Credit deflation and the reflation cycle to come (part 3)

[sancho panza]

#Herecomesthebankingcrisis

There's something about the ongoing crash in San Fran CRE that will have BK watchers intrigued.I suspect their office vacancy rate will lead their debt ratings lower .

Although US banks don't look as levered as UK ones.I'll run some Dowd Buckners tmrw if I get the chance.

https://wolfstreet.com/2021/10/04/office-slump-gets-even-uglier-in-houston-san-francisco-los-angeles-chicago-washington-dc-seattle-manhattan/

San Francisco, from office shortage to office glut in no time.

The office market in San Francisco is about half the size of Houston’s. Just a few years ago, it was one of the hottest, tightest, and most expensive office markets in the US. But the erstwhile heavily hyped office shortage has turned into a magnificent office glut, second only to Houston’s, and getting closer.

The amount of office space for lease rose to 26.2% of total office space (up from 23.6% in Q2), and up from 7.3% two years ago (chart via Savills):

Sublease inventory, which had exploded to 8.9 msf in Q1 as companies put their unneeded and empty office space on the market, ticked down in Q3 to a still huge 8 msf after some leases were signed.

The overall asking rent has dropped 10% in Q3 2021 from Q3 2019, to $72.79 psf per year. Class A asking rents dropped 15% to $75.98.

But in this market that has gotten hit so suddenly by a collapse in demand and a glut in supply, pricing remains to be discovered, and asking rents are a landlord’s wish. But deals are being negotiated.

Total leasing activity rose to 1.9 msf, a pandemic high, after the market froze up last year, with 40% being renewals. But it was still down by 26% from Q3 2019.

Manhattan, the giant

Overall availability in the largest office market in the US with 468 msf of inventory, remained at the record level of 18.4%, first set in Q2. By submarket, availability ranged from 11.4% in Hudson Square to 23.7% in the Financial District and 24.5% in Soho

[Yadda yadda yadda]

10 minutes ago, sancho panza said:

#Herecomesthebankingcrisis

There's something about the ongoing crash in San Fran CRE that will have BK watchers intrigued.I suspect their office vacancy rate will lead their debt ratings lower .

Although US banks don't look as levered as UK ones.I'll run some Dowd Buckners tmrw if I get the chance.

https://wolfstreet.com/2021/10/04/office-slump-gets-even-uglier-in-houston-san-francisco-los-angeles-chicago-washington-dc-seattle-manhattan/

San Francisco, from office shortage to office glut in no time.

The office market in San Francisco is about half the size of Houston’s. Just a few years ago, it was one of the hottest, tightest, and most expensive office markets in the US. But the erstwhile heavily hyped office shortage has turned into a magnificent office glut, second only to Houston’s, and getting closer.

The amount of office space for lease rose to 26.2% of total office space (up from 23.6% in Q2), and up from 7.3% two years ago (chart via Savills):

Sublease inventory, which had exploded to 8.9 msf in Q1 as companies put their unneeded and empty office space on the market, ticked down in Q3 to a still huge 8 msf after some leases were signed.

The overall asking rent has dropped 10% in Q3 2021 from Q3 2019, to $72.79 psf per year. Class A asking rents dropped 15% to $75.98.

But in this market that has gotten hit so suddenly by a collapse in demand and a glut in supply, pricing remains to be discovered, and asking rents are a landlord’s wish. But deals are being negotiated.

Total leasing activity rose to 1.9 msf, a pandemic high, after the market froze up last year, with 40% being renewals. But it was still down by 26% from Q3 2019.

Manhattan, the giant

Overall availability in the largest office market in the US with 468 msf of inventory, remained at the record level of 18.4%, first set in Q2. By submarket, availability ranged from 11.4% in Hudson Square to 23.7% in the Financial District and 24.5% in Soho

I'd like to see the stats for London offices. They're still throwing them up in the city but I've no idea who is going to use them. Businesses might move up market, at lower prices, but that would mean outlying areas such as Old Street and Southwark emptying out.

[Hancock]

11 minutes ago, Bobthebuilder said:

Talking out my arse here, but.

Never try to guess the housing market, it's a beautiful witch bitch, with lovely eyes that never seem to fade.

Oh yes i do like to think of myself at being the most useless on here at doing so, though like a stopped clock i will be right eventually, and interest rates are seemingly the only things that going to crash prices.

Its a 3 bed detached that i presume they'd take 250K for. Its more a case of if i could do with the hassle of being a landlord. 10 year fix at 2% on £125k is £533PCM, such a place would rent for close to a grand PCM.

[Bobthebuilder]

5 minutes ago, Hancock said:

Oh yes i do like to think of myself at being the most useless on here at doing so, though like a stopped clock i will be right eventually, and interest rates are seemingly the only things that going to crash prices.

Its a 3 bed detached that i presume they'd take 250K for. Its more a case of if i could do with the hassle of being a landlord. 10 year fix at 2% on £125k is £533PCM, such a place would rent for close to a grand PCM.

I would never contemplate being a landlord myself, but I know plenty who do it for a living.

[wherebee]

10 hours ago, Hancock said:

You still looking to sell before you believe a BK happens? seem to remember that being your plan last year.

Just curious about the psychology of it all as a BK "might" be getting nearer.

I'm going to have to accept i lacked the balls the other week to buy 70 odd grands worth of BP at 295p and do a months work to cover the would have been gains.

If a BK happens there'll be another chance at getting such prices, though obviously will spread it out in such a scenario into other sectors.

I've now got 30% sitting in cash.  

Rest in Oilies, some miners, and ARB.L

 

Happy to wait, enjoy the dividends, and if a BK happens jump into more dividend producing stocks.

[leonardratso]

ive got 42P, a bent washer and broken cable tie in my pocket.

[JMD]

5 hours ago, Cattle Prod said:

Cheers, but per the above, it's not going to be raised at all. Kept flat at best. Does anyone think Asian demand is going to stay flat? How is China going to get the oil it needs...

Might 'coal liquefaction technology' give China a solution to its future energy needs? Sasol in South Africa has been doing this commercially for decades. If oil goes to 100 dollars the economics might encourage big uptake, especially if country is sitting on large coal reserves, along with utilisation of carbon capture.                                       CP do you know about this sector and it's viability to bridge the looming oil squeeze, or perhaps do others on here know about the technology?                                                                                                             ...Perhaps another great reason to buy more coal miners?!                                                                                               https://en.m.wikipedia.org/wiki/Coal_liquefaction                            

[macca]

1 hour ago, Bobthebuilder said:

I would never contemplate being a landlord myself, but I know plenty who do it for a living.

People farming.. Its not a job,, its a disease.. exploitation of the young and low paid..

There is no difference in my mind between buy to leech and slavery.

In slavery the lord of the land got people to work for them and gave them food and lodgings,, 

With buy to let people go to work to make the land lord rich, they have just enough money left for food.

They are in the same boat as the slaves were,, There is just a layer of choice.. pay your rent or you can live in a ditch if you want, you have choices.. I'm not forcing you to hand your wages over..

And if you get a pay raise , i will put my rent up to take that off you,, in fact if you get a 2% pay rise, your rents going up 5%.. You will have to cut back.. tighten your belt.. 

[jamtomorrow]

Imagine how this looks once demand has *really* been destroyed by the energy and labour price shocks yet to come. Keep watching those velocity prints

 

[jamtomorrow]

Talking of velocity ... M2 print is still showing no signs of life. Maybe, just maybe, they've fully f***ed it this time?

[jamtomorrow]

Haha, this is an absolute stone-cold bobby-dazzler. Turns out the contract for Gazprom to use the Ukraine pipeline only obligates them to pay for transit - they don't actually have to pump the gas.

And a contract that involves an obligation to supply gas was never an option. In the world of football, this is known as "shithousery" - Europe has been out-shithoused on this one.

 

[Barnsey]

 

[MrXxxx]

12 hours ago, Bobthebuilder said:

There is a poster on this thread that says he rarely buys outside of a crash, I wonder who that person is that was born in Durham?

It's a big lesson I have learnt, be patient and wait for the market to come to you instead.

And don't FOMO...good deals are not unicorns, so wait and like a London bus there will be another one along soon enough.

[MrXxxx]

11 hours ago, Bobthebuilder said:

I was going to type a long rant about this, but better to let it speak for itself.

https://www.bbc.co.uk/news/uk-politics-58804607

 

 

Like he has had a real job to know all about the world of work (2 years at a PR company! )(https://en.m.wikipedia.org/wiki/Oliver_Dowden)

...cheeky fuc£er!

....why does the local electorate vote in such people with limited life skills, would they be as happy with a surgeon with such little experience dictating their future I wonder?

[Boon]

27 minutes ago, Barnsey said:

 

That was probably me, sorry

[Lightscribe]

1 hour ago, jamtomorrow said:

Talking of velocity ... M2 print is still showing no signs of life. Maybe, just maybe, they've fully f***ed it this time?

It would seem so.

https://www.axios.com/trillion-dollar-platinum-coin-mint-janet-yellen-223e7722-d7ba-47c9-b5f6-49a841d181de.html

 

[Loki]

18 minutes ago, Lightscribe said:

It would seem so.

https://www.axios.com/trillion-dollar-platinum-coin-mint-janet-yellen-223e7722-d7ba-47c9-b5f6-49a841d181de.html

 

I love the veneer of it being a reasonable and intelligent action that article puts on it

[nirvana]

20 minutes ago, Lightscribe said:

It would seem so.

https://www.axios.com/trillion-dollar-platinum-coin-mint-janet-yellen-223e7722-d7ba-47c9-b5f6-49a841d181de.html

 

DXY is back above 94......all that Silver and other shiny shite is doing us no good lol 

[jamtomorrow]

6 minutes ago, Loki said:

I love the veneer of it being a reasonable and intelligent action that article puts on it

Similar vibes ...

[nirvana]

what do we think of this POV?

 

[Harley]

3 hours ago, jamtomorrow said:

Talking of velocity ... M2 print is still showing no signs of life. Maybe, just maybe, they've fully f***ed it this time?

I been banging on about V for so long.  Low V with asset inflation of the rich and low MPC.  But now we have inflation fears and money given out we have a higher MP, real inflation and an uptick in V.  Oh yes, this it's different!

PS:  MPC = Marginal Propensity to Consume.

[Harley]

Drax now at about it's initial offer price back in 2006!  Congratulations Drax!  Been quite a ride.  Up c.20% since breaking out of resistance at the start of September so what's next?  I took profits (too soon!) but will personally let the rest ride for now (DYOR).

[Green Devil]

6 minutes ago, Harley said:

I been banging on about V for so long.  Low V with asset inflation of the rich and low MPC.  But now we have inflation fears and money given out we have a higher MP, real inflation and an uptick in V.  Oh yes, this it's different!

PS:  MPC = Marginal Propensity to Consume.

They say inflation causes spending. Like fuck it does. Interested in buying large ticket items, car, house, campervan, boats? Have you looked at the prices recently, theyre soaring. No one is buying now, theyre waiting for the insanity to end (but will it?). 

[DurhamBorn]

49 minutes ago, nirvana said:

what do we think of this POV?

 

Lets hope so because thats all part of the cycle,companies pulling supply back home in lots of areas.All that uses more energy etc during the transfer.China will need to ensure its consumers take up the slack.Every factory around me is hiring,even the very well paying ones.This is only just starting,

The great dis-inflation saw costs cut out by stretching chains and keeping them complex didnt seem to matter with better tech to control everything.Inflation is the great destroyer though.Now every part of those chains is seeing inflation,so the irony is the more diverse and efficient the supply chain was the more it will suffer now.

Profit is being taken from all the complex areas and handed to two sets.The de-complex commods and critical services,and labour.Of course as you show above this transition is violent and dangerous and creates systemic risk for the markets.The likely outcome though is inflation for a cycle 3.5%+ above trend.

[Yadda yadda yadda]

11 minutes ago, Green Devil said:

They say inflation causes spending. Like fuck it does. Interested in buying large ticket items, car, house, campervan, boats? Have you looked at the prices recently, theyre soaring. No one is buying now, theyre waiting for the insanity to end (but will it?). 

If wages start rising more broadly and people expect inflation to continue then things will change. At the moment a lot of people don't have spare money to spend. Those with big wage rises and those that saved lots over the last 18 months due to WFH etc do have lots to spend. The economy is very lopsided at the moment.