Juggling Dynamite

Thirteen years of ultra-easy money (2009-2022) drove an epic malinvestment of resources on a global scale. Now, we are grappling with the weight of those choices. From here, there’s a lot of room to make wiser investments that will increase efficiency and free cash flow while reducing waste, especially around energy, housing, transportation and food.

China’s property crisis is expected to worsen as new home sales plummet and indebted developers struggle to find funds to complete projects. WSJ’s Jonathan Cheng traveled to an abandoned ‘ghost town’ to see the challenge China’s real estate slump poses for the government. Photo: Antoine Morel for The Wall Street Journal. Here is a direct video link.

See more in China’s home prices slide, increasing pressure on Bejiing:

For decades, the property sector had been a major driver of China’s economic growth. Real estate and related sectors such as construction represented around a quarter of China’s gross domestic product in recent years, according to widely cited estimates by Kenneth Rogoff of Harvard University and Yuanchen Yang of the International Monetary Fund.

That has made it an open question how far the pain of the real estate slowdown will spread.

Hybrid work has put office building owners in a bind and could pose a risk to banks. Landlords are now confronting the fact that some of their office buildings have become obsolete, if not worthless. Here is a direct video link.

See more in Why Tech Companies Keep Laying People Off.

Some illuminating facts on the ground in this segment.

Starwood Capital Group CEO Barry Sternlicht says regional banks have a “giant skeleton in the closet” when it comes to real estate loans. Speaking on Bloomberg Television, Sternlicht also discusses the state of the real estate market and his support for presidential candidate Nikki Haley. Here is a direct video link.

See more on the broader implications in The time bomb lurking in all those empty office buildings.