Toxic Asset

Wouldn’t’ you be a little wary about buying something called a “Toxic Asset.” It’s like walking down a supermarket aisle and seeing a bathroom cleaner with a skull and crossbones and the word “POISON” in bold red letters. But, that bathroom cleaner is the one that works; you just need to heed the directions, warnings as they are, to immediately wash your hands in water from the Sea of Galilee should you inadvertently touch it. But from the sounds of it, the U.S. government’s announced $1 Trillion Toxic Asset Plan will not require that type of announcement to those buyers who will stroll the halls of Congress and presumably choose those portfolios that they’d like to take home with them. Of course, our government states that , “to help protect taxpayers, who would pay for the bulk of the purchases, the plan calls for auctioning assets to the highest bidders.” How lovely. What a novel idea. So here are the three components of this masterminded plan: One: The Federal Deposit Insurance Corporation will set up special-purpose investment partnerships and lend about 85 percent of the money that those partnerships will need to buy up troubled assets that banks want to sell. (SF Note: Setting up public-private partnerships is a frightening thing). Two: The Treasury will hire four or five investment management firms, matching the private money that each of the firms puts up on a dollar-for-dollar basis with government money. (SF Note: The Vegas odds-makers have pegged these firms already so I doubt if we’ll see any surprises there). Three: The Treasury plans to expand lending through the Term Asset-Backed Securities Loan Facility, a joint venture with the Federal Reserve. Yup, this is exactly what I would do….Not. But then again our government is in a desperate battle to do, as Todd Rundgren’s album was titled, “Something, Anything.” I’m worried that these solutions will back-fire, big-time and fairly quickly and just as the money given to companies like AIG, just as a poster child, will end up being misused, abused and will help change Toxic Assets into Toxic Solutions for only the privileged few. And in the end they'll have so little skin in the game they're not worried at all about the poison touching their skin. But I think the real opportunity is to start selling bottled water from the Sea of Galilee-anybody want to form a partnership with me? Last item about MIPIM. Here are some things heard at MIPIM as posted on Creopoint.com: - “When the going gets tough the tough get going...To the south of France!” Boris Johnson, Mayor of London - ”There were two kinds of people at MIPIM. Those complaining about the lower number of visitors, and those happy with the higher ratio of C level people there.” Magnus Svantegård of Datscha -“We are all feeling the impact of this new world order where what happens in a blink may affect our lives and those of our clients.” DLA Piper - "We feed our investment team Prozac on a regular basis." Janice Stanton of C&W - “There’s no talk about sovereign funds or Russian oligarchs compared to last year.” Dietrich Heidtmann of Morgan Stanley - “It is not the strongest of the species who survive, nor the most intelligent, but the ones most responsive to change." Charles Darwin quoted by Robert Newhart of Innovation Center - “When money no longer controls your culture, there’s room for new ideas to establish themselves.” Wolf Priz, leading architect - “Be open to new people, everyone is in the same boat today.” Steve Felix, Aviva - "The immediate future is very much in the hands of our banks and the success of our government support.” Nigel Roberts, JLL - “The US government should stop saying they will sweeten the pot. No one wants to be seen as a premature ejaculator.” Ken Patton, Dean New York University RE Institute Natasha Richardson’s death this week was very sad. While we only know what we read in the papers it sounds like the delay in getting medical attention made the unfortunate difference. It’s a reminder, once again, that life is so fragile and it can change in the blink of an eye. The PREA Spring Conference is coming up in Washington, DC next week. The advance registration list just came out and there are 666 names on it! Given what is going on in the world and the industry, that is a huge amount and congratulations to PREA for putting together a program that is attracting a lot of interest. I’ll give you my report next Friday. I finally saw “Slumdog Millionaire” on a flight recently. What a powerful movie. Now I know what all the hoopla was about. And speaking of hoop-la: Syracuse wins their first round. While I don’t have a TV where I can watch four games simultaneously but I think this is going to be one of the most exciting NCAA’s in a number of years. Singer/Songwriter of the Week: A couple of months ago I bought a piano through Craigslist from Shannon Corey. While I have not yet seen her perform live I thought you might like the new song that she has on her website called “I Miss Home). http://www.shannoncorey.com (p.s. the song is also available for download at iTunes). Where I'll be: Mar.24: New York to moderate a panel at the Second Annual iGlobal Forum Real Estate Private Equity Summit. Mar. 25-26: Washington DC to attend PREA's Spring Conference Apr. 10-11: New York to see Umphrey’s McGee at the Nokia Theatre (a great venue) April 23-25: Athens, Greece for INREV’s Annual General Meeting and Conference May 14-16: North Palm Beach, FL to attend the annual Homer Hoyt Institute and Weimer School sessions with some of the industry’s leading academics. These are my personal views and not that of my employer.