I write from CREFC’s annual do with my 800 or so best friends. We are trying to party like it’s not 2009, and you know, we’re getting there. The government’s still playing pin the tail on the regulatory donkey, Europe’s a mess, housing and employment are not ready for prime time, and the banking system hangover goes on. Yet…JPM got a deal done, the bonds cleared, and pricing was… well, it’s been reported that they made a few bucks.
The CREFC convention kick off is the Monday night parties, of which yours truly was a host of the annual Dechert dinner. Note I said parties with an “s”. We’ve had a banker party drought these past few years. I see the return of the Street parties as a leading indicator of CMBS 2.0. We cannot wish 2.0 into existence, but let’s face it: A robust appetite for anything to invest in with yield measured in percentage points not basis points plus good vibes can a market revive.
Mixed bag on sentiment. Here’s my day two:
• More of my friends are off gmail and have real email addresses at banks. A very good sign.
• Congressman Scott Garrett of New Jersey’s fifth did not cheer us up. He sees Fin Reg reconciliation (he sits on the joint committee) going nowhere good. The populist Wall Street bashers are in full throttle. Senator Blanche Lincoln, the middling lefty incumbent Senator’s near-death experience at the hands of the truly far left means we may be going to a bad place on proprietary trading.
• Our fundamentals panel saw cap rates coming in and happy days again by 2012. But also acknowledged 2010 cap compression didn’t make a whole lot of sense, except as a response to too many dollars chasing any yield. I wasn’t left feeling comfy about recovery. Employment growth anyone?
• Our keynote speaker, the noted economist Mark Zandi of Moody’s Analytics, told us that if a whole bunch of really positive and thoroughly unlikely events occur, we could get this languid, desultory excuse for a recovery to a successful conclusion in three years. I was close to irrational exuberance.
• We had a series of meetings of investors, servicers and issuers which proved, if proof was needed, that we ain’t figured out what CMBS 2.0 ought to look like yet. In one corner, the Investor’s Forum which, Moses-like, brought down from the Mount a Best Practices missive. In the other, JPM, with a reportedly fully subscribed deal in the market with just a nod to said Best Practices. We do not need a Colonel Gaddafi and Ronald Reagan “line of death” moment here. No one wins here if the investors get rolled and keep buying but are horribly disaffected. No one wins if Best Practices brings issuance to a grinding halt because of cost and other deal features that kill the golden goose. I’m reminded that, in Canada, where they make the Amtrak Acela, the train is called the PIG because it was finally made so heavy by US safety standards it cannot meet its design specifications of speed. So we end up with a marginally useful, world’s slowest fast train. Perfect.
Finally, everyone is fibbing again. Deals done, terms given, workouts embraced, bonds sold or bought. This is terrific news and the best leading indicator of a repairing market. We’ve been so depressed these past few years, we had neither energy nor incentive to spin. Energy and optimism (irrational in part) are back. Bring on the spin!
So, we’re partying – and why not? Just don’t think The Decameron.