Crap for Clunkers

Looks like nobody knows how to spend like the good ole gubbamint, eh? How do you manage to lose $1 billion dollars in the span of 4 days? Easy, promise everyone a program that has no need and you'll find out that within a WEEK, you need an additional 2 billion dollar injection to save a program.

And these are the same morons who want to run our health care? The same morons who say they will be able to keep health care spending under control? Here's a better reading of keeping health care that people will like...and it involves MINIMAL involvement of the liberals in government.

Otherwise what you'll get is a new kind of clunker program...one in which the government considers your parents and grandparents to be clunkers to be traded in rather than allowed to live a full life.

Only the Lonely...funny can't make it up real estate stories of the day

Seems like this stuff is ridiculous but true...

Victor Vangelakos lives in a luxury condominium tower on the Caloosahatchee River. He never has to worry about the neighbors making too much noise.
There are no neighbors.Vangelakos, 45, his wife Cathy and their three children are the only residents in the 32-story Oasis I condo on the east edge of downtown Fort Myers.

At the same time, our idiot Treasury Secretary Tim Geithner can't sell his own house...maybe because, I dunno, its WAY overpriced??? Daily Show skewers him!

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Home Crisis Investigation
www.thedailyshow.com
Daily Show Full Episodes Political Humor Joke of the Day

"Economy Matters" starring Barack Urkel?

Is the next bubble in China? I vote "Yes"

The writing is on the wall. China's stock market is up an astounding 79% year to date. Unbelievable, but considering that last year their markets got clobbered, it is somewhat too much too soon. On top of that, Chinese banks are lending like crazy and building everything everywhere while they are still holding loads of US dollars.

In one sense, its a smart strategy in some sense, as John Mauldin pointed out...they are playing a game of "old maid", where they don't want to be the last one holding US dollars. In another sense, they've stimulated too much rather than let natural growth occur. More and more IPO's are hitting their market, which means the top is near and a beatdown is coming. Long term, they'll be a good buy, but not today.

Banks making more $$$ from Foreclosures than Loan Mods

And now, the truth starts coming out...the banks would rather foreclose than do a loan modification out of a belief that many people are capable of "self curing" their default and don't need to do a loan mod.

The problem is that modifying mortgages is profitable to banks for only one set of distressed borrowers, while lenders are actually dealing with three very different types. Modification makes economic sense for a bank or other lender only if the borrower can't sustain payments without it yet will be able to keep up with new, more modest terms.

A second set are those who are likely to fall behind on their payments again even after receiving a modified loan and are likely to lose their homes one way or another. Lenders don't want to help these borrowers because waiting to foreclose can be costly.

Finally, there are those delinquent borrowers who can somehow, even at great sacrifice, catch up without a modification. Lenders have little financial incentive to help them.

When Your State Goes From NonRecourse to Recourse Mortgages

Hat tip to Housing Doom on this one...

I smell the law of unintended consequences about to happen here...the state of Arizona, in their infinite wisdumb, have decided to make some mortgages into recourse mortgages (where you have to pay back the entire amount), a change from it being non-recourse. (where you just lose title to the home).

The new law would affect any Arizona homeowner in foreclosure who has not lived in the home for six straight months. This might include landlords, second-home owners and investors who bought homes hoping for quick resales and big profits. Once the home is sold in foreclosure, the homeowner would have to pay back the remaining value of the loan, minus the proceeds from the foreclosure sale. Currently, Arizona homeowners, including investors, who lose a house to foreclosure take a big hit on their credit scores but aren't usually required to pay back lenders.

When Debtors Default: How debt defaults are at levels last seen during "Shay's Rebellion"

Pretty bad when the most relevant comparison of today's level of consumers not paying on their credit cards is best compared to a revolt in 1786!

The deteriorating relationship between Americans and their creditors has not yet reached the level of Shays’ Rebellion, the 1786 uprising by poor farmers in western Massachusetts during a recession. But the basic issues are strikingly similar, suggesting an eternal tension between creditor and consumer.

Boston merchants, who were suffering themselves, aggressively sought payment from their customers. When the folks could not pay, which was often, they were jailed. The incensed farmers sought “reforms that would permit repayment on less destructive terms,” writes Bruce H. Mann in “Republic of Debtors,” a history of bankruptcy in early America. “Creditors replied with lectures on frugality, luxury, virtue and the sanctity of obligations.”

Shays’ Rebellion provoked mixed reactions, then and now. Were the rebels trying to remedy grievous wrongs in the spirit of the Revolutionary War, or were they threatening public order and the fledgling state — acting as terrorists, in the modern parlance? Shays’ followers were quickly arrested and quickly pardoned, although two were hanged.

Interesting Investment Ideas to Consider

1) Some dividend stocks are in danger of blowing up their dividend...some names here!

2) A 100% FDIC insured CD that invests in BRIC (Brazil, Russia, India, China) currencies

3) Taking advantage of Circuit City going out of business and cheap rental rates in retail, this electronics retail company is now taking aim at Best Buy and will be one of the few retailers expanding.

4) 10 Questions To Ask When Joining A Startup company.

5) Why you shouldn't lease space to state or government agencies: NY state demands lower rents and that all contractors employed by commercial real estate leased to state agenices are paid "prevailing wages"

Banks Ignoring Foreclosures

Banks walking away from foreclosures. I saw some of this earlier this week. Properties so run down and overloaded with liens that they aren't even worth doing anything with them. What happens to a property if the lienholder doesn't take it back. I guess it eventually goes to the city for back taxes and municipal liens. What does it become then. Worthless I guess. Who would have ever thought that a building could become completely worthless.

Is It Morning Again In America? Dow, Buffett Say So

One of the greatest political ads of all time may be ready to repeat itself, Obama-style.

Yes, the DOW is outperforming what almost anyone would have expected months ago when it was toiling near 6500. Warren Buffett is telling everyone "I told you so" about the stock market recovering up nearly 44% from its lows. And it looks like Obama won't get all his wishes, as health care reform seems to be on hold but the country is seeing improvement in overall GDP. Only about 10-15% of the stimulus money has been used so far, which means the economy may get a HUGE bump up/upside surprise in January of 2010.

I am politically neutral and prefer to stick with the facts...and while unemployment is soaring, the reality is that unemployment lags. Housing is likely to hit a bottom this fall. And the 2 year recession may end in December 2009. Not saying a double dip recession can't happen..in fact, it is likely to happen. But you should invest according to the facts, not according to your political beliefs or desire for any President to be proven wrong.

Water, Water Everywhere...Saving $ on it and Making Money Off It

Water MAY be the next oil...or it may not. Water is in some circles referred to as "Blue Gold" since "Black Gold" is selling for less than 1/2 of its all time high. Regardless of how soon the "water bubble" occurs, all the likelihood of a big run up in water related stocks and water related industries are forming. A shortage, a strong surge in demand, and a feeling of "they are idiot proof investments and everyone needs them" similar to dot com stocks and houses makes me think that there is a big bull market in water in the next 10 years. Businesses are coming up with innovative ways to reduce their water costs in the face of an increase in demand.

Some companies are coming up with creative ways to make money off of reusable "grey" water. Other bloggers have noted how to make money on the water sector.
And of course, you can buy individual water stocks that are highly undervalued.

Another contrarian success story

Ok I have been talking about a bunch of downer shit lately. Time for a success story. I have some friends. I absolutely love them to death. One day we will be fishing off the back of some BIG BOAT(big boats suck unless you have a big boat) and reminisce about these days. I am about to go work with them on flipping short sales. They have spent the last few years putting a system in place. They are on the cutting edge of the great RE clearinghouse. I truly believe they are a contrarian riches story. They have short sale negotiation to a science, and are putting a system in place to handle the volume. 1 in 8 loans are in the crapper right now. Currently foreclosures are down, but defaults are at a scary level. I know some peeps that can't cover their nuts right now. It's in my world so it's real. If you build the right relationships, there are fortunes to be made. Loss mitigators want files off their desks. They get paid bonuses to clean up files. They are also overwhelmed, and really don't give a crap about the screwed borrower. To them it's just a file, and they are overworked.

I've been told that being sweet, and constant follow up is the skill needed. It can take 4 months to negotiate thru the muck, then you have 3 days to close once you get approval. It's a numbers game and not all work out. You better have impeccable contracts, a kick ass title person, and a marketing force to get rich. If you do you just might. These guys are on to something. If your in a jam and need short sale help it's http://www.shortsalespa.com/ . Good people who really care about the seller. They have an 80% close ratio. If it was baseball, they'd be all stars.

Welcome to economic hell

I truly respect Karl Denninger as an economist. He thinks we are in for a Japan type recession only worse. He predicts a rebound in the market before the crash. Could this be what we are experiencing here? Read the article. It's good stuff.

Things just don't make sense

1/4 of a trillion dollars in Treasuries to be sold next week!?!? Who is going to buy all this debt? When is all this deficit spending going to catch up, and why is the stock market continue to go up? I can't figure out anything that is going on now. I guess we will have things looking like they will improve, until all of a sudden it will crash and burn again? I can't believe after all the rampant speculation and fraud over the past 10 years that all of a sudden everything is OK. I think it might be time to stock up on Guns, ammo, food and water. Get a nice garden growing and prepare for the worst. Then hope it doesn't happen. I am starting to 2nd guess myself here. Could I be wrong? Could things actually get better this quickly? Some Wall street guys are calling for DOW 15000 by sometime next year?! I still think they are smoking crack, and will remain on the sidelines a while longer. Something still stinks in the air, but it appears the perfume is covering it up well.

Housing must go down. It's as simple as that

This one is a pretty basic economic post based simply on supply and demand. More foreclosures are in the pipeline, There are more sellers than buyers, and builders way overbuilt and it will take 3 to 5 years to clean out the excess inventory. There are over 3000 building lots approved just in my county of residence. That is around a 5 to 8 year supply, and possibly more as the buyer pool dries up. With all the government intervention slowing down the inevitable crash I just wonder WHEN IS THE TIME TO BE AN INVESTMENT BUYER ONCE AGAIN? If you listen to the media they would like you to believe the bottom is near. They are trying to mislead the sheeple that it is a great time to buy with low rates and an 8000 dollar tax credit. They are trying to bail out the bankers at your expense. Unless you can buy well below market value, now is NOT A GOOD TIME TO BUY A HOME! It's as simple as that. Read the link. It's an interesting read.

Wrestling with Appraisers On short sales

I almost had a short appraisal kill a deal for myself recently. The appraiser used a few low ball comps. I pulled a few of my own retail comps to try to help dispute his appraisal. He wouldn't even look at them, and at the end of the conversation I proceeded to curse him out. I am sure he was a part of all the fraud over the previous few years, and now he wouldn't even make a few thousand dollar adjustment on an FHA deal which was the buyers dream home. I guess he's afraid of something. Once again it is government intervention, too little, too late. I always said appraisers should never see an agreement of sale, so we could get a true opinion. Now that all the damage has already been done they change the rules. Now they are killing deals of people just trying to buy a place to live. What a crock of $hitit this is. One of these days I will have something good to post. Believe me I am searching hard for an opportunity to benefit from this trainwreck. Everyday I search the web for info, this is what I find. This could get real ugly. The 2nd wave is out at sea building right now. Don't let the stock market or media fool you. We are in for a long hard road to recovery.

The Commercial RE time bomb

Commercial RE is something I have always wanted to invest in. After reading this article I wonder. 2 to 3 trillion in bad commercial RE debt that must be turned over. WOW that's a big number. I am hoping to be able to take advantage of some firesale pricing when it hits bottom, but based on Denningers opinion it may never come back. I have seen the for lease signs popping up all over recently. Even in class A space in very prominent areas there must be a 25% vacancy factor. As things continue to get worse I wonder how low it can really go. I see a bunch of available industrial and warehouse space. Who the hell is going to be looking for that type of space the next 5 to 10 years. What about all the car dealerships going out of business. What type of business, other than a car dealer has use for this type of space. What about all the Big box retail stuff. Who is going to take over the vacated K Mart building, or empty ACME supermarket. What will happen to all the employees of these vacated ventures? Their lack of spending will further continue the downward spiral. Never in my lifetime have I seen such an economic decay. The media is seeing light at the end of the tunnel. I wonder if it's an oncoming train.

Pain

It's been a tough time lately. Our rental properties are doing OK, but my other business is failing horribly. I have been successful in most everything I've done till recently, so I am finding financial failure to be a painful, and depressing experience. Sometimes it's so bad I don't want to answer the phone or talk to anyone. I stick my head in the sand and quite frankly am not sure what to do to end things without losing my shirt. I am not alone. Many of my friends are fellow entrepeneurs. They have real estate, are developers, small business owners, stock and option traders, financial advisors, builders, contractors, used car dealers, mechanics, mortgage brokers, realtors, insurance brokers and a few others. There is one common denominator amongst them all. Business sucks, and I don't know what to do to fix things. Some are losing their homes, having their trucks repossessed, losing their rental properies, selling business assets to try to cover personal expenses. Some are living on credit cards while hoping to find work. These are all very inteligent hard working people, who like myself, have just been strangled by this horrible economy.

I also have friends in the workforce who have had their hours cut, or after 15 years of being a loyal employee, given their walking papers then had their employer fight their unemployment claims. A friend of Mrs. Bottom Feeder had her job cut due to the fact that her employer was a sub contractor for THP builders, and they screwed him to the tune of millions. He couldn't afford to pay his debts and was forced into bankruptcy. He was in business for over 20 years.

I just don't understand how anyone can predict a recovery in 2010 based on what I see going on. Some will have a lifetime of work and investment wiped out, many more may recover but it will take years. I may be forced to take a JOB(if I can find one, I may be unemployable after being self emloyed for the last 10 years) just to cover the debts I will be left with when I finally close the doors. This blog is about how to build wealth in a shitty economy. I'm still trying to figure out how to do that. I do know that there will be big opportunities in the Real Estate clearing house. I'm just not quite sure yet what the right strategy will be.

I guess I wrote this post to get a few things off my chest. I am hoping that if anyone reading this is also feeling the pain, they know they are not alone. I don't blame myself(or at least try not to). Until last September we had a flourishing growing business. Then the financial markets collapsed and credit dried up. I saw a housing crash coming, but I didn't see credit disapearing altogether. Hind sight being 20/20 I should have seen it coming. I shouldn't have been so hungry to be a business owner to put my families future in Jeopordy.
OK time to stop feeling sorry for myself, pick myself up and persevere moving foward. It's just really painful sometimes. I just have to recover from my failure and figure out how to profit from this trainwreck.

5 Important Things To Read

1) A doctor's prescription for health care reform
2) Using solar energy for a lot cheaper than what is currently offered
3) Best time to buy anything
4) The 400 biggest banks and their troubled loan list
5) Affordability gap between renting and buying a home narrows

I saw some really crazy stuff today

I was looking at some short sale opportunities today. It's a rather large portfolio with a pretty typical trainwreck story. Today I looked at 20 properties in some old industrial cites of SE PA. It's amazing the decay of what was once some amazing housing stock, as far as craftsmanship goes. It is really sad what it has become, and the destitution of the population living here.

I must admit sometimes I wallow in my own self pity of how a failing business can bring me down. I had a wake up call today. I may have some financial struggles, but I am not struggling to survive. Looking at these properties today I saw what true struggles are. The 1st building we went in to was obvious that people were breaking in to drink, do drugs, and crash. There was no power or water in the house, and it appeared they used candles for light. The next property around the corner was quite startling. The front door was open, and the house was rather clean. The power was on, the water running, and it appeared someone was cooking in the kitchen when we walked in. About 3 trash bags worth of clothing and a few jackets were lying right by the front door. A few dolls and a small doll house were on the living room floor. There was about 3 or 4 days worth of basic food in the fridge. Upstairs there was a single mattress, and a tiny air matress, and TV with DirectTV box hooked up. This is a home that was supposed to be vacant and not cleaned out yet. The tenant was evicted in May. There was even mail sent to the address concerning her food stamps. When we pulled away we saw a woman and small girl appear on the sidewalk from the neighbors. We drove around the block and saw them standing out front. It was obvious they were afraid of what happened.
The next few properties weren't secure either. It appeared all the back doors were pried open, and the locks on the front doors were changed, because none of our keys worked. The one house looked like someone was dealing out of the kitchen since it was tough to get out back, and the train tracks were right out back for a quick getaway. I actually chambered a bullet in the barrel of my pistol. I have never carried it chambered before. The neighbors were all checking us out with concern. Two white guys taking pictures and going in and out of buildings seem to make people nervous. The blight of these areas is worse than ever, yet for one reason or another alot of people still choose to live there. The rent must be really cheap.

These properties were bought between 02 and 04. They were bought pretty well, and it apperars the guy did a lot of cash out refi's(who didn't, I know I raped a few buildings to buy some more) The amount owed on these properties is rather staggering, compared to what they are worth. There was most definetly some fraudulent appraisals pushed through, by greedy underwriters. Our offer prices might be 25% of the debt owed, and even then I don't know if they are worth it. To be quite honest, if these properties go back as REO's I truly wonder if anyone will ever live in these properties again, or will they just be boarded up, and decay to nothing. Slowly but surely a once thriving industrial city will become functionally obsolete, and decay to nothing. I have seen a lot of $hit in the 13 years of being a RE investor and landlord. What I saw yesterday was the worst I have seen.

Investing Based On Teen Spending Habits

Interesting report by Morgan Stanley about how and what teens spend their money on and how to invest accordingly. Buyer beware: Teen spending habits can change on a dime..make sure its not on yours.

Going Down 7 Reasons why housing will keep sliding

This article coincides greatly with my own personal thoughts.http://www.ritholtz.com/blog/2009/07/why-housing-isnt-yet-bottoming/. I have been hearing so much BS that the bottom is near, complete with graphs. I just can't see it. I have friends who seem to continue to get in trouble. My one buddy who is a small business owner just fell 90 days behind on his mortgage. That is the 5th person I know within my own sphere of influence in danger of losing his home. I think it is 2 to 3 years before we hit bottom, and I think the prices at the bottom will be painful if you are a homeowner. My RE Broker was sharing data with me that showings are up 200%. I guess that means people are looking. Why then aren't they buying? Could it be they are scared of a job loss, or they couldn't get financing, or is it that something in their gut just tells them it's just not the right time. Something just really smells bad. My next post will be rather insightful. Be sure to check back

5 things that Piss Me Off & Show Why We're In Trouble

1) Congress is making plans to pass mandatory health care for all Americans. Yet Congress won't eat their own cooking. Anyone ever seen the plans that Congress has for themselves? If not, click here...they have great options, of which 75% are paid by the hardworking taxpayers of the US. I am not in favor of any of what Congress and the President are trying to pass.

2) Goldman Sachs, after sleeping with the government by putting their criminal CEO Henry Paulson in as Treasury Secretary, had the walls cave in on them and depended on the American taxpayer to save them via the TARP fund and becoming a "bank" instead of an investment bank. So how do they repay the taxpayer? By trying to pay back only 1/2 the TARP funds they received and keeping the rest of their RECORD profits to dole out to employees who ran illegal trading schemes that gave them an unfair advantage. Remember how Halliburton was in bed with the Republican administration of Bush? Goldman has managed to be in bed with both Obama and Bush administrations.

3) The BS employment rate...I mean the BLS unemployment rate, which the government says is 9.5% but anyone with half a brain knows is much higher than that.

4) Banks are making record profits but are not lending at all, or making you bend backward, take it in the arse, and then tell you they promise they'll call you in the morning.

5)That until the public had an outcry, the Treasury Department had a job opening for a "humor expert cartoonist"". The job offering has since been cancelled. Among the duties included:

Humor in the Workplace programs that will discuss the power of humor in the workplace, the close relationship between humor and stress, and why humor is one of the most important ways that we communicate in business and office life

All About Short Sales

No, not the first picture...the 2nd picture

One of the key tools any contrarian investor, especially one buying real estate, must know is the ins and outs of short sales. Without further adieu, our first in a series of education related posts designed to help bring out the inner contrarian in you:

1) Insider's Guide to short sales
2) 10 FAQ's about Short Sales
3) Short sale secrets
4) Questions to ask about a short sale
5) Short sales- the definitive article
6) Downside of Short Sales
Discuss your experience with short sales in the comments below

What's coming next?

That Winters coming post really got me thinking. I keep waiting for the other shoe to drop, but now I'm starting to see things slowly get worse, not quickly. The foreclosure and default levels are now at all time highs. 1 in 8 American homes is in default. I have a few buddies in the contracting, landscaping and asphalt business. They just can't find work, or are working so cheap to get the job it almost isn't worth it. One of them just fell 90 days behind and just got fired.

On the flip side(pun intended) I have another friend that has successfully flipped 5 homes this year. Each flipped for a decent profit. I know there will be any money to be made in the car business the next few years. There are wants and needs, and people are only spending on needs right now. If you have a car you don't need another one. I hope to be out of business by October.

The government scares me. The things they are doing is only going to stretch out the pain. Cap and Trade, and the health care reform is going to pinch small business in a big way. It will cost millions of jobs. Obama playing "Rob in da hood"(Robin Hood) Taxing the rich to give healthcare to the poor will backfire miserably. Over taxing the rich will cause further investment decay, and possibly the wealthy and their businesses to leave the country all together.

The stock market is sideways, and more cash is on the sidelines than ever. The only way to get a mortgage is through the FHA, other than that banks just aren't lending. Hell you can't even get a credit card, a 5000 dollar personal loan, or lease a car. Until lending comes back we are dead in the water. I see the downward spiral continue for another 3 or 4 years, and an overall crappy economy for the next 10.

I think buy and hold, reasonably low to mid grade rentals the way to build wealth. You need to buy cheap enough(which at 50%LTV you can right now) to be able to undercut your competition, because rental prices are coming down. Household startups are at an alltime low. Kids coming out of school can't find jobs and are just chillin with Mom and Dad. I think that banks are starting to get reasonable enough that you can buy a few flips as long as you can sell below market, and stay under 200k purchase prices. The market may be slow but people are still buying if they see a perceived value.

I would love to hear other peoples comments on where they think this trainwreck is headed, and what they plan on doing to profit from it. I think the next 10 years will be the best time to be a contrarian Real Estate investor, both on the flip and buy and hold side. I think it will be harder than in the past, and you must be willing to play the landlord game for the next 12 to 15 years before you can sell for a big hit. I also think that learning how to short the stock market, and learn how to option trade a sideways market will be good income streams. The next thing I need to do is have a low overhead cash flow business. Possibly home inspections, especially with the cap and trade inspections coming. What's your thoughts on the trainwreck, and what are you doing to profit from?

Fight Da Man!!

A great look at how every homeowner can use the system against itself...

That's right, ANYONE can lower their property tax bill by following this wonderful article on how to get your property tax lowered.

Initial evaluations are often free at these sites, which include EasyTaxFix.com and LowerMyAssessment.com. For a fee of $50 to $100, users can obtain forms with data already filled in and instructions on how to appeal, and a list of recent sales of comparable properties. Ms. Davidson of Bonita used EasyTaxFix.com to help with her appeal.

Fixed Plastic A Thing Of the Past

Looks like the days of a fixed credit card are jusssssst about over.

Full disclosure: I have several credit cards with a variety of companies. My cards that are with Chase (aka JP Morgan) all sent me a notice in the past month strong-arming all cardmembers that 1) if you owe a balance, your rate is going up 2) we will bend you over and *$(& you in the arse if you use a balance transfer by charging you 5% of the amount 3) If this pisses you off, close out the account and pay us back.

On the other hand, Home Cheapot increased my credit line by 1500 bucks. Lackluster sales, maybe?

Advanta, which issued cards to small businesses, shut down their company altogether and just wants you to please pay them back. Capital One may be next, which is why they absolutely HAD to buy MD based Chevy Chase Bank.

The days of leveraging credit card advances and playing the balance transfer game. The entire American economy and most of its population (including this author) all fell for the trap of debt and overleverage at some point and in some manner.

Landlord in Chief??

U.S. government officials are weighing a plan that would let borrowers who have fallen behind on their mortgage payments avoid eviction by renting their homes instead

Under one idea being discussed, delinquent homeowners would surrender ownership of their homes but would continue to live in the property for several years, the sources told Reuters.

Officials are also considering whether the government should make mortgage payments on behalf of borrowers who cannot keep up with their home loans, tapping an unused portion of a $50 billion housing aid kitty. As part of this plan, jobless borrowers might receive a housing stipend along with regular unemployment benefits, the sources said. (Reporting by Patrick Rucker; Editing by Diane Craft)

Simply, the most interesting read on markets/politics/business cycles I've read

Doesn't get much more interesting than this...lots of wild and zany predictions, some that I can foresee happening...

Hard Times

Is this a "great recession" or a "soft depression"? Difficult to tell, but here's some food for thought:

1)In 2007, 51 percent of graduating college students had jobs lined up before graduation. This year, less than 20 percent had jobs. 2) State income tax receipts from January 2008 – April 2009 were down 26 percent from the year before, and money wired back to homes in Mexico from America is down 20 percent.
3) 51 million people on social security, 12 million people on SS disability, 34 million people subsiding on food stamps.
4) Seven million people are collecting unemployment benefits, and another eight million are unemployed and collecting nothing! There are 38 million part-time or self employed workers, and 2.4 million people in jail (1 in 100 adults).

By every measure, whether or not we are including the government's unemployment rate (9.5%), Shadow Stats unemployment rate (16.5%) or my personal estimate (12%), there is no doubt that times are bad. Housing numbers, horrible. Credit card defaults? The evidence is there, too.

My take...we are still in a great, great recession that is about 2 news stories away from officially being in a depression. What could take us to that point? Your thoughts are welcome here...

Interest rates going up???

The yield on Treasuries should be aroung 10%. It's obvious that government manipulation is keeping them low. Mortgage rates are based on the treasuries, The 10 year in particular. It is possible for them to keep rates articicially low for a few more years but when you stretch a rubberband to far it eventually breaks. Now before I continue just know I don't have any degrees in finance and economics. I'm just a guy with some rental properties and a failing car lot. That being said I am going to throw out a hypothetical possibility.

Everybody is talking about a 2nd stimulus, even Warren Buffet. The government is already 11TRILLION(11,000,000,000,000 damn that's a lot of zeroes) in the hole. In order to stimulate they have to borrow or print money. They will sell treasuries to the world to fund this stupid idea. Now if you are an investor in American government it looks like a high risk investment to lend money to someone already over their head in debt, while revenues and cash flows are on the decline. In order to create investment it will become evident that you would have to give a good return. So this will force the yields up in order for investors to fund our debt. So if the yield were forced to 10% that would mean mortgage rates at 11 to 13%. That would cut the values of homes in half. Add in the fact that it is going to take an increase in lending rates to motivate the banks to start lending again I think the Big Picture forces interest rates to rise in order for money to hit the street again. I'm sure people didn't expect double digit interest rates in the 80's, but it happened. Rates have been too low for too long. The economy won't recover until credit becomes available once again, and banks won't lend until the returns are worth it. Do as you choose but I am going to prepare for a high rate enviorment to hit sometime in the future.

As a contrarian investor this is a good thing if you are a real estate investor. High rates mean low prices. My philosophy of fully leveraged cash flow won't change so I just have to buy cheap. When rates lower someday and I can refi that will just make the cash flows even better. Intersting times are ahead indeed. Invest wisely.

How The Government Will Get Us Out of Debt

US To Trade Gold Reserves For Cash Through Cash4Gold.com

FBI reports 1.4 billion in 2008 mortgage fraud

CNBC's Diana Olick(she's a hottie) just did a report on the FBI's report of rampant mortgage fraud investigations. Our clueless leader President Obama just signed a half a billion dollar mortgage fraud investigation and prosecution bill. Why the heck would we spend 500 million on this now??!! The damage has been done. This is like trying to put out a house fire by pissing on it. What a joke. Where was the FBI, the SEC and our clueless leaders when Julio(an illegal immigrant) with no verifyable income, and no way to repay a loan was given a mortgage for 500k. Where were they when Joe Blow bought a new Mercedes and a big screen with a 100% LTV cash out refi where the property appraised even though there were no comps to support the appraisal. I remember in 2006 when a client of mine wanted to buy a 1.2 million dollar house. She had a 750 credit score and made about 45k a year selling Amway multi level marketing. She was approved for a 97% LTV option ARM loan even though her entire yearly income barely covered the negative amortized payment. Thankfully I talked her into buying a 300k home for 225k so the sellers could settle a deceased estate. I found the fact that she actually qualified for this loan appalling, and it was at that moment I knew this housing run was caused by pure geed and fraud.
So NOW we find out that there was rampant mortgage fraud LOL. I could have told you that back in 2005. I guess possibly I should be an FBI agent, or even better our next president. I could have save our country billions of dollars by telling them of all the fraud going on. Oh wait, that's right, I did try to tell everyone. The fact is no one wanted to listen.

Extraordinary Circumstances? You mean **** hitting the fan?

You know they are expecting another shoe to drop when Congress adds in case of emergency, or in case of extraordinary circumstances in a bill concerning FDIC borrowing. Adding these words to a bill concerning the Treasury department lending to the FDIC certainly means that while they are telling the American sheeple everything is OK, they are in reality getting prepared for **** to hit the fan. What is frightning is by adding these clauses it allows the Treasury to make moves without Congress approval? Wouldn't that mean that the government is spending taxpayer money without any representation IN CASE OF EMERGENCY? I am starting to get really pissed off at all the things going on in this dictatorship we put in office! I don't want socialized healthcare. I don't want the government telling me how to build or renovate a house. I don't want to be taxed on my carbon footprint. I don't want shady scumbag self serving bankers bailed out, and I certainly don't want the treasury and the fed to be able to circumvent our legislative body IN CASE OF EMERGENCY. They just said on CNBC that the SEC is planning on putting more regulations on Wall Street. Where the hell was the SEC when The Orange Man was giving money to anyone who could fog a mirror, then bribing the ratings companies such as Moody's to rate these garbage deriviatives as triple AAA. I hate to say it, but things are far worse than the Government wants you to know. We are in A state of very extraordinary circumstances. It's time for America to wake up, put down the Bong or the Budweiser and take a look at the big picture.

Need a good laugh, Hitler the Flipper

Hitler the Flipper, gets caught by the housing crash. This one is so funny I almost pissed my pants.

The knife is still falling on US home prices

Ready to buy a home? You might cut yourself on the falling knife. I have been hearing a lot from the real estate cheerleaders(my RE broker, mortgage brokers, people trying to sell their homes) that real estate has bottomed out, and we are turning the corner. I think they are dead wrong. There are a whole bunch of prime ARMS to reset over the next 2 to 3 years. People are still losing jobs, and interest rates are at artificially supported lows. Many banks are trying to avoid foreclosing on non performing loans because it is better for them to have a non performing loan, than an REO in inventory. I know someone who hasn't paid on a vacation property in over 2 years. They still hold title to the property. I have another friend who due to illness and job loss hasn't paid their mortgage in over 18 months. They are still living there for free. Things are so bad the banks can't keep up with the defaults. I've been working on a short sale for over 6 months. I've been waiting for a final approval for over 3 weeks now.
The media likes to paint a rosier picture because the government is encouraging them to try to reinstill consumer confidence, they are even giving you 8 grand if you buy a home today, but truth is it is going to get a lot worse before it gets better. If things weren't so bad, why would they have to give an 8 grand credit to convince you to buy a depreciating debt trap????There are many many more foreclosures to come, and if interest rates were to go to 6.5% to 7% prices will really tank because as the price of borrowing money goes up, the value of the asset been borrowed against goes down. It is much wiser to buy a cheap property with an expensive loan, than an overpriced property with a low rate loan. Prices will continue to fall until all the foreclosed properties are sold off. I see prices falling for another 3 years or so and then going sideways for another 10. If rates go to 7 or 8% the knife will drop hard and be very sharp causing a lot of pain.
I plan on buying 30 or 40 properties to add to the rental portfolio sometime down the road. It is possible to negotiate 40 to 50% discounts on short sales or REO's right now, and the cash flows are starting to make sense again. I'm just not quite ready to jump in the pool yet. I'm sticking my foot in to test the water, but I don't think I need to be in a hurry to catch the wave. I think there will be more properties available, at better prices a year or 2 out.

The house of the Future?

I'm really starting to wonder if this is reality or not. If solar technology is close this could be a huge transition. The thought of trading power off the grid is bigger than just your house. What could be the ROI on buying 100 of these solar panels. Energy is the next bubble. Hopefully it is the real deal, and energy independence puts the US back on the map as a world leader. The cost of 10 solar panels, and a windmill is a little salty(45 k for a 2000 sq ft home). It comes out to be around a 10 year payback. I like to get my money back on improvements or aquisitions in 3 ears or less. It isn't cost effective unless the price of the technology comes down, or as I fear prices of energy skyrocket. I wonder if the lobby money of the oil companies, and huge utility monopolies can keep this under wraps for another 20 years or so. I'd love to own this home, although I'm not quite ready for an electric car. There is something about the power of combustion engines running on high octane fuel. Although if I didn't have to worry about fuel costs because I can charge my car for FREE?! I might learn to live with it.

It seems this is the wave of the future. I'm not sure if the technology is real or not. It certainly isn't cost effective. If it becomes the real deal it will create a lot of infastructure changes, which will be a huge stimulus for the economy. I think it will be a good idea to become an energy auditer/ home inspector. It wouldn't hurt to learn how to install solar panels, and windmills.

As a rental property owner this excites me, and scares the you know what out of me as well. I am very frightened of increased energy costs, and the costs of improvements to convert. The thought of not having to pay much to power my buildings. That is around a 15 to 20% reduction in operating costs. It will be interesting to see how the government tries to control this process, or if big brother rolls over to the deep pockets of the utilities, and oil companies.
We will find out a lot about ourselves, both personally, and as a nation the next decade. I do think our economy is headed for the beating of our lifetime the next 10 years. That house looks great. I wonder if anyone can afford it???

House of the Future- Sustainable MicroGrid for Each home (CLICK ON THE PICTURE!)

Contrarian success story

Just talked to a friend who is a Norristown landlord. He has bought close to 20 homes in Norristown this year for around 40 to 50k a pop. He has added around 9k a month in positive cash flow. At 40k for a property that can rent for 1100 a month sec 8. Depending on how you borrow the purchase money you could have around a 400 to 500 dollar a month positive cash flow per unit.

Here is a hypothetical contrarian riches analysis. Buy 40 properties in Norristown over the next 5 years. You plan on holding and being a Landlord for 10 to 13 years. At 20k per month cash flow it's 240k per year times 10 years is 2.4million cash flow. Now it will be safe to assume these properties will sell for 75k 10 years later. That is fair market value today. On the conservative side we are making a 30k profit per unit pre tax, which will be around 23k after tax. Based on these numbers there is just short of a million dollar profit. All told between cash flow and capital gains the investor stands to make around 3million bucks on less than a 2 million dollar borrowed investment. Anyone got 2 million bucks to lend???? That's the missing link to this 3 million dollar puzzle.

Inflation or Deflation?

I've been trying to figure out where this trainwreck is headed. The Government money bombs would lead you to believe inflation is around the corner. If that was the case this would be a very bad reccession. The more I look around and see, the more I think we are in for the worse Deflation in the history of our lifetimes.That would mean that this is more like a depression.

Asset and income deflation were gorillas in the great depression, and that is what I see happening. I know that my used car inventory has deflated in a huge way, causing me much financial pain. I also know that sales are down 60% because people have no discretionary income. They are experiencing cut hours, pay cuts, or out right layoffs. The ones that do have discretionary income are choosing to save it instead of spend it.

This creates less demand for goods, which causes business to cut costs and spending, causing a downward spiral. Until the job market turns, and people begin spending again the 500lb gorilla in the room has a name beginning with a D not an I. Love to hear others thoughts on this topic.

Office Vacancies Rise

I think that one of the biggest opportunities to gain wealth in this coming Depression is in the commercial Real Estate market. Many commercial RE investors will not be able to cover their nuts as vacancies increase. I know my landlord at the car lot owns a bunch of industrial and retail properties. Many of his tenants(myself included) are struggling to pay the rent, and are giving notice they cannot continue operations. I am pretty certain there will be commercial foreclosures ramping up the next few years. Since you can't live in a commercial piece demand will be low, and banks will be offering firesale pricing, and in house financing to get these off the books. If I can get a fully leveraged break even with a bunch of upside potential, I'm in. Here's hoping it continues to get worse.(It's hard to swallow as I write that, but a true contrarian wants to see it hit the fan.)

Plummeting Tax Refunds, Property Taxes May Be Next Shoe To Drop

Hard to figure out which will have the bigger impact....

1) Delays in getting a tax refund/getting your tax refund in the form of an IOU?

OR

2) Local governments getting swamped by smart people appealing their property taxes?

What to do if you are unemployed

Today's unemployment numbers were AWFUL! 9.6% unemployment rate, but a higher rate of 16.5% if you include people who have given up looking for a job.

The good news is that the media has it figured out and offers this wonderful tidbit of jobs you can get if you are unemployed, including:

1) Become a fake employee

2) Be an actor in a zombie movie

3) Do your best Michael Jackson impersonation

Yes, the financial media is doing a great job indeed....whats next to recommend, become a contrary investment blogger??

Want some good, solid advice? Read Mark Cuban's guide for becoming rich

It's going to hit the fan hard

A scary article from The Market Ticker, As I sit at my car lot with no customers I have time to surf the web and find info like this. Between my personal experiences, and what I see our incompetent government trying to bruch it all under the rug, I can't help but wonder how bad it is really going to get. In order for recovery to begin the bad debts must be cleaned out. This can not end well folks...click on the link to read the whole thing:

Recessions cannot end until the conditions that caused the recession are removed from the economy. This is elementary logic and obvious to anyone with an IQ larger than their shoe size.
For an inventory recession growth returns when enough capacity is destroyed through layoffs and inventory selloffs to bring capacity and demand back into balance. Employers then hire new workers and the economy recovers.
For a credit recession, however, there is a much larger problem: The reason real interest rates went negative is that debt has a carrying cost and consumes free cash flow; so long as the debt taken on in the credit binge remains the cash flow impact also remains.
Default and bankruptcy clears excessive credit (debt) from the system - if it is allowed to occur. But if it is not, then the bad debt remains on the balance sheets somewhere and the cash flow impact remains in the economy. Employment remains weak, capital spending restart attempts falter as demand fails to return and credit quality continues to remain insufficient to support new credit demand.

If ya can't beat em join em

OK Now that I got the anger off my chest, let's figure out how to get paid off the shit coming down the pike. In order to enforce this cap and trade there will have to be inspectors. I would love to bill the govt to be that guy that makes sure all these buildings comply. I guess it's time to start an inspection company that is certified by the government. Cha ching. Instead off getting pissed think contrarian and be the guy that benefits from the trainwreck.

Wild Wild West

Cap and Trade, Wal mart and the government in bed together, and Micheal Jackson is the big headline. It is amazing how stoned the American people are to let this happen!!!!! A power hungry Chicago thug is trying to take over america and we are just rolling over. Who is the government to tell me what improvements I need to make to a home in order to sell it!!!! I'll show them I just won't sell. Next I'll need to be energy efficient to get a simple rental license. Don't get me wrong, I think becoming a green energy efficient world is a key to the long term survival of mankind, however in a land of freedom like America it is supposed to be my choice as to when and how I conform. I should conform because it is economically and morally feasible, not because big brother tells me I have to.

Guess what folks, our broke ass governments can say they are ramming it down our throats, but I can't wait to see them enforce their grand sceme. Local governments are broke, state govts are, and so is our federal government. Why the hell should we listen to an organization that can never run in the black???!!!!!

I need to take care of my own. So if the government wants to play games, i'll create games of my own. If you want to tax the shit of my income, I guess it's time to not let em know what the income really is. Cash is now king. The government would love everything to be on a debit card so they can track it all, and eventually thats the way big brother will roll. Until then an underground economy will arise bigger than ever. Our US dollar may become a joke soon, and if the world decides to stop buying our debt our govt, debt and all their ideas to control the nation. It will become a joke since they won't have the money to enforce their grand socilization, and taxation without representation. Meanwhile pay me in cash baby!

I can tell you that I suddenly have a 25% vacancy factor(wink wink) and I am living barely above the poverty line. In the car business it's cash for everything, I pay my mechanics cash, my customers pay cash, many tenants pay cash. Guess what, cash is real hard to keep track of. If the government wants to bail themseves out on my dime, come try and find it. With the way you have screwed up this country so far,I doubt your good enough to beat me. I've played fair to this point, and you've continued to screw me . Now it's every man for himself. Wild wild west style.