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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Elroy Jetson who wrote (159729)10/24/2008 10:30:39 AM
From: ChanceIsRead Replies (1) of 306849
 
>>>City National Bank is still funding the building of a large number of development projects <<<

A little tangential, but it brings memories of Ara Hovnanian's comment about 18 months ago that builders were "poping up houses" and selling them at a loss because that was the most efficacious way for them to move the land underneath.

There may be lots of reasons - none of them good IMO - for the insane building to continue. Other than the above, one might be tempted to keep up the pretense that the project is credible so that you don't have to write it down and bring the desperation to the attention of the banks.

Back in the merchant generation bust, Calpine kept building electric generation units about three years into the bust. There is something laudable in determination. There is also virtue in living to fight another day. Calpine went BK. But hey!! It was OPM being used to continue to overbuild. If the market recovered in time then management won big. If it didn't then the shareholders and partly the bondholders picked up the tab. The execs all had their golden parachutes.

Aubrey McClendon, CEO of CHK, got flayed alive recently when CHK dropped about 60% - since June. He had leveraged CHK. But he had also leveraged his personal account in CHK and got a huge margin call. I don't mind it so much when the CEO roll the dice a little if they have half of the skin of their person riding on the venture. I still think CHK will do great.
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