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IPO Madness Continues

IPO madness continues unabated. Today’s target? Castlight Health (CSLT), went public today at $16, and quickly shot up to $42, giving it a valuation of roughly $4 Billion. Not a big deal, you might think. Until you find out that the company has only $13 Million in revenue and huge net losses. With it’s valuation at 307 times it’s revenue this company better cure cancer and bring world piece to justify its valuation. In case you believe this sort of a valuation is alright, give me a call, I have some Nortell and Pets.com stock to sell you. 

Just another nail into this bull markets casket. If you would be interested in learning when the bear market of 2014-2017 will start and its internal composition, please Click Here.  

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IPO Madness Continues Google

Castlight Health: Most overpriced IPO of the century

In hindsight, it’s kind of funny that the big tech bubble debate this week focused on Candy Crush Saga owner King Digital Entertainment’s IPO filing. It’s funny because, on Thursday night, Wall Street priced the craziest deal since the heights of the Internet bubble and almost no one complained a bit.

 

That deal was for Castlight Health (CSLT), a company that offers health information via the Internet to inform medical choices and reduce insurance costs. Sounds like a pretty good idea, and Castlight says it has helped some of its corporate customers reduce their health costs by more than 10% a year.

Goldman Sachs, Morgan Stanley and other lead underwriters priced Castlight’s shares at $16, above an already raised expected range of $13 to $15, giving the company a valuation of $1.4 billion. That’s billion with a “b.” Last year, Castlight had $13 million of total revenue. That’s million, with an “m.”

Then the stock opened on Friday at almost $40, giving it a valuation of over $3 billion!

Insane valuation

Jay Ritter, a professor at the University of Florida and my go-to source on IPOs for the past few decades, tells me that Castlight’s insane level of valuation – 107 times revenue (not profits, as they had huge losses last year) – of the original IPO pricing hasn’t been seen for a tech deal since the year 2000, the twilight of the 20th century. Of the prior 13 deals priced at 100 times revenue or more and sales of at least $10 million, the average 3-year return was -92%.

Investors have been attracted by the siren song of market potential. With trillions spent on health care and everyone trying to save money, surely there’s a big market for Castlight’s services?

That’s probably true but it’s also obvious to a lot more folks than those at Castlight. Try the numerous private competitors, companies such as Change Healthcare, backed by investors including Blue Cross Blue Shield, and Healthsparq, which recently said it served 60 million consumers. And the big health insurers themselves, Aetna (AET) and UnitedHealth Group (UNH), for example, are already experimenting with similar services and giving them away free to major customers.

To be sure, it’s a great idea. One of the biggest hurdles to controlling healthcare costs is the complexity and obfuscation in the market. It’s hard to be a smart shopper when you can’t compare the quality of different providers or even know how much they’ll end up charging. Castlight and its competitors collect vast amounts of data and display relevant bits in a more clear and simple way to help consumers make smarter choices.

The next Netscape?

But there’s no way to tell who will win this theoretically huge potential market in the future, nor is there any way to predict how profitable it will end up. Castlight seems far more likely to end up as the next Netscape, which got obliterated when Microsoft decided to give away an Internet browser for free and wipe out Netscape’s whole business model of charging.

Investors who agreed to pay $16 a share for Castlight Thursday night seem more focused on the inspiring performance of other cloud-service stocks, such as Benefitfocus (BNFT), which went public at $26.50 a share last September and currently trades at $58, off its all-time high of $77 in January.

It’s pretty clear a bubble is inflating in this sub-sector of Internet stocks and Castlight makes that incredibly obvious. In early trading, Castlight’s $3.5 billion valuation is more than double the value of Benefitfocus though it has about 1/10 the revenue. Next week the bubble may inflate further when a couple more cloud service providers are expected to price their IPOs, including banking specialist Q2 and HR benefits provider Paylocity.

Meanwhile with all the competition for Castlight, the company is spending like crazy on marketing, R&D and the like. On its $13 million revenue base last year, it spent $34 million on sales and marketing, $15 million on R&D and $9 million on administrative costs. Bottom line: a $62 million net loss.

And then there’s the curious case of Castlight’s present business. The company already has 24 corporate customers in the Fortune 500, including Walmart Stores (WMT). The retailing giant, which covers more than 1 million people under its employee health plans, was responsible for 16% of Castlight’s revenue, or about $2 million, under a contract which expires at the end of 2015.

Does that seem like a massive revenue stream from one of the single largest healthcare providers in the nation? Not exactly. Again – they already have one of the biggest clients on the planet and the revenue is peanuts. Yikes.

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Why Putin Doesn’t Care About The Russian Stock Market -or- Russia’s Rich

In another propaganda piece by the Western Media, the WSJ reports (see report below) that Russia’s rich are freaking out. They have already lost billions in the Russia’s stock market collapse and might face margin calls if things continue to deteriorate. Further, if sanctions are implemented, the Oligarchs stand to lose countless billions more. Nice try WSJ, but you don’t get.

Putin, doesn’t give a flying fuck about Russia’s stock market or Russia’s rich at this juncture. He is in full control. I have been saying this since this whole thing started, but no one gets it. Putin is committed to go to war. Against Ukraine, the US or NATO. Whoever decides to intervene into Ukraine will be in a war with Russia. Immediately. There is no way that Putin or Russia will let Ukraine fall into NATO hands. I am not sure why our administration doesn’t understand that.   

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Why Putin Doesn’t Care About The Russian Stock Market -or- Russia’s Rich  Google

Russian Richest Face Margin Calls With Billions at Stake 

“Russian businessmen are very scared,” the 54-year-old former billionaire, who served in the Soviet embassy in London during the Cold War and owns Russia’s National Reserve Corp., said by phone. “There are risks to the Russian economy. There could be margin calls, reserves might be drawn down, exchange rates may fall and prices will rise. This worries me.”

Billionaires in Russia and Ukraine risk further losses as market volatility and the threat of Iran-style economic sanctions intensify following Russia’s incursion into Crimea. Since Feb. 28, the day unidentified soldiers took control of Simferopol Airport in southern Ukraine, Russia’s 19 richest people have lost $18.3 billion, according to the Bloomberg Billionaires Index, a daily ranking of the world’s 300 richest wealthiest people. 

“The instability caused by the situation in Crimea could be a problem for the oligarchs,” Yulia Bushueva, who helps manage $500 million at Arbat Capital in Moscow, said in a telephone interview. “If a billionaire pledged their stakes in publicly traded companies as collateral for a line of credit, they could face margin calls and have to re-negotiate with banks.”

The U.S. and the European Union are threatening sanctions against Russia if it doesn’t back down from annexing the Black Sea province, which is holding a referendum in two days to join Ukraine’s former Soviet-era master.

‘Negative Consequences’

“All sides now understand each other’s positioning and understand the constraints each other face,” Michael O’Sullivan, chief investment officer of Credit Suisse Private Banking, said in a telephone interview. “It’s now clear as well that an escalation would have negative consequences on pretty much all the players.”

How the Crisis Began, Where It’s Heading

The European Union last week froze the assets of 18 Ukrainians, including “hundreds of millions of euros” in the Netherlands controlled by former President Viktor Yanukovych and his son, Oleksandr, Dutch Finance Minister Jeroen Dijsselbloem said March 6 on the television show Pauw & Witteman.

Dmitry Firtash, a 48-year-old Ukrainian billionaire who made his fortune importing Russian natural gas, was arrested in Vienna Wednesday by an organized-crime unit of the Austrian police on a warrant issued by the U.S. Federal Bureau of Investigation, according to a statement by the country’s Interior Ministry.

Outside Russia

He is alleged to have paid bribes and formed a criminal organization, according to the warrant, issued after an FBI investigation that began in 2006, the ministry said.

One Russian billionaire, who asked not to be identified because of the sensitivity of the situation, said he was concerned about the effect potential sanctions might have on business. He said he’d consider buying assets outside of Russia if sanctions were imposed.

Dmitry Peskov, a Kremlin spokesman, said in a March 11 telephone interview that “there were no consultations” with Russian businessmen and that they “have not expressed any concern” over the situation.

According to a March 13 report in the Wall Street Journal, a spokesman for President Vladimir Putin acknowledged that business leaders in Russia have been in “constant contact,” and that Putin had not met with any of them. The report said a recent meeting between the country’s industrialists and high-ranking government officials turned “tense” when the subject of sanctions came up.

Broken Sanctions

Doing business under sanctions might not be all bad for Russian entrepreneurs, according to South African billionaire Natie Kirsh.

“There are opportunities that come out of sanctions,” the 82-year-old, who started building his $5.9 billion retail and real estate empire during apartheid, said by phone from Johannesburg. “Sanctions can be broken. It always depends on the extent of the sanctions and how they take.”

F.W. de Klerk, South Africa’s last president during the apartheid era, said the country and businessmen were able to work around the sanctions levied by the U.S. beginning in 1986.

“The sanctions delayed change in South Africa because it made us look for ways to evade them,” de Klerk, 77, said in a telephone interview from Cape Town. “We worked with the business community to find ways to keep companies going. In the end, not many factories shut down, they just changed ownership.”

Ukraine’s Richest

Kirsh said the Cold War could reemerge out of Russia’s incursion in Ukraine, and energy suppliers outside of Russia will benefit if sanctions are levied.

“It’s a different story with Putin,” Kirsh said. “South Africa doesn’t supply 30 percent of Europe’soil and gas. There will be some people outside of Russia that will see a huge benefit. Some people who supply oil and gas for Russia will not believe how busy they will be.”

Rinat Akhmetov, Ukraine’s richest person, has lost more than $550 million since Feb. 28. The 47-year-old billionaire, who owns Donetsk, Ukraine-based conglomerate System Capital Management Group, expanded his business with help from Yanukovych. Akhmetov’s DTEK Holdings BV was the only bidder in two of five auctions of state-owned energy assets, which were organized by the former president’s government.

‘Maintain Relations’

The billionaire no longer supports his longtime ally and has committed to rebuilding the government of Ukraine, according to a March 10 report in London’s Telegraph newspaper. Elena Dovzhenko, a spokeswoman for Ahkmetov, said the billionaire wasn’t immediately available to comment.

“He understands that the previous state of things is over,” Ihor Burakovsky, head of the Board of the Institute for Economic Research and Policy Consulting in Kiev, said by phone. “He will try to maintain relations with all the significant players in the country.”

Ahkmetov on March 9 met with Vitali Klitschko, leader of Ukraine’s UDAR party and a potential candidate for Ukraine’s presidency, to discuss the situation, according to a statement from UDAR.

“The use of force and lawless actions from outside are unacceptable,” the billionaire said in a separate statement on March 2. “I state with all due responsibility that SCM Group, which today employs 300,000 people and represents Ukraine from west to east and from north to south, will do everything possible to maintain the integrity of our country.”

State Assets

The 19 Russian billionaires on the Bloomberg ranking have businesses, homes and bank accounts scattered around the globe valued at more than $208 billion. Some of that wealth was accumulated through government ties that enabled them to acquire former state assets during privatization in the 1990s, transactions Putin called “unfair” in 2012. They have since moved control of the assets out of Russia and into the West.

Alisher Usmanov, the country’s richest person, controls his most valuable asset, Metalloinvest Holding Co., Russia’s largest iron ore producer, through three subsidiaries, one of which is located in Cyprus, an EU member nation. The 60-year-old also owns a Victorian mansion in London that he bought in 2008 for $70 million, according to a May 18, 2008, Sunday Times newspaper report.

He’s lost $1.5 billion since the crisis began, according to the Bloomberg ranking.

“We are concerned with the possible sanctions against Russia but don’t see any dramatic repercussions for our business,” Ivan Streshinsky, CEO at USM Advisors LLC, which manages Usmanov’s assets, including stakes in Megafon OAO and Mail.Ru Group Ltd., said in an interview at Bloomberg’s offices in Moscow today.

Greater Compliance

“Mail.Ru and Megafon revenue is coming from Russia and people won’t stop making calls and using the Internet,” he said. “Metalloinvest may face closure in European and American markets, but it can re-direct sales to China and other markets.”

Transferring ownership abroad may prove problematic if sanctions are imposed. The U.S. Securities and Exchange Commission and other regulatory authorities may tell U.S.-based banks to exhibit greater compliance with the existing Foreign Corrupt Practices Act, Standard Bank (STAN) Group Ltd. said in a March 11 report.

The report also said the U.S. might investigate Russia’s compliance with the Financial Actions Task Force on Money Laundering and Terrorism Financing in an effort to push the country onto a black list, a move that would prevent global banks from dealing with Russian lenders.

‘Nuclear Blow’

The third escalation would be actual asset freezes, which perhaps would be “the nuclear blow, as it would risk countermeasures from the Russian authorities,” according to the Standard Bank report.

“Currently, there is no clear link between events taking place in Ukraine and any steps that might be available to freeze assets of wealthy Russian citizens overseas,” Marta Khomyak, a partner of London-based PCB Litigation, said in a telephone interview. “However, given the pace of events and the underlying political tensions, I would not rule out attempts being made to attack various Russian interests overseas.”

Sanctions related to the Crimea crisis so far have been levied on individuals the EU said were responsible for the “misappropriation of state funds” and “human rights violations,” according to the regulation passed by the Council of the European Union on March 5. President Obama echoed the language in a briefing with journalists at the White House the next day.

Lisin’s Steel

“Russians who are making bank transactions and opening new accounts will now be confronted with increased suspicion,” Valery Tutykhin, an attorney with John Tiner & Partners, a Geneva-basedlaw firm that specializes in wealth management, said in an e-mail.

The crisis also threatens to derail the relationship between the West and the Russian businesses the billionaires control. Among the companies potentially affected is OAO Novolipetsk Steel (NLMK), the country’s most-valuable steelmaker, which is controlled by Vladimir Lisin, Russia’s 13th-richest person. The company derived 21 percent of its $12.1 billion in 2012 revenue from Europe, according to data compiled by Bloomberg. Sergey Babichenko, a spokesman for NLMK, declined to comment.

“In the event of a European and U.S. ban on exports of the metal, NLMK’s position would be weakest among Russian steelmakers, because it ships steel slabs to its own mills in Europe,” Kirill Chuyko, head of equity research at BCS Financial Group said. “We see such actions as unlikely for the time being.”

Amicable End

With its stock market falling and interest rates rising, Russia has suffered most of the financial pain the crisis has inflicted.

“To the extent that they can, the businessmen in Moscow will be making their sentiments and voices heard,” said Credit Suisse (CSGN)’s O’Sullivan. “I’m not sure the Kremlin will listen to them.”

Billionaire Naguib Sawiris, Egypt’s second-richest person, who’s done business with North Korea, Russia and Pakistan through his telecommunications companies, said he’s concerned about potential sanctions.

“Putin has proven that toward the end of any crisis, he always goes back to reason and finds compromises,” Sawiris, 59, said in a March 14 e-mail. “Therefore, I bet this crisis will end amicably.”

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Say Goodbye To Income Equality

Wall Street Journal Reports: Income Inequality a “Key Issue” for Global Economy. Absolutely. Hands down, no questions asked. Without income equality and a strong middle class no nation or its economy can function properly for very long. Unfortunately, over the last two decades the FED has been hell bent on destroying the middle class for the benefit of the rich and powerful. Now we find ourselves in the economy where the 85 richest people have more wealth than the bottom 3.5 Billion people.

Will this trend change anytime soon? 

Not a chance. If we look at the actions of the Federal Reserve, they will perpetuate this trend until people get fed up and demand change. Until that time, they will continue to inflate the markets while providing free credit to the top 1-5%. Enriching them in the process. Unfairly I might add. As for you? Better luck next time. Either get rich or you will be stuck in this “income inequality conundrum” for the foreseeable future. A sad  state of affairs. 

Oh, I almost forgot, if you need someone to blame, blame Greenspan, Bernanke and Yellen. 

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Say Goodbye To Income Equality  Google

 

Income Inequality a ‘Key Issue’ for Global Economy

Income inequality is becoming a bigger issue on the global stage, with the IMF out this week saying it is one of the biggest challenges to global growth

“It’s a serious economic and political issue,” Eswar Prasad, author of the book “The Dollar Trap”, said this morning on the MoneyBeat show. “I’ve seen it close up-front in emerging markets.” When the people perceive that the vast majority of a nation’s wealth is going to small minority at the top, it erodes the desire for reform.

“Dealing with inequality is going to be a key issue in the years ahead,” he said. “Social instability is a major concern, not just in the advanced economies, but in many other emerging markets.”

Turning to China, where Premier Li warned about a wave of bankruptcies as the nation tries to introduce market-based reforms, Mr. Prasad said, “they’re playing a very dangerous game but one that they have no choice but to play.”

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Jews Are Told To Flee Ukraine Before It’s Too Late. Why Is Obama Supporting Neo-Faschists?

Various reports confirm. Attacks on Jews in Ukraine are intensifying (see report below). Just last night a Rabbi and his 3 year old son were beaten to a pulp by a group of neo-fascist closely related to Ukraine’s new government. That’s right, not by Russian troops, but by the same people who want the US to interfere militarily into Ukraine and possibly start a WW 3. President Obama met with the illegitimate and illegal leader of Ukraine in the White House. In the fu$%ing White House. My questions are as follows…..

  • Why is Obama meeting with a Neo-Fascist backed illegitimate government leader in the White House?
  • Why is Obama Administration hell bent on going to war over Ukraine? A small country 6,000 miles away from American shores.

Can someone explain this to me….or….. are these people just a bunch of fucking warmongers? 

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Jews Are Told To Flee Ukraine Before It’s Too Late. Why Is Obama Supporting Neo-Faschists? Google

 

After two Jewish Yeshiva students were attacked last month – a story covered by Times of Israel – Moshe Reuven Essman, one of the Chief Rabbis of Ukraine, urged Jews to flee Kiev if not the entire country while they still can.

According to an article in Ma’ariv, Essman said the following:

“I said to my community to go out from the city center or the city in general and if possible from the state,” says Essman. “I did not want to open your tongue, but there are always warnings about attacking Jewish institutions.”

With the situation in Ukraine having some to a head, with chaos and violence in the streets of Kyiv, concerns about the safety of the Jewish community in the city is rising. Many Jews live within walking distance of the main square – Maidan – where the violence has been occurring, and the situation remains unpredictable.

Although there has been no overt signs of anti-Semitism in the EuroMaidan protests to date, one of the leading political parties leading the protests has far-right neo-Nazi and anti-Semitic roots. As the BBC has noted, in 2005 Oleh Tyahnybok, the leader of Svoboda, signed an open letter to Ukrainian leaders, including President Yushchenko, entitled Stop the Criminal Activities of Organised Jewry, the comments of which the BBC summarized as follows:

• calling for the government to halt the “criminal activities” of “organised Jewry”,
• Lists Jewish businessmen, who got rich in the 1990s, and claims they control Ukrainian media
• Describes Zionism as “Jewish Nazism” and warns of “genocide” through the impoverishment of Ukrainians
• Demands investigation into the activities of Jewish organisations headed by people “suspected of serious crimes”

Svoboda is now the fourth largest political party in the Ukrainian Parliament, and even beyond Tyahnybok, other Svoboda political leaders have also made anti-Semitic remarks. For example, Parliamentary deputy Igor Miroshnychenko once called Ukrainian-born American film actress Mila Kunis a “dirty Jewess”, while another deputy founded the Joseph Goebbels Political Research Center in 2005.

To provide some context, from a historical perspective, Ukraine does have a history of anti-Semitism, and there was widespread collaboration with the Nazis in Ukraine after the German invasion of the former Soviet Union in 1941. Ukraine suffered horribly under the forced farm collectivization Soviet Dictator Joseph Stalin in the 1930s, with as many as seven million Ukrainians dying from starvation, including three million children. Not surprisingly, many Ukrainians initially looked on the Germans as liberators from Soviet rule, and what many perceived as Russian “Jewish Bolshevism”.

It should be noted that the vast majority of the protesters on Euromaidan to date have been ordinary citizens who in the face of horrifying losses from pro-government snipers in the security forces, the opposition has forced the authoritarian Ukrainian President Victor Yanukovych to flee Kiev. The opposition seems to have a large proportion of young, democratically oriented liberals who wish to be part of what they perceive as a civilized EU and Europe rather than a Russian-dominated “Eurasian Customs Union”. And even Svoboda, as it emerged as a power in Parliament recently has moderated its language and seems to have purged itself of its previous anti-Semitic leanings.

With all that said, however, given the history of Jews in Ukraine, the situation in that country bears watching closely as events unfold.

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Fun Facts About Bill Gates

  • Bill Gates intends to leave less than $10M for each if his three children “so they can make their own way” and that the family mostly drives a minivan when all going somewhere.
  • Bill Gates continued to fly coach until 1997, at which point his net worth was $36 billion.
  • Bill Gates has saved over 5-10 million lives by “bringing vaccines and improved healthcare to children internationally”.
  • The generic silhouette outline placeholder picture in Microsoft Outlook 2010 is actually Bill Gates’ mug shot.
  • Steve Jobs accused Bill Gates of stealing from Apple, Gates said, “Well, Steve, I think there’s more than one way of looking at it. I think it’s more like we both had this rich neighbor named Xerox and I broke into his house to steal the TV set and found out that you had already stolen it.”

ALSO, A FEW BILL GATES QUOTES:

  • “I really had a lot of dreams when I was a kid, and I think a great deal of that grew out of the fact that I had a chance to read a lot.”
  • “Be nice to nerds. Chances are you’ll end up working for one.”
  • “Intellectual property has the shelf life of a banana.”

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Fun Facts About Bill Gates  Google

 

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Warren Buffett Is Losing It

Dow 100,000, people have learned their lesson in 2008 meltdown, stocks will not drop 50% from the current levels, unicorn farm is opening up on the moon, etc…..Whatever you say Mr. Buffett.

Actually, I agree with him on two issues. No matter how much the Perma Bears huff and puff, the stock market will not decline over 50% in the upcoming Bear Market of 2014-2017. Our mathematical and timing work confirms the same. Sorry, Elliot Wave followers. The market is not going down 95%. I also agree that we will see DOW 100,000 right before the BIG WAR starts.  Most of the gains will be from inflation thou.

I do take issue with Mr. Buffett when he states that “people have learned their lesson from the 2008”. I disagree, not when the Federal Government comes in and bails everyone out. In fact, current economic environment is continuation of insane macroeconomic policies that FED has implemented. The balance sheet is massively leveraged and our existing economy depends entirely on cheap credit and speculation. No doubt, Buffett understands this very clearly. He just can’t say it. 

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Warren Buffett Is Losing It Google

 

Warren Buffett told CNBC on Friday he would be “surprised a lot” if stock prices around the world fell 50 percent from their current levels.

Aanother financial crisis “someday” in the years ahead that will shock financial markets, but he doesn’t think it will happen anytime soon.

“Humans will behave in crazy ways, both on the upside and the downside in the next 50 years. It’s very unlikely they do it in the next few years because after something like 2008, once they get out of the emergency room, they’re a little more careful for awhile.”

During an appearance on CNBC’s “ Squawk Box ,” Buffett told 58-year-old host Joe Kernen that he will live to see the Dow at 100,000. “I won’t, but you will,” the 83-year-old Berkshire Hathaway (BRK-A) chairman said.

Buffett pointed out that Berkshire stock has dropped 50 percent four times in its history, but always recovered.

While he now thinks his characterization of the 2008 crisis as an “economic Pearl Harbor” now looks understated, the U.S. did recover and he believes “this country will come through anything.”

Buffett said he’s been bullish on the U.S. economy since the fall of 2008, but he doesn’t expect it to rapidly accelerate this year. Instead, he thinks it will continue its slow upward trajectory.

 

Buffett said he’d advise people to “stay away” from bitcoinbecause the cryptocurrency is a “mirage” without any intrinsic value, although it’s an efficient way to transfer dollars.

Buffett also said Berkshire Hathaway has “almost” eliminated its catastrophe insurance in the U.S. because rates have dropped too much.

“The rates came down dramatically, and we do not regard the exposure as having come down dramatically,” Buffett said.

Berkshire is still writing policies in Asia.

Asked about the controversy over faulty ignition switches in General Motors (GM) cars, Buffett said CEO Mary Barra has a “new chance” because she just started in the post but the company needs to tell the truth and act quickly to fix any problems.

He said his advice is to “Get it right, get it fast, get it out, get it over, but get it right first.”

Buffett appeared on CNBC with Dan Gilbert to promote their “Quicken Loans Billion Dollar Bracket Challenge with Yahoo Sports” in which anyone who correctly predicts the outcome of every game in the NCAA basketball tournament will win $1 billion.

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What Happens When Blackstone Starts Dumping Real Estate At Market?

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In another sign that the “Dead Cat Bounce” for the Real Estate market is now over, Blackstone Group has announced that it’s real estate acquisition pace has slowed 70% from last years pace due to higher prices. In fact, this is the trend seen across the industry. Investors, hedge funds, institutions are all slowing down their real estate acquisitions to the tune of 70-90%.  

“The institutional wave has passed,” Gray, who oversees almost $80 billion in property investments, said in a telephone interview. “It’s at a much lower level than it was 12 or 24 months ago.”

What happens next?

Easy. The real estate market might hover here for some time. Not too long thought. As soon the Bear Market of 2014-2017 hits and the US falls back into a severe recession, you will see housing going down once again. Once investors realize where we are in the real estate cyclical composition (dead cat bounce and not expansion) you will see the likes of Blackstone trying to get rid of their properties as fast as possible. With investors heading for the doors, mass volume of real estate should hit the market. Collapsing existing values just as fast, if not faster, than their initial ascend between 2010-2014. 

Good luck selling your 43,000 rental properties Blackstone. 

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What Happens When Blackstone Starts Dumping Real Estate At Market?  Google

 

 

 

Blackstone Group LP (BX) is slowing its purchases of houses to rent amid soaring prices after a buying binge made it the biggest U.S. single-family home landlord.

Blackstone’s acquisition pace has declined 70 percent from its peak last year, when the private equity firm was spending more than $100 million a week on properties, said Jonathan Gray, global head of real estate for the New York-based firm. After investing $8 billion since April 2012 to buy 43,000 homes in 14 cities, the company has narrowed most of its purchasing to Seattle, Atlanta, Miami, Orlando and Tampa.

“The institutional wave has passed,” Gray, who oversees almost $80 billion in property investments, said in a telephone interview. “It’s at a much lower level than it was 12 or 24 months ago.”

Private-equity firms, hedge funds, real estate investment trusts and other institutional investors have spent more than $20 billion to buy as many as 200,000 rental homes in the last two years. They snapped up properties after prices fell as much as 35 percent from the 2006 peak and rental demand rose from the almost 5 millionowners who went through foreclosure since 2008. PresidentBarack Obama credited the investors for helping put a floor under the plunging housing market and consumer advocates such as the National Community Reinvestment Coalition later blamed them for soaring prices in some cities.


Photographer: Victor J. Blue/Bloomberg

Blackstone Group LP Global head of real estate Jonathan Gray said, “The institutional… Read More

Foreclosures Fall

American Homes 4 Rent and Colony American Homes, the second- and third-largest single-family landlords, also have been scaling back as bargains dry up. Home prices have risen 24 percent since a post-bubble low in March 2012, which was about when corporate buyers started their buying spree, according to the S&P/Case-Shiller index. The rate of U.S. foreclosure startsfell to its lowest level in eight years in the fourth quarter as higher prices allowed more delinquent homeowners to sell without taking a loss, according to the Mortgage Bankers Association.

Jade Rahmani, an analyst for Keefe, Bruyette & Woods Inc., said large investors are focusing on fewer locations as they gain experience and prices go up.

“Home prices have increased, which narrows the acquisition opportunity,” Rahmani said. “In addition, these companies have done this for a certain amount of time and there are lessons learned.”

While institutional purchases nationwide fell to a 22-month low in January, corporate investors were more active in the Atlanta region, buying 25 percent of homes sold, according to data firm RealtyTrac. That helped drive up Atlanta prices 37 percent since the March 2012 trough.

Outbidding Homebuyers

Last week, a group of 80 tenant and neighborhood advocacy organizations, including the National Community Reinvestment Coalition and the National Consumer Law Center, asked federal regulators “to address first-time homebuyers being outbid, tenants being displaced, and neighborhoods undergoing dramatic changes as private equity and investor cash continues flooding into local housing markets.”

Gray, 44, said the influence of corporate investors on home prices has been exaggerated. They represent at most 10 percent of the 2 million homes bought by investors in the last two years, according to Rahmani, the analyst.

“There’s a narrative out there that institutional buyers are driving the market,” Gray said. “But the reality is that institutional buyers are in a relatively limited number of markets, their buying is tapering and yet home prices continue to go up at a pretty strong clip nationally — even in markets where institutional buyers haven’t purchased a single home.”

American Homes

At the height of its activity, Blackstone’s Invitation Homes LP made purchases that may have comprised as much as 6 percent of sales for several months in one or more of its 14 markets, Gray said. This may have had a short-term impact on prices, he added.

“We definitely helped alleviate excess distressed housing stock,” he said. “We weren’t 5 or 6 percent for a sustainable period of time in any market.”

After collecting more than 21,000 homes in 42 markets, American Homes 4 Rent (AMH) has slowed its buying in some locations, chief executive officer David Singelyn said at a March 5 investor conference in Florida. The benefit of being in 22 states is that the Agoura Hills, California-based company has the ability to move within many locations and “buy as the opportunities ebb and flow,” Singelyn said.

Colony Financial Inc. (CLNY), a REIT that invests in Colony American Homes, slowed its funding for acquisitions last year to focus on improving operations, CEO Richard Saltzman said in a November conference call. Colony Financial has been gradually allocating less to the landlord business and capped its investment at $550 million for the quarter ending Dec. 31, Saltzman said last month.

Slowing Purchases

Colony American, which owns 16,000 homes, declined to comment, according to Owen Blicksilver, an outside spokesman for the Scottsdale, Arizona-based landlord. American Homes 4 Rent Chief Financial Officer Peter Nelson didn’t reply to a phone message seeking comment.

American Residential Properties Inc., a landlord with 6,000 homes, slowed acquisitions by almost half in its latest quarter ending Dec. 31. It invested $104 million in 633 homes compared with $204 million on 1,251 homes in the previous quarter, the Scottsdale, Arizona-based company said in a statement.

“We intend to maintain the pace of our acquisition activity at roughly the same rate we had in the fourth quarter,” CEO Stephen Schmitz said in an earnings conference call yesterday.

Ramping Up

Some corporate rental companies are still focused on growth.

“We’ve been ramping up acquisitions,” David Miller, CEO of Silver Bay Realty Trust, which owned 5,642 homes as of Dec. 31, said in a conference call with investors last week.

“Looking ahead, we plan to acquire in Florida and Texas while opportunistically adding properties to our Atlanta market and perhaps other markets as well.”

While their acquisitions slow, Blackstone and Colony are extending their reach into the rental business by offering financing to smaller landlords. Last month, Blackstone’s B2R Finance LP originated its first loan for $5.7 million and Colony formed a joint-venture with plans to originate $1 billion in landlord financing this year.

Both companies plan to package the loans as mortgage-backed securities, similar to Blackstone’s $479 million bond issue in October, the first securitization of single-family rental properties.

Long Haul

That’s concerning to U.S. Representative Mark Takano, a Democrat from California. This month he called for the Consumer Financial Protection Bureau, the Department of Housing and Urban Development, the Securities and Exchange Commission and the Treasury to report on the possible risks of “the recent increase of investor owned rental properties and the development of single-family rental-backed securities.”

Institutional investors are not going away even though their size will remain a modest part of the market, Gray said.

“We’re not selling the homes. We’re building a long-term business,” he said.

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China Warns West: We Stand With Russia, Stop Your Sanction Madness

If you’ve had any doubts who China aligns itself with, those doubts should now be gone. In no uncertain terms China warned the West to “Back Off” from any sanction threat against Russia. In fact, according to the Chinese any sanctions against Russia can spiral into a chain of events with unforeseeable consequences. I tend to agree. 

If you look at Russia at this juncture, Putin is in no mood to mess around. Should the West push forward with sanctions, the EU might find itself on a receiving end of Putin’s wrath. If sanctions go through two things will happen immediately. In defiance, Putin will immediately invade Ukraine (flipping the proverbial bird to the West) and possibly shutting down gas/commodity supplies to the West. Or he can demand payment for gas in gold. Whatever the case, this will send a massive economic shock wave throughout the EU and start the “Dangerous Spiral” China is talking about.  

Let’s see who blinks first.  

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China Warns West: We Stand With Russia, Stop Your Sanction Madness   Google

China warns of dangerous Russia sanctions ‘spiral’

(Reuters) – China’s top envoy to Germany has warned the West against punishing Russia with sanctions for its intervention inUkraine, saying such measures could lead to a dangerous chain reaction that would be difficult to control.

In an interview with Reuters days before the European Union is threatening to impose its first sanctions on Russia since the Cold War, ambassador Shi Mingde issued the strongest warning against such measures by any top Chinese official to date.

“We don’t see any point in sanctions,” Shi said. “Sanctions could lead to retaliatory action, and that would trigger a spiral with unforeseeable consequences. We don’t want this.”

The interview was conducted on Wednesday, the same day that the EU agreed a framework for sanctions that would slap travel bans and asset freezes on people and companies accused by Brussels of violating the territorial integrity of Ukraine.

German Chancellor Angela Merkel, who has taken the lead in trying to mediate in the crisis, has said the measures, which mirror steps announced by the United States, will be imposed on Monday unless Russia accepts the idea of a “contact group” to resolve the crisis diplomatically.

Using her toughest rhetoric since the crisis began, she warned in a speech in parliament on Thursday that Russia risked “massive” political and economic damage if it did not change course in the coming days.

Russia’s Deputy Economy Minister Alexei Likhachev responded by promising “symmetrical” sanctions by Moscow.

But Shi urged patience, saying the door for talks should remain open even after a referendum on Sunday in which Ukraine’s southern region of Crimea could vote to secede and join Russia. Merkel and other western leaders have denounced the referendum as illegal and demanded that it be canceled.

“We still see a chance to avoid an escalation. The door to talks is still open. We should use this possibility, also after the referendum,” Shi said.

Chinese President Xi Jinping, who will visit Berlin and other European capitals later this month, held separate phone calls on the Ukraine crisis with Merkel and U.S. PresidentBarack Obama earlier this week.

But beyond urging restraint and dialogue, China has shown little public interest in becoming involved diplomatically, a stance that is in keeping with its low-key approach to many international crises.

Still, Ukraine presents Beijing with a dilemma. On the one hand it is a traditional ally of Moscow and has routinely sided with its northern neighbor in major international conflicts. On the other hand, the question of territorial integrity is a tricky issue for the Chinese because of Tibet and Taiwan.

If the West’s confrontation with Russia over Ukraine worsens in the coming weeks, Xi’s visit, the first by a Chinese president to Germany in eight years, risks being overshadowed by the crisis.

Before coming to Berlin, Xi is due to attend a nuclear security summit in the Netherlands which Obama, Merkel and dozens of other world leaders will attend. He is also due to visit Paris and Brussels.

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Do You Believe Facebook’s Zuckerberg OR NSA?

I don’t believe we have a place for an organization such as NSA in our society. It must go. Benjamin Franklin said it best over 200 years ago. 

“They who can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety.” -Benjamin Franklin

Now, let’s take a look. Zuckerberg says: 

“The U.S. government should be the champion for the Internet, not a threat,” he wrote in a post on his Facebook page yesterday. “They need to be much more transparent about what they’re doing, or otherwise people will believe the worst.”

“We encrypt communications, we use secure protocols for traffic, we encourage people to use multiple factors for authentication and we go out of our way to help fix issues we find in other people’s services,” Zuckerberg said. “When our engineers work tirelessly to improve security, we imagine we’re protecting you against criminals, not our own government.”

NSA says: 

“NSA uses its technical capabilities only to support lawful and appropriate foreign intelligence operations, all of which must be carried out in strict accordance with its authorities,” it said. “NSA does not use its technical capabilities to impersonate U.S. company websites. Nor does NSA target any user of global Internet services without appropriate legal authority. Reports of indiscriminate computer exploitation operations are simply false.”

Who do you think is telling the truth here? I blame Obama. 

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Do You Believe Facebook’s Zuckerberg OR NSA?  Google

Facebook Inc. (FB) Chief Executive Officer Mark Zuckerberg said he called U.S. PresidentBarack Obama to express his frustration over the government’s spying.

“The U.S. government should be the champion for the Internet, not a threat,” he wrote in a post on his Facebook page yesterday. “They need to be much more transparent about what they’re doing, or otherwise people will believe the worst.”

Zuckerberg’s comments follow reports that the National Security Agency has been disguising itself as Facebook to gain access to users’ computers for spying, according to documents leaked by former NSA contractor Edward Snowden to the online news site The Intercept. It was the latest in a string of revelations about government surveillance that led Facebook, along with Google Inc., Apple Inc. and others, to call on the U.S. to disclose more about government requests for user data.

“We encrypt communications, we use secure protocols for traffic, we encourage people to use multiple factors for authentication and we go out of our way to help fix issues we find in other people’s services,” Zuckerberg said. “When our engineers work tirelessly to improve security, we imagine we’re protecting you against criminals, not our own government.”


Photographer: Andrew Harrer/Bloomberg

Facebook Inc. Chief Executive Officer Mark Zuckerberg said, “When our engineers work…Read More

Caitlin Hayden, spokeswoman for Obama’s National Security Council, confirmed the conversation between Zuckerberg and the president. She declined to give any details.

NSA Statement

In a statement yesterday, the NSA said it is “inaccurate” to say it is impersonating Facebook or any other websites.

“NSA uses its technical capabilities only to support lawful and appropriate foreign intelligence operations, all of which must be carried out in strict accordance with its authorities,” it said. “NSA does not use its technical capabilities to impersonate U.S. company websites. Nor does NSA target any user of global Internet services without appropriate legal authority. Reports of indiscriminate computer exploitation operations are simply false.”

Zuckerberg, the 21st-richest person in the world according to the Bloomberg Billionaires Index, has been ramping up his involvement in political issues, from education in New Jersey to infrastructure development in Africa. He has donated to candidates in both the Democratic and Republican parties and started an advocacy group called Fwd.us to lobby for changes to U.S. immigration policy.