General Growth Properties files for bankruptcy
Real Estate News & Commentary by Chris McLaughlin, April 17, 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 flipping 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
Saturday:
https://www2.gotomeeting.com/register/357681810
———
General Growth Properties files for bankruptcy
The U.S. real estate sector witnessed one of its largest failures yesterday when General Properties, the second largest mall owner in the U.S., filed for bankruptcy protection. While the company has been making money at the operating level, it was forced into bankruptcy on account of it not being able to refinance mortgages. The company blamed it on the collapse of the credit markets. Mike Prew, an analyst with Nomura securities said, “This underscores that real estate companies are most vulnerable to refinancing risk rather than market risk.” Indeed, liquidity problems can lead to solvency problems. The competitors of General Growth Properties must be looking for cheap pickings from the real estate portfolio of the company. How endemic is the problem? What about the fate of smaller real estate companies? What is the likely impact of this on banks that have made loans to real estate companies? Scary and depressing.
Joseph Stiglitz lambasts the bank rescue initiatives of Obama administration
Nobel Laureate Joseph Stiglitz, who, some weeks ago, described the toxic asset plan of Tim Geithner as “privatizing of gains” and “socializing of losses,” came down heavily on the bank rescue initiatives of the U.S. government in an interview yesterday. According to Stiglitz, the size of the Troubled Asset Relief Program (TARP) is not big enough to adequately capitalize the banking system, and tax payers’ return from TARP is just about 25 cents on a dollar. “The bank restructuring has been an absolute mess,” said Stiglitz. Stiglitz also expressed concern about the links between Wall Street and the President’s advisers. Citing potential conflicts of interest, Stiglitz said those who designed the rescue plans are, “either in the pocket of the banks or they’re incompetent.”
Credit-card securities under pressure
According JP Morgan’s Bankcard Index, an indicator of credit card market performance, charge-offs (card credit debt gone bad) increased from 8.4 percent in February to 8.82 percent in March. This is in line with the rise in unemployment rate. Despite the increase in charge-offs, JP Morgan expressed optimism in the future performance of the credit card market on account of the positive impact of the Federal Reserve’s Term Asset-Backed Loan Facility, a program aimed at reviving consumer lending. Obama administration officials will meet executives of credit card companies next Thursday to discuss lending practices and rates charged. The government is considering introducing a legislation to curb “deceptive” practices (read, hidden fees and usurious interest rates) of credit card companies.
Banking stress test
As part of introducing its plan for bringing about financial stability, the Obama administration has been conducting stress tests and what-if analyses to evaluate the impact of the economic environment on the banking system. The government will disclose the assumptions underlying the stress tests on April 24. Between April 24 and May 4, the banks – some 19 of the nation’s largest — that are participating in the stress tests will have an opportunity to comment on the test framework. On May 4, the government will announce the results of the tests and highlight the capital adequacy requirements of the banking system given the different economic scenarios. The test results are likely to provide fodder for both critics and supporters of the government bailout plans.
Residential Capital hiring 1000 people
Some good news, at last. Residential Capital LLC, the mortgage unit of GMAC, has announced it is hiring 1000 people to meet the requirements of business growth. With over $10 billion in losses over the last couple of years, Residential Capital’s very survival was in question not so long ago. GMAC announced last September that it was planning to fire over 50% of Residential Capital staff and close down all its offices. The firm received $6 billion bailout from the government last December and has benefited from the growth in demand for refinancing on account of drop in mortgage rates.
Now on to our real estate investing education section…
Time is On Your Side – Short Sale Investors
Like the old Rolling Stones song “Time is one my side” short sale investors may also find themselves joined by millions of Americans who have come running back to real estate after taking a temporary respite. Wondering why? It’s simple. Real estate has historically been one of the few roads to real wealth throughout the world. Going back as far as Greece, Rome and other empires, those that owned land and the underlying natural resources were the wealthiest in the land. It’s a simple time tested fact.
However, that isn’t the end of the story, Another equally important phenomena is at work. Namely, short term losses are typically less important than long term gains. Over time, the inflationary pressures exerted by a capitalistic based economy result in a rise of all asset groups. Consider these interesting statistics…
On any given day, roughly half of all investors will make a profit while the other half of investors will lose money.
Over a one month period of time, roughly 55 percent of investors will make a profit while the rest lose money.
Over a three month period of time a little over 60 percent will make money while the rest lose.
Over a year that may grow to as high as 70 percent and eventually, if you take the time period out long enough, close to 100 percent of people will “make” money.
So, how can so many people make money while still losing so much? It’s simple. Most investments are measured in nominal terms prior to taxes, interest, holding fees and other expenses. Next, the time value of money means it is entirely possible to “make money” while watching the true purchasing power of an investment shrink.
The same trends hold true for real estate as other investments. While it is entirely possible to lose money now and then, the long term potential is quite positive for turning profits related to buying short sale real estate. History has also shown this to be true; hold long enough and real estate invariable looks like a real steal. Not convinced? Just take a look from the pages of history itself; each of these were scorned as a bad buy. Today they would be pocket change for large private investors like Trump.
The Louisiana Purchase: The United States paid roughly $15 million dollars for what later became Arkansas, Missouri, Iowa, Oklahoma, Kansas, Nebraska, parts of Minnesota, North and South Dakota, Wyoming and Colorado.
The Alaska Purchase: Costing just over $7 million dollars, Alaska was considered little more than a barren wasteland by many.
The Florida Purchase: At $5 million dollars, the original purchase price of Florida could barely cover the cost of many personal estates today.
See you at the top!
Chris McLaughlin
http://www.shortsalesriches.com/welcome.html
P.S.
Don’t miss our webinar Saturday at 3:30 PM ET, 12:30 PM PST:
https://www2.gotomeeting.com/register/357681810
P.P.S.:
Check out one of the ShortSalesRiches students holding himself as well as us accountable to whether the system truly works! Go here now to
watch the videos from John Michailids:
http://www.youtube.com/shortsalesriches
and
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
—
Posts tagged as:
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General Growth Properties files for bankruptcy
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Understanding Volatility Versus Risk in Short Sale Investments
Real Estate News & Commentary by Chris McLaughlin, April 16, 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 flipping 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 tonight where
we explain it all Thursday @ 8:30 PM ET, 5:30 PM PST:
https://www2.gotomeeting.com/register/344712594
———
Loan modification program starts
The Treasury Department announced that the first six participants to sign up for President Obama’s loan modification program are JPMorgan Chase, which will get up to $3.6 billion in subsidy and incentive payments; Wells Fargo, $2.9 billion; and Citigroup, $2 billion. The others are GMAC Mortgage, $633 million; Saxon Mortgage Services, $407 million; and Select Portfolio Servicing, $376 million. A statement issued by Wells Fargo said, “We view this modification program as yet another incremental opportunity for thousands of homeowners to preserve and maintain the dream of homeownership.” Left unsaid is the fact that now the second wave of foreclosures will begin, as banks decide which loans are worth trying to save and which are not.
Details of the loan modification program
Only loans where the cost of the foreclosure would be higher than the cost of modification will qualify. The modification plan calls for the bank to reduce interest rates so that the monthly obligation is no more than 38% of a borrower’s pre-tax income, and the government would then kick in money to bring payments down to 31% of income. Mortgage servicers (banks and mortgage companies) can also reduce the loan balance to achieve these affordability levels, and the government will share in the cost of the reduction, up to the amount the servicer would have received if it had reduced the interest rates.
Treasury will not provide subsidies to reduce rates to levels below 2%. In addition to subsidizing the interest rates, servicers will use Treasury funding to pay for incentives for themselves, homeowners, and investors. The program gives servicers $1,000 for each modification and another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind. Homeowners will even get up to $1,000 a year for five years if they keep up with payments. The funds will be used to reduce their loan principals. “We’re confident we’ll have enough money,” said Treasury spokesman Andrew Williams. Of course you will…if you run out, you’ll just print more, right?
Housing starts down
The US Commerce Department said housing starts fell 10.8 percent to a seasonally adjusted annual rate of 510,000 units, the second lowest on records dating back to 1959, from February’s 572,000 units. Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto, said, “While the situation in housing and in the labor markets is not necessarily deteriorating, it’s clear that there is no real sign of recovery whatsoever…taken together, both releases will put a damp on the nascent optimism we’ve seen in the markets in the past couple of weeks.” Analysts had expected an annual rate of 540,000 units for March.
JPMorgan beats expectations
JPMorgan Chase said its net income for the first quarter was $2.1 billion, or 40 cents a share. This was down 10% from a year ago, but still beat expectations. According to Thomson Reuters, analysts were only anticipating a profit of $1.38 billion, or 32 cents a share. The strong investment banking performance was driven by a revenue surge in its fixed income division, but Chase’s credit card division reported a net loss of $547 million, down from a profit of $609 million a year ago. The bank cited a sizable increase in allowances for loan losses and higher charge-offs, or loans the company doesn’t think are collectable. CEO Jamie Dimon expressed interest in paying back TARP funds, and unlike Gold Sacs, says Morgan can pay them back without issuing stock. After what some call Goldman Sac’s accounting sleight of hand, and KBW’s downgrading of Wells Fargo, it will pay to watch the details in this reporting.
Initial jobless claims slow, but joblessness at a record high
The U.S. Department of Labor says initial jobless claims dropped to 610,000 in the week ended April 11, but a record 6 million-plus continued to file unemployment claims during the week ended April 4, the most recent week for which data are available. That’s up 172,000 from the prior week’s revised tally of 5.85 million. John Lonski, chief economist for Moody’s Investors Service, said he puts more of his focus on the continuing claims number: “That tells you that things are getting worse and we’re going to see another rise in the unemployment rate, and that’s not good news.” He’s right of course; a sinking ship doesn’t stop sinking just because its rate of descent slows down. The job market is one of the most important foundations of the economy, and one of the greatest causes for concern.
Now on to our real estate investing education section…
Understanding Volatility Versus Risk in Short Sale Investments
One of the most common mistakes made by novice and veteran short sale investors alike is to confuse volatility versus risk. Unlike the stock and bond market where the principle can go to zero, real estate always retains some type of inherent value. To put it another way, when dealing with stocks and bonds what goes up must come down..and when it does it can drop to zero never to return again. On the other hand, real estate can go down but rarely drops to zero. Companies can and do go out of business. Real estate is still standing. Even if the structure is totally eliminated the value of the raw land beneath remains.
This brings us to an important difference between volatility and risk. Risk involves loss. True loss of the type that wipes away fortunes over night. A company is here today but gone tomorrow…along with it the stocks, bonds and investments that represent a lifetime of work. Volatility is different. Volatility means prices can go up and down then up again. It is a function of time – not absolutes. Wait long enough and the inherent value of the land itself will retain some type of value. It might rise, it might fall. It might rise relative to the work able to be performed on it or it might fall related to the value of the interest rate used to finance it…but in all cases the volatility is relative. The land does not cease to exist.
Today there are two types of investors – those seeking a return of their capital and those still seeking a return on their capital. In large part, the difference has to do with where they have decided to invest their cash. Those that follow a traditional investment strategy (buy and hold stocks, bonds, treasury bills and keep some cash on hand for an emergency) are watching in utter dismay as they watch some of the biggest business concerns in the nation – indeed the world – drop to a fraction of their former value while others may simple cease to exist. The risk is very real and leaves traditional investors few options rather than attempting to park their cash into ‘safe’ federal treasury bills in an attempt to preserve their capital.
On the other hand, short sale investors are still indeed seeking actual returns on their capital – not merely a return of capital. While most are able to turn relatively quick profits, even those that made an early mistake are comforted by the fact that the long term risk is relatively minor…if in fact, even existent. While the price of a home and land may be volatile and subject to increase or decrease over any given period of time…it is equally likely to remain in existence. Unlike financial instruments where absolute loss is a very real concern, hard assets like real estate are primarily a function of time. The inherent value eventually returns.
Consider a worst case scenario for each of the following investments:
Stocks/Bonds: Worst case = cease to exist. Value drops to zero and unable to sell.
Cash: Worst case = cease to exist. Value drops to zero. Unable to spend (ie, confederate dollars).
Real Estate: Worst Case – price drops. Still can rent, sell, owner finance, plant crops or otherwise retain some form of value. Price never drops to zero as land retains an inherent value depending upon use, natural resources and other productivity.
See you at the top!
Chris McLaughlin
http://www.shortsalesriches.com/welcome.html
P.S.
Don’t miss our webinar Thursday at 8:30 PM EST, 5:30 PM PST:
https://www2.gotomeeting.com/register/344712594
P.P.S.:
Check out one of the ShortSalesRiches students holding himself as well as us accountable to whether the system truly works! Go here now to
watch the videos from John Michailids:
http://www.youtube.com/shortsalesriches
and
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
—
{ 1 comment }
Bad Banks Up 50% in Fourth Quarter
Real Estate News & Commentary by Chris McLaughlin, February 26, 2009
http://www.shortsalesriches.com/welcome.html
—-
Recessions hit us all differently. Al Capone
once complained that hard times forced him
to lay off 4 judges and 2 Congressmen.
Seriously, the results are always uneven in bad
times. Most people lose money, but some actually
get rich.
But if you’re in the real estate business, then
you have one of two choices: feast or famine.
Both are available. Which one have you chosen?
Click here to learn about our Recession Proof Real
Estate Investing webinar tonight at 8:30 PM ET. 5:30 PM PST:
https://www2.gotomeeting.com/register/628859068
–
The FDIC announced today that the nation’s banks lost 26.2 billion in the last quarter of 2008, which is the first negative quarter in 18 years. And the deposit insurance corporation said that there were 252 banks considered to be in trouble at the end of 2008, which was up 171 in the third quarter and a 50% increase. FDIC Chair Shelia Bair noted that even though the results appear dismal, domestic deposits have increased in the fourth quarter. “Clearly, people see an FDIC-insured account as a safe haven for their money in difficult times,” Bair said.
JP Morgan increased its layoffs to a stunning 14,000 and indicated that it expects to shed 12,000 jobs from its acquisition of Washington Mutual.
Now on to our real estate educational section …
What’s Better – Short Sales & REO vs. Gold?
Historically gold has served as a store of value throughout most of history so it should come as no surprise it is a favorite among contrarian investors and those seeking a safety “hedge” against both inflation and deflationary pressures…but does gold really measure up to its reputation? Before putting their hard earned money into the hands of an ETF or placing big orders for bullion, short sale investors and others seeking real returns on their money would do well to evaluate the actual numbers – not just the hype. Let’s begin by examining a few facts:
During the last bout of major inflation, the average price of gold went from $41 per ounce in 1971 to over $610 in 1980 before reaching a high of $875 per ounce. Today, gold is selling for approximately $900 per ounce…a mere 50 percent increase in 29 years. Adjusted for inflation gold would need to be selling for $2,000 to $2,500 per ounce in order to reach its former high’s…clearly, not a solid investment for those seeking “safe” returns. On the other hand, in 1971 the average home sold for roughly $28,000. By 1980 the average selling price increased to roughly $75,000 and by 2006 the average American home was selling for over $240,000. Despite the recent downturn in the real estate market, homes are still selling (on average) for over $180,000.
To provide some perspective, in 1980 it required approximately 85 to 122 ounces of gold to purchase the average home in the United States whereas today you would need 200+ ounces of gold to purchase the average discounted home. Additionally, gold provides zero tax advantages when holding and depending upon the form, may be lost, stolen or require additional storage fees. On the other hand, real estate provides favorable tax advantages and may generate additional cash flow through rentals, leasing or sales of raw materials and assets included in the purchase price of the property.
Further complicating the issue is the advent of ETF’s or other paper-backed gold proxies. Unlike taking physical possessions of gold, the use of ETF’s, gold stock and other substitutes may allow investors to take advantage of leveraging to increase profits while eliminating much of the storage issues surrounding gold however, the resulting “I.O.U.” negates much of the “safety” surrounding gold as an investment hedge. Real estate provides investors and opportunity to use leverage while taking physical possession of an actual tangible assets – not merely some type of I.O.U.. Even experts agree the amount of physical gold is nowhere near the sums required to fulfill even a fraction of the obligations currently outstanding; hence, the disparate trading between physical sales of gold versus paper gold sales in the recent months.
In summation, investors searching for tangible assets with real rates of return would do well to turn to short sales above gold especially during uncertain economic times.
See you at the top!
Chris McLaughlin
http://www.shortsalesriches.com/welcome.html
P.S.
Don’t miss out on tonight’s amazing webinar on Recession Proof Real Estate investing:
https://www2.gotomeeting.com/register/628859068
Copyright Loss Mitigation Institute 2009.
All Rights Reserved.
http://www.shortsalescoach.com
http://www.shortsalesriches.com
http://www.reomillionaireclub.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
—
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What Happens to Real Estate In a Recession?
Impact of a Recession on Real Estate
Mid-Day Market News & Commentary by Chris McLaughlin, October 15, 2008
http://www.shortsalesriches.com/welcome.html
The BEST fr’ee webinar that you’ll ever attend on short sales & wealth building in this market:
Join us this Thursday, October 15th, at 9 PM EST, 6 PM PST:
https://www2.gotomeeting.com/register/945219328
RSVP early as spaces are limited!
—-
At midday investors continued to hold their breath, as the Dow Jones Industrial Average was down 317.24 to 8993.75. A government report released this morning showed that retail sales had dropped by 1.2 percent, which was twice as much as most analysts had been expecting. The report does not bode well for the upcoming holiday season, where many Americans are seen as tightening their belts.
JP Morgan Chase’s profit dropped 84 percent to $527 million from the $3.4 billion in the year ago third quarter. “It’s an unpleasant situation, and I don’t want to underplay it. It’s unpleasant for the country,” said CEO Jamie Dimon. “I hope that the financial crisis, with the powerful moves made by governments around the world, will start to ease.”
In other banking news, Wells Fargo fared much better than JP Morgan Chase. Its third quarter profit fell 25% to 1.64 billion from $2.17 billion in the year ago period. The company was successful in breaking up the proposed Citigroup-Wachovia merger and now Wells plans on merging with Wachovia. Citigroup has indicated that it will not stop the deal but does plan on extracting its pound of flesh in court for damages.
Now on to our real estate investing news arena…
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.
More on Thursday…
See you at the top!
Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com
Phone: (800) 452-7627P.S.:
Join us for our fr’ee Webinar this coming Thursday at 9 PM EST/ 6 PM PST that will reveal the Top 12 Strategies on Getting Rich with Short Sales:
https://www2.gotomeeting.com/register/945219328
P.P.S.: If you really want to get started building your wealth, now that recognize that your 401(k) isn’t going to do it, what are you waiting for? Take action today! A journey of a thousand miles begins with a single step. Take that step right now by clicking here:
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Your New Banker, Uncle Sam
Mid-Day Market News & Commentary by Chris McLaughlin, October 14, 2008
http://www.shortsalesriches.com/welcome.html
—–
The BEST fr’ee webinar that you’ll ever attend on short sales & wealth building in this market:
Join us this Thursday, October 16th, at 9 PM EST, 6 PM PST:
https://www2.gotomeeting.com/register/945219328
RSVP early as spaces are limited!
—-
The banking industry as many realtors and real estate investors know it is gone. It was replaced by Uncle Sam. The U.S. government announced today that it would allocate $250 billion to purchase preferred stock in banks—and nine of the largest banks in the U.S. have agreed to such an equity sale. The deal also came with strings attached to help calm the outrage over excess (perhaps the party at the St. Regis by AIG executives, to the tune of $400k, was a bit much??) on Wall Street: executive compensation and golden parachutes will be limited.
The Wall Street Journal reported this morning that the following banks were a part of the plan: Goldman Sachs, Morgan Stanley, J.P. Morgan Chase & Co., Bank of America, Citigroup, Wells Fargo, Bank of New York Mellon, and State Street Corp. The Journal noted that the deal comes with a 5% dividend to the government that will increase to 9% after several years. Fact check: a few weeks ago I would have received e-mails correcting me for calling Goldman Sachs and Morgan Stanley banks instead of investment banks…but they are banks now.
So what did King Henry say?
“Government owning a stake in any private U.S. company is objectionable to most Americans – me included,” U.S. Treasury Secretary Henry Paulson said. “Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable.”
Other pundits of the business world also weighed in on the latest government action. Donald Trump, speaking to CNBC’s Squawk Box, said that but for the government intervention “We were headed for Great Depression No. 2.” Trump liked the plan to inject capital into the banks as opposed to buying up all of the troubled assets: “It’s almost socialistic, but I like it, really like it,” he noted.
Now onto our real estate investing and education section…
Recession Proof Your Income with Short Sales
It’s official. The IMF (International Monetary Fund) has openly predicted a major global recession as being “highly likely.” If the idea of rising prices coupled with a falling dollar, economic uncertainty and a pink slip coming soon to cities near you doesn’t sound attractive then chances are you have already started your search for safety. Unlike millions of other Americans frantically looking for returns in all the wrong places, some savvy investors are learning how to use short sales to recession proof their income.
Short Sales provide an alternative source of income. Although unemployment rates are rising, to quote a common cliché’ “You aint seen nothing yet.” The big bail-out and dramatically reduced lending standards between banks and major corporations has not trickled down to Main Street – yet. Even companies with healthy balance sheets are likely o be negatively impacted by their trading partners or suppliers with less than stellar credit lines or other interruptions. Reduced demand and slumping sales are creating additional pressure likely to result in further cut-backs in coming months. The resulting picture is clear – pink slips, pay-cuts and frozen wages are expected while inflation continues to take a toll on individual budgets. Supplement your income and investments with short sales.
Individual Diversification. Short sales have the unique ability to act somewhat like a hybrid investment/business model. The use of leverage to build impressive equity positions coupled with great tax advantages mimics many of the advantages experienced by small business owners sans the need for inventory, labor and long term commitment to workers compensation etc… while the instant equity, appreciation and ability to maximize returns mimics the best of the investment world. Additional advantages inherent in the holding of tangible assets further increase the individual level of diversification in a paper denominated world.
Flexibility. Perhaps the largest single benefit to be derived from short sales is the flexibility afforded through the purchase of various types of properties. Although most short sales center on single family residential properties, it is possible to purchase a wide variety of commercial, agricultural, retail, commercial or other types of land in addition to deriving benefit via a wide range of other activities including:
• Factoring
• Owner Financed Sales – all or partial.
• Rentals or Leasing – short or long term including
vacation, land lease, traditional rentals, etc..
• Farming, Agricultural, Timber, Mineral, Water or Other
natural resources.
• Business use or improvement then sale of business including property or just business while leasing back land/housing.
More on Wednesday…
See you at the top!
Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com
Phone: (800) 452-7627
P.S.:
Join us for our fr’ee Webinar this coming Thursday at 9 PM EST/ 6 PM PST that will reveal the Top 12 Strategies on Getting Rich with Short Sales:
https://www2.gotomeeting.com/register/945219328
P.P.S.: If you really want to get started building your wealth, now that recognize that your 401(k) isn’t going to do it, what are you waiting for? Take action today! A journey of a thousand miles begins with a single step. Take that step right now by clicking here:
http://www.shortsalesriches.com/welcome.html
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