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9:00 AM EST, Monday, May 4, 2009. My distress real estate fund is distressed. It keeps losing money. Yet, you'd think distress real estate should be booming. You'd be wrong. Reasons my fund gives for problems in distress:

+ Pricing – Banks and other sellers of non-performing commercial real estate loans have been reluctant to adjust pricing downward to reflect current economic conditions because of their capital constraints (and other reasons -- see below).

+ Supply – While default rates have increased they still remain below the levels reached in the early 1990s.

+ Quality – Many defaulted commercial real estate loans, including those for land acquisition, commercial construction and condominium development, are secured by properties that are illiquid given the current distressed real estate market.

+ Underwriting Uncertainty – Because of falling rents, rising vacancies and general uncertainty regarding future economic conditions, it is more difficult to underwrite the value of properties securing loans put up for bid, or anticipate that such values will not decrease further.

During the past quarter, three other factors have emerged that also inhibit banks’ willingness to sell defaulted debt:

+ PPIP – The Treasury’s Public-Private Investment Program (PPIP) was established to provide up to 6:1 leverage for the purchase of distressed bank debt through FDIC debt guarantees. Thus banks have less incentive to unload distressed loans today and may prefer to wait for the implementation of the PPIP program so that buyers can pay higher prices by taking advantage of government guaranteed acquisition financing.

+ Mark to Market – Under industry pressure, the FASB relaxed the mark to market regulations which guide how auditors value the loan portfolios of financial institutions. The new regulations allow banks to value loans on a hold to maturity basis rather than simply looking at recent trades. This easing of the capital penalty for retaining illiquid loans diminishes the incentive of lenders to sell at discounted prices.

+ Illiquidity – According to Real Estate Alert’s Deal Database, large property sales were down 85% from a year ago and 95% from the 1st quarter of 2007. The lack of real estate liquidity makes loan purchases more problematic since there is no longer a clear exit strategy (sale of the property) following the completion of foreclosure.

Unlinked diversification remains the key to portfolio management.

The upcoming hunger strike. Billions of dollars are still stuck in the gigantic Wall Street fraud known as auction rate securities. This morning, the first person, a former Credit Suisse Group broker, will plead guilty to criminal fraud charges. And now I'm hearing rumblings that an 80+year old lady with cancer and all her funds locked up in auction rate securities will begin a hunger strike to focus the regulatory authorities on the situation. Sad, but likely to attract a lot of attention. Financial reporters are salivating for this horrible story.

From my currency trader: "The 25000, 10 000 and 5000 Iraqi dinar notes are the best sellers. The best deals are in the largest denomination which is the 25000. The lower the denomination the harder it is to get. So the price goes up a lot. Best to stick with the larger notes." -- Bruce Tupholme. His web site is IraqiDinars. Pretty notes:

A bunch of readers are excited about collecting currency. For more, see Friday's column.

Children never neglect their parents. They visit for funerals, marriages, birthdays (sometimes), but definitely when their clothes or their car needs cleaning. This is me cleaning Claire's car on Sunday:

This is Claire banging the dirt out of her mats.

With all our work, the car left spotless. How spotless? Before riding in her car, you now have to remove your shoes!

The Garmin Nuvi 350 is on sale at Radio Shack. It's refurbished, but costs only $109.99. I still like mine. It does its job admirably -- getting me around the country. I'm guessing you can give it back if it doesn't work. Personally I like refurbished. Never had a problem.

Here's the link to Radio Shack.

Recession "humor" is in vogue. You can buy greeting cards with such tasteful lines as these.

Cover....................................Inside

Each card is "only" $2.75, which includes the envelope. Go to RockScissorPaper.

Swine flu email floating on the weekend:

It was once said that a black man would be president "when pigs fly."
Indeed 100 days into Obama's presidency. . . Swine flu.

Great truths little children have learned:
+ No matter how hard you try, you can't baptize cats..

+ Never ask your 3-year old brother to hold a tomato.

+ You can't trust your dog to watch your food.

+ Don't sneeze when someone is cutting your hair.

+ You can't hide broccoli in a glass of milk.

+ Don't wear polka-dot underwear under white shorts.

+ The best place to be when you're sad is Grandpa's lap.

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 on this site. Thus I cannot endorse, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Michael's business school tuition. Read more about Google AdSense, click here and here.