Posted: 10/13/2011 12:45:53 AM
Originally Posted by I_Need_A_Detox
i'm not smart at all and i've managed to do ok.
a person that can work the banking system the right way and had some real cash could do serious damage right now.
too much risk?
I agree completely.
The USA went from a situation in 2003-2007 where there was "no money in cash", to the present "where cash is king".
My family's business was building single family homes....I started in 2002 after college and went partners with my dad (he was a builder/contractor for 25 years in the area ) building and selling homes in the northwest (montana). We built 2-3 houses (mostly ourselves) per year and made a living....the homes were always sold before finished and the credit was easy for anyone who paid thier bills. Asset value swelled and the growth rate of home prices soared. It was worth it to build a house, and the buyer had a product that served a purpose and was valuable.
Over a period of 18 months beginning in mid 2008 to early 2010, we saw the value of our real estate assets take a devastating hit, and more importantly CREDIT, in all forms, dried up. No money was being put on the street to anyone.... to build, buy, or even carry home inventories. It took 18 months for 8 years of work to go down the drain.
Basically, the banks shifted thier liquidities. There was more money to be made on trading the subprime mortgage bundles back and forth between each other than there was in stimulating or even sustaining economic growth.
The proof of that was the design and implementation of interest only variable rate loans (ARM) ......the bank could charge a higher rate for a fixed period of time, collect high cashflows from these interest rates in the short term, and when the show was about over ( when the home owner couldnt pay the juice anymore) bundle up 10,000 subprime mortgages and sell them off to mega banks as "securitized debt obligations". The beauty of this was that the bundles could be highly valued because of these inherently superior cashflows, and the larger financial instituions found them valuable.The bundles came in very handy in hiding the buyers own financial shortcomings....basically when a huge commercial lender had to limit exposure they would bundle and sell to get the bad debt off of the books....and the next mega bank would step in and buy, rebundle and flip.....etc.
The mega banks (Bank of America, etc.) new damn good and well that the paper was trash, but they had the Feds to run to at the end of the day. The small business men (builders, contractors, realtor/ broker) did not have anyone to run to. Let me tell you, doors slammed, and they slammed FAST.
My point is this: Until credit loosens up, the real estate market will remain depressed. Unfortunately, that is very unlikely for the foreseeable future. The inflation monster is out there, lurking. That is the final knockout punch for anyone involved in the housing market that has somehow held on and carried the financial burden. When we see credit loosen, we will also see interest rates increase dramatically, and assets across the board will begin to be re-valued on a grand scale.
I would say we are in the 8th round of a 12 round title fight......right eye closed....mouse under left....cracked ribs from the vicious 7th round, broken right hand. Losing on all cards (even Lederman's!). But there is still a punchers chance of walking out a winner.
Good luck to everyone whom knows what I am talking about and continues to press on in a tough financial environment.
Congratulations and bravo to all those whom had the foresight to rack profits and got out when the getting was good.