Market News & Commentary by Chris McLaughlin, September 26, 2008
http://www.shortsalesriches.com/welcome.html
Bye bye WaMu. It was nice knowing you.
Washington Mutual finally went bust – everyone was expecting it, and its stock had been in the tank for months. But it finally happened. Any who benefited? Certainly not WaMu shareholders…but it looks like JP Morgan Chase will be the winner here. JP Morgan Chase bought WaMu’s $307 billion in assets and $188 billion in deposits for a mere $1.9 billion, which actually goes to the FDIC. The bank will also re-capitalize by selling some of its stock to raise $8 billion. The combined entities will have 5,400 branches in 23 states. JP Morgan shares jumped 10% on the news, as investors believe the company continues to gobble up assets on the cheap that will ultimately provide a solid shareholder return.
But the fall of WaMu certainly could put more investors in a panic and tighten up liquidity. The good news is that the White House says that by Monday a deal should come together. In the latest political twist, a group of conservative house Republicans, led by Representative Boehner, said that instead of buying the illiquid securities the government should just insure them. Other proposals have reduced the proposed $700 billion to $250 billion with another $100 billion provided at the President’s discretion and a final $350 billion would be provided after the next President is elected (subject to Congressional approval). We’ll know more Monday.
Wachovia also tanked today, as shares slid 31%. Investors are still nervous that Wachovia’s 2006 purchase of Golden West Financial, which has $122 billion in exposure to subprime mortgages, could lead to the company’s ruin. But in after-the-bell news the New York Times reported Wachovia is in early talks with Citigroup to be acquired. Looks like the only ones making money these days in New York are the mergers & acquisition attorneys.
In real estate news (although all this news is related to real estate!), KB Home reported a 56% decline in revenue. “These difficult conditions have now been exacerbated by the recent, unprecedented turmoil in financial and credit markets,” said Chief Executive Jeffrey Mezger. The company lost $144.7 million for the three month period ending August 31st. But in typical Wall Street fashion, the results weren’t as bad as some were expecting, so the stock closed up 1.89% today.
Now on to a real estate discussion…
I’m still hearing from people, Chris, how does this all affect my business? I’m a realtor…I’m a real estate investor. Or I’m thinking about getting into real estate investing. Is now the best time?
Folks, there’s never been a better time! When equity markets are awful, and investors are looking for hard assets, where do you think they are going? Well, precious metals that’s for sure. But don’t forget about bricks and mortar. Some investor pulls out $500,000, does a self-directed IRA into real estate, and gets a 8% to 10% return on the cash just based on rent alone. Then they get the upside appreciation, too.
I’m telling you. Read me loud and clear: when financial markets plunge, the real estate market will be the beneficiary. Just watch. Only so much money can go to gold. Or better yet, start taking action!
So who gets us out of this mess? You do. If you’re reading this, you’re probably a real estate agent or investor. Once you get going, and do your thing, and start telling people that the real estate market is A LOT more stable than the stock market, you’ll begin to make sense.
And guess what else? Banks are tanking. They have to unload nonperforming assets. So short sales will become easier. REO’s will become plentiful. And realtor bank accounts will start filling up, not depleting.
So hang in there. Sure it is painful for your 401(k), but you better be able to make it back in spades with the opportunity you’ve got in front of you.
See you at the top!
Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com
P.S.: Thank you for the hundreds that joined our Webinar last night! What an amazing opportunity to learn about short sales and investing. We’ll be doing another one NEXT THURSDAY at 9 PM as well as one during the day (to be announced), so go ahead and setup your DVR to record your favorite shows next week so you can attend our Webinar!
P.P.S.: Have you thought about building an investor-focused short sales business? There’s never been a better time. Go now to http://www.shortsalesriches.com/html and take action today!
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