The Other 630 Billion

News Flash!

Today the Federal Reserve injected a total of 630 billion dollars in the financial system in an effort to alleviate the lack of liquidity.

So while Congress is fighting back and forth over this bail out plan (or rescue plan, depending on which spinster you talk to), two miles away the Federal Reserve found 630 billion dollars and threw it into the market.

Odd how this story is being so widely ignored while the crash and burn of the 700 billion bailout makes the headlines. Is this 630 billion not as important as the other 700 billion? The 630 billion wasn’t here this morning – it’s being printed on high powered color printers as we speak.

No vote, no debate. Now we know who’s really running the Country.

Rome is not burning

At some point in our lives we've found ourselves being forced to make a decision out of fear. When we take a step back and look at the issue with a more rational lens, we see things quite differently. On the other hand, when we let fear motivate our decision we often find out later on just how bad of a decision we made.

This is where we stand today, with our esteemed leaders irresponsibly running around crying the sky will fall on Monday if we don't take 700 billion tax payer dollars and throw it at a problem. I don't buy it, and I'm far from alone.

While Congress, Paulson and the President plot to spend our money, take away whatever is left of capitalism, and still not have an inkling of a real solution, JP Morgan buys out Washington Mutual. Like Bear Sterns, JP Morgan got a great deal - this is the free market in action. This buyout did not cost taxpayers a dime.

So where's this 700 billion coming from? Two sources - our taxes or they're going to print more money. Is a massive tax hike or long term inflation in order to bail out companies that only deserve bankruptcy a better alternative than a recession that will likely occur anyway?

This 700 billion will be one of the largest government expansions ever, and we don't want our financial markets turning into the DMV. I'm not saying stand back and let Rome burn. But with buyouts like Merrill Lynch and WAMU happening on their own, let's not rush to interrupt the free market from correcting itself when there's still companies out there who can recognize an opportunity in the face of adversity.

If you agree, contact your congressman or congresswoman and let them know to slow down their 700 billion shopping spree.

The end of Free Market Capitalism

If you're watching CNBC, Fox Business or any other financial channel you're hearing the same mantras every day.

"We had to bail them out, otherwise there would have been a major financial meltdown."

"This is the purpose of the government, when the free market loses control."

WRONG AND WRONG.

The essential purpose of the free market is you have good times, and you have bad times. The mortgage and financial companies make irresponsible decisions. If you and I operated like they did we'd be in debt up to our ears with no lifeline. All because we're not "too big to fail".

So what's the moral of this? If you're going to make irresponsible decisions, just make sure you do it at a magnitude that can hurt the maximum amount of people possible. If you do it any less, nobody cares to help you. Just make sure you're too big to fail.

So, now that the government comes in and buys up all the debt. No big deal, they'll just print some more money. All the financial institutions face no punishment for their decisions, and get to do it all over again. You and I get to pay this for the rest of our lives.

Welcome to the United Socialist Republic of America.

Citigroup to Cut Costs

It’s clear as day that companies should be putting themselves under the microscope to see how and where they cut and costs. But some of these larger companies have no idea just how fat they really are. I love this article:

Citigroup Limits Meetings, Pares Color Photocopies

On first glance, it seems like a minor but prudent step being taken. Color copies cost upwards of 10 times the amount of black and white copies, and I know from experience that many copiers are simply set to color even if they don’t need to be. On further scrutiny, what types of policies (or lack thereof) were in place prior to these changes that allowed such wild spending?

Under the new policy, employee meetings must be held within Citigroup offices and client events will require approval, the memo said.

Oh well, I guess that means no more spontaneous sales meetings held at Scores.

Color photocopiers will be removed from some locations and their use will be limited to client presentations.

As opposed to printing of family photos and NCAA office pools.

Citigroup is also scaling back external training, which will be limited to that which is ``strictly necessary,''

Well, there goes advanced dinner party etiquette. Hopefully “introduction to Microsoft Excel” is strictly necessary.

Purchases of computer hardware and software must also be pre-approved under the new rules,

Seriously – were they really buying hardware and software without approval? I should have asked someone from Citibank to expense a new server for me – or an Xbox 360.

We will be conducting a review of our Blackberry usage,'' Citigroup said. ``In the interim, all new Blackberries will require pre-approval.'

Nice. So no one approved Crackberries previously, nor did anyone ever review usage.

I’m glad Citi’s making such responsible steps in limiting what seemed to be complete out of control unchecked spending. Too bad they didn’t do that before whacking 14,000+ employees.

Prince George County Police Murder 2 Family Dogs

Let me start by saying I'm not in line with PETA. I also happen to have great respect and admiration for law enforcement anywhere. They put their life on the line every day they don a uniform and hit the streets to protect us. I also happen to think that dogs are the most wonderful creatures on this planet. Needless to say, this story angers me to no end.

http://www.baltimoresun.com/news/local/bal-mayor0807,0,4563211.story

Berwyn Heights Mayor Cheye Calvo had his home invaded last week by a Prince George County SWAT Team because the Mayor was being set up with drug possession charges - the police even acknowledge there was no wrongdoing on his part. That didn't stop them from bursting into his home, tying him and his family up for 2 hours, and shooting down both of his labrodor retrievers.

Berwyn Heights is an incorporated town within Prince George County. So where was the Town's police force? Normally municipalities will cooperate with each other in these type of investigations. Instead, these guys rush in with guns blazing.

Sadly enough, this isn't an isolated incident. These thugs shot and killed an innocent family's dog back in November of 2007 in this story.

The Calvo family has my most sincere condolences for the loss of their two dogs. I hope this travesty of justice does not go unpunished.

Identifying Good Comparables

Intended Readers: Real estate appraisers, investors, brokers, homebuyers, and anyone else needing to understand real estate valuation.

Many of my clients and associates are appraisers and other real estate professionals; determining the market value of real estate is a critical component to them.

For residential real estate especially, the most common way to determine value is to compare a property against other properties that are similar and have recently sold. These similar sales are called sales comparables, or comps for short.

Most of you reading this already know the basics for good comparables, but I’ll start from the beginning. A good comparable is geographically close to the subject property, was sold recently, has similar taxation characteristics such as the same school district, and has similar attributes such as style, building and lot size, as well as actual and effective age. For an explanation of actual and effective age, click here.

A typical (if not too ideal) search for sales comparables in a residential area of Nassau County, Long Island would consist of:

• 1 mile radius or less from the subject property.
• Sold within the past 6 months.
• Same school district as the subject.
• Building square footage (or gross living area) within 10% of the subject's square footage.
• Similar number of rooms/baths.
• Same architectural style as the subject.

Of course, no two properties are identical. This is why appraisers and other valuation experts use adjustments, which essentially allows them to compare apples to oranges – actually let’s say Fiji apples to McIntosh apples.

In addition to similarities, timeliness and physical characteristics, the circumstances of the sales need to be taken into consideration. Market value is determined by using arms length transactions, or a sale between two unrelated parties with no conflicts of interest sold under typical market conditions.

Examples of arms length transactions are a real estate agent selling a property to a buyer who attended an open house, or homeowner who sold his/her property by listing it in the local newspaper. Example of non-arms length transactions are sales between family members, foreclosures, and flipped properties.

You can weed out a lot of these non-arms length transactions with a little due diligence. Look at the names of the parties involved in a transaction; if the last names are the same it’s likely a family transfer.

If a property was sold more than once in a relatively short period of time, it may have been flipped. Not all flips are bad, but flips have often been used to artificially inflate property values or to conceal ownership.

Other sales to watch out for are those that occur shortly after a bank files a lis pendens on the property. A lis pendens is usually a notification to the public from a bank that a borrower is in default of their mortgage loan. Properties sold in the wake of a lis pendens may be due to a short sale, foreclosure auction, or an REO sale. Any of those circumstances are viewed differently than a typical market sale.

Whether you’re an appraiser, investor, homebuyer, homeowner or real estate agent, knowing this and utilizing it to make sound real estate decisions can greatly affect your success in real estate. Many areas have online data providers that have some or all of this information for a few hundred dollars a year. If you’re in the business or just looking to purchase a property, such an investment can pay off with huge dividends.

Shameless plug: GeoData Plus is a real estate provider for New York, and they have a great comparable search tool. They even highlight sales that are potential flips and foreclosures.