notes aug 21
August 22, 2008 § Leave a comment
good paper on housing. pdf only.
One reason we are week in understanding this economy goes back to y2k, where the recognition of interdependencies drove much of the remediation. Here falling incomes lead to falling spending lead to less business in restaurants leads to lease non-renewalleads to mall closures… the cycle is much more intense than in the past.
Information defeats time-lag and makes everything happen all at once.
A reciprocal relationship between time and information?
and via Calculated risk, From Bloomberg: Commercial-Mortgage Bond Spreads Soar on Harlem Loan (hat tip Bob_in_MA)
Yields on commercial real estate securities relative to benchmarks rose to near record highs amid concern that Riverton Apartments, a high-rise complex in Manhattan’s Harlem neighborhood, will default on a loan.
At Riverton, income projections (pro forma) factored in converting rent- stabilized apartments to market rates. … The borrower burned through a $19 million reserve to cover the shortfall in cash flow that was expected from initially lower rent payments …
“We expect that additional pro forma loans will likely suffer a fate similar to Riverton Apartments,” … Lehman analysts wrote.
The rent goes to pay interest. This is a good example of how lots of money could be made with a small investment, and,and,it shows how much what we spend is turned into interest, that is, profit and income. The percentage of all income in the us from such transactions is high.
Shirky believes that “we can take advantage of our cognitive surplus, but only if we start regarding pure consumption as an anomaly, and broad participation as the norm. This not a dispassionate argument, because the stakes are so high. We don’t get to decide whether we want a new society. The changes we are under can’t be rolled back, nor contained in the present institutional frameworks. What we might get to decide is how we want this change to turn out.”