Being Bold in Rough Economy

January 30, 2009

The economy is in deep trouble.   It’s bad now, but this is just the beginning.   There will be fundamental changes in the global banking system, the use of credit and the value of currencies.   It’s going to be rough.

So what do you do?   Wait it out?

I think this is a time to be bold.   Not stupid or careless, but bold.

So, in keeping with my “Be Bold!” strategy I’m still spending money, investing and growing my business.   In fact, I’m working on buying a pretty expensive domain name for a project right now and I plan to launch two completely new businesses in the next two months.

One of my biggest sources of income is selling domain names.  [I'm not talking about ultra-premium names I've kept in my portfolio for years either.   I'm talking about buying and quickly reselling domains for ~$300 each.]    Anyhow…In September of 2008, it really appeared that this part of my business was on a serious decline.   I couldn’t help but only expect it to get worse.

But, As quickly as my domain sales went down, they came back.   Right now, January 2009 is looking like my second best month ever.   How much money did I make flipping domains this month?  It’s a big number, trust me.

So, if I’m selling domains, that means people are still buying.   The world (especially the world of entrepreneurs and small businesses) is made up of innovative people who will strive to survive the downturn.   But more than that, there are many that will “Be Bold!” and take advantage of opportunities and weakness in the marketplace.

Your task, if you want to thrive in this bad economy,  is to serve be Bold by serving the Bold.


Foreclosures continue to expand…

August 15, 2008

According to the website zillow.com 1/4 of all houses sold last quarter were sold for less than was paid. Not only are people dumping their real estate as fast as they can, foreclosures just continue to accelerate. It seems that the government bail out plan hasn’t had an immediate effect on the problem.

If you’re interested in taking a look as some of the many foreclosure listings you can access one of the top sites on the Internet for free foreclosure listings, including foreclosed homes in all 50 states, HUD foreclosures and Washington Mutual REO properties.



High Gas Prices = Mad as Hell!

April 29, 2008

Ridiculous. Yes, $3.50+ for a gallon of gas is ridiculous. If you ever want it to change you need to be mad. In fact, you need to adopt the mantra of Howard Beale from the 1976 film, The Network. If you haven’t seen that movie, you should. It was far ahead of it’s time.

Anyway, Howard a network news anchor goes on prime time TV and loses it. Repeating over and over Howard says, “I’m mad as hell and I’m not going to take this anymore!”

Upon whom should we direct this anger?  Not the usual suspects, I would suggest.

The oil companies, gas stations, the rich monarchs in the middle east, and the OPEC cartel are NOT to blame. Sure, they’re benefiting from the situation. But, they’ve ALWAYS benefited. And why shouldn’t they? They provide a service to you don’t they?

Think about all the pain in the ass it must be to dig that nasty oil out of the sands of some of the most inhospitable regions on earth and move it half way around the world, processed, refined and delivered to a 24hour pay at the pump service stations on your neighborhood corner.

Considering the convenience of having it delivered to you so smoothly, shouldn’t these guys make some money? Most of us certainly thought so when gas was reasonably priced didn’t we? This is America after all and we don’t mind people making a profit. “But now it’s too much!”, you might be saying.

Recently, OPEC’s president came out and told it like it was. When the dollar goes down just $.01 in value (due to inflation, bad economic policies, etc) a barrel of goes up by $4. A similar thing happens with eggs, milk, corn, gold, copper, beef and just about anything else you can think of.

It’s time we face the facts: Just about everything that matters is getting more and more expensive and the primary reason for it is that the lovely US Dollar is becoming worth less and less.

“A weaker U.S. currency, besides pushing up the price of foreign goods, also drives up the price of commodities priced in dollars, such as oil, which has a big impact on consumer spending by Americans.” according to a recent article by CNN.

So who’s to blame?

Well, we are. Or at least our leadership is. The Federal Government is spending money it just doesn’t have. So what does it do when it doesn’t have enough money? They fire up the printing presses and make more money. Every dollar they print makes the few dollars in your pocket worth less and less. According to ShadowStats.com they’ve been printing a heck of a lot of dollars.

M3 Growth

The sad truth is none of this is going to change. The next president/administration and congress are just going to do more of the same. None of the three jokers now in contention for office addresses the simple fact that the destruction of the dollar is quietly stealing all the wealth of the American people.

And why should they? You don’t care about it do you?

You’re just mad because it costs you too much to fill your gas tank. You want the simple solution. You want to blame some “towel head” half a world away or the big evil oil companies it’s so much easier to blame others for our increasingly desperate situation.

Or even better, you want the government to help you by printing billions more and sending you a check for $600….

Things are going to get far worse until two things happen.

First, We must wake up to the facts. We must sseek out the truth and stop being fooled into simple blame the pathetic man from Salta, Argentina who’s never earned anything for himself or had any job daddy didn’t give him named Juan Esteban Romero or blame the arab thinking. High gas prices are a symptom. They are not the problem.

Second, as Howard Beale would suggest, you’ve got to get mad. Really mad. You’ve got to get so mad that you’ll opening your bedroom window and shout at the top of your lungs, “I’m mad as hell and I’m not going to take this anymore.”


Flood of People Set To Walk Away From Their Mortgage

April 18, 2008

Panicked by rising foreclosures, banks and the government are willing to do just about anything to stem the tide. More regulations, rules, bailouts (primarily directed to the banks themselves) may slow the reckoning, but ultimately doesn’t the market need to do what the market does?

We’ve discussed this before here… The catalyst to the current economic crisis was real estate and although there are many other fundamental problems with the US economy (debt, trade deficits, weak dollar, etc.), real estate is the primary problem.

The trouble with realestate is that prices went up so much so quickly. Naturally, nobody complains when the market is driving prices up at an absurd rate. When things go the other direction (even falling just 5% so far), regulators and politicians act as though the sky is falling.

The tipping point: Walk Aways (AKA MilkWalkers)

Fact is things can, and probably will, get much worse. Right now, a number of market forces are doing their thing… correcting the market and driving down real estate values. These forces squeeze even the non subprime homeowners. Putting their biggest “investment” in the red.

Adopting the Milk And Walk Strategy

Underwater on their homes, reasonable, responsible homeowners must ask themselves if it’s worth sticking it out. At some point, more and more homeowners who could afford to pay their mortgage will simply stop. They’ll stay in their home not paying the mortgage for as long as they can. And when the bank says they need to leave, they’ll just walk away. This Milk and Walk strategy is shockingly effective. As more people discover it, it’ll become widespread.

In fact, I know two people that are doing this right now. One hasn’t paid a mortgage payment in 11 months. He’s still in “his” home that he “bought” two years ago for 2,500,000. He’s stalling the bank through a variety of strategies. At the end of the day, he’ll simply walk using a years worth of mortgage payments to fund his future rental home.

Barriers to Milk Walking…

As prices plunge there’s only a few things keeping people from pulling the plug on the mortgage payments and voluntarily going into foreclosure.

  • Future Prices Psychology: If the homeowner believes that things are bad now and only going to get worse, they’re far more likely to stop paying, milk the clock on the bank then just walk away. Each individual does what they think is best for them and their family.
  • Social Stigma: If homeowners think they can cut their losses and walk away from a bad investment without being looked down upon by other people they’re far more likely to do it. There might still be some negative view of people who walk away from their debts, but more and more it appears that homeowners are being cast in the role of victim. This makes it far easier for them to walk away from the “injustice of unscrupulous brokers, banks and appraisers.” As more people turn to a Milk the clock then take a walk strategy, others will follow in greater and greater numbers. The “social proof” that Milking/Walking can be done and that others are doing it will cause numbers to increase massively.
  • Availability of other options: Homeowners truly struggling probably won’t be too picky about the housing they’ll be in after they decide to walk, but better heeled homeowners will. If there are good rental housing options at reasonable prices then these folks are much more likely to make the decision and pull the plug. Given the available inventory of unsold homes on the market, I’m guessing many will have to be converted to rental. If this happens then these “MilkWalkers” might be able to walk away from a mountain of debt in their old home and actually UPGRADE to a better home as a rental saving thousands of dollars along the way.

Quite frankly, if this trend picks up I don’t see what can stop the downward spiral in the economy. It could be bloody. The trillions of dollars “lost” in this scenario would make the losses to date look like a rounding error. I think if the trend picks up, government officials might step in with a carrot and stick approach to solving the problem perhaps going to the extreme of making it a crime to walk away. That would certainly be a frighteningly high level of government intervention in our “free markets”, but so far they’ve indicated they’ll do just about anything.


Three Percent of Homes To Go To Foreclosure

April 16, 2008

Shocking information from Pew Center shows that 3% of homes will face foreclosure in the next three years.   It’s  far worse in some states like California which is projected to have 1 in 20 or 5% of all homes turn into foreclosures.   No, doubt the dream of home ownership has been shattered by recent economic twists and turns.

What about those that don’t go into foreclosure?

Plummeting real estate values will dominate the landscape as more and more homes are seized by banks and liquidated at far lower values.   Neighborhoods likely will deteriorate.   “Wealth” will be destroyed.   If PEW is right, it looks like those on CNBC who predict we’re at a bottom are very wrong

The credit crisis started in housing and will continue to expand as housing values continue to deteriorate.   Until we reach a floor in real estate values, how can we not see continued erosion of the credit markets?

I think the cycle of pain is just getting started.


Smart Cars hit Iowa

April 15, 2008

Driving around Davenport today, I saw two different eco friendly cars.

One was the long awaited “Smart Car” (see below). A young couple (probably about 30 years old) drove this into a local shopping center. I guess since they saved so much money on gas they wanted to apply that savings to some consumer goods.

Earlier in the day I saw an even smarter car driving down River Drive in Davenport. Since it was going the opposite direction, I didn’t have a chance to check out exactly what brand it was, but it appeared to be like the one below, a 3 wheeled Electric Condor II.

Incidentally, the Condor II does look way more economically interesting than the Smart car. It’s 100% electric costs about as much as the Smart Car and gets up to 80 miles on a single charge.

I think this is going to be a huge trend (as long as credit for new cars is easy to come by). It’s not so much that people want to do what’s economical (especially in the case of the “smart car”). Let’s face it a new car, even a ‘smart one’, isn’t economical. How long does it take you to recoup your outlay. Financing, depreciation, etc. etc. Especially since the “Smart Car” gets only 32 MPG!

Also, It’s not so much that the environment is the priority, rather it’s that Green is cool. And people always want to be cool. Being seen in your Smart car is like being seen in a Porsche. It strokes the ego in exactly the same way, but for different reasons. It’s always nice to show how much better you are than those around you. Green is the new cool brand.


Inflation is our friend!

January 23, 2008

If you don’t subscribe to http://dailyreckoning.com/, you should. It’s free, funny and a much needed bit of financial common sense. Today, Bill Bonner republished a portion of an old SNL skit.

Dan Akroyd pretending to be President Jimmy Carter on Saturday Night Live and 30 years ahead of his time:

“President Jimmy Carter: Good evening. On Tuesday, we Americans will have the opportunity to exercise our role as citizens in a free democracy. Yet, only a third of the eligible voters will actually cast ballots. The other two-thirds are, in a sense, very lucky. Because they do not know what’s going on.

“Last week, I delivered a message on inflation. Since then, the dollar has dropped in value, the stock market has sustained record losses, and the whole Dow price index increased 0.9%. In other words, our economic system is screwed, blued and tatooed! We just have to face the fact that there is simply no way to fight inflation in a capitally-intensive, highly-technological, conflict-riddled, anything-for-a-thrill world of today. That’s why, tonight, I want you to try to look at inflation in an entirely new way: Inflation is our friend.

“For example, consider this: in the year 2000, if current trends continue, the average blue-collar annual wage in this country will be $568,000. Think what this inflated world of the future will mean – most Americans will be millionaires. Everyone will feel like a bigshot. Wouldn’t you like to own a $4,000 suit, and smoke a $75 cigar, drive a $600,000 car? I know I would! But what about people on fixed incomes? They have always been the true victims of inflation. That’s why I will present to Congress the ‘Inflation Maintenance Program’, whereby the U.S. Treasury will make up any inflation-caused losses to direct tax rebates to the public in cash. Then you may say, ‘Won’t that cost a lot of money? Won’t that increase the deficit?’ Sure it will! But so what? We’ll just print more money! We have the papers, we have the mints. I can just call up the Bureau of Engraving and say, ‘Hi! This is Jimmy. Roll out some of them twenties! Print up a couple thousand sheets of those Century Notes!’ Sure, all these dollars will cause even more inflation, but who cares? Everyone will be a millionaire!

“In my speech last week, I said that America would have to undergo an austerity program, but since this revolutionary new approach welcomes inflation, our economy will be free to grow, and we can spend, spend, spend! I believe the watchwords for the ’80s should be ‘Let’s Party!’ And in that spirit, I’d like to say, ‘Live, from New York, it’s Saturday Night!’”


Foreclosure Filings Nearly Double

October 11, 2007

Every month it gets worse and there’s no relief in sight as the biggest batch of adjustable rate resets are still yet to occur.   Credit markets are frozen, people are over spent and the pain has just begun to be felt.  The perceived wealth of American households is evaporating as  home foreclosures double.

Foreclosure Filings Nearly Double: Financial News – Yahoo Finance
U.S. Foreclosure Filings Nearly Double in September Over Same Month a Year Ago


$6.28 for a gallon of milk

September 29, 2007

Earlier this week my wife reported that she’d spent $6.28  on a gallon of milk.    Granted it was organic milk, but still!   $6.28 seems to be a staggeringly large number and here in the farm belt… Davenport, Iowa no less.

And yet, inflation is not an issue we’re told…

Clearly the powers that be don’t shop for groceries….or read commodity reports

“Illinois corn and soybeans are up 40% and 75% from a year ago. Kansas wheat is up more than 70%. In Georgia, three-pound chickens go for record prices, up 15% from a year ago. A pound of whole wheat bread is up 24%. Whole milk, up 26%,” reports Capital & Crisis’ Chris Mayer.

The government wants us to believe that inflation is not a problem. Tell that to America’s families, who face the fastest rising food prices in more than 17 years. That’s on top of rising energy prices.


It’s time to be a foreclosure investor

August 21, 2007

If you are an investor, you may already know that real estate offers many exciting areas for revenue and profits, but unless you are considering foreclosure properties as well, you may not be getting the most for your property dollar. Under current market conditions, it’s important to be a bargain hunter, and with the boom in foreclosures there’s a real opportunity for well positioned investors.

In general, a foreclosure is a real estate property that has been repossessed, usually because the owner was not able to make mortgage payments. Once the lender legally repossesses the property through a legal process known as foreclosure, the property can be sold again to investors and other property buyers. There are several sellers you can turn to for a foreclosure:

1) The government. When a home owner defaults on a home loan insured by the government, the government pays the lender for the money lost through the loan. In exchange, the lender hands the home over to the government agency and the government then sells the property in order to make up the money that has to be paid to the lender. From the government, you can buy an HUD foreclosure, a VA foreclosure, and a Fannie Mae foreclosure.

2) Banks and other lenders. When a home loan is not insured by the government, the lender has all the responsibility of a bad loan. This means that when the owner defaults, the lender repossesses the property and tries to sell it themselves or through a third party.

3) The owner. When an owner knows that foreclosure is imminent, they still have the option of selling the property as a pre foreclosure and paying off the lender. This saves their credit and may give them some cash. Buying a pre foreclosure can be risky but can also give an investor some great deals in real estate.

However you buy a foreclosure, you can expect certain benefits. Most of the time, a foreclosure is sold under it’s market value, which means that you can buy this sort of property very inexpensively. Since a foreclosure may have been neglected for a while and since the seller wants to get rid of it fast, you can expect savings of 5% to 50% and more when you buy a foreclosure. This means that you enjoy instant equity you can use right away. The low price also means that you can offer great deals on the property to your own buyers and renters. Plus, the low price and equity you get on a foreclosure can mean very affordable financing, so that you save money all around, which an boost your bottom line.

With these benefits, you may want to buy a foreclosure of your own. Don’t look in your local real estate section, though – most foreclosure properties are unadvertised. The best way to find a foreclosure is to subscribe to quality foreclosure listings service. Good foreclosure listings offer frequently updated lists of foreclosures that are available for you right now. Online home foreclosure listings such FreeForeclosureDatabase.com make finding a foreclosure a snap, no matter where you live. Plus, you can browse Listings for free. No registration is required, so there is no need for you to pay big bucks to make money with foreclosure properties.


Don’t worry inflation isn’t a problem….except

August 16, 2007

I remember having a conversation with my portfolio manager nearly two years ago about inflation.    I was telling him that despite the official numbers, it seemed to be common knowledge that inflation was running rampant.    He agreed with me that the exclusion of Food and Fuel (the only two things you need to buy) from the CPI made the numbers incredibly misleading, but we had divergent opinions about how serious the problem was.   For my part, it seemed clear that it was taking a big toll on average citizens.

Even though it’s well accepted by nearly everyone I speak with, our “leaders” keep telling us that we’re just out of touch with the economic realities.    Meeting with economic journalists last week, President Bush dismissed several polls that show Americans are down on the economy. He expressed surprise that inflation is one of the stated concerns.

“They cite inflation?” Bush asked, adding that, “I happen to believe the war has clouded a lot of people’s sense of optimism.”

That’s right, Americans are just out of touch and have a clouded “sense of optimism”.    While it’s understandable that Americans might be a little pessimistic due to the planned “generation of warfare” against the “evil doers” (who they are exactly, no one can be sure.),  I think the pessimism comes from a source much closer to home.  The grocery eisle, for example:

According to McClatchy Newspapers- The Bureau of Labor Statistics said in its July inflation report that egg prices are 33.7 percent higher than they were in July 2006. Over the same period, according to the department’s consumer price index, whole milk was up 21.1 percent; fresh chicken 8.4 percent; navel oranges 13.6 percent; apples 8.7 percent. Dried beans were up 11.5 percent, and white bread just missed double-digit growth, rising by 8.8 percent.

These numbers get lost in the broader inflation rate for all goods and services, which measured 2.4 percent for the same 12-month period. Across the economy, rising food prices were offset by falling prices for things bought at the mall: computers, cameras, clothing and shoes.

If you’re in the market for a new flat panel HTDV,  you’re in luck.  If, however, you’re trying to feed your family, fill up your gas tank or simply save for the future you’re probably feeling like stretched to the max.    Add in the recent market, credit, and housing turmoil and it can seem like the sky is falling.   Or maybe that’s just my “clouded optimism” speaking due to the 41 tragic and unnecessary deaths of US soldiers in Iraq this month so far.

Are you feeling the effects of inflation?   What impact is it having on your daily life?   I’d love to hear your comments on this important topic.


Foreclosure stats underreported in 2006

August 9, 2007

Nearly Everyone is becoming more concerned about the sub-prime lending mess and the subsequent home forclosures.   Now, a recent analysis shows that Real Estate foreclosure stats were actually dramatically underreported in 2006.  

According to the ECM Post Review:

More than 60 community leaders from outstate Minnesota gathered in Saint Cloud to hear the results of a new study documenting that foreclosures in Minnesota are occurring at twice the rate previously being reported to Congress and other policymakers. The summit was convened by Greater Minnesota Housing Fund, a statewide non-profit affordable housing organization.

“This newest study reveals what was an invisible epidemic of foreclosures in Greater Minnesota,” said Warren Hanson, president of Greater Minnesota Housing Fund. “We now see that the foreclosure crisis extends to every corner of the state and hurts both families and neighboring property owners,” said Hanson.

The new study quantified for the first time the number of actual sheriffs’ sales of foreclosed properties county by county in Minnesota in 2006. It found a stunning 11,207 foreclosures statewide – nearly double the 5,995 reported in a national study conducted by RealtyTrac, a leading provider of real estate industry data, over the same period.

What if the foreclosure reports for 2006 are substantially off not just for MN but for the entire country?   What does that say about the reporting systems in place currently?   And, doesn’t this situation make the lender mess look even worse?   

Bad news all around… Unless, of course you’re a Real Estate investor in a strong buying position.   There’s lots of buying opportunities out there and it’s easier than ever to browse through home foreclosure listings to find great deals.    Appraisers, Brokers, Banks, the Fed and homeowners themselves drove the Real Estate bubble.   As it pops, there’s many great opportunities to profit from their excesses.


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