Sometimes redevelopment works. Sometimes it doesn’t. Homes for employees can easily enough become homes for retirees. But not all mis-allocations of capital are so easily absorbed. Lehman Brothers is finding this out the hard way. Having lost billions in bad mortgage bets, it has to look to Middle Eastern Sovereign Wealth Funds to recapitalise, and surrender equity in the bargain. It’s either that…or stare into the abyss.

Colorado boomed again with Internet in the late 1990s. The bust wasn’t quite as bad in terms of employment. But there was a lot of empty commercial real estate in Denver and the surrounding suburbs. Lucky for real estate agents that Alan Greenspan turned the tech bust into the housing bubble by slashing interest rates.

Where are we today? Well, it’s not twilight in America. But the hour is getting late for a nation that’s used to getting its way because of the last 100 years of history. The corporate culture on Wall Street has led a lot of firms to a short-sighted management philosophy to maximise executive compensation while selling off under-performing capital assets. In Washington, career politicians exist to re-elect themselves and pass laws that favour their campaign contributors, corporate and personal.

And while many investors lost their paper gains in the dot.com bubble, they did not lose their capital. So here they sit in 2008, waiting for the credit crunch to end and waiting for the housing market to bottom. They may be waiting a very long time. And many of them may not realise that America’s heavily indebted chickens are coming home to roost during their lifetimes.

It’s probably a good time to live in Australia. Australia has similar problems with debt, and, we believe, a similar mortgage bubble that’s led to over-priced residential housing. But there’s that little matter of the mining boom. And there’s that bigger little matter of the great industrialisations going on in the developing world.

Those industrial revolutions, energy intensive as they are, put Australia on the frontier of the great economic story of the next 100 years. And even though the Mexican food here in Colorado is much better, we wouldn’t trade the investment opportunities in Australia for even the best green chile.

Dan Denning
The Daily Reckoning Austraila

Source: How the Economy Looks in Colorado

Pages: 1 2

Pages: 1 2