Today, there is news that a Morgan Stanley real estate fund has defaulted on a 3.3 Billion USD debt payment for a building that they "owned" in Tokyo, Japan. The real losers will be the investors who bought the repackaged loans from the fund: In June 2007, the first cracks of the bubble appeared in the form of defaults of two different highly leveraged real estate funds that were managed by Bear Stearns. That was the first sign that the economy, and particularly the real estate bubble, was starting to come apart at its seams. The news was dismissed by nearly everyone, including Jim Cramer, and the markets recovered and made new highs. However, all was not well below the surface and we know how the story ended. Last week, we learned that Chinese real estate prices plunged 26.7% month over month, and now we learn of this large default by Morgan Stanley. The nuclear situation in Japan is deeply saddening, and this has hugely negative consequences not only for the people but for the global economy as well. Anything can happen in the short term, but this is not going to end well. |
Monday, April 18, 2011
Morgan Stanley Fund Defaults
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