Property Bubble Is Positioned to Pop, Columnist Claims

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Paul Krugman, the Princeton economist and Op-Ed columnist for The New York Times, told a packed auditorium at Santa Monica College last week that the U.S. housing bubble is ready to burst and likely to coincide with a decline of the dollar.


Krugman, who accurately predicted South East Asia’s 1997 currency crisis, said the problem with predicting a housing bubble is that it can take years for problems to reverberate through the economy. Still, he sees trouble on the horizon because 40 percent of new jobs created in the past few years have been housing-related (most economists see a softer real estate market next year but not a hard landing).


“People make a living by selling each other’s houses and paying for the houses with money borrowed from the Chinese government,” said Krugman. “We are out of balance as an economy right now.”





Rather than doling out dollars to the needy, the non-profit Robert Gumbiner Foundation in Long Beach has transformed itself into a real estate developer, with plans to build 40 rental lofts on property near its largest beneficiary, the Museum of Latin American Art. Gumbiner, founder of health maintenance organization FHP International Corp., built the posh Trader’s Ridge Resort on the island of Yap in Micronesia, near Guam, to support another museum he created, the Ethnic Art Institute of Micronesia.





The Pacific Stock Exchange, which closed its Los Angeles trading floor in 2001 and was sold in September to Archipelago Holdings, held a reunion last week at Wedbush Morgan Securities and is actively trying to track down former traders and staff members. “We’re trying to be the repository of information about the old Pacific Exchange,” said Harvey Cloyd, a Wedbush vice president who spent 15 years as an institutional floor broker at the exchange.





DLJ Merchant Banking Partners, the private equity arm of Credit Suisse First Boston, tapped Susan Schnabel, a 15-year veteran and managing director of the firm, to head a new Los Angeles office.


Joining Schnabel is Ron Beegle, a former chief operating officer at Gap Inc., who will specialize in sourcing consumer and retail transactions.


“Many of our portfolio companies are already based on the West Coast,” said Schnabel, who recently moved to Los Angeles from London. “We think Los Angeles is a terrific market for middle market buyouts.”





ARC Investment Partners, an investment firm specializing in reverse mergers, recently opened an office in Beverly Hills with funding from two of Southern California’s wealthiest families: the Marvin Davis family and the family of Younes Nazarian, one of the founding investors in chipmaker Qualcomm Corp.



*Staff reporter Kate Berry can be reached at (323) 549-5225, ext. 228, or at

[email protected]

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