Wall Street F*cked it up...again

[Bouncing Soul]

Anyways, to really get back on point. When I saw the funds going into RE, I was certain that they would F*ck it up. I couldn't figure a way to play so I just watched from the sideline.

I've been wondering if I should take some money and bet against housing again, plenty of ways to do it.

 

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[jon.a]

I've been wondering if I should take some money and bet against housing again, plenty of ways to do it.

I think it's a little early. We don't have as many glaring signs as we had the last time.

 

[Bouncing Soul]

I think it's a little early. We don't have as many glaring signs as we had the last time.

That's the problem with shorts, you can be right and still go broke.

 

[hellolin]

OK then- non-whites and women in the middle class have all seen their standard of living improve. White males have not stalled but in fact fallen.

This could be true, matter of fact I think I was benefited from that when I was in the military, I got more pay and more attention because I am one of the super minorities. And like a poster said here before, pension system locks you in and is the ultimate slowlane lifestyle, and there are more middle classes moving into the rich than falling in the poor. Indeed Americans do not know what to do with their new found freedom, except for many first generation immigrants who saw the abundances in their new found life and worked hard to get up to the middle class.

 

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[hellolin]

Of course. Back when I started working, practically everyone who didn't work at a fast food joint or a gas station had something called a pension. I know there's a few of us older guys and gals here who remember those. When I was a lineman, I used to get a statement every month telling me how much I would get when I retired based on my present earnings and projected future earnings.

Sometime in the 1980s companies started phasing out pensions in favor of 401ks. No shit. Now, instead of the company funding the pension plan, workers had to "save for retirement." Note however, the money companies saved by eliminating their pension funds didn't show up as a wage increase in the employee's paycheck to help them save for retirement. No, in fact when adjusted for inflation, real wages have gone down over the last 40 years. And against that backdrop, folks who are trying to raise a family on a diminishing paycheck are expected to save a million dollars or more for retirement. Yea, right.

Now, besides relieving companies of the obligation to fund employee pensions, the move to 401ks was a boon to the Wall Street elite because it essentially forced virtually everyone to become customers of the financial services industry. In my childhood, it was usually only weird uncle Bob who had a brokerage account. The rest of the family would talking about him as if he had a gambling addiction - because he did! That's right boys and girls - strip away the thin veneer of respectability and "investing" in the financial markets in nothing more than another form of gambling, and I say this as a former futures trader. I know people who have saved for retirement and then lost half of it in a market "correction."

Maybe a bit off topic, but since the last recovery was all smoke and mirrors another crash is inevitable so maybe not - the only way to protect yourself is to develop a stream of income that is independent of the markets and if at all possible, independent of the need for your daily involvement, given we all get older. Alternatively, an income stream derived from something you can do that involves primarily mental effort - writing, certain types of consulting, etc. Particularly if your ultimate products do fulfill the needs of poor people, cause we're going to have a lot more of them (payday loans, anybody?).

Anyway, rant mode off - I just see red when people (not that anyone in the previous posts here did, but our financial overlords do) criticizes Joe Sixpack for not saving for retirement.

Cheers,
O-2-

I live in the city of LA, and almost all my friends right now are working class, boarder line poor Hispanics living in the city. Knowing them on a personal/social basis had me thinking of creating a social networking website that's just for poor working classes, their needs and wants and daily lives are very different from those of middle class and rich, and since there are older poor people in the next 10 years, I don't know if this is such a good idea?

 

[Mineralogic]

System and the banskter frauds have helped create beyond regular slowlaners
iTs creating slaves and people who will eventually become less and less the consumers everyone thinks

The landlords doing well have probably seen the bubble articles on rent In major cities i hope

The dream is dead in many peoples minds and that is a crime for any Laner

 

[JustAskBenWhy]

OK then- non-whites and women in the middle class have all seen their standard of living improve. White males have not stalled but in fact fallen.

Interesting - so in essence, what you are saying is that with US opening to trade to the world the white males haven't been able to keep up? You are saying that they are too stupid to invest 401k funds properly for themselves and have fallen in a ditch without pensions. Is that the union people who's intellectual worth enables them to push the F*cking button on an assembly line but stops there? Are white males falling those guys that used to dominate sports but found out black guys have much more kinesthetic predisposition?

You cannot keep a fast-laner down - period. No regulation can, and no social dimension can. If trash is in your white, then you deserve to be decimated.

Having said this, I really have no idea what you're talking about. All of the people that surround me, white, or not, are excelling, pushing forward, and achieving. Minorities have been propped up, but anyone who is losing the game of life because of it needs to get some F*cking game on!

 

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[Mineralogic]

Interesting - so in essence, what you are saying is that with US opening to trade to the world the white mails haven't been able to keep up? You are saying that they are too stupid to invest 401k funds properly for themselves and have fallen in a ditch without pensions. Is that the union people who's intellectual worth enables them to push the F*cking button on an assembly line but stops there? Are white males falling those guys that used to dominate sports but found out black guys have much more kinesthetic predisposition?

You cannot keep a fast-laner down - period. No regulation can, and no social dimension can. If trash is in your white, then you deserve to be decimated.

Having said this, I really have no idea what you're talking about. All of the people that surround me, white, or not, are excelling, pushing forward, and achieving. Minorities have been propped up, but anyone who is loosing the game of life because of it needs to get some F*cking game on!

That is correct, some fast laners will as matter of practice not abide by social customs, ethics, government control/laws, in their quest to crusade over slowlaners. I think the new Steve Jobs movie will cover some of this

 

[Bouncing Soul]

Interesting - so in essence, what you are saying is that with US opening to trade to the world the white mails haven't been able to keep up? You are saying that they are too stupid to invest 401k funds properly for themselves and have fallen in a ditch without pensions. Is that the union people who's intellectual worth enables them to push the F*cking button on an assembly line but stops there? Are white males falling those guys that used to dominate sports but found out black guys have much more kinesthetic predisposition?

You cannot keep a fast-laner down - period. No regulation can, and no social dimension can. If trash is in your white, then you deserve to be decimated.

Having said this, I really have no idea what you're talking about. All of the people that surround me, white, or not, are excelling, pushing forward, and achieving. Minorities have been propped up, but anyone who is loosing the game of life because of it needs to get some F*cking game on!

I'm not saying anything. I'm summarizing data, no analysis or synthesis.

 

[JustAskBenWhy]

I'm not saying anything. I'm summarizing data, no analysis or synthesis.

I understand. All I am saying is that the numbers tell a story, and seems that we may be reading the story very differently!

 

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[Bouncing Soul]

I understand. All I am saying is that the numbers tell a story, and seems that we may be reading the story very differently!

My high level read is pretty simple, if you didn't figure out how to be on the side of the tech revolution, you were F*cked. If you did figure it out, you got to join the largest group in history to get rich.

This is not to say the techies exclusively got rich, but that it allows for more people to get rich more easily if they figure out how to use it to their advantage..

 

[jon.a]

Get some F*cking game on!

Now there's a tag line.

 

[JustAskBenWhy]

My high level read is pretty simple, if you didn't figure out how to be on the side of the tech revolution, you were F*cked. If you did figure it out, you got to join the largest group in history to get rich.

This is not to say the techies exclusively got rich, but that it allows for more people to get rich more easily if they figure out how to use it to their advantage..

Sure - tech helps, and I make money there too. But, I started in RE. I pay very low taxes because of RE. And it didn't and still doesn't require tech. I just have always worked hard and smart, and refused to think of W2 income as any kind of way forward. No one said it's easy. But, you can't be lazy or stupid...

 

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[jon.a]

Going back to the OP again. Do the smart guy's here think Wall Street is stupid or just manipulating the masses?

 

[Bouncing Soul]

Going back to the OP again. Do the smart guy's here think Wall Street is stupid or just manipulating the masses?

By the measure of sheer intelligence, those are some of the smartest, most driven people in America. How they use that intellectual horsepower, and whether they're manipulating people, is a more complicated question. Certainly HFT is pure market manipulation. Thieves like Jordan Belfort are still there. But I think other areas get more grey. For example, is the Bogle theory of indexing truly manipulation? The demand for REITs? How about the quants that build models that don't account for massive non-linearity? If you're really interested in the topic, and you haven't, read some Nassim Taleb.

 

[Finance_Machine]

A few points to consider after reading the original post:
- a 7% cap rate isn't necessarily bad. The focus should be on the spread between your cap rate and debt rate. If you can get a 4.5% loan on a deal with a 7% cap rate, and that 250bps will show a nice return on investment.
- in my opinion, single family homes are largely consumption goods, and as such shouldn't be viewed as an investment because it is the "buy, hold, pray" approach
- a good block and tackle deal can be found if you focus on building solid relationships whereby people trust you are a closer. By block and tackle, I mean a basic 200bps spread between the cap rate and debt rate
- a 200bps spread on an apartment deal provides an investment that allows for one to raise capital. As great as the investment might be, the business model is raising capital and being a good steward of your investors capital. The real estate deal is the product. As an entrepreneur, you need to hone in on the underlying business model, not just the product.
- there is a reason why they say "nobody ever got rich investing their own money". The investment side is great, but it is the underlying business model that can make you rich.
- think of your investment as the chips required by your investors to play the game

- and if/when the $hit hits the fan in the single family home market, it is unlikely to result in great deals on apartment complexes for a number of reasons, but most importantly because the owner of a good building likely knows a thing or two and will negotiate his deal based on the underlying cash flow and where he thinks debt will be priced for a prospective buyer.

 

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[JustAskBenWhy]

A few points to consider after reading the original post:
- a 7% cap rate isn't necessarily bad. The focus should be on the spread between your cap rate and debt rate. If you can get a 4.5% loan on a deal with a 7% cap rate, and that 250bps will show a nice return on investment.
- in my opinion, single family homes are largely consumption goods, and as such shouldn't be viewed as an investment because it is the "buy, hold, pray" approach
- a good block and tackle deal can be found if you focus on building solid relationships whereby people trust you are a closer. By block and tackle, I mean a basic 200bps spread between the cap rate and debt rate
- a 200bps spread on an apartment deal provides an investment that allows for one to raise capital. As great as the investment might be, the business model is raising capital and being a good steward of your investors capital. The real estate deal is the product. As an entrepreneur, you need to hone in on the underlying business model, not just the product.
- there is a reason why they say "nobody ever got rich investing their own money". The investment side is great, but it is the underlying business model that can make you rich.
- think of your investment as the chips required by your investors to play the game

- and if/when the $hit hits the fan in the single family home market, it is unlikely to result in great deals on apartment complexes for a number of reasons, but most importantly because the owner of a good building likely knows a thing or two and will negotiate his deal based on the underlying cash flow and where he thinks debt will be priced for a prospective buyer.

250 basis point delta may be OK if it's true, which is the point. Most underwriting today is looser than a hooker. LTL - what LTL?! Bad debt - what bad debt?! 2.5% delta is just not enough to mitigate risk without a significant value add component.

I was talking to a friend who heads CapEx deployment for a $2 bil. fund. They acquired new 2 new communities in Mid West. Within 1 week he deployed $2 mil in CapEx. The CEO and CFO of underwriting were fired right then. RE is so hot that no DD is being done, and assumptions are being made that are ridiculous. I understand the macro play on FED policy and all that, but you still have to underwrite, and no one does...

7% CAP is great, if there's a value ad component. In other words, if I can buy at 7 cap, drive NOI, and exit at the same 7 cap - I am in all day long. But, this isn't what's going on in today's market.

Totally agreed on the SFR

 

[Finance_Machine]

I don't think there is a premium that would compensate for dealing with a seller that is "looser than a hooker." This is why I mentioned that you should focus on relationship based deals.

 

[BrandonS85]

Wall street always tends to lag behind in what's doing well. Real estate was stupid easy in 09-11 to make money in with overly depressed prices. You still can do well in it, however it gets harder as more and more large players dump their obscene amounts of capital into it. Eventually the cycle will complete once again.

 

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[MattCour]

That first video is frightening! I just watched The Big Short and I hope history does not repeat itself like 2008.

 

[obrian]

lol when it reminds of the story of the frog in the pot.

 

[obrian]

 

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[obrian]

When wall street starts unloading there will be a bust. The million dollar question - when??!

nice question but i don't know if it will be a as big as the 1929 crash or even bigger. but the only thing we can do is be prepared though, buy up some gold and silver and probably some bitcoins. because when it comes it's going to wipe out alot of persons, alot of persons right now think that they are safe but their not. i think we need a crash because it would be great for the economy to rebuild over again because the last collapse was around 2008 but i never think it was really that serious because what obama actually did is pump back money out of thin F*ckin air back into the economy and prevented it and this was quite obvious tbh.

alot of persons saw this and when we step foot into the new decade everything looks fine but when you peel the onion to it's core, you can see that it was just an illusion. donald trump said the american dream is dead well i don't know about that lol but i know alot of persons right now who believe him.maybe we are in the frog in the boiling pot scenario right now who knows but as you said though it's only a matter of when. it can happen tommorow, next week, next month, next year, next decade eventually it will though. we as individuals like me and you and all of us on this thread can't control it we only can be prepared my friend. fail to prepare, prepare to fail.