Did the recent market shift affect Hitler too?

This recently discovered (by me) video on YouTube hits a nerve when it comes to how many are affected by the current market dynamics around the country.  I found this a bit funny, if not unnerving, considering how many people I’ve been talking to lately that are in short sale position.  The discussions are because I’m not just acting as an agent but because of my involvement in a real estate investment group that is buying these kinds of properties. 

What I’ve noticed while doing research is that an oddly large number of agents have been hit by the issue of needing to short sell - you’d think that these would be the people prone to seeing the fallacies of some of these loan products and how they’d impact them in a market downturn, but I’m not going to point fingers since I know as independent contractors and small business owners we are tied to these loan products that got misused during the market hey-day.  Even with my own great credit score, I know that today I probably couldn’t qualify for a loan in today’s market because as a business owner, I must go stated income.  I’m thankful that I was able to change my situation before things went nuts in the industry.

If you decide to watch the video, know that my linking to it here is only to provide a bit of levity to a not so fun situation for everyone right now.  I feel blessed that my business is doing so well right now and that many of my choices to downsize last year seemed to be a lucky break ahead of the curve of what is happening to many right now.

Comments

  1. I didn’t make it that far through, but I did find it interesting how many people claimed to have warned him about the bubble! :D

    For those interested in a “real” Hitler video, who have Netflix, the movie “Downfall” is pretty good.

  2. Reba, I don’t think anyone predicted that agents or other 1099 contractors (landscapers, carpenters, etc). would have their income reduced so dramatically. Predicting a bubble isn’t the same as predicting the financial devastations we’ve been seeing. Having a WAMU and a Lehman Bros go down is historically significant.

    Anyone with income reductions or job loss may have had savings, but the market has been difficult for more than a year, and barely anyone has or had that kind of savings — especially in light of the stock market declines.

    So far, it’s been a 3-tiered crisis: job incomes, stock market losses, and home value prices. Let’s just hope that massive layoffs don’t happen to cause that 4th tier loss.

    What’s unnerving is to not have some working solutions entering the market right now — and watching Congress and Paulson et all arguing, grandstanding, and simply not making the decisions that the American public needs. Paulson thought he was right by starting “at the top”, but I don’t see any effect at the “street” level …

    We need something immediate or all across the country, things will get worse. Winter is always difficult economically, and here we are, right on top of it.

    And, once a business owner has 2 full years of valid income tax returns, they won’t need to go ‘stated income’, they would qualify just as normal income people do. But – certainly, the last 2 years for most 1099 contractors will show big declines in income. Hopefully, once things stabilize, we’ll see lenders agreeing to use a 5-year income average for 1009 folks.

  3. Leanne, some of the bubble bloggers (most notably Eleua) were predicting the downfall of institutions.

  4. Kary this must be a first, you beat me with almost the exact comment I was going to make :)

  5. You liked the movie Downfall too? ;) :D

  6. There you go, you actually made two comments that I agree with.

  7. “my involvement in a real estate investment group that is buying these kinds of properties.”

    Hi Reba,

    So how’s it going with purchasing short sale property these days?

    Where are you obtaining your stated income non-owner occupied financing?

    Thanks.

  8. leanne finlay says:

    Kary, I was thinking no one with a REAL name and economics credentials had forecasted this devastating meltdown :-).

  9. leanne, I don’t have a problem with people not using their real names–especially our “regulars”. You get to know where they’re coming from and folks may agree or disagree or agree to disagree–no different than those of us who sign our names.

  10. Leanne,

    Are you unaware of the many people who accurately predicted the bubble and financial devistation?

    I could give you a list of them if you’d like.

    You might even be interested in reading what they’re saying today. Let me know, and I’ll post it here.

    By the way, Eleua was one of them along with synthetik and The Tim.

    Leanne, there are many reasons why people prefer to use an anon handle when blogging. We don’t mind here on RCG.

  11. Thanks Jillayne,

    Some other notable authors who predicted this as well:

    Nouriel Roubini
    Jim Rogers
    James Kunstler
    Marc Faber
    Bill Fleckenstein
    “Mish” Shedlock
    Karl Denninger

  12. leanne finlay says:

    Hi all, I wasn’t suggesting that people should sign in with real names on blogs. Published authors have been calling for various stages of decay, decline and collapse for as long as I’ve been able to read, so that isn’t new either.

    You can find published cases for any direction you want, as far back as stone and tablet writing :-)!

    What my point was that the economic leaders in business in our country and around the world, were not predicting this scale of a meltdown — if they were, firms such as Lehman and AIG, and maybe yes/maybe no WAMU, would have ‘planned their plan’ entirely differently. Had everyone believed the dire news, large portfolios would have gone out of the stock market and into safety nets, etc. etc. etc. (which would have caused problem too, eh?)

    What I am seeing out there in the field is that a lot of self employed people and small businesses who formerly had very decent incomes, have seen large reductions in the last 2 years, that they really couldn’t have planned for.

    Even a safety net of 6 months or a year cash reserves may not be enough for small businesses, or self-employed people; and how many really have a full year of cash reserves anyway? Unemployment benefits for those who were W2 certainly help those who are laid off, but they aren’t enough to make things even, nor should they be.

    Here’s an example of a family business that is hurt today, and hurt far worse than they ever thought could be possible (they even had disability insurance to cover the risk of being hurt or too ill to work):

    One of my clients has been a professional landscape designer for nearly 30 years. They have laid off all employees, and are barely able to make ends meet today, and are worried about the house mortgage, and even their ability to buy groceries. They had savings, but ran thru that last June. They had a couple of summer design/install jobs, which carried them thru till today. They don’t have any prospects in front of them, and December will be the first month they can’t make the mortgage payment. They would rather not sell, since their acreage has a greenhouse and place for their plants. Retirement accounts have been slashed, so cash out is a rather doubtful possibility. They don’t have a particularly high mortgage, so they do have equity if they have to sell, but not enough to buy again.

    Both husband and wife work the business, so they don’t have a ‘fall back’ salaried job. They have never been in this situation before, and they had savings which lasted about 7 months, no debt other than mortgage, and basic business expenses.

    They are only one example of many.

    I think a lot of people who are holding their own financially are not seeing into the lives of the folks around them, and are not noticing that many strong people are see what they’ve built literally falling of that proverbial cliff.

    As real estate agents and mortgage professionals, we do see and hear a lot of first-hand situations, but I think we all could use some extra strength this year to really be more aware, and try to be more sensitive.

  13. To the growing list of predicters with real names and credentials, I’ll add Peter Schiff. He predicted this collapse, again & again, not as a broken clock but with a realistic analysis of broken fundamentals.

    I’ll concede that his predictions weren’t popular. Here’s a video compilation of Peter Schiff as guest on various mainstream media from 2006-2007, “predicting this scale of meltdown”. Watch it. You’ll be amazed to hear what he says vs. other guests. He is openly mocked: “What are you TALKING about? Wow, what are you like at a party?” It’s embarrassingly moronic. But well worth listening to Peter’s views, even now.

    So there were plenty of warnings & time to prepare. Sad truth is most people don’t want to know very much or make any changes until their rear view mirror tells them it has happened. I’m not insensitive to the downside and to those who are caught on the wrong side of this crash. I have a few family members who are. What has been amazing to me is how many people were unable to believe Anything Else — until AFTER it happened. When hope masquerades as belief, that’s trouble.

  14. Bob Hunter says:

    Leanne, maybe none of the popular ‘talking heads’ predicted what is happening, but there were plenty of people with economic credentials that did, just as some predicted the dot com bubble. That the economic leaders, as you put it, did not predict this should be a lesson to us all. The simple fact is that the system is a deck of cards and telling the truth would result in these political and economic non-leaders in losing their power and influence. AIG, Lehman, Wamu and the rest are broke because they bought and sold investments that were/are just plain bad. Greed did them in.

    We have been on a carnival ride for many many years. The standard of living we’ve become accustomed to is simply not sustainable.

    The video so sad but true.

  15. Bob Hunter says:

    uh, “house of cards” not deck

  16. @Leanne,

    What my point was that the economic leaders in business in our country and around the world, were not predicting this scale of a meltdown — if they were, firms such as Lehman and AIG, and maybe yes/maybe no WAMU, would have ‘planned their plan’ entirely differently. Had everyone believed the dire news, large portfolios would have gone out of the stock market and into safety nets, etc. etc. etc. (which would have caused problem too, eh?)

    Our economic ‘leaders’ had to have known what was coming. The scale of the meltdown was knowable. The reason they didn’t “know” was due to them wanting the easy times to continue. As long as dim bulbs kept overpaying for real estate, they didn’t have to address the underlying industrial rot in our nation as well as being preoccupied with counting all their “green” tax revenue. All those kiddies that spent $100K on a third-rate college education so they could get a cube-job would have something to do.

    They didn’t “know” because they chose not to know.

    These big institutions wrote all this toxic debt and SOMEONE has to eat it. There is no way out of it, so if they get out, someone else has to get in. This is why the US Treasury is trying to buy all this stuff, but it will only impair the US Treasury – a situation that is not an improvement.

    All of the firms you mentioned were engaged in blatant fraud. WM was calling capitalized interest income for the purposes of making their “numbers.” There was no way out of this and their failure was certain as early as the spring of 2007. AIG wrote insurance that they were not adequately capitalized, and LEH did the same.

    It takes more fiscal responsibility to run a paper route.

    We passed the event horizon for a depression in 2005. You can’t have homes retrace half of what is necessary for valuations to fall within historical norms without wiping out the economy. It would help if we actually made things, rather than just spun debt from party to party. Now that America is facing that reality, hopefully we will start up our industrial base. We will not achieve a bottom until that happens.

    Ask around on this board what percentage of downpayments are backstopped by Uncle Sugar. Now look at what Obamessiah is promising everyone in terms of freebies, and all the bailout funding, and ask how the bond market is able to support this. When you drill into that, you will find the next ‘crisis’ that will hit us.

    Our bond market is going to shatter into a bazillion pieces and send interest rates sky-high. The velocity of money is rapidly approaching zero, which makes borrowing very, very difficult.

    My prediction: The US lifestyle will rollback to the 60s/70s era, and our economy will shed the bulk of the jobs that were created in the long boom from the July 1982 low. These jobs fall in the Real Estate, Finance, and Insurance industries. The bulk of the tech industry supports the above three, which leaves DoD spending, and that has to survive Obamessiah and a hard-leftist Congress.

    So, that’s my sunshine outlook.

  17. Eleua, so what do you recommend average people do? I’m only half sarcastic here…but… do you have an underground bunker set up?

  18. Well, my point is that the average person had no clue things would get to where they are today. You can argue all you want that so & so said this, and so & so said that, but major corporations all over the world didn’t get their act together enough to minimize their losses, so neither could or did families.

    And our little ray of sunshine, Eleua, thinks we’re going back to the 60′s and 70′s ‘era’ … do you mean era really? Will we wear paisley and bell bottoms? Or do you mean the economy, where mom stays home with all the kids and dad takes the station wagon to work? :-) You and I have had this conversation before, and all I can say to that is we had better literally be stocking up on our guns and ammos if your world comes to play. Not to mention fishing gear, hunting gear and gardening skills.

    My point remains: we as professionals are going to need a whole lot of understanding and empathy to help our clients thru some pretty tough and devastating times.

  19. cautious buyer says:

    I don’t recall reading about that much violence, anarchy, or starvation in the 60s and 70s Leanne, although I suppose people did enjoy hunting, fishing, and gardening.

    No doubt people will go through some tough times. Those in real estate may take a disproportionate share of the burden. I doubt people will be forced to downgrade to only 1 station wagon per family though!

  20. @Rhonda,

    If we get the systemic bank failure that I have been predicting, you will need the ability to sustain yourself for a few months. While a bunker may have practical applications in the future, I don’t think the war will be for at least two years. Your resources are better spent building relationships and stockpiling food, cash, fuel, and learning how to use a shotgun.

    @Leanne,

    When I say 60s/70s, I am saying that we will rollback several decades as the depression destroys wealth and people that have been living off the FIRE industries will have to retool to meet the demands of repatriated industry. Look at the lifestyles of the 1920s and then the 1930s. We were better off in the 1880s/90s. Societies expand and contract. First Century Rome was far better off than 5th Century Rome.

    While I will admit that the average person may not have had the ability to see the financial doom we were building, look around at people that had the facts rudely shoved in their faces, and continued to believe that we could just flip property and paper back and forth to create wealth. Many of these people were very well educated, but were blinded by their circumstances. I’m also of the opinion that many of the people that were running these large institutions lacked the wisdom to see more than 3 months in the future. Their compensation is always based upon hitting their numbers, rather than securing their future. WM’s Killinger would be my poster-boy for this phenomenon.

    Lest we think I am being excessively arrogant, I will freely admit that my industry (air transport) had sealed its fate by 1999, and it was readily apparent that it was going to implode by mid-2000, I didn’t come to that reality for another two years. It is very difficult to see your own livelihood as being unsustainable in its present form when you are drawing paychecks.

    Remember, debt is the antithesis of wealth and our societal priorities relating to commerce should be to build and sustain wealth and the means of production. Housing is not production, but an end-use consumer item. Finance is nothing more than a means to direct money to its most productive end, rather than a means unto itself. Goldman Sachs produces nothing. It is an intermediary between people with money and those with the means of production.

    Leanne, I feel the conflict within you. Come over and join us on the Dark Side. It is your destiny.

    Darth Eleua – unofficial ray of sunshine for Rain City Guide.

  21. leanne finlay says:

    Oh please. You really are the official ray of sunshine.

    Cautious buyer, you missed the point. You really don’t want Eleua’s world to appear, what he is talking about wasn’t really the 60′s or 70′s. Much worse.

  22. Jillayne, sorry for the delay, I’ve been traveling today to visit family. Short sale purchases are going well and I’m part of an investment group, so I personally don’t have to find the financing. The investment team pays cash so no financing involved. There are a lot of these short sale properties out there.

    I see plenty of others were eager to discuss the subject though. Thanks to everyone for chiming in!

  23. No one’s desire to see or avoid Eleua’s world will have any effect on said world materializing.

    Also, most of the “named experts” were wrong. Why would you care what they think now?

  24. Alan, your last point is what gets me about much of the news reporting of predictions. They report the predictions of entities and individuals, without giving any information of their track record. Complete waste of ink as far as I’m concerned.

    And even those that are right on an issue–many of them are right because they were wrong for 10 years and then something finally happened. The “broken clock” situation.

  25. Kary, I’d like to recommend you read “The Black Swan” by Nassim Taleb. The whole book is about the nature of “unpredictable’ events. One of the points made in the book is that “experts” are often worse at prediction than “non-experts”. Experts have a reputation to protect and so they often make the prediction that meshes with the general consensus. They rarely challenge common held, but flawed assumptions. The few that do get ridiculed by the rest. That is what happened to Peter Schiff.

    Taleb says that bank failures are inevitable. A banker is fellow who takes risks such that he only goes bankrupt when all of the other bankers go bankrupt too. By acting in that way he gets profits most of the time, but doesn’t have to accept responsibility when the inevitable black swan appears.

  26. Take a look at these quotes from Taleb:

    http://www.fooledbyrandomness.com/imbeciles.htm

  27. KLK,

    Would you care to name a particular “broken clock?”

  28. I don’t listen to enough of those people to know. Maybe Rogers?

    The problem is you need someone that’s consistently one position to qualify as a broker clock. Even the NAR now has had some negative predictions, even though they’re predictions are (almost?) always off.

    And speaking of bad predictions, it seems in this thread Godwin got it entirely backwards! :D

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