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.