Daily Archives: May 18, 2009

On Faith

A fascinating discussion of faith versus “scientific reason” by Professor Stanley Fish in, of all places, The New York Times. What is less surprising is that Professor fish reports that, judging from the comments to his earlier essay on the subject, 95% of NYTs readers are atheists. And proud of it, no doubt. Well, won’t they be sorry come the Rapture!

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It hasn’t worked out so well in Greenwich, either

Formerly rich try to auction off their unwanted junk. Downsized multi-millionaires are discovering that their toys cost an arm and a leg (see below, “Denny’s”) to maintain so they’re dumping them. Trouble is, according to the WSJ, no one else wants their crap either. 309 Taconic tried an auction. It failed, and last week a cottage on the 29 acres burned up in sympathy. There was a Dwight Road house sold by the IRS last fall to an out-of-towner (anagram for sucker) but other than that, we haven’t seen any successes. Yet.

On the morning of Mr. Peacock’s auction, more than 100 bargain-hunters flocked to the auction tent along with dozens more bidding live online. The bids started strong, with the metal signs and animals selling. An online bidder bought the elephant head for $6,750. A bright yellow Honda motorcycle went for $9,500, and a 2003 Country Motor Coach fetched $150,000 — far less than the $600,000 Mr. Peacock paid for it or the $200,000 he owes on it.

“This guy had all the toys in the world,” marveled Pat Nugent, a local real-estate agent.

When the six cars came on the block, however, the sale stalled. Only one — a cloned 1970 Plymouth Hemi Cuda convertible — reached Mr. Peacock’s asking price. The Peacocks didn’t accept the bids on the others, including the Ferrari. An Italian speedboat and a pair of jet skis also failed to sell.

Bids on the house ground to a halt at $5.5 million. The Peacocks decided they couldn’t let it go for that. Since they didn’t want to live in an empty mansion, they pulled the other items, including the parrots, off the block.

In all, 500 items sold for about $300,000. About $200,000 went to pay the auctioneer and other expenses. Both houses are still on the market.

“Nobody’s spending money right now,” said Mr. Peacock, sitting under the tent with his head buried in his hands. “I guess we’ll try to just keep hanging on.”

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With no personal exposure to the Picard suit, life returns to normal at the Noels

Andres does discipline.

Andres does discipline.

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You gonna eat that?

Man amputates arm in Denny’s.

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Walt, this may be your best hope

Madoff bankruptcy Trustee Irving Picard finally sued Fairfield Financial Group today, a development that even Monica’s publicist must have expected. But Walt, despite the harsh words we’ve traded, I think it may be time to bury the hatchet so that Frankie P and I can get rich and you can get busy making money to fork over to Irving. So here’s the deal:

I wrote earlier today that some defunct firm (was it FGG?) is offering trading desks for just $99 on Ebay. They don’t work for a rugged individualist like myself because the damn things are tandems, with two traders facing each other. But here at Putter & Fontanski we’re thinking of moving into stage two of our scheme – we’ve driven down the price of real estate by fraudulently reporting distress sales and claiming that they represent the going price, now we turn our attention to buyers and tell them that the bottom’s been reached and they should buy now! if they don’t want to lose out.

But who’s going to make all those awful cold calls to strangers, who’s willing to sit around dreary old Round Hill Club making small talk while simultaneously fleecing yokels? That, you wizard you, is where you come in. You don’t like cold calling either? Pull Monica off that dress making gig that’s going nowhere and she can work the phones while we prop you up at the RHC bar, mojito in hand, and use you as bait. I think it’s brilliant, and those desks are cheap enough that we can accommodate the Fabulous Five and their no-good husbands, too! What do you say?

UPDATE: Upon reflection Walt, we may want to set you up in a country without an extradition treaty with the US. Is Ireland too cold for you? ‘Cause I worry, see, that peckerheads like Picard are gonna keep asking you embarrassing questions that even you, old Bushy Brow, will have a hard time answering to anyone’s satisfaction. Like this:

Clients of Fairfield Greenwich had accounts valued at $7.3 billion when Mr. Madoff was arrested, about $60 million of which came from the firm and its partners. Internal documents show those investments had generated more than $500 million in fees since 2003 alone for Fairfield Greenwich, enriching a handful of the firm’s top executives.

The fees financed the increasingly expensive lives of the firm’s partners, most visibly for Mr. Noel, who divided his time between homes in New York, Connecticut, Florida and the island of Mustique, in the Caribbean — properties collectively valued at about $20 million.

As it raised money all over the world, Fairfield also made detailed pledges about how it would monitor and track Mr. Madoff’s investments.

The trustee’s complaint repeats the central accusation of other lawsuits: How could the firm have kept its promises to supervise Mr. Madoff diligently and still have missed all of the red flags in his operation?

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What does this tell you about the advice you’ve been getting?

A fellow Greenwich agent said to a pal of mine, “everything Chris is saying is absolutely true – we all know it – it’s just that people don’t like the way he says it.”

Well, judging from the prices of most of the new listings coming on, sugar-coating isn’t making the pill easier to swallow. In fact, the pill is still being spat out.  The late Betty Moger, one of the original “ladies in station wagons” who sold real estate in town forever, used to say of the spring sales season, “if you wait for the dogwoods to bloom, you’ve missed it.”

The blooms have long since passed and it’s fair to say that there will be no spring this year. So now home owners will have to wait until September,  when they’ll have ten weeks – the week after Labor day until the week before Thanksgiving – to get their price. And if, God forbid, they fail then, too, it will be a long time before spring comes around again. So do what you like, but you may find that sugar can be bitter-sweet.

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Get over it – there’s the U.S. and the British Open still to go!

Protestors refuse to believe in  Tiger’s defeat

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One heartbeat away from the presidency

Joe Biden reveals the (formerly) “secure, undisclosed location” that was supposed to be the Vice Presidential secret hidey-hole. It turns out to be under the Naval Observatory although perhaps they’ll move it once Loose Lips Joe retires.

Relax, they'll never find me in this disguise!

Relax, they'll never find me in this disguise!

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Whose lifetime?

A reader has forwarded a promotional email she received touting a “buying opportunity of a lifetime” for a little (1,300 sq.ft.) bungalow at 30 Havemeyer lane. The reader asked whether the house hadn’t sold for $500 a few years ago so I looked it up. It’s got an interesting history. Built in 1948, it was in pretty much the same shape when it sold in 2001 for $300,000 ($5,000 over asking price). A builder bought it, fixed it up by adding central air and such and resold it for $455,000 a couple of years later. In 2004, still sporting just one bathroom, the place asked $669,000 and sold in eight days for $705,000. Now, five years later it’s asking $769,000.

So not quite the only time in anyone living’s lifetime that this was an “opportunity”, but perhaps when Obama’s inflation plan takes off this will once again seem like a bargain price.

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Buy your last car before 2014, when you can still afford to

This should help the auto industry: Obama will impose California’s fuel efficiency standards on the entire country, effective 2014. The wonderful thing about this, if you like black humor as much as I do, is that under Obama’s plan California will be allowed to dream up even stricter standards in the future. The way this has worked in the past and will work in the future is that California, which is ruled by a rabid band of anti-civilization crazies, comes up with onerous, expensive regulations  to attack automobiles and defends those regulations on the ground that they have crummy air. New York, Connecticut and other eastern states declare that their air sucks too and adopt the regulations for themselves. Then, the whole scheme spreads nationwide, to await the next loony thinking from the west.

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And this is from a liberal!

Obama’s  budget astonishes and dismays Robert Samuelson

Monday, May 18, 2009

 Just how much government debt does a president have to endorse before he’s labeled “irresponsible”? Well, apparently much more than the massive amounts envisioned by President Obama. The final version of his 2010 budget, released last week, is a case study in political expediency and economic gambling.

Let’s see. From 2010 to 2019, Obama projects annual deficits totaling $7.1 trillion; that’s atop the $1.8 trillion deficit for 2009. By 2019, the ratio of publicly held federal debt to gross domestic product (GDP, or the economy) would reach 70 percent, up from 41 percent in 2008. That would be the highest since 1950 (80 percent). The Congressional Budget Office, using less optimistic economic forecasts, raises these estimates. The 2010-19 deficits would total $9.3 trillion; the debt-to-GDP ratio in 2019 would be 82 percent.

But wait: Even these totals may be understated. By various estimates, Obama’s health plan might cost $1.2 trillion over a decade; Obama has budgeted only $635 billion. Next, the huge deficits occur despite a pronounced squeeze of defense spending. From 2008 to 2019, total federal spending would rise 75 percent, but defense spending would increase only 17 percent. Unless foreign threats recede, military spending and deficits might both grow.

One reason Obama is so popular is that he has promised almost everyone lower taxes and higher spending. Beyond the undeserving who make more than $250,000, 95 percent of “working families” receive a tax cut. Obama would double federal spending for basic research in “key agencies.” He wants to build high-speed-rail networks that would require continuous subsidy. Obama can do all this and more by borrowing.

Consider the extra debt as a proxy for political evasion. The president doesn’t want to confront Americans with choices between lower spending and higher taxes — or, given the existing deficits, perhaps both less spending and more taxes. Except for talk, Obama hasn’t done anything to reduce the expense of retiring baby boomers. He claims to be containing overall health costs, but he’s actually proposing more government spending (see above).

Closing future deficits with either tax increases or spending cuts would require gigantic changes. Discounting the recession’s effect on the deficit, Marc Goldwein of the Committee for a Responsible Federal Budget puts the underlying “structural deficit” — the basic gap between the government’s spending commitments and its tax base — at 3 to 4 percent of GDP. In today’s dollars, that’s roughly $400 billion to $600 billion.

The Obama budgets flirt with deferred distress, though we can’t know what form it might take or when it might occur. Present gain comes with the risk of future pain. As the present economic crisis shows, imprudent policies ultimately backfire, even if the reversal’s timing and nature are unpredictable.

The wonder is that these issues have been so ignored. Imagine hypothetically that a President McCain had submitted a budget plan identical to Obama’s. There would almost certainly have been a loud outcry: “McCain’s Mortgaging Our Future.” Obama should be held to no less exacting a standard.

I’m not a liberal and I’m worried, too.

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Another Lawler production?

Still time to customize!

Still time to customize!

Nah, just kidding. This hole in the ground is at One North Ridge, at its intersection with Havemeyer Lane. The developer, a man named Ross, paid $667,500 for it in April ’07 and offered it back up for sale in November of that year at either $1.995, which would have included a house built on the foundation you see here,  or mere land for $895,000. It turned out that there was only one other person on earth who thought a house on Havemeyer Lane could be worth $2 million and that guy turned out to be a developer, too, who had twin no-sales going up just down the street.

Well, life is often disappointing, so today Mr. Ross has cut his price to $595 but that amount does not include, so far, a house. It will be interesting to see what a building lot’s value in Havemeyer falls to. I’m thinking maybe $350,000.

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More price reductions

46 Terrace Ave

46 Terrace Ave

46 Terrace in Riverside sold for $1.925 (bidding war, I believe) in 2007. Asking price as of today? $1.525.

 

38 Khakum Wood, a building lot purchased by Scott Lawler (Broadway Partners) for $4.8 million, is down today to $3.8. That’s bad enough, but Scotty, while busy  building Broadway Partners up into a REIT behemoth and watching it implode this year, poured a fortune into a foundation for a 17,000 sq. ft. house (and doesn’t every rich man want to start a foundation?). He put the land and foundation back on the market for – I am not kidding, this is not a typo – $8.5 million in 2007 and has been slicing that price ever since. So what’s a three – acre building site in Khakum Wood worth? Not $8.5 million and probably not $3.8, either. But at some price, someone will want this dirt pile, won’t they?

UPDATE: Thanks to Frankie Foker, here’s a story about Lawler’s woes from a nifty website called Developerimplode.com. The site’s so much fun I’m adding it to my links. Is this a great partnership or what?

The Queens native, who owns multiple homes in Greenwich, Conn., and Nantucket, Mass., is a self-made mogul. He started Broadway in 2000, after stints at financial outfits including BlackRock and UBS.

Broadway’s first purchase, a former school in Westchester, cost a mere $4.8 million. The company grew modestly until 2005. At that point, Mr. Lawlor switched to the fast track, launching a series of real estate investment funds backed by large pension funds and others. At about the same time, a dispute over how the fund’s profits would be paid out led three of Mr. Lawlor’s partners to quit, with two of them suing him for back pay.

In 2006, Broadway bought its first Manhattan office tower, paying $216 million for 660 Madison Ave. After that, Mr. Lawlor picked up the pace as he piled on more debt. In the same year, he bought 10 buildings from Beacon Capital Partners—including Boston’s striking John Hancock Tower—in a $3.3 billion deal. Six months later, he purchased 24 more buildings from Beacon for $5 billion. Little more than a year ago, with the credit markets already seizing up, Mr. Lawlor added another trophy, 280 Park Ave.

The question now is how much of that empire he will be left with when the commercial real estate recession that is only just beginning finally hits bottom.

“Is Scott smart? We’ll see how much he loses on the way down,” says Steve Klein, a managing partner at Joss Realty Partners who also sued Mr. Lawlor for back pay

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Not all Harvard kids are as dumb as Walter Noel

Harvard Crimson students shun careers in newspapers. Of course, that’s because there are no careers in newspapers anymore, but an ability to grasp reality is a valuable thing in itself.

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Here’s a new index: the price of used hedgies’ desks

If I can't trade, how do I make a living?

If I can't trade, how do I make a living?

Clusterstock reports that a Stamford hedge fund is offering trading desks on Ebay, original price $1,500, asking $99, and there are no bidders. Watch this item carefully – if it breaks $100, recovery’s on the way.

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Blodget asks, “is Trump broke?”

I ask, who cares? Blodget says that he is, I figure that the Donald’s been morally bankrupt forever, so shouldn’t his pocketbook rejoin his soul?

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Price cut

40 Sawmill Lane sold new in May 2006 for $6 million. The buyers put it back up for sale last September at the same price (actually, $5.995). At the time, I thought that would move it – it was pre-Lehman, and going back to 2006 prices seemed likely to resolve the slow market difficulties we were encountering. Besides, it’s a nice house.

But Lehman did happen, the house didn’t sell, and today it’s taken another price cut, down to $5.1 million. I still hear sellers say “no one’s going to steal my house!’ and I admire their spirit, but these days, they should consider themselves lucky if anyone wants to buy their house at all.

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Walt dodges a bullet – too dumb to play?

The Wall Street Journal reports today (no public access, so no link) that federal investigators are looking into whether some of Madoff’s biggest investors were actually co-conspirators rather than mere victims. the name that most intrigues me (and, due credit where due, Franki Farricker, who raised this point with me this morning) is Carl Shapiro, the 90 – year-old Palm Beach retired garment worker who, until now, has been described as Madoff’s biggest sucker.

Federal investigators are reviewing evidence that they think suggests Mr. Shapiro also knew his returns were fraudulent, according to people familiar with the matter. Unlike Messrs. Picower and Chais, Mr. Shapiro, a women’s clothing entrepreneur, was never in the finance business. He is one of Mr. Madoff’s oldest friends and biggest financial backers and helped Mr. Madoff start his investment firm in 1960.

In 1971, Mr. Shapiro sold a clothing brand for about $20 million. Over the years, that sum grew to hundreds of millions of dollars and some say more than $1 billion, the vast majority of it from Mr. Madoff, according to people close to Mr. Shapiro.

Mr. Shapiro personally lost an estimated $400 million from the fraud, including $250 million invested with Mr. Madoff 10 days before the fraud collapsed, said people familiar with the matter. His foundation lost more than $100 million.

So that answers the question of how Bernie could rip off his oldest, closest friend as the wolves were closing in; he didn’t. That last $450 million contributed by Carl was not the dumb act of a befuddled old man – Shapiro was trying to keep the Ponzi from collapsing and his lifetime of crime exposed. Kind of kills my sympathy for the senile bastard.

And, speaking of which, no mention, so far, of Walter being investigated. Well, there are some cash laundering questions being addressed by British authorities, but that seems to be about son in law Andres’ machinations. It looks as though Walter might really have been the dumb F… his friends describe him as. Hey Walt, I’m sorry for the harsh suspicions I’ve voiced about your complicity.  Subject to further revelations, maybe you’ll be getting off with just the loss of all your assets, and that’s not so bad:  life in a  Florida double-wide perched on a swamp, the Fabulous Five and Monica serving you cat food and Cheeze Wiz on crackers is a lot better than bologna on Wonderbread served by a prison trustee. Just ask Bernie.

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Here’s what’s selling

49 Hillside

49 Hillside

49 Hillside, a spec house, was listed back in September, 2007, for $5.975 million. It went to contract and sold the same day  last Friday for $4.2 million. If you have cash, there are houses out there. This  sale will no doubt be reported as a favorable sign of “activity” by the Greenwich real estate community and I guess it is, but I doubt Quaker Builders, who paid $1.980 for the land they built on, are ecstatic. Relieved, sure, ( the mortgage alone was $3.538 million) but not ecstatic. As an aside, buyers, don’t confuse a perception of value with value itself. Just because a house was priced at $6 million does not necessarily make it a bargain at $4 million. This buyer would obviously dispute that he’d made that mistake and of course, what’s more personal than a house? So good for him.

 I thik that 10  Hearthstone Drive in Riverside must have also gone  to a cash buyer – contract date May 7th, sale date May 15th, for $1.720 million from an original asking price of $2.395.

For all the talk of real estate coming back, with very few exceptions, the sales we are seeing are way, way off the owners’ hoped for prices. My colleagues have been dismissing these as “distress sales” but what do you think of a market comprised solely of such distress sales? I think it’s defining the market – these aren’t exceptions to the market, they are the market.

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