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This Is A Very Scary Time To Be An Investor

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moh malekpour

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http://www.nypost.com/seven/0117200...y_scary_time_to_be_an_inves_358671.htm?page=0
What's the problem?

It's simple. America - the country and the people - has lived high on the hog for decades on borrowed money. Now we're in the slop and someone has to clean up the mess.

Under normal circumstances Washington would spend money to help the economy. Or reduce taxes. Or hand people cash. Sometimes there'd be a combination of all those remedies.

But right now moves like those would increase the already-disturbing federal deficit. And that in turn would hurt the dollar, which has been limping along for years.

A weaker dollar could drive away foreign investors in our government's debt. Those investors have been the salvation of our failing financial institutions.

Worse, if foreigners shun America's debt markets American companies and the US government would have to pay higher yields to borrow money.

That's the same danger if the Fed cuts interest rates too aggressively.

Current Fed Chairman Ben Bernanke, who speaks to Congress today, is already seen as soft on inflation.

Years ago, when he was still a Princeton professor, Bernanke was quoted as saying he'd simply run the printing presses if the US economy needed a boost.

That's one of those loose-lipped moments that Bernanke probably now regrets.

Investors are just not going to feel confident putting their money into a country where the Fed chairman thinks it's OK to inflate his way out of an economic crisis.

But these first weeks of the New Year haven't been a time for big thoughts.

The financial markets are too busy grappling with micro-problems - like declining corporate profits, banks with new woes and investors who are unable to cope.

According to Thomson First Call, Wall Street now expects earnings for the 500 companies in the Standard & Poor's index to be a scant 0.3 percent higher for 2007.

Back in October the gain was expected to be 7.7 percent; just two weeks ago the profit increase was seen as 1.2 percent.

By the time you read this, even that 0.3 percent gain will probably disappear.

One of the reasons is that nobody really knows how bad the situation is with our banks, most of which haven't even begun to estimate their losses from subprime mortgages, much less anything else.

A new estimate is that once the recession hits, a bank like Citigroup might have to increase its write-downs for bad consumer loans 10 times.

Last August I wrote that Americans were managing to pay their credit card bills even though home mortgage defaults were rising.

Apparently that's no longer true.

Experts are now worried that Americans will be unable to pay credit card bills and other debt because they can no longer tap into their home equity.

And that gets me to the last point.

With so much going on, is it any surprise that $49 billion went into the relative safety of money market funds last week? That's more than 10 times the average over the past month.
 

Terrel L. Shields

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Years ago, when he was still a Princeton professor, Bernanke was quoted as saying he'd simply run the printing presses if the US economy needed a boost.
He wasn't just a professor at that time, he was on the Federal Reserve too.
 

john snyder

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Weird market - one of my tenants specializes in REO work and his phone is ringing off the hook. He has had 25 offers in this week all on different properties priced from $ 10k to $ 150k. Either some people have deep pockets or - are we near the bottom??

jbs
 

LA Woman

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Reaching the bottom of the market?

Weird market - one of my tenants specializes in REO work and his phone is ringing off the hook. He has had 25 offers in this week all on different properties priced from $ 10k to $ 150k. Either some people have deep pockets or - are we near the bottom??


Out here in LaLa Land I've been seeing a decrease in the number of listings, an increase in pending/contract sales and a big increase in the number of people buying new construction. However, in this particular market area we are still seeing a 3-4% per month decrease in sales prices.

Also, I've noticed that most of the new construction has their models completed, streets and curbs are in, lots are graded, but thats it, no building is going on. But the sales agents are saying they are almost sold out! These are the bigger builders too.

I'm thinking that prices have declined enough to be affordable, and that coupled with the lower interest rates, many are thinking its a good time to buy (which is isn't). We are currently at about 2003-2004 prices right now and as we still have an oversupply of inventory, and with prices still declinging, our prices have no where to go except down right?

I'm predicting that we will level off when we hit about 2001 prices. But who knows, strange forces are running amok within this business.
 

Greg Bell

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Out here in LaLa Land I've been seeing a decrease in the number of listings, an increase in pending/contract sales and a big increase in the number of people buying new construction. However, in this particular market area we are still seeing a 3-4% per month decrease in sales prices.

Also, I've noticed that most of the new construction has their models completed, streets and curbs are in, lots are graded, but thats it, no building is going on. But the sales agents are saying they are almost sold out! These are the bigger builders too.

I'm thinking that prices have declined enough to be affordable, and that coupled with the lower interest rates, many are thinking its a good time to buy (which is isn't). We are currently at about 2003-2004 prices right now and as we still have an oversupply of inventory, and with prices still declining, our prices have no where to go except down right?

I'm predicting that we will level off when we hit about 2001 prices. But who knows, strange forces are running amok within this business.
Typical dead cat bounce. Many poor suckers will catch the falling knife.Just like 1932-1933..Quick buy some beans and Ammo..
 

hastalavista

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May 16, 2005
Professional Status
Certified General Appraiser
State
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Out here in LaLa Land I've been seeing a decrease in the number of listings, an increase in pending/contract sales and a big increase in the number of people buying new construction. However, in this particular market area we are still seeing a 3-4% per month decrease in sales prices.

Also, I've noticed that most of the new construction has their models completed, streets and curbs are in, lots are graded, but thats it, no building is going on. But the sales agents are saying they are almost sold out! These are the bigger builders too.

I'm thinking that prices have declined enough to be affordable, and that coupled with the lower interest rates, many are thinking its a good time to buy (which is isn't). We are currently at about 2003-2004 prices right now and as we still have an oversupply of inventory, and with prices still declinging, our prices have no where to go except down right?

I'm predicting that we will level off when we hit about 2001 prices. But who knows, strange forces are running amok within this business.

Interesting observation and analysis.

North of Lala land, in a recent pre-foreclosure appraisal I did, about 30% of the listings were REO/short-sales, and at least half of the REO listings were lowered after the first of the year.
These were homes that were purchased in 2006 for $600k, foreclosed on in 2007 for between $500-$600k, and now listed for $375k to $450k (and falling).
 

Terrel L. Shields

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Arkansas
I'm predicting that we will level off when we hit about 2001 prices. But who knows
True enough, who knows. But I think you might be onto something. If you are believer in things regressing to their mean, then about 2001 was when the trend line went skyhigh in many places and prices were increasing faster than historical norms.
 

Charles West

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Sep 14, 2004
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California
What I am seeing pretty much echos what Dennis said. Here at ground zero in Sacramento, CA prices are off nearly 40% from their peaks in late '05 early '06 in the neighborhoods that saw the greatest price appreciation. Been getting a couple listings a month from my sole client and my broker is picking up 10 to 15 from the multiple clients he has picked up since I started helping him out. Working my *** off doing the monthly marketing reports and new listing bpos. So far the money just dripples in. Lots of lookie loos but few committed buyers. We're closing anywhere from 5 to 10 deals a month. Haven't sold one of my own listings yet-hoping somebody else steps up to the plate and puts a deal together. God knows I don't have the time to hold an open house or do any other kind of one on one marketing. I got every appendage that'll move crossed with the prayer that the perfect storm of dropping rates (c'mon Bernanke) and falling prices will jack up buyer interest in the Spring. If the market doesn't start to pick up this Spring and prices are truly heading back to 2001 that means 2008 is going to be one bad news year. There will be blood in the streets this summer!
 

murray stroupe

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Apr 27, 2005
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General Public
State
Tennessee
Mo says scary time to be an investor-true/unless you have studied short selling

And mr Mo, i though that was understood by all;
unsecured debt like credit cards, other stuff called collateralized-but not really collateralized, that would be the first thing to be late/or not paid.

Weaker dollar makes USA on sale;
certainly the Chinese, Arabs...... put their money where their mouth/weak dollar is.

Personally i hope the main S&P trend stays down, ,like a good trend;
bulls had a good multi year run anyway, some sectors usually uptrend anyway
 
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