As The Federal Reserve continues its assault on inflation by raising their target rate, Blackstone Inc.’s $69 billion real estate fund for wealthy individuals said it will limit redemption requests, one of the most dramatic signs of a pullback at a top profit driver for the firm and a chilling indicator for the property industry.
Blackstone Real Estate Income Trust Inc. has been facing withdrawal requests exceeding its quarterly limit, a major test for the one of the private equity firm’s most ambitious efforts to reach individual investors. The news, in a letter Thursday, sent Blackstone stock falling as much as 10%, the biggest drop since March.
You can see the problem facing commercial real estate. Since December 31, 2021, NAREIT’s all-equity REIT index has fallen -23.6% while NAREIT’s mortgage REIT index has fallen -28.6%. It looks like Blackstone’s Real Estate Income Trust has a decline coming.
If I look at NCREIF’s commercial property index, we can see that The Fed helped boost CRE values. But what will happen if and when The Fed actually shrinks its balance sheet.
I call The Fed’s attempts at cooling inflation “Fed Dead Redemption” since it resulted in redemptions from real estate funds.
Yes, The US Treasury 10Y-2Y yield curve remains inverted, for the 104th straight day. And Bankrate’s 30-year mortgage rate has dropped -57 basis points since November 3, 2022.
This comes after a gruesome Pending Home Sales and mortgage applications reports today.
The US has an inflation problem. Both headline and core inflation YoY remain high compared to the previous 40 years. And The Federal Reserve is resolute in trying to curb inflation to 2%.
But as The Fed counterattacks inflation by raising their target rate, we are seeing a problem forming at the nation’s commercial banks. The growth in deposits YoY is now -0.6%. Commercial bank holdings of Treasuries and Agency MBS are declining as well. Agency MBS holdings are down -4.6% YoY and Treasuries and Agency holdings are down 0.0%.
How about M2 Money growth and M2 velocity? M2 Money growth has fallen to 1.3% YoY while M2 velocity has not been the same since the Covid sugar splash by The Fed and Federal government.
While inflation is creating havor for commercial bank deposit growth, it is interesting to follow the adventures of a spoiled child from MIT and his multi-billion dollar lemonade stand with all the controls of a child.
Once again, how did regulators get this SOOOOO wrong? And why didn’t investment advisors look at the balance sheet of FTX and Alameda Research. Yes, the media loves to report on FTX orgies, but the FTX fiasco points to something far more sinister. Were Sam Bankman-Fried and his paramore Caroline Ellison fronting this operation on behalf of some other parties?
I recall one of Woody Allen’s best lines. When asked what an investment manager does, the response was “they manage your money until nothing is left.” Sounds like SBF has a great future on Wall Street! And Caroline Ellison should have known better than to post things like “Here are what I think about some things: controlling most major world governments.”
Why is this terrifying? Blockchain technology is a fantastic innovation for processing payments given its ledger capabiliities. But that means that The Federal Reserve might be able to look at your complete history of expenditures. Or worse, perhaps even shut down your ability to make payments, This may lead to a China-style “social credit score” where the Fed and the Federal government punish people for driving “too much” increasing your carbon footprint or eating non-Federal government approved foods and lowering your social credit score.
Will there be safeguards? Allegedly, but remember the FBI hid Hunter Biden’s laptop prior to the Presidential election of late 2020. And HOW did our nation’s regulators completely drop the ball on Sam Bankman-Fried (or Spam Bankfraud)?
Not surprisingly, the median price of new home sales are up 8.2% MoM (since September).
The Fed’s minutes for their last FOMC meeting will be out at 2pm EST. Let’s see if they discuss WHY they haven’t reduced their balance sheet by much which is contributing to asset bubbles.
Here is The Fed’s Dots plot from the September meeting. I get the impression that The Fed thinks that their target rate will be coming down in 2024 and after.
Again, why did people with professional investment managers not look under the hood, so to speak, when touting FTX and Sam Bankman-Fried’s scam? Or why didn’t Washington DC politicians like Maxine Water (D-CA) look into what was going on with their second largest donor after George Soros?
Former FTX Trading CEO Sam Bankman-Fried, NFL quarterback Tom Brady, supermodel Gisele Bundchen and comedian Larry David are among a celebrity-studded list of people accused of defrauding investors who lost money in the cryptocurrency exchange’s sudden collapse.
A proposed class-action filed in federal court in Florida late Tuesday names those four, along with other athletes and entertainers, as defendants in the case. All promoted FTX, one of the world’s largest crypto trading platform exchanges before it declared bankruptcy on November 11, with the company now under investigation for possible securities violations.
“It is still very difficult to comprehend that just one company defrauded more than $11 billion dollars from consumers, all from our backyard here in Miami,” Adam Moskowitz, the attorney leading the class action, said in an email.The suit seeks unspecified damages and is the first filed against Bankman-Fried and his companies since FTX filed for bankruptcy protection. BECAUSE MR MOSKOWITZ, NOBODY LOOKED UNDER THE HOOD.
Other current and former athletes named in the suit are NBA star Stephen Curry; NFL quarterback William Trevor Lawrence; baseball player Shohei Ohtani; tennis player Naomi Osaka; and broadcaster and former basketball player Shaquille O’Neal. Kevin O’Leary, a host of “Shark Tank,” is also named in the complaint, which was filed Nov. 15 in the Southern District of Florida.
The exchange shuffled customer money between affiliated entities, using new investor funds and loans to pay interest to the old ones in an attempt “to maintain the appearance of liquidity,” Moskowitz alleged, adding that FTX used public figures to give the operation an air of credibility.
Larry David, Trevor Lawrence and Naomi Osaka got stung by SBF like Tom Brady and Step Curry in a fraud scheme. True, celebrities should have excercized caution with dealing with SBF (I would love to see SBF’s investor presentation, but there may not have been one).
Or did SBF show this Bitcoin chart with Fed tightening? Or did ARK’s Cathy Wood look at this chart?/
Despite the recent FTX-fueled crypto market collapse, Cathie Wood, founder and CEO of Ark Invest Management, stood by her prediction that Bitcoin would reach $1 million by 2030.
$16,500 to $1,000.,000 by 2030? In 8 years??
“FTX were geniuses at public relations and marketing, and knew that such a massive Ponzi scheme — larger than the Madoff scheme — could only be successful with the help and promotion of the most famous, respected, and beloved celebrities and influencers in the world,” he said.
FTX did not reply to a request for comment.
FTX’s creditors will be first in line to get whatever assets a bankruptcy judge deems appropriate to distribute as the company seeks to restructure as part of its Chapter 11 filing. Investors in the Bahamas-based company, which had raised some $2 billion in venture capital, come next.
That means FTX account holders, who used the platform to trade bitcoin, ethereum and other digital currencies, may have to wait years to get their money back – if they ever do.
And so it goes. I doubt that Maxine Waters House Financial Services Committee will do anything constructive. The hearing will be a battle cry for more regulation and perhaps even paint SBF as victim of volatility.
The really sad part of this story is that SBF is still trying to raise money to do it all over again. But there are always investors who want to buy a piece of the blue sky, or a bridge in Brooklyn.
The chaos created by Sam Bankman-Fried (FTX Crypto Exchange) and Alameda Research (SBF’s hedge fund) will go down in history as one of the biggest scams. And should earn a top spot on Phil Hall’s 100 Years Of Wall Street Crooks.
Sam Bankman-Fried’s bankrupt crypto empire owes its 50 biggest unsecured creditors a total of $3.1 billion, new court papers show, with a pair of customers owed more than $200 million each.
FTX-linked entities owe their single biggest unsecured creditor more than $226 million, according to a redacted list of top 50 creditors filed late Saturday. All of them were listed as customers and ten have claims of more than $100 million each, the filings show.
The creditors, whose names and locations weren’t disclosed, are among the vast array of people and institutions caught up in FTX’s insolvency. The 50 largest claims are all from customers owed $21 million or more.
In the US, bankrupt companies are required to disclose information about their debts as part of insolvency proceedings. Creditors will get to weigh in on the best way for FTX to repay its debts as the bankruptcy unfolds.
FTX said it has assets and liabilities of at least $10 billion each in preliminary court papers. The case may involve more than one million creditors, according to lawyers for FTX.
The case is FTX Trading Ltd., 22-11068, U.S. Bankruptcy Court for the District of Delaware.
On top of that, SBF is attempting to raise MORE money. The question is … who would be dumb enough to listen to SBF?
Crytpo continue to fall as investor confidence in crytpo has waned since SBF’s fraud was exposed. (In SBF’s defense, I am sure that current House Financial Services committee Chair Maxine Waters will declare he is a victim of changing market conditions, not historically massive fraud and political influence pedaling).
Didn’t SBF or his Alameda Research girlfriend Caroline Ellison look at Bitcoin as inflation roared under Biden and Fed started to remove its epic monetary stimulus? Or did any of the investors or their representatives bother to look at the books of FTX or Alameda Research??
I have the sneaking suspicion that Caroline Ellison or some other little fish will take the fall for SBF’s fraud. SBF has bought-off too many politicians.
As of today, the US Treasury 10yr-2yr yield curve is the most inverted since 1981 at -70 basis points.
Meanwhile, equity put/call ratio from CBOE spiked yesterday to highest since 1997.
I am disappointed that The New York Times cancelled their $2,400 event to listen to Sam The Sham Bankman-Fried, Vlad “Show my your money!” Zelensky, Larry “The Big Fink” Fink and Janet “We never saw it coming” Yellen. I would have loved to do the New York Times job for them and ask hard questions to Sam The Sham and Zelensky about money laundering.
Of course, it is easy to blame the figure on rapidly rising mortgage rates and Federal Reserve tightening.
But the rest of the story (as Paul Harvey used to say) is that US REAL wage growth has been NEGATIVE for 19 straight months. This alone makes housing unaffordable for the middle class and low wage workers.
Again, why are Biden and Trudeau wearing Mao jackets in Bali? And why is Biden looking like a robot?? Biden does look like he is saying “Take me to my leader, Pei.”
US mortgage rates fell last week by the most since the end of July, slipping below 7% and helping generate a bounce in purchase applications that otherwise remain depressed, but only in the Seasonally Adjusted data. The NON-Seasonally Adjusted data show a hefty decline.
The contract rate on a 30-year fixed mortgage decreased 24 basis points to 6.9% in the week ended Nov. 11, according to Mortgage Bankers Association data released Wednesday. The group’s index of applications to buy a home rose 4.4% — the most since June — but is still near the weakest level since 2015.
But the bounce was in Seasonally Adjusted data only. The NON-seasonally adjusted data remained depressed.
Mortgage applications decreased -10.0 percent SA from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 11, 2022. This week’s results include an adjustment for the observance of Veterans Day.
The Refinance Index decreased -11.44% percent from the previous week and was 88 percent lower than the same week one year ago.The unadjusted Purchase Index decreased -10 percent compared with the previous week and was 46 percent lower than the same week one year ago.
Mortgage purchase applications will continue to fall in NSA terms since it is the Winter and home buying season won’t really start until January. Refinancing applications actually dropped -11.44% even with the drop in mortgage rates.
The data. As my former students know, I like the “raw” data, better known as NON-seasonally adjusted (NSA) data and avoid seasonally-adjusted data (SA) since it hides what is going on.
And on The Fed Futures Front, The Federal Reserve is still looking a hiking their target rate from 4% to just under 5%.
Confounded Interest - Anthony B. Sanders 
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