Below is a copy of my comment made back on May 3, 2006:
Dear Mr. CR,
The only thing I know about Ameriquest is the blimp I used to see last summer flying around Wrigley Field, while I was shooting baskets at a playground on the North Side. The summer before that I used to see a Fannie May (thats the confectionery company, not the mortgage folks) blimp. Of course, Fannie May went out of business that year. Im starting to take that blimp as a harbinger of company fortunes. Wonder if I will see any this year?
I like your linking of blimp advertising to a pending corporate disaster. Met Life is excluded of course, but Ameriquest just seemed to pop out of nowhere, kind of like so many tech companies in the 90s. I'm a baseball fan, and I noticed that Century 21 sponsors the home run derby. Blimps, stadiums, MAJOR corporate sponsorships? Definitely a shoe shine boy moment, especially when one considers that RE has always been a fairly hum-drum business, just on a steady beat and providing a marginal living for its practitioners. THe past five years has seen the residential REIC rise to a dominator, and even commanding respect amongst the unwashed masses. I look forward to it returning to its old ways.
This reminds me of E*TRADE a couple of years ago--if you'll remember, there was a spot of bother with an overpaid CEO who was forced to resign and things got ugly for a bit. A friend of mine concluded that the rule involved was "Never Put A Chimp In Your Superbowl Ad." It dovetails nicely with the Stadium Principle and the Blimp Axiom. I suspect they're all corollaries of what the Brits call the This Isn't Cricket Law. Having spent the better part of my career suffering under the management of dolts who confuse sports metaphors with excuses for running a business ("those folks over in Quality Control just aren't team players!"), I take comfort from the implication that the karma gods punish these things from time to time when they become to public to ignore.
The price of the Ameriquest deal will tell us everything we need to know about how far into reality the world of mortgage capital has managed to descend. I can, I expect, wait to find out.
Here's how it works: Investment banks create CDO securities and sell them to investors at, for example, Libor plus seven-tenths of a percentage point. They also sell a smaller piece of equity in the deal to separate investors.
With the proceeds, the banks turn around and buy asset-backed securities that pay Libor plus 1.5 percentage points. The difference, eight-tenths of a point before expenses in this case, translates into a gain for those who purchase the equity portion of the CDOs. In addition, the investment banks borrow money against every dollar invested in the CDO, sometimes five, 10, or even 20 times the original investment, which can boost the return substantially.
Doesn't most of the money raised from MBS have to go to the seller of the house the loan is meant to finance?
It also seems to assume that sub-prime backed bonds will continue you enjoy relatively low yields, even as defaults climb rapidly. Does that make sense?
CR, do you have a link to the article you cite? I can't find it.
Definitely a shoe shine boy moment, especially when one considers that RE has always been a fairly hum-drum business, just on a steady beat and providing a marginal living for its practitioners.
Whoa! Wait a minute - I'm as bearish as anyone here but don't kid yourself - real estate has and will remain the single best way average people can become real millionaires.
I've known way too many who - over the course of a career, not just a five year bubble - have amassed many millions... as in double or even triple digit millions. And many of these folks start at the bottom, learn 'timing' like old time comedians did in vaudeville before going 'big time'.
This has been an extraordinary period & in that respect has been the WORST of times for learning good practices - I mean flipping? Excuse me that won't happen again for a generation. I feel for the newbies who entered the biz say 3-4 years ago - they are ruined, spoiled for life, throw aways.
However if you have a spouse earning decent money & knew how to hunker down (live small & hustle - guerrilla marketing style)... now would be the PERFECT time to enter real estate.
Don't expect to make any money for a couple 2-3 years and be careful not to get exposed (buy stupid) or burn cash... but watch, learn & make good contacts. Once the shake out is complete those with good skills & even better contacts (and still alive) will do very well going forward. Price resets have a way of clearing out dead wood - just don't be one of them.
I remember an old friend of the family who was a stock broker & trader who made a fortune - he said it was the bear markets that made successful traders NOT the bull markets. He said that until a young broker had survived a bear market (and still was able to add to his client list even if his book fell)... he couldn't call himself a trader or broker. Same thing applies to RE.
Now we return to our regular programming of gloom & despair...
NAR just released existing sales for October. At 6.24 units this is significantly higher than expectations. They also revised last month's number up to 6.21.
It's curious that inventories actually increased again. Now up to 7.4 months by their reckoning. And median price is down.
And, as usual, Lereah's spin added for comic relief.
Oh and one last thing I forgot to mention... if you wait for the next bull market to enter - you'll be too late. By then all the really good contacts have already been made & nurtured... only the margins will be 'open' for new conquest.
You really have to look at this or any other cyclical business as a full cycle & all parts of the cycle play require attention - though different tactics at each phase.
Option One and Now Ameriquest...With 2 of the 2 EX leaders of Subprime lending out...I expect New Century to be on its way out as well. This should benefit bigger and stronger Souther Cal Subprime player Countrywide...Any views on this topic?
Zar: "Option One and Now Ameriquest...With 2 of the 2 EX leaders of Subprime lending out"
Out of what? I don't follow you. Why would someone buy them and close them down?
Ameriquest is just trying to cash-in before the market sours, kind of like Golden West. Only Golden West's timing was a lot better. They're privately held so there isn't a lot of info available.
Bob_in_MA
I agree, but I think it's more than cashing-in. They must be worried about credit performance...consider the level of fraud in the recent vintage...also If you consider the residual losses that they are holding on to, their problems are bigger than some other subprime investors...Not to mention their lack of knowledge in Hedgint the Credit risk that they are hanging on to.
Sorry if my comment was confusing. I was referring to the business of selling real estate, i.e. realtors and loan agents. They were always decent or good jobs, nothing special though. Certainly not like recent levels. Bubble prices and quick easy sales made these guys look like silicon valley venture capitalists circa 1999. Hence the sudden emergence of all their corporate sponsorships. I agree with you wholeheartedly. RE is a great way to amass wealth assuming you are wise in the way you mention. Personally, I'm a big believer in value investing and being contrarian, but I'm still way down on the learning curve at this point. Those who are successful long term are the ones who are bold at times others cower in the corner. I could never get myself to attempt flipping because I just could not believe that it was logical in any fashion. I hope you are correct when you say we won't see that crap for another generation at least. FOr the time being I will continue trying to learn as much about the guerilla tactics you mention. These blogs are great for that and I appreciate all the intelligent people who post here.
The last comment attributed to "aseem" mentions Ameriquest is set to be sold to Citigroup next week. Are we to believe Aseem, the CEO of ACC, the parent company of Ameriquest, Argent and the servicing company AMC is on a blog at 3 in the morning announcing something as important as that? Are Argent and AMC set to be sold too? If you want to spread rumors, that is up to you (and maybe you have inside information, who knows?), but be man or woman enough to not assume someone else's identity.
A monument to graft Texas style, or how our president finally learned to make money.
Dear CR
Below is a copy of my comment made back on May 3, 2006:
Dear Mr. CR,
The only thing I know about Ameriquest is the blimp I used to see last summer flying around Wrigley Field, while I was shooting baskets at a playground on the North Side. The summer before that I used to see a Fannie May (thats the confectionery company, not the mortgage folks) blimp. Of course, Fannie May went out of business that year. Im starting to take that blimp as a harbinger of company fortunes. Wonder if I will see any this year?
Best regards,
Kett82 | 05.03.06 - 7:09 am |
You can find a photo of the blimp at Blimp and Airship Info - The Lighter Than Air Society
I still think that blimp is an excellent indicator of company fortunes
Regards!
Would 5 cents be too much to pay?
5 cents is too much for a depreciating asset.
I just released my report on Orange County
Daily Home Price Analysis
What payment options are available?
Uh-oh. I better sell the Qualcomm and Petco stocks, then!
Can I buy them with No Money Down.
kett82:
I like your linking of blimp advertising to a pending corporate disaster. Met Life is excluded of course, but Ameriquest just seemed to pop out of nowhere, kind of like so many tech companies in the 90s. I'm a baseball fan, and I noticed that Century 21 sponsors the home run derby. Blimps, stadiums, MAJOR corporate sponsorships? Definitely a shoe shine boy moment, especially when one considers that RE has always been a fairly hum-drum business, just on a steady beat and providing a marginal living for its practitioners. THe past five years has seen the residential REIC rise to a dominator, and even commanding respect amongst the unwashed masses. I look forward to it returning to its old ways.
This reminds me of E*TRADE a couple of years ago--if you'll remember, there was a spot of bother with an overpaid CEO who was forced to resign and things got ugly for a bit. A friend of mine concluded that the rule involved was "Never Put A Chimp In Your Superbowl Ad." It dovetails nicely with the Stadium Principle and the Blimp Axiom. I suspect they're all corollaries of what the Brits call the This Isn't Cricket Law. Having spent the better part of my career suffering under the management of dolts who confuse sports metaphors with excuses for running a business ("those folks over in Quality Control just aren't team players!"), I take comfort from the implication that the karma gods punish these things from time to time when they become to public to ignore.
The price of the Ameriquest deal will tell us everything we need to know about how far into reality the world of mortgage capital has managed to descend. I can, I expect, wait to find out.
There'a a related article in today's WSJ, "Wall Street Leads Consolidation Of Subprime-Lending Business." It tells of how the the Wall St firms profit from their sub-prime pipeline, but frankly I don't get it. For instance:
Here's how it works: Investment banks create CDO securities and sell them to investors at, for example, Libor plus seven-tenths of a percentage point. They also sell a smaller piece of equity in the deal to separate investors.
With the proceeds, the banks turn around and buy asset-backed securities that pay Libor plus 1.5 percentage points. The difference, eight-tenths of a point before expenses in this case, translates into a gain for those who purchase the equity portion of the CDOs. In addition, the investment banks borrow money against every dollar invested in the CDO, sometimes five, 10, or even 20 times the original investment, which can boost the return substantially.
Doesn't most of the money raised from MBS have to go to the seller of the house the loan is meant to finance?
It also seems to assume that sub-prime backed bonds will continue you enjoy relatively low yields, even as defaults climb rapidly. Does that make sense?
CR, do you have a link to the article you cite? I can't find it.
Definitely a shoe shine boy moment, especially when one considers that RE has always been a fairly hum-drum business, just on a steady beat and providing a marginal living for its practitioners.
Whoa! Wait a minute - I'm as bearish as anyone here but don't kid yourself - real estate has and will remain the single best way average people can become real millionaires.
I've known way too many who - over the course of a career, not just a five year bubble - have amassed many millions... as in double or even triple digit millions. And many of these folks start at the bottom, learn 'timing' like old time comedians did in vaudeville before going 'big time'.
This has been an extraordinary period & in that respect has been the WORST of times for learning good practices - I mean flipping? Excuse me that won't happen again for a generation. I feel for the newbies who entered the biz say 3-4 years ago - they are ruined, spoiled for life, throw aways.
However if you have a spouse earning decent money & knew how to hunker down (live small & hustle - guerrilla marketing style)... now would be the PERFECT time to enter real estate.
Don't expect to make any money for a couple 2-3 years and be careful not to get exposed (buy stupid) or burn cash... but watch, learn & make good contacts. Once the shake out is complete those with good skills & even better contacts (and still alive) will do very well going forward. Price resets have a way of clearing out dead wood - just don't be one of them.
I remember an old friend of the family who was a stock broker & trader who made a fortune - he said it was the bear markets that made successful traders NOT the bull markets. He said that until a young broker had survived a bear market (and still was able to add to his client list even if his book fell)... he couldn't call himself a trader or broker. Same thing applies to RE.
Now we return to our regular programming of gloom & despair...
NAR just released existing sales for October. At 6.24 units this is significantly higher than expectations. They also revised last month's number up to 6.21.
It's curious that inventories actually increased again. Now up to 7.4 months by their reckoning. And median price is down.
And, as usual, Lereah's spin added for comic relief.
Oh and one last thing I forgot to mention... if you wait for the next bull market to enter - you'll be too late. By then all the really good contacts have already been made & nurtured... only the margins will be 'open' for new conquest.
You really have to look at this or any other cyclical business as a full cycle & all parts of the cycle play require attention - though different tactics at each phase.
BTW - my biz is no different (mfg agent).
Typo...
all parts of the cycle play require attention
Should have read...
all parts of the cycle play differently and require attention
Sheesh, I need to remember to engage brain before hitting the Publish button.
Bob_in_MA nice article!
Option One and Now Ameriquest...With 2 of the 2 EX leaders of Subprime lending out...I expect New Century to be on its way out as well. This should benefit bigger and stronger Souther Cal Subprime player Countrywide...Any views on this topic?
Any views on this topic?
Looks like Countrywide will need a blimp & have to name a stadium or two.
Ummmm, It is now Chase Field in Phoenix....JP Morgan Chase next?
Ominous clouds today too.....
Zar: "Option One and Now Ameriquest...With 2 of the 2 EX leaders of Subprime lending out"
Out of what? I don't follow you. Why would someone buy them and close them down?
Ameriquest is just trying to cash-in before the market sours, kind of like Golden West. Only Golden West's timing was a lot better. They're privately held so there isn't a lot of info available.
I miss Enron Field.
Bob_in_MA
I agree, but I think it's more than cashing-in. They must be worried about credit performance...consider the level of fraud in the recent vintage...also If you consider the residual losses that they are holding on to, their problems are bigger than some other subprime investors...Not to mention their lack of knowledge in Hedgint the Credit risk that they are hanging on to.
dryfly: Another good point! lol
"NEW" Short or Long?
dryfly,
Sorry if my comment was confusing. I was referring to the business of selling real estate, i.e. realtors and loan agents. They were always decent or good jobs, nothing special though. Certainly not like recent levels. Bubble prices and quick easy sales made these guys look like silicon valley venture capitalists circa 1999. Hence the sudden emergence of all their corporate sponsorships. I agree with you wholeheartedly. RE is a great way to amass wealth assuming you are wise in the way you mention. Personally, I'm a big believer in value investing and being contrarian, but I'm still way down on the learning curve at this point. Those who are successful long term are the ones who are bold at times others cower in the corner. I could never get myself to attempt flipping because I just could not believe that it was logical in any fashion. I hope you are correct when you say we won't see that crap for another generation at least. FOr the time being I will continue trying to learn as much about the guerilla tactics you mention. These blogs are great for that and I appreciate all the intelligent people who post here.
another one bites the dust...
Ameriquest has been marked for sale to Citigroup. This agreement will be signed next week.
The last comment attributed to "aseem" mentions Ameriquest is set to be sold to Citigroup next week. Are we to believe Aseem, the CEO of ACC, the parent company of Ameriquest, Argent and the servicing company AMC is on a blog at 3 in the morning announcing something as important as that? Are Argent and AMC set to be sold too? If you want to spread rumors, that is up to you (and maybe you have inside information, who knows?), but be man or woman enough to not assume someone else's identity.
Yeah, AMC Argent and Ameriquest are on their way out.