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Nick Corbishley



Articles by Nick Corbishley

It Starts: The Corporate Mega-Bailout Bonanza in Europe, Germany on Top

May 26, 2020

Airlines, automakers at the forefront. And it has only just begun. EU waives rules banning state aid. Ryanair, which doesn’t need a bailout, is furious.
By Nick Corbishley, for WOLF STREET:
Governments around Europe have rolled out a dizzying array of measures, including loan programs, tax payment deferrals, and furlough schemes, to help companies, large and small, withstand the fallout of the Covid-19 lockdowns. Large companies have also benefited from massive central bank purchases of their corporate bonds, which has helped to keep their debt costs low. But for some companies, including many of Europe’s largest corporations, it’s not enough.
The UK government last week launched Project Birch, an initiative that will allow the UK treasury to offer “last resort” support to select

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Student Housing, One of the Most Hyped Asset Classes, Runs Out of Students

May 24, 2020

Here’s the story of two student housing REITs in the UK that crashed.
Wolf here: In recent years, student housing, a subcategory of Commercial Real Estate, became one of the hottest asset classes in the US, in the UK, and elsewhere. Big money piled in. Wall Street raked in the fees by securitizing the mortgages into commercial mortgage-backed securities (CMBS). Large firms spun off their portfolios of student housing buildings into publicly traded REITs. The article below is about two of those REITs in the UK, but the issues are the same in the US. This asset class is risky even in good times because students are not stable renters. Last fall, long before Covid-19 showed up, delinquencies and special servicing rates on US student housing CMBS already spiked. The pandemic has now

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What Horrified Fund Managers, Banks & UK’s Pension Minister Said About the Bank of England’s Sudden “We Don’t Rule Out” Negative Interest Rates

May 22, 2020

“The stimulus the country urgently needs is not experimental and dangerous monetary policy.”
By Nick Corbishley, for WOLF STREET:
Andrew Bailey, the recently appointed governor of the Bank of England (BoE), is considering going where no other BoE governor has ever gone in the central bank’s 325-year history: into negative interest rate territory. On May 20, Bailey told British MPs that the BoE is refusing to rule out cutting the benchmark interest rate below zero in response to the virus crisis.
“We do not rule things out as a matter of principle. That would be a foolish thing to do,” Bailey told MPs. “But that doesn’t mean we rule things in either.”
That statement came just six days after Bailey had told FT readers that negative interest rates are “not something we are currently

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Green-Energy Zombie Abengoa Threatens to Default 3rd Time Since Enron-Style Collapse, Blames Covid, Begs for Fresh Bailout

May 20, 2020

In the forlorn hope the world’s biggest green-energy zombie will somehow survive the oncoming storm.
By Nick Corbishley, for WOLF STREET:
When it comes to amassing and defaulting on insurmountable debt loads and then having the debt restructured to live another day, few companies can hold a candle to Abengoa, the global green energy giant, headquartered in Spain, famed for cooking its books with Enron-esque aplomb before collapsing in 2015. Reverberations were felt the world over, including in the U.S. where its unit filed for bankruptcy with $10 billion in debt. The company then rose from the ashes of its monstrous debt pile, only to reenter default in 2019. Once again, the debt was restructured.
Now, Abengoa is warning of a third default, which it’s partly blaming on Covid-19,

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With No Mainland Chinese Buyers, Hong Kong’s Commercial Real Estate Dives

May 18, 2020

The most important source of inbound investment — mainland China — has vanished, with huge ramifications for CRE.
By Nick Corbishley, for WOLF STREET:
The Hong Kong government’s Land Office did something rather unusual. On May 13, it withdrew a major commercial plot it had put up for sale at the site of the city’s former airport at Kai Tak. The Land Office had received four bids for the plot, including from Sun Hung Kai Properties, Hong Kong’s biggest developer by value, but none of them came close to the government’s undisclosed reserve price, prompting the Land Office to pull the offer.
The withdrawal of the lot, only the fourth since January 2018, came after appraisers had lowered estimates of the land parcel’s value by 20% to a range between HK$6.38 billion ($820 million) and

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Third Mega-Crisis in 12 Years: Eurozone Economy Plunges at Fastest Rate on Record

May 17, 2020

First the Global Financial Crisis, then the Euro Debt Crisis, now the Big One.
By Nick Corbishley, for WOLF STREET:
In its 21 years of official existence, the Eurozone has already been through two brutal crises — the Global Financial Crisis and one of its own doing, the Euro Debt Crisis — that nearly tore the bloc apart. Now, it is in the grip of another one that is already exacting a larger toll than the first two, despite having barely begun.
The preliminary GDP in the first quarter for the Eurozone fell by 3.8%, according to Eurostat’s flash estimates (for the entire EU, it fell by 3.5%), “the sharpest declines observed since the time series started in 1995,” Eurostat said. This is despite the fact that most of the region’s lockdowns did not begin until mid-March:

All things

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Non-Paying Tenants Trip Up Land Securities, Once UK’s Largest Commercial Property REIT. Stock Plunges

May 15, 2020

The industry exhorts the government to call out “can pay, won’t pay” retailers, many of them global brands that avoid paying rent despite their cash reserves.
By Nick Corbishley, for WOLF STREET:
Until two years ago, Land Securities was the UK’s largest listed commercial real estate company by market cap. It owns and manages more than 26.5 million square foot of property on the British Isles. The problem is that much of that property is in the worst possible sector — brick-and-mortar retail — at the worst possible time: now. And it’s showing. In its results for its last fiscal year, ended March 31, Landsec posted an £837 million loss — roughly seven times the £127 million loss it posted in the previous year.
The company’s shares have fallen 17.5% over the past three days, 48% since

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Airbnb Gets Disrupted. Hosts, “Super-Hosts” Try to Survive. Apartments in Prime Locations Suddenly Flood Rental Market

May 12, 2020

Big driver behind soaring rents — the “Airbnb effect” that removed countless properties from global cities’ long-term rental markets — reverses.
By Nick Corbishley, for WOLF STREET:
With many of the world’s most popular tourist destinations locked down, and many flights canceled, making international tourism all but impossible, the world’s biggest disruptor of global tourism, Airbnb, faces a starkly different market reality. As of mid-April, new bookings on the company’s portal had plunged 85% year over year while cancellation rates were around 90%, according to AirDNA, an online rental analytics firm.
Airbnb has warned that its 2020 revenue could come in 50% lower than its 2019 total. This is a company that wasn’t even able to turn a profit when the Good Times were raging.
To try

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Another SoftBank Unicorn Gets in Trouble: “Reverse Factoring” Specialist Greensill

May 7, 2020

“Its track record of disrupting traditional financing” hit by fallout from client companies that suddenly collapsed under undisclosed debts. Tentacles spread to Credit Suisse.
By Nick Corbishley, for WOLF STREET:
SoftBank appears to have a brand new problem on its hands: UK-based unicorn Greensill. Last year, SoftBank’s Vision Fund invested  $1.45 billion in two rounds in this company. The second round pushed its “valuation,” decided behind closed doors, to $6 billion. The stated purpose was to allow Greensill to continue “its track record of disrupting traditional financing.”
Greensill provides supply chain financing in form of “reverse factoring” which can be used by companies to create the illusion of cash flow, reduce the appearance of debt, and mask the true state of their

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Retail Landlords Reel as Big Luxury Brands Threaten to Close Stores if Rents Aren’t Slashed

May 6, 2020

Luxury retail isn’t what it used to be, from Barcelona to Hong Kong.
By Nick Corbishley, for WOLF STREET:
In Barcelona, frantic backroom haggling is taking place between some of the world’s biggest luxury retailers and the owners of some of the city’s most expensive commercial real estate. That real estate is on Passeig de Gracia, a ten-block avenue that is home to two of Antoni Gaudi’s most emblematic buildings, La Pedrera and Casa Batllo. It is currently Spain’s third most expensive shopping street, having lost the top spot to Av. Porta de l’Angel (also in Barcelona) and Av. Preciados (Madrid).
Two months ago, renting a street-level store on Paseo de Gracia would have probably set you back around €3,000 per square meter. But that was before the arrival of Covid-19, when the street

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European Banks Reveal Scale & Complexity of Crisis. Shares Hammered Back to 1987 Level

May 1, 2020

They haven’t gotten over Financial Crisis 1 and the Euro Debt Crisis. Now there’s a new crisis. Deutsche Bank’s CEO going on TV to soothe nerves didn’t help matters.
By Nick Corbishley, for WOLF STREET:
The biggest European banks have started to report their earnings against a bleak backdrop of locked down economies, plunging economic activity, surging business closures and rising loan defaults. Each earnings call laid bare the scale, scope and complexity of the problems and challenges facing a European banking sector that never really recovered from their last two crises — the Global Financial Crisis followed by the Euro Debt Crisis.
The Stoxx 600 Banks index, which covers major European banks, fell 4.5% on Thursday. Today, continental European stock markets were closed (May Day),

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Life Under Draconian Lockdown: I Can Barely See the Light at the End of this Long, Dark Tunnel

April 29, 2020

The process of reopening Spain has been dubbed, rather ominously, “Operation New Normality.”
By Nick Corbishley, for WOLF STREET:
“Is there any light at the end of this long dark tunnel?” That’s a question many people are asking themselves in Spain, whose government has implemented one of the most draconian anti-Covid lockdown regimes in the world and is now beginning to loosen some of the restrictions. Sunday was the first time in 43 days that children were allowed to venture out, albeit only for a maximum of one hour. And only if they were accompanied by one adult. And under the age of 14.
It was hardly a return to normality, but after six long weeks of being cooped up at home, most of the children and their parents were happy to take up the invitation of a little fresh air, a few

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Wolf Richter Rails Against Mexican Companies that Borrow in Dollars and then Get Bailed Out When it Blows Up, Which is Now

April 27, 2020

“I want these f**kers to collapse and their CEOs thrown into a Mexican jail for having borrowed in dollars. I want shareholders and bondholders to pay the price, not the people. Let them eat their dollar-bonds.”
By Nick Corbishley, for WOLF STREET:
Mexico’s economy, like just about every national economy on the planet, is going through the grinder. Its currency has lost 26% of its value against the dollar in little over two months. In the past week alone, it tumbled 5.7%. One of its most important exports, oil, is trading at historic lows. Its state-owned oil company Pemex has been slashed to junk. Other key commodities are also plunging in value. Most of its car assembly plants are closed and remittance payments from migrant workers in the U.S., another major source of income, are

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Supermarket Sales Jumped, Alcohol Sales Spiked 33% & Online Grocery Sales 100%, But “Non-Food” Sales Collapsed

April 26, 2020

How the Virus Crisis Flipped UK Retail Sales Upside Down.
By Nick Corbishley, for WOLF STREET:
In the UK, where consumers are generally a sturdy lot when it comes to borrowing and spending, retail sales just had their worst month since records began in 1996, according to the UK’s Office for National Statistics (ONS). Sales at “non-food stores” plunged 20.9%. This does not include auto sales or gasoline sales. And sales at clothing and shoes stores collapsed 35.7%. But online sales rose, sales at supermarkets jumped, and sales of alcohol (the drinkable kind) spiked.
Non-food stores are broadly considered non-essential and have therefore been closed since March 23, when the UK’s lockdown began. They’d already been through a sharp decline in the second half of 2019, as some large

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Tourism in Southern Europe, Accounting for 13%-21% of GDP, is on its Knees. When Will it Get Back Up Again?

April 24, 2020

The economies are still incredibly fragile, even eight years after the last crisis.
By Nick Corbishley, for WOLF STREET:
The tourism industry is in the “eye of the hurricane”, says Manuel Butler, executive director of the World Tourism Organization. “It was the first sector to be afflicted by the virus crisis and, unlike other crises, is likely to be the last to recover from it.”
Tourist spending across Europe already slumped 68% year-on-year in March, when the lockdowns began to spread across the continent, according to a recent UBS analysts’ note based on data from Planet, the VAT refund provider. “Chinese spend in Europe was down 84.6% y/y, with all other nationalities also declining in March,” the report said.
Italy, the first European country to be hit by the virus and the

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Market Mayhem Meets Liquidity Mismatch: “At Least” 76 Mutual Funds in Europe Were “Gated” in March

April 22, 2020

Due to “the interconnectedness of the financial system” fund gatings can trigger “contagion risk” with “the potential to become a systemic issue”: Fitch
By Nick Corbishley, for WOLF STREET:
The mass shuttering of open-end mutual funds, a problem that has dogged the UK’s fund industry for months, appears to have crossed over to multiple fund industries in mainland Europe. According to Fitch Ratings, “at least” 76 European mutual funds, with an estimated $35 billion of assets under management (AUM), suspended redemptions in March after investors scrambled for the exits. Almost £9 billion was pulled from UK-based funds alone, more than any other month on record.
Fitch was able to identify the gated funds by scrutinizing their respective investment managers’ disclosures. But the actual

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Mainland Chinese Stop Buying Hong Kong Residential Properties, Try to Unload What They Have, Prices Follow

April 21, 2020

“Some forced selling is highly likely.”
By Nick Corbishley, for WOLF STREET:
Mainland Chinese buyers, who largely drove the luxury real estate boom in Hong Kong, the world’s most expensive housing market in terms of affordability, have stopped buying. The number of homes eligible for buyer’s stamp duty, which is only paid by overseas or company buyers, mostly from the Mainland, plunged to an unprecedented low of just 42 homes in March, from a record monthly high of 534 in December 2017, according to the city’s Inland Revenue Department:

Sales of Hong Kong property to mainland investors have been trending downwards for the past two years or so, largely due to the Chinese government’s decision, in late 2017, to crack down on money laundering and illicit capital flows from mainland

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Demand for Bank Notes in Dollars & Euros Spikes Despite Fears of Covid-19 Contaminated Cash

April 19, 2020

A curious phenomenon.
By Nick Corbishley, for WOLF STREET:
In the United States, as coronavirus concerns grew and state after state went into lockdown, and as consumption plunged and unemployment exploded at a previously unimaginable rate, the amount of physical dollars in circulation spiked to $1.89 trillion, as of the Federal Reserve’s balance sheet on April 16, having jumped 9.1% compared to a year earlier.
During the darkest days of the Financial Crisis, the demand for U.S. dollar banknotes spiked at year-over-year rates of over 8% for ten straight months and peaked at rate of 11%. But that was nothing compared to what happened during the Y2K craze, when fears that computer systems would malfunction when dates rolled over in the new millennium triggered a mad rush for US dollar

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“Something Has Gone Wrong”: UK Government, Banks Screw Up Coronavirus Loans, Small Firms Near Collapse. Better Results in Other Countries

April 14, 2020

Part of the problem is cultural: big banks in the UK don’t like lending to small businesses, especially not at 1.5%.
By Nick Corbishley, for WOLF STREET:
Thanks to its Brexit planning, the UK should have been better positioned to help its small businesses through the coronavirus crisis than most of its European peers. In early 2019, the UK treasury, together with the business department and the state-owned British Business Bank, laid the groundwork for a loan guarantee system for small businesses in the event of a chaotic Brexit. This meant that when the Covid-19 lockdown began, all the government needed to do was dust off those plans and put them into action. It should have been smooth sailing. Instead, it’s been an unmitigated disaster.
On March 19, the day the economy went into

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Farm-Labor Crisis under COVID-19 Sends Countries Scrambling

April 13, 2020

Miserable, crowded living conditions of Europe’s foreign farm workers put them at much greater risk. And they’re staying away.
By Nick Corbishley, for WOLF STREET:
In one of the many paradoxes of the new world we live in, Western European countries that have seen millions of jobs wiped out in a matter of weeks are now facing an acute shortage of agricultural laborers.
Farmers in Germany, France, Italy, Spain, the UK and other parts of Western Europe have come to rely on huge numbers of cheap labor from Eastern Europe, North Africa, and Sub-Saharan Africa. Now, those workers are either no longer able to make it to the farms or are choosing to stay with their families in their home countries.
This is leading to an “alarming” shortage of farmhands, warns the EU in an as yet unpublished

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Now in Lockdown, Mexico’s Economy Slides. Banks & Companies Clamor for Bailout. Government Refuses

April 9, 2020

All non-essential activities have been suspended for at least a month. But where are the bailouts?
By Nick Corbishley, for WOLF STREET:
Mexico faces its biggest economic storm since the Tequila Crisis in the mid-1990s. Then, the peso lost almost 50% of its value against the dollar in a matter of weeks, wiping out the life savings of much of the country’s middle class and stoking fears that collapsing asset values would push Mexican banks over the edge, taking part of Wall Street with them. In the end, that fate was averted with a bailout and the creation of one of the world’s first ever “bad banks.”
Today, as a whole different kind of crisis — this time a health crisis, global in nature — builds, the peso is once again sinking. In March, it suffered its biggest monthly decline since

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Construction Activity Plunges in Germany, France, & Italy

April 8, 2020

And construction companies “aren’t expecting a swift recovery.”
By Nick Corbishley, for WOLF STREET:
The signs of strain continue to come thick and fast for the Eurozone’s economy. At the end of last week, it registered a fall-off-the-cliff collapse in its all-important services sector. Also confirmed was a vertiginous downturn in manufacturing. Now it’s the construction industry.
The IHS Markit Construction PMI for the Eurozone, which tracks how executives of unnamed companies perceive various aspects of business at their own company, suffered its steepest decline since February 2009, when Euro Area economies were grappling with the fallout of the first installment of the Global Financial Crisis.
In these Purchasing Managers Indices, 50 is the no-growth line; above 50 means

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A Word About Hong Kong’s Retail Sales Collapse: It’s a Mess

April 2, 2020

Sales at luxury goods stores, once the largest category, collapsed by 86% since their peak in 2013-2014.
By Nick Corbishley, for WOLF STREET:
As Hong Kong tourist arrivals collapsed by 96% in February, with travel essentially banned since late January and borders to mainland China blocked, and with mainland visitors down 97.8%, retail sales at brick-and-mortar stores plunged 44% compared to February last year, the 13th month in row of year-over-year decline — and the sharpest yet — after having plunged 21% in January. But as you can see, this collapse in sales started long before COVID-19:

“The business environment of retail trade will remain extremely austere in the near term, as the COVID-19 pandemic has brought inbound tourism to a standstill and severely dented local

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The $1.5 Trillion Global Tourism Industry Faces $450 Billion Collapse in Revenues, Based on Optimistic Assumptions

March 31, 2020

“We are temporarily a company with no product and no revenue.”
By Nick Corbishley, for WOLF STREET:
TUI, the global travel and vacation giant that owns six European airlines, 1,600 travel agencies, over 300 hotels and 14 cruise ships, desperately needs help. And it appears to have got it. On Friday, the company announced that the German government had approved a €1.8 billion loan to help keep the group afloat as COVID-19 brings the global travel sector to a literal standstill. The bridge loan, which still needs to be approved by TUI’s creditors, would be one of the biggest ever issued through German state-owned lender KfW.
“We are currently facing unprecedented international travel restrictions. As a result, we are temporarily a company with no product and no revenue. This situation

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Latin America Was Already Steeped in Economic Problems. Now Come the External & Internal Shocks of COVID-19

March 27, 2020

Not even Brazil and Mexico have the fiscal and monetary leeway to offset those shocks.
By Nick Corbishley, for WOLF STREET:
Covid-19 is beginning to gain a foothold in Latin America. Even in some of the region’s tropical areas, the case numbers are rising at a startling rate. Ecuador, which appears to have caught the bug a month ago as a result of its close connections with Spain, now has over 1,300 cases — more than any other country in the region except for Brazil, which has over 12 times Ecuador’s population.
If the virus spreads across Latin America with the same virulence as as it has in Europe, the U.S. and large parts of Asia, the results could be disastrous. The region’s cash-strapped governments simply cannot afford to provide the sort of financial support programs being

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Self-Employed Left Hanging after Spanish Government Promised to Protect Them from Worst of Covid-19 Fallout

March 25, 2020

During the last crisis, Madrid ramped up the tax burden on the self-employed to historic highs while wasting vast sums on corporations and banks. Same thing on an even bigger scale is now in the offing.
By Nick Corbishley, for WOLF STREET:
Since Spain was put on lockdown, ten days ago, its government has repeatedly said it will do everything within its powers to insulate the self-employed from the worst of the economic fallout. It was a lie. All Madrid has really offered them (or should I say, us) is the opportunity to get into (more) debt. That debt will be provided by the banks, who will get to enjoy all of the interest paid on it, but it will be underwritten by the government to the tune of 80%.
In other words, if you’re self-employed or a small business owner and most or all of

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New Currency Crisis Dawns: Mexican Peso Plunges to Record Low Against the Dollar

March 23, 2020

The flight into US dollars! Dollar-denominated debts of Mexican companies weigh heavily.
By Nick Corbishley, for WOLF STREET:
As the coronavirus crisis roils the global economy, the strengthening dollar is causing all manner of stress and mayhem for national economies and their respective currencies. Nowhere is this clearer than in Mexico, whose currency, the peso, never really recovered from the last crisis and is now collapsing all over again. As of 4 p.m. Monday (Mexican time), it had tumbled over 3% to a record low of 25.42 pesos to the U.S. dollar.
Even by historic standards, the sell-off has been relentless. In the past 16 days, the peso has experienced 16 record daily lows. Not since the height of the last peso crisis, five years ago, has the currency notched up so many new

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Australia’s Construction Industry “On Brink of Collapse”: Started Going to Heck Last Year, Now Comes COVID-19

March 22, 2020

Bailouts, please!
By Nick Corbishley, for WOLF STREET:
Australia’s construction industry, which accounts for 13% of Australia’s GDP and one in ten jobs, is unsustainable and on the brink of collapse, according to Joe Barr, the CEO of John Holland, one of Australia’s biggest infrastructure firms and a wholly owned subsidiary of China Communications Construction Company (CCCC).
“I won’t sugar coat it,” he told The Australian Financial Review. “Tier one contractors in Australia are not making any money, and governments across Australia keep having successive project cost blowouts.”
The underlying message was not exactly subtle: Unless the government recognizes the pressures the industry is under and allows construction companies to renegotiate contracts that are either behind schedule

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After Epic “Run on the Funds,” 10 More Real Estate Mutual Funds Shuttered as COVID-19 Batters UK Property Values

March 20, 2020

Triggered by the belated realization of the risks in mutual funds that offer daily liquidity but invest in illiquid assets.
By Nick Corbishley, for WOLF STREET:
Over the past two days, 10 open-end property funds in the UK have slammed their doors shut on investors, citing concerns about asset valuation. The funds’ two property valuers, CBRE and Knight Frank, say that it is currently impossible to accurately value the funds’ real estate assets amid the market chaos being caused by the response to Covid-19.
“The UK commercial property market is facing unprecedented circumstances as a result of the COVID-19 outbreak, and so valuation firms can no longer make reliable judgement on value. This is known as ‘material value uncertainty’,” said Paul Richards, managing director of the

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European Banks Face Financial Crisis 2, Shares Hit 1988 Lows

March 19, 2020

The ECB promised “to monitor markets closely.” Then it came out with a new bond buying binge.
By Nick Corbishley, for WOLF STREET:
Bank stocks in Europe plumbed fresh mutli-decade lows despite the release of a hurriedly improvised one-paragraph announcement by the ECB pledging to do just about whatever it could take to keep the banking system in tact. The ECB will continue “to monitor markets closely”, the message read, and is “ready to adjust all of its measures, as appropriate, should this be needed to safeguard liquidity conditions in the banking system.” In other words, the ECB is willing to throw what remains of the kitchen sink at the problem.
The message may have been intended to reassure investors, calm market jitters, and stop the sell-off of sovereign bonds and bank shares

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