OT: Post Corona - What Will Change?

[CH1]

You want people investing money into activities that cause economic growth. When you look at "investing = good" taken to it's modern extreme, you see a complete uncoupling of the markets and the economy in it's entirety.

The market is important in it's function to provide liquidity to businesses that actually serve economic purpose but it needs to stop being our god.

Yep. That was the original goal but it's been gamed to death, with derivatives upon derivatives to the point that the initial goal is just a small part of what we consider the market. You can see that with how important finance has become in the economy, including how the big firms snap up all the brightest mathematical/science/engineering minds to make profits rather than build things.

This was not always the case. Pre 1970s, the market was a pretty boring industry with little appeal to the average person. That's largely how Buffett made his Billions; he was buying shares of everything when nobody gave a shit.

 

[UWHabs]

We're going to see a lot of office buildings at half capacity.

I don't know that there's going to be enough use to fill up the space. Already the world is struggling with what to do with all the retail space, and now the rush to drop office space will be on. You can get creative all you want, but I don't think you're going to have warehousing on several floors of class A and B high rise buildings. Converting to apartments is going to be difficult too because the market is already flooded and the cost to own living quarters in a high end office building probably wouldn't be justified. So unless there's some large scale unexpected use that no one has thought of, all of this points to rents going down, way down. And lots of vacancies at the same time. But those mortgages will still need to be paid.

There's going to be more companies to fill office space anywhere downtown. You're going to see some medium size tech companies potentially able to afford a floor in an office tower downtown while the rest of the team works in other offices.

It's the large suburban office areas that I think are going to see the issues. IBM doesn't really need a massive corporate park in Markham if they shift more people to working from home, and I doubt those are really prime real estate for other businesses or people.

 

[GEEMAN]

Yep. That was the original goal but it's been gamed to death, with derivatives upon derivatives to the point that the initial goal is just a small part of what we consider the market. You can see that with how important finance has become in the economy, including how the big firms snap up all the brightest mathematical/science/engineering minds to make profits rather than build things.

This was not always the case. Pre 1970s, the market was a pretty boring industry with little appeal to the average person. That's largely how Buffett made his Billions; he was buying shares of everything when nobody gave a shit.

Bang on

 

[LeafOfFaith]

It's not going to go from 100% of current demand to 0%. It's going to go from 100% of current demand, to like 60-70% and that space isn't going to become delipidated and look like a futuristic rendition of detroit, it will get bought at various levels of value by companies looking at changing it into something else.

As things were before CV, most of the best buildings in LA weren’t fully rented out. And things were on their way to getting worse with WeWorks popping up where tenants are getting a nice lobby to hang in and then shove five or six employees into a sardine can of a shared office to do actual work. Not to mention the already growing openness to remote workers. Now CV forced businesses to see just how well they could get by without an office at all, and that’s going to change the landscape on a much quicker timeframe.

Is the outcome going to simply be rents going down, spaces getting filled, and landlords just being a little less rich? Maybe, but I doubt it. There’s just so much inventory and more being built all the time, and that just runs counter to the move to remote working. I guess we’ll see soon enough.

 

[Habsy]

The Purge is coming if they don't fix stuff soon.

 

[LeafOfFaith]

You want people investing money into activities that cause economic growth. When you look at "investing = good" taken to it's modern extreme, you see a complete uncoupling of the markets and the economy in it's entirety.

The market is important in it's function to provide liquidity to businesses that actually serve economic purpose but it needs to stop being our god.

The masses don’t have access to investing in private ventures. Nor do we probably want them to frankly since they’ll almost all get wiped out. So the public markets are what’s left. Day traders are already taxed at ordinary income rates, so they get no breaks. It’s just the long term gains that get the more favorable tax treatment, and those are the actual “investors”, who aren’t in and out of positions every day, but in for the long haul. I don’t see a societal issue in rewarding long term investors for contributing their capital and staying put.

 

[Habsy]

Think about what will be considered commodities in a post apocalyptic purge. Forget money at that point. Someone should make a movie about that. Maybe even a series or two.

 

[GEEMAN]

As things were before CV, most of the best buildings in LA weren’t fully rented out. And things were on their way to getting worse with WeWorks popping up where tenants are getting a nice lobby to hang in and then shove five or six employees into a sardine can of a shared office to do actual work. Not to mention the already growing openness to remote workers. Now CV forced businesses to see just how well they could get by without an office at all, and that’s going to change the landscape on a much quicker timeframe.

Is the outcome going to simply be rents going down, spaces getting filled, and landlords just being a little less rich? Maybe, but I doubt it. There’s just so much inventory and more being built all the time, and that just runs counter to the move to remote working. I guess we’ll see soon enough.

You brought up an excellent point ....just being a little less rich

A little less might be the norm for everyone right now , especially the landlords and bankers who were used to everything and more

 

[CH1]

Think about what will be considered commodities in a post apocalyptic purge. Forget money at that point. Someone should make a movie about that. Maybe even a series or two.

No thanks. People trading their surplus beef for a bushel of corn and their cutest daughter. Sounds like a medieval period piece.

 

[Habsy]

I just want to know if I can still shoot people if they threaten me...

 

[GEEMAN]

I just want to know if I can still shoot people if they threaten me...

Shit that put me in tears

 

[MindzEye]

Is the outcome going to simply be rents going down, spaces getting filled, and landlords just being a little less rich? Maybe, but I doubt it. There’s just so much inventory and more being built all the time, and that just runs counter to the move to remote working. I guess we’ll see soon enough.

A number of buildings will get re purposed, a number of commercial real estate operators will go broke. In the end anything worth something will be appropriately valued by someone for something and life will go on. The horse and buggy industry would have drawn similar types of discussion 110 years ago. 110 years later there is still a market for horses, and still a market for buggies, they're just value differently than they were 110 years ago.

The worst case scenario here is that the banks have to write down some bad commercial real estate mortgages. Let's hope that a couple trillion in derivative bets weren't tied to those like they were tied to residential mortgages 13 years ago.

 

[MindzEye]

I don’t see a societal issue in rewarding long term investors for contributing their capital and staying put.

If the capital is staying put, it's not being taxed yet. You don't get taxed on capital value inflation, but on capital gain.

 

[LeafOfFaith]

I know, further supporting the point that the taxing of long term capital gains is hardly an issue.

 

[MindzEye]

I know, further supporting the point that the taxing of long term capital gains is hardly an issue.

I'm not intimately familiar with how they're taxed in the US, but I'm under the impression that my 5% flip and your 100% return over 10 yrs are taxed identically when they're realized.

 

[LeafOfFaith]

Not over here. Short term gains are regular tax rates, long term is greatly reduced.

 

[GEEMAN]

A number of buildings will get re purposed, a number of commercial real estate operators will go broke. In the end anything worth something will be appropriately valued by someone for something and life will go on. The horse and buggy industry would have drawn similar types of discussion 110 years ago. 110 years later there is still a market for horses, and still a market for buggies, they're just value differently than they were 110 years ago.

The worst case scenario here is that the banks have to write down some bad commercial real estate mortgages. Let's hope that a couple trillion in derivative bets weren't tied to those like they were tied to residential mortgages 13 years ago.

What if you cant pay the derivative or credit default swaps

I dont think everyone paid the piper a decade ago

 

[MindzEye]

What if you cant pay the derivative or credit default swaps

I dont think everyone paid the piper a decade ago

Defaults. Credit market implosion.

Government intervention. Though hopefully this time they let the lenders evaporate and protect deposits instead.

 

[MindzEye]

To the surprise of no one who has been paying attention:

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Bank of Montreal anticipates that as much as 80 per cent of its staff -- or about 36,000 employees -- may adopt new flexible arrangements that blend working from home with going into the office even after the COVID-19 pandemic subsides.


The virus prompted the bank to make a sweeping reappraisal of workplace policies, according to Mona Malone, chief human resources officer. She said the lender expects that 30 per cent to 80 per cent of employees may continue to work from home at least some of the time. The Toronto-based bank employed about 45,000 people as of Jan. 31.


“We’ve been able to maintain continuity of banking services with far more people working outside the office than we ever thought possible,” Malone said Monday in an interview. “We thought it was critical that we were in the office to make something happen, and what we’ve proven through this is that’s actually not the case.”


Chief Executive Officer Darryl White has said “a 2.0 version” of the workplace may include the blended home-and-office arrangements, as big employers worldwide reconfigure offices and routines. Malone said Canadian and U.S. branch employees have “by and large” been going into work during the crisis along with a “small amount” of technology and operations employees, while 95 per cent of those in office towers have been working from home.

I can imagine the C-Suite zoom meetings across north america as the data rolls in that their workers are happier, more productive and cheaper for the company when they work from home. So much of the office workplace culture is based on broken bullshit.

 

[Habsy]

Any bets the cost savings of overhead doesn’t get transferred to employee pay?