Debt is a reality-altering drug

Debt will make your brain deny reality.

Take retail property for example.

Even before COVID, it was pretty obvious retail property was facing two headwinds: a drift to online shopping, and over-trading (ie: too many centres).

It’s now clear, even to the blind, that retail property is going down.

Down down down. 

And yet there is still denial.

Retail property developers and owners still believe things will return to normal. Yields will recover.

Yeah right.

The reason for the irrational denial is simple: debt.

The property industry is built on debt.

And debt is the world’s most powerful reality-altering drug. 

Accepting the truth that retail property yields will fall by more than half, never to recover, means accepting the truth that equity-holders of retail property portfolios will be wiped out, and banks will also take haircuts on their debt positions

A painful pill to swallow. 

That’s why even though it’s an obvious truth, many people deny it.

Debt is a reality-altering drug.