Tuesday, November 11, 2008

You Call That a Knife? THIS is a Knife!

You call that market volatility? This is market volatility. Below is a chart for Double Inverse Real Estate (Symbol SRS), which is up another 10 points as of this post.

20 point daily swings have been commonplace and a 60 point move occurred just a few weeks back on October 28th. The following news explains it all in a nutshell (WSJ):

One of the nation's largest shopping mall owners, General Growth made the warning in a quarterly filing with the U.S. Securities and Exchange Commission. The company, based in Chicago, faces an additional $3.07 billion in debt coming due next year.

General Growth has struggled for the past year to refinance and pay down a $27 billion debt load, amassed in acquisition sprees in recent years. The company owns more than 200 U.S. malls, including flagships such as Honolulu's Ala Moana Center and Las Vegas's Fashion Show mall.

General Growth has $900 million in debt coming due Nov. 28 on two luxury malls on the Las Vegas strip. It has another $58 million in bonds due on Dec. 1. The company is attempting to meet those obligations by selling those two malls as well as another on the Las Vegas Strip. It also is negotiating with its lenders to gain an extension on its deadline to pay those debts.
Another victim of an era of easy money. Expect commercial real estate properties to be under immense pressure as they get hit from the bottom (vacancies due to unemployment) and the top (deleveraging).

In other words, expect this volatility to continue for a long time to come...