The History Lesson of the Stock Market Crash

Prior to the crash people were receiving higher incomes. With more income average people invested in the stock market driving prices up.  With an unbelievable amount of prosperity there looming in the background, was the thought of a stock market crash.

Then it happened.

Economist had warned of a crash, a bubble bursting, but it fell on deaf ears.  So then the tragedy began, the bottom fell out and everyone scrambled to keep from losing everything.

The world was succumbing to a global economical crash and a wide spread fear of a faulty recovery.

The banks began failing one by one, occasionally four or more at a time.

And don’t get me started on the whole immigration thing.

When reading this article please keep in mind the title, the history lesson of the stock market crash.

If history has taught us nothing but one thing, in time everything repeats its cycle.

The previous stated lesson is from the crash of the 1920’s the last quarter of 1929, October 24^th to be exact.

Back then a group of bankers pooled their money to buy stocks to convince others to stop selling their stocks, while in this century we experienced the Goldman- Sachs scandal, a legal pump and dump.

An Unethical confidence game.

Although there were rumors the bankers were secretly selling their stocks after the pooling and buying.  This would still be a legal pump and dump.

Unethical.

In the stock market crash of 1929 the bottom was not finally felt until July 8, 1932, an approximate time period of two years, nine months, and two weeks and two days.

Even today economist are looking at the stock market crash of 1929, comparing it with our current economy.  The global economy at that time was bleak, but not too long after, the healing did begin.

We started a new cycle of growth.

Our new cycle of growth is going to be small hops (as stated in a previous post) which will total one big leap when we look back a year from now.

A recovery is not an overnight fix.

At this time we should take advantage of the downturn before the upswing and invest in the one tangible asset that will appreciate in the very near future.

Commercial real estate is seeing more foreclosures and is due for even more, making the prices unbelievably low.  This low will not last more than two to two and half years.

The residential housing industry is also going to experience another down turn before its appreciation upswing.

As far as the stock market, well picking stocks like Warren Buffett is better than Jack Rabbit investing any day.  The Jack Rabbits seem to go broke while Warren is still making gains.

So think about where you would like to be in five years.

Would you like to be thinking about how you shoulda, woulda, coulda (sown) invested to (reap) profit, or will you be thinking about all that you are reaping because you realized it was time to invest.

Our Turtle Economy

As our American economy is turtling along, the European’s are experiencing an economy of marked growth, albeit small, as our stock market has seen its third bad day in a row the European’s are experiencing positive trade.

For France the growth for the second quarter was from consumerism, for Germany the rise is from exports.  The United Kingdom is also seeing an improving economy.  But most of the economists of said countries seem to be surprised by the improvement in their economies.  Russia’s second quarter finish is also showing growth, so what is happening to the good ole’ USA?

The short answer, lack of consumerism, credit, and jobs our countries biggest economy drivers.

On the horizon, the Federal Government will be making it easier for businesses to have credit lines and tax breaks which trips into hiring and thereby moves into a more robust consumerism economy.

With the new changes in banking and credit lending the economy will continue to experience ups and downs, mainly due to our basic nature as humans, we resist change but change does happen then we adapt.

In the future we will see housing demand being more robust and possibly experience a housing shortage, a shortage which may cause many areas to appreciate considerably.

So now would be the time to invest in real estate, residential and commercial.  The sidelines are full of those that will never take action, but action is required in this economy.  Don’t let it pass you by invest now although things may look bleak a new horizon of improved change is on its way.

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Realistic Investing vs Speculative: Sunday Morning Thoughts 01 August 2010

Warren Buffett defined the difference between investing and speculation in this famous passage from his book, The Intelligent Investor:

The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels, at which he would be wise to buy, and high price levels, at which he certainly should refrain from buying and probably would be wise to sell.

This statement can apply to the new wave in investing, binary options.  This is a loose example of how binary options work; the premises is to state whether or not a stock or commodity will go up or down in the next ten minutes.  Although this is a rather pedestrian look at the inner workings of binary options, this is basically the way you play the hand.

If you picked up on the poker, or card game reference, this is what binary options sum up to be, yet another casino game.

Currently on the trading floor a lot of speculation has been transpiring.  Many investor newsletters are giving their predictions for stocks, commodities, etc. to have in their portfolios.

When choosing to invest you will have to have a proven earning strategy to see a return on investment.   Not matter how you look at investing you will always be speculating or projecting on a number of factors.

Studying the cycles is also a proven strategy to help increase a return on investment.

Everything in nature has a cycle.  To better understand the cycle of things is to watch and make note of changes.

The changes could be obvious or very subtle.  Noting the changes in the cycle we can then project what will likely happen next.

The housing and commercial housing market also have a cycle, when the prices go up drastically in any given area that same area have a hard bottom.  Examples would be Stockton, CA and the Inland Empire.

The house prices in those areas where going up up up almost everyday by leaps and bounds.  Then suddenly the market in those same areas fell down just as hard.

The Inland Empire was a growth area in the late eighties then became a declining area a short time later.  Fast forward to the late nineties, the same area was growing past its highest peak.  Then with all things fell as sharply as it went up.

If you were to invest now in the Inland Empire the starting strategy would be to hold the property knowing it will appreciate as in times before, and then sell the property right at the peak or slightly before the peak.

The stock market also has a pattern because all things in nature follow a cycle.  This is one of those rare times when all really does exist.  But also note within a cycle are also more cycles contributing to the larger cycle.

In real estate the job market fell in the early nineties with companies cutting back to purchase stocks back from their investors.  For our current housing market the down turn initiated from the sub prime lending and over extension of credit; similar to the late eighties early nineties.

So with all cycles now is the low time in the market, the time to buy and hold.  Appreciation is waiting.

A Closer Look at Using a Self Directed IRA to invest in Real Estate

For many investors using a self directed IRA to invest in real estate seems a little scary.  People may think to themselves what about my retirement?  What if the deal goes south?  If the deal goes south how can I get my money back?

Those questions are perfectly normal to ask, especially since the stock market beat up many IRAs, 401ks, annuities, and other investments.  In addition to the stock market taking a negative toll on investments in general, people wonder if real estate is a viable option for their nest egg; since many once thriving markets and sub markets are presently plagued with upside down mortgages, causing negative equity, and resales selling for a considerable amount less than the once high asking price.

One thing most new investors learn quickly is buy low sell high.  Or maybe if you buy high you can short the stock.  Well the same type of thought can be applied to real estate.

When the market was high many free and clear owners sold their properties for the highest possible price.  Just when they thought the price had gone much higher than they expected, the purchase price went a little higher.  Sub prime lending was also a factor, people were able to buy more house than they could afford in the future reset to principal and interest payments.

The then buyers and lenders did not think the bubble would rupture, but it did.

Now with a housing glut in many prime areas, plus commercial real estate to soon take a tumble due to stricter lending practices, this would be the time to implement the strategy of buying low and hold for appreciation.

Shorting is an option as well in real estate; this practice is known as a short sale.  Although you did not purchase the property when it was a high price or market peak, some one else did.

In a short sale the lender would accept less than owed provided the property is sold to an uninvolved third party.

Meaning the seller may not keep the property nor have a relative or friend purchase the property for them.  The original purchaser must server all ties to the property.  Many lenders are now coming to the negotiation table of short sale a little easier now this could be due to being overwhelmed with foreclosures and more foreclosures on the horizon.

In a real estate buyers market the strategy of holding for appreciation is a very good option.  So if you lend on a current income producing property now then in 3-5years the property would be worth more than now, provided the area is a stable, or stable and emerging area.  A property is considered income producing if after all debt service and maintenance is subtract from the gross income does the property have a brisk cash flow.

So if the deal goes south the property is your collateral.  You have the option to sell the note, sell the property or hold the investment.  Remember you need to receive detailed information on any venture if you decide to invest.

Please subscribe so you many receive the eBook about cycles (it’s only 6pages but is packed with a lot of information) it may help you in your understanding of events to come.

Was That The Recovery You Asked: Sunday Morning Thoughts 11 July 2010

Answer, NO.  Not all of it, there’s more to come.

We are in the midst of the recovery.  Currently the stock market is correcting itself from our past transgressions.  The stock market ending on an up for Friday is good but don’t be surprised on Monday when the market opens down but closes moderate.

This type of activity is normal in a stable recovery.  We are going to see many ups and downs, peaks and valleys in the stock market, the overall will be a slow movement up for the stock market.

At this time foreign Investors being squeamish towards the American stock market is with good cause because we are in an unstable time of the recovery.  One good push in the wrong direction, and we will be looking down the barrel of a long Depression much worse the one from the late 1920’s.  Many of our own American Investors are showing indecisiveness with jumping from stock to stock just for a moderate fluctuation in the price of the stock.

The investments showing growth from week to week are tangible assets such as gold and silver.  The current market prices have not been this high for a very long time.

Suffice it to say, a tangible asset is a good investment.  Real estate is also a tangible asset which has a lot of influence on the global economy.  Now is the time to make sound investments in real estate.  When this tangible asset starts showing strong signs of improvement it may be a long time before it will be this affordable again.

Cutbacks, Down Stocks and other Economical Tragedies: Sunday Morning Thoughts 4 July 2010

This week in retrospect has seen many changes.  The banking Reform Bill has made its way to the house for final approval.  California State workers wages have been rolled back to minimum wage, $8 an hour, with a promise to have withheld wages paid retroactively when the budget is balanced.

With hiring in the private sector being weak, this shows the recovery is still going at slow speed.

The oil spill does not look as though it will be cleaned up any time soon.

The close of Wall Street on Friday was the worst week in the past two months.  The S & P 500 (click the link to read about the impending “death cross), NASDAQ, and the DOW all fell before the start of this holiday weekend.   The DOW fell below 10,000 again, but as time has shown it will rise this coming week.

One thing that has been noticed is the real estate sector.  With a housing glut and more to come from single family homes to commercial property, the market will probably experience another down turn making even more people upside down on their mortgages.

Although on the horizon will be the Reform Bill for banks.  The bill will tighten the rules for being able to extend credit.  This will in turn cause higher interest rates and lower available credit to consumers.  This action is a double edge sword.

This action of banks having to have more money in the bank to be able to lend means, the outstanding credit banks currently have will have to be reevaluated.  The banks may respond with more charge offs and higher interest rates, which will cause a possible decline in the economy.

The power to give people lower interest rates will cut into profits for the banks, but the alternative of increase interest rates is actually a worse option.

A Slow Steady Economic Recovery: Sunday Morning Thoughts 20 June 2010

First let’s start with a few tidbits that do not seem to have a reason in this posting.  But, these same tidbits will come back in future postings as their influences progresses in our economy.

Everyone seems to be welcoming the newly proposed flexibility of China’s Yuan exchange rate.  This will help lessen trade barriers with China.  At this point it is unknown whether this new flexibility will make the Yuan weaker or stronger than the US dollar; stronger is what Washington wants.

With May housing starts home building plunges but this is to be expected with the current housing glut.  With fewer new constructions starting this would help balance the current glut instead of making an even bigger issue of empty properties.  On the upside, there has been a rise in mortgage purchase applications last week, although it is too early to really tell the future impact.

The feds may keep interest rates low.  With the interest rates low more people will be able to qualify to purchase houses, even when the new reform bill passes the House and Senate.  Although it will be harder to acquire large lines of credit, the overall future impact will make it better for the economy.

One of the factors causing our current housing issues was caused by the average homeowner receiving interest only loans.  Interest only loans were for investors when they wanted to only hold a property for three to five years.  The loan was not suitable for families to purchase their dream home, because the reset of the mortgage payment would be greater than income, or they would not be able to keep up with the payments if the debts were too great.

The pace of the recovery may not be as fast as we all may have wanted, but slow and steady is better than fast as a rocket.  A rocket recovery would be unstable, going up fast and strong and plummeting faster and even stronger which in the short term would and only cause more problems such as a stock market crash.

A slow steady recovery will be a lasting solution to our current down economy.  While our economy is in a stabilization phase tangible assets are more attractive to investors.

Gold at this time is one of the most attractive tangible assets, but real estate should also be considered.

Why should real estate be considered if there is a current housing glut?

If nothing else time has proven real estate to be one of the best appreciating assets.  A down market is truly a buyers market; more houses are going into foreclosure, along with commercial properties, many of which are positive income producing commercial properties.

Senior Investing: Sunday Morning Thoughts 13 June 2010

How Seniors can use Their Home for Investing

With the downs and up swings of the DOW many investors are having increased leeriness of investing in the stock market. With the recent Goldman Sachs issues one would find it difficult to feel fairly comfortable investing in the DOW. Let’s face it; if you do not have a knowledgeable stock broker acting for your benefit, and you are not Warren Buffet should you really invest in the stock market?

Well, as we have all seen in the past few months and weeks the stock market has it’s good days as well as it’s horrifying ones. No matter your age, no one really has money to loose in the stock market, seniors especially. For a retired senior having earned income is not necessarily an option.

Most seniors live on the investments made from when they were younger, pensions, and/or social security. Seniors are the group that may not be able to make up for the recent losses in the stock market. With that in mind what are some ways to create a nest egg without having to reenter the work force?

Many would tell seniors who own their home to do a reverse mortgage, others would tell them to sell their home and downsize to something smaller such as a condo in a senior community.

A reverse mortgage works when you do not have heirs or the residence will not benefit your heirs. But, keep in mind the bank is not offering you the total value of your home; it will be a considerable amount less.

If you are a senior and you decide to sell your home and live in a condo community, you may miss your home. Home for many has the memories of family, friends, and life’s accomplishments, although you will make new memories and new friends in a condo community.

In today’s investing world looking at things slightly differently may make a big difference. But, remember all investments have risks. What if you use a home equity line of credit to make investments?

Your home serves as collateral for the line of credit. The amount of the credit will depend on any outstanding mortgages on your home. For most seniors the home is free of any outstanding mortgages, you stand a better chance at receiving a home equity line of credit. In general the banks look at ability to repay, your debts, etc. Each lender is different so if you consider a home equity line of credit, shop around for the best rates and lenders that will not charge a multitude of fees.

Once you have decided between home equity line of credit, reverse mortgage, or second mortgage then you will need to place that money into an investment that will give you a better return than the money you are borrowing.

When investing please consider investing in real estate with Immaculate Enterprises. Lenders are paid eight percent to twelve percent on their money. When investing you may opt for quarterly payments or you may choose to wait till the real estate venture is sold.

The better profit is when you wait till the venture is sold but some private lenders choose to have quarterly payments. Either way it will be the choice of the lender.

The DOW drops under 10k: Sunday Morning Thoughts 6 June 2010

As predicted two weeks ago, the DOW has gone under 10,000. Friday 4 June 2010 also witnessed the NASDAQ and the S and P end with a loss. These are more market corrections and foreshadowing of more to come. The economy has been on a strange roller coaster ride for quite sometime now. This roller coaster will probably see a strong come back in the stock market followed by sharp down turns.

One reason for the loss in the stock market, foreign investors being skittish of the American market with the three reports of this week coming back showing losses; the retail, car, and housing all showing loss. The unemployment rate has only changed marginally, also showing the American economy is not coming back as strong as investors and non-investors would like.

At this point our American economy is being beaten by our own efforts of regulation. The banks are experiencing near record highs of charge-offs and non-performing assets. This is causing a glut of bad debts for many banks which in turn is leading the bank into receivership. We, the American people are feeling the after shocks of an economy gone badly by the actions of most banks. The first reaction was to cut credit limits to what the person owed, causing a person with good credit to look like a bad credit risk. As if that wasn’t enough the banks charged off on people.

People with a good payment history, proper use of credit, now having the deck stacked against them with an excuse of being a high credit risk. The credit risk situation only exists because of the actions of the bank. In short, the banks are trying to protect themselves by “cutting off their own noses” so to speak. Then the banks raised the interest rate due to being a credit risk.

All of this is adding to the strain on our economy and the world economy.

At this point investors and people able to buy property will be the saving grace of a global economy gone sour.

Creative financing is the only thing that will overcome the current credit crunch. With the plummeting of many exuberant markets, now is the time to invest in real estate; being able to invest in the future of a tangible asset instead of a fund in a market of volatility.

Each property we look at is a stand alone property; the property does not rely on another deal. This is one strategy that will only increase earnings in the short term and equity and liquidity in the long run.

Market Predictions: Sunday Morning Thoughts 30 May 2010

The Dow fell 7.9% during this not so merry month of May, at least not for some stock investors; others may have made money if they had the right position.  The NASDAQ also performed poorly hitting new lows not seen since November 2008.  The S and P were equally as bad with losses comparable to February 2009.

On a different note the price of gasoline is down on a holiday weekend.  Traditionally, or pre-conditionally, Memorial weekend is the beginning of the higher gas prices due to less oxygenation and higher oil prices.  This month has seen what most people are wondering how something so good could even remotely be bad, lower gas prices on a get-away weekend.

What does all this mean to the investor or anyone in the market?  Well it means right now the mutual funds, annuities, and money market accounts are not going to show too much appreciation.  Depending on how the money is invested it may show a loss.  But at the moment the reports for cars, retail, housing, et al are not due until after Memorial Day.  The first reports will be Tuesday the rest to follow throughout the remainder of the week.

The new construction report should come in low for homes, commercial, and multifamily.  This is actually a good thing.  With less being constructed and many going into foreclosure that makes now the optimal time to invest in housing and commercial real estate.  With less being constructed, with an ever expanding surplus driving prices on commercial property down, home prices will depend more on the demand in a specific area.

All in all, this is now the time to purchase real estate.  Currently, many prime and emerging markets are at an all time low.  Just think of the appreciation, many properties are being purchased at half and in some case less than half of its value.  Some were just plainly mismanaged, but have vastly improved with the change of management.

Commercial properties such apartment complexes and business centers are being foreclosed at an increasing rate.  On the flip side, these foreclosure properties are generating income to sustain a mortgage and also have positive cash flow.