The Coming New York & The Hamptons Real Estate Bust - Will New York Ever Regain Its Financial Glory? Maybe Not.
It really wasn't long ago when many were chattering that New York real estate was going to avoid the downturn. Remember, the true collapse of Wall Street really only gained momentum in September. As we have discussed, the epicenter of the U.S. bubble is in New York. As the pool of liquidity receded, New York was spared until the very end. Frankly, the best way to visualize this is the U.S. is your sink and New York is the drain. As liquidity is emptied from the sink, the last to be exposed is in fact the drain itself. And, so it was in reality.
During the Goldilocks era, we wrote that there were ominous parallels to the traffic jams of the late 1920s as New Yorkers headed to The Hamptons for the weekends and the chatter today of providing a new expressway so that New Yorkers could again avoid the traffic delays associated with travel to The Hamptons. Of course, in a vacuum this may have been a dubious data point. But given the building clouds, it was more than ominous. We also wrote that before this cycle ends, we expect New York to suffer one of the worst real estate markets in the U.S. That hasn't happened. Yet. The coming real estate crisis in New York has been delayed due to the bailouts of the Federal Reserve. The eventuality cannot be denied. When I lived in New York, I saw high-end prices drop 30% overnight. It can and likely will happen that fast for many segments of the market as New York real estate plays catch up with the U.S. markets.
It is very apparent to me that the vast majority of people working in the finance industry still have no idea how serious and permanent the phase shift is. We first wrote of this phase shift years ago. I have had quite a few discussions with people in the industry who believe Wall Street will somehow "recover" to the status quo as they have from past crises. But, they didn't "just recover" post 1929 and as we also wrote leading up to this crisis, this is the biggest Wall Street bubble in history. There are literally dozens of headwinds facing Wall Street. Headwinds that are on some level permanent regardless of the attempts at lobbying our government to manipulate the outcome to their advantage. They are permanent or semi so because they are based in fundamentals that cannot be manipulated.
Wall Street plays a substantial role in our economy and on some level the financial community will continue this role and some day even thrive. But, even transformative change due to available technology could eventually replace Wall Street with a more efficient distributed process model, something else we have also talked about. So, by the time Wall Street is able to get its sea legs some years down the road, a revolution in go-to-market strategies enabled by new technologies could very well have passed New York by. In other words as we have written, the financial sector could very well be rebuilt as a virtual entity. A cloud. Such a process model would yield substantial advantages to the most prized capital of all, human capital, and would be substantially more efficient at monetizing future innovation for the American economy. It is also a major reason why I have been a proponent of letting large banks fail under controlled authority of the government. The market is giving us the keys to the future of finance. I believe it is telling us what we have written leading up to this mess. A distributed process model is subtantially more efficient and desirable by the economy. And, the underpinnings are already in place so we don't need to start over.
Anyhow, we now see the start of what will likely be a termed as a bust in The Hamptons by the time this crisis has passed.
During the Goldilocks era, we wrote that there were ominous parallels to the traffic jams of the late 1920s as New Yorkers headed to The Hamptons for the weekends and the chatter today of providing a new expressway so that New Yorkers could again avoid the traffic delays associated with travel to The Hamptons. Of course, in a vacuum this may have been a dubious data point. But given the building clouds, it was more than ominous. We also wrote that before this cycle ends, we expect New York to suffer one of the worst real estate markets in the U.S. That hasn't happened. Yet. The coming real estate crisis in New York has been delayed due to the bailouts of the Federal Reserve. The eventuality cannot be denied. When I lived in New York, I saw high-end prices drop 30% overnight. It can and likely will happen that fast for many segments of the market as New York real estate plays catch up with the U.S. markets.
It is very apparent to me that the vast majority of people working in the finance industry still have no idea how serious and permanent the phase shift is. We first wrote of this phase shift years ago. I have had quite a few discussions with people in the industry who believe Wall Street will somehow "recover" to the status quo as they have from past crises. But, they didn't "just recover" post 1929 and as we also wrote leading up to this crisis, this is the biggest Wall Street bubble in history. There are literally dozens of headwinds facing Wall Street. Headwinds that are on some level permanent regardless of the attempts at lobbying our government to manipulate the outcome to their advantage. They are permanent or semi so because they are based in fundamentals that cannot be manipulated.
Wall Street plays a substantial role in our economy and on some level the financial community will continue this role and some day even thrive. But, even transformative change due to available technology could eventually replace Wall Street with a more efficient distributed process model, something else we have also talked about. So, by the time Wall Street is able to get its sea legs some years down the road, a revolution in go-to-market strategies enabled by new technologies could very well have passed New York by. In other words as we have written, the financial sector could very well be rebuilt as a virtual entity. A cloud. Such a process model would yield substantial advantages to the most prized capital of all, human capital, and would be substantially more efficient at monetizing future innovation for the American economy. It is also a major reason why I have been a proponent of letting large banks fail under controlled authority of the government. The market is giving us the keys to the future of finance. I believe it is telling us what we have written leading up to this mess. A distributed process model is subtantially more efficient and desirable by the economy. And, the underpinnings are already in place so we don't need to start over.
Anyhow, we now see the start of what will likely be a termed as a bust in The Hamptons by the time this crisis has passed.
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