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Good Morning!

Good Morning Everyone! We’re talking Chinese property giant dodging default, China's slowing race to beat U.S. GDP, Goldman's recession U-turn and McKinsey's $1.3T real estate ticking time bomb prediction. First time reading? Sign-up here.

Let’s get into it!

GOLDMAN CUTS RECESSION ODDS

Goldman Sachs lowers U.S. recession odds to 15% from 20%, disagreeing with Bloomberg's 60% estimate. They think the FED won't need to raise rates as inflation cools. They base this on strong job markets boosting income in 2024 and disagree that monetary policy lags will cause a recession.

Goldman thinks the FED will only loosen conditions (cut rates) if growth slows more than they forecast. They expect “only very gradual cuts of 25-bps per quarter starting in Q2 2024.”

GRIT TAKE: U.S. consumers have nearly drained their pandemic savings (about 90%), and credit card debt is soaring (and interest on credit card debt is at a record high). Late payments on cars and credit cards are at a decade high, and buy-now-pay-later use jumped 40% early this year. Even Macy's reports rising card delinquencies. We're more bearish than Goldman on recession odds.

EMPTY SPACE: $1.3 TRILLION TIME BOMB

One-third of global desks are empty. According to a new study by XY Sense, office use is just half of pre-COVID levels, with Asians and Europeans returning faster than Americans. Big firms like Google and Amazon push for office returns, claiming Zoom can't replace collaboration. Yet, 80% of office space is for solo work (individual desks), leaving just 20% for teamwork.

GRIT TAKE: McKinsey warns empty offices and hybrid work could slash $1.3T from big-city real estate by 2030. Despite the gloom, Bloomberg's Office Property Index is up 25% from its May low. Back then, the dividend yield spread (perceived risk measure) nearly hit post 2008 peak levels. Things are getting better, for now.

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