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Thursday, 3 February 2011

SMS: Short Messages Service (1)

The European Central Bank, represented by chairman Jean-Claude Trichet, has decided to keep the interest rate for Main Refinancing Operations on 1%.

While this might be good news for all stock investors and house owners, it remains very bad news for pension funds and especially the small European savers, that get an insulting amount of interest on their savings accounts. An interest rate that doesn’t pay any reward for the inevitable risk that every saver runs with his bank. It is like the ECB is forcing everybody into stock, corporate and sovereign bonds or raw materials when people want to receive a little bit more return on their investments. This might force the markets into new bubbles.

It seems like Europe and the USA are following the Japanese roadmap “Getting out of a crisis for Dummies” from the first to the last letter. Unfortunately this roadmap proves already for more than 20 years that it doesn’t work, as Japan suffers from next to 0 interest, a huge national debt and an economy that already stagnates for ages.

Todd Harrison, the well-respected founder of Minyanville says this about it. “There are two solutions for a crisis like this: the car crash and the cancer. Unfortunately both the American and the European governments chose for the cancer and great amounts of financial drugs are administered to mask the symptoms for this cancer" 
Chairman Kees Jan de Vet of Dynamis, the Dutch society for Realtors in Commercial Real Estate, declares: ”for future CRE-projects a fixed percentage of the building costs needs to be reserved,  in order to be able to rebuild vacant CRE for different purposes (f.i. student housing) when there is a real risk for longterm vacancy ”

This is really a good idea and one that I am advocating already for a number of years. Two things:
·    It is a shame that people in charge only have these kinds of ideas when the CRE-market is already extremely bad. 
Currently, according to the same spokesman, there is already 7 million square meter (≈70 million sqr ft, about 1000 football fields) of office vacancy in The Netherlands and every day new CRE-projects are being built. 
    I think that 7 million square meter is very optimistic, as already in Amsterdam and Rotterdam there is about 15% of vacancy in CRE.

·     No-one and I mean no-one is willing to pay voluntarily the 10-20% extra costs per CRE-project that this reservation should be to have any effect. Sad, but true

Tomorrow at 13.30 (GMT)/08.30 (EST) the American Bureau for Labor Statistics is going to publish the latest unemployment figures.

Looking at the last 36 months of Unemployment figures there is absolutely no reason for optimism. And although the figure U3 in table A-15 Alternative measures of labor underutilization tells you the official employment number, the real truth is out there in figure U6 (Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force ). This is 16.7% at the moment, which means that 1 of every 6 Americans in the labor force is unemployed or underemployed. This figure tells you how the average Joe in the street feels unemployment.
Mike Mish Shedlock one of the best bloggers I know tells some very interesting stories about unemployment; read his blog and read it every day (of course after you read

In Egypt the risk for a civil war is looming and becoming bigger every day.
I truly feel sad about this as I hope that the Egyptian revolution could succeed without massive bloodshed. But Hosni Mubarak is like the proverbial Old Fox and he is going to sell his skin deerly. Believe me, in Riyadh, Amman, Damascus, Rabat, Tripoli and Tel Aviv all governmental television sets are tuned in to Al Jazeera. And even in Beijing, Caracas, Minsk and Moscow  officials are aware of the thunderstorm that might be heading their way.


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