News that Moves: China,Obama & the IMF, Commercial Property Woes, Meriwether

RCM Comment: The following three stories illustrate the desire for liquidity both here and abroad. And while billions of US$s & trillions of Yuan are created the IMF still feels this is not enough as they make their case for even more spending. As a reader of this blog you know that fiat currencies are easy to create. All you need is paper, ink and a printing press. I have highlighted in GOLD the sentences that hold a clue to the best investment vehicle during times of extreme currency printing. Can you guess which asset I am recommending?
China cuts rates, bank reserve ratio to boost economy - DJ
DJ reports China said it will lower deposit and lending rates as well as banks' reserve requirement ratio as part of continued efforts to boost liquidity and ease the country's economic woes. Analysts said more interest rate cuts are likely as China's government continues to worry about a sharp slowdown in the domestic economy, even after it recently launched a 4 trln yuan economic stimulus plan and eased restrictions on the development of the property market. The People's Bank of China said it will cut the one-year yuan lending rate to 5.31% from 5.58%, and the one-year yuan deposit rate to 2.25% from 2.52%, effective Tuesday. The PBOC said it is also cutting banks' reserve requirement ratio from Thursday by 50 basis points.

Obama expands goals of stimulus - Financial Times
Financial Times reports Barack Obama has expanded the goals of his proposed economic stimulus, with a plan to create or save an additional 500,000 jobs. The president-elect raised his jobs target over the next two years to 3 mln -- up from the 2.5 mln goal set last month -- after US unemployment hit its highest level for 15 years in November. Transition officials said Mr Obama had agreed the outlines of a $675 bln - $775 bln two-year recovery plan last week. But the price tag is likely to rise above $800 bln as Congress makes its own demands during the legislative process. The moves come amid a warning on Sunday, from the International Monetary Fund, that governments must act more aggressively to prevent a deeper slump. Dominique Strauss-Kahn, IMF managing director, told BBC radio that inadequate stimulus measures risked making the slowdown worse than expected next year. "I'm specially concerned by the fact that our forecast, already very dark.. will be even darker if not enough fiscal stimulus is implemented," he said.

IMF head worried about lack of fiscal stimulus - Reuters.com
Reuters.com reports International Monetary Fund chief Dominique Strauss-Kahn said a lack of fiscal stimulus by governments to tackle the global slowdown may make a bad 2009 even worse, according to an interview. Strauss-Kahn told BBC radio that the IMF may need to cut its next economic growth forecasts, due in January, referring to "2009 as really being a bad year." "I'm specially concerned by the fact that our forecast, already very dark ... will be even darker if not enough fiscal stimulus is implemented," he said in an interview. "The question of having social unrest has been highlighted by journalists and I can understand that, but it's only part of the problem," he said. "The problem is that all the whole society is going to suffer."

RCM Comment: I spent time at an investment conference recently and had the good fortune to meet some quality people involved in the commercial property market. This market had held up well vs other real estate assets until October at which point business froze seemingly over night. The key take away from this conference was the high likelihood that the commercial property market would be the next "shoe to drop" in this snowball of a financial crisis.
Times of London discusses commercial property sector pleas for help from Washington
Times of London reports America's commercial property industry got out the begging bowl yesterday as the credit crisis tightened its grip on the world's biggest economy. Amid grave warnings that thousands of office blocks, hotels and shopping centers are braced for bankruptcy, representatives of the industry went cap-in-hand to Washington. Henry Paulson, the US Treasury Secretary, managed to secure $700 billion of taxpayer funds in October to help to bail out Wall Street banks. It emerged yesterday that representatives of America's real estate bodies have written to Mr Paulson, who has only a month left in office before he is succeeded by Tim Geithner, requesting federal assistance. In a letter sent to Mr Paulson, signatories representing a dozen property trade groups, wrote: "We believe there is insufficient systemic capacity to refinance expiring, performing commercial real estate loans. For many borrowers, [credit] is not available."... In recent weeks, executives from the US commercial property market have been engaged in talks with the Treasury, Harry Reid (the Senate Majority Leader), the Federal Deposit Insurance Corporation and members of Barack Obama's transition team. As a result of those talks, it is understood that both the Treasury and the US Federal Reserve have agreed to consider assisting the commercial property market with loans. However, such a measure would not come into effect until February at the earliest.

Developers ask U.S. for bailout as massive debt looms - WSJ
... $530 bln of commercial mortgages will be coming due for refinancing in the next three years -- with about $160 bln maturing in the next year. To head off some of the impending pain, the industry is asking to be included in a new $200 bln loan program initially created by the government to salvage the market for car loans, student loans and credit-card debt. This money is intended to go directly to help investors finance purchases of securities backed by these assets. If commercial real estate is included, banks might have an incentive to make more loans to developers since they'd be able to repackage and sell them more easily to investors with the assurance of government backing. As part of their lobbying efforts, some industry representatives have asked lawmakers to explore the idea of setting up a separate program aimed at boosting lending to commercial real estate only.

RCM Comment: Will people never learn? From the Madoff case to Meriwether I find it amazing that investors willingly overlook major red flags in their quest for returns. Clearly the sickness of greed clouds judgement.
Meriwether Fund to cut staff over losses - WSJ
WSJ reports JWM Partners, a hedge fund set up by John Meriwether in 1999, told investors it will lose four partners and cut staff after the performance of its flagship fund plummeted this year. JWM Partners was founded by Mr. Meriwether after his previous hedge fund, Long-Term Capital Management, had to accept a $3.6 billion bailout by U.S. banks in 1998 after it ran aground with highly leveraged trading strategies. Connecticut-based JWM Partners said in its November letter to investors, seen by DJ, that its flagship fund, the Relative Value Opportunity Portfolio, fell 42.78% in the year to the end of November, to reach a net asset value of $554.8 million. Many investors have their funds locked into the company because of a system that allows one-eighth of the cash to be pulled out of the relative value vehicle at each quarterly redemption date, according to one investor in the fund.