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I'm working on something that I think a lot of people would find interesting. As many of you know, CRE is in BIG trouble. And it's just starting. But heavy losses of property values and massive increases in defaults present huge opportunities.
The problem is accelerating. Here are a few recent articles:
https://sfstandard.com/2023/07/18/san-francisco-commercial-property-values-could-plummet-40-by-2025/
Now, whether banks are bailed out or not after loans stop being paid, technical defaults are still going to happen which will trigger credit default swaps.
Now, think Big Short. We identify which buildings are going to default and buy CDS against them. This presents two questions:
How do we identify which buildings are going to default?
Who would be willing to be a counter-party in this current atmosphere?
How do we identify which buildings are going to default?
Well, that's easy. AI. They didn’t have that in 2008 but we do today. You can buy cell phone data, building access data, and property owner financials, feed it into AI, and it'll tell you which buildings are occupied (leased), which are not, and based upon the owners’ financials, which are likely to default. It's really not hard. We can find even more data to tell us with a ton of accuracy which to bet against.
Who would be willing to be a counter-party in this current atmosphere?
Well, like 2008, banks. They are greedy and think they are smarter than everyone. The CDS likely won't be cheap on a bps level, but with an ace up the hole like AI, we'd be smarter. We can also run the AI for a while and see how accurate it is. If it’s right 80% of the time and banks are willing to sell us CDs for 20 cents on the dollar, you could literally make billions on this.
We could either do this with private capital or turn it into an ETF and let the whole world bet against CRE.
So who wants to do this with me? Reach out to me.