The Wall Street Slide of 2010

It's early May and the U.S. economy is budding like a spring field--real green shoots this time, it seems--and yet Wall Street decides its time to panic.

May 7, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user epicharmus

It’s early May and the U.S. economy is budding like a spring field–real green shoots this time, it seems–and yet Wall Street decides its time to panic. On Thursday afternoon it was like the bad old days of October 2008 for a while: the Dow Jones Industrial Average was down nearly 1,000 points at one moment.

And then it sprang back, mostly, to lose 347.8 points by the close of trading, or 3.2 percent. The S&P 500 lost 3.24 percent and the Nasdaq was down 3.44 percent. Serious declines, but not Great Crash or Black Monday territory.

Odd rumors followed in the wake of the bungee-jumping equity markets, such as that a slip of a trader’s finger caused the sale of too much Proctor & Gambol stock (the “fat-finger theory”), which in turn caused a cascade of selling, much ordered by automatic trading algorithms. Other observers chalked it up the dive to pervasive nervousness about Greece and other crises de jour.

April: Not the Cruelest Month for Retailers

One of those green shoots is increasing retail spending by U.S. consumers. According to consultancy Kantar Retail on Thursday, April same-store sales increased 1.2 percent based on a sales-weighted composite for the 31 retailers it tracks.

The results were led by stronger-than-average results among the food, drug and mass retailers that report their numbers to Kantaar, primarily Costco and BJ’s Warehouse Clubs. Apparel and accessory stores were about flat. Department stores were down slightly, the consultancy said.

The 1.2 percent average increase isn’t a vast one, especially compared with March’s increase of 9.2 percent. But any gain is good when compared with 2009. In April of that year, same-store sales were down 2.3 percent from the previous month, and it was one of a long string of declining months.

“More than one-third of the retailers reported posted gains in April on top of March’s gains,” said Frank Badillo, a senior economist at Kantar, in a statement. “These results provide some signs of the pickup in spending that shoppers are sustaining despite the Easter calendar shift.”

CRE Opportunities in Them Thar Hills

Green shoots there may be, but commercial real estate is still suffering enough to mean that a certain class of seller is really motivated to sell. That’s what the newly formed Mountain Real Estate Capital, the equity investment arm of Charlotte-based Mountain Real Estate Group, is hoping. During 1Q10, the company closed on several opportunistic acquisitions of various CRE assets, and is on the hunt for more.

Among other assets, the Mountain Real Estate acquisitions included an equity partnership with GL Homes of Florida to acquire assets from a major financial institution, with a potential real estate sell-out in excess of $1.8 billion eventually; the REO purchase of a portfolio of 56 residential communities in the greater Atlanta area from Bank of North Georgia; and an equity joint venture with GreenPointe Communities of Florida to develop and sell two subdivisions located in Jacksonville.

The company reports being “inundated” with further offers–there are a fair number of motivated sellers and potential JV partners out there, it seems. Arthur Nevid, chief investment officer of Mountain Real Estate Capital, told CPE that the company has to move quickly to winnow the good opportunities from the less favorable: A proposal in two to three days, then a due diligence period of two to four weeks, and then a closing shortly after that.

In other words, the race is on among opportunity funds to find properties now. The economy, and even the CRE market, are going to be soft only so long.