Quick Notes - June and July 2008

    Below you will find this month's Quick Notes and links for prior month's and the most recent Quick Notes.  If you would like to receive my Quick Notes as I post them via email, please send me an email request - Mike@MorganFlorida.org

Current Quick Notes - Click Here 

May 2008 - Quick Notes - Click Here

April 2008 - Quick Notes - Click Here

March 2008 - Quick Notes - Click Here

February 2008 - Quick Notes - Click Here

July 31, 2008 - Confirmation from the Three Stooges - Let me give you the three things that happened today which guarantee a market collapse that will renew itself over the next few days:

1 – Jim Cramer called the Absolute Bottom and he pulled out the Bear Slicer.

2 – British Hedge Fund Increases Stake in Washington Mutual – that’s truly bad money chasing already dead money. And it was interesting that this was initially announced as an investment, when it was nothing more than adding to their mistake, which triggered a regulatory announcement.

3 – Alan Greenspan is back on TV today telling finally admitting the truth. He has finally flip-flopped and now he says it is not a liquidity problem. I’ve said that for two years now . . . it is a solvency problem. He stated we are nowhere near the bottom in housing, but then he started talking GobilyGook. It was truly a pukable performance.

Sell the kids and short the market. We will be below 9000 before we ever see 12000 again. After hearing Greenspan’s opening comments, I can’t understand why the market is not down 500 points. He summed it up perfectly . . . this is a Solvency Problem.

TONIGHT - We are having a client meeting here in Jensen Beach at 7pm this evening.

NEXT WEEK - Conference Call on August 7^th. You are not going to want to miss it.

UPDATES AND BLOG – If you are not a client, you have probably realized you are not seeing much in the way of Quick Notes, Blog Posts or Trade Alerts. I’ve tried to provide my clients with the value they are paying for, so I have held back most of what I have written and all of the alerts. If you are interested in becoming a client, you can purchase a one month trial that will include:

1 - Next Week’s Conference Call

2 - Both of July’s Conference Call Replays including the 3.5 hour call

3 - All Trade Alerts and Portfolios

4 - Ten Minutes of my time

5 – All of July’s Client Emails and Alerts

July 28, 2008 - Hard Core Depression Warnings from 1998 - There are many things I could write about today. But if you need another article of mine to bring you to your senses, your senses are too dull for words. You need to watch the video in the link below. You need to see and hear what I’ve been writing about. You need to get a grasp on reality and start protecting your assets NOW. Because if you still think we can avoid a Depression, you are going to be one of the suckers standing in a bread line . . . or worse.

1998 Warnings - By the way, the video you are going to watch, is from 1998. I found it hard to believe folks were talking about these things in 1998. I can’t confirm that date, but if it was done in 1998, that makes it much more scarier. I do know Larry Burkett died in 2003, so it is at least five years old. And the video’s reference to a total debt of $19T makes sense for 1998. The video covers all bases . . . from housing to employment to borrowing to financial creativity to the government shell game with our money, as well as the truth about the Federal Reserve’s printing machines and all that we have just witnessed.

Two Hours of Hard Core Truth - It’s a two hour video. You might say, “I don’t have two hours.” Fine, my clients need losers on the other sides of our short trades. If you don’t have two hours, you might want to watch the first ten minutes. That’s all you need. Then again, if you only watch the first ten minutes, you confirm the point of the contents of the video. Most people just don’t care. Most people still believe all is well, and they can use their credit cards for another fancy dinner out or $500 for a day at Disney with the family or a jet ski or another car or another boat or whatever they think they “need.”

Greed and Morals - The only problem with the video, was if it was done in 1998, people that followed its advice would have lost fortunes by now. However, that was only because the experts in the video actually “underestimated” just how unscrupulous our economists and politicians could be. These experts also underestimated the greed and lack of morals in their neighbors . . . you, me and everyone else. So I suggest you watch the video, and make your own decision based on what we are seeing unfold now. Remember, four years ago I started talking about problems. Three years ago I started writing about them publicly. A year ago I coined the term Decession. This year it has become clear we have are facing a Depression attributable to physical debt combined with moral debt.

Video Link - http://wealthbygold.com/content/view/27/46/?mikemorgan

Crisis Investing - When you’re ready to start a Crisis Investing Portfolio and joining a group that is going to continue to discuss asset protection, I suggest you become a client for a month. By the way, this Thursday we are holding our first meeting in Stuart, Florida at 7pm. If you are interested in replays of our two public Conference Calls - http://www.morgan-florida.org/07-18-08

July 26, 2008 - Two More Banks Seized by FDIC - It looks like it is starting, and we are going to be seeing Failure Fridays on a regular basis. Two more banks were seized by the FDIC later Friday. The story is below. As I have noted all along, this is going to speed up, and I expect 100+ failures by the end of the year, and now I am calling for more than 1000 bank failures over the next two years. If things continue to deteriorate, that number could double. (More Detailed Information and investment strategies for my clients about this and other developments from last night and the weekend)

CRISIS INVESTING – I know I sound like a broken record, but if you are not prepared for what is unraveling, you will be in dire financial straits. There is no way for the Fed to fix this mess, and what the Fed did over the past two weeks was nothing more than to line the pockets of Paulson’s frat buddies. I highly recommend you listen to the 3.5 hours Conference Call we held on July 17th. The link is to the left of this piece.

FDIC takes over 2 more banks, closing 28 branches
By BRENDAN RILEY
CARSON CITY, Nev. (AP) — The 28 branches of 1st National Bank of Nevada and First Heritage Bank, operating in Nevada, Arizona and California, were closed Friday by federal regulators. The banks, owned by Scottsdale, Ariz.-based First National Bank Holding Co., were scheduled to reopen on Monday as Mutual of Omaha Bank branches, the Federal Deposit Insurance Corp. said.

The FDIC said the takeover of the failed banks was the least costly resolution and all depositors — including those with funds in excess of FDIC insurance limits — will switch to Mutual of Omaha with "the full amount of their deposits."  The FDIC also said accountholders can access their funds during the weekend by writing checks or using ATM or debit cards. As of June 30, the closed banks had total assets of $3.6 billion. That's down from $4.1 billion six months earlier. Most of the assets are in 1st National while First Heritage accounts for $254 million.

Calls to 1st National were referred by a receptionist to Joe Martony, an executive vice president in Scottsdale, Ariz. Martony didn't return repeated calls to his office. In Nevada, 1st National has 10 branches and employs about 350 people. Five of its branches are in Las Vegas, three are in the Reno-Sparks area, one is in Carson City and one is in Laughlin. Notices of the closure were being posted late Friday. Fifteen 1st National branches are in Arizona, while Newport Beach-based First Heritage has three branches in Southern California.

Bill Uffelman of the Nevada Bankers Association said Friday the FDIC action "is a reflection of the times for the banks. It's a poor economy." Uffelman cautioned against the sort of consumer concern that prompted many customers of IndyMac Bank branches to wait for hours in line to withdraw funds across Southern California last week after that bank was seized by federal regulators. All FDIC-insured bank deposits are guaranteed by the FDIC up to $100,000, he noted.

Gov. Jim Gibbons said the bank takeover will be closely monitored in Nevada "to ensure there's minimal disruption to business and that employees' jobs are protected as much as possible."  Arizona Gov. Janet Napolitano spokeswoman Shilo Mitchell said in a statement that the FDIC's takeover of 1st National is not indicative of the overall banking climate in Arizona. "It's very important that Arizonans know that their deposits are secure," said Felecia Rotellini, superintendent of Arizona Department of Financial Institutions. "They are well-managed and the 1st National

July 24, 2008 - Quick Notes Alert - Just a Peek - Here is a quick peak at a Client Only Quick Notes Alert that went out this morning. Some days my clients get one and some days two, three or more throughout the day.

Hello Everyone:

Very interesting developments overnight. Two of the biggies:

1 – National Australia Bank has taken a huge CDO write down. This will reverberate through the financial world. It will get everyone thinking about . . . (more for clients)

2 – The SEC has been leaking out little tidbits overnight about their plans to overhaul the entire shorting system here in the US . . . . I(more for clients) f it is extended beyond the 19 stocks or if new rules apply to all stocks, this will absolutely destroy the financial markets . . . . (more for clients) big boys will be battling each other. . . . It’s a lose – lose for America and a win – win for the Paulson’s buddies.

The politicians know what’s going on. Just look at what President Bush said last week, when he though the microphones were off . . . President Bush: "Wall Street got drunk" - http://www.youtube.com/watch?v=z_FDRjluLJQ

If you have friends that are not Crisis Investing now, you need to talk to them. At the very least, they need to sell all of their stocks and mutual funds.

TRADERS: We had a fantastic day yesterday. . . . (more for clients) start thinking about futures until around 8ish in the morning. We will be looking at adding additional . . . . (more for clients) providing the SEC does not do something really stupid. If they do, we go to cash ASAP and wait till things settle down.

BASIC ACCOUNTS: I would still be adding to positions. I like all of the positions we have listed. . . . (more for clients)

CNBC: If you watch Kudlow at all, this man is dangerous. He is far more dangerous than anyone else that is on TV or writes anything. This man is truly a devil’s assistant. It is pukable to listen to him and he has destroyed many lives with his Buy-Buy-Buy and his Goldilocks comments. If you are mesmerized by this loud mouth, you need to turn off the TV, and go see an exorcist ASAP.

TRADE ALERTS: (for retainer trading clients only)

WARNING: If you are not Crisis Investing yet, you need to sell all of your stocks and mutual funds and start looking at some of the investment and protection things we are doing.

July 23, 2008 - The Back Half of the 500 Year Hurricane - It Gets Worse

11:40am - July 23 - In 2006 I wrote about the "Housing Hurricane" in Barrons. In April of this year Barrons published my piece titled "The Eye of the Housing Hurricane." You can read both pieces via the links at the left. Today we are in the back half of what has just grown from a 100 year hurricane to a 500 year hurricane, and we still have yet to realize just how devastating this hurricane is and will yet be. Is there anything new to write about? It depends. If you are a client, this is old news. If you still believe the worst is over, read on.

- Million Dollar Plus Homes
- Short Term Memory? - Credit Default Swaps
- Subprime v. Credit Default Swaps
- More Memory Loss - Auction Rate Securities
- Paulson’s Fraternity Bros
- Consumer Debt Exploding
- (F x 4)/ H + I(3) = Not a Happy Ending
- LENDER COLLAPSE
- Housing Bill Bail-Out
- Armageddon

Million Dollar Plus Homes - Here’s something you haven’t read about. For the past two weeks I had two of the most interesting residential clients I have ever worked with. This was a husband and wife team that is involved in international investing at a level very few people are exposed to. They were here shopping for a vacation home, purchasing 60 hours of my time in a block. As many of you know, when I do work with a residential buyer, I only do so with clients that retain my time, just like the financial institutions I work with when they retain me for research projects. For my residential clients, when they do close on a home, whatever commission the seller pays me, is turned over to my client. So on a two million dollar home with a $50,000 commission, even if my client purchased $30,000 worth of my time, my client still comes out ahead of the game.

But that is not what I want to write about this morning. I am explaining this process, so you will understand just how serious my clients are. I don’t work with "lookers" unless they are prepared to shell out a minimum of $7,500 for 30 hours. So when I spend 60 hours with buyers looking at homes, they are real buyers . . . or they are sharp enough to gather information to make an intelligent decision about buying or renting. And that is exactly what happened here.
After two weeks of looking at homes in the $1.5 to $3M range, my clients decided NOT to purchase a vacation home, but instead to rent this coming season, and wait for prices to come down further. Very smart decision from the sharpest buyers I have worked with in several years. Here’s what’s interesting.

You’ve read so much about subprime and foreclosures and the general malaise facing the heart of American home ownership. But you have not read much about what is happening in the very high end markets. It is this part of my work that my Wall Street clients want to hear about. They want to know what I see on the ground with residential clients. They want to know what I see when I am out with analysts or hedgies researching commercial space. And what I saw during this two week field trip was an eye opener for me and my clients.

Second, Third and Fourth Homes - The market that we were looking at consists of homes that start at $1.5M and run all the way up to $10M. In the communities we toured, these are second, third and fourth homes for many people. Two years ago, there were a handful of these homes on the resale market. Today, the numbers of these homes on the market is staggering. Why? A little research into who the sellers are, spells a picture we have yet to grasp as a nation. Many of the sellers are financial executives that have lost their jobs. Some sellers are high net worth individuals that have purchased several of these homes to flip when the average Joe was buying condos in Miami or single family homes in Cape Coral. And some of the sellers are people that have simply overextended the good life to the point of breaking. Overall, it is the same story we hear at the lower end . . . just a different flavor.

The only difference between this market and the lower end, is the number of foreclosures and short sales. Oh . . . but wait. This is a very stubborn market. These are people that still believe the value of their homes can’t go down 20, 30, 40, 50%. So a solid one half of these puffed up sellers are priced in the stratosphere. The folks, for the most part, will resist reality, because they are so out of touch with reality. And here’s the catch. Even the sellers priced below the "market" are not getting bids. Once again, we have more homes than we have people to live in them. Moreover, when it comes to the level of home, the supply is even more staggering by percentages.

My clients decided not to buy right now, because they believe the global markets have not finished punishing those that are sucking on helium balloons and sipping the Kool-Aid being served up by Bob Toll, Cramer, Paulson, Bernanke, Roubini et al. So my clients will rent this season, and come back after a market crash forces these puffed up sellers to face reality. The lenders will have a new group of short sales and foreclosures to deal with, but with this group they will have their hands full of gooey stuff. We are not seeing it yet, but all the signs are on the wall. It is only a matter of time before this market gives lenders a new migraine. These owners have huge egos and jumbo sized arrogance. Unfortunately, that’s not enough to keep their homes from falling in price, and even these wealthy individuals will eventually throw in the towel when they see just how expensive it is to carry these homes.

Short Term Memory? - Credit Default Swaps - Remember these? How soon we forget. Well, let Captain Mike poke you in the eye. Back in the first quarter of this year, these were all the rage as the next crisis to crush the markets. Some estimates put this market as large as $40 trillion, which is more than double the size of the entire U.S. stock market. A CDS is, or was, or is . . . insurance on securities like bonds and mortgage securities. Here’s the catch. This market is not regulated. That should not come as a surprise. Moreover, this market was created by banks and hedge funds . . . stellar performers in the opera we are painfully living through. Allow me to continue. It gets better.

Credit Default Swaps are traded (swapped) from investor to investor (read: sucker to sucker). The protectors of our financial markets created Credit Default Swaps as another means to make money from nothing. Kinda like the Dire Straits lyrics . . . Get your money for nothing and the chicks are free. Don’t laugh. Remember the folks I wrote about a few seconds ago with the second, third and fourth vacation homes? Many of them lived and will die by the Dire Straits lyrics. And how appropriate is the name of the band? Okay, back to CDS.

We haven’t heard much about the CDS market since March. It didn’t go away. It just reached the point where the banks have no clue what they own or what its worth. You’ve heard that before from me. That is the mantra I started hearing from my European bankers almost two years ago. Remember when I told you these guys were telling me the liquidity crisis was not a liquidity crisis, but a . . . Duhhhhhh Crisis, because these guys admitted they had no clue what they owned, and even when they figured it out, they had no clue what it was worth. And that has not changed much since then!

The top commercial banks hold more than a trillion dollars in swaps. But here’s the catch . . . they are on both sides. I kid you not. This is a true story. Honest. Sometimes they were the screwer (insurer) and sometimes they were the screwee (insured). And from what I hear in the field, some of these clowns are on both sides of the same freakin’ trade! By the way, two of the top five players in this market are BOA and Wachovia . . . two of the rising stars this past week.
Subprime v. Credit Default Swaps - No comparison. Subprime is a baby compared to the ramifications of the CDS market when it starts to unravel. And I love it when we keep hearing over and over and over about how we should not be comparing this market to 1929 . . . because we have more safeguards now. What? Huh? What safeguards? Greenspand did away with all of that nonsense. By the way, where is Greenspan lately.

Unfortunately, there are NO safeguards in place when it comes to the Credit Default Swaps market. None. Nada. Zipity Doo Dah.

More Memory Loss - Auction Rate Securities - Here’s another area lost in the fog of deception. Or maybe it was just Bob Toll passing out enough Kool-Aid to fog over the memories of entire segments of the financial world after doing such a great fog-job in the home builder sector. But MadDog Morgan is here to bite you in the ass, just to make sure you don’t forget about this one either. Auction Rate Securities were developed by none other than Goldman Sachs back in the 80's. I’d love to see a history of what’s come out of Goldman Sachs over the years in terms of creative financing and guys like Paulson who reaped the rewards . . . and now want to tell us how to clean up the mess they created. By the way, don’t you find it just a little funny that Goldman exec Kindrick Wilson is taking a leave of absence to go to Washington to "help" Paulson? Oh, and the new CEO of Wachovia, Robert Steel . . . you guessed it. He’s another Golman/Paulson fraternity brother. C’est la vie . . .and we sit back and watch.

So Goldman Sachs created Auction Rate Securities as a means to . . . . . . . . well, they want you to believe it was a new form of liquidity for the markets, but if you look at it real hard, it was nothing more than a shortcut to disaster and huge fees for companies like Goldman Sachs. The problem with all of this liquidity we created, is that it was constantly being moved, just like the pea under the shell or the three-card Monte scam. For those of us that have been taken in by the shell game, you know there is no pea . . . and you can’t beat the Monte scam. Well, that’s the same thing we are seeing today in our financial markets. We’ve carved off so many pieces from the side of beef, that there is no beef in the game. Guys like Paulson, Rubin, Mozilla, and other have the beef socked away in their private meat lockers.

Okay, so I am straying again. But it has been awhile since I produced anything for the public, so allow me the luxury.

ARS in a nutshell was a way to trade long term debt like donuts. Strike that. I meant, like Miami condos. No, no. Strike that too. I really meant, like Credit Default Swaps. Naaaah. I’m just teasing to make a point. A point that only Senator Bunning seems to understand, but guys like Barnie Fife (Frank) turned on Bunning as if Bunning were the enemy. That’s another story, so if you have no clue what I am talking about, Google Senator Bunning.

Back to Auction Rate Securities. They were created so long term debt could be traded like short term debt . . . with huge fees and expenses going to companies like Goldman Sachs for the privilege of playing the shell game. Other than the skimming that went on, the ARS has demonstrated that liquidity is totally controlled by the creators of the game . . . just like the guys on the streets of New York with the shell game and three-card Monte. When they want to play, they are taking your dollars. When you figure it out, they pack up shop and leave. Ah, hah. I think I just summed it all up in a neat and tidy package for you.

In February of this year, the Auction Rate Securities market failed, seized up . . . so the street boys packed up their shells and ran. The biggest players in this market declined to step in and support the market! When "investors" declined to bid on the securities the broker-dealers ran for cover . . . rates spiked and assets were frozen.

Oh, by the way, one of this week’s financial stars is at the current heart of this investigation. Last week state regulators showed up at Wachovia to demand the documents they have been trying to obtain for several months. But it doesn’t stop there. It gets worse folks.

Consumer Debt Exploding - Maybe Captain Mike needs to keep poking folks in the eyes, even though American Express did a pretty good job of that the other day. To understand who gets hurt on consumer debt, you need to understand the difference between American Express and Master Card and Visa. The latter two make money on fees. They do NOT lend money, so they don’t care how much debt the consumer builds up. The more debt, the more fees. On the other hand American Express actually earns fees AND they take on the debt when card holders cannot pay off their monthly balance. For Master Card and Visa, their cardholders are racking up debt with our nation’s banks. Yup, the banks again. Start adding it up and you will soon understand why my banker buddies keep telling me they have no clue how bad it is . . . but they know it is really, really bad . . . and it is getting worse. I don’t need to see the statistics and the numbers and all of the keen stuff the analysts use to make their rear-view mirror calls. When my banking clients tell me they are in trouble and things are getting worse . . . and when I see consumers that have tapped out the housing ATM who are now juggling credit cards, I’ve seen and heard all I need to know.

Housing Bill Bail-Out - Bail Out what? How can you bail out two industries that are destroying themselves. I simply don’t understand how the American public can be expected to bail out the banks and builders, along with the junkies that bought houses like they bought stock options. It;s interesting how the White House called the Housing Bill exactly what it was (a dud), and now is backing it. Paulson has the power. He’s not looking out for our best interests, but for the best interests of his fraternity bros. And here’s something to chew on. As credit card debt continues to explode, and people use credit cards like they used their homes to rack up debt, is Paulson going to bail-out credit card debt as well? Not likely.

(F x 4)/ H + I(3) = Not a Happy Ending - I haven’t discussed some of my formulas for several months. And when I see all of the stuff coming out from Roubini and other prophets of economic wisdom, I feel a little left out. I’ve written extensively about my SSI Index, and my GOOBer Index, and my TTFN (Ta Ta For Now) Index, and some of my exclusively private formulas and indexes which have accurately predicted the level and intensity of the hurricane we are in. But I haven’t shared Happy Ending with you, simply because it is NOT a Happy Ending, and I didn’t want to burst the bubble of the folks still drinking the Kool-Aid. But the time has come to burst your bubble.

There are four "Fs" including fraud, fantasy, fiction and foreclosure. The first three are the foundation for the fourth "F." Enough said. We take this and divide by H + I, which represents Hype and Incompetence. Okay, so you don’t need a discussion about the four "F’s" or the Hype. But let me share a bit about just how severe the "I" factor is of total, absolute, and beyond any belief . . . Incompetence.

LENDER COLLAPSE - Over the last two weeks I have noticed a decisive shift in how lenders are handling foreclosed properties (REOs), or maybe I should say mishandling. There are three issues bubbling out of the Ooze of Incompetence at these lenders. First, they can’t get deals done. The ship is headed for the rocks, and the captain has abandoned ship. He’s sitting comfy on his own private island sipping cocktails with the Fat Lady in the thong. This is a very severe crisis in operations. Lenders are not responding to offers, and when they do respond, they make the process so convoluted, that the buyers often walk away and buy another property . . . at a lower price. Instead of jumping on contract and moving them through the system, the lenders have stalled the process to an agonizingly painful stand-still.

Second, over the last two weeks we have seen another leg down in pricing from some lenders. And the pricing makes no sense, because if they managed the sale process properly, there would be no need to slash prices. These two events are disturbing. We are essentially seeing a total collapse in the housing market. Unless someone sprinkles these guys with Smart Dust, they are going to destroy themselves. When you look at this, you don’t think it can get any worse, but it keeps getting worse.

The third issue is financing. Its tough to put a deal together, and when you do, usually FHA is involved. The 3% down payment is a myth. Either the seller or the builder pays it, so you still have folks getting into homes with zero down. And the moment they close, they are into negative equity. Thirty days later, they could be 10-15% negative when you consider a falling market and the costs of a buy/sell transaction. When things go bad, as they are, it is the Fed that is eating the 10-15% plus another 50-60K in expenses to unload foreclosed properties . . . at a very minimum. If you want to hear more, you need to be a client. This is a very complicated subject, but it is at the heart of our crumbling economy.

If you take a moment to list it all . . . consumer debt, swaps, defaults, foreclosures, commercial debt and on and on an on, you will realize we are witnessing a complete collapse of our country’s financial institutions. And all we are doing . . . or all we can do at this point is watch it all unfold.

Armageddon - I believe it is all but written into the screenplay at this point. The recent rally of 50-100% in banks and builders is indicative of the nonsensical days leading up to October 1929. What I am seeing in the field, is a crumbling of the builders and the banks, followed by retailers. But on Wall Street, Paulson is passing out the Kool-Aid and telling us we need protection from the short sellers. Let’s face it, if the short sellers push the envelope too far, buyers have the right to step in and take advantage of the bargains. But when the Federal Government, or should I say Goldman Sachs (Paulson), take it upon themselves to change the rules, that’s when you can bet Armageddon is in the cards. Over the next few weeks, we will all see just how much more pain there is, and the bag of garbage we just threw up in the air, will come back down harder and stinkier.

Crisis Investing - Please. If you are not considering it, you need to start thinking about it. If you want to buy into the rally and continue to sip the Kool-Aid, you will be devastated.

IN CLOSING . . . I wish I was a market timer with magic dust and a magical wand. For the folks that just joined me, there would have been less pain if I was a magician. And trust me, I feel it. My clients are like family. I have a bottle of Tums on my desk today, and I am still nauseous. I can take some relief in the nice emails I am receiving, and so far I haven’t received any ugly ones . . . but I know some of you want to send them. You need to sit tight, and not let Paulson and his fraternity buddies shake you out. They are systematically shaking out the pension funds our municipal government accounts and so much of the wealth this country has built up over the last 200+ years. Unfortunately, the American public enjoyed the ride . . . and that ride is coming to an abrupt end.
Whether it is a week a month or a few months, our markets will be much lower and the financial crisis I have written about for the last four years will be reality. Unfortunately, it will not be a Reality TV Show that we can simply change the channel on.

Senator Bunning summed it up for us last week – “The Fed is the Systematic Risk.”

By the way, even when the Housing Bill passes today, it will probably not have a positive effect on the markets. It is old news, and if you really look at it, the Housing Bill is bad for the economy and the markets.

July 18, 2008 -  Crisis Investing Conference Call

       We held a 3.5 hour conference call on Thursday, July 17, 2008.  It was a great call with more than 50 questions from callers. If you are interested in the replay link, you can purchase a download for $20 which will be emailed to you as soon as we receive your payment.  And remember, all of the replay money goes to charity for children and the homeless.  One more thing, all of my charity work . . . is done anonymously.  No one ever knows it is me.  I do it through my website, and if any of you want to do the right thing, you are welcome to join are very private and very discreet group.  Visit our website at www.MatthewSixFour.com  -  Matthew 6:2 - "So when you give to the needy, do not announce it with trumpets, as the hypocrites do in the synagogues and on the streets, to be honored by men. I tell you the truth, they have received their reward in full. (3) But when you give to the needy, do not let your left hand know what your right hand is doing, (4) so that your giving may be in secret. Then your Father, who sees what is done in secret, will reward you.
     If you have what it takes, join our group.  In any event, if you just want to help with the $20 for the replay - Purchase Replay Now

    I will hold another conference call on Thursday evening (August 7th) at 9:30 p.m. EDST. I'm doing it at 9:30 p.m. EDST so my clients on both coasts can participate, as well as my clients in Australia and Southeast Asia.  If you are interested, I will speak for up to three hours.  This call will be moderated and OPEN to questions from anyone on the call.  Instead of me speaking for an hour in the beginning, the call will be pure questions from callers.  Even though we went till 1:00 a.m. last night, we did not get all the questions answered.  I will discuss individual stocks, but I will not tell you whether they are in our portfolios, and I will not give you details that are reserved for my paying clinets.  That level of information is reserved for one-on-one clients and our "client only conference call."  You can purchase that call as well below.

    If you want to see some of the comments from last night's call here is a link to the blog where I posted just a few.  Responses were overwhelming, with two negatives and many dozens of nice thoughts, support and suggestions for the next all. –  www.888Mike.com 

    For everyone receiving the replay it is copyrighted, so please don’t share it with any of your collegeagues , friends, family or associates.  That will only cheapen the value.

NEXT CONFERENCE CALL – Pure Questions & Answers - I will hold another conference call on Thursday evening (August 7th) at 9:30 p.m. EDST.  It will last 2.5 hours.  I will have to cut it off then.  The last call went 3.5 hours, and it was really pushing it for everyone. This call will be open to the general public and I will address all questions, but I will NOT get into specifics about stocks.  Mutual funds and hedge funds don’t get into that.  In fact, they only give you a one month performance report.  I offer a variety of levels of service.  So if you want the deatails and you want on-on-on investment advice, I offer that.  Hedge funds, mutual funds and 99% of the other Investment Advisors don’t do that because they can’t make the piles of money they make by ripping off the general public.  I invest my client’s money as if it were my own.  I invest in groups, sectors or best of breed.  If you are looking for a dart board pro . . . . try Cramer or any of the other guys that put out rear-view mirror newsletters and stock picks.  This is not a horse track folks.
    The next call will be moderated and OPEN to questions from anyone on the call.  If you are on the shy side, and do not want to ask a live question, you can email your question before or during the call.  Instead of me speaking for an hour in the beginning, the call will be pure questions from callers.   

    I can assure you, it will be a FANTASTIC call.  I encourage you to email comments and questions for the call in advance to Mike@MorganFlorida.org

    General Conference Call Only - $45 if you purchase by July 25th - Purchase Now

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    20 Minutes - If you want to pick my brain for 20 minutes, I'll offer six 20 minute blocks each week for $75 each.  This will provide you with sufficient time to address a few questions and determine if you wish to purchase more of my time.  
    Purchase 20 Minutes Now

    FREE Investment Advice - FREE Investment Advice and More FREE Advice  Enjoy!

Mike Morgan, J.D., RIA
772-260-5448 - Mike@MorganFlorida.org

July 13, 2008 - At the Precipice of Global Depression - I've received many emails and voice mails to write something about what is going on with IndyMac, Freddie and Fannie . . . and what is going to happen moving forward with other banks and markets. I have written quite a bit about it for clients over the last year. These failures are no surprise, and my clients have been handsomely rewarded. The answer to the second part of the question is Yes. There will be many more failures. I believe we could see 100+ by the end of the year, in a worst-case scenario. At the very least, I would imagine we are going to see an average of one a week. I am not going to publish anything public this week. That information is reserved for clients for the time being.
    Crisis Investing Conference Call - I will hold a conference call on Thursday evening (July 17th) at 9:30 p.m. EDST. I'm doing it at 9:30 so my clients on both coasts can participate, as well as my clients in Australia and Southeast Asia. If you are interested, here is the link on my website to purchase the dial-in code. I will speak for up to three hours. Since we have received a fair response to this call, I will drop the price to $25. If you already purchased at the higher price, you will receive a refund. This call will be moderated and OPEN to questions from anyone on the call. Let me close with this. When the Fed bails out Freddie and Fannie, the dollar could plunge, maybe moving to the $1.80 - $2.00 range against the Euro. If that happens, oil could spike to $200, and short term trading will be nuclear in terms of the intensity of the swings. We will have a great call on Thursday. I encourage you to participate.

Conference Call Only - $25 - Purchase Now

Conference Call PLUS . . . Trading Portfolio, Trade Alerts and Private Updates - 30 Day Plan for $150 - Purchase Now

Conference Call PLUS 90 - Everything above, plus 90 minutes of one-on-one investment advice - Purchase Now

July 11, 2008 - Crisis Portfolio Update - It was a huge week and there is a lot of news coming out this weekend. By the way, the Feds “seized” IndyMac today. Don’t you just love that word? I guess if you were long the stock, you might not love it. But if you were long IndyMac or any other financial institution, you must be dumb as a soggy bagel. As for IndyMac, Freddie and Fannie, I hate to say I told you so, but “I told you so.” And there is more to come, so stay tuned. Watch for 100+ bank failures by the end of the year. More on the conference call, and more for clients. 
    As of today’s close the July Crisis Investment Portfolio is up 10.78% this month (without leverage) versus a drop in the S&P 500 of 3.71%. That’s our basic . . . and worst performing portfolio. It sucks, but it’s better than the kick in the teeth most folks have been getting from their portfolio managers and mutual funds. Overall, every single one of my portfolios is up over 50% this year, with the best up over 300%. 
    I created the Basic Portfolio for everyone that did not want to spend the money for a managed portfolio. And I priced the Basic Portfolio, so everyone could afford it . . . at $150 a month with trade alerts and updates from Behind Enemy Lines. If you are interested, you can put on a Happy Face with a click of the mouse – Click Here 
    Here’s an email I received this afternoon: “Thanks Mike. The best $150 I’ve spent in my entire life. By the way. I am 79 years old, so to say it is the best $150 I have ever spent is saying a lot. I’m cheap too. I not only made a pile of money with you, but I saved a pile of money by listening to you and selling everything six months ago. I also got to laugh at my older brother who lost a bundle this week. We can laugh at those things at our age. Thanks Again.” 
    Enjoy the weekend. We’re in for wild ride this week. I will be holding a conference call this week for anyone that is sick and tired of the dribble you’ve been reading and watching on TV. The dial-in for the call will be $150, and you will also receive the July Trading Portfolio. Or, you can watch Cramer, Kudlow and Becky for free. 
    Email me if you are interested in Crisis Portfolio Investing. And if not, here’s the man for the masses or for those that just want a chuckle . . . Click Here

July 8, 2008 - Financials - Zero, Zip, Zilch, Znobeli - Sometimes I feel as if I am in a bubble or a daze of my own. I can’t seem to understand how all of the “experts” can continue to talk about a bottom or even a recovery of the financials. I’ve only heard one commentator pose the question recently: "If we are at a $400B markdown and go to a trillion, is there any shareholder equity left?” The guest, Peter Cohen of Ramus answered, “Sure there’s equity.”
    Well, several of my retainer clients wanted a paper on the equity response given by Cohen. But instead of a rear-view mirror paper with fancy historical numbers and lots of KaKa de Poop, I prepared a comprehensive white paper with my response from “behind the enemy lines” . . . like evaluating the “real” assets many of these institutions own and the "real" values. I understand how difficult this is for most to comprehend, because most on Wall Street and at the Fed are accustomed to marking to myth or marking to mystery or my personal favorite Marking to Désir.
    In any event, I’ve decided to share this white paper with my public distribution Quick Notes list, so here it is in it’s entirety:

start

"Sure There's Equity."
Analysis, Discussion and Response: “WRONG”*
_________________________________
*Footnote: See Icahn, Ross, Gross, etal.

end

    That’s it. It sums it all up without all the crapola we’re hearing that should give you a stomach ache if you have a brain that has not been overwhelmed by the fumes. If you want more detail, I will be holding a conference call next week. It is not for everyone. If you are interested, listen-only is $150 and Q&A access is $450. Q&A will be limited to 10 participants.
    When I look at the assets of the financials and I look at the leverage, it is a clear picture. There is no equity. There is no other rational, logical or honest explanation. For the guys out there raising capital, they are either doing it fraudulently or the folks they are raising it from have done no research. It’s probably a combination of the two. Just look how dumb Icahn, Ross and Gross have been in their calls. It doesn't end there. I get calls every week from international institutions looking at asset portfolios. And these folks have not only sipped the Kool-Aid, but they've been sprinkled with the fairy dust. Unfortunately, there is fraud and dishonesty in the system . . . a lot of it.
    There is NO reason for pension funds and managed trust accounts to be investing in some of the stuff I have reviewed. And right at the very top are institutions like Harvard. Here’s an institution that claims to have the brain power of the world, yet they have made some horrible real estate speculations. Harvard is not alone. Where do you think the huge sums of money are coming from to feed this world-wide Ponzi scheme? It’s not you and me. It’s not just high net worth individuals too busy with their boats and bon-bons. It’s our money that we have entrusted to others . . . and they are not only abusing their duties, but they are enriching themselves at the expense of draining our futures. And as we undwind, schmucks like CALPERS are sending in money like there's no tomorrow. (There's Not)
    I don’t even want to call them investments, because they were (and are) anything but. And if you think it is just Harvard, take a hard look a CALPERS and hundreds of others that have a fiduciary duty they have tossed to the wind. Why? Because they can, and because the rewards are huge, while the risks are nil. There is no accountability. Think about it. We’ve only see the Feds go after two traders at Bear, and that’s only because they pissed off the wrong guy.
    For those that know me, you know I can get off on five tracks simultaneously, so expect the conference call to be a windfall for anyone participating. And yes, there will be a moderator to keep me on track and . . . yes, she will keep notes so we come back to cover everything raised during the call. The last call scheduled for one hour, lasted for 4.5. In closing, the flip flops of the last two days are your signal that we are dancing on the precipice.
    Peter Cohen said it best when he summed things up this week, as the “Great Financial Crisis.”
    One more thought. Go back and read some of my stuff from two years ago. At that time folks were talking about at a $200B-400B problem in line with the S&L crisis. At that time, I pegged it at two trillion . . . and just about everyone laughed. At that time I called the analysts fools, when they talked about 1-2M foreclosures. Let me bring you up to speed:
    $5 trillion global problem when you look beyond housing to office, commercial, retail, warehouse, land, etc. etc.
    10M+ homes in foreclosure or escaping the “F” word through “short sales.”

Equity? What Equity?

Regards,
Mike

P.S. By the way, our Crisis Investment Portfolio was up 4.12% in week one, and is up over 5% this week. Now that’s equity you can spend with a smile. When you're ready to start investing wisely, instead of following the heard off the cliff - Click Here

July 5, 2008 - Below is what went out to our email distribution list on July 3rd. The "July Portfolio" referenced below is just one of my very basic portfolios. I have several portfolios offering a variety of risk exposures to clients with as little as $10,000 to invest, as well as clients with multi-million dollar portfolios, and clients interested in a mix of portfolios. The basic July Portfolio below is one of my lowest risk portfolios.

Week 1
July Portfolio – UP 4.12%
S&P 500 – DOWN 1.21%

$104,120.92 – Value of July Portfolio
$ 98,790.00 – Value of $100,000 invested in S&P since June 30.

ROAD TRIP – I am on the road all week with a Wall Street analyst. What we are seeing is shocking to even two guys like us. Without question, banks will fail throughout the country. This is not a wild guess. This is ABSOLUTE, CLEAR AND CONFIRMED REALITY. I’m not sure how else to say that in an email, but you can bet your last dollar it IS reality. There is much more available for clients. I will discuss REITs and the retail sector, as well as banking. I will also discuss some of the things we are seeing and hearing from the builders. In particular, Bob Toll’s recent comments, and the BooYaa garbage we heard from Jim Cramer about Toll’s comments have been debunked. These two guys failed to tell you what is really going on, and instead used some really borderline fluff to tell a story that is false, misleading and dancing on the line of fraud or gross negligence. A full report is available for retainer clients.

Crisis Investing – If you are not doing it, you need to sit down and reevaluate what is going on and what is coming at us. It is far worse than anything you have read from the mainstream media.

Investment Advice – I offer four levels, as well as a limited number of hours each week at $75 for 30 minutes to “individual” investors that need one-on-one advice. Here is a link to additional information - http://www.morgan-florida.org/investment_advice and below are the basic levels.

1 - $150 a month for my trading portfolio. We are up 60%+ this year alone

2 - $500 a month for the portfolio and 90 minutes of my time a month to work with you to tweak the portfolio for your specific needs, or just for general one-on-one investment advice.

3 - $2,000 a month for a custom portfolio and three hours of my time a month for everything from tax planning to estate planning.

4 – Custom plans for high net worth individuals looking for a comprehensive plan.

June 24, 2008 - The Last Mango in Paris - As Jimmy Buffet would say, "if the phone doesn't ring . . . it's me." I've decided to put up the hurricane shutters and settle in for the back half of the monster hurricane with my clients. We'll see the survivors on the other side. If you are interested in becoming a client, please call or email me. In closing, if you're wondering about today's 5-10% run-up in the builders. That's a result of the lemmings following Dan Oppenheim off the Credit Suisse cliff. For my clients, it was a great opportunity to put on more shorts and take advantage of some great short term put opportunities. Three cheers for Danny Boy. I couldn't have asked for a better sign off.

June 23, 2008 - Credit Suisse Signals BUY on Builders -  I wasn't going to read the full report until tomorrow, but after receiving several copies of the Credit Suisse report tonight, and senders asking for comments, I decided to give it a quick read tonight. It's 53 pages of pure KaKa de Poop. Strike that. It's not even pure KaKa de Poop. this is one of the stinkiest pieces yet to come out. You've almost got to wonder if Dan was paid to write this with spin or maybe Lereah and Yun were the ghost writers. 
    On the other hand, it has a lot of pretty graphs and charts and a lot of silly words that don't speak of reality. It's one of the best examples of rear-view mirror analysis and a poor stab at predicting the future without ever leaving the office. Dan Oppenheim took over after Ivy Zelman was nudged out of Credit Suisse, and not only does Dan pick up with the fantasyland KaKa we saw Ivy produce, but he takes it to a new level that David Lereah and Lawrence Yun would have been proud to have co-authored. It's not only science fiction, it borders on negligent reporting and analysis. Dan not only gets it wrong, I had to stop several times and ask myself if this was maybe just a joke. No joke. I received three copies within 15 minutes of it going out today. More on specifics for clients, but for non-clients BVC.

June 18, 2008 - Banks Closed Till Further Notice

Investment Advice - For more than a year, many of you have asked me for investment advice. I have been unable to provide it as I would like, so finally after enough prodding, I sat for my Series 65 exam and passed it. With the Series 65 I can provide investment advice for a fee, which means I can devote the time necessary to providing you with the very best advice. I will be accepting a limited number of clients in two distinct groups. One, will be high net worth individuals interested in a comprehensive strategy. And the second will be a group of clients interested in Crisis Investing, and how to trade and protect their accounts.

Depression – I am no longer shy about the word. I have been talking about it for two years, but now my Depression Index is 100%, and after today’s Royal Bank of Scotland announcement, I feel much more comfortable. RBS got the dynamics wrong, but they still understand there is going to be a crash. RBS believes it is attributable to inflationary issues, when in fact, the foundation of the crash will be the failure of international banking. And this will be a direct result of the leverage we have seen mis-used during the last eight years. I should note . . . the leverage with “absolutely no accountability.” More on that for clients, but builders are still building and office/retail/commercial is still going up with non-recourse money. We will talk about this on the Conference Call next week.

Banks and Financial Institutions – Not a day goes by now that I don’t see something extremely disturbing in the banking/financial sector . . . first hand. Whether it is a spread sheet I am asked to review or an inventory list or a huge project gone bad. I’ve written about assets, inventory and all of the creative ABCs. I also discussed what happens when you strip out CMOs and how the pie was divided into more pieces than there was pie. Just about every day now I am quizzed by a financial institution trying to find the hidden value in their assets. I refer them to Carl Icahn and WCI, and Wilbur Ross and his subprime slime. I tell them to follow the money. It’s not that hard. The money didn’t simply disappear. It just changed hands, and unfortunately it is not in their hands. I tell them to look at what they did yesterday AND what they are doing today AND what they are planning for tomorrow. Nothing much has changed, except they now are compounding the problem by totally mismanaging their assets and not lending to qualified buyers. Strike that. Totally, strike that. . . . . . . .

Banks Closed Till Further Notice - Banks are not lending BECAUSE they can’t. They can’t lend what they don’t have. They can’t create more leverage, when they are trying to deleverage and get rid of assets worth just a fraction of what they are telling the Fed they are worth. They can’t lend on residential properties that they are dumping without talking to the guys in the office next to them. Depression? Folks, it’s already here. But this time it will take a bit longer to register. We will see bank failures, despite what the totally clueless and misinformed FDIC Chairman Bair said the other day. She has no clue what is going on. This lady is either dumb as a box or slick as a fox. If I had a TV show like Cramer, now would be the time for screaming NO CLUE and beating my fists on the table. Instead, Jimbo just reported a turn in Florida Housing because SPF announced a spike in numbers, and Bob Toll took an extra shot of Kool-Aid!!!! Jimbo, you have No Clue dude, but a hearty stuttering Boo Ya to you. By the way, Jimbo told me I was totally clueless in November of 2006 when I was writing about exactly what we have seen for the last 18 months.

Cool Down Period – Before I overheat, I will take this opportunity to cool down. It’s sad that we are where we are, and still we have politicians and executives jockeying for position and nose rings. As of now, I must limit some of what I report because my clients feel they are paying for things I discuss in public. But I will close with a banking wrap up.

I have had the opportunity to speak with quite a few executives from financial institutions. Some of them pay me quite well for my time, but then don’t do anything remotely close to what we discussed. And then they come back two months later wondering what hit them. All of them, without exception, either have no clue what is going on or are simply lying to collect a paycheck. Either way, it is bad. I’ve spoken with some banks about their residential inventory in terms of how to sell it quickly, without huge expenses and for the best price. It’s like talking to a rock underwater. I’ve spoken to institutions that have hundreds upon hundreds of millions invested in projects that I am quite familiar with. They’re still looking for the hidden value because they cannot believe their $300M loan is now only worth $50M. And if you think Goldman Sachs and JPMorgan are immune, think again. I can say that now because JPMorgan is not a client and Goldman Sachs has not been a client for a couple of years. You might think I am a jackass for saying that, because they will now never think of giving me new business, but for those that know me . . . they know I always tell it like it is.

Where’s Greenspan lately?

June 16, 2008 - Mondays with Morgan - 1 – The Country’s Biggest Liar - NAR’s chief economist, Lawrence Yun, is making his predecessor David Lereah (Liar) look like a wimp when it comes to touting the strength of the housing markets. Yun met with Realtors in Coral Gables this week and told them this is nothing more than a “small blip on the radar screen.” He touted prices to be 20-30 percent higher in Florida in just five years. As a member of the National Association of Realtors, I take great offense to jackasses like Yun and Lereah, and the folks we pay our dues to, that are pushing clowns like this into perpetrating a national fraud on consumers and institutions. The NAR never raised a flag about any of the issues leading up to the crisis we are in. In fact, they are still waving the cheerleader pom poms. By the way, did you know that USA Today recently called Yun one of the nation’s top 10 analysts on a list measuring accuracy in forecasting. Yun and Lereah should be in jail for fraud, but the USA Today ranking just reinforces how deep the problems are.

2 – Suicide Calls Spike – Suicide lines throughout the country are spiking. Let me give you a disturbing fact. In Palm Beach County there have been 256 suicide calls. Of those, 44 told operators their reason for suicide was a lost job, foreclosure, bills or being homeless. This is a 300% increase from the same period a year ago, and a 500% increase from two years ago. I know I’m going to hear from folks telling me this is just a Florida problem. My response is, keep on drinking the Kool-Aid.

3 – Retailers New Competition – Your Neighbors – Have you noticed an increase in garage sales? If not, you will. I’d also suggest you take a look at what is being sold. You’ll be shocked. Everything from clothing to flat screens, boats, jet ski’s, and more. If you are thinking about buying a flat screen or jet ski or ATV, why pay retail, when you can go next door and buy it for less than wholesale from your neighbor. Let’s get serious, and take gasoline sales out of the retail numbers that the Street is so happy about. Back out a few other inflated numbers that don’t even belong there, and you’ll see retail is not healthy. When I say inflated numbers, let’s face it . . . even the retail numbers that are up, many of these are at super discounted prices. Take it one step further, lower margins, lower profits, lower stock prices, not to mention layoffs and less need for replacement inventory, which means less work in manufacturing and around and around.

4 – Selling Teeth, Nose Rings, Wedding Rings and the Silverware – I received a call this week from a jeweler that buys gold and silver. He says his business is booming. In fact, he has never seen it this busy or this disturbing. The customers coming in with teeth, rings, knives and forks are telling him they need to the money to pay their bills and put gas in the car. And just three days after I get the first call, I get a second call from another jeweler in another part of the country who says he needs to buy a vacation home on the beach in Florida to get away from it all. He told me he has been working 12 hours a day, seven days a week . . . buying gold and silver from people that need money for groceries. So what do they do when there is nothing left to melt down????

5 - Lehman’s Leverage Lunacy – I choked this week when I heard a couple of talking heads on CNBC praising Lehman for reducing leverage for an all time high of 45:1 to the current estimate of 25:1. Are they kidding? Yes. They are kidding themselves, and kidding the folks that believe this crap. At 25:1, a mere 4% loss in value is a wipe out. Did that sink in? If not, think about Bear Stearns who was at 40:1 when they died. And then think about this? Lehman is not the only one with this leverage. Take a look at Corus, Wachovia, Deutsche Bank, UBS, Merrill, WAMU and yes . . . Wells Fargo and BOA. Okay, so they are not all at 25:1, some are more and some are much less. But even at 10:1, we are in serious trouble. Just look how long it took the Fed to step in with Fremont. We have not just leveraged the leverage, but our regulators have been listening to rear-view analysts with financial interests in what they are analyzing. I realize that’s a stretch into a dark area, but let’s call it what it is. I’ve spoke to both sides of the same teams at these banks. It’s shocking. It’s beyond explanation.

6 – Everything is Fine Outside the US – I’m not sure how to even respond to this when I hear it in an interview. Have these guys taken a hard look at England and Ireland, who are now suffering a housing crisis even worse than the US? Have they looked at Australia and Hong Kong? Maybe they should take a peek at the Palm and World Islands in Dubai. Don’t stop there, because I can show you the same problems with condos in the Caribbean in places like the Turks and Caicos. Everything is not fine outside the US, and for those that think the rest of the world will keep things rolling . . . one word . . . bêtise. It sounds better in French, but it doesn’t change the meaning of what we are hearing from the talking heads.

7 – Zelman and Corkery Together Again – Maybe no one with credibility will talk to the Wall Street Journal’s, Mike Corkery, because he seem to keep returning to Ivy Zelman for her rear-view mirror look at things. Mikie’s story about Bank Woes is typical Corkery-Zelman, a day late and ten bucks short. The article was packed with rear-view numbers, old ka-ka with a different “color,” and Ivy’s “analysis” . . . but what these two continue to miss, are the facts. Banks are peddling portfolios, but there are no buyers. That’s what’s happening NOW, but that’s not what we’re reading about. Prices come down, and a few portfolios change hands. Some of this crap is moving to pension funds. And that’s not good, but guys like Corkery don’t dig that deep. And finally, the story should be about the banks that are still lending to builders and developers.

8 – 4 Day School Weeks – That’s the latest from Florida’s crystal ball. School districts are going broke, so they are discussing 4-day work weeks to save money on utilities and busses. I guess they didn’t think this through very well . . . as usual, because unless the entire State goes to a 4-day work week, who’s going to watch the kids on Fridays. And when they really get down to the numbers, how much are they going to save? Not much. You still need to pay the teachers for the hours. You still need to keep the AC running in Florida. And you still have all of your fixed costs. What we don’t have, is enough money to run our schools, or pay our police and fireman.

9 – Courts and Fire Stations Closing – The cuts we are seeing are crippling the core of our democratic system. The Miami-Dade County Public Defender just announced they are going to start turning away thousands of cases. Criminal cases are rising, and judges are forced to put civil cases on slower tracks. But all of this comes as foreclosures lawsuits are swamping every county in the State. We have already discussed shutting down the civil courts for three months. Can you imagine what that would do? Fire Stations? This one is a little easier to sneak past the residents. Cut backs in police? Yup. Here in Florida, and coming to a town near you.

10 – FHA (NOT) Solvent – Brian Montgomery, the FHA commissioner, told the National Press Club this week . . . “Let me repeat: F.H.A. is solvent.” First of all, he has no clue just how deep the problem is. He’s the kind of guy relying on folks like Ivy Zelman and Mike Corkery to tell him what “was” and not what “is.” But let’s take a look at Montgomery’s other remarks in the SAME speech. He told us . . . “Unless we take action to mitigate losses, F.H.A. will soon either have to shut down or rely on appropriations to operate.” Duuuuuuh. Exactly what I am talking about. If he had a handle on the market NOW, instead of last quarter, he would realize F.H.A. is NOT solvent today. Period. Full Stop. Конец

11 – US Infrastructure is Deadly – Here’s a bitter chaser of reality, for the first 10 on the list. This week big-city mayors told Congress they are in a crisis when it comes to roads, water, sewer, rail, police, fire and schools. In fact, the number needed to bring just the transportation system up to a properly functional level is more than $2 trillion. We ain’t got it. And the number to fix and maintain our water and sewer systems. Don’t ask. Don’t tell. Do you remember the bridge collapse in Minnesota? That was just one of hundreds of bridges that repeatedly failed inspections. Now kick the $2 trillion up a few notches to address water and sewer. We can live without roads. But we can’t live without clean water.

12 – On The Bright Side – Let’s wrap up Monday’s with Mike on a sunny note. FPL. One of the stars here in Florida just keeps getting better. They are the largest wind farm utility in the US with 47 operating wind farms from California to Pennsylvania and from Texas to North Dakota. And they have plans for more. They are running nuclear. And they have plans for more. And now they are kicking it up a notch in Solar. FPL has plans to build the largest solar powered plant outside of California. And that’s just for starters.

That’s a dozen donuts for Monday. As usual, much more detail for clients. Don’t forget our Conference Calls on June 26th and July 17th. The first call will be on Housing and the Real Estate Markets. The second call with cover Bulk REOs from both sides of the arena.

June 12, 2008 - Reality in Your Face - Since publishing my piece on Florida’s Depression (Click Here) I have received hundreds of emails and comments to my posts.  I would like to share one of the emails with you and below that a few slices of Reality.

Email Received: When you speak to the waitress serving you coffee who says she doesn’t  know how she will pay her rent since business is down, to the owner of a landscaping company who laid off workers and has started cutting grass again after 8 years of having his crew do it all, when your favorite restaurant has cut staff and now only does dinners, with the 2 hours in your community sell as foreclosures for less than what you paid for your house in 1999, when everyone has their hand out for your wallet from local government to the FPL of your kids at school come home to tell you another friend/teacher/family is leaving town . . . you start to realize that things aren’t bad in Florida . . . they are depressing.  I have lived here for 20 years and this is the first time I have seen everyone, from every walk of life complaining. . . . I believe a wave of change is coming for America and will have a historic impact as great as 1929. 

    That was just one of hundreds of posts.  But instead of watching Reality TV tonight, read on . . .   You might want to have a box of tissues nearby.  Here are five true stories about people that have called me over the past few weeks.  I am writing this now, only because of the first story below.  I spoke with this lady earlier today, and it has haunted me all day.  The only thing I have changed below are the people’s names.

    Barbara’s Story - When she called me this morning, at first I thought it was a prank call.  She was talking very fast and, I couldn’t even catch what she was talking about.  In fact, I slowly realized she was in a state of panic.  She confided in me that her husband recently tried to commit suicide so the family could receive the insurance proceeds.   WARNING: It gets worse, so you might just want to stop here.  
    Barbara and Jim live in a small town in Oregon.  They are in their 30's and they have three kids, 2, 5 and 7.  Jim was employed in the lumber industry.  Barbara is still employed but her hours have been cut.  They have no health insurance.  They have wiped out their IRA and are left with a little less than $20,000 in the bank. 
    Jim took a job for $8 an hour at a big box retailer.  And then he took another job at night stocking shelves for $8 an hour.  He was working 16 hours a day and still not able to put food on the table.  He can’t find work in his industry.  Their 7 year old daughter is dying from cancer.  And remember, they have no insurance.  
    Four years ago Jim’s aunt told him about the fantastic condo opportunities in Las Vegas.  Barbara and Jim had visited their family there many times, so they knew the area.  With the advice from his aunt and other family members that had “invested” in condos, they put a $100,000 deposit a pre-construction condo.  They have been trying to carry the unit for more than a year.  They cannot sell it for what the mortgage is.   I can’t even figure out how he got the mortgage to close on the property.  The unit is being foreclosed after they sunk their life savings into this unit, including being scammed by a company that told them they could sell the unit if they came up with $25,000.  
    A month ago, Jim’s five year old daughter found her Daddy hanging in the garage after a failed suicide attempt.  Barbara said she can’t afford the help her daughter needs to get through what she saw.  And it gets worse.  Much worse.  Jim tried again.  He’s now in a psychiatric institution.  The daughter dying of cancer is in hospice.  And the five year old has stopped talking. 

    Dan’s Story – Dan and his wife bought a home in 2006 for $350,000.  They both lost their jobs this year.  He was a trucking executive and she was a receptionist at a bank.  They can’t find work in their home town in Ohio.  He has a job offer in Atlanta for about half of what he was making, but he is ready to take it.  Unfortunately, their home is only worth $200,000 now.  They originally put down 20% and took out an 80% mortgage.  If they sell the house now, they have to pay the bank about $75,000.  They don’t have it.  And they don’t have the money to buy a home in Atlanta.  They don’t even have the money to move to Atlanta.  Now what?
    Dan called me, and with his voice cracking he said, “All I want is to be able to take care of my family.  What do I need to do, rob a bank or steal food to feed my kids?”  He explained how he can’t sleep and they have lost their health insurance.  He has two kids, and he doesn’t know what to tell them.  His daughter caught him crying the other night.  He said, she was watching him from the steps, and he didn’t even see her.  He was talking to himself, and he doesn’t know how much she heard.  When she came down to him, she gave him her piggy bank and told him he could use her money.  The next day she boxed up all of her toys and most of her clothes and told him that they could sell them at a garage sale.  It gets worse.
    She’s nine, so she has a sense of what is going on.  Now all she can talk about are ways for the family to make money or cut back.  Now she refuses to eat more than a mouthful because she knows food costs money.  She has been selling some of her things at school, and that is when the school’s principal called Dan and Janet in for a meeting.  
    So then Dan says he can pull together $50,000 to invest.  He wants to buy a foreclosure property and flip it.  I tried to explain how that was not a good idea.  I thought I got through to him.  But he has called me three times to discuss this idea.  Each time he has another crazy idea that he has seen on TV or heard on the radio or received an email on.  Dan called yesterday.  He started off the call okay, but by the end of the call he was sobbing, crying and pleading. 

    You know, I was going to share a few more, but what’s the sense at this point.  In any event, my point is this.  These are everyday people.  These are your neighbors.  And they are not in Florida.  So for all the folks that have been telling me it is just Florida for the last four years . . . get a life.  By the way, I receive 2-3 calls like these every week.

SOLUTION: There is a solution, but we will never even come close to looking at it.  Instead, we will let the economy collapse.  And the folks that will become mega-wealthy from the collapse are the same folks that marched us into this mess.  Unfortunately, I think this time we will see real violence that will tear at the very essence of who we are. 

Conference Call: I am going to hold a conference call on June 26th. If you are interested Click Here

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June 11, 2008 - Scalping Calpers - The Brilliance of Lennar and Stuart Miller - On Monday, Mike Corkery with the Wall Street Journal, wrote a piece about the LandSource bankruptcy. As usual, Corkery missed the details and skimmed the story. Calpers was scalped by Lennar and LNR. Corkery didn’t report on how Lennar acquired the property and how quick they flipped it to Calpers. It was a brilliant move on Lennar’s part, and the fact that LNR was a spin off basically controlled by Lennar simply added to the brilliance. But that’s not all. 
    Corkery didn’t bother to mention Laurence Pelosi’s ties to Lennar as a former land acquisition executive. Oh, by the way, Corkery didn’t mention Pelosi’s current position as a real estate executive with Morgan Stanley . . . who is now advising Calpers and wasn’t it Morgan Stanley that was the scalpee on another Lennar deal last year? Yup. MacFarlane Partners??? More on that for retainer clients, but wouldn’t it be nice if the Wall Street Journal reported on the entire story, instead of the dribble Mike Corkery regurgitates from old news. You’ve got to ask one question. Why does the Wall Street Journal only print half the story, leaving out the entire foundation and the facts that make the story. 
    When I am asked if Lennar goes BK in this housing bubble, my answer is No Way. Stuart, Jonathan and Bruce are way too shrewd and way too connected. These guys are the best of the best when it comes to making deals. Hey, these guys did two deals and cleaned up $4B worth of ka ka, while still retaining an interest and control if things swung back the other way. That’s pure brilliance. Right?

Conference Call: I am going to hold a conference call on June 26th. If you are interested Click Here

June 10, 2008 - Pending Homes Sales – Misleading Tease
    Twisted Numbers - I’ve written about this last year, but I still get a lot of questions about it. And it is quite clear the analysts and Wall Street execs don’t understand just how misleading this number can be. We just saw a Pending Home Sales number that was headlined as “6-Month High” and in analysts notes as a “Sign of the Bottom.” I have one word in response. NO WAY.
    PHS Flops - Okay, so I can’t count either, but you get the point. And here’s why. In fact, here’s why the recent PHS number is actually very ugly. A PHS simply means there is a contract on the property, but it does NOT mean the property will close. In fact, we no longer write contracts for residential Buyers unless we are 100% sure they will obtain financing or they pay us a $200 fee for writing the contract. The majority of the contracts we have been writing and seen written, do not close. I can safely say the number of deals that don’t make it too closing is at a record high. And that is what you need to focus on. 
    Lollipops - Even when a Buyer walks into our offices with a pre-qualification letter, it does not mean they will get financing to close. There are a dozen more hoops to jump through, so lenders and mortgage brokers hand out pre-qual letters like they hand out lollipops to kiddies to keep them quite. Get it? Same thing here, just a different piece of candy. 
    Short Sales – In some markets Short Sale sellers will accept a contract with an addendum that requires third party approval. If this contract was marked as Pending, it shows up in the PHS numbers, even though it is not truly pending, because the lender is the one that needs to accept the contract . . . not the Seller.
    Last Minute Deal Breakers – Just days before a closing, lenders are now ordering a second or third appraisal. They want to make sure the market has not collapsed further since they offered the mortgage. I’ve had deals fall apart three days before closing, because the lender either wants more down or they are not willing to lend based on the sale price. 
    The Real Numbers – If you want to use PHS in your analysis, great. But do it properly. And we have yet to see a single analyst do it properly. Not one. You need to look at the number of these PHS that fail to close. Use that ratio to evaluate what the pulse of the market is. 
    More Numbers – Some of the emails I receive want more detail and more statistics. I do this free of charge. I have retainer clients that pay for my services, and it would not be fair if I provided detailed reports to the public. You don’t see Credit Suisse or Goldman Sachs releasing their reports to the public. If you are interested in more in-depth analysis, you may join my client list. If you are paying one of the big-shot Wall Street analysts for detailed models and reports, that’s great. But you are only getting rear-view. You are not getting information about what is going on now, or how to interpret the numbers properly, with the exception of one analyst that actually gets out in the field 2-3 times a month! In any event, PHS is a perfect example of analysts failure to grasp the basics. 
    Non-Performing Assets - NPAs are an even more critical example of the failure of analysts to grasp the magnitude of the problems. In fact, this might just be one of the most hidden, secretive and manipulated numbers in the economy today. And I can assure you, you will be hearing a great deal more about what NPAs are, how they are classified and why banks are not reporting them property . . . and doing everything possible to hide them.
    Quick Notes Blog Link - http://realestateandhousing2.blogspot.com/
Same as this email, but the blog has comments from readers and an easy to use Archive.
    Email This Piece To Your Congressmen And Senators: 
Congress - https://forms.house.gov/wyr/welcome.shtml
Senate - http://www.senate.gov/general/contact_information/senators_cfm.cfm

June 5 - Florida at the Precipice of Depression -  I was going to call this “Banks March Us Into Depression,” or maybe more fitting is . . . “Complete Collapse of US Banking System.” Folks, that is what we are looking at. I don’t see any way around it. What we’re seeing here in Florida, is your crystal ball. And what happens here, is coming to a town near you . . . soon.
    This past week I didn’t write anything, because what I am seeing unravel is disturbing to the point I had to question what I was seeing and hearing. So I decided to take as much time as I needed to digest it all, and then put something together for you. So here goes . . .
     I could prepare volumes of spread sheets with Bernankesque numbers. I could talk about commodity prices and oil and third world politics and a dozen other metrics that all lead to the same conclusion. But let me give you a ground zero look. That’s what I do best. I will leave the manipulation of the numbers to the folks on Wall Street that do it best. The same folks that have created the precipice they will soon push us off.
    I spend a great deal of time dealing with Asset Managers hired by banks stuck with REOs. So as not to re-hash the events leading to the housing crisis, I will not discuss the free-money policies of the past, and I will not discuss the absolute lack of accountability in making the bad loans of the past. Let’s just deal with how the banks are attempting to recover. 
    Unfortunately, banks are not making a realistic effort to address the crisis. That may be because they cannot. As the banks and builders have announced write down after write down, my mantra has been . . . and continues to be . . . NOT ENOUGH – NOT ENOUGH – NOT ENOUGH. I still believe that. The builders and the banks have underestimated the magnitude of the problem, and they continue to do so. Analysts continue to look at the rear-view mirror and attempt to manipulate numbers based misguided historical assumptions. NAR and the economists continue to twist the numbers, lie and then slip in prior-month adjustments without actually comparing apples to apples. But that is another article. The bankers and the fat cats on Wall Street sit back and watch the carnival, collecting fees from everyone they can snooker.
    I have recently started turning away REO properties from banks and asset managers, even though hundreds of thousands of real estate agents nationwide are lined up waiting for these listings. I made the decision because we have reached a point where these listings are costing us money, and the asset managers are squeezing harder and harder . . . because they can. There are GREAT asset managers and there are incompetent ones. The majority fall into the incompetent bucket, but we eliminate them quickly. The banks, on the other hand, continue to throw away money with the bucket of incompetent managers. It seems like the mortgage brokers that pushed funny money for the last six years are now starting asset management companies. We still work with a number of asset managers and banks directly, but the list of asset managers is growing smaller as properties fail to sell. When that happens, properties are bundled up and sold in bulk or at auction. This puts further downward pressure on markets because of lower prices and the inventory was not absorbed . . . it just changed hands.
    Banks cannot afford to take 50-75% hits on mortgages, and that is exactly what is happening. The precipice is here, and we are on it. Recent reports about home sales rebounding are insignificant, because no one is accurately describing the growing inventory build-up. Banks simply don’t have the margins to deal with this crisis. And for that reason, we will see massive bank failures and this will snowball into a complete economic meltdown. If you have an argument against this scenario, I’d love to debate you on a live conference call. We deal with the banks. We know what is going on before the numbers show up at the Fed or any analysts desks. We deal with the public, so we hear the desperation at all levels. I listen to grown men cry about how to explain to their families that they are losing everything. I listen to people that I fear are on the verge of suicide. I read about people committing crimes simply to put food on the table. Spend a week with me, and you’ll understand why there is no feasible way to avoid a Depression. 
    The banks will fail, just as they failed in 1929 . . . but worse because this time some of this leverage is as high as 40:1. Insurance? Where is that going to come from? There is no insurance that can cover the cost of the coming bank failure, unless we just print more money. We are two generations removed from 1929. I am talking about Biblical 40 year generations. And when you look at who we were in 1929 and who we are now, you’ll realize just how ugly it is going to be. In 1929 there was a stronger base of family values. There was a work ethic that we don’t see today. The generation from 1929 – 1969 grew up with a totally different set of values than the generation from 1969 – 2009. The first generation worked their way out of the Depression. Today’s generation doesn’t understand work. We only understand creative financing and how to live off the next generation. And sadly, that is where we are today. We are at the precipice, and we are going to push our children over the edge because we lived so far above our means and ignored all of the warning signs. We lived just like the Romans in their final days. 
    Harsh? Like I said, spend one week with me, and you will go home with a new outlook about life, people and the crisis that is unfolding. You will go home with a sick feeling in the pit of your stomach. Guaranteed. 
    Just Florida? No, but Florida is your crystal ball.

    The next generation? I would like to think we will eventually build ourselves out of this Depression with nuclear plants, solar and wind farms, seawater desalinization plants, cars of the future and a biotech/health industry that one can only dream of.  Unfortunately, who is going to get their hands dirty? For those that study history, how would we manage a WPA with today’s generation? It will be a much tougher recovery, because we have lost the fundamentals that made us the greatest country in the world.

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