timothy geithner

Smart Real Estate News & Commentary by Chris McLaughlin July 26, 2010

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New home sales will be up?

According to outlook and commentary services firm Econoday, new home sales should total 310,000 units in June, up from May’s record-low 300,000.  The Census Bureau is scheduled to release its monthly new home sales data later this morning. The error ratio, however, could swing the new home sales into negative territory, month-on-month, as the possible range is listed between 280,000 to 350,000 home sales.  Months’ supply of new homes on the market surged to 8.5 months in May, from 5.8 months in April, due to the drop in sales, Econoday noted in commentary. But the actual number of new homes on the market was down 1,000 in the month to an adjusted 213,000 — to its lowest level in 40 years, since 1970, the firm said.  Econoday noted that lower interest rates are likely to boost sales for the June data. Employment and income growth, however, also have an impact on the decision to buy housing.

More magic numbers from the WH

The numbers, projections, and estimates that come out of the White House under this administration are famous for their inaccuracy and fantasy-like quality, but even it is slowly coming around to reality, admitting that unemployment will stay at or above 9% until 2012. Of course, we can expect the truth to be varnished at least a little bit…well, maybe a lot:  it now believes the 10-year deficit will be $58 billion less than projected in February when the budget blueprint was first released, and that the economy will grow by at least 4% in 2011 and 2012.   Under the revised estimates, Uncle Sam will ring up $8.474 trillion in deficits between 2011 and 2020, down from the $8.532 trillion estimated in February.  In the near-term, the administration expects the 2010 deficit to come in at $1.47 trillion — slightly lower than originally forecast and slightly above last year’s deficit of $1.41 trillion. Meanwhile, the 2011 and 2012 deficits will come in somewhat higher than the White House forecast in February. 

“The economy is still weaker than we’d like, and [there is] a medium-term and long-term fiscal situation that requires attention,” outgoing White House Budget Director Peter Orszag said in a call with reporters.  In terms of taxes, the administration now expects that the Treasury will take in $402 billion less over the next 10 years than originally expected, but at the same time will also spend $461 billion less than was forecast.  The tax revenue collected will average 18.7% a year, slightly above the 40-year historical average. Federal spending, however, will average 23.2%, above the 20.7% historical average.  When asked what accounted for the White House’s relatively optimistic growth estimates relative to other economists’ forecasts, Christina Romer, who chairs the president’s Council of Economic Advisers, said the administration believes rapid growth in business investment and an emphasis on U.S. exports is “what we think makes these numbers completely reasonable.”  In other words she has no real basis for any of it…business as usual.

Freddie’s mortgage and issuance $179bn in H110

Mortgage purchase and issuance at Freddie Mac rose to $30.9 billion in June, from $25.1 billion in May, bringing the year-to-date total to $179 billion for the first half of 2010 (HI10), according to a monthly volume summary.  Freddie’s total mortgage portfolio decreased at an annualized rate of 0.9% in June. Total guaranteed Participation Certificates (PCs) and structured securities issued fell at an annualized rate of 0.6%.  The monthly contraction in the portfolio arrives after Freddie wrapped up an initiative announced in February to purchase essentially all the single-family mortgages delinquent by 120 or more days out of its PC pools.  The single-family delinquency rate decreased to 3.96% in June from 4.06% in May, and the multifamily delinquency rate fell to 0.28% from 0.32%.  Refinance-loan purchase and guarantee volume was $19.1 billion in June, up from $17.1 billion in May. Freddie reported 21,367 modifications in June, for a total 93,558 in the first six months of 2010.  The aggregate unpaid principal balance of the mortgage-related investments portfolio slipped by $8.6 billion.

Soak the rich

Treasury Secretary Timothy Geithner said yesterday that the economy is not likely to slip back into recession, but letting tax cuts for the wealthiest Americans expire is necessary to show commitment to cutting budget deficits.  “We think that’s the responsible thing to do because we need to make sure we can show the world that (we’re) willing as a country now to start to make some progress bringing down our long-term deficits,” he said on ABC’s “This Week” program.  In other words, pretend the economy is great, soak the people most likely to invest in private enterprise, and call it “responsible.”  Geithner said only 2 to 3 percent of Americans — those making $250,000 or more a year — will be affected when tax cuts enacted under former President George W. Bush end on schedule this year. 

Republicans want to extend the tax cuts and Democrats are divided but Geithner said reductions for top earners should end.  There’s another way to be responsible, of course, and that’s by not driving the country into the wall at exactly the wrong time with programs we can’t afford, but no one in the administration has stumbled on that idea yet.  “I think the most likely thing is you’ll see an economy that gradually strengthens over the next year or two, you’ll see job growth start to come back, investments expanding … but we’ve got a long way to go still,” Geithner said.  Indeed.  In fact, for some reason this administration is intent upon making it as long as possible…

DSNews.com – GSEs next?

Now that the Obama administration is finished “fixing” financial regulatory reform, it’s setting its sights on restructuring the housing finance system, namely the GSEs.  The White House says it will put forth a formal proposal by early next year, and some say its focus will be a departure from the age-old adage of homeownership as everyone’s “American Dream,” and shift support for the housing market from Fannie Mae and Freddie Mac to the private sector.  There’s no doubt change is coming for the nation’s two largest mortgage companies. Many were disconcerted that the Dodd-Frank Wall Street Reform and Consumer Protections Act didn’t include a new blueprint, or at least new rules, for Fannie and Freddie. 

Rep. Darrell Issa (R-California), ranking member of the House Oversight and Government Reform Committee, called the president’s signing of the Dodd-Frank bill a “charade” on true reform, particularly in light of Issa’s recent investigation that revealed former executives at both Fannie Mae and Freddie Mac accepted so-called sweetheart loans from subprime mortgage lender Countrywide before it imploded.  Since the federal government took control of the GSEs in September 2008, the two companies have had to draw $146 billion in federal funding to stay afloat, giving taxpayers an 80 percent ownership stake in the mortgage financiers. Fannie and Freddie’s rescue has become the costliest of all the government bailouts, making the fact that the two companies were never mentioned in a bill that promises to end “too-big-to-fail” even that much more ironic.  Recent estimates from the Congressional Budget Office (CBO) put the tab for subsidizing Fannie and Freddie at $389 billion, when all is said and done.

Now for our real estate education section…

Bills, Bills, Bills – How Reform is Changing the Face of Real Estate

Whether you like him or not, one thing everyone can agree upon is that President Obama has indeed kept his promise to bring change to the nation. From healthcare reform to finance reform, some of the most radical changes in decades have come to pass with profound implications for the future of real estate.

Although superficially healthcare reform may not seem to have a direct impact on real estate, upon closer examination it becomes clear additional taxes (including the 3.8 percent premium on investment earnings for high net worth individuals, the upcoming requirement to send 1099′s to every company or service provider which you do more than $600 of business with annually and other upcoming changes) required to fund the measure will indeed directly affect investors. Finance reform presents a myriad of new taxes, decreased write-offs and stringent lending regulations likely to transform the mortgage and banking industry for decades.

But the worst may be yet to come in the form of the upcoming energy bill. “What energy bill?” you ask…the one that has been in the works since the Supreme Court ruled that carbon dioxide is a poison which must be cleaned up. As an environmental pollutant, the ruling gave the EPA (Environmental Protection Agency) oversight that directly affects business and industry throughout the nation with or without a new bill. However, experts and politicians alike expect an energy bill to be put through sooner rather than later.

What possible implications could this hold for the future of real estate?

Apparently a lot especially when “Carbon credits” are taxed into the equation of a new home, roads and other improvements. The cost  of electricity and other fuel based services are also likely to increase…along with the cost of goods which use fuel or electricity.

What other areas should savvy short sale and real estate investors keep an eye on? How about VAT taxes, Cap & Trade modifications, Climate bill, Privacy bill and a new living wage bill just for starters. In fact, even proposed revisions to the “No Child Left Behind” law is expected to impact real estate since one of the major predictors of home value and neighborhood desirability is related to school performance. Under the proposed changes, a single federal formula will be used to calculate and report high school graduation rates and other statistics…including the federal funding and ability of parents to remove children from schools or obtain vouchers….all of which are likely to impact the desirability of any given home or neighborhood.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

http://www.shortsalesriches.com
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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, March 24, 2009
http://www.shortsalesriches.com/welcome.html

——–

Brand New Investor Makes It Happen!  If you

missed the amazing testimonial from a newbie

real estate investor who made $51,000+ on her

first deal, go here now to watch this video:

 

http://www.youtube.com/shortsalesriches

 

Then grab a spot for yourself before they all

disappear in our no-cost, no-obligation
webinar right here live tonight (Tuesday) at 8:30 PM

ET, 5:30 PM PST:

 

https://www2.gotomeeting.com/register/982247811

———

Up and…down.

 

The Dow Jones industrial average jumped 498 points yesterday, or 6.8 percent, and the S&P S&P 500 rallied 7.1%, on news that Treasury Secretary Timothy Geithner would buy a trillion dollars worth of toxic assets, and an unexpected 5.1% rise in existing home sales.  The jump was the biggest since October 28 of last year.  Not surprisingly, the markets opened lower today on profit taking.  “There’s a feeling that we’re getting to the end of the worse of the news,” said Ken Wattret, economist with BNP Paribas in London, but noted that there’s still plenty to be pessimistic about, including skepticism over whether the toxic assets at the center of the government’s plan will ever rise in value.

 

AIG – the saga continues

 

15 of the top 20 bonus recipients at AIG have agreed to return their bonuses, for a total of $50 million of the $165 million originally paid out.  Whether it has more to do with altruism, or angry mobs with torches, is open to speculation.  Just about everyone in the United States is outraged over the payouts, including congress, the president, and New York Attorney General Andrew Cuomo.  Today Chairman Ben Bernanke got into the act by claiming in testimony to congress that he too wanted to sue AIG, but declined because if he had lost it would have added punitive damages to the bonuses.

 

Real estate rebounding?  Sort of.

 

In housing markets around the country, there are signs that the bottom may have been reached, and sales are beginning to come back up.  First-time buyers are coming back into the market thanks in part to federal incentives, which include a $8000 tax credit for first-time, residential buyers.  Real estate search firm Trulia found that the greatest rise in internet searches occurred in Florida, where investors and retirees are snapping up bargains.  Sales for Lee County, Florida, which includes Fort Myers and Cape Coral, were up nearly 80 percent from 2007 to 2008, says Mark Washburn, a realtor at Island Coast Realty in Ft. Myers.  “That’s pretty impressive.  The caveat is the prices are half.”  That’s a caveat indeed.

 

Detroit troubles.

 

Car dealerships are going broke across the US.  Nationally, the United States lost about 900 car dealerships last year, according the National Automobile Dealers Association.  About 66% percent of the dealers that closed last year were single-brand dealers.  The losses are greatest among dealers selling Detroit brands, said Jim Appleton, president of New Jersey Coalition of Automotive Retailers.  Big dealerships with deep pockets are snapping up some of the smaller dealerships at fire sale prices, but many small dealerships are just closing up shop, unable to service the financing on the automobiles sitting idle on their lot.

 

Now on to our real estate investing education section…

 

It Can’t Happen Here – or Can it?

 

In the famous satirical novel written in the midst of the last great economic Depression by Sinclair Lewis, the election of a new president spurs the fanatical rise of “true believers” to propel the newly elected leader to the height of government.  After gaining control of Congress and the Supreme Court the nation is radically altered as the dictator attempts to save the nation from financial cheats, crime and other societal woes through a series of ever more severe restrictions on the lives of citizens.

 

While the story might center around a fascist regime, the similarities are otherwise well worth noting; a charismatic presidential candidate that runs on a platform of “reform” and claims to be a champion to the causes of the average citizen while still maintaining close ties with big business. A media darling who is elected during a time of financial crisis, greed and the growing distress of the masses, he soon has the support of the populace in exchange for their freedom. Notice any similarities yet? Whether you love him or hate him, one thing is certain…going on late night television to proclaim up to 90 percent taxation plus retroactive implementation of taxation is one way to get the attention of every hard working American in the nation. Even the host admitted the prospect was of more than passing concern.

 

So, what does this have to do with Short Sales? Take a look at the state of the nation; from Wall Street to Main Street people are searching for someone to bail them out and fix things. The repeated refrain is “This is America”…things are supposed to turn out just fine and recovery is just around the next corner. But what if it isn’t? What if the economy continues to falter in a Japanese style lull that lasts for years as economist Nouriel Roubini predicts? Worse, what is the USA goes the way of the former USSR as predicted by Dmitri Orlov? What if income taxes are suddenly increased with little to no warning? What if your prior earnings are retroactively taxed at rates as high as 90 percent?

 

Consider this, while domestic automobile manufacturing companies beg for bail-out funds even while slashing payroll and cutting back on benefits, car sales continue to decline and obtaining financing to purchase a depreciating asset like a new vehicle becomes even harder…meanwhile, it’s now possible to purchase a home – complete with lot and land – in Detroit for less than the cost of even a modest compact car. In fact, most people could pay in cash simply by charging it on a credit card. Now, we aren’t suggesting this is the right road to wealth but it does point out some of the underlying assumptions and mixed-up priorities currently being perpetuated by the mainstream media. As little as two years ago real estate was considered the road to wealth by everyone – so why the sudden change of heart?

 

During tough economic times it is more important than ever for investors to think for themselves rather than follow the masses. Real estate is a tangible asset that allows you to secure additional sources of cash flow when and how you want. Have a high income year? Take time to fix up the place to secure some additional write-offs. Need a little extra cash this year? Sell a property while you are in a lower tax bracket. Searching for a regular supplement to a fixed income? Rent or lease a property.  Want to sell but retain a long term steady income? Hold a note. Whatever your situation, real estate has the flexibility to provide the financial returns you need to ride out the economic storm. While most American’s agree that it can’t happen here – some already think it did. Either way, learn how to profit while others panic by coming to our webinar this evening at 8:30 PM ET, 5:30 PM PST:

 

https://www2.gotomeeting.com/register/982247811

 

 

See you at the top!

 

 

Chris McLaughlin

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

 

P.S.

 

Don’t miss out webinar tonight at 8:30 PM ET, 5:30 PM PST:

 

https://www2.gotomeeting.com/register/982247811

 

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, March 16, 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 live on Tuesday night at
8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/661793179

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:

https://www2.gotomeeting.com/register/661793179
———
Ah, we have spent a lot of time talking about the poor idiots over at AIG, the insurance giant that is now 80% owned by Uncle Sam.   This is the company that spent weekends at the St. Regis charging up crazy spa packages and the bill went to the taxpayer.  What have they done lately?  Well, they lost $61.7 billion last quarter.  But that’s not really what we’re going to talk about …

How about recently handing out $165 million in bonuses … all of which come directly from our taxpayer money.  Now the truth is that these are bonuses were under contract during 2008, so it wasn’t a recent decision, but after a review by their attorneys the current AIG executives said they had to pay them out.

 And that didn’t leave our President very pleased. “It’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay,” a noticeably angry President stated.  “How do they justify this outrage to the taxpayers who are keeping the company afloat,” he stated. 

President Obama instructed Treasury Secretary Timothy Geithner to figure out a way to rescind the $165 million in bonuses.  And the pressure was also mounting from Congress.  Representative Barney Frank, Chair of the House Financial Services committee, suggested that anyone was took the bonus ought to be terminated.   “These people may have a right to their bonuses. They don’t have a right to their jobs forever,” said Frank.

The National Association of Home Builders/Wells Fargo Housing Market Index stood at 9, just 1 point above a record low.   If the index is lower than 50 it indicates there is negative sentiment about the market.  Regionally the index was steady throughout the US but in the Northeast there was a single point bump upward. 

The financial markets were higher today after Fed Chairman Ben Bernanke gave an optimistic forecast on CBS’s 60 Minutes over the weekend where he suggested that the recession would probably end this year.  And, like many of us, Bernanke shows certain disgust over AIG.  The nation’s economist in chief said he “slammed the phone more than a few times on discussing AIG.” 

Now on to our real estate investing education section …

Short Sales, Infinite Stupidity and Savvy Investors

“Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.”   Albert Einstein

Best known for his theory of relativity, Einstein had a way with words. In his distinctive style, the quote above applies as much to the laws of nature as it does the laws of investing; in both cases human stupidity can appear limitless. Take for instance the current opportunities afforded by short sales. If history has a way of repeating itself then it would seem only natural for savvy investors –especially those that have taken a major beating in the stock market – to examine the past in search of likely outcomes and time tested trends.

While a few stout hearted souls may have already done so, the vast majority of the population dutifully follows whatever they hear on the major media outlets. The same people that persuaded low-income homebuyers to take advantage of variable interest rates rather than some of the lowest fixed interest rates in history are probably not the first place to turn for reliable real estate advice.

By now everyone knows the 1950, 60’s and 70’s represented some of the most prosperous times for the American household…especially those that owned real estate. Many became wealthy beyond their wildest dreams while others steadily increased the lifestyle of their entire family simply by having had the foresight to buy right. Much of the original buying opportunity began during the economic crisis now known as the Great Depression.

Only time will tell whether or not that title stands after the current financial fiasco settles down but one thing is certain – the timeline between now and then deserves more than a passing interest. Use this checklist to compare the past to the present…then give serious consideration to purchasing short sale real estate as a way to preserve purchasing power and regain wealth in the same way others did in former years. Remember, there are always a few people that make money even during the worst economic times…the only question is whether or not you will be one of them or join the ranks of those that start all over again.

General Comparison between 1920’s and Today

Federal funding expanded by three times…Yep. Thanks to Congress it has taken less than 3 months to match the combined budget of a generation – or two (or three).

Bank failures. Again, yes. Although fewer banks are failing it is due in large part to the dramatic consolidation of major banking institutions throughout the nation.

Organized labor declines. Yes, organized labor has been in a state of survival only for years with workers working harder for less spending power.

Mergers, Mergers, Mergers. The 20’s saw unprecedented numbers of mergers between banks and other corporations responsible for influencing millions of Americans. Likewise, modern day media, banking and even utilities have grown “too big to fail.”

Dramatic stock market rise…yep, the American investor knows the highs – and recent lows – only all too well….and then begins to fall/decline.

Federal Reserve begins cutting interest rates in an effort to curb losses…especially in labor, real estate and inventory. Ouch – beginning to have a familiar ring isn’t it?

The GNP falls even as the unemployment rate rises – yes, we are still speaking about past history although the comparisons are admittedly grim.

By 1932 GNP falls over 13 percent as unemployment reaches over 23 percent. Stocks lost 80 percent of their value and international trade declined by 2/3’rds. Income Taxes are increased from 25 percent to 63 percent and Congress passes the Federal Home Loan Bank Act.

In 1933 the working wealthy are subjected to even more taxes in order to pay for massive government spending programs designed to make work and stabilizing the economy including the real estate market.

So, what can the average investor learn from this series of unfortunate events? A few considerations to keep in mind:

1. Working for a living can become very expensive. The public backlash against high wage earners has already started. Expect higher and higher income taxes as the federal government raises taxes in order to pay for everything from Social Security to the newly proposed universal health care plan (estimated to add another 10 percent tax to wages). Earned income has always been the most expensive form of revenue – instead, seek out short sales as a way to generate revenue that qualifies for hefty deductions and future appreciation.
2. The cost of credit experiences exponential increases. Interest rates are at near historic lows – just as anyone that purchased a home in the late 70’s or early 80’s about the cost of credit. Double digit mortgages combined with rapid inflation was the end result of inflation. Experts across the nation agree the time will come when the government will be forced to monetize the current debt…when it does the big buying spree will be over.
3. Buy for pennies on the dollar. During the Great Depression one of the most significant ways people prospered was by having the foresight to invest in hard assets for pennies on the dollar. Homes that sold for 3, 4 or even 10x’s the current price may not have cash-flowed for the original owner but that doesn’t mean you can make a profit while gaining valuable assets.

See you at the top!

 

Chris McLaughlin

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

P.S.

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

https://www2.gotomeeting.com/register/661793179

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, February 10, 2009
http://www.shortsalesriches.com/welcome.html

—-

“How to Exploit a Little Known Flaw in the Bailout
Package for a Six-Figure Payday!”  (But it’s only
good for the next 14 months…)

I don’t know why people haven’t caught on to this yet.
Because with this, you can forget fearing this recession,
and use it to your advantage instead! 

I’ll show you how, and it’ won’t cost you a cent. 

But there IS a catch – we fill up early, and there’s no
wait list.  And at last count, we only had 6 spots left for
tonight’s webinar that begins at 8:30 PM ET, 5:30 PST.
Go and grab one of these last openings NOW, or miss out.

https://www2.gotomeeting.com/register/202760525

—-
The Wall Street Journal reported today that banks will receive what doctors commonly refer to as a “stress test” before receiving additional money.  The short of it: if you aren’t healthy enough to lend, you might not receive any more government aid.  We’re not going to do surgery on a patient that won’t wake up.  Treasury Secretary Timothy Geithner said: “We want their balance sheets cleaner, and stronger. And we are going to help this process by providing a new program of capital support for those institutions that need it.”  But banks need to start lending, else they won’t be getting additional help, since “every dollar of assistance preserves or generates lending capital above the level that would have been possible in the absence of government support,” noted Geithner.

At least the new Treasury Secretary is more sensitive to public perception than his predecessor.  The “Troubled Asset Relief Program” will now get a nice fluffy new name: the “Financial Stability Plan.”  Ahh, I feel better already, don’t you??

Well, until I just continued reading the WSJ article, where it noted that RBC Capital Markets research shows that over 1,000 banks could go under in the next few years, which is triple its prior estimate.  But guess what?  Many of them should absolutely fail.   That’s how capitalism works, folks.  If a bank took unnecessary risk, and leveraged itself with bad assets, at some point the markets have to correct themselves and those that were in trouble need to be punished for being dumb, and those that made the right moves should be rewarded with increased market share in loans and deposits.  If not, then you simply create a moral hazard again where companies take unnecessary risk because they know Uncle Sam will come and bail them out again.

Meanwhile, last night there was a press conference that sobered up anyone sitting around drinking a few beers.  They got a douse of frank talk from President Barack Obama.  In a televised address, the new President did little to calm fears; rather he talked of the “profound economic emergency” our country faces.  The President that normally talks of hope was clearly tightening his message to the critics of his economic stimulus plan: “The plan is not perfect. No plan is. I can’t tell you for sure that everything in this plan will work exactly as we hope, but I can tell you with complete confidence that a failure to act will only deepen this crisis as well as the pain felt by millions of Americans,” he said.

Actually, Mr. President, many in the real estate trenches that have been living this recession and feeling the pain think that the House Democratic plan does little to stimulate housing demand and is full of so much pork that it could feed every human being on Earth with bacon from now until the end of time.  But the Senate plan, which at least includes at $15,000 tax credit for home buyers, will make some headway even if we want to waste billions on silly projects like putting new grass on the National Mall.   So what I can say with complete confidence is that if you don’t fix housing, you’re blowing billions of dollars trying to keep people employed who will just be out of work once the pork runs out.  Fix Housing First! ‘Nuf said.

Now, on to our real estate investing section…

What’s Better – Short Sales or 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 (Exchange Traded Funds)  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.

This week’s webinar replay is right here…for the next 8 hours:

http://www.webinarwizards.com/custom/index.cfm?id=170879

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

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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

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