Property Grunt

Friday, March 09, 2007

Roll Call: The arctic wind edition

Greetings folks, it has been a long week for the Grunt dealing with sleep deprivation, cold weather and moving.

So here comes the roll call.

Alison Rogers sounds of with her diary of a Real Estate Rookie with her interview with a financial planner. I recommend you read it while it is for free since Dick Bellmer, a financial planner, gives the rundown on how to pick a financial planner and why it is important especially those in the real estate industry.

This guy is a straight shooter all the way. You can tell from this quote.

Rookie: Given the season, one last question about taxes. A lot of us work from home a lot; is claiming a home office an audit flag?

Bellmer: I'm not sure I would call it an audit flag; I don't think any of us know what the audit flags are. But you do want to make sure you have t's crossed and your i's dotted. From my perspective, anything having to do with the IRS, you learn what the rules are and you play by them. Don't have a home office and then try to deduct

It appears that I was wrong about the sub prime mortgage fallout. It seems that not all of us are in deep s**t. Yes. You heard me. Apparently for on segment of society this sub prime mortgage meltdown is the best thing ever. They are hedgefunds.

According to the NYT

Some hedge funds have made a killing. Paulson & Company, an $11 billion hedge fund in New York, had such a strong belief that the subprime market would fall apart that it started two funds last summer concentrated solely on expecting such a collapse. Paulson’s Credit Opportunities Funds, now with more than $1 billion, were up 67 percent for February and about 82 percent for the year to date. A spokesman for Paulson declined to comment.

And this is how one master of the universe pulled it off.

In May 2005, Mr. Burry decided that the housing market was overheated. Credit had been overextended and the appreciation in home prices had the earmarks of a bubble. He placed a bet that the subprime market would collapse.

To do so, he used credit derivatives to short — bet against — subprime mortgage tranches that are part of mortgage-backed securities. The derivatives were essentially insurance against a default, so he would make money when subprime started to deteriorate.

Mr. Burry ultimately entered into eight credit derivative agreements that effectively shorted the riskiest parts of subprime mortgage pools issued in 2005. That investment, which looks smart today, hurt the performance of the overall fund as the subprime market continued to hum.

Through the first nine months of last year, Scion Value Fund and the Scion Qualified Value Fund were down 16.4 percent, with a big chunk of that loss coming from credit derivative positions, some tied to mortgages and others related to corporate bonds, according to a letter to investors. The fund ended the year down about 17 percent, most of which was attributed to the credit derivative positions.

Yet at the end of the third quarter, Mr. Burry still had faith in his trade.

“Never before have I been so optimistic about the portfolio for a reason that has nothing to do with stocks” he wrote in his third-quarter letter to investors, referring to the credit derivative positions. The letter was confident — bordering on cocky —suggesting that others players jumping into the market would pay for being late to the game.

Feels the dot com boom all over again.

And right now, I would like to say goodbye to old friend.

I eagerly await your triumphant return. Which I know will come because as is the way with Marvel, nothing ever stays dead. Even if it takes a half a century.

And Joe Quesada, you suck for leaking the story to the media before the rest of the fans could get their hands on that issue. You would have gotten alot more money from the fans if you had leaked it to the retailers first and then let the media know the next day.