dow jones

Well you don’t have to worry about AIG bringing down the Dow Jones Industrial Average anymore…the Ritz cracker just ate AIG.  Yep, Kraft Foods will replace AIG in the Dow Jones next week.  We’ve gone from insurance to mac and cheese.  At least my 3 kids, all under the age of 4, will be happy.

 

And President Bush attempted to calm markets as well and indicated that the government bailouts of Fannie Mae, Freddie Mac, and AIG were essential to keep the economy sound. “These actions are necessary and important, and the markets are adjusting to them,” the President noted.

 

Adjusting? Panicking seems more like it, huh?

 

Washington Mutual continued to find itself a suitor today, but The Wall Street Journal reported that Citigroup didn’t want to get engaged just yet.  Morgan Stanley is rumored to have been thinking about dating and possibly proposing to Wachovia Bank, but a few Asian banks—and perhaps that Chinese government itself, might come to the rescue of the firm.

 

Politics took center stage today as well.  Republican Presidential candidate John McCain, seeking to put some distance between him and President Bush, said he would fire Securities and Exchange Commissioner Christopher Cox.  The chairman of the SEC serves at the appointment of the president and in my view has betrayed the public’s trust,” McCain stated. “If I were President today, I would fire him.”

 

How does this affect Main Street?  Well money markets are getting a little jittery these days.  These funds invest in short-term corporate and government bonds, but they have taken a hit as of late due to significant redemptions.  The Primary Fund RFIXX went below a benchmark of $1, which meant that if someone held money in these funds they would actually lost money, not make money.  The Primary Fund had around $40 billion in withdrawals since last Friday.  And Putnam Investments said it was now closing its $15 billion Prime  

 

What good news was out there?  In a move reminiscent of the Resolution Trust Corporation (remember the good ole’ days of the S&L Crisis), US Treasury Secretary Henry Paulson is developing up a plan to take the bad debts from banks and investment houses and package them up for an orderly sale.  That sent stocks higher today, with the Dow Jones finishing the day up over 400 points. 

 

So let’s get this straight.  Mom and Pop don’t have much money anymore, but what little money they do have is now losing money in what some folks thought was risk free, a money market fund, for the first time ever.  Major financial institutions like Morgan Stanley and AIG are teetering.  Credit has tightened beyond all recognition and the thought of getting a loan that isn’t government backed is laughable.

 

But I still here from some Realtors that foreclosures are just gonna be here for just another year.  Well, if you think they aren’t here for the next 3 years, in this economy with this type of financial turmoil, you might as well grab some of those Ritz crackers and have a pity party now, because it isn’t going to happen.

 

But it is the single biggest gift many of us will ever be given in our lifetime.  Wherever the public runs one way, I say run the other.  And I have made a lot of money because of it.  When a sink hole drained a local lake in my hometown, where all the fancy houses were located, I made a low ball offer on a house a few days later when everyone was freaking out thinking the lake would be a swamp.  As I type this, I’m staring over a beautiful lake with a magnificent view of the water.   The story is true, by the way… just Google the words “sinkhole McLaughlin buy dry sell high” for a funny story on it.

 

So remember … in this market, you can now buy low, and not sell high, but sell fast.  And that means less risk, less holding costs, and money in the bank.  But you have to do more than read this and agree … you need to take action, too.

 

I’m loving this market more and more each day.  The real estate market, that is.

 

 

Chris McLaughlin

Web: http://www.shortsalesriches.com/welcome

e-mail: info@shortsalesriches.com

Phone: (800) 452-7627

P.S.: P.P.S.: Nathan just told me he will be closing 20 homes within the next 30 days.  Not bad for a kid that was home schooled with no formal education, huh?  All the guys with the fancy education work(ed) at Lehman, Bear Stearns, AIG, Fannie, Freddie, and other banks .. hmm… kinda ironic ain’t it?  Check his secrets out at: http://www.shortsalesriches.com/welcome

P.P.S.: Want to comment on this article?  Go to the blog!  It is located at http://www.shortsalesriches.com/blog. 

Alan Greenspan says that this is a once in a lifetime financial crisis.  Then why is someone I know making more money in this crisis than ever before?  Well, read on …

And I know what you’re thinking.  “What’s it going take to fix this mess?”

I have the answer … and if you’re reading this, you are probably part of the solution.  Read on …because the answer might surprise you!

But first, let’s recap.  The Dow Jones Industrial Average tanked again today.  It wasn’t pretty.  It lost 449 points, or 4.09% of its value.  And Uncle Sam came to the rescue again.

This time, however, it is serious.  Helping Bear Stearns out was one thing.  Giving investor confidence to Fannie and Freddie was another.  But all of a sudden, the perfect storm developed and Merrill Lynch and Lehman Brothers were is trouble.  The bull lost its horns and is now a cow, out to greener pasture somewhere…with plenty of foreclosures around the farm to boot.

Merrill was saved by Bank of America, but Lehman is done and sold some assets to Barclays today.  Now the bloody streets get even worse … Morgan Stanley tanked 25% today.  Goldman Sachs plunged 17% today.  All my buddies from Georgetown are crying.

Why?  Well, the AIG mess is quite a mess.  We’re talking over $1 trillion in assets that almost went on the auction block for pennies on the dollar.  That would spell financial ruin the likes we haven’t seen in a century.  It would make AIG’s 74 million clients a little panicky, too, don’t you think?  AIG still will be selling its assets, but in this case they’ll be doing so to pay Uncle Sam back, rather that giving folks a free to all in a liquidation.   So thanks, USA, for backing AIG with $85 billion.

What happened in real estate today (of course everything that’s happening is related to real estate).  Housing starts for August dropped to 17 ½ year low the U.S. Commerce Department reported today.  The seasonally adjusted annual rate was 895,000, which is off from the estimated 950,000 and represents a 6.2% drop.

But, as long as you are not a homebuilder, we in the real estate world know that this is actually a good sign… meaning that in order to recover, this is the medicine we need.  We need less new home inventory so that we can move more of the existing inventory we have, and to create an equilibrium of supply and demand.  A new house just isn’t going to compete against a bank-owned 2007 or 2006 house that is 30% less than the cost of construction.   Starts on single family homes were 33% below August 2007 levels at 630,000.

Ok, but Chris … you’re the guy that’s screaming that this is the biggest opportunity ever.  So where’s the silver lining you ask?

The Mortgage Banker’s Association reported that loan applications jumped 33.4% to 661.7 just last week, its highest level since May 9, 2008.  This shouldn’t be too much of a surprise because the government bailout of Fannie and Freddie gave more confidence to the market for mortgage backed securities.  So rates dropped.  This is good news for Realtors, good news for lenders…and perhaps good news for new home builders going forward.

And guess what?  When equity markets are awful, and investors are looking for hard assets, where do you think they are going?   Well, precious metals that’s for sure (gold had its best day ever today, up 11% to $80/ounce).  But don’t forget about bricks and mortar.  Some investor pulls out $500,000, does a self-directed IRA into real estate, and gets a 10% return on the cash just based on rents alone.  Then they get the upside.

I’m telling you.  Read me loud and clear: when financial markets plunge, the real estate market will be the beneficiary.  Just watch.  Or better yet, start taking action!

So who gets us out of this mess?  You do.  If you’re reading this, you’re probably a real estate agent or investor.  Once you get going, and do your thing, and start telling people that the real estate market is A LOT more stable than the stock market, you’ll begin to make sense.

And guess what else?  Banks are tanking.  They have to unload nonperforming assets. So short sales will become easier.  REO’s will become plentiful.  And realtor bank accounts will start filling up, not depleting.

So hang in there.  Sure it is painful for your 401(k), but you better be able to make it back in spades with the opportunity you’ve got in front of you.

Go for it!

Chris McLaughlin
Web: http://www.shortsalesriches.com/welcome
(800) 452-7627

P.S.: Thanks to many of you who have e-mailed us giving glowing reviews for including the CDs in the Short Sales Riches packet you recently got.  Yep, we threw that in at no extra cost because we want you to be able to not only read it, but live it.  And when you hear Nathan and I talking about how to make money in this market it all starts coming together, doesn’t it.

P.P.S.: Nathan just told me he thinks he’ll make $160,000+ this month.  Not bad for a kid that was home schooled with no formal education, huh?  All the guys with the fancy education work(ed) at Lehman, Bear Stearns, AIG, Fannie, Freddie, and other banks .. hmm… kinda ironic ain’t it?  Check him out at: http://www.shortsalesriches.com/welcome