Monday, June 30, 2008

What's The Monthly Payment On A 2 Billion Dollar Home?

A lot.

But you probably have other types of problems when you are worth $42bn than making your mortgage payment. Such as, figuring out which of your 6 levels of garage you want to park on for any given day, or deciding which in-your-house gym you'd like to lift weights in. Or finding your kids.

Due up this January, the world's most expensive home. There are video and photo tours in this article. Not really my style, but I could manage...

Tuesday, June 24, 2008

Inflation Panic 2008 - What Are We Headed For?

I wonder if in a few years, when we look back at this great Credit Crunch episode, and the associated economic slowdown, if we will remember the extreme moodiness of the markets during the transition. It seems every other week the Dow is posting multi-day consecutive 3-digit gains or similar consecutive losses. The financial news media is loaded with guys who say "we are nearing bottom" or "we are at the bottom", yet none of these guys was here telling us we were headed for this in the first place, so how are they expecting to be viewed as credible? One article I read recently (from Marc Faber, introduced by John Mauldin) labeled this a "conspiracy of optimism". A pretty dismal prognosis for our economy is laid out in this piece. I have to admit, it was a bit jarring to read.

But the view is a slight bit different in this one, from Pimco's Paul McCulley. With all this debate going on about stagflation, wage-price spirals, the 1930s (depression) or the 1970's ("the lost decade", at least economically speaking), and general financial Armageddon, eyes are on the Federal Reserve this week for an updated policy statement. Expectations, via the Fed Funds Futures trading activity, are all over the place in predicting the Fed Funds rate over the coming year. There is a general lack of consensus, the market is confused.

It will be interesting to see if "Doctor" Bernanke appears on board with McCulley's concept of a Hippocratic Oath, and there should be a lot of attention on tomorrow's Fed news release.

Interesting times for sure. Where exactly is this economy headed, and what's it going to mean to you? How does it impact your investments? Your employment? Your family? Are you positioned to endure the downdrafts as well as participate in the bull runs?

Friday, June 13, 2008

Hidden Camera Inside A Mortgage Company Office?

Is this the scene inside a local mortgage company office? Could be, although the lack of empty desks might be a clue that it is not. Nonetheless, it is a fair depiction of the office rage that I have heard too many times in the last year.

I have heard a few statistics ranging from 40-50% workforce attrition in recent weeks. To be perfectly honest, while I know some great people are being knocked out, the industry was due for a cleansing. All markets need to correct when they grow out of control for a prolonged period.

How Foreclosures Increase The Risk Of West Nile Virus


A couple of interesting news headlines today, especially when you put them together. First, a 48% surge in foreclosure filings nationwide for the month of May. The 'pig in the python' is just beginning. If you want to learn more about this, and more about the shape of things to come, email me.

And second, public health workers in Phoenix have devised a strategy to combat a spike in mosquito populations now that so many homeowners have abandoned their homes, and their pools, leaving the water to stagnate and become a habitat for the little pests. They are concerned that thriving mosquito populations raise the risk of outbreak of West Nile.

So this is another sign of how foreclosures can drag down community integrity. We have some choppy waters ahead still, but there is opportunity across the board. You must learn to position yourself, and ownership of a home requires much more careful planning today than in recent years. Work with a qualified professional to review your position and if you must abandon your home, for the sake of the neighborhood, drain the pool on your way out the door.

Monday, June 09, 2008

Ed McMahon In Foreclosure - Lessons Learned?

Ed McMahon, notable sidekick to Johnny Carson for what, 25 years or so, host of Star Search for 12 years, and pitchman for Publishers Clearinghouse Sweepstakes for who knows how many years, is making headlines for hitting the skids. At 85 years old, he is late on roughly $650,000 in payments on his $4.8 million mortgage with Countrywide.

So what's the problem? For a guy who's been working forever, in the entertainment industry, where we are taught that employment is very lucrative, this seems pretty odd.

Apparently at 83 years old, Ed broke his neck, and has been unable to work. And the housing market coupled with the his injury is forcing him to fail making his payments. He put the home on the market 2 years ago, and has been unable to sell it.

Are we really supposed to believe that a guy who was forced to stop working at 83 due to injury, and worked in a lucrative business all his life is supposed to go broke 2 years later? Are we supposed to feel sorry for this? In the article, McMahon cites "the economy, health problems, and poor planning" as reasons this happened. I think we can strike the first two excuses from the list.

He isn't exactly shirking responsibility, but this is an "aw, shucks" way of avoiding the significance of POOR PLANNING. First of all, the guy should have socked away a boatload of cash in his line of work. Second, he should have planned for retirement, differently, and should not have been living in a house with 4.8MM in debt unless he had significant liquid assets on the other side of his balance sheet. I love that he was still working at age 83, but sadly this seems now to have been out of necessity rather than a passion for his work.

The market has been turbulent, this much is obvious. But when high profile, high income-earning people like this get caught up in the mess, you have to take a hard look at why. Is the economy so bad that even rich guys like Ed McMahon, Jose Canseco, and Evander Holyfield are getting wiped out? Or is it a fact that people with more money that most of us can fathom can get ruined with poor planning, while modest income-earning blue collar workers, and others can take a slow steady path to safety and wealth if they plan wisely? The answer is very clearly the latter.

Look at this headline for Holyfield's case. "Not Broke, Just Not Liquid". You must learn how to plan, and learn not to compartmentalize your financial decisions. For those who's mortgage is their biggest bank account, this is where it begins. Work with a Mortgage Planner to learn how to position yourself for the right balance of cost, safety, and return on your investment.