The Nation's Financial Condition

[CU88a]

How about we just collect the taxes that are properly due now, is that too much to ask of r's?

October 30, 2023
HEATHER COX RICHARDSON
OCT 31, 2023

After three weeks without a speaker, the House today tackled one of the key items on its agenda: providing additional funding for Israel and Ukraine. Immediately, the majority under Speaker Mike Johnson (R-LA) made it clear that they have every intention of pushing their extremist agenda. Despite pressure from Republican Senate minority leader Mitch McConnell (R-KY), they have split funding for Israel away from the funding for Ukraine and funding for humanitarian assistance for Ukraine, Israel, and Gaza that President Biden has requested.

They have gone further, though, to push the far right’s agenda. The House Republicans’ $14.3 billion aid package for Israel claims that it will “offset” that spending by taking $14.3 billion from funding for the Internal Revenue Service (IRS) passed by Congress in the Inflation Reduction Act. But this “offset” is nothing of the sort: funding the IRS brings in significantly more than it costs.

For each dollar spent auditing the top 1% of U.S. earners, the IRS brought in $3.18; for each dollar spent auditing the top 0.1%, it brought in $6.29.

In September the IRS noted that it recovered $38 million in delinquent taxes from 175 high-income taxpayers within a few months and would be increasing that effort. A 2021 study showed that people whose income is in the top 1% of earners fail to report more than 20% of their earnings to the IRS.

[MDlaxfan76]

Welcome to Speaker Johnson, puppet of DJT.

[Seacoaster(1)]

Welcome to Speaker Johnson, puppet of DJT.

Performance art;
Grievance bullhorn;
Curry the wealthy.

Today's GOP.

[MDlaxfan76]

Welcome to Speaker Johnson, puppet of DJT.

Performance art;
Grievance bullhorn;
Curry the wealthy.

Today's GOP.

It seems amazingly stupid politically, but if you have an "audience of one" perhaps the performance is effective in assuring him and the extremists in the House that you will be as stupid as he commands you to be.

But really crazy to think that the base MAGA voters will applaud this linkage. Sure, maybe some are deluded into thinking that the IRS collecting money from tax cheats threatens them personally, though that's straight cult-like belief system stuff, but linking to funding Israel??? Gotta think the evangelical supporters of Israel will be PO'd.

Sure, some of those could care less about Ukraine, but Israel and "End of Days" another matter...

[OCanada]

Welcome to Speaker Johnson, puppet of DJT.

Or as one columnist described him:

Johnson is a Trump-loving, election-denying, abortion ban-supporting, gay rights-opposing, climate change-rejecting, and conspiracy-believing conservative. If House Democrats are smart, they will turn Mike Johnson into a household name — though not in a good way.

Perhaps the D’s dream Speaker. Much of what he opposes is heavily favored by voters. He and his wife have been deleting posts and closing a site or two.

Miley speaking of marriage and roles mentioned he liked her position being on her knees. No not in that context. Our most CIS speaker ever.

[a fan]

How about we just collect the taxes that are properly due now, is that too much to ask of r's?

October 30, 2023
HEATHER COX RICHARDSON
OCT 31, 2023

After three weeks without a speaker, the House today tackled one of the key items on its agenda: providing additional funding for Israel and Ukraine. Immediately, the majority under Speaker Mike Johnson (R-LA) made it clear that they have every intention of pushing their extremist agenda. Despite pressure from Republican Senate minority leader Mitch McConnell (R-KY), they have split funding for Israel away from the funding for Ukraine and funding for humanitarian assistance for Ukraine, Israel, and Gaza that President Biden has requested.

They have gone further, though, to push the far right’s agenda. The House Republicans’ $14.3 billion aid package for Israel claims that it will “offset” that spending by taking $14.3 billion from funding for the Internal Revenue Service (IRS) passed by Congress in the Inflation Reduction Act. But this “offset” is nothing of the sort: funding the IRS brings in significantly more than it costs.

For each dollar spent auditing the top 1% of U.S. earners, the IRS brought in $3.18; for each dollar spent auditing the top 0.1%, it brought in $6.29.

In September the IRS noted that it recovered $38 million in delinquent taxes from 175 high-income taxpayers within a few months and would be increasing that effort. A 2021 study showed that people whose income is in the top 1% of earners fail to report more than 20% of their earnings to the IRS.

That's ok, CU*88. We don't need roads, or to educate our kids. We'll be fine.

[Farfromgeneva]

Zero rate easy money policy created this (WeWork)-this may be true of a lot of successes in the 2010s:

Its total losses since founding topped $16 billion as of June, as it churned through all the money it raised from top investors and lenders over the past decade. Even after four years of cuts and reorganizations under new management that followed Neumann, the company was still burning through $300 million of cash a quarter.

But the company couldn’t escape weaknesses in its business model, which was always vulnerable to any softening in the office market.

[youthathletics]

Zero rate easy money policy created this (WeWork)-this may be true of a lot of successes in the 2010s:

Its total losses since founding topped $16 billion as of June, as it churned through all the money it raised from top investors and lenders over the past decade. Even after four years of cuts and reorganizations under new management that followed Neumann, the company was still burning through $300 million of cash a quarter.

But the company couldn’t escape weaknesses in its business model, which was always vulnerable to any softening in the office market.

They poured cash building out tenant spaces in CRE all over the place, CV19 hit and the bills still needed to be paid. Carlyle Tower had a similar model/tenant: https://www.industriousoffice.com/blog/ ... lyle-tower It was running around 2k/month to lease a single desk.

[youthathletics]

An NFL Player's weekly paycheck: https://x.com/darrenrovell/status/17203 ... 96743?s=20

[Farfromgeneva]

Zero rate easy money policy created this (WeWork)-this may be true of a lot of successes in the 2010s:

Its total losses since founding topped $16 billion as of June, as it churned through all the money it raised from top investors and lenders over the past decade. Even after four years of cuts and reorganizations under new management that followed Neumann, the company was still burning through $300 million of cash a quarter.

But the company couldn’t escape weaknesses in its business model, which was always vulnerable to any softening in the office market.

They poured cash building out tenant spaces in CRE all over the place, CV19 hit and the bills still needed to be paid. Carlyle Tower had a similar model/tenant: https://www.industriousoffice.com/blog/ ... lyle-tower It was running around 2k/month to lease a single desk.

I was spending about $1,650/mo for 96sq ft in an industrious private office near me (newish Billion dollar mixed use redevelopment so already pricey real estate but close to my home). That’s basically $20k a year. (Semi tax efficient) or $200/sq Ft. And the social aspect is dumb, give me the old boring 80 style IWG/Regus-who went bankrupt around 2000 because it’s the exact same asset liability mismatch business model, long term master lease, short term sub leases. Plus you have a lot of overflow sales folks with no professional etiquette - close your f’ng door when you are having a business conference call. Plus the all gals
Fish bowl element sucks. Basically it never should’ve been created but was done so w leveraged cheap and easy money and will decimate an already over leveraged office CRE sector. Leverage amplifies gains and losses…

[youthathletics]

Zero rate easy money policy created this (WeWork)-this may be true of a lot of successes in the 2010s:

Its total losses since founding topped $16 billion as of June, as it churned through all the money it raised from top investors and lenders over the past decade. Even after four years of cuts and reorganizations under new management that followed Neumann, the company was still burning through $300 million of cash a quarter.

But the company couldn’t escape weaknesses in its business model, which was always vulnerable to any softening in the office market.

They poured cash building out tenant spaces in CRE all over the place, CV19 hit and the bills still needed to be paid. Carlyle Tower had a similar model/tenant: https://www.industriousoffice.com/blog/ ... lyle-tower It was running around 2k/month to lease a single desk.

I was spending about $1,650/mo for 96sq ft in an industrious private office near me (newish Billion dollar mixed use redevelopment so already pricey real estate but close to my home). That’s basically $20k a year. (Semi tax efficient) or $200/sq Ft. And the social aspect is dumb, give me the old boring 80 style IWG/Regus-who went bankrupt around 2000 because it’s the exact same asset liability mismatch business model, long term master lease, short term sub leases. Plus you have a lot of overflow sales folks with no professional etiquette - close your f’ng door when you are having a business conference call. Plus the all gals
Fish bowl element sucks. Basically it never should’ve been created but was done so w leveraged cheap and easy money and will decimate an already over leveraged office CRE sector. Leverage amplifies gains and losses…

I agree, curious.....what are you reading on the tea leaves with all the vacant office. As I've stated earler, our office has downsized and consolidated 2 floors in to one floor. Renovation designed with hot desks, and just off the front desk, an open area kitchen-livingroom area with some small huddle tables for a quick meeting over coffee lunch. some private small sized meeting areas, and a a handful of small soundproof rooms to work quietly and for private calls.

[Farfromgeneva]

Zero rate easy money policy created this (WeWork)-this may be true of a lot of successes in the 2010s:

Its total losses since founding topped $16 billion as of June, as it churned through all the money it raised from top investors and lenders over the past decade. Even after four years of cuts and reorganizations under new management that followed Neumann, the company was still burning through $300 million of cash a quarter.

But the company couldn’t escape weaknesses in its business model, which was always vulnerable to any softening in the office market.

They poured cash building out tenant spaces in CRE all over the place, CV19 hit and the bills still needed to be paid. Carlyle Tower had a similar model/tenant: https://www.industriousoffice.com/blog/ ... lyle-tower It was running around 2k/month to lease a single desk.

I was spending about $1,650/mo for 96sq ft in an industrious private office near me (newish Billion dollar mixed use redevelopment so already pricey real estate but close to my home). That’s basically $20k a year. (Semi tax efficient) or $200/sq Ft. And the social aspect is dumb, give me the old boring 80 style IWG/Regus-who went bankrupt around 2000 because it’s the exact same asset liability mismatch business model, long term master lease, short term sub leases. Plus you have a lot of overflow sales folks with no professional etiquette - close your f’ng door when you are having a business conference call. Plus the all gals
Fish bowl element sucks. Basically it never should’ve been created but was done so w leveraged cheap and easy money and will decimate an already over leveraged office CRE sector. Leverage amplifies gains and losses…

I agree, curious.....what are you reading on the tea leaves with all the vacant office. As I've stated earler, our office has downsized and consolidated 2 floors in to one floor. Renovation designed with hot desks, and just off the front desk, an open area kitchen-livingroom area with some small huddle tables for a quick meeting over coffee lunch. some private small sized meeting areas, and a a handful of small soundproof rooms to work quietly and for private calls.

The big thing for lenders is figuring out the bottom and where they can manages losses and where they may need to manage equity capital better. For most, like 20% of the deals are toast and need to go to receivership as fast as reasonable. 20% will refinance cleanly. 60% remaining have maturity balloon issues of some kind that in the financial crisis would’ve been extend and pretend except we had a decade of extraordinary Monterey stimulus and unprecedented interest rates after that period which helped all CRE (literally every younger person who’s io to 35 now has no idea if they’re Nat good or talented at all in CRE it was that easy), the headwind not at our backs now. There’s a million levers being pulled and smoke and mirror loans sales forma couple of regional/super regional banks on clean stuff to show “near par” prices but it’s coming and it’s structural.

Basically CRE has gone from a passive investment to an active one with shorter leases and tenants at higher risk of failure all the time. I wrote CMBS loans at 1.01x Debt Service Coverage Ratio on GE healthcare single tenants real estate in Wisconsin nearly 20yrs ago when it was Aaa and some insurer stuck the bonds in their desk drawer to be forgotten h Tim GE turned into a near junk company from gold standard in a matter of 6-8yrs..

Office in general sucks. All you have to do is sign up for a free note from this rating agency to see the distress daily and losses being incurred. Banks and funds/“private credit”* have certain ability to slow roll or manage distress longer (hope as a strategy usually) but CMBS are publicly registered bonds backed by CRE loans. Those problems have to get resolved faster typically. Morningstar has some free access-https://credit.morningstar.com/?utm_sou ... tent=43336

There’s also strep but that’s also CMBS specific:

https://www.trepp.com/trepptalk/q3-2023 ... e=hs_email

Urban vs. Suburban Offices: Metrics, Distress, and the Road Ahead

Overview

Office performance has been shaky throughout 2023 with commercial mortgage-backed securities (CMBS) delinquency rates nearly quadrupling since the end of last year, up to 5.58% from 1.58% This trend has also been observed within two of the largest subtypes within the sector, suburban and urban offices.

Ranging from traditional private offices to collaborative coworking spaces in the most densely populated areas, the prime positioning of urban offices offers convenience at a premium cost.

Suburban offices typically offer a more spacious and diverse range of workspaces at a more cost-effective level. Across the entire property sector, these two subtypes represent the largest segments, accounting for 90% of the overall balance of outstanding debt.

* (not everyone who lends outside of a bank is propagate credit like not everyone who ever did anything with other people’s investment is “private equity” but everyone will claim that’s what they do while it’s a hot term)

[youthathletics]

Zero rate easy money policy created this (WeWork)-this may be true of a lot of successes in the 2010s:

Its total losses since founding topped $16 billion as of June, as it churned through all the money it raised from top investors and lenders over the past decade. Even after four years of cuts and reorganizations under new management that followed Neumann, the company was still burning through $300 million of cash a quarter.

But the company couldn’t escape weaknesses in its business model, which was always vulnerable to any softening in the office market.

They poured cash building out tenant spaces in CRE all over the place, CV19 hit and the bills still needed to be paid. Carlyle Tower had a similar model/tenant: https://www.industriousoffice.com/blog/ ... lyle-tower It was running around 2k/month to lease a single desk.

I was spending about $1,650/mo for 96sq ft in an industrious private office near me (newish Billion dollar mixed use redevelopment so already pricey real estate but close to my home). That’s basically $20k a year. (Semi tax efficient) or $200/sq Ft. And the social aspect is dumb, give me the old boring 80 style IWG/Regus-who went bankrupt around 2000 because it’s the exact same asset liability mismatch business model, long term master lease, short term sub leases. Plus you have a lot of overflow sales folks with no professional etiquette - close your f’ng door when you are having a business conference call. Plus the all gals
Fish bowl element sucks. Basically it never should’ve been created but was done so w leveraged cheap and easy money and will decimate an already over leveraged office CRE sector. Leverage amplifies gains and losses…

I agree, curious.....what are you reading on the tea leaves with all the vacant office. As I've stated earler, our office has downsized and consolidated 2 floors in to one floor. Renovation designed with hot desks, and just off the front desk, an open area kitchen-livingroom area with some small huddle tables for a quick meeting over coffee lunch. some private small sized meeting areas, and a a handful of small soundproof rooms to work quietly and for private calls.

The big thing for lenders is figuring out the bottom and where they can manages losses and where they may need to manage equity capital better. For most, like 20% of the deals are toast and need to go to receivership as fast as reasonable. 20% will refinance cleanly. 60% remaining have maturity balloon issues of some kind that in the financial crisis would’ve been extend and pretend except we had a decade of extraordinary Monterey stimulus and unprecedented interest rates after that period which helped all CRE (literally every younger person who’s io to 35 now has no idea if they’re Nat good or talented at all in CRE it was that easy), the headwind not at our backs now. There’s a million levers being pulled and smoke and mirror loans sales forma couple of regional/super regional banks on clean stuff to show “near par” prices but it’s coming and it’s structural.

Basically CRE has gone from a passive investment to an active one with shorter leases and tenants at higher risk of failure all the time. I wrote CMBS loans at 1.01x Debt Service Coverage Ratio on GE healthcare single tenants real estate in Wisconsin nearly 20yrs ago when it was Aaa and some insurer stuck the bonds in their desk drawer to be forgotten h Tim GE turned into a near junk company from gold standard in a matter of 6-8yrs..

Office in general sucks. All you have to do is sign up for a free note from this rating agency to see the distress daily and losses being incurred. Banks and funds/“private credit”* have certain ability to slow roll or manage distress longer (hope as a strategy usually) but CMBS are publicly registered bonds backed by CRE loans. Those problems have to get resolved faster typically. Morningstar has some free access-https://credit.morningstar.com/?utm_sou ... tent=43336

There’s also strep but that’s also CMBS specific:

https://www.trepp.com/trepptalk/q3-2023 ... e=hs_email

Urban vs. Suburban Offices: Metrics, Distress, and the Road Ahead

Overview

Office performance has been shaky throughout 2023 with commercial mortgage-backed securities (CMBS) delinquency rates nearly quadrupling since the end of last year, up to 5.58% from 1.58% This trend has also been observed within two of the largest subtypes within the sector, suburban and urban offices.

Ranging from traditional private offices to collaborative coworking spaces in the most densely populated areas, the prime positioning of urban offices offers convenience at a premium cost.

Suburban offices typically offer a more spacious and diverse range of workspaces at a more cost-effective level. Across the entire property sector, these two subtypes represent the largest segments, accounting for 90% of the overall balance of outstanding debt.

* (not everyone who lends outside of a bank is propagate credit like not everyone who ever did anything with other people’s investment is “private equity” but everyone will claim that’s what they do while it’s a hot term)

Saw this today: https://x.com/TripleNetInvest/status/17 ... 59780?s=20

[youthathletics]

Concerns over M2 money. https://www.msn.com/en-us/money/savinga ... 82c1&ei=28

[Kismet]

Concerns over M2 money. https://www.msn.com/en-us/money/savinga ... 82c1&ei=28

I'd watch out using Microsoft as a credible news source - they just canned their editorial staff and replaced them with AI.

[youthathletics]

Concerns over M2 money. https://www.msn.com/en-us/money/savinga ... 82c1&ei=28

I'd watch out using Microsoft as a credible news source - they just canned their editorial staff and replaced them with AI.

It's from The Motley Fool, Microsoft only present it

[Kismet]

Concerns over M2 money. https://www.msn.com/en-us/money/savinga ... 82c1&ei=28

I'd watch out using Microsoft as a credible news source - they just canned their editorial staff and replaced them with AI.

It's from The Motley Fool, Microsoft only present it

My experience with Motley Fool is that they aren't right most of the time.

I'd also caution about drawing market parallels from 1929 to the modern day. Too many other differences to even count. Not to mention that the Fed actively monitors the money supply.

https://www.forbes.com/sites/greatspecu ... cea9d133c6

[OCanada]

Going beyond the data points and looking at the current situation the GOP has done significant damage to the financial and economic infrastructures whose synergies have produced the greatest economy in the history of the world but has bern chipped away by the GOP for 40 years

[Farfromgeneva]

Going beyond the data points and looking at the current situation the GOP has done significant damage to the financial and economic infrastructures whose synergies have produced the greatest economy in the history of the world but has bern chipped away by the GOP for 40 years

There’s a growing theory we had an opportunity after world war 2 for about 30yrs where the rest of the world was closed for business. All the other narratives beyond that and the demographic story may alone explain a large component of American exceptionalism (economically). Obviously having the strongest property rights in the world but I’m not sure fighting last weeks battles and managing a path forward on any narratives makes much sense just just focusing forward.

That’s not a free pass for anyone on either side but don’t know that the “decline” had much to do with either party anymore as much as all of us collectively.

[Farfromgeneva]

Handful of various finance reads that may of interest to different folks.

1. Office loan delinquencies at large banks in Q3.

https://www.spglobal.com/marketintellig ... e-78173476

2. OCC on lending to venture and earlier starve Corp developed companies-Commercial Lending: Venture Loans to Companies in an Early, Expansion, or Late Stage of Corporate Development

https://www.occ.gov/news-issuances/bull ... dium=email

3. Review of small bank failure in IA last Friday. One large credit (whos concentration escaped regulators somehow for more than a year) that was far too large a concentration took them down vs general asset/liability problems. The combination of credit turning and the general A/L mismatch will still take some more banks down, there’s 4,000 in this country, the CEOs aren’t all A students, but presume the largest ones at risk now are sub $20Bn in assets. Even FRBK at $4-$5Bn asset size is probably going to whistle bu the graveyard (and that CEO is talented did nice work at a NY bank building and running a LOB but let’s just say feel free to Google “hanky panky banker” + key + geisel)

https://bankregblog.substack.com/p/a-ba ... dium=email