Markit CMBX

Look what happened to the CMBX today! After climbing to a height of 275 a few days ago, it is now down to 150. Basically this means that the spread on triple AAA commercial real estate bonds was north of 2.75% over the risk free rate but now only has a risk premium of 1.5%. As an indicator of risk, this would mean that the risk of default has just been cut in half. Half as many commercial defaults are predicted.

But how realistic is this?

The actual number of commercial defaults is at an historical low. Are the bond prices falling because they have a lower expected return? Or are the prices falling because there are no buyers? And what about speculation: is short selling having an influence?

An article in the Economist suggests that the CMBX and other indexes may be overly sensitive to downward distortion.

And why did CMBX so dramatically improve?

There are two pieces of news that influenced this. First, the offer for Bear Stearns was increased from $2 per share to $10, which would suggest that there is still some value in some of their financial assets. The other piece of news was that housing sales in the U.S. had risen slightly in February - even if prices had continued to fall.

The market does not seem to be behaving rationally. "Psychology has now overwhelmed economics," wrote Alan Blinder, former Fed vice-chair, in the Washington Post.

Google Reader

In the previous post I was suggesting that we scan the news for items and issues that are of interest to our clients in order to be able to add more value to the services we provide to our clients. Searching the web for news on specific topics can be an arduous task simply because there is so much content out there.
There are two related technologies that make sifting through lots of content a lot easier. The first one is RSS. RSS stands for 'Real Simple Syndication'. It is a technology that allows us to 'subscribe' to the web content that is often updated.

In IE7 you can directly subscribe to these feeds by clicking on the RSS button in the toolbar. These feeds are then available in your browser next to your favorite links. There are also software programs you can install that will manage feeds. The new outlook can do this for example.
The best tool I have seen for this is Google Reader. You can add all the feeds that you are interested in and you can organize them into folders. It's very easy to scan through the articles and it keeps track of what you have looked at.
Here's a movie of what it can do:

Chris Gadula's friend Jesse Hirsh pointed out a key benefit of this tool that you can share what you are reading very easily. You can then publish this list on a web page or integrate it into other pages. A really cool feature is that your shared list can also be seen as an RSS feed! One of the feeds I am subscribing to is Jesse's shared items. You can see them on a web page here: http://www.google.com/reader/shared/00787694365499276274
Here is a link to my shared items page: http://www.google.com/reader/shared/05387315875848305761 And you can also see the same items in the side bar further down on this page.
Play around with Google Reader and keep your eyes open for RSS feeds. I look forward to seeing your shared news items!

News, news, news

We are on a mission to raise our profile and to add more value to our clients. One of the ways we can do this is through knowledge. We work very hard to understand out clients needs and the issues that they face.
We all follow the news to some extent to make sense of the world around us. We pick and choose the topics and items that are meaningful to us. As we scan the paper and the web we filter and select from vast content the few items that effect us in some way.
I will suggest that one of the ways we can help our clients is to slightly alter the way we read the news. If we look at the news from the point of view of our clients we will both be better informed about their needs as well as more aware of ways that we can help them. So when we follow the news, online, in print, on TV and on the radio, let's pay a little extra attention to news that might effect or help commercial real estate people.
We want to raise the level of knowledge that we all have in regard to our clients' concerns. To support this goal we have added two new web tools. First we have a rotating block of news on the front page of the main website. This is pulled from Wall Street Journal articles on commercial real estate. The other new tool we have is a blog that contains a compilation of relevant news items. It can be found at http://news.spacedatabase.com
Take a look at our news items each day and please let us know if you come across anything interesting that you think we should share!