muses of the moment

June 6, 2012

Commerical Real Estate

Filed under: European Debt Implosion, Fiat Currency, Housing Market, Tangible Assets, The Banking Crisis — totallygroovygirlfriday @ 1:20 am

groovygirl wanted to bring up a point for a while now. Reggie’s recent blog post on the implosion in European CRE (commercial real estate) brings the perfect opportunity. Click here. You will immediately notice the similarities between US Real estate crash and the coming European Real Estate crash (caused by a European banking crisis). Deja vu!

Long term view:

The creditor nations (like China) are using their excess dollars to buy things. Pre- 2007, they were buying up commodities and mining industries in Africa. Recently they have been using their excess dollars to buy bankrupt US commercial real estate and invest in commodity-related companies. They are also sitting on a lot of euros from trying the help out Europe/Greece situation the last few years. As soon as the European CRE market  hits bottom, they will play the same hand. Buy real estate cheap with excess fiat currencies they don’t want long-term. They are trading fiat currency for tangible assets.

The Western nations, or debtor nations, are creating more fiat currencies and national debt to try and plug the their debt/banking implosion and keep their populations from rioting in the streets.

Now, I understand that China’s economy is deflating and their own banking/housing market is in jeopardy, but just as the US came out of the Great Depression owning the world, so to will China.

Between moving away from the dollar/euro for trading (setting up their own trading, reserve, and SWIFT systems) and using excess dollars/euros to buy the globe’s tangible assets, they will be the next world economic power.

Having said all this, gg is not advocating investing in China right now. This is a macro-world empire change, not necessarily investment advice.

Side musing: it is this macro-economic lesson that suggests becoming a creditor and not a debtor, and holding onto the purchasing power of your money. This will allow you, too, to buy tangible assets (and income-producing assets) at fire-sale prices.

Right now there are a lot of income-producing assets that are eating investors alive because of the debt to income ratio. Income decreased from the economic depression, and they can not service the debt. The only thing making that income-producing asset a loss is the debt. If another investor came in with straight cash, bought it at a discount, the asset would all of sudden be solvent again. As the economy continues to drag, more investors/businesses will be in this situation.

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3 Comments »

  1. The Trend of Commercial Real Estate is increasing day by day because its future is bright.

    Comment by Property Management Adelaide — June 26, 2012 @ 4:33 am

  2. Commercial real estate is now the new trend in real estate industry. It became a widely known issue all over the world because of its ability to bring many businessmen to success.

    Comment by josephfinkelberg — June 30, 2012 @ 10:31 pm

  3. Commercial Real Estate will collapse just like residential. In fact it did. Most of the regional banks in the US are still manipulating their balance sheets and auctioning off the worst on their books. Very few are lending, they are only re-financing.

    Private equity funds are the only ones lending commercial real estate money now (and at a must higher rate than the the “official” rate).

    Commercial real estate will continue the downturn, just like residential, after 2015.

    If you purchase commercial (or any) real estate, use cash, so a collapse in income will not cause you to lose the whole investment from default. More fire sales coming in all real estate, because of the continuing global debt collapse.

    gg

    Comment by totallygroovygirlfriday — July 1, 2012 @ 9:21 am


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