Is Warren Buffett Signaling a Housing Recovery?

by Robert Williams, Publisher Thursday, November 5, 2009

Warren Buffett is teaming-up with Goldman Sachs as the investment bank attempts to buy $3 billion of tax credits from taxpayer-owned mortgage firm Fannie Mae.

According to The Wall Street Journal, investments in low-income housing tax credits has waned dramatically in the face of the credit crisis.

Credits are being sold for between 65 cents and 79 cents on the dollar. By comparison – at the height of the real estate boom – developers were fetching 95 cents on the dollar.

(Property developers receive tax credits – worth between 30% and 60% of a project’s cost – to encourage building in low-income areas and to hold rents down. They typically then sell the credits to large financial institutions for the tax benefits they offer.)

Although Buffett and Sachs surely intend

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By Simon van Norden

Today, we're fortunate to have Simon van Norden, Professor of Finance at HEC Montréal (École des Hautes Études Commerciales), continue as a guest contributor.

In my previous post, I wrote about some of the evidence linking serious banking crises to real estate market collapses. That evidence is far from iron clad; it is simply the observation that many banking crises in mature economies have their origins in a real estate boom and bust cycle. However, the idea is also intuitively appealing.

Remember that at the end of 2008, the Federal Reserve Board estimated that there was $12 Trillion of mortgage debt on residential properties in the US, with the Federal government and its agencies providing about 5% of the total, individuals 9% and the rest coming from the financial sector. The Case-Shiller composite index of housing prices has fallen 1/3 from its peak in

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The Friedman Effect: Is Another Bear Market Around the Corner?

by Dr. Mark Skousen, Advisory Panelist

In 1961, the great free-market economist Milton Friedman wrote a paper called “The Lag in Effect of Monetary Policy,” wherein he discovered a six- to nine-month delay in how long it would take for a change in monetary policy to be felt in the economy and the stock market.

Since then, it has been known as “The Friedman Effect.”

It’s important to understand the Friedman Effect because it can have dramatic impact on your investment decisions and your portfolio…

Milton Friedman & The Friedman Effect

Basically, Milton Friedman found that if the Fed switched from tight money to easy money, or vice versa, it would take about six months before you would see any change in the direction of the economy or Wall Street.

The Friedman Effect worked like clockwork during the financial

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CVC To Keep Staff At BGI?

In this column by Kathleen Pender of the San Francisco Chronicle, Barclays Global Investors' impending deal with European private equity player CVC Capital Partners is reviewed. BGI insists that the new parent won't slash current staffing levels. 

But others aren't so sure, figuring that CVC will streamline operations and unload it during the next bull market. Just a thought ... what if that turns out to be fairly soon? Private equity firms can move fast ... but later this year or even next would seem awfully fast, even for the most optimistic and aggressive speculator. 

You can read the column here.

 

Bogle Takes On Institutional Money Managers

Vanguard founder John Bogle is raising an interesting point these days.

As noted in this New York Times column by Gretchen Morgenson, the indexing pioneer is pointing out that much of Wall Street's excesses resulting

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by Edward Hugh: Barcelonabr /br /blockquoteJoke - How do you know when a country is in crisis? Well, on the buses on the way to work, and in the bars and cafes during the mid morning break, everyone is reading the economy rather than the sports section in the local newspaper./blockquoteSeveral pieces of news out over the last week are relevant to the whole debate we are having about how to drag the Estonian economy (kicking and screaming it would seem) out of its current slump. In the first place the Estonian parliament passed a supplementary 2009 budget at the start of the week, in an attempt to address the ongoing crisis in the economy and the dramatic decline in revenues. The cuts were approved by 61 votes to 35 against in what was also an effective vote of confidence in the present government. So at least it is clear ...

Never before have I learned so much so quickly from my readers as I have now — all just by reading the thousands of comments you have posted on my blog in the past week!

One of your key questions: Will the new Obama stimulus and banking bailouts succeed or fail?

What will be the immediate and ultimate consequences?

What should I do?

Today’s gala edition is my response.

But let’s not waste time digging for causes — the economic blunders of Washington, the financial greed of Wall Street, or the big debts and risky bets by almost everyone.

Let’s also not waste time pointing fingers — the Clinton administration for creating the tech bubble, the Bush administration for creating the housing bubble, or the Obama administration …

Huang Guangyu, China's richest man with an estimated net worth of $6 billion, has been detained by police amid a title=gome target=_blank href=http://www.financialpost.com/most_popular/story.html?id=987831allegations of securities fraud. /abrbrGuangyu built from scratch one of China's largest companies, home appliance retailer Gome Electrical Appliances. Gome stores are all over China and prospered during the Chinese real estate boom. brbrTrading of Hong Kong-listed Gome shares have been halted too. brbr