Mish's Global Economic Trend Analysis

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Real Estate Emails from Arizona and Florida: Should I Buy? Is this a Scam? Posted: 26 Feb 2011 05:12 PM PST In response to Interactive Map of Case Shiller Home Price Drop from Peak; Reflections on Flying Monkeys I received questions from readers regarding real estate in Arizona and Florida. Phoenix Email Reader Ron is from the Midwest and asks about Phoenix... "I am very interested in the Phoenix housing data, however given the commentary below I cannot tell either context or time frame. Is Phoenix improving or declining? I cannot tell from your article. Can you elaborate in terms and time frame that would explain?" Hello Ron Phoenix may easily be close to the bottom given that massive drop. However, I would not expect significant appreciation for years even IF Phoenix is at the bottom. That holds true for any bottoming area. I think parts of Florida have probably bottomed as well, but prices could easily stagnate for a decade. In general, the last bubble is not reblown for decades. Look at the Nasdaq or better yet, the Nikkei. If you are thinking of moving to and living in Phoenix, I believe the worst of the decline is over. However, if you are thinking about the rental market, you need to be very careful if you do not know what you are doing. Please see Phoenix Property Scam Targets Australian and New Zealand Buyers for details. I strongly suggest not attempting to manage property from a distance. Florida Email Stuck-In-Florida writes .... I own three residential home properties in Orlando that I bought in 2006, and obviously over held them and they are now all worth half the price. I have had many problems with leasing them out due to many people moving in making the place a mess and leaving due to personal financial problems! I cannot figure out what to do with the homes now because the options are to lose half my investment or ruin my credit. I do not like either option. Recently I have been contacted by a gentleman that lives in the area and he found 3 year lease to own (option to buy) tenants for two of my homes, I read over the contract and they are very attractive, 3 years contracted tenant, and an option price at the end of three years at the price of the peak in 2007 or double the price of the home now. Is this a scam for me as the owner or is this a scam for the tenant, or both ways? Let me know if you know anything about this? Stuck-in-Florida Hello Stuck... I cannot answer your question directly but I may be able to help. For starters, I am suspicious of "offers to help". Moreover, I do not know Florida law or any specific Florida pitfalls, nor can I (or would I even if I could, attempt to sort out a legal contract for anyone). Secondly please note what I said to the potential Phoenix buyer above. Even IF this is the bottom, do not expect rapid appreciation, perhaps any appreciation. In real (inflation adjusted returns), I expect real estate to be a poor investment for as long as a decade. Do you really want to be a landlord? Even if you do, my advice is simple and easy to understand: Before you sign anything or do anything please consult with an attorney for your state. You may wish to consider walking away, or you may want to go ahead if an attorney reviews what you have in mind. Again, I am very suspicious of "offers to help". Perhaps that offer is not a scam, perhaps it is. I do not have legal contacts for many states. In fact, I happen to have a contact for precisely one state. That state just happens to be Florida. Please read Before Walking Away Consult An Attorney for information about walking away and the name of a Florida attorney specializing in real estate problems. Tell him Mish sent you. I get nothing out of this. I am just trying to help. Good luck to you. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

189 German Academics Support EU Sovereign Default Plan Posted: 26 Feb 2011 10:37 AM PST Unlike the Keynesian and Monetarist academic clowns that rule US academia German academics push for EU sovereign default plan Almost 200 German economics professors have signed a declaration rejecting current proposals to resolve the eurozone debt crisis, instead calling for a way for distressed countries to declare bankruptcy. More than 200 professors were invited to sign the document, and 189 did so, including prominent figures such as Manfred Neumann of the University of Bonn and Justus Haucap of the University of Duesseldorf, both in western Germany. Instead of the collective support mechanism set up last year that could be made permanent in a modified form from 2013, the economists argued it would be better to let countries restructure their debts. "Restructuring allows the countries concerned to reduce their debt and start over," said the economists. The solution being mulled at present and likely to be approved by European leaders next month would amount to "a permanent guarantee" of some countries' debt, with "very serious consequences," they added. The signatories also doubted the effectiveness of measures to reinforce the competitiveness of weaker eurozone countries and control members' public finances owing to the European Union's "limited firepower." The document was published as lawmakers from Chancellor Angela Merkel's ruling coalition sent her a clear message ahead of negotiations on a permanent EU rescue plan to take place in Brussels. The German deputies said the future European Stability Mechanism should not be allowed to buy eurozone government debt, as the European Commission and European Central Bank would like. Those 189 academics simply want the ECB to admit that the debt owed by Greece, Ireland, Spain, Portugal, cannot possibly be paid back. What cannot be paid back, won't, and pretending that it will just makes problems worse. It is refreshing to see a large group of academics on the right side of an economic issue. Axel Weber, once heir apparent to ECB presidency to replace Jean-Claude Trichet, resigned as president of the German central bank over the issue of the ECB buying sovereign debt. He did not want the ECB to buy debt, most of the rest of the ECB did. Academics in Germany are disregarded even though they make economic sense. Keynesian and Monetarist academics in the US make no sense but are revered. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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