Great Video

This explains it all. Sorry about the long time in between post. This is why I shut down forsaken. I just read more and see more than I have time to post.

Inland Empire- I told you so

I been saying over a year how I knew people could not afford these prices. It is a new world to get the Sunday paper and see your home values tanking due to foreclosures. Told you so...

Front page of today's Press Enterprise: http://www.newseum.org/todaysfrontpages/hr.asp?fpVname=CA_PE&ref_pge=gal&b_pge=1

https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiWzd79auI92pPTPkdcY819BzfcLSsMKCcbMtOzdRhnkh9e1Y0E7W-w3ckn_M48XuDzBdF3uolmjv8xFgUqxicoDkaGs0T4LfNBf1UepJMdZMPJbmwLavZWtdMuXuUEjt35qg60Vhb72pF/s320/CA_PE.jpg

Lotto Ticket Needed

Here is a funny story. I was training a newer guy to do commercial building inspections. I was off the 405 freeway and stopped to take photos of some of the subprime buildings (he thought I was weird). One of which was Home 123. Funny how I get home and there is a post from Mortgage Imploder on how they are done as of today. Someone get me a lotto ticket fast. Here is the photo I took of Home 123.

"New Century Mortgage Corporation and Home123 Corporation are unable to continue the origination or funding of mortgage loans, and no new loans are being accepted. We are committed to helping borrowers who have been affected by this. We are in the process of contacting customers and brokers to inform them that we’re returning their loan applications, and to assist them in obtaining funding for pending loans."

http://www.home123.com/

Latest Video

Broken clock right twice a day? I think not!

I posted this on forsakencraft.com back in July of 2006…

My title--“These guys are guessing you think? No way, nobody guesses with $1.8 billion dollars without hard data..


FROM NY TIMES
"In July, Paulson Credit Opportunities Funds raised $147 million in equity and promptly put it to work on a leveraged $1.8 billion bet that home owners are going to have a very difficult time paying their mortgages."
""The U.S. housing bubble is deflating, and bulls hope average house prices will not drop the 20 percent or more we foresee," Schilling predicts. "With [house price] appreciation evaporating, refinancing will dry up and foreclosures leap.""
http://www.nypost.com/business/home_fires_dying_business_roddy_boyd.htm

Me---Funny thing is their economist they hired only predicted the stock market crash before the dot.com bust.

"A. Gary Shilling has often been way ahead of the crowd in forecasting some of the recent significant trends in the economy and stocks. In the late 1990s, he predicted the demise of Internet stocks leading to a U.S. and global recession"
http://www.agaryshilling.com/

Now let’s go forward to the present (April 2nd 2007)
“Paulson's pay-out
Still, many hedge funds have made money from the subprime shakeout.
Paulson & Co., a New York hedge fund firm that oversees more than $10 billion, did especially well.
The Paulson Credit Opportunities fund, set up last year to take advantage of mortgage turmoil, was up 67% in February. The firm's flagship merger arbitrage fund was up almost 16% that month too. “
http://www.marketwatch.com/news/story/whos-winning-lose-subprime-shakeout/story.aspx?guid=%7b20967453-D958-4D99-B40B-59C0E80FC036%7d&dist=MostReadHome


They shorted that mess. They make out like bandits.

Insider
Winners Amid Gloom and Doom
By JENNY ANDERSON
Published: March 9, 2007
Chaos spells opportunity on Wall Street.
Chip East/Reuters
John Paulson used his hedge fund to bet against the subprime market.
When Amaranth Advisors, the $9.5 billion hedge fund, collapsed, Citadel Investments and JPMorgan swooped in for the leftovers. After the Sept. 11 attacks and Hurricane Katrina, reinsurance companies sprouted like weeds to take advantage of soaring premiums.
So it is no surprise that the meltdown of the subprime mortgage market is producing a who’s who of winners and losers among hedge funds.
Some hedge funds have made a killing. Paulson & Company, an $11 billion hedge fund in New York, had such a strong belief that the subprime market would fall apart that it started two funds last summer concentrated solely on expecting such a collapse. Paulson’s Credit Opportunities Funds, now with more than $1 billion, were up 67 percent for February and about 82 percent for the year to date. A spokesman for Paulson declined to comment.
Losers abound as well. Greenlight Capital, a $4.7 billion hedge fund in New York with a blue-chip reputation, has been hurt by the troubles of New Century Financial, a subprime mortgage originator. At the start of 2006, the fund owned about 5.5 million shares of New Century. A year ago, with the stock trading around $40, Greenlight’s founder, David Einhorn, joined the board after a proxy fight. He resigned from the board yesterday and the stock closed at $3.87.
Greenlight now owns 3.5 million shares, or 6.3 percent of common shares. A representative declined to comment yesterday.
Some hedge funds actually hedged from the start. In July 2005, TPG-Axon, a $7.5 billion hedge fund founded by a former Goldman Sachs trader, Dinakar Singh, invested $100 million in ResMae Financial Corporation, a residential mortgage originator and servicer. In February, ResMae filed for bankruptcy protection. (An affiliate of Citadel Investment Group has since agreed to buy the remains.)
TPG-Axon, however, also bet against the subprime sector to offset its exposure from the Resmae position, said a person briefed on the fund. TPG-Axon funds are up about 6 percent through February.
But the more nuanced tale in the subprime meltdown is that of Scion Capital, a $700 million hedge fund in Cupertino, Calif., founded by a former neurologist, Michael J. Burry. The fund made a smart bet — but one that was early and nearly brought the fund to the brink.
Scion Capital is a long-short value hedge fund, meaning that it looks for undervalued and overvalued stocks and bets for them or shorts them, betting the price will fall.
In May 2005, Mr. Burry decided that the housing market was overheated. Credit had been overextended and the appreciation in home prices had the earmarks of a bubble. He placed a bet that the subprime market would collapse.
To do so, he used credit derivatives to short — bet against — subprime mortgage tranches that are part of mortgage-backed securities. The derivatives were essentially insurance against a default, so he would make money when subprime started to deteriorate.
Mr. Burry ultimately entered into eight credit derivative agreements that effectively shorted the riskiest parts of subprime mortgage pools issued in 2005. That investment, which looks smart today, hurt the performance of the overall fund as the subprime market continued to hum.
Through the first nine months of last year, Scion Value Fund and the Scion Qualified Value Fund were down 16.4 percent, with a big chunk of that loss coming from credit derivative positions, some tied to mortgages and others related to corporate bonds, according to a letter to investors. The fund ended the year down about 17 percent, most of which was attributed to the credit derivative positions.
Yet at the end of the third quarter, Mr. Burry still had faith in his trade.
“Never before have I been so optimistic about the portfolio for a reason that has nothing to do with stocks” he wrote in his third-quarter letter to investors, referring to the credit derivative positions. The letter was confident — bordering on cocky —suggesting that others players jumping into the market would pay for being late to the game.
“But man oh man are they the overconfident big boys diving head first into the shallow end of the pool,” he wrote. “Despite our mark to market losses, we’re short the mortgage portfolio everyone would want if they knew what they were doing.”
Page 2 of 2)
But investors were wary. Rumors abounded that two significant investors wanted to pull their money because of the poor performance — departures like that, if true, might have sparked a run. Scion, it seemed, might be dead before it had the chance to be right. Dan Nero, chief financial officer and chief operating officer of Scion, declined to comment on investors’ perceptions.
Then Scion made a radical decision: It put the poorly performing credit derivative positions in a side pocket, essentially separating them from the main fund whose performance they were hurting.
Investors were required to enter into the side pocket, which locks up investor money until Scion decides to unwind it. Scion would not receive performance fees on the side pocket until it was liquidated.
Some investors were furious, said one investor because they were locked into a poorly performing fund that they hoped to exit. In essence, Scion erected a steel gate as investors were trying to get out the door.
“We thought it was in the best interest of shareholder because of the illiquidity of the market,” Mr. Nero said.
Then something funny happened: The subprime market imploded, and Scion’s investment looked a whole lot better.
The market entered a tailspin. Investment banks that had been financing mortgage originators put back loans that were in early default or violated the bank’s credit quality terms. Almost two dozen subprime originators declared bankruptcy.
When Mr. Burry first bet against the subprime market, few saw the carnage coming, and as a result the cost to insure subprime mortgage bonds did not reflect significant risk. According to research provider Markit, the cost to insure $10,000 worth of low-rated parts of subprime mortgage-backed securities in early August was only about $217.
But by the end of February, the cost to insure those subprime mortgage-backed securities shot up to almost $2,000, making Scion’s positions suddenly valuable.
Scion Capital’s bets, including its side pockets, started to pay off: through February, the funds are up 19 to 20 percent, according to a person close to the fund.
According to Hedge Fund Research, a Chicago-based firm, hedge funds investing in mortgage-backed securities were up 2.25 percent through February; the HFRI index, a measure of overall hedge fund performance, was up 1.81 percent through February.
Investors who were unwittingly locked into Scion were saved, at least for now. (The investment is expected to remain in place until 2008.) Patience paid. Or perhaps Scion was saved by timing and side pockets.
Either way, chaos created opportunity and Scion investors might feel lucky that they were locked in the castle.
http://www.nytimes.com/2007/03/09/business/09insider.html?ex=1331096400&en=7db67ab8dbfe982b&ei=5090&partner=rssuserland&emc=rss

Interesting to look back.

Housing negative forever?

What a lot of people talked about is that this thing is going down, I told you so and all that. Cool, are we done or do we buy or just keep saying the same things? I told the wife a few days ago after seeing an article on http://www.marketwatch.com/ saying in bright red color that Asia and Europe markets were lower due to US Housing problems. How far have we all come from saying the obvious to a lot of people around the world noticing the same problem? It has been such a relief. It is currently crashing and the foreclosures are mounting every single day. Temecula is a driver commuting nightmare without any decent jobs that support the current housing prices. Remember that you can easily spot fundamentals, ie where home prices should be or what the price any asset should be, but you can never know the psychology of fundamentals from people in a society that will continue to hold an asset price up for as long as possible. Shoot even the NAZDAQ at 5000 took 2 years to collapse from 5000 starting in 2000.
I have predicted that we would see home prices in Temecula at 300k for a small 3 bedroom house for the beginning of this year. I only saw 2 before the end of the year and now there are countless foreclosures at 300-350 with realtors saying to offer 15% less.
We are now changing our position. We are heading down there this summer and renting. I saw last year average rents of a 3 bedroom house ~1600-1800 a month and now have seen them ~1300-1500. We are going to rent down there and sit on the fence longer but I do not advise this to anyone else. If you like the price and have knowledge of everything that has gone on and think it is time then do it. I have realized that no amount of able people buying will help the train wreck from reaching its ultimate destination. We are going to buy 1 acre plus so I can remain living as a hermit and continue to play on my computer (just kidding). We are going to hit the bottom though. No kids, no rush.
I am and always will be bullish on housing long term. It is not all bad. Yes if you buy now or if you bought in 2005 the housing market will reach that price again (unless you are 55+) then it could be a gamble. When everyone is on the bandwagon, you are off. When everyone is off, you are on. I am extremely glad that lost souls still think that housing is still going up because it makes me feel sounder on my position. Once there is blood in streets and people think that real estate would be a bad buy forever, then we will buy. I believe that we will never see a run up like this again. After the mess this market will leave behind there will be so many regulations on loans and laws about down payments that it will strain the market for many many years to come. The only thing that will make prices go up from the bottom will be inflation (isn’t gold and other things a better hedge?). I sold all gold at 660 btw. I’m not a gold bug and wanted to put it in less risk (except a few thousand on CFC).
The true reason for the previous site going down was the negativity. I was at Loma Linda Hospital every day seeing kids with mask on that had cancer and other things. You actually become a very negative bastard after smiling at others pain. After being around so much negativity and after an email from a debtor that was shocked about a post I made on the site, I knew it was time to take it down. The are many more bloggers to take up the slack anyways. Don’t get into the mentality on never buying a place. It is better to own than renting (just not now). This thing will not play out all negative either. People will always jump in and buy, but it will slowly dredge downward (like our current stock market). For anyone that does not own make sure to save up, enjoy life, and do not look at the market every day. You will get immune to high prices and you start seeing a mirage of decent deals in price drops and foreclosures. They are not decent deals but they sure are better than what we had in mid 2005. I wish everyone the best of luck and will check in once my CFC short comes in more (I like to gloat sometimes). Check out the latest video I made and I wish everyone the best of luck in your future endeavors.

http://video.google.com/videoplay?docid=6897935140271687860

Top investor sees U.S. property crash

By Elif Kaban
MOSCOW (Reuters) - Commodities investment guru Jim Rogers stepped into the U.S. subprime fray on Wednesday, predicting a real estate crash that would trigger defaults and spread contagion to emerging markets.
"You can't believe how bad it's going to get before it gets any better," the prominent U.S. fund manager told Reuters by telephone from New York.

"It's going to be a disaster for many people who don't have a clue about what happens when a real estate bubble pops.
"It is going to be a huge mess," said Rogers, who has put his $15 million (8 million pound) belle epoque mansion on Manhattan's Upper West Side on the market and is planning to move to Asia.
Worries about losses in the U.S. mortgage market have sent stock prices falling in Asia and Europe, with shares in financial services companies falling the most.
Some investors fear the problems of lenders who make subprime loans to people with weak credit histories are spreading to mainstream financial firms and will worsen the U.S. housing slowdown.
"Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults. This time it'll be worse because we haven't had this kind of speculative buying in U.S. history," Rogers said
"When markets turn from bubble to reality, a lot of people get burnt."
The fund manager, who co-founded the Quantum Fund with billionaire investor George Soros in the 1970s and has focused on commodities since 1998, said the crisis would spread to emerging markets which he said now faced a prolonged bear run.
"When you have a financial crisis, it reverberates in other financial markets, especially in those with speculative excess," he said.
"Right now, there is huge speculative excess in emerging markets around the world. There will be a lot of money coming out of emerging markets.
"I've sold out of emerging markets except for China," said Rogers, long a prominent China bull.
Even in China, the world's fastest expanding economy, Rogers said stocks were overvalued and could go down 30-40 percent.
But he added: "China is one of the few countries in the world where I'm willing to sit out a 30-40 percent decline."
The last stock market bubble to burst was the dot-com craze which sparked a crash from March 2000 to October 2002.
When the last bubble burst in Japan, said Rogers, stock prices went down 85 percent despite the country's high savings rate and huge balance of bayment surplus.
"This is the end of the liquidity party," said Rogers. "Some emerging markets will go down 80 percent, some will go down 50 percent. Some will most probably collapse."

http://investing.reuters.co.uk/news/articleinvesting.aspx?type=managerMoves&storyID=2007-03-15T074443Z_01_ZWE468140_RTRUKOC_0_MARKETS-ROGERS.xml&pageNumber=0&imageid=&cap=&sz=13&WTModLoc=InvArt-C1-ArticlePage2