Want to know how low housing might go?? Merrill Lynch just found out!!

[j1dias]

fdjake - great tips on buying cars... THANK YOU.

I bought my first car for my wife used from a dealership. We bought it because we liked the salesperson... I even asked (and paid) for four new tires and a CD player... The tires lasted for 2 full years... When I tried to find the manufacturer to claim my warranty, I couldn't even find it in the internet... It was a name I never heard of... I then called Honda and they told me no problem - I could bring the car in, they would take the tires and send them to the manufacturer. It would take 7 to 10 business days... When I asked if they would put a set of tires while we waited, they said NO. I would need to take care of that myself... I decided to buy new tires elsewhere... and I learned my lesson.

My first truck was a success history. I can tell you that when I bought it new from the dealer I had paid $50 less (including taxes, registration, doc fees, etc, etc) than KBB estimate for the same car. Basically, a used truck was quoted by KBB $50 more expensive than my brand new truck... :O)

I found it in the newspaper during a end of semester weekend. Actually I saw it advertised on Friday. It was one of those 3 days end of month/end of semester weekends when the dealers are eager to make their quotes... June 30th was Monday. I didn't go to the dealer until early Monday evening (June 30). I asked for the truck in the ad and the sales person looked at me as if I came from another planet. He basically told me that considering that the ad was published on Friday there was no way that the truck would still be there. When I told him that I knew he had several of the same truck in stock he laughted and told me that that price was only for that one truck they put in the ad. He showed me the small stock number in the bottom of the ad. He basically told me that they advertise one truck at very low price to get people in the dealership and they eventually buy something else. I was very disappointed. I asked him to check if that specific truck was still there or not... just in case.. We went to the lot and eventually we found the truck... :O) It was a white no-frills Sonoma. The truck next to it was exactly the same but a nicer color. I asked if I could buy that instead and he went to check the price. That truck would have costed me almost $6k more than the one I bought... I decided to get the white one. When I sold the truck 3 months ago I sold it for exactly $500 less than I paid for it. It felt really good. I had it for four years... :O)

And then I tried to repeat this same strategy again when we bought my wife's new minivan. I looked at the ads and went to the dealer early in the weekend. After visiting 4 dealers we couldn't find any of the advertised vans. We ended up buying one from another nice salesman. Two years later, that van is worth half what I paid for it... Not such a good deal... :O(

Anyway - now that I wrote this I am starting to realize that my cars are usually a bargain and my wife's cars are the ones that end up being expensive... :O)

[wilsem]

VERY interesting. Thanks for that article.

[allagash]

Anyone here smart enough to go out and buy themselves a BARGAIN BASEMENT SUV???  I did....2006 Ford Explorer with 25,000 miles on it.  Bought it from a moron who thinks gas is going to $12/gallon.  He just paid $5000 OVER sticker for a Prius.  So his total loss including the beating he took on the Explorer plus the cost of the Prius was about $45,000!!!! But THINK of the money he's saving on GAS!!!!!       

Another nice contrarian move....

http://www.oinkdesigns.co.uk/About%20You_files/stand-out-in-a-crowd.png

-Mike

[Liquidity]

Merrill Lynch today finally found a buyer for some of their CDO's. Remember, this market has basically LOCKED UP,  NO ONE is buying this stuff because every 6 months the "COLLATERAL" is worth less and less.   For those that don't know what a CDO is, it's simply a Collateralized Debt Obligation.  In other words...MORTGAGES!!   It's a fancy term Wall St. invented, but in reality it is just a LOAN/MORTGAGE backed by collateral (Real Estate)

So what did Merrill get for their CDO's???????

22 CENTS on the DOLLAR!!!!!!!!!!!!!!!!

The interesting part of this is 22 cents is now what the market has valued this "paper" at.  If a bank is holding $10 BILLION dollars in CDO's it is now worth almost 5 TIMES less than it was when those banks purchased the debt.  That DEBT isn't just a piece of PAPER, in most cases, it's a REAL PIECE OF PROPERTY!!!!

In case anyone isn't clear how the banking system now works here's a quick refresher.   Mortgage money originates from Wall St.
Mortgage companies, local and regional banks originate mortgages but most (not all) simply SELL those mortgages to bigger banks on Wall St. They make a percentage on the sale and recoup their original capital then make another loan. The Wall St. banks hold the "paper" (CDO's) then they create "INVESTMENTS" out of this paper.  The Wall St. banks sell some of those "investments" to pension funds, insurance companies, but they KEEP a large portion of those CDO's for themselves.

The market has just valued a big giant pile of HOUSING at 22 cents on the dollar!!!!!!!!!  It IS housing, not the mortgages that has been valued because as defaults on those mortgages continue, the investors who purchased those CDO's for 22 cents are now hoping that the underlying value of the COLLATERAL (real estate) they just purchased will be worth AT LEAST 22 cents!!  Again.....there's a LOT of people out there who thought buying this stuff at 75 cents on the dollar was GODD INVESTMENT??  Obiviously they lost their shirts.  At 22 cents these guy's are probably OK.  But remember.....in every case, housing has CAUGHT UP to these numbers and eventually continued it's downward slide.  When guy's were buying this stuff at 75 cents on the dollar, other people were saying housing had hit bottom!!!

This has happened numerous times in the last 2 years.  Prices for these CDO's started out at 75 cents on the dollar, and prices for homes continued to fall.  They then hit 50 cents on the dollar, but prices for the collateral (homes) STILL continued to fall.  Now we have hit a new low....22 cents on the dollar!!!  Is it a bottom????  We'll see.

The next phase of this DISASTER is just now waking from a decades long sleep.....

JOB LOSSES will start to increase.  Ask any local business man how they're doing??  I know there are pockets of strong business out there.  But as a whole, we are in very tough economic times, and they WILL get worse.  How do I know this????   

The next President of this country on DAY ONE in office will be looking at a HALF A TRILLION DOLLAR DEFICIT!!!!!  The amazing thing to me is we have been robbing Peter to pay Paul for so long in this country NO ONE even cares about the deficit.  BUT.............very soon, a whole bunch of FOREIGN COUNTRIES WILL start to care.  We have a rich uncle.  He's been loaning us money for YEARS, and just like a spoiled little brat we think we're ENTITLED TO IT NOW!!!!!

WE'RE NOT.  See how people who bougfht homes they couldn't afford to keep are now losing them????  Welcome to the future folks.  This will be the USA if we don;t get our heads out of our @sses and QUICK!!

This is a  WORLD WIDE economic SLOW DOWN.  ANYONE who thinks that we are going to slide by is fooling themselves.
Even LANDLORDS are feeling the pain.  Remember the old theory???
Hey, people have to live somewhere!!!!  If the economy gets hurt they'll lose their homes and have to rent from me!!
Oh really? Homeless people don't pay rent.  I'm seeing families DOUBLING UP in 3 bedroom apartments.  2 families living TOGETHER in ONE apartment!!!  The adults take two bedrooms and the kids all pile into the 3rd.  If that trend continues, we have a BIG problem because that means a LOT of the exsisiting apartments out there will be VACANT!!!

A very strange thing is happening in this country.  People are losing their homes at never before seen rates, and rents are actually DROPPING!!!  Too many unsold homes desparately looking for ANYONE to rent them so the homeowner gets some relief from a mortgage that is killing them.

The guy's on Wall St. created this mess by loaning money to idiots who couldn't finance a ham sandwich never mind a home.  Now they just told us all what they think all that underlying "COLLATERAL" is worth.

22 CENTS on the dollar!!!

The writing is on the wall boy's.  Don't be one of those who 5 years from now says......."HOW DID I NOT SEE THIS COMING????"

for those of you who dont understand what the gov's bailout plan is. It is to buy these these cdo's. they will be bought buy the us govenmemt by reverse auction.  1 buyer , alot of sellers (banks) Lowest prices offered get bought by government, so those banks can lend again.

and we think we are getting deals buying 50% off market LOL

Do you still think it was a bad idea for the bailout plan ???

I'm willing to guess the government plan will make money here.  the only way is if we see some real crooked offers now. if merrill sold theirs for 22 cents on the dollar. the government better not being paying alot more than that. if they do pay anything over 50 cents on dollar then we were duped by these banks here.

I had to look for this thread i knew i remembered reading it here.

[camilleb]

Hey thanks for clearing that up jake. Basically what the market is saying then is that we're still not at bottom, so purchases at market value now will still continue to depreciate over the next year at least.

I'm just happy that you said that... thank God this work is not dragging me down at the bottom of the food chain