substantial share of value produced in other countries in the form of components which are imported into China, assembled and then exported. In that case, the only value added is the assembly.

Only if the country exporting the components also revalued its currency relative to the dollar, would the U.S. buyer's cost rise noticeably. Even that assumes that someone in the production chain does not accept a lower profit margin to keep the dollar price unchanged.

Joint Ventures
Whalley and Xian found that what they call Foreign Invested Enterprises -- usually joint ventures between foreign companies and Chinese companies -- accounted for more than half of Chinese exports and 60 percent of its imports in 2003 and 2004. And even though the FIE's produced more than 20 percent of Chinese GDP -- and accounted for about 40 percent of its growth in those years - - they employed only 3 percent of its workforce.

FIE's production is geared to exports with the foreign partners providing ``both distribution systems abroad and product design for export markets,'' they say.

It doesn't seem likely that revaluation of the yuan in any reasonable measure would disturb this entrenched arrangement.