[bubba99]

To those of us who are car guys, the car is not a symbol of wealth, but rather an object of affection. The sound of a Ferrari, or the handling of a Porsche on a complex road course is itself the reward. The price is just the cost of admission to the ride.

Weekend Porsches are not practical for daily drivers. Those of us who love our cars cannot park them next to a hoopdy and let the doors get dented and scratched. The car versus another investment is just a choice. The money will do me no good in 30 or 40 years, but the memories may still be there.

I don’t think I would be a good idea to trade my Porsche for acceptance by those who cannot afford, or cannot allow themselves any real treats in life.

[bubba99]

And Germany Japan, France and the UK are all below us. Plus China is number 54. The worlds powerhouse economies did not make the top 5.

[bubba99]

Don’t take advise from anyone over 30 – they are most likely trying to justify their own decisions or atone for their bad choices.

Don’t hesitate to take a risk if it feels right. Regrets about things not done are the worst. At least if you tried you know what would happen.

Do it now! Whatever the drive, do it while you are young enough to enjoy it. Bumbing around Europe is not as much fun at 50 as it would be at 20.

Don’t ever stop trying to learn and accomplish difficult things. The drive to better yourself is one of the best we have.

And finally do not take advise from anyone who claims to have all the answers. You should know that by definition they are fos

[bubba99]

If everything in a transaction goes well, the realtor does look somewhat un-necessary. But when thngs start to go south, everyone looks to the agent to fix the problems. It is probably true that the better the agent, the more un-necessary they appear.

FSBO transaction can work smoothly and save the seller some money, but if there is a problem with the loan, or title, or cold feet, or enything else, an agent is sure a welcome addition to the party

[bubba99]

With judicial foreclosure on the rise, and the new bankruptcy laws, many borrowers could get a double whammy.

First they will lose their home and find that the lender does get a judgment against them for the unpaid balance – and then discover that they cannot just walk away with an “old style bankruptcy”. Many families could be left paying for bad real estate mortgages for the rest of their lives.

[bubba99]

If we start to analyze the 1.5 trillion in debt that is at risk next year, the fallout raises some interesting questions. Making conservative assumptions about the number of loans that will go into foreclosure still leads to banks holding a lot of bad paper.

Say for arguments sake that only 25% of these highly leveraged loans get foreclosed on. And that the banks can recover 50% of their losses by reselling the foreclosure on what will be a very glutted real estate market. (Think sales costs, market loses, foreclosure exenses, and eviction costs) This leaves the banks holding .25*.5*1.5 trillion = 187.5 billion in loan losses. You can play with the numbers and say only 10% get foreclosed on, that is still 75 billion in losses. And this is the first of the bubble bursting years, with bigger losses the next year.

You can argue that 10% with a 50% recovery is too negative, but with a glut of inventory already, banks looking for a quick sale are going to take big losses. If 7.5 million people are in the 1.5 trillion dollar basket, and only 10% are unable to stand a 50% increase in loan payments, then 750,000 houses hit the market – either because the owners try to sell in advance of a foreclosure, or the bank forecloses. Cut that number in half, and it is still 375,000 new homes on the market.

If any of this comes to pass, the banking system and real estate markets will have a hard time absorbing the losses.

[bubba99]

Or it could be a tried and true retail tactic of rasing the price when customers begin to expect a big discount. The discounted higher price is what the retailer really wanted in the first place.

Just a ploy to manage buyers expectations.

[bubba99]

IMO rental prices must go up. With demand for housing staying relatively constant, and the “purchase” market in a downturn, rental markets will see increased demand.

Rents have stayed low for years inspite of rapid appreciation of the underlying property. As more people flow to the rental market it is almost a given that prices will increase. It may be that the easy credit of the last five years has artificially kept the rental market demand down as buyers moved to their new homes instead of rentals.

When the rental market equalizes from the shocks of the easy credit era, we may see the real economic value of housing. If we start with the rentals at equilibrium, and work backward, the underlying economic value is a simple calcualtion based on the cost of money.

If you are in a rental now, it might be a good idea to lock in a lease price or cap on increases before the market does equalize.

[bubba99]

This is why real estate tends to go up. It has a real value, the value of the house and the intrinsic value of the land. Land has a real value based on “economic use”, but most of the value is “what someone is willing to pay”.

As long as there are these tremendious optimists who will bid up land, real estate will carry a premium relative to economic value. Talk about a bubble – scorching desert property with no real proximity to viable economic centers. Most of the value is what the optimist sees for the future.

[bubba99]

M3 is the real deal. M2 does not include T_Bills of 100k or more, any time depostit like a 3 month cd, repos, and euro deposits etc. This is the only measure that showed if the FED were printing money. Whey they stopped publishing it in March the growth rate was 8.7%. The “M3” component will be about 3.8 trillion by the end of 06 = growing to 4.04 in 07. This is a lot of money.

It is in this component of money supply that the trade deficit is managed. Here is where the FED buying govt securities would show up – printing money.

You would think the world would be up in arms about the US just printing money to pay debt, but the europeans are also cheating. They are growing their “money supply” at almost 9%.

[bubba99]

If the fed does cut rates next meeting, will our foreign friends accept losing even more on their US investments. If they dont buy the debt, sooner or later the FED will get caught buying the deb themselves and the dollar will calapse even faster.

I keep trying to find an investment strategy that can use this scenario to make money. The obvious plays, puts on HomeDepot, Lowes, the home builders are already priced like a recession is a reality. Gold is already doubled, gold mining up 85%. I was surprised to see calls also priced through the roof for early 2007, like the FED can create another dot com like bubble in the S&P or Dow.

If the fed does start cutting rates, who knows where they will stop.

[bubba99]

davidpeace,

you did not tell us how much they were asking for the house, or what you think is should sell for. I am guessing that you got a very good deal on the purchase, and thats why you are reluctant to back out of the deal. What was the asking price?

[bubba99]

sold in march – about 5% off peak
living on boat waiting to buy back in a few years.

[bubba99]

Last year my credit union (Patelco) went with private insurance instead of FDIC. They claim each investor is now insured up to $250,000 in “American Share Insurance”. The claim is of course that this is better than FDIC and covers the depositor completely.

Any thoughts?

[bubba99]

The fed no longer reporting M3 is a big deal. This is/was the only real measure of “everything”. M2 excludes CD’s over $100k, and repos, eurodollar and other big institutional money instruments.

If the fed were just printing money, we could no longer tell.

[Author]

Posts