Fri 24/10/2008
The US passing of the ”emergency“ rescue package already seems so….well……….last week.
As Michael Bloomberg, Mayor of New York says of Henry Paulson & his crew “Socialize the losses but privatize the profits”.
After a brief moment of relief, investors focused on their fears again and the result was a bloodbath on a global basis.
Iceland – (who are they?) teetered on the edge of bankruptcy; nationalizing 2 of the 3 largest banks and pleading for billions from Russia. Why Russia? Well, the new “Czar of Russia” – Prime Minister Vladimir Putin – is rumored to have stashed away more than $40 billion spread throughout secret bank accounts in…where else?
Switzerland, Iceland & Liechtenstein.
These countries are too small to prop up their failing banks. Switzerland & Iceland are very small in relationship to the size of their banks. They don’t have enough people, (like our government did) to jump in and guarantee these giant banks. UBS, the largest of them all has been failing since October 2007.
Contributing to such banks which allow unregulated deposits are:
1) The “Stan” countries – Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan and Turkmenistan… all the new oil and gas money
2) The corrupt African Dictators… siphoning off foreign aid funds
3) The profit from illegal internet gambling sites have been disbursed into these untraceable accounts
4) The countless drug lord dollars have been dropped here...
5) The crown Princes and Royal Families… a place for them to stash their dough
I guess some of the bad guys are losing their “own” money now….
So where did all of these “trillions” of dollars go? They didn’t just get burned up in a bonfire somewhere - somebody has it.
What about the reclusive “hedge funds” billionaires, like Steven Cohen? - He earned the top of his class last year, taking in an estimated $1 billion… (Some of which might go to expensive lawyer’s fees). He has been buying art to build a world-class collection where money is no object when he desires a certain piece…
The film industry is benefiting, though. These shy guys want a part of the Hollywood glitter. Renowned producer George Lucas was quoted saying: “Hedge-fund guys - we call them the ‘sucker of the moment’. They are convinced they are going to make money at it. I’ll guarantee they won’t. They want producer credits. They want the girls. They are going to find out that it is a very expensive way to go about that situation”.
But even “the sweater tied around the neck” crowd is hurting. Three years ago if you had a pulse, you could get a luxury yacht or small aircraft loan. Now you have to have down payment, income verification, and all that “stuff”…
Wall Street didn’t just give money to mortgage companies for predatory lending; they gave money to who ever applied for it. After all, none of these guys on the food chain were lending their own funds---------no one had any skin in the game. The money was gathered up from all over the world.
What cracks me up is that orange TV ad featuring the guy with the funny accent. -ING was just caught on the edge of bankruptcy this week; meanwhile, they haven’t stopped any of their advertising. I guess you can be in bankruptcy & still legally be luring clients in with false advertising.
The crisis is leaving buyers in the stock market unable to gauge value. A lot of things that looked cheap a week ago have cratered in their faces. If you’ve just bought something, you’ve been clipped even lower.
Traders don’t know what they are buying and selling. They are just buying pieces of paper and the prices are falling – so now they want to sell. When prices start to rise, the traders will be right back in line, trying to buy the very thing they had sold last week. – They have a herd mentality. Does this sound like the Real Estate market, or what?...
Real estate seems fast to be coming a safer and safer place to invest your money.
The crisis is officially global, as evidenced by the unprecedented coordination by major banks on October 8th who cut interest rates by a half-point.
Another cut this week by the Bank of Canada shows willingness; they are making an effort to rebuild confidence & set a floor for the recession towards a new beginning.
Until a floor gets set--------everyone is afraid to get back in---.
This recession (although they really need to invent a new word for what is going on) could be shallow, but long. It might be deeper than the downturns of 1990 and 2001 but still gentler than the postwar average---thanks to bold policy actions, falling inflation and early inventory adjustments. Businesses had already finished liquidating their stockpiles in the 3rd quarter of last year, by the time this crisis was known; reducing their debt load and saving huge amounts in carrying costs.
Start with past recessions as reference points. On average, the 10 downturns since World War II lasted 10.4 months - with real GDP falling 2% from peak to trough. The last two episodes were relatively mild 1990-91 was 1.3%. In 2001, the downturn was a mere 0.4% (tech wreck). The average rise in the unemployment rate, from its low to its peak was 3 percentage points.
Against that baseline, there are now several reasons to believe this recession is shaping up to be on the mild side of average but with the risk that it could be more severe than either of the last two. That’s because the financial headwinds facing the economy are without precedent since the 1930’s.
The response by Washington policy makers & the G 20 (new European group of Banks united together for this cause only), however has been equally extraordinary. Congress has ventured outside the free-market mold, committing $1 trillion alone to boost the economy and wobbly banks. The Federal Reserve is putting up another trillion to boost credit market liquidity and the Fed isn’t finished buying unsecured commercial paper in an effort to thaw the market for short term lending, which is crucial to day-to-day business operations.
The good news is this:
It could be a great time to start looking at real estate again. The Canadian Banking system was ranked #1 by the World Bank while Britain slipped to #44 & the US # 42. We are okay.
I think clients should look at refinancing existing debt into one package, freeing up credit so they are ready to buy back in when the price is right.
Prices started to drop here a year ago---------we’re ahead of Kelowna, Saskatoon & much of the country who haven’t realized there has been a slowdown. Vancouver is still going boom busters because of the Olympics.
As our dollar becomes stronger, Ontario & the East will start to recover lost jobs.
We lead the boom & we stated the decline first. Flippers and speculators are on the sidewalk.
It’s coming to the time where real investors, (putting 25% down payment into the property) will see the rent carry or offset the mortgage. Real estate is not the “Stuff of Fools” if it’s priced right. It has consistently done better than the stock market over time.
Have you heard the saying—copy of from one its plagiarism-copy form two, its called research? I read Forbes, Business Weekly, the Globe, Vanity Fair, everything Tom Friedman has written. I attend economic lectures, I listen to my clients in the business community and lenders inundate me with information. Much of their wisdom along with their “bull….” has sunk so deeply into my consciousness that I can no longer identify where it came from.
If you have any questions or wish to hear more about Vladimir Putin - or if you can fill me in on something new - please don’t hesitate to use my number.
I also have a new web-site (see below) that can offer you customers some valuable tools. They can go in and pull their own credit bureau, get reports and even check out rates.
I was ranked #26 in Canada last year for single broker (not submitting under a team) & was just rated #2 in Canada for Merix financial (they wholesale funds for Royal Bank Securities & white label the Dominion Lending Centre “no frills mortgage”) --------This give me valuable leverage & volume rate discounts. I am a platinum broker with Firstline Mortgages who have some great products for the self employed & salaried individuals who need “State” their income. My record is impeccable & solid.
I am partnering & collaborating with my previous clients, to help them transition through this period. Some of my realtors are helping their clients who want to move on & buy up but can’t sell their existing, to get into a legal “rent to own.” Some have even liaisoned with good leasing agents.
I am doing deals every day---------stop by my office any day of the week-------Kayla & I are here working----------we’re not faking it. We’re having fun, the tea or coffee pot is always on!
On the lighter side… below is a list of “Market Terms”. Have a good read!
BULL MARKET -- A random market movement causing an investor to
mistake himself for a financial genius.
BEAR MARKET -- A 6 to 18 month period when the kids get no
allowance, the wife gets no jewelry, and the husband gets no sex.
VALUE INVESTING -- The art of buying low and selling lower.
P/E RATIO -- The percentage of investors wetting their pants
as the market keeps crashing.
BROKER -- What my broker has made me.
STANDARD & POOR – The nitwits who rated these securities triple AAA
STOCK ANALYST -- Idiot who just downgraded your stock.
STOCK SPLIT -- When your ex-wife and her lawyer split your
assets equally between themselves.
FINANCIAL PLANNER -- A guy whose phone has been disconnected.
MARKET CORRECTION -- The day after you buy stocks.
CASH FLOW-- The movement your money makes as it disappears
down the toilet.
YAHOO -- What you yell after selling it to some poor sucker
for $240 per share.
WINDOWS -- What you jump out of when you're the sucker who
bought Yahoo @ $240 per share.
INSTITUTIONAL INVESTOR -- Past year investor who's now locked
up in a nuthouse.
PROFIT -- An
Have a good weekend everyone!
Regards
Marvis L. Olson, Mortgage Architects
2639 29th Street SW. Calgary, AB T3E 2K6
Phone 403-620-8200 Fax 403-451-1697 or Toll Free Fax 1-866-467-3877
marvis@marvisolson.com www.marvisolson.com