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Millionaire Now! by Larry NusbaumThis blog is based on the organizational principles found in my new book, "Millionaire Now! - A Financial Toolbox with Seven Steps to Wealth". |
Consider Yourself Warned!
Posted on 12/07/2006 08:57 AM | Link | Post Comment
THE NEXT BUBBLE IS COMING!
Btw, it had to come eventually, you know, the next bubble, in anticipation of, prices that can't be sustained, and investors' expectations that are "unrealistic" and all: Commercial Real Estate is about to crash! (a bit of sarcasm here)
Here's what Richard Pearlstein wrote yesterday An Economic Pillar on the Verge of Collapse at the WashingtonPost.com: "The new story is the bubble in the commercial real estate market -- offices, hotels and retail establishments -- which has generated spectacular returns for investors over the past few years.
Prices have risen to ridiculous levels, relative to the risk involved and the amount of income generated by these properties. But even those prices don't seem to scare away pension funds, university endowments and Arab investors, who continue to pour hundreds of billions of dollars into real estate investment trusts, private-equity real estate funds and hedge funds that specialize in real estate finance.
What, exactly, does that mean?
First of all, it means that the lessons of the past five real estate crashes have, once again, been forgotten, and real estate has once again become a highly leveraged investment class. So, when the inevitable downturn finally happens and the price falls by more than 20 percent, there's a pretty good chance the value of the collateral will fall below the value of the loans, which in financial circles is considered a no-no. To make things even worse, it's a good probability that these are interest-only loans, which means that even in good times, the borrower is not paying down principal."
It's true that cap-rates are down everywhere. But, won't that be cured by rising rental rates from dropping vacancies? The answer is yes. Unless, the {service} economy tanks.
Also read:
Btw, it had to come eventually, you know, the next bubble, in anticipation of, prices that can't be sustained, and investors' expectations that are "unrealistic" and all: Commercial Real Estate is about to crash! (a bit of sarcasm here)
Here's what Richard Pearlstein wrote yesterday An Economic Pillar on the Verge of Collapse at the WashingtonPost.com: "The new story is the bubble in the commercial real estate market -- offices, hotels and retail establishments -- which has generated spectacular returns for investors over the past few years.
Prices have risen to ridiculous levels, relative to the risk involved and the amount of income generated by these properties. But even those prices don't seem to scare away pension funds, university endowments and Arab investors, who continue to pour hundreds of billions of dollars into real estate investment trusts, private-equity real estate funds and hedge funds that specialize in real estate finance.
What, exactly, does that mean?
First of all, it means that the lessons of the past five real estate crashes have, once again, been forgotten, and real estate has once again become a highly leveraged investment class. So, when the inevitable downturn finally happens and the price falls by more than 20 percent, there's a pretty good chance the value of the collateral will fall below the value of the loans, which in financial circles is considered a no-no. To make things even worse, it's a good probability that these are interest-only loans, which means that even in good times, the borrower is not paying down principal."
It's true that cap-rates are down everywhere. But, won't that be cured by rising rental rates from dropping vacancies? The answer is yes. Unless, the {service} economy tanks.
Also read:
- The Recession Of 2007 (Goldseek.com, Dec. 3rd)
- Apartment REITs Stocks Should See Pressure (Daniele Guerini in Seeking Alpha, Dec. 1st)
- HOW TO PROFIT FROM THE OFFICE CONDO BOOM NOW!
- How Housing Rescue Bill Can Help You
- Are The Financials Suddenly Cheap? Part III
- Canslim.net Morning Comment And Links (for Traders)
- Are Financials Suddenly Cheap? Part II
- Are Financials Suddenly Cheap?
- July 2008
- June 2008
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- April 2008
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- January 2008
- December 2007
- November 2007
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- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- December 2006
- November 2006
- October 2006
- September 2006
- August 2006
- July 2006
- Millionaire Now!
- The 7 Steps to Millionaire Now!
- Build Your Financial Plan
- RETIRE RICH: Survival Guide
- ASSET ALLOCATION MODEL
- THE BIG ROLLOVER IS HERE
- THE END OF THE GRAND SUPERCYCLE?
Examples
Morpheus Trading - Mon Jul 21, 2008 08:33AM
NOTE: Please click on the charts below to enlarge them if [read more]
NOTE: Please click on the charts below to enlarge them if [read more]
Morpheus Trading - Mon Jul 21, 2008 08:31AM
NOTE: Please click on the charts below to enlarge them i [read more]
NOTE: Please click on the charts below to enlarge them i [read more]
Millionaire Now! by Larry Nusbaum - Tue Jul 22, 2008 09:23AM
Hedge funds have made billions this year shorting the banks, [read more]
Hedge funds have made billions this year shorting the banks, [read more]
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