Property Grunt

Friday, May 29, 2009

Gay Marriage: It isn't what they say it is

Oh, bulls**t

There has been a ton a controversy regarding the California Supreme Court holding up Proposition 8.

Let's not forget the lip flapping over Ms. California being against gay marriage because it does not fit the definition of marriage and then having very revealing pictures of herself posted online.

Those videos posted above are talking about rights and the children being destroyed by gay marriage.

In other words they are having a Helen Lovejoy moment.

I wish these idiots just be honest and tell truth why they are against gay marriage. Because it is only about two things: MONEY AND POWER!

In real estate, the gay community is considered to be one of the forces of gentrification because of two reasons.

1. They can live anywhere because they are fearless.

2. They have a ton of disposable income.

Legalizing gay marriage would give them access to the same benefits that heterosexual couples get which are the following:

From The myth of the marriage penalty
* Workplace health and pension benefits coverage. While some
companies offer health coverage to domestic partners, this benefit
is typically taxable as income. When spouses are covered, the
benefit is tax-free.

* Social Security retirement and survivor benefits. A husband or
wife is entitled to one-half of the spouses Social Security
benefits and to additional benefits in the event of death.

* Lower insurance rates. Married people usually get a discount on
auto insurance and may pay less for other types of insurance.

* Automatic inheritance rights. Die without a will, and your spouse
gets your stuff. In many states, the surviving spouse has a legal
right to at least one-third to one-half of your estate.

* Preferential estate tax treatment. The $1 million estate tax
limitation doesn't apply to married people: you can leave an
unlimited amount to a spouse without owing one penny of estate
tax. In certain states, this benefit is multiplied by special
capital-gains tax treatment for homes and other assets held by
married couples as community property.

Now if the gay and lesbian community get these rights, then the government is going to have to say good bye to a lot of that tax revenue. A number of industries will see their costs go up because they would have to provide benefits to married same sex couples

Would Gay Marriage Help the State Economy?

But, at the same time, the analysis also determined that the cost to businesses of providing benefits like health insurance to married same-sex couples would be about $69 million over three years, with about $37 million of that paid by businesses in New York City.

However there is a very positive side to gay marriage.

A new analysis by the New York City comptroller’s office has concluded that the state’s economy would gain up to $210 million over the next three years if same-sex marriage becomes legal.

As for the power, remember the late great Sonny Bono? After his death, his widow took over his position in Congress. If Sonny was gay and had a partner instead of a wife, do you think that partner would have been able to finish out Bono's term. Hells no. Keeping marriage straight shuts out the gay community out of certain spheres of authority allowing others to benefit.

There are certain parties who are going to fight tooth and nail so they have access to that disposable gay income and be able to keep the leverage they have over others. They are not who you think they are. It is not a bunch of bumpkins fighting against gay marriage. It is people with copious amounts of juice. It is not by accident that during the Presidential debates that Obama stated that he was against it. This is a man who was backed by David Geffen. Geffen is one of the most powerful homosexuals in Hollywood which might as well be the world.

When Geffen was interviewed about Obama, he stated the following.

“After I heard him give that speech, I called him up and said, ‘You’re going to run for president and I’m going to support you.’” Geffen said.

You do not go against someone like David Geffen, especially when he has pretty much politically bankrolled your campaign unless you have a really good reason.

However, I think it might be all for naught. I believe it was back in the late 80's or early 90's, a friend of a family member told a very interesting story about working at Disney. It was announced by Disney HR that all benefits would now be extended to the partners of gay employees which was unheard of back at that time. Contrary to what you see on television and movies, Disney has a well earned reputation being quite stringent with their policies. In other words it is the Disney way or doomsday. So why did Disney take such a revolutionary step? If Disney had not done that there would have been a massive brain drain in their creative departments because they were predominately staffed by gay people. That would have crippled Disney's productivity.

I can sum it up with this picture below.

This is just the beginning folks.

Wednesday, May 27, 2009

Back in action, ever so slowly

I am a little slow on the uptake. Got back on Monday afternoon but still feeling the effects of traveling and lack of sleep. More on this and other issues later.

Saturday, May 23, 2009

Memorial Day Weekend

I am going to be away for the weekend. More on that later.
Have a good holiday.

Friday, May 22, 2009

Goldmine Part 3

Got the link below from Kelly Kreth

Unloading properties at auction


Tuesday, May 19, 2009

The Goldmine Part 2

So it begins-

Vampire Hunter D

Got another email from Kelly Kreth regarding Bid on the City's first auction on May 17th.

Here is a quick rundown of the results.

1. There were 5 properties on the auction block.

2. A total of 37 bids.

3. Only one property did not sell.

4. Overall it was an impressive debut.

I plan on posting more information in the near future.

As I stated in my entry The Goldmine, the potential in the real estate auction model can't be ignored. Even if Bid on the City fails, the cat is out of the bag. There will be others to take its place.

Kelly has informed me that the next auction is June 12th which will feature 4 residential properties and include a commercial one.

Sunday, May 17, 2009


This is what it is all about.

The New York Times Magazine has shot a triple threat of articles regarding the current state of the economy which all have a common thread.

First up is

What Does Your Credit-Card Company Know About You?

Back in January, I did an entry on AMEX taking a pre-emptive strike in cutting their losses by cutting credit lines of customers within purchases that do not fit in their parameters.

Cutting their losses: Enter Financial Precrime

Now this type of profiling is being applied to marketing credit cards and collecting from dead beats.

The other solution was learning to predict how different types of customers would behave. Card companies began running tens of thousands of experiments each year, testing the emotions elicited by various card colors and the appeal of different envelope sizes, for instance, or whether new immigrants were more responsible than cardholders born in this country. By understanding customers’ psyches, the companies hoped, they could tell who was a bad risk and either deny their application or, for those who were already cardholders, start shrinking their available credit and increasing minimum payments to squeeze out as much cash as possible before they defaulted.

Credit card companies want to deal with their customers on an emotional basis because an emotional customer is a more malleable customer. It is a customer that they will have fewer problems with. When people are emotional, they can't think straight, they are only doing with their emotions are dictating them to do and that is not always in their best interest.

If a credit-card company detects unsettling patterns, it might start cutting credit lines, raising interest rates or accelerating repayment schedules. (Companies are expected to withdraw $2.7 trillion of credit by the end of 2010, according to a March report from the Meredith Whitney Advisory Group, a banking-analyst firm.) But the most useful information the card companies are deriving from their data are the insights that help them deepen their relationships with customers, particularly when a cardholder is going through a rough time. One of the strongest conclusions of the psychological studies is that cardholders are most likely to pay the bills of those companies with which they have an emotional connection.

“Today the goal is for customers to get a warm-and-fuzzy feeling from their credit-card company,” said Carl Pascarella, a former chief executive of Visa USA. “If we have a deep relationship with you over a range of products and experiences, if we trust each other, you’ll listen when we give you advice.”

It is a smart approach to create that relationship of warm fuzziness however, it is an illusion or aspirational at best. A customer's relationship with a credit card company should be base on what the benefits they can get out of the card when they pay their balance in full every month. Any benefits for minimum payments should be ignored because there are no benefits to minimum payments due to the interest they charge.

Santana had actually already sought permission from the bank to settle for as little as $10,000. It’s an open secret that if a debtor is willing to wait long enough, he can probably get away with paying almost nothing, as long as he doesn’t mind hurting his credit score. So Santana knew he should jump at the offer. But as an amateur psychologist, Santana was eager to make his own diagnosis — and presumably boost his own commission.

“I don’t think that’s going to work,” Santana told the man. Santana’s classes had focused on Abraham Maslow’s hierarchy of needs, a still-popular midcentury theory of human motivation. Santana had initially put this guy on the “love/belonging” level of Maslow’s hierarchy and built his pitch around his relationship with his ex-wife. But Santana was beginning to suspect that the debtor was actually in the “esteem” phase, where respect is a primary driver. So he switched tactics

“You spent this money,” Santana said. “You made a promise. Now you have to decide what kind of a world you want to live in. Do you want to live around people who break their promises? How are you going to tell your friends or your kids that you can’t honor your word?”

The man mulled it over, and a few days later called back and said he’d pay $12,000.

“Boom, baby!” Santana shouted as he put down the phone. “It’s all about getting inside their heads and understanding what they need to hear,” he told me later. “It really feels great to know I’m helping people in pain.”

Helping people? He's helping himself by scoring a bigger commission for himself by having the guy pay more. However, I don't begrudge him for that. In fact I am glad he did that because that customer is getting off light. As you see, there is no hocus pocus here. All it is basic psychology and the right words and tone and former deadbeats are turned into paying customers.

This next article is just f**king insanity. Edmund Andrews is a NYT reporter who covers the economics beat and is writing about his own financial woes which include massive amounts of credit card debt, a subprime mortgage and foreclosure.

My Personal Credit Crisis

The cause of this problem can be summed up in the author's words.

As for me, I had two utterly compelling reasons for taking the plunge: the money was there, and I was in love. It was August 2004, just as the mortgage party was getting really good. I was 48 years old and eager to start a new chapter in my life with Patricia Barreiro, who was then my fiancée.

And here is how it unfolded.

Between humongous loan balances and high rates, we had hung ourselves with the rope they gave us. In the previous December alone, we charged $2,845 on the Chase card for Christmas gifts, food, gasoline, clothing and other expenses. The charges included almost $350 for groceries, $700 in clothes from J. Crew, $179 at GapKids and $700 for airplane tickets for two of Patty’s children to visit their father in Los Angeles. Our balance climbed from $14,118 to $17,135, and in January 2006 we maxed out at our $19,000 credit limit. And there were other expenses on other cards: $1,200 in dental work for Patty’s son Ben; $1,600 to rent a beach house the previous year for us and all the children. Granted, the beach house was an embarrassing mistake. But given that Patty had landed a solid job, it seemed like an indulgence we could work off later.

I don't think so.

My next paycheck would come in about a day or so, but that was entirely reserved for the February mortgage payment. We didn’t have enough cash to cover more than a week’s worth of groceries and gasoline. For the last few months we were living off the cash left over after I sold my Times stock and we bought the house. But now it was gone.

“How the hell could we have run through so much money so quickly?” I asked her accusingly.

Patty wasn’t sharing my shock. “I don’t know what’s going on,” she responded. “Let’s talk about it when you get home.”

Patty had spent much of the two previous decades as a stay-at-home mother in Los Angeles. Her last full-time job, as an editor at a political research company, was back in the early 1980s. Not surprisingly, Patty’s re-entry into the job market was bumpy. When Saks Fifth Avenue offered her a full-time job selling high-end clothing on commission — something she knew about and loved — she grabbed it. But with her take-home income averaging only about $2,400 a month, we didn’t make enough to cover our bills because my take-home pay was going straight to the mortgage. We were spending way more than we were earning.

It is always the house.

After a one-year bicoastal courtship, Patty was about to move from her home in Los Angeles to Washington. We would need a home with enough space for her two youngest children, as well as for my own teenage boys on the weekends. I had assumed we would start by renting a house or an apartment, but it quickly became clear that it was almost easier to borrow a half-million dollars and buy something.

Patty discovered a small but stately brick home in a leafy, kid-filled neighborhood in Silver Spring, Md. We sent in an offer of $460,000 and one day later got our answer: the sellers accepted. I felt both amazed and exhilarated, convinced that the stars had aligned for us. I loved the house as soon as I saw it. It was one block from a school and a park. My boys would be within a 15-minute drive, and it would be easy for them to come over and stay whenever they wanted.

The only problem was money. Having separated from my wife of 21 years, who had physical custody of our sons, I was handing over $4,000 a month in alimony and child-support payments. That left me with take-home pay of $2,777, barely enough to make ends meet in a one-bedroom rental apartment. Patty had yet to even look for a job. At any other time in history, the idea of someone like me borrowing more than $400,000 would have seemed insane.

Edmund and Patty's objective was to have a life together that would include their own kids. It is very admirable but they let hearts not their minds lead them into this direction. Edmund is what is known as an educated fool. He is probably very well educated and could probably run circles around any of us on the issues of economics. But he still can't control his own finances.

If he had simply had walked across the hall and spoke to Joyce Cohen or Gretchen Morgensen he would have learned what a bad idea this was before getting into that mess.

I remember reading a column by the late Reverend Kensho Furuya who was an Aikido master and ordained Zen priest. He wrote about how a discussion he had with a sensei of his who explained to him that people usually come undone not from one problem but a series of problems. When they are not addressed, these problems land on top of each other, creating a compounding problem. It is when the last problem steps over a person's threshold and the person freaks out. That is why it appears a person loses their s**t over one issue.

What Edmound Andrews is experiencing is simply a compounding of problems and that he has been unsuccessful to solve.

By the way, if anyone believes that the housing market has bottomed. Don't bother.

I called Chase back in January, when I was 90 days past due. Another representative told me that I would automatically be evaluated for a loan modification.

“You should just wait until you hear from one of our negotiators,” he told me politely.

Another two months passed without anyone calling, so I tried again in late March.

“I’m sorry, but our analysts have been backed up,” yet another Chase rep told me, even more politely than the previous one. She said each analyst had about 500 distressed borrowers to deal with, and it had been taking about five weeks for customers to get a direct response. The delays seemed to be getting longer.

Then we have Suze Orman.

Suze Orman Is Having a Moment

Overall, she is a good reputation but she does have her detractors. In all honesty, I find her a bit much. But I like her message and they she ties emotion to finance.

What’s most striking about Orman’s frenetic, outsize celebrity is how starkly it contrasts with the sober simplicity of her message. Track your spending. Stay out of debt. Take care of your car. Look into a Roth I.R.A. Though she is larger than life and wealthy, her primary message is not about larger-than-life ambition or a sky-high entrepreneurial spirit. Orman’s advice rarely sounds like “Go West, young man.” It sounds more like, “Everyone should have a liquid eight-month emergency fund.”

Orman has been propelled to fame not by her financial success, or because of any revolutionary insight about, say, index funds. Rather, she has figured out a way to channel an innate charisma and a televangelist’s intensity into an otherwise bland message of fiscal responsibility. She could recite the phone book with her broad, Midwestern accent, her repetitive rhetorical flourishes, her interjections of “Are you kidding?” and people would still sit up and listen. There’s as much Joan Rivers in her delivery as there is Deepak Chopra, and somehow, in Orman, neither part makes the other look ridiculous.

This I have never heard from any author.

Karen Fonner, the vice president of strategic content for QVC, recalls watching Orman tell a heavily indebted woman who had just ordered her book not to buy it. “She told her: ‘I want you to cancel your order. Go to the library, my book is there,’ ” Fonner remembers. “That was the first time I’d ever seen someone do that.”

That is ballsy and sensible for her customer. And it shows how much Suze stands by her principles even if it means she does not benefit.

Orman has strong opinions in general. She won’t speak before many doctors’ groups, because they get on her nerves (doctors always think they know better, she says). Until recently, she didn’t like to speak at universities, because they generally don’t charge students to attend her lectures, and she says that people don’t value things they haven’t paid for.

She has been reluctant to work on school curricula on personal finance, because she says students can’t learn empowerment from people who aren’t empowered, and teachers, she says, are too underpaid ever to have any real self-worth. She told me: “When you are somebody scared to death of your own life, how can you teach kids to be powerful? It’s not something in a book — it ain’t going to happen that way.” She once delivered pretty much the same message at an anniversary celebration of a private school — she seems to recall calling the school a “travesty” — and was all but escorted to the door when she was done.

Love her or hate her she is upfront with her opinions and has no problem with lacing them with her passions. That is why she has such a large following because she is able to connect to everyone on an emotional level.

Emotion is the common factor for all of these articles. From losing focus and making the wrong decision to using them influence people to take certain actions, it is all emotional.

When I was in high school I had an AP American history tutor who told me once that economics is all psychological. These articles are just more evidence of that statement.

I am not perfect folks. In fact, from reading these articles I am quite humbled and grateful for what I have in my life. There have been many occasions where my Amygdala nearly got the best of me and I almost made decisions that could cripple me.

If I my words appear judgmental, I assure you they are not. But I admit to being very firm with I am saying because you and I could be these people who are taking the brunt of our failing economy.

So please, I urge all of you to exercise a strong sense of emotional detachment in your financial matters, especially during these times.

Thursday, May 14, 2009

Bear with me

Get it? Bear? Admit it. I am too fast for you.

I am under a bit of stress which I must admit is self induced which is due to a personal event that I am invited to attend to and I am in the process of preparing for it. Which is why my entries will be erratic for the next couple of weeks.

Tuesday, May 12, 2009

Gotti has to go?

I saw the story about this last night on the news.


They Gotti find a new home!

Victoria Gotti's palatial Long Island estate -- which she and her sons once flaunted in the reality show "Growing Up Gotti" -- is now under foreclosure.

Despite a vast fortune amassed by her late father, Gambino boss John "Dapper Don" Gotti, the flashy Mafia princess has skipped two years of loan payments and will lose her home in tony Old Westbury, according to court records.

The 46-year-old former reality-TV star owes $650,000 to lender JPMorgan Chase -- a debt secured by a mortgage on the nearly $4.2 million mansion that she won in her divorce with ex-husband Carmine Agnello.

"I was awarded full ownership of marital property . . . and all I inherited was a house with millions of dollars' worth of debt," Gotti told The Post yesterday.

"This should finally put to rest all the government lies and rumors that I have $200 million buried in my back yard."

The couple split in 2003, while Agnello was serving a prison stint for racketeering, and the grandiose, 6-acre home was deeded over to Gotti in 2005.

But Gotti claims Agnello had secretly taken out an $850,000 loan in 1997 without her knowledge and has left her holding the bag.

Not so, according to lawyers for the bank, who convinced judges with the Brooklyn Appellate Division that Gotti is crying wolf.

Last week, the appeals court gave the bank a green light to start foreclosure proceedings and reversed a Nassau County judge's ruling that would have allowed Gotti more time to fight the case.

"Good riddance," said one neighbor on Birch Hill Court, who asked not be identified.

This isn't the first time Gotti has faced losing her house.

Upon taking ownership of the house in 2005, Gotti immediately defaulted, and JPMorgan scheduled to auction off the estate that summer -- even as she and her three hair-gel-loving sons preened for the cameras for "Growing Up Gotti," which ran from 2004 to 2005 and was canceled after 41 episodes because of poor ratings.

Gotti persuaded the bank to give her an extension on the mortgage with the condition that she would pay $200,000 by February 2006, at a rate of $25,000 each month.

Court records show Gotti forked over an unspecified portion of the cash -- and then stopped paying.

In the latest ruling, the appeals court granted JPMorgan's request for summary judgment and ordered Nassau County Supreme Court Justice Roy Mahon to appoint a referee to determine how much money is owed and whether the property can be sold in one lot.

The estate, which Gotti once tried to sell at $4.8 million, is currently listed with Century 21 at $3.2 million, a source said.

Since its reality-TV days, the estate's grounds have turned into an eyesore.

Back in my media days, I was actually assigned to read and evaluate her proposal for the Senator's Daughter, it wasn't Shakespeare but she definitely had the makings in becoming the next Jackie Collins.

If you look at her credits on Amazon, she has an impressive portfolio of books any author would be envious of. She probably got hefty advances for each of these books. That is why I am shaking my head in how this foreclosure situation has transpired for her. From what I have read about investing, there are plenty of very risk averse and user friendly ways to save for a rainy day.

With the amount of money she was pulling in, it surprises me that she did not have at least put together a reserve fund. And I don't care how rich you are, this sort of thing cripples your credit. But maybe that is the point. Maybe she has no concerns regarding this credit which is why she is in this situation.

Upon taking ownership of the house in 2005, Gotti immediately defaulted, and JPMorgan scheduled to auction off the estate that summer -- even as she and her three hair-gel-loving sons preened for the cameras for "Growing Up Gotti," which ran from 2004 to 2005 and was canceled after 41 episodes because of poor ratings.

Gotti persuaded the bank to give her an extension on the mortgage with the condition that she would pay $200,000 by February 2006, at a rate of $25,000 each month.

Court records show Gotti forked over an unspecified portion of the cash -- and then stopped paying

Basically she is been in this situation for over two years. Whether it is her ex-husband's fault or not, she is the one holding the bag and she has to deal with it.

Monday, May 11, 2009

Foreclosure Report April 2009

I got this straight from Property Shark for April 2009. Read em and weep.

This game is to blame

All the same.

As someone who is a self-professed comic book fan, I confess that Eisner was never one of my favorites. I knew of his work in the Spirit and I knew that he was part of the family of icons that included Jack Kirby and Stan Lee.

But I never really got into the Sprit. As kid I may have flipped through the Spirit and I watched the first Spirit Movie on ABC starring Sam Jones. I wasn’t really impressed by it. I mean yeah, he survived a near death experience but he had no super powers or nifty gadgets. And he got beat up, a lot.

Every now and then I would hear about his other non-adventure works and how it was critically hailed, however at that point I was more interested in the works of Garth Ennis and Warren Ellis.

With Frank Miller’s aborted fetus of a film version of The Spirit, I became curious about Eisner once again. But I began to read his non-Spirit related works which were tales based on growing up in New York City and being an immigrant.

The result is that I have an insatiable hunger for Eisner now and I realize why I had no interest in his work back then. It was because I was not ready to read them.

One particular work that has resonated within me is “The Name of The Game.” which chronicles the lives of a very prominent Jewish Family known as the Arnheims. It is a tale of greed, betrayal, spousal abuse, assimilation and copious amounts of family dysfunction.

One of the main characters in this tale is Conrad Arnheim who is a douchebag of the highest order and it is no surprise why. As a child, his father deems him the heir to the family's corset manufacturing empire however this position only creates a monstrous sense of entitlement within Conrad which destroys all he touches and eventually leads to his own demise.

Here are some examples of Conrad’s actions

When the company is about to go under, Conrad sets up a loan in putting up shares of the company as collateral. But he sets it up so his shares are protected while leaving his cousins on the hook for the loan when the company goes go under.

His cousins threaten to put Conrad’s brother in jail for embezzlement unless Conrad helps them out. Conrad responds by having his brother committed.

On his wedding night, his wife is hesitant about consummating the marriage, Conrad’s response is to beat and rape her.

In Conrad’s defense, he is not the only one with an agenda. Every character, even ones with the noblest intentions has an angle when they get involved with the Arnheims.

When Conrad leaves the garment industry he buys a seat on the stock exchange and sets up his own firm. All the other prominent Jewish families throw tons of money at him without engaging in any acts of due diligence because they trust the Arnheim name. Sound familiar?

The two women who marry Conrad are not motivated by love but the opportunities that come by being an Arnheim. Despite the indignities of Conrad’s affairs and beatings, they still stay.

Conrad’s mother espouses the following mantra which is Always Keep up Appearances which is the main theme of the book. By making every effort to maintain this charade of success and good fortune, they are perceived as being prosperous to the general public.

If you want to truly understand why the economy is in the tank and why the real estate market has imploded read this book because it all comes down to keeping up appearances.

We are constantly being bombarded with real estate reports from real estate brokers that claim everything is honky dory when the evidence shows the contrary. The list of real estate developers who are in deep trouble is rapidly growing as they realize that owe more than they actually own. But we still hear reports of "green shoots" and the market turning for the best.

Why did all of these people buy bigger homes? Why did they take out mortgages they could not afford? They wanted to create the façade they were moving up in the world. A new home is a simple and easy symbol that says to the world, I am somebody. Respect me. It is a status symbol and status symbols are a huge part of the social construct in our society.

Even the very act of refinancing says to the world. “Hey, my home has risen in value and I am going to tap into it.”

The credit card industry is also part of the game and is going to get destroyed for being such a bad player.

Banks Brace for Credit Card Write-Offs

It used to be easy to guess how many Americans would have problems paying their credit card bills. Banks just looked at unemployment: Fewer jobs meant more trouble ahead.

The unemployment rate has long mirrored banks’ loss rates on card balances. But Eddie Ward, 32 and jobless, may be one reason that rule of thumb no longer holds. For many lenders, losses are now starting to outpace layoffs.

Mr. Ward, of Arkansas, lost his job at a retail warehouse in April and so far has managed to make minimum payments on his credit card debt, which he estimates at $15,000 to $20,000. Asked whether he thinks he will be able to pay off his balance, he said, “Not unless I win the lottery.”

In the meantime, he said, “I’m just doing what I can.”

Experts predict that millions of Americans will not be able to pay off their debts, leaving a gaping hole at ailing banks still trying to recover from the housing bust.

The bank stress test results, released Thursday, suggested that the nation’s 19 biggest banks could expect nearly $82.4 billion in credit card losses by the end of 2010 under what federal regulators called a “worst case” economic situation.

But if unemployment breaches 10 percent, as many economists predict, the rate of uncollectible balances at some banks could far exceed that level. At American Express and Capital One Financial, around 20 percent of the credit card balances are expected to go bad over this year and next, according to stress test results. At Bank of America, Citigroup and JPMorgan Chase, about 23 percent of card loans are expected to sour.

Even the government’s grim projections may vastly understate the size of the banks’ credit card troubles. According to estimates by Oliver Wyman, a management consulting firm, card losses at the nation’s biggest banks could reach $141.5 billion by 2010 if the regulators’ loss rate was applied to their entire credit card business. It could top $186 billion for the entire credit card industry.

Unlike in prior recessions, cardholders who recently lost their jobs are unlikely to be able to extract equity from their homes or draw down retirement accounts to help pay off their debts. That means borrowers who fall behind on their bills are more likely to default, leading to higher losses.

After writing off about $45 billion in bad debts during 2008, credit card lenders are bracing for the worst year in the industry’s history. Not only are losses spiraling, but also lawmakers are on the verge of passing a set of tough new consumer protections that could have a devastating effect on profits. This week, the Senate is expected to take up the Credit Cardholders Bill of Rights after the measure passed in the House with a strong bipartisan vote of 357 to 70.

Over the weekend, President Obama pressed lawmakers to approve the new rules, which would curb the ability of card issuers to raise interest rates retroactively on consumers and would require them to reduce hidden fees and penalties. He hopes to sign the legislation by Memorial Day.

For the banks, the economics of the credit card business are increasingly troubling. As the recession has dragged on, cardholders have sharply reduced spending. New customers with strong credit histories are increasingly hard to find.

Many who have played the game of keeping up appearances are screwed because they have nowhere to turn to for funds. Lenders are freaking out because of the rising defaults and the plummeting levels of qualified customers.

This is is just the tip of the iceberg. If these people are having credit card problems, do you think they will be able to cover health care costs, let alone food?
How can this economy recover when everyone is reining in their spending? When we treat consumer as our only annuity, this is what we get.

It is not all gloom and doom. In fact if you did not play this game you have the advantage. If you paid your credit card balances in full, if you kept a pristine credit report and if you saved your money and lived frugally, then you are in a better position than most.

For you buyers out there, if you are willing to wait at least another 6 months to a year and treat real estate like a night at Scores (Look but don't touch.) Then there will be some very sweet deals for you out there.

Sellers, pray. Because that is all you can do now.

Wednesday, May 06, 2009

The Doom Generation

Recovery will be a long time coming.

Over at Bloomberg, John F. Wasik is calling bulls**t about the bottom of the market.

U.S. Home Prices May Be Lost for a Generation: John F. Wasik

Below are points of interest.

You won’t see a widespread housing rebound in an economy in which 600,000 jobs a month are lost and foreclosures ravage the most overleveraged areas. These are just the visible barriers to a recovery.

Mortgage lending has also been an unusually tightfisted process of late. Lenders are demanding a 20 percent deposit for home purchases, and want impeccable credit ratings. About 45 percent of U.S. banks surveyed by the Federal Reserve said they had “tightened their lending standards on prime mortgages.” I suspect that number is much higher.

Then there’s the reality that the market is glutted with homes. A record 19 million homes stood empty at the end of 2008

It has gotten to the point that lenders who own these homes realize it is cheaper to simply demolish these brand new homes.

I caught the above the story on NBC last night. I suspect they got it from Youtube.

And even that isn't a quick fix to this mess we are in.

The U.S. is experiencing a 40-year generational peak in consumer spending, one that will lead to “the first and last Depression of our lifetimes,” author Harry Dent predicts in his book “The Great Depression Ahead” (Free Press, 2008).

Although we may not be headed for a 1930s-style Depression, there’s plenty of evidence to suggest that boomers are dumping their four- and five-bedroom suburban homes for two- and three- bedroom condominiums.

It’s also unlikely that the “Generation X,” born between 1965 and 1976 (or more derisively called “baby busters”), will bid up home prices. They are only 44 million strong, not as wealthy and even more in debt from college loans.

The are two types of debt that is the crippling young Americans and it is credit card debt and student loans. Banks have jacked up credit card rates much to the anger of their customers, particularly those who actually pay their bills on time. Students loans are not tax deducitble and you can't get rid of it through bankruptcy. These kids can't build equity because their money is going elsewhere and chances are they may never be able to pay all of it.

Rebuilding Wealth

While building permits don’t mean that housing will be built, they are one indicator of housing-market growth.

Yet don’t confuse building with the ability to restore home equity. Simply moving to another area won’t rebuild the estimated $6 trillion that was lost during the bust.

One of the reasons the housing mania was so damaging was that median home prices rose to about three times average household incomes as opposed to double income levels in 1950.

Wages simply weren’t keeping pace with housing inflation, so homeowners overleveraged to make up the difference. The wave of deleveraging will depress home prices in most markets.

It’s time to assess your options. Your home may not be a nest egg. You may never recoup your losses from the dot-com and credit busts in the stock market.

For most homeowners, wealth building and retention may depend more on a diversified, inflation-indexed bond portfolio than on real estate. This new reality, though, may be lost on those still trying to price their homes at 2006 levels

Overleveraging, wages that are nowhere the unrealistic levels of the housing market and the destruction of home equity. Once again, will not happen in a year or two.

Another sane voice in all this green shoot madness is Noah Rosenblatt who is also calling anyone out who drinking the Kool Aid.

Broker: Hold Your Horses, Comrades

UrbanDigs broker-blogger Noah Rosenblatt takes aim at all those recent broker reports that speak of an "uptick"—whether in foot traffic or sales—and rains on the parade a little bit: "I am hearing and seeing this pickup in foot traffic myself. But for every top producer benefiting from a pickup in action, trust me, there are many more brokers out there struggling to survive. Plus, what is this pickup being compared to - a period that saw barely any deals done?"

Get off the merry go round folks. Rest up and then look around you.

Tuesday, May 05, 2009

No wonder Lehman imploded

Last Sunday the NYT did a great article on how real estate became the downfall of Lehamn Brothers.

How Lehman Brothers Got Its Real Estate Fix

I think this particular paragraph indicates why Lehman f**ked up so badly.

One partnership pursued by Mr. Walsh exemplified his newfound appetite for ever riskier deals: transactions with the SunCal Companies of Irvine, Calif., an operation with an intriguing business model. It bought land, primarily in its home state, and sought government approval for residential development. If it got the green light, it sold the land to builders for an enormous profit. Mr. Walsh lent SunCal more than $2 billion and formed a close relationship with its founder, Boris Elieff. Mr. Elieff did not return calls seeking comment.

When it comes to raw tracts of land, my motto is straight from Nancy Reagan's mouth

I am being dead serious about. Raw tracts of land is the simplest yet most dangerous form of real estate investing in my opinion. The value from land comes from what people want to do with it and if no one wants to do anything with it then there is no value.

For a tract of land to become real estate requires the proper zoning and entitlements. This requires a lot of money and a lot of lawyers. I haven't even begun to talk about the physical costs of turning raw tracts of land into a product that is development friendly.

What killed Lehman was that they were too focused on closing as many deals as possible instead of focusing on what type of deals to close.

One word: Greed.

Monday, May 04, 2009

Fair Game

I can't believe this was actually a movie.

The New York Times did not just do one but squeezed out two article out of a subject that could have been condensed into one article. I guess this their version of double spacing a term paper so it fits the requirements of two pages.

Snark Attack

Bulletproofing Begins at the Open House

The first article is about the online sniping that occurs on real estate listings in blogs and other sites and how brokers and sellers deal the fall out.

The second article argues that the best way to defeat snark is staging an offensive at an open house.

Honestly, there is nothing anyone can do about snark. Once a listing is put online, everything is up for grabs. The internet is a free fire zone and with the distance that is created with a computer and the anonymity, it is very easy for people to hit below the belt on a regular basis. I am not saying it is right. I am just saying it is what it is.

It is good to know that Curbed and other blogs are taking control of the situation.

Mr. Waxenberg spends about two hours a week on StreetEasy’s forums, where among other things he posts reviews of the open houses he attends.

“The discussion runs along two tracks generally,” he said. “Pricing is one. The other half is how a property showed on a particular day — the layout, the space, the light, the building, the location. Are they showing the property to its best advantage? Is the broker doing a good job, or is it made impossible by the way the owner inhabits the space? You don’t need calla lilies on the console table, but just understand that anything that is glaringly bad is going to get mentioned by someone and it’s never going away.”

True enough, said Lockhart Steele, the founder and president of Curbed. “We err on the side of giving readers freedom,” he said. “We remove comments that cross the line into personal slander, like making fun of someone or revealing extremely personal information, like posting a phone number.”

Brownstoner and StreetEasy take a similarly hands-off approach.

Despite these efforts, I feel that it is only a matter of time before some broker or seller is going go completely apes**t and begins to sue people left and right. And the lawyers won't just stop at the blogs and forums, they are going to want to the blood of the commentors. Sounds impossible right? With the right judge, court orders can be issued to strip those sites bare for IP addresses that will lead to those who have snarked. It won' t happen over night since it will cost a lot of money for someone to pursue this, but it can't be ruled out.

To all those sellers and brokers, your reputation is a carpet and everyone is going to step on it. So you are either going to need an ample supply of carpets or be ready to clean it as much as possible.

Friday, May 01, 2009

Swine Flu Email

I got this email from a family member who received it from a bunch of other friends that work in various medical fields. So at face value this looked real.

Date: Wed, 29 Apr 2009 08:55:31 -0500

Subject: Flu Update from Dr. Marcus Gitterle

After I returned from a public health meeting yesterday with community
leaders and school officials in Comal County , Heather suggested I send
an update to everyone, because what we are hearing privately from the
CDC and Health Department is so different from what you are hearing in
the media.
Some of you know some or maybe all of this, but I will just list what
facts I know.

- The virus is infectious for about 2 days prior to symptom onset

- Virus sheds more than 7 days after symptom onset (possibly as long as
days) (this is unusual)

- Since it is such a=2 0novel (new) virus, there is no "herd
so the "attack rate" is very high. This is the percentage of people
come down with a virus if exposed. Almost everyone who is exposed to
this virus will become infected, though not all will be symptomatc. That
is much higher than seasonal flu, which averages 10-15%. The "clinical
attack rate" may be around 40-50%. This is the number of people who show
symptoms. This is a huge number. It is hard to convey the seriousness of

- The virulence (deadliness) of this virus is as bad here as in Mexico ,
and there are folks on ventilators here in the US , right now. This has
not been in the media, but a 23 month old near here is fighting for his
life, and a pregnant woman just south of San Antonio is fighting for her
life. In Mexico , these folks might have died already, but here in the
US , folks are getting Tamiflu or Relenza quickly, and we have ready
access to ventilators.
What this means is that within a couple of weeks, regional hospitals
will likely become overwhelmed.

- Some of the kids with positive cases in Comal County had more than 70
contacts before diagnosis.

- There are 10-25 times more actual cases (not "possible" cases --
actual), than what is being reported in the media. The way they fudge on
reporting this is that it takes 3 days to get the confirmatory nod from
the CDC on a given viral culture, but based on epidemiological grounds,
we know that there are more than 10 cases for each20"confirmed" case
right now.

- During the night, we crossed the threshold for the definition of a
WHO, Phase 6 global pandemic. This has not happened in any of our
lifetimes so far. We are in uncharted territory.

- I expect President Obama will declare an emergency sometime in the
72-96 hours. This may not happen, but if it doesn't, I will be
When this happens, all public gathering will be cancelled for 10 days.

- I suggest all of us avoid public gatherings. Outdoor activities are
not as likely to lead to infection. It is contained areas and close
contact that are the biggest risk.

- Tamiflu is running out. There is a national stockpile, but it will
have to be carefully managed, as it is not enough to treat the likely
number of infections when this is full-blown. I don't think there is a
big supply of Relenza, but I do not know those numbers. If I had to
choose, I would take Relenza, as I think it gets more drug to the
affected tissue than Tamiflu.

- You should avoid going to the ER if you think you have been exposed or
are symptomatic. ER's south of here are becoming overwhelmed -- and I
mean that -- already. It is coming in waves, but the waves are getting

- It appears that this flu produces a distinctive "hoarseness" in
victims. The symptoms, in general, match other flu's; namely, sore
throat, body aches, headache, cough, and fever. Some have all these
symptoms, while others may have only one or=2 0two.

- N-Acetyl-Cysteine -- a nutritional supplement available at the health
food store or Wimberley Pharmacy, has been shown to prevent or lessen
the severity of influenza. I suggest 1200mg, twice a day for adults, and
600mg twice a day in kids over 12. It would be hard to get kids under 12
to take it, but you could try opening the capsules and putting it on
yogurt. For 40 pounds and up, 300-600 mg twice a day, for less than 40
pounds, half that.

- Oscillococinum, a homeopathic remedy, has been vindicated as quite
effective in a large clinical trial in Europe , with an H1N1 variant.
You can buy this at Hill Country Natural Foods, or the Wimberley

I will try to keep everyone posted if I have any new information.
Meanwhile, don't be afraid just avoid infection. The fewer people
infected the easier it will be for our public officials to manage it.


These types of forwarded emails are notorious for being fake. However, I did some research it turns out the doctor is for real, but I was still skeptical since anyone can create a legitimate email from what you can find online.

It appears the email is for real according to this article. But the doctor's credibility is in question.

I really hate this type of bulls**t because it just does not help the situation we are in since more gasoline is added to the fire and instead of duck and roll people panic and keep running around.