This sector of the real estate market may never recover. Were you forwarded this email? [Sign-up to Rude Awakening here.]( [Unsubscribe]( [The Rude Awakening] Not All That Glitters is Good Real Estate - The âMine is Bigger Than Yoursâ Era is probably over.
- Commercial real estate will almost certainly collapse once the stimmy runs out.
- WFH may kill off the WEFâs Great Reset Plan for good. Recommended Link [How war impacts the stock market]( Russia's invasion of Ukraine has already sent the stock market down 10%. But that's just the opening act for the new Russia-China Alliance. There's a [major event]( involving China that's heating up... and it could boil over as soon as April 21st, 2022. [Click Here To Learn How To Protect Your Retirement]( Sean Ring Editor, Rude Awakening Happy Hump Day on another clear, dry day in Piedmont. As I sit in our Airbnb kitchen writing this, I canât imagine ever having an office job again. The crappy commute through gray suburbs into the big city with more gray buildings doesnât do it for me anymore. Sure, I did all that before and built a worldwide network of great friends and colleagues, so naturally, I wouldnât be as keen as a 25-year MBA graduate. But I fondly remember back in â97 when I lived with my parents in Joisey while commuting to Lehman Brothersâ World Financial Center office. I would get to Hoboken and take the ferry on a clear day. It was eight minutes of awe. As we set sail, the World Trade Center got bigger and bigger until we docked. Then, theyâd tower over me as Iâd enter the Winter Garden atrium and head into the office. I felt so lucky to work in such a fantastic place. The work itself sucked, but I didnât care. I had made it! Finance was the garden spot in those days, and finance in New York was the best, even if you were a mere accounting clerk. Heck, it was the 90s, when you could spend four years in college drinking and still get a job upon graduation. But something happened in the first decade of the Noughties that changed everything. The App Store Started This! I may have thought I was the luckiest guy in the world to work in banking, but things changed once Steve Jobs got his paws on the job market. Imagine designing a simple, helpful thingy called an app, putting it in a virtual store that sits on these newfangled thingamajigs called iPhones, and having the world pay you for your services? You could make boatloads of money sitting from home! Heck, if you did it well enough, youâd make more than most bankers⦠Once Jobs built the App Store, the âbest and brightestâ started to leave finance in droves to head into tech and entrepreneurship. Suddenly, you had the one thing everyone needs in a salary negotiation: other options. Donât want to pay me to be your accountant? Fine, Iâll monetize a blog. Donât want me to fix your computer system? Fine, Iâll build an app. Donât want me to get the bugs out of your system? Fine. Iâll build a system to replace yours and steal all your customers. As someone who still teaches young banking graduates, I can tell you the kids are still bright. But theyâre nowhere near the level of kids who studied finance pre-2008. Kids of that caliber are building apps, starting businesses, or freelancing on Fiverr. As a result, this newfound freedom had two significant effects on the economy. One is that fewer employees mean less directly suffered income tax. Remember, companies are not taxpayers; they are tax collectors! And second, you donât have as many people in your building as you used to. But still, most entrepreneurs chose to be near the action, whether thatâs New York, San Francisco, or London. It was great living in those cities when you donât have to commute during rush hour. But then⦠the government-mandated private-sector shutdown happened. WFH Finished It I bet those technocrats thought they were so clever. Shut it down, control the plebs, and still, the economy wonât collapse because of Zoom, Google Docs, and online tax filing. Except they forgot the one thing that happens when things change suddenly: a loss of âstickiness.â We usually use stickiness in the context of prices - especially wages - and how they can be resistant to change. But in this case, many people who were absolutely convinced they were required to be present at the office or their business would fall apart suddenly found the opposite. It was ok to work from home. Even bankers could do it and do it well. When I was a broker, most of my colleagues barely knew their kidsâ names because they only saw them on the weekends. Now, families were reacquainted. And they liked it. If the job could get done well without making you sacrifice family time, why on earth would you go back into the office? I donât know what Micah may say about me in the coming years, but one thing he wonât say is, âMy dad was never around.â Recommended Link [Free Crypto âInternet Hackâ Demonstrated Live on Camera]( [Click here for more...]( This viral video is spreading across the internet. Crypto millionaire James Altucher demonstrates a [âfree crypto hackâ]( live on camera. And you can generate up to $167 of FREE crypto without risking a single dime of your own money. Iâve checked it out and itâs completely legitimate. [Click Here To Learn More]( NYC Panics So you could imagine my unabashed glee to read in the rag known as [The New York Times]( that the Democrats of New York are panicking about taxes and spending. âYou canât stay home in your pajamas all day!â screeched New York mayor Eric Adams. My God! Itâs delicious! Iâm reminded of when Jerry Seinfeld tried to one-up my erstwhile colleague James Altucher when Altucher alleged it was over for New York. I agreed with Altucher then, and nothing has changed my mind since then. You simply donât need to be in Manhattan; you can make it anywhere now. And why would you want to be in New York? You canât move freely. And when you can, you may get shot at without being able to defend yourself. Itâs ludicrously expensive. What do you get for that? The Big Money has moved to Palm Beach and Austin by now. So the networking isnât as great as it was before. People like Seinfeld canât imagine a world without a vibrant NYC. But historians know all too well the ebb and flow of city populations. Rome had a population of 1 million during the Empire. But that[population fell to only 35,000]( during the Early Middle Ages. Lest you think Iâm cherry-picking, Pittsburgh, Detroit, Cleveland, Buffalo, and St. Louis have all [lost over 50% of their populations since 1950](. My point? This spells disaster for commercial real estate. Companies donât want to sign up for office leases because that pressures workers into thinking they need to be in the office. Thatâs now a dealbreaker for many workers. This will put enormous pressure on the commercial real estate markets in huge metropolises. Iâm not saying to short that market now. But I think this is a secular decline no one wants to talk about. Wrap Up I love suburban and rural real estate in prime areas. People will move out of cities but may remain near them for entertainment purposes. Iâm a 30-minute train ride from Turin and its airport here in Asti. Milan and its vast airport hub are only 90 minutes away. Itâs a case of ânear enough is good enoughâ for me. And Iâm out of the bloating commuter belt where house prices are much higher. Iâm not the first to think this way, and Iâm certainly not the last. As workers move out, tax revenues for cities will fall and turn many of them into no-go zones. Iâm long-term bearish on office buildings. And as many pension funds own commercial real estate to match assets to their long-term liabilities, thatâs just one more problem. This is a must-watch sector. Until tomorrow. All the best, Sean Ring
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