Think Marketing

Smells Like Enron

Caleb Mardini (M2M) — Thu, 31 Jul 2008 12:30:16 -0500

This is a repost of something I wrote in another blog, but I thought it apt to share here in that it involves one of the investment banks involved very heavily in sub-prime lending and selling mortgage backed securities. How does this affect you? Credit (read: mortgage) markets are tight, there are many factors contributing to credit contraction, but one big one is lack of confidence in mortgage backed investment vehicles. Actions like these taken by Lehman Brothers further erode market confidence, prolonging a downturn.

Lehman Brothers, a sort of Wall Street cousin to Bear Stearns (read: should have collapsed a long time ago), is showing that it finds Enron style solutions to financial inconveniences a usefull way to stave off pending disaster. The company spun off a hedge fund staffed by "former" Lehman executives.

R3 Capital Partners is a group that was essentially established to "buy" Lehman's risky investments, taking them off of Lehman's balance sheets. Lehman is going out of its way to say that R3 is not a related company and deny that it has any "ability to exercise significant influence'' (Lehman Spokewoman Keri Cohen) over R3. But the evdidence shows otherwise:

1. R3's employees maintain their restriced Lehman stock as if they were still Lehman employees.

From Naked Capitalism
"the former employee charged, based on information provided by several people at Lehman, that the R3 employees' restricted stock was still vesting on its original schedule, as if they were still on the firms' payroll. If true, this is both highly unusual and costly."

2. Lehman assets could account for nearly half of the fund's investment base. According to Lehman's own advisor Felix G Rohatyn in an interview with Andrew Sorkin of The New York Times, money like that does buy influence:

“The big difference is the political element,” he said. Mr. Buffett is seeking the best return when he invests; that’s his only goal, Mr. Rohatyn said. For Dubai and China, whether the investment returns 10 percent or 20 percent — or perhaps much less — is almost beside the point, he suggests. What they really want is influence on the world stage, despite their insistence otherwise."

Yes the article and the quote are discussing a different idea, but Rohatyn's point is that money buys influence. With a 48% holding in R3 could Rohatyn deny that Lehman has influence in R3?

3. Lehman is R3's Landlord.

The Empire Strikes Again

R3 allows Lehman to hide the truth from investors, creating and funding it's own buyer for potentially failing assets. This is very much like Enron's Chewco, created to hide debt off balance sheet and inflate profits. Chewco was named after Chewbacca, a Star Wars character, I have to say "R3" sounds similarly named considering the star droids R2D2 and C3PO.

[Naked Capitalism and Bloomberg News]

Privatized Gains, Socialized Losses

Caleb Mardini (M2M) — Mon, 07 Jul 2008 15:44:33 -0500

It's not secret that H.R. 3221 is about to move on to the president for signing. What's less understood is that a section entitled "Hope for Homeowners Act of 2008" was written by Bank of America. The effect of the bill is to offload from lenders some $300,000,000,000 of some of the worst performing loans to taxpayers.

Senator Dodd (D CT) introduced the bill stating there would be no investor bailout, but a reading of the bill shows clearly that's what it is.

Dodd has been in the limelight more recently for improprieties related to preferential treatment he received from one of the main beneficiaries of this bill Countrywide Financial. Furthermore the bill, was written by the other main beneficiary, Bank of America Corp.

This bill threatens to extend a housing crisis and the economic recession in that it harms prudent investors and prevents those less prudent from bearing the full consequences of their actions.

The section of the bill that provides for the bailout, and Bank of America internal documents can be found here.

http://sites.google.com/site/bankbailout/

Senators Kit Bond (R MO)and Jim DeMint (R S.C.) seem to be the only ones raising any concern about the bailout portion of the bill.

Update: From an Associated Press Article

Rep. John A. Boehner, R-Ohio, the House minority leader, called on Rep. Barney Frank, D-Mass., to hold a hearing investigating allegations that Dodd and Sen. Kent Conrad, D-N.D., got preferential mortgages at the behest of Countrywide Financial Corp. CEO Angelo Mozilo. Countrywide, a leading subprime lender that has been blamed for helping to cause the mortgage meltdown, is among those that could benefit from the housing rescue.

"Democrats who receive sweetheart deals from their campaign contributors shouldn't be pushing legislation forcing taxpayers to bankroll a $300 billion bailout of scam artists and speculators, and the American people have every right to demand answers if they do," Boehner said in a statement.

Again I don't think this is partisan, it's a problem on both sides, but I'm glad to see someone making a fuss about this.

New real estate comes online. Stake your claim.

Caleb Mardini (M2M) — Fri, 27 Jun 2008 16:33:28 -0500

Virtual real estate gets bigger and better?

As probably one of the biggest changes to come to the the Internet in a long time, ICANN, the body that that gives us .org, .edu, etc., is opening things up to a whole new range of names.

Looking toward 2009 ICANN plans to make it possible for the characters after the "." like the com in ActiveRain.com to become any number of other names (.caleb .rainmaker etc.).

"Presently, users have a limited range of 21 top level domains to choose from — names that we are all familiar with like .com, .org, .info." ICANN Chariman, Peter Dengate Thrush

It's a big change from 21 to ???, that's a lot of real estate opening up folks, I'm not sure if it's better, but it'll be interesting.

Donate to the Charles Richey Fund

Friend, husband and fellow REALTOR® was unexpectedly hospitalized read more

Very "Active" Rainer, Charles Richey Needs Your Help

Caleb Mardini (M2M) — Tue, 24 Jun 2008 23:25:19 -0500

Please help Charles and Jacqulyn Richey.

I received an email today from Max Chirkov over at IBSTeam.net (you've seen his links at the bottom of AR's Directory pages) asking for help on behalf of Charles and Jacqulyn. Charles has been diagnosed with Guillain-Barre Syndrome, a rare disorder that attacks part of the peripheral nervous system. Over a period of days or sometimes weeks GBS causes muscle weakness and eventually complete paralysis.

The good news is Charles is currently in the ICU undergoing treatment, and while "GBS" can be life threatening, Charles was diagnosed early and patients most of the time recover with few ongoing issues. While his recovery might take a while, it's my impression that he's going to be OK.

Now an ICU is an extremely expensive place to undergo treatment. He's also going to need ongoing physical therapy. Without medical insurance the need for support is going to be high. Max over at IBSTeam.net is taking up a Paypal collection, to help Charles and his wife Jacqulyn cover some of the costs of treatment.

I've known Charles for some time, he's a major impact on this community. He went out of his way to help me work through things when ActiveRain was growing. I know I'm not the only one he's helped directly or indirectly. Given that he has touched so many of us, even a small contribution from the many people that know him will add up to a lot, and go a long way toward helping. So if you can make a contribution even a small one please visit Max's page to do so. Max also has more information about what's going on if you'd like more information.

___

And please help yourself too.

For many of us that are self employed, I realize medical insurance is most often a low priority concern. It seems if we're healthy now, there's no need for it. In my own case, I grew up with entrepreneurial parents, and went into entrepreneurial work myself, medical insurance was never a priority. I've spent most of my life without insurance.

Through many medical incidents involving people I know, I've come to see that medical issues can suddenly hit any of us. I now have my own "catostrophic" insurance plan. I'm in good health and rarely need to see a doctor, when I do I can pay out of pocket. I have this plan for the unanticipated concerns.

I would encourage each of you without coverage, to take a look at what options might be available to you. Even if you don't expect to need medical attention having a coverage plan in place is in my opinion a good idea.

Donate to the Charles Richey Fund

Friend, husband and fellow REALTOR® was unexpectedly hospitalized read more

Printer Angst

Caleb Mardini (M2M) — Fri, 28 Mar 2008 14:02:28 -0500

Have you ever fumed, wondering why the replacement cartridges cost more than the printer itself? If you have then this video might be satisfying.

Via Gizmodo

A Slippery Slope; Fraud and Lending

Caleb Mardini (M2M) — Thu, 27 Mar 2008 18:51:16 -0500

There are many factors that have contributed in creating a crisis in the credit markets. We haven't seen the end yet, we're still learning about what created the problems we're facing now.

This system of loan origination is highly organized, and more recently some investment products were created that allowed financial institutions to more efficiently move mortgages into secondary markets and off their books. The result was that lenders became more interested in originations than they were in creating quality products. Fed Governor Frederick Mishkin calls it "the originate-to-distribute model."

"The originate-to-distribute model, unfortunately, created some severe incentive problems, which are referred to as principal-agent problems, or more simply as agency problems, in which the agent (the originator of the loans) did not have the incentives to act fully in the interest of the principal (the ultimate holder of the loan). Originators had every incentive to maintain origination volume, because that would allow them to earn substantial fees, but they had weak incentives to maintain loan quality. " Governor Mishkin 2/29/08

A memo circulating through JPMorgan Chase entitled "Zippy Cheats & Tricks" ended up in the hands of Oregonian reporter Jeff Manning. The memo explains how to push loans through the company's automated underwriting system, essentially encouraging fraud. Manning it's unclear how widely the memo was circulated, but it does provide a piece of evidence supporting an issue I've been talking about for some time, and exactly what Governor Mishkin was trying to explain.

While loan submissions do have to be put together to fit specific loan products, suggestions from the memo like "Remove any mention of gift funds" asks the reader to commit fraud. While a lender rep might instruct a broker on how to structure loan submissions to fit a particular loan program, I believe there was a fuzzy line between putting together a package that fit the program, and putting together a loan package that shouldn't have made it through they system in the game to bypass program guidelines enforced computerized (automated) underwriting systems and human underwriters.

Due to the interconnected nature of the loan industry, the effects from memos like these wouldn't have been restricted to JPMorgan Chase, these types of ideas would have been disseminated to all institutions from the top, and laterally. As bank employees and brokers picked up practices from one institution, they could communicate them to others and take them with them as the changed jobs (which occurred often as the jobs in the mortgage industry boomed). This is how I believe these and other "Cheats & Tricks" affected many institutions.

The resulting loans wouldn't meet the requirements for the packages they were bundled in. Subsequent ratings would be meaningless. This leaves us today with no idea what potential performance to expect from specific mortgage backed investment products.

This is not the only reason we are facing issues today. High rates of leverage, dissaggregation, rapid (miscalculated) inflation are among many factors contributing to this credit crisis. I suggest however, that this cheating contributed to increasing the volume of mortgages that currently are souring the performance of and investor confidence in credit markets.

Jeff Manning"Chase mortgage memo pushes 'Cheats & Tricks" The Oregonian 3/27/08 via Calculated Risk

Calculating "Advantage" Redfin study misleads

Caleb Mardini (M2M) — Tue, 25 Mar 2008 18:00:06 -0500

Hello all, I know it's been quite some time since I've posted. I saw some posts today I thought I'd pass on. Seattle based Redfin today came out with a study declaring a customer advantage in savings prices. Ultimately however as I looked at the numbers and how the study was conducted, I found the results to be less conclusive than they are portrayed.

I'd give the company kudos for their customer satisfaction ratings. If a company can create a consistent satisfactory experience in this business I think they are doing a good thing for the industry.

The main point that is being expressed however, is that the company can save customers money through the negotiated sales price. My first thought however after reading the claim was how would they account for the negotiated concessions I'm used to? The company claims a buyer's sales price advantage of .928% This is not saying much. It's not saying much because final sales price is not necessarily reflective of the ultimate results for the buyer and seller.

I've seen a lot of deals cross my desk as a sales person, a real estate broker, and a mortgage broker. The deals I've seen take many forms. In my experience The ultimate selling price, is NOT a reflection of how well either the buyer or the seller was served. Most every deal involved some kind of negotiation and concessions that were worked on between the parties that involved any number of things, including property improvements, closing costs and loan fee arrangements. The net sales price did not necessarily reflected net concessions to favoring either party.

I actually discussed this last March, in going over the impact the practice might have on comparable sales data. My example deal was one where I was the sales person. In addition to negotiating a final price it involved $20,000 to be refunded to the buyer to go toward "current and future updates" on the property. The seller preferred to do it this way as he was a builder and did not want the reduced price to impact his future sales. While there were other things negotiated into the deal, that $20,000 reduction would never have shown up under the analysis performed by the company.

Just a thought. Did I miss something?

Chicagoland...More Blogging Help, Meet Craig Schiller.

Caleb Mardini (M2M) — Mon, 01 Oct 2007 19:11:59 -0500

Chicago area Coldwell Banker Agents. This Wednesday October 3, the company is putting on an awesome expo. Craig Schiller will be there, and so will I, representing ActiveRain. From what I can see there's going to be a lot to learn there. The line-up looks great. If you don’t go to this I think you’re doing yourself a disservice. How many homes are you really going to show this Wednesday anyways? .

Registration is only 69$. If you take a look at the speakers and the break out sessions alone you’ll see there’s tremendous value in this. They say retail value 150$ and I’d say it’s more than that. This is a terrific opportunity to hone your e-marketing tools and to explore things that you might not have considered.

I’ll be there in Chicago with Craig discussing blogging and social networking. Coldwell Banker is setting up a blogging lounge. I'll be there and so will Craig to talk more about emarketing, blogging, and social networking. If you're a Greater Chicago Area Coldwell Banker Agent, I would strongly suggest you attend.

Thank you.

Update Oct 3:
OK I’m here at the Coldwell Banker Emagine Expo and I’m impressed with how into blogging all of these agents are. Craig and I are almost out of business cards and flyers and it’s only 10:00 am!

Onward

Caleb Mardini (M2M) — Tue, 25 Sep 2007 18:18:41 -0500

I'm moving on to do other things. I've got a number of things to wrap up before I go, but from now on Jonathan, Bob, and Nicole will be around to help you with ActiveRain. I'll still be available to talk about blogging, networking, and sales.

A terrific journey.
We've come a long way from when Matt and Ben and I first set this community growing in Late May/Early June 2006. The goals I set are being fulfilled. We now have a community of almost 50,000 real estate professionals who are communicating with each other on almost a daily basis. Working as a community many members, are getting more out of their businesses than ever before. They are also offering their customers a better value proposition. Participants in this community are far better resources for customers because of the knowledge and connections developed here.

Being a part of this community has made us all better and I have no one to thank more than those members who have contributed to the foundations and growth of this community. This is your network. You've brought it here, and I thank you all for doing so.

Some thoughts:

Take advantage of The Network.
I very much appreciate all the members who have called emailed or written me regularly telling me about the wealth of knowledge they've acquired in their work here. This is a terrific resource and I encourage all of you to take advantage of it.

Technology has a tremendous impact on marketing. Right now blogging and social networking are two important aspects of that. Get your voice out there with blogging, and continue to develop connections with home shoppers, and your colleagues. Participate, and enjoy yourself, if you're not having fun then something's not right.

A reminder about competition.
ActiveRain thrives on the competitive spirit. Please enjoy the interactions with your competitors. For individual sales persons the largest obstacles to sales aren't other sales people, but rather the customer's desire not to make a change, and your own personal limitations. By learning with your fellow sales people you'll be able to improve in so many ways that it's worth embracing the opportunity.

Stay out of trouble.
As a a part of this industry you are also required to work within a legal framework that is industry specific. U.S. wide you will have fair housing and anti-trust among other things to be careful of. The web has a permanence to it, what you do will stick, so be sure to know your legal obligations and responsibilities.

Be nice to the new person.
Remember at this early stage there are going to be a lot of people who are trying to figure it out. We were all new once. It takes time to adjust so please treat the new comers with kindness. Ultimately how you treat others will reflect on you.

Thank You
I am looking at a number of opportunities, but I'll still be available to you to talk about the web, marketing, blogging, networking, and sales, you can reach me via my ActiveRain profile.

I feel very fortunate to of had this opportunity to service this community. Thank you for everything.

What Changed For Me.

Caleb Mardini (M2M) — Tue, 11 Sep 2007 18:32:59 -0500

I don’t want to get to far into it here because there is a lot that can be said. I do want to share a little bit of my own experience however. It's been six years, but I don't think I've really shared this since then.

On my mothers side my family has been a part of this country since before its founding. I am often asked what my ethnic background is. When I’m asked, I often jokingly reply that I’m Pilgrim. My mother’s family arrived here on the Mayflower.

On the other side I’m Arab. My step-father's family is from Lebanon. Growing up, Lebanon was in a civil war. I heard a lot about what was going on there. I heard nostalgic expressions of how great things used to be, and how bad they’d gotten. When I was 11 I spent about 8 months there during the tail-end of the war.

I knew that people lived their lives there, war or no war. I also experienced it, I went to school, picked up food for the family. I was just a kid like anywhere else. But it was still a different world.

From my experiences and what I heard I knew there was a world out there, that was very different than the one I grew up with here. I knew I was fortunate to be growing up in the United States as opposed to many other places. Here there is a much more stable civil society than in many other places. Corruption is much lower and we enjoy a significantly stronger rule of law.

When the Oklahoma City bombing occurred my world was rocked. I couldn’t believe that something as horrible as that could happen here. I thought of the lives destroyed, those that died, and all those that were affected by it. There was however some reassurance in a sense that the Oklahoma City bombing was an isolated experience. It was the act of a few people who were found and brought to justice.

What happened to us on September 11, 2001, changed things permanently for me. The loss of life was, again devastating. The stories of heroism, and people working together to take care of each other were inspiring. But in Seattle, I was far removed from that.

For me on that day, I saw my world view change. Those two worlds I had once separated were separate no longer. The day the planes went down the world that I had known only to exist elsewhere, came flooding in. The country changed for me. The oceans no longer mattered as they once had. Our borders now reached out beyond the oceans.

That is what changed for me.