One of the ingredients for “bubbles” is the quest for the home run. Investors look to how much they wish to gain rather than to risk and reward.

What happens when this quest intersects with a major downturn in an asset class?

The Foreclosure Boom: Donald Trump

Our local papers have featured ads from Donald Trump, explaining how you can profit from the foreclosure explosion. This article, while a few months old, is typical of what is happening. It is from Seattle, a pretty strong housing area which we visit four times a year for board meetings.

But not to fear, capitalists, because one man’s misery is another man’s meat. In the same issue of the P-ITrump University“,”
a class where Trump promises “If you’re not a millionaire by December
2008, you didn’t attend my foreclosure workshop.” Yes, that’s right.
Your struggling neighbors who are losing their homes in the subprime
fiasco, are easy prey. The ad enthuses that “Foreclosures soared 94% in
2007!” What a paradise for the entrepreneur. The ad features a
full-length Trump (who won’t actually be at the seminar, by the way)
staring you down, challenging you to become as rapacious, amoral, and
loathsome as he is. If you don’t have the guts to let Donald make your
rich at the expense of the suckers of Pottersville, well, you’re fired!

The LA Times also reports on the Trump approach:

An ad in this very newspaper showed a picture of The Donald and quoted
him as saying, “Investors nationwide are making millions in
foreclosures . . . and so can you!

“I’m going to give you 2 hours of access to one of my amazing instructors AND priceless information . . . all for FREE.”

OK,
I know what you’re thinking. You’re thinking there has to be a catch,
such as the fact that the ad doesn’t mention anywhere that the free
two-hour seminar is only a “preview” of the three-day workshops that
Trump offers for $1,495.

The reporters are skeptical of the Trump seminars, but we are offering no opinion. We merely suggest this information as an interesting piece of information about identifying market bottoms and investor behavior.

Books on Foreclosures

There were a number of books on foreclosures in the last real estate bust, and now we see some new ones and also some revisions.

• Foreclosure Investing for Dummies is a year old now, so not a good bottom call. Nonetheless, we are always interested when dummies get into the game.
• Here is one that came out in April.
• This “insider’s guide” is almost a year old.
• This “complete guide” came out in January.
• If you want something that no one else knows, and only a couple of months old, this is your choice.
• And finally, here is something for “dummies” who want to fight foreclosure — with or without help from Barney Frank and Congress!

What Does it All Mean?

We do not know! When will the wave of foreclosure buyers intersect with the foreclosure sales? Perhaps we need to wait for the cover of a major magazine before we have a clear contrarian signal.

While we are confident of the knowledge base of our regular readers, let us make it clear that we are neither endorsing the foreclosure course nor the books cited. It is information for investors to consider — that is all.