general motors

Smart Real Estate News & Commentary by Chris McLaughlin October 12, 2010

Forward this e-mail to your friends! 

Then they can subscribe directly at the following link: 

http://www.smartrealestatenews.com/ 

*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com 

*** Follow Chris on Twitter–> http://www.twitter.com/mclaughlinchris

**********************************************************

EMERGENCY WEBINAR: What’s going on with servicers halting

foreclosures, and how does this impact the real estate investing

community? 

Join Attorney and Real Estate Broker Chris McLaughlin this Thursday, October 14th at 2 PM ET, 11 AM PST:

https://www2.gotomeeting.com/register/495865914

*********************************************************

JPMorgan expanding mortgage review

In September, Chase announced a review of 56,000 foreclosure cases in 23 states that require a judge to sign off on a foreclosure. The recent move expands the inspection to states that do not require judicial approval.  Under the latest expansion, the foreclosure process will continue while documents are being examined, expected to take a few weeks.  In the initial review, Chase requested that the courts not enter judgments until completion of the audit. Without a judgment from a court, those homes cannot be sold.  The initial review was announced after the lender discovered that its employees may have signed affidavits on the basis of reviews done by other personnel.

In those 56,000 cases, JPMorgan Chase has asked its local foreclosure attorneys to communicate to courts, affected homeowners and their lawyers. The notification process is underway, a company spokesman said.  Banks have come under increasing pressure from lawmakers in recent weeks to review foreclosures or to expand existing reviews.  On Friday, Bank of America announced it was halting foreclosure sales in all 50 states as part of a widening investigation into flaws in the process. The bank said the foreclosure process on delinquent borrowers will continue, but it will not proceed to judgment or a foreclosure sale.  Ally Financial, previously known as GMAC, the finance arm of General Motors, has said it is temporarily suspending evictions and post-foreclosure closings in states that require judicial review while it conducts a review of documents.

I’ll be covering this mess in detail this coming Thursday at 2 PM ET, 11 AM PST:

https://www2.gotomeeting.com/register/495865914

Job losses worse than we thought

The government currently estimates that 2.2 million jobs were lost from April of 2009 through March of this year, a significant portion of the 7.8 million jobs lost since the start of 2008.  But in a little-noticed note at the bottom of September’s jobs report, the Labor Department said it now appears there were 366,000 additional jobs lost during the 12 months that ended in March, a revision that is not yet included in the official numbers.  During the 12-month period that ended in March, that so-called birth-death adjustment added 336,000 jobs to overall total payrolls. 

The birth death adjustment also resulted in an estimated 682,000 additional jobs in the six months since March, although unlike the widely-reported monthly job readings, that gain is not seasonally adjusted. Still it is significant, accounting for more then 40% of the job gains reported since the spring. “The birth-death model isn’t working,” said Robert Brusca of FAO Economics. “As businesses are having trouble getting credit, it’s not surprising.”  “Around turning points, the revisions tend to be larger,” said Lakshman Achuthan, managing director of Economic Cycle Research Institute. “At the bottom of the cycle, they tend to underestimate the job losses.”

A U.S.-wide foreclosure moratorium would be “catastrophic”

The Securities Industry and Financial Markets Association said foreclosure processing mistakes should be fixed but warned against dramatic nationwide action.  “It is imperative, however, that care be taken in addressing these issues to ensure that no unnecessary damage is done to an already weak housing market and, in turn, that there is no further negative impact on the economy,” SIFMA Chief Executive Tim Ryan said in a statement.  On Sunday, White House adviser David Axelrod said he was “not sure” about a national halt to foreclosures.  Disclosures that some big mortgage processors filed affidavits without proper scrutiny in thousands of foreclosure cases has drawn anger from Congress and advocacy groups, with some prominent lawmakers calling for foreclosures to be halted in all 50 states.  The health of the U.S. housing market is a key concern.  Politicians are acutely aware of voter anxiety as the congressional election looms on Nov. 2 and regulators are under heavy pressure to prevent a repeat of the 2007-2009 financial crisis that began when the U.S. housing bubble burst.

2010 deficit at $1.3 trillion

The Treasury Department will deliver the official deficit numbers later this month, but according to preliminary estimates released by the Congressional Budget Office, the federal government ran a deficit of nearly $1.3 trillion in the fiscal year that ended Sept. 30.  According to CBO, the fiscal year 2010 deficit came in $125 billion below last year — the worst on record since World War II.  On the tax front, corporate revenue rose by $53 billion, or 39%, from 2009. Stronger corporate profits were the result of improved economic conditions and more generous rules for writing off business expenses.  The Federal Reserve’s investments in the housing market and other areas of the economy also paid off for Uncle Sam. Receipts from the Fed to the Treasury rose $42 billion, or 121%, over 2009. 

Overall government spending fell. The costs of the Troubled Asset Relief Program, which just ended, and payments to mortgage giants Fannie Mae and Freddie Mac declined. The same is true for funds spent on federal deposit insurance.  But other than that, the CBO reported, spending rose at a faster pace — 9% — than it has in awhile. Much of that increase was due to greater spending on the unemployed, on benefits for Medicare, Medicaid and Social Security and various provisions in the 2009 Recovery Act.  The federal cost of benefits for the jobless alone rose by 34% as the economy continued to suffer high rates of unemployment.  Interest payments on the debt also rose 13%.

Record number of foreclosures in Washington, Oregon 

A record number of properties were foreclosed in Washington last month with 2,007, which is up 55.2% from year ago and 19% higher than August, according to Foreclosureradar. The company said just 7.3% of the foreclosures were sold to third-parties, with the rest going back to the bank and pushing REO inventory up nearly 11%.  Foreclosure sales in September also rose in Oregon with an 18.5% jump to a record 967, which is almost 90% higher than the year earlier. Nevada’s sales of foreclosures increased 39.2% last month from August.  Meanwhile, the bank-owned, or REO, inventory in Arizona and California continues to increase, as fewer foreclosed homes are being purchased by investors. Foreclosureradar said the number of foreclosed properties acquired by third parties fell 15.6% in California last month.  “Most foreclosure investors flip the properties they purchase after taking care of title, occupancy and repairs,” the company said. “This process is taking 44.5% longer [in California] than it did a year ago, up from 95 days to 137.”  Arizona’s REO inventory has climbed steadily for a year, rose 4.2% in September, and is now 68% higher than a year ago, according to Foreclosureradar. 

The real estate data firm has been tracking foreclosure rates in California since March 2007, and recently began offering data for Arizona, Nevada, Oregon and Washington.  Foreclosureradar said its analysts have yet to see any impact from the foreclosure moratorium in the states it tracks because they don’t handle foreclosures through the courts.  “We regularly see lenders make minor mistakes in foreclosure filings” founder and chief executive Sean O’Toole said. “But the reality is that far more homeowners are behind on their mortgage payments than are even in foreclosure. The clear problem in the housing market today is not foreclosures, but negative equity; and as long as the focus remains on the symptom rather than the disease we will see little progress towards real solutions and this crisis will drag on for years to come.”

Small business optimism up

The National Federation of Independent Business (NFIB) said its optimism index edged up 0.2 points to 89.0 in September — the latest sign of sluggishness in the U.S. economic recovery.  Boosting the index, the number of firms reporting increases in capital outlays in the last six months rose to 45 percent, up 1 percentage point from a month earlier but still near a 35-year low, the NFIB said.  “The downturn may be officially over, but small business owners have for the most part seen no evidence of it,” said William Dunkelberg, the group’s chief economist.  The U.S. recession ended in June 2009 but the recovery slowed dramatically in the second quarter.  Investors bet the Federal Reserve will pump billions of new dollars into the economy soon to spur growth.  The NFIB poll showed 16 percent of small businesses plan to cut jobs over the next three months, up from 13 percent in an August survey 

Now for our real estate education section…

Nixing the Fix?

On October 7th, President Obama announced his intent to veto the foreclosures document bill which could potentially help restore some semblance of balance to the current crisis involving the robo-signing scandal. Advocates of Obama’s position claim it would lead to increased numbers of foreclosures and greater potential risk of banking abuse or irregularities in an already abusive system. Critics say the bill was urgently needed to curb the rising backlog of homes and prevent a complete meltdown of an already stressed system due to the foreclosure moratorium. Who is right and what are the stakes if Obama is wrong?

In a Nutshell

The law was originally proposed in April of 2005 by Rep Robert Alder of Alabama in order to allow states to recognize the authority of foreclosure documents from one state to another. It was currently revitalized in response to the robo-signing crisis. President Obama intends to use a pocket veto to nix the proposed fix.

More Than What Meets the Eye

The question of whether or not this is the correct course of action is exacerbated by President Obama’s timing; according to political experts, a pocket veto can only be used when Congress is out of session however, the Senate is not yet adjourned. Critics point to the irony of using yet another “technical irregularity” as a proposed method of solving the original one.

Right or Wrong?

Setting the legal and technical issues aside for just a moment, the most urgent question is whether or not the proposed legislation would curb the tidal wave of documentation irregularities that have resulted in a near stand-still of foreclosures in half the nation. By signing the bill, President Obama would open the door for states to recognize the documentation from state to state and therefore help expedite the processing of an already huge backlog. Critics claim irregularities are prevalent and automatic approval would be less likely to recognize – much less correct – faulty processing and leave little room for appeal. Who are the winners and losers? It depends on who you ask or believe but unanticipated consequences are a very real threat including:

Distressed Homeowners – Despite the claim that the bill is intended to help homeowners, they may find little comfort in a more rigorous process given the already extended delays and moratorium on current foreclosures. Experts agree it is unlikely the technical difficulties are likely to result in any real changes to the default status of the homeowner but rather a more extensive process.

Banks and Investors – Investors are likely to react negatively to the news that an end to the real estate crisis isn’t in sight and may actually grow worse. Once again, government intervention is skewing the “invisible hand” toward a direction that many disagree with. Banks, already reeling from the burden of bad loans and depressed portfolios, are likely to suffer extensive setbacks while attempting to process this new batch of butchered loan documents. Lenders may soon be required to mark down the value of bad assets resulting in insolvency for borderline banks.

HOA & County Government – Improper documentation has resulted in homeowners not having been removed from the tax rolls in many states, leaving them financially liable for property taxes yet unaware or unable to respond. HOA’s are already suffering from a loss of income and likely to see even longer delays due to documentation issues. Empty homes are becoming a source of blight in many communities even before the impending moratorium. More empty houses are simply expected to worsen an already bad situation.

The Bottom Line: Short sales are an increasingly attractive alternative for desperate homeowners and banks alike. Rather than see this as a set-back, savvy short sale investors should learn to recognize the opportunity and move on it sooner rather than later!

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

http://www.smartrealestatenews.com (subscribe to this newsletter)

*************************************************
About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com

Smart Real Estate News & Commentary by Chris McLaughlin August 19, 2010

Forward this e-mail to your friends! 

Then they can subscribe directly at the following link: 

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com 

*** Follow Chris on Twitter–> http://www.twitter.com/mclaughlinchris

**********************************************************

Fix A Flip Re-Opens … all new content, all new case studies.  This is

one webinar that you don’t want to miss!

When: Thursday, August 19th at 8:30 PM ET, 5:30 PM PST

Where: https://www2.gotomeeting.com/register/618365627

**********************************************************

Homeowners pessimistic

According to the Zillow Second Quarter Homeowner Confidence Survey, U.S. homeowners were less confident about the value of their homes in the second quarter, with one-third believing home prices had not yet reached a bottom.  Homeowners were more pessimistic about the short-term future of home values in their local market than they had been in the previous three quarters, with 33% believing home values in their local housing market had not yet reached a bottom, while 38% believed they had already reached a bottom.  Nationally, 28% of homeowners said home values in their local real estate market would decrease in the next six months, up from 20% in the first quarter.  Additionally, less than one-third, or 30%, believed home values in their local market would increase, down from 42% in the first quarter. 

Zillow said less than a quarter, or 24%, of homeowners said their home had increased in value in the past year, compared with 27% in the first quarter. In reality, 34% of homes increased in value in the second quarter, according to the Zillow Q2 Real Estate Market Reports.  27% of homeowners believed their own homes’ values would increase in the next 12 months, 35% believed they will stay the same, 12% expected a decrease and 26% did not know.  Of those who expected their homes’ values to increase, the median expectation was a rise of 6%, although that varied by geography.   Despite the increasing pessimism, a large number of homeowners were anxiously awaiting the opportunity to sell. Indeed, 5% of U.S. homeowners said they were very likely to put their home on the market in the next six months if they saw signs of a real estate market turnaround.  Zillow said this translated into 3.8 million homes with the potential to come into the market. By comparison, 5.2 million existing homes were sold in all of 2009.  “As these homeowners hear news of stabilization in home values, they put their homes on the market, driving up inventory and keeping a cap on home value appreciation,” Humphries said.

Jobless claims jump

The Labor Department says that initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 500,000 in the week ended Aug. 14, the highest since mid-November.  Analysts polled by Reuters had forecast claims slipping to 476,000 from the previously reported 484,000 the prior week, which was revised up to 488,000 in Thursday’s report.  The four-week average of new jobless claims, considered a better measure of underlying labor market trends as it irons out week-to-week volatility, rose 8,000 to 482,500, the highest since early December.  The number of people still receiving benefits after an initial week of aid fell 13,000 to 4.48 million in the week ended August 7 from an upwardly revised 4.49 million the prior week. Analysts polled by Reuters had forecast so-called continuing claims rising to 4.50 million from a previously reported 4.45 million.  The insured unemployment rate, which measures the%age of the insured labor force that is jobless, was unchanged at 3.5% during that period.  The number of people on emergency benefits increased 260,105 to 4.75 million in the week ended July 31.

Olick – Refi boom could break smaller banks

” To summarize, refinance applications are way up, up 17%, while purchase applications are on life support, down 3.4% from the previous week and down nearly 39% from a year ago. Refis now make up a full 81.4% of all mortgage applications, up from 78.1% the previous week, and at their highest level since January of 2009.  With home prices way down and mortgage interest rates hovering near record lows, you would think more buyers would get off the fence and sign a contract, but continued weak consumer sentiment is hold them back. You would also think that the bright side to all this is that all this refinancing is putting more money in the average, struggling American’s pocket. 

But then I read this note from FBR’s Bob Ramsey, who believes the rate on the 30-year fixed could go as low as 4%, with the following implications:  ‘If rates continue to fall, a refi boom could swamp banks and thrifts with cash flows with no obvious place to invest. With newly issued agency MBS yielding approximately 3.5%, banks and thrifts face considerable reinvestment risk.’  Thrifts, he says, are better positioned to handle the risk than regional banks, because, ‘better efficiency provides a significant buffer to weaker revenues.’  The less efficient regionals, he says, are most at risk and adds:  ‘Further, if rates remain low for an extended period, we would expect an increase in bank M&A activity as challenging prospects convince some to sell, and others choose to consolidate and grow earnings by cutting duplicative costs.’  I had thought that most borrowers who could had already refinanced by now, but he says that, for some unknown reason, is not the case.  “We believe approximately half of conforming borrowers have both the economic incentive and equity to refinance.”  It seems that in today’s housing finance market, for every upside, there is a downside.

GM tries to break away from the government

General Motors Co. filed registration papers Wednesday for an initial public stock offering, laying the groundwork for the car maker to begin cutting its ties to the U.S. government, its majority owner.  GM outlines a business plan that intends to leverage its massive global scale, strength in fast-growing emerging markets such as China and a balance sheet cleaned up by Chapter 11. At the same time, the company warns it faces many risks, such as continuing losses in Europe and a significant underfunding of its pension obligations.  GM’s plan to return to the public markets includes preferred stock, which the company will sell to raise funds, along with common shares, which will be sold exclusively by some of GM’s current shareholders, including the U.S. government. The company said no dividend is currently planned to be paid on the common shares. 

The IPO will allow the U.S. Treasury to begin selling the 61% stake it holds in GM after last year’s $50 billion U.S. government bailout of the company.  Another holder of GM shares, the United Auto Workers, also is expected to sell some of its stock during the IPO, according to people familiar with the situation.  The IPO, expected later this year, is anticipated to raise $10 billion to $15 billion but possibly more. An expected price range for the shares will be determined closer to the sale.  For the government to recoup its full investment GM must achieve a stock-market value of $70 billion—10 times GM’s market capitalization before the company headed into bankruptcy-court protection in June 2009, and at least $30 billion more than the market value of Ford Motor Co.

Now for our real estate education section…

Best Real Estate Resources You Never Knew Existed

By now everyone has heard of Zillow but when it comes to serious real estate related research, here’s how to find the best of  the best…the type of data the experts use to create those ground-breaking reports and hard hitting case studies. Whether you are working on your next commercial enterprise or simply want to stay abreast of the latest and greatest real estate related information, tap into sure-fire resources to access the best data available.

1. Put a Ph.D to work. Search thousands of doctoral dissertations to see who is working on relevant housing and commercial development related projects. Sponsored by the Office  of University Partnership and the US Dept of Housing and Urban Development, this is a goldmine of research:

http://www.oup.org/ddrg/ddrg_profilesearch.asp

2. Free Information resources. Need a few good resources but don’t have the time or money to hire a writer? Use these free foreclosure related resources to educate consumers and help them make informed decisions about the best course of action when it comes to keeping, selling or buying a home. Produced by the Making Home Affordable Program in conjunction with HUD, they are designed for maximum readability in both spanish and english.

http://portal.hud.gov/portal/page/portal/HUD/topics/avoiding_foreclosure

3. Social Media & Uncle Sam – Your good old Uncle Sam has finally taken the plunge and is now available via Facebook and Twitter. Find out about the most recent research, grant and tax credit opportunities, new programs and much more with instant updates via your favorite social media site.

http://www.facebook.com/pages/Washington-DC/HUD-USER/183685747712?v=wall

http://twitter.com/HUDUSERNEWS

4. Taxing Tips – It’s a topic we would all rather avoid but make it as painless as possible by tuning in for great tips right from the source. IRS.gov has it’s very own real estate tax center…a topic of profound importance to every real estate investor.

http://www.irs.gov/businesses/small/industries/article/0,,id=185194,00.html

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

http://www.smartrealestatenews.com (subscribe to this newsletter)

*************************************************
About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Real Estate News & Commentary by Chris McLaughlin, April 27, 2009
http://www.shortsalesriches.com/welcome.html

——–

No money, no credit – but an honest desire to succeed? 

That’s all it takes to get into the lucrative business of

finding and reselling short sale properties.  We’ve had

people go from zero to six figures in less than six months! 

 

See if there’re any spots left for this webinar this

Tuesday at 8:30 PM ET, 5:30 PM PST:

 

https://www2.gotomeeting.com/register/500640410

———

 

Housing messages mixed

 

The Obama administration keeps telling us things are looking up, but the real players in both the economy and real estate are all over the map in both results and predictions.  The National Association for Realtors has pulled together some of those confusing housing indicators from last week:

 

- The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, reported that home prices rose 0.7 percent from January to February 2009. 

- The February 2009 RPX Monthly Housing Market Report said home sales increased month over month in 22 of 25 key metropolitan statistical areas and 13 of these areas posted the largest gain in February 2009 since 2006.

- The National of Association of REALTORS® reported that existing home sales dropped in March 2009, and median prices fell 12 percent from a year earlier.

- First American CoreLogic announced that national housing prices declined 12.2 percent in February from a year earlier and have been in decline for 24 straight months.  It predicted that home prices would continue to decline through 2010.

 

Clarification or more mixed messages?

Just to keep up the confusion by trying to explain it, The National Association of Home Builders reported that production of single-family homes is unchanged, despite falling housing starts.  “Today’s numbers are right on target with NAHB’s forecast, which anticipates that housing starts will bottom out in the second quarter, after new-home sales have stabilized,” said NAHB Chief Economist David Crowe.  “Single-family starts remained virtually unchanged over the past three months, indicating that we are closing in on a bottom.  Multifamily starts – which tend to bounce around from month to month — were responsible for the decline in total starts as they readjusted following a substantial gain in February.”  But he warned, “A substantial recovery in housing of the kind that’s required to help get the national economy back on its feet will not happen until the logjam in acquisition, development and construction financing has been broken.

 

Swine Flu hits the market

World stocks tumbled after seven weeks of gains, and both oil and the euro fell on Monday as concerns intensified the spread of swine flu would hit the global economy.  Mexico seems to be the center of the outbreak, although cases have spread to countries around the world.  As many as 103 deaths in Mexico are thought to have been caused by swine flu, CNN reported.  In the United States, the largest number of cases has been reported in New York City.  “The swine flu seems to be one of those ‘Black Swan’ events that has caught the market by surprise.  This is a concern as to whether it might impact any potential…recovery chances,” said Martin Slaney, head of derivatives at GFT Global Markets.  The MSCI world equity index fell 0.7 percent.  The U.S. government plans to issue a travel warning later Monday urging Americans to avoid all “nonessential” trips to Mexico because of an outbreak of swine flu, a U.S. official said.

 

GM slashes jobs, debt, and dealerships

In its latest bid to stay out of bankruptcy, General Motors announced plans to drop Pontiac, cut 23,000 U.S. jobs by 2011, and slash 40% of its dealer network.  GM is also offering bondholders 225 shares of its stock for every $1,000 it owes the bondholders in principal.  GM’s first plan was turned down by President Obama’s auto industry task force in February, but this restructuring announcement goes much further. 

 

The company had announced many of the job cuts in February, but Monday’s news that GM would have about 38,000 hourly U.S. employees by 2011 represents an additional reduction of 7,000 to 8,000 jobs beyond what GM disclosed in its previous viability plan.  The Obama administration’s task force said today that the new plan “reflects the work GM has done since March 30 to chart a new path to financial viability,” but added that it “has made no final decision regarding the treatment of its current loan to GM or with respect to any future investments in the company.”  Not exactly a rousing endorsement, is it?

 

 

Wall Street Journal explodes at regulators

In perhaps its harshest language yet, the Wall Street Journal takes a crack at mismanagement by Paulson and Ben Bernanke.  Here’s how the article opens:  “The cavalier use of brute government force has become routine, but the emerging story of how Hank Paulson and Ben Bernanke forced CEO Ken Lewis to blow up Bank of America is still shocking. It’s a case study in the ways that panicky regulators have so often botched the bailout and made the financial crisis worse.  In the name of containing “systemic risk,” our regulators spread it. In order to keep Mr. Lewis quiet, they all but ordered him to deceive his own shareholders. And in the name of restoring financial confidence, they have so mistreated Bank of America that bank executives everywhere have concluded that neither Treasury nor the Federal Reserve can be trusted.”

 

Now on to our real estate investing education section…

 

Derivatives – The Next Shoe to Drop?

 

About the time short sale investors have started to grow weary of watching the evening news a new economic threat is beginning to rear its ugly head – derivatives. While most of the media has been content to talk about falling real estate prices (which are beginning to look good in comparison to other investment options), faltering currencies, corporate bankruptcies and bail-outs only the most fearless dare to mention what is on everyone’s mind…the dreaded derivative market.

 

To get a perspective on the situation consider these startling facts:

The total value of residential real estate in the United States is estimated to be roughly $10 Trillion.  

 

The annual GDP of the USA is roughly $15 Trillion.

 

The global GDP for the entire world is roughly $50 Trillion.

 

The total value of all real estate in the entire world is roughly $75 Trillion.

 

The derivative market is roughly $516 Trillion…excluding private transactions between non-reporting entities.

 

Obviously the problem is huge which is one reason big banks are eager to settle the real estate related problems as soon as possible in order to position themselves – with cash in hand – for the next stage of the economic playbook. By now there should be one burning question on the minds of every savvy short sale investor; “Which banks are heavily invested in derivatives?”…well, that is a good question and one in which we have an answer. In order of shock and awe are the derivative investments of some of the biggest names in the banking industry as of the end of 2008 as represented by a percentage of their risk based capital is as follows:

Wachovia: Approximately 53 percent

 

Bank of America: 194 percent

 

Citibank: 258 percent

 

JPMorgan Chase: 430 percent

 

HSBC: 595 percent

 

Scary isn’t it? This means that for every dollar of capital held by HSBC, they have nearly $6 of exposure to the derivative market however, all of these banks are above the suggested maximum of 25 percent exposure so at what point does it even matter? This type of scenario is what has many economic experts calling for the end of the historic strategy of buying and holding stocks, bonds and even dollar based currency for the foreseeable future as one bubble after another continues to burst.

 

Remember, the entire global GDP is only $50 trillion….which would not even be enough to “bail-out” Citibank alone should the derivative market collapse. Now ask yourself, where do you intend to park your hard earned money over the coming years? Stocks? Bonds? Currencies backed by governments forced to bail-out one bad investment after another?

 

How about putting it into the one tangible asset that provides the fundamentals required for a great return, flexible financing, long term tax breaks and a historical precedent unlike all others…real estate. The choice is yours – listen to the same media pundits that lead you down this path and believe the rhetoric about the market moving upward or cash out while you still can and invest in something safe for the long haul. Just remember, when the derivative shoe finally does drop…you heard it here first.

 

See you at the top!

 

Chris McLaughlin

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

 

P.S.

 

Don’t miss our webinar Tuesday night at 8:30 PM ET, 5:30 PM PST:

 

https://www2.gotomeeting.com/register/500640410

 

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

http://www.shortsalescoach.com
http://www.shortsalesriches.com
http://www.reomillionaireclub.com 
http://www.sixfigurebpo.com *************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…

http://www.shortsalesriches.com/blog

*************************************************

About the author:

 

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

 

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month

   * Long-time authority on real estate investing
      and rapid flipping of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties

    * Owner and Supervising Broker of one of Florida’s
     largest Real Estate firms, running 4 different
     offices, supporting nearly 450 agents, uniquely
     positioning him to help thousands of investors
     make money in the biggest market opportunity ever!

     * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building

     * On twitter: http://twitter.com/mclaughlinchris
     * On facebook:

http://www.facebook.com/addfriend.php?id=709199143

—

Real Estate News & Commentary by Chris McLaughlin, April 7, 2009
http://www.shortsalesriches.com/welcome.html

——–

“2 Careers That Boom in a Recession!”
I’ll tell you about one of these for fr*ee
in my no-charge, no-cost, no-obligation
webinar right here at on Tuesday:

 

https://www2.gotomeeting.com/register/798281842

 

Why would I do that for no charge?  Because
I want a chance to tell you about the other
high-income opportunity, too.

 

And I can’t do it in an email.

 

But if you’re finally ready to blast out of
this economic mess, then get a move on… I’d
hate for you to miss out, because we always fill
up a day or so early.  See if there’re any spots
left for this webinar tonight at 8:30 PM ET, 5:30 PM PST::

 

https://www2.gotomeeting.com/register/798281842

———
Markets down

Aluminum giant Alcoa will kick off the dreaded next corporate reporting period after the markets close today.  Alcoa earned 44 cents per share a year ago, but it’s expected to have lost 57 cents per share this period, according to analysts surveyed by Thomson Reuters.  The markets are girding their loins in anticipation or, more exactly, running away fast, if today’s opening is anything to go by.  Asian stocks finished lower, and European markets were down in afternoon trading.  The Dow Jones industrial average, Standard & Poor’s 500, and Nasdaq 100 all opened lower for the second day in a row.  Anthony Conroy, head trader at BNY ConvergEx Group helpfully pointed out, “We must maintain some semblance of confidence in the economy.  There’s this tremendous amount of nervousness, and this nervousness breeds volatility.”  Really?  When did that start happening?

 

Crackdown on scams

Hard times always brings out the scammers, and this one is no exception. 

According to the Department of Housing and Urban Development (HUD), a multi-agency crackdown is set to target real estate scams and frauds, as well as bolster state and federal action and efforts to protect homeowners.  An online survey by the FTC found 71 distinct companies running suspicious ads, and a Treasury committee found nearly 180,000 fraudulent mortgage reports.  The FBI is currently investigating more than 2,100 mortgage fraud cases, up 400 percent from five years ago, according to ABC News.  Among those involved in the effort are the U.S. Department of the Treasury, the U.S. Department of Justice (DOJ), the Department of Housing and Urban Development (HUD), the Federal Trade Commission (FTC), and the Attorney General of Illinois.

 

Uptick rule back again?

The U.S. Securities and Exchange Commission (SEC) will consider four proposals to restrict short selling – a bet that a given stock will fall.  As it stands now, speculators can leap on a declining stock and drive it down further, according to many executives.  At its Wednesday meeting the Securities and Exchange Commission will consider, among other ideas, the restoration of the “uptick rule,” which allowed short sales only in cases where the last price was higher than the previous price.  SEC Chairwoman Mary Schapiro said at the Council of Institutional Investors conference that they’ll be looking at different proposals, including a so-called “bid test” and a “circuit breaker.”  Schapiro did not provide details on how the bid test or circuit breaker could work and did not elaborate on the fourth proposal.

 

The Puma

Will urban streets soon be clogged with two wheeled electric automobiles that look more like partially assembled wheelchairs than cars?  They will if General Motors (GM) gets its wish.  GM is teaming with Segway Inc., maker of the upright, self-balancing scooters to build the PUMA, an acronym for Personal Urban Mobility and Accessibility.  The machine, which GM says it aims to develop by 2012, runs on batteries, has a range of about 35 miles between charges,  and uses wireless technology to avoid traffic backups and navigate cities.  GM didn’t say how much the machines would cost, but research chief Larry Burns said owners would spend one-third to one-fourth of the cost of a traditional vehicle.  Well, we all said we wanted change, right?

 

Now on to our real estate investing education section…

 

Shell Games in a Banana Republic – How to Surf the Tide of Short Sales

 

$46, 666 for every man, woman and child in the nation. That is the estimated current level of expenditures, promises and (as of yet) unfunded liabilities guaranteed by your good old Uncle Sam since January 2007….with relatives like that who need enemies? Now ask yourself – do you feel like you are getting your money’s worth? Did the government perform $46,000 of improvements to local parks, roads and public services that enhanced your life by the equivalent of thousands of dollars per month for the past 16 months? If not, where is the money going? To that great shell game in the sky of course.

 

The problem with shell games is the players always have the illusion of knowing the right choice – only after the choices are made does the slight of hand become apparent. The same goes for investments today. The common “buy and hold” strategy has wiped away a decade or more wealth from the pockets of most American investors while foreign bond buyers are calling en mass for the IMF (International Monetary Fund) to propose a new reserve currency for the world. Unable to pay the current debts while making good on bail-outs and future funding, the USA is resorting to the financial policies used by banana publics world-wide….just print and deal with the day of reckoning later.

 

So let’s see what Uncle Sam has hidden under those shells; guess right and you get to ride the largest transfer of wealth in modern history. Guess wrong and you get to spend your retirement years trading coconuts for a little spare change.

 

Shell #1 – Cash transfer payments. The current economic plan penalizes

those holding cash or cash equivalents by inflating away the value of their dollars. Average Americans, the Chinese and others with large cash reserves are rightfully concerned about the growing supply of “stimulus” as the government prints money out of thin air then sells it to itself. Around and around we go…where we stop nobody knows. One thing is certain, when it does stop those in cash or cash equivalents are likely to be big losers. Hard assets like real estate have always re-indexed to the inflated or new baseline. Buy now while the buying is good.

 

Shell #2 – “I’m from the government and I’m here to Help”…Ronald Reagan once called these the most terrifying words you might ever hear and with good reason. The US government is getting ready to “help” every person in this nation by expanding over 80 percent – in ONE Year! Yes, you heard that right. The baseline budget for the US government is set to expand by over 80 percent in one year. This will mean the federal government alone is responsible for more than 1 of every 3 dollars produced in this country…and still growing. Let’s face it – by the time you add in state and local government, roughly half of all revenue does not come from the production of goods and services but by government and government has even more plans to help you and your family. Healthcare, education and cradle to grave social services are just a few of the proposed ways Big Brother will keep an eye on you. The only problem is you must play by their rules or risk financial ruin as evidenced by the recent government intervention into the business practices of corporations that received federal assistance. Don’t believe it will apply to individuals? Just ask any welfare recipient how much “freedom” they have. Value your way of life and freedom? Better have alternative plans to finance your own lifestyle rather than rely on Uncle Sam’s shell game.

 

Shell #3 – Someone has to win so you might as well be one of them. Even if you aren’t a DC insider expecting to receive big bucks from the bail-out, bonus or other transfer of wealth scenario it doesn’t mean you can’t still survive or even thrive. Learn how to ride the wave of wealth as it is transferred from those in dollars to those in assets. In the future, the ability to create wealth from work will grow increasingly possible thanks to progressive income taxes that take an ever greater percentage of earned income and penalize the wealthy. Likewise, with roughly 1 of every 2 dollars generated by state, local or federal government, creating wealth from a small business is increasingly difficult since you will almost undoubtedly be forced to deal with government regulations every step of the way. Few safe-guards remain to the average American…fortunately, real estate and the land itself is one of the few options available.

 

So, how can you surf the tide of short sales while the rest of the nation goes bananas?

 

Take advantage of historic lows in hard/tangible assets before inflation rears its ugly head. By the time everyone else figures out high prices are here to stay it will be too late.

 

Lock-in low rates now. Banks are almost losing money on interest rates so

you can rest assured they can’t keep them low forever. Lock-in low rates while you can…it could take awhile before rates begin rising due to the current economic crisis but when they resume their upward momentum it could be the last you see of low rates during this lifetime.

 

Follow the lead of those few big banks and states that rejected federal funds rather than accept the draconian “strings” likely to lead to a lifetime of servitude later. Smart states, banks and soon to be individuals that value the freedom to lead as they see fit must remain solvent without reliance on government. The price to pay for financial “security” is financial freedom and opportunity in the future.

 

See you at the top!

 

 

Chris McLaughlin

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

 

P.S.

 

Don’t miss out webinar Tuesday at 8:30 PM EST, 5:30 PM PST:

https://www2.gotomeeting.com/register/798281842

 

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

http://www.shortsalescoach.com
http://www.shortsalesriches.com
http://www.reomillionaireclub.com 
http://www.sixfigurebpo.com *************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…

http://www.shortsalesriches.com/blog

*************************************************

About the author:

 

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

 

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month

   * Long-time authority on real estate investing
      and rapid flipping of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties

    * Owner and Supervising Broker of one of Florida’s
     largest Real Estate firms, running 4 different
     offices, supporting nearly 450 agents, uniquely
     positioning him to help thousands of investors
     make money in the biggest market opportunity ever!

     * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building

     * On twitter: http://twitter.com/mclaughlinchris
     * On facebook:

http://www.facebook.com/addfriend.php?id=709199143

—