This is how a bubble ends: not with a bang, but a discount.
I’ve been talking about the brittleness bubble — the widespread and growing over-valuation of brittle assets, and their certain repricing as climate risks are acknowledged — since 2002. Now we are seeing the beginning of its end.
I suspect that over the next five years (ten at most) we’ll see revealed risk rip through exposed communities, shredding hundreds of billions of dollars of paper wealth and leaving in its wake something like the Subprime Crisis, topped with eroded streets, downed bridges, killer heat waves and mass-migration.
Houston is America’s bellwether.
J. David Goodman is reporting what’s going on there right now, in the aftermath of Hurricane Beryl. It’s tense. His piece ‘This Storm Has Broken People’: After Beryl, Some Consider Leaving captures the feeling of foreboding spreading in climate-battered places around the world; the feeling that what can’t go on, doesn’t.
Houston is no stranger to natural disasters, but living through two crippling power outages in two months has driven some in the city to consider what may be the ultimate evacuation plan: moving out.
The more powerful of the storms, Hurricane Beryl, devastated the power infrastructure over nearly the entire city. When it hit, thousands of people were already living in shelters and hotels, according to state officials, because they had been displaced by an earlier weather event, the spring thunderstorms that caused wind damage and flooding.
Driving around Houston, it can be hard to tell which of the storms that crashed through the city had mangled the highway billboards, torn out the fences or knocked down the trees still strewn along roadsides.
Everyone knows how long it took to get their power back from the first big storm — and when they lost it again. A second round of spoiled food. Of sweltering temperatures. Of emergency plans. In many cases, of repairs to homes that were damaged in the major May storm had yet to be finished when Beryl arrived as a Category 1 hurricane.
For some, it was too much.
People are worried. They’re fearful in a way they haven’t been. That’s because they’re starting to see the world around them as it actually is: a world in the grips of a terrible crisis whose like we’ve never seen before; a world where things no longer work the way things have always worked.
The response, predictably, has been a mix of rage, defiance and collapse.
Consider these excerpts from Beryl was the weakest a hurricane could be. Why does it feel like Houston isn't the same? by Sarah Smith, in the Houston Chronicle.
These lines resonate with the passions and griefs of a city whose sense of its own value (or even habitability) is breaking down. (The same piece also manages to only obliquely mention the climate chaos and unsustainability that are the major drivers of that crumbling stability — Houston, after all, being America’s oil town.)
Beryl advances on us Monday, delivering 84 mph punches. Telephone poles topple. Roofs collapse. Buffalo Bayou swells until it kisses the bottom of the tree canopies. Streets drown. The winds roar. Power snaps out. We crouch in our innermost rooms.
…
We are the fourth-largest city in America. We are the so-called energy capital of the world, and today, we are powerless.
The heat index climbs to 105; at least 1.8 million wake up without air conditioning.
…
None of the disasters that have rolled through in the past decade has been so singularly devastating that we fled en masse. Instead, we strain under the weight of flooded-out cars and warped wallpaper and drenched family photos and chicken turned sour in silent freezers. Our cars get clipped at intersections with broken lights and, as we sit in the repair shop, we wonder: Why are we still here?
Some of us are (proudly, foolishly, admirably) H-town till we drown.
…
Some of us ache with a new knowledge: One day — maybe not now, but one day — we will have to leave this place we love. The lives we envisioned for ourselves here, we worry, cannot hold against what we know will come.
We begin to grieve the futures we wanted.
That last line is a perfect summary of the tragedy of personal discontinuity.
When we come to see that the world isn’t as we were taught to expect it would be, we also see that our own lives aren’t going to be what we dreamed. I’ve spoken with hundreds of people who’ve gone through this loss of cherished hopes. For many, it’s shattering.
Now whole cities are going through this experience. Houston won’t be the last. Indeed, the planetary crisis is not yet done with Houston… or the hundreds of other frontline communities around the world.
I can tell you what is happening, right now, in places all around the world where reality has slammed through the roof like a fallen tree: a reckoning. Folks are measuring their options, weighing how long they can wait, calculating how much of a loss they can bear, trying to figure out where they might live instead.
Does it even make sense to repair our home? Will the insurance cover enough of the cost to be able to sell it, maybe at a discount? Will we even have insurance in a few years? Will the next storm turn this city into a buyer’s market, as more people look to relocate, and homes flood the market — or will it be the storm after that? If we wait a few years, will there still be buyers, and if so will they demand fire-sale prices? What will our town be like, if home prices crash, the economy falters and everyone who can leave has left? Where would we go? Where can we afford to go? Should we leave now, before others start relocating in greater numbers? What will happen to us if we wait too long? Will our kids be able to afford some degree of relative safety? How do we make a path for ourselves and our loved ones, in a world that’s suddenly hard to understand?
Millions of us are already wrestling with these thoughts, and discussing these worries with our family and friends. These thoughts are starting to take form, in “For Sale” signs, moving trucks and GoFundMe campaigns for relocation expenses. This is only the beginning.
A lot of us will take less than we thought we could expect, out of fear that if we wait, we’ll get far less than that.
We’ll offer our old lives up on a discount, hoping to fund new ones before time runs out.
And that is how the bubble ends.
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