TARP

Market News & Commentary by Chris McLaughlin, January 12, 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 34 spots that we have left for our Tuesday night webinar 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/655619177

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Citigroup and Morgan Stanley were in talks over the weekend about combining their brokerage division.  The Associated Press reported that Morgan Stanley may pay up to $3 billion for a 51% stake in Smith Barney, and then Morgan Stanley would be given five years to buy the rest of the brokerage firm.   This wouldn’t be the only change for brokerage firms lately, as Merrill Lynch sold to Bank of America amid all of the turmoil in the banking world.

In bailout news, the U.S. Senate may be voting this week to authorize the incoming Obama administration to tap the remaining $350 billion in TARP funds.  But the outgoing President was a bit defensive about the criticism of his administration’s handling of the event, and said that wouldn’t be asking Congress for it unless Obama wanted him to do so.  Bush noted: “I readily concede I chunked aside some of my free market principles when I was told by chief economic advisers that the situation we were facing could be worse than the Great Depression.”

And in welcome news to those Realtors and investors that are driving clients around looking for short sales and foreclosures, oil fell below $38 a barrel.  The continued slide is due to weak earnings from corporate America as well as concerns about macroeconomic issues that will reduce demand for oil and gas.

Now on to real estate investor education …

Short Sale Real Estate Versus Municipal Bonds

Outside of federal bonds, municipal bonds have historically been considered one of the safest places to park your cash especially in preparation for retirement; but, are they really as safe as they appear? If 2008 didn’t convince you of the futility of holding paper instruments or glorified promissory notes rather than hard assets, then perhaps a cold-hard look at the number may. 

Let’s examine muni bonds compared to real estate; how much cash flow can you realistically expect to generate from each? There was a time not all that long ago when financial advisors would pull out fancy charts showing how your retirement account would grow by 10 percent annually and viola’ …you would be wealthy and well established once retirement age arrived simply by contributing to your 401-K or setting aside a relatively modest fund each month.

Over the years those 10 percent returns were replaced with 8 percent returns on the charts but still a relatively robust expectation. As of 2008 the analysts and financial advisors are more likely to hide those charts or spend an extensive period of time talking about “historic norms” since the returns are elusive and principle loss is the name of the game for 2008 and beyond.  The fact is, today the average muni investor is happy to squeeze out 3 percent returns from those “safe” bond portfolio’s or dividend accounts.

Think about it…at 3 percent you aren’t even keeping pace with the government estimated rate of inflation…and you can expect to be “locked in” to that rate for 5, 10 or even 20 – 40 years. With the current rate of economic stimulus being pumped into the economy, few experts believe the rate of inflation will remain at the current “low” of 5 percent.

Now let’s compare cash flow – after all, the numbers are what really matter. To generate $1,500 per month income from  muni bonds at the current rate you would need to have invested $600,000; it’s worse for dividend paying stock since taxes would be required….plus, stocks are subject to dramatic increases and decreases putting your principle at risk should you be required to liquidate. On the other hand, short sale investors could easily generate $1,500 of income per month with as little as ONE paid in full piece of property used as a rental to generate retirement income. In fact, by investing the same $600,000 into short sale real estate rather than muni bonds or dividend paying stock a real estate investor could realistically expect triple, quadruple or even greater returns than those allotted by bonds.

The benefits don’t stop there! In addition to easily outperforming bonds, short sale real estate provides tremendous tax advantages over the life of the home and future price appreciation that keeps pace with inflation. As tangible assets, real estate can be used as collateral for other loans or expenses, increases net worth, generate monthly income in the form of rental real estate plus much more. Now as yourself, which makes more sense: $600,000 investment to generate $1,500 per month return or buying short sale real estate capable of producing multiples of that amount each and every month?

As tough economic times continue into 2009 and beyond, investors from all walks of life need to take steps to protect their own financial interests. Don’t leave your hard earned money in the hands of the same people that created this crisis; instead, crunch the numbers and find ways to grown your own income. One of the advantages of investing in short sale real estate is the ability to begin with next to nothing; you don’t need to have $600,000 sitting around in a bank account…in fact, millions of people have learned how to start small with just one or two homes and build a satisfying 2^nd income, retirement account or long term portfolio in their spare time.

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See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/blog

P.S.: Don’t miss out on our upcoming webinar on Recession Proof investing this Tuesday at 9 PM ET!  There’s only 34 spots left, so jump on this now:

https://www2.gotomeeting.com/register/655619177

P.P.S.: If you wanted to get in on the Seven Figure REO product, sorry we’re SOLD OUT!  Congrats to the lucky folks who jumped on it when we told them to!

But there is a launch by our friend Mike Collins..get information on what he’s doing before that goes away too!

https://rehablist.infusionsoft.com/go/tvsmash/NJur1

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Mid-Day Market News & Commentary by Chris McLaughlin, January 2, 2009
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?  Well, you asked and we listened … some of you said that 9 PM ET webinars were just too darn late for you!  So we’re holding one this Saturday … at 4 PM EST: 

https://www2.gotomeeting.com/register/703821628

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In a reminder of how many loans were authorized but didn’t comport with true underwriting guidelines, Fannie Mae estimates that IndyMac owes up to $1 billion in mortgage repurchases.   When loans don’t comport to Fannie Mae’s guidelines they are able to be called, thereby forcing the originator to repurchase them.  In this case, IndyMac is bankrupt and is controlled by the Federal Deposit Insurance Corp. (FDIC).  It remains to be seen how the FDIC will handle this issue.

GMAC won’t get exclusivity with GM anymore.  Typically the finance arm of the motor giant provided all of the financing for GM vehicles.   But now that it converted to bank status in order to tap into $5 billion of the government’s $700 billion in TARP funds, Uncle Sam has placed new restrictions on the financial giant to enable more competition.

Now on to our real estate investing education section…

Must Have’s for Better Ads

Learn how to create fantastic copy with these “must have’s for better ads”.  Whether you are buying or selling your short sale career will never be complete until you understand how to effectively communicate with others. One of the most misunderstood aspects of modern methods of communication is the Internet; you don’t need to spend thousands on Google Adwords or build expensive flash based websites…just give people what they want when it comes to solid information.

1.     Photos. They say a picture is worth a thousand words but even more importantly, it attracts attention. Before you can say anything meaningful, it is necessary to grab the attention of others. If you are selling a property then the more the merrier; take as many pictures as possible and don’t scrimp on style. Make sure the property looks its best and lead with something that grabs the attention of others. If you are selling then don’t discount the power or pictures; simply go for one that exemplifies the main message. For example, a fist full of bills might be a powerful message for someone in financial distress. Learn to use pictures to capture attention and tell the story when buying or selling short sale real estate.

2.     Descriptions. Provide detailed information without overwhelming the reader. This is not the time or place to try an impress viewers with your superior knowledge or intellect; use the KISS formula (Keep it Simple Stupid) to communicate with buyers and sellers by providing the information they really want to know in a non threatening manner.

3.     Contact Info. Make it easy for both buyers and sellers to contact you – right now. People have grown accustomed to instant gratification so make it easy for others to find you instantly. Provide email, phone, instant chat or other methods of contact then follow-up as soon as possible.

4.     Examples. Don’t assume your reader fully understands the information provided; instead use working examples to communicate in a meaningful way. Be sure to use a cross section of people and situations that are similar to your target audience. For example, if you plan to target working class family neighborhoods then use an example of a family that would likely live in that area. Ditto for the pictures.

5.     Testimonials. Never underestimate the power and influence of peer pressure or word of mouth marketing. Whenever possible, use testimonials especially from neighbors or other easily recognized resources. Studies demonstrate people are much more likely to use the services of someone they trust if the name is associated with a recognized ‘authority’ or provided by a neighbor or family member.

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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 this coming Saturday at 4 PM EST, 1 PM PST:

https://www2.gotomeeting.com/register/703821628

Mid-Day Market News & Commentary by Chris McLaughlin, December 26, 2008
http://www.shortsalesriches.com/welcome.html

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Are you ready to get 2009 rolling?  Then it is time to come to our LIVE “Recession Proof Real Estate Investing” webinar tomorrow, Saturday, at 4 PM ET and 1 PM PST! 

https://www2.gotomeeting.com/register/521115603

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GMAC Financial Services got a huge Christmas present this week when the Federal Reserve approved its application to become a bank holding company, thereby enabling it to tap into $700 billion of TARP rescue funds.  Not only will GMAC be able to tap into the bank stabilizing funds, it will also be able to borrow from the Fed’s discount window for virtually no interest. 

Somber retailers took note that the Grinch showed up this holiday season.  According to Mastercards’s SpendingPulse division, total retail sales dropped 5.5% in November and a whopping 8% in December as most Americans kept their money in their bank accounts.  Luxury items were hit the hardest, with a drop of 35%, while electronics dropped 27% and women’s apparel slid 23%.  But there was so positive news from retailers, but it just so happened to be online…

There’s more proof that Americans are tired of crazy malls and rude drivers that steal your parking spots: Amazon.com announced that its 2008 holiday season was its “best ever.”  Get this: orders came in at a record-breaking 72.9 items per second! 

Here are some pretty cool amazon.com holiday facts they released today:

• Amazon.com sold enough “Breaking Dawn” books that stacked end to end they would reach the summit of Mt. Everest eight times.
• During the period from Nov. 15 – Dec. 10, Amazon sold one copy of Microsoft Office Home and Student 2007 every 2.5 minutes.
• The weight of all GPS devices sold from Black Friday through December equals the combined weight of 151 Mini Coopers.
• Amazon sold enough high-performance headphones that everyone attending the last three Super Bowls could grab a set and rock out.
• Amazon Grocery sold enough coffee to give each resident of the highly caffeinated city of Seattle a cup per day for two months.
• Amazon sold enough Casio G-Shock watches to outfit every Kanye West fan attending the 2008 Glow in the Dark Tour concert at Madison Square Garden, N.Y.
• Amazon sold enough Coldplay CDs that laid side by side they’d stretch from Seattle to Violet Hill (a street in London and the album’s first single) and more than halfway back.
• Amazon sold enough Munchkin Mozart Magic Cubes to fill every seat in the Sydney Opera House five times over.
• Amazon sold enough Wild Planet Hyper Dash games that the total weight of sets sold is over 81,000 pounds — almost the size of two 747 aircrafts.
• Amazon sold enough Spalding basketballs to fill three C-130 cargo planes.

Now, on to our real estate education section…

The Misery Index and Short Sales Negotiations

The Misery index is derived from taking the unemployment rate and adding it to the rate of inflation to gauge the economic and social climate of the nation. The higher the misery index, the more negative and desperate the average consumer tends to become. The low was 2.9 percent in July of 1954 with the high reaching 21.9 in June of 1980. Today the misery index stands at 7.77 and rising as of the end of November 2008.

So, how should short sale investors use this information? Well, in a couple of ways. First of all, watch the macro trend…as the index increases so too does the uncertainty of the average American consumer (and by proxy, business owners). Their spending habits tend to decrease and they often start to save for a rainy day.  People, business owners and even banks in this stage tend to think it is short-term and less inclined to negotiate more than a minimal reduction.

Next, watch for a shift. The second stage takes place as momentum builds and the rate of change increases at a faster and faster pace. Uncertainty gives rise to outright fear as people begin to worry about their own job or financial future. Banks and business owners begin to think this could last longer than expected and begin to pad their own balance sheets for the long run. There is a decidedly motivated response to downsize unnecessary assets, overhead or other non-performing holdings.  Short sale investors will find these individuals and banks much more motivated especially if approaching with fast closing and minimal escape clauses. The emphasis of 90 percent (or more) of people will be a flight to “safety” during this  stage as evidenced by the purchase of government bonds or other items that provide little to no real return.

The third and final stage is recuperation. Banks, investors and others realize the properties or other holdings were now over-sold and represent financially desirable long term investments. Even more importantly, there is a renewed interest in actual earnings due to the erosion of real earning power. Every short sale investor will do well to remember that earned income represents only a relatively modest allocation of most income…over the long term few people can actually live entirely on their own earned income. At this point, the money tends to flood into tangible assets and commodities including oil, real estate, farm and agricultural lands or products, oil, minerals, natural gas and other related holdings resulting in rapidly rising prices…and profits for those with the foresight to buy during stage two.

So, where are we today…most experts agree we are now transitioning from stage one into stage two making this the perfect time to begin buying foreclosures and short sales in earnest.  To keep track of where the misery index is heading, visit http://www.miseryindex.us/default-pda.asp at least quarterly. 

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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, Saturday, at 4 PM ET and 1 PM PST! 

https://www2.gotomeeting.com/register/521115603

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

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Tired of being sick and tired of this economy and all the negative news that goes along with it?  We have an amazing recession proof investing strategy that we’ll reveal to you on our webinar that we’re hosting tomorrow, yes SATURDAY at 2 PM ET LIVE.  This is your opportunity to learn about RECESSION PROOF INVESTING.  We’re going to share with you TRUE STORIES of investors who made over $80,000 and over $115,000 using the methods we’re teaching!  Go here now, there are just 18 spots left:

https://www2.gotomeeting.com/register/788305762

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

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

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

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

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

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

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

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

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

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

More on Monday!

See you at the top!

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

P.S.:

Are you ready to crack the law of the lid?  Are you ready to get serious about your business and wealth heading into 2009?  If so, you have to go now and watch Nathan’s youtube video!  Leave some comments on it …this is AMAZING to watch, and all TRUE:

http://www.youtube.com/watch?v=KQu75ne01Vg

After you’ve watched it go here and learn how to make serious money in a recession:

http://www.webinarwizards.com/custom/index.cfm?id=169716

P.P.S.:

If you missed the amazing Web2.0 webinar, the replay is available right here:

http://www.realestateinvestor.com/nathanspecial