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Why Bank of America Needed More TARP Money

Market News & Commentary by Chris McLaughlin, January 16, 2009
http://www.shortsalesriches.com/welcome.html

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This is your year, right??  Let’s make it happen!  Forget the headlines, forget all the negativity, and forget all the turmoil.  More millionaires are created during times like these than any other time … so are you ready to make it happen?  If so, be one of the 23 spots that we have left for our Saturday webinar at 4 PM EST and 1 PM PST entitled “Recession Proof Real Estate Investing: How to Buy Property with no out of pocket costs!”

The link is right here, so jump on this now:

https://www2.gotomeeting.com/register/783035902

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Even before taking the oath of office President elect Barack Obama got what he wanted for Congress.  The US Senate voted yesterday to release the second half of the $700 billion TARP fund, and the incoming Obama group has planned to allocate between $50 and $100 billion toward foreclosure prevention.  In a positive sign for Realtors and investors looking for buyers, the new President’s team has signaled that stimulating buyer demand for homes is a priority, possibly by reducing interest rates even further is part of such a strategy.  We’ll have to wait for more information to come.

Bank of America announced its worst financial performance in 17 years today – they lost $2.39 billion.  Ouch!  The bank also announced that it would take on another $20 billion in TARP money.  Why?  Two words: Merrill Lynch.  As  Bank of America readies itself to buy the brokerage firm, the bank is discovering that the “mark to market” write downs, an accounting rule that requires Bank of America to write down assets to their existing market price, not the price that they might be worth if you took the time to sell them.  How does this accounting rule affect banks? 

Let me give you an example.  Let’s say Merrill Lynch has a billion worth of mortgage backed securities.  Let’s also say that 25% of those are now in default, but 75% of them are paying just fine and are on time.  You would think that the valuation of the securities would be $750 million or less, right?  Well, given how mad investors are with the rating agencies they just don’t want them on their balance sheets.  Period.  So what would be considered $750 million worth of good loans are now worth $100 million at today’s market value.  No one wants them: they are toxic at any price!

Now let’s assume the Merrill Lynch has to recognize these assets on their financials.  What used to be a billion is now $100 million in the current market.  So even though the securities would be worth a lot more than $100 million if they were to go through an orderly process of selling off the assets, the bank is required to report it based on what it is worth now—in an illiquid market.

Now understand that we got these new “mark to market” rules after the Enron scandal, and they do have validity, because without them banks can essentially lie about what their assets are.  But in this instance, when extraordinary circumstances have created tremendous illiquidity, many banks are frankly being forced to unfairly write down assets that will be worth much more than their current liquid valuation. 

If the new Congress wants to save some taxpayer money, they should modify the mark to market accounting rules to have an outside appraisal identify what they assets are really worth versus forcing banks to mark down assets that are viewed as toxic. 

Now on to our real estate education section…

Unemployment Claims Crashing Websites – Create Your Own “Safety Net”

As pink slips pile up, jobless claims have become so prevalent they are literally crashing websites and phone systems as workers rush to file unemployment claims. New York, Ohio and North Carolina were forced to shut systems down completely due to heavy volume; considering the average unemployment wages are less than $400 per week or roughly $1,600 per month (or less), one might wonder if there is a better way to create your own safety net.

As it turns out…there is! Short sales offer investors of any background the ability to take their financial future into their own hands rather than stand in line waiting for the government to provide minimal income replacement. It doesn’t require a lot of money, time or extensive training to create your own safety net with an income stream as high or low as desired.

In less time than you might spend on “hold” when applying for a Michigan unemployment benefits (average hold time of four hours according to some clients), you could be well on your way to submitting an offer on your first short sale transaction worth thousands – or even tens of thousands. With a straight 12 months of job losses, 2008 is shaping up to be the worst on record in over 50 years. 

Learn how to create your own safety net with these short sale related resolutions for the new year:

1.      Do it daily. Each and every day do something toward growing your short sale empire. It doesn’t need to be a lot but you should get into the mindset of profit and success.

2.      Try something new. Once you master a formula that works (like the one provided by ShortSalesRiches) then continue to refine it and add to your portfolio of tools and resources.

3.      Expand. Begin small then build a base by incorporating new areas, different types of real estate or other potentially profitable relationships.

4.      Educate. Never stop learning. Find a mentor and learn from others as you go along. Share your knowledge with others along the way.

5.      Add a subscription. Find a source of reliable, pertinent and up-to-date information like that provided by the ShortSalesRiches.com/blog to keep a pulse on the trends.

6.      Query like crazy. Set a personal “outreach goal” for the next month to revitalize and jump-start this year’s success.

7.      Embrace the Internet. Learn how to use it then stick to it. If you don’t have the time to dedicate to doing it all yourself then hire someone to help. It’s an investment in success.

8.      Don’t be fearful. During tough economic times there is a tendency for people to run for cover and settle for less – often much less – rather than bet on their own skills and tenacity.

9.      Get organized. Stop procrastinating and take the time needed to put everything in its place, set up the tools you need and start using them.

10.  Be a bit of a brag! Yes, when you have a success it is important to pat yourself on the back…just be selective. While you are making thousands or tens of thousands of dollars on short sales, don’t expect your unemployed brother in law to be thrilled for you. Instead, teach him how to join you in creating a long term safety net and life you love.

See you at the top!

Chris McLaughlin

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

P.S.: Be one of the 23 spots that we have left for our Saturday webinar at 4 PM EST and 1 PM PST entitled “Recession Proof Real Estate Investing: How to Buy Property with no out of pocket costs!”

The link is right here, so jump on this now:

https://www2.gotomeeting.com/register/783035902

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Mid-Day Market News & Commentary by Chris McLaughlin, December 29, 2008
http://www.shortsalesriches.com/welcome.html

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You really can make a huge six figure income … even a 7 figure income … with no money out of your pocket in the deepest recession our country has ever faced.  How?  Just register now for our fr’ee webinar unveiling the strategies to use in this economy…all on Tuesday night at 9 PM ET: 

https://www2.gotomeeting.com/register/638209573

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CNBC reported today that several private equity firms are circling the wagon to purchase IndyMac Bancorp, the huge bank that went belly up because of the subprime mess that is now run by the Federal Deposit Insurance Corporation (FDIC).  The prospective buyers include J.C. Flowers & Co., Dune Capital Management, and Paulson & Company.   In the small world of finance, IndyMac was founded in 1985 by Angelo Mozillo and David Loeb, who later went on to found Countrywide Financial, which is now owned by Bank of America.  Looks like the initial management team setup both companies for failure, huh?

And if you thought the housing mess was limited to just the United States, think again.  Reuters reported today that prices dropped 8.7% in England and Wales for 2008 and are expected to fall further. 

Now on to our real estate investing education section…

As 2008 draws to a close and short sale investors look to 2009 the question on everyone’s mind is whether or not the economy will continue its downward spiral or experience a recovery. Despite the considerable abundance of doom and gloom reporting in the media, there are a few bright spots that aren’t receiving the full attention deserved. Short sale investors searching for a silver lining in an otherwise cloudy economic environment would do well to focus on these current trends:

1. $40 per gallon oil and $1.65 per average gasoline. How low will it go and how long it will last is subject to debate but one thing is certain; those who rely upon gasoline and oil are experiencing a bit of much needed relief in the form of lower prices.

2. Low Mortgage Rates & Dropping LIBOR Rates. The cost of money is cheap – not just inexpensive but downright cheap. Make no mistake about it, real interest rates are the lowest in decades and make it less expensive than ever to borrow money to build a short sale empire. It is possible to buy more house for less money while simultaneously spending less on taxes and insurance. It’s a win-win-win situation for those with the courage to buy when others are selling.

3. Huge Fiscal Stimulus. Coming soon to a federal budget near you is a huge fiscal stimulus package destined to become one of the largest in history. Bridges, roads, hospitals, schools, utilities and other mega-projects are slated to spur the economic growth needed to jump-start the economy. Whether you believe the stimulus package will work or worsen the long term economy, one thing is certain; those workers will need affordable and convenient housing for long term projects. Short sale investors would do well to make a mental note of future road plans, schools and other large building projects in the target areas of interest. Whether you buy low and sell high or wait for the path of progress to reach you, it is a position of strength rather than weakness.

4. Long Term Lag-Times. The global decline in commodities and other tangible assets will eventually lead to long term shortages with tremendous upside profit potential for short sale investors. Remember, there is a lag time between the supply and demand which will result in high demand and low supply once the economy stabilizes. Everything from basic building materials to mineral rights, timber and even natural gas holdings will be impacted. Savvy short sale buyers would do well to realize the long term potential inherent in their holdings.

5. More Renters. Foreclosures aren’t over…in fact, due to legislative restrictions on the number of “bad loans” and tangible assets a bank may have on the books at any given point in time, the current bail-out simply provided the liquidity required for banks to prepare for the 2^nd stage of the growing mortgage meltdown. Most experts agree that what began as a sub-prime mess is expanding into ARM’s, low/no Doc loans and even prime mortgages in response to rising unemployment, falling stocks and bonds plus a plethora of other economic problems hit the average homeowner.

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See you at the top!

Chris McLaughlin
http://www.shortsalesriches.com/blog

P.S.:

Are you ready to get 2009 rolling?  Then it is time to come to our LIVE “Recession Proof Real Estate Investing” webinar tomorrow night – Tuesday – at 9 PM ET:

https://www2.gotomeeting.com/register/638209573

P.S.S.:

Have you seen the hilarious “Short Sale Kid Gets a Holiday Haircut.”  Don’t miss this challenge issued by Nathan Jurewicz:
http://www.youtube.com/shortsalesriches

Join us Tuesday, October 21^th (Tuesday) at 9 PM EST, 6 PM PST:

https://www2.gotomeeting.com/register/196317932

RSVP early as spaces are limited!

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You asked.  We delivered.

A comprehensive guide to short sale coaching that is incredibly affordable.  Choose between three short sales coaching plans that begin at less than $7 a day!  Visit us right now at http://www.shortsalescoach.com to jump start your bank account!

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The US financial markets were in positive territory around noon today.  The Dow Jones Industrial Average was up 136.44 to 8988.66 and the Nasdaq was up 11.22 to 1,722.51.   The S&P 500 was up 16.80 to 957.35.

Federal Reserve Chairman Ben Bernanke was grilled by members of Congress this morning before the House Budget Committee and signaled that more stimulus might be needed to keep the recession less severe.  “With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate,” Bernanke said.  The Fed Chairman said that consumers needed access to credit: “If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, home buyers, businesses and other borrowers.”

US Treasury Secretary Henry Paulson said that the equity stakes the US government has taken in banks “won’t cost taxpayers anything” and might also give taxpayers a nice return over time.  The former CEO of Goldman Sachs noted that the government will be receiving a reasonable return on its money and that the banks have a vested interest in paying the government back since the preferred dividend to the government increases over time. 

The CEO of Merrill Lynch, John Thain, indicated that the banking industry still has a rough road ahead.  “It is likely to take multiple years to repair the damage that has been done… This is not going to get better in three to six months,” he said.  Thain said the merger with Bank of America was still on track to close by the end of 2008.

Now on to our real estate investing educational section…

Why the Melt-Down isn’t Done and How Short Sales Might Save your Assets

Common investment wisdom goes something like this…buy a diversified basket of stocks, store a little away in savings and bonds then sit tight for 20, 30 or even 40 years and let the market work its magic. If the past several weeks haven’t demonstrated the folly of this strategy then perhaps it is time to take off the rose colored glasses and face the cold hard facts.

1.     For every winner in the market there must be a loser. Plain and simple – the money must come from somewhere. A lot of people “won” big money for many years and now the price must be paid. Beginning with the sub-prime mortgage crisis the Wall Street pundits proclaimed the worst was over only to meet the current liquidity and credit crisis head-on. Unfortunately, the biggest problem of all is still looming in the not so distant future. At 50x’s the size of the subprime mortgage mess, the credit derivative crisis is likely to dwarf everything else to date.

2.     Inflation isn’t just predictable – it is inevitable. The Fed has been printing money out of thin air for weeks; money that isn’t based upon production or the exchange of goods or services. Money that didn’t exist just weeks before. Money that will be difficult to repay with a rising rate of unemployment. Money that represents more debt.

3.     Risk has reared its ugly head. Although the market supposedly prices risk into the equation on a regular basis, the past few weeks have demonstrated how false that supposition really is; now that real risk has reared its ugly head banks don’t want to loan money and people are afraid to invest. Of course, the longer you hold a stock, bond or even insurance policy the greater the risk. Banks are going bankrupt. Insurance companies are getting bailed-out and trying to time the market only adds risk. On the other hand, buying real estate through short sales utilizes leverage while minimizing risk. You can sell right away, hold and rent, improve then resell or any combination in between.

4.     Boomers Want to Cash-Out. Think the stock market is due to a correction then things will get back to “normal”? The Baby Boomers want to cash-out their stocks and bonds in order to begin enjoying the good life and avoid unpleasant surprises like the stock market losing 20 percent in the first few weeks of October. The great sucking sound you hear is the sound of money leaving long term investments and being put into retirement and vacation homes, visits to the grandchildren and a lifestyle they love.

5.     Going Global. Capitalism has spread but foreigners are no longer as willing to support our standard of living here in the states at the risk of their own. In fact, they are becoming increasingly non-tolerant of bad debt, a falling dollar and low interest rates on the money they have been loaning us as a nation. Rising interest rates will only make our domestic problems more painful but we don’t dare play too hard or they may just cut our supply line entirely. Either way – the day has come where we must learn to share the wealth…even if it denominated in declining dollars. Get into hard assets while the getting is good. Chances are you will be glad you did for many years to come.

More on Tuesday…

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.: 

Interested in learning how to make over six digits a month flipping real estate short sales on autopilot? 

Join us Tuesday, October 21^th (Tuesday) at 9 PM EST, 6 PM PST:

https://www2.gotomeeting.com/register/196317932

RSVP early as spaces are limited!

P.P.S.: If you really want to get started building your wealth, then 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

and clicking here:

http://www.shortsalescoach.com

Mid-Day Market News & Commentary by Chris McLaughlin, October 16, 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 TONIGHT (Thursday) at 9 PM EST, 6 PM PST:

 https://www2.gotomeeting.com/register/945219328

 

RSVP early as spaces are limited!

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The Dow Jones Industrial Average made some positive movement forward today after new claims for jobless benefits came in lower than anticipated.  The U.S. Department of Labor said that unemployment insurance claims fell 16,000 to 461,000, which was below the general consensus of 475,000. 

 

U.S. Treasury Secretary Henry Paulson acknowledged missteps today in an interview with Fox news.  “We’re not proud of all the mistakes that were made by many different people, different parties, failures of our regulatory system, failures of market discipline that got us here,” Paulson said.  But the embattled former Goldman Sachs CEO sounded more confident about the future: “We will mitigate the impact on the real economy and we’ll get this financial system working again.”

 

The National Association of Homebuilders/Wells Fargo housing market index dropped 3 points to 14 in October, which was an all time low.  Last month the index was at 17, which was up from 16 in August.  Typically a rating of 50 or more indicates a positive environment; the index has been below 50 since May 2006.

 

Now on to our real estate investing system…

 

How to Find FDIC Real Estate for Sale

While many short sale investors tend to focus on local bank owned properties, don’t neglect FDIC asset auctions. Since fewer people are familiar with finding and buying FDIC owned assets, there tends to be less competition and thereby, lower prices. FDIC is often forced to assume the assets of individually failed banks; especially smaller entities which may not have been purchased or assumed by larger banking institutions.

Learn More

To find out about FDIC owned properties call 888.372.FDIC (3342), (800) 568-9161 or visit http://www2.fdic.gov/drrore/index.asp to perform a property search. FDIC properties are sold “as-is” by sealed bid. It is necessary to complete a “Purchaser Eligibility Certification” prior to submitting bids on certain properties- especially commercial or affordable housing units.  The FDIC updates the list of available properties on Monday so make a point of visiting weekly.

Big Bonus

One of the biggest “boons” to potential investors is the ability to obtain seller financing for the following types of properties:

·        Those selling for $500,000 or more.

·        Properties qualified as “affordable housing units”

·        Commercial and land properties of any price.

Rates are competitive and further reduce the need for bank financing – an especially attractive alternative for small investors trying to “move up” during a period of tightening lending standards.

To Participate

Each property will have a specific contact number to the broker or auction house required to find out more information. Remember, all FDIC properties are sold as-is so it is important to understand what repairs, back taxes or other costs may be involved. When submitting a bid package, it is possible to place a “low ball” offer for a property but keep in mind that the highest net bid typically is awarded the property. It is often a good idea to review prior property sales to get a basic idea of realistic prices as well as competition. If you have reason to suspect you may be the only bid, an aggressively low offer may become the basis for immediate equity.

 

More on Friday…

 

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 TONIGHT 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, then 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