Monthly Archives: September 2008

What’s YOUR Favorite Business Meltdown Movie?

Meltdown    So with all the trainwreck-iness happening on Wall St. this past week, I was entertained by “The Best Business Meltdown Movies” on MSBNC.com, talking about how real-life scandals have inspired Hollywood for decades.

So, because I love a bunch of these movies on the list — but not all of them — I thought I’d take a quick straw poll. And, I modified the list to replace a couple of them with ones I personally like. Take your pick!

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If You’re a Home Buyer, Read This…

“The best time to buy, is when there’s blood in the streets”

        John D. Rockefeller

 

“Timing is everything”

          Anonymous

 

“Just Do It”

          Nike

 

Opportunity  Prolific words for today’s market.  Actually, for this WEEK’S market.  A more simplistic analogy for how some of these billionaires became billionaires – “buy low and sell high”.  Wow, brilliant! Novel concept.  Barring inheriting tons of money….to me, this is the most common sense recommendation for how to truly make money off your investments, whether that’s real estate, or stocks, or any other liquid vehicle.  This is truly the “duh” factor.

 

But of course, the selling high piece often takes some waiting time for the right moment to sell.  Not months. Years.  Many years. As it relates to real estate, this is NOT a flipper’s market anymore. Gone are the days of buying something “cheap” and making a fat profit in just a few months.  Trying to “time the market” is a losing proposition. Anyone who tells you they “timed the market correctly” is – more than anything else – not smart, not prescient, but flat out LUCKY. Flippers need not apply (related post here).

 

Now, this is not meant to be self-serving – like when a realtor says “right this second is

the best time to buy” – but, despite this week’s miserable economic news, and here’s the essence of this tome: if you have the need/commitment to purchase something, and you have the financial wherewhithal – in layman’s terms, you either can actually qualify for a mortgage, or you have all cash to put down, why would you NOT buy during these times?

 

Yes, gas prices are high. Yes, financial institutions are in turmoil. WaMu? Holy crap, they’re out of biz? Yes. The biggest — bank failure — in HISTORY. Unemployment high, wages are lower than 8 years ago.  If you can’t afford to buy a home, then simply and realistically, you should NOT buy a home. That, my friends, is the anti-Nike slogan, “Just DON’T Do It”.

 

But like I mentioned, if you CAN afford to buy a home – and you NEED to buy a home – wouldn’t common sense dictate that you buy when there’s less competition forcing you to spend more money than you intended?  Does anybody really make money when they overextend themselves? Someone please tell me if I’m smokin’ crack with this opinion.

 

Let me rephrase that with a multiple choice question:

(A)  Do you want to purchase a home that meets most of your needs, when prices are skyrocketing, when you have to compete with 6 other motivated buyers, and you’re likely to pay WAY over asking price?

(B)  Do you want to purchase a home that meets most of your needs when nobody is buying, you can probably get it for less than asking price, and use the money you saved to bring the house up to 100% of your needs?

 

Keep in mind, with option A, you have a 5 out of 6 chance of being disappointed. And you’re going to probably pay a disgusting amount over asking price (see here for an example). 

 

But keep in mind that with option B, don’t expect sellers to completely drop their drawers – it’s rare to see sellers take anything less than 90% of asking price these days (just talking about the Peninsula here in Silicon Valley).  Yes, some sellers NEED to sell, but more often they won’t be completely unrealistic about how low they’ll go.

 

The word…of the day.

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Bargains Abound — Relatively Speaking, Of Course…

Bargain-Center-Sign Good article on Bloomberg the other day. While it’s relative to the catatonic financial market, its message is definitely relevant in the world of real estate.

Here’s the gem:

The U.S. slowdown may be shorter than expected and private equity investors should start searching for bargains after valuations tumbled this year, said Mark Mobius, executive chairman of Templeton Asset Management Ltd.

“I just don’t see a long, protracted recession,” Mobius, who manages about $40 billion in emerging market stocks, told the Super Return Asia conference in Hong Kong today. “There is an opportunity to buy low right now and sell high in the next cycle.”

Hmm — buy low….and sell high. Seems to have worked for the Donald, The Buffet Man, the Rockefellers, and countless others.

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Community Alert: Beware the “*72” Scam

Ok, so this isn’t on the ridiculous level of your garden-variety Nigerian Free Money Scam.

But it’s definitely something to beware of, so pass this on to your friends & relatives.  Got it from the Chronicle the other day, and here’s the gist of it:

A warning from the California Highway Patrol: If someone calls up claiming to be a CHP officer, phone company employee or even a jail inmate and tells you to hit “star-72″ on your phone, don’t do it – it’s a scam.

Some people learned the hard way when they got huge phone bills for unauthorized calls, authorities said Friday.

The CHP is taking particular umbrage because some scam artists have masqueraded as one of the agency’s own, calling with supposed bad news such as the involvement of a relative or close friend in a crash.

The scammer tells the person to contact another “officer” by dialing star-72 on the keypad, followed by another phone number. But star-72 is a custom feature for call forwarding. When someone punches in star-72, it causes all incoming calls to ring at the other number.

Another person in on the scam is then able to accept collect and third-party calls – and the victim gets stuck with the bill.

There are variations of this scam. Callers have pretended to be inmates who contact people “accidentally” and then say they need help calling relatives because they can make only one call.

Scammers have also pretended to be a phone company technician who needs to check the phone line for problems and tells people to hit star-72 or 72-pound, depending on the service provider, so they can get “remote access.”

Others have pretended to be calling from a pay phone and claim they need help to make an emergency call.

Authorities recommend that anyone who is asked to punch a strange code into the phone hang up and report the call to law enforcement. Those who believe they have fallen victim to the scheme should press star-73 or 73-pound to turn off the call-forwarding feature

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Fannie & Freddie Failure is Good News for Homebuyers

(props to Rick Soukoulis for the great thoughts):

It seems like more has been written on Fannie Mae and Freddie Mac in the past 48 hours than has been written in the past ten years. Confusing? Probably so.

Lifesaver Looking past all the double-talk by the politicians and the Secretary of Treasury, there are some very elemental truths to the whole failure of these two giant companies with strange names.

First off, let’s make a bold statement here: for homeowners (and people like myself), this is all very good news.

Fannie and Freddie only failed in the sense that their shareholders took a beating.  The government action came in and rescued them and is strengthening them as you sit there reading this.

The shareholders, unfortunately, were the losers.

The winners are people buying homes.

The morning began with a monster stock market rally on the news of that they were seized.  Well, markets hate uncertainty, and this rally was a reaction to the steps the government has taken. The uncertainty is now gone. Fannie and Freddie will not fail or file for bankruptcy.

But let’s forget about the stock market for a minute.

What about interest rates?

The bond markets were more than a bit ecstatic to hear the news about Fannie and Freddie being rescured. They responded with rates falling as much as 3/8ths of a point today.

This was a strong vote in favor of the stability that will come with a government infusion of capital into Fannie and Freddie.

It’s also a vote of support for the Federal Reserves statemnet that they and the Treasury Department will now buy mortgage backed securities to help drive down mortgage rates.

There’s a huge amount of firepower at the Fed and at Treasury, and if they’re in there buying mortgage-backed securities, that will cause mortgage rates to fall.

Anyway, here are some key truths:

Fannie Mae and Freddie Mac have been rescued and strengthened. And, they will only get stronger. This is fact.

Rates have started to come down. Tis is a fact.

Now is the time (no, this really isn’t a shameless plug) for people uncertain about buying a home to get off the fence and, as Nike says “just do it”.

Just the facts, m’am.

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