Remembers the billions of dollars that were made by clever hedge funds selling short bond derivatives at the peak of the housing market?

A similar opportunity may be presenting itself.

As electric cars go mainstream, a number of unintended consequences may be triggered.

One big one that no one is thinking about is that a good portion of the global corporate bond market may be demolished.

Some one-quarter of the $14.7 trillion in issues outstanding have been issued by the energy industry.

Fitch, the ratings agency, has just downgraded many of these bonds.

They cite the threat posed by electric cars, which could lead to ?an investor death spiral? in the energy industry.

Let me give you a few simple numbers.

When I bought my first Nissan (NSANY) Leaf 6 ? years ago, the battery cost $1,000 per kWh.

Two years later, Tesla (TSLA) dropped the price to $300/kWh with their sleek Model S.

This year, General Motors (GM) shaved that figure to $125/kWh with their all electric Bolt.

That is an 87.5% cost reduction in only 6 ? years.

The non-subsidized breakeven point for car batteries is widely considered to be around $100/kWh, a mere 20% lower. At that point, electric cars take over the world.

There are only about 1.2 million electric cars on the road today out of a global fleet of 1 billion.

However, worldwide production this year is expected to exceed 500,000 which is equivalent to 2.85% of the total US car market.

Tesla alone is planning to ramp production up from 80,000 vehicles in 2016 to 500,000 by 2020. They are now running at a 100,000-unit per year annual rate.

These are still small numbers. But here is the scary thing about the energy market.

Sometimes it takes only a 1% change in the supply/demand picture to trigger a 50% collapse in prices.

Energy pays no interest or dividend, and is expensive, dangerous, and toxic to store. No one wants to get stuck with excess supply.

Look no further than the contango in the oil futures market, where prices for one-year delivery are 10% more expensive than the front-month futures contract. Oil for immediate delivery is trading at an enormous discount.

Another problem is that all of the world?s strategic petroleum reserves are full, with the US and China holding the largest reserves. Over 200 tankers worldwide are storing crude, awaiting an improvement in prices that may never come.

And then we have the lesson of the past five years, when oil prices crashed by 83.3% from a 2008 peak of $149.50. Bondholders shuddered.

A sudden surge in electric car production could produce a tipping point that brings a cataclysmic decline in oil prices. Automobiles currently account for 50% of US oil consumption.

And what if we then go into another recession? It could make this year?s $25.50 low in Texas tea look spectacularly expensive.

If you have any doubts about the disruptive possibilities of electric cars, go visit the Tesla factory in Fremont, California which I have been doing for five years.

When I first went there in 2011, the assembly line occupied just a small corner of the cavernous 500,000 square foot facility, the site of a former General Motors/Toyota (TM) joint venture. You could almost hear a pin drop.

I went there last week to check on my Model X order and the plant was a beehive of activity. There were multiple assembly lines. Shiny aluminum parts were stacked to the 30-foot ceiling.

Robots silently delivered parts from one side of the factory to the other. A couple of times I almost got run over by emergency repairmen on bicycles rushing to fix some vital part of the process.

You could spend the day listing other unintended consequences of electric cars.

They use 80% fewer parts than conventional cars, so you can kiss the auto parts industry goodbye.

They require no maintenance, so one million car repairmen across the country will lose their jobs.

Self-driving technology will wipe out the auto insurance business, since accidents will rarely happen. It will also cut hospital emergency room visits by half, chopping down health care costs.

The Tesla assembly line uses less than half the workers of equivalent Detroit lines, so the company is a net job destroyer.

Where will all the jobless go?

I could go on and on.

Bottom line: approximately half of the entire US economy will, in some way or another, be dramatically affected by electric cars.

On my way out of the Tesla factory, we passed by the Founders? Wall. This is where the buyers of the first 100 Model S-1?s signed their names with a magic marker, hoping for the best.

After all, we didn?t know if the $110,000 ultra modern vehicle would work.

There was ?JOHN THOMAS? in big bold letters.

I smiled, didn?t say a word, walked out, jumped in my Tesla S-1 and drove home.

I tell people at my strategy luncheons that living in the San Francisco Bay area is like living in the future.

There is an explosion of high tech innovation going on here, and we locals often find ourselves the guinea pigs for the latest hot products.

However, sometimes the future is not such a great place to be.

I learned this the other day when I received a parking ticket in the mail. I didn?t recall finding a notice of violation tucked under my windshield wiper in the recent past, so I looked into it.

To my chagrin, I learned that the city is now outfitting its buses with video cameras pointing forward and sideways.

The digital recordings are then transmitted to parking control officers sitting behind computer screens for review.? They issue tickets, which are mailed to the registered owner of the vehicles.

San Francisco suffers from one of the worst parking nightmares in the country. The streets were never planned, they just sort of happened on their own during the frenzy of the 1849 gold rush.

They were built to handle the traffic of horses and carriages, and later cable cars, not the crush of traffic we have today.

Sky-high real estate prices have driven millions into the suburbs across the bridges over which they must commute. So parking has always been in short supply and it is very expensive. When I drive into the city for a Saturday night dinner, sometimes the parking tab is more expensive than the meal.

Newly minted millionaires from tech IPO?s are now buying vintage Victorian homes, and then retrofitting garages underneath them. Every time this is done, it eliminates another parking spot on the street to make room for the driveway.

So while the traffic is increasing, the number of parking spots is actually declining.

The city originally installed the cameras to catch offenders driving in bus lanes during rush hour. When they discovered that the cameras also captured the license plates of illegally parked cars they expanded the program. Last year 3,000 such tickets were issued.

The program has been so successful that the cash-strapped city will greatly expand it this year. And with a great San Francisco track record to point to, the firm selling the system is planning on going nationwide. Soon it will come to a city near you.

Like I said, sometimes the future is not such a great place to be.

Parking in San Francisco Can be Tight

Location, location, location.

Those are the three most important elements of a successful real estate transaction.

A glut of $2 million plus mansions has suddenly hit the market in the posh Berkeley Hills, with dozens of signs for weekend open houses congesting every corner.

However, in nearby West Oakland a mere few miles away the market is on fire, a gritty, but rapidly gentrifying area near San Francisco Bay.

There you can pick up a fixer upper Victorian for as little as $400,000 walking distance from the BART station, and a mere five minute commute from pricey downtown San Francisco.

So is the residential real estate market going up, down or sideways? Which neighborhood has it right?

There is no doubt that this is not our father?s real estate market.

Nationwide, luxury homes are in recession. Some of this reflects profit taking by the smart money that got in at the 2011 bottom.

Prices in key markets like San Francisco, Seattle, and Portland have nearly doubled in five years.

New York penthouses listed for tens of millions of dollars, heavily dependent on the Russian and Chinese buyers, are going begging.

Multifamily dwellings, that have been on a tear, have also gone soft.

However, it is still early days for new entry-level homes.

While Millennials thought it was cool to live with significant others in postage-stamp-sized inner city apartments, throw a couple of kids into the mix, and the picture changes completely.

The US birthrate, falling for the past decade, has taken off like a rocket. The birthrate among woman over 25 is suddenly exploding, while for those over 35 it is rising at an even faster rate.

As with the original Great Depression, the 2008 Great Recession ended up pushing out the demographic curve by five years, delaying new family formation.

Yes, I know what you are going to call it. This is nothing less than the start of a millennial baby boom which will power our economy for the next 20 years.

The biggest demand is now in starter single-family homes with 3-4 bedrooms, modern kitchens, and generous backyards in leafy suburbs.

The math here is very simple.

Why face an onslaught of 4%-12% annual rent increases, when you can build equity, install your own solar panels, and harvest great tax breaks through home ownership?

A silent revolution in home finance is making all the difference.

You hear a lot about the difficulty in getting home loans from traditional brick and mortar banks these days.

Tales are legion of mountainous paperwork requirements, low loan to values, second signers, ridiculous appraisals, and stringent FICO standards.

Blame The Dodd-Frank financial regulation act. Some eight years after all the big banks required bailouts, the government still has them on a short leash.

But guess what? Banks aren?t the main players in the market anymore.

Non-bank lenders now account for 56% of the residential real estate market.

Firms like Quicken Loans, Stearns Mortgage, and Freedom Mortgage have moved aggressively to offer streamlined online applications and instant approvals.

Just for fun, I called Quicken Loans in Detroit, Michigan to get a refinancing offer on my San Francisco Bay Area home.

Within a minute, the agent was looking at my house from Google Earth, and had obtained an appraisal from Zillow.com.

I only needed a FICO score of 700. Within three minutes, he received approval to refinance 70% of the appraised value with a 5/1 ARM at a 2.87% interest rate. The closing would be in 30-40 days.

If you want to go through this exercise yourself, please visit
http://www.quickenloans.com.

Banks are now responding by attempting to claw back lost market share. Wells Fargo recently announced a first time buyers program with only 3% down. Other banks are rolling out similar programs.

?What about rising interest rates?? you may ask.

My bet is that interest rates will rise so slowly that the impact on monthly mortgage rates will be negligible.

The great thing for stock investors is that the demographics are ramping up just when housing inventories are at 30 year lows.

New home construction in recent years by risk averse builders is proceeding at less than half the frenetic rate we saw during the 2000s. And this is an industry where it takes two years or more to ramp up production.

This all shines a great spotlight on the home construction industry.

In the sweet spot are Lennar (LEN), DR Horton (DHI), Home Deport (HD), and Tripointe Group (TPH).

The performance of these shares has been lackluster for a couple of years. They have additionally been hammered by the recent selloff in interest-rate-sensitive asset classes and fixed income surrogates.

They are about to play catch up with a vengeance.

Real Estate is Hopping in West Oakland