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A Discount Isn’t Unusual In An Entrenched Buyers’ Market

A report from the Wall Street Journal on California. “The property Jordan Mazer bought in December is the classic Venice beach house in more ways than one. Another thing that makes his property emblematic of the neighborhood: He paid $213,000 less than the buyer in 2018, and $450,000 less than the buyer in 2016. There were 43.2% more single-family homes on the market in 2020 than there were the year prior. ‘I’m sure a lot of it is the homeless situation, but it is probably also the overpriced listing situation,’ said CJ Cole, an agent with The Agency who has specialized in Venice for over 30 years.”

The Los Angeles Times in California. “The number of Californians leaving the Bay Area has increased during the COVID-19 pandemic, particularly from San Francisco, according to a new study. ‘There is a trend in most urban areas, but it’s most pronounced in San Francisco,’ said Evan White, executive director of the California Policy Lab at UC Berkeley. ‘With people leaving, we’ve seen rents going down pretty dramatically.'”

From The Broadsheet on New York. “A range of reports indicates that the Downtown real estate market has imploded in the wake of the recession brought on by the pandemic coronavirus. Perhaps the most radical undoing, however, was on the residential front. ‘According to our research, an estimated 40 percent of the local population left amid the pandemic,’ the Downtown Alliance notes.”

“Condominium and cooperative apartment owners resisted downward pressure on prices, if they could, by refusing to sell at all—with the number of units turning over down by 42 percent from 2019 and 75 percent from 2015. For those who had to sell, properties closed at distressed prices, with the median cost for owner-occupied dwellings falling to $1.6 million in the third quarter of 2020, down 21 percent from the third quarter.”

The Real Deal on New York. “Michael Stern sold his duplex at Walker Tower for less than he’d hoped. The 4,748-square-foot unit sold for $21 million, 24 percent less the $27.8 million it was initially listed for in June 2019. But Stern is still making off with a tidy profit. Not all units at Walker Tower have fared as well upon resale. The building’s condo board recently tried to stop the U.S. Department of Justice’s ‘low ball’ sale of a penthouse, which the DoJ was selling after seizing the property due to its connections to stolen funds from Malaysia’s sovereign wealth fund, 1MDB.”

“The board was unsuccessful and the penthouse sold for $18.25 million, well below the $50.9 million paid by previous owner Khadem Al Qubaisi, an Abu Dhabi businessman and alleged co-conspirator in the 1MDB scandal. The unit had been on and off the market since 2017. But a 24 percent discount isn’t unusual in Manhattan’s entrenched buyers’ market.”

“Extell Development, responding to a condo sale at One57 that closed in December at 32 percent under ask, attributed the substantial discounts in recent months to the pandemic. ‘Almost all Covid-era transactions have been at exceptional prices for the buyer,’ said a spokesperson at the time.”

From Downtown Bellevue in Washington. “Bellevue and Redmond were ranked as the second most expensive cities to rent in the metro area, costing $1,820 for a single bedroom. Bellevue experienced a drastic 16.9% decline in rent which was cited as the largest year-over-year drop within the 19 cities.”

From Boston.com in Massachusetts. “For the second month in a row, the median rental price for a one-bedroom apartment in Everett fell sharply, dropping 29.2 percent from February 2020 to February 2021, according to Zumper. Other communities also saw a big year-over-year drop: Waltham (-20.9 percent), Cambridge (-19.8), Brookline (-16.8), Revere (-14.5), and Boston (-18).”

From Narcity in Canada. “City living in 400 square feet is going out of style fast, according to a new report on Toronto’s rent prices by Rentals.ca. The report indicates that the average rent for smaller units in the city is down almost 23% year over year and it’s believed that prices will drop even more from here.”

From 3 AW on Australia. “Neil Mitchell says Melbourne is ‘in deep trouble’ and the CBD urgently needs caps on office worker limits to be lifted. ‘I think the city feels really sad at the moment, it’s partly COVID, it’s partly just rundown,’ the 3AW Mornings host said. ‘It’s feeling grubby and dirty and underused and a bit threatening. A lot of it is businesses closed, empty shops because they’ve been crippled by COVID. Hopefully we can get through that.'”

“Mitchell called for the lifting of office worker restrictions, which are ‘killing the city’ to be prioritised. ‘Melbourne is in deep trouble,’ he said. ‘We need people back into the city as soon as its safe, for the sake of the city … for the sake of the cafes and restaurants, for the sake of Melbourne’s soul.'”

“A Melbourne businessman, who has run several successful businesses in the CBD in the past 30 years, agrees. Peter Butterss says he was accosted aggressively ‘a dozen times’ at the intersection of Elizabeth and Flinders streets. ‘It is threatening, and once I got through that mess I had to step over human waste to get into Little Collins Street,’ he told Neil Mitchell. ‘There are many parts of the city where it’s like this. I wouldn’t go into town after dark anymore.'”

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This Post Has 80 Comments

  1. ‘It is threatening, and once I got through that mess I had to step over human waste to get into Little Collins Street,’ he told Neil Mitchell. ‘There are many parts of the city where it’s like this. I wouldn’t go into town after dark anymore.’

    They are purposefully destroying these cities.

    1. Which kinda goes against the whole Great Reset thing. I thought they were going to herd us all into cities where can own nothing but happily rent everything and have it delivered by drone. Meanwhile they can control the farmland while hobnobbing with Bill Gates. But if they destroy the cities with homelessness and riots, isn’t the population just going to scatter out to the countryside where they can’t be controlled?

      1. Kind of ironic that Pol Pot and the Khmer Rouge, an ideological guiding light to the Democrat-Bolshevik Party, emptied all of Cambodia’s cities when they came to power in 1975, and forced all the former city dwellers onto agrarian communes where over a million died of hunger and disease. Now the globalists and their Democrat Quislings want to pack all the people into Chinese-style “smart cities” where they can be more closely surveilled and controlled. Sorry, comrades, but I decline your offer.

      2. “Which kinda goes against the whole Great Reset thing.”

        Wrongthink! Our society needs to be destroyed so it can be saved.

        Or sumptin’.

        1. Luqily we eleqted the the rightful President on Mqrch 4th. Oh uh wait…goalposts moved again.. 🙁

        2. Or maybe they plan to destroy the cities so they can buy up the properties for a song, fix them up shiny new with granite countertops and telescreens, and lure the people back in with free stuff. But they’d better do it fast, before people establish themselves out in the burbs and exurbs and small towns and become pesky and dangerous kulaks. Otherwise, the only people who would go back to those cities would be the ones who need the free stuff — not the best workers.

  2. The titles for the first link:

    The Venice Real-Estate Market Is Unstoppable No More

    Covid and a growing homeless population have impacted the area’s home prices and have led to uptick in inventory, according to local agents

    Uptick? Prices have been sinking like a turd in a well for years.

    1. Could you imagine actually paying property taxes to a city like this?

      I never will.

      And a reminder to all the mortgage slaves, I am never more than 12 months away from the end of a financial contract. And if I wanted to move early, I could write a check to cover the rest of the lease.

      Debt is slavery.

      You’re gonna have to bring hundreds of thousands of dollars to the closing just to escape your debt prison.

      1. You can’t simplistically ignore the power of leveraged debt. Least sophisticated consumer does not wield it but it is a good thing and offers opportunities which would not otherwise exist.

    3. For some closeups of homelessness in Venice Beach, there’s a youtube channel for German in Venice. He scooters around filming all the tents and sometimes talking to the homeless.

    4. “Prices have been sinking like a turd in a well for years.”

      The resulting enragement and foot stamping is one of the best parts about this truth.

      1. All the unharnessed kinetic energy released by the stamping of little feet could power a small city.

        1. Could California collect all the poop on their sidewalks and burn it to generate electricity? Could be the latest green energy source.

  3. ‘City living in 400 square feet is going out of style fast, according to a new report on Toronto’s rent prices by Rentals.ca. The report indicates that the average rent for smaller units in the city is down almost 23% year over year and it’s believed that prices will drop even more from here’

    These shoeboxes were built to sell to speculators. Of course they are getting their a$$es kicked, with tens of thousands of units on the way.

    1. Nobody wants to live in those tiny shoebox apartments if something bigger’s available and they can afford it.

  4. ‘Extell Development, responding to a condo sale at One57 that closed in December at 32 percent under ask, attributed the substantial discounts in recent months to the pandemic. ‘Almost all Covid-era transactions have been at exceptional prices for the buyer’

    Yeah, blame it on the CCP virus. This developer is probably the dumbest in NYC. And what does this crater do to previous buyers?

  5. ‘an estimated 40 percent of the local population left amid the pandemic’

    This is one grim report all around: commercial, everything.

    1. In NYC olden days, my family (and everyone else we knew) held on to our rent controlled and rent stabilized apartments like grim death. We did move when a building got out of hand but because we had all lived in the neighborhood for decades, we worked the friends and family network and got another cheap place fairly easily.

      One of my friends used to sing out “who’s dead?” when we walked by the local funeral home. She pays $1,200 for her three bedroom, one bathroom apartment now. I’m surprised it’s that much.

      My great aunt passed away around 1993 and her rent was $169 ($306 today).

        2. Illegal aliens – Dominicans, mostly. Drug dealing. Music dialed to 11, dancing on the sidewalk all night long outside the bodega. Constant harassment of women (they sometimes had their wives and children with them). Electricity hooked up to the hallway outlets. Graffiti (“Gangsta Bitch” spray painted across the mail boxes). Mice.

          A building could go bad very quickly. I remember a Village Voice article about landlords receiving three months rent up front when they rented to welfare. Long time residents who swore they would never move did, sometimes without a word.

          1. Wow…that’s intense. I’ve only lived in a comparable apartment situation a couple of times in my life. There was the student apartment that burned and was condemned, followed by another fire in the next student apartment my roommates and I relocated to (footnote…I dropped out of college after that quarter).

            Then in my bachelor days, I lived in a building with some rent controlled units. The lady upstairs ran the water in her bathtub with the stopper in, and for some reason left it unattended. The water leaked through my ceiling, then flooded and destroyed the beautiful hardwood floors of my ground level place. Not too long after, the neighboring apartment to mine had the door broken down and the contents cleaned out.

            Within a few months of these incidents, I was married and living with my wife in a nice part of town.

          2. PB
            Yeah, floods and break-ins, what fun 😳

            A friend of mine’s building down the block was deliberately set on fire by other residents (60’s). She and her family didn’t get the high sign. (Welfare recipients were given a new apt, relocation costs and a stipend if they were displaced by a fire.) Some had their furniture on the sidewalk. We watched the Bronx burn from our apt building roof (‘70s). We moved to better places in the neighborhood and were able to stay for many more years.

            With so many illegal aliens pouring in, some lawless, you had to be aware and more careful. Still, even as little kids we’d travel everywhere on the subway and buses. Every summer we rented a bungalow in Rockaway Beach and in the Spring and Fall went to Palisades Park as often as we could.

            As much as I complain about renting (and I do, a lot), it’s good to be able to move when things change around you. Lease is up again, waiting to hear. Tight market for SFH rentals here in Las Vegas.

  7. Will this piece of Babylon Bee satire actually come true?

    Texas Removes Mask Mandate To Scare All The Californians Away

    1. Now that everyone is getting vaccinated, doesn’t it make sense to ditch the masks?

      If Texas had never adopted the law, THAT would have been news.

      1. THAT would have been news

        Have the states that never adopted the PC laws been large in the news?

      2. This isn’t about masks or vaccines. It’s about conditioning the sheeple to mindlessly accept control and compliance.

          1. Some people are just irrational terrified. They act like the atmosphere is covid radioactive.

          2. I’ve been seeing more and more of this, which is really frickin’ weird. The virus is just about gone.

  8. Another thing that makes his property emblematic of the neighborhood: He paid $213,000 less than the buyer in 2018, and $450,000 less than the buyer in 2016.

    Jordan bought into a Bolshevik-malgoverned city & state on a terminal downward spiral into Third World socialist dystopia. Whatever he paid, it was too much.

    1. 2.225 million

      I’m not familiar with salaries, but since when do “human resource executives” get paid north of a half million per year? Doctors and lawyers don’t make that much. Or was it one of those 10x income things?

      1. I have heard (don’t know, too lazy to look up) that the highest paid position in a hospital is the head of HR, surprising.

      2. Doctors and lawyers don’t make that much.

        My wife had her eyeball lenses replaced. IIRC, the surgeon’s portion of the bill was about $700, per eye (they don’t do them both at the same time). The surgery is very quick. Per the nurse the surgeon replaced about 20 lenses that morning. That’s about 15 grand. He doesn’t do it every day, but let’s say twice a week. That’s well over a million smackeroos a year, plus whatever he gets for office visits.

  9. “Condominium and cooperative apartment owners resisted downward pressure on prices, if they could, by refusing to sell at all—with the number of units turning over down by 42 percent from 2019 and 75 percent from 2015.

    Go ahead & cling to your wish prices, greedheads. I’ve got all the time in the world. You don’t.

  10. “City living in 400 square feet is going out of style fast”

    400 sq ft for 1 person is doable but not for 2 …..In the years we we cat sitting for people people have downsized a lot due to everything going digital. No more multiple bookcases filled with books cd’s records vhs tapes, no more big screen tube or projection tv’s just a big flat screen on the wall, multiple laptops instead of desktops with separate monitors.. free all that space up and its amazing how a 600 sq ft 1 bedroom can feel spacious.

  11. “The number of Californians leaving the Bay Area has increased during the COVID-19 pandemic, particularly from San Francisco, according to a new study. ‘There is a trend in most urban areas, but it’s most pronounced in San Francisco,’ said Evan White, executive director of the California Policy Lab at UC Berkeley. ‘With people leaving, we’ve seen rents going down pretty dramatically.’”

    I saw this coming when I visited the Bay Area in late summer of 2019, and had dinner with an old friend in San Francisco, who grew up in the area and has lived in SF for two decades. Her family was contemplating a move out of the city, as the homeless problem had crossed a threshold where she feared for the safety of her adolescent daughters when out in public.

    Of course things didn’t exactly improve a few months later, with the advent of the pandemic lockdown.

      1. Houses aren’t transacted by the square foot.

        Prices fell 18% and falling fast.

        Very good news indeed.

  13. I have been watching this making of markets for decades now, like the real estate markets.
    But, I have also been watching this Medical market creation.
    As I have said before in my youth people did not revolve their lives around the Medical system.
    As time went on this constant consult your Doctor to even get permission to exercise. Constant testing emerged for people not even sick. Anti depressants handed out like toilet paper for the slightest amount of stress.
    The constant lowering of tests to justify putting younger and younger people on long term medication.
    The Standard of Care forcing Doctors into a one size fits all, rather than Dr. discretion in treatment.
    The uptick in vaccines, that my generation didn’t need, but now they do.
    Constant Pharma ads on TV, so they own the news no doubt. Some kind of normalization of snarly side affects with these meds. .
    Talk about creating insecurity in people , about being able to survive without the magic pills.
    I was reading about Ancient Greece where people survived into their 80’s , without modern day vaccines and magic pills. Apparently a global warming period during that time was beneficial in terms of greater crop yields. They were also smart enough not to pollute their water, and have a form of downhill waste disposal.
    So, the modern day increase in lifespan, no credit given to clean water or the modern day plumbing system, or less density in living conditions, better hygiene and greater access to food.
    The life spans went up about 20 years on average from the 1930 “s.
    But even with small pox they didn’t vaccinate the whole population, and they just confined it to small areas of outbreaks.
    The evidence shows these diseases were dropping like a rock prior to these vaccine programs..
    But anyway, wanting to vaccinate 70% of the Globe over the Covid19 when you have a 99.8% survival rate isn’t justified.
    I heard someone say yesterday that maybe people over 75 shouldn’t take the vaccine because they are to weak. Yet the over 75 is the group thar was most affected by Covid, or whatever it was.
    I was thinking the other day that old people die of respiratory failure, or heart attack or stroke, or the vital organs shutting down. . So, why is everything Covid.
    But, they didn’t test these vaccines long enough IMHO
    .I’m just saying this Medical Cartel has become more and more invasive as the years have rolled along, to a unjustified Lockdowns and shutting down of a good portion of the World.

  14. The 1.9 trillion relief passage just passed the senate on a party line vote. The expected post-covid economic surge is expected to come in this summer. Interest rates on US 10 Years have been creeping up for many months, with a sharper increase over the past 5 weeks. Mortgage rates track the US 10 Year, plus a premium. They’ve gone up about a half a percentage point, from 2.75 to 3.3, on 30 year fixed nonjumbos.

    Policy makers have decades of experience now with QE and money printing and financial repression in a low-inflation environment. It’ll be interesting to see if we get inflation (there are two types, cost-push and demand-pull), we could see demand-pull.

    The current system has been very lucrative for policy makers, both in terms of stocks and real estate. I saw a major player in the mortgage field say higher interest rates would be good to cool the housing market. He was lamenting that many people want to sell and then buy but could not find anything to buy.

    types of inflation:
    /understand-different-types-inflation.asp
    US 10 year:

    1. “The 1.9 trillion relief passage”

      I read recently that 40% of all dollars that ever existed have been printed since the beginning of last year.

        1. Bitcoin should do just fine…no wheelbarrows are needed in the 21st century currency printing binge.

    2. “post-covid economic surge is expected to come in this summer.”
      One pundit on Bloomberg has a 6+% GDP target for Q3 & Q4, but he said if the stimulus and the $2.9 T in savings from the pandemic is spent he could see growth at 11+%.

    3. “He was lamenting that many people want to sell and then buy but could not find anything to buy.”

      🤣🤣🤣

      Righto. Millions of unemployed and dead broke debtors are lined up to buy a(nother) house.

        1. But sales are actually way, way down in many areas, and the median is only up because these people who are buying are the higher income earners. The median is grossly distorted right now due to the sales mix, and it’s giving speculators false hope that will be dashed once all the shenanigans (forbearance) are over with.

        2. Most people who kept their jobs in 2020 were probably already able to buy a home if they wanted.

    1. Good luck ahead to retirees on fixed pensions.

      “We expect that as the economy reopens and hopefully picks up, we will see inflation move up through base effects,” Powell said during a Wall Street Journal conference. “That could create some upward pressure on prices.”

      1. Good luck ahead to retirees

        Chasing a relentless debt obligation is normally miserable, but in a squeeze it would be crushing.

  17. Also, they keep talking about sustainable earth , but what about sustainable medical system.
    With the Medical prices these days it’s not sustainable. I observe friends that go to the Doctor all the time. They do the same old test, than prescribed the same stuff.
    I’m just saying that this will lead to rationing like they want to do with energy.
    They want to go natural with energy systems, but humans have to be so dependant on Medical, when lifestyle is responsible for a lot of what ails people.
    It’s the creation of Medical need. And I’m not talking about the good stuff medical has to offer.
    So, medical Insurance got the party going with Medical, just as low rate loans create bubbles in real estate.

    1. With the Medical prices these days it’s not sustainable. I observe friends that go to the Doctor all the time. They do the same old test, than prescribed the same stuff.

      That’s the cheap stuff (office visit, lab bloodwork, generic pills for blood pressure, cholesterol, etc.).

      A new knee costs about $50,000

    2. People need to eat more fruits and vegetables, exercise, and treat their body like a temple. Eating a bunch of HFCS-laden junk food and sitting down all day is just guaranteeing you’ll be making some doctor’s monthly nut. They want you medicated and “under their care.”

      1. Four causes of obesity: Sugar, seeds oils, snacking, and stress.

        For people who are already obese/unhealthy, they pretty much have to eat near-carnivore for a year, one big meal per day, just to heal the metabolism. Only then can they think about vegetables. Fruit? Maybe some berries but otherwise, forget it. And if you’re stressed out or working two jobs because you’re poor? Good luck.

        1. A carnivore diet will do wonders for blood pressure, especially for an already obese person…

      2. 100% agree…It’s so obvious, but obesity is a true scourge on this society. All the diseases caused by eating $hit food and inactivity. I’d bet $1000 if you pushed everyone to walk a couple miles a day and eat under 150g of carbs, you’d destroy the medical complex.

  18. OK, I remember here in the US when different industries stayed in balance as to what they could charge.
    Like everyone paid about 25% of income for housing, it was dirt cheap for Medical, food was cheap, higher education was pretty reasonable, and investments were long term generally. And it all tracked with average wages. If that’s capitalism than it was great.
    You didn’t get this looting or price rigging so prevalent today. Going into debt was not considered good. The Government wasn’t backing all these loans.
    People use to put about 10 to 15% toward investment, and saving accounts had a reasonable yield. You didn’t have all this money coming in from all over the World either into our systems.
    So, before manufacturing left and jobs were outsourced jobs floated all boats. And taxes were actually higher during a lot of the period I’m talking about.
    The stability of markets was great, as well as long term job stability.
    I just don’t know why they moved to Globalism and Monopolies and Big Government when a more capitalist system was more beneficial to the majority, and freedoms and rights for the individual was a high priority.
    Anybody who lived during that period has got to admit that it was great.
    Communist or Monopoly Rule or any kind of Top Down control of populations would suck, but that’s what they are trying to do it seem now. No way the majority voted for something like this.

  19. so are we going to magically have 5 million jobs come back after the restrictions are lifted?

    2. have 5 million jobs come back

      It will take years, if not decades, to undo the lock down damage. And the locales most affected will keep re-electing those who caused it, or if they “throw the bums out” they’ll elect new bums to take their place.

  21. In furtherance of our quest for Wuhan virus information, just found the following video.
    Robert F. Kennedy Jr., Interviews Dr. David Martin about Fauci Moderna Corruption.
    https://www.bitchute.com/video/eQj2MwpwgTgA/
    Kind of tied a lot of bits of information together. Don’t think this has been posted – apologize if it has.

  22. Mar 5, 2021,
    09:37am EST | 570 views
    Jay Powell Isn’t Here To Save Your Stonks
    Oliver Renick
    Contributor
    Markets
    I am the Lead Anchor at TD Ameritrade Network.

    It’s been a rough week for traders. Real yields posted one of their biggest spikes in modern history and everyone’s favorite investment vehicle (ARKK -1.1%) entered a bear market. Momentum stocks are going belly-up and reopening trades are losing their mojo.

    As far as Fed Chair Jay Powell’s concerned, it’s all a distraction.

    It… “caught my attention,” Powell told the Wall Street Journal on Thursday. Like when you’re walking down 5th Ave and there’s a nice suit in a window display. No reason to stop — maybe you’ll come back one day. Let me phrase it another way: Jay Powell isn’t here to save your meme stocks. Here’s here to chew bubblegum and get back to full employment. And he’s all out of bubblegum.

    Everyone knows by now that Powell is not going to let inflation get in the way of achieving his goals. What they apparently did not know was that Powell isn’t going to let market volatility get in his way either — at least not yet.

    That is a big deal. For years, there’s been a prominent narrative that the Federal Reserve is the guardian angel of the U.S. stock market. It was never based on any real empirical data, just a mythos that fed on itself as stocks managed to always find a way higher, and interest rates… always managed… to find a way… lower. OK, so maybe it isn’t that absurd of a notion. Anyone who tells you interest rates and quantitative easing have not played an enormous role in keeping stocks rallying for a decade-plus is off their rocker. Yes earnings also mostly climbed, yes there’s been tons of tech innovation, this, that, sure. But bottom line: I’ve been asking investors for almost a decade why they’re buying stocks and bonds and the foremost, most frequent answer is: the Fed.

    This logic was never more obvious than in the past year, as a huge dose of monetary and fiscal support kept the party going and made everyone feel invincible — from day-trading Redditors YOLOing Tesla (TSLA -3.8%) calls to serious, big-money institutional investors. And now, by no instruction from Chair Powell, they expect the Fed to ramp up the money-printer again. Example A: on Monday, Bloomberg cited strategists from Jefferies, Bank of America (BAC +1.2%), and Credit Suisse (CS +0.2%) calling for the Fed to control the yield curve via a “Twist” program.

    Ridiculous. Because 10-year yields achieved a whopping 1.5% and the most expensive stock market in history barely hit a correction? Powell is right to let the froth come off.

    Frankly, he’s also partly at fault for the froth to begin with, after reversing rates at the first sign of volatility and amid pressure from President Trump at the end of 2018. Financial conditions were the loosest for a rate-cut in history and inflation rose, but yields went down. How could one not be forgiven for thinking the Fed was at the market’s back? Just look at the Google Trends chart for the term “stonks,” — it was birthed right at the start of the big reversal!

    But I’m not here to judge. What’s done is done. What matters right now is that Powell has one goal: to get the economy back to where it was before the pandemic, and rising rates are not going to stop him. If you want to know when he’ll care about the stock market, then you’ve got to figure out how low the market needs to go before tightening the economy. I don’t know.

    What I do believe is that the long-end of the bond market is going to run wild until some major economic downturn, a crash in the market, or yield-curve control. “J-Pow” is right to play it cool right now, with stocks grossly overvalued by every measure, but I suspect we may see a change of tone if bond yields go the way I think they will — up, persistently. If the trend in yields keeps going, then the downtrend in expensive stocks will too, unless Powell decides it’s derailing the economy. Next we hear from him will be March 17, so buckle up: this part gets bumpy.
    …

    1. The Financial Times
      Opinion Inside Business
      Greensill implosion exposes risks of shadow banking
      Revolutions in finance have a nasty way of ending badly, especially when they happen at breakneck speed
      John Plender
      Greensill ‘bore many of the classic signs of a financial accident waiting to happen’
      John Plender
      March 6 2021

      Relief tempered by residual nervousness will be the likely reaction of central bankers and financial regulators to the sudden implosion of Greensill Capital, a sizeable shadow bank.

      The plight of this global player in supply chain finance appears to pose no systemic threat or need for a central bank bailout. Yet its rapid passage from hubris to nemesis raises disquieting questions about the evolution of the global financial system and the ability of the regulatory authorities to keep abreast.

      Greensill bore many of the classic signs of a financial accident waiting to happen, starting with a flamboyant founding entrepreneur, Lex Greensill. The company’s website trumpets his trajectory “from humble beginnings to revolutionary thinking”, explaining that he saw the devastating impact that inefficient financial supply chains can have on a business as he grew up on his parents’ sugar cane and melon farm in Australia.

      Revolutions in finance have a nasty way of ending badly, especially when they happen at breakneck speed. Greensill Capital went from nothing in 2011, when Lex Greensill abandoned a big-bank career, doing global supply chain financing at Morgan Stanley and Citibank, to go it alone.

      By 2019 this upstart non-bank says it had extended $143bn of financing to 10m-plus customers and suppliers in 175 countries. Its founder also notched up powerful contacts in government and hired former UK prime minister David Cameron as an adviser.

      In banking that rate of expansion tends to point to excessive risk-taking and a poor-quality loan book. And certainly the Australian parent felt balance sheet strain. In 2016 and 2017, its liabilities exceeded its assets, according to a report by Scope rating agency. Yet Lex Greensill pulled off an astonishing coup by persuading first private equity group General Atlantic to put in $250m of fresh capital, and then the SoftBank Vision Fund of Japanese entrepreneur Masayoshi Son to stump up $1.5bn more.

      So it is no surprise that the last accounts filed by the British subsidiary at end-2019 showed a very solvent balance sheet with a fat capital cushion of $155m backing total assets of $682m. Yet, in supply chain financing the face of the balance sheet conveys little about the nature of the risks being run.

      Supply chain financing is just a fancy modern name for the age-old practice of factoring, whereby suppliers sell at a discount the debts their customers owe them to a financier who collects the full amount in due course. Lex Greensill’s revolutionary innovation was to realise that these debts could be packaged into investment funds — much as the big investment banks turned subprime mortgages into securities before the 2008 financial crisis.
      …

      1. How rare: A large cockroach, all alone in the world, with no familial connections!

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