Thoughts about the financial markets and real estate

Implications: Consider: “a lot of the financial system looks like it’s going to shrivel up and have to be rebuilt”; “it’s clear that we’re going to have a commercial real estate crash not too far short of the severity of the housing crash”; “the only good thing we have going for the U.S. economy now is the weak dollar and how that helps exports”; “ I’m actually for public investment now”; “I wouldn’t be surprised if it goes longer than that-maybe into 2011”; “that’s about a 25% decline in overall home prices”; “In places like Miami or Los Angeles, you could be looking at 40% or 50% declines”; “about 20 million people with negative equity.  That’s almost a quarter of U.S. homes”; “I think there’ll be $ 1 trillion of losses on mortgage backed securities showing up somewhere”; and finally “so I’m not quite sure how this works.” 

Analysis: Also read “Wall Street’s Next Crisis” http://www.portfolio.com/views/columns/2007/12/17/Commercial-Real-Estate...   to expand the commercial real estate market thought presented above.  
So there is the common present wisdom nicely presented.  But you can be sure that some of the common wisdom will not be actualized and that’s where profit makers of the future will have to look.   I’m thinking about matters like those presented in “The Coming Oil Crash” http://www.portfolio.com/views/columns/economics/2007/12/17/Why-Oil-Pric... and whether that analysis might be extended to all manner of natural resources now under development.  Will the underlying cost basis for construction materials be permanently altered to a lower level as we are also adjusting the cost of the labor component down too?  If we combine direct construction costs reduced to much reduced materials prices with the cost of a less worthy U.S. dollar and accomplish other efficiencies in the indirect costing of real estate development and design for nanotechnology and other future emerging science, will we have a new commercial development opportunity which will obsolete both as to function and reproduction cost the existing inventory of business property we so laboriously erected in the last twenty-five years?  Is there a revolution coming here or are we just going to take moderate evolutionary steps forward as in the past?  Can we accelerate our productivity/efficiency by taking advantage of losses our recent underwriting has created and create a new product type?  Can our communities afford lower cost structures and meet the need for increased public health, safety and welfare?  Will our markets accept a revolutionary product or will the tried and true at a higher cost be the choice of future business real estate needs?  
It’s not hard to find material which will dispute the premise of “The Coming Oil Crash”.  But out of all this darkness will come products and people who will make over the world again.  It was fun to predict the end of the last cycle over the last two or so years, but the real challenge is to create value, not just speculative excess, out of the near future.  I’m thinking about it, I know you are too.