Bernanke USUALLY boosts the market.
Will he be able to restore confidence today? He’ll be speaking to the House Committee on Financial Services in a hearing titled: "Monetary Policy and the State of the Economy," which used to be called the Humphrey Hawkins Testimony - and that means it’s time for another episode of my favorite TV show – something I call "When Ron Paul Attacks." Ron Paul has been on a roll lately and today is the perfect day for him to use his 5 minutes to build a platform for his 2012 run at the White House.
Yesterday was disappointing, to say the least as we blew all of our bounce levels EXCEPT the Russell, which finished right on our 625 line. That makes the RUT our canary in the coal mine today as we’ll use it to see which way the market winds are blowing. We didn’t mind yesterday’s sell-off as it was led by a 2.2% drop in Basic Materials and Energy – two sectors we were betting against anyway and we just upped our bets against CRE after skipping most of February as the timing hadn’t seemed right.
Now we are getting a flood of bad new in the Commercial Real Estate space including a report from Real Capital Analytics that shows the Commercial Mortgage Default rate more than doubled in Q4 – from 1.8% to 3.4% and is projected to hit 5.4% this year. “The level of distress continues to rise irrespective of improving economic trends,” Sam Chandan, Real Capital’s global chief economist. Almost $1.1 trillion in commercial loans and $211 billion in apartment loans were held by U.S. banks on Dec. 31, according to Real Capital. “With the concentration of commercial mortgages in small and community banks, there is a potential spillover that will impinge on their ability to make loans to small businesses and families,” Chandan said.
The Congressional Oversight Panel on the financial system bailouts said in a Feb. 10 report that “the ultimate impact of the commercial real estate whole loan problem will fall disproportionately on smaller regional and community banks” that have higher concentrations of such loans. “Some community banks seemed to have abandoned, or never really practiced, sound risk management” by lending too much on real estate in their local markets, David A. Hendler, New York-based analyst for CreditSights Inc., said in a Feb. 22 note.