Hello from your favorite Pessimistic Investor

[randallg99]

I honestly don't think we will hit bottom until the gold: Dow ratio hits single digits likely 7 or 8.

this is an excellent point... doing some back of the napkin calculations has my conclusions leaving me in awe ... but what's really shocking is that the revalations may in come true. if gold goes up, it will be most likely fast and furious....

it's gonna be ugly if the downtrend in general markets continue without any bull rally and without testing any support will most likely create a true capitulation in the markets.

here are some more of my thoughts - a chunk of my net worth has been sliced right off... it's painful to see those kinds of digits go buh-bye

I think we are witnessing only the beginning of a 1 or 2 year long bear market that will prove more detrimental to the society at large since a much bigger portion of peoples retirement are invested in the markets unlike the previous bear markets and recessions

this is really, really a dangerous time to be an investor in the markets... trading with a lot of protection to the downside seems to be the plays of the day.

except for my trading in and out of SRS, my port looks like someone took out back and shot it up and down....

a couple of big news over the weekend- hedge fund redemptions are creeping high putting more stress on the brokerages (or now, the new owners, banks).... these guys are levered like mad especially in commodities... might see another leg down in gold/silver. but who knows... gold should hypothetically increase everytime dollar is diluted, so the markets aren't working to historical data

another biggie - Italy is latest to announce problems with their banks liquidity.... European collapsing before our eyes is the US$'s saving grace....

lots of unintended consequences with the bailout approved on friday... despite it being much needed to get the banks rolling again, the regulations imposed by legislation will slow down the process of spilling into the economy... granted, the catch 22 is that the money won't be as frivilously spent as if it were only a few wall streeters drunk like sailors....

anyway, now that the media can stop pouncing on the bailout news, we can turn our attention back over to all of the news we all have been overlooking - unemployment, notice of defaults, foreclosures, are all increasing. manufacturing down, Wages still stagnate, etc... I hate to say it- but the wheels are falling off faster than anyone expected . coming to grips with the reality of the entire realm of the markets is difficult but it's happening

I think the media has finally realized all of its nonstop coverage of the bailout hoopla makes it feel like the wild wiley coyote hanging out in midair after running off the cliff and muttering under it's breath: "oops...."

not sure about its validity, but it seems realistic- I recently read only 20% of the USA's population qualifies for obtaining mortgages with the new regulations in place... if these guidelines continue, then I don't think we will have seen the end of the real estate market spiral down for quite some more time... maybe another year

I'd hate to sideline the cash... I pulled the trigger and am meeting with a potential partner and money raiser to work on a new biz plan to acquire large investment properties. I am probably going to shy away from commercial/retail/industrial unless someone has a convincing argument or even a compelling deal but instead will be targeting apartments ala steveO Volluci style.... a lot of fear has spilled into all aspects of the real estate markets making the current environment pretty compelling to at least throw out some really low ball offers based upon a whole new set of metrics unseen in decades

sorry for being defragmented.... my feverish kids have had me up for a couple of nights in a row.

 

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[Russ H]

. . . sorry for being defragmented.... my feverish kids have had me up for a couple of nights in a row.

Glad you said this, Randall. I thought a lot of your thoughts were well in line w/past things you've said, but you seemed a bit discombobulated. I was concerned that you were more afraid, and having a hard time saying it.

Being the parent who does the night shift, though, once you said this, I completely understood where you were coming from!

To add to your thoughts: I honestly think that the banks selling their repossessed homes for pennies on the dollar is what is KILLING this housing market. That, combined w/the lack of credit/ability to get mortgages.

I truly think if these two things were addressed:

1. Stop the short-term focus banks from flushing their repos at 70% of current market, and

2. Allow people w/20% down to get a mortgage without having to give up their first born, then

we'd see some real improvements in the RE markets.

BTW, as much as some of us might like it/want it, I think the Fed reducing the interest rates even further will not help, if #1 and #2 above keep happening. What good is a low interest rate if you can't get a mortgage!?

Anyway, just my thoughts.

-Russ H.

 

[randallg99]

Glad you said this, Randall. I thought a lot of your thoughts were well in line w/past things you've said, but you seemed a bit discombobulated. I was concerned that you were more afraid, and having a hard time saying it.

Being the parent who does the night shift, though, once you said this, I completely understood where you were coming from!

throw an emergency room visit and a couple of doctors in the mix and that gives you the idea of the week.... hopefully you don't have to deal with that stress but it appears to be inevitable for parents!

the markets definitely rattled me.... not so much because I lost some of my own funds, but I manage others and while their ports are down, they are significantly better than the indices so I should at least revel in that fact.

To add to your thoughts: I honestly think that the banks selling their repossessed homes for pennies on the dollar is what is KILLING this housing market. That, combined w/the lack of credit/ability to get mortgages.

I truly think if these two things were addressed:

1. Stop the short-term focus banks from flushing their repos at 70% of current market, and

2. Allow people w/20% down to get a mortgage without having to give up their first born, then

we'd see some real improvements in the RE markets.

BTW, as much as some of us might like it/want it, I think the Fed reducing the interest rates even further will not help, if #1 and #2 above keep happening. What good is a low interest rate if you can't get a mortgage!?

Anyway, just my thoughts.

-Russ H.

the simplicity of the problem is amazing in itself.... banks are truly and really running out of cash and are doing whatever they can do to stop the bleeding.

the need to generate that cash lost to defaults and foreclosures is crucial to banks sruvival.... the reo/foreclosures costs banks excess expenditures not including lost cash flow and then fed regulations require levels of cash in reserve to support banking activity but once this certain cash ratio is violated, the gov't has no choice but to overtake operations ala IndyMac style.

part of the problem was the low rate spreads and the excess liquidity that prevailed in the markets.... spreads were so thin that margin for error or defaults were unrealistically slim but the banks are the ones that ultimately made the risk

so the vicious cycle continues: actual real estate in most peoples eyes is an asset, but the banks own real estate as a liability on their balance sheets because it does not provide the cash flow and more importantly, they cannot be held accountable for market fluctuations for assets they've lent on .... (the bank does not share upside potential and likewise does not share downside either - there was another thread debating this fact, but it ultimately keeps banks honest, haha if there's such a thing)

the bailout hopefully will alleviate the above problem and allow the banks to absorb the properties for longer periods of time, but this doesn't look realistic unless they change what you mentioned in #2...

I have always contended that housing prices need to revert back to what they would have been if there weren't such frivilous lending practices in the first place because the markets were totally skewed as a result of the banks loan originating procedure breakdown.

I personally forsee a revisit to price levels just 4-5 years ago, but knowing human behavior, we'll probably overshoot it.

regarding rate reductions - the fed is stuck in a quandry to fight inflation and to stem the credit crisis.... alot for one plate indeed.

anyway- I plan on taking advantage of the market conditions regardless of conditions.... it's a matter of deciding which is the avenue that will produce best returns in the next 3 to 5 years.

 

[randallg99]

fed buying com paper these days leaves no room for a stable $ and gives even more compelling evidence for owning gold and silver, as if we needed more justification for owning gold/silver

1. I bought slugs of SLW to play the silver market.... a very compelling story, do your own DD. I owned it many moons ago on several occasions. if owning silver bullion is not an option, I suggest investigating SLW

2. I have my fingers on the buy if/when SKF hits 100-110.... another leg down is realistic for financials

3. I will be adding to SDRLF... pricing at these levels is a gift. Do your own DD

4. in the camp that the DOW still has room to fall so playing SRS for day trades is compelling.

5. working with and finalizing business plan for commercial real estate holding company to present to group of investors within next couple of months

opportunities galore in this media hyped up bail out event.... don't get me wrong, the USA and the tax payers will have to wrestle with the debt thrown onto our shoulders, but this is cherry picking season.... and it only comes once or twice a decade.

 

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[randallg99]

Fed cut a half point - short term bullishness prevails as futures did a turn about face.... went from under 150 to over 150.... good save by the Fed even though he claimed very recently the interest rate cut was not in our best interest. Again, the short term mentality shapes policy making regardless of long term plans and best intentions.


As I type, the futures are red hot and my strategy for getting back into the market is not for the faint of the heart, but if we get a strong rally, ie 500 points, I will pick up inverse ETFs ie DUG and SRS .

I will also sell my JPM into this rally.

 

[RJP]

Randall - you've got brass balls there brother! I guess you have to, to be a trader in this market. Myself, I'm a wimp at these times. I actually not much of a trader - more of an investor. These swings represent great opportunities I guess. (Of course, risk increases also). This particular cut scares me a bit because as I read on Bloomberg "this may be the equivelent of throwing in the Kitchen sink". Also ... hard to say how much of this may have already been "priced in" to the markets already. I don't have enough skill to play these things effectively and then get out the door before everyone else. I'll am trying to learn more about trading .... one reason I visit this site. Like your posts very much.

 

[phlgirl]

Agreed. Great stuff, Randall. Keep it coming.

Any chance you can tell me the key difference between owning SLW and SLV? I understand that one is an EFT and the other is appears to be a mining company....but why would one favor one vs. the other?

I bought SLV the other day around 11. Figured it was time (or well past time) that I hedge against what is left of my rollover accounts.

 

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[randallg99]

Randall - you've got brass balls there brother! I guess you have to, to be a trader in this market. Myself, I'm a wimp at these times. I actually not much of a trader - more of an investor. . . . . I'll am trying to learn more about trading .... one reason I visit this site. Like your posts very much.

I have been and very much an investor. I have only started recently "playing" the market - if you follow my posts, you will see I liquidated my positions little by little and converted them into cash and this was my saving grace.

the gyrations and irrational activity on the exchanges are making it difficult to be a buy and hold... regardless of being a "trader" or an "investor" I believe the stop losses are EXTREMELY CRUCIAL to successful investing. I can't stress this very fact enough... so that said, it's easy to be stopped out in this market as many of my holdings have been.

Yesterday's intentions were to play the gyrations - the extreme fluctuations still show there is a lot of uncertainty in the markets and quick profits are probably as prudent as it gets.

Because I believe the downtrend or even the levels we're currently at will realisitcally last 2 or 3 years, I am not in any rush to pick up "bargains" for long term holds. Yes, there are bargains, but confidence or lack thereof in the markets will not drive the prices up for a while... we really need the financial markets to stabilize.

HOWEVER, I am inclined to rebuy into an old strategy of holding income producing stocks via dividends, but I am watching patiently because many of their P/E's are being adjusted due to slowdown in the economy...

btw, none of my triggers went off yesterday.... actually played golf for the 2nd time this week which I hadn't done in about 6 or 7 years and watched the market from my blackberry... didn't make any money, but at least I played ok

Agreed. Great stuff, Randall. Keep it coming.

Any chance you can tell me the key difference between owning SLW and SLV? I understand that one is an EFT and the other is appears to be a mining company....but why would one favor one vs. the other?

I bought SLV the other day around 11. Figured it was time (or well past time) that I hedge against what is left of my rollover accounts.

here are the definitions - you can see that SLW (courtesy of Yahoo) is Silver Wheaton Corp., a mining company, engages in the silver production. The company purchases silver from Goldcorp mines in Mexico, Zinkgruvan Mine in Sweden, Yauliyacu Mine in Peru, and Stratoni Mine in Greece. Silver Wheaton Corp. was incorporated in 1994. It was formerly known as Chap Mercantile, Inc. and changed name to Silver Wheaton Corp. in 2004. The company is headquartered in Vancouver, Canada.

then SLV an ETF that (according to Yahoo) is... The objective of the investment is to reflect the price of silver owned by the trust less the trust's expenses and liabilities. The fund is intended to constitute a simple and cost-effective means of making an investment similar to an investment in silver. Although the fund is not the exact equivalent of an investment in silver, they provide investors with an alternative that allows a level of participation in the silver market through the securities market.

and an ETF is (per some stock site out there): Exchange-Traded Fund (ETF): A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange, thus experiencing price changes throughout the day as it is bought and sold.

so SLV is a collaborative group which is a good strategy for those who don't follow companies and certain stocks. When I first started investing in SLW, it was when the canadian looney was building strength, so my intentions were to hedge against US$ while capitalizing on precious metals market building momentum against inflationary pressures. It made sense for a long time to own it and it did very well.

there are several reasons that I like SLW: they have more upside than most metal companies since they have historically been able to acquire rich mines using little debt and they also have significant stockpiles of metals. They are also experiencing very nice profits year over year...

I don't usually buy a stock if it's below both the 50 and the 200 dma, but I believe gold and silver are very compelling stories right now.

a recent acquisition that seems profitable
Make Silver Streams Your Golden Parachute


other thoughts -TA folks are looking to break DOW 9000 ... hopefully that's not realized, but maybe its the pain that the market needs to "clean up" the sheets and shake out weak investors and companies

and Iceland, what a mess... a fun place to travel to and I was very impressed by their self sustaining energy programs. They are very independent but their investments in world growth obviously backfired...

 

[randallg99]

wow - futures up 350!.... trying to figure out why.... LIBOR is the same which indicates the credit freeze has not thawed out....

maybe a good day trading session, but not a good day to go long, IMO.

 

[RJP]

Interesting perspective from Hugh Hendry

Bloomberg News

 

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[palacekid]

Do NOT Despair!!

The Market will turn around very quickly !!

Everybody is asking the same question where are the markets heading, have we found some stability in the market or the market bottom. Let me share with you an important tool, which will help you to find those answers - the VIX Index. I want to emphasis on my favorite topic the VIX Index.

Why is the VIX index so important?
To me it is for one reason - it make easier to guessing the direction of the underlying markets. Let us see why and what it is saying now about the markets.

Current VIX level is at 70
A level of 35 and above signals a buy.

The market is currently into tons of fear.

More information in my later posts

Regards,
PalaceKid

 

[randallg99]

I was looking forward to that commentary regarding the VIX from that spammer, lol.

anyway it's probably not the time to be any more optimistic but it's absolutely and positively a very good time to start planning a list of companies to own during this economic climate.

my list includes CMO, which I opened a position with a couple thousand shares this week. It's already underwater by 20 cents, but this seems to be the perfect environment to own an MBS that holds completely 100% guaranteed backed by USA bonds. The book value is entirely based on its portfolio, so the share holders are virtually covered if the the portfolio of mortgages are liquidated (as long as the stock trades at or below book value, which it currently is). CMO is also paying a hefty dividend at this time but is at risk of reducing it slightly.

there are other stocks I am looking into, but won't post about them unless they're worth buying but I can say that anything involving a carry trade is a profitable venture with the yield curve steepening by the day

some time ago, I asked on this thread http://www.thefastlanetomillions.com/stocks-options-currency-trading/16892-hey-kimberland.html about the Canadian trusts, but I am now shying away from them until the currencies stabilize... .no sense in owning a stock that deteriorates because of currency fluctuations.

It seems that the world is chasing the US$ again since it seems to be the fx du jour compared to just about any other currency in the world. No other country can compete with the concept and the strength that a trillion dollar bailout can bring to its currency

now for my rants- and in all fairness for the readers, here's your warning not to continue you don't like dark outlooks.

there are some really scary developments recently that will absolutely affect the world security landscape. the #1 resource a government can provide their population anywhere in the world is food (along with shelter). when people go hungry, harsh resentment is held against the government.

This is happening in some unstable regions around the world due to astronomical pricing. Just saw an online article (I lost the link, sorry... and the #'s here are pretty accurate) that 32% of Pakistanis have reduced food consumption and that 70% of the entire population is blaming the government for this problem. A 26 nation survey was completed and every country is experiencing similar sentiments.

so you ask wtf this means? if a republican administration goes in, then you can bet the farm on defensive stocks. the threat of unrest and destabilizing among nations with nuclear power is NOT in the USA's best interest and the republican party typically creates a war chest....but for either party, unstable countries waging war with their respective neighboring countries becomes inevitable... many points in history where food was a primary incentive for inciting war... it's no different today.

but I am not sure if a democratic administration would be so inclined to ignore the situation .... I have seen articles that health care stocks are poised to do well under a dem administration, but it's likely due to the aging population that they will do well regardless of party elected in nov.

there are a lot of other ramifications for the stock market if another war breaks out... but the general sentiment is very bearish.

====

Oil & gas. Demand destruction is now the topic du jour. but the reality is that winter has not set in.... the investing population is apparently not expecting winter to happen this year.... I am in the camp that long term oil & gas is set to go higher from these levels however, the exception is if the economy further deteriorates, then it's hard to justify the o&G prices increasing. We'll probably get a kick higher due to winter setting in after the shoulder season, but it's probably a good calculated risk to sell back into strength

====

unemployment is still increasing on a weekly basis and there is no beating around the bush. Higher unemployment = softer economy. in my view, it does not get any simpler than this and I see very easily in the not to distant future 1 million unemployment claims

====

certain areas around the country once believed to be "immune" to the foreclosures are now at eye popping rates.... in NJ, the rate of foreclosures have jumped 71%. and this is after some legislation leniency was applied so in other words, homeowners who were subjected in the past to foreclosure after a 90 day delinquency are now more than 150+/- days delinquent before being subjected to proceedings. The handwriting is on the wall: we will now enter further delevering on a personal level unseen before in the history of the USA. I saw one projection that more than 33% of the properties will owe more than what they're worth.

that said, what's also happening is that banks and lenders are resorting to quality lending standards that used to be the norm.... the more of this occurring can only mean more stability to the banking sector

====

opportunities seem to be popping up in the commercial real estate arena, especially in retail sector. The recovery will be a long wait because there is an enormous amount of absorption needed due to some large store closings. This will affect financials (those who lent the companies the $ and those who lent the landlords $) and then also affect commercial rentals in surrounding areas. those looking to open up retail space will find some fantastic opportunities. those who are locked in leases would be prudent to renegotiate them.

====

all in all, I am going net long in the markets again slowly, but surely. I will be investing in income yielding holdings that once made me slugs of money just a few years back. MBS Reits and MLPs seem to be the logical and safest places for money.

good luck to all and let's make some money

 

[kidgas]

randall,
I tend to think that in times of uncertainty, investors will tend to purchase business that supply the basic needs of humanity--food, utilities, etc. In other words, what does everybody need to some extent in the face of recession? These companies may also hold tangible assets. Companies possessing low levels of debt and healthy cash flows will prosper during this time of deleveraging and redistribution of assets. Just a few quick thoughts.

 

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[randallg99]

too many vairables in this market makes it very difficult to stick to a buy & hold investment plan. speculation of more dramatic drops in the dow/s&p only continues to instill fears into the investing crowd.

some interesting developments - China once hailed as the world's savior of the economy now has to use a package to fund their economy to encourage spending.... and this to me is a very large red flag.

I mean, ??? makes me want to :smx4: or :cheers: heavily!!! The USA had its own economic stimulus package that prolonged the inevitable and if we learn from our own actions, we see the handwriting is on the wall for China.

as a result of China's hoarding cash there is a new quandry. we should have seen it coming.... it will become harder for US to sell treasuries because if foreign countries need to shore up their own capital reserves and/or meet demands of their own shortfalls, then there will be less buyers for USA treasuries. There are so many more auctions these days than ever and this is the biggest fear: the USA will run out of foreign investors to buy the treasuries.

we see the trend that the longer term notes are becoming more popular (higher rates) and this is already a sign lowering demand. and this makes sense in a global economic slowdown as money is not as available as it once was.

btw, I recently read that 50% of USA bond ownership is foreign.

I liked this interview. Whitney still thinks our markets are overvalued (gulp).

FT.com / View from the Markets

 

[randallg99]

goodnight sweetheart... http://www.nytimes.com/2008/11/23/business/23citi.html?_r=2&ref=business


important paragraph: >>>When he was Treasury secretary during the Clinton administration, Mr. Rubin helped loosen Depression-era banking regulations that made the creation of Citigroup possible by allowing banks to expand far beyond their traditional role as lenders and permitting them to profit from a variety of financial activities. During the same period he helped beat back tighter oversight of exotic financial products, a development he had previously said he was helpless to prevent. <<<


"we've had enough of you" and it looks like Whitney is being vindicated and has been right all along. the "mismanaged affairs" are coming back to haunt Prince with thick steely knives. (lol, anyone like the Hotel California?)

more importantly, there's a real dilemma in the markets that has put most investors in a quandry unseen before in recent times: people with money are not spending it and people who need money are not getting it. And folks, it is as simple as that.

as a result of the spending freeze, there are some scary developments. Regardless of the newly elected presidential policies, we now have monumental, unforseen, "numbers too big to fathom" amounts of debt that will have to be accounted for. This has not been on the front page of the news; none of us will see this in the news until that in itself becomes a problem. Only the very short term problems are highlighted and government's tendencies to put out the immediate fires now out of fear and panic only creates even more severe consequences down the road.

the case in point is how Freddie/Fannie even got involved with subprime to begin with. 99.9% of the population has absolutely no idea that it was during the Clinton administration that strong armed the GSE's into giving mortgages to "below" perfect credit ratings to expand the home ownership program into minorities. "everyone in America should own a home" was a mantra thrown around like a bag of jelly beans at a 4 year old's birthday party and easily gobbled up (sorry for the t-day pun) and it took about 10 years for this very policy action to rear its ugly head. THIS, AT THIS POINT IN TIME, DURING THE MID-LATE 1990s IS WHEN THE PROBLEM BEGAN. The government instantaneously, with good intentions, became entirely exposed to the subprime market without understanding the very basic concept called "risk." Now, we are suffering from those consequences of an implemented policy that had good intentions.

So, now we understand how long it takes for policies to take hold and enact its intentions, we now fast forward to 2008 to today. The government today is sponsoring bills in excess of 1 trillion dollars to save the world (yes, the world) from a financial ruin. Little the government is giving any consideration to is the fact that the amount of money spent on the bail out is money that we simply did not have just a few months ago! it just appeared! This entire saga is really an amazing turn of events that will be undoubtedly written in history books and financial studies for decades to come because there was already a large concern the government was stretched too thin even before the financial crisis.

The US Government JUST MAGNIFIED THE DEBT PROBLEM MANYFOLD. But we won't hear of this problem until it actually becomes a front page headline. Some very respected financial economists are predicting a USA bankruptcy.... but I won't go that far unless the BRIC countries fall down. BUT, we need to account for the deflating dollar because this very fact influences our investing decisions and it is absolutely no doubt in my mind we will continue to see an unprecedented devaluations of assets (ie real estate, dollars, commodities, etc)

The devestating consequences of an illiquid government can be easily (but absolutely prematurely) compared to the Great Depression era, hence many doom & gloom articles but the truth is, we won't enter that "depression" unless other world markets have serious collapses and if unemployment goes to 20%+. This is left to be seen and now I think we can't take it for granted that "that can't happen...." because it obviously appears anything is possible now. I mean really... who thought Bear Sterns would close their doors? a century old establishment. And the many banks and Freddie, Fannie among many others. Now it's Citi in line for the guillotine.

I never saw the scope of the problem go this deep even though I saw the stress the housing markets were placing on debt instruments, but I am still in awe as to how powerful the problem has transmitted throughout the best known and "well-funded" companies in the world. It's really a treat for the academic, but it's a living bitch for the investors.

This is only my 2 cents and since it's all I seem to have left, I hope you enjoy them, heh. Happy Thanksgiving to all of you and your families.

R

 

[randallg99]

I actually for a little while recently became somewhat optimistic and was contemplating changing this thread's tone but then I read this:

Commercial Real Estate Direct - 50 Largest REITs Face $28.5Bln of Debt Maturities Through 2009

>>>>But REITs aren't the only borrowers with financing needs in the coming years. Some $600 billion of bonds - from banks to insurance companies and governments - come due next year, Reilly said. "It's really difficult to see the appetite for $500 billion to $700 billion of bonds," he said.<<<<

I think the real estate arena as we know it today will be a much different vehicle in 2 years unless liquidity crisis ends.

the handwriting is on the wall for some of these companies who are facing maturing debt next year.... the "too big to fail" companies are no longer "too big to fail"

 

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[andviv]

I can only think of two scenarios:

1. REITs forced to have a fire sale to raise capital

2. Lenders have to suck it up and extend the loans. What are they gonna do with the properties anyway? Especially malls an other retail properties.

Thanks for this link... I was thinking it was time to start buying funds of REITs again, but this information tends to indicate that will be a better deal late in 09.

I hope SteveO reads this and comments, he definitely understands this topic better than me.

 

[SteveO]

I don't want to claim to understand all the dynamics behind this. I do know that most reit's are not as leveraged as many other RE investments. Will there be some flood of properties for sale that will glut the market? I certainly don't know.

I have been following some points here that are related. I have had my lender gathering information for me on loans that are coming due in the apartment market in the next couple of years. Some that leveraged highly in markets that have not seen large growth over the past 5 years will have a potential for a large number of listings.

It is all very dependent on the economy and the lending environment.

 

[andviv]

I have had my lender gathering information for me on loans that are coming due in the apartment market in the next couple of years. Some that leveraged highly in markets that have not seen large growth over the past 5 years will have a potential for a large number of listings.

Has this lender mentioned what is expected to happen in those cases? Foreclosures and then regular listings by the lenders? Are shortsells viable for properties like this in this market conditions?

 

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[SteveO]

No, they are not expecting anything more that a period of slight adjustment. It really depends on the capital market and how much liquidity is out there. Seems like the fed pays a lot of attention to that.

 

[randallg99]

I don't want to claim to understand all the dynamics behind this. I do know that most reit's are not as leveraged as many other RE investments. Will there be some flood of properties for sale that will glut the market? I certainly don't know.

I have been following some points here that are related. I have had my lender gathering information for me on loans that are coming due in the apartment market in the next couple of years. Some that leveraged highly in markets that have not seen large growth over the past 5 years will have a potential for a large number of listings.

It is all very dependent on the economy and the lending environment.

there is one thing I know for sure: share holders are an easy screw. The company will attempt to survive at any expense, including even the bond holders! And this we've seen in recent months.

the ripple effect will be too devestating for the debt holders not to allow these larger REITs to rollover their debt.

right now, the ones in most jeopardy are those in the retail sector/malls. A lot of space is going to be vacant soon (just today, Office Depot announced a large closure)

office seems stable (outside of N Jersey and NYC) as far as I know. And apartment buildings seem stable, too so we can't put all REITs in one bag because the ones that are still rolling in the money will not have much problem rolling over their debt unless circumstances change.

thanks for your input Steve.

 

[randallg99]

been a busy week- fighting banks for more money, fighting vendors to expand credit lines (manufacturers have guns to their heads these days), holiday shopping & parties, kids falling down stairs, doctors, trading, real estate, etc, but anyways:

lot's of big news this past week (what else is new besides a lot of news?)

the Madoff ponzi scheme (as Bernard Madoff himself labels it) has huge repercussions that will simply crucify investors confidence.... and we've already seen the ripple effects where redemptions just yesterday have been halted at Citadel. Look for more hedge funds to go bust due to a run on redemptions.

The big money that helps support the economy in the private sector is now being lost, manipulated and for those who still have it will now hoard it. (anyone see the 90 day t-bills???) and now the liquidity crunch spreads from bankikng into the investors market

and this is on top of what we've already seen earlier this year when large selling pressures was coming from hedge funds and this is exactly what we don't want... hedge funds are usually heavily leveraged and are nimble in selling at their discretion (vs. mutual funds who trade based on allocations and end of day settlements)

there was a lot of talk about impacts of Madoff vs. LTCM, but the main difference I see is that Madoffs clients were isolated and their losses will not rip through the markets as LTCM debacle had the potential to do because of the counterparty risk .

and I haven't even touched the real premise of the problem: the lack of accounting and oversight in this industry continues to boggle my mind. Only if there was just an ounce of brains or balls by any of the investors in Madoffs funds to check the auditors reports and talk with accountants to see how the returns were made (Madoff boasted incredible returns even during the current bear market) ...

this harsh lesson will resonate for years. pressures on the SEC will be numbing until real accountability and transparency is developed....

and to think, despite all of the recent troubles, that the USA remains holds the most transparent regulations in the world....

.........

auto bail out. Everyone you know has an opinion so there's no use in telling you mine so here are facts:

everyone is comparing the autos with the airlines industry, but here is the main difference and this is why the USA Gov't backed the airlines' loans: if any of the numerous air companies failed, certain hubs around the country would have very little flight availablity if any and this is the concern.


if the big 3 go bust, we can all still obtain cars from other sources. But if an airline that serviced a lot of MidWest cities went bust, then chances of getting flights became slim to none and the impact of this is much more severe than any car company busting. The form of travel is exclusive with airlines while the auto industry has multitude of alternatives.


But here is the caveat: if big 3 go bust, the impact on American workforce is mind boggling- has anyone seen the figures? the percentage of Americans indirectly involved in the big 3 auto companies is unbelievable - from plant workers, car dealers, service stations, parts suppliers, parts manufacturers, etc.... and it's nationwide. the impact will be more than what the politicians can bear. But the politicians are simply afraid of rewarding the unions with their massive pay scales... (would you reelect your senator or congressman if he/she voted to continue paying $73 per hour for auto workers?)

but I am not playing the auto companies although shooting for the moon with F stock or leaps might be a good play for the "gambling" part of the portfolio (about 1% for me)

.......

anyone see FDIC reports? The FED is going to need to bailout the FDIC if current rate of bank failures continues

.......

anyone seen corporate bankruptcy rate? highest ever by a large margin. more distressed companies than ever before.

........

I bought and sold DRYS 3 times last week. I wanted to write calls against it but only found myself watching the stock skyrocket everytime and the last time I sold it was in the 11's. One of my trades lasted about 2 hours for a 7% gain. The value of the stock was unrealistic which is why I jumped in early in the week. My intentions were to write the calls to offset risk, but just taking the profits made much more sense due to the volatility.

Depending on the sentiment, I will probably do the same this week for trading

........

all in all this is nothing more than a trading market and investing for long term right now is way too dangerous as some of the trends listed above continue south and I didn't even mention unemployment..... good luck, all.

 

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[kidgas]

I agree that the Madoff scandal will have another impact on confidence. Can confidence go much lower? Regulation is now inevitable.

Good call on DRYS. It is a trader's market. I am planning for longer term. Will have to see what happens.

 

[randallg99]

what I once pounded the table on: the verdict is still out on the alt-a mortgages...

The Mortgage Meltdown Video - CBSNews.com

 

[Russ H]

Staggering.

FOUR to FIVE more years of stuff this bad!?

Because of alt-A's, option-Arms, COMMERCIAL loans, plus CC and car loans that WE HAVEN"T EVEN HEARD ABOUT YET.

Staggering.

Thanks, as always, for this stuff, Randall. Your input has allowed us to plan for some of this crud, and we have adjusted our PLAN several times now, in part b/c of the info provided on this thread.

Rep speed for these updates-- you have helped us move our PLAN forward-- not in the way we wanted, but in the way we NEEDED to go, based on what was happening! Thanks again.

-Russ H.

 

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[andviv]

so what do we do about it? gold? oil? guns? RE?
Is there any positive?

 

[Russ H]

so what do we do about it? gold? oil? guns? RE?
Is there any positive?

Sure, just KNOWING is a positive.

You can more accurately predict RE trends for the next 4 years (BTW, this is the entire first term for Obama).

Prices may well stay deflated or go even lower for FOUR YEARS, unless these kooky loans are all identified and those holding them are allowed to refi.

But in the video, the expert is amazed--he says that people w/the 3% loans that adjust upwards are actually defaulting at these ARTIFICIALLY LOW rates NOW-- before they even adjust up!!!

Wowsers.

So andviv, the positive here is not where to put your money now-- it's where NOT to put your money (or, where not to expect any kind of returns-- i.e., RE speculation).

-Russ H.

 

[lee]

so what do we do about it? gold? oil? guns? RE?

Shorting banks!?

 

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[unicon]

In outlining RK's latest book Increase your Financial IQ first printed in March 2008, before the latest swoon he stated:

"Personally, I believe we as a people, a nation, and the world are all headed for a perfect storm."

Looks like he understated the issue!! I am looking at capacity issues for problem solving.

" I believe the financial integrity of the world is going to be challenged as never before in history."

"The eye of the storm is a few years away"

"It may have already started"

"Problems previously swept under the rug will be exposed."

"Being out of Integrity for so long, the financial, political, enviornmental, and spiritual forces will demand the pendulum swing in the other direction."

Has he got a way with words or what?

 

[randallg99]

New jobless claims drop unexpectedly - Yahoo! Finance

another bad, misleading headline... jobless claims drop.... but let's read between the lines:

>>>But the number of people continuing to claim jobless benefits jumped unexpectedly by 101,000 to 4.61 million. That was above analysts' expectations of 4.5 million and the highest level since November 1982.

The high level of ongoing claims indicates that laid off workers are having a harder time finding new jobs.<<<

and the view of having the "glass is half empty" or cautionary or risk averse investing is how I continue to manage my money....

until these numbers stop bleeding, the economy will continue to spill its guts....

I am using tight stops and trading carry trade holdings. Good luck to us all because we haven't seen the bottom of the indices yet.