The bullet everyone saw coming is due this year — Commercial property is in deep trouble
By Paul Wallis
DIGITAL JOURNAL
February 16, 2024
A business centre in the heart of London. Image. — © Tim Sandle.
It’s interesting that markets that keep sticking to obsolete not to say fraudulent business models keep tanking, isn’t it? The commercial property market and its dung cart of bad loans is about to hit the fan, and it could be worse than 2008 for banks and lenders.
These commercial property bad loans are worth trillions. Some are better than others, but “better than godawful” isn’t exactly an investment opportunity.
Yep, it’s “Go back to your deeply indebted unflippable office and keep the myth alive” time. The building may be gone before you get there, at this rate.
At a time when people can’t even afford to rent a home, this will be just one more bit of necrotic fecal icing on the cake. As though the global economy wasn’t in a bad enough state, particularly in the West, without this.
Commercial property was a shining light. Now nobody will touch it. Prices have been caving in since 2022. Lenders stock prices have been crashing, too. Exposure to this black hole is dangerous.
Valuations for these overstated chicken coops are also likely to be worthless. The valuations are always on the upside. In the big commercial property booms, nobody did a lot of due diligence. They just made money for themselves.
The New York Community Bancorp is a good example of what happens when the waters and the liquidity get choppy. This bank is a “regional” bank. It’s not huge. It’s not even a bad player. It’s in a market that’s this dangerous. It’s a player in a famously tough regional market. This type of lending is core business for banks of this type.
So, when the market pulls the rug out from under valuations, and the bank makes losses, the stock price gets hammered. Extrapolate this to every other bank on Earth, and you see the problem.
Lenders are now directly in the firing line.
This means that they have to cover their tails. That will make borrowing more expensive. Never mind official interest rates, rates can go up on their own as demand for credit increases.
There’s another issue here. If these bad loans aggregate and become massive losses across the banking and credit sectors, it’s Armageddon.
Excuse the expression:
“They’re too big to bail. “
Nobody has a few lazy trillion to bail them out. The US can’t do 3 to 4 trillion dollars. Europe can’t, although their debt is slightly more manageable. Local economies with heavy property investment like the UK, and Australia will be floundering.
How did it all happen, you ask, slyly hiding under that nice oxalis with your 18 children and 200 or so dependents?
Waaal…
You remember when deregulation was the big deal for rich hypocritical criminal drunks who believed in Reaganomics and Thatcherism? They didn’t actually believe in them but saw opportunities. Making bad loans and fiscal irresponsibility became a lot easier with no compliance. Let’s just say corruption became a lot more profitable.
Credit makes the world go round, but it can also stop it going round in cases like this. The hit to the credit market will be bad enough in real money, let alone pretend money.
How to fix it, you enquire from your bunker in the Mojave Desert?
Quarantine the loans.
Dispose of the borrowers and some of the lenders in some scenic landfill.
Anyone working with credit must be required to have at least one verifiable IQ point.
Regulate the hell out of these fools.
Who’s paying for it, you ask in your fashionable graffiti-ornamented crypt? You are, as usual. This will spill over into consumer credit soon enough.
By Paul Wallis
February 15, 2024
I’ve always wanted to fit this into an article: There are 8 billion people on this planet who would like a chance sometime to get on with their lives. This mystic vision would be greatly assisted by shutting down the never-ending series of political catastrophes.
What causes human misery? The total failure to respond rationally to any situation. Who’s supposed to get it right? Politicians. Have they got anything right in the last 40 years?
No further witnesses.
There are also the compulsory wars, crime, profiteering, and insane cultural obscenities to be considered. Clearly the best people to manage these issues must be living in someone’s pocket.
A case in point for this elegant audit of the obvious is the debate whether Europe should have nuclear weapons. France and the UK have some, but Europe as a whole doesn’t. Germany has now raised the issue following comments from that roguish and also presumably compulsory sage Donald Trump.
Thanks to politics, a new trigger in humanity’s instant demise may well be added to the mix. It took one rant for America’s Least Interesting to start this debate. Only in a political system where you have to take sides would this utter drivel be taken seriously.
You could argue by scratching on your cave wall that any useless prehistoric idiot could have made the same statements. True. Said idiot, however, wouldn’t get the publicity that a political hernia like Trump gets.
Politics is the science of amplifying stupidity. However idiotic, when it becomes political it has to be taken seriously. Europe is quite rightly wondering what the funicular it’s supposed to do if facing Russia alone. The subject didn’t even exist previously.
…But, you declaim, hopefully for proper remuneration:
“Doth not the vainglorious vaunted vacuum of far too many noises have a right to speak? Shall we not be blessed with his fabled wisdom?”
Uh… No. there is no statutory or other legal obligation to listen to drivel.
Even Americans, who are sometimes slightly verbose, are running out of names for Trump. Interestingly, it was the NATO commentary that prompted this sudden descent into honesty. The NYT link is quite eloquent, and as usual with Americans who can read or write, much too polite.
Back to the political issue:
How many morons do we actually need to destroy the world?
Why are we paying actual money to listen to this idiocy?
Is the political system’s total and utter failure to address any of the world’s actual issues indicative of some sort of systemic problem?
How many lapdogs does it take to change a light globe? None. Lapdogs don’t change light globes or anything else if they can help it.
I have a much better gooder sorta snufflier plan.
Now that we’ve found an all-round reliable moron, we simply put it in a terrarium and use it for entertainment. Ditch the rest of them, and rake in money on the subscriptions to the only show in town.
We’d save billions and maybe even see out the decade without the wars.
Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.
WRITTEN BYPaul Wallis
Editor-at-Large based in Sydney, Australi
By Paul Wallis
DIGITAL JOURNAL
February 16, 2024
A business centre in the heart of London. Image. — © Tim Sandle.
It’s interesting that markets that keep sticking to obsolete not to say fraudulent business models keep tanking, isn’t it? The commercial property market and its dung cart of bad loans is about to hit the fan, and it could be worse than 2008 for banks and lenders.
These commercial property bad loans are worth trillions. Some are better than others, but “better than godawful” isn’t exactly an investment opportunity.
Yep, it’s “Go back to your deeply indebted unflippable office and keep the myth alive” time. The building may be gone before you get there, at this rate.
At a time when people can’t even afford to rent a home, this will be just one more bit of necrotic fecal icing on the cake. As though the global economy wasn’t in a bad enough state, particularly in the West, without this.
Commercial property was a shining light. Now nobody will touch it. Prices have been caving in since 2022. Lenders stock prices have been crashing, too. Exposure to this black hole is dangerous.
Valuations for these overstated chicken coops are also likely to be worthless. The valuations are always on the upside. In the big commercial property booms, nobody did a lot of due diligence. They just made money for themselves.
The New York Community Bancorp is a good example of what happens when the waters and the liquidity get choppy. This bank is a “regional” bank. It’s not huge. It’s not even a bad player. It’s in a market that’s this dangerous. It’s a player in a famously tough regional market. This type of lending is core business for banks of this type.
So, when the market pulls the rug out from under valuations, and the bank makes losses, the stock price gets hammered. Extrapolate this to every other bank on Earth, and you see the problem.
Lenders are now directly in the firing line.
This means that they have to cover their tails. That will make borrowing more expensive. Never mind official interest rates, rates can go up on their own as demand for credit increases.
There’s another issue here. If these bad loans aggregate and become massive losses across the banking and credit sectors, it’s Armageddon.
Excuse the expression:
“They’re too big to bail. “
Nobody has a few lazy trillion to bail them out. The US can’t do 3 to 4 trillion dollars. Europe can’t, although their debt is slightly more manageable. Local economies with heavy property investment like the UK, and Australia will be floundering.
How did it all happen, you ask, slyly hiding under that nice oxalis with your 18 children and 200 or so dependents?
Waaal…
You remember when deregulation was the big deal for rich hypocritical criminal drunks who believed in Reaganomics and Thatcherism? They didn’t actually believe in them but saw opportunities. Making bad loans and fiscal irresponsibility became a lot easier with no compliance. Let’s just say corruption became a lot more profitable.
Credit makes the world go round, but it can also stop it going round in cases like this. The hit to the credit market will be bad enough in real money, let alone pretend money.
How to fix it, you enquire from your bunker in the Mojave Desert?
Quarantine the loans.
Dispose of the borrowers and some of the lenders in some scenic landfill.
Anyone working with credit must be required to have at least one verifiable IQ point.
Regulate the hell out of these fools.
Who’s paying for it, you ask in your fashionable graffiti-ornamented crypt? You are, as usual. This will spill over into consumer credit soon enough.
Op-Ed: Should Europe have nuclear weapons? The case for abolishing politics
By Paul Wallis
February 15, 2024
I’ve always wanted to fit this into an article: There are 8 billion people on this planet who would like a chance sometime to get on with their lives. This mystic vision would be greatly assisted by shutting down the never-ending series of political catastrophes.
What causes human misery? The total failure to respond rationally to any situation. Who’s supposed to get it right? Politicians. Have they got anything right in the last 40 years?
No further witnesses.
There are also the compulsory wars, crime, profiteering, and insane cultural obscenities to be considered. Clearly the best people to manage these issues must be living in someone’s pocket.
A case in point for this elegant audit of the obvious is the debate whether Europe should have nuclear weapons. France and the UK have some, but Europe as a whole doesn’t. Germany has now raised the issue following comments from that roguish and also presumably compulsory sage Donald Trump.
Thanks to politics, a new trigger in humanity’s instant demise may well be added to the mix. It took one rant for America’s Least Interesting to start this debate. Only in a political system where you have to take sides would this utter drivel be taken seriously.
You could argue by scratching on your cave wall that any useless prehistoric idiot could have made the same statements. True. Said idiot, however, wouldn’t get the publicity that a political hernia like Trump gets.
Politics is the science of amplifying stupidity. However idiotic, when it becomes political it has to be taken seriously. Europe is quite rightly wondering what the funicular it’s supposed to do if facing Russia alone. The subject didn’t even exist previously.
…But, you declaim, hopefully for proper remuneration:
“Doth not the vainglorious vaunted vacuum of far too many noises have a right to speak? Shall we not be blessed with his fabled wisdom?”
Uh… No. there is no statutory or other legal obligation to listen to drivel.
Even Americans, who are sometimes slightly verbose, are running out of names for Trump. Interestingly, it was the NATO commentary that prompted this sudden descent into honesty. The NYT link is quite eloquent, and as usual with Americans who can read or write, much too polite.
Back to the political issue:
How many morons do we actually need to destroy the world?
Why are we paying actual money to listen to this idiocy?
Is the political system’s total and utter failure to address any of the world’s actual issues indicative of some sort of systemic problem?
How many lapdogs does it take to change a light globe? None. Lapdogs don’t change light globes or anything else if they can help it.
I have a much better gooder sorta snufflier plan.
Now that we’ve found an all-round reliable moron, we simply put it in a terrarium and use it for entertainment. Ditch the rest of them, and rake in money on the subscriptions to the only show in town.
We’d save billions and maybe even see out the decade without the wars.
Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.
WRITTEN BYPaul Wallis
Editor-at-Large based in Sydney, Australi
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