Financial Circulation in US Commercial Real Estate
If US loan interest rates (US10Y as a guideline) rise too much due to inflation, demand for real estate will be sluggish, the cash circulation system will collapse, and concerns leading to a financial crisis will also increase. So,
Issue 1: Is there a possibility of a worst-case situation
Assignment 2: Examples of emergency preparedness
I collected information about If suggestions appear in the financial results of US financial institutions after 4/15, the market may shake again.
★ Problem pointed out IMF 2024 Jan 18
Despite expectations for a soft landing, he pointed out that there are huge risks faced by commercial real estate in the US.
★ American Bank Stability Real Estate Loan Bankers Association 2024 Feb 23
The maturity of many commercial real estate loans scheduled to mature in 2023 has only been postponed or extended from 2024 to 2026, and debts and claims have not been resolved.
★ Bank profile
2023 4Q FDIC Chairman Martin Gruenberg's speech 2024 Mar 07
Large non-current expenses had an adverse effect on net profit in the fourth quarter, but bad debts were within the range that bank profits could handle, and the soundness of the US financial system was maintained.
★ Worst case simulation
The indicator value called LTV (Loan To Value) is rising. For example, a 20% loss determination would cause damage to banks of 160 billion dollars. It can be pointed out that when depositors are attracted by this and withdraw large amounts of uninsured deposits, the risk that approximately 2,000 banks will go bankrupt in a chain manner.
/Reference youtube by Money Health CH 2024/04/04 https://youtu.be/XRAIsp12brc
★ Countermeasures in case of emergency (example) Incorporation of medium- to long-term US bond ETF portfolios.
The lowest price level (high interest rate) during QT and reverse yield → the price is maximized (lowest interest rate) with QE during a serious financial crisis.
[For example, in the case of 2621 IS US bonds 20 years, listing value: 2532, depreciation: 1138, current (4/11) value: 1213. In other words, if the worst situation on par with the COVID-19 pandemic occurs, it will increase by about 2.09 times. If FED interest rates are cut even if it's not that far, there could be a slight price increase (interest rate drop)]
However, when the Fed raises interest rates due to deep-seated inflation, there may be losses due to price drops (interest rate rises). Necessary entry point exit point examination, appropriateness examination of anticipated situations, etc.
★ Centralized diversified investment strategy in anticipation of a financial crisis
Assuming that a crash will occur by the latter half of 2025, they regard the present as a bull trap and plan a strategy. Now that I can make full use of my securities account, I now just work and save yen cash. When a financial crisis occurs and stock prices crash, we “concentrate” and “diversify” investments in indices, etc. If the stock market recovers after that, unrealized gains will be huge.
/Reference Youtube by Money Health CH 2024/03/14 https://youtu.be/LbwXYr5oQEs
This is just a summary of survey information. Just for your reference. Please make all investment decisions at your own risk.
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