Mondays with Morgan

1 – The Country’s Biggest Liar - NAR’s chief economist, Lawrence Yun, is making his predecessor David Lereah (Liar) look like a wimp when it comes to touting the strength of the housing markets. Yun met with Realtors in Coral Gables this week and told them this is nothing more than a “small blip on the radar screen.” He touted prices to be 20-30 percent higher in Florida in just five years. As a member of the National Association of Realtors, I take great offense to jackasses like Yun and Lereah, and the folks we pay our dues to, that are pushing clowns like this into perpetrating a national fraud on consumers and institutions. The NAR never raised a flag about any of the issues leading up to the crisis we are in. In fact, they are still waving the cheerleader pom poms. By the way, did you know that USA Today recently called Yun one of the nation’s top 10 analysts on a list measuring accuracy in forecasting. Yun and Lereah should be in jail for fraud, but the USA Today ranking just reinforces how deep the problems are.

2 – Suicide Calls Spike – Suicide lines throughout the country are spiking. Let me give you a disturbing fact. In Palm Beach County there have been 256 suicide calls. Of those, 44 told operators their reason for suicide was a lost job, foreclosure, bills or being homeless. This is a 300% increase from the same period a year ago, and a 500% increase from two years ago. I know I’m going to hear from folks telling me this is just a Florida problem. My response is, keep on drinking the Kool-Aid.

3 – Retailers New Competition – Your Neighbors – Have you noticed an increase in garage sales? If not, you will. I’d also suggest you take a look at what is being sold. You’ll be shocked. Everything from clothing to flat screens, boats, jet ski’s, and more. If you are thinking about buying a flat screen or jet ski or ATV, why pay retail, when you can go next door and buy it for less than wholesale from your neighbor. Let’s get serious, and take gasoline sales out of the retail numbers that the Street is so happy about. Back out a few other inflated numbers that don’t even belong there, and you’ll see retail is not healthy. When I say inflated numbers, let’s face it . . . even the retail numbers that are up, many of these are at super discounted prices. Take it one step further, lower margins, lower profits, lower stock prices, not to mention layoffs and less need for replacement inventory, which means less work in manufacturing and around and around.

4 – Selling Teeth, Nose Rings, Wedding Rings and the Silverware – I received a call this week from a jeweler that buys gold and silver. He says his business is booming. In fact, he has never seen it this busy or this disturbing. The customers coming in with teeth, rings, knives and forks are telling him they need to the money to pay their bills and put gas in the car. And just three days after I get the first call, I get a second call from another jeweler in another part of the country who says he needs to buy a vacation home on the beach in Florida to get away from it all. He told me he has been working 12 hours a day, seven days a week . . . buying gold and silver from people that need money for groceries. So what do they do when there is nothing left to melt down????

5 - Lehman’s Leverage Lunacy – I choked this week when I heard a couple of talking heads on CNBC praising Lehman for reducing leverage for an all time high of 45:1 to the current estimate of 25:1. Are they kidding? Yes. They are kidding themselves, and kidding the folks that believe this crap. At 25:1, a mere 4% loss in value is a wipe out. Did that sink in? If not, think about Bear Stearns who was at 40:1 when they died. And then think about this? Lehman is not the only one with this leverage. Take a look at Corus, Wachovia, Deutsche Bank, UBS, Merrill, WAMU and yes . . . Wells Fargo and BOA. Okay, so they are not all at 25:1, some are more and some are much less. But even at 10:1, we are in serious trouble. Just look how long it took the Fed to step in with Fremont. We have not just leveraged the leverage, but our regulators have been listening to rear-view analysts with financial interests in what they are analyzing. I realize that’s a stretch into a dark area, but let’s call it what it is. I’ve spoke to both sides of the same teams at these banks. It’s shocking. It’s beyond explanation.

6 – Everything is Fine Outside the US – I’m not sure how to even respond to this when I hear it in an interview. Have these guys taken a hard look at England and Ireland, who are now suffering a housing crisis even worse than the US? Have they looked at Australia and Hong Kong? Maybe they should take a peek at the Palm and World Islands in Dubai. Don’t stop there, because I can show you the same problems with condos in the Caribbean in places like the Turks and Caicos. Everything is not fine outside the US, and for those that think the rest of the world will keep things rolling . . . one word . . . bêtise. It sounds better in French, but it doesn’t change the meaning of what we are hearing from the talking heads.

7 – Zelman and Corkery Together Again – Maybe no one with credibility will talk to the Wall Street Journal’s, Mike Corkery, because he seem to keep returning to Ivy Zelman for her rear-view mirror look at things. Mikie’s story about Bank Woes is typical Corkery-Zelman, a day late and ten bucks short. The article was packed with rear-view numbers, old ka-ka with a different “color,” and Ivy’s “analysis” . . . but what these two continue to miss, are the facts. Banks are peddling portfolios, but there are no buyers. That’s what’s happening NOW, but that’s not what we’re reading about. Prices come down, and a few portfolios change hands. Some of this crap is moving to pension funds. And that’s not good, but guys like Corkery don’t dig that deep. And finally, the story should be about the banks that are still lending to builders and developers.

8 – 4 Day School Weeks – That’s the latest from Florida’s crystal ball. School districts are going broke, so they are discussing 4-day work weeks to save money on utilities and busses. I guess they didn’t think this through very well . . . as usual, because unless the entire State goes to a 4-day work week, who’s going to watch the kids on Fridays. And when they really get down to the numbers, how much are they going to save? Not much. You still need to pay the teachers for the hours. You still need to keep the AC running in Florida. And you still have all of your fixed costs. What we don’t have, is enough money to run our schools, or pay our police and fireman.

9 – Courts and Fire Stations Closing – The cuts we are seeing are crippling the core of our democratic system. The Miami-Dade County Public Defender just announced they are going to start turning away thousands of cases. Criminal cases are rising, and judges are forced to put civil cases on slower tracks. But all of this comes as foreclosures lawsuits are swamping every county in the State. We have already discussed shutting down the civil courts for three months. Can you imagine what that would do? Fire Stations? This one is a little easier to sneak past the residents. Cut backs in police? Yup. Here in Florida, and coming to a town near you.

10 – FHA (NOT) Solvent – Brian Montgomery, the FHA commissioner, told the National Press Club this week . . . “Let me repeat: F.H.A. is solvent.” First of all, he has no clue just how deep the problem is. He’s the kind of guy relying on folks like Ivy Zelman and Mike Corkery to tell him what “was” and not what “is.” But let’s take a look at Montgomery’s other remarks in the SAME speech. He told us . . . “Unless we take action to mitigate losses, F.H.A. will soon either have to shut down or rely on appropriations to operate.” Duuuuuuh. Exactly what I am talking about. If he had a handle on the market NOW, instead of last quarter, he would realize F.H.A. is NOT solvent today. Period. Full Stop. Конец

11 – US Infrastructure is Deadly – Here’s a bitter chaser of reality, for the first 10 on the list. This week big-city mayors told Congress they are in a crisis when it comes to roads, water, sewer, rail, police, fire and schools. In fact, the number needed to bring just the transportation system up to a properly functional level is more than $2 trillion. We ain’t got it. And the number to fix and maintain our water and sewer systems. Don’t ask. Don’t tell. Do you remember the bridge collapse in Minnesota? That was just one of hundreds of bridges that repeatedly failed inspections. Now kick the $2 trillion up a few notches to address water and sewer. We can live without roads. But we can’t live without clean water.

12 – On The Bright Side – Let’s wrap up Monday’s with Mike on a sunny note. FPL. One of the stars here in Florida just keeps getting better. They are the largest wind farm utility in the US with 47 operating wind farms from California to Pennsylvania and from Texas to North Dakota. And they have plans for more. They are running nuclear. And they have plans for more. And now they are kicking it up a notch in Solar. FPL has plans to build the largest solar powered plant outside of California. And that’s just for starters.

That’s a dozen donuts for Monday. As usual, much more detail for clients. Don’t forget our Conference Calls on June 26th and July 17th. The first call will be on Housing and the Real Estate Markets. The second call with cover Bulk REOs from both sides of the arena. Visit http://www.morgan-florida.org/ for additional information.