Tom Lindmark's Instablog About a year ago, a company asked me to write a daily blog for them. I told them that I’d never read a blog and had absolutely no idea how to write one but sure, if you want to pay me for it, I’ll give it a shot. It was either my good or bad fortune to start at the beginning of the credit crisis. Good because there was a lot to write about, bad because they didn’t really want me to chronicle and opine on the disaster of the day. Guess who won that standoff. But I was hooked on blogging, so I started my own blog, called it But Then What and here we are. I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time. Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so. Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy. Visit my blog http://www.butthenwhat.com or follow me on twitter at twitter.com/tomlindmark. Tom Lindmark http://seekingalpha.com Arizona Revokes Some Homeowners' Foreclosure Protection http://seekingalpha.com/instablog/183730-tom-lindmark/19250-arizona-revokes-some-homeowners-foreclosure-protection?source=feed 19250 The new law stipulates that anyone that doesn't occupy a property for a continuous period of six months will not be eligible for protection under the anti-deficiency statute. The lender will have the right to pursue the borrower for any shortfall between the price it receives when it sells the foreclosed property and the amount owed on the mortgage. The law affects foreclosures started after September 30, 2009.

The purpose is to curb speculators who buy properties in the hope of flipping them at a higher sales price. In the past, if the market didn't cooperate and bring a higher price these flippers had a propensity to just mail in the keys and move on. The reality is that while it might curb some of this type of speculation, it also puts owners at jeopardy. Specifically, second home owners would fall under the statute since almost by definition they wouldn't live in the house for the required period of time.

The law took a lot of people by surprise even though it was advertised and debated. The realtor community is trying desperately to either amend or repeal the law but that might probe difficult. The legislature is currently meeting but in a special session which limits its permissible activities to only those that were cited for calling the special session. Additionally, there doesn't appear to be among the legislators any particular concern about the bill nor has any one of them stepped forward to carry the banner for repeal.

The banking lobby, particularly the community banking lobby, is the group that pushed hardest for the legislation. Given their clout and a general antipathy towards single family home investors, it might be difficult to rally much support for repeal. Eventually, I suspect there would be some modification to more precisely limit the laws application to investors but that might take some time.

It's hard for me to argue that an investor should receive protection under the anti-deficiency statutes. They were designed long ago to prevent owners from being completely ruined by the event of foreclosure and have certainly been taken advantage of over the past few years by unscrupulous investors. It seems, though, that the statute might be poorly drafted and could use some tweaking.

more: here

]]> Mon, 27 Jul 2009 21:31:50 -0400 The new law stipulates that anyone that doesn't occupy a property for a continuous period of six months will not be eligible for protection under the anti-deficiency statute. The lender will have the right to pursue the borrower for any shortfall between the price it receives when it sells the foreclosed property and the amount owed on the mortgage. The law affects foreclosures started after September 30, 2009.

The purpose is to curb speculators who buy properties in the hope of flipping them at a higher sales price. In the past, if the market didn't cooperate and bring a higher price these flippers had a propensity to just mail in the keys and move on. The reality is that while it might curb some of this type of speculation, it also puts owners at jeopardy. Specifically, second home owners would fall under the statute since almost by definition they wouldn't live in the house for the required period of time.

The law took a lot of people by surprise even though it was advertised and debated. The realtor community is trying desperately to either amend or repeal the law but that might probe difficult. The legislature is currently meeting but in a special session which limits its permissible activities to only those that were cited for calling the special session. Additionally, there doesn't appear to be among the legislators any particular concern about the bill nor has any one of them stepped forward to carry the banner for repeal.

The banking lobby, particularly the community banking lobby, is the group that pushed hardest for the legislation. Given their clout and a general antipathy towards single family home investors, it might be difficult to rally much support for repeal. Eventually, I suspect there would be some modification to more precisely limit the laws application to investors but that might take some time.

It's hard for me to argue that an investor should receive protection under the anti-deficiency statutes. They were designed long ago to prevent owners from being completely ruined by the event of foreclosure and have certainly been taken advantage of over the past few years by unscrupulous investors. It seems, though, that the statute might be poorly drafted and could use some tweaking.

more: here

]]> Friday Failures http://seekingalpha.com/instablog/183730-tom-lindmark/18973-friday-failures?source=feed 18973 Here are the links:

Waterford Village Bank, Williamsville, New York

Security Bank of Jones County, Gray, Georgia

Security Bank of Houston County, Perry, Georgia

Security Bank of Bibb County, Macon, Georgia

Security Bank of North Metro, Woodstock, Georgia

Security Bank of North Fulton, Alpharetta, Georgia

Security Bank of Gwinnett County, Suwanee, Georgia

All of the Georgia Banks were owned by Security Bank Corporation, Macon, Georgia. I think this puts Georgia far ahead in the state race for the most seized banks. Once we whittle down the number of banks in Georgia maybe we should consider a ban of say fifty years or so on any new charters for that state. What do you think?

]]> Sun, 26 Jul 2009 19:01:57 -0400 Here are the links:

Waterford Village Bank, Williamsville, New York

Security Bank of Jones County, Gray, Georgia

Security Bank of Houston County, Perry, Georgia

Security Bank of Bibb County, Macon, Georgia

Security Bank of North Metro, Woodstock, Georgia

Security Bank of North Fulton, Alpharetta, Georgia

Security Bank of Gwinnett County, Suwanee, Georgia

All of the Georgia Banks were owned by Security Bank Corporation, Macon, Georgia. I think this puts Georgia far ahead in the state race for the most seized banks. Once we whittle down the number of banks in Georgia maybe we should consider a ban of say fifty years or so on any new charters for that state. What do you think?

]]> Housing's Bottom http://seekingalpha.com/instablog/183730-tom-lindmark/18972-housing-s-bottom?source=feed 18972 Housing Wire had the story and it's a pretty small little data point but I thought the comment they included in their article from the President of Data Quick was worth noting.

Here is what he had to say:

“There is a perception that the housing market is dragging along bottom, that it probably won’t get much worse, and that the lenders need to get serious about processing the backlog of delinquencies, either with work-outs or foreclosure,” said DataQuick president John Walsh.

And servicers are getting serious, according to Walsh, hiring additional staff to handle the pipeline of delinquency cases. But he warned that a push in the servicing space to move these mortgages through either workout or foreclosure will likely lead to a higher volume of foreclosure filings in the third quarter.

You may not be familiar with his firm, Data Quick. They're located in San Diego and produce some of the most complete sets of information on real estate markets in various state markets. I've used their products before and was always impressed with how complete and timely their data tended to be.

Throughout the bubble and its aftermath they've consistently called the situation as they have seen it based on their data. Never have I felt they were industry cheerleaders and by the same token I never found them to be the types that bought trouble. Just a firm with a lot of data that seems to draw pretty supportable conclusions in an unbiased manner.

Therefore, I buy their contention that we're probably around the bottom. That doesn't mean that were over the pain or that there won't be a lot more foreclosures to come down the pike, just that we've taken the biggest hit we will likely see and now have to suffer some bumps and bruises on the way back up. And, by the way, I don't know how far back up we go but I suspect any housing recovery is going to be pretty muted.

I doubt that residential real estate is going to contribute much to the recovery of the overall economy for some time to come. That's a pretty important consideration as normally it is one of the drivers of recovery. At the same time, I think that we are probably past the point at which it subtracts from growth.

]]> Sun, 26 Jul 2009 19:00:51 -0400 Housing Wire had the story and it's a pretty small little data point but I thought the comment they included in their article from the President of Data Quick was worth noting.

Here is what he had to say:

“There is a perception that the housing market is dragging along bottom, that it probably won’t get much worse, and that the lenders need to get serious about processing the backlog of delinquencies, either with work-outs or foreclosure,” said DataQuick president John Walsh.

And servicers are getting serious, according to Walsh, hiring additional staff to handle the pipeline of delinquency cases. But he warned that a push in the servicing space to move these mortgages through either workout or foreclosure will likely lead to a higher volume of foreclosure filings in the third quarter.

You may not be familiar with his firm, Data Quick. They're located in San Diego and produce some of the most complete sets of information on real estate markets in various state markets. I've used their products before and was always impressed with how complete and timely their data tended to be.

Throughout the bubble and its aftermath they've consistently called the situation as they have seen it based on their data. Never have I felt they were industry cheerleaders and by the same token I never found them to be the types that bought trouble. Just a firm with a lot of data that seems to draw pretty supportable conclusions in an unbiased manner.

Therefore, I buy their contention that we're probably around the bottom. That doesn't mean that were over the pain or that there won't be a lot more foreclosures to come down the pike, just that we've taken the biggest hit we will likely see and now have to suffer some bumps and bruises on the way back up. And, by the way, I don't know how far back up we go but I suspect any housing recovery is going to be pretty muted.

I doubt that residential real estate is going to contribute much to the recovery of the overall economy for some time to come. That's a pretty important consideration as normally it is one of the drivers of recovery. At the same time, I think that we are probably past the point at which it subtracts from growth.

]]> Two Lost Decades http://seekingalpha.com/instablog/183730-tom-lindmark/18971-two-lost-decades?source=feed 18971 DateEventPriceAppreciationSourceApr 30, 2009Sold$32,500-87.1%/yrPublic RecordsFeb 08, 2008Sold$399,479-8.3%/yrPublic RecordsSep 22, 2006Sold$450,00028.4%/yrPublic RecordsSep 20, 2005Sold$350,00063.3%/yrPublic RecordsJul 30, 2004Sold$200,00089.0%/yrPublic RecordsOct 06, 2003Sold$119,00024.3%/yrPublic RecordsOct 11, 2002Sold$96,000114.3%/yrPublic RecordsJun 28, 2001Sold$36,000-26.2%/yrPublic RecordsApr 16, 2001Sold$38,250--Public Records
  

more: here

Sun, 26 Jul 2009 18:59:21 -0400 DateEventPriceAppreciationSourceApr 30, 2009Sold$32,500-87.1%/yrPublic RecordsFeb 08, 2008Sold$399,479-8.3%/yrPublic RecordsSep 22, 2006Sold$450,00028.4%/yrPublic RecordsSep 20, 2005Sold$350,00063.3%/yrPublic RecordsJul 30, 2004Sold$200,00089.0%/yrPublic RecordsOct 06, 2003Sold$119,00024.3%/yrPublic RecordsOct 11, 2002Sold$96,000114.3%/yrPublic RecordsJun 28, 2001Sold$36,000-26.2%/yrPublic RecordsApr 16, 2001Sold$38,250--Public Records
  

more: here

Calpers Shows No Fear Of Risk http://seekingalpha.com/instablog/183730-tom-lindmark/18970-calpers-shows-no-fear-of-risk?source=feed 18970 I don't see any reason that this shouldn't work out well.

Calpers, the giant California pension fund, is planning to make up some rather substantial losses by increasing its portfolio allocation to the investment sectors that were chiefly responsible for the losses. Got that?

From the NYT:

The fund, known as Calpers, lost nearly $60 billion in the financial markets last year. Though it has more than enough money to make its payments to retirees for many years, it has a serious long-term shortfall. Meanwhile, local governments in the state are pleading poverty and saying they cannot make the contributions that would be needed to shore it up.

Those problems now rest largely on the slim shoulders of Joseph A. Dear, the fund’s new head of investments. He is not an investment seer by training, but he thinks he has the cure for what ails Calpers, or the California Public Employees’ Retirement System, the largest in the nation with $180 billion in assets.

Mr. Dear wants to embrace some potentially high-risk investments in hopes of higher returns. He aims to pour billions more into beaten-down private equity and hedge funds. Junk bonds and California real estate also ride high on his list. And then there are timber, commodities and infrastructure.

That’s right, he wants to load up on many of the very assets that have been responsible for the fund’s recent plunge. Calpers’s real estate portfolio has tumbled 35 percent, and its private equity holdings are down 31 percent. What is more, under Mr. Dear’s predecessor, Calpers had to sell stocks in a falling market last year to fulfill calls for cash from its private equity and real estate partnerships. That led to bigger losses in its stock portfolio.

OK, to give the guy his due, it's not entirely crazy to put some money into really beaten down sectors. The economy will recover in some manner and there probably is an upside to them given the depressed prices that they now command.

Still, it seems like a bet on the world returning to the status quo ante. Instead of hoping for a home run maybe they should think about restructuring their gold-plated pension plans to cut their future liability. Then the numbers would let them buy boring things like Treasuries and high quality equities.

But I forget, this is California and they always rise from the ashes, don't they? ]]> Sun, 26 Jul 2009 18:57:51 -0400 I don't see any reason that this shouldn't work out well.

Calpers, the giant California pension fund, is planning to make up some rather substantial losses by increasing its portfolio allocation to the investment sectors that were chiefly responsible for the losses. Got that?

From the NYT:

The fund, known as Calpers, lost nearly $60 billion in the financial markets last year. Though it has more than enough money to make its payments to retirees for many years, it has a serious long-term shortfall. Meanwhile, local governments in the state are pleading poverty and saying they cannot make the contributions that would be needed to shore it up.

Those problems now rest largely on the slim shoulders of Joseph A. Dear, the fund’s new head of investments. He is not an investment seer by training, but he thinks he has the cure for what ails Calpers, or the California Public Employees’ Retirement System, the largest in the nation with $180 billion in assets.

Mr. Dear wants to embrace some potentially high-risk investments in hopes of higher returns. He aims to pour billions more into beaten-down private equity and hedge funds. Junk bonds and California real estate also ride high on his list. And then there are timber, commodities and infrastructure.

That’s right, he wants to load up on many of the very assets that have been responsible for the fund’s recent plunge. Calpers’s real estate portfolio has tumbled 35 percent, and its private equity holdings are down 31 percent. What is more, under Mr. Dear’s predecessor, Calpers had to sell stocks in a falling market last year to fulfill calls for cash from its private equity and real estate partnerships. That led to bigger losses in its stock portfolio.

OK, to give the guy his due, it's not entirely crazy to put some money into really beaten down sectors. The economy will recover in some manner and there probably is an upside to them given the depressed prices that they now command.

Still, it seems like a bet on the world returning to the status quo ante. Instead of hoping for a home run maybe they should think about restructuring their gold-plated pension plans to cut their future liability. Then the numbers would let them buy boring things like Treasuries and high quality equities.

But I forget, this is California and they always rise from the ashes, don't they? ]]> The UPS View Of The Economy http://seekingalpha.com/instablog/183730-tom-lindmark/18969-the-ups-view-of-the-economy?source=feed 18969 In that regard, UPS didn't exactly deliver the best news today. For the quarter UPS reported a profit of $445 million on revenues of $10.83 billion. That compares to a profit of $873 million on revenues of $13 billion for the same period last year. Yikes, those are ugly numbers but they're backward looking. So do things look better going forward?

Well, not really. Here via Calculated Risk are the words the CEO used to open the conference call today:

“On our last call we told you economic conditions for the second quarter would be slightly worse than the first and UPS performance would reflect those conditions. And that's what happened. The results we announced today are a clear indication of the tough economic environment. As you're aware, the rates of decline of some key economic indicators, like GDP and industrial production, have slowed. Other indicators, like manufacturing and service sector indices, are exhibiting signs of improvement. Most forecasters are saying that we may be at the bottom.Whether or not we're at the bottom is not the main issue; what is important is how long we remain here and what type of recovery we will have. Remember, all these indicators are still well into negative territory, illustrating the challenges that lie ahead. We will continue to manage the Company under the assumption that the economy will stay at this level until definitive signs of improvement materialize.

That message was repeated several times in other comments. The company remains optimistic about the economy eventually improving but at this point in time doesn't see any indication that's happening. The company has reduced headcount and indicated that unless business picks up, further reductions are likely.

Their message was carefully worded, but I think pretty clear that they don't see all that much improvement in the economy. Given that their business gives them as good a real time view of overall business activity as you're likely to find, their observations would seem to indicate an economy that hasn't recovered much at all yet.

]]> Sun, 26 Jul 2009 18:56:42 -0400 In that regard, UPS didn't exactly deliver the best news today. For the quarter UPS reported a profit of $445 million on revenues of $10.83 billion. That compares to a profit of $873 million on revenues of $13 billion for the same period last year. Yikes, those are ugly numbers but they're backward looking. So do things look better going forward?

Well, not really. Here via Calculated Risk are the words the CEO used to open the conference call today:

“On our last call we told you economic conditions for the second quarter would be slightly worse than the first and UPS performance would reflect those conditions. And that's what happened. The results we announced today are a clear indication of the tough economic environment. As you're aware, the rates of decline of some key economic indicators, like GDP and industrial production, have slowed. Other indicators, like manufacturing and service sector indices, are exhibiting signs of improvement. Most forecasters are saying that we may be at the bottom.Whether or not we're at the bottom is not the main issue; what is important is how long we remain here and what type of recovery we will have. Remember, all these indicators are still well into negative territory, illustrating the challenges that lie ahead. We will continue to manage the Company under the assumption that the economy will stay at this level until definitive signs of improvement materialize.

That message was repeated several times in other comments. The company remains optimistic about the economy eventually improving but at this point in time doesn't see any indication that's happening. The company has reduced headcount and indicated that unless business picks up, further reductions are likely.

Their message was carefully worded, but I think pretty clear that they don't see all that much improvement in the economy. Given that their business gives them as good a real time view of overall business activity as you're likely to find, their observations would seem to indicate an economy that hasn't recovered much at all yet.

]]>