Sunday, November 1, 2009
Executive Summary
- A break in past relationships between the stock market, the dollar, and gold, along with a breakout in the VIX, could be signaling the beginning of an important turning point
- Capmark declares bankruptcy (CIT is next).
- A commercial real estate emergency is upon us.
- Is gold signaling a continuation of the financial crisis, or something more?
As you know, I spend a great deal of time combing the available market information for clues about what is happening in the economy and where it may be leading us. This past week (October 24 – October 31, 2009) showed some amazing developments indicating that a major turning point is once again upon us.
This assessment is based on several key events, including the bankruptcy of Capmark Financial, which kicked off the week, the return of volatility to the stock market (reminiscent of past tops), and the bizarre strength in the price of gold on Friday, even as the Dow peeled off nearly 250 points.
Let’s take a look at these events one at a time…
Capmark Goes Belly Up
On Sunday, Capmark, one of the largest commercial real-estate lenders in the US, declared bankruptcy.
Capmark Seeks Chapter 11 (Wall Street Journal)
Capmark Financial Group Inc. has been one of the biggest lenders to U.S. investors and developers of office towers, strip malls, hotels and other commercial properties. An independent company that used to be the commercial lending unit of GMAC LLC, a financing affiliate of General Motors Co., it has been in financial straits for months and warned in September that it might have to file for Chapter 11 reorganization.
The filing comes amid similar troubles in the commercial-property arena. Mall-giant General Growth Properties and hotel-chain Extended Stay Inc. filed for bankruptcy in the past year, and more commercial-company real-estate ventures could fail, amid an inability to refinance debts and reduced customer traffic as consumers continue to pull back.
The difficulties are a blow to Capmark’s private-equity owners. In 2006, a group led by Kohlberg Kravis Roberts & Co., Goldman Sachs Capital Partners and Five Mile Capital Partners paid $1.5 billion in cash to acquire lender GMAC’s commercial real-estate business, which they renamed Capmark.
by davos