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Catching Babies From The Bath Water

Work From Home Is The New ESG. ESG woke culture is experiencing some cathartic outflows as governments and institutions realise that in the era of great power competition, politics have no room for virtue signalling. Great power competition is always a matter of industry and resources, and the bedrock of these pillars is energy. In a hunky-dory world, there is a lot of “excess fat” in the form of low-interest rates and volatility control measures (REPOs etc.) to help spin a yarn in the bid to shape policies that coax markets to think a certain way (ESG is fiscal intensive and GDP expansive, a perfect solution for Controlled Debt Inflation overtime). However, the war in Ukraine melted this “excess fat” and exposed the bare bones for what it is, and ESG is the first of many casualties of the previous regime (every great and competitive civilization is built upon efficient units of energy, and ESG standards are the most inefficient of them all).

Policies on a grand scale are always lagged (Cantillon effect), and we believe that the next casualty will be the Work From Home bros. Office Real-Estate is left for dead post-covid, and the dead horse was pummeled even further after fears of a banking contagion reminiscent of the 2008 subprime credit crisis. Office REITs were heavily sold with short interest at record highs, setting this up to be, in our opinion, a massive bear trap. First off, are offices, and we are talking about Class A offices in prime New York City locations, now really worth less now compared to the height of Covid when everyone was actually working from home, or comparable to 2008 GFC? We believe not, and Real-Estate will not be the cause of the next financial disaster; proponents of this are fighting the last war and creating further value dislocation that can be exploited. In addition, if we subscribe to the view that inflation will be higher on an absolute basis in the decade to come, then we need to have a discussion about the Replacement Costs of infrastructure. Skyscrapers on Prime Land (Penn Station) are, first and foremost, irreplaceable based on a location standpoint and are billion-dollar material and commodity projects which inadvertently makes them beneficiaries (if the building already exists) or liabilities from a tangible book value point of view. Many babies are being thrown out with the bathwater when it comes to Commercial Real-Estate, and some babies are worth catching.

We’ll just leave it at that.

Work From Home Is The New ESG. ESG woke culture is experiencing some cathartic outflows as governments and institutions realise that in the era of great power competition, politics have no room for virtue signalling. Great power competition is always a matter of industry and resources, and the bedrock of these pillars is energy. In a hunky-dory world, there is a lot of “excess fat” in the form of low-interest rates and volatility control measures (REPOs etc.) to help spin a yarn in the bid to shape policies that coax markets to think a certain way (ESG is fiscal intensive and GDP expansive, a perfect solution for Controlled Debt Inflation overtime). However, the war in Ukraine melted this “excess fat” and exposed the bare bones for what it is, and ESG is the first of many casualties of the previous regime (every great and competitive civilization is built upon efficient units of energy, and ESG standards are the most inefficient of them all).

Policies on a grand scale are always lagged (Cantillon effect), and we believe that the next casualty will be the Work From Home bros. Office Real-Estate is left for dead post-covid, and the dead horse was pummeled even further after fears of a banking contagion reminiscent of the 2008 subprime credit crisis. Office REITs were heavily sold with short interest at record highs, setting this up to be, in our opinion, a massive bear trap. First off, are offices, and we are talking about Class A offices in prime New York City locations, now really worth less now compared to the height of Covid when everyone was actually working from home, or comparable to 2008 GFC? We believe not, and Real-Estate will not be the cause of the next financial disaster; proponents of this are fighting the last war and creating further value dislocation that can be exploited. In addition, if we subscribe to the view that inflation will be higher on an absolute basis in the decade to come, then we need to have a discussion about the Replacement Costs of infrastructure. Skyscrapers on Prime Land (Penn Station) are, first and foremost, irreplaceable based on a location standpoint and are billion-dollar material and commodity projects which inadvertently makes them beneficiaries (if the building already exists) or liabilities from a tangible book value point of view. Many babies are being thrown out with the bathwater when it comes to Commercial Real-Estate, and some babies are worth catching.

We’ll just leave it at that.