Wednesday, March 30, 2011

Monday, March 28, 2011

Seattle Rejects New Sign Rules

The Seattle City Council today decided not to consider changes to the city's rules on big signs on big buildings.

At a time when the city's downtown office vacancy rate is about 20%, any measure that attracts tenants makes Seattle more competitive.  The notion of whether ALL signs are ugly and ruinous to the landscape has also not been settled.  There are many examples of large corporate signage that people love.  Here is what I wrote about this subject last December.

One of my favorite Seattle landmarks is the Pink Elephant Car Wash near the Space Needle.  So does most of Seattle.   It's fun to look at day or night.  I find it ironic that the very people who fight against large corporate signs would fight any developer who tried to tear this corporate sign down.  How can you love some signs but support laws that ban nearly all of them?

Friday, March 25, 2011

Bernanke News Conferences

Fed Chairman Ben Bernanke has agreed to hold regular news conferences.

To those of you who can't contain your enthusiasm and relish the thought of spending an evening being mesmerized by Helicopter Ben's scintillating economic wizardry, he will be holding these press conferences every three months.

I sense a disaster waiting to happen.  Personally, I can't wait to see it.

Fed Chairman are supposed to act like children.  They are to be seen and not heard.  The more central bankers open their mouths, the more foolishness comes out and the markets respond with false volatility over the confusion.

For a recent example of this phenomenon, check out New York Fed President William Dudley's comments this month to a gathering in Queens, New York.

When asked about radically rising food and commodity price inflation and why the Fed for no good reason uses a "core inflation" rate rejected by virtually every other central bank around the world, Dudley responded this way:

"Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful.  You have to look at the prices of all things."

The audience that heard this nonsense sat in stunned disbelief.

"I can't eat an iPad" replied one angry observer.

Another asked if Dudley has ever gone grocery shopping.

You can click on the link above to see Bernanke when he recently appeared on the CBS show 60 MINUTES, his first major public interview in TWENTY YEARS.

His appearance is regarded as a disaster.  Here is one substantive review worth reading.

Here is another review that called Bernanke's performance and his lame defense of his QEII policy "desperate" and I agree.  It showed.  Central bankers are not supposed to sweat while talking about how well they are managing the currency.  It sends the wrong signal to the markets.

I applaud Ron Paul's efforts to get some transparency at the Fed.  He's on the right track.  Seeing Helicopter Ben peppered by reporter questions he likely can't answer every ninety days sounds like fun but watch out for added stock and bond market volatility which inevitably will be caused when the world slowly realizes Bernanke honestly doesn't know what he is talking about.

To quote Margo Channing:

"Fasten your seatbelts, it's going to be a bumpy night."

Wednesday, March 23, 2011

Homes Sales Fall to Record Low

Read this extremely important article.

Home sales at slowest pace EVER.  Prices fall to 2003 levels.  Foreclosures at 2.2 million in January 2011.

It is hard to be bullish about U.S. residential real estate.

The days of buying houses and counting on rents and property sales to carry you through retirement are long over.  American attitudes towards home ownership are changing.

Home ownership rates in the United States have peaked and likely will trend downwards for many years.

Renting is the new buying.

What is there to be bullish about in this sector?

Higher mortgage interest rates are on the way.  They sure can't get any lower.

The end of Fannie Mae and Freddie Mac will dry up LOTS of mortgage money.  Lenders can't lend what they haven't got.  Plus without F&F home prices have to fall.

The unemployment rate is going to remain high "for several years" according to the eternal optimist Ben Bernanke.  I read this as "many years."  The honest truth is that many of the jobs lost in the last recession are never coming back.

There is chaos in this industry, uncertainty everywhere.  That's not good for business and it shows.

Saturday, March 19, 2011

Buy a Home, Lose $65,000

Here is a heart wrenching tale of how a married couple bought their first home and promptly lost $65,000.

That is real money out of their pocket, not just paper equity.  I also applaud the honesty of the writer who really explains his situation with great personal detail.

This article makes the key point I have been telling readers for more than ten years.


Your own home is a liability, not an asset.  Treating your home as a retirement savings plan is a disaster waiting to happen, as this unlucky couple learned the hard way.  For most people, especially these days, renting a home makes much more sense than buying one.

Friday, March 18, 2011

Skyscraper Bubble Indicator

Hawking back to this debate in this blog between Jim Rogers and James Chanos on whether there is a bubble brewing in China's real estate market, this gem of a new indicator joined the discussion.

Does the building of skyscrapers, especially really tall ones, precede a bubble popping?  It sure looks that way in the past, but that is no indication of the future.

The author of this idea, Vikram Mansharamani, has a new book called Boombustology and I'm going to review it  here soon.  That's him in the picture, by the way.

In the meantime, his thinking makes a great deal of sense.  Capital investment is usually highest at the top of a bubble market so trophy projects that soak up lots of cash would be one genuine sign of a bubble.

I can't wait to read his new book.

Tuesday, March 15, 2011

Fannie Mae and Freddie Mac Reforms

Want another dark cloud for residential real estate going forward over the next ten or so years?

Put another way, precisely the time frame when a large chunk of baby boomers will be retiring and wanting to sell some homes and rental properties to provide for their Golden Years.

Reform is coming to the scandal-ridden and financially crippled Fannie Mae and Freddie Mac.  The era of large scale government loan guarantees in the mortgage market seems to be coming to an end.

Treasury Secretary Geithner is suggesting some type of covered bond market.  Interesting idea, but not if the Federal government is running it.

Whatever comes out of DC it is going to be EXPENSIVE.  Here is one realistic estimate of $5 trillion.

If that sounds like a wild number, it really isn't.  Fannie and Freddie will have cost American taxpayers $169 billion through fiscal year 2012.

Government reforms always come with large price tags.  Watch what is coming closely.

This development further underscores the fact that homeownership rates in the United States have likely permanently peaked, at least for the next fifty years or so.  Check out this editorial from Fortune magazine that says homeownership should no longer be part of the American dream.

All this seems like statistics but think about it.

Who is going to buy your rental houses and condos in ten or twenty years?

How are they going to finance them when PIMCO's Bill Gross says to buy mortgage paper he would want a three point premium?  More precisely, how many are going to be able to afford it?

I hope investors are asking these questions.  These are not bullish signs of a robust real estate market circa 2021-2031.  Those dates may look futuristic but today is March 15, 2011.

Monday, March 14, 2011

End of the Thirty Year Mortgage

Here is a very insightful essay on why the thirty year mortgage may be going the way of the American Austin Car Company of Butler, Pennsylvania.  Or the dodo bird.

The implications are enormous for rental property owners, especially when you want to sell one of those rental houses for retirement purposes.

Tuesday, March 8, 2011

Mike and Irene Milin Update

This post has just been updated here to reflect the Milin's involvement with Trump University and media requests for more information on the Milins.

Since writing this post last October asking for information about former real estate gurus Mike and Irene Milin, the self-described "Dynamic Duo" of get-rich-quick real estate in the 1990s, I have received a steady trickle of tips and news about the pair.  I wrote my original post because I was curious to learn what happened to them, because there was a time not so long ago that late night television seemed to be the kingdom of the Milins and their absence has certainly been noticed by some.

In the 1990s and up until a few years ago, they were EVERYWHERE, flaunting symbols of great wealth in their infomercials, flying on private jets only to be picked up by a waiting limousine to be rushed to a huge waterfront estate filled with all the best things money can by.  If you think I'm overstating the imagery, I'm not.  One of their infomercials actually had Lifestyles of the Rich and Famous host Robin Leach interviewing the Milins about their expensive tastes---and their get-rich-quick in real estate home study courses.  Champaign wishes and caviar dreams, Millin style.

Most of what I learned about the Milins was routine, or should be kept private, and that's where that road ends.  The Milins are no longer public people and their privacy should be respected.  But I would love the public's help in tracking down this bit of information that puts their entire career in a whole new light.

In the 1990s, the Dynamic Duo certainly loved money.

But in the 1960s, they seemed to passionately love another Dynamic Duo.

Marx and Engels.

It seems the Milins were total 1960s campus radicals, hard Communist left and proud of it.  They were members of the SDS, Young Socialist Alliance, the Socialist Workers Party, the Revolutionary Youth Movement, Progressive Labor Party, and many others.

According to multiple sources, Mike was a student at Arizona State University from 1969-1973 at the height of the Vietnam War protests.  Through his left wing political affiliations, he was a close friend of ASU Professor Morris Starsky who will always be remembered for his involvement in the notorious FBI COINTELPRO scandal.  During the very time Mike and Irene were hanging out with Starsky and plotting international socialist revolution, the FBI had Starsky under surveillance for his political activism and was illegally sending anonymous letters to ASU officials falsely claiming that Starsky was involved with violence.  Starsky was the first person targeted by the FBI under the COINTELPRO operation and he later won a court case against the FBI with the damages going to the Socialist Workers Party.

According to one source, Mike and Irene stayed in touch with Starsky until his death in 1989.

College is the place to be a radical, and I applaud their campus activism.  On the contrary, they should be more proud of it.  What makes me curious about all this is HOW do the Milins go from advocating the violent overthrow of the United States government and a hatred for private property to Robin Leach in just ten years?  I was never a fan of their real estate books but their whiplash conversion from ultra-left to ultra-right is a story I would pay to read.

This whole situation is ripe with irony.  One great one is that the last Milin infomercial I ever saw was one where they were pitching in 2007 for the National Grants Conference, or "How to Get Rich Getting Grants and Loans from the Government", much like Matthew Lesko's hyperactive offerings.

This infomercial had Mike and Irene being interviewed by, get this, TWO FORMER REPUBLICAN CONGRESSMEN, J.C. Watts and J.D. Hayworth.  Both right wingers at that.  Read this article and learn how Hayworth got burned by his association with the Milins when he ran against John McCain for his Senate seat.

This article above also mentions how Mike Milin gave U.S. Presidential candidate John McCain nearly $10,000 in campaign gifts in his run against Obama in 2008.

Amazing how times (and politics) change.  But get-rich-quick home study courses are always the same.  The Milin's National Grants Conference flamed out in a tirade of consumer complaints.  Read this amazing letter sent by THIRTY FOUR state Attorney Generals asking for the Federal Trade Commission to act because of the Milin's claims with respect to government loans.

I have been reading Mike and Irene's book, How to Buy and Manage Rental Properties, since learning about all this and you occasionally get some tame references to class warfare, the rich and the poor, and that sort of rhetoric between the lines.

All this just makes me wonder.  Why?