The Real Estate Investment Blog

Scott Pelley interviewed Treasury Secretary Henry Paulson on 60 Minutes Sunday night and I thought I was going to blow a gasket.

Pelley reminded Mr. Paulson of a quote he said way back in April 2007:
“I don’t see sub-prime mortgage market troubles imposing a serious problem. I think it’s going to be largely contained.”

And when Pelly asked why he didn’t know this coming, Paulson replied “Hindsight is 20/20… I didn’t expect quite this.”

Are you kidding me? Now, I may be just a pretty little girl and may not know a lot about this “economic stuff”, but how is it that I saw this coming 5 years ago? I was a manager of a real estate agency from 02-04 when houses were getting 10 offers and people with bad credit making $60K a year were buying $500K houses. We saw this catastrophe happening right before our very eyes and knew that very very bad things were going to happen once these loans started to adjust.

You’d Have to be Blind to Miss the Signs

We were having meetings to discuss it for goodness sakes! We were telling our agents that they need to learn how to become REO agents because that is where we were going to be in a couple of years! I even considered becoming an agent just so I could be an REO Agent when this puppy was going to hit the fan! That was way back in 2004! (Thank god I didn’t go that route. After all, it’s so much more fun to be a stressed out real estate investor rather than a stressed out REO Agent.)

Fast forward to the last 2-3 years and see all us investors educating ourselves to buy houses in this market crash. Did we investors know it was coming?

So how is it that we “regular” people knew that our market was going to crash and 10’s of thousands of people where going to loose their homes and banks were going to fail – but very important smart people like Paulson “didn’t expect quite this”?

Pelley also quoted several emails by analyst for credit rating agencies on Wall Street and one of the emails from two years ago said:

“Let’s hope we are wealthy and retired by the time this house of cards falters.”

Well it’s almost what we investors have been saying for the past couple of years – except that we are saying “Boy - We are sure going to be wealthy and retired by the time this crash is over.”

Advertisement: Tennessee Rental Property Memphis, TN Foreclosures For Sale 901-725-6825

This Article is Copyright © 2004-2008 BiggerPockets, Inc. All Rights Reserved. If this article is showing anywhere other than at http://www.biggerpockets.com/renewsblog/ then the website has stolen our feed and is using it illegally. Please notify us at BiggerPockets.com.

Paulson didn’t see this Meltdown Coming? Huh?

ROCKVILLE, Md.----Washington Real Estate Investment Trust will announce 3rd Quarter 2008 Earnings in a Press Release to be issued on Thursday, October 23, 2008, after the market close.

Buying a home, there are a lot of things that you need to consider. It needs a lot of preparation and you should be prepared financially. Choosing to buy a home at Miami real estate market is one great option because there are vast of options that you can have on this market.

Dear Harry: I'm 58 years old, single, own my own home clear of a mortgage, have $10,000 in a checking account (interest-bearing), $10,000 in short-term CDs, $135,000 in an IRA, own a car outright, retired with a pension of $5,000 a month, have life and lo

Colliers International has added an investment services unit to its UAE business operations, launching a dedicated Capital Investment Division. The unit aims to provide investors with access to the firm's market intelligence and network of clients when investing in the global real estate market.

Greetings from the metropolis of Cedar Crest, NM.  Where my weekends are filled with  youth football, soccer…and then some.  As I yell at my boys from the sidelines to hustle and tackle and kick….the number 700 billion creeps into the forefront of my mind.  What in the heck is 700 billion?

What can one say about 700 Billion?

 
What does that number mean?  I cannot even fathom seven hundred billion.  I am used to using such a label on the number of stars in a constellation (I am sure I am off a billion or so).  How about the number of grains in a sand pile.   How about how old the earth is (okay…I am exaggerating now…right?)  How about the number of cells in one’s body?

Next question is …how does someone come up with the number “700 billion” as the magic number to bailout our financial institutions?

Am I the only one that finds that odd…? “Oh….700 billion should do the job!”  What is the bank failure formula?

Either way…something must be done….right?  Either way….we are going to pay for it right?  By the time this blog is posted….congressional leaders will have approved a bailout plan of some sort….at least some of us hope so.

I am not sure where I stand on this….and I realize that it does not matter.  But what I do know is there will be a lot of opportunity for those who prepared for this.  Everyone else will be in survival mode.

What is the truth?

The urgency of our congressional leaders to act was strongly worded by Bernanke during a commercial break at the most recent congressional testimony……..

“Senators, we live in a world that has bonds and bad construction loans and those assets need to be bought by men and women with balance sheets. Who’s going to do it - you, Chairman Dodd? You, Senator Schumer? I have a greater responsibility than you can’t possibly fathom. You weep for Bear Sterns and curse the banks just trying to get their collateral; you have that luxury. You have the luxury of not knowing what I know: that Lehman’s bankruptcy, while tragic, probably saved firms and that my existence, while grotesque and incomprehensible to you, saves markets. You don’t want the truth, because deep down in places you don’t talk about at parties, you want me buying assets - you need me buying assets. We use words like “foreclosure,” “Discount Window” and “TARP.” We use them as the backbone of a life trying to defend something. You use them as a punch line. I have neither the time nor the inclination to explain myself to a group of media hungry politicians who rise and sleep under the blanket of the very liquidity I provide and then question the manner in which I provide it. I would rather you just said “thank you,” and went on your way. Otherwise, I suggest that you purchase a defaulted option arm and pay par. Either way, I don’t give a dang what you think the American taxpayer is entitled to.”

Well….700 Billion seems to be the magic number NOW……unfortunately….there will probably be another magic number in the near future.

Until next time…..rob

Photo Courtesy: Jakerome - No way, no how, no bailout.

Advertisement: Real Estate Investing Forums Discuss real estate, network, or learn about investing on our forums!

This Article is Copyright © 2004-2008 BiggerPockets, Inc. All Rights Reserved. If this article is showing anywhere other than at http://www.biggerpockets.com/renewsblog/ then the website has stolen our feed and is using it illegally. Please notify us at BiggerPockets.com.

700 Billion: Can we handle the truth?

Many consider investing in real estate properties in Florida a risky business.

ROCKVILLE, Md.----Washington Real Estate Investment Trust announced today that it has executed two leases totaling 154,000 square feet at Dulles Station West, Phase I. The 180,000 square foot, Class A office building located in Herndon, Virginia was delivered in the third quarter of 2007.

If are into Miami real estate investing, you should not just enter the market without being prepared. Real estate investing requires lots of work, so you have to bear in mind that there are factors to think about.

As a little boy I used to ask my grandmother to tell me stories of her life as a young girl in Germany. She was always reluctant to talk about it, but I was usually able to coax something out of her. I didn’t understand until I was much older, but her reluctance was a result of the pain those memories caused.

One of the stories that she would tell took place after the First World War. Germany lost and, in so doing, agreed to the Treaty of Versailles. In addition to the loss of geographical territory, the German Weimar Republic was forced to pay enormous sums in reparations. In essence, the Germans had to pay for all of the damage done in the war. Germany did not have the financial means to pay these damages and their solution was to just print money.

Catastrophic Consequences

As this new money moved into circulation the impact was devastating to the German economy. The inflation rate was absolutely staggering. A few years after the end of the war the German economy had an inflation rate in excess of 300% per month! The economy had essentially collapsed and the country was experiencing a depression of enormous proportions. This set the stage for the rise of the Nazi party several years later.

Which brings us back to my grandmother’s story. She would tell me how her father and brothers, all coal miners, would get paid twice a day. The currency was devaluing so fast that it needed to be spent as fast as it was earned. My grandmother told of collecting the money and going shopping for food. The grocers didn’t even bother counting it, they just estimated the amount by how large the stack was. A loaf of bread could be purchased for two bags of money in the morning, by the afternoon the price might be three bags. The currency had so little value that people would burn it in their stoves for heat because wood had more value than the money.

We Are Getting $700 Billion From Where?

The US dollar is a fiat currency. That means that it is not backed by gold or any other asset but instead is backed by “the full faith and credit” of the United States Government. As we increase the national debt we are destroying faith that the rest of the world has in our economy. As that faith erodes the dollar will fall further, and imported goods (read oil) will cost more and more. The inflation that we are already experiencing can quickly turn to hyper-inflation if we keep spending money that we don’t have.

Hyper-inflation is an end-stage terminal cancer to any fiat currency. However that inflation does not immediately follow the event that caused it. In Germany the Weimar republic began printing excess money in 1919, but the hyper-inflation didn’t take hold until a few years later. It may be several years before we see the real effects of the proposed bailout that we have before us.

No Simple Solution

There is little doubt that something needs to be done. My initial reaction is to let these businesses fail and have the chips fall where they may. Capitalism follows the law of the jungle in that it is truly survival of the fittest. However, it is not so cut and dried in this case. This crisis touches everyone whether they realize it or not. We are now faced with choosing the lesser of two evils, let the economy collapse or get this bailout deal done and hope it doesn’t collapse anyway.

My grandmother was a simple woman

who was never more than a blue-collar worker. Yet somehow she managed to buy her own house and live a decent life. She had a great work ethic and believed that people should earn the things that they want, not have them handed to them. One of the most difficult things that I ever had to do was to give the eulogy at her funeral, yet it was also one of my proudest moments. I can’t help but wonder what she would think of this mess if she were still here among us. I’m sure she would want to know how we let this happen.

A weak currency is the sign of a weak economy, and a weak economy leads to a weak nation. -Ross Perot

Advertisement: Tennessee Rental Property Memphis, TN Foreclosures For Sale 901-725-6825

This Article is Copyright © 2004-2008 BiggerPockets, Inc. All Rights Reserved. If this article is showing anywhere other than at http://www.biggerpockets.com/renewsblog/ then the website has stolen our feed and is using it illegally. Please notify us at BiggerPockets.com.

A Bag Of Money To Buy A Loaf Of Bread?