Commercial Real Estate Will Be the Next Crisis

New problem: Commercial mortgage-backed securities are falling through the floor. Bank of America (BAC - commentary - Cramer's Take) has an index, the 10-year AAA CMBS index that many of the heavy hitters use, and it is quoted vs. 10-year swaps. My friend Kevin Griffin from Cantor Fitzgerald is making sense of this to me and telling me that in the last two weeks this index has exploded to the downside, basically going from 583 on Nov. 5 to 1218 today.

The best way to look at this is that the smaller the number, say, 27, where it was in June, the more it is like the same yield you would get for a Treasury. Now you would get a much larger yield - sky-high yield -- because the risk of defaults on the underlying security is huge.

Now, what does this mean in English? The commercial real estate market is about to drop like a piano from a tall building almost immediately, and, Griffin says, you can bet that more and more commercial property owners cannot refinance their commercial mortgages.

As we look on our screens, let's stay focused every time the bulls out there say we are about to have the roar upward, that underneath some of this market are abstruse things like the CMBS benchmark, and that benchmark is just off-the-charts bad, which cannot be good for the economy, particularly because we know from St. Louis Fed data -- the best place for it --that commercial real estate was one of the few engines left that wasn't collapsing.

Random musings: So much for the idea that Nov. 15 was some important benchmark. Doug talking about a big liquidation today. ... Remember when Ambac (ABK - commentary - Cramer's Take) held the key to the next leg up and they kept saying everything was terrific? Remember that? Where the heck are those guys? ... You can buy some unsecured General Motors (GM - commentary - Cramer's Take) debt for 17 to 20 cents on the dollar. Better bet than the common.

At the time of publication, Cramer had no positions in stocks mentioned.

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