Implode-Explode Heavy Industries news feed Tracking the many faces of the global credit implosion. en-us iehi-feed-65425 Fri, 10 Jul 2020 14:07:38 GMT A Coffee Chain Reveals Flaws in the Fed's Plan to "Save" Main Street ``La Colombe didn't think it qualified for the government's forgivable small-business loan program given its size and canned coffee manufacturing business. It is too small to have ready access to the debt markets big companies use to raise funds -- markets that are chugging along with the help of Federal Reserve backstops.

The company's leaders thought that another Fed program, one intended to help midsize businesses by providing loans, would be their best shot at getting help. But when the central bank announced the details in early April, it was clear that La Colombe would not qualify. The company has too much debt relative to earnings to meet the Fed's leverage restrictions.

"That just doesn't make sense for companies like La Colombe, because we're growing so quickly," said Aren Platt, who leads special projects for the company.


First announced on March 23, the Main Street program finally allowed banks to register as lenders in mid-June -- but only about 450 of the nation's thousands of eligible banks have registered so far. Banks have reported that many clients are not interested in using the program, the Fed chair, Jerome H. Powell, acknowledged to concerned lawmakers during testimony in late June.


Small-town bankers say some clients have gotten spooked by the substantial paperwork involved in using the program. Big companies often have more attractive options elsewhere in the market. Some, like La Colombe, have too much debt to apply. That problem is echoed across the comment letters by companies that were expanding their footprint pre-pandemic.


The program fully opened on Monday, and Mr. Rosengren said banks had already offered loans for companies that had been hard-hit, like movie theaters. He declined to say how many, and said he expected demand to ramp up over time. The Boston Fed disclosures show that hardly any of the biggest banks, other than Bank of America, are willing to publicly say that they will make loans to new customers through the program.


Lawmakers have repeatedly pushed policymakers to make the program more inclusive and widely available. But Mr. Mnuchin has been relatively cautious about taking on credit risk, occasionally describing the Main Street program as a backup option that could be successful without ever being used by providing certainty to the market that credit would remain available.

Compare this with the Fed's pandemic support of the stock market and corporate debt -- it just goes in and buys without the companies having to do anything, or give up any rights...

iehi-feed-65424 Fri, 10 Jul 2020 14:02:31 GMT What It's Like to Enter the Work Force From Your Childhood Bedroom Over Zoom Matthew Feldman, who graduated from Syracuse University in December before interning at Edelman, the public relations firm, in the spring, started his full-time communications job with the defense contractor Raytheon in June from the basement of his family's home in Bellefonte, Pa. -- the house where the family has lived since Mr. Feldman, 23, was in kindergarten.

He logs on to work from a couch or a bar top. The weak signal from the basement, strained by an entire household working remotely, made Mr. Feldman fearful that his orientation calls during his first week would drop.

"We had four people doing different jobs all working on the same internet connection," he said. "It was really a nightmare."

Mr. Feldman's father, an elementary school principal, and his mother, an elementary school teacher, had claimed the main floor of the home, where for the past few months his mother taught classes on Zoom. His younger brother, a rising junior at Georgia Tech, was also taking classes remotely.


Relationships are the key to success, Mr. Hellmann said, adding that people who build connections with their teams and with colleagues in other departments are better positioned for promotions -- something Ms. Delgado said she was worried about falling behind on.


"You're with people that love you, and a community you're super familiar with," he said of being at home. But after attending college out of state, studying abroad in Spain and living in various cities around the country for internships, Mr. Feldman said, he longs for the personal growth that comes from living in an unfamiliar place. He has considered working remotely from Brooklyn for a few months.

iehi-feed-65423 Thu, 09 Jul 2020 22:18:08 GMT Soaring demand for federal jobless benefits points to fresh fissures in the U.S. economy The number of unemployed people collecting jobless benefits through a temporary federal-relief program has exploded in the past month to more than 14 million, suggesting the U.S. labor market is facing a fresh set of problems.

After a small decline in mid-May, applications for benefits filed through the federal Pandemic Unemployment Assistance program have soared 53% to 14.4 million as of June 20 from 9.37 million a month earlier. Federal continuing claims are reported with a two-week lag.


The portrait of the coronavirus-infected labor market looks worse if all continuing jobless claims are combined. Almost 33 million people were receiving benefits as of June 20, up from 31.5 million in the preceding week, according to Labor Department data.

By contrast, the Bureau of Labor Statistics' normally more reliable monthly employment report indicated 17.8 million people were unemployed in June.

The gap between weekly continuing jobless claims and the monthly unemployment numbers has left a big -- and inexplicable puzzle -- for economists. Why aren't all these people telling the Labor Department they are unemployed?

The BLS has already said that people aren't answering the survey correctly (really, it lacks the appropriate categories to handle the current situation). A lot of people are functionally unemployed but hopeful of being rehired -- it's hard to infer from this that they are "employed", though we hope their employers' businesses do survive, and rehire them.

iehi-feed-65422 Thu, 09 Jul 2020 22:11:49 GMT Why ‘safe haven' gold and the stock market are now moving the same direction Chalk it up, in part, to opportunity costs. Efforts by global central banks to push down interest rates, which have fallen into negative territory in real, or inflation-adjusted terms, in the U.S. and are outright negative in many parts of the world, mean that investors who hold gold aren't missing out on the yield they would earn from holding bonds in more usual circumstances.


"Firstly, central bank policy is a strong driver behind higher gold prices. Not only are official rates close to zero in a large number of countries, they will unlikely go up in our forecast horizon," Boele wrote.

Most central banks have announced quantitative easing, with the Federal Reserve embarking on unlimited QE and the Bank of Japan and the European Central Bank also implementing large programs. "This sounds like music to the ears of gold bugs as money floods into the market and currencies begin to decline," she said.


"Now the psychological resistance of $1,800 per ounce has been surpassed. It seems that investors will only be satisfied if the former (intraday) peak in gold prices at $1,921 per ounce is reached and taken out. Above that, the important psychological level of $2,000 per ounce is within reach," she said.

iehi-feed-65418 Wed, 08 Jul 2020 21:55:29 GMT Never Before Have I Seen So Much Fake Unemployment & Jobs Data by the Bureau of Labor Statistics | Wolf Street The difference between those actually receiving unemployment insurance (31.5 million people) and those that the BLS claims are unemployed has today exploded to 13.7 million. In other words, the BLS has under-reported the number of unemployed by at least 13.7 million people.

No one knows how many jobs were created on net, but it wasn't 4.8 million as the BLS tried to make us believe, or even a smaller positive number, but a negative number, with more jobs being shed on net, because the number of people still receiving unemployment insurance since the end of May has surged by 1.3 million people, according to the Labor Department.


Of course, the dire unemployment data released today by the Department of Labor got practically no air time. And the BLS's fake BS trumped, so to speak, all news coverage.

iehi-feed-65417 Wed, 08 Jul 2020 15:10:18 GMT How Trump Could Lose the Election--And Still Remain President iehi-feed-65415 Tue, 07 Jul 2020 02:05:00 GMT Kushner's family, Trump tenants received coronavirus business aid The Trump administration funneled millions of dollars in coronavirus aid to companies with potential conflicts of interests, including some owned by Jared Kushner's family and others housed in buildings operated by the president's real estate company, according to records made public Monday.


Kushner no longer owns [Observer Holdings, LLC], but his sister's husband, Joseph Meyer, counts it as part of his investment firm, Observer Capital, according to public records.

Princeton Forrestal LLC and Esplanade Livingston LLC, a couple of holding companies owned partially by Jared Kushner's father, mother, brother and sister, pocketed between $1.35 million and $3 million in PPP funds collectively, the records showed. The exact amount the Kushner-tied LLCs received isn't available as the Small Business Administration records only provide ranges for amounts larger than $1 million.


At least two companies renting space at the Trump International Hotel on Central Park West and the Trump Hotel in Washington, D.C., got between $2.1 million and $5.3 million collectively, the records show.

Jordan Libowitz, the communications director of Citizens for Responsibility and Ethics in Washington, said the PPP payments present a potential conflict of interests, since some of that aid could've ended up being paid as rent into the coffers of the Trump Organization, which the president still owns and profits from.

"It's part of this ongoing issue of potential conflicts of interest from the president continuing to hold a stake in his company," Libowitz told the Daily News.

iehi-feed-65414 Tue, 07 Jul 2020 01:59:41 GMT PPP: Relief went to hair salons, restaurants, law firms -- and some members of Congress After withering pressure from lawmakers, the federal government on Monday released data on hundreds of thousands of borrowers from the $660 billion Paycheck Protection Program -- the main relief vehicle for small and mid-size companies suffering from the pandemic lockdowns.


Multiple members of Congress or their families benefited from the Paycheck Protection Program, the data shows.

They include Rep. Mike Kelly, a Republican from Pennsylvania who owns namesake car dealerships, received three loans ranging up to $1 million, according to the data. His spokesman said in a statement that Kelly is not involved in day-to-day operations and "was not part of the discussions between the business and the PPP lender."

As it was designed, the program provides potentially forgivable loans to businesses with fewer than 500 employees in order to keep their workforce on payroll. The program was so critical at its inception that a first round of funding dried up in less than two weeks and had to be replenished. But interest in the program largely dried up in recent weeks, as shifting rules and the inability of borrowers to come back for a second loan limited the number of small businesses willing or able to go through the application process.

As mentioned elsewhere, a business invested in by Nancy Pelosi's husband (at about an 8% stake) also got money.

iehi-feed-65413 Mon, 06 Jul 2020 23:32:22 GMT Coronavirus can spread as aerosol ‘beyond any reasonable doubt,' over 200 scientists tell the World Health Organization More than 200 scientists have called for the World Health Organization and others to acknowledge that the coronavirus can spread in the air -- a change that could alter some of the current measures being taken to stop the pandemic.

In a letter published this week in the journal Clinical Infectious Diseases, two scientists from Australia and the U.S. wrote that studies have shown "beyond any reasonable doubt that viruses are released during exhalation, talking and coughing in microdroplets small enough to remain aloft in the air." That means people in certain indoor conditions could be at greater risk of being infected than was previously thought.

... The letter was endorsed by 239 scientists from a variety of fields. It stated that the issue of whether or not COVID-19 was airborne was of "heightened significance" as many countries stop restrictive lockdown measures.

iehi-feed-65412 Mon, 06 Jul 2020 16:25:01 GMT What the Coronavirus Has Wrought on New Development in NYC ... [Long Island City,] as in Manhattan, a number of factors, including changing tax incentives and the retreat of foreign buyers, have slowed sales just as many new projects have been coming online. In Long Island City, out of 1,945 condo units completed since 2018, nearly 60 percent remain unsold, he said.

"If you're a shoemaker, and 60 percent of your shoes haven't sold, you've either made the wrong shoes, or you've made too many," he said.

The problem is not necessarily too much building -- there is huge demand for affordable housing in the city. It's a matter of what was built, agents said.

"There is simply no demand for two-bedroom apartments that are 950 square feet and go for $1.5 million," said Patrick W. Smith, an agent with Corcoran who specializes in Long Island City, referring to the recent trend toward apartments with less square footage but higher-end finishes. The average size of a two-bedroom apartment in Manhattan is 1,344 square feet, according to Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers & Consultants.

Mr. Smith considers himself lucky that his upcoming projects are still in the planning stages, which means the developers still have time to change their layouts to react to the coronavirus. At one upcoming project, the ubiquitous open floor plan has been modified to create an old-fashioned foyer -- a decontamination area of sorts before entering the living room. At another, some kitchens will shrink to make way for offices, now that so many people are working from home.


The lasting impact of Covid-19 is not lost on buyers. Gary Hirshfield, a 58-year-old ophthalmologist who works in Queens, moved with his wife, Stacey Kruger, also an ophthalmologist, into a three-bedroom penthouse at Galerie, a nearby condo project, at the end of 2019. Now he is having second thoughts.

"Today, if I could get my money out, I'd consider it," Mr. Hirshfield said. For the cost of his 1,690-square-foot apartment, he said he could have bought a 5,000-square-foot house with some land in the suburbs. But Long Island City appealed to him because of the restaurant scene, its proximity to Manhattan, and the high-end fitness center in the building (now closed to residents). He still believes in the value of the project, but doesn't know when he'll feel safe enough to use the gym again.

Some buildings are already sweetening the pot to entice new buyers. At the Neighborly, where prices range from $585,000 for a roughly 440-square-foot studio to $2 million for a three-bedroom penthouse, the developer, New Empire Corp., is offering to pay residents' taxes and common charges for the first full year, almost $10,000 for a one-bedroom. Another project, Corte, offered a number of "rent-to-own" plans, in which a renter would pay toward ownership -- a tactic more commonly seen during the last recession.


It's unclear how well the units will be received in this new climate, but early data suggests hurdles ahead. Nearly a quarter of New York City rentals were discounted in May, up from 15 percent in the same period last year. And the discounting was most pronounced in buildings with more than 50 units, where the median discount was 9.3 percent below the original asking price, according to Nancy Wu, an economist with the real estate listings site StreetEasy. She calls that discount the "social distancing premium," because the data suggests renter wariness with more crowded buildings.

iehi-feed-65409 Fri, 03 Jul 2020 22:05:54 GMT Dalio: "Capital Markets Are No Longer Free Markets" Due To Central Bank Interference iehi-feed-65407 Tue, 30 Jun 2020 21:18:13 GMT The Fed is buying some of the biggest companies' bonds, raising questions over why ``Disclosures filed this week surrounding its credit facilities show the Fed is not only buying the bonds of struggling companies hit hard by the coronavirus pandemic but also some of the stalwarts of American industry -- Microsoft, Visa and Home Depot just to name three companies whose debt the Fed holds directly.

The Fed holds an expansive list of other companies indirectly, including names like Apple and Goldman Sachs, through exchange-traded funds it has purchased.

In addition, it has purchased bonds in speculative-grade companies as well as ETFs, including the SPDR Bloomberg Barclays High Yield Bond, a fund in which the Fed holds a $412 billion position.


"It does sort of make you wonder if it makes sense for them to be buying bonds of Apple. Spreads are so tight and stocks are doing so well. You wouldn't think they would need support from the Fed," said Kathy Jones, director of fixed income at Charles Schwab. "The reasoning I guess makes sense. But when you look at the outcome, you scratch your head and wonder whether this is where we need the money to go."

To be sure, the purchases thus far have been modest.Disclosures the Fed filed over the weekend show it owning nearly $430 million in individual bonds and $6.8 billion in ETFs. That's barely a sliver in a corporate bond market worth more than $10 trillion and fixed income ETFs with assets of $961 billion.


Those purchases thus far have come in the secondary market, or bonds already issued. The Fed announced Monday it soon would open its primary market facility, which will buy directly from companies.

"They've achieved a couple things. They've managed to follow through while having very little impact on how those bonds actually trade," said Tom Graff, head of fixed income at Brown Advisory. "This is literally saying we're going to go through the motions of doing what we said we were going to do, but we're going to do the bare minimum and have as minimal impact as possible beyond what we've already created by acknowledging the program will exit at all."

This is at least a bit unseemly given it takes place while small businesses have no Fed facility of their own, and must struggle through SBA programs and unemployment to get any assistance (with possibly the majority of them not getting any, so far).

iehi-feed-65406 Tue, 30 Jun 2020 20:02:03 GMT Land loss has plagued black America since emancipation -- is it time to look again at 'black commons' and collective ownership? Discriminatory practices have also affected who owns property as well as land. In 2017, the racial homeownership gap was at its highest level for 50 years, with 79.1% of white Americans owning a home compared to 41.8% of black Americans. This gap is even larger than it was when racist housing practices such as redlining, which denied black residents mortgages to buy, or loans to renovate, property were legal.

The lack of ownership is crucial to understanding the crippling economic disparity that has hollowed out the black middle class and continues to plague black America -- making it harder to accrue wealth and pass it on to future generations.

A 2017 report found that the median net worth for non-immigrant black American households in the greater Boston region was just US$8, but for whites it was $247,500. This was due to "general housing and lending discrimination through restrictive covenants, redlining and other lending practices."

Nationally, between 1983 and 2013, median black household wealth decreased by 75% to $1,700 while median white household wealth increased 14% to $116,800.

iehi-feed-65404 Fri, 26 Jun 2020 22:02:48 GMT Millennials Will Be Poorer Than Parents If They Can't Buy Homes - What Singapore's Example Teaches Many analysts have zeroed in on housing as the reason millennials have failed to match their predecessors. As of 2019, millennials owned only 5% of the U.S. housing stock, compared with 15% for the previous generation at the same age. The homeownership rate for households headed by Americans younger than 35 was 43% in 2005, but only 31% in 2015. Instead of accumulating mortgage debt like their predecessors, they've racked up student loans and consumer debt.


The U.S. used to facilitate mass wealth-building via homeownership. The GI Bill helped WW II veterans buy homes en masse, and the expansion of the suburbs gave them and the boomers who followed plenty of new homes to buy. But those homes have appreciated in price and nationwide construction has stalled, leaving many millennials priced out of the market amid a slow-growing stock of housing. Today, U.S. housing, rather than a driver of wealth accumulation, has become an engine of intergenerational inequality.

Some countries have done a better job than the U.S. of using housing to build and transfer wealth across generations. One of these is Singapore. Although most of Singapore's housing is government-built and is technically government-owned, the government allows occupants to buy and sell 99-year leases that essentially function as title deeds. Homeownership, therefore, is near-universal. The government also gives out subsidies to help young families buy starter homes. Because the government manages the supply of new homes, it can ensure that young people earn a decent return by the time they retire.

The U.S. could adapt this system to promote mass homeownership and wealth creation for millennials and later generations. The government could build and sell new housing, especially in inner-ring suburbs, potentially using eminent domain to keep construction costs low. Young people -- especially young families -- could get down-payment assistance to buy their first home. By carefully managing the amount of new housing construction, the government could make sure that home prices appreciated enough to provide people with a decent return over their lifetime, but not too much to price younger people out of the market.

Each generation would thus get to enjoy what the WW II generation and boomers enjoyed -- the security and personal freedom of owning a home at a young age, coupled with the knowledge that their wealth would appreciate over time. And because down-payment assistance would be funded by progressive taxation, the system would redistribute wealth to those who weren't born with rich parents.

The alternative -- letting young Americans reach middle age without a stake in the U.S. economic system -- is both sad and frightening to contemplate because it could lead not just to ennui but to unrest. A housing system built loosely on the Singaporean model would allow today's young people to enjoy the same life progression as their parents and grandparents, preserving the American dream in perpetuity.

iehi-feed-65403 Fri, 26 Jun 2020 20:26:39 GMT Workers Were Allowed To Return To New York Offices This Week. Almost None Of Them Did. ... the city entered into Phase 2 June 22, allowing commercial office properties to operate at 50% capacity, outdoor dining to commence, barbershops to reopen and real estate agents to tour properties. There were fewer than 1,000 hospitalizations from the virus Thursday, the lowest number since March 18, per state figures. But businesses remain cautious with back-to-work plans, and occupancy at many office buildings this week has been even lower than some predicted, industry experts told Bisnow. Sources pointed to the summer lag as a contributing factor. Most acknowledged anxiety around the subway as a serious obstacle, and some said exploding infection rates in states that opened sooner has slowed the return.

"When we see high spikes outside of New York, there may be a fear factor here for going back to work, and it's not a surprise," said CBRE Senior Managing Director of Investor Services Thomas Lloyd, whose company handles property management for 80 office buildings in Manhattan and 20 across Westchester and Long Island. The company has been tracking occupancy levels each day since Monday. In the Downtown portfolio, which covers buildings south of 42nd Street, occupancy over the last two days was at around 6%. In properties north of 42nd Street, occupancy has been hovering around 9%, Lloyd said, and out of a total of 41 multi-tenanted buildings, six are still totally empty.

In buildings in the suburbs, which entered Phase 2 ahead of the city, occupancy is at around 30%, Lloyd said. "They are lower than expected, given the circumstances that the state of New York allowed 50% [capacity] and our surveys of tenants. We were expecting a 15% return to work in the first few days," he said.

iehi-feed-65402 Fri, 26 Jun 2020 18:18:47 GMT Manhattan Office Rents Seen Plunging 26% in Prolonged Downturn Asking rents could decline 26% to about $62.47 a square foot (roughly $672 per square meter) in a prolonged recession, according to a report from Savills. Rents haven't fallen to that level since 2012, the real estate services firm said.

Some offices in New York City have reopened, though many buildings remain empty. The city faces a long recovery with workers wary of public transportation and dense workplaces.

"Many assume that when the stay-at-home measures are lifted, there will still be Covid-19 fears that will continue to materially influence behaviors and the economy," Savills said. "These fears will likely remain until a vaccine or antibody therapy is developed and widely available, which experts currently estimate is at least 12 months away."

iehi-feed-65399 Thu, 25 Jun 2020 01:36:13 GMT ‘Will the Fed spend trillion of dollars, every year, forever to support the market?' asks billionaire Howard Marks iehi-feed-65398 Thu, 25 Jun 2020 01:35:24 GMT COVID fallout: Pressure Builds For A CMBS Bailout Whether the Fed or Congress will act on relief for CMBS isn't clear. Even the fate of another stimulus package, which is scheduled to be taken up by Congress in July, is uncertain. The prospect of sending more cash directly to Americans, which President Donald Trump seems to support, is a matter of contention among members of the legislative branch, The Washington Post reports.

About $20B in CMBS debt is now in special servicing, most of it associated with hospitality and retail properties, which are by far the hardest-hit sectors of commercial real estate.

The rigidity of CMBS as a financing structure has helped exacerbate the crisis. Only 20% of hotel owners with conduit loans have been able to adjust their payments recently, compared to 91% of those with bank loans, The Wall Street Journal reports, citing American Hotel and Lodging Association data.

Hotel occupancies and revenue per available room improved in May compared with April, but those metrics still are historically low for the industry, leaving many borrowers unable to keep current. Retail operations have been similarly crushed by the coronavirus pandemic.

iehi-feed-65397 Wed, 24 Jun 2020 02:52:00 GMT Trump's "Boy Wonder" Kushner Faces Foreclosure Auction on Times Square Building The massive retail condominium owned by Kushner Companies at 229 West 43rd Street in Midtown Manhattan is headed for a Uniform Commercial Code (UCC) foreclosure auction scheduled for June 30, according to an auction notice from JLL, which is marketing the sale.


The auction-- which fast-tracks the foreclosure timeline -- is being pursued by one of the property's mezzanine lenders, Paramount Group, under the entity 229 WEST FUND VIII LP. Paramount had provided a $70 million mezzanine loan as part of larger refinancing in 2016. The 251,000-square-foot asset will be sold at a "as is, where is" basis -- all cash ...

Kushner made a splash with its $296 million purchase of the condo in the fall 2015, receiving a $470 million appraisal not long after closing the acquisition and then subsequently locking in a $370 million debt package a year later to refinance the asset (Kushner bought it from Africa Israel USA, a U.S. subsidiary of Israeli investment firm Africa Israel Investments, at a 7.53 percent cap rate, according to data from CoStar Group.) That package included a $285 million commercial mortgage-backed securities (CMBS) loan from Deutsche Bank as well as Paramount's $70 million mezzanine loan and a separate $15 million mezz loan from SL Green Realty Corp., as CO previously reported...

In the middle of an unpredictable and volatile retail market last year that spilled into the early part of this year, that $285 million CMBS loan was sent to its special servicer KeyBank last December due to income struggles caused by tenancy financial troubles. Its transfer came after Kushner failed to fund "a shortfall on the loan's debt service payments and required reserves," according to a previous statement from Kroll Bond Rating Agency (KBRA) that was reported by CO. The loan itself -- which had been previously watchlisted in Sept. 2017 -- is split among four CMBS conduit transactions, including the JPMDB 2017-C5, the CD 2016-CD2, the CD 2017-CD3 and the CGCMT 2017-P7. At the time of the transfer, Kushner had also defaulted on the building's junior mezzanine debt and was in negotiations with that lender, according to KBRA.

Not long after Kushner's purchase, tenancy issues began to set in, muddying its cash flow outlook. In the first two years, the landlord had unfruitful experiences with two different celebrity chefs. Guy Fieri's Guy's American Kitchen closed in 2017 after a 5-year-long stint at the location. And the landlord had also gotten embroiled in a lawsuit in early 2018 over leased space and rent payments with chef Todd English's operating company Outstanding Hospitality Management. English had been selected to oversee a food hall there that never came to fruition.

These misses, coupled with eventual troubles with two of its largest tenants -- experiential attractions in Gulliver's Gate and National Geographic's Ocean Odyssey -- culminated in the special servicing transfer of the $285 million senior mortgage earlier this year.

iehi-feed-65395 Tue, 23 Jun 2020 02:20:14 GMT Rural America is more vulnerable to COVID-19 than cities are, and it's starting to show