This Sentinal "Money Market" liquidity crunch is a bit of a worry. If funds start preventing redemptions from Money Market funds we could see a real run on the funds! I wouldn't be surprised to see the FED step in again this week to provide more liquidity to the funds. Sentinel Management Group Halts Client Redemptions (Update5) By Jenny Strasburg and Matthew Leising http://www.bloomberg.com/apps/news?p...1Vg&refer=home Aug. 14 (Bloomberg) -- Sentinel Management Group Inc., the Illinois-based cash-management firm that oversees $1.6 billion, froze client withdrawals after saying that credit-market turmoil made it impossible to trade without incurring losses.
Best article I've read so far on the subject. "I never sell. I never refinance," Zambrano said. "I don't take money out of my house to buy a car or take a vacation. I'm not stupid."
Bingo. The current sub-prime mess is yet another chapter in a long, long story. Those of us who have been around remember previous chapters: the Savings and Loan Crisis, Long-Term Capital Management, the Dot-Com Bubble. The story goes way back before anyone of us was here; Galbraith and Mackay are well worth reading for those who want more. One thing that I have NOT heard in the press in recent weeks is that one of the reasons why hedge funds "invested" in this sub-prime mortgage securities products is because they, as well as most of corporate America, have been flush with cash. Easy credit is partly to blame, of course, but the fact is that these have been good times. This isn't like the 1970's, when companies struggled to find the necessary capital to build their businesses. Companies increase their dividends, and increase them again, and still have too much cash. Perhaps one of the reasons why Bernanke has been hesitant to cut rates (other than because he is an inflation hawk) is because he would like those with excess capital to invest in more stable, reliable investments (bonds, bills, notes), and not in speculative garbage like these packaged mortgage products. One of the reasons why Americans have not been eager to lend money to the federal government is because, frankly, the rate of return has been pretty pathetic. In the long run, that may well change. Rising interest rates will only let more air out of the real estate bubble. There will be foreclosures, and cheap homes (again). The dollar may stop going down (sorry manufacturing). And in the long run, the purge will be good for the system, because that is how capitalism is supposed to work.
My current home is the only piece of real estate I've ever bought, so I have a lot to learn on the topic of real estate speculation. When the prices crater, what types of assets will you be looking to pick up? Residential, right? Single family homes, condos, or apartments? Urban, suburban, or rural? Seriously, I'm interested in hearing your strategy.
My $0.02... I have been looking at commercial office space in chicago for the past 18 months or so just to get a feel. Commercial office to me means: 1) Longer leases 2) Repeatable processes/materials (maintenance) that can be consolidated for multiple properties in the same geographic area. 3) Built-in lease increases 4) Chicago is here to stay because of the cultural options it offers. 5) People can live like pigs, but you can't run a business that way for long. So the theory goes that it won't be mistreated at the same level as a residential property. 6) A lot of these buildings have significant equity, so attractive seller financing options can be structured to meet the 20% requirements. I haven't purchased anything yet, so it is possible that I am wrong...but I have done homework and I will find out if I am right/wrong about commercial office properties in due time!
bubbles been going on for a Loooooooooong time. dutch tulip bulb scandal anyone? heck, there was probably a frankincense and myrrh scandal in biblical times as for what i plan on doing in real estate? well, i just sold one house got about a 70% return in 9 years. i still have one house. i am waiting for seattle market to soften SIGNIFICANTLY. my house i have now is relatively modest 3br 2.5 bath. your basic single family home. i know that when bubbles pop, the highest priced assets go down in price the most (both in dollars and in a %age basis). so, basically, i will be picking up one of the nice 1/2 million dollar houses when i can get them around 380-410k. i have little doubt they will come down to this level (or farther). put @ least 2/3 down. park some capital there.
Just as I thought...FED back at work. Expect more action today. http://www.newyorkfed.org/markets/omo/dmm/temp.cfm The following operation has just been announced: Deal Date: Wednesday, August 15, 2007 Delivery Date: Wednesday, August 15, 2007 Maturity Date: Thursday, August 16, 2007 Type of Operation1: Repo Settlement: Same Day Term of Operation2: 1 Day Operation Close Time: 09:40 AM