The Villager, a New York magazine that since 1933 has been doing what newspapers do best — covering their street — has, in its editorial this week, apologised for Goldman Sachs.

“Since Goldman Sachs has been a big part of the Lower Manhattan fabric for almost a century and a half, we’d like to take this opportunity to apologise to the rest of the country on behalf of our neighbour, a financial giant personifying much of what is wrong on Wall St.”

The subject is not the notorious behaviour of this para — government nor its chairman Lloyd Blankfein’s remark that his paragon of selfless virtue was, like other bankers, doing “God’s work”.

It just that God’s work does not, traditionally include the starving of cats.

“Before we get to the multibillion-dollar stuff, we’d first like to apologise that the firm has not yet paid a few thousand dollars of vet bills for the five kittens born in its headquarters building nearing completion in Battery Park City. In August, after our sister publication Downtown Express reported the kittens’ discovery, Goldman offered to pay the bills and encourage its employees to adopt the ‘BlackBerries.'”

Unhappily Goldman has not met its obligations and the cats (sorry kittens) are being found new homes by more responsible New Yorkers.

The Villager finds it difficult to comprehend that Goldman has reneged on its promise. Others, like yours truly, see it as an example of exactly what Goldman is. But let’s add that the new Goldman HQ, like everything else that company touches, took most of the $US1.6 billion ($A1.7 billion) construction costs from tax-free Liberty Bonds, a post-9/11 federal program. Then there is the matter of shocking constructing standards — a project architect was paralysed by falling debris and neighbourhood children and a cab driver were almost hit in separate incidents. That’s Goldman.

And it is the real estate side of this that has many an eyebrow raised.

On Wednesday, Goldman published a research report on US REITs (real estate investment trusts) from its analyst Jonathan Habermann, which suggest cats, or kittens, do bounce from the tops of the very buildings from which they have been flung. Metaphorically, of course. REITs includes just about any aspect of the US property market, perhaps the most perilous investment that could spring to mind, but all gained a delightful spike — thanks to Goldman. So it’s hard to know exactly what they are talking about. But a Conviction Buy may not be far off, thus the rush to REITs immediately after this report was posted.

A juicy selection from Goldman’s report follows. “In short, with declining rents and occupancy to persist next year, relative operating results will drive upcoming growth as well as REITs that can deliver external growth given their better balance sheet.”

I am afraid I have some trouble with the logic of that statement but Goldman figures it makes for a “screaming buy” as one cynic remarked.

The bloody-minded irresponsibility of this is mind boggling. The housing overhang still extends beyond a year — and we are yet to see the impact of the Alt-A and the rest of the “prime mess” which is driving down upper income homes values and with it much of the REIT sector but “prime” as I like to call it will drive more from their homes than subprime.

On the commercial front, the prospects are equally noxious, with malls closing and mall owners heading for bankruptcy while small town and Main Street America stagger to a forlorn future.

Indeed the very day Goldman went upbeat on REITs, Commercial Real Estate Consumer Confidence Mack-CaliREITUS issued a somewhat different report arguing instead that “Commercial Real Estate Is Somewhere Between An Orderly Massacre And A Disaster.”

Some points from William Mack’s Consumer Confidence report:

  • The value of real estate from the top is down anywhere between 25% and 75% (or more).
  • The hardest hit in the CRE “food chain” is raw land, after that hotels, office, retail and industrial. Least affected is multi-family residential.
  • The consumer confidence reflation propaganda machine will take a long time.
  • The CRE crisis will hit a pinnacle when $US500-700 billion of re-equitisation becomes needed in a few years. Where that equity will come from is unknown as the US will need a lot of foreign investors to achieve this equity bubble reflation, and they are not there due to a foreigner-unfriendly investment regime.

Meanwhile, yesterday Reuters published figures on US home foreclosure filings, which slowed in October for a third straight month, but the reports was grim thereafter. Rising unemployment will spur another record year of failing mortgages in 2010, RealtyTrac said.

RealtyTrac estimates as many as a record 3.4 million households will get a foreclosure notice this year, a 48% spike from 2.3 million last year.

Foreclosure filings — including notices of default, auction and bank repossession — dipped 3% in October from the prior month but were up 19% from a year earlier.

Although foreclosure filings are off the record high hit in July, and there are intensifying federal efforts to press lenders to alter terms for struggling borrowers, the chief problem lies with unemployment that is at a 26.5-year high.

And RealtyTrac sees yet another record high in 2010 and no chance of peace in the valley ’til 2011. No chance.

“Unless we have an almost miraculous recovery in housing and employment, there’s really no way to get through this pipeline any earlier than that,” Rick Sharga, senior vice-president at Irvine, California-based RealtyTrac, said in an interview.

Zero Hedge — which published the Goldman report commented:

We hope we are wrong in our cynicism, as the real estate market, and particularly the CRE subset via REITs, is so distorted that it bears absolutely no resemblance with underlying fundamental cash flow reality. Another upgrade will just make this distortion even more unfathomable, yet in today’s banana market, this may be the most expected outcome. It would also explain Mr Cramer’s recent all-in bet on CRE. As everyone knows, the man never speaks without an agenda. And what better way to be proven right than to have his former employer upgrade his chosen sector. Little does it matter that in four years CRE will look darker than a black steer’s tuchus on a moonless prairie night.

Thus God-fearing Americans, knowing that starving cats in the name of profit is all part of “God’s work” have been at work. Marshall Auerback, a fund manager and investment strategist who writes for New Deal offers this:

Our Chairman,
Who Art At Goldman,
Blankfein Be Thy Name.
The Rally’s Come. God’s Work Be Done
On Earth As There’s No Fear Of Correction.