Economy Beginning to Turn?

Banking sector improving -- hmmmm.

In a glimmer of hope for the banking sector, Wells Fargo shares soared nearly 32% in early market trading on Thursday on news that it had a better-than-expected profit of approximately $3 billion in the most recent quarter. Wells Fargo attributed the latest results to strong performances in its traditional banking and mortgage businesses. The news sent bank stocks higher across the board -- including Citigroup, JPMorgan Chase, Goldman Sachs, and Morgan Stanley -- driving the Dow up over 200 points in early trading.

Economy beginning to turn?

According to the Wall Street Journal, there's a growing body of evidence that the economy is beginning to make a cyclical turn: wholesale inventories fell by the largest increment on record, and the inventory-to-sales ratio, the most direct measure of supply and demand in the economy, showed that the latter is gradually catching up with the former. Treasury prices declined, with the 10-year note sliding 16/32 to yield 2.921%, oil prices gained and gold prices fell, while the dollar strengthened against the yen and the euro.

Unemployment numbers slow, but unemployment stays high

If jobs were dollars, this would sound a lot like the national deficit, except that unfortunately the president can't just print more jobs to make up for it. The number of people filling for unemployment benefits dipped to 654,000, but continuing claims hit a record high. In the week ended April 4, a total of 654,000 people filed initial jobless claims, lower than the previous week's upwardly revised 674,000, the Labor Department reported. The 4-week moving average of people filing initial claims for unemployment benefits was 657,250, a decrease of 750 from the previous week's revised average of 658,000. A consensus estimate of economists polled by Briefing.com expected 660,000 first-time filers last week.

Trade deficit shrinking

A new government report reveals that the U.S. trade deficit shrank in February by 28.3% to its smallest level since November 1999 as imports slowed and exports grew slightly in the face of shrinking global demand. The monthly trade gap dropped to $26 billion, down more than $10 billion from the revised $36.2 billion deficit in January, and about $10 billion less than Wall Street economist polled by Reuters had forecast. The February percentage drop was the steepest since a 34.9% fall in October 1996. Overall world trade is expected to fall this year for the first time since 1982 as businesses and consumers cut back on spending in response to growing job losses and a continuing credit crisis. Imports fell across all major categories, with crude oil imports falling to $39.22 from $39.81 the prior month. Exports increased slightly across all major categories: food, feed and beverages, industrial supplies, capital goods, automotive and consumer goods.

What to do with toxic assets?

As part of its plan to sell toxic assets, the Obama administration is encouraging several large investment companies to create bailout funds, not unlike the war bonds sold to finance WW II. Well, except that one was for a noble cause and the other is for banks... The idea is to share the risk, and give ordinary Americans a chance to profit from the bailouts that are being financed by their tax dollars. Or lose, and there's the rub. If, as some analysts suspect, the banks' assets are worth even less than believed, the funds' investors could lose.

Berkshire Hathaway downgraded

Tell me it ain't true! Berkshire Hathaway, the legendary company owned by Warren Buffett, has lost its coveted top-level credit rating from Moody's Investors Service. Moody's downgraded Berkshire by two notches to Aa2 from Aaa, claiming that severe stock price declines and the U.S. recession have weakened National Indemnity Company -- an important Berkshire reinsurance subsidiary. Moody's says the outlook for its rating is now stable and says it has no plans to make further cuts over the next 12 to 18 months. Before we all panic, hedge fund manager Whitney Tilson said that the Moody's downgrade will have no effect on Berkshire's holdings, and only a very small potential impact on its earnings. It may face slightly higher borrowing costs, but Tilson notes that Berkshire has lots of cash and doesn't do much borrowing anyway.

Now on to our real estate investing education section...

Delays - Why the Long Wait Just ask any real estate or short sale investor about the most frequently overheard complaint would be and you are certain to receive the same answer - long waits. Lenders tend to take their time when reviewing and approving a short sale offer. Some are certainly better than others but as the short sale arena goes into overdrive, savvy short sale investors would do well to understand what is taking place behind the delays and how to address the most common causes.

1. Multiple offers. One of the main reasons for a lender to take their precious time before approving a short sale is to consider multiple offers. Homeowners are increasingly entertaining several short sale offers in an attempt to get the best deal and maximize the likelihood of sealing a deal on their own timing. Ask homeowners if they are currently entertaining other offers or plan to do so in the future. Many short sale investors require contracts stipulating they are the only current offer on the table.

2. Lack of staff. Many banks are simply short on staff and unable to keep up with growing demand. Make it easy on overwork workers in every way possible; not only will they appreciate the reduced work but it certainly helps to present your offer in the best light possible.

3. Failure of the homeowners to prove financial hardship. Keep the lines of communication open and help the homeowner provide the appropriate paperwork in a timely manner. While it might seem a bit obvious, don't expect every homeowner to have the motivation required to follow-up even on something that is likely to help their own situation. Many people simply shut-down when overwhelmed.

4. Lack of other offers. While entertaining multiple offers is more frequently the cause of delays when processing short sale offers, the lack of any other offers especially on an otherwise, "attractive" property may also result in longer approval times or outright procrastination on the part of the lender. It's not uncommon to encounter a lender that rejects a short sale offer only to receive a lower net when a property goes to auction. Depending on your personal level of chutzpah, you may opt to date an offer then return with even lower offers until the property is accepted or rejected but don't expect threats to make any appreciable difference in the responsiveness - or lack thereof - of the lender. In fact, rather than speed things up you are probably more likely to get on the last nerve of some overworked bank employee. Either way, remain analytical and don't fall in love with any one house or property...remember, it's a numbers game.

See you at the top...or at my website www.ShawnDodson.com !