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Wednesday, March 24, 1982

03.24.2007 - Weekend Open Thread

This is your open thread for the weekend of March 24-25, 2007. You may post random links and off-topic discussions here.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

109 comments:

Lionel said...

I realize that I'm probably the only one amused by the following, but, here it is anyway. I just zillowed the house I just rented in Ravenna. 509K. Hmmm, I'm renting it for under 1700, so it would list for roughly 300X rent! Either I've just got the single greatest rental deal in history, OR (especially considering the fact there was only one other interested party, and it had been on craigslist for a month)... there's a massive equity/housing bubble. You choose.

meshugy said...

That sounds like a pretty good deal...however it depends on the location, size, and condition of the house. Where is it?

Lionel said...

It's on 26th Ave., near 55th, near Ravenna park AND UW, where I'll be in grad school. We literally couldn't have found a better place for us. We love craftsman houses, and it's in terrific condition, with a completely and tastefully renovated kitchen (viking, bosch, blah blah blah - no granite). A little more urban than some would like, but it's completely removed from traffic and businesses. And most importantly, near Zoka coffee, where I'll likely spend three hours a day.

The larger point is that it wasn't hard to find, and the price is comparable to other houses near there. The day my wife and I were deciding on it, a woman was frantically trying to get to us, as she had a house in Montlake to rent for 1050. Not as nice a house, but Montlake's a nice neighborhood. I was just eager to be in the Ravenna school district for a number of reasons.

The gap between renting and owning just seems a little silly to me. 120 - 150X would mean that this house would sell for 200, 250. If that were the case, we'd buy. But 509? That's absurd. The rent wouldn't come close to covering the mortgage.

Daniel said...

I just made an offer on a starter house for 30k below asking price (410k -> 380k). Going through inspection right now. House prices are already going down :)

I should have waited, but I got a low enough interest rate where I didn't care if it dropped down another 50k.

Once those interest rates go up, house prices are gonna collapse in a big way here.

meshugy said...

I just made an offer on a starter house for 30k below asking price (410k -> 380k)

Can you provide an MLS#?

meshugy said...

It's on 26th Ave., near 55th, near Ravenna park AND UW

Great location for a grad student!

Sounds like you're close to a lot traffic and frats though...the same house would rent for a lot more in Greenlake, Queen Anne, etc.

Lionel said...

Daniel, I'm not even so certain that interest rates have to go up for prices to come down. I'm much more familiar with California stats. We're at 11.5X income for a median house ($570K) right now. That's totally unsutainable. The only way we could keep on that track is if people pretty much stopped buying anything else. Of course that might just have a little itty bitty negative impact on the economy. I don't know what the Seattle income to median multiplier is, but judging from my rental, it's probably pretty high.

Lionel said...

Shug, I think you're right about Queen Anne. Too far from school to make sense for us, but the prices certainly seemed significantly steeper. I did find a number of nice rentals for 1600-1800 in Greenlake, but I was less familiar with the school district there, so that was a no go. Traffic, not so bad, as we are set back on a hill. Frats? I'll find out in September.

And again, it's not so important that it might rent for more in another neighborhood, according to Zillow anyway, the gap between renting and owning is much, much too great.

I actually looked at Ballard too. Great place. If it weren't for the distance from UW, we might have landed there. There are a number of terrific rentals in the 1500-1900 range there.

I don't know, Shug, sometimes I think this blog has become so contentious between you and some of the others that it seems like information isn't shared or respected at all. It just ends up being a pissing match.

I have mixed feelings about the bubble popping. My family owns a lot of property in both socal and nocal, so it doesn't really benefit is that it happens. On the other hand, I fear for a society where hard-working professionals can't afford a median home. That's simply wrong.

Whatever I feel about it, of course, is entirely separate from what will happen. I just can't imagine these inflated prices continuing to increasead infinitum. One thing I have learned about in grad school is the reversion to the mean.

Anyway, my apologies to everyone else for taking so much blog space.

Daniel said...

Can you provide an MLS#?

I would prefer to not to post where I am going to be living on the internet. If the inspection reveals a rotting foundation and I bail out, I'll post the MLS.

In the mean time, I'll gladly email/phone it to you.

ron said...

I rent a house about 1/2 mile off I-90.. Zillows for 540,000. Rent is 1,495.00 per month.. 2200 square feet recently remodeled. Only about 1/2 mile off the Freeway.

House across street rents for 1,300. present people have lived there for several years also about 2,200. square feet zillows for 500,000. dollars. The owner has owned that house for many years. Guess since the renters are highly disirable he has never raised there rents.

Same as myself, I rented this place going on 3 years and never seen a rent increase. I first started renting in the year that saw 20% rent decreases. I pay just a portion of the overall rent with 3 other roommates.

I work for Boeing and have a savings rate of roughly 60-70% of wages.. How many times is that over the national average? How many people renting from the Bank can claim those numbers?

My money is on Gold some in looking for some short postitions in the markets currently. Been eyeing Countrywide recently. Studying Currency Trading at the moment as well.
Was long on several positions up to a while ago in the markets. Now very cautious... Only holding shares in Boeing and my vip money has been shifted into Stable Value recently. Im not crazy about a good portion of there assets are Bonds in Fannie and Freddy Mac, Then again all things considered- The Government willing to bet would do anything to protect those 2 companies.


anyone see Suzie Ormans investment portfolio-- SHE IS OR MUST BE THE BIGGEST BEAR AT HEART.

Shes holding some in Real Estate about 1 million in the markets the rest in Guaranteed Municipal City Bonds that even if the Cities go Bankrupt, "Shes Guaranteed.. Its like Wooow-- She must be one of the biggest Bears at Heart.~!!

Brettro said...

apologies if this was already posted, but I thought it was a good read for someone like me who is still learning about the credit bubble chaos. 1 in 3 ARMs end up in foreclosure, yikes.

Bummer on the ARMs Front

Perplexed said...

"anyone see Suzie Ormans investment portfolio-- SHE IS OR MUST BE THE BIGGEST BEAR AT HEART."

I don't think that is the case. Her portfolio is so big that it generates more than enough income to meet her needs. In addition to that she doubtless has substantial income from her employment/performance activities.

meshugy said...

1 in 3 ARMs end up in foreclosure, yikes. netween 2004-2006 and had an initial teaser rate of less than 4 percent.

That's actually a small percentage of ALL arms.

MisterBubble said...

Hammer,

Do you even realize how silly you sound?

Someone shows that their rent is dramatically lower than the mortgage cost of their home -- you tell them that it's because they live near frat boys.

Someone else posts that 1/3 of ARMs ends up in foreclosure (a statistic that could probably be attacked on its own merits, incidentally), and you make the dubious, unsupported argument that sub-four-percent teaser loans aren't a significant portion of the market.

Meanwhile, what kind of evidence do you post? Articles from 2005. Newsitorials whose sources are exclusively employed by the NAR. Inaccurately-titled stories that claim one thing, but actually show another.

I could go on.

The reason that things have become so "contentious" for you, is that you behave like a petulant child. You don't listen to other arguments, you repeatedly spam the forum with the same inane links, and you are seemingly impermeable to logic and reason.

In short, you act like a moron, you add nothing to the conversation (other than blind dissent), and most recently, you've increasingly taken to a creepy and threatening persona.

Where is your credibility? Do you care, or are you simply seeking attention?

Mike said...

'Shug - I enjoy reading your comments. I don't think you act like a moron, and I certainly don't think you have a "creepy and threatening persona". I encourage you to keep posting, as it is nice to hear some perspectives different from the usual suspects on this blog.

Misterbubble - Thanks for taking a big 'ol dump on an interesting and respectful conversation.

Some points to keep in mind:

- Lionel said that his rent was far under the "Zillow value", not far under the mortgage cost of the home. Naturally, the Zillow value is a raw guess. My interpretation of Meshugy was he was trying to understand why the place would rent at such a discount. Frat boys and traffic would explain such a discount.

- The article says that 1/3 of ARMs with a sub-4% teaser rate end up in foreclosure. Meshugy claimed that these types were a small % of all ARMs. While unsupported, his claim is far from dubious (I personally would be surprised if his claim was wrong). Perhaps rather than attacking someone for posting an unsupported claim, you can refute their claim by citing some statistics. That would be beneficial for everyone.

- The Tim does a great job of posting very well-thought-out analysis and conclusions. Ad hominem attacks really detract from the effort that he and others have put into this blog.

I think the reason things have gotten so contentious around here is just a plain lack of respect. Because someone disagrees with your point of view doesn't mean they are a moron.

ron said...

1,700.00 dollars for an Mortgage of 500,000. dollars?

What are you implying above? That the cost of a 500,000. mortgage is fairly close in cost of a 1,700. rental.. which Planet are you Borrowing Money from.. or are talking about The Teaser Rate part of the Mortgage Loan.

Mortgages are easy to Figure.. Just take the Interest RATE X 5 To calculate the Loan approximatly that Loan on 500,000. at about 7% which is probably pretty close on after all the fees and such... WOULD COME IN ABOUT 3,500.00 A MONTH

I dont think 3,500. dollars a MONTH IS ANY WHERE CLOSE TO 1,700. Dollars a month..

If you think there fairly close why dont I send you my address and you could mail me the difference every month..

ron said...

even an 100% interest loan wouldnt put you in the ballpark.. of getting an 500,000. dollar loan.

That would be about 2,800. dollars a month without even figuring in the Cost of insurance and Taxes.


I think you have to get one of those low-low teasers that promise 500,000. dollar mortgages for 1,500. dollars a month.. However we all know after all the adjustments up your real price is probably closer to 4000,00. dollars a month with everything included.

ron said...

Interest only loan would most likely be made with about 7- 7 1/2 interest rate

meshugy said...

WOULD COME IN ABOUT 3,500.00 A MONTH

Not really...if you paid 20% down and got a 6% interest rate is would be 2398.20 a month.

ron said...

Of course if you actually get a 6% loan the amount of mortgage cost would be about 3,500. a month..

5% if they exist anymore.. would be about 3,000. on a 30 year fixed 500,000. dollar loan.

MisterBubble said...

Mike,

Forgive me if I'm wrong, but I don't think you've been posting here for very long; those of us who have are quite familiar with Meshugy's "reasonable" brand of argumentation.

"My interpretation of Meshugy was he was trying to understand why the place would rent at such a discount. Frat boys and traffic would explain such a discount."

He's not trying to "understand" anything -- he systematically advances this same line of argument every time someone points out the easily verifiable fact that rents in Seattle are nowhere near the same-property PITI. If it isn't frat boys, it's street access, traffic, proximity to a convenience store, whatever...when dealing with meshugy, there's always some deficiency in your data, but there's no limit to the questionable, unsupported drivel that he can spew.

Again, this is a pattern -- Meshugy sounds reasonable if you're new to the conversation. If you've been here a while, you realize that he never considers the counterarguments. He posts the same crap, again and again, and runs away when challenged.

"Meshugy claimed that these types were a small % of all ARMs. While unsupported, his claim is far from dubious."

Prove it.

"Perhaps rather than attacking someone for posting an unsupported claim, you can refute their claim by citing some statistics. That would be beneficial for everyone."

A) Sorry, but that's just not the way arguments work. You don't get to assume that something is true if stated by meshugy, until proven false by misterbubble.

B) I am unaware of a public source of information that would confirm or deny the "facts" that he has presented here. As such, I am quite confident that he's blowing smoke. But hey...if Meshugy can offer up some data to support his assertions, more power to him. His silence is deafening.

"Because someone disagrees with your point of view doesn't mean they are a moron."

Plenty of people disagree with me, and I don't automatically assume that they're morons. In fact, I tend to welcome reasoned, fact-based arguments from people who disagree with my opinions.

The thing is, Meshugy doesn't make arguments. He posts assertions, half-truths and propaganda, and more often than not, resorts to blatant deception to make himself heard. And lately, he's added threats into the mix, with his increasingly aggressive and unbalanaced insistence on obtaining personal information.

One final thing: I don't need to defend my "big ol' dump" on your polite, tea-party conversation. I have as much a right to make comments here as either you or Meshugy. I also happen to have greater context on his argumentative tricks than you do, and I'm choosing to call his bluff.

ron said...

meshugy you never cease to amaze me your always the glass is full when it comes to Real Estate... figuring out everything with rose colored glasses.

meshugy whats the National Savings Rate???..isnt that a negitive 2% I have been reading, or maybe rose glasses dont see the Big Picture?

20% down-- what, that im hearing and wheres the 20% coming from?

only 1 person I know that put down 20%.... Guess where that money came from the sale of there other residence.
Where that money come from? probably not someones pocket, most likely came in form of someone else getting an loan. Now fast forward to now, WHATS HAPPENING?

That loan money is drying up~!!

Real Estate is something that needs LONG CHAINS OF TRANSACTIONS TO OCCUR~!!

You start breaking those chains and many other transactions dont get done.

Without the easy credit many transactions are left swinging in the wind.

This isnt the stock market where I have money in my pocket and decide to buy share x.. Real Estate transactions are linked with suzie selling to Paul who first needs to sell his house to Fred in order to have the money to buy Suzies house.. Usually there is money being borrowed to keep the chain link from being broke.

Now All those Small Chain deals with first time buyers is getting Disrupted which spells bad for business of selling homes. First time buyers and Speculators are Small chain deals where only couple people need to be in the chain in order to get the deal done.

Where not the market is reliant on the large chain deals to get done to keep the music going.

ron said...

That is now the Market is Faced with having to resort mostly to LARGE CHAIN Deals..

Large Chain deals are nothing that speaks Upward Price Movements or Multi-Offers coming to the table.

You cut the Supply of those buyers that are getting those easy loans, Where are sitting? is the Question...

Supply and demand simple as that.. I think its only been recently that we actually have population thats surpassing the 2000 high before the Dot-Com crash. Yet ive read we built something like 15000 additional houses in the area while out population numbers are down.

Amazing it is with all the Cranes going down the freeway passing Bellevue-Woodinville-Seattle-Tacoma isnt it?

nearly 3 years ago I took a 8 month road trip arround the country and couldnt believe all the construction.. In fact I say Dallas Texas was about the Worst I seen. Now fast forward to today and I might say what were seeing traveling arround the area would something that might compare with some of what I seen in Vegas and Dallas.

This whole thing is simply a Gold Rush of easy credit chasing Returns- One hand simply doesnt know what the other hand is doing.

You think these builders are really that smart? you think maybe that punchbowl was spiked just a little to much?

Mikhail said...

Lionel said: "I'm not even so certain that interest rates have to go up for prices to come down."

I completely agree. In fact, my guess is that interest rates will head down even lower than anything we've seen in the last 10 year: for anything that is of low risk, that is.

As the global economy heads south, I expect to see a rush to "safe" investments like the sovereign debt of industrialized nations, and super-safe borrowers. All other kinds of debt will only be had with a HUGE risk premium.

For example, someone with a 750 credit score, putting 40% down might be able to get a 4% 30 year fixed mortgage, but someone with a 650 score, wanting to put 5% down would need to pay 25% interest.

In short, the spreads between investment, and junk, grade credit will rise dramatically. Central banks can lower their rates all the way to 0, but I predict we will reach a point where the fear of borrower's ability to repay will cause lenders to hugely tighten their loan criteria.

At least these are my current thoughts...

ron said...

Personally I dont care about house prices, Really..

As long as I can find a reasonable way of keeping costs down and saving/Investing over 50% of income.. I'm all with that~!!

All things aside it hasnt effected me ONE BIT~!! then again it mostly effects me with the worry of our economy. Our economy is much more important than wether paul paid 40% to much for that house that he thought was an INVESTMENT....... Which in the End He found out it was REALLY A LIABILITY~!!

Houses on the other hand should be affordable to people that are contributing to society. If you make them unaffordable to most then something has to give.

I always laugh to myself when I hear people bragging about how much there house gone up..hahahaha..
Funny thing is are they really getting any wealthier?? paying the extra tax and besides when they sell now they are forced to buy the other guys house that went up as well.

Lady at work was talking about her house going up 100,000. dollars in an average neighborhood in federal way and how she was really profiting from it.
I asked her how?? then she told me she could sell and buy somewhere else....
I then askded her where that other house MIGHT BE? Her response BALLARD..hahahahahaha...

I TOLD HER--SORRY-- That House in Ballard went up 200,000. Dollars... SHE WAS REALLY SILENT... Then said that couldnt be true--- I took her to Craigslist, to her disbelief it was more than true....

matthew said...

Shug does in fact, act like a moron. He posts the same b.s. all day long, he has been doing it for a long, long time. When actually called for statistics to back up his claims, he ignores your comments and instead posts 2 year old articles.

He skirts the boundaries between truth and fiction, and more recently has exhibited crazed stalker like behavior, seeking to know everyone's address or MLS listing on this forum that posts an anecdotal story.

Mike said...

Misterbubble - I've been reading this blog semi-regularly for I think about 8 months now. So, I'm very aware of what different people tend to post on this blog.

My assertion is that you should attack Meshugy's arguments, not him. And out of respect for others, you should (in my opinion of course) try to keep it civil.

You said: You don't get to assume that something is true if stated by meshugy, until proven false by misterbubble.

I never said that, and I never assumed his claim was true. I did say that his claim sounds reasonable. And I said that if you disagree with his claim, proving so would be beneficial for everyone. I'll futher claim name-calling is useless for everyone.

I am unaware of a public source of information that would confirm or deny the "facts" that he has presented here. As such, I am quite confident that he's blowing smoke.

Are you saying that if Meshugy states a fact that you can't find data to support, the fact is not true? This is a classic "Ad Hominem" logical fallacy.


Meshugy doesn't make arguments. He posts assertions, half-truths and propaganda,


As do a lot of other people who post on this blog. The only difference is they are all housing bears, and Meshugy is a bull.


I have as much a right to make comments here as either you or Meshugy.


You're right. You can post here whatever you want. Remember though, you reap what you sow.

I also happen to have greater context on his argumentative tricks than you do, and I'm choosing to call his bluff

Careful there. You don't have any idea how much context I have.

Tai said...

ron, stop flooding this thread.

first of all, just because you only know a handful of people, it does not reflect the actual population. In fact, the latest number estimates that ~35% of home owners do not owe any mortgage, therefore 20% down is not unusual.

second, mortgage rate is nowhere near 7%.

stop posting.

matthew said...

Tai,

20 percent down is not unusual? Do you have any statistics to back this up? Everything I have heard from those in the mortgage business state otherwise.

texas skeptic said...

Great location for a grad student!

Sounds like you're close to a lot traffic and frats though...the same house would rent for a lot more in Greenlake, Queen Anne, etc.


I live on the top of Queen Anne hill in a nice restored craftman and rent a 4 bedroom, 2 bath house for $2,000/month. Not very different than Lionel. The Zillow estimate is $616,000, but based on the heavy research I have done in Queen Anne, I suspect that the asking price would be north of $700K.

meshugy said...

I live on the top of Queen Anne hill in a nice restored craftman and rent a 4 bedroom, 2 bath house for $2,000/month.

Cool...where?

Matthew said...

Stalker!

Deejayoh said...

I'll add to the "rents not covering PITI" crew.

I rent a 3/3.5 Townhouse 2 blocks from volunteer park. Very nice neighborhood.

Zillow value is $628k. I rent it for $2100/month. Owner bought it it 2005 for $587k. If they are cash-flowing, it is only because they put down a lot and locked in at 5.25% - which could happen back then. I am too lazy to calculate actual PITI. Others with more time or interest may choose to do so.

However, I do they aren't making it up on "equity". A zillow-paper profit of $41k in 2 years ain't much to write home about. Won't even cover the comm/taxes.

As far as shuggy goes, I'm glad he's here. Stirs the pot. I just wish he'd throw a hardball once in a while instead of the whiffle-ball pitches he usually comes up with!

ron said...

Tai said...
ron, stop flooding this thread.


Wait stop the Presses...
I know as well that the rates are not nowhere near 7%-- However when people go down to actually get that loan there could be some shocks in what the True Cost is~!!

Just because you find references of interest rates being for example: 30-yr Fixed 5.68% 5.67%
doesnt mean thats the rate YOUR GOING TO GET.

Subprime loans cost have gone up quite a lot in the last several months and Interest Only which is alive & Kicking in Seattle... Is higher than the 5.68 stated for 30 year fixed. Your Credit rating and amount of cash NOW Carries a lot of weight when getting the loan.

ive been lurking arround this Blog for about a Year.. Its My Day To Post~!! The Party Is Just Starting To get Interestin now im out of the Closet.

Bens Blog has The True Real Estate Bears over there..

By the Way I know about dozen people in the Mortgage Industry and they are the Biggest Drinkers of The Kool-aid. I Count 4 people out of those that are busy playing the flip game here in Seattle.

In fact I know one guy with 5 empty houses- NOT ONE RENTED-- Why Because he thinks it will wreck his Appeciation. I know of another that just bought a house in Monroe for just a shade above 300,000. on a speculation play with a 60,000. year job carrying now 2 mortgages. And if you ask how that first person has been carrying those 5 mortgages ITS CALLED EQUITY MAKEING PAYMENTS.. Dont be fooled "Speculation is alive and kicking here in Seattle, AFTER ALL WERE DIFFERENT.

Im a motor mouth that extracts lots of information from various sources.. Ive been though all the couses (Kiyosaki, John Burley-Real estate, Carlton Sheets- The investor that just sells courses- hahaaaha.. Remember Dave Del Gotto- Hawaiian Shirt and all, the scammer of deals.. Dolf De Roos- Claims hes a PHD, kind of elementary at that... could go on then again im not crazy, I didnt ever pay retail for information amazing how cheaply this material sells for at a garage sale.. funny thing is hardly anyone involved in the specuation going on arround the country knew very little about what they were doing.

I have partnership with a cousin down in Texas on properties that postitive cash flow the way they should if your actually investing. Then again wasnt it Seattle Erics website that I went to recently and the complaint was that he couldnt seem to make anything cash flow without at least putting 50% down. Try Positive cash flowing properties in Seattle USING A 30% Year Fixed at todays prices.. WANNA LOSS 1,500-2000. Dollars a month for the Privilage of CALLING YOURSELF AN INVESTOR~!!

End of my Blogging-- OUT OF HERE.

Richard said...

Even in Meshugy's neighborood houses rent at a huge discount, though there aren't any frats nearby.

7503 Jones ave was purchased in December for $410K and popped up on Craigslist for $1500/month. Check out just about any unit being offered by Loyal Property Management (the main leasing company in 98117) and you'll find the same kinds of rental rates.

ron said...

Deejayoh--TOTALLY AGREE~~!!

Think of it this Way~!!

Imagine Putting your 600,000. CASH Paying the property in full and collecting 2000,00 dollars a month which comes to 24000,00 dollars a year.

WHAT KIND OF RETURN ARE YOU GETTING???

24000,00 Dollars on 600,000. dollars HAS ( 4% ) Written all over it.

4% for WHAT-- Renters that might or might not pay? Vacancy Rate- lets count that.. how about maintenance Taxes Insurence? and in Seattle if your Renters dont pay it can take a couple months of more to evict them.. That 4% Doesnt have MY VOTE..

Knock off the Appreciation and what do you have ONE BIG HEADACHE...

ron said...

OOOoooops- Now I forgot that since I have all this expected Appeciation that Im going to go out and Hire A Property Management company.

Oooh nO--- They want 10% of the Rental Agreement for there fees.. Wooow THAT 4% Might be Actually closer to 2%-3% when its all said and done.

EconE said...

I'll speak to the power of this blog and the posters on it. Other than the bulls (hello...econ 101). They finally were the "other voices" that saw the same thing coming and I had been talking about for a long time.

My dad's talking to a Realtor this week about putting his house on the market here in L.A.

I'll keep you posted.

Tim...you rock.

meshugy said...

7503 Jones ave was purchased in December for $410K and popped up on Craigslist for $1500/month.

That place is kind of a dump...very small, kitty corner to 24th which has tons of traffic. It would be a huge drop in quality of life for me to move into a place like that. I'd rather pay $900 more a month, have more space, a nicer place, no adjacent traffic, and be earning equity.

This exactly what I'm talking about, usually the rentals are the least desirable houses and aren't kept up very well. If you do get a really nice place in a good location, you pay for it.

Eleua said...
This comment has been removed by the author.
Eleua said...

I'd rather pay $900 more a month, have more space, a nicer place, no adjacent traffic, and be earning equity.

Shug, you don't earn dinky-doo until you sell. It isn't sold until you walk out of the closing with a check in your hand. That check is worthless until it is cashed.

MisterBubble said...

Mike:

"Are you saying that if Meshugy states a fact that you can't find data to support, the fact is not true? This is a classic "Ad Hominem" logical fallacy."

No it isn't. Ad hominem means "to the person"...a personal attack on another to counter their argument. To wit:

"Meshugy is a moron, therefore, his argument is wrong."

...which is not what I said.

Suggesting that an argument should not be believed without support is basic logic. It's not personal, and it's not specific to Meshugy.

Eleua said...

Because someone disagrees with your point of view doesn't mean they are a moron.


Well...sometimes it does. Case in point:

Anyone that thinks that renting out a $600K house for $2K/mo is not playing with a full deck. Let's look at this.

House goes for $600K
Rent goes for $24K/yr
Management fees are $2400
Property taxes are $7500
Insurance is $600
Maintenance is $6000
Occupancy rate is 21 months every two years, or 87.5%

That leaves you with a whopping $4500/yr on your investment. That is assuming you paid cash for the house, and Mr. Bankster is out of the equation.

For those keeping score, this is called the "cap rate" or EBIT, and for this specuvestment, you get .75% Notice the decimal. That is less than one percent.

That is assuming you get $2K/mo, and your house is only vacant 6 weeks per year, and nothing major happens to your house. It assumes your tenants don't trash the place and pay on time.

OK, let's cash flow this dog.

Assume 5.75%, 30Y fixed, with 80%LTV. P&I run $33649/yr. Add in the $4500 returns from the previous exercise and an average principal paydown of $8061/yr over the first 10 years, and you cash flow...

drumroll please...

-$21,088/yr. That is a negative cash flow of $1757/mo.

But wait, it gets better.

You put down $120K (as if!), and that $120K would have earned 6% in a brainless, short term CD, which averages $820/mo over the same 10 years.

Your negative cash flow just jumped to $2577/mo, or $31K/yr for the first 10 years.

Keep in mind that these assumptions are skewed to show a positive outcome on the property. In reality, the outcome would likely be worse.

I feel very comfortable conferring a title of moron on anyone that thinks this is a good investment.

Eleua said...

Yessiree! Burning $31K/yr so I can have an EBIT of less than 1%, and spend a bunch of free time writing checks to keep the place maintained, and the taxman happy, not too mention all the anxiety of getting and keeping renters that gross $72K/yr in verifiable income and hoping nothing major goes wrong with the house, or the property market doesn't take a headder...

Sounds like a great investment to me.

It is much better than that CD that pays 8X as much, without all the negative cash flow or worries.

Where do I sign?

Is there any wonder why the lenders are all going under? They loaned money to morons.

Alan said...

My rental is listed on zillows at 650k. The house around the corner recently sold for nearly around 750k. Zillow may be undervaluing my place in today's market.

I pay around 1750 in rent. That puts me at 370X. Who can beat that?

(I am near downtown Bellevue, Meshugy)

justics said...

This is my first post here, but I’ve been reading the blog for about 2 months. I’m currently renting and was thinking of buying a house last summer, but after 2 failed attempts, I decided to sit still for a while.

The purpose of my post it to point out an anomaly I found, in a pretty good location. It's true the house is listed as Fixer-upper, but I was not sure if that explains the downtrend. Here is the address and the sale history (as reported by Redfin):

12106 NE 66TH ST, 98033-8433

03/29/2006 $679,000

01/30/2007 $582,550 => (582,550 - 679,000) / 679,000 * 12/10 = -17.05 % / year

03/30/2007 $547,900 (if it were to sell then for list price) => (547,900 - 582,550) / 582,550 * 12/2 = - 35.69 % / year

Zillow estimate is $739,158…

I don’t know what’s wrong, but the sale on 01/30 this year does not seem to affect Zillow. This house is probably a good example that buying/flipping has its risks and Zillow’s estimate can be pretty inflated.

Tai said...

matthew,

google it around, you should find that 20% down or more is actually not that unusual. all the bad publicity around subprime and alt-a loans is why most people find it difficult to believe. The latest number released by mortgage banker association says that ~35% of home owners do not have any mortgage.

As for the true cost of mortgage, I can list them for you. On a $500k loan, title is roughly 600 - 850, escrow about 700-800, appraisal 400, processing 400, underwriting 500, tax prep 80, and misc another 100. Altogether around 3500-4000 in closing cost. With the low rate right now, you can easily get a 30 year fixed at 6% without paying any origination, and perhaps even some credit for the closing cost.

APR, which includes all the cost associated with the closing of loan is 6.08% for 500k loan with 4000 closing cost. So explain to me again how is it 7%?

Tai said...
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Tai said...
This comment has been removed by the author.
Grivetti said...

Zillow estimate is $739,158…

Yeah, this is why zillow, despite their apparently meteoric rise to dot-com start-up superpower (yeah... right) is more or less garbage...

Had a friend who had her place on the market in the Central District at $379,000 (close to the z-estimate at the time), didn't sell for about 5 months, knocked it down to $365,000, still didn't sell until finally ended up renting it out...

z-estimate today? $418,000

Zillow's pretty worthless

Matthew said...

Tai,

I have done some googling, and I still don't see where 20 percent down is common. In fact, it seems like it is not common at all. Chances are the 35 percent of people that own their houses outright have been in that house for a considerable amount of time, and are probably not the people that have been taking out loans the last couple of years.

From my research it would appear that the majority of loans the last 2 years have had very little money put down. Do you have any evidence /stats to show otherwise?

S Crow said...

People are paying 700-800 in escrow fees for a $500K loan? Are you quoting just a first or a 1st & 2nd?

Tai, explain to the viewers how you can receive a 6% 30 yr fixed with no origination fee and/or some credit to the borrowers closing costs. I'd like to review the GFE, so that consumers here, when they do decide to buy or refinance, can consider that mortgage broker or lender and understand the true costs associated with originating a loan similar to that. Consumers should understand that loans with rebates (selling the consumers a loan at a higher interest rate)to reduce out of pocket expenses utilized to pay for closing costs are not free.

I agree with you 20% down or more is common. This month, our office has not closed too many large cash down purchases. YTD 50% of the purchases have been 100% financed and and some of them were Option ARM's, some with prepayment penalties. Again, in EVERY case of a 100% loan close through our office,the purchase price was increased over list price to offset buyer paid closing costs. A couple of those were Option Arms for new construction. This is only our office (Snohomish Co) and other offices nearer Seattle proper may have a different data.


S-Crow
Legacy Escrow Service, Inc.

E-sidedave said...

Once upon a time, Tim deleted the posts with the personal attacks.

Mike said...

Eleua said:

I feel very comfortable conferring a title of moron on anyone that thinks this is a good investment.

No, that doesn't mean moron. That does means a very high tolerance for risk. The reality is that if that property appreciates at 15% yoy for a few years, and the person sells, this was a profitable investment. And this has been the case in seattle for the past 4-5 years; bubble or not, if you timed it correctly, you made out very well.

Moronic? No. But there are certainly other places to put your money with much nicer risk/reward outlook (like T-bills).

Mike said...

Misterbubble said:


No it isn't. Ad hominem means "to the person"...a personal attack on another to counter their argument.


Perhaps you are correct. You said previously:


I am unaware of a public source of information that would confirm or deny the "facts" that he has presented here. As such, I am quite confident that he's blowing smoke.


I interpreted this as

"A states X AND X doesn't have immediate support, therefore X is false".

Which is ad-hominmen - the "A states X" part is "to-the-person".

You could very well have meant:

"X doesn't have immediate support, therefore X is false"

which could be restated as

"X is true OR X is false, therefore X is false"

I think you'll agree that this is nonsenical.

Mike said...

And just to add something productive and relevant to the convesation:

My "apartment" is a recent condo conversion, located on captiol hill. 2br, 1 bath, 2 garage parking spots, granite, stainless, hardwoods...

It was purchased for $270,000, taxes for 2006 were $1300, and I'm guessing HOA dues are about $2400/year.

I rent this from the owner for $1300/month.

The monthly costs for the owner are:

Taxes: $112.50
Insurance: $112.50
HOA dues: $200.00

Assuming an 87.5% occupancy rate, the cap rate here is 3.17% (if I did the computation correctly). No idea if this is cap rate is good or bad.


Assuming the owner put 20% down, 30-year fixed, and 5.75% interest rate, the P&I is $1,260. His totaly monthly expenses are $1685. Subtract from this the $1300 in rent to get a negative $385/month for the cashflow.

Is this a worthwhile investment? I don't know. I'll tell you when he sells.

Eleua said...

Mike,

I set the trap for 'Shug, but you fell into it.

You NEVER, EVER, EVER compute investment ROI based upon the capital appreciation - NOT EVER!!!

That is speculating, not investing.

Yes, this is a very high risk speculation, and shows exactly how much a property has to appreciate in order to keep the speculators in the game. It doesn't even have to shift into reverse or stagnate for them to go underwater.

As this game progresses, specuvestors need a higher and higher appreciation just to stay in the game.

When it shifts, they will abandon the property at any price.

Classic bubble.

Matthew said...

To clarify what I was saying earlier regarding the tightening in the market not being felt for 6 months or so, I was refering to housing prices, not people inside the business. I do not think that housing prices will really start to drop for another 6 months or so.

I understand that people in the mortgage biz and/or mortgage biz are "feeling" the tightening, however house prices tend to be sticky, and will not feel the impact for sometime.

Mike said...

I set the trap for 'Shug, but you fell into it.

You got me there. What trap did I fall into exactly? Confusing speculating with investing? I am certainly able to "invest" money in a speculative bet, am I not?

I think we're going to be arguing semantics here. Irrespective of how you define speculating vs investing, if you time it right, "investing" in a "speculative bet" during a "speculative bubble" can be very, very profitable. It can also be financially devastating. Caveat Emptor.

Nobody knows the size of the bubble or the timing of its implosion. Personally, I've been thinking it would pop from about 2004. If I would have bought then and sold in 2006, I would have raked a tidy profit. That's a fact.

meshugy said...

I do not think that housing prices will really start to drop for another 6 months or so.

But you just said prices would go down in April. Have you changed your mind?

Matthew said...

Shug,

For the final time:

Yes I think that prices will go down after April. However, I do not think that the effects of the tightening that is going on in the lending industry will be truly felt for another 6 months. Comprende?

ron said...

CLASSIC: The Richest Man in Babylon... anyone read that book here

The Richest man in Babylon didnt believe in Risking his priciple.

you will ever see Warren Buffet EVER ON FLIP YOUR HOUSE.. Its not his investment principle.

Speculation Generally is that of risking your principle, Risking your Pot of Gold.. in the End usually you end of loosing your Priciple at some point- Thats what happened in the Internet Gold Rush. That type of speculation usually at a point you end up in worst position than when you started.. Those people involving themselves in those speculative bets at some point end up loosing big in the long run. Its only a matter of time, for a while they think of themselves being crafty and smarter than the average dog- then in the end they up just being a mut-of-a-dog..

People werent actually investing they were going for Usurious Returns not based on sound fundamentals... same as the housing bubble- people have forgotten the TRUE UNDERLYING VALUE OF THE HOUSE- Its true value when it comes down to it only what you can rent it for.. Thats the P/E= Price to earnings ratio..

ron said...

The RICHEST MAN IN BABYLON- first print was in the 20s... to bad more didnt read it back then.

I personally think its about the Best Book for a great fundamental book on Investment Principle. Its my favorite~!! written about the richest man in Babylon in the days of kings and queens.

The investment principles of then still apply to today-- the same emotions apply thoughout time, were really no different at our core than our forefathers..

ron said...

I think the Core Beliefs of People is where they fail-

I had a friend Cynthia that 3 years ago wanted to get started in Real Estate.
I thought I would help her she wanted to borrow some of my investment courses, I gave her 3 she only listened to 1# cd then she greased her wheels and was ready for the world of investing-- she went to kirkland signed a mortgage for 1,700 dollars a month then rented the place for 1,300. which the tenant became her friend then convinced her to drop the rent to 1000,00. ... Cythia simply got very-fortunate and the property appreciated nearly 100,000. she went though a realtor and ended up with about 70,000. dollars after all said and done.


Then what does she do? she pushs the buy button again Another Specualtive purchase in Gated Community in Issaquah, Trys to rent it to WITH NOT LUCK after 3 months~!!

Then she decides her Primary house 1/2 mile from Microsoft is more ideal to be rented.. She picks up and moves to the Issaquah expensive Gated Community.
She trys to Rent the house in Bellevue to carry the mortgage costs and the 2nd. mortgage which after makeing the profit from selling the other house forgot to put that money back into the other house since it was where her speculativ purchase money came for the down payment.

She then has no luck renting the House in Bellevue for 2000,00 dollars a month. She turns arround sells that house..

Now she stuck in the Gated Expensive Community with costs that far exceed what she was paying in Bellevue- ALL ON A TEACHERS SALARY...

IS SHE BETTER OFF? I think in the end her speculation has made her much poorer- Now shes stuck with double the commute and almost double the mortgage.

MisterBubble said...
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MisterBubble said...

Mike:

I agree that your interpretations of what I wrote were incorrect and nonsensical.

Meshugy needs to support his arguments, just like the rest of us. If he wants us to believe that the sky is orange, that his house is built on top of a diamond mine, or that teaser-rate ARMs are a small percentage of Seattle mortgages, then he needs to provide evidence. His word doesn't count.

MisterBubble said...

"Irrespective of how you define speculating vs investing, if you time it right, "investing" in a "speculative bet" during a "speculative bubble" can be very, very profitable. It can also be financially devastating. Caveat Emptor."

I think you've missed Eleua's point. If you define an investment solely as "something that gives a good return on money," then a winning lotto ticket becomes a great investment.

You're right that there's no fixed line dividing "speculation" from "investment", but Eleua's point still holds for real estate -- it's folly to assume capital appreciation. For all you know, your capital could burn down tomorrow night -- it wouldn't be a very good investment then, would it?

In the context of real estate, it's generally accepted that you need a positive cash flow to have a true "investment". Otherwise, you're speculating; you're gambling that property values will rise faster than your carrying costs.

synthetik said...

I agree with you 20% down or more is common.

I have no data to back this up, but I'm sure this is the case with most loans. What's probably more important is this:

How many first time home buyers are putting down 20% on a $450K home? (likely answer: almost zero) How many can even put 5% down?

(We're about to find out that it won't be that many!) The easy money is gone!

Credit expansion=easy/free money=wild consumption=asset bubbles

Credit contraction... well, you get the idea.

Imagine what happens when there is a tremendous expansion in worldwide liquidity resulting in asset bubbles in real estate AND stock markets.

See Japan 1985, USA 1927-1929, and SE Asia 1992-1997 (USA 1996-2006)

How can this not end badly?

Mike said...

Misterbubble said: it's folly to assume capital appreciation.

Tell that to everyone who made money speculating during the real estate boom.

Matthew said...

Mike,

how many of those people that have "made" money speculating on the current runup, have actually realized those gains? How many of those people were smart enough to get out at the top? How many of those have sold all their properties and have liquid assets?

Answer:

Not many.

Mike said...

Misterbubble said: I agree that your interpretations of what I wrote were incorrect and nonsensical.

Perhaps you can clarify how I should interpret your previous statement:

I am unaware of a public source of information that would confirm or deny the "facts" that he has presented here. As such, I am quite confident that he's blowing smoke.

Is the following a fair generalization? "Meshugy said X. X doesn't have immediate support. Therefore, X is false"

I think that sounds like a fair generalization. Let me know if you disagree. I also think it is an illogical conclusion. Let me know if you disagree with that as well.

And just to keep things in perspective, I check out this blog for interesting & relevant info about the seattle real estate market - articles, anecdotal stories, opinions and the thorough analysis that The Tim does. I don't really enjoy reading personal attacks. I also don't really enjoy picking apart people's arguments to make a point. If I did make a point, I hope it is this: keep it civil and keep it respectful.

This has been fun, but I'm done. You can have the last word misterbubble.

Peace,

Mike

Mike said...

matthew said:

How many of those have sold all their properties and have liquid assets? Answer: Not many.

The question isn't whether or not they've sold *all* their real assets, but whether or not they've realized *any* profit from them.

matthew said again:
How many of those people were smart enough to get out at the top?

You don't have to get out at the top. You just have to get out for more than you paid.

Matthew said...

Mike,

And how many of these people do you think have "realized" any of these gains? I would venture to guess that the amount of people that will be hurt by the bubble bursting will far outnumber those that reap any benefit from it.

BTW, taking out a HELOC and buying a H2, plasma, and trip to Mexico do not equal realizing gain.

Do you think otherwise? Do you think that the bubble is going to be beneficial to most?

Mike said...

matthew -

I think the bubble has been pretty beneficial to a lot of people. The downside is just now starting to show itself. We'll see how things turn out. Whether or not any individual makes out depends on when they bought, and what happens with prices before they sell.

Some people raked in cash on the way up. Some people are going to get screwed on the way down. That's the game.

Wall Street made out like bandits on the way up. And they'll probably make out just as well on the way down. Good for them.

To claim that "not many people made money on the real estate boom" is, well... I don't buy that statement in the least bit.

confused said...

To address what type of loans are being transacted in our market place:

On 12 March 2007, Credit Suisse published a 67 page report on the mortgage, housing and builder markets. In this report they quantify the entire spectrum of mortgage product and include the geographical excesses. Seattle on page 37 of this report is shown as having 35% of loan originations 2006 were 100% ltv or had negative amortization. This is one of the reasons that the Puget Sound region will feel the pinch as lending changes back to realistic underwriting standards with full documentation and verification.

They also discuss the various foreclosure prospects and the recasting of the various types of loans including its impact on builders and particularly all of the publicly traded builders.

It is a great deal of material to read and digest. I can not do it justice in attempting to condense it for you.

Here is a link to a site that will allow you to download this report.

http://www.billcara.com/CS%20Mar%2012%202007%20Mortgage%20and%20Housing.pdf

Matthew said...
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Matthew said...

Mike,

This thing has a long way to go before it unfolds. 42 lenders have already gone bust in 2006 alone. We'll see just how many people have made money when its all said and done.

Sure a few people are intelligent enough to jump ship before it starts taking on water. But the majority of the bulls will find their way to the bottom of the ocean.

ron said...

Many of the People that think of themselves as benefiting from there primary resisdence gaining in value are under the illusion that they will hold there value and dont think of all the costs that Ownership carry-

Ive noticed a current trend in Room Rental Rates.. They are asking Quite a bit more at the moment, Interesting it will be how that market holds up? during a recession those people offering rooms for rent sure seems to spike during bad times.

Joe Six Pack doesnt genereally understand how money works, for that matter not a lot of people do.. afterall its not something taught in school. Should be though.. U.S. would probably be in much better shape going forward if the general public really understood there finances.

Then again I think thats also by design- The wealthy like the masses buying there assets. Its might be much rougher for the Real Estate agent and financial Consultant to name a couple if people had a much better understanding of the big picture.

ron said...

Real Estate Recessions generally Last for 5 years. Ive read recently the Shortest real estate recession in the last roughly 40 years has been 20 months.


This real estate upturn is claimed to be the Largest going back many-many years, I would think that it could be very likely the largest in timeframe going down.. only stands to reason..

ron said...

I personally laugh at the NAR-- Calling a Bottom on the National real estate market downturn after 12 MONTHS..

Ya-Right.. Give me a break~!!

ron said...

as far as investments or investing..

If you derive income from lets say you buy an stock with 10% dividend
I would call that possibly an investment..

If you buy a stock with no dividend and Only After I kill the investment and realize a return would I call that an investment- There is no guarantee on any sort of income... in order to realize a return in such you have to kill the investment to get the return.

Now same goes for housing based on Appreciation.. now if the house pays for its-self and derive an income from that house then thats an investment.

Only way I would call an primary residence an investment would be to rent out the rooms let the room renters pay the mortgage and realize a positive cash flow every month..

Problem is room rental rates are about 400. dollars a month and from personal experience doing this its hard pressed to charge anything over that.
Now fast forward to todays prices you rent out the rooms and carry the cost of only 1/2 the mortgage- I dont think that would be very smart... still being left with a 2000,00. dollar bill for the privilage of having 3-4 room renters.

to add insult to that ROOM Renters sit in there rooms and watch you do all the housework and yardwork.. I do know this from personal experience as well. It wouldnt be so bad if the mortgage cost was being carried.. however paying 2000,00. dollars out of pocket to have someone watch you spend your extra time picking up and cleaning isnt my cup of tea.

ron said...

Then maybe I should Call the Real Owners the ROOM-RENTERS..hahahahaaha..


No Risk~! No Worries.. No Yardwork- No Upkeep and Flexibility.. they just move~!!


No Appreciation however we all know where that going now-- Depreciation.. Not the Room Renters they get to watch the people that thought they were landlords get landlorded by the banks.

ron said...

SOLUTION: Put the Room Renters on 100% Interest Low Teaser Rate rental agreements locking them in for 10 year agreements.

Thats the problem Rents are Based on Actual wages... you cant get low teasers that reset to costs 2-3 times greater. They dont qualify you based on what that intial teaser rate is going in the front door.

Now if they only could take that creativity over to the RENTAL AGREEMENT And come up with ways of getting people speculating on they will priced out of rent forever.

Maybe by creative 10-15 year agreements that look more like Ownership? Then again they do have these in the form of Lease Option Agreements which last up to 10 years.

Then again IM RAMBLING ON.. Out of here

Mike said...

Confused - thanks for posting the link to the csfb report. Interesting stuff.

ron said...

Lease Option, Excuse me that should be 30 years NOT 10

That would be meshugy ammunition- then again Meshugy isnt exactly what I would call an investor or exactly knowledgable when it comes to money.

andymiami said...

all of you are way too serious...

http://www.youtube.com/watch?v=7MV4txjNwyI

Eleua said...

I keep hearing about how the PNW market will only go up by 5-10%, and that is just fine for keeping everything together.

If you are losing $30K/yr on your "investment", how long can you carry it if it is appreciating by that amount? You are treading water, and have to pay out RE fees to get at the money.

You could refi/heloc, but lenders and interest rates are not as helpful as they once were.

The modern RE "investment" game works thusly...

Buy an overpriced home.
Rent out for a loss.
House appreciates faster than you burn cash.
Refi/sell, and repeat.

The problem comes when you can't refi, and you can't sell. You now find yourself burning cash, and soon you will be depleted.

Now, the cycle feeds in reverse.

This is a classic speculative bubble. There is no "investment" of any kind.

When you buy an asset that returns a dividend to you, that is investing. When you buy an asset and you need a buyer to make you whole, that is speculation.

The very first question you should ever ask when investing is:

"How long until I get my money back?"

That is the point that your initial outlay is paid back to you, and you still own the asset.

In the example we have been discussing, that point is never. You must sell to get your money back. Ergo, this is not investing; it is speculating.

Mike said...

Eleua said: When you buy an asset that returns a dividend to you, that is investing. When you buy an asset and you need a buyer to make you whole, that is speculation.

So by this classification, any stock that doesn't pay a dividend is a "speculation", not an "investment". I don't buy this.

I get your point you're trying to make: buying real estate for the appreciation is not a smart investment.

Believe it or not, I agree with you. I personally wouldn't touch real estate now.

However, that doesn't mean though that you can't make money speculating.

Eleua said...

Mike,

You are starting to catch on.

I never said you can't make money by speculating. I speculate heavily in finanace and tech options, metals, and mining companies. Did you hear that? I SPECULATE. I am not investing.

Buying a stock that does not pay a dividend may be called investing by Wall Street, but it is speculating. That is the whole point of the internet mania we had.

BTW, the stock market is wildly overpriced due to speculative behavior. It is largely speculating.

Investing has lost much of its meaning. It is now a generic term for putting money at risk for a reward.

Eleua said...
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Eleua said...
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Eleua said...

(darned preview)...

I "invested" in an Airline Transport Pilot license from the FAA. It cost a lot of money and time. I have no intention of selling it to another party for a higher price than I paid.

I use it to derive a benefit from the various employers I have worked for. It paid for itself, over and above what I would have had without it back in 2004. I still have the asset and I still derive a dividend from that asset.

Last month I purchased some $20 put options on Accredited Home Mortgage. I paid about $65 per contract and sold them for $1500 per contract. That was speculation - pure, raw, naked speculation. I absolutely needed someone to purchase those options from me in order to get my original stake out and to show a profit. I received absolutely no dividend from those options (other than the giddy feeling of watching the housing market crumble).

I know it seems like splitting hairs. I am just trying to show the difference between the two behaviors.

Eleua said...

BTW...

Lest anyone think I am bragging about my LEND options, let me just go on the record and state that I have lost plenty of trades - more than I care to count. Some have really hurt.

Eastside RE Shopper said...

Ron,

You have a lot of posts where you are confusing 'their' and 'there'. This makes your posts hard to read.

synthetik said...

That was speculation - pure, raw, naked speculation

I cleaned up on those LEND puts too! But was that really pure speculation? That was calculated risk wasn't it? While I wasn't 100% sure LEND would crater, I felt about 90% sure -- sure enough to buy 80 March, June and Jan PUTS.

Seeing the subprime debacle in advance was the direct result of following this entire story, was it not?

Isn't that different from someone that does no research but somehow feels the 'equity' train is leaving without them, so out of fear and greed they jump on?

ron said...

Mike- Heard ya.. however on your investing comment depends on who you talk to? finacial Consultants- well most of those are to busy trying to churn fees and would call anything an investment that puts money in there pocket.

EXAMPLE:
heres what I called an investment couple of years ago I bought 2,000 grams of gold from a seller over in Instanbul in bulk- each gram actual cost was 14.00 dollars mind you ... I was guaranteed my return going in the front door By selling the grams on ebay with a shipping actual cost of 50 cents per gram... Charged 4.99. Gram blocks were at the time selling singularily for 19. dollars waited 9 months sold the first 1000 grams for average price of 27. dollars add the 4.00 shipping profit on and 31,000. dollars was returned to me. Now I have 1000 grams of profit.. My money is back in my hands and has since generated additional 10,000 since.. now the children of that money is working for me as well.

Investing is about getting a return and your money returning to you as Quickly as possible so it can get back out and turn some more. Investing is a lot of times NOT Always about risk its a lot of times about seeing/recognizing an opportunity with little risk and capitalizing.

I saw that shipping charge as eliminating my risk when purchasing the gold.

ron said...

synthetik-

You were being rewarded for your hard work in following this whole market fallout.. You took action out of Knowledge that you worked hard in acquiring.

ron said...

'their' and 'there' MAYBE IM NOT QUITE "ALL TherE,TheiR or They're ?... haahahaa

Eleua said...

Synthetik,

Using knowledge to exploit a situation for a capital gain is speculation, IMHO.

A blind crapshoot is gambling.

Speculation is not a bad thing. I just don't want it confused with investing.

ron said...

I would call it Speculation when you making a profit depends on the Price of that Assett going up in value.

DOES THAT SOUND FAIR~!

Investments are something that you derive and income from coming in the front door even if the value of the underlying assett falls it doesnt have and effect on your income stream.

I called my Gold analogy and investment with the thought my risk was very low. However only when I sold that 1000 grams did it trully turn into and investment.

ron said...

synthetik- I agree a lot on what you did than what the millions of people that participated in the housing market run-up the last 3 years.

I think it was smart the people that entered in arround 2002 where interest rates were really low and the big-runup hadnt occured yet.

ron said...

synthetik- That Is I agree a LOT MORE on how you arrived at your decision to short when you did..

In fact Country Wide Mortgage has been getting awful tempting.. seen the insider stock sales numbers.. UNBELIEVABLE~!!

ron said...

im Nervous about SHORT SQUEEZES Though... total speculation play at that

Then again Country Wide has one big Float~!!

synthetik said...

synthetik- That Is I agree a LOT MORE on how you arrived at your decision to short when you did..

Timing with optoins is a real bitch. While the put contracts were all fairly cheap, the March ones were a steal. I bought some June and Jan 08's too just in case @ $20 strike price.

While I expected the stock to crash, it seemed like more of a risk since the general consensus was "Accredited Home Lenders (LEND) was the strongest of the subprime bunch".

Timing, as far as covering my LEND position was pure luck... I decided ahead of time that I'd cover my positions if the stock dipped down to $5/share - it actually went under $4/share, but I ended up covering at $5.50/share.

Much more experienced investors than I told me to expect a bounce, which turned out to be true... the stock is now trading near $12, possibly a target for speculation!

Now I'm speculating that Alt-A will be heavily affected, bringing down stock prices of companies like Countrywide, Downey Financial (DSL), Wells Fargo and some smaller regional banks.

This past week was horrendous in terms of my put option positions while the bulls drink all news/no news pretty, but at least I have until Jan 08 to ride them out.

Only time will tell.

MisterBubble said...

"Is the following a fair generalization? 'Meshugy said X. X doesn't have immediate support. Therefore, X is false'"

Is that a fair generalization of what I said? No. Is it a fair generalization of your twisted interpretation of what I said? Sounds like it.

You're also (rather conveniently) leaving out the last two sentences of what I originally wrote:

"I am unaware of a public source of information that would confirm or deny the "facts" that he has presented here. As such, I am quite confident that he's blowing smoke. But hey...if Meshugy can offer up some data to support his assertions, more power to him. His silence is deafening."

Since you've done this three times now, I'm going to assume that you're either incredibly dense, or you're playing stupid to be provocative.

Either way, Meshugy still hasn't offered any evidence for his claims. As I said...his silence is deafening.

Troll on, mike. I'm done with you.

ron said...

Those whose Investment Stategies heavily rely on Speculation usually always end up loosing in the end.

That speculation is something that most the people I talk to that consider themselves investors do..

Just this last week friend approached me talking about IMPAC MTG.

Now look at this divedend- now how they might be able to afford to pay out this dividend going forward is anyones best guess?

Then again my best investment was phillip morris and RJ Reynolds back when they were 17-Reynolds paying about 20% dividend and Phillip Morris at 19 dollars a share paying 17% dividend all during the Dot Com route taking place. Then the Publics view was so heavy into the lawsuits brought on by the cancer victims, then again both companies have such deep pockets and many-many lawyers..

Last Trade: 4.94
Trade Time: Mar 23
Change: 0.18 (3.52%)
Prev Close: 5.12
Open: 5.12
Bid: N/A
Ask: N/A
1y Target Est: 7.75

Day's Range: 4.88 - 5.17
52wk Range: 4.03 - 11.74
Volume: 1,539,900
Avg Vol (3m): 1,847,250
Market Cap: 375.85M
P/E (ttm): N/A
EPS (ttm): -1.18
Div & Yield: 1.00 (19.50%)

teck said...

First time posting here.

Someone posted this link at fatwallet. Thought I shared it with you guys. Sorry if the chart has been posted here before.

http://www.autodogmatic.com/forum/viewtopic.php?p=1226#1226

ron said...

Had to Get a Closer Look at IMPAC IMH Mortgage- Here it is... Wanna Speculate, Try these Apples from the Motley Crew. They apparently come out with earnings this week- Not much here to short~! going long Well, Im not to sure about that either.

Quick Take: Relax, We're Not Subprime!
By Seth Jayson
March 8, 2007
The market's manic reaction to mortgage stocks these days is good for a giggle -- so long as you don't own the stocks.

The response to the fallout from the implosions at Novastar Financial (NYSE: NFI), New Century Financial (NYSE: NEW), and Fremont General (NYSE: FMT) has run the gamut from panicked to bizarre.

After its shares were pummeled along with the subprimes, Impac Mortgage Holdings (NYSE: IMH) took the unusual -- and to my mind, unusually suspicious -- step of issuing a press release that said, in effect: "Remain calm! All is well! We're not a subprime lender!"

Perish the thought! Impac's loans are "Alt-A," a designation which includes stated income loans, commonly called "liar" loans.

Personally, I don't buy Impac's feel-good story. Part of my skepticism stems from whispered scuttlebutt. I've gotten email from some loan officers (not Impac's, mind you) warning of impending doom in the stated-income loan market. Even big banks, so the claim goes, are booking huge percentages of liar loans.

One correspondent asked me a very good rhetorical question: "Why do people with good credit scores need stated income loans?" The answer, he believed, was that fudging income numbers was the only way to qualify to buy as much house as they wanted. What happens when people who can't afford the house they're in see an ARM reset?

Default, I'm guessing.

Impac's SEC filings don't seem to reveal how much of its biz is in "stated income," but this article reports that in 2005, Impac ran a seminar called "How to Make a Fortune in the Alt-A Market." Remarks attributed to an Impac Lending Group's senior vice president report that 75% of that business is stated income, and that half of the borrowers "can't or won't tell us where their down payment came from."

Sounds like pretty shaking underwriting to me.

But if you think that's an ugly bit of data, just look at Impac's filings. The Q3 2006 report detailing mortgages held as securitized mortgage collateral shows 60-day delinquencies that more than doubled year over year. More than half the mortgages were in bubble-icious California, and only 79% of the properties were owner-occupied. Oh yeah, 85% of the loans were ARMs, while 73% of the loans were interest-only.

Looks to me like there's plenty of potential for major problems, subprime or non-subprime.

synthetik said...

Those whose Investment Stategies heavily rely on Speculation usually always end up loosing in the end

Mostly true. Slow and steady wins the race.

That's why I try not to commit more than 20% of my investment capital into speculative investments.

What's speculative at this point in the market? I'd content that 401K/mutual funds are probably at great risk at the moment. I'd rather be in all cash.