Thursday, April 16, 2009

Malls and Parallels to the Great Depression?

As I've been saying the commercial real estate market (particularly the segment with retail exposure) could be the next shoe to drop.

Well, today that prediction looks a little more valid with the bankruptcy filing of General Growth Properties, the second largest mall operator in the US with 200 malls in 44 states. One data point does not make a trend, but I'll be watching to see if other real estate companies run into trouble.

The IMF warned today that there are "worrisome parallels to the Great Depression". I tend to agree with the IMF's observation that the recession will be long and deep and when recovery comes it will be sluggish.

The IMF tends to be a good neutral read on the global economy --- they're the original no spin zone.

Finally, despite all the gloom and doom that seems so pervasive some times, the tech heavy NASDAQ hit a 5 month high today on expectations that Google would blow away numbers again. Well, Google kind of squeaked through the quarter by cutting costs and selling business, but sales fell 3% from the December quarter, the first time in Google's history that sales fell.

We'll see what happens tomorrow - remember it's option expiration so there could be lots of crazy swings.

Finally, please let me rant for a moment on the concept that the market is a discounting mechanism. Every other commentator on TV is telling us that "since the market is up, it is looking 6-12 mths down the road." Really? How good was the market at predicting the collapse of the banks? How about the housing slowdown? Exactly - the market missed both events.

The market is a real-time example of group think (it's the end of the world or everything's coming up roses) exhibited by daytraders.


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