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| How to Profit from the Coming Real Estate Bust: Money-Making Strategies for the End of the Housing Bubble | 
 enlarge | Author: John Rubino
Publisher: Rodale Books
Category: Book
List Price: $24.95
Buy New: $1.86
You Save: $23.09 (93%)
Buy New/Used from $0.76
Avg. Customer Rating:  (28 reviews)
Sales Rank: 312655
Languages: English (Original Language), English (Unknown), English (Published)
Media: Hardcover
Number Of Items: 1
Pages: 288
Shipping Weight (lbs): 1.1
Dimensions (in): 9 x 6.1 x 1
ISBN: 1579548709
Dewey Decimal Number: 332.63240973
EAN: 9781579548704
ASIN: 1579548709
Publication Date: September 20, 2003
Availability: Usually ships in 1-2 business days
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Product Description
Ride the housing crash to big gains, build recession-proof wealth, protect your biggest investment We are in the midst of uncertain economic times. Though there has been a slowdown in the economy, real estate is the one area that has continued to grow. Until now. According to financial expert John Rubino, a real estate crash is coming--and it's going to be a bad one. Don't be caught without the information you need to protect yourself and your nest egg. After all, your house is your single largest investment. In his incredibly timely book, industry veteran Rubino outlines: -The present U.S. real estate market and how it got this way -Statistics that indicate the coming dramatic market turn, including the increased use of cash-out mortgages and near-record levels of consumer debt -Consideration of the events that will inevitably follow the bursting of the bubble -Strategies for protecting yourself -Clear ways to profit from the crash How to Profit from the Coming Real Estate Bust is the essential how-to book to read if you want to survive, and benefit from, the upcoming crash.
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| Customer Reviews: Read 23 more reviews...
 $1.5/2 Trillion Debt Outstanding for Fannie and Freddie July 22, 2008
1. States are required to balance their budget. 2008, forward will see big cuts in spending and tax increases at the state and local level. A switch from government hiring to firing is likely.
2. Consumers will react to debt burdens by tightening their belts and/or defaulting.
3. The federal reserve responds to slow-down in consumer spending by lowering interest rates, to ease the burden of the heavily indebted and to induce the rest of us to borrow more.
4. As the Fed cuts rates the dollar declines.
5. For the housing boom to continue, home owners will have to borrow more money, as a percentage of their income; interest rates will fall further in record low territory; foreign investors will have to keep financing our trade deficit by buying more Treasury and mortgage backed bonds at historically low rates.
6. Mortgage rates will stabilize and refinancing activity gradually drives up and cash-outs become less attractive, as borrowers are saddled with higher payments. Without the ability to borrow against ones property to buy another, home owners will buy fewer second homes and rental properties, and the home-building market will contract. After some initial stickiness, home prices will begin to fall, slowly in stable markets, and precipitously in overheated ones. Fewer jobs will mean fewer home-owners and few jobs in the housing-related industries.
7. If you think a given stock is heading for a fall, you can enter a sell order with your broker. Later when the stock has dropped, you can buy it back and pocket the difference. This is known as selling short. This is a way the hedge funds and investor play overvalued markets. Dangerous. Shorts are vulnerable to buying panic called short squeeze, where a large number of short sellers try to cover at the same time, forcing the price upwards, taking away profits. Sell and watch compulsively.
8. In 2003, Fannie Maye and Freddie mac had $2 trillion in liabilities atop less than $1 trillion in mortgages. Loan defaults could quickly turn Fannie and Freddies spectacular growth and call for a government bailout. Short sellers would quickly take 50 to 75 percent profits.
9. The derivative business is easy to enter and almost impossible to exit. A derivative is a contract that derives its value from something else. The function of a derivative is to divide the risk associated with the underlying asset into pieces, allowing them to be sold to different people. Stock options are purchased contracts to buy or sell a given stock at a certain price. Future contracts work the same way for commodities like wheat or silver. The farms eliminate risk caused by low prices in the future and give up a windfall if the prices soar. Both parties make and acceptable profit while eliminating threats to their survival.
10. The new derivatives are interest rate swaps, currency swaps, total return swaps, credit default swaps, portfolio insurance, and gearing.
11. A hedge fund might put $100,000 investment to borrow $1 million and then buy derivatives (10 to 1 ratio). Bear Sterns ratio was (1:165). Suppose the derivative is a future on gold. The hedge fund would control $10 million in gold. If the commodity raises by 10 percent, the hedge fund would profit $1 million. If the price falls by 10 percent, the hedge fund is wipe out by $1 million. Long term capital management had $3 billion in equity, $140 billion in debt, and $1.25 trillion in derivatives exposure.
12. If citigroup has $1 trillion in derivative exposure, then people on the other side of those deals - the counterparties- are dependent on Citigroups ability to make good on its obligations. In a system where insurers and insured may be one in the same, the ability for counterparties to depend to make good on their obligations
13. The idea was to attract new cash, which banks could use to make more loans; this would free banks from dependence on local depositors, smooth out credit cycles, and make mortgages more affordable and accessible. GSE gave birth. The Federal National Mortgage Assocation (Fannie Mae) and the Federal Home Mortgage Loan Corporation (Freddie Mac) were enabled to buy loans originated by banks, bundle them together in bonds, and sell them. Loans were converted into securities, so they can trade like bonds. Fannie would give the mortgage backed security a contractual promise to pay interest and principle should the mortgage holders default. A broker then sells the bonds to pension funds and mutual funds.
14. Doug Noland says, "Fannie can give a money market fund an IOU (commercial paper), take that money, and use it to buy mortgages. Whoever sold that mortgage deposits the proceeds into a money market fund, and because there's no reserve requirement, Fannie can go to that fund, give them another IOU, and spend it again." The only limitation is the ability of banks and other originators to find people willing and able to buy and/or refinance a home. Between 1995 and 2001, $5 trillion in mortgage loans were sold. Fannie Mae account for 35 percent of all the money that flowed into home mortgages. Nolands says, "We now have a real estate economy." Fannie Mae has derivatives obligations totaling $533 billion, primarily for interest rate swaps and Fannie has liabilities in excess of $2 trillion.
15. Between 1990 and 2001, the total national debt equaling debt of government + business + household borrowing reached $32 trillion. Assuming a $10-13 trillion, US GDP. Oversea Trade deficits accumulating at $435 billion, in 2002 in trade deficits. The dollar value dropping against gold, euro, and the yen and imports became more expensive. As interest rates dropped, between 2000- 2002, foreign direct investment declined from $250 billion to under $50 billion. The fed had to raise interest rates to save the dollar and consequently pop the real estate bubble.
16. What determines a currency value? The profit a foreign investor expects to make when they buy a stock, bond, factories, and buildings. Secondly, a country with low taxes, cheap, well trained workers, and clear laws making it easier to make money. When you buy a bond denominated in yen or euros or dollars, you get the interest rate that prevails in that market. The bond interest rates determine the attractiveness of the bond to foreign investment.
17. Despite risk and complexity, shorting is the purest, most popular way to profit from a given stock's overvaluation. If the housing bubble burst, it will throw in reverse all the forces that made Fannie and Freddie titans. Insurers will be unprepared for inevitable spike in defaults.
18. The obvious winner in a bull market is the investment industry composed of 70 firms with a market value of $270 billion, in 2003. The big Investment banks include Morgan Stanley, Bear Sterns, Merrill Lynch, Charles Schwab, and Goldman Sachs. Investment banks survive when investors keep putting their money into the game.
19. Credit card companies are logical short candidate. Mortgage lenders have become just as reckless. There is a threat of rising defaults from the newest customers, which are only prevented from becoming a tidal wave by availability of home equity loans and new credit cards. More stringent government regulation is limiting the use of late fees, high rates and other tricks for milking low-income customers. A slow down in credit card debt will be followed by a collapse in the credit company's market value.
20. The big banks don't do well during the early stages of recession. Even though the big banks have handed most of the mortgages they have originated off to the packagers, they've kept enough mortgage debt on their books to cause them trouble when defaults begin to rise. Other lines - auto, business, and personal loans, and investment banking and securities trading - all depend on consumer willingness to borrow and/or market's appetite for more structured finance deals. GE capital has become one of the world's largest banks.
 Accurate Prediction But Now Past It's Shelf Life June 28, 2008
I bought this book in 2004 when many reviewers' were arguing that there was no real estate bubble. Now in 2008 it looks like the author was correct. If you read discussions on the website www.zillow.com , there are many people there who should have read this book. Had they read the book prior to 2005, they could have bailed out before the crash.
Reading this book now is a waste of time.
 not useful anymore February 6, 2007
2 out of 3 found this review helpful
If this is the first time you've thought of or talked to anyone about real estate, it's worth a read. You get some history. If you've read any newspaper, magazine or book about real estate in the last year, you don't have to read the first 3/4 of the book. It's the same stuff over and over again. The last part suggests stock picks, buying gold and holding cash. Financial advice should probably not be taken from a journalist anyway.
If you're a contrarian, doesn't the bubble only burst when people say it's not going to burst?
Advice Taken October 5, 2006
1 out of 1 found this review helpful
Two years ago I purchased Mr. Rubino's book. Back then the housing bubble was a seldom-discussed topic. For me, the information and advice made absolute sense. We sold our 5 acre property in Oregon and moved to be close to the kids. We are debt-free, have money in the bank, and will rent until the insanely high house prices decline to a reasonable level. Thank you Mr. Rubino. I could not be happier that I took your timely advice!
An OK book, eye opener for mainstream investors, but old news for most financial professionals January 3, 2006
5 out of 7 found this review helpful
First of all, a correction for the review from David "Pudd'nhead" Wilson. Graphing Total US Debt to US GDP shows that it was flat around 1.40 from 1955 to 1981, then exploded up to 1.85 by 1986, flat at 1.85 up to 2001, and *most ominously* has been rising steadily each year .. 1.84 in 2000, 1.90 in 2001, 1.96 in 2002, 2.01 in 2003, 2.05 in 2004.
Get your facts straight before you shoot your mouth off!
Otherwise, this book is interesting reading for most mainstream investors who are bullish on real estate given the last few years' outperformance. For most financial professionals and goldbugs, this won't be anything new and you are probably better off cosying up to something anti-fiat-money like Conquer The Crash, Financial Reckoning Day, or Tomorrow's Gold.
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