December 29, 2009
National Real Estate Investor
Several major commercial real estate groups are fighting a proposed federal tax provision that they say would have a devastating effect on real estate investment partnerships.
Commercial real estate groups contend that the Tax Extenders Act of 2009 (HR 4213) would more than double the taxes on carried interest received by general partners in real estate partnerships because the carried interest would no longer be taxed as capital gains at 15%, but as ordinary income with rates as high as 35%.
“That’s a huge increase at a time when the industry is on the precipice, so to speak,” says Thomas Bisacquino, president of the NAIOP, the Commercial Real Estate Development Association. “There really isn’t any real estate-related group that supports it. We’re trying to stimulate the industry. We feel it would create a huge impediment.”
The House of Representatives passed the “tax extenders” bill on Dec. 10. It would prolong a number of tax breaks currently scheduled to expire at the end of the year. Although the bill contains elements that benefit commercial real estate, such as an extension of tax credits for owners who conserve energy through retrofits or remediate brownfields, the prospective change in policy toward real estate investment partnerships has many investors seeing red.
NAIOP has issued a “call to action” to its approximately 16,500 members urging them to contact senators to defeat the proposal. If enacted, it could bring about the largest modification to the taxation of real estate in more than 20 years, since the Tax Reform Act of 1986, NAIOP said in its alert.
The group added that the proposed tax change would have an effect far beyond the Wall Street hedge funds whose practices originally gave rise to the proposal.
The Institute of Real Estate Management (IREM), an association of property managers, has sent a joint letter with the National Association of Realtors and the CCIM Institute, urging all 100 U.S. senators not to change the current capital gains treatment of carried interest for real estate partnerships.
Other organizations are expressing similar concerns. “Changing the current capital gains treatment of carried interests would undermine job creation and have a negative impact on commercial real estate values, which would devastate local property tax revenues and put pension fund investments at risk,” says IREM’s senior legislative liaison Vijay Yadlapati. “Just as importantly, such a policy would slow the national economic recovery.”
This week, in IREM’s latest legislative report, the group says the loss of capital gains treatment for real estate investment partnerships would turn long established taxation rules upside down and have a far-reaching effect. “Real estate partnerships, from the smallest venture to the largest investment fund, have a carried interest component. Approximately $1 trillion of commercial and residential properties are held by partnerships.”
The tax measure would put additional pressure on the commercial real estate industry at a time when it already faces heavy burdens, IREM notes, including a rapid rise in delinquencies and foreclosures and restricted access to credit.
Because of the health care debate, the Senate is unlikely to introduce its own version of the tax extenders bill until early in 2010. But the commercial real estate groups fear that the Senate could quietly add the tax measure affecting partnerships to any unrelated bill now under consideration.
The Senate Finance Committee intends to take action on its own “tax extenders” bill shortly after lawmakers return from the holiday recess in mid-January, says Yadlapati. However, it’s not known whether the carried interest provision will be included in that bill.
Tuesday, December 29, 2009
2010 Promises More Deleveraging for REITs, Great Buying Opportunities
Dec 22, 2009 12:11 PM, By Sibley Fleming
On the surface, it’s a bad combination: $1.4 trillion in commercial real estate debt maturing through 2010, limited capital and 7 million job losses since the start of the recession. Despite the sour-tasting mixture, signs of liquidity returning to the market as well as stellar buying opportunities may make next year a bit more palatable for investors.
“Although troubling times are ahead for many investors, lifetime investment opportunities are forming for the real estate cycle players with cash in hand,” according to the most recent PricewaterhouseCoopers Korpacz Real Estate Investor Survey, which polls major institutional equity investors who invest primarily in institutional-grade property. Investors who are patient, but also daring and selective will acquire high quality assets in markets such as Boston, Washington, D.C., San Francisco, New York and Austin.
Compared with the drought of debt in commercial real estate over the past 12 months, there is evidence that capital will be available to refinance 2010 maturities. For instance, Inland American Real Estate Trust, a real estate investment trust based in Oak Brook, Ill., recently announced that it has refinanced or retired $684 million of its 2010 debt maturities. The remaining $90 million, slated to mature in the second half of the year, is currently being marketed.
“This achievement is indicative of the high quality of Inland American’s real estate assets, and the strong interest of lenders in our portfolio,” said Lori Foust, chief financial officer with Inland American, in a statement. “With approximately $500 million in available cash on hand, we obviously have much more liquidity than we need to retire the remaining $90 million with or without financing.”
Equity REITs raise nearly $10 billion
Since March, the 14 Fitch-rated equity REITs have raised $8.3 billion through the unsecured debt market. An additional $3.4 billion has been raised through bond tender offers and issued common equity, bringing the total to $9.8 billion.
However, whether or not REIT managers wish to continue deleveraging in 2010 remains to be seen, according to the agency. Additional stock offerings would hit common shareholders with a “double dose” of stock dilution and per-share earnings growth.
Liquidity also will play a key role in the asset sales that do come to market, Fitch reports. Properties that come to market will likely reflect commercial real estate companies seeking to delever their balance sheets. The aim is to improve cash flow rather than cleaning up portfolios by disposing of lower-quality assets.
Although the ratings agency forecasts greater liquidity and access to capital in 2010, Fitch still maintains a negative outlook for the U.S. equity REIT sector. That is primarily because the firm’s property-type outlooks are either “negative” or “stable” and are likely to remain so until mid-2010 at least.
Broken down by property sector, Fitch expects that multifamily REITs will continue to be negatively affected by the record-setting unemployment rate, now above 10%, the highest rate in 20 years. In addition, vacancy rates will be pressured by greater housing affordability and first-time owner tax credits as well as an expected decline in household formation. The 2010 outlook for multifamily is “negative.”
Retail REITs also received a negative outlook for the coming year as unemployment continues to weaken consumer demand, pressuring retailers and retail REITs’ ability to maintain occupancy and cash flow.
In contrast, Fitch’s outlook for office REITs are “stable” for 2010, an improvement from mid 2009. Improved balance sheets are projected to offset some of the deterioration in property fundamentals. “Moreover,” Fitch reports, “rated REITs with strong liquidity positions may be able to seize revenue-enhancing acquisition opportunities.”
On the surface, it’s a bad combination: $1.4 trillion in commercial real estate debt maturing through 2010, limited capital and 7 million job losses since the start of the recession. Despite the sour-tasting mixture, signs of liquidity returning to the market as well as stellar buying opportunities may make next year a bit more palatable for investors.
“Although troubling times are ahead for many investors, lifetime investment opportunities are forming for the real estate cycle players with cash in hand,” according to the most recent PricewaterhouseCoopers Korpacz Real Estate Investor Survey, which polls major institutional equity investors who invest primarily in institutional-grade property. Investors who are patient, but also daring and selective will acquire high quality assets in markets such as Boston, Washington, D.C., San Francisco, New York and Austin.
Compared with the drought of debt in commercial real estate over the past 12 months, there is evidence that capital will be available to refinance 2010 maturities. For instance, Inland American Real Estate Trust, a real estate investment trust based in Oak Brook, Ill., recently announced that it has refinanced or retired $684 million of its 2010 debt maturities. The remaining $90 million, slated to mature in the second half of the year, is currently being marketed.
“This achievement is indicative of the high quality of Inland American’s real estate assets, and the strong interest of lenders in our portfolio,” said Lori Foust, chief financial officer with Inland American, in a statement. “With approximately $500 million in available cash on hand, we obviously have much more liquidity than we need to retire the remaining $90 million with or without financing.”
Equity REITs raise nearly $10 billion
Since March, the 14 Fitch-rated equity REITs have raised $8.3 billion through the unsecured debt market. An additional $3.4 billion has been raised through bond tender offers and issued common equity, bringing the total to $9.8 billion.
However, whether or not REIT managers wish to continue deleveraging in 2010 remains to be seen, according to the agency. Additional stock offerings would hit common shareholders with a “double dose” of stock dilution and per-share earnings growth.
Liquidity also will play a key role in the asset sales that do come to market, Fitch reports. Properties that come to market will likely reflect commercial real estate companies seeking to delever their balance sheets. The aim is to improve cash flow rather than cleaning up portfolios by disposing of lower-quality assets.
Although the ratings agency forecasts greater liquidity and access to capital in 2010, Fitch still maintains a negative outlook for the U.S. equity REIT sector. That is primarily because the firm’s property-type outlooks are either “negative” or “stable” and are likely to remain so until mid-2010 at least.
Broken down by property sector, Fitch expects that multifamily REITs will continue to be negatively affected by the record-setting unemployment rate, now above 10%, the highest rate in 20 years. In addition, vacancy rates will be pressured by greater housing affordability and first-time owner tax credits as well as an expected decline in household formation. The 2010 outlook for multifamily is “negative.”
Retail REITs also received a negative outlook for the coming year as unemployment continues to weaken consumer demand, pressuring retailers and retail REITs’ ability to maintain occupancy and cash flow.
In contrast, Fitch’s outlook for office REITs are “stable” for 2010, an improvement from mid 2009. Improved balance sheets are projected to offset some of the deterioration in property fundamentals. “Moreover,” Fitch reports, “rated REITs with strong liquidity positions may be able to seize revenue-enhancing acquisition opportunities.”
Budding Housing Recovery Fails to Bolster Broker Commissions
Dec. 29 (Bloomberg) -- A surge in home purchases by first- time U.S. buyers is doing little to help real estate agents and brokers who close the deals.
Commissions in 2009 fell to the lowest level in seven years, driven down by sales of low-priced homes to first-time buyers using the federal tax credit. Commissions through November dropped 6.2 percent from a year earlier to $40.6 billion, according to Bloomberg calculations based on the average commission rates from Real Trends Inc. and on home price and sales data from the National Association of Realtors.
The tax credit strengthened only the low end of the market and reduced agents’ pay, according to Steve Murray, president of Real Trends, a residential property research company. The tax benefit and foreclosure sales may lower the national median home price by a record 13 percent this year to $172,700, according to the Chicago-based Realtors’ group. Last month almost 75 percent of sales were for $250,000 or less, the Realtors said.
“The impact of the tax credit has been huge,” Murray said in an interview. “The average commission rate inched up this year and the number of real estate sales have gone up too, but the average price has dropped significantly because of the bulge of first-time buyers.”
The dollar value of commissions fell to the lowest amount since 2002 even as the average U.S. rate per transaction rose to about 5.29 percent this year, the fourth consecutive annual gain. The average commission rate was 5.26 percent in 2008, according to Real Trends, based in Castle Rock, Colorado.
‘No Trivial Number’
Commissions earned by real estate agents typically are computed as a percentage of a property’s sale price. Agents negotiate with sellers to set the rate and are required to pay a portion of it to the brokerage they work for.
Income from commissions at Realogy Corp., the largest U.S. residential brokerage and franchiser, fell to $2.1 billion during the first nine months of 2009 from $2.8 billion a year earlier, the Parsippany, New Jersey-based company said in a Nov. 10 regulatory filing.
“Income from real estate commissions is not a trivial number,” Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. “In a very weak economy, every little bit helps strengthen GDP.”
During the five-year real estate boom, commission rates dropped as agents competed for clients and surging prices boosted income from each transaction, according to Murray. By 2005’s record low of 5.02 percent, the average commission had tumbled more than a percentage point from 1992’s 6.04 percent.
Charging More
When home prices declined in 2006 and properties began sitting on the market for longer periods, agents started charging more, Murray said. Real Trends commission data is based on surveys of the largest 500 U.S. real estate brokerages.
“When the market was super-hot, getting a listing was like cash in the bank and there was a huge amount of competition,” Murray said. “Listings are not scarce anymore and, even if priced right, they’re not easy to sell.”
Sales of previously owned homes probably will total 5.15 million this year, a 4.8 percent gain from 2008, according to an estimate on NAR’s Web site. In November, sales rose 7.4 percent to a 6.54 million annual rate, the highest level in almost three years, as buyers rushed to meet the tax credit’s original Nov. 30 deadline, the trade group said in a Dec. 22 report.
Leaving the Business
“I had the busiest November I’ve had in five years, which made up for lower prices and lower commissions, but I know some people who left the business altogether or took second jobs because they were making so much less for each transaction,” said Karen McCormack, co-owner of McCormack & Scanlan Real Estate in Jamaica Plain, a Boston neighborhood.
The number of U.S. real estate brokers and salespeople as of Sept. 30 fell 9.2 percent from a year earlier to 850,000, according to the Bureau of Labor Statistics in Washington.
Housing demand probably will drop in December, even though Congress extended the home-buying tax credit to April and expanded it to include some move-up buyers, according to Lawrence Yun, chief economist at the National Association of Realtors.
“We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit,” Yun said in last week’s NAR report.
There are already signs that the real estate market is slowing again. The Mortgage Bankers Association’s index of loan applications decreased 11 percent to 595.8 the week ended Dec. 18, the lowest level since October, from 667.3 the prior week, the bankers’ trade group said last week.
“Starting this month, home sales are going to take a hit,” said Global Insight’s Newport. “The first credit used up the pool of first-time buyers by moving 2010 sales into 2009. We may not get much of a kick from the extension.”
Commissions in 2009 fell to the lowest level in seven years, driven down by sales of low-priced homes to first-time buyers using the federal tax credit. Commissions through November dropped 6.2 percent from a year earlier to $40.6 billion, according to Bloomberg calculations based on the average commission rates from Real Trends Inc. and on home price and sales data from the National Association of Realtors.
The tax credit strengthened only the low end of the market and reduced agents’ pay, according to Steve Murray, president of Real Trends, a residential property research company. The tax benefit and foreclosure sales may lower the national median home price by a record 13 percent this year to $172,700, according to the Chicago-based Realtors’ group. Last month almost 75 percent of sales were for $250,000 or less, the Realtors said.
“The impact of the tax credit has been huge,” Murray said in an interview. “The average commission rate inched up this year and the number of real estate sales have gone up too, but the average price has dropped significantly because of the bulge of first-time buyers.”
The dollar value of commissions fell to the lowest amount since 2002 even as the average U.S. rate per transaction rose to about 5.29 percent this year, the fourth consecutive annual gain. The average commission rate was 5.26 percent in 2008, according to Real Trends, based in Castle Rock, Colorado.
‘No Trivial Number’
Commissions earned by real estate agents typically are computed as a percentage of a property’s sale price. Agents negotiate with sellers to set the rate and are required to pay a portion of it to the brokerage they work for.
Income from commissions at Realogy Corp., the largest U.S. residential brokerage and franchiser, fell to $2.1 billion during the first nine months of 2009 from $2.8 billion a year earlier, the Parsippany, New Jersey-based company said in a Nov. 10 regulatory filing.
“Income from real estate commissions is not a trivial number,” Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. “In a very weak economy, every little bit helps strengthen GDP.”
During the five-year real estate boom, commission rates dropped as agents competed for clients and surging prices boosted income from each transaction, according to Murray. By 2005’s record low of 5.02 percent, the average commission had tumbled more than a percentage point from 1992’s 6.04 percent.
Charging More
When home prices declined in 2006 and properties began sitting on the market for longer periods, agents started charging more, Murray said. Real Trends commission data is based on surveys of the largest 500 U.S. real estate brokerages.
“When the market was super-hot, getting a listing was like cash in the bank and there was a huge amount of competition,” Murray said. “Listings are not scarce anymore and, even if priced right, they’re not easy to sell.”
Sales of previously owned homes probably will total 5.15 million this year, a 4.8 percent gain from 2008, according to an estimate on NAR’s Web site. In November, sales rose 7.4 percent to a 6.54 million annual rate, the highest level in almost three years, as buyers rushed to meet the tax credit’s original Nov. 30 deadline, the trade group said in a Dec. 22 report.
Leaving the Business
“I had the busiest November I’ve had in five years, which made up for lower prices and lower commissions, but I know some people who left the business altogether or took second jobs because they were making so much less for each transaction,” said Karen McCormack, co-owner of McCormack & Scanlan Real Estate in Jamaica Plain, a Boston neighborhood.
The number of U.S. real estate brokers and salespeople as of Sept. 30 fell 9.2 percent from a year earlier to 850,000, according to the Bureau of Labor Statistics in Washington.
Housing demand probably will drop in December, even though Congress extended the home-buying tax credit to April and expanded it to include some move-up buyers, according to Lawrence Yun, chief economist at the National Association of Realtors.
“We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit,” Yun said in last week’s NAR report.
There are already signs that the real estate market is slowing again. The Mortgage Bankers Association’s index of loan applications decreased 11 percent to 595.8 the week ended Dec. 18, the lowest level since October, from 667.3 the prior week, the bankers’ trade group said last week.
“Starting this month, home sales are going to take a hit,” said Global Insight’s Newport. “The first credit used up the pool of first-time buyers by moving 2010 sales into 2009. We may not get much of a kick from the extension.”
Biggs, Faber Predict Dollar Rally as S&P 500 Extends 67% Surge
Dec. 29 (Bloomberg) -- Barton Biggs and Marc Faber, who recommended buying stocks in March when investors were dumping them, are again united as they predict gains for U.S. equities and the dollar.
Shares in the largest equity market and the U.S. currency may add 10 percent as economies improve around the world, Biggs of New York-based hedge-fund firm Traxis Partners LP said in a Bloomberg Television interview yesterday. Faber, publisher of the “Gloom Boom & Doom” newsletter, told Bloomberg TV that the dollar may rise 5 percent to 10 percent against the euro while stocks gain, reversing the inverse relationship that existed between March and November.
Biggs and Faber’s advice nine months ago proved profitable as the Standard & Poor’s 500 Index surged 67 percent in the biggest rally since the 1930s. They saw a buying opportunity as investors speculating the financial crisis would cause a depression drove stock valuations to the cheapest level since 1986. Now, Biggs, 77, and Faber, 63, see gains as the economic recovery accelerates and investors shift money from Treasuries.
“History would suggest that after such a severe economic shock like we’ve just had that the odds are that we’re going to have a pretty good burst of growth in 2010, 2011,” Biggs said. “I don’t see any reason why we can’t have a further rally in the dollar and a further rally in stocks. And my guess is that the next move in both could be on the order of 10 percent.”
GDP Recovery
U.S. gross domestic product will increase 2.6 percent next year after contracting 2.5 percent in 2009, according to the median economist forecast in a Bloomberg survey. GDP will expand 3.5 percent next year, the most since 2004, as spending increases and companies boost investment, said London-based Barclays Plc’s Dean Maki, the most-accurate forecaster.
Equities started rebounding after investors paid a 23-year low of 11.9 times earnings at S&P 500 companies on March 9, according to data compiled by Yale University’s Robert Shiller, who adjusts valuations for inflation and uses a decade of profit to smooth out short-term fluctuations.
Shiller’s earnings multiple has surged to 20.3, matching the level before New York-based Lehman Brothers Holdings Inc. collapsed in September 2008, after the U.S. government lent, spent or guaranteed more than $11 trillion to end the recession.
The rally in stocks was accompanied by a 17 percent retreat in the Dollar Index between March 5 and Nov. 25, the biggest slump since 1986. The measure tracks the currency’s performance against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc.
Stocks, Dollar Rise
The S&P 500 has added 1.5 percent since Nov. 25 while the Dollar Index advanced 4.7 percent.
Biggs, the chief global strategist for Morgan Stanley until 2003, said in a Bloomberg interview on Feb. 18 that the S&P 500 was poised to rise because economic indicators were starting to improve. Biggs reiterated his optimism in the March issue of Newsweek. His bullish bets during the worst of the credit crisis are giving his six-year-old firm its best returns ever.
Faber advised investors to buy U.S. stocks on March 9 when the S&P 500 was at a 12-year low.
Stocks may rise as Federal Reserve Chairman Ben S. Bernanke is forced to inject more liquidity into the financial system, spurring inflation that prompts investors to shift assets to equities from Treasuries and cash, Hong Kong-based Faber said.
The yield on Treasury 10-year notes has increased 0.64 percentage point this month to 3.84 percent, approaching the seven-month high of 3.95 percent reached in June. The 100 largest taxable U.S. funds returned an annualized 0.06 percent during the past week, according to data compiled by Westborough, Massachusetts-based Crane Data LLC.
“The worst investment will be U.S. Treasuries and cash, which has no return at present,” Faber said. “That money will shift into other assets, and this is the one reason that I am moderately positive about equities.”
Shares in the largest equity market and the U.S. currency may add 10 percent as economies improve around the world, Biggs of New York-based hedge-fund firm Traxis Partners LP said in a Bloomberg Television interview yesterday. Faber, publisher of the “Gloom Boom & Doom” newsletter, told Bloomberg TV that the dollar may rise 5 percent to 10 percent against the euro while stocks gain, reversing the inverse relationship that existed between March and November.
Biggs and Faber’s advice nine months ago proved profitable as the Standard & Poor’s 500 Index surged 67 percent in the biggest rally since the 1930s. They saw a buying opportunity as investors speculating the financial crisis would cause a depression drove stock valuations to the cheapest level since 1986. Now, Biggs, 77, and Faber, 63, see gains as the economic recovery accelerates and investors shift money from Treasuries.
“History would suggest that after such a severe economic shock like we’ve just had that the odds are that we’re going to have a pretty good burst of growth in 2010, 2011,” Biggs said. “I don’t see any reason why we can’t have a further rally in the dollar and a further rally in stocks. And my guess is that the next move in both could be on the order of 10 percent.”
GDP Recovery
U.S. gross domestic product will increase 2.6 percent next year after contracting 2.5 percent in 2009, according to the median economist forecast in a Bloomberg survey. GDP will expand 3.5 percent next year, the most since 2004, as spending increases and companies boost investment, said London-based Barclays Plc’s Dean Maki, the most-accurate forecaster.
Equities started rebounding after investors paid a 23-year low of 11.9 times earnings at S&P 500 companies on March 9, according to data compiled by Yale University’s Robert Shiller, who adjusts valuations for inflation and uses a decade of profit to smooth out short-term fluctuations.
Shiller’s earnings multiple has surged to 20.3, matching the level before New York-based Lehman Brothers Holdings Inc. collapsed in September 2008, after the U.S. government lent, spent or guaranteed more than $11 trillion to end the recession.
The rally in stocks was accompanied by a 17 percent retreat in the Dollar Index between March 5 and Nov. 25, the biggest slump since 1986. The measure tracks the currency’s performance against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc.
Stocks, Dollar Rise
The S&P 500 has added 1.5 percent since Nov. 25 while the Dollar Index advanced 4.7 percent.
Biggs, the chief global strategist for Morgan Stanley until 2003, said in a Bloomberg interview on Feb. 18 that the S&P 500 was poised to rise because economic indicators were starting to improve. Biggs reiterated his optimism in the March issue of Newsweek. His bullish bets during the worst of the credit crisis are giving his six-year-old firm its best returns ever.
Faber advised investors to buy U.S. stocks on March 9 when the S&P 500 was at a 12-year low.
Stocks may rise as Federal Reserve Chairman Ben S. Bernanke is forced to inject more liquidity into the financial system, spurring inflation that prompts investors to shift assets to equities from Treasuries and cash, Hong Kong-based Faber said.
The yield on Treasury 10-year notes has increased 0.64 percentage point this month to 3.84 percent, approaching the seven-month high of 3.95 percent reached in June. The 100 largest taxable U.S. funds returned an annualized 0.06 percent during the past week, according to data compiled by Westborough, Massachusetts-based Crane Data LLC.
“The worst investment will be U.S. Treasuries and cash, which has no return at present,” Faber said. “That money will shift into other assets, and this is the one reason that I am moderately positive about equities.”
Copper, Mining Stocks, Rand Rally on Economic Growth Outlook
Dec. 29 (Bloomberg) -- Copper rose to a 15-month high, mining companies led an advance in stocks and currencies of commodity producers strengthened as investors anticipated faster economic growth next year.
Copper advanced 2.7 percent at 12:45 p.m. in London, extending its 2009 gain to 136 percent. Sugar rose to a two- decade high. The Dow Jones Stoxx 600 Index of European shares added 0.4 percent as the U.K.’s FTSE 100 Index recouped its losses since Lehman Brothers Holdings Inc.’s collapse in September 2008. The South African rand strengthened against all 16 of its most-traded counterparts.
Barton Biggs, a hedge-fund manager at Traxis Partners LP, and Marc Faber, who publishes the “Gloom Boom & Doom” report, predict that stocks will extend gains in 2010 while the dollar will rally. Bill Miller has made 43 percent this year in his Legg Mason Capital Management Value Trust fund, beating 93 percent of similar funds by betting on a recovery. The decrease in U.S. home prices probably moderated in October and consumer confidence improved, economists said before reports today.
“History would suggest that after such a severe economic shock like we’ve just had the odds are that we’re going to have a pretty good burst of growth in 2010, 2011,” Biggs said in a Bloomberg Television interview yesterday. “I don’t see any reason why we can’t have a further rally in the dollar and a further rally in stocks. And my guess is that the next move in both could be on the order of 10 percent.”
Mining Strikes
Copper rose $189 to $7,259 a metric ton on the London Metal Exchange, which was closed yesterday for a national holiday. The metal is heading for its best year since at least 1986. Officials in China, the world’s biggest copper user, said the economy expanded more than 8 percent in 2009. Workers at Chile’s Altonorte copper smelter went on strike yesterday and employees at the Chuquicamata copper mine voted to do the same.
White sugar advanced as much as 1.9 percent to $707.20 a metric ton on the Liffe exchange in London, its highest since at least 1989. Crude oil for February delivery fell 0.5 percent to $78.37 a barrel in New York trading. Gold for immediate delivery fell 0.2 percent.
Mining stocks including Vedanta Resources Plc and Xstrata Plc led the 0.5 percent gain in the U.K.’s FTSE 100 Index. The MSCI World Index of equities in 23 developed nations advanced 0.4 percent. China Railway Construction Corp. and Tongling Nonferrous Metals Group Holdings Co. offered C$679 million ($651 million) for Canada’s Corriente Resources Inc., the owner of copper deposits in Ecuador.
U.S. Futures
Futures on the Standard & Poor’s 500 Index added 0.4 percent before reports on U.S. home prices and consumer confidence. Property values in 20 metropolitan areas probably fell 7.2 percent in October from a year earlier, the smallest 12-month drop since 2007, according to the median forecast of 31 economists surveyed by Bloomberg News. The Conference Board’s consumer sentiment gauge probably improved in December for a second month.
Oil-producing nations were the biggest gainers in emerging market stocks, with Abu Dhabi’s ADX General Index advancing 0.6 percent. The MSCI Emerging Markets Index fell 0.1 percent, snapping a five-day rally.
The Australian dollar climbed 1.1 percent to 89.72 U.S. cents, gaining for the fifth successive day, and rose 1.2 percent to 82.23 yen. South Africa’s rand added 1.4 percent to 7.4121 per dollar.
Bonds Fall
U.K. government bonds declined, sending the yield on the 10-year gilt up as much as 11 basis points to 4.11 percent, the highest level in more than a year. The market was closed yesterday.
The U.S. plans to sell a record-tying $118 billion of securities this week, including $42 billion of five-year notes today and $32 billion of seven-year debt tomorrow. Two-year Treasury note yields reached the highest level since September yesterday as an investor class that includes foreign central banks bought the lowest amount of the debt in five months at an auction. The yield was 2 basis points lower today at 1 percent.
Copper advanced 2.7 percent at 12:45 p.m. in London, extending its 2009 gain to 136 percent. Sugar rose to a two- decade high. The Dow Jones Stoxx 600 Index of European shares added 0.4 percent as the U.K.’s FTSE 100 Index recouped its losses since Lehman Brothers Holdings Inc.’s collapse in September 2008. The South African rand strengthened against all 16 of its most-traded counterparts.
Barton Biggs, a hedge-fund manager at Traxis Partners LP, and Marc Faber, who publishes the “Gloom Boom & Doom” report, predict that stocks will extend gains in 2010 while the dollar will rally. Bill Miller has made 43 percent this year in his Legg Mason Capital Management Value Trust fund, beating 93 percent of similar funds by betting on a recovery. The decrease in U.S. home prices probably moderated in October and consumer confidence improved, economists said before reports today.
“History would suggest that after such a severe economic shock like we’ve just had the odds are that we’re going to have a pretty good burst of growth in 2010, 2011,” Biggs said in a Bloomberg Television interview yesterday. “I don’t see any reason why we can’t have a further rally in the dollar and a further rally in stocks. And my guess is that the next move in both could be on the order of 10 percent.”
Mining Strikes
Copper rose $189 to $7,259 a metric ton on the London Metal Exchange, which was closed yesterday for a national holiday. The metal is heading for its best year since at least 1986. Officials in China, the world’s biggest copper user, said the economy expanded more than 8 percent in 2009. Workers at Chile’s Altonorte copper smelter went on strike yesterday and employees at the Chuquicamata copper mine voted to do the same.
White sugar advanced as much as 1.9 percent to $707.20 a metric ton on the Liffe exchange in London, its highest since at least 1989. Crude oil for February delivery fell 0.5 percent to $78.37 a barrel in New York trading. Gold for immediate delivery fell 0.2 percent.
Mining stocks including Vedanta Resources Plc and Xstrata Plc led the 0.5 percent gain in the U.K.’s FTSE 100 Index. The MSCI World Index of equities in 23 developed nations advanced 0.4 percent. China Railway Construction Corp. and Tongling Nonferrous Metals Group Holdings Co. offered C$679 million ($651 million) for Canada’s Corriente Resources Inc., the owner of copper deposits in Ecuador.
U.S. Futures
Futures on the Standard & Poor’s 500 Index added 0.4 percent before reports on U.S. home prices and consumer confidence. Property values in 20 metropolitan areas probably fell 7.2 percent in October from a year earlier, the smallest 12-month drop since 2007, according to the median forecast of 31 economists surveyed by Bloomberg News. The Conference Board’s consumer sentiment gauge probably improved in December for a second month.
Oil-producing nations were the biggest gainers in emerging market stocks, with Abu Dhabi’s ADX General Index advancing 0.6 percent. The MSCI Emerging Markets Index fell 0.1 percent, snapping a five-day rally.
The Australian dollar climbed 1.1 percent to 89.72 U.S. cents, gaining for the fifth successive day, and rose 1.2 percent to 82.23 yen. South Africa’s rand added 1.4 percent to 7.4121 per dollar.
Bonds Fall
U.K. government bonds declined, sending the yield on the 10-year gilt up as much as 11 basis points to 4.11 percent, the highest level in more than a year. The market was closed yesterday.
The U.S. plans to sell a record-tying $118 billion of securities this week, including $42 billion of five-year notes today and $32 billion of seven-year debt tomorrow. Two-year Treasury note yields reached the highest level since September yesterday as an investor class that includes foreign central banks bought the lowest amount of the debt in five months at an auction. The yield was 2 basis points lower today at 1 percent.
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