If there is one key tool that will tell us when the credit crunch and problems in the financial markets are easing? It is the TED Spread. That is the gap between three-month US Treasuries (the risk free rate) and three month Libor (the rate at which banks lend to one another). Historically that rate has been a fraction of one percent. It spiked in September 2008 to over 2% and has increased since last month to well over 4%. A chart can be seen here. When this ratio declines it will be good news and when it it under 1% this crisis is likely nearing its end.
Another eventful weekend. The Morgan Stanley Mitsubishi transaction is being renegotiated but is likely to be completed. Were that to not happen, it would really rattle the markets. Germany has announced a $400 billion bailout of its banks. European leaders are considering guaranteeing all interbank lending. Clearly there is now worldwide political will to infuse capital into banks in return for a taxpayer ownership stake. This is MUCH better idea in our view than buying troubled mortgage assets directly.
National governments around the world have agreed to do what is necessary to prevent another major financial institution from failing, the International Monetary Fund's managing director said, although he didn't specify any measures.During weekend meetings, the IMF's 185 member nations endorsed an earlier commitment by the leading industrial nations to "use all available tools" to prevent the failure of "systemically important" financial institutions. Essentially that meant "no one is going to let an important financial institution fail," said the IMF chief, Dominique Strauss-Kahn.
In response to the ongoing financial crisis, central banks from six countries have announced a joint interest rate cut:
Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions.
Federal Reserve Actions
The Federal Open Market Committee has decided to lower its target for the federal funds rate 50 basis points to 1-1/2 percent. The Committee took this action in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.
We are pleased to announce the sale of Wailea Ekolu 1603. This beautiful two-bedroom condominium has been thoroughly renovated. Once again the LEADING EDGE REAL ESTATE MARKETING SYSTEM succeeds in a difficult market.
Wailea Ekolu nestles into the foothills of Haleakala and lies within walking distance of the Shops at Wailea and this world famous resort's other amenities. Only a minute away is a selection of Maui's finest beaches as well as Wailea's three golf courses. Owners of Wailea Ekolu appreciate the two swimming pools, the complex's recreation center and available golf privileges, and the flexibility to utilize the property as a vacation rental.
Beautifully remodeled and privately located, Wailea Ekolu 1603 provides a serene and peaceful haven available only on Maui. With two en suite bedrooms and what is essentially a private yard, this luxurious, 1071 square foot condominium boasts the feel of a single family home and twenty-first century appointments. The spacious floorplan includes three tiled lanais and an open design. The kitchen has been lovingly remodeled and includes slab granite countertops, maple Merillat cabinets (including pullouts galore), new Kitchen Aid appliances, Elco recessed lighting, Delta faucets, instant hot water and a wine refrigerator.
We have been saying for several months that the direct impact of the issues facing the credit markets on Maui has been small. That is no longer the case.
Maui Land & Pineapple Co. and its partners in the Kapalua Bay Hotel redevelopment have had to advance money to pay contractors after losing financing from the bankrupt Lehman Brothers. Lehman had an agreement to loan $370 million for the project, or 61.6 percent of the total cost. But the investment firm filed for bankruptcy Sept. 15, a week before it had been scheduled to release the next funding installment. Other lenders provided 22 percent of the payment, but Lehman failed to release its share, or $27.7 million, according to a disclosure ML&P filed Friday with the Securities and Exchange Commission.
While our guess is that this will not slow down the completion of that project, other new projects on Maui are clearly being affected:
Developer Everett Dowling, who is pursuing the expansion of Makena Resort, said he plans to complete projects that are already under way. But he has shelved proposals for new projects because of the difficulty in getting financing for resort developments, and because financing costs more when it is available.
What does this mean for Maui real estate? Less new product for buyers to choose from, fewer construction jobs and some cushion on high end values.
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