All Topics / Overseas Deals / Foreclosures – will we actually see another drop

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  • Profile photo of worldinvestorworldinvestor
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    Profile photo of FreckleFreckle
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    worldinvestor wrote:
    Not worried about the drop, hoping that we may still see some more great deals.

    I’m sure you will WI. About 9 million to work through I think

    http://www.zerohedge.com/news/second-foreclosure-tsunami-coming-and-about-kill-any-hopes-housing-bottom

    To me the US is in a low angle death spiral but velocity is increasing. It can’t pull out of this without crashing. The pilots of the US economy have neither the fuel nor the ability to control this descent. The only thing to wonder is how bad and when the crash wil occur.

    I have to make a point of getting over there and having a look so I can tell my grandkids about the America that used to be before it degenerates into a 3rd world country.

    The Freckle

    Profile photo of kylermricekylermrice
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    Lol, ah Freckle

    It's not going to happen.  If we go do down everybody goes down.  Even with shadow inventory and what follows we have enough investors buying now to eat that back up.  When it comes down to it we can sustain. With just what we have here, we have reserves in oil that other country's couldn't even think of.  If we could just mind our own business and do it all here.  but, we got spoiled and burned by out sourcing.  Not even mentioning expensive wars that most countires couldn't even dream of you.  You have to pay the cost to be the best.    We aren't Mexico, most of Africa, is Europe going to pick up the slack.  When it comes down to it we can reset in do it all here.  Goods, food, resources, still lots of good land.  It has been proven that communism just doesn't work and isn't right.  Is China going to shift into gear, they are already hurting from all this default on debt happening.  We might not ever have the wealth we used too but we will still won't be third world.  Come on, really?!?

    I have to make a point of getting over there and having a look so I can tell my grandkids about the America that used to be before it degenerates into a 3rd world country.

    I invite you to come over and show you how bad it is here.  I think you will see it's still pretty [email protected] good and will be for many decades beyond. 

    Profile photo of worldinvestorworldinvestor
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    Freckle

    I think you are right, everyone should stay away from US market, very nasty….. shocking rental returns, no possibility of growth, Aus $ at an all time low…

    WI
    http://www.thepetitionsite.com/2/save-our-animals-ban-puppy-mills-in-aus/

    Profile photo of Alex SCAlex SC
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    worldinvestor wrote:

    Freckle

    I think you are right, everyone should stay away from US market, very nasty….. shocking rental returns, no possibility of growth, Aus $ at an all time low…

    WI
    http://www.thepetitionsite.com/2/save-our-animals-ban-puppy-mills-in-aus/

    Some times I wonder my self. There are days I feel confident we can come out of this mess. Other times I think Our Government  has lost touch with the every day people. Just watched a  tv program the other night  can not recall the name Theshowed the  years of the 1950s and 60s in the USA. I made the comment to my wife how proud and classy the American people were( yes I am one of them ). Maybe our society has lost some of that.Greed, and the need to have things quick and fast could be one cause. Ease of technology and loss of family values is another huge problem.

    Guess this is some thing I take heart – being proud of who I am and where I was born. Seems like each generation down from my great grandparents  we are losing that pride

    Just me venting I guess….

    Profile photo of jbelmorejbelmore
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    Most people can see this is the Asian century where Asia will regain its former strength it had in previous centuries as the US loses its dominance. But I can’t see an Asian property market with growth prospects that has proper governance eg security of property rights for foreign investors. If I did I would consider investing there.

    So Im looking at the US like investing in the UK in the 20th century. It’s losing ecomically to Asia but still has good investment opportunities if you seek them out. Having a foreign currency hedge is a plus.

    Profile photo of jayhinrichsjayhinrichs
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    Freckle,,

    the US is so vast and diverse,, One area can be in  the tank and others are thriving.

    ITS Called foreclosure clusters….70% or more of the problem housing debt is in 6 markets.

    We do though have a shortage of engineers and higher educated work force.

    I invite you to travel to the US… land in San Francisico…. Drive through Silicon valley,,,,, Stop at Apple headquarters in Cupertino,, then go to any shopping center or resturant within 5 miles of apple and you will see 80% population is chinese, and Indian.. thats were are engineers are coming from,, When I graduated from Cupertino High School in 1974   the demographics were 97% caucasian.. maybe 2% hispanice 2 black kids… and 5 asians… and there were 2500 of us…..

    So its a world wide social scene and economy…for many parts of the US.

    Your crash's occured in:

    Phoenix
    Vegas
    central CA… ( too many chinese engineers speculating on housing in the Central valley and got stung bad)
    Florida
    Georgia
    Inland Empire of Southern CA.

    Foreclosures have always been a part of our real estate cycle. some of my best years buying foreclosures were in 2003 2004.

    And there will always be foreclosures as long as people die intestate and people divorce and job market ebbs and flows.. Not to mention just some folks can't handle credit no matter what they do.

    DO You not have any foreclosures in OZ??? Does every single borrower pay as agreed, does no one get divorced? Or die Intestate???

    JLH

    Profile photo of lawsjslawsjs
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    Freckle:
    Only something like 4% of homes at the worst point in the crisis in the US were in foreclosure. Jay is absolutely spot on with his points above.

    Jay – you are correct, Australia basically has no foreclosures. Certainly no foreclosure market. Occasionally you will get a ‘Mortgagee in possession’ sale (REO) but it will be advertised specifically as such for more publicity. In 25 years of actively buying real estate I have never seen a Mortgagee in Possession sale go for anything under market – usually the reverse because of the publicity. We have a very controlled market, very safe and secure – which is why it is very difficult for Aussies to understand the whole risk/reward scenario.

    Comparing the WHOLE Australian market to something like New York is probably not unreasonable. Extremely tightly controlled and (amazingly given the size) little development – certainly nothing like you see in the US. The boom/busts are very small, nothing like an S&L, tech wreck or sub prime has ever happened. That is why I think Aussies lean towards the risky stuff, because at home it always works out in the end.

    Profile photo of FreckleFreckle
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    kylermrice wrote:
    Its not going to happen.  If we go do down everybody goes down. 

    It will happen of that I have no doubt and yes everyone goes down.

    Current estimates suggest globally we need to get rid of $70T in debt just to get debt levels back to a managable level.

    The US share of that is approx $25-30T

    Unless you know of a way an economy can spend more than it earns and print its way to prosperity we are goners big time.

    Its going to hit at a global, national and local level

    Globally almost all major economic regions are contracting, are printing money to support an insolvent banking system and have passed the point of being able to support debt serviceability in a sustainable way.

    Nationally countries are engaged in currency manipulation, market manipulation, data manipulation, QE/money printing, trade protectionism etc in a vain attempt to prevent their economies imploding.

    At a local level States, Provinces and Municipalities are struggling to contain exploding liabilities (wages, pensions, bureaucracy) as income plunges on consumer debt deleveraging and faltering housing markets.

    32 of 52 US States are bankrupt

    States Continue to Feel Recession’s Impact – March 21, 2012
    I don’t buy the upbeat future projections in this report. Treasury projections are almost always over confident. Fed Govt is pulling back on assistance and austerity actions by States will invariably impact their bottom lines. I expect to see their positions deteriorate rather than improve in most cases. The exception will be the progressive states that are pro business. I’m afraid there are too few of these.

    If I were you guys I wouldn’t necessarily look at this situation negatively but more as an opportunity, however, everything has a sting in the tail and this one has a beauty. Fore warned is fore armed as they say. Any good investor will take seriously the deteriorating economic situation and plan for the worst with exit and hedging strategies.

    The Freckle

    Profile photo of FreckleFreckle
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    ITS Called foreclosure clusters….70% or more of the problem housing debt is in 6 markets.

    Only something like 4% of homes at the worst point in the crisis in the US were in foreclosure.

    I tend to think we look at this problem from quite different perspectives. You guys seem to assess the situation from a housing market perspective while I look at it from an overall economic perspective.

    The US housing correction started from dubious sub prime loans packaged as AAA mortgage backed securities. It was a toxic problem that crashed the banking system. Foreclosure stocks working their way through the system are the result of that implosion.

    The GFC of 2007/08 has morphed from a banking collapse to a sovereign debt collapse which is being prevented by vast amounts of money printing from every large central bank in the world.

    What I am trying to articulate to you guys is that the sub prime debacle was just the beginning, the tip of the iceberg. What’s coming is magnitudes bigger. It’s so big I struggle to get my head around it at times.

    The Freckle

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    Money is not being printed, it is being sold to banks at low rates to stimulate borrowing. It is a subtle but very important difference. I get the point you are making, but your explanation is lacking. From the US housing perspective the points you highlight above are extremely relevant. Nothing supported the prices that have been achieved in those 70%/4% pockets, it was raw capitilsm. Take a ‘non foreclosure’ suburb – say where Freckle Senior has been living in a mortgage free house for 30+ years. The only reason he would really care about a further collapse is if the country entered a post apocalyptic era like Mad Max – which didn’t even come close in the depression. There is an outstanding Paul Barry 4corners docco from the early ’90’s that is available online that outlines what you are getting at, but if you are buying assets for cash in a raw capitalist state with real income attached you are as far from the world of the financial alchemist as you can get. I hasten to add that I am not, but I am moving in that direction. I would suggest the mining industry is far more risky than the isolated and population backed properties the guys here are generally buying.

    I guess you are alluding to something I think of as a derivative bubble. It will be interesting to watch, but I think you might be looking at this backwards. The US housing market has been (as far as it is possible to be) ‘cleaned’ of almost every derivative it created. For that reason I see it as insulated (again as far as possible and certainly compared to almost anything else I can think of) and therefore ‘safe’ – or at least ‘safer’ than any other market you could name – assuming you can buy something without being ripped off and actually manage the thing properly.

    You must get away from the simplistic journalist line of ‘printing money’. Money was thrown at banks to hopefully get it into the system. They basically paid it all back to keep the Feds out of their pockets. The Fed response was then to ‘print money’ which was simply to sell bonds at low rates, which then allows banks to on loan the money at ‘attractive’ rates to get the economy moving again.

    Sovereign debt is a very big issue, surely there is a finite amount of money that is possible to be created, but if anything is ‘safe’ I would think it it is the stuff that is being discussed here.

    Profile photo of jayhinrichsjayhinrichs
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    Lawsjs

    The derivative that we see today is CASH.

    So much is happening with cash sales… As I have stated All the foriegn investment that is made with cash, and or at least 30 to 50% down…  All our US citizens paying cash with their IRA's.

    Big players paying cash,,, cash cash cash… The market is going to correct and be far stronger,

    Now if we all have short memories and lending policies start to erode to "everyone in America deserves to own a home" Like Clinton ushered in then we are in for another wave of defaults 10 to 20 years from now… j

    Profile photo of FreckleFreckle
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    lawsjs wrote:
    Money is not being printed, it is being sold to banks at low rates to stimulate borrowing. It is a subtle but very important difference.

    Money IS created and then SOLD to the banks. The initial plan was to maintain liquidity but no one knows how deep in the hole the next guy is so banks literally refuse to lend to each other creating a liquidity crises. To overcome that Central banks every where have become lenders of last resort. Banks take the freshly printed money and reinvest it back into treasuries which enable them to comply with reserve requirements and underpins their insolvent balance sheets because of property losses (If they marked to market they’d be bust tomorrow)

    The US housing market has been (as far as it is possible to be) ‘cleaned’ of almost every derivative it created. For that reason I see it as insulated (again as far as possible and certainly compared to almost anything else I can think of) and therefore ‘safe’ – or at least ‘safer’ than any other market you could name – assuming you can buy something without being ripped off and actually manage the thing properly.

    Rubbish. There’s currently $9 trillion in mortgages. Of which 600 billion is in default. There’s all sorts of property related derivative instruments available on the market. If you want to hedge property then inverse ultrashort ETF’s are an effective tool if you know how to use them.

    Money was thrown at banks to hopefully get it into the system. They basically paid it all back to keep the Feds out of their pockets.

    Rubbish again. The bail out monies you think have been paid back is all smoke and mirrors. Banks underpin the property market and central Banks underpin banks. The too big to fail banks have even more bloated balance sheets than prior to the GFC. To get your head around how this fiasco is manipulated behind the scenes read the following;

    http://www.ritholtz.com/blog/2012/03/open-ended-bailouts-are-continuing/

    Sovereign debt is a very big issue, surely there is a finite amount of money that is possible to be created, but if anything is ‘safe’ I would think it it is the stuff that is being discussed here.

    Theoretically there’s no finite amount of money creation/QE/money printing call it what you will. Once they get on a roll it’s much like a drug addict. They go till it all goes boom!. If you think property is safe then you’re simply deluding yourself.

    The name of the game in a GFC event is capital preservation. I think the graph below illustrates spectacularly how property responds to financial crises

    The Freckle

    Profile photo of pc9geekpc9geek
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    Freckle wrote:

    Unless you know of a way an economy can spend more than it earns and print its way to prosperity we are goners big time.
    ..

    Hi Freckle, I live in the Middle East and I would like to give my perspective. The US is the only country in the World who can “print its way to prosperity”. It has just recently gone too hard and fast at it.

    The reason I say that is if you look at all the commodities which are traded for in USD and the large number of nations tied to the USD at fixed exchange rates either officially (China, Hong Kong, Saudi Arabia, UAE and at least a dozen more) and unofficially (Australia, UK, Canada etc.)

    Let me give you a fiction (for laughs) that illustrates

    Just say each of the following fictitious countries had their own currency
    FreckleLand has the Freckle,
    PC9GeekLand has the PcPeso,
    JayTopia has the JYen, and
    the United Stated of Federal Reserve has the USFR Dollar

    Ok so we all trade goods and services and the value of our currencies is set by the work we do or the commodities we exchange, but the USFR insists that we all start accepting USFR Dollar for all transactions between us and some commodities like fuel can only be bough in USFR Dollars. They go further and the USFR insists that we fix our currencies at a fixed rate to the USFR Dollar.

    So now the USFR can sit back and stop nationally doing work or exporting commodities because every Dollar it prints now dilutes the entire global multi-currency supply, but it is the USFR that gets to spend it.

    So yes the US can print its way out of recession.

    I do like the way you think.

    Steve

    Profile photo of FreckleFreckle
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    pc9geek wrote:
    Hi Freckle, I live in the Middle East and I would like to give my perspective. The US is the only country in the World who can “print its way to prosperity”. It has just recently gone too hard and fast at it.

    The reason I say that is if you look at all the commodities which are traded for in USD and the large number of nations tied to the USD at fixed exchange rates either officially (China, Hong Kong, Saudi Arabia, UAE and at least a dozen more) and unofficially (Australia, UK, Canada etc.)

    Let me give you a fiction (for laughs) that illustrates

    Just say each of the following fictitious countries had their own currency
    FreckleLand has the Freckle,
    PC9GeekLand has the PcPeso,
    JayTopia has the JYen, and
    the United Stated of Federal Reserve has the USFR Dollar

    Ok so we all trade goods and services and the value of our currencies is set by the work we do or the commodities we exchange, but the USFR insists that we all start accepting USFR Dollar for all transactions between us and some commodities like fuel can only be bough in USFR Dollars. They go further and the USFR insists that we fix our currencies at a fixed rate to the USFR Dollar.

    So now the USFR can sit back and stop nationally doing work or exporting commodities because every Dollar it prints now dilutes the entire global multi-currency supply, but it is the USFR that gets to spend it.

    So yes the US can print its way out of recession.

    I do like the way you think.

    Steve

    Boy I’m glad you cleared that up. Here’s me thinking QE is inflationary and devalues the printers currency.

    Silly me.

    The Freckle

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    Freckle
    the department of homeland security  has purchased  450 million 40 caliber hollow-point
    bullets

    thats  more  more bullets  than americans

    I think  they are going to shoot   all our  tenants

    Profile photo of pc9geekpc9geek
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    KnoxOff

    The Hague Convention of 1899, Declaration III, prohibits the use in international warfare of bullets that easily expand or flatten in the body.

    Clearly these rounds are intended to be used domestically!

    Someone is very scared about a catalyst event creating a breakdown in law and order.

    I am having a bit of difficulty processing this.

    Profile photo of KnoxOffKnoxOff
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    pc

    its just a bit of  ammo    for the freckle  to fire  off  

    in his US   armageddon arguments

     

    Profile photo of FreckleFreckle
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    KnoxOff wrote:
    pc

    its just a bit of  ammo    for the freckle  to fire  off  

    in his US   armageddon arguments

     

    An here’s me just studying another analyst who talks in terms of a “Super depression” yet to come. And I thought I was pessimistic about future economic recovery.

    An interesting blog article from Steve Hansen, “Seeing The End Of The Real Estate Death Spiral”
    http://seekingalpha.com/article/455201-seeing-the-end-of-the-real-estate-death-spiral.

    Kinda mixed signals with this one. I think predicting the bottom or end of the property correction is a little premature at this point.

    The Freckle

    Profile photo of FreckleFreckle
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    KnoxOff wrote:
    thats  more  more bullets  than americans

    Yanks have never been renowned for accuracy.

    US forces have fired so many bullets in Iraq and Afghanistan – an estimated 250,000 for every insurgent killed – that American ammunition-makers cannot keep up with demand. As a result the US is having to import supplies from Israel
    http://www.abovetopsecret.com/forum/thread173251/pg1

    Based on that Home Sec may have to order a few more. 450m will only get 18000 kills.

    I think your tenants are safe ;-)

    The Freckle

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