Next financial fall out is ...??? commercial real estate

AS I have said, when do the office towers go ? Ain't a matter of IF, it's WHEN.

When do they stop building the bloody condos for yuppies - crazed yuppies who are suddenly going to find themselves empoverished? (Reports are there are no buyers any more in some well-heeled communities.)

When - now that peak oil's reality is SINKING IN, although still a bit under the radar - are they gonna admit that they can't pay the utility bills and the lights go off?

It is my contention that looking at the ca$h flows of the bigger players will give you the clues as to what sectors of the economy goes next -- it has to do with corporate culture being of NO DAMNED GOOD to anyone since the Reagan years and then just continuing into today when Cheney and BuZh got their fingers into every little fiscal pie all over North America. Hank Paulson LIED all year, he will continue to lie, and this weekend I wuz hoping the chickens would come "home to roost" on all their friggin headz when he faced the music, I mean press. Having at one time (long ago) worked on The Street and in the legal offices of S&P, I still maintain that when the rationing of the airlines takes effect (big gas guzzler, big carbon footprint, little rationale for flying nearly empty planez .. ) the other thing to watch is the fall out of guys like Fed Ex, DHL/Purolater -- businesses that have been propped up by the flow of PAPER - as in CONTRACTS for the past two decades .. But don't take my word for it, just WATCH.

I worked for these desperados; I know what they got up to and how incredibly, really stoopid they were. They thought I was the stoopid one for not going about getting a legal degree and joining The (gambling) Game, but ya know, I still have my wits and humanity about me, as the saying goes.

I think I can safely say their MacMansions will be incredibly hard to heat in the near future.

One of these high buck lawyers I worked for did the following - he raised his kids living in a high buck apartment in NYC -- once he got them through school, and was an empty nester THAN he built his MANSION North of Yonkers! I mean really. For how many millions of dollars was he gonna impress the neighbors?

I mean really ... I think people are BONKERS. But then they surely did keep The System going for an awfully lot longer than I thought they would!!

It might have been wiser to find out how to plant seeds rather than find out which ex-urban gardening shop provided the best looking lilacs as said Lawyer's wife was a "pro" at doing. May Martha Stewart finally find some common sense. She was a Very Bad Role Model for America.

For those just "catching up" and have questions, put fiscal crisis into the search box in the top left hand corner.

In the meantime, before the lights go out, place yer buck$ on bicycle manufacturers and running shoe makers IN NORTH AMERICA.

http://www.handmadebicycleshow.com/
http://www.bikeforest.com/

Veeger

On 12/20/07

Wall Street's Next Crisis
by Jesse Eisinger

So far, the current credit crisis has zeroed in on mortgages for the less affluent. But easy credit was a sprawling millipede whose wobbly legs reached into the farthest corners of the financial markets. This is the year the other 999 shoes start to drop.

Any loan to any borrower can begin to seem subprime if there's too little down and too much debt. And that, unfortunately, brings us to the commercial-real-estate market.

For the past several years, the market for commercial property—offices, malls, apartment buildings, industrial plants, warehouses, and the like—has enjoyed the very best of times. Prices soared, and lenders lent readily. Owners had no problem meeting their payments. By early 2007, delinquencies had fallen to record lows.

In their own way, however, commercial-real-estate loans were no less foolish than those made to home buyers with speckled credit. And as with the subprime mess, the reckoning will come. Just like what happened in other sectors already hit by the credit crunch, these loans will cause problems that will probably find their way beyond the obvious players in the commercial-real-estate market. Judging by the aspects of the credit crisis we've already seen, commercial-real-estate trouble will probably emerge sooner than people expect—and will be worse than they anticipate.

The implosion is going to be a refreshingly simple and familiar story. The commercial-real-estate frenzy has none of the nagging complications found in the residential market. There aren't any targets of predatory lending. There are no huge failures by government regulators. The aftermath won't see people thrown out of their homes—an unadulterated societal ill regardless of whether they should have known better or were tricked into taking on loans they couldn't afford.

Let's make it clear up front: The commercial-real-estate blowup—while ugly—won't be as bad as the current housing crisis. It's a smaller market, and any single property often has a diversified group of tenants with different sources of income. The supply of buildings didn't increase dramatically over the past several years, as in residential real estate. And the losses won't be as severe, because many commercial spaces can be refashioned for new occupants.

But there will be trouble, in part because of the rise of the untested commercial-real-estate structured-finance market. Just as with residential mortgages, Wall Street banks package commercial-real-estate loans, slicing them up into tranches according to risk and parceling them out to a range of investors. In 1995, $15.7 billion worth of commercial-mortgage-backed securities were issued. Through the third quarter of 2007, $196.9 billion was issued, according to Commercial Mortgage Alert, a trade publication. That amount means 2007 will be a record year, even though issuance collapsed in the fourth quarter as investors panicked over the credit crunch. Right now, there is about $730 billion in commercial-mortgage-backed securities outstanding. "Not only have we been in a rising tide, but the loans are very different in underwriting standards than even five or 10 years ago," says Alan Todd, head of commercial-mortgage-backed-securities research at J.P. Morgan. "We haven't been through a cycle yet" with these new structures, he adds ominously.

The perennial lesson to be drawn from the coming slump: You can't protect greedy and myopic people from themselves. With residential mortgages, one of the most persistent myths to take hold in recent years was that home prices on a national level had never decreased in a given year. That wasn't true, but perhaps we can forgive people for being hopeful.

The commercial-real-estate market has no such excuses. Everyone knew that the business is highly cyclical. Indeed, a huge downturn had occurred as recently as the early 1990s, within the memory of most of the professionals now in the market.

Amid the tall office spires of America's cities, big-money pros have simply been playing a game of greater fool, trying to bring in huge returns with borrowed money and sell out before the arrival of the crash they knew was coming. And in this case, the fools won't just be famous developers. Some of the same banks and Wall Street firms now entangled in the subprime residential crisis will also be caught in the mess. The commercial-real-estate meltdown will be a market failure, pure and simple. We will be able to look at the wreckage in the next several years with wonder and awe, untroubled this time by sympathy for those left holding the bag.

Here's what we know about what happened in commercial real estate: Lending standards fell, starkly. Or as I prefer to see it, they were thrown out of the 60th-floor window of that gleaming office tower in downtown Atlanta/Phoenix/New York/San Francisco/insert your city here. The gap between the cost of debt servicing and the cash actually being generated by the buildings narrowed. What's more, it used to be that banks made loans for no more than 80 percent of the value of a property to ensure a healthy cushion of protection, but by the early part of 2007, loans were sometimes made for 120 percent of a property's value. Who would be so crazy as to lend more than a property is worth? Anyone who believes in perpetual-motion machines—that is, that rents and underlying property values must always go up.

A prime example is Tishman Speyer Properties, which paid a record price for two giant New York apartment complexes. To make the purchase work, the company must now figure out a way to kick out current tenants—many of whom have their rents stabilized by law—at a faster rate than has been managed in years past, in order to replace them with ones who will pay more. Historically, that turnover has been about 6 percent, says Todd, but Tishman Speyer is assuming a rate of more than double that for the first couple of years, and 10 percent for the next few after that.

Free money frothed up the market. The clear top—as clear at the time as it is in hindsight—was when real estate mogul Sam Zell sold his Equity Office Properties to the Blackstone Group, a private equity firm. Blackstone had entered into a bidding war with Vornado Realty Trust for E.O.P. and ended up paying much more than it had initially bid. Yet Blackstone managed to unload so many E.O.P. properties so fast that the deal looks brilliant. The bag holders are ultimately the ones who will appear foolish. Indeed, in a sign of things to come, one titan already does: Harry Macklowe, a famed New York real estate buccaneer, leveraged himself to the gills to buy seven New York office buildings from E.O.P., a side agreement to the Blackstone purchase. He borrowed $7.6 billion, based on stratospheric valuations, while putting a minuscule $50 million of his own equity into the deal, financing much of the purchase with short-term debt. Since the summer, Macklowe has struggled to refinance the debt in increasingly choppy markets. And he has had to put up as collateral his trophy property, the General Motors Building in midtown Manhattan.

Lending standards had been loosening across the industry for years. Standard & Poor's and Moody's both voiced early concerns in late 2004 and the beginning of 2005. Sure, "supply and demand is in balance, but that's not a license to loan more money against a given cash flow," says Tad Philipp, Moody's managing director of commercial-mortgage finance. "What we were seeing was riskier and riskier loans, and the loans got riskier still. And we are just past the top of the cycle."

Despite their misgivings, the ratings agencies kept slapping seals of approval on commercial-real-estate structures. Just as they did when rating securities containing residential mortgages, the agencies relied heavily on recent historical data, which were misleading. Such transactions are designed so that investors who take on the most risk stand to get wiped out first. What happened is that the level of cushioning shrank dramatically, meaning damage from bad loans will seep into higher-rated tranches more quickly than generally expected.

To its credit, Moody's started requiring higher levels of protection in the spring of 2007. S&P and Fitch, according to a J.P. Morgan analysis, lagged significantly—and won market share as a result. Those two will come to regret that they didn't respond faster to the Moody's move. And of course, those stuck with the paper won't be able to ignore what they bought during the frothy times, when commercial-real-estate structured finance became a big, lucrative business for Wall Street. As financial firms pushed these securities out the door, the structures took on alarming qualities.

As Todd explains, in the early part of the decade, commercial-mortgage-backed-securities deals rarely had any one loan that was so big it dominated the pool. But in recent years, the top 15 loans in a 200-loan pool could make up 40 to 65 percent of the pool's total value. In the old days, any single default wouldn't hurt a structure disproportionately. That's no longer true. Investors and ratings agencies haven't fully appreciated how hairy these structures have become, according to some commercial-mortgage experts. Todd calls this blindness to risk the agencies' and investors' "biggest mistake" with regard to commercial real estate. "You are disproportionately exposed to the largest loans.... It's been so good for so long, we don't have models set up to look at defaults properly," he says.

In recent months, as real estate developers have scrambled for funding from lenders, a standoff has developed. The banks haven't been able to find buyers for structured financial products. At some point, the banks will have to come down in price, and then they will take losses, just as they have with leveraged loans made to corporations being taken over by private equity. Since the losses haven't happened yet and since we've reached the end of a very good year in commercial real estate, Wall Street is understandably reluctant to face reality. Why take losses that will eat into this year's bonuses if you can take the losses next year, when, as everyone knows, the market will be bad?

We've seen this throughout the financial markets in 2007. This has been the season of see no evil, hear no evil, speak no evil—until you absolutely have to. But you can't hold off losses forever, as the huge write-offs at banks have demonstrated. Through the first nine months of 2007, Wachovia was by far the top contributor of loans in the commercial-real-estate-structures business, followed by Lehman, Credit Suisse, Morgan Stanley, and J.P. Morgan, according to Commercial Mortgage Alert. Now the firms are sitting on those loans, waiting to unload them. "The problem is there are no buyers. Nobody wants to take a really big loss and jump the gun too quickly," an investment professional at a commercial-real-estate investment trust told me. "There's a game of chicken going on."

A few weeks ago, a hedge fund manager emailed me a PowerPoint presentation on the commercial-real-estate market. It opened with a typically dry title: "2008 C.M.B.S. Forecast."

I clicked through to the first page, "Capital Markets." It had a picture of a derailed train. The next page, "Credit Fundamentals," included a photo of a bridge collapsing in a hurricane. Next came "Property Values," featuring an imploding skyscraper. The fourth page was "Economic Outlook"—a ship run aground on the rocks.

And the slide titled "Conclusion"? A photo of the exploding Hindenburg.


http://www.portfolio.com/views/columns/wal...l-Estate-Crisis

STUFF: Is Our Worship of Consumerism and Technology Making Us Depressed?

By Bruce E. Levine, Chelsea Green Publishing. Posted November 26, 2007.

It would be a lot easier to address the increasing rate of depression among Americans if we weren't so afraid to admit that our consumer society makes us unhappy.

The following is an excerpt from Surviving America's Depression Epidemic: How to Find Morale, Energy, and Community in a World Gone Crazy (Chelsea Green, 2007) by Bruce E. Levine, and is reprinted here with permission from the publisher. In this book, Levine delves into the roots of depression and links our increasingly consumer-based culture and standard-practice psychiatric treatments to worsening depression, instead of solving it.

U-Turn from the Wisdom of the Ages

Throughout history many seekers, thinkers, and prophets have taught about overcoming despair. However, it would be difficult to top the greatness of Buddha, Spinoza, and Jesus. All three were rebels and heretics. All three rejected societal norms and religious orthodoxy. Buddha rebelled against both the caste system and religious rituals. Spinoza rebelled against hypocrisy in his community and certain aspects of accepted theology. Jesus rebelled against a materialistic society and religious authorities. Buddha gave up royalty and wealth, Spinoza was excommunicated and nearly assassinated, and Jesus sacrificed his life.

Buddha, Spinoza, and Jesus all came to a similar conclusion about despair -- quite a different one than that reached by the modern mental health establishment. Although each described it differently, Buddha, Spinoza, and Jesus concluded that the source of our misery is avarice, material attachment, and self-absorption. While each used different language, they all provided a path away from torment and toward wellbeing. Buddha taught how to release oneself from narrow self-interest and craving. Spinoza taught how to liberate oneself from greed and other irrational passions. And Jesus taught, very simply, about love.

Modern mental health culture classifies depression as quite a different matter from the despair spoken of by Buddha, Spinoza, and Jesus. However, while modernity has resulted in different sources of pain, human beings and their responses to pain can hardly have changed so dramatically. And so to believe that Buddha, Spinoza, and Jesus would have dealt only with mild and moderate unhappiness and left debilitating depression for future mental health professionals to tackle seems quite unlikely.

Buddha, Spinoza, and Jesus were not alone in their understanding of the importance of moving beyond self-absorption. In more recent times, their message has been echoed by many others, including psychoanalyst and social critic Erich Fromm (1900-1980). Fromm argued that the increase in depression in modern industrial societies is connected to their economic systems. Financial success in modern industrial societies is associated with heightened awareness of financial self-interest, resulting in greater self-absorption, which can increase the likelihood for depression; while a lack of financial self-interest in such an economic system results in deprivation and misery, which increases the likelihood for depression. Thus, escaping depression in such a system means regularly taking actions based on financial self-interest while at the same time not drowning in self-absorption -- no easy balancing act. In Fromm's culminating work, To Have or to Be? (1976), he contrasts the depressing impact of a modern consumer culture built on the having mode (greed, acquisition, possession, aggressiveness, control, deception, and alienation from one's authentic self, others, and the natural world) versus the joyful being mode (the act of loving, sharing, and discovering, and being authentic and connected to one's self, others, and the natural world).

Fromm's penetrating social criticism of an alienating society resulting in increased depression was, during his lifetime, widely respected by many mental health professionals. Today, however, the mental health profession has come to be dominated by biopsychiatrists: those who see depression as a matter mainly of brain chemistry. Fromm, if alive today, may well have labeled this as "microscopic self-absorption." And he most certainly would be sad that mental health treatment has increasingly become a component rather than a confrontation of modern consumerism.

Technology Worship and Scientific Sham

The faith of our culture is that technology is omnipotent. On my way to getting a PhD, I learned about behavioral technologies, about cognitive technologies, and about biochemical technologies. I learned to think about depressed human beings as broken objects that needed to be fixed. After experiencing the futility of this type of approach, I learned a completely different way of thinking.

I do not oppose technology per se. I merely oppose the uncritical worship of it. My concern is not unique; it echoes that of Ralph Waldo Emerson, Lewis Mumford, and many others. Human beings have always had technology of sorts -- some sort of tools and techniques to make their lives easier. The difference today is that technology has increasingly become the supreme value of American culture.

Technology is all about control, and the more we Americans singularly worship technology, the more we singularly worship control. Our society is increasingly dominated by megatechnologies -- huge, complex technologies that most of us neither understand nor can control. Human beings pay a psychological price for any technology that controls them more than they control it; they can actually feel more powerless. And the feeling of powerlessness is highly associated with depression.

Uncritical worship of any value or belief leads to extremism and fundamentalism. Henry David Thoreau, another early critic of technology worship, lamented, "Men have become the tools of their tools." He knew that a society that worships technology would spend little energy assessing its ultimate value, resulting in what he described as "improved means to unimproved ends." Beyond its attribute of control, technology has no meaning, and if people singularly worship it, they will have meaningless lives. A meaningless life, like a powerless life, is a depressing one.

The consequences of technology fundamentalism are no less comical and tragic than the consequences of antitechnology fundamentalism. The belief that technology is the solution to all of life's problems is no less naive than to believe that technology is the source of all of life's problems.

American mental health culture has increasingly become a technology fundamentalist one. Drugs have become a first option for many doctors, electroconvulsive therapy has made a comeback, and psychosurgery is no longer frowned upon. Technology fundamentalists demand speed and efficiency. By the early 1990s, two-thirds of doctor visits were less than fifteen minutes, and a 2001 RAND Corporation survey revealed that the majority of physicians were diagnosing depression in less than three minutes. In a culture that worships speed, I suppose this is considered progress, but a culture that truly respects life would view this quite differently.

In a society that worships technology, the authority of science provides any given technology with legitimacy, and so there are great incentives to convince the public that the techniques used to measure depression are scientific. However, the technology for assessing depression lacks the basic elements of science -- including objectivity and verifiability.

One of the most common depression measurement techniques used in researching the effectiveness of antidepressants and other biochemical treatments is the Hamilton Rating Scale for Depression (HRSD). The HRSD was the primary measure of depression in the NIMH STAR*D study, and it is routinely used in antidepressant studies evaluated by the FDA for drug approval. However, even the American Journal of Psychiatry, the American Psychiatric Association's own journal, concluded in 2004, "Evidence suggests that the Hamilton depression scale is psychometrically and conceptually flawed." And the Journal of Clinical Psychopharmacology noted in 2005, "When looking closely at the construction and content of the HRSD, it is clear that this is a flawed measure." When legitimate scientists examine the HRSD, they immediately notice its biases in how depression is defined, the arbitrariness of a point total for qualifying a person as depressed, the arbitrariness of what qualifies as remission of depression, and the subjective nature of how responses are interpreted and evaluated.

In the HRSD, clinicians and researchers rate subjects, and the higher the point total, the more one is deemed to be suffering from depression. There are three separate items about insomnia (early, middle, and late), and one can receive up to six points for difficulty either falling or remaining asleep; however, there is only one suicide item, in which one is awarded only two points for wishing to be dead. The HRSD is heavily loaded with items that are most affected by psychotropic drugs, and thus it is not surprising that pharmaceutical-
company-sponsored researchers use the HRSD in their antidepressant studies. And it is therefore especially damning for antidepressants that even with such measurement dice loading, these drugs routinely fail to outperform placebos.

Even with depression measures that reflect the standard psychiatric view of depression more accurately than the HRSD, there are interpretation problems. Standard depression symptoms such as depressed mood, loss of interest and pleasure, sleep difficulties (too little or too much), activity difficulties (agitation or lethargy), lack of energy, guilt and self-reproach, poor concentration, indecisiveness, and suicidality are not objectively quantifiable in a scientific sense (and weight gain or loss, a standard symptom that can be objectively measured, is routinely assessed via interview -- without a scale or baseline weight). I have talked to people who, while eating a sandwich, report that they have no appetite, and I've talked to others claiming a good appetite who in reality have not eaten in days. People routinely deny they are suicidal when they are in fact so, and vice versa. And I've known people who had poor concentration because they were passionately in love, and people with excellent concentration who were considering suicide.

There can be some value in interviewing or polling people on their subjective experience of "unhappiness," "depression," or "number of depressive episodes" and comparing the responses of different populations. However, only someone who knows nothing about the objective nature of real science could take seriously an arbitrary point total on a subjectively interpreted questionnaire and conclude it to be a scientifically conclusive criterion for diagnosing a person as suffering from the disease of depression (or declare that another arbitrary point total is scientific evidence for remission from the disease of depression). Yet such is common practice in the mental health establishment.

A worship of technology rather than a respect for its power and limitations has also resulted in denying or ignoring phenomena that are obviously nonquantifiable. However, if one dismisses all phenomena that are not measurable, some of the most significant aspects of humanity are simply not discussed. Science cannot accurately quantify the emotional impact of a given trauma on any given person or the love required for healing that wound. And authenticity, spontaneity, compassion, and other variables involved in morale and healing are too subjective to be captured with any scientific certitude. But rather than acknowledging the limitations of quantification, powerful nonquantifiable antidotes to depression are too often simply neglected.

The Unhappiness Taboo

There are many possible reasons for the increasing rate of depression among Americans, but I believe that one important cause is a culture that demands happiness. The pressure to be in a good mood can make people ashamed of not being in one. This "pain over pain" can then result in normal low moods becoming prolonged bouts of despair.

Why did this unhappiness taboo take hold so strongly in the United States? One possibility is a societal distortion of the right to "the pursuit of happiness," which has come to mean the expectation of being in a good mood all the time. The irony here is that the signers of the Declaration of Independence signed their death warrant had the American Revolution failed, and it is difficult to imagine Thomas Jefferson telling them, "Don't worry, be happy." It was once accepted that experiencing uncomfortable feelings was often necessary to achieve an ideal.

The unhappiness taboo has dominated the United States since it became a nation primarily of consumers rather than citizens, a gradual process that accelerated with the ascent of advertising in the beginning of the 1900s, and which dramatically spiked with the consumer boom following World War II. The belief that people should be either happy or trying to be happier is a fundamental principle of modern consumerism -- the never-ending search for products and services to bring happiness and prevent unhappiness.

In a culture of consumerism, people are forever trying to buy happiness, and sellers are expected to appear happy so as to inspire confidence in what they are offering. There are few businesses that are not in some sense selling happiness or the relief from unhappiness -- and thus there is enormous pressure to maintain the appearance of happiness.

The perversion of the pursuit of happiness to mean that it is our duty to be chronically upbeat has, according to psychologist and journalist Lesley Hazleton, resulted in the labeling of anxiety and depression first as weakness and now as illness. In 1984 she published The Right to Feel Bad, which confronts this unhappiness taboo:

"Feeling good is no longer simply a right, but a social and personal duty. ... How are we to see depression as a legitimate emotion? How are we to avoid calling ourselves sick or wrong when we feel it? How are we to reclaim it from the clutches of those who claim that anything but feeling good is bad? ... Seeing depression as pathological -- that is, as illness -- is a useful way of invalidating it. ... If we were allowed to be depressed -- if we could allow ourselves to be so -- we might find it much easier to tolerate."

Hazleton convincingly argues that depression is a normal human reaction, and if we cannot accept it, we become ashamed and alienated from ourselves, and this is what makes depression so lethal.

Is it the stigma of depressive illness that we need to eliminate, or rather the stigma of being depressed? Instead of viewing being depressed as weakness or illness, we Americans might better decrease depression by understanding it as a normal human reaction -- to be taken as seriously as all other dimensions of our humanity, but neither shamed nor pathologized. When people label a natural component of their existence as "sick," they run the risk of alienating themselves from a part of who they are, making that component far more problematic than it naturally is. By contrast, when we accept the whole of our humanity, we are often rewarded with greater joy -- and almost always receive increased wisdom about life.

Bruce E. Levine, Ph.D., is a clinical psychologist and author of Surviving America's Depression Epidemic: How to Find Morale, Energy, and Community in a World Gone Crazy (Chelsea Green, 2007).

Another piece on SSRI's and VIOLENCE

From:
www.NewsWithViews. com

subtitled: You CANNOT fight fire with fire

May 1, 2007

Is Psychiatry Scientific and Dangerous?

This is laughable but it has serious
consequences. When a child is diagnosed with depression the child is often
placed on a potent SSRI drug. The manufacturer of one of the leading SSRI drug
knew for many years that the drug caused loss of the ability to control violent
behavior thus increasing violence toward self (suicide) and others (mass
murders). This information was covered up because it would have hurt sales of
the drug. Nearly every teen involved in the Columbine and Red Lake mass murders
was taking an SSRI drug......

http://www.newswith views.com/ Howenstine/ james58.htm

by
Dr. James Howenstine, MD.

Powered by ScribeFire.