Interest Rate Roundup

Friday, July 18, 2008

Back on board after a nasty bug

Ugh. There's nothing worse than a nasty stomach bug to put you on your back for a while. That's why I didn't have anything to say at the blog yesterday. I'm feeling better now so let me take a crack at updating you, dear reader, on some of the things I'm seeing ...

First, an interesting study from the American Institute of Architects (via Bloomberg) caught my eye. The AIA noted that tenant demand is falling and that credit conditions are tightening. The combination of those factors, plus rising building costs, should hit portions of the commercial construction business pretty hard. Office construction should fall 3.7% this year and 12.3% in 2009 and retail construction should drop 8.3% this year and 9.9% in 2009. Hotel construction should fare fine this year -- up 6.6% -- but drop 9.9% in '09. A similar trend should unfold in warehouse and industrial property construction -- +4.6% this year, -5.5% next year.

Second, how about that volatility in financial shares? Companies like Wells Fargo, JPMorgan, and Citigroup haven't been releasing good earnings news. But because the news has been only awful, rather than monumentally terrible, the stocks have responded explosively. Wells was up almost 33% on Wednesday, while JPMorgan shot up roughly 40% from intraday low to high in just a couple of days. This kind of extreme volatility is simply astounding.

Third, I can't help but chuckle at this newfound approach of government officials. Oil prices up? It's all speculation! Let's find those meanies and put them in their place. Stocks going down? Let's shoot the short-sellers! It's obviously their fault. Financial companies imploding? It's rumor-mongering. It has absolutely nothing to do with all the crummy loans they foisted on consumers, or the slicing and re-slicing of those crummy loans into all kinds of complicated securities no one really understood. It's great to see our tax dollars being put to such good use.


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