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Saturday, October 31, 2009

End of the Commercial RE, the beam holding it up....


Hi Bill -

I understand that some of my Road to Roota followers were disappointed in my call that you deamed as "Way Out There" last week.

I admit that I have missed on timing (repeatedly) before but I don't think I did this time.

Last week this was my call:

"I continue to believe that next week will be the week that shakes the financial world at its foundation."


I believed it happened on Sunday evening.

Although it may not seem like it on the surface.. yet... I believe that the "temporary structural I-beam" that has supported our financial system for the past 8 months CRACKED on Sunday night with the bankruptcy of Capmark Financial. Capmark was THE ring leader in the Commercial Real Estate derivatives markets. Two days later GMAC declared they needed many more billions from the government. CIT will likely go down this weekend.

But the key to all this is that the Commercial Real Estate Derivative market is now IMPLODING. Everyone talks about the imploding Credit Default Swaps at AIG...which were bad but they are dwarfed by the derivatives related to Commercial Real Estate.

The Commercial Real Estate derivatives are the largest and most structured of all the derivative products. Just look at this 2007 presentation at a Mortgage Bankers Conference and you can see the insanity of these structured products.

http://www.mortgagebankers.org/files/Conferences/2007/CREFFebruary/DarrenEsser.pdf

Capmark (with major help from their Goldman Sachs part owner) was the ringleader, organizer and conductor of the Commercial Real Estate derivative market. Although they claim to have a world wide portfolio of $288B, they were also a major component of the secret off shore "special purpose entity" placement of these products.

Here are just some of the majorly structured derivative products in Commercial Real Estate.

CDO's
Conduit CMBS
ConduitREIT
REITWhole Loan
FixedREIT
TrupsCRE
CDOsWhole Loan
Fixed or FloatingCTLC
MBS Large Loan FloatersB-Notes
FixedCRE CDOs
Rake Bonds
FixedCTLB-Notes
Fixed or FloatingRake Bonds
Fixed or FloatingMezzanine Loans

My call that this week will mark the END of the cabal will be proved out over the next few weeks/months.

The world changed this week…and most people have no idea.
Bix

Later

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