big 3 bailout

Another Bailout: Bush Gives $17 Billion to Big 3 Auto

by Chris McLaughlin on December 19, 2008

Mid-Day Market News & Commentary by Chris McLaughlin, December 19, 2008
http://www.shortsalesriches.com/welcome.html

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President George Bush decided to throw out a lifeline to the automakers, a possible retreat from his “orderly bankruptcy” comments yesterday. Bush noted that with the country in a severe recession, “Allowing the auto companies to collapse is not a responsible course of action.” Bush has approved $17.4 billion in rescue loans, part of which comes from the $700 billion TARP, with the government having an option of becoming a stockholder in the automakers.

Now on to real estate investing education …

Do You Hear What I Hear?

During this most festive of holiday season, the sound of “cha-ching” normally rings just as loudly as that of the carolers and party-goers but this year is different. In fact, instead of singing and the sound of cash registers ringing the average short sale investor is more likely to hear wailing and gnashing of teeth from investors both near and far as the Federal Reserve reports that Americans have lost $2.8 Trillion in Net Worth…since last quarter!

Meanwhile, charge-off and delinquency rates for residential real estate loans have reached 1.45 for all banks and a whopping 1.66 for the 100 largest banks. Delinquency rates for residential real estate have now surpassed 5.08 for Q3 of 2008; the highest rate for residential real estate in over 25 years. With the economic news at home sounding so lackluster, it might lead some to seek returns in the foreign exchange markets. So, should potential short sale investors sink funds into global money market accounts or continue to pursue opportunities here at home in the current “buyers market” for real estate?

If the news domestically is hard to hear then consider the global perspective; entire nations are going bankrupt. Iceland, Hungary, the Ukraine, Pakistan and others are either facing bankruptcy or in the midst of a massive bail-out by the International Monetary Fund (IMF). Lest you think “it can’t happen here” consider this; Argentina went bankrupt as recently as 2001 as did Russia in 1998. Once an economic powerhouse, Germany has gone bankrupt twice in the recent past including 1923 and 1945. With interest rates in excess of 20 percent, Argentina is attempting to inspire investors to take a chance on investing in their nation; to date, there has been an apathetic response at best.

According to Stephen Jen, a currency specialist with Morgan Stanely, a 1 percent drop in growth could reduce the flow of capital to “threshold countries (those in a financially precarious situation) by more than half! Should this transpire, the IMF would not have enough reserves to “bail-out” each individual nation resulting in Argentina style cycle of events including frozen bank accounts, withdrawal caps, hyperinflation and social unrest. Dare to guess which nation “guarantees” the IMF slush fund should it run dry? Yep-the good ole USA. So much for “Plan B”. As these threshold nations face economic disaster, the trading partners and surrounding nations would be exposed to further strain…setting the stage for a global economic meltdown.

Experts such as Nouriel Roubini are already calling for the most severe global crisis since the Great Depression while others like Ron Paul are openly questioning the Federal Reserve about contingency plans in the event of global economic collapse. Plain and simple; fiat currency around the world is risky business even with the prospect of double digit returns. On the other hand, real estate has historically fared well even during dollar devaluation.

Five Favorite Facebook Tips to Build Your Short Sale Empire

Whether you are a novice real estate agent or veteran short sale investor you probably realize the power and influence the Internet holds in building your success. With over 80 percent of buyers beginning their search online, the Internet is a vital tool that few can afford to ignore. However, when it comes to the use of social media applications, far fewer people understand how to put these powerful resources to use for more than just socializing. The fact is, with a little tweaking and adjusting, Facebook and other social media sites have the potential to provide powerful – and free- tools to help with your day to day business or investing needs.

Contrary to popular opinion, Facebook isn’t just fourteens; here are some of the best business applications you can use to build your short sale empire:

1. Demographic Research. This little known Facebook nugget is a fun twist to standard demographic research. Find the Facebook “Insight Corner” to locate advertising information and find out how many people reside in a specific zip code or other identified demographic data.

2. Syndicate Yourself. Set up a Facebook page then import the RSS feed from your blog to the notes application and distribute to all your friends and associates.

3. Send Video Messages. Showcase homes, send out a video blast of recent news or simply make a personalized greeting. It’s a simple, personalized and cost effective way to make a big impression with a small budget.

4. Collaborate. Combine Facebook with Google documents to collaborate in a secure environment. Share everything from text to excel spreadsheets with ease while tracking changes, making comments and sharing information.

5. Picture It! Use the mobile application to upload photographs from your cell phone automatically. It’s a great way to capture information on prospective short sale properties on the spur of the moment or simply share information with others in real time.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/blog

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Mortgage Rates Hit a 4 Year Low As Short Sale Investing Gets More Fun!

by Chris McLaughlin on December 12, 2008

Mid-Day Market News & Commentary by Chris McLaughlin, December 12, 2008
http://www.shortsalesriches.com/welcome.html

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The good news keeps coming for mortgage rates: they hit a 4 year low at 5.47% and then dropped further to 5.33% yesterday, with no points or origination fees. The new rates have encouraged fence sitters to jump off and begin making purchases, and loan officers have reported a bounce in mortgage applications as well.

Bank of America announced late yesterday that it would be giving pink slips to over 35,000 employees as it finalizes its merger with Merrill Lynch. The reduction will account for approximately 10% of the combined companies’ total employee base. The announcement comes on the heels of a similar one from Citigroup, which announced last month that it would eliminate 52,000 jobs, or about 15% of its total workforce.

And in a sign of the greedy times on Wall Street, get this: the former Chairman of the Nadaq Stock Market was arrested for what investigators have described as a “stunning fraud that appears to be of epic proportions.” The fraud is estimated to be a “50 billion Ponzi scheme,” where the assets that Mr. Madoff would tell his investors about actually didn’t even exist. I wonder whether Madoff will ask the Treasury for a bailout? Think about it … banks lied about the value of their mortgage bank securities and induced people into loans they weren’t suited for, so why given them money and not Madoff? Ok, I’m just kidding but you get the point!

And in the latest on the Big 3 Bailout, it appears that Congress hit a snag and can’t come to agreement … so the Bush Administration is reversing course and now suggests that the money might be able to come from the $700 billion TARP. “Under normal economic conditions we would prefer that markets determine the ultimate state of private firms,” White House press secretary Dana Perino stated. “However, given the current weakened state of the US economy, we will consider other options if necessary, including use of the TARP program to prevent a collapse of troubled auto makers.”

Now, on to our topic of the day: Recession, Depression, Inflation, Deflation…What’s it all About and How Does it Impact Real Estate?

Ronald Regan once stated “A recession is when a neighbor loses his job. A depression is when you lose yours. If we were to apply the same logic to the real estate market, then the nation has been in the midst of a recession for some time as people have been steadily losing (or walking away from) their homes. In fact, there is a great deal of recent debate on whether the nation is already in a recession and heading for a depression or whether the easy money economics of the Federal Reserve will prevent a depression at the risk of creating further inflation…or perhaps world-wide deleveraging will actually result in massive deflation instead. Let’s take a few moments to examine real estate in each of the above scenarios’…

Recession. Unlike employment figures (or stocks), real estate doesn’t act the same as jobs during a recession. When a worker loses a job the position may be completely eliminated (or the stock completely wiped out). When someone loses a house it reverts back to the prior owner, heirs, bank or local government. Short sale buyers realize the inherent value in the home or property and act like a middle man to obtain a percentage of that value for themselves in the form of resale, rentals or retained equity.

Depression. During a depression the entire economy may slow down so much that little to nothing is being produced. Job loss often runs rampant as prices drop below the cost of production. Unemployment drives labor costs down – creating a downward spiral as unemployed workers are unable to afford more than the basic necessities. Again, jobs and stocks alike may all but disappear during a depression but a house remains standing. Housing is a basic necessity and tends to take top priority even during the most critical economic crisis.

Inflation. Inflation tends to drive the price of all commodities and assets higher as the replacement cost rises; real estate is no exception. With the Federal Reserve practically printing money out of thin air, the ability to own or control physical assets with a fixed rate of interest is often the best way to preserve wealth during periods of escalating inflation. On the other hand, the increased cost of production and labor often leads to more work for less pay among employees.

Deflation. Falling assets prices and world-wide deleveraging tend to drive down the price of commodities and assets including real estate. However, short sale buyers are often purchasing property at or near the fully depreciated value. Even those who experience further price drops still have other options available to bridge the gap until the market recovers; rentals, owner financing and factoring may each help raise needed capital or reduce individual debt repayments until the property has regained full value.

Another Bailout: Bush Gives $17 Billion to Big 3 Auto

Mortgage Rates Hit a 4 Year Low As Short Sale Investing Gets More Fun!

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