The new bubble in commercial real estate – another major financial catastrophe in the making
Fred Day
Jun. 2, 2007

The commercial real estate has rallied very heavily recently. That is exactly what happened at the peak of the Japanese economy in 1987-88 before deflation and severe stagnation took over. Commercial real-estate lenders and investors may be turning more cautious. As prices surge, lenders have become worried buyers won''t be able to raise rents high enough to pay off loans.

The concern is further confirmed by low quality hob growths. The in built deflation within the economy is from low wages and wage deflation due to illegal immigration, possible guest worker program and outsourcing.

Commercial real estate especially apartment complex prices are determined by the supply of apartments in an area and the gross rent that apartment can fetch. The gross rent multiplier is on the decline. Builders have converted their condo projects into new apartment complexes. This gives rise to a new bubble – the commercial real estate.

The new bubble in commercial real estate – another major financial catastrophe in the making
Fred Day
The gross rent multiplier is on the decline. Builders have converted their condo projects into new apartment complexes. This gives rise to a new bubble – the commercial real estate.
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The bubble in the stock market is real now – it is much bigger than that in 2000
Sam Adelton
The gap between the 52-week moving average and S&P is 15% higher than the peak gap in year 2000. That gap is the best analytic measure of the bubble.
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Job growth accelerated but quality of job degraded further - sign of increasing stagnation with deflation in early stages
Peter Oberois
However a closer loom at the whole scenario shows the number of job growth was primarily in burger flipping low wage jobs. The cheap labor scenario strengthened while the standard of living declined.
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Hedge funds are attacking Banks on the subprime lending concessions as Real Estate crash escalates – but all blame goes to those who provided liquidity
Jeff Cantor
You can blame it all on any one you like. You as a hedge fund forgot to hedge you risks. You thought the boom is forever; there is no end to good times.
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Signs of deflation and start of depression - Dell plans to cut 10% of its work force, its first layoffs since 2001
Fred Day
The cyclical boom with secular long-term economic weakness may have ended abruptly. The technology companies are reporting horrible prospects for 2008-2009.
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Signs of European slowdown - manufacturing leads
Claude Baudau
European growth may cool from the fastest pace in six years as rising interest rates and a U.S. slowdown curb demand for the continent's cars, machinery and appliances.
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Japan’s deflation was the first indication of worldwide economic trouble but all other developed nation cared little – now the collapse is inevitable
Alex Hernandez
When Japan, the world’s second largest economy, faced deflation and stagnation twenty years back from excessive borrowing, the other developed economies did little to understand the impact twenty years later on them.
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