Commercial real estate debacle item #1

Enrico believes that a debacle in commercial real estate is going to unfold in the US over the next 12 months.

Commercial real estate was as overbuilt and bubble-licious as residential real estate. Banks made similarly stupid, absurd loans based on stupid, absurd valuations. The worst excess in residential real estate will undoubtedly beat the worst example in commercial, because, in residential real estate, there was rampant out-and-out fraud, with appraisers, lenders, brokers, borrowers, and everyone else you could name conspiring to make a stupid ridiculous lying loan.

However, the total dollar amounts of troubled loans in commercial real estate dwarf the magnitude of the problem in residential.

From time to time, Enrico will post examples of the unfolding disaster. Here’s the first one.

This mortal coil

Enrico intends to live to be 160 years old.

He is currently 48 years of age.

He has made a brief, but thorough, study of this table which provides official FedGov statistics on the probability of death and remaining life expectancy for in-duh-viduals (and other US citizens of normal rational capabilities), broken down by age and gender.  Those broken down by sex will have to apply to another department for a prediction of their mortality.

Enrico inserted a new column in this table, to calculate the incremental life expectancy for males.  The results:  for males, the incremental life expectancy peaks at the increment between age 9 and age 10, when the increment in life expectancy is 1 year.  In other words, a 9 year old male is expected to live to be the same age as a 10 year old male (75.53 years of age).  So, the year of aging from age 9 to age 10 is free, it doesn’t come off the total clock.

Thereafter, each year, the expected age you will survive until increases by more than one year, but time comes off the clock.  Each year, your remaining life expectancy is a smaller remaining span.

If you live to be 103 years of age, your life expectancy is 104.64.  If you life to be 104, your life expectancy is 105.54.

The dominant cause of death for males is some variety of heart disease or cardio vascular disease, or cerebral vascular disease.  Stroke and heart attack are the main enemy.  Cancer is well up there.  If you beat diseases of the arteries and if you beat cancer, you’re doing very well.

Enrico is worried about his arteries, because he is a full figured gal.  He is hyper vigilant for technologies that will enable him to dratt arterial disease with impunity.

Recently, Enrico’s physician told Enrico that his girth, and his level of serum cholesterol, and his blood pressure, assured Enrico of an early grave.  Enrico’s doc urged manic consumption of statins, and several other substances, as a preventative measure.

Enrico was skeptical.  Did you know, there has never ever been a scientific study which has demonstrated a significant correlation between serum cholesterol levels and mortality?  Despite dozens of attempts to demonstrate this link?

The statins do clearly and demonstrably reduce mortality in patients who have already had a heart attack.  There is substantial evidence that statins reduce mortality in the general population, but the evidence shows that the reduced mortality effect is highly correlated to the probability that a given person suffes from arterial disease.

In other words, if you have arterial disease, by all means, take statins.

Enrico’s doc proposed a sonography exam which examines the thickness of the intima media, the interior wall, of the carotid arteries.  Allegedly, the thickness of the interior wall of the carotid arteries is a reliable proxy for the thickness of other arteries, and, allegedly, thickness of the interior wall of arteries is a reliable predictor of the build-up of placque in the arterial walls.  Definitively, high levels of placque in the arterial walls is eventually deadly.

Enrico’s arterial sonography revealed an arterial wall thickness which is correlated (allegedly) with low levels of arterial placque.

Enrico looks forward to an interview with his doc, in which Enrico confronts the doc with the paradox of the doc’s assurance of Enrico’s early demise and the results of the sonography.

Enrico told the doc that serum cholesterol levels are not correlated with mortality.  The doc asked Enrico where and when Enrico obtained his medical degree.  Enrico replied that he had earned no medical degree, but that he HAD learned to read, and that he had read the studies.  He asked the doc if HE had read the studies.  The blustering response, while unresponsive, suggests an answer in the negative.

You might ask, why does Enrico continue to employ a doc who possesses what might be regarded as a poor empirical capability?

Well, Enrico has learned, to his sadness, that the experienced level of empirical capability amongst docs leaves a great deal to be desired.  Enrico concludes that one might be better off finding a doc who is, admittedly, a victim of the medical profession’s herd mentality, but who is willing to consider the possibility that the herd might be headed in the wrong direction.  Enrico has been completely unable to detect a doc who is not a victim of the herd, and who is also not a complete wacko.

To the credit of Enrico’s doc, Enrico asked the doc why he had sent Enrico for a cardiac stress test, when it is completely obvious that cardiac stress tests are at best totally useless, and at worst, fatal?  Enrico’s doc said that he no longer utilizes cardiac stress tests, because he now realizes that they are in fact totally useless.

Good for him!

Greatest. Theory. Ever.

John Bott, the bond guy on KSEV here in Houston, just advanced the greatest.  theory.  ever.

Iceland gets tired of having to make amends for its bizarre failed adventure in being the financial hub of Europe.  The IMF declines to bail Iceland out.  The EC declines to bail Iceland out.

Left with no options, Iceland adopts the gold standard.

This move immediately has the same effect on other countries’ currencies as an approaching tidal wave has on a group of secretive skinny-dipping bathers:  the water retreats, and reveals who is swimming naked.

Sadly, EVERYONE is swimming naked.

Now, the IMF is BEGGING Iceland to reconsider, and is offering copious loans, if only they will renounce the gold standard.

Sportsfans, that’s how fragile this situation is.  If the Austin Powers movies were real life, and Dr. Evil was defrosted tomorrow, surely his henchmen would urge him to buy control of some obscure nation, and threaten to put that nation’s currency on the gold standard, unless the world’s big powers paid him one MILLLION dollars.

[cue embarrassed cough from henchmen]