Commercial Real Estate Finance

Posts Tagged ‘treasuries’

As I sit here and watch the S&P 500 trade through 1040, I can’t help but wonder, “Are we Japan?”

That’s right, we’re back to the “Inflation/Deflation” debate. Are we going to print endless sums of money and end up like Zimbabwe? Or, are we going to be too conservative with the USD and end up like Japan? Or, are we going to spend like maniacs and end up like Greece?

Assuming we have an answer, what does it have to do with commercial real estate? Read the rest of this entry »

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China’s decision to let the Yuan appreciate is a drain on global liquidity. While various legislative elements and the treasury have aggressively pushed China to revalue the Yuan, the Federal reserve has indicated that rates will stay low for a while. Unfortunately these policy goals are at odds and it leads to some confusion in the market place.

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Somehow the image of a canary just doesn’t do the $10 trillion treasury market justice.

As you may have read, last week former Fed Chairmen Alan Greenspan remarked that the steep yield curve is a “canary in the coal mine“; a warning that interest rates will be heading higher.  Dallas Fed President Richard Fischer made a related comment regarding the effect of large fiscal deficits on long term interest rates.  These are important points because they describe the intersection between fiscal and monetary policy.  The ‘net’, of course, is that short term interest rates are under increasing pressure to rise.

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Reuters reports that two-year notes sold by Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity. In school I learned that investing in international real estate is risky because of differences in property rights; political risk including layers of taxations; and financial risk such as foreign exchange risk. There are several ways one can try to adjust account for international investment risks. One way is to use the adjusted NPV model proposed by Hayden and Musa (1990). Unlike the standard DCF model which discounts the cash flows by the discount rate, the international DCF model multiplies the Cash Flows by the Forward Exchange Rate in the numerator, and uses a discount rate that incorporates political risk, labor risk, and un-hedged currency risk. Read the rest of this entry »

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Which one of these kids is doing their own thing?

What is interesting about this chart?

I’ll give you a hint: it’s the blue line. More specifically, it’s the bit at the end that pops up when all the others go down. Read the rest of this entry »

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Caveat Emptor!

As this recent article in the WSJ articulated, the recent run-up in stocks has given some hope to the commercial real estate market. What’s interesting is that many of the enterprises are players who typically enjoy prospering as private shops. Perhaps the warm reception Starwood received earlier this year encouraged them.

Like with the rash of private-shop-turned-public IPO’s announced in early 2007 (Fortress, Sam Zell, BlackRock…etc), I can’t help but feel a little nervous. While Zell actually sold his public company, the point remains the same. I’m not so sure I want to be buying what these guys are selling. Why? Read the rest of this entry »

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