The Bad News Report

[Nick2]

My parents just shifted all stock investment money into money market accounts. Things are pretty unstable right now.

[Miesian Corners]

16 hours ago, jednc said:

My reality was I was frozen for a few pay raise and that's about it. No real effect other than that. I take that back...NC elected a Republican majority NCGA. I'm still suffering those effects (I am a R, but that stupid super majority has almost ruined us all).

But, by all means if you want to run and cry under your bed because of what a2 has said then have at it. I'll just stay the course.

Not hiding anywhere. My savings and investments are diversified and fairly conservative. I also have no debt. But I know I'm in the minority. 

[a2theb]

With all the new replies, I came in expecting news of BofA leaving and now I am leaving with the knowledge that I will be jobless and homeless in the next 12-18 months.

[videtur quam contuor]

This is.. just...the best

18 hours ago, tozmervo said:

Maybe in 10 years we'll have a sequel to "The Big Short" with a reprisal of Margot Robbie taking a bubble bath, explaining what the hell negative interest is

 

[Commoner]

This (and A2's intellectual honesty) is a great discussion, and reminds me of the exciting (for sure) 2007-2009 time period.  I also stayed away from UP for years, and for some reason, the irrational exuberance (and the development that ensues) lures me back, as usual, just in time for a reset.  

As a not-yet-but-approaching-40 year old, the Great Recession happened at a critical (early) juncture in my career.  It was life-changing,  It affects every economic decision I make.  But the dichotomy for me, personally, is going to make this one even more impactful.  

On the one hand, I'm in the asset management business.  We're liquid and hungry for any reset in asset valuations and investment terms.  It's been silly for over half a decade.  Financing is "secured" (to paraphrase Elon Musk) and locked in for the long haul.  It couldn't come fast enough.

On the other hand, I've been divorced TWICE since the Great Recession.  I'm silly broke.  All assets and over half of my income is gone.  I'm personally levered beyond reason, and need a miracle to dig out.  I'm dreading the impact.  

Should be exciting.  

[DMann]

Don't remarry!

[SgtCampsalot]

I imagine if one has no assets or savings then the only thing they could truly do to prepare for a downturn is to try to find a recession-resilient job position.

I actually had this conversation with a friend yesterday (thanks to this thread) who works in residential property management (apartments etc) but they want to move laterally into the construction side of development firms. After our chat they were having second thoughts about trying to make the transition; apartments will still be needed (especially uptown), but construction projects may bottom-out.

I mean that's sound logic, no? I guess I talked 'em out of it. This friend was kinda bummed, though (thanks @A2.  )

Edited September 4, 2019 by SgtCampsalot

[videtur quam contuor]

Early in my adult life I was in construction equipment sales and the more experienced colleagues explained the cyclical nature of the business, with personal experiences, and I chose to move on and move out. I would have been at the very bottom of the hierarchy.

[urbanlover568]

https://www.wsoctv.com/news/local/video-shows-carolina-panthers-fans-brawling-during-weather-delay/985995898

[KJHburg]

Don't know if this is good or bad news or just news but Michael Jordan is selling a huge stake but not controlling stake in the Hornets.

From Observer article

""Michael Jordan has agreed to sell a large piece of the Charlotte Hornets to two New York-based investors, the Observer has learned.   Jordan is bringing in Gabe Plotkin, a founder of Melvin Capital, and Daniel Sundheim, a founder of DI Capital. Both prospective owners must be approved by the NBA, but that is already in process and the sale is expected to close in the next couple of weeks, a league source confirmed.  Jordan controls about a 97 percent stake in the Hornets. This agreement has no provision for him to give up majority control of the team or its operation. A source familiar with Jordan’s thinking said he plans to own and run the Hornets “a good, long time.” ""

Read more here: https://www.charlotteobserver.com/sports/charlotte-hornets/article232128902.html#storylink=cpy

[urbanlover568]

WeWork halts all new lease agreements to stem losses. Wonder what would happen if the company goes bankrupt. 
 

https://www.bizjournals.com/albany/news/2019/09/27/wework-halts-all-new-lease-agreements-to-stem.html

[Urban Cowboy]

2 hours ago, mpretori said:

WeWork halts all new lease agreements to stem losses. Wonder what would happen if the company goes bankrupt. 
 

https://www.bizjournals.com/albany/news/2019/09/27/wework-halts-all-new-lease-agreements-to-stem.html

They would take down the oversized and ridiculous WeWork sign on 128 Tryon, I’d hope.

[atlrvr]

2 hours ago, mpretori said:

WeWork halts all new lease agreements to stem losses. Wonder what would happen if the company goes bankrupt. 
 

https://www.bizjournals.com/albany/news/2019/09/27/wework-halts-all-new-lease-agreements-to-stem.html

Not much.  Their operating margins per location post cap ex are just fine.  They can also shutter any unprofitable location with minimal repercussion to the parent company.  Finally, if they went BK, most corporate tenants would just sign a direct lease with the building owner, and the individual space would either become internally managed or taken over by a competitor like Industrious.  Not sure why people are so concerned.

[urbanlover568]

5 minutes ago, atlrvr said:

Not much.  Their operating margins per location post cap ex are just fine.  They can also shutter any unprofitable location with minimal repercussion to the parent company.  Finally, if they went BK, most corporate tenants would just sign a direct lease with the building owner, and the individual space would either become internally managed or taken over by a competitor like Industrious.  Not sure why people are so concerned.

When you say it that way, what's the purpose for WeWork then? 

Edited September 28, 2019 by mpretori

[kermit]

5 minutes ago, mpretori said:

When you say it that way, what's the purpose for WeWork then? 

They have the same business model as any other retailer. The lease space at wholesale and rent it back out at retail.

[Old Carolinian]

WeWork's purpose appears to have been (1) to lose money and (2) enrich Adam Neuman, its former CEO.

2018    $1,900,000,000  loss on $1,800,000,000 of revenue

2019 forecast   $2,700,000,000 loss

WeWork doesn't work (financially).    Also, Neumann's $60,000,000 Gulfstream is for sale.  Contact WeWork's head office before everyone loses their job in the bankruptcy.

[videtur quam contuor]

They lose money on every lease and make it up in the volume. That was a vaudeville punch line that has continued to make appearances. Hats, Florida real estate, whatever.

Edited September 29, 2019 by tarhoosier

[Matthew.Brendan]

https://www.zerohedge.com/markets/miami-real-estate-about-collapse

Florida real estate you say?

[A2.]

15 hours ago, Old Carolinian said:

WeWork's purpose appears to have been (1) to lose money and (2) enrich Adam Neuman, its former CEO.

2018    $1,900,000,000  loss on $1,800,000,000 of revenue

2019 forecast   $2,700,000,000 loss

WeWork doesn't work (financially).    Also, Neumann's $60,000,000 Gulfstream is for sale.  Contact WeWork's head office before everyone loses their job in the bankruptcy.

WeWork will go down in a ball of flames. The comments above are correct and the company is a laughable joke on Wall Street. 

It’s a dumpster fire of a company and is already looking for a cool Billion to even continue. 

https://markets.businessinsider.com/news/stocks/softbank-reportedly-talks-with-wework-ipo-1-billion-lifeline-2019-9-1028555201

Edited September 29, 2019 by A2.

[urbanlover568]

15 minutes ago, A2. said:

WeWork will go down in a ball of flames. The comments above are correct and the company is a laughable joke on Wall Street. 

It’s a dumpster fire of a company and is already looking for a cool Billion to even continue. 

https://markets.businessinsider.com/news/stocks/softbank-reportedly-talks-with-wework-ipo-1-billion-lifeline-2019-9-1028555201

What is troubling is that WeWork occupies 46,630,00 sq ft of office space and has 562 locations. I don't know how much of that space they sub-leased out, but if it's a small fraction, we could be looking at a lehman brothers style collapse here. They have 3 locations in Charlotte with a significant amount of space. There are other companies like WeWork out there that might also face the same fate.  All of this would send shockwaves through the markets and developments. 

[KJHburg]

^^^ Charlotte's percent of coworking space to the overall market is 2% much less than the larger markets like San Fran, Manhattan. Miami and LA.  Even Seattle has a lot more coworking than Charlotte as % of overall market.  I can only speak to Charlotte's Weworks the 3 of them.  All of them seem pretty full as a mixture of large companies and 1-5 job offices.  Ally Bank, MUFG Union  Bank, Better.com are all tenants in Charlotte locations.  But you look at a market like NYC where they have 64 locations and many seem really close to each other.    Their biggest space is in First Citizens Bank plaza building where they have 120K sq ft or so, 90K in 615 Regions and only 45K or so in Railyard.  The latter 2 new buildings could easy absorb the space given any spectacular failure mentioned above.  I think they will be some consolidation in this area and many some locations closing but Charlotte will be fine in even in the doom and gloom scenario mentioned above. 

Here is CBRE's recent report on coworking and its growth.

https://www.cbre.com/agile-real-estate/Lets-Talk-About-Flex-US-Flexible-Office-Market-2019?article={C46C92DB-0326-4DF8-95CB-96983FA2B3A3}&utm_source=National PR&utm_medium=Media&utm_campaign=Flex Office Major Report

Edited September 29, 2019 by KJHburg

[urbanlover568]

21 minutes ago, KJHburg said:

^^^ Charlotte's percent of coworking space to the overall market is 2% much less than the larger markets like San Fran, Manhattan. Miami and LA.  Even Seattle has a lot more coworking than Charlotte as % of overall market.  I can only speak to Charlotte's Weworks the 3 of them.  All of them seem pretty full as a mixture of large companies and 1-5 job offices.  Ally Bank, MUFG Union  Bank, Better.com are all tenants in Charlotte locations.  But you look at a market like NYC where they have 64 locations and many seem really close to each other.    Their biggest space is in First Citizens Bank plaza building where they have 120K sq ft or so, 90K in 615 Regions and only 45K or so in Railyard.  The latter 2 new buildings could easy absorb the space given any spectacular failure mentioned above.  I think they will be some consolidation in this area and many some locations closing but Charlotte will be fine in even in the doom and gloom scenario mentioned above. 

Here is CBRE's recent report on coworking and its growth.

https://www.cbre.com/agile-real-estate/Lets-Talk-About-Flex-US-Flexible-Office-Market-2019?article={C46C92DB-0326-4DF8-95CB-96983FA2B3A3}&utm_source=National PR&utm_medium=Media&utm_campaign=Flex Office Major Report

Having a disruption of possibly 842,00 sq ft of office space will effect the market. The magnitude of the effect is still unknown. I, personally, think it will have very negative effects. Banks are borrowing up to $100B daily from the fed now, moves not seen since the great depression. Highly doubt banks can help here at this point in time. But we will see. Charlotte, has done remarkably well during economic hardships.  

 

 

 

 

[A2.]

^agree with KJ

Even if WeWork fails (which to me is a forgone conclusion based on basic financial accounting), the space that is needed today, is still needed tomorrow regardless of who the landlord is. The real factor in growth of office space is the demand by the firms that need it or don’t. For now, the net absorption  of class A office space in Charlotte is excellent, especially compared with similar sized metros. 

The real factors of growth and decline will continue to be the macro economic environment,  not the rise or fall of WeWork. 

 

A2

[cltheel.sdl]

@A2., just curious, but do you think the impending crash will be largely tied to stocks, real estate, or both?  OR something different?  Also, how much longer do you think we have before the proverbial sh!t hits the fan?  

[A2.]

4 hours ago, cltheel.sdl said:

@A2., just curious, but do you think the impending crash will be largely tied to stocks, real estate, or both?  OR something different?  Also, how much longer do you think we have before the proverbial sh!t hits the fan?  

I personally believe what is coming will be quite severe (worse than 2008). I also believe it will impact all facets of the economy. Both stocks and real estate will be impacted, and probably quite dramatically. On the Real Estate side (including commercial), the depth of falling or stagnating prices will be location dependent. So properties in hot markets will fall harder than those is markets with less froth.

There are already signs of stress under the surface that Joe public doesn’t see and other signs that are already in plain view (think personal, corporate, and government debt loads at all time highs).

That said, timing is always challenging. Sometimes markets (both Real Estate and Stocks) can stay elevated longer than the most brilliant of economists and traders could imagine. That said, if I were a betting man, I’d put volatility entering in the markets by years end, but no later than 1Q of 2020. After that I see a real escalation of turbulence taking us into the next election (so essentially most of next year will be quite challenging).

If I were forecasting, I would say the real material issues come after the election and beyond. Regardless of the election results, the future beyond mid 2020 looks to be quite tentative from a economic standpoint. 

This might be construed to be a doom and gloom comment, and make no mistake, I’m not here to pretend it’s not. However, I am suggesting that when we do drop, it’s not going to be a garden variety correction, but a structural shift in the markets and economy. The other thing that I see (and am more worried about) is that unlike the severe downturn a decade ago, this one will not be “V” or “U” shaped in its response to the Fed. This go around it will be a fall in asset prices, followed by a longer term trough and anemic growth (if any)  that will last much longer than a year in duration. Think of it as more of an “L” shaped recovery or stagnation, with a true reset in expectations in returns for many investable assets. Simply put, people are going to be forced to reevaluate what market returns will yield going beyond the next reset. 

Lastly. I am more concerned that our country, with the impacts a deeper recession/depression might have, will drive a wedge between people politically even further than they are already (if that is even possible). Along those same lines I also see war on the horizon. As sad as I am to admit it, economic downturns often always are accompanied by military conflict. 

****please note, I pray I’m wrong, but for now, I’m simply calling it as I see it. I would rather be wrong and called out and ridiculed than being right. Being right isn’t some kind of bighead thing that I would pound my chest over. I could care less about my future predictions, and honestly would love to just cheer on more cranes. And quite frankly, I just like it when things are going up and everyone is happy. 

A2

 

Edited September 30, 2019 by A2.