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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (6529)	11/3/2002 1:04:31 AM
From: Elroy Jetson	Respond to of 306849

I would be surprised if the Fed cut rates as well - what difference could it possibly make? * * * * * * * * * * * * * * * * * * * * * Low Cap-Rate madness is leaking into the large property market. Chicago based REIT, General Growth Properties, just purchased the Glendale Galleria (major L.A. shopping mall) for a roughly 6% Cap-Rate. That's certainly better than the hordes buying duplexes at near zero Cap-Rates, but not the sort of investment I'd look forward too.

To: GraceZ who wrote (6529)	11/3/2002 9:24:41 AM
From: SouthFloridaGuy	Read Replies (1) \| Respond to of 306849

Grace, I think the Fed is in a pickle here. Reinflating will be unsuccessful, IMO, because the absolute levels of debt are so high. As Mucho mentioned, the cost of capital is not falling for companies, but in fact rising. This makes the Fed quite useless except for keeping short-term borrowing possible. The most likely scenario of the Fed's reflation efforts will be an Argentina like situation where there is a pull out by investors which spurs a dollar devaluation, inflation, but no growth. I have waffled on the outcome of Fed efforts for 18 months now (deflation or stagflation). I have hedged this "bet" as a gold bull; I am betting on the inflationary recession type scenario and it seems that the market is too. In this scenario the dollar hegemony will be over. Financial assets will tumble, while hard assets will appreciate. The only reason we haven't seen inflation yet is 1) world instability has spurred a flight to quality (dollar) 2) debt levels are so high that the fed can't print enough to match liquidation levels.