Cheap Money…Stupid Decisions

As of yesterday the latest headlines from the commercial real estate markets…”Commercial Behemoths Tishman Speyer and Blackrock WALK AWAY AND HAND OVER THE KEYS from their $5.4 BILLION 11,400 unit apartment project in Manhattan”

Yes, it is the confirmed trend, not only in residential but in major commercial to simply hand over the keys to properties, rather than fight it out.

Tishman and Blackrock paid $5.4 billion with $4.4 billion in debt for the project at the peak of the bubble. Now it is worth maybe $2 billion. The answer….walk away.

Hmmmm…now you know why BIG BANKS are not lending money. Because Creditors do not value their assets.

My question, however, is not yesterdays action by these two major developers…it is why did they buy this project in the first place at the peak of an obvious mega bubble, when all, obvious market momentum indicators were pointing to SELL SELL SELL?

The answer my friends….TOO MUCH CHEAP MONEY MAKES FOR STUPID DECISIONS.

So, here is my pitch to Tishman and Blackrock…Hire us to implement our Market Advisors Method momentum analytics for your projects. Your Investors will get the benefit of clear BUY and SELL signals which makes money for your Investors…NOT LOSE IT.

The Federal Government Now Needs $1.9 T To Pay Its Bill!

If you look back at the focus of my blogs you will see that my agenda has always been to keep up with what is happening in our economy and how it is affecting the foreclosure market.  Let’s face it; the Market Advisors Investment Fund depends on the foreclosure market for its continued success.  In addition, I feel our readers need to know what’s happening in that market for their own real estate investing as well, whether that be through our Fund or strictly on their own.

So, in this blog I am reporting on a January 20th Associated Press article by Andrew Taylor about our record setting deficit!  And this folks is the end result of all the Wall Street bailouts, fiat money, unprecedented government spending and “meddling” that our leaders have been doing to “fix” our economy.  All of this during a recessionary period when tax revenues have been drastically cut.  Interesting philosophy – revenues are down so let’s spend more!  The bottom line is the $1.9 Trillion dollars being asked for right now (bringing the national debt up to $14.3 Trillion!!) won’t even carry us through the year!  Here’s what the White House has to say about this record breaking increase:  the increase “is critically important to make sure that financing of federal government operations can continue without interruption and that the creditworthiness of the United States is not called into question.”

Believe me the credit worthiness of the US is already being called into question.  Some how, some way, we are just going to have to eventually “bit the bullet” and let the market take over.  Stop with the programs!  It will hurt but the only way to get rid of all of this over leveraged debt is to let the market move it through the system.  Yes, a lot of Wall Street “icons” will suffer and many will fold, along with a lot of banks, but it will force the “pig through the python” a lot faster then with all of this government manipulation.

These deficits in spending will not go away and we, the taxpayers, will have to pay for them.  So we need to stop the spiral.  It’s not a party issue – it’s a freedom issue.  How many more years of record deficit spending can we stand?  I say none – what do you think?

Paul Davis, Market Advisors, LLC

The Financial Crisis Inquiry Commission!

Did you know we have launched a commission to study just what it was that brought our financial system to its knees in 2008?  Maybe greed had something to do with it!  Anyway, I found this report in an article published last week in the UK Daily Mail.  This commission is a prototype of the Pecora Commission, the Senate committee that investigated Wall Street abuses in 1933-34.

The commission has pledged that it will make “a full and fair inquiry into what brought our financial system to its knees”.  They further say they will “explain it in a way the American people can understand”.  Now that would be a switch!  The Commission started off by interviewing high profile financial leaders such as: Goldman Sachs’ Lloyd Blankfein, J.P.Morgan Chase’s Jamie Dimon, John Mack of Morgan Stanley and Bank of America’s Brian Moynihan.  As a group these leaders all tended to apologize for their risky behavior and poor decisions during the turmoil of  2008 but to a man they all justified their current compensation decisions.

The general “party line” seems to be, as expressed by Brian Moynihan, that “the vast majority of our employees played no role in the economic crisis’ and therefore do not deserve to be penalized with lower compensation.  Of course we all know that B of A paid their Bailout money back early and most analysts believe they did that so they wouldn’t have to follow the Obama guidelines to lower high bonuses.  I for one sincerely hope this commission will uncover just how these institutions actually were able to generate the fast profits used to make their early Bailout payoffs.  If they do, I think we will all find out that it was a combination of manipulating “free” government money for high profits and implementing changes in accounting and reporting standards – to favor the banks balance sheets of course.

Anyway, you should check out this article for yourself and I will try to find out what the US media has to say about these commission hearings (if anything!) as well.  I’ll report on what I find in a future blog.

Paul Davis, Market Advisors LLC

Why The TEAM Matters…

And YES this has absolutely nothing to do with the playoffs…

Today’s Blog has everything to do with improving your real estate investment results by joining the RIGHT TEAM.

I have been doing a lot of public speaking lately, the subject of which continues to be educating Investors as how important it is to assemble a TEAM that can improve your chances of success.

The fact of the matter is that it is difficult and time consuming to put together a winning TEAM…and…wouldn’t it be easier just to join a winning TEAM?

I am inviting you to join the Market Advisors TEAM; our expert bird-dogs who feed us property deals in choice markets, our phenomenal design team that can transform a wreck of an REO into a valuable property (Watch Foreclosure Makeover), the portfolio managers who maximize the value of our Funds assets, to our expert Preferred Advisors who can counsel our clients investment/retirement strategy, together with our continuous education (Webinars and Seminars) make for a priceless combination.

Why not supercharge your investment and retirement portfolio today! Contact Us and find out how you can join our TEAM.

Disaster strikes Haiti…where next?…do the right thing!

When cataclysmic tragedy strikes we, as fellow Human Beings, can empathize with those who are suffering. Certainly the events in Haiti are a reminder to all of us that everything we have can be lost in an instant. As fellow Americans we should be proud that we have organizations comprised of  people who jump to the call of need when disaster strikes, at home or abroad.

The organization that I am most thankful for is the American Red Cross. Do you realize how much this organization does not only at our community level, but for others around the world? I strongly suggest you take a look , here is their website, Red Cross

Now do the right thing;

Text 24357 with the message GIVE, this will send $5 to the Red Cross. Here is the link for the instructions Click Here

Now send the link to this blog to everyone you know to do the same.

Do the right thing.

John

Still Hunting for the Bottom!

Thanks to good friend and colleague, Larry Tam, I saw an excellent article in Time.com that does a great job of re-enforcing what I have been writing about for the last several months.  The article, by Janet Morrissey, was publish last week (1-7-10) and here is her opening sentence:  “The decimated housing market may get considerably worse before it gets better, according to housing-industry professionals, who expect foreclosures and home-price declines to continue pressuring the sector through at least the first half of 2010.”

The article goes on to talk about the rising foreclosure rate as we move into 2010 which is being driven (in part) by a flood of Option ARM and Alt-A mortgages slated to re-set over the next 12 to 18 months.  That coupled with the utter failure of the Obama loan modification program will continue to put downward pressure on prices for the next 12 + months.  (More great deals for Market Advisors and other REO Investors!)

As for the loan modifications, here’s what Morrissey had to say about that programs success.  From reports out of the offices of the Comptroller of Currency and Thrift Supervision it shows that of the loans modified after the third quarter of 2008, 61% are now in default!  Not a very effective program I’d say.  She also reports that John Burns, a respected real estate consultant, believes that 50% more people will lose their homes in 2010 then did in the record foreclosure year of 2009.  Of course that means more opportunity for Market Advisors but it also means great opportunities for those of you who want to get into investment real estate at or near the bottom of the market.  Don’t wait!!  Especially if you are a cash buyer.

For example, Market Advisors just turned a house around for a total purchase and rehab price 25% below current market and they rented it in less then 30 days (during December!) for absolute top of the market rent!  So, stop procrastinating – just get your team together and get in there now!  Or, enjoy the ride as a passive investor in a Fund like ours.  What ever you do – do something!

Paul Davis, Market Advisors LLC

Resolution Time! My Retirement Checklist…

Happy New Year! Time for me to check up on my retirement strategies going in to 2010.

I want to make sure my strategy is built on a simple foundation (a foundation that I can understand)

• Place as much of my investment power (this is my war chest…my investment dollars and collateral) as possible in tax-advantaged accounts. For me these are: HSA (Health Savings Account if you don’t have one of these you should), ROTH (convert my IRAs to ROTH just too damn good), SoloK (awesome because I am self-employed), Defined Plan (benefits me and my company).
• Make sure I control the choice of investments I make. I want to be flexible, I like to make my own investment decisions, I prefer to write my own checks. I LIKE BEING IN CONTROL.
• Invest in Real Estate…Simply take advantage of one of the best historical BUY opportunities.
• Work with Experts to facilitate my strategies.

HAPPY 2010

More Flexible Accounting Rules for Banks!

This is one of those stories that kind of gets “swept under the rug” but I think it is important enough to bring to your attention.  I also know that if you don’t have an accounting background then this might seem a bit esoteric but believe me it is important.   According to Floyd Norris in a December 8th NY Times article, Robert H. Herz, the chairman of the Financial Accounting Standards Board (FASB) is facing political pressure to abandon “fair value” accounting for banks.  This “political pressure” wants Herz to “decouple” bank accounting rules from normal accounting standards.

Here’s how Morris explains it:  His proposal would encourage bank regulators to make adjustments as they determine whether banks have adequate capital while still allowing investors to see the current fair value — often the market value — of bank loans and other assets.

Wow! What a coup for the banking industry.  You see FASB is responsible, in coordination with the SEC, for setting Generally Accepted Accounting Principals (GAAP).  These GAAP guidelines are what all CPA’s must follow in order to audit public company’s books.  It’s these audited financial statements that the SEC requires all public companies to publish in order for the public to see how the company is doing.  This change will allow banks to legally book their asset values at false levels as compared to current market thus making them look like they are doing better (on paper) then they really are – the same practice that would send private accountants to prison!

Herz justifies this proposal by saying: “Handcuffing regulators to GAAP or distorting GAAP to always fit the needs of regulators is inconsistent with the different purposes of financial reporting and prudential regulation.”

This is just another “smoke and mirrors” problem for our economy and for the value of real estate that is being held by Banks.  How this might effect our recovery is only a guess at this point but I don’t think it will be good.

Paul Davis, Market Advisors LLC