Will the Market Crash Again?

I have been talking about the market being a big smoke and mirrors show for some time. I believe that the market is not in a V or a U, but a W curve and the worst is yet to come.

I do not know if the next crash will be as bad as the first, but I do know that it won’t be pretty. We all seem to be in some sort of denial about how bad the economy actually is.

Dubai was just in the news, but it is not really news. The media may have just discoved Dubai issues, but if you look at the reports you will find that the Dubai debt problems have been known for awhile. You can find stories of Dubai debt issues in Febuary. http://www.guardian.co.uk/world/2009/feb/13/dubai-boom-halt

The debt Dubai has built and you are now reading about are based on issues for 2008 and we are now at the end of 2009. I believe the next reports will be even worse.

The U.S. has pumped billions into the economy. Billions we don’t really have, which should point to rising inflation in the comming years.

The un-employment numbers are at extremely high levels and growing. The retail numbers are not completely in, but if they are over expectation, I would attribute this to denial about the economy, not a stablizing of the economy.

Many banks and the federal government are holding distressed and unstable assets just waiting for future appreciation to help make these properties sell at higher rates in the future. If you believe in the law of supply and demand you can figure out that even if assets begin to appreciate to the point the banks and the fed can sell some of the assets; you can see that they can only sell small amounts at a time. The problem is that if you release to much inventory in the market at one time; the whole market will loose value.

John Hussman believes the market has an 80% chance of crash next year. http://finance.yahoo.com/tech-ticker/article/382709/80-Percent-Chance-of-Market-Crash-Next-Year-Says-John-Hussman?tickers=%5Edji,%5Egspc,%5Eixic,dia,spy,xlf

Some say the bigger the slump the bigger the recovery. I believe we will have many ups and downs over the next few years, but recovery is not around the corner, it looks to me like we will look more like Japan in the 90′s going forward.

JW Najarian
www.jwnajarian.com
CREPIG
CREDAA

When will the Commercial Real Estate Market Recover? Are you Kidding Me?!

I recently commented on a blog post on LoopNet. This was the Q4 Poll on the Current State of the State of CRE. http://blog.loopnet.com/2009/10/q4-poll-results-when-will-market.html

I wanted to share my comments here as I would like to start a discussion that may help us figure out what we are doing and where we might be headed going forward. I used to love to watch CNBC as the market was up for a day we were told that we were in recovery Yeah! and then the market dumped for a couple of days and all you heard was doom and gloom. Do they really have that short term a memory or are they really that reactive? News has become entertainment and if you tell the same story every day then you will be boring and probably won’t last to long on the show.

I recently saw David Rosenberg, chief economist and strategist at Gluskin Sheff and believe he has a real handle on the state of the state. Here is a video I found from him. Not the one I saw. http://www.cnbc.com/id/15840232?video=1174036163&play=1

Here is my rant:

What would a recovery in 2010 or 2011 be based on? Most I talk to base the recovery on a hope of recovery, not any real data.

CMBS will be coming due up till 2015, Double digit unemployment, the fed is holding distressed properties off the market indefinately, banks are still failing. The dollar is at all time low as trillions were printed for the bailout. GDP figures (un-incentivised) was flat and even if we could sustain 3% growth, this did not help Japan over the last 20 years.

We are doing a great job of keeping ourselves in the comfort zone and pushing the inevitable into the future, but are we really in recovery or headed toward recovery. I think not.

There are hundreds of billions in committed funds waiting to pick up distressed properties or non-performing notes (Check out RIISnet.com), but REO’s in commercial real estate and residential are not being released in any bulk.

I believe the recent stock market climbs are all based on smoke and mirrors for the most part. If you have been in the market you will have to agree it has been substantially bullish in some sectors, but this cannot last. I believe there is no V recovery or U recovery, but more a a W.

The obstacles to more transactions are mainly based on debt financing, this I believe. Also the market is still having a real hard time pricing itself and cash flow assumptions are very hard to make, but there is money out there and plenty of it for both unstable and stable assets. The problem is that letting go of current properties will result in losses to the owners; be it the private owner or the bank. And no one is ready to take the loss yet, but this too shall pass and if I am right this does not spell recovery. Let’s not forget about the shadow market in residential that will or is affecting Multi-Family in some locations.

Not a doom and gloomer, just a realist. Hope I am wrong, but my partners and I have started a Distressed Assets Association in alliance with RISSnet and their ARGUS Software ADAPT Platform to try and help the market work out the distressed properties and notes. Our association hopes to be an information source that can make sense of the markets and possibities for recovery.

JW Najarian
Co-Founder
CRE Distressed Assets Association
http://www.CREDAA.com
Founder
CRE Professional Investor Group
http://www.CREPIG.com

Welcome to the Commercial Real Estate Distressed Assets (CREDAA) www.CREDAA.com

If you are engaged in the Disposition, Acquisition, Valuation, Development or Finance of Commercial Non-Performing Notes, Commercial REOs or Unstable CRE Assets you are in the right place. I am guessing that if you are reading this then you are probably in the right place.

CREDAA is in pre-launch and welcomes you aboard early. As we are building the CREDAA site please know that we have not completely launched so we may be shifting things around a bit. If you join us early you will be give founding member status and as many spiffs as we can come up with, to thank you, ongoing.

As the distressed and unstable assets market heats up, there will be a lot of conflicting information. CREDAA is working diligently to become a force in the industry and local communities. Your help will be needed to help us find the best members and resources along with being able to count on members to participate online and hold association events locally to help investors and professionals traverse the plethora of good and bad information out there.

We welcome your knowledge, point of view, brilliance and participation. Join us Today.

JW Najarian

Co-Founder / CMO CREDAA

———————————————————————————————————————————————–

A Message From Our President:

In the last few months our market has changed tremendously. Just a little over a year ago you could talk to someone and they were able to put a deal together and find deals that they thought would work. It was a little less than a year prior to that when everyone seemed to be 10 feet tall and bullet proof. Today the market requires knowledge and determination. There are a lot of sites out there that offer up deals that really do not make sense but they are at least trying. Why are we different? Let me see if I can put my thoughts on paper for you so you can see the vision and direction we would like to go with CREDAA.

I envisioned an online commercial real estate association that allows us to get together as a group of professionals to educate, teach and mold our market into a solution orientated alliance. When I sat down with my team of advisors and founders we all agreed that we need to be different than the current sites and have our focus and direction be real education and connection.

CREDAA was created on the belief that education is the key to our success, so we will be working to have numerous webinars in the near future with the eventual launch of a national association. This association will be similar to the ones you currently are members of and attend seminars for, with experts in their fields, and we would like your help with this. If you are or know of any industry experts, bankers, attorneys, government officials, etcetera, that can come on our site and provide valuable information; we would like to hear from you.

CREDAA’s unique way of connecting our community to each other will be our real added value. As an association member of CREDAA you will be listed in our unique, powerful, highly searchable directory. A Location Based Service Data Base complete with ratings and the ability to offer commentary on the service you have received or given to a particular client. An Angie’s list if you will of Commercial Real Estate.

Another benefit we will be working on is the collection of data for distressed assets to provide to our members as well as Research papers and finally a Data Mine service. We will have a robust forum complete with all of the Commercial Real Estates Distressed News, Blogs and Videos.

Lastly, we have aligned ourselves with some very key players in the industry who will be helping not only to feed data but to steer us in the right direction. We currently have aligned ourselves with RIISnet powered by Argus Software so they can do what they do best align real time supply and demand to put deals together and with Fidelity to close those deals. Through these relationships we plan to have many people come into our site to provide valuable information on the current market from the Government and Large investment firms as well as the banks and brokers who can give us the pulse of the direction of the market in their regions.

Our Mission here is to provide information that will fill the void of knowledge we all have experienced in the last few months. Our hopes are each and every one of you takes an active role in educating us on your geographical locations and field’s progress and perspective in your industries. How we envision you using our site is to connect with other professionals like yourself and put together teams of people throughout the country to help you put deals together and help others put deals together. We will not be a place to put your disposition properties on or sending out looking for properties info that is not us. We want participation to educate and develop a best practice for all of our professional B2B partners and how we move forward to a stable market again.

I look forward to working and networking with each of you real soon.

Scott Miller

Co-founder / CEO CREDAA

Commercial Real Estate Distressed Assets Association (CREDAA)