REIT - May/June 2010

help prevent future crises? Shiller: There’s always been concern that creating a speculative market will reinforce speculative behavior and create bubbles. There’s scholarly literature on this, but no one has been able to prove by controlled experiment that destabilization necessarily results.

It seems to me that setting up speculative markets stabilize things. They embody the market’s view of future asset prices, so they aid in price discovery. Investors who doubt current asset prices can, with derivatives, nudge them down, and those who support them can nudge them up.

Moreover, creating liquid, ef-
ficient markets helps people get
out of risks. Sometimes you see a
bubble happening and you don’t
know how to get out or protect
yourself against an eventual
crash. How do you get out or
protect yourself when it’s your
own home? Having liquid con-
tracts will allow people to express
their opinions better, and I think
it will tend to stabilize things.

REIT: In addition to home equity insurance, you’ve also advocated continuous workout mortgages and regulatory hybrid securities. The former adjusts the balance as the home’s value changes, with debtholders mitigating their risks in the futures market. The latter is debt that converts into equity, boosting bank capital ratios in bad times. Are any of these innovations transferable to com-

I represent a few investors from Korea (Private and Institutional) from $40M to $200M.

Preferred California Retails/Multi-Family.

Any company interested in Korea REIT operations?

Sam Yi

One Properties P 213-252-9100 C 213-675-7872

E samyi957@hotmail.com DRE License No. Calif. DRE#00808681

BROKERAGE | LEASING | MANAGEMENT

mercial property?

Shiller: I don’t see why not.

Why shouldn’t someone who is buying casualty insurance on a commercial property also not get insurance against the bigger market risk of declines in the value of that property?

Also, I intended continuous workout mortgages for hom-eowners, but commercial mortgages could benefit from the same risk-reduction technique. A developed, modern economy should allow companies to pursue their business without the distraction of other risks. Leave the speculating to the speculators.