The Wave Is Finally Hitting The Beach
The Bend Bulletin reports from Oregon. “Paul Helikson stepped into the swirling snow on the steps of the Deschutes County Courthouse on a Thursday morning just before Christmas. Another day, another foreclosure auction. As is usually the case, nobody raised a hand to bid on the little north Bend house, where the owner owed the bank more than $12,000 in unpaid mortgage payments. In fact, as is often the case, no potential bidders showed up at all.”
“More than 590 properties entered the earliest stages of the formal foreclosure process last year in Deschutes County, according to records on file in the Deschutes County Clerk’s Office, the highest number this decade and, even in proportion to the county’s growth, the highest rate of potential defaults per 1,000 housing units since the post-9/11 recession of 2002.”
“Failed investments account for some of it. One investor went on a buying spree from September 2006 through February 2007, county records show, taking out mortgages on 17 different properties. He stopped paying on all of them last July, leaving about $23,305 per month in unpaid mortgage payments in his wake.”
“Other cases, like the single mother’s home that Helikson auctioned on the courthouse steps, were driven by a combination of loans that were given out too generously at the peak of the housing boom’s price spike, a borrower’s job loss, a health problem, or some other financial setback that caused their payments to fall behind.”
“Thirty-eight Bend-area houses were designated ’short sales’ on the Central Oregon MLS Thursday, agent Jane Flood said, out of a total of about 1,200 listed for sale. But that doesn’t mean they are the only homes that will ultimately sell short.”
“Often, broker Terry Denoux said, borrowers will list their homes while a foreclosure is pending, fishing for the best deal they can find to pitch to the bank.”
“Some houses that were bought with 100 percent financing 12 to 18 months ago may have lost 10 percent of their market value since then, depending on where they are and what they are, Denoux said, so picking them up at auction at the lender’s asking price might be a mistake.”
“‘To a lot of people, the word foreclosure indicates, ‘Oh! Good deal! Fire sale!’ Denoux said. ‘And sometimes that’s not the case.’”
“Flood, who contracted with RealtyTrac to send her sales leads last year, said she dropped that contract this year to concentrate more on relocation business, even though she still bills herself as a ‘foreclosure specialist.’”
“‘I felt I knew everything I wanted to know about foreclosures,’ Flood said. ‘And, you know, some of the people you couldn’t help.’”
The Register Guard from Oregon. “Foreclosures against Lane County homeowners increased in 2007 at a rate almost seven times higher than those statewide, according to RealtyTrac. 1,227 homes in the Eugene-Springfield metropolitan service district entered the foreclosure process in 2007. That’s an 83 percent increase over the 672 Lane County homes that were foreclosed upon in 2006.”
“‘I’m not surprised, given what’s been going on in the national housing market,’ said Tim Duy, an assistant professor of economics at the University of Oregon.”
“‘It was unrealistic to expect we weren’t going to be hit by similar trends,’ Duy said. ‘In Eugene, we didn’t have the hot housing market. Still, the weaker underwriting standards (for mortgages) were pushing people into houses they probably couldn’t afford. Now they’re in foreclosure as a result.’”
“‘What I think is happening here, the biggest factor is the slower appreciation of home prices,’ said economic consultant Bill Conerly of Portland. ‘If you can’t make (mortgage) payments but your house is going up in value, you can sell it and come out without a foreclosure. With slower appreciation, it makes you more vulnerable.’”
“Lane County records confirm an increase in homeowners in trouble, with 2,207 notices of default filed in 2007. There were 1,844 notices filed in 2006. But the county records also indicate the trend may be increasing. There were 238 default notices filed this month through Tuesday, compared with 121 during the same 29-day period during January 2006.”
“Todd Williams, legislative committee chairman for the Oregon Association of Mortgage Professionals, said that neither his organization nor the mortgage industry as a whole dispute that many inadvisable home loans were made during the housing boom of 2002 through 2005.”
“‘A lot of folks chose to buy a house and get a loan that, really, they could never afford,’ Williams said.”
The Chronicle from Washington. “The subprime mortgage crisis may not have hit Lewis County as hard as it hit the rest of the country, but there was still a noticeable impact throughout 2007.”
“Lewis County had 231 foreclosures filed last year, up 32 percent from 2006. ‘Going back to about August of last year, we started seeing a lot of subprime companies having problems with people not being able to make payments,’ said Sharyll Fisher, branch manager of Chehalis’ Horizon Mortgage. ‘It leads them into foreclosure, so the subprime companies sitting on a lot of loans (that are not being paid back) go into bankruptcy or try to sell.’”
“‘Banks are trying to recoup some of what they’re sitting on,’ she added. ‘It’s definitely a tough market right now.’”
“Gary Rask bought out his parents’ former home in Winlock from his sister about two years ago. Rask, retired and on a fixed income, took out an adjustable rate mortgage with a 6.75 percent interest rate and a monthly payment of just under $700.”
“‘Then, all of the sudden, I get this notice from the mortgage company,’ said Ras. ‘It said my payment would be going up, and said it’d be sizable.’”
“His payment jumped to about $900 a month, and the interest rate rose to 10.75 percent.”
“He was able to refinance the loan and, with a little help from his children. ‘At the time, with the estate and the income, they had to put me in the adjustable rate, and said that it could go either way,’ he said. ‘As it turned out, it went up.’”
“The adjustable rate mortgage was, essentially, a gamble. ‘You can’t foresee what’s coming down the road,’ he said. ‘If I’d gotten locked in, I’d have been fine. I got caught up in the system.’”
“Ted Holmes, a title examiner for Lewis County Title Company, said he was surprised the subprime drop didn’t come sooner.”
“‘We’ve been saying for a number of years, we knew it was coming,’ Holmes said. ‘You could see it. We were getting applications and so on from lenders who send those things through the mail like candy.’”
“Lewis County Title Company was averaging over 200 orders a month for more than two years when the mortgage boom was on, he said. ‘People were selling off bad paper,’ he said. ‘They’d get in any way they could.’”
“The rising real estate prices could only hold out so long. ‘That kind of came to a screeching halt last year,’ he explained.”
“The two kinds of loans that became problems were option-arm loans and 228 loans. The thought was that, in two years, the home would have appreciated in value. When the housing market slowed that theory proved false.”
“A huge number of those loans were done about two years ago, said Diane Inman, working with Serenity Mortgage and a broker since 1974.”
“‘I’m not so sure everybody, officers included, understood the impact,’ she said, regarding the volume of subprime loans issued. ‘A lot of loan officers were newer, and just didn’t have the experience of being in a market where someone would really have to hand in their keys.’”
The Columbian from Washington. “Foreclosures increased significantly in Clark County in the last three months of 2007, reflecting the increasing problems of overstretched homeowners. The 494 foreclosures filed here in the three months ending in December more than doubled the 208 foreclosures filed in the same period in 2006, according to RealtyTrac.”
“The end-of-year surge coincides with an increase in the number of new and pre-owned homes for sale in the county and doesn’t surprise those who’ve been tracking the local market.”
“‘The wave is finally hitting the beach,’ said Dick Riley, co-owner of appraisal firm in Vancouver and an economic forecaster for The Columbian.”
“He blamed subprime mortgage loans sold during the 2005 housing boom - now 12 months past due - for the rise in fourth-quarter foreclosures. In many cases, lenders gave buyers a false sense of what they were worth, Riley said.”
“‘People bought homes that they couldn’t afford and had no business buying,’ Riley said.”
The Bellingham Heraldfrom Washington. “When it comes to foreclosure filings, Whatcom County took some lumps in 2007. There were 379 Whatcom County foreclosures filings in 2007, an 83 percent increase from the previous year, according to RealtyTrac.”
“What could be a troubling sign for Whatcom County is what’s been happening lately. There were 133 filings in the fourth quarter of last year, the highest quarterly total in the past three years. The next highest was in the second quarter of 2007, when 90 were filed.”
“Glenn Crellin, director at the Washington Center for Real Estate Research at Washington State University, said the biggest problems in the state will probably be in the greater Seattle area, but overall the state won’t be hit hard.”
“‘Washington wasn’t as involved in the high-risk loans as other parts of the country,’ Crellin said.”
“‘I really don’t think we’re in a hurtful area,’ said Mark Cross, president and owner of Security First Mortgage and Escrow in Bellingham. ‘We haven’t seen a big price drop. We’ve seen some corrections.’”
“But he also acknowledged that the mortgage market is national, and mortgage loan requirements have tightened here, just as they have everywhere else. Some people have borrowed against all of their home equity, and lenders let them do it, Cross said. Now, with steep price increases cooling and refinancing harder to get, those people are getting squeezed.”
“‘I have people calling me and saying, ‘I can make my payment but I don’t have any equity in it. Why should I be making payments on it? I might as well mail the keys back to the bank,’ he said.”
“Tony Brooks blames a mortgage broker for the loss of his home, and wanted state lawmakers to know his story. Brooks drove twice to Olympia from Seattle in the span of a week to testify for a crackdown on brokers.”
“‘There are predatory lenders out there ripping off people with subprime loans,’ Brooks said. ‘By me going down there, they will see somebody that it happened to.’”
“Proposals targeting mortgage brokers that would require full disclosure on all points in a loan, such as possible fees and interest rates, in plain language, require brokers to act in good faith toward borrowers, and increase state oversight.”
“‘Mortgage brokers are an unregulated group of people that sometimes prey on people’s lack of knowledge,’ said Sen. Brian Weinstein, who sponsored the good-faith bill.”
“The mortgage brokers oppose Weinstein’s bill, fearing it will open floodgates for lawsuits. ‘We’re already serving our customers in a fashion that already represents a commitment to the customer,’ said Dave Erickson, the Washington Association of Mortgage Broker’s president.”
“Erickson also doesn’t buy the dire predictions, saying that the percentage of subprime loans in trouble in Washington is small compared to other states, and that property values are holding steady. Mortgage brokers, he said, are taking an unfair amount of the blame.”
“‘There’s plenty of borrowers who say ‘I didn’t know, nobody told me,’ and yet you see their fingerprints all over the disclosures mandated by federal and state laws,’ Erickson said.”
“Brooks ran into trouble when he refinanced his home in Seattle’s Rainier Valley area in 1998. After being fired from Boeing, a divorce, and the opening of his barbershop, he was left in a financial bind and refinanced with a subprime loan to tap the equity in his home.”
“By 2002, he had filed for bankruptcy twice, and was falling into more debt after his monthly payments went from $1,400 to $2,900, something Brooks said this broker didn’t tell him would happen.”
“He acknowledges that he didn’t know much about loans when he refinanced, but he expected his mortgage broker to look out for him. ‘I’m a really hard worker,’ Brooks said. ‘When you go out to refinance your life’s work, you’d think the broker would be there to help you.’”
‘What I think is happening here, the biggest factor is the slower appreciation of home prices
I’ve mentioned before that each market plays out almost exactly like the others. First, multiple bids end. Sales slow and inventory builds. Builder incentives begin. The resales do the same. The process repeats with prices cuts. And at some point in there, prices stall and that’s when foreclosures take off. And it’s all downhill from there.
This can only mean that people have financed more than 100% of even recent sales, and apparently at the peak of the lending boom. Of course, that’s when one would expect standards to be the most relaxed.
And the realtors hang onto “slower appreciation” as long as humanely possible.
“This can only mean that people have finaced more than 100% of even RECENT sales, and aparently at the peak of the lending boom.”
Ben,
I toggle around on loan forums to see what the scrubs are doing–what new strategies they are developing.
I refuse to polute your place with the likes of them!
I can say, it’s a really good idea to keep both eyes peeled on loan officers and their ilk. The toxicitity of creative financing is TODAY pervasive.
This will not end well and will need much scrubbing.
Best,
Leigh
P.S. I report anything I read to several entities (for all the good it may do) that doesn’t pass the smell test!
Leigh,
I too check the mortgage broker forums to look for upcoming trends and am shocked how many suicide loans are still being moved through the system. Most days there are interesting stuff. Any wholesaler that puts in even half reasonable controls gets slammed by them.
Got popcorn?
Neil
whenever I looky-loo at an open house I always ask a pathetic question about whether you need a down pmt, like no way I have it, and they always tell me that “creative financing” is still available, “it just depends.”
Neil,
Suicide does not begin to cover what tha-hey-is-gooooing on.
IMO, you write it, ya own it!
I love intelligent conversations. The banks, OMG, little has changed!
The next bubble? (A NEW HEDGE FUND?)
Thank heavens for air popped corn!
Leigh
Neil,
A thousand pardons.
I do not mean to be cryptic - nor can I say I feel sorry for the loan officers - nor can I say “it’s all their fault.
I so want to believe in balance, honesty, ethics - and I do so believe.
Loan officers are but a piece of the puzzle.
Greed is rampant, with few exceptions.
Ya just can’t make this stuff up!
Leigh
“He was able to refinance the loan and, with a little help from his children. ‘At the time, with the estate and the income, they had to put me in the adjustable rate, and said that it could go either way,’ he said. ‘As it turned out, it went up.’”
The sins of the parents visited on the children?
You’re kidding, right? “It could go either way?”
Tell me how that is any different than going into a casino and playing blackjack. Sometimes you get blackjack, sometimes the dealer gets blackjack.
No, at historically low interest rates, its more like hitting 20 and then requesting another card.
I think what they are not saying is it was negative amortizing. He wasn’t making FULL payments, his mortgage balance grew with the teaser payment and he hit the penalty fence.
Hey Lost,
I really feel sad for most of today’s children.
What have we left them?
- Unaffordable housing
- Bankrupt government
- Outsourcing of employment to other nations
- Feel free to add your own
Not a generation discussion, more of a, “I really do feel sad for today’s child.
Perhaps there is hope.
Best,
Leigh
I’ll add -
- TV for a babysitter
- Very little freedom
- Violent video games
- No connection to the natural world
- Being nobody unless you own stuff (8 year olds with cell phones, etc.)
That’s enough, you’re right, it’s very sad, but it’s already coming back to haunt the parents.
Lost,
There is hope! Ben avails an avenue for exchange!
We can change the outcome, (uh oh, I’m going to break out in song) one voice…one vote…one
Smiles,
Leigh
Jeshus Madia!
Eight year olds with cell phones?
Have we lost our collective minds?
Please say no.
Leigh
Good, the bubble is bursting in Oregon and Washington. Places like Bend were not even heard of six years ago, now I see advertisements for overpriced property in that town in just about every airline magazine I read. Hopefully, with the declining home prices in Oregon, coastal northern California will follow. I’ve just been amazed at how well home prices have held up in Eureka despite the massive declines elsewhere. But, at the coffee shop today, I actually heard a group of old-timers talking about price drops in the local housing market, something that would have been unheard of even six months ago.
However, there is plenty of denial here from Realtors (R). One that frequents my wife’s bank was in the other day. My wife asked her about foreclosures and her response was that “there really aren’t any foreclosures in Humboldt county!” Funny, on Realty Track, there are approximately 180 properties (about 1/3 of the total inventory for sale) in foreclosure or pre-foreclosure. Gotta love the dope everyone around here is smokin’!
As a former Eureka resident I understand what you say. Denial there is thicker than anywhere. Folks are quite sure they are isolated and protected from any housing woes.
Keep your eye on Danco and other big builders. That will tell the tale even through the “smoke screen”.
As of last night the Bend MSA is on track to double last years NOD’s
My data base of distressed property also shows the majority of repo’s going back to the lender instead of to a third party.
80/20 loans were very popular back in the day. Due to the over inflated prices that were paid on these houses even a so called short sale that only recovers say 90% of the primary loan the price is still way too much for the local economy to support.
“But he also acknowledged that the mortgage market is national, and mortgage loan requirements have tightened here, just as they have everywhere else. Some people have borrowed against all of their home equity, and lenders let them do it, Cross said. Now, with steep price increases cooling and refinancing harder to get, those people are getting squeezed.”
But all real estate is local!
Yet the article notes later on:
“I really don’t think we’re in a hurtful area,” Cross said. “We haven’t seen a big price drop. We’ve seen some corrections.”
J6P’s now firmly believe prices will just hold steady with high inventory. The NAR has done a great job brainwashing that into people. Somehow those same J6P’s don’t see any correlation between housing being unfordable and their friends abandoning homes and going off to regions where price/income isn’t as insane. What blows my mind is that they can still get mortgages! Yet… they are being very upfront about abandoning their current homes. Sigh…
I love how the current tactic of Realtors ™ is to point out how in their area “prices are steady or increasing (on the median, not Case-Shiller)” and they aren’t the area with 40+ months of inventory.
Oh… 2008 will be interesting. 2009 even more so. My wife has finally agreed it would probably be smarter to rent through 2009 than to buy this coming winter (when we have a planned move). I’m not looking to time the exact bottom and I’ve studied the reset charts… But dang will we see discounts over the next 24 months… My latest article (click on name. Yes, I’ll clean it up today) shows a few graphs on inventory. Its interesting out there…
Got popcorn?
Neil
“What blows my mind is they can still get mortgages!”
Neil,
Many folks believe creative financing is the in the past (Aug 07).
I call B.S.!
Apparently, you do too.
Leigh
Far too many of those creative loans are out there. Its still scary. Every new creative loan is just one future foreclosure statistic… sigh…
Got popcorn?
Neil
Tell your wife to be patient at least another 2 more years. If she can’t wait any longer, then relocate to a cheaper state.
It looks like she’ll be patient enough.
The relocation idea appeals more and more… the bubble regions won’t be back to ‘normal government services’ for the middle class for a long time.
Got popcorn?
Neil
Neil,
Your lady values your opinion - you love your lady.
Take a deep breath, and kiss her on her forehead.
Best,
Leigh
P.S. Then maybe write out a game plan together (opps…Superbowl…grrr…I don’t give a care!) and see what happens
I listened to a presentation by a guy who directs hedge fund investments. He reported a great new opportunity in the hedge industry - discount mortgage investing. Basically, hedge fund managers are approaching banks close to their minimal capital limit due to subprime losses and are buying mortgages, presumably not FNM material (jumbos) for 50 cents on the dollar, then cutting deals with homeowners to keep paying. The example used was a homeowner who paid 525K, put 25K down and borrowed 500K. Now the house is only worth 400K, and the borrower with FICO 620 thinks about doing jingle mail but instead the hedge fund tells the owner they will get a new mortgage for 400K (and no 1099 thanks to the IRS), they keep the 100K and the hedge fund comes out 150K+ thanks to the desperation of the bank.
Has anyone seen this happen on any scale? I would think the impact on banks would be profound if significant portions of their non-prime debt would be discounted so much.
Impact to banks should not be profound going forward if they have written off their junk to levels that most WS firms claim to think they have - which I would think would be around 50 cents on the dollar on subprime. Once banks truly have marked this stuff down to what they can sell it for (such as doing these types of deals) than they should (kind of) be OK. But the cleverer-by-half discount mortgage investors may be just a new form of knife-catcher. They’re holding their hands lower, but the blades haven’t yet reached terminal speed.
This investment doesn’t involve subprime borrowers - subprime loans are what caused the banks to be so stretched, and as Etrade found out - 50 cents on the dollar is way too high for subprime loans. This new investment activity would be for the next wave of desperation by banks trying to raise capital by selling non-performing assets. The hedge funds would take advantage of the banks and then negotiate with the borrower who has good credit to start paying knowing their house valuation was decreased - everyone comes out ahead (Bank stays in business, homeowner keeps the house at market price and of course the hedge funds made a profit). Of course if Government decided to start buying these loans by raising the conforming limit, banks could conceivably get a better price for their loans - but would FHM buy loans on properties worth less than the loan with borrowers ready to walk?
The hedge funds are presumably using OPM (other people’s money). If things work out well for the hedge fund (doubtful in this declining market) then the promoters of the hedge fund get to cash in on some hefty bucks.
If things go sour for the hedge fund then the promoters lose nothing. Meanwhile, before the hedge fund goes south, the promoters most likely get to enjoy some hefty fees.
Risk to promoters? Nothing.
Risk to investors? Everything.
In other words, instead of taking “advantage of the banks” the hedge funds are taking advantage of the ’savvy’ speculators who invest in the hedge fund.
Google up “Jon W. James” and you’ll get to read about a guy who plundered the wealth of several people I know.
One person who (barely) escaped from his charms told me of being mesmerized into signing up for the scam. She came to her senses after a good night’s sleep and decided not to commit herself. Then came the endless phone calls urging her to reconsider. Others were not so fortunate.
There are some first class charmers out there eagar to take your money. They know all the psychological tricks. One must be well armed with knowledge and fortitude to withstand their speils.
FWIW.
The hedge fund pays 250K for a 500K loan, gives the borrower 100K if he’ll stay in the loan and keep making payments, so the hedge fund gets to log 150K profit.
Sounds good until the property value drops some more, the FB mails the keys after all, and the 150K profit vanishes leaving the hedge fund with an empty POS.
Bingo!
They aren’t ‘giving’ the borrower $100K - they are ‘forgiving’ $100K of the loan when it is rewritten from $500K down to $400K.
Everything will work out fine until a year from now when the house is worth $300K.
Gee, where do I sign up with that fund?
So now the borrower has a 400K mortgage on a house “worth” 400K. As soon as that puppy drops to 350 or 300, will he stay?? Perhaps not, then the hedge fund is now in the housing business and needs to sell as bad as all the others they’ll compete with.
Borrower most likely cannot afford a $400K loan any more than a $500 K loan. Would not make a lot of difference in many cases at all.
citi bank paying 9% for petrodollars
that’s big
Coming soon to a credit card company near you: Citi bank bought out Egg Financial in England. Egg re-evaluated all credit card holder’s credit history, and in many cases, are closing accounts if things look too dour for said credit card holder - regardless of the cc holder’s history with the Egg card. Egg swears up and down that this action has NOTHING to do with the subprime and credit crunch.
dour = dire oops.
Oh fer cryin’ out loud!
Doesn’t anyone know how to fight fire with fire any more?
Charge $5 and make the minimum payment each month. Don’t charge any more. The postage and processing costs will eat up everything, and you’ll be out, what, $10?
Where has the pragmatic attitude disappear? And why is everyone behaving like my dad who is kerfuffled by “everything” corporations do?
“It’s the principle; it’s the principle.”
Boll*cks to the principle. Let’s partaaay!
This is the bankers version of the house flipper buying a foreclosed refurb house from another flipper before he’s fixed it. Selling a loan because you aren’t competant or don’t have time to service it.
Definition of Hedge Fund
*warning* not for the faint hearted
may cause:
- nausea due to your high ethical standard
- hypnosis due to exposure of MSM excesive greed contaminants
- desire to become Hedge Fund Manager (gulp!)
http://tinyurl.com/3dg9×2
Leigh
I’ve known of people doing this on a small scale with mobile home notes (az_lender, you out there??), but not on this scale. Wouldn’t surprise me though if someone gave it a go.
I’d do something like this if I had the backing, only banks wouldn’t get 50 cents on the dollar out of me.
az_lender has posted several times about people trying to buy her mobile home/lot notes (at a substantial discount).
I understand she has always politely declined, on the grounds that she has minimal defaults and is happy to simply keep collecting the monthly payments.
Depends on the banks thinking they’ll get 50% or less on the foreclosure sale, legal and other foreclosure costs included.
“Erickson also doesn’t buy the dire predictions, saying that the percentage of subprime loans in trouble in Washington is small compared to other states, and that property values are holding steady. Mortgage brokers, he said, are taking an unfair amount of the blame.”
Just because property valuse have on dropped does not mean they won’t! If they got pushed way above the mean it is just a matter of when NOT if they will fall.
A little OT, but speaking of Washington, how are all those Microsoft and Starbucks employees feeling about their stock and stock options? To me, one of the most telling/predictive events in the economy is the fact that MSFT’s stock has fallen from a P/E of 20 to a P/E of 16 in the last year even as the company has had increasing earnings growth. This tells me that there is a lack of new money coming into the stock market - in the final analysis it is investable dollars (i.e., net global savings) that drive the market higher, and if this number falls, equity prices have to fall worldwide. I agree with an earlier poster today that P/Es can fall much lower, even on good companies, and that high P/E stocks/countries are risky beyond belief.
“Investable dollars” that only exist because of debt creation - no new debt - no new money.
Real estate was THE debt creation vehicle. It is GONE. And eventually, so is the stock market.
Not unless they lower margin standards. And in any case, the amount of debt that can be created in this way via the stock market is miniscule compared to the housing market.
Of course, they could let each household start writing derivatives contracts in which case the sky is the limit. However, I don’t think that’s going to happen.
Everyone wants to be a monoline insurer!
Or those Washington trolls that used to post from Microsoft ISPs? Where are you Mikail? You don’t open your mouth much anymore.
Hello Ben,
Go long on memory and short on Microsoft!
Baaaaaaaaaaaaaaaaaby,
Leigh
“To me, one of the most telling/predictive events in the economy is the fact that MSFT’s stock has fallen from a P/E of 20 to a P/E of 16 in the last year even as the company has had increasing earnings growth.”
How low can a great company’s P/E go in a bear market?
In the late 1960’s I bought a neat small cap growth company with a P/E of 30 and watched the price go down until the P/E was at 3 in late 1974. This occured even though the company (New England Nuclear) reported annual 20% growth in both sales and earnings.
The company was doing outstanding but nobody wanted it. Finally General Electric bought up the whole company for a song and I was lucky to break even.
There’s a message embeded in this story: If I have to explain the message then you won’t get it anyway.
what - it’s all hype and nothing but?
Mess - age- + age - sage = stuff a sage will keep (no age required).
P/E = Squared - greed.
To think Bill Gates (lord) was once my hero.
Flame away, I deserve de fire!
Leigh
“Tony Brooks blames a mortgage broker for the loss of his home, and wanted state lawmakers to know his story. Brooks drove twice to Olympia from Seattle in the span of a week to testify for a crackdown on brokers.”
I’m going to restrain myself here and not start screaming at my innocent computer screen. Last week I had to sit through several public hearings down at the capitol where the realtors, builder, and brokers/lobbyists were crammed in the room like evil black-suited sardines, exhaling lie-tainted breath moistly from their evil lungs, dribbling deceit and craven whines from their greedy sardine mouths.
All their drivel about legislating ‘affordable’ housing mandates, and why there should be fewer rules on land use regulations, and why growth planning is bad…on and on. If you all had heard it you would have leaped up and throttled the nearest sardine. I didn’t, because I have great self-control, and also it would have taken too long and made me miss lunch.
Anyway, HBBers, if you live in WA, why not call up your legislator and enthusiastically support HB(house bill) 3202 and companion bill SB(senate bill) 6784: vesting reform, which we NEED here. NEED. BAD. And HB 2797, which is more great stuff, if only for the side benefits. You can research these bills online at http://www.leg.wa.gov/legislature. All sorts of interesting, and sneaky stuff that will fascinate you.
Or, you can save some researching time by simply taking my word for it that the realtors, builders, developers scream like little French girls against these bills. That ought to satisfy you right there.
1. It used to be incredibly hard to get fired from Boeing.
2. Bought a house in the Rainier Valley area.
3. Went bankrupt with a barbershop. Twice.
And he blames his subprime ARM for his troubles.
What ARE you on about, man? My point is, if you are a WA HBBer, why not research bills currently in committee before the legislature, and support the good ones. Legislators pay attention to public comment, long as it’s not dressed in dirty overalls.
Jeeze. Pay attention.
Olympia!
One voice can make change!
I love your voice!
Best Always,
Leigh
I know this is slightly OT, but was wondering if anyone had ever done any precious metals business with Tulving? Are they respectable? Thanks for any information!
I think this would be a perfect first post for my new blog,
“The Use of the Word ‘Slightly OT’ Bubble Blog”
“5. Hannes Tulving Rare Coin (X900050) A consent order was signed by the court on June 22, 1992. The financial records for this case show that the defendant complied with the order and made all payments between 1992 and 1997. There has been no payment activity since December 1997. As of 09/30/99, there was $245,309 in the account. According to the FTC attorney, because so little was collected relative to the value of the scam (estimated at $10 million or more), redress was never considered.”
http://www.ftc.gov/oig/agingmemo.shtm
______________________________________________________
Once honor is lost, it’s very hard to get it back…
I read about that in the FTC papers and it was disconcerting.
Caveat Emptor…
The Wave Is Finally Hitting The Beach indeed !!!!!
(US Banking System Teetering on the Brink of Collapse)
http://www.marketoracle.co.uk/Article3570.html
It’s “On The Beach”
http://en.wikipedia.org/wiki/On_the_Beach_(novel)
Aladinsane,
Have you read the “Earth Abides”?
I haven’t, but will buy a used one on amazon…
Looks like an interesting read~
Thanks for the tip!
I have
Banks can borrow reserves, and the “lower rates” reduce outflows to savers (interest payments).
I made my annual IRA contribution yesterday, so everything’s gonna be ooookkkkayyyy!
(imagine that said in a Krusty the Clown voice and it’s a lot funnier)
I’m tempted to show those charts to my wife. She is bored with this stuff, but anyone can read graphs where the plotted data goes vertical
Show her the bank reserves chart.
If that doesn’t scare the pi$$ out of her, nothing will. In that case, I would advise you dump her, and save yourself.
I’ll even provide a link.
How can anyone get bored by money and where-money-is-going-to-go stuff? Money is what buys pretty shoes, first of all, and not only shoes, it hires land-use lawyers, so that you can out-represent oily evil sardine-men. They don’t take daffodils or pretty stones for those things, and don’t think I haven’t tried.
I don’t know how people get “bored” with money, either. It turns out that “Helicopter” Ben has a profound how many of those paper things I need to buy the stuff I want. He does not, however, seem to have the same immediate impact on the amount of money I have coming in.
And that graph is totally making me want to hide all of my cash in my mattress. It is very freaky.
Yeah! And ‘yeah’ squared.
Don’t worry, the published data will soon be “seasonally adjusted”.
‘Washington wasn’t as involved in the high-risk loans as other parts of the country,’ Crellin said.
Sure you weren’t Glenn, just like the folks from OH, CNY, OK, WI, NC, etc. say they didn’t use the funny money loans too. Where weren’t those products peddled?
THe last I saw, WA state was in the 2nd tier for option or interest only ARMs. California was bright red, WA, NV, AZ and FL were orange. Anyone else remember that map and have it on hand?
Hey……anyone know who this guy is?
http://i146.photobucket.com/albums/r253/Torqued713/baghdad-bernanke.jpg
with the beret I’m guessing cuban revolutionary or a boho artist !? no? mon dieu - but of course - itz bagdad bob !!
Jetson_boy, here’s the reply you never read yet
It’s funny that “lower end” is now $100k to $200k. I would need $40k to $75k annual salary and 20% down to afford those homes. What is the median per person salary in those locations? Even if it’s $40k, this barely gets you into a $100k house and you need $20k down at that. I do not consider those prices reasonable if they were much cheaper before the bubble. My dad bought an upper middle class house(3777 living sf) in West Palm Beach on an acreage lot(with pool and tennis court) for $225k back in 1995. He sold his middle class 5/3 2300 sf house for $105k.
Wages in 1995 were almost the same as wages today and the cost of living was much lower due to cheaper gas and food. Nowdays essentals take a bigger chunk out of wages, leaving less available for houses. I honestly think a $100k house today isn’t any easier to afford than a $100k house before the bubble.
I also want to thank you Jetson for your replies. So it’s all those new jobs that’s making house prices in the southeast permanently higher. You are saying whatever houses cost won’t drop much, if at all? Guess ill be staying in the rust belt forever as I can neither afford a $150k house nor do I want to pay that when it’s so much cheaper in the rust belt and let those people move out, I don’t like overcrowded towns, too much crime and traffic.
Bye FL, the SE is cheaper than many other places especially in housing but is (relatively) not a cheap place to live. You still must have an income in order to exist. You don’t get a 50% decrease in car prices because you live in Tn, NC, Al, etc. Gas is essentially the same everywhere. Food might be somewhat cheaper at the local farmer markets in the summer but most grocery store chains still cost just like everywhere else. The same is true for utilities.
Housing prices have gone up in the SE, some increases due to inflation and some because of people moving to the area (like from Fl) and paying more (ie, they got took because of comparing local prices to the more expensive areas they came from). I do think there will be some percentage drops but not like Fl or Cal or ???
Quite frankly, $150k isn’t a lot to spend on a good house today in a nice part of any major SE metro area. Not even in 2001. You are dreaming if you think you’ll be able to find something at $40k-$50k you’d want to live in (unless in a ghetto area - they are alive and well in the large SE cities).
Out of curiosity, what do you think the median family income is in the SE metro areas anyway? I think you are looking for the unattainable.
good evening
went out to look at a new rental apt. for the hell of it.
well nice girl owns the coop apt and it was redone nicely
but on the small side. she was looking for a out $500 or so more
a month than similar apts in the area rent for. she has a new house and i believe she was trying to cover her nut on the rent.
good luck with that one
after today i have decided i am staying in my current place until
may 09 and will see where we are then
any money i could save on my rent would be lost in moving
and possible broker fees
Fitch Places $139 Billion of Subprime RMBS on Negative Watch, Cites ‘Walk Aways’
http://www.housingwire.com/2008/02/01/fitch-places-139-billion-of-subprime-rmbs-on-negative-watch-cites-walk-aways/
Don’t walk away mad, girl, just walk away.
“Negative Watch”? Is that like double secret probation?
Ah, so fast to call AAA, but so slow to call anything less.
Earthquake at British Land as £1.3bn is wiped off portfolio
http://business.timesonline.co.uk/tol/business/industry_sectors/construction_and_property/article3294074.ece
Totally off topic, but did anyone see that picture of Hillary on Drudge? She looks like a Nazi, literally.
Well, I’m not voting for her in the CA primary, but really, if you are followed by cameras 24/7, they are going to come away with pictures of you that aren’t flattering. And really, who the hell cares what the president looks like? We’re not hiring them to be a model - we’re hiring them to run the country.
Another shoe about to drop?
Goldman Says Banks May Face $60 Billion in Writedowns (Update2)
Feb. 1 (Bloomberg) — Banks may face additional writedowns of as much as $60 billion this year from investments in commercial real estate and non-traditional residential mortgages, Goldman Sachs Group Inc. analysts said.
Commercial real estate prices may fall 21 percent to 26 percent from current levels, resulting in writedowns for banks of about $20 billion, Goldman Sachs said today in a report.
Home price declines will probably drive defaults in non- traditional loans such as Alt-As, which often include limited or no income documentation, resulting in $40 billion in markdowns, the analysts added.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ajirYNA8Yqeg
Top 10 Ways You Know the Property crash Has Gotten Out of Hand
10. “Open a crack house” is on the list of ways the government suggests you can help finance your home debt.
9. Duane ‘Dog’ Chapman is afraid to get out his car in your once middle-class ‘hood.
8. “Here’s a $300 dollar cheque to help you open a crack house” arrives in the mail from the government.
7. Wesley Snipes knocks on your door and offers to help you solve your money issues.
6. Purveyors of late-night “Paid for content” are offering systems guaranteed to earn you millions with no money down by “flipping municipalities!!!”
5. The “Mountainview Ghetto” video shows up on YouTube.
4. Your property tax cheque says “Pay to the order of The Government of Singapore”, despite the fact that you still live in the USA.
3. It’s really starting to look like a Black Democrat and a female Clinton have a shot at the White House.
2. You send your final mortgage payment demand back to your lender, with your house keys included.
and the Number 1 way You Know the Property Crash Has Gotten Out of Hand….
Your lender sends back your jingle mail, having added the keys to their own offices!
http://chicago.craigslist.org/nch/rfs/552509656.html
Five houses from a “foreclosure specialist”, each asking over a million dollars. That must have hurt some lender. And that faux-Wright design is so wrong!
$990K in Skokie, IL?
Pull the other one, dude, pull the other one.
“Notice how the same people who say the storm has passed are the very ones who never saw the storm coming in the first place…”
From a commentor on the Business Week article.
Priceless!!
That is priceless! I’m going to use that quote quite a bit!
Rotflmao. That quote you picked Curt, is too priceless. That is a great way to shut some people up!
Got popcorn?
Neil
Where is the Biz Week article posted?
bend prices dropping like stone. sold in 06, for 287k. Same houses today are closing for 250k. sold another in 06 for 350k. Same townhomes going now for 315. Both indicate a 10% drop so far. We used our profits to buy a house in Logan Utah free and clear and used the extra to put 20% down on a townhome in the same complex we sold out of. but a much better situated unit. But we paid 400k and dont want to sell it for 315k and lose our 80k down. But gotta be creative to hold. we are renting out our Logan home on a lease option and renting out our Bend property and renting another property ourselves to make up some of the difference. Its a hovel, but hey at 450 a month it aint so bad. Plus I started working as a teacher. And walk to work. Things are different in Logan, Utah, really. In a fundamental way, we did not like over from heaven and down makes a seven public school. Or the heathans vs. the chosens in P.E. or the scary things done to the girls in the alcoves. Silly realtor promised us a 50/50 blend, but we found out different. Beautiful area, hope prices hold up there. But if they drop there they will drop everywhere, so everything is relative I guess. just hope lease to own guy does not take advantage of us like every Mormon businessman we dealt with. we thought no drugs would be great, just don’t know where all the girls are on Sunday afternoons. With dad in his alcove. Not prejudiced, just scared for our daughter’s safety being circled by the older boys on sunday afternoons when she was the only girl out playing. so we ran back to C.O., but its so californicated it is not even funny, thus moving to the sticks and paying 450/month in rent and trying to ride out the storm. gonna use the proceeds from the Utah sale to pay down the mortgage on the Bend place and should be alright….maybe!
Utah prices are melting down just like every where else. Logan is not immune, even the local realtors are talking about how all the ‘investors’ have bailed out of the market.
Talked my sister into selling last month, closed just before two comparables went into repo for $200k less than her place.
By the way, if painting all Mormons as child molesters and cheats isn’t prejudiced I don’t know what the word means. Weird Sunday afternoon references dude. Smoking some magic mushrooms you found in the forest around Bend? You sound a bit paranoid.
Also, paragraphs, have you heard of them?
Good luck not getting killed in your ill-advised ‘investments’ in both Bend and Logan, you will need it.
jb
Logan, Utah?
If you’re not LDS forget about it. What’s the median income there?
$20,000 a year.
People are as mean as snakes there if you’re not LDS.
Good luck.
Thanks, not trying to sound prejudiced, just giving the anecdotal evidence of non mormons living there without any seer stone to guide them, it seems creepy and sexist. So be it if that bigotry, it was shown to us as we were shown the door. I like snakes, you are giving them a bad name, prejudiced comment, comparing them to Mormons! Mine is actually quite friendly. He types for me, just can’t get him to hit enter which apparently bugs jb.
I was out walking around in Mountain View today, saw several “short sale” properties for sale, lots of regular “for sale” signs including at several shabby apartment complexes that had presumably been converted to condos. Crossed the pedestrian bridge over into Palo Alto, and the signs disappeared. Give it time, though.
Txchick - can you please email me. I have a friend in Dallas who is looking for a bulldog. You are involved in some rescue groups?
Stephen @ hilltx - com
‘When you go out to refinance your life’s work, you’d think the broker would be there to help you.’” How very sad. Yes, its true. You used to be able to expect honesty, not just from brokers,but from EVERYBODY!
But people who worship the god of the Mercedes Benz have no idea bout ethics. The American people brought this on themselves. No more
“In God We Trust”. Judgement this a-way comes. I know, I know, that makes you mad.
You’re the one that sounds angry. I’m feeling better every day.