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> let some defaulting actually happen Do you realize the impact this would have on pension plans and mom and pop investment portfolios too? It isn’t just Bezos

by voisin 3y ago

> let some defaulting actually happen Do you realize the impact this would have on pension plans and mom and pop investment portfolios too? It isn’t just Bezos and other billionaires who would feel pain - it would be a lot of regular folk getting annihilated financially as well.

NewJazz 3y ago
Doubt it. Most people are well diversified. I'd be surprised if anyone's retirement was more than 20% commercial real estate. Easy to stomach some moderate losses in the sector even at that absurdly high allocation.
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BlackJack 3y ago
Have you done the math, even at a ballpark level? Commercial Real Estate (CRE) is estimated to have ~$500B loss in 2023 and nearly the same in 2024 (different from debt repayment) [1]. Stock indices were fine. In general, there's way more private investment/ownership in CRE. The market can suffer a lot more in losses before it starts to meaningfully affect mom&pop. Even stocks like SLG and BX have done fine last year. [1] https://finance.yahoo.com/news/commercial-real-estate-values-suffer-123000415.html https://finance.yahoo.com/news/commercial-real-estate-values...
mindslight 3y ago
Sure. "Investment" used to mean that what you invested was at risk, and if you (or whomever you delegated to) made bad investments you would lose. The answer to the current hazardous dynamic where everyone just dumps money into investment funds on autopilot is not to double down and bail them out so the Potemkin party can continue. Rather the negative possibilities of such investments need to be demonstrated so that people are appropriately leery of relying on them going forward.
jbm 3y ago
Yes — in that case you can bail out mom and dad personally. If the 0.1% owns a disproportional amount of wealth any financial bailout will disproportionately help them.
nradov 3y ago
Relax. The largest US pension funds have only limited exposure to office real estate. https://www.calpers.ca.gov/page/investments/about-investment-office/investment-organization https://www.calpers.ca.gov/page/investments/about-investment...
slv77 3y ago
A lot of those regular folks could have kept their money in US Government bond funds or in FDIC backed bank accounts as well. They invested in commercial real-estate paper because they wanted higher returns than those bonds funds would provide. Usually higher returns means accepting higher risk. Maybe to level the playing field the government should publish a list of investments with high returns and implicit government guarantees so that we’d all know where to put or retirement money. It really screws with my retirement planning to only find out after the fact.
Geisterde 3y ago
There are consequences for both courses of action, if you bail out the banks -you are diluting the wealth of primarily poor people who save instead of invest -real estate prices will scream upwards having barely paused for the fed rate hikes -you will distribute more of societies scarce resources into already failed investments, less of what people want and more of what people demonstrably dont. Only one of these two options is actually moral; in the case of no bailout, investors who have provably acknowledged the risk of investing, and who still recklessly barrelled cash into an industry that everyone knows is a bubble, take a haircut based on the risk they themselves chose. In the bailout reality (aka reality because we all know how this ends), you commit mass theft to bail out a failed investment. We can cut onions over how broken the stock market is for the average person, as I do on a daily basis, but that isnt justification to absolve people of the basic and predictable economic consequences of their choices, and certainly not to place those consequences on someone elses back. You won't have fixed anything, investors wont get spooked, prices wont finally come down, they will see the blood in the water and continue doubling down on risky investments. They now know the government would sooner shake you down then let their investment fail, its all upside for them and all downsides fall to you, humble tax payer.

by voisin 3y ago

NewJazz 3y ago

Doubt it. Most people are well diversified. I'd be surprised if anyone's retirement was more than 20% commercial real estate. Easy to stomach some moderate losses in the sector even at that absurdly high allocation.

deleted 3y ago
[deleted]

BlackJack 3y ago

Have you done the math, even at a ballpark level? Commercial Real Estate (CRE) is estimated to have ~$500B loss in 2023 and nearly the same in 2024 (different from debt repayment) [1]. Stock indices were fine. In general, there's way more private investment/ownership in CRE. The market can suffer a lot more in losses before it starts to meaningfully affect mom&pop. Even stocks like SLG and BX have done fine last year. [1] https://finance.yahoo.com/news/commercial-real-estate-values-suffer-123000415.html https://finance.yahoo.com/news/commercial-real-estate-values...

mindslight 3y ago

Sure. "Investment" used to mean that what you invested was at risk, and if you (or whomever you delegated to) made bad investments you would lose. The answer to the current hazardous dynamic where everyone just dumps money into investment funds on autopilot is not to double down and bail them out so the Potemkin party can continue. Rather the negative possibilities of such investments need to be demonstrated so that people are appropriately leery of relying on them going forward.

jbm 3y ago

Yes — in that case you can bail out mom and dad personally. If the 0.1% owns a disproportional amount of wealth any financial bailout will disproportionately help them.

nradov 3y ago

Relax. The largest US pension funds have only limited exposure to office real estate. https://www.calpers.ca.gov/page/investments/about-investment-office/investment-organization https://www.calpers.ca.gov/page/investments/about-investment...

slv77 3y ago

A lot of those regular folks could have kept their money in US Government bond funds or in FDIC backed bank accounts as well. They invested in commercial real-estate paper because they wanted higher returns than those bonds funds would provide. Usually higher returns means accepting higher risk. Maybe to level the playing field the government should publish a list of investments with high returns and implicit government guarantees so that we’d all know where to put or retirement money. It really screws with my retirement planning to only find out after the fact.

Geisterde 3y ago

There are consequences for both courses of action, if you bail out the banks -you are diluting the wealth of primarily poor people who save instead of invest -real estate prices will scream upwards having barely paused for the fed rate hikes -you will distribute more of societies scarce resources into already failed investments, less of what people want and more of what people demonstrably dont. Only one of these two options is actually moral; in the case of no bailout, investors who have provably acknowledged the risk of investing, and who still recklessly barrelled cash into an industry that everyone knows is a bubble, take a haircut based on the risk they themselves chose. In the bailout reality (aka reality because we all know how this ends), you commit mass theft to bail out a failed investment. We can cut onions over how broken the stock market is for the average person, as I do on a daily basis, but that isnt justification to absolve people of the basic and predictable economic consequences of their choices, and certainly not to place those consequences on someone elses back. You won't have fixed anything, investors wont get spooked, prices wont finally come down, they will see the blood in the water and continue doubling down on risky investments. They now know the government would sooner shake you down then let their investment fail, its all upside for them and all downsides fall to you, humble tax payer.