Uh, Paging Brian Wesbury: Commercial Real Estate IS a Disaster

By John Galt
July 30, 2011

On Larry Kudlow’s CNBC program tonight, perennial mega-unicorns-pooping-rainbows-and-skittles bull Brian Wesbury from Cumberland er now First Trust Advisers, made the following statement on commercial real estate in this economy:

Uh, Mr. Webury, I’m fairly certain you can afford or already receive the Financial Times and read this story today:

Rating move shocks CMBS investors

In the article by Tracy Alloway the following doesn’t sound like we’re experiencing a boom and in fact the long predicted second shoe is not only dropping but cratering through the floor:

The $750bn US CMBS market has yet to fully recover from the turmoil of 2008, despite some new securitisation deals in recent months. Net issuance of CMBS has been negative ever since 2007, and new issuance is needed to help refinance existing loans. Any decrease in the amount of new CMBS issuance could increase defaults, analysts said.

Fitch Ratings noted in a report on Friday that the default rate for fixed-rate US CMBS had increased to 12.9 per cent at the end of the second quarter of this year, up 2.28 per cent from the end of 2010. Mary MacNeill, Fitch managing director. said “limited issuance” so far in 2011 had not helped to stabilise the default rate.

So if commercial real estate is just being ignored by the mainstream media, I guess that means it’s booming or at least not crashing based on Brian’s logic. Of course there are other more positive articles:

Goldman Sachs Head of Commercial Mortgage Trading Salem Said to Leave Bank

Well heck, that Bloomberg article has to be mean the market is bullish.

Maybe the NASDAQ news release today had better news:

Wells, Deutsche Get $1 Billion CMBS Sold, But With Higher Yields


The dealers sold the top-rated $695 million slice at 200 basis points above interest-rate swaps, compared with yield guidance on Monday of 170-175 basis points, according to a person close to the deal and an investor.

The issue, to finance The Blackstone Group’s acquisition of Centro Properties Group’s U.S. retail property portfolio, sold at one of the most volatile times for the CMBS market since the financial crisis.


Okay, maybe not there either and the stories above are from just the past 72 hours.

The one thing that is consistent though is that the majority of  perma-bulls on Bubblevision maintain an awesome track record of providing those with the nerve to short their insanity a chance to make a fortune. With Borders recent bankruptcy and the already tenuous situation of many retailers and small businesses, look for more, not fewer nightmares to erupt from the commercial real estate arena as the next recession “officially” is about to start in the third quarter of this year.


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