Blackstone Defaults: Subprime Meltdown 2?

March 5th, 2023

This story seems like it should be a bigger deal:

Blackstone (NYSE:BX) has defaulted on part of a €531M bond backed by a commercial portfolio owned by Finnish property investment firm Sponda, which it acquired in 2017.

The private equity firm has repaid almost half of that figure, closer to €300M, according to a person familiar with the matter.

Currently €297.1M of the loan remains outstanding, according to ratings agency Fitch. The loan is secured against 45 properties in Finland, most of which are offices and the rest are stores.

Blackstone (BX) earlier sought an extension from holders of the securitized notes so that it could sell the assets and repay the debt, Bloomberg reported citing people aware of the matter. The commercial mortgage-backed security has since matured, without being repaid.

A Blackstone (BX) spokesperson told Seeking Alpha that “this debt relates to a small portion of the Sponda portfolio. We are disappointed that the servicer has not advanced our proposal, which we believe would deliver the best outcome for noteholders.”

Translation: “Shut up and let us force our losses on you rather than taking them ourselves.”

Though off in Finland, this story should probably receive more notice due to the “mortgage-backed” angle.

Remember the 2008 Subprime Meltdown, fueled by easy taxpayer-backed Fannie Mae money and bundled subprime mortgage securities? And how all sorts of banking fatcats got bailed out and never paid a price for their shenanigans?

Well, mortgage backed assets never went away, they just moved into commercial real estate. There’s untold trillions of dollars in Commercial Mortgage-Backed Securities (CMBS) across the world, and almost no one is keeping track of them. The average retail investor probably knows less about CMBS now than they did about subprime mortgages in 2008.

And you know one of the hardest-hit sectors following the Flu Manchu lockdowns? Commercial real estate. A whole lot of companies figured out that a whole lot of their work force can work from home, freeing them from having to pay expensive rent on office space.

Add to that the fact that the way CMBS are structured has immediate negative consequences on several cities. Because the rules of many CMBS state that the value of a property doesn’t need to be reevaluated as long as the asking price per square foot doesn’t change, commercial real estate spaces stay vacant for years rather than lowering their prices, screwing would-be renters and shrinking tax bases. (Louis Rossmann has been ranting about this for years.)

Letting valuation get too out-of-whack with reality you get bursting bubbles and market panics. Blackstone Group is the largest commercial real estate owner in the United States. And they’ve been having other financial difficulties.

Blackstone Inc’s (BX.N) fourth-quarter distributable earnings fell 41% year-on-year as the world’s largest manager of alternative assets said on Thursday it cashed out fewer investments across key portfolios.

Blackstone has been dealing with rising redemptions at its flagship real estate income trust (BREIT), prompting the private equity firm to exercise its right to block investor withdrawals at 5% of the quarterly net asset value of the fund.

That’s not exactly a sign of unassailable strength.

Blackstone also gives political donations generously to both parties. Oh, and Chuck Schumer’s son-in-law works there. And Blackstone’s president Jonathan Gray and executive chairman Tony James were both big Biden backers in 2020.

I am very far indeed from being an expert on how Blackstone has structured its various holdings. I suspect that its various funds and trusts and CMBS are all well-siloed and isolated from each other, which is the smart way to do things. But The Biden Recession That Dare Not Speak Its Name, falling real estate prices, frozen rental prices and huge shift in the need for commercial real estate all point to some very difficult challenges for Blackstone to navigate.

Given the amount money Blackstone has spread around to the Chuck Schumers of the world, expect that there are going to be a whole lot of swamp creatures ready and willing to make any serious Blackstone financial problem into a big problem for the America taxpayer.

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Posted in Democrats, Economics | 6 Comments »

University of Texas Announces DEI Pause

March 4th, 2023

A lot of conservatives have criticized Governor Greg Abbott’s anti-CRT/DEI/SJW initiatives as all show and no teeth. But there is at least some sign that those directives have had an effect on the people that run the University of Texas system.

The University of Texas (UT) System will pause all Diversity, Equity, and Inclusion (DEI) efforts, the board of regents announced last week.

The board chairman Kevin Eltife stated at the start of the meeting he had a comment that was “not an action or discussion item.”

“The topic of DEI activities on college campuses has received tremendous attention nationally and here in Texas,” Eltife said.

“We welcome, celebrate, and strive for diversity on our campus with our student and faculty population.”

“I also think it’s fair to say in recent times, certain DEI efforts have strayed from the original intent to now imposing requirements and actions that, rightfully so, raised the concerns of our policymakers,” he added.

Eltife went on to announce that all DEI policies would be paused on UT campuses and he will be asking for reports on any current policies still operating.

“We will await any action from the legislature for implementation by the University of Texas system at the appropriate time, and if needed, the board may consider a uniform DEI policy for the entire UT system,” Eltife said.

This announcement follows many reported incidents of DEI policies on UT campuses.

In 2021, Texas Tech University announced it was hiring four new assistant professors for its Department of Biological Sciences. Its social media posts made clear the department’s commitment to DEI hiring.

The department released a rubric for evaluating new faculty candidates’ diversity statements about how well they understand and have knowledge of “dimensions of diversity.”

Texas Tech has already released a statement about its steps toward ending DEI hiring and its desire to “always emphasize disciplinary excellence.”

UT Austin has been accused of using DEI policies to “espouse a clear ideological agenda,” and other reports have shown the pervasiveness of DEI in multiple Texas medical schools.

A medical school applicant, George Stewart, has filed a lawsuit against six Texas medical schools for alleged willingness to “discriminate on account of race and sex when admitting students by giving discriminatory preferences to females and non-Asian minorities, and by discriminating against whites, Asians, and men.”

It’s one thing for the board to announce policies, it’s quite another for administrators and department heads to follow them. Right now I would bet some social justice warrior administrators at UT are busy telling their friends on Facebook how they’re going to ignore the board’s directives.

When we start seeing entire DEI pockets of resistance being laid off the way we’ve seen in Florida and in the private sector, then we’ll know it’s real and not just empty talk.

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Posted in Democrats, Social Justice Warriors, Texas | 5 Comments »

LinkSwarm for March 3, 2023

March 3rd, 2023

In addition to getting over a cold, I spent most of the non-work day trying to assemble a pressure washer so I could attach a water-jetting attachment so I can clean out a blocked exterior line so I can run my dishwasher without it overflowing my sink.

The result of all this labor is that I still need to call a plumber. So enjoy yet another abbreviated LinkSwarm.

  • Hmmmmmm! “Hunter Biden Business Partner Flips, Now ‘Cooperating’ With GOP Investigators.”

    Eric Schwerin, a close business associate of Hunter Biden who also dealt with Joe Biden’s business and tax affairs, is now working with House GOP investigators looking into Biden family dealings – particularly in Ukraine and China, where the family collected millions of dollars, Just the News reports.

    Eric Schwerin, a close business associate of Hunter Biden who also dealt with Joe Biden’s business and tax affairs, is now working with House GOP investigators looking into Biden family dealings – particularly in Ukraine and China, where the family collected millions of dollars, Just the News reports.

    “He is cooperating with us,” House Oversight and Accountability Committee Chairman James Comer (R-KY) told the outlet.

    “His attorneys and my counsel are communicating on a regular basis. Now, I feel confident that he’s going to work with us, and provide us with the information that we have requested,” Comer continued. “I think that Schwerwin is going to be a very valuable witness for us in this investigation.”

    Of note, Schwerin, the former president of Hunter Biden’s now-dissolved investment firm Rosemont Seneca Partners, visited the White House at least 19 times from 2009 to 2015, according to White House visitor log records reviewed by The Epoch Times and first reported by the New York Post.

  • Chicago’s massively incompetent Democratic mayor Lori Lightfoot defeated for reelection.
  • “Lori Lightfoot Blames Election Loss On ‘Tricksy Hobbitses.’
  • The Democratic Party’s war on natural gas continues apace. (Hat tip: Director Blue.)
  • Patrick L. Wojahn, the Democratic mayor of College Park, MD, resigns over child porn charges. Name that party: His political affiliation only shows up in the 19th paragraph of the piece. (Hat tip: Dwight.)
  • “Russia’s Latest Advance on Vuhledar Fails After 12 Seconds.”
  • Fruit and vegetable shortage hits the UK.
  • Illnesses to Democratic senators Dianne Feinstein and John Fetterman mean that Democrats have temporarily lost their senate majority. That will teach you to rely to Octagenerians and visibly impaired stroke victims to carry your water. (Hat tip: Stephen Green at Instapundit.)
  • Pakistan swears it won’t default on it’s debt.

  • SUV struck by lasers. And by lasers, I mean a minigun. Watch the video.
  • Cuba facing shortages of just about everything. Communism will do that for you. (Hat Tip: The Other McCain.)
  • Fully automated, 100 ton, container-moving robots.
  • Baltimore police chase ends in building collapse.
  • “Rockets owner Tilman Fertitta submits $5.5 billion bid for NFL’s Commanders.” He should move them to Austin and change the name back to the Redskins, just to spite them.
  • Breakfast Bitch convicted of interstate wire fraud.
  • Did MacKay get Tulipmania wrong? It turns out he was also an enthusiast for the far more destructive “Railway Bubbles” that struck England in the 19th century.
  • Man, the pollen in Texas is just brutal this time of year. (Hat tip: Ace of Spades HQ.
  • God Confirms Heaven Will Have A Buc-ee’s.

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    Posted in Communism, Crime, Democrats, Foreign Policy, Guns, Military, Social Justice Warriors, Texas, video, Waste and Fraud | 4 Comments »

    Ukraine Steps Up Drone Strikes

    March 2nd, 2023

    Ukraine has stepped up its drone attacks against a wide spectrum of Russian military infrastructure targets.

  • “Ukrainians are reportedly attacking objects from St. Petersburg to Krasnodar, which is a 2,000-kilometer front line in the air.”
  • “Ukrainians have also reportedly accompanied the drone attack with a cyberattack on the Russian regional missile detection system.”
  • They also hit an oil depot in Tuapse, for which Suchomimus has a video:

    That’s way beyond the Kerch Strait Bridge. Back to the first video.

  • “The Russians have also closed the sky near St. Petersburg. After Russian detection systems were set off, Russians reportedly used interceptor jets to eliminate the threat.” That’s more than 1,000km from Kiev, which must have Russian air defense planners freaking out. (Or drinking even more heavily than usual.)
  • The hit a number of targets in Crimea, though many of the drones launched there were shot down, and some were hijacked by Russian electronic warfare countermeasures. (Cue a Cory Doctorow-esque rant about the need for strong encryption.)
  • “Some analysts are saying that Ukrainians are just testing Russian air and electronic defense systems, and are creating an elaborate map for building more sophisticated trajectories. After they finish, these analysts are predicting a much larger scale attack, which would cause a lot of destruction of the airfields, as well as oil refineries and factories producing military equipment.”
  • “The second camp of analysts is saying that the goal of these attacks is to disperse Russian air defense that has been greatly concentrated on the fronts.”

    • Reporting from Ukraine is usually pretty solid and seems to have sources inside Ukraine’s defense ministry.

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    Posted in Foreign Policy, Military, video | 4 Comments »

    Taking His Deposition, Open Carry Advocate Dismantles Police Officer Who Unlawfully Arrested Him

    March 1st, 2023

    This is from a few months ago, and acting as your own attorney is usually a bad idea 99 times out of 100. But this video of Florida Open Carry advocate Don Andre calming and patiently dismantling the police officer who violated his rights by arresting him without proper cause in the course of taking his deposition is a thing of beauty.

    Again, it is generally best to leave such activities to the legal professionals. But if you are going to represent yourself, make sure that you’re as calm, and know the relevant law as thoroughly, as Mr. Andre

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    Posted in Jihad | 5 Comments »

    Remembering the Battle of Medina Ridge

    February 28th, 2023

    We’ve already talked about the Battle of 73 Easting, so let’s talk about the battle that followed close on it’s heels, the Battle of Medina Ridge, the 32nd anniversary of which just passed, and which some regard as the largest tank battle of Desert Storm.

  • Following 73 Easting and the Battle of Norfolk, The Adnan Republican Guard division of motorized infantry launched an artillery spoiling attack against the U.S. First Armored to slow their advance, only to be slaughtered by MLRS cluster bombs, Apaches and A-10s.
  • This is simultaneous with the destruction of loot-laden Iraqi vehicles on the Highway of Death and the burning of Kuwaiti oil fields.

  • Despite the Iraqis believing that the rugged terrain south of the Euphrates valley is too difficult for an armored division to negotiate, the 24th Infantry Division reached their objective, securing Highway 8 east of where the 101st had done so a couple of days earlier. They blockade the highway, destroying over 100 vehicles retreating westwards with tank and TOE fire. Bedouin nomads watching from atop a nearby ridgeline politely applaud as tank rounds hit their targets.

  • The Medina Division of the Iraqi Republican Guard is the last organized combat force standing against the U.S. and its allies.
  • While the Iraqis have entrenched behind a small hill the Americans must crest, they’ve made the mistake of being just out of range of their T-72s.
  • “For the next 40 minutes, the engaged elements of the First Armored Division simply sit there picking off Iraqi tanks and armored vehicles with impunity. The Iraqis desperately call in artillery support, but the rounds fall behind the front line of Abrams tanks.”
  • “The 1st and 25th Field Artillery Regiments respond. Using artillery acquisition radars, the U.S. artillery is able to detect the firing of an Iraqi artillery piece, pinpoint its exact position, and return counter artillery fire on it before the Iraqi round has even landed. Within just a few minutes, two entire artillery battalions of the Medina division have been wiped out.”
  • “40 minutes after the battle began, the Medina’s right flank has been completely destroyed, and the right flank of the American force is just beginning to smash into the Medina’s left. In this sector, many Iraqi tanks are pointing southwest. The nearest tanks are destroyed before they can even rotate their turrets towards the Americans. Those that do fire back find that they are again outranged.”
  • Apaches and A-10s join in here as well.
  • “The battle would become known as The Battle of Medina Ridge. It lasts just two hours during which 186 Iraqi tanks and 172 armored vehicles are destroyed. Four American Abrams tanks are lost.”

    • I’m skipping over some secondary action and friendly fire incidents, but the Iraqis were complete routed and Americans took minimal casualties.

    If more modern American and NATO tanks using combined arms operations took on even more antiquated Soviet tanks in Ukraine, the result is likely to be similar.

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    Posted in Military, video | 5 Comments »

    Dear Chinese Workers in 2023: Sucks To Be You

    February 27th, 2023

    It turns out that having your ruling party alienate the entire world with a genetically engineered plague, rampant human rights abuse and widespread intellectual property theft is not conducive to continued economic success. Who knew?

    Hence comes the hashtag #SaveTheBoss, i.e. the company needs to survive to save jobs. I assume there’s more than a little irony to the tag, given how badly conditions suck in so many Chinese factories. .

    Takeaways:

  • “In the first half of 2022, 460,000 companies announced their closure, and 3.1 million self-employed people have canceled their business.”
  • “It’s hard to be a boss this year. All industries are in decline. In order to maintain the factory, profits have to be squeezed and squeezed. Many have even accepted orders with zero profit outright. The purpose is simply to keep the cash flowing.”
  • “According to data released by China’s General Administration of Customs, China’s exports fell 9.9 percent year on year in December 2022, widening the decline from 8.7 percent in November and marking the biggest drop since February 2020.” And those are the official numbers. It’s almost certainly worse.
  • “The once congested roads in this major terminal in Guangdong Province, and also in the Pearl River delta region, are now empty. Trucks are parked all over the parking lot, reflecting how depressed the foreign trade export industry is.”
  • “The Chinese government is carefully covering up the situation of its major economic regression, so it isn’t easy to tell from the statistics how serious the situation is.” But employers think it’s really bad.
  • “I heard that four or five factories are closing down here every day.”
  • Foreign companies are pulling out as well. “500 European companies have already moved to Singapore to set up their headquarters.”
  • Workers are returning from their Chinese New Year vacations only to find their factories shut down owing them back wages.
  • “At least 80,000 to 100,000 people are stranded in Suzhou, and there are probably more than 200,000 workers in the whole Yangtze River delta who are looking for work.”
  • “If someone promises to work in an electronics factory for 30 RMB, that is 4.3 USD an hour, don’t believe it. It’s all a lie.”
  • “Just after the Chinese New Year, the labor prices are dropping like an avalanche.”
  • And more foreign companies are pulling out of the country, like Toshiba, Microsoft and Panasonic.
  • “4.6 million factories are without orders.” I’ve got to think some of those “factories” have to be pretty small.
  • American capital firms are planning to pivot to Europe for foreign growth.
  • “The largest wave of unemployment in the history of CCP country is here.”
  • Many Chinese business owners are mystified by this drop in foreign orders.

    • Here’s a hint: Your crooked commie rulers acted like the biggest jerks in the world and everybody got tired of it. You reap what you sow…

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    Posted in Communism, Economics, Foreign Policy | 13 Comments »

    The Tank Isn’t Obsolete, Russia Is Just Using Them Stupidly

    February 26th, 2023

    Here’s a video from Samir Puri and the Imperial War Museum that echoes something Nicholas Moran said ten months ago, namely that the tank is not obsolete on the modern battlefield, it’s just that the Russians are using them wrong.

    Takeaways:

  • Russia, despite a century of data, isn’t using tanks properly in combined arms operations in concert with infantry, artillery and close air support.
  • Ukraine is, though much of their close air support has taken the form of drones. “These unmanned aerial vehicles have proved very effective especially against slow-moving Russian armored convoys.”
  • “We don’t really see this kind of tight combined arms operations being mounted by the Russians. They really struggled to do this. Instead, what we saw were quite disconnected Russian elements, and that meant that often the Russians were moving into positions it was still very well defended that hadn’t been softened. Which is why as the war has moved on sixth, seventh, eighth month [this video came out two months ago], the Russians have changed tack very much to I guess quite brutal indiscriminate bombardment of the cities they want to take.”
  • “There are no massed tank battles for which the Cold War T-72 was designed. In fact, engagements in Ukraine are on a much smaller scale with platoons and companies clashing together rather than divisions and corps.”
  • “There has also been an absence of close air support, a crucial tool for supporting tanks as part of combined arms operations. There was a lot of aerial activity, there was a lot of dog fighting as well, early on in the in the invasion. But the aerial defense systems that both sides have gotten and can deploy to cover their their more fixed positions are effective enough that the attrition rate amongst combat aircraft has risen. And the Russians interestingly appear to be husbanding the resources of their air force.”
  • “In the early months of the war, Russia had little infantry with which to protect its tanks, particularly in urban settings. That that allowed small groups of Ukrainians to mount what almost seemed like guerrilla operations. Getting in close to Russian armor and taking them out with anti-tank guided missiles before they knew what was happening.”
  • “Russia has now launched a much larger mobilization of manpower to try and fix this problem, but with many of its best troops and equipment already expended, there are questions about the quality, supply, and morale of these new soldiers.”
  • “The fact that the Ukrainians are actually able to capture intact or largely intact T-72s is a testament to the Russian logistics. Meaning that you find in captured Russian equipment low supplies, some Russian PWOs complaining of a lack of lack of proper support from their headquarters and have simply given up or run away.”
  • Drone warfare has also made it much harder for Russia to use tanks in a traditional defensive role in static positions on systems of defensive trenches.

    • Though Russia’s forces have shown some small signs of increasing technical competence in various areas, the fact that they lost so much armor attacking Vuhledar shows that they still have a long way to go when it comes to staging competent combined arms operations.

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    Posted in Foreign Policy, Military, video | 30 Comments »

    The Tank Museum on The Tanks Going To Ukraine

    February 25th, 2023

    The Tank Museum has a video up covering five tanks being sent to Ukraine (Challenger 2, T-72, Leopard 2, Leopard 1, and the M1A2 Abrams).

    Some of this will be familiar to regular readers, but I did learn a few new nuggets:

  • Despite previous reports that we were sending M1A1 Abrams to Ukraine, we’re actually sending more modern M1A2s. No word on which SEP level, but I would bet against the most modern SEP3 package, as not all America’s own active armor has been retrofitted with that yet.
  • I didn’t realize Germany had also given the greenlight to ship older Leopard 1s to Ukraine. The 105mm rifled gun is probably undergunned vs. T-72 and newer Russian tanks, but should be able to punch through older tanks and pretty much all Russian BMPs. They’ll be useful for second echelon and infantry support roles. (And we might consider demothballing older 105mm gunned M1s to ship to Ukraine as well.)
  • I didn’t realize that only some 440 Challengers had been built.

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    Posted in Military, video | 2 Comments »

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