Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Wednesday, May 25, 2005: The
biggest boom is not in real estate. It's publishing articles about real
estate, or more precisely, the end of real estate. For your latest enjoyment,
Toronto's Globe and Mail has this wonderful piece. I especially like the
reference to "economists" as knowledgeable and the fact that it's all
bad in the U.S. and all pristine perfect in Canada...
YORK -- Playboy's Miss May, Jamie Westenhiser, may well be to the 2005 real
estate bubble what the ubiquitous cabbie with a stock portfolio was to the
1990s dot-com frenzy: An indication it's time to get out.
former Hooters girl told the magazine that she wants to abandon her modelling
career to take up real estate investing, after she uses her Playboy earnings
to pay off her debts.
from Payboy's web site
May, 2005, Jamie Westenhiser
TURN-ONS: Honest, secure, good-looking men with confidence, class and
TURNOFFS: LIARS, jealousy, fakes and laziness.
JOBS I HAVE HELD: Smoothie maker, Hooters girl and bookkeeper.
MY HOME TOWN: Ms. Westenhiser hails from Hollywood, Fla., one of the hottest
real estate markets in North America.
As with the
dot-com bubble in the late 1990s, speculators are now fuelling overheated
housing markets in many cities across North America. And as interest rates
climb this year, many economists forecast that the inflated prices will crash
back to earth, badly burning heavily indebted latecomers and speculators.
are likely to fall in places where they have been booming the most, and where
people are having trouble affording the houses," said Yale University
economist Robert Shiller, who has published a second edition of his book,
Irrational Exuberance, which covers the housing market boom.
Florida lead that list, along with cities such as New York, Boston, Las Vegas
this is actually the biggest [real estate] bubble in U.S. history and possibly
even world history," he said in a telephone interview yesterday.
Last week, U.S.
Federal Reserve Board chairman Alan Greenspan denied there is a national real
estate bubble, mainly because there is not a "national" housing
market. But he acknowledged that "there are a lot of local bubbles."
He added that,
in many key markets, there is an "unsustainable pattern" of speculation
and reliance on mortgages that require little or no down payment to buy a
argued that house prices -- which have risen at double-digit rates for several
years in many U.S. cities - will soon "simmer down" but are unlikely
to fall because there is a natural demand for housing, unlike technology stocks.
chief North American economist for Merrill Lynch & Co., yesterday begged
to differ with the revered Fed chief. Prices "can and will fall,"
Mr. Rosenberg said in an interview.
said that despite Mr. Greenspan's somewhat reassuring comments, the Federal
Reserve has signalled it is aware that key housing markets are experiencing
unsustainable price increases.
He said that
with the exception of Vancouver, Canadian real estate markets have not experienced
the same speculative excesses as many U.S. cities, although house prices have
Association of Realtors reports that a record 66 of 136 metropolitan areas
had double-digit first-quarter increases in the median housing price this
year compared with 2004.
In Orange County,
Calif., the median price for a house sold was $657,000, a 15-per-cent increase
from the first quarter of 2004, while the New York area saw an 18-per-cent
increase in the median price, to $435,000. (The median is the mid-price point,
with half sold above and half below.) At the same time, more buyers are purchasing
homes as investments, often with little or no money down, or using mortgages
on which they pay only interest. The realtors' association recently said that
23 per cent of homes sold in 2004 were purchased as investments, with such
sales up 14.4 per cent from 2003.
worried that a downturn in the housing market will spread to the broader economy
because U.S. homeowners borrow so massively against their home equity to finance
said U.S. homeowners boosted their liquidity by about $700-billion (U.S.)
in 2004 through mortgage refinancing, home-ownership loans and capital appreciation.
chief economist with Economy.com, said he's worried about the vulnerability
of the mortgage-backed securities industry, where hedge funds and other investors
have made huge bets. That derivative industry funds many mortgages for home
buyers, particularly for low-equity loans.
the mortgage-backed securities market could result in a credit crunch for
would-be home buyers.
Mr. Zandi said
his concern about the broader economy would escalate if the speculative interest
in the real estate markets continues unabated, as he believes it will.
continue on as they are for another year or even six months, the potential
for price declines is that much greater and the risk to the economy is much
more significant," he said.
Every reader knows
my feelings on real estate:
1. Don't be stupid -- like borrowing 100% of an overpriced property.
2. Assume prices will fall 10% and 15%. Make sure your cash can take
3. The price you buy it at is your only chance. It's legitimate (and
expected) to haggle.
buy the first you see. Keep looking.
My friends look at 100 before buying one. You should too.
Real estate is
an imperfect market. There are always deals. All it takes to find
one is hard work.
alerts work in a weird way: Pick a dozen attractive stocks. Set Google
Alerts on them. Then buy the ones with the greatest number of positive alerts
-- i.e. the ones mentioned most often positively in the press. When the alerts
begin to fade, dump the stock. As most readers know, I do love Whole Foods
(WFMI). I get several alerts a day... and the stock? Well, it's been an
animal. If only I owned 100,000...
Is Whole Foods overpriced? Yes. Should you wait for a pullback before buying
some more stock? I have been waiting, but have despaired. I bought some more
and it went up. And then some more and it still went up. Will it continue to
go up? Your guess is as good as mine. Meantime, today I and 9,000 other folks
will shop at my local Whole Foods -- the one in New York's Time Warner building.
U.K. Honda commercial: Click
years in the sands: My dear friends, Paula and Gerry Friesen, just
returned from Vietnam. They loved it. Thirty seven years ago, the Vietnam War
was raging. I was a student at the Harvard Business School. My classmates and
the faculty favored the War. I believed it was unwinnable and made no business
sense. Too much expense (lives and money) for too few gains -- no natural resources.
I have the same arguments against Iraq. But I don't express them often. I figure
it will take us many years to figure the waste. Meantime, the latest issue of
Harper's Magazine has a history article titled, "Forty years
in the sand. What happened the last time freedom marched on Iraq."
British created Iraq in 1918, confident it would become a beacon of enlightenment
unto the Middle East, that it would nurture moderate Arab regimes, that its
monarchs would serve as peacemakers between Zionists and Arabs in Palestine,
and that it would anchor the region in the wider interests of a far-flung
empire. The experiment persisted for forty years, and it failed.
The United States has occupied Iraq for more than two years now. Our stated
ambition is to "spread freedom," nurture moderate Arab regimes,
act as a peacemaker between Israel and its neighbors and anchor the region
in the wider interests of American national security. Yet the lessons of Britain's
failure have eluded the American promoters of Operation Iraqi Freedom, who
remain strangely uncurious about Britain's chastening moment in the Mesopotamian
Britain began its own adventure from a similar position of overwhelming might
in the Middle East where its armies swarmed for the first time through the
crumbling Ottoman Empire. By the end of World War I, Anglo-Indian troops had
captured Baghdad and Jerusalem. ....
rulers assumed their mastery would benefit subject peoples, possibly with
divine benediction. George Nathanial Curzon, the future foreign secretary
and viceroy of India memorably pronounced his nation's unrivaled power in
1894 as an expression of God's will. The Empire was "under Providence,
the greatest instrument for good the world has seen." Speaking Crawford,
Texas, in August 2002, President George W. Bush inadvertently echoed Lord
Curizon: "Our nation is the greatest force for good in history."
In Britain's case, this presumption of superiority was not lost on subject
races, and their resentment fanned the bonfire that ended Britain's moment.
full article is in Harper's June 2005 print edition. It has not been posted
Good is the smartest man in the whole world. I know because he told
me so. He also found K7, the excellent free fax service. Meantime CallWave's
(CALL) president, Dave Hofstatter, who is not the smartest guy on the planet,
surfaced, was not pleased about yesterday's piece who knocked his horrid stock.
He refuses to address the issue of his ridiculous price rise -- from $3.95 to
$7.95 a month for fax-email service, which K7, his competitor gives away for
free. I should have sold his stock short way back. Maybe I still should? It
closed last night at $5.64.
Dancing for real estate: Remember this photo
from yesterday's column.
Reader Bill Brandenberger with Smith
Barney in Houston writes:
The picture is something called Capoeira - a brazilian martial art. If you
have never heard or seen it -- it is absolutely amazing, not to mention beautiful.
On Saturday - June 4, there is what is called a Batizado at St. Mark's Church
- if you are in NY that weekend you should really go see it - it is amazing.
Not violent, but absolutely amazing. I have been doing it for 5 years and
it is the best thing I have ever done. The website is www.tibacapoeira.com.
Mary, the church gossip,
and self-appointed monitor of the church's morals, kept sticking her nose into
other people's business. Several members did not approve of her extra curricular
activities, but feared her enough to maintain their silence.
She made a mistake,
however, when she accused George, a new member, of being an alcoholic after
she saw his old pickup parked in front of the town's only bar one afternoon.
She emphatically told George and several others that everyone seeing it there
would know what he was doing.
George, a man
of few words, stared at her for a moment and just turned and walked away. He
didn't explain, defend, or deny. He said nothing.
Later that evening,
George quietly parked his pickup in front of Mary's house -- and left it there
This column is about my personal search for the perfect investment. I don't
give investment advice. For that you have to be registered with regulatory authorities,
which I am not. I am a reporter and an investor. I make my daily column -- Monday
through Friday -- freely available for three reasons: Writing is good for sorting
things out in my brain. Second, the column is research for a book I'm writing
called "In Search of the Perfect Investment." Third, I encourage
my readers to send me their ideas, concerns and experiences. That way we can
all learn together. My email address is .
You can't click on my email address. You have to re-type it . This protects
me from software scanning the Internet for email addresses to spam. I have no
role in choosing the Google ads. Thus I cannot endorse any, though some look
mighty interesting. If you click on a link, Google may send me money. That money
will help pay Claire's law school tuition. Read more about Google AdSense,
here and here.