Zuckerman - "Worst set of macroeconomic conditions since the Great Depression"

Discussion in 'Wall St. News' started by ByLoSellHi, Mar 12, 2008.

  1. Who said this? Roubini? Marc Faber?? Some other perma-bear?


    This is a quote of none other than perma-bull and Boston Properties founder Mort Zuckerman.


    Zuckerman Says U.S. Economy Potentially Facing `Perfect Storm'

    By Michael McKee and Deirdre Bolton

    March 12 (Bloomberg) --
    Mortimer Zuckerman, co-founder of Boston Properties Inc., the largest U.S. office real estate investment trust, said the U.S. economy is in a recession and there's no sign of a recovery.

    ``We are looking at the worst set of macroeconomic conditions since the Great Depression,'' Zuckerman said in an interview with Bloomberg Television. ``I don't know where the bottom is. The federal government's going to have to do a lot more to contain what I think is the potential of a perfect storm.''

    Employers are cutting jobs and demand for housing is tumbling. On March 7, the Labor Department said payrolls fell by 63,000 in February, the most in five years, after a revised decline of 22,000 in January.

    ``The most dangerous part in my judgment is what is going on in the housing world, where we're now running foreclosures at the rate of two million a year, where nine million homes, according to the government, just slightly under nine million homes, have either no equity in them or negative equity,'' he said.

    ``That will go up to 15 million if housing prices continue to go down this year as they've done last year,'' Zuckerman added.

    ``We are clearly heading down. We are in a recession even if it's not technically a recession. The February unemployment numbers were terrible,'' he said.

    Federal Reserve

    Zuckerman said the Federal Reserve and the government need to take more action to stem rising foreclosures. He said the Federal Reserve's move yesterday to lend, in return for mortgage debt, $200 billion of Treasuries to the securities firms that trade directly with the central bank, was not enough.

    The Federal Reserve can't solve the problems of banks that aren't willing to make loans, falling home prices or a lack of confidence in the economy over the next year or two, he said.

    One bright spot, Zuckerman said, was the New York City office market, where the lack of new construction has helped keep prices high.

    ``The real question is, is there a shadow inventory of space?'' he asked. ``Because right now there's virtually no inventory of space and I assume at some point there will be some inventory of space built up from tenants who are putting space on the market as a sublease.''

    Still, he said, ``clearly there is going to be a pullback from both commercial space and residential space over the next year. It's going to come about as a result of the recession that we are entering into.''
  2. If I were him I wuld not go around saying things like that unless he wants a call from Paulson telling him he should be more of a patriot and asking him if he is sure there is nothing in his tax filings for a determined team form the IRS to get contentious about,
  3. I agree with the diagnosis, but not the solution. Liquidity isn't the issue, it's a symptom. There has to be a complete, systemic overhaul of the way financial institutions model risk. The market has to sort out the mis pricing of risk related to debt on its own. Injecting liquidity is not going to help with the long term functioning of debt markets. Nor is bailing out non-performing institutions, creating further moral hazard, distrust between member institutions, incomplete information, and just an overall failure of efficient market transmission.

    Let em fail. And let the market price risk, this time with more people paying attention.
  4. You are only part right.

    The FED has unfortunately been "saddled" with the job of facilitating the de-leveraging of the U.S. banking system.

    You can talk all you want about the LONG-TERM but we won't ever get to the end game of this scenario unless the FED is able to buy some "time" for the commercial banking system. The systematic overhaul will take place at a later point and time. Right now, the FED is more concerned about allowing institutions to "unwind" themselves out of this mess. They were incredibly leveraged ( see the 33:1 and 25:1 leveraged mortgage funds of Bear Stearns from last year at this time ).

    Such de-leveraging takes time.

    And . . . you run the risk of an all-out DEPRESSION if it is not monitored properly.
  5. Paulson's an idiot.
    He actually was quoted last weekend by wire services that this Administration has always advocated a "strong" dollar policy.

    If that's the case . . . I'd hate to see what a "weak" dollar policy is from this terribly incompetent Administration!
  6. Was this guy around in 2001/2002? We had NFP releases of -200k every other month. If February was terrible I wonder what he'll call -200k?
  7. Paulson clearly has no idea that the education level in Europe is way higher than that of the 50% of the US who voted for Bush. All he is doing is completely destroying his credibility and the credibility of the US with the rest of the world by making such idiotic statements.

    What needs to happen is to do away with a full blown moral hazard banking system that alows the creation of generational wealth from presiding over a ponzi scheme for a few years and allows that wealth to be kept when the FRAUD (that is what it is) is exposed and/or the business implodes. There should be a clawback facility for monies paid to C suite and business heads if the business that generated that money subsequently implodes. O'Neal, Prince and Mozillo are prime examples of where this could be appropriately applied.
  8. Good post!

    I actually believe that Paulson is very mindful of the FRAUD that has occurred and that is why he wants to buy some time so that everyone that is "underwater" in the subprime arena can re-finance and then that gets the mortgage lenders and banks off the hook from all sorts of lawsuits.

    Can you imagine a bond covenant that stipulates that if the investor ( say a foreign central bank ) that bought into a pool of mortgages can prove FRAUD in the way that the appraisals were done and the rating agency's rating were assigned to these tranches FORCED THE ISSUER TO BUY BACK THE investment vehicles at FACE VALUE, what would happen???

    That's what some of these bond covenants state.

    Believe it.
    And Paulson KNOWS it.
  9. jsmooth


    haha i remember that. those headlines were coming across at the very same time the EURO making making some new highs
  10. Also, Paulson has a vested interest in stalling this issue until it works through with time. He stated that this was "not about pointing the finger", because of course he was GS CEO at the time all this FRAUDulent packaging was going on and the finger points at him and his ill gotten gains.

    Zero chance of an orange jumpsuit for him unfortunately.
    #10     Mar 12, 2008