Pop Goes The Weasels

The question is not "Will there be yet another bubble to pop and strangle the economy" but what that bubble is. The smart money is on consumer credit card debt detonating, but the even smarter money is on commercial real estate going straight to hell in 2009.

Investment in multimerchandise shopping structures (malls) decreased in Q4 2008 to .21% of GDP, after peaking in Q4 2007 at .25% of GDP. This is a pretty steep decline, but now it appears that new mall construction is about to almost stop.

As David Simon, Chief Executive Officer or Simon Property Group, the largest U.S. shopping mall owner said a few weeks ago:

"The new development business is dead for a decade. Maybe it’s eight years. Maybe it’s not completely dead. Maybe I’m over-dramatizing it for effect."

Kaboom. This is what's going to finish off banks in weakened parts of the country like the Rust Belt, California, Nevada, and Florida. Malls, hotels, and office construction is going to evaporate, taking the rest of the construction business with it, and with the entire retail sector falling apart, empty storefronts, vacant offices and unused hotel rooms will only get worse.

Banks who are landlords on this type of property will find a whole other pile of assets just decreased massively in value. As the tenants fold, the banks will have to foreclose on even more property, driving values down more, yadda yadda. The same death spiral that is killing residential real estate is now just really starting in commercial real estate, meaning we have whole new level of disaster coming.

Pop goes the weasels.