Every so often, I try to make a point through these newsletters. This is one of those instances. Bear with me.
I’m feeling overtly positive right now. Very ‘glass is half full’. Not necessarily any kind of justified positivity incited by stupendous macro-economic data, just viewing the world through rose-tinted glasses.
Let’s talk hard numbers:
1) The consumer price index came in flat at +0.1% month over month.
2) Unemployment is hanging out in the high 9% range.
3) Our economy is growing at slower than a 2% annualized rate.
4) New problems concerning improperly filed foreclosures and overly skittish lending
practices are plaguing our housing system with more problems than it is prepared to handle
in its current iteration.
None of this bodes well for a prompt and robust rebound in home prices. Flat job growth, flat economic growth and flat price movement means, for the time being, everything is kinda chillin’ where it’s at.
So here’s the reason I have a big, dopey grin on my face: I am an integral part in a certain sector of this fine nation’s economy, the housing market. And as badly as housing has been hammered, there really are no domestic stand-out sectors for investors to throw their money at. Sure, you can point out various emerging markets or commodities that have enjoyed a good rally as of late. Heck, I’m sure there are even stocks out there that have been kicking butt and taking names. But you can’t point out an overall market that has safe, non-volatile growth right now.
And just because we’re in recovery from a nasty recession doesn’t mean people aren’t still seeking a solid and stable return-on-investment.
So, I’m not gonna lie to you and say that housing is primed for a bounce. It’s not. But what can you point towards that IS ready for a bounce? Equities, as measured by the Dow Jones Industrial Average has enjoyed a near 75% rebound from it’s 2008 lows already. Housing has not seen any sort of com-parable gains. Bonds are yielding investors…. the safety of knowing they’ll get their money back eventually.
So, what do you see happening first: Stocks moving from where they’re at back up to the sugar-high 14000+ level or that $80,000 place appreciating back up to a reasonable $100,000 price?
Right this second, we are in a world of confusion. Problems of unprecedented size have been thrust upon our best and brightest and they are doing their best to navigate us all through it. However, it is a painful process of trial and error that will be further complicated by the winds of political change sweeping through Washington. All we are doing right now is establishing a rock-bottom floor for real estate prices to launch off of and extend away from for the next few decades. It’ll have blips of ups and downs, but the trendline will likely stay positive for a long while as we get our feet back underneath ourselves and move forward out of this dry spell.
This gigantic slowdown is offering all of us at the ground floor an opportunity to get our financial lives straight and capitalize on the current depressed market. I’m not trying to sell you that housing is a sure-fire bet, but I am at the very least trying to remove the entire sector from ‘economic pariah’ status. People gotta live somewhere. Population is growing. Florida is a nice place to live. You do the math.
Tuesday, October 19, 2010
Tuesday, October 12, 2010
A tale of how we paid top dollar through bailouts to screw ourselves yet again
Remember when we had a liquidity crisis? When all the banks started freaking out about the mounting losses from crappy loans they slapped together without reading the paperwork? And then once the taxpayers bailed them out we suddenly had a foreclosure crisis because now they could afford to pay the people to take away our homes? Remember that?
Well ladies and gentlemen, let me be the first to introduce you to our latest addition to the American family of crises, the botched paperwork crisis! (cue thunderous applause followed by an awkward and confused silence)
Yes, it appears that a ton of deals to sell foreclosed properties have been halted indefinitely because the documentation to foreclose in the 1st place was rushed through the system and, as such, is full of holes. So, just to clarify, the mass of issues started by shoddy, unread paperwork used to write bad loans is now being handled by bankers who are writing shoddy, unread paperwork to foreclose.
I’d like to say it’s the blind leading the blind, but I don’t think that’s a brutal enough metaphor. How’s about: it’s like the criminally insane leading the morally destitute. That seems to fit pretty well.
So how do lenders respond? By speeding up any foreclosures they know that they actually can get done. At the request of wards of the taxpayers Fannie Mae and Freddie Mac, any further delays in foreclosures have been cut short on properties seeking a short sale. So, if you were a homeowner who fell behind and was working with a real estate agent to try and sell the place and save both yourself and the economy at large the hindrance of foreclosure… well, sucks for you buddy. Not happening.
And while we’re on a happy note, our nation’s unemployment rate stayed steady at 9.6% as the econ-omy unexpectedly shed 95,000 jobs in September. Floridians, being the overachievers that we are, currently enjoy an 11.7% unemployment rate. The Federal Reserve Board has come out with multiple speeches implying pretty blatantly that another round of quantitative easing (printing money) is just around the corner.
I swear, by the end of this we’re gonna end up buried to our necks in cash with no living trees left over.
Mid-term elections continue to heat up. Most would agree that the Republicans are going to take the House of Representatives in a public backlash against the current establishment due to our economy’s continued weakness. But just as I was starting to understand the ‘red pill, blue pill’ dichotomy of our political structure, the Republicans have undergone mitosis and spawned a new entity: the Tea Party.
That is the first time I have used the term ‘mitosis’ in context since biology class, and I believe I deserve bonus points for it. I suggest the Democrats start the Coffee Party as their next tit for tat move. Because who drinks tea anymore? Or maybe the Red Bull Party. I could vote for that.
Finally, I’d like to share with you a lesson in hypocrisy. The Mortgage Bankers Association, one of the top proponents of fiscal responsibility in our nation chose to strategically default and walk away from their promissory obligations when their new headquarters building went upside-down on it’s mortgage. So, it’s not okay if YOU flush your faltering assets and bad debt, but it’s okay if they do it. Because, you know, they were the ones who got you there in the first place.
If I weren’t laughing, I’d be crying right now.
Well ladies and gentlemen, let me be the first to introduce you to our latest addition to the American family of crises, the botched paperwork crisis! (cue thunderous applause followed by an awkward and confused silence)
Yes, it appears that a ton of deals to sell foreclosed properties have been halted indefinitely because the documentation to foreclose in the 1st place was rushed through the system and, as such, is full of holes. So, just to clarify, the mass of issues started by shoddy, unread paperwork used to write bad loans is now being handled by bankers who are writing shoddy, unread paperwork to foreclose.
I’d like to say it’s the blind leading the blind, but I don’t think that’s a brutal enough metaphor. How’s about: it’s like the criminally insane leading the morally destitute. That seems to fit pretty well.
So how do lenders respond? By speeding up any foreclosures they know that they actually can get done. At the request of wards of the taxpayers Fannie Mae and Freddie Mac, any further delays in foreclosures have been cut short on properties seeking a short sale. So, if you were a homeowner who fell behind and was working with a real estate agent to try and sell the place and save both yourself and the economy at large the hindrance of foreclosure… well, sucks for you buddy. Not happening.
And while we’re on a happy note, our nation’s unemployment rate stayed steady at 9.6% as the econ-omy unexpectedly shed 95,000 jobs in September. Floridians, being the overachievers that we are, currently enjoy an 11.7% unemployment rate. The Federal Reserve Board has come out with multiple speeches implying pretty blatantly that another round of quantitative easing (printing money) is just around the corner.
I swear, by the end of this we’re gonna end up buried to our necks in cash with no living trees left over.
Mid-term elections continue to heat up. Most would agree that the Republicans are going to take the House of Representatives in a public backlash against the current establishment due to our economy’s continued weakness. But just as I was starting to understand the ‘red pill, blue pill’ dichotomy of our political structure, the Republicans have undergone mitosis and spawned a new entity: the Tea Party.
That is the first time I have used the term ‘mitosis’ in context since biology class, and I believe I deserve bonus points for it. I suggest the Democrats start the Coffee Party as their next tit for tat move. Because who drinks tea anymore? Or maybe the Red Bull Party. I could vote for that.
Finally, I’d like to share with you a lesson in hypocrisy. The Mortgage Bankers Association, one of the top proponents of fiscal responsibility in our nation chose to strategically default and walk away from their promissory obligations when their new headquarters building went upside-down on it’s mortgage. So, it’s not okay if YOU flush your faltering assets and bad debt, but it’s okay if they do it. Because, you know, they were the ones who got you there in the first place.
If I weren’t laughing, I’d be crying right now.
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