Buy and hold. And hold, and hold, and ….

Mad Monkey won’t like this: the reason the banks went belly up is that, unlike the dot.com era when they flipped their fecal inventions as soon as they could sell them, they held on to their phony baloney securitized mortgage “assets” figuring they’d be worth more down the road.

Perhaps the most troubling aspect of all this is that its clear that banks and regulators continue to hold on to exactly the same idea: these assets will appreciate, housing will go up, if we just hold them we’ll make money. The fact that this was the road to ruin apparently doesn’t cause any hesitancy to march down it all over again.

5 Comments

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5 responses to “Buy and hold. And hold, and hold, and ….

  1. Ach

    Another key problem is that houses that aren’t lived in deteriorate. Rodents, weather, mechanical problems – houses that aren’t lived in depreciate over time. So if they don’t move houses – they lose money, even if they’re getting payments from the PMI provider of the previous owners.

    Speaking of which, how long can a bank soak up PMI on a foreclosed house? Anyone know?

  2. Mad Monkey

    Where’s the controversy? It’s true. These troubled assets will rebound overtime. A fortune will be made in MBS once the economy levels off and confidence returns to the marketplace. Those hedge funds that bought debt for pennies on the dollar will make a fortune in a few years. And guess what? Hedge fund managers will again pay through the nose to live among the elite in Greenwich, the Hamptons and Manhattan.

    Out of the three aforementioned locations, Greenwich represents the best value and most bang for your buck. In the Hamptons, $20mm represents the baseline for a quality home south of the highway. All spec houses houses that are greater than 10,000 sft and below $15mm look like crap and everyone knows it (postage stamp lot size too). To find a large, good construction, quality estate on multiple acres with any significant water views will run you well north of $25mm. For the most part, you can get a beautiful estate in Greenwich for $10mm – $20mm, get far greater square footage and also have year round use. I rather own a $20mm home in Greenwich and spend $400k for a summer rental in the Hamptons. Before Greenwich implodes, the overpriced secondary home market in places like the Hamptons will have to fall back down to earth – hasn’t’ happened yet. In short, you smug losers shouldn’t be holding your breath for 1999 prices in Greenwich anytime soon (unless Al Qaeda detonates a nuclear suitcase in Times Square in which case we’re all fucked anyway).

    With respect to Manhattan, those $3o00/sft apartments on the Upper East Side with Central Park views are beginning to lose their appeal. These apartments are becoming increasingly small and quite frankly look very pedestrian, e.g., check out multiple lawsuits filed at the Plaza, over hyped and overpriced apartments that look like shit. Overtime, the wealthy will increasingly resist paying $20mm for 3000 sft three bedroom co-op junk and return to their roots – owning and managing 15000 sft estates on greater than 4 acre lots with pool and tennis court in Greenwich.

  3. Ach

    “In short, you smug losers shouldn’t be holding your breath for 1999 prices in Greenwich anytime”

    You referring to me in that group of losers? Heh. Well, let me know when the Greenwich prices go back down to 1899 prices, and then maybe I’ll be able afford to live there (my price level tops at 300k – but then, I live in Maryland, nowhere near Greenwich).

    When the house is on the Bank’s balance sheet as a non-performing asset, that means foreclosure, and then no one living at the house to maintain it. Perhaps the banks in Greenwich aren’t inundated with foreclosures around here, and are happy to spend the money sending someone around to maintain the places. Around here (Maryland), there isn’t enough nearly enough manpower. Which means that the value of the houses will decline overtime due to miscellaneous damage.

    I absolutely agree that anyone who doesn’t have to sell their house should just sit tight. Prices should improve in another 3 to 10 years (I hope that’s an outer limit – depends how much the Gov’t manages to f’ things up). But you go to sell your house with the market you’ve got. If you don’t like the market, don’t sell your house.

  4. Cos Cobber

    I don’t know Mad Monkey, you keep bringing up NYC and the Hamptons. Sounds like your friends, peers, colleagues, etc have nested in one locale and you here in Gwich and now you feel the need to justify your decision. I see/hear a little of the same blowback from my superiors at work.

  5. Mad Monkey

    Ahhhh…Cos Cobber, young lad, you see right through me. I hate my life. I want out. Tribeca here I come! NOT!!!