Posted on December 26, 2007 @ 8:34 pm - Written by BawldGuy
It’s late Christmas afternoon, and Trophy Wife and I are watching our laptops, Tom Hanks & Meg Ryan in You’ve Got Mail, and each other while 15″ away apart. I’m writing this, while one of my brain’s many caches is helping me ponder what’s next on today’s list of, How Much Food Can I Eat Today? The list has truly risen to the level of felonious, accomplishing that effortlessly before noon. For a guy who’s been shamelessly bragging about losing so many pounds and inches, the 24 hour period from last night through tonight has been nothing short of a culinary crime spree.
I couldn’t care less. It took me three days to lose back the 4 pounds gained in Texas, so I’m more afraid of what’s ahead this week in the gym, than I am of the actual crime. That’s my story, and I’m stickin’ to it.
Next up: Either a plate of cold shrimp and way spicy sauce OR Nachos with ground beef and everything needed to ensure a week of nothing but paying the price the gym will require.
Turns out there was a third choice. Josh came over and decided a new batch of warm chocolate chip cookies would be the perfect
On to predictions and the 2007 report card.
Remember now, these predictions are what I think, for my own reasons. Your laughter will not detour me from my appointed rounds. If you think we’re all goin’ to hell in a hand basket on June 22nd next year, good for you. Just make sure you act accordingly. 
Prediction — Apartments, including 2-4 unit props — my all time favorite real estate investment — will become even more of a darling with serious real estate investors. As more folks are relegated to the growing list of what appears to be permanent renters, apartments will be their obvious destination. Rents will, over the long run, go up a bunch. (real estate technical term)
Tip: Buy duplexes and fourplexes by the dozen. Houses, townhomes, and condos are wonderful, and they’ll probably out-appreciate every kind of apartment property. That’s why currently much of what we recommend fall into those categories. That said, when we locate solid multi-family product, we get all tingly inside and make our move. Especially — and this is key — when the units are already sporting their own separate tax ID numbers for each unit.
Prediction — Many large (at least 1 office w/75+ agents) real estate offices close their doors. This will give birth to more narrowly defined and much smaller operations. These companies will be populated by established, seasoned pros, who many times will also own a piece of the pie. They’ll take business from larger but less talented firms.
Prediction — What I’ve been hearing for the nearly 40 years of my career may finally be approaching reality. As a direct result of smaller (boutique?), far more talented real estate firms, the pretenders will accelerate their permanent exit from the real estate brokerage business. This will pose a huge problem for Prudential, C/21, and all the rest of the biggies who rely heavily on Chuck and Debbie Newbie selling/listing a couple family and/or friends’s homes — while paying Chuck and Debbie a commission of only 50%. It’s in large part what’s been keepin’ many of those firms above water. Those listings will start going to solid pros whose expertise, experience, and plain old savvy will trump their favorite niece/nephew.
Prediction — Lenders will split into a couple camps — incredibly conservative
, and those who will be more conservative than they’ve been, but still wanting to live up to their title as lenders. I’m betting a new loan approach, predicted in Volume I, will come from the latter group of campers. Brian Brady thinks it’ll be pretty radical in four states. Those currently investing in solid growth regions outside of those states, will reap the benefits of those fleeing said states. (I even talk that way sometimes just to crack myself up.)
Tip They’ll be heading towards anything they can remotely describe as stable. Which means they definitely won’t be headed our way, San Diego. You need to be headin’ out now. If Brady’s correct, and I think he is, just not with as dire consequences, you’ll be facing stiff competition as you try to sell your income property. Now is the time to make your move.
2007 Predictions — Some came true — Some went into the porcelain fixture.
Said fixed rate loans would be 5.5% by the end of the year. Close, but no cigar. The last client to refi their home, a San Diegan, is now happily paying 5.75%. Rates are still available at just under 6%. I’m hoping for a half point drop by next Monday, but not betting much on it. wrong — but close.
Said traditional neg-am loans would give way to some sort of compromise (hybrid?) which would help solve the issue of lenders becoming grotesque hogs in the setting of their neg-am spreads between payment rates and indexed rates. Right on the money. It was a simple modification too.
Said Brown and Brown would sell less than $1 Million worth of San Diego income property. The younger of the two Browns confirms this as having come true in the strictest sense possible. Though this was more or less part of our ‘07 plan, he wants to see that changed in ‘08. I agree. Right again! Not only less — none — zip zero nada. Very little of it sold period — with us or without us. As I keep bellowing from the mountain top — get outa Dodge now.
Said the Dodgers would win the National League West Division crown. Wrong.
Also said the Padres wouldn’t win the division. Another one for One With Smooth Pate.
Said Keller-Williams would be an exception to those losing money and closing their doors. Since they tend to attract more than their share of Alpha Dogs, it makes sense. Also, since they share profits, their agents do their best to ensure there are profits to share. Right. I also think they’ll be attracting more than their share of solid producers as they jump sinking ships.
That makes me 6/10 so far. That’s a cool .600 batting average for 2007 predictions. Of course, that’s not all of them by a long shot. I was wrong 40% of the time so far. In subsequent Volumes we’ll see if my batting average holds up, or folds under the weight of life’s merciless and unrelenting reality.
Volume III soon — plus more of my 2007 report card. As always, feel free to add your predictions to mine, and let us know how your ‘07 predictions fared.
If you Christmas was as cool in every way as mine, you’re still smiling from ear to ear — while not movin’ to quickly just yet.
Posted on October 27, 2007 @ 12:51 am - Written by BawldGuy
At this very moment, somewhere in the country, there’s an investor making a decision between two or more properties, based almost, if not entirely upon what they think the appreciation rate will be. If all other factors are equal, this isn’t a problem usually.
However, if the financing is fixed rate in one area, and neg/am in another — well, you have much more to consider. Things aren’t necessarily how they seem — even if you’ve done all the numbers to your satisfaction and checked ‘em thrice, you could be making a common mistake.
Neg/am loans are part of an investor’s tool bag. They’re not the best thing since sliced bread, nor are they Satan’s loans. They’re to be used when the circumstances are right, and that tool is called for. In growth areas like San Diego for example, when prices were going up like a NASA launch, they were the perfect way to afford twice the property.
Twice the property multiplied by double digit appreciation rates = a pretty cool upward modification of yer net worth.
Those days are over for awhile — and nobody knows for how long. Betting on high appreciation rates for the foreseeable future is, to use a real estate technical term — stoopid.
Back to choosing between two properties in two areas with different financing.
Both properties will be acquired using 10% down payments — are in growth regions — with great locations. Operating expenses of 35% will be used for each.
Note: This is an illustration. You surely won’t infer from it I’m predicting there will be regions appreciating at 10% yearly for the next five consecutive years. I believe that’s plausible — just like it’s plausible the colored eggs my kids used to find on Easter, were hidden by a big bunny.
Choice #1 — Appreciation: 10% annually for the next five years. Price: $225,000 Rent: $1,450 monthly
Choice #2 — Appreciaton: 5% annually for the next five eyars. Price: $225,000
Rent: $2,200 monthly.
#1 requires a much lower loan payment, because the rent just won’t cut it with 10% down — if our investor insists on putting 10% down. He either uses a neg/am loan, or has some pretty significant negative cash flow, or walks away. His net operating income just won’t service a fixed market interest rate.
#2 can support a 7% interest only loan, (including added mortgage insurance) with its net operating income. It will cash flow roughly $100 monthly, or as I tell my clients — let’s just call it a break even and call it a day.
Neg/am minimum loan payments are based on what I’ve always called their cartoon rate. That rate these days, for an investor non-owner occupied property, will run around 2-4%. 
However, the real or indexed rate, the rate you’re really paying, is 7.75%.
Let’s use one of the currently more popular loans. Cartoon rate = 2.375% Real (indexed) rate = 7.75%.
That’s a 5.375% spread. What does that mean to the investor you ask? In dollars, it means the first 12 months will result in the following.
Remember, the price was $225,000 with a 90% loan — $202,500.
Now take the difference between the cartoon rate and the indexed rate (5.375%) and multiply it by the original loan amount. #1 will have an increased loan balance of roughly $10,900 after the first year. Based on the purchase price of $225,000 — the appreciation rate that year needed to be 5% for the investor to be ahead by less than $500.
In other words, his capital growth rate doesn’t even begin, until his investment property appreciates –above the 5% rate. That’s fine if, for whatever reason, you believe the property will rise in value sufficiently. There are many areas of the country, currently moribund, that will resume their growth as their particular region emerges from this correction.
Neg/am loans will still be of value in those regions — but only if the investor believes in its future growth.
In 1996, San Diego had been sickly for almost five full years. It was, literally the worst stretch I’d seen in my career, hands down. Still is by a long shot. 
The current correction in comparison? A 1st grader’s birthday party at Chuck E. Cheese. Really.
I had faith in this region’s fundamentals. Investors, in my judgment, could make use of neg/am loans then, because the fundamentals said supply/demand was on our side, along with the job picture, and several other factors. This opinion turned out to be correct.
I don’t think that about San Diego any longer, nor do I expect to ever again.
That said, there are many regions for which I harbor expectations of growth, just as I did a decade ago for San Diego.
Now #2.
It breaks even or trickles a little cash flow. The loan is interest only, so nothing’s happening to the loan balance — either way. (Take deep breaths Chris, it’ll all come out well in the end.)
It appreciates at half the rate of #1. Yet, the capital growth rate of our investor is 50% the first year. After five years, his property value would be about $287,000 or so. If they decided to execute a tax deferred (1031) exchange at that point, their net proceeds would be just less than $62,000.
Soooooo, in five years, if the investor chose #2, his capital growth rate for the five year holding period would have been, give or take, over 22% annually — at only a 5% yearly appreciation. This doesn’t count cash flow or tax savings through depreciation, which of course moves that figure up.
All this to demonstrate this: Investors chasing appreciation, need to seriously weigh carefully whether the neg/am gamble is worth it. Time and money must always remain central to any investment analysis. In order to choose #1 I would have to believe the appreciation figures, over the long haul, would be impressive. Of course, growth regions aren’t known as growth regions because they have poor fundamentals, right?
You better hope so.
When, back in the day, I used to teach cash flow analysis, and all that goes with it, students would ask me how I decided which property was better over time. That’s always been easier than you might imagine.
Our policy is simple: If the analysis is fairly even, pick the safest. How hard was that?
If the decision isn’t which one, but whether the client should do something, or nothing, we view it this way: If the analysis shows us the move will yield only marginally beneficial results, we tell them to pass. The policy is to give a go signal only if it’s truly a no-brainer.
Marginal moves just don’t make sense.
As enticing as some investments can be, there are times when solid analysis shows them to be mediocre — or marginal. Learning to discern what area to choose, isn’t always about the highest appreciation rate, or the lowest loan payment.
If your agenda is growth, paying attention to your capital growth rate is numero uno on any list you wanna make. I realize this sounds the same as saying grass is green, and the sky is blue. The difference is, you don’t confuse grass and sky.
Investors seem to think, at least sometimes, that appreciation and capital growth are synonymous.
Big mistake. Appreciation does not equal capital growth — contrary to popular opinion.
Investors paying attention to appreciation to the detriment of capital growth — are destined to learn what really matters.
It’s a lesson you don’t want to learn the hard way.
Posted on October 20, 2007 @ 12:12 am - Written by BawldGuy
San Diego real estate investors have never had so many opportunities in so many different regions than now. I know, I know, the last 40 years, right? San Diego income properties have been their own best reward — no argument there from me. Any local investor can tell you stories outsiders would question. In San Diego though, they’re routine. How ’bout more than tripling your money in 13 months? Or year after year of microscopic vacancy rates with only a couple exceptions?
Face it — we’ve been spoiled. We also need to face the most recent sea change in our market.
San Diego is no longer a place experienced investors see as attractive — not by a long shot.
Do you think I spend so much time going to other regions cuz I like Southwest and ExpressJet so much? Or is it the nights at the Holiday Express that’s so alluring? Could it be I couldn’t look clients in the eye and tell them to keep investing in San Diego?
Pick the last one. I like the other places, but anyone who lives in San Diego knows flat out — there’s simply not a better place to live, hands down, don’t embarrass yourself trying to debate it. No bias here.
Let’s compare what options an investor with $100,000 plus closing costs has on his menu these days.
In San Diego he can buy a duplex for half a million bucks that’ll rent for roughly $1,200 a side.
If he acquires it using a hybrid neg/am loan, (his only real choice, unless he wishes to put about 40% down) with a 2.5% payment rate, 
his annual debt service (total yearly payments) will be just under $21,000 including mortgage insurance. His rent is $2,400 and his expenses (he self manages) are roughly $8,700 a year — his cash flow will be negative — about $900 a year. That assumes he won’t tire of managing it himself. (There are three chances of that not happening — slim, fat, and none.)
He does have another financing option. He can choose a 5-7 year interest only loan, which today will run around 7% or so. That’s $28,000 a year for those of you keeping your own scorecard. Unfortunately, that leaves just $800 for annual operating expenses. On second thought, maybe that’s not really an option. Never mind.
If he goes to Texas he can buy four brand new duplexes about 20-30 minutes south of the Dallas-Fort Worth Metroplex. He’ll pay an average of $225,000 a duplex. Each side will rent for around $1,150 or $27,600 yearly. At 35% expenses, he’ll net around $17,940 or so. If he puts 10% down apiece, using an interest only loan, at 7% interest, he’ll have a positive annual cash flow of just under $2,000.
Uh, that’s just under $8,000 positive cash flow, cuz he bought four.
Tax Shelter
Depending upon the approach taken, the depreciation for the San Diego duplex will land in the range of $18-25,000 a year.
The duplexes in Texas will get him, (same parameters used) in the range of $32-45,000 yearly. Oh my.
I’ve heard so many San Diegans ask me what my point was.
This is an unfair comparison is what I’m hearing San Diego investors saying.
THAT’S THE POINT.
I met today with one of my all time cool clients. She’s a single, (although that appears it might be coming to an end) kindergarten teacher, making some pretty good money. She came into quite a bit of cash recently, as a result of the first leg of her Purposeful Plan. What are the chances she’s investing any of that capital in San Diego?
Don’t answer — it’s a trick question.
She’s goin’ to two different states — Colorado and Texas. Why? Look at the above comparison. She had to be thinking, ‘Why are we having a meeting about this? If it wasn’t for the $5 coffee he bought me, it would’ve been better just to have done this on the phone.’ (Our meeting was at my satellite office. I let them put their Starbucks sign up front — but everyone knows it’s my branch office.)
Between Thanksgiving and late spring ‘08 she’ll own roughly $1.35 Million in investment properties in two states. She’ll have at least $50,000+ tax shelter yearly. (Only $25,000 of which she can use each year.) She’ll have accomplished this with a total capital outlay of about $135,000 — including closing costs.
Oh yeah, speaking of those pesky closing costs…
Her settlement statements will look a lot different. She won’t have to much in the way of closing costs.
She’ll be able to acquire a bonus (fifth) Texas property. Seems she’ll have so many of her closing costs paid for by sellers — plus plain old buyer credits — the fifth property is easily doable. Imagine that.
So I say to San Diego investors, whether you live here or not — convert your equity to cash and get the heck outa Dodge. You’re losing out on capital growth big time. You already know this, right? Right.
I’m easy to talk to. Ask anybody. Email me, call me, send your favorite carrier pigeon. But find me and discover what yer missin’ out on — cuz you are missing out.
The problem is the timing of your realization of this fact. If you’re like most investors holding San Diego investment property, you’ll understand what I’m talking about the first month after you retire.
Your income, relatively speaking, will be puny when compared to those who moved their equities out of San Diego via a tax deferred (1031) exchange, or through refinancing. I gotta say here, the refinancing route, though better than nothing, just means your capital invested out of San Diego will kick major butt. The property you refinanced? It’ll be the same overpriced property it was before you pulled the cash out — only now it’s got a much bigger loan on it. You’d do that on purpose because…?
Oh — I saw you roll your eyes. Give me a break, please. You know your small unit rental properties are overpriced. No? Then I guess it’s a safe assumption you’d buy them today for their current market value? What? Can’t hear you.
OK, I won’t insist you answer that question — but we both know the answer, don’t we? I bet we do.
Your retirement depends upon, in large part, the investment decisions you make now.
The San Diego real estate investment gravy train has made its last run. Face it, and get out.
You’ll feel retire much better for having done it.
Posted on September 14, 2007 @ 2:55 pm - Written by BawldGuy
What with the negative (pun intended) press constantly surrounding neg-am loans, it’s almost impossible for the real estate investor to know which way is north on the loan map. Let’s take a look at exactly what a neg-am is — and more importantly — what it’s not.
The difference between the negative amortization loan and the traditional amortized, fixed rate loan,
is principal pay down — or the lack thereof. If you have a neg-am and opt for the minimum payment, you will add some to your loan balance each month. The loan Grandpa had paid a little principal each month along with the interest owed. As time went on, the principal portion of the monthly payment increased. At the end of the loan period, usually 30 years, the loan was paid off completely.
Wow.
Given the above descriptions, why would anyone with an IQ above room temperature choose a neg-am loan? The answer is not so simple, as it depends on all kinds of market factors.
The #1 requirement for even allowing a neg-am loan to be on your menu? You must reasonably believe the region in which you’re investing is highly likely to increase in value.
Reasonably?
Now for those who’re screaming in their living rooms and offices that nobody knows that for sure — you’re right. At this point I’ll invoke one of the Top 10 most used BawldGuyisms: My crystal ball is as cracked as yours.
Let’s take a market and take a look at what I mean.
The population is currently about half a million. Every demographic study done in the last few years says the region will double that figure in 15 years. The job market is great, and among the nation’s leaders in new job creation. Homes haven’t yet hit a median price of $250,000 yet. The weather offers four seasons, none of which are extreme. National size retailers are moving in steadily. Local and state governments are pro business.
That area is ripe for neg-am loans.
How might you analyze the property with an eye towards using a neg-am loan? Here’s the way I look at it. It’s proven itself over the last 20 years. In that time dozens of clients have made use of hundreds of neg-am loans — very profitably — especially in the bad times. (We’ll come back to that nugget later.)
Let’s make some assumptions here.
Your loan is 80% of the purchase price. The difference between the payment rate and the indexed rate is 5%. Let’s say your payment rate is 3.5% and your starting indexed rate is 8.5%. That’s how we arrive at the 5% difference — which is the unpaid interest added onto your loan balance.
The price will be $100,000.
Let’s not make this more complicated than it is. Your loan is $80,000. It’s growing by 5% a year. Bookmark that in your head.
You’re a married couple making about $80,000 yearly between the two of you. The tax shelter (read: depreciation) for this property is $5,000 a year. This results in an income tax savings, fed and state, of around $1,500 or so.
Let’s put some of these numbers together.
The loan balance grew by $4,000, but you’ve saved $1,500 in taxes. You’re behind so far, by about $2,500 for the year.
This means if your $100,000 property increases in value that first year by just 2½%, you’re even. If it appreciates more, you’re ahead. It ain’t complicated.
If your property is cash flowing, and you already have a Sominex (Ambien) Account, it might make sense to apply that cash flow to your payment each month, thereby lowering the neg-am affect. Since your investment goal is to grow your capital, this move is an option. It’s not necessarily the best option for all investors — but it’s an option.
How ’bout the bad times?
During the S & L crisis over a decade ago, we had clients everywhere with neg-ams. Here’s what happened.
One client in San Diego owned a couple fourplexes, while their friend down the block owned just one. They both used the exact amount of capital to buy their units. Our clients used 10% down payments, 80% neg-am loans, and 10% owner financing for the balance. They banked about $200 monthly. Their buddies used 20% down, an 80% fixed rate loan, and lost about $100 a month (not the end of the world).
Then the smelly stuff hit the fan.
Vacancy rates shot — rents dropped — simultaneously.
The guy with the safe 20% down payment and the prudent fixed rate loan? He was now losing $250-400 a month, and hating life.
Meanwhile, our clients went from a modest positive to either a break even, or a miniscule negative. ($100 a month or less — again, not the end of the world.)
Who was more at risk? Whose bank account took a bigger hit?
Fast forward to normal times. Appreciation emerged from years of hibernation, and my client’s $400,000 worth of property benefited twice as much in the same time span as his buddy’s.
And before you start bellowing about the enlarged loan balances of my client’s units, let’s look at that.
At 5% appreciation, the traditional investor made $10,000 as the market normalized. My clients made $20,000 — which back then, amounted to a complete deletion of all added loan balance during the bad times. His buddy lost over $10,000 in negative cash flow.
Ask his buddy how he’s ahead and listen to his answer. If his reply was a movie it would’ve been rated at least ‘R’. He lost $10,000 directly out of his Levi’s, then gained it back with the appreciation. 
My guy held his own on a month to month basis, and the first year’s appreciation wiped out his increased loan amount. This doesn’t even take into consideration the tax savings my guy was enjoying — twice as much as his friend. Don’t gloss over that last statement. Twice the shelter means twice the tax savings, means twice the dollars remaining in my guy’s Levi’s each and every April 15th. Don’t think for a second he doesn’t bring that up every spring.
The next several years post S & L bad times? My client left his friend in the dust. By 2000 he exchanged his then significantly increased value units for more than twice the number of units — again using just 10% down and negotiating owner financing. By 2004 his buddy wasn’t talking much because of the chasm between the size of their net equities.
Bottom line: There are times when neg-am loans are simply stupid to use — and for many reasons, both client, property, and market related. Until just recently I’ve been telling clients not to use them, because the hybrids were a better deal.
Lately though, the indexes are falling. Even Libor fell a little bit yesterday, and they’ve been horrible lately. If Bernanke reads the script I sent him, and lowers the Fed Funds rate next week, they’ll continue to fall. This makes neg-am loans, relatively speaking, a better bet.
But remember I said: THEY’RE NOT FOR EVERY INVESTMENT IN EVERY MARKET FOR EVERY INVESTOR.
Why?
Because it’s called Purposeful Planning, which means you’re doing everything on purpose — including how you’re structuring your acquisitions.
This is 2007, not 1957. One size doesn’t fit all. It’s those who understand that principle, and understand rational real world analysis who will prosper in the long run.
Neg-am loans are simply one of many investor tools. Kinda like wrenches. They’re magnificent for dealing with bolts and pipes, but they’re horrible as hammers. Used in the right circumstances neg-am
loans are workhorses allowing investors to not only benefit month to month, but create much higher capital growth rates.
Contrary to what’s in much of the media on the subject, neg-am loans are not an invention of Satan — but they’re not sent from the Lord either.
The next time you use a wrench to pound a nail, remember for what purpose the wrench was created, and go get a hammer.
Posted on August 31, 2007 @ 6:09 pm - Written by BawldGuy
Many of you may already know, I write for other real estate related blogs. I’ve written for BloodhoundBlog for several months now. This week I was honored to begin writing a weekly piece for Laurie Manny over at her Long Beach blog. To say Laurie has figured out her market, is understatement at its most British. Anyway, if you wish to see my first post, you can find it over there. It’s called Bernanke’s Purposeful Plan?. If you have any reason to search out info in the Long Beach area, trust me, Laurie is the person to see.
Looks like we’re gonna have our hands forced in our quest to open up Kansas City for our clients. So far, our efforts there have generated yawns from the local pros. Of course, if it didn’t take a couple days to get phone calls and emails returned, we might’ve already been there a couple months.
So we’re taking the bull by the horns, and eschewing our normal approach. We staunchly maintain our core belief there are title companies, lenders, inspectors, etc. with whom we’ll be excited to do all our business. Meanwhile, it seems the lender portion will be handled by those already under the Brown and Brown umbrella. Though I’d much rather use local guys, we’ve already wasted six months in our fruitless search. Plus, our current mortgage guys are battle tested, and rarin’ to go. I know one thing — our failure to locate a solid KC mortgage guy isn’t the fault of our studly local agent, Chris Lengquist. He’s been trying for months. The only agent Brown and Brown has hired in the last couple decades, carried our DNA. If Chris lived in San Diego, and was interested in the least, we’d hire him in a nano-second. Read this and understand why.
Investors — There’s an opportunity on the horizon. The axiom quoted here ad infinitum — Lenders Lend — has proven itself once again. 
A couple lenders have now come up with new adjustable rate loans for investors. They’ve retaken the momentum from hybrids by lowering their indexed rate. Also, they lowered the payment rate. Big deal you say? They’re still neg-ams. Yer absolutely correct. The prudent use of those type loans in years past resulted in the creation of untold million$ in capital growth. Ask your skeptical self this question: If you buy in a relatively low priced, but demonstrably growth region, and interest rates keep falling — What will your net result be?
Ah — I just saw the light go on a touch. Remember the days when the indexed rate on neg-am loans was actually lower than 30 year conforming fixed rates? I do. So do my clients. You know, the ones who have either come close, or have actually added a new comma to their net worth? With a falling indexed rate, you’re gonna see a rise in the use of these loans — as weird as it sounds.
And this one cracks me up. A man I respect very much, Warren Buffett, that ignorant wannabe investor from Omaha, 
(insert laugh track here) has shown great interest in investing significant capital into, wait for it………Countrywide. How stupid can some folks be? I dare the talking heads to call him out on this one. Please, please, please, interview him. But alas, they won’t, as he just might say something rational on the air. Who says the Lord doesn’t have a sense of humor? Wall Street is reacting positively at just the thought of Mr. Buffett following through by acquiring shares of the (deep announcer’s voice) beleaguered lender.
Finally, let’s see if I can’t send you into the Labor Day weekend with a good thought.
I’ll invoke the — This opinion along with my heavily armed Starbuck’s card will get you some coffee and a great big oatmeal raison cookie disclaimer here. I’ve seen this economic movie more than once before. Here’s what happens, more or less.
Wall Street wrings its collective hands while shedding crocodile tears, imploring the Fed to wave its magic wand and make the boo-boo go away cuz it hurts really bad.
Just when even the cooler heads begin to show a little fear, the Fed lowers rates.
Once again the confidence factor proves to be the most important factor, as a ¼% drop is treated like the discovery of penicillin.
By New Year’s Eve folks everywhere, including you, will be telling whoever will listen, that you told them so.
Those who’ve invested in the right markets (read: low priced & growth) this year, and probably the first 2-3 quarters of next year, will be handsomely rewarded in the next several years.
It will be enormously entertaining watching the doomsayers explaining away the lack of the total economic collapse they’ve been predicting for so many years..
The next few months are gonna be, as the Chinese proverb says — interesting times. Much of the time they wished those times on folks with ill will. I think the upcoming times have an excellent chance of being interesting the same way a movie with a Hollywood ending is.
I wish you all a safe and fun Labor Day weekend.