September 25, 2009 :: Mark Lederer

Let’s Talk Recovery. What does it mean for your opportunities?

US Dollars
Thank you to Think Panama for the photo.

I just read the new East Bay Economic Development Aliance report. If you have not read it I suggest you give it a look (here). In the latest report Jerry Nickelsburg a Senior Economist for UCLA’s Anderson Forecast discusses what California’s turn around may look like.

One thing I found funny is that the report is titled July 2009 Update with Overview by UCLA. Are we not in September? Well as it occurs all data is provided on past events, thus a reader should keep this in mind when reading the report and speculating about what is going on now in the market.

I do agree with the report that a Bay Area residential real estate turnaround is underway. Being that we are transacting frequently in this market, we are observers of the current market climate. Today we are seeing really low inventory with lots of buyers to gobble it up. In fact, most properties are now receiving multiple bids and selling for over their asking prices. Of course, this is reflected in the above report as an increase in median prices in the Bay Area. It is simple supply and demand.

So, What about all the foreclosures that we are supposed to be seeing? Well I believe the banks have gotten smart and are happy with the competition and multiple offers they are now receiving.  They also have the staying power to trickle listings on the market and produce a greater and greater return as the market continues to improve. For example, there is an agent in my office that is in the REO business and said the number of deals given out by the banks has dropped to a trickle. Even a prominent purveyor of Foreclosure information, Foreclosure Radar is saying the wave of foreclosures some are expecting may never crash on the East Bay’s shores. You can read there article (here).

So, what does this mean for buyers? Well, we now have some very low interest rates with some moderate pressure upward on rates. Many economists believe that we are in for an inflationary period sometime in the future due to all the money the US government has pumped into our economy. Thus there is a real risk for buyers that a contracting supply coupled with rising rates may make housing less affordable. Not to mention that in inflationary times your home should increase in value while your payment stays the same. That means that net worth will be built for those that can buy property and hold on to it through the ups and downs of the market.

So, how should you move in this market? We have just had the worst real estate crisis in California’s history. Prices are back at 2003 levels and well below Bay Area’s median housing inflation trends. Knowing that values tend to return to the mean this is an opportunity for buyers who can buy and hold. Will the road be bumpy along the way? Of course, but taking action to minimize your mortgage risk while maximizing your opportunity is the name of the game. Those that get into the market and hold their homes through the rough patches are in for handsome returns.




June 29, 2009 :: No Way

For those with kids in their lives

Touch is the most fundamental sense.  A baby experiences it, all over, before he is born and long before he learns to use sight, hearing, or taste, and no human ever ceases to need it.  Keep your children short on pocket money—-but long on hugs.

Robert A. Heinlein

April 3, 2009 :: Mark Lederer

Interest Rates Drop to the Lowest Level On Record!


Thanks Criggchef for this flickr image.

We are currently seeing some amazingly low interest rates. Rates on loans less than $729,000 fell to the lowest level on record for the second consecutive week after the Federal Reserve launched a new effort to assist the staggering U.S. housing market. Yet, also interesting is that rates on loans larger than $729,000 are abnormally low as well.

With a loan amount of $1,000,000 and 75% Loan-to-Value:

Purchase Price $1,333,333
Loan Amount $1,000,000
Loan Program Rate Points APR Payment
30 Yr FRM Int Only 6.000% 1.000 6.142% $5,000
3/1 LIBOR ARM Int Only3/1 4.500% 1.000 4.629% $3,750
5/1 LIBOR ARM Int Only 4.750% 1.000 4.881% $3,958
7/1 LIBOR ARM Int Only 5.000% 1.000 5.133% $4,167
10/1 LIBOR ARM Int Only 5.250% 1.000 5.385% $4,375

We are big believers that it is impossible to time the bottom of the real estate markets. Yet, what we can assess is the current opportunity in the market relative to other times in history. Currently, rates are reaching historical all time lows while at the same time buying conditions and available residential housing inventory are creating abnormal Bay Area buying opportunities. This market is a prime residential buying opportunity for individuals and families that are endeavoring to purchase and live in their homes for the next 7-10 years.

One only has to look at the evening news to see that the National residential housing inventory has been seriously devalued over the last 2 years. Yet, the story that is not being told is that much of this Bay Area housing stock is now being sold with multiple offers. We know for we have been watching these offers begin to pool as rates have fallen. So, with this recent shift in financing over $729,000, we are also now beginning to witness a huge opportunity in the $700,000-$2,000,000 market. Many opportunities are beginning to present themselves to those that are looking for long term ownership (7-10 years) and can afford to ride out the many ups and downs we will inevitably see over the next couple of years.

March 11, 2009 :: Mark Lederer

Save Money on Buying a Home!

Thanks ladybugbkt for the flickr photo.

We have been transacting some amazing deals in this market! Prices have fallen and interest rates have remained very low for the time being. Qualified home buyers looking to enter this market are getting the best of both worlds. 

There has also been much discussion about the stimulus package circulating in our office lately. Out of the entire package we have found the $8,000 first time home buyers tax credit to be the most important to Bay Area buyers.

Below is more information about what you need to qualify for this credit…

– You must either be a first time buyer or have not owned a home in 3 years

– The property you purchase must be your principle residence

– You must make the purchase between January 1 through December 1 of 2009

– Your yearly modified adjusted gross income must not exceed $75,000 for singles and $150,000 for married couples

– There is no cash exchange or payout for closing costs or down payment – you must file your tax return to get the $8,000 credit

– If the house you buy costs less than $80,000 you will receive only 10% of the purchase price in credit

– You must live in the property for a minimum of 3 years, or you will have to pay the credit back

– There is STILL time to use the credit on your 2008 tax return! Alternatively you can claim the credit on 2009 taxes.

The above information is provided for informational purposes only, and believed to be accurate. For legal or tax advice, please consult an attorney or tax adviser.

March 9, 2009 :: Mark Lederer

Upgrading Your Home Furnace or Water Heater?

Thanks Kristie Wells for the use of this Flickr Photo.

I just had a heating specialist look at a heater replacement for one of my clients. It appears that the new stimulus bill is going to create an opportune time for home owners to replace old appliances. Specifically speaking, ABC heating and cooling just broke it down for me on an average 2000 square foot home. They showed me how an 80% low efficiency furnace is still the cheapest product. Yet, the $1500 credit will make the highest efficiency furnace (95% efficient) so that it is only $20 more than the mid-range model (90% efficient).

Below is a summary of the changes to the energy efficiency tax credits.

On February 17, 2009 President Obama signed a stimulus bill that made some significant changes to the energy efficiency tax credits.  The highlights of the American Recovery and Reinvestment Act of 2009 are the following:

– The tax credit has been raised from 10% to 30% for 2009 and extended through 2010.
– The tax credits for a specific dollar amount have been converted to 30% of the cost.
– The maximum credit has been raised from $500 to $1,500.

Note, there do seem to be income limits to these tax credtis and it is worth checking with your tax advisor before making purchases. For a more complete explanation of the tax bill and  the products that it covers go to the Energy Star website.

Looking for a great heating and cooling specialist in the Bay Area, contact Jeff Cecchin with ABC Cooling and Heating at (925) 250-0202.

February 3, 2009 :: Mark Lederer

A Tough Market: Why Your Advisor Is So Important

Thanks Victoria Peckham for this flickr photo.
I often read John Mauldin. He has a unique perspective on the financial markets and macro-economic issues. Yesterday, I received his weekly e-newsletter and it had an interesting quote from Charles D. Ellis.

…Charles Ellis, who helps oversee the $15-billion endowment fund at Yale University, said:

Watch a pro football game, and it’s obvious the guys on the field are far faster, stronger and more willing to bear and inflict pain than you are. Surely you would say, ‘I don’t want to play against those guys!’

Well, 90% of stock market volume is done by institutions, and half of that is done by the world’s 50 largest investment firms, deeply committed, vastly well prepared — the smartest sons of bitches in the world working their tails off all day long. You know what? I don’t want to play against those guys either.”

I began to ponder about this in regard to the real estate markets. I was able to establish that this statement works for the real estate market. In every market marginal value is constantly being ground out as competitors compete with one another. This is why free markets are so efficient and why competition reduces the cost to transact. Now in real estate the complexities of financing, insurance, construction and other specific knowledge, make transacting less efficient than say using e-trade to exchange stocks and bonds (this means you can find value in the inefficiency if you have the right adviser). Yet, real estate too must adhere to the indifference principal.

OK… so, work with me here. If you are a buyer or seller in the real estate markets (or any other markets for that matter)… And you are looking for value in your next transaction… And you yourself are not a big player in these markets (most home owners only transact several homes in their life times and often there is many years between transactions)… And you want to compete with others in the market…

Find the best help you can. Don’t just look for the agent that says, “I have lived and worked in the neighborhood for many years”. Although, specific market knowledge is important, the internet has now made it so any agent can search the local multiple listing service and see the limited inventory that is available. Look for the advisors that demonstrate the largest capacity to create marginal value in your next transaction. For example, in the Bay Area we have found that our strategies for buyers allow them to win competitive offers even when they are not the highest offer. We accomplish this by preparing our clients financially. Working with a competent financial planner/mortgage broker we developed a strategy for our clients that allows them to close their leveraged transaction in 7 days verses the typical 30 days. We do this with no additional transactional risk. This is based on the market mechanic that sellers are willing to take a lesser price if it means they get their money faster. This is just one example of the marginal utility that we create for our Bay Area buyers. This strategy has become even more valuable in the current liquidity crisis where sellers are highly concerned with whether a buyer can complete a transaction or not.

The real estate markets are tough. So, seek the best help possible.

January 21, 2009 :: Mark Lederer

The House Explained: Check Out Jay Marlette’s New Blog

The House Explained Blog 


One of our premier home inspectors just started a new blog. It is called Jay Marlette’s: The House Explained. We have used Jay for our home inspections for over 7 years now and because he is so technologically savvy it did not surprise me that he would start a blog. In fact, his current home inspection site ( is one of the best home inspector sites in our area. It has online scheduling, which is great for both customers and agents.

I spoke with Jay about this new venture and I knew it could be a valuable resource, but I never expected such in depth articles. His posts really explain how different aspects of your home work. We are always saying that house construction and home improvement projects are not rocket science, but Jay’s writing and understanding of a home’s fundamentals is fantastic. I highly recommend Jay’s services as a home inspector, and his new blog. 

January 12, 2009 :: Mark Lederer

Planning for Your Future: An Interesting Tool

Fianancial Comeback 

We all are concerned with the current financial situation. Yet, how has it affected our retirement and our savings. We can easily calculate what we have lost, but how much must we save to make up the difference. Even more important we all must know what we need to save every year so that we can live what we deem to be a good life. Do you really know what you need to retire? If you do have you been tracking how you will get there?

I just saw this interesting New York Times tool that can help you see what you are on track to produce. It’s free and is a great illustration of how many years our current recession may have put you back. It also could be an interesting tool to help you start thinking about how much is enough and what you need to save to get there.

January 9, 2009 :: Mark Lederer

Welcome to 2009: Interest Rates Hit an All Time Low

Houses and Dice
Thanks woodlywonderworks for this Flickr Photo

Yesterday this was posted on’s Market Dispatch… 

Freddie Mac this morning said that the benchmark 30-year fixed mortgage rate fell to an average of 5.01%, with an average of 0.6 point for the week that ends today. That’s the lowest rate since Freddie Mac started tracking the numbers in 1971.”Interest rates for 30-year fixed-rate mortgages fell for the tenth week to a fourth consecutive record low due in part to the Federal Reserve’s recent purchases of mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae,” Frank Nothaft, Freddie Mac chief economist, said in a statement. “On Nov. 25, 2008, the Federal Reserve announced that it planned to purchase up to $500 billion of these securities by the end of June of this year. For the sake of comparison, there were roughly $4.7 trillion of such securities backed by home mortgages available as of Sept. 30, 2008.”  

As we enter 2009 I was struck by the amount of activity in the real estate markets. If this is any indication of what 2009 will look like then I expect refinances and purchases to boom in the first quarter of this year. In December we wrote 5 offers on different properties and all of them had multiple bidders. This is a big difference compared to December of 2008 when most agents had zero offers in contract. We are not seeing the over bidding that we witnessed at the height of the market, but Bay Area properties which are listed at market prices are selling quickly a bit over their asking prices. This December we witnessed homes in North and East Richmond, which were hammered by the liquidity crisis, snatched up in less than 3 days!

We are seeing cheep financing coupled with low prices that is driving buyers into the real estate markets. This is healthy for it is beginning to clear out the foreclosure and short sale inventory that has plagued pricing for the last year and a half. In turn we believe this shrinking inventory will stabilize prices and subdue the skewed deep discounting that is caused by the banks fire selling as a means to getting real property off of their books.

This is a fantastic buyers market, and thus we are seeing the frozen gears of the market begin grind into motion.It is anybody’s guess as to when supply and demand will stabilize and a more normal market will arise. Yet, the signs of buyers returning to the markets are a definite plus and the longer rates remain low, the better off our markets will be. For the foreseeable future this will be a terrific market for buyers to get great values.

January 8, 2009 :: Mark Lederer

Oakland Speaker Series: Why the News Media Does Not Tell The Truth?

2 nights ago I went to the Oakland Speaker Series for the first time. I listened to Fareed Zakaria speak who has been described as the most influential foreign policy advisor of his generation. It was very interesting to hear Fareed say that we live in some of the most prosperous times even with all of the current economic turmoil. He cited the lack of military competition amongst world super powers and the growth of capitalism and economic prosperity around the globe. He also said the amount of worldwide terrorism and death due to war has fallen over the last decade.

Then he made a point I never expected to hear from a CNN analyst embedded in a media centric culture. He first asked the question, so why are we all so scared? He then answered it by saying the news media now has channels dedicated to 24 hour coverage. He stated how they have the responsibility to fill all of the hours with content. Thus, we are constantly being bombarded with narratives that are not grounded in our personal realities. He used the weather channel as an example and joked about how you turn it on and they start talking about a storm in some faraway place that has no influence on your current situation. Yet, we sympathize with it and it affects our mood or the story we are living in.

Financial Ambition has long spoken about the false realities that the modern news media perpetuates and how it negatively effects our everyday actions. We have made these statements so that our readers and clients will not let the media influence their actions and decisions. We have witnessed that those led by the media’s narratives drift without strategic relevance for their own situations. When people accept the media’s narratives as their background thinking, it often causes action when observation or assessment would be more appropriate, or stagnation when action is imperative.

It was inspiring to hear a news media veteran illustrate and validate the media’s real purpose. Many people expect the media to tell the truth, when actually the media’s purpose is to draw in advertising dollars. So the next time you watch the news or read one of the many periodicals think about where the story is coming from. Are you listening to truth and reality or are you witnessing a story that has been manifested to trigger you to continue watching?

On a side note, I found that the Oakland Speaker Series is one of the best values in the Bay Area. For a small fee (on their web site the Oakland speaker series can be seen for $304 for 8 different events) you get access to some of the most influential speakers of our time. Some of the past speakers have been: Carly Fiorina, Robert Redford, Colin Powell, Tom Brokaw, Neil Armstrong and Alice Walker. I highly recommend it.

December 19, 2008 :: Mark Lederer

Investing: Why Smart People Do Stupid Things


There is a great series of YouTube videos of Warren Buffett speaking to the University of Florida’s MBA class. Part 1 has a great discussion about integrity and why it is fundamental for success. I found one of the most interesting segments (shown above) to be Buffett’s discussion of the rescue of Long Term Capital Management (LTCM). LTCM was a hedge fund that went belly up in late 1990’s and was rescued by a massive industry bail out, supervised by the United States Federal Reserve. Buffet speaks about how LTCM was run by 16 exceedingly high IQ, long term veterans of the investment markets that probably had a combined 300-400 years worth of experience. Buffet makes a fundamental interpretation about risk and how much is too much. He spoke to how these men foolishly risked their own livelihood when he stated, “To make money they risked what they had and needed for what they didn’t have and did not need.”

After watching this segment I began to think philosophically about how the destruction of LTCM was a smaller scale bail out that sounded very similar to our current credit crunch and massive US bail out. Both instances were caused by some of the smartest minds in their industries. Both ended with the destruction of businesses, where owners risked everything (including the jobs and the livelihoods of others) to gain much of what they did not need to be a viable business in the first place. Is greed the best word to describe this kind of behavior?

Buffet also spoke about how knowledge can create blindness. For instance, in the case of LTCM the owners were experts at mathematics, which blinded them to the simple fundamental human and business concerns that all businesses must acknowledge. I have seen this in my own industry, where some of the brightest have let their intelligence get in the way of their own ability to make prudent decisions surrounding real estate investing. I have also seen many others avoid this pitfall, by living in a mood of wonder. I have seen how part of success is an awe-inspiring willingness to learn more and explore new possibilities, while thwarting moods of over informed arrogance. There is also something to Warren Buffett’s ability to be explicit about the offers, actions and investments he makes and how he rarely relies on inexplicit decisions. We should all be mindful that the philosophies we hold directly influence the actions and practices we live in.

December 17, 2008 :: Mark Lederer

Inflation and Your Strategic Financial Plan

No Inflation

Inflation Graph

As we are watching the Federal Reserve lower the Federal Funds rate to 1/4% and witnessing the Federal Government give away 700 billion tax payer dollars I have encountered many economists (and Dan Green) that are speaking about the fears of future inflation. In this context, I just read an interesting posting called The Inflation Factor written by Doug Short. Posted on the macro economic blog The Big Picture (that I suggest and frequently read), this article is an interesting prospective on how inflation could effect your retirement.

More pertinent to residential real estate, this article takes a look at how inflation affects our individual financial situations. It is very interesting to note how inflation can change your perspective about your home mortgage. As the posting states “…inflation is the main reason why a long-term fixed expense like a mortgage payment goes from a major burden to a minor nuisance.” Inflation is just another example of how purchasing real estate is a part of your entire financial plan. Inflation is market mechanic that no one individual can control, yet it can drastically effect how your future turns out if you do not factor inflation into your entire strategic financial plan.

Note, that Dan Green’s article Explaining What Happened At the Fed (December 16th, 2008) is interesting speculation that the current financial regulation that is occurring in the US will probably keep rates low for the short term, but will also most likely spur inflation that will make rates rise in the long term. This means if you are considering a refinance, now might be an opportune time. If you are considering buying real estate this might also be a window of opportunity.

November 27, 2008 :: No Way

The Millennium Wave – Accelerating Change

The Millennium Wave

By John Mauldin, November, 2008

John Mauldin, Best-Selling author and recognized financial expert, is also editor of the free Thoughts From the Frontline that goes to over 1 million readers each week. For more information on John or his FREE weekly economic letter go to: 

Over the next ten to twelve years, we will see three recessions that will slowly move the average price-to-earnings ratio of stocks to historic lows. Rising oil and energy prices will be a main culprit of both the slowdown in the economy and an increase in inflation. Ever-increasing monetary inflation will, in fact, trigger a huge increase in all commodity prices, as well as a decline in bonds. Asset inflation will show up in the housing markets as home values continue to skyrocket. The dollar will continue to weaken against major foreign currencies. The current war will become increasingly unpopular, and the next administration will be forced to withdraw troops, under the guise of declaring victory. The American voting public will be split as never before, with major patterns in voting habits making a generational change. The newspapers will continue to write about how an Asian country will dominate the world economically in less than a few decades.

Following this period of malaise, there will be an amazing cycle of new technical innovation that will spark yet another major bull market. The new technologies will change the world in ways that simply cannot now be imagined and will lead to whole new industries, putting amazing new power and abilities into the hands of individuals and governments.

The preceding scenario would, in fact, all come to pass. Except that the year that was written was 1970, (more…)

November 17, 2008 :: Mark Lederer

Gifting and the Current Market

 Gift house
Thanks H Dickens for this flickr photo. 

I have recently written about how the current volatile market has created many windows of opportunity for buyers and sellers in the real estate markets. Yet, I had not realized how the current market volatility had also created an opportunity for inner family wealth transfer. I just read an article in the Wall Street Journal, titled With Shares Tanking Think About Gifting, which illustrates this situation. When investments are down and the value is less, then there may be an opportunity to transfer these assets to family with the strategy of building wealth once the market recovers. Many wealth advisors are also speculating that congress will reform the gift and estate tax system. When you put all of this together the current volatile market may be an opportunity to pass an estate onto the next generation at a reduced cost.

This year I have had several clients take action to pass property and other assets to their children. There is great opportunity in change if you have a competent team to help you assess the different possibilities and then advise you on the prudent actions to fulfill on your ambitions. 

November 11, 2008 :: No Way

If you are counting on a pension, this should give you pause

None are safe.  Today it’s the car company, tomorrow the hospital and very soon the States and Cities will begin to renege on their pension promises.
November 10, 2008
Some G.M. Retirees Are in a Health Care Squeeze

DETROIT — General Motors is living on borrowed time, spending more than $2 billion in cash a month and lobbying for a government bailout to keep it out of bankruptcy.

And for about 100,000 of its white-collar retirees, time is about to run out on G.M.’s gold-plated medical benefits.

To conserve its dwindling cash reserves, G.M. is eliminating lifetime health care coverage for its legions of retirees at the end of this year, leaving people like Ken Hewitt to fend for themselves in deciding how to cover their doctor’s bills and prescription drug costs. (more…)

November 8, 2008 :: No Way

Is It Time to Have a Money Talk, Child to Parent?

November 8, 2008
YOUR MONEY – New York Times
Is It Time to Have a Money Talk, Child to Parent?

The federal bailouts of the last few months raise a variety of thorny questions, including who benefits at whose expense. But the question that hits home the hardest is the one that isn’t getting enough discussion around kitchen tables:

Will we have to bail out our own family members?

It’s started coming up in asides I hear from middle-aged friends who are concerned about their parents ending up in the poorhouse. And I see it in e-mail from people in their 60s and 70s, who can’t believe their offspring got mixed up in funny mortgages and wallets full of credit cards.

But often, the grown children don’t know precisely how the devastation in the markets has affected their parents’ portfolio, and the older parents don’t know what their children’s monthly debt payments are.

None of this is fun to think about. And if you dare to open your mouth about it, relatives may take offense. Silence, however, is good for no one. You don’t want to be blindsided months or years from now by a family member in desperate straits, nor do you want to worry yourself sick when there’s no reason to.

So this week, please consider starting an intergenerational conversation about money, perhaps in writing, which might reduce the risk of a knee-jerk response that leads to an argument. I’ve suggested an approach below, for an e-mail message or letter to a parent and a possible reply, though you could easily tweak it if you’re initiating the chat with your child. (more…)

November 1, 2008 :: Mark Lederer

Volatility and Value: Creating Windows of Opportunity

 Windows of Opproitunity

There is no doubt that we are in turbulent financial times. Yet in volatile markets are opportunities. Katie and I are committed to producing a competitive advantage for our clients to achieve their financial and lifestyle goals. We do this by designing effective strategies for our clients, taking into account their specific situation, wherewithal and ambition. With our team of financial, investment, mortgage, insurance and tax advisors, we are able to help our clients take advantage of the unique opportunities made possible by the current real estate market.

We believe the main stream media has overemphasized the threats and tragic stories of owning real estate. This is not a big surprise since the media’s job is to sell news and entertainment. Therefore sensationalism works. But in this approach the media disregards any financial benefit associated with real estate and masks the new opportunities that are now possible for buyers and sellers. For this reason, we thought it would be helpful to share with you some of our recent transactions that demonstrate our ability to create and implement strategic plans that opened major opportunities for our clients.

• Last month one of our clients was able to purchase a million dollar home in San Francisco with a 15% down payment. (If you are wondering, being able to buy at that price range with 15% down in this market is just short of a miracle.) Our client was able to finance the purchase with a 1st mortgage for approximately 75% of the purchase price at an interest rate of 5.5%. For the balance, we were able to get him a home equity line of credit (HELOC) at prime minus 1%! This is a concrete example of the superior help provided by our financial & mortgage provider who was able to accomplish this in a market where the common media is saying mortgage rates are close to 7% and HELOC’s do not exist.

• Other clients of ours recently acquired their dream home a $500,000 home on 5 acres with an apricot orchard. This same home would have sold for close to $800,000 in 2005. We put together a strategy where they could sell their current home or rent it and keep it as an investment. After exploring selling their current residence they decided to rent it instead. This has increased their investment capacity while they have acquired a replacement property at an opportune time when values of real property are artificially low due to the liquidity crisis.

• This month we formulated an uncommon strategy for one of our clients who was looking to move into a larger home to better care for his family. We found that the San Francisco market he currently lived in was not nearly as affected as the market he wanted to move to in Concord. We sold his 1936, 1,450 square foot home in San Francisco for $566 per square foot and helped him buy a brand new 3,856 square foot home in Concord for $272 per square foot. The 2 properties are only about 30 miles from one another, but have a difference in cost of $294 per square foot. This strategy helped our client transition to a new home with a significant profit. Volatility means there is more risk in the marketplace. It also means there is more opportunity. In order to take advantage of these opportunities, we have found that it is necessary to have a powerful team of financial, investment, tax and real estate advisors. We and our network of professionals have demonstrated our ability to help our clients to take advantage of the current market.

We thank all of our clients that have transacted with us in the past and we look forward to helping many of you in the future. Please contact us if you need assistance or if you know of anyone else who may need our services. It would be our pleasure to assist them with the same care as we have provided you.

October 29, 2008 :: No Way

But Have We Learned Enough?

So who can we trust to anticipate the future in the markets? It looks like no one.
The New York Times, October 26, 2008


But Have We Learned Enough?
LIKE most economists, those at the International Monetary Fund are lowering
their growth forecasts. The financial turmoil gripping Wall Street will probably
spill over onto every other street in America. Most likely, current job losses are
only the tip of an ugly iceberg.
But when Olivier Blanchard, the I.M.F.’s chief economist, was asked about the
possibility of the world sinking into another Great Depression, he reassuringly
replied that the chance was “nearly nil.” He added, “We’ve learned a few
things in 80 years.”

Yes, we have. But have we learned what caused the Depression of the 1930s?
Most important, have we learned enough to avoid doing the same thing again?
The Depression began, to a large extent, as a garden-variety downturn. The
1920s were a boom decade, and as it came to a close the Federal Reserve tried
to rein in what might have been called the irrational exuberance of the era.
In 1928, the Fed maneuvered to drive up interest rates. So interest-sensitive
sectors like construction slowed.

But things took a bad turn after the crash of October 1929. Lower stock prices
made households poorer and discouraged consumer spending, which then
made up three-quarters of the economy. (Today it’s about two-thirds.)
According to the economic historian Christina D. Romer, a professor at the
University of California, Berkeley, the great volatility of stock prices at the
time also increased consumers’ feelings of uncertainty, inducing them to put
off purchases until the uncertainty was resolved. Spending on consumer
durable goods like autos dropped precipitously in 1930.

Next came a series of bank panics. From 1930 to 1933, more than 9,000 banks
were shuttered, imposing losses on depositors and shareholders of about $2.5
billion. As a share of the economy, that would be the equivalent of $340 billion

The banking panics put downward pressure on economic activity in two ways.
First, they put fear into the hearts of depositors. Many people concluded that
cash in their mattresses was wiser than accounts at local banks.
As they withdrew their funds, the banking system’s normal lending and money
creation went into reverse. The money supply collapsed, resulting in a 24
percent drop in the consumer price index from 1929 to 1933. This deflation
pushed up the real burden of households’ debts.

Second, the disappearance of so many banks made credit hard to come by.
Small businesses often rely on established relationships with local bankers
when they need loans, either to tide them over in tough times or for business
expansion. With so many of those relationships interrupted at the same time,
the economy’s ability to channel financial resources toward their best use was
seriously impaired.

Together, these forces proved cataclysmic. Unemployment, which had been 3
percent in 1929, rose to 25 percent in 1933. Even during the worst recession
since then, in 1982, the United States economy did not experience half that
level of unemployment. (more…)

October 1, 2008 :: Jeffrey T. Smith

Tax Law Changes for 2008 – What to Expect When You’re Filing Next Year

Money HouseThere are a number of important tax law changes that take effect this year, including three changes that will affect some homeowners. There are also changes that impact business owners.

While you won’t see the impact of these changes until you file your returns early in 2009, it helps to know about them now so you can keep proper records and make the smartest decisions for your money.

Take a few minutes to review the changes so you can keep them in mind as you devise your 2008 tax strategies.

Changes for Homeowners

Homeowner’s Exemption: In the past, taxpayers have taken the opportunity to convert a rental property or vacation home into their primary residence and then later sell the property. This allowed them to take advantage of the Homeowner’s Exemption which allows a taxpayer to exclude up to $250K ($500K for married couples) of gain realized on the sale of a primary residence. An example of a common strategy has been:

  • Taxpayer acquires rental property in 2000 for $100K.
  • Taxpayer rents the property out for three years.
  • In 2003, taxpayer moves into the property as his/her primary residence.
  • In 2005, taxpayer sells the property for $600K.
  • Taxpayer (married couple) avoids paying taxes on the entire gain ($500K).


September 29, 2008 :: Jeffrey T. Smith

Who’s Afraid of a Big, Bad Bailout?

Following is an excerpt from John Mauldin’s “Thoughts from the Front Line” and a link to the entire piece. It’s lengthy but a great articulation of the current financial situation and proposed government intervention. It is in the form of a letter to Congressman Joe Barton, TX, a top Republican House leader. John Mauldin is a multiple NYT Best Selling author and recognized financial expert. He has been heard on CNBC, Bloomberg and many radio shows across the country. He is the editor of the highly acclaimed, free weekly economic and investment e-letter that goes to over 1 million subscribers each week.

It’s the End of the World As We Know It

Dear Joe,

I understand your reluctance to vote for a bill that 90% of the people who voted for you are against. That is generally not good politics. They don’t understand why taxpayers should spend $700 billion to bail out rich guys on Wall Street who are now in trouble. And if I only got my information from local papers and news sources, I would probably agree. But the media (apart from CNBC) has simply not gotten this story right. It is not just a crisis on Wall Street. Left unchecked, this will morph within a few weeks to a crisis on Main Street. What I want to do is describe the nature of the crisis, how this problem will come home to your district, and what has to be done to avert a true, full-blown depression, where the ultimate cost will be far higher to the taxpayers than $700 billion. And let me say that my mail is not running at 10 to 1 against, but it is really high. I am probably going to make a lot of my regular readers mad, but they need to hear what is really happening on the front lines of the financial world.