Quickies

FALLOUT

It was just a few weeks ago that I wrote about some evidence that I was seeing that suggested the real estate market in my neck of the woods (North of NY on the Hudson) was stabilizing. I was aware of a number of transactions for upper end homes that looked encouraging. To be sure this price action was at levels that were about 40% below the froth of 2007. Supply and demand seemed to be leveling out at around 2002 values. So we have had a lost decade. But I was a bit encouraged by what I saw as evidence of increasing demand.

Now the update. Two of the deals I referred to have cratered. The reason? No mortgage money? Not the case, these were all cash buyers. Sellers remorse? Hardly, not after two years on the market.

The reason for the busted deals? It was the Indian Point Nuke that did them in. Both of the deals I know of (and apparently a few others) had the happy buyers walking as the homes in question were inside of the ten-mile radius of a 40 year old and badly flawed nuke. Apparently the events in Japan have caused some re-thinking.

Some RE agents are taking the issue head on. Rather than hiding the fact that there is a nuke nearby they are highlighting it as an “Upside”. They provide a copy of the following story suggesting that Governor Cuomo will soon close IP and when it does all that depressed real estate is going to pop by 20%.

 Proving once again that real estate agents, like car dealers and bankers, have no shame.

Cuomo’s comment from New York Magazine:

"It should be closed. This plant in this proximity to the city was never a good risk."

On Hot Money

I have been pounding the table over the issue of banking secrecy for some time. I don’t like when Potentates can stash huge dollars in secret accounts. I don’t like it when drug dealers, pirates, dirty politicians or anyone else has a convenient and safe place to hide money. I think these policies work against the common good. When a guy like Ghaddafi can stash the odd $20 billion in US banks there is something wrong.

I have been amazed at the level of opposition I get on this theme. There is a large group out there that believes that no regulations are good regulations. I am no fan of regulations, but it is equally clear to me that we need some rules that are followed. If we don’t, we just promote and encourage lawlessness. Sorry.

For those that think I am off in left field with this notion I provide you with a letter from those good folks at the American Banking Association. They are doing everything they can to keep foreign accounts in the dark. So those that think secret accounts are such a good idea are actually in bed with the likes of the ABA. I think both of them should change their tune. At a minimum they ought to consider who they are sleeping with.

Link to letter. Some snippets:

Know your enemy

Gadhafi……..WSJ

Gaddafi……..London Telegraph

Qaddafi…….NYT

Kadafi………LA Times

Kaddafi…….Christian Science Monitor

Gadahafi…..Yahoo

Khadafy……NY Daily News

Ghadafi…….NZZ

Khaddafi…..NZZ

Khadifi……..Wikipedia

Ghaddifi……Daily Mail

Shipping News

The Baltic Dry index has bounced 50% from 1000 to 1500 in the past month. Other indexes have followed suit. I asked a friend in shipping if this a true turnaround or just a dead cat bounce in an index that fell 75% (peak to trough) in 10 months.

I got an interesting response. In this fellow's opinion the improved outlook can be attributed to a big deal by the Carlyle Group (DC hedge fund). Bloomberg link

The Carlyle Group, the world’s second-biggest private equity fund, said it’s forming a venture to buy more than $5 billion in container, dry bulk, and tanker vessels as well as other shipping assets.

So is this a good sign for the industry? Yes and no was the answer.

Anytime an entity commits big capital like this it will affect the whole industry. Pure supply and demand suggests ships are gong to up in value. So that seems like good news.

But the other side from the Greek shipper:

“For years we have all made a fortune shipping raw materials and other goods to and from China. The Chinese know this. The China/Carlyle deal will create competition that now does not now exist. I am afraid that our biggest customer will no longer need our ships. Long-term this will be bad for us.”

Chinese dominance of the global economy is growing every week. Nothing is going to slow that ship down. It's written in stone.