A global recession is on the horizon - please read OP for mod warning

SpoonyMcSpoon

Commercial Real Estate post-covid in the West is a black hole of mystery at the moment. So much of the valuation work is done privately with no external, independent checking being necessary. How deep the fallout goes is guesswork but it appears that CRE is getting hammered as badly as the Irish property market did 08-13. It’s staggering to see this collapse, like a slow motion car crash.

This week alone we had even more news stories of the dramatic CRE crash which is ongoing;

Starwood Capital blocks redemptions from its property fund as it has no cash, having burned through its credit facility https://www.ft.com/content/2b375114-049e-49f4-814a-2abce846f99d

Bank of Ireland wrote down the value of its CRE portfolio by 12% in the last year https://www.rte.ie/news/business/2024/0523/1450840-bois-commercial-property-loan-book-resilient-kennedy/

Investors in top rated CRE-backed bonds have taken hits for the first time since the 08 GFC https://www.bloomberg.com/news/articles/2024-05-23/cmbs-buyers-suffer-first-loss-on-aaa-debt-since-financial-crisis

There are multiple canaries in the coalmine that all seem to have died and the black swans are possibly hidden in plain sight.

herbalplants

https://www.boards.ie/discussion/comment/122180073#Comment_122180073

Very true. I was reading this morning on Starwood too, they sent an investor communication to their LPs.

ottolwinner

I saw a house up for rent today 3 bed in an estate €3500 surely this can’t be sustained ? When will the peak come

Timing belt

https://www.boards.ie/discussion/comment/122180073#Comment_122180073

it all depends on which sector of CRE that they are exposed to.

Retail was in decline way before Covid and is nothing new besides maybe less footfall with people WFH.

Offices likewise were in decline before Covid with WFH being tried out to save on costs with hot-desking introduced. Granted this was small scale and Covid opened people’s eyes and massively accelerated what was going to happen anyway.

Hotels etc still have a shortage likewise warehousing is massively in demand and residential housing (which is technically classified as CRE if there are more than 6 units) shows no signs of slowing down.

CRE is a beast as projects are multi-year with a long lead time so what’s being delivered now was in pipeline/started 5 years ago and to late to delay or change and by the time of delivery may actually be back in demand.

Wanderer78

how exposed are pension funds to a potential commercial real estate crash?

SpoonyMcSpoon

https://www.boards.ie/discussion/comment/122180938#Comment_122180938

Difficult to say but not that big of a deal for pension funds or at least not that big of a deal for the vast majority of people as property is extremely speculative and risky so it is not going to be more than a tiny portion of any pension fund.
The deep pockets investors and those that got greedy during zero interest rate mania are those most exposed I would say. Anyone who gets burned walked into the investment eyes wide open!

The Big Mac index has been used to track purchasing power across the globe over ghe decades. Apparently McDonalds and Burger King are reintroducing their value meals as consumer demand has been waning for the inflation-fuelled meals of the last couple of years. Potentially a sign of things slowing when even McDonalds and BK have to introduce cheaper menu items again!

https://www.bloomberg.com/news/articles/2024-05-23/burger-king-launching-5-value-meal-to-one-up-mcdonald-s

Dohnjoe

https://www.boards.ie/discussion/comment/122180979#Comment_122180979

Or a sign that inflation is reducing and merchants/suppliers having to be more competitive again (instead of the unlimited gouging that could freely take place in the last 2 years of high inflation)

timmyntc

https://www.boards.ie/discussion/comment/122182887#Comment_122182887

It means inflation effect on disposable income has fed through - inflation falling still means prices rising, just slower. Introducing cheaper value meals would imply general market deflation (which isn't the case), or purchasing power has been eroded such that sales are falling more than price increases can recoup the cost i.e. price gouging no longer works as consumers voting with their feet

Dohnjoe

https://www.boards.ie/discussion/comment/122182919#Comment_122182919

Indeed in simple terms in peak 2022 you weren't going to find as many e.g. value meals because everyone was in gouge mode. Now, in a surprise to no one, things have changed.

Wanderer78

https://www.boards.ie/discussion/comment/122182919#Comment_122182919

…so purchasers voted with their feet, causing energy prices to fall!

Timing belt

https://www.boards.ie/discussion/comment/122183061#Comment_122183061

energy is only one component and doesn’t explain all the price increases. Way before energy and input costs increased prices were rising when it came to takeaway food. During Covid most places upped prices under the excuse of increased cost to operate during lockdown. This wasn’t a temporary increase and had nothing to do with energy.

Yes energy contributed to part of the increases but so did wage increases etc. yet despite these increases in costs profit margins increased ( peaked any 57% in December 2023) this means that not only were additional costs contributing to the increase in prices but there was also additional profits contributing to the increase in price.

In relation to MacDonalds you’re talking about 45 euro for a family meal now and consumers aren’t visiting as frequently as a result and explains the 15% drop in turnover and why they are prepared to give back some of the profit margin in the form of value meals etc.

herbalplants

Israel's ambassador to Ireland has warned that a crisis in bilateral ties over Ireland's plan to recognise a Palestinian state sends the wrong message about Ireland as a tech hub and is worrying Israeli investors in the Irish IT services sector.

Speaking in Jerusalem, where she has held Foreign Ministry consultations after being recalled from Ireland in protest, Dana Erlich voiced hope of returning to Ireland, though said she saw its Government as siding with Palestinians against Israel.

The statehood recognition is due to be formalised tomorrow by Ireland in conjunction with Spain and Norway.

The United States and some other European countries favour first reviving negotiations on resolving the conflict.

The move by Ireland, Spain and Norway was denounced as a "reward for terrorism" by Israel, which is waging a devastating Gaza war in response to the 7 October cross-border rampage by Hamas.

Ms Erlich said all aspects of Israeli-Irish ties were under review but stopped short of predicting further action by her government, which has continued sparring with Madrid.

"Ireland is not neutral or an honest broker in this case, because they are very supportive of the Palestinians. But what we are saying (is): This is not the time for such announcement on recognition," Ms Erlich told Reuters in an interview

Many Irish sympathise with Israel "behind the scenes", Ms Erlich said.

"I think there is a lot of potential in our bilateral relations, if it's cybersecurity or health care, climate change. I hope to be given that opportunity to continue that."

But she said a public mood of hostility, which some Jews deem antisemitic, is making Israelis question their place in Ireland - a threat to tech services that account for the lion's share of some $5 billion in annual trade between the countries.

"We are getting more and more phone calls and conversations of concerned people - if it's Israelis who invest in Ireland and are concerned about their investment, if it's Israelis who have relocated to Ireland into different tech companies and either are requesting to be relocated somewhere else or asking to return to Israel," Ms Erlich said.

"I think it sends the wrong message about the location and the centrality of Ireland as a tech hub when there are more and more people who are concerned about moving to Ireland. I don't think that this is the message that Ireland wants to send to the world... And this is not what we want to see."

The business connection has already been hit by the decision announced on 5 February by Israel's national carrier, El Al, not to renew direct flights to Dublin that were launched last year, citing changes in customer demands since the Gaza war.

The Government has rejected calls by pro-Palestinian activists to impose sanctions or an economic boycott on Israel.

But on 5 April, Ireland said its €15bn sovereign investment fund would divest from six Israeli companies, including some of its largest banks, over their activities in the occupied Palestinian territories.

The Gaza war broke out a month after Ms Erlich arrived in Dublin, plunging her into 24/7 crisis-management and outreach.

"There are many similarities between Ireland and Israel that I'm curious to learn more about - if it's a reviving of an ancient language, if it's the diaspora, if it's the different scenic options," she said.

"And I hope to be given that opportunity to continue exploring Ireland. But right now, we need to address our concerns."

Taoiseach Simon Harris has described Ms Erlich's comments as "a distraction".

"Ireland was very clear last week when we announced along with Norway and Spain our intention to recognise the state of Palestine, why we were doing it, what it was and what it was not," he said.

"We believe in the state of Israel, in the state of Palestine, living side by side in peace and stability.

"Quite frankly, I think many people in Israel, many people in Palestine, many people the world over, are able to differentiate between the people of Israel and the Netanyahu government. I certainly am able to differentiate between the two, just like we can differentiate between right and wrong."

More stories on

mariaalice

Fear of a recession or constant anxiety about a recession must be difficult.

I wonder if this is caused by living through the Celtic tiger downturn.

Wanderer78

https://www.boards.ie/discussion/comment/122190679#Comment_122190679

it definitely had a profound effect on some, so its completely understandable why so

herbalplants

https://www.boards.ie/discussion/comment/122190679#Comment_122190679

No anxiety here whatsoever.

Sleeping very well indeed. Thanks for asking.

timmyntc

https://www.boards.ie/discussion/comment/122190423#Comment_122190423

This is complete nonsense

Not only are Israeli ambassadors comments complete nonsense, but your subsequent linkdump of those comments with the implication that the Irish economy is actually at risk, is complete nonsense

tohaltuwi

it remains to be seen how the politics re Palestine play out over next few years. It sounds like a lot of empty threat with Israeli government panicking at the world turning against Zionist interests. However the bottom line of companies is profit and if we can supply the platform for that we stand to be ok. But nothing is ever guaranteed in a world in flux.

Cluedo Monopoly

https://www.boards.ie/discussion/comment/122190423#Comment_122190423

I wouldn't take a blind bit of notice of that brainwashed idiot ambassador or her insane government.

Mr. teddywinkles

https://www.boards.ie/discussion/comment/122190679#Comment_122190679

What goes up must come down. How fast and how far and when is the unknown unfortunately.

mariaalice

https://www.boards.ie/discussion/comment/122192079#Comment_122192079

Of course, but that wasn't my point.

zerosquared

https://www.boards.ie/discussion/comment/122192079#Comment_122192079

This thread is just full of economic illiteracy nonsense

So when exactly are we going back to the Middle Ages now? What goes up must come down, right? Right??

source: https://en.m.wikipedia.org/wiki/World_economy

Mr. teddywinkles

No im wrong it will continue indefinitely. 🙄

Middle ages. A bit melodramatic there.

zerosquared

https://www.boards.ie/discussion/comment/122192568#Comment_122192568

About the time Act of Union was signed pre Industrial Revolution

Sure what goes up must go down

Wanderer78

https://www.boards.ie/discussion/comment/122192349#Comment_122192349

…such statements come across as being extremely arrogant, your data is almost irreverent as we re clearly experiencing a rapid rise in uncertainties and instabilities, this can be clearly seen politically, socially and environmentally, its clearly obvious our current rates of growth, and in the ways we re achieving that, are completely unsustainable, and if we continue on this path, we ll eventually end up in deep sh1t.

with this rapid growth in gdp, which is commonly calculated in the value of assets, but doesnt actually explain the fact, the ownership of those assets is concentrating, resulting in rapidly growing wealth inequality, which is now resulting in rapid rising instabilities, particularly in those already mentioned, i.e. socially, political and environmental, this wont end well if we maintain this trajectory…..

…i.e. the pie maybe growing, but that doesnt mean everyone's piece of the pie is growing!

zerosquared

https://www.boards.ie/discussion/comment/122192753#Comment_122192753

no what we are experiencing is a rapid rise in social media and various parties trying to push a sense of “crisis here” and “crisis there” and “crisis everywhere”

Everything is a crisis now, and that feeds into the psyche of people with apocalyptic tendencies who see a crisis around every corner and bush

Wanderer78

https://www.boards.ie/discussion/comment/122192843#Comment_122192843

…and again, there is plenty of evidence, we are actually experiencing what some are now calling a 'poly-crisis', which is simply an accumulation of serious crisis, this has little or nothing to do with the dysfunctions of modern media, which agreeably isnt helping the situation, but is in fact true…

again, your depiction of rapid global gdp growth is only telling a very small part of this story, yes we re currently experiencing this, but this is in turn causing a rapid rise in instabilities, which if are continued, would probably lead to catastrophic outcomes. we re already starting to experience some of these outcomes, i.e. millions on the move out of regions that simply cannot harbor human life anymore, i.e. wet bulb conditions etc, a rapidly rising number of people unable to meet their most critical of needs, housing, health care etc etc, in both developed and under developed nations, the list goes on and on, i.e. its really starting to happen….

some of these issues were highlighted many decades ago, in works such as 'the limits to growth', but we chose, lets ignore those folks, theyre just negative nellies!

zerosquared

https://www.boards.ie/discussion/comment/122192914#Comment_122192914

Ah Malthusian nonsense that was repackaged in that Limits of Growth 1970s book which predicted economic collapse before end of 20th century that ended up not only being wrong but being wildly wrong

Wanderer78

https://www.boards.ie/discussion/comment/122192951#Comment_122192951

…and since you read it, you ll also know, they said if we continue with the concept of unlimited growth, we ll do so much environmentally damage, the planet will eventually become uninhabitable for most living beings, including humans!

…thank god they were wrong on that to!

…and since environmental damage is only an 'externality', plough on lads!

zerosquared

https://www.boards.ie/discussion/comment/122193031#Comment_122193031

When will that happen, before or after the impending global recession that no one can give a date for 🤣

Wanderer78

https://www.boards.ie/discussion/comment/122193275#Comment_122193275

…such accuracy simply cannot be predicted, as we now live in a highly complex and dynamic world, but this level of growth simply is completely unsustainable, if continued, its very likely we d end up in serious depressions, let alone recessions, there would also be more than likely serious global conflicts and wars, as we all attempt to gain access to critical resources…

…its also important to note, its common for gdp to rise as environmental damage is done, as we need to attempt to repair the damage, so going back to your original post on the matter, rapidly rising gdp isnt always a good thing, as such data omits critical nuances…..