How will Wall Street's failing financial poducts affect real estate values?

Implications: The press is reporting on defaulted CDO’s and CMBS’ and Credit Default Swaps endlessly these days.  The referenced article is just one of the many occurring in almost every business paper and publication.  Now Michael Lewis has reported in the latest issue of Portfolio reports on the options-pricing model called Black-Scholes which is the guiding portfolio insurance strategy in the American system.  Seem this strategy doesn’t work since there are no buyers in a crashing market to execute the short side of the formula. 

Analysis:  What all this tells us is that Wall Street and our financial institutions have no idea what they’re doing in regard to the products they’re creating and selling.  It appears that the majority of the products are wrong headed and that the opposite side of the position is most often the beneficiary.   Fortune Magazine this month reports on Harry Macklowe and his defaults.  Interesting to me is that he toured the Emirates looking for sovereign wealth investments and came up short.  The next issue of Portfolio will report that the hedge funds are not finding the petrodollars and sovereign wealth fund financing they are counting on for next year.  Further, Portfolio is speculating on the U.S. government bailouts for the banks that are coming.  Since there isn’t enough private capital in the world willing to invest, the federal credit will be the only way to keep the doors open and the capital flowing.   There aren’t many categories of real estate that won’t suffer a significant decline in value from these travails over the coming five year period.  We bubbled up real estate just like we did the dot-com investments and now the flip side is here.  There will be another government induced bubble in alternative energy or the like to lead the general economy up and fill the tax coffers, but the liquidity to ramp up real estate won’t be there.  Count on at least a tough fve and probably ten coming for real estate.