Whether Thornberg cleared up the uncertainty remains to be seen, but he did provide was a better understanding of what is happening right now with the recovery and where he thinks we are headed. "In many ways, where our economy is right now is a place where it hasn't ever been before," he said. "While it is recovering in a strong way right now, it is recovering for the wrong reasons and is moving from a private to a public bubble."

There is no doubt that the recession is over, he said. As a matter of fact, Thornberg said that 2010 may be stronger than people expect. But what is driving the economic recovery, he said, is the most aggressive fiscal and monetary policy we have ever seen. "This is a problem because these policies are creating a new bubble, rather than allowing us to fully recover from the last one," Thornberg said.

California is basically stabilized overall, but the state's problems "aren't solved, they are simply hidden," according to Thornberg. What is worrisome to him is consumer spending, which as a percentage income is at an all-time high. "We haven't solved our spending binge," he said, "we have hidden it, and we can't do this forever."

Among the problems still remaining that Thornberg cited are the chance of a double-dip recession, continuing commercial property troubles, banks not being out of the woods yet and the housing market bounce not lasting. Businesses are a wild card, he said, and consumer weakness will likely continue.

"What do I know?" he questioned. "I know that deep down, things aren't good and I know that for the next year, they will be very good," he said. But he warned that "the economy will stumble again in 2011 and 2012" by not actually solving the roots of the problem." "Mark my words," he said.

White, who presented an overview of the property markets, said that he sees mixed messages in the economy, although overall, "There are some positives, at least for now." He cited a slow uptick in transactions, pointing to Q1 2010 sales numbers, which increased approximately 40% to 50% on a year-over-year basis. And while that sounds hefty, he noted, "You have to remember where we actually are" because those are increases over a 2009 in which sales were extremely low.

For the most part, White said that the outlook for fundamentals remains poor and is expected to stay that way in 2010, but most buyers have already priced that into their thinking about prices. He explained that he is beginning to see property prices bounce a little bit, and is starting to see cap rates come down rapidly. For the most part, however that is for an elite tier of assets. "Investors still place very little value on vacant space or on anything where the value is well into the future," he said.

White pointed out that equity capital is not the problem. "There is plenty of it out there and some might say there is too much of it," he said. He noted that public capital and foreign investors are very interested in the US right now, that "REITs could end up ruling the world over the next two years." Equity funds, although they haven't been active yet, by all reports, have tremendous buying power," White pointed out.

One factor that is causing a sense of urgency among investors, White said, "is that they have seen the rest of the globe turn very quickly." He pointed out that Europe and Asia have jumped ahead with the rebound and the US has lagged, "which has scared a lot of our international investors." White ended his overview with the point that the future is uncertain, "but it depends on what happens with all that distress and the debt markets."

Wednesday's conference also featured a presentation on demographics by James Chung, president and founder of Reach Advisors in New York City, and a luncheon keynote by professor Edward J. McCaffery from USC Gould School of Law. Chung explored questions like "what happens when demographic tailwinds work in favor of a developer, and what happens when they don't," while McCaffery discussed how the US "may be entering a period of radical destabilization."

Chung said that the good news for developers is that the US population is marching forward and is projected to grow to 350 million 15 years from now and 400 million in 25 years. "The American demographic rate has been fantastic for development," he said, "but as we take a look at the growth looking forward, bear in mind that it will be much lumpier than it has been in the past."

Chung pointed out that the 17% population growth over the next 15 years doesn't necessarily translate to 17% household growth because other factors are involved." Some of those include growth by ethnicity, income and race, as well as the baby boom age wave, and generational shifts.

Chung discussed the effects of the women getting married later, having children later and having fewer of them, which he said, "will change the timing and housing needs." One result of this "will be a slow build rather than a massive boom," he said.He closed his discussion noting that "we are living in much more than just an economic correction." Although there is a fundamental challenge, he said, in responding to "shifts of this magnitude," the flip side is that it creates unique opportunities. "We are in a unique window for total reinvention."

McCaffery outlined what he called the three big crises of the past 20 years, including the crash in the early 90s, the Internet bubble and today's downturn. He said that government fiscal policy was an important factor in all three. "What happens if the federal government goes bankrupt?" McCaffery said. By roughly 2025, he explained, the debt-to-GDP ratio will hit a post-war high and "it is only getting worse." He pointed out that more trouble is coming and the ratio will continue to rise to a level that could be catastrophic.

Neither low interest rates nor high interest rates will solve the long-range problem, McCaffery said, and the government's "old-fashioned" solution of printing more money won't work either. The federal government is "set up to have this train wreck happen," he said, so somehow the government must fashion a solution.

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Expert: Problem Not Solved, Simply Hidden

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