A Frightening Anticipation of Jobless Reports Drop Confidence

Finally, we saw more than average volume return to the market today, as the fear for increasing unemployment as well as worsening economic conditions took the wind out of buyer’s sails. To be honest, I believe the market should be reacting like this every day, considering the mess we’re in. It’s still hard to say whether this will begin the next crash, as Obama hope still lingers, but it indeed made a statement that the bear is still out there.

Everyone is talking about the upcoming jobless reports coming out Friday. Some analysts are saying that this month we could see a jobless count of 670,000 for December (today’s ADP report showed that we slashed 693,000 jobs in the private sector). I personally feel that we will be even worse than that number and have a lot more to go. We haven’t even begun liquidating the retailer positions. Once more of these big retailers go down, we should see some absurd unemployment numbers. In fact, in regards to that subject, North Carolina had an interesting experience this past week. North Carolina, being headquarters for a lot of major commercial and investment bankers had some problems with their unemployment office. It seems that their unemployment computer service was overloaded, because over 50,000 people were trying to access it at once. After fixing it and adding room to the server, the server was overloaded a second time due to over 70,000 simultaneous requests. The actual phone number to call was down as well. I believe the reality of our situation is slowly beginning to settle in with people.

I wanted to share an article from the Boston Globe dealing with commercial real estate. Myself being a big proponent of SRS, I thought it would be appropriate. It said, “If you think selling a home was tough in 2008, be thankful you weren't trying to unload an office building.
Sales of Boston-area commercial properties plummeted 86.5 percent last year, with about $1.35 billion in property changing hands compared to $10 billion in a red-hot 2007, according to the global real estate firm Jones Lang LaSalle.

The drop-off portends a turbulent 2009. Now, real estate investors don't have data to guide them in pricing properties in the soft economy, making it less likely that buyers will come forward out of fear of overpaying.

"Its a huge challenge right now for investors to figure out if they're getting a fair price," said Lisa Campoli, executive vice president at commercial brokerage Colliers Meredith & Grew. "During the last downturn in the 1990s, we had the S&L crisis and some banks went under, but there wasn't the global lack of confidence we're seeing right now."

Commercial real estate is the latest sector to be hit by the deepening recession, with the fallout just now sweeping through Boston and other markets. Rents are starting to fall sharply as vacancies pile up.

The impact is especially severe in New York City, where there is a large increase in space available for subleasing, a key measure of weakness in the office market. Available sublease space in Manhattan has increased 43 percent from the end of 2007 as foundering financial companies have rapidly shed jobs and floors of offices.” All over the country real estate is dying. Just remember, most of these properties that are dying have very high leveraged loans on them. Eventually, this should come back to haunt the banks again. This is why I still can’t even closely be comfortable with buying financials right now.

As a result of the -2.72% day for the Dow, almost all of the shorts were up today. SRS had a moderate 5.5% up day as hopes for more Obama bailouts keep investors a little confident in some of these REITS. Don’t ask me why. FXP had some enormous gains, closing over 15%, as China continues to have problems with their businesses. The element that is killing China is their enormously large work force. I mean, just to give everyone jobs, they need to be exporting into almost every nation. As demand is going down, this is killing their employment. Their unemployment number may be higher than our actual population. Also, if any of you have dealt with the Chinese culture you will know that when times get tough, they close the door to spending COMPLETELY. Here in the US, we love to use our credit cards, and dig us into more debt. With the Chinese culture, most people choose to save than to spend. This lack of spending and lack of exports should bring a lot of hardships for their country and businesses.

I wouldn’t be surprised to see this sell off continue tomorrow. As more negative employment numbers come out and other sore economic data, I don’t see a lot of optimistic buying going on. We could rebound a bit either tomorrow or Friday, but I still feel the bear is here right now. The only thing keeping me from putting all my chips into the short side is Obama and his list of bailouts. I’m going to let that ride out a bit, plus I’ve got enough currently in SRS, SKF, FXP and EEV.

I also wanted to clarify some things with my Lending Club investment. The times that were given in my portfolio is when the loan is set to begin, not mature. So my money will be tied up longer than I originally anticipated. However, I will still be shooting for that 10.5% return, it is just going to take longer. Anyway, I love looking into these different investment opportunities. If you know of some that have worked for you, please share. Have a great night everybody, keep up the pace. Happy Trading and we’ll see you tomorrow.

9 comments:

  1. Anonymous Says:

    any comments on stem cell companies or alternative energy (solar)? with the new administration moving in, i don't think it's unlikely to expect at least a minor boost in those companies. look at actc, up over 200% in less than 5 days.

  2. Anonymous Says:

    Doug Kass of thestreet.com has as one of his 20 "surprises" that commercial real estate actually does a lot better than people think, especially if banks are incentivised to make loans. I would be a little careful with SRS. As for FXP, an influential newsletter writer (and CNBC commentator) Dennis Gartman has been recommending buying China via FXI for at least a couple of weeks and continues this recommendation. So both FXP and SRS are fighting an uphill battle (in the short run) against influential people.

  3. Anonymous Says:

    I found an interesting pro SRS article:

    http://wallstnation.com/SRS-01052009.HTML

    I'm in big averaged at $65 and hoping for at least $120 in the next few months. I lost a lot though playing around with SRS options, bad idea.

  4. Finance Fanatic Says:

    Anon,
    As nice as that sounds from Mr. Kass, I work heavily in the commercial real estate business, and it's scary. I attended a BofA meeting last month and they dont see the CMBS lending markets coming back until 2012. Until then, they said expect interest rates to inch towards double digits and have extremely rigorous underwriting. That coupled with massive office and retail vacancies, commercial transaction volume should be extremely low for 2009.

    As for China, I would just say to have these analysts visit the country. My partner is Chinese and fears for the country. You can find analysts that say anything. I may be wrong, but these are my thoughts on those.

  5. Anonymous Says:

    you didn't know how long your money was tied up in lending tree? that's not good man.

  6. Finance Fanatic Says:

    Anon,
    It's my trial run, I am only using $200. I was a bit loose in my underwriting. But I am still very pleased thus far and have had no hickups or problems. The interface is very user friendly.

    Shorts look good today, fairing very nice for my portforlio.

  7. Finance Fanatic Says:

    Earlier Anon,
    I did talk of alternative energy either in my last post or the one before. I definitely think their will be a boost in alt energy (I like STP). But yeah, good point.

  8. QUALITY STOCKS UNDER 5 DOLLARS Says:

    Where are the shovel ready jobs.

  9. Maria Owens Says:

    We know that unemployment is one of the main and big problems of this time. A lot of able and clever people are jobless but i suggest them to start their own small businesses of best research paper writing services or anything else. Because it is better than nothing.