Do you think the problems with subprime mortgages means major opportunities?

Will you still be actively buying stocks or focusing more of your capital towards REI?

Is that measurement unit part of the metric system?

I think the term “sub-prime” is being throw around way too loosely. Kinda like the term “junk bonds” which in some (many) cases are perfectly good investments IF you understand the risk. At the end of the day, there is tons of capital awash in our financial system and Joe and Jane Borrower who take out loans way past what they can afford are just the cogs in the money wheel that make it turn. While I hate big government, this probably an area in need of some regulation. Yes, I’m strong believer in personal repsonsibility, but at the end of the day most people are just idiots.

And the debate will always be whether or not the goverment should protect idiots from themselvse or not. Always a big issue.

In most markets, when market sentiment turns to doom and gloom, that's when the opportunity to buy is best.

That’s true. The trick is to have some money (to buy) when the market is at the bottom.


Both. Being a good investor is about limiting or diversifying your risks. Anyone can make money when everything goes just up. BUT, good investors are ones that make money when there is volatility and investments go down. Currenty, I own no stocks. I make my living trading and yet I dont own one. I sold every one about 2 months ago. I thought they were overvalued and will wait for the market to blow up before I buy any more… same with RE. I dont mind sitting with 100% cash–many of my colleagues thought I was nuts for doing so. In general, Ill be allocating a much larger proportion of my capital to REI in the future. There’s just a better feeling of comfort owning something that you know everyone needs-- housing.

the other trick is knowing whats the bottom, and whether that point is just a momentary resting spot before a lower move.

I don’t think anyone will know the bottom, I think its just important to buy low enough that it will eventually go above your buy in point in a timeframe that is appropriate to you.

yes. it’s unlikely you’re going to buy the low or sell at the high, but you certainly dont want to buy the top (like many already have) or sell at the low (which many will be forced to do in foreclosure). If things get bad, the spread on deals will have to increase. Volatility is good for knowledgable seasoned investors.

There’s a classic investment book called “Manias, Panics & Crashes: a history of financial crisis.” READ IT NOW!

If you think for one minute that this downturn is going to be like the dot com bust you’re dreaming.

The money lost during that era is a drop in the bucket compared to this mess. We are looking at a GLOBAL event here. You think that little blip in China a few weeks ago is over? It’s just a warning shot. I love when people say “too much doom and gloom” I’ve made a nice pile of money over the years because people didn’t want to see the obvious because it wasn’t pleasant to think about or look at.

Think about this… NO ONE reading anything on this forum ever LIVED through the depression. That is EXACTLY when these things repete. Look at any boom bust cycle, in any economy, it’s like reading a road map. It boggles my mind when I hear people say “Things are going to pick up this spring, we’re seeing pent up demand” Yea, we just went through a run up in real estate the has no equal. Take a look at the charts on for U.S. housing prices since the depression. The last 6 years look like a vertical wall. It makes the boom after WWII look like a joke. And how was this stuff funded? We just said it. By a lot of people who got in because they thought it would never end… THAT IS A RECIPE FOR DISASTER.

Reading this now, pretty interesting:

If you think for one minute that this downturn is going to be like the dot com bust you’re dreaming.

thats not what I said. I said there are a lot of parallels to the internet bubble. largely due to the numerous people who should not have been in the market to begin with, which will make the price movement lower more violent. secondly, we may all try and predict what will happen-- but hypothesizing means sh-t. not even the brightest economists have a clue. only time will tell the truth. thats what makes markets.

Watch, It’s not rocket science. Take a look at those price charts.
I’ve been doing this for over 20 plus years. The one thing I’ve learned is a verticle price increase is followed by a verticle price drop. How long have you been investing in Real estate?

My fear of what is going on in the subprime market is the gov’t or states adding more restrictions and lenders starting changing the rules. One of the exit strategies investors use is buy sub2 and sell on owner finance or lease option to someone with low FICO score hoping to finance them in couple of years. What if new regulations block them from refinancing? I am waiting to see how the shakeup will play out.

then you must be right–world trade, monetary policy & macroeconomics may not be “rocket science” to you, but when a lot of very well respected and knowledgable market analysts, pundits and observers have very differing views, im not sure how you can make that statement. i have not been a RE market participant to this point, butI have made a very significant living on wall street investing in these very things. also, to make the statement that alludes to the possibility of another “Great Depression” due to subprime lending is irresponsible. with the advent of many controls in the financial and banking system due ti the GD, a shock to the financial system like the GD is unlikely at best. at no point do you give any rational basis for your assertions why “the world will blow up”. past history is only an indication of the future if all the same factors remain. there was no FDIC or minimum wage or any significant federal aid, to name a few. your only rationale is that it will happen again, because it happened before. not really a convincing argument. having said that, as i stated before, i think we will see a real, meaningful and very painful decline.

pete- care to make a friendly wager whether we see another great depression again or not due to this subprime stuff?

OK , Let me go into a little more detail for you Mr Wall Street.

Do you think it’s a convincing argument that China is about to curb their citizens ability to continue to pour the equity in their homes into the stock market. Now where have we seen that scenerio play out. ( Here’s a hint: it happened here about 70+ years ago, you know, people investing money they don’t actually have)

Do you think that the DEMOCRATIC congress will tighten lending requirements in this country? BANK ON IT. Now what did I read about tighting lending reqs. and it’s effects on money flows? Oh yea! Usually leads to RECESSION.

Do you think the sub-prime meltdown is limited to second rate loan company’s. Nope, GMAC just reported huge losses due to THEIR exposure to subprime. And this band has just started to play.

And finally, and my personal favorite. I have consistantly made money investing in things the EXPERTS on WALL STREET told people to stay away from. Merck, Chrysler in the early 90’s, Kmart/SHLD recently (best real estate play EVER!) Thanks, Eddy!
The fact that YOU don’t agree with my theory put’s my mind at ease more than anything I’ve read lately.

Hey, Wall St. where were you for the last 6 years. Just decided now to invest in real estate? So your one of those guys on the street who likes to play “catch the falling Knife” You missed out pal!


I would like to hear your entry on SHLD…I follow Eddie also but no one hits it right all the time…You definitely talk a good game pete…

I guess this means that you have no interest in the wager? I mean if you are so sure of a meltdown on the magnatude of the Great Depression, then you should be very willing to bet… you aren’t backtracking are you?

as ive said is that this would be downright ugly. A recession, hell yes! Financial pain for the masses? you got it! A depression? Not a shot. you implied another depression previously-- none of what you listed even remotely indicates a depression or worldwide collapse of the financial markets as you state. maybe thats what makes you such a brilliant investor, taking the contrary opinion to everyone. When the “Second Great Depression” occurs and I am standing in line for my weekly ration of bread, I’ll wish I listened more closely to your sage advice.

And by the way, it’s Sir Wall Street to you… :biggrin

Eddie is the man.

Here’s the deal. I’m a real estate guy, always have been, always will be. When Lampert purchased Kmart out of bankruptcy I knew that those properties were worth a fortune. Not because I’m smarter than anyone else, but because I’ve built properties in the same areas those stores are in. My properties in those areas are cash cows.

Let me say this. I bet I have made more mistakes than any 4 people you know. But I do know when something is CHEAP, whether it’s a stock, a car, or a property. I liked the fact that Lampert had returned 20+% yearly at ESL and saw the value in just the real estate. And In all honesty, I got lucky too, Bought SHLD at $20 and still own it.

Tom Baldwin is one of THE BIGGEST bond traders on the planet, his theory is “It’s as hard as you want to make it.” No truer words have ever been spoken.

Hey Wall St. pony up Junior, It’s going to be ugly, but don’t worry you can wash floors in my buidings anytime.

How much? Big shot!

One other question. How old are you, oh great one?

I guess Wall Street had to get off the computer.

I don’t like my kids spending too much time on it either. HA HA!