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randallg99

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lots of news and a little banter on this forum about HELOCs, Reits, Home values... but very little about the Fed, Interest rates, credit risk and the corresponding credit bubble.... its not all bad news, but the changes are coming faster than ever...

lets review what seems like years worth of news all packed in the past couple of weeks...

1. Housing- still in free fall. inventory levels and foreclosures continue to creep up. My opinion is that we aint seen nothin` yet.... I am in the `waiting` camp and may pursue property in the form of low ball offers of 50%+/- the asking prices..

2. Interest rate today was cut by 1/4. Many wanted 1/2, but they will live with it. The concern is not that the rate was `only cut` by 1/4, but the language used in the report... Bomber Ben all but told us flat out not to expect any more cuts and started using inflation (gasp!) as his basis... so what now, Ben? dont worry about the dollar anymore? ... unfortunately, it will take much longer for any positive effects of a lower dollar to take hold than the negative effects on the economy...

3. Looking at new cars for my wife. All German cars are holding firm in value, if not downright increasing in price... what this means? My vanishing US$ is starting to hit the consumer where it hurts...

4. Oil at $94 per barrel. You have got to be kidding me... one slip in logisitics, any more congestion at the ports and any indication of a refinery shut down will send gas prices to the moon.... mark my words. (I have bought slugs of PBT in the past week, mid 15s)

5. Merrill just had the single largest write down in history.... and THEY STILL CANNOT VALUE IT PROPERLY. (Hate to use caps, but if this doesnt freak people out, then I dont know what will...) Friends on wall street are glad they are able to kill this quarter once and for all so they can focus on profits again. But even they admit they freaked out and are not sure all of the bad news has come out because the true cost vs. current basis has a spread so out of whack they dont know which a$$ the dirt is flying out from next...

6. Did anyone see the MasterCard earnings report? This all but confirms credit has ever so quickly shifted the risk from home eq lines that were used as ATMs over to plastic credit.... the problem? for the consumer, higher interest rates/higher pymts and lower net worth. (IMHO, Mastercard will realistically be a strong short when a lot of the dust settles)

7. Default rate at Alt-A levels are increasing... see #1.

In summary- the economic reality of Americans is that they cannot afford all of the above in one full swoop... Lower $, higher oil, reduced home equity/net worth, higher payments... the economy reminds me of a table with a broken leg being held by books...

but who am I? currently investing in gold, silver and bulk shipping companies and recently have reentered the oil/gas arena. So far, so good. good luck to the rest of you.
 

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Andrew

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In terms of #5, there is an excellent article in the most recent issue of Portfolio magazine on the investment banks; it is the cover story on page 178. All the banks are highly leveraged, from 32 to 1, down to 23 to 1 (Merrill Lynch is 23 to 1.) There is some hedging which decreases the exposure, but still the numbers are high. Either way, I think its fair to say that there is more to come.
 
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randallg99

randallg99

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Aug 9, 2007
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In terms of #5, there is an excellent article in the most recent issue of Portfolio magazine on the investment banks; it is the cover story on page 178. All the banks are highly leveraged, from 32 to 1, down to 23 to 1 (Merrill Lynch is 23 to 1.) There is some hedging which decreases the exposure, but still the numbers are high. Either way, I think its fair to say that there is more to come.
I am in the camp that we haven't scratched the surface yet while many are speculating that these write downs are a one-time event that will be quickly put behind this quarter.

The main problem is that these companies holding defaulting paper are counting on the residential housing market sustaining status quo but foreclosures and defaults continue to climb.... even today, a report disclosed a 30% rise in foreclosures

these foreclosures are expanding well beyond the "subprime" arena

It's really a shitty time period to be holding debt that was most likely overpaid.
 
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randallg99

randallg99

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Like EGLE?

It's been doing fine lately!
I have traded in and out of EGLE and could never keep it as a long term hold.. it has performed well and its distributions are very healthy but secondary offerings and greedy management turned me off. I have also traded in and out of Diana Shipping for same reasons. Oil shipping such as Frontline got me into this arena initially.

I hold long term DRYS and Golden Ocean Freight (Norway) and recently, long and short DRYS calls.
 

Edge

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lots of news and a little banter on this forum about HELOCs, Reits, Home values... but very little about the Fed, Interest rates, credit risk and the corresponding credit bubble.... its not all bad news, but the changes are coming faster than ever...

lets review what seems like years worth of news all packed in the past couple of weeks...

1. Housing- still in free fall. inventory levels and foreclosures continue to creep up. My opinion is that we aint seen nothin` yet.... I am in the `waiting` camp and may pursue property in the form of low ball offers of 50%+/- the asking prices..

2. Interest rate today was cut by 1/4. Many wanted 1/2, but they will live with it. The concern is not that the rate was `only cut` by 1/4, but the language used in the report... Bomber Ben all but told us flat out not to expect any more cuts and started using inflation (gasp!) as his basis... so what now, Ben? dont worry about the dollar anymore? ... unfortunately, it will take much longer for any positive effects of a lower dollar to take hold than the negative effects on the economy...

3. Looking at new cars for my wife. All German cars are holding firm in value, if not downright increasing in price... what this means? My vanishing US$ is starting to hit the consumer where it hurts...

4. Oil at $94 per barrel. You have got to be kidding me... one slip in logisitics, any more congestion at the ports and any indication of a refinery shut down will send gas prices to the moon.... mark my words. (I have bought slugs of PBT in the past week, mid 15s)

5. Merrill just had the single largest write down in history.... and THEY STILL CANNOT VALUE IT PROPERLY. (Hate to use caps, but if this doesnt freak people out, then I dont know what will...) Friends on wall street are glad they are able to kill this quarter once and for all so they can focus on profits again. But even they admit they freaked out and are not sure all of the bad news has come out because the true cost vs. current basis has a spread so out of whack they dont know which a$$ the dirt is flying out from next...

6. Did anyone see the MasterCard earnings report? This all but confirms credit has ever so quickly shifted the risk from home eq lines that were used as ATMs over to plastic credit.... the problem? for the consumer, higher interest rates/higher pymts and lower net worth. (IMHO, Mastercard will realistically be a strong short when a lot of the dust settles)

7. Default rate at Alt-A levels are increasing... see #1.

In summary- the economic reality of Americans is that they cannot afford all of the above in one full swoop... Lower $, higher oil, reduced home equity/net worth, higher payments... the economy reminds me of a table with a broken leg being held by books...

but who am I? currently investing in gold, silver and bulk shipping companies and recently have reentered the oil/gas arena. So far, so good. good luck to the rest of you.
Items 1,2,3,6, and 7 seem to all point in the direction of international real estate investing. I think it was one of your earlier posts where you said you might start a thread on this topic. Seems to me that it addresses this in two ways, gets real estate investors out of a bad and possilby declining market, and investing overseas is a play to short the US$.
 
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randallg99

randallg99

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Speculation that Merrill still has another 10bil to write off was written in weekend edition of WSJ...

folks, I think we have barely even scratched the surface yet...
 
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randallg99

randallg99

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I think it was one of your earlier posts where you said you might start a thread on this topic. Seems to me that it addresses this in two ways, gets real estate investors out of a bad and possilby declining market, and investing overseas is a play to short the US$.

I mentioned about buying real estate in Panama where I am part of an existing project consisting of a marina and several hundred homes/townhomes and am currently doing DD for another project.

There are many pros of developing in Panama vs. any other Latin American country.... but the main focus of the question correctly identifies that foreign real estate ownership in a growing economy represents a strong hedge against declining dollar values.

What I think most of the population misunderstands is that the deflated currency is actually not a "temporary setback" like the Nasdaq bubble, but a generation long period... Any planning for investments has to account for the deflated dollar for short and long term.

The reality is that the USD will take much longer to recover its value than it took for the dollar to lose its value.

If there is enough interest, I will highlight why I chose foreign real estate investment in Panama versus about 12 other countries I visited.
 

andviv

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What I think most of the population misunderstands is that the deflated currency is actually not a "temporary setback" like the Nasdaq bubble, but a generation long period... Any planning for investments has to account for the deflated dollar for short and long term.
Interesting opinion. But it is only your opinion. I am not saying you are right or wrong, I just want to mention it explicitly, this is your opinion and not a fact. I've seen many other opinions that disagree with you on this, but in the end they are just that, opinions, not facts.

About the interest rate drop, it may be time to refi for many, given that is not expected to be more cuts anytime soon.

About the german cars.... I just went browsing to the three top auto lease trader websites and found that the number of people 'selling' their leases for luxury cars has increased... or so it seemed. But this is not a fact, I have not seen the real numbers, that is just my feeling compared to when I visited the same websites last year. Seems you can get a lease on a luxury car for free these days.... people are dumping their toys.

About oil... I do remember when many had the opinion that it will get to $100 and I did think they were crazy, extremely pessimistic. Go figure.
 
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randallg99

randallg99

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Interesting opinion. But it is only your opinion. I am not saying you are right or wrong, I just want to mention it explicitly, this is your opinion and not a fact. I've seen many other opinions that disagree with you on this, but in the end they are just that, opinions, not facts.

About the interest rate drop, it may be time to refi for many, given that is not expected to be more cuts anytime soon.

About the german cars.... I just went browsing to the three top auto lease trader websites and found that the number of people 'selling' their leases for luxury cars has increased... or so it seemed. But this is not a fact, I have not seen the real numbers, that is just my feeling compared to when I visited the same websites last year. Seems you can get a lease on a luxury car for free these days.... people are dumping their toys.

About oil... I do remember when many had the opinion that it will get to $100 and I did think they were crazy, extremely pessimistic. Go figure.
1. you are right that it's only our opinions expressed... one day we are all correct. Hell, a broken clock is even right twice a day. More importantly, my opinions are based upon convictions which help me with my investments and while my opinion is just that, it is however gathered based upon many facts.

2. the rate drop makes another wonderful opportunity for a refi. But so have the previous several years... ever since 2002 interest rates have been historically low, even when commercial loans were in the 8's in 02 and 03 presented incredible opportunities for those who have lived knowing nothing other than double digit rates...

3. I don't know what people are doing as far as selling leases or buying cars and like you I don't have any real numbers. What I do know however is that while foreign products have escalated in price to a certain degree, the BMW's have jumped dramatically. I do know that our 2 year old X5 is worth significantly more than what I expected it to be worth today when I first bought it as a result of the current new car values. This is based purely upon my own personal observation and while I am no expert, I can say this will impact their American sales as people find it more diffuclt to afford them with a lower dollar.... In my area, we see beemer dealers giving away the 1st two monthly payments which exemplifies my point

the main part of the equation is that foreign COGs are exponentially outpacing american wages strictly due to diminishing value of us$

4. a couple of years back when pipelines were temporarily the target of suicide bombers, I called the $100/bbl. I acted upon my convictions and made a lot of money from Canadian Royalty trusts and other companies involved in NG and Oil... it's not really a matter of being pessemistic, but rather viewing the macro scale of events and being able to digest the direction of its momentum. I will admit I never would have believed it was going to happen as fast as it did...

my current conviction: Gold will be the next bull... it will be fast and furious.
 

Yankees338

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I mentioned about buying real estate in Panama where I am part of an existing project consisting of a marina and several hundred homes/townhomes and am currently doing DD for another project.

There are many pros of developing in Panama vs. any other Latin American country.... but the main focus of the question correctly identifies that foreign real estate ownership in a growing economy represents a strong hedge against declining dollar values.

What I think most of the population misunderstands is that the deflated currency is actually not a "temporary setback" like the Nasdaq bubble, but a generation long period... Any planning for investments has to account for the deflated dollar for short and long term.

The reality is that the USD will take much longer to recover its value than it took for the dollar to lose its value.

If there is enough interest, I will highlight why I chose foreign real estate investment in Panama versus about 12 other countries I visited.
I don't really have any opinions on the whole national economic crisis, but I would be interested in hearing about your decision to invest in Panama as opposed to the other Latin American countries.

Hopefully I can gain more information and knowledge about everything else so that I can form an opinion, but for now, it's all just learning.
 

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mglshark

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German cars....

Just said good bye to 2 Mercedes, lease thru our company. To buy out the leases ($48k & $25K) too much money compared to buying a Honda fit used ($14.5k) and 2 year old Chevy Malibu ($10k). Mercedes tried so hard to put us into another lease...

Repo guy I know is so busy picking up luxury cars from yuppies going upside down. Now is the time to pick up nice cars cheap.

RE down in our market (San Diego) , still waiting for another 30 - 40% drop to make rentals work for cash flow. Non traded REITS look good now at 6 - 7% as well as big REITS and REIT index for the long term (5 yrs plus).

My oil / gas / driller stocks are racing to all new highs, how much more can they go? Now is bargain shopping time for financial / bank / insurance stocks - maybe long term LEAPS buying for the big caps.

India / China stocks are off the charts - so overheated - I think they will crash as our markets slow down. Time to sort? Our big caps will rally as overseas investors buy our cheap stocks with our money, better deal then our bonds or T bills.

IMHO

mglshark
 
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randallg99

randallg99

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I think what is happening and people are not understanding is that the dollar is only as good as what it can buy... nothing more, nothing less...

the US economy and consequently the strength of its dollar is absolutely dangerously sitting on a fence that can go either way... there just way too many elements in this environment that is considered untainted territory... the financial institutions have been in bad messes before, but in conjunction with all of the following:

1. FACT Subprime mess has spilled over into prime based lending and Alt-A borrowers
2. FACT foreclosures continue to creep up... and by the way: this is important for those who do not understand the seriousness of its dire consequences on a macro scale... it's not the single homeowner that affects the economy and value of the dollar as it does the institutions writing down their values to keep up with the deflating asset.... you better believe that the financial institutions who once relied on assets that outvalued the dollar lent against are the ones screaming "fire" while all trying to fit through the door at once... and you all can bet your last dollar they are only looking out for their own asses.

3. FACT China replaced the US as Japan’s biggest export destination
4. MY OPINION Stagflation, in my opinion is inevitable.
5. FACT Oil flirting at $100/bbl
6. FACT NYTimes today had article about deteriorating consumer confidence
7. FACT USD is at decade level lows
8. FACT ... AND FOLKS, THIS IS REALLY IMPORTANT TO REMEMBER: PRICES OF PRODUCTS AND SERVICES ARE DETERMINED BY THE VALUE OF THE DOLLAR THUS THE DOLLAR IS ONLY AS GOOD AS HOW MUCH IT CAN PURCHASE.

So, the economy which is supported by the main financials is able to sustain a few of the risks affecting it at any one single moment, but with so many variables affecting its downside at this intense velocity, it's clearly becoming a serious threat to the US$ and consequently the stock market's value and we will see a very serious aberration.
 

Russ H

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randallg99-

I have only one observation to make on all of your "facts" and opinions:

For the past 5 years, I read the same gloom and doom predictions on richdad.com. The poster may not have been you-- but the logic was always the same:

FACT: This is happening
FACT: This is also happening
FACT: I read an article that says this . . .
. . . etc.

The underlying tone of those old richdad posts, and yours is:

WATCH OUT! BIG CHANGE IS A'COMIN'!!!

And, "You could LOSE BIG, so BE CAREFUL!!"

You may be trying to say something totally different, but that's what I read in this thread.

******

Here's the thing:

I have a different approach.

I may read/see the same things you do,

but I focus on abundance, and growth.

Not loss and gloomy scenarios.

In that time, while others on the richdad boards were saying "WAIT!!!! BE CAREFUL!!!!", we kept going.

Hard.

So while those other folks were worrying about RE and other market futures . . .

. . . or just "waiting for the right time to buy" . . .

We acted. Moved forward, following our PLAN.

And we made millions.

Yes. Millions.

Just in the past 5 years.

From an initial investment of about $40-70K of our own money (the rest was OPM, using leverage).

Risky you say? Perhaps.

But to me, sitting it out and *not* doing anything is far, far riskier than getting in the game and playing hard.

I just bought another property.

Spent $0 of my own money.

It should be throwing off about $100K in earnings in about 6 months.

The RE we bought last Dec 06 for $0 of our own money started generating $$$ in Sept (9 months later), and has already brought in $35K through the end of the year, with anticipated revenues next year of over $120K.

Will the markets change?

Yep.

Will things all come crashing down?

I doubt it.

Perhaps that's the difference between me and so many of those other rd posters:

I see the future getting better, but have backup plans if it doesn't.

They see the future getting worse, and are afraid to move (or, choose safe harbor investments).

I'm not suggesting our approach would work for everyone.

I'm just saying it's worked-- extremely well--- for us.

Perhaps it's like the surfer who takes the big waves, and skims the edge.

He goes fast, and hard.

While others sit on the beach (or at home), and talk about how the waves are too big.

I see lots of big waves coming.

And I'm looking forward to riding them.

Hard. :)

-Russ H.
 
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randallg99

randallg99

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Russ,

I really dont want to be misunderstood...

my purpose in this thread is not to discourage investing. That would obviously be futile and contradictory behavior in this forum.... I absolutely concur that waiting for the doom and gloom to subside is death to investing... However, the investments change and ways of making money are changing fast along with the opportunities.

Clearly, there are always opportunities and current market conditions have not prevented me from entering large transactions myself, but I am weighing scenarios much differently than last year.... and yes, I will reiterate changes are happening very, very fast: its how astute investors digest the information and make their decisions based on the data.

Realistically speaking, our risk analysis discussions are much different than they were just only 2 years ago.... oil was still in the 30s/bbl, interest rates were stable, US$ was very strong and imports were much cheaper than today, stagflation was an unknown phenomenon to most consumers, anyone with a pulse qualified for a mortgage, and etc... the consumer driven economy had a lot of societal and infrastructure support to spend. Many of these components are now missing and more importantly, the credit lines are being pulled slowly from the consumer.... hence my harping on the financials in this thread among others.... the REI is not going to get the mortgages as easily as he/she did 2 years ago... let alone credit lines. More private equity is going to be needed to sustain businesses and fund start up businesses as a result. The Federal bailouts are putting strains on all aspects of Fed funding including SBA... the domino effects of these significant changes will impact the economy more than most people realize and without going into further detail, people whose intentions of building businesses or getting funding for Real Estate will have to modify their plans.

Gladly my investments have been been good to me this year I am typically a buy and hold investor in real estate, businesses and equities....

however, because of much of the new information and some that I have listed in this thread, it has guided me to make significant changes in managing all of my portfolios
(RE, Biz, Equities.) I have started to actively use options as hedges, (thx to Kidgas and The Edge for enlightening information and motivation) I have started shorting more, I am putting more cash on the sidelines waiting for a significant aberration to occur and I have been trading more junior mining companies. In my real estate holdings, I have decided to actively pursue larger properties (>50 apartments) and retail pads/sites and soon I will hopefully post good information about a deal for 3 Rite-Aid Drug store pharmacy locations that I have been working on.

Congrats on your recent investment, I hope it goes as planned.
 
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randallg99

randallg99

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the financials in the markets are getting slaughtered... may be overdone at this juncture, but speculated liquidity problems which were at one point underlying tones are now surfacing to realities... in the past several months, the problems were simply "write-offs" and ceasing to do subprime mortgage lending. now the faucet has been shut off in several different areas of lending... just heard a horror story on a commercial deal that left someone exposed after the bank did a 180 on him.

I also fail to see how this time it's "not" different... prior recessionary periods in the USA did not have other economic superpowers that can exploit the USA's weaker dollar (besides Japan for the limited time in 80s) .... I am afraid the lower dollar is here to stay for a long time....

and folks, I'll say it again- average consumer's standard of living will decrease unless credit starts flowing again at the rate it did only last year and that may be next year, or it may be 8 years.... only problem with this theory is that it's a catch 22, money printed = lower dollar...

I won't pound the table on this, but my conviction is that gold will be above 2000/ounce within 24 months. do your own DD
 
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randallg99

randallg99

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So here we are... my opinion is only my opinion so take my statements with a grain of salt. I have spent days reading and analyzing financials and it has paid off handsomely. Long before starting this thread, I was not pessemistic and was inclined to invest in "high grade" debt holders thinking they were isolated from the mess created by deliberate ignorance of reality thus credit overextension and thankfully my DD has literally saved my a$$...

Many of the major "blue chip" and AAA Moody rated financial companies I considered buying at one point are now trading at decade level lows despite "conventional wisdom" completely ignoring basic fundamentals.

This liquidity crunch unfortunately has only just begun and has much deeper ramifications to our society than most people understand, let alone care to even understand.

Now, recession or not, there are opportunities as Russ said. At this time, it is my opinion and my opinion only, that real estate values will continue to decline for some time, but we have not seen the bottom yet. I can't help but think the low ball offers today just may be the fair market values tomorrow. If someone can dispute my claim, please enlighten me The original post in this thread indicated the freefall housing markets are experiencing is one that is going hand in hand with several other elements of the economy... this has not changed, because the indicators are still pointing to one direction. Being prudent, it is wise to wait before buying real estate, even certain commercial. The liquidity problem is now spilling into the CP arena (commercial paper) which poses a serious threat to economic expansion.

what to do next?

The setting for gold has been served on a (excuse the pun) ... silver platter. It absolutely, positively doesn't get any clearer than this. Dollar imbalance, overstretched US deficit, oil at highs, threats of stagflation, housing bubble continuing to pop and a seemingly never-ending war that continues to threaten harmonious economic resolution on a political level.

Now, what will it take for gold not to climb? The housing market will need to reverse gears and go back up. Builders will become recapitalized, lenders will get loose again and the average Joe6pack will be qualified for a mortgage well beyond his means... Oil will have to retrace minimum back into the 60/bbl levels.... interest rates have to stay firm, if not rise.... US Deficit has to start decreasing via forms of payments .... USD has to stabilize, but we all know currency fluctuations are 10-20 year cycles...these scenarios are unfortunately highly unlikely in short term.

Comments and disputes are welcome.

Randall
 

Edge

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Now, what will it take for gold not to climb? The housing market will need to reverse gears and go back up. Builders will become recapitalized, lenders will get loose again and the average Joe6pack will be qualified for a mortgage well beyond his means... Oil will have to retrace minimum back into the 60/bbl levels.... interest rates have to stay firm, if not rise.... US Deficit has to start decreasing via forms of payments .... USD has to stabilize, but we all know currency fluctuations are 10-20 year cycles...these scenarios are unfortunately highly unlikely in short term.

Randall
Looks like you've got an investment and hedge picked out. Now, what would be a good position to make some fastlane type profit?

Long OIH?
Long GDX or GLD (no derivatives on GLD)?
Short XLF (might get a rally to sell into today with the CITI news?
Short XHB?
Long Gold Futures or Silver Futures?
Would you structure these positions with the underlying or options?

I don't mean to be annoying with a bunch of hypothetical questions, I just think that you did some awesome fastlane analysis and it deserves a fastlane investment positions. I think you can make that analysis more profitable for yourself than just going long gold.
 
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randallg99

randallg99

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I'm not sure whether gold does well in a liquidity crisis. It usually doesn't, with fewer dollars in circulation... Of course, all that liquidity injected by the Fed...

Isn't that why gold goes up? because the Fed doesn't even take a coffee break from running that money press... too much money in circulation drives the value of gold, or is it the other way around? the old theory of gold remaining constant sticks out in my mind.... due to overprinting of dollars, it takes that many more units to buy the same piece of gold.
 
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randallg99

randallg99

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Looks like you've got an investment and hedge picked out. Now, what would be a good position to make some fastlane type profit?

Long OIH?
Long GDX or GLD (no derivatives on GLD)?
Short XLF (might get a rally to sell into today with the CITI news?
Short XHB?
Long Gold Futures or Silver Futures?
Would you structure these positions with the underlying or options?

I don't mean to be annoying with a bunch of hypothetical questions, I just think that you did some awesome fastlane analysis and it deserves a fastlane investment positions. I think you can make that analysis more profitable for yourself than just going long gold.

At this time I am long mining companies and jr. miners... via shares and LEAPS and I want to deepen my positions in the upcoming month when there is window dressing.... hypothetically should be a good time to rebuild gold positions. Time will tell.
These are my current positions now:
AUY
SLW
Silvercorp (China)
San Gold

Creating hedges is a prudent way to position, but I am very bullish at this juncture.
 

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SteveO

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I am not challenging many of the notions from this post but would like to discuss the article.

Lending on apartments has changed. The securitized money that was allowing people to purchase on crazy pro formas and loaning 95% LTV are gone. That time period was fairly short and the people that purchased at crazy high valuations will suffer.

But, most of the investors that have been in the market for a while did not participate in the frenzy. Sellers are still asking too much in many markets, especially the ones that were going crazy for a while.

The market is normalizing to a degree. Some of those properties will go back to the bank.

I am still getting close to the same interest rates as I did before. I am also still getting 80% LTV, even on under performing properties. The difference is who is loaning the money. There is not a lot of securitized money from wall street these days. People are scared to invest in these types of loans. That money has dried up. Fannie Mae, Freddie Mac, and a host of apartment portfolio lenders are still out there making loans and looking for business.

I am not an interest rate predictor. I go with what data I have. Rates and terms have not changed a lot from my perspective.

If they do tick up, it will have an affect on cap rates. That is not a major concern to me though.

I care about the fundamentals of rent and income growth. There are still going to be plenty of cities that are in a favorable position for purchasing now and in the future. A recession will have some affect as jobs go away but, some areas will be affected more than others.

There are still household formations. There are less houses being built. Some areas are still developing apartments. There are still jobs growing in some locations.
 
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randallg99

randallg99

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Steve, I am in comlete agreement with your post... and in regards to the int. rates, I believe the interest rates will stay stablized as the short Treasuries drop and the long rates continue to climb.

one thing that may or may not change the landscape is that because much of conduit financing options dried up, you will find less qualified buyers in the market place, and it is this factor alone that convinces me we will see higher caps enter the arena.

Ultimately, the deal has to cash flow positive to underscore any potential pitfall in the marketplace, no?
 

SteveO

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one thing that may or may not change the landscape is that because much of conduit financing options dried up, you will find less qualified buyers in the market place, and it is this factor alone that convinces me we will see higher caps enter the arena..
If financing dries up, I agree. But right now Freddie, Fannie, and the apartment lenders have filled this void. I don't see any difference yet.
 
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randallg99

randallg99

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geezus... I was starting to think that most of the damage has already been revealed...

too much compelling evidence is weighing too heavily on the markets and my sentiment regarding the US equities at this time is probably as bearish as it has been since I have started posting this.

Unfortunately, announcements such as the one from Morgan Stanley this morning are most disturbing when there is no mention of any light at the end of the tunnel... as a matter of fact, it was mentioned "THE WORST IS YET TO COME."

guys, don't forget... these are the folks along with Goldman/ML/UBS, etc... who had the most capital to fund many of the loans to keep the economy humming pretty strong....

that's all but gone.
 
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randallg99

randallg99

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now the bond insurers are getting nailed to a wall... rating agencies and resellers are fending off busloads of action suits and are trying to avoid new ones...

this really smells worse than when I began this thread... even the safest debt instrument in the American/Free Market world is in jeopardy of default and that very fact cannot be saved by Fed rate cuts or mega billion injections because we are probably talking 100'sbils or possibly trillions at this level.

All of the write downs from the banks and big houses are putting them at risk of violating regulations which further complicate the scenario.... balance sheets reflecting all of the write downs are showing depleted assets and are imbalanced... the dead men walking need to liquidate ASAP

The unfortunate reality is that much of the economy is interconnected with the financials and at this juncture, many of the financials have either not recognized the reality or are simply ignoring the fact that cash levels must be raised at whatever costs... we know what happens next: the assets become the hot potato that nobody wants to be stuck with...

history is repeating itself. Big opportunity to make huge money in the markets now.
 
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randallg99

randallg99

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More gold demanded than supplied is a strong bullish sign I think. If the pressure of the credit crunch eases(unlikely in the short term) or is perceived to have lifted, gold should have potential.
miners are severely lagging price of gold and while I am still patient with out the entire economic scenario plays out, it will take a lot more time as the market does not understand how miners derive their values.

the economy unfortunately for many will have dire consequences. The natural defense has been precious metals and this time it is not any different at all.

I wish I was worth my weight in gold (all 180 lbs)... but by the time this economic cycle finishes out, I hope my trades will be worth my weight in gold at $2000/z
 

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