Property Grunt

Thursday, September 18, 2008

Real estate chatter: The Great American Bugout and how Morgan Stanley is trying to pull a Houdini

Yeah, they planned it.

There has been a ton of financial chatter that I have been hearing from the financial trenches. I am unable to verify or confirm the authenticity of the chatter. It is just what I hear.

1. The American Markets are done.

The investors with the liquidity are staying away from the American Markets are treating them as if it is a reunion of former members of Plato's Retreat. The new game plan is emerging markets. They are focusing on places like Russia.

This piece of chatter is pretty much confirmed by the New York Times article on on the current state of Sovereign Funds.

To Avoid Risk and Diversify, Sovereign Funds Move On From Banks

The explanation is simple, bankers in the region say. Plenty of other, more attractive assets are out there right now.

With markets having been hit by the global downturn, compelling, value-priced deals are numerous — from sports teams in Britain and publicly traded companies in Russia to deals closer to home, like Middle East infrastructure buys, Youssef Nasr, chief executive of HSBC Bank Middle East, said.

Middle East funds certainly took their wallets out in September — just not for Wall Street banks. A unit of Kuwait Investment Authority is taking stakes in the country’s national telecommunications company, and Abu Dhabi’s investment fund bought the Manchester City soccer team. A Dubai fund is in talks with the British property developer Minerva, and Saudi funds are weighing agricultural tie-ups in Pakistan.

But bankers say that because the funds have already invested billions in American financial institutions, they are less likely to put more cash into that sector right now. Middle East sovereign wealth funds “put more money in a few months ago then they would have ideally done,” because financials were cheap then, Mr. Nasr said. That has “unbalanced” the portfolios of sovereign wealth investors, he said. “Now they need to go in the other direction” to diversify, buying up assets that are not financial institutions.

Sovereign wealth funds “haven’t disappeared, they’ve remained on the sidelines or gone elsewhere,” said Jan Randolph, head of sovereign risk at Global Insight, an economic forecasting firm with offices in London and Boston.

My theory is that they are waiting till things really hit rock bottom, after all why should they buy a rapidly depreciating asset?

This is a no brainer but buyers that are armed with tons of liquidity are the ones in control. Which means they can demand guarantees for their investments. Anyone that says otherwise is either delusional or in denial.

2.Citibank is not going out like that!

Citibank is not going down anytime soon. I am unsure if this is common knowledge but apparently there is a 51% stake owned by a member of Saudi royalty. Allegedly this guy has 30 wives, if he can take care of them, he has no problem laying out a couple of billion to keep things going.

3. Federal Governement: Lender to the world

It is common knowledge that the Federal Government is being very generous with their lines of credit. But what is really f**ked up is that they are pretty much giving credit to everyone, including overseas banks.

4. The Morgan Stanley Shell Game or Isn't this how they got into trouble in the first place?

Now here is the story behind the Wachovia and Morgan Stanley merger.

Morgan Stanley is definitely drooling over Wachovia however they are having trouble raising the capital for a merger, therefore they are taking chunk of Morgan Stanley and selling it to JP Morgan Chase. The capital from that will be used for the Wachovia merger. But wait there's more. Apparently after that deal closes, they are going to go after Wamu which is already on the auction block.

Expect alot of layoffs in that direction.

I have also been hearing the following being said a lot which although I understand the commonalities, I disagree with its use. "It feels like 9/11 all over again."