[V8] C4 (microscopic Audi content)

Mon Oct 25 08:55:25 PDT 2010

Excellent examples and synopsis's there, Mike!

I'll be sure to pick up that book, too.

Ingo

On Mon, Oct 25, 2010 at 11:22 AM, Mike Arman <Armanmik at earthlink.net> wrote:

>
>
>
> In my chequered past, I taught small business management at a local
> community college.
>
> Part of the spiel went something like this: "If you want to sell your
> product or service, you must
> appeal to the big five human motivators, and the more of them you appeal
> to, the more successful you
> will be.
>
> "The five human motivators are Fear, Sloth, Lust, Greed and Envy. We'll
> disregard Gluttony because
> MacDonalds has that pretty much locked up.
>
> Now lets look at how the big five applied to the mortgage melt-down/blowup.
>
>
> Fear - everyone is getting rich, I don't want to be left behind
>
> Sloth - I can get rich without doing any work at all, just by living in my
> house!
>
> Lust - (hey, four out of five wasn't bad, look at what we did with only
> four out of five!)
>
> Greed - I want to be rich so I can buy all kinds of stuff, doing these real
> estate deals is easy
> riches, all I have to do is wait!
>
> Envy - Joe Schmoe made a fortune in real estate and he only has a fifth
> grade education! I'm a lot
> smarter than him and I want to live in a bigger house than he does and
> drive a fancier car - I
> deserve it!!!
>
>
> Here is a partial list of the upward pressures on real estate prices:
>
> Sellers want to make a quick profit, maximize selling price - upward
> pressure from cocktail party
> conversations (lies), media reports (bullshit) and TV shows like "Flip This
> House" (bullshit cubed).
>
> Real estate agents benefit from higher commissions - 6% of $400,000 beats
> the crap out of 6% of
> $70,000 and it is the SAME amount of work!
>
> Appraisers found unless they appraised to a target price, they'd lose
> business to appraisers that would.
>
> Mortgage brokers benefit from higher commissions as well - two points on a
> $400,000 loan beats two
> points on a $70,000 loan, and it is the SAME amount of work! As people
> became sensitized to "evil
> points" the points changed into fees (some overt, some hidden) and then you
> could get a loan with
> "no points!!!" - so the *PERCEPTION* was that this was easy money.
>
> Lenders benefited from the increased volume of loans - remember that Wall
> Street has an insatiable
> appetite for ANY financial instrument that can be
> collateralized/securitized/packaged/homogenized/painted green and SOLD to
> hungry and not very
> discriminating investors based on utterly fictitious "Quality" ratings -
> yes, you can BUY a grade
> for the proposed investment package you want to sell!
>
> Credit card companies benefited because everyone thought they were doing
> really, really well and the
> party would never end - real estate ALWAYS goes up, right? They aren't
> making any more land and the
> time to buy is NOW. (Ever notice that the time to buy is always "NOW"?)
>
> Wal-Mart benefited because people spent a LOT of their (illusory) wealth on
> flat screen TVs and
> other non-durable goods, HomeDepot/Lowes benefited from all the people
> doing fix-ups, spruce-ups and
> pimp-ups of houses for all kinds of reasons. China benefited because a LOT
> of this stuff was made in
> China.
>
> The state and local governments benefited because higher property values
> means higher property taxes
> and the government's appetite for money is utterly insatiable . . .
>
> Builders, contractors, tradesmen, suppliers all set records because of the
> insatiable demand for
> ever larger, ever more expensive homes which people were convinced they
> could afford and had a right to.
>
> Win, win, win, win, happy, happy, happy, happy . . . .
>
>
>
>
> Here is a list of the DOWNWARD pressures on real estate prices (during the
> boom)
>
>
> 1) Alan Greenspan's comment that "there is a certain amount of froth in the
> housing market".
> Greenspan has the reputation for taking difficult concepts and making them
> totally unintelligible. I
> interpreted his comment to mean "Get the **** out NOW, run, hide, we're all
> gonna DIE!!!!" and it
> seems I wasn't too far off. Most people ignored him, they don't like to
> have their parades (or their
> cash flows) rained on.
>
> 2) Me - I kept telling people that these loans were unsustainable and this
> was all going to blow up
> sooner or later and it would be REAL messy when it did. I *stopped* writing
> residential loans in
> 2005, I refused to be a party to this madness. Most people ignored me, too,
> they don't like to have
> their parades (or cash flows) rained on. (I also don't seem to be as well
> known as Mr. Greenspan.)
>
> 3) . . . Bueller . . .  Bueller . . . Bueller . . . ?
>
>
>
> Who lied and who didn't know what they were doing?
>
> Lenders misrepresented their offerings - low or no money down, easy
> payments (for a while) - the
> ominous "reset" date is safely far in the future by which time your house
> will have appreciated into
> the stratosphere anyway and you'll be making so much money that the payment
> will only be sofa money
> - don't worry, be happy. (Besides, we're selling your loan anyway, so if it
> goes sour, we don't care!)
>
> Mortgage brokers both misunderstood and misrepresented the offers - yes,
> there were some who would
> tell you with a straight face that people DO spend 80% of their income on
> housing . . . then there
> are those who never did the math and didn't realize these loans were
> unsustainable and the house
> prices were a huge bubble about to burst.
>
> Real estate agents told people they were making an INVESTMENT, not
> "spending money" and strongly
> implied that anyone who didn't get on the wagon as soon as possible was a
> total fool and was doing
> their family a great dis-service. When you BUY something to USE, you are
> spending money. The
> psychology behind this is "fools buy things, smart people make INVESTMENTS,
> so which are you?
>
> Wall Street - they'd be willing to sell bags of shit in pretty packages if
> they thought they could
> make a profit - oh, wait, they did!
>
> The consumer, the buyer, the poor schmucks who got hammered when this all
> blew up . . . most of
> these people were acting in what they thought were their best interests
> (Fear, Sloth, Lust, Greed
> and Envy) but they are NOT experts - they bought the "INVESTMENT" line
> hook, line, sinker and the
> fishing boat as well. "Everyone" is making money in real estate, we want to
> also (lemming effect).
> Some research and clear thinking would have kept people out of this
> particular disaster - but
> research and clear thinking are diametrically opposed to the Big Five.
>
> Unfortunately, a lot of people were pushed into loans that everyone KNEW
> they couldn't afford and in
> more than a few cases didn't even understand. Deltona (Florida) has an
> extremely high foreclosure
> rate, even for Florida - and many Deltona residents are recent immigrants
> who don't speak or
> understand English very well, but wanted a part (more specifically THEIR
> part) of the American
> Dream. (Hell, I DO speak English fairly well, and *I* don't understand some
> of the parts of these
> mortgage documents - actually I do, it translates into "You're gonna git
> screwed!")
>
> Many of these borrowers were also relying on the "experts" to keep them out
> of trouble - expert TV
> shows and media reports which convinced them that real estate investments
> were THE express way to
> fame and fortune, expert real estate agents who know what the property is
> worth, expert appraisers
> who back them up, expert lenders and lender representatives (banks,
> non-bank lenders and mortgage
> brokers) who will put them into a loan that fits them perfectly (more like
> an Iron Maiden, you get
> to fit it).
>
>
> So - where do we go from here?
>
> 1) Spending more than 35% or so of your annual family income on housing is
> risky. Until REAL WAGES
> rise in the USA (and the trend is flat or even downward), house prices
> cannot go up either. This
> means people will have to live in houses that are smaller and have fewer
> amenities than the
> McMansions they see on TV.
>
> 2) Many of these overpriced homes have seen their selling prices collapse
> dramatically, sometimes as
> much as 50%! Foreclosures bring yet more houses to a saturated and frozen
> market (remember that it
> is very difficult to get ANY loan right now!!!), and when supply exceeds
> demand prices fall. When
> supply dramatically exceeds demand, prices fall spectacularly.
>
> 3) JP Morgan said "Buy when there is blood in the streets." Well, in the
> housing market, there is
> blood in the streets - lots of it. Buyers, sellers, builders, contractors,
> tradesmen, bankers,
> appraisers, real estate sales people, mortgage brokers, EVERYONE involved
> in the "shelter" business
> in any way is HURTING, BAD.
>
> 4) With blood in the streets there are deals to be had . . . if you have
> CASH. People need to live
> someplace, if they can't buy, they will rent. Remember that the rents you
> will charge can't exceed
> 35% of the income of the people you hope to rent to . . . and that will
> partly determine how much
> you bid to buy. Rental properties are now a whole 'nother game - in the
> "good old days" people
> bought something, let the rents pay the mortgage and took their profits out
> when they sold the
> appreciated property. Well, without appreciation, and we likely aren't
> going to see much
> appreciation in real property for a decade (!), rents have to support the
> property - you need
> POSITIVE CASH FLOW, and for many rental properties, that is just a fever
> dream at best.
>
> 5) There are a few profitable niches in the real estate business, but for
> the most part the days of
> "Buy something, anything at all, and you'll get rich by breathing" are
> OVER. (Until the next time.)
> If you are nimble, smart, careful and lucky (luck is not a strategy), you
> can make money in this
> market. My own game plan is to let things settle down for a few years
> before I go back to playing
> mortgage broker. I'll make some exceptions for exceptional circumstances
> and particular deals, but
> this isn't going to be my day job for a while. (Fortunately, I have other
> incomes.)
>
>
> And before you make ANY investment in ANYTHING, read Charles McKay's book
> "Popular Delusions and the
> Madness of Crowds". You will howl with laughter - until you look in the
> newspapers. What he wrote
> 200 years ago remains true today.
>
> Now I'm going to go see if my V8 will start (required Audi content).
>
>
> Best Regards,
>
> Mike Arman
> 90V8Q
>
> _______________________________________________
> Audifans V8 mailing list
> Send posts to: mailto:V8 at audifans.com
> Manage your list connection: http://www.audifans.com/mailman/listinfo/v8
>
> You can help keep the audifans site running by shopping at
> http://audifans.com/shop/
>
>