Extend And Pretend Eventually Comes To An End
The commercial real estate time bomb keeps ticking. Meanwhile regional banks look far too expensive here.
One of the risks I repeatedly warned about in my 10 Areas Of The Market I’d Avoid Right Now was commercial real estate and the regional banks that remain heavily exposed to it.
That wasn’t a particularly popular view this year as the market chased AI, crypto, and mega-cap tech higher, but the underlying problems in commercial real estate never actually went away.
This year, much of the market’s attention has shifted toward private credit, another area I cautioned investors about. But in doing so, I think many people are making the mistake of assuming commercial real estate is somehow behind us. I don’t think it is. I also think that regional banks, with the State Street SPDR S&P Regional Banking ETF (KRE) trading at all time highs, are far too expensive to be buys here.
In fact, I think CRE remains one of the biggest sleeping risks in the system, particularly for regional banks whose balance sheets are still loaded with commercial real estate exposure.
