Sunday, October 31, 2010

Office equipment review-the Epson Workforce 635

As an investor in both real estate and the stock market, office machines are part of my life. I regularly need to FAX documents to a bank or customer. I need to be able to receive a FAX. Being able to make copies without going through the computer can save a lot of time. And scanning documents to a hard drive file so that the paper original can be filed(hopefully permanently) saves a lot of desk and file clutter in the office.

This blog came to the attention of Walt & Co.(Epson marketing and promotions) last month and I was offered an Epson Workforce 635 for evaluation. I was clear with the contact person that I have used nothing but Hewlett Packard printers and all-in-ones for more than ten years. A week later the new Epson arrived at my door.

I was quite impressed by the easy set-up on a PC running Windows7. From opening the box to the first test print took less than 30 minutes with no glitches. I used a USB connection because there was already a cable in place. Other connection options for this printer are wired or wireless network.

The Workforce 635 has many features that save time and make business life easier. It will automatically copy and scan double-sided documents. Borderless printing is available. Text is very crisp and sharp and graphics/photos have accurate colors and fine detail without edge artifacts or banding in large, evenly colored areas. Text-only printing is very fast and graphics take only slightly longer.

This machine is obviously designed for heavy daily use. It is solid and very quiet when operating. The automatic document feeder will take up to 30 originals and the paper tray is designed for more than 200 sheets. It takes individual large-capacity ink cartridges for black, yellow, cyan and magenta that are very easy to change. The included software has a great driver interface for printing from a computer and the control panel on the printer makes access to any commands easy. Good optical recognition software is also included for converting scanned documents into editable text documents.  Prints can be made directly from all common types of digital camera flash memory cards.

I have used the Workforce 635 for three weeks and am pleased with all aspects of its performance. It has produced high-quality bordered and borderless letter-sized photographs on both glossy and matte photo stock. Post-card sized mail pieces on plain 110# card stock were no problem. Tri-fold brochures on heavy presentation paper and many house flyers and documents on my standard 24#, 30%-recycled bright white paper were quickly printed. After nearly 350 total pages there has not been a single mis-feed or paper-jam and I am still on the first set of ink cartridges. That is pretty impressive performance for any printer. Scanning and Fax operation have also been flawless.

I would not hesitate to recommend the Epson Workforce 635 to anyone looking for an office machine capable of handling scanning, copying, FAX and printing on a daily basis. It has a smaller footprint than some competitors and produces less than average vibration/wobble during printing. Just as important in a busy office is the low noise level during all operations. Pricing should be approximately $250 and this machine should stand up to many years of heavy-duty use.

Saturday, October 30, 2010

My new commitment to writing

I have been writing an on-line real estate and real estate investing column with a focus on the Saint Petersburg area for for nine months. I started The Zen Estate blog to share my interests in both real estate and “green” stock market investing. A more recent addition is the Florida Image Tools blog concentrating on photography tips and personal experiences relating to Florida. I also contribute occasional personal opinion articles to and “green” articles to Greenwalacom.

The writing has been a thoroughly enjoyed pleasure, but inspiration and time have sometimes been lacking. This has led to short contribution gaps at both Examiner and The Zen Estate. I have worked hard on my schedule the past few months and arrived at a better place that seems to be working for me. My original goal was to post three to four articles and/or photos per week at each destination. I have now consistently achieved that goal for three months.

This morning I am rededicating myself to a new writing goal. Having seen a direct relationship between the frequency of new posts and number of readers, particularly at, I am now committing myself to a minimum of six new articles at each outlet every week. I am looking forward to this new challenge and will no longer accept time constraints or lack of topics as excuses.

I have recently expanded my stock market “green company” portfolio and am about to greatly expand that again next week. While taking considerably more time to manage the larger stock portfolio, I am also anticipating a wealth of new article material for this blog as things progress. I am setting aside at least one hour each early morning for quality time with my cameras and will continue to use that material for Florida Image Tools articles.

Please give me relevant feedback on blog post and articles so that I can continue improving the content. I welcome any ideas for new topics of interest. I am currently completing an in-depth on-line course covering options trading techniques, at which I am a complete neophyte. The first book review went live on Florida Image Tools this morning and I anticipate many more book reviews on a range of topics. What do you want to hear about? What do you think about what you have seen so far?

Friday, October 29, 2010

Green investing now

Solar power, wind power, wave power and advanced battery technology for electric vehicles are all the future of green investing. All of these industries are dependent on rare earth elements.

The past few weeks have seen a lot of consolidation going on in the green investing market. Solar, wind, batteries and rare earths/lithium have all stalled or pulled back. It seems the companies enjoying the fastest share price growth since July have been the hardest hit in the second half of October. This is all expected to be temporary as demand for all products continues to grow, though parts of the wind power industry seem to be faltering.

I do not follow wind as avidly as most green sectors because share performance has been lackluster for years. A-Power Energy Systems(APWR) shares are at early May levels and have not varied more than +/-$1 per share since that time. Vestas Wind Systems(VWDRY), once the darling of green energy companies, has been on a long, multi-year decline and recently hit a new 52-week low with no recovery in sight. China Wind Systems(CWS) has been essentially flat since late January and also shows no signs of imminent improvement. There are plenty of new wind farms being built and on order but that activity is not transferring to share price.

The solar power sector has been a great performer since early June, with a few companies outpacing the pack. JA Solar(JASO), Trina solar(TSL), Renesola(SOL), SolarFun Power Holdings(SOLF) and GT Solar(SOLR) have all set new 52-week highs in the past month. Most of the rest of the sector have seen increasing share prices since mid-summer. The past two weeks saw a significant pull-back that I do not expect to last past the upcoming election next week.

Rare earth element and lithium producers have been steady performers. Trading volume and volatility have increased in lockstep with anxiety over China’s rare earth exporting policy. My favorite companies in this sector are Great Western Minerals Group(GWMGF), Avalon Rare Metals(AVARF), Hudson Resources(HUDRF) and Western Lithium USA(WLCDF). All have been slowly but surely increasing share price except WLCDF, which has been more erratic. These are all very solid and well established companies with a guaranteed and growing market for their product. I remain strongly bullish across the board.

Battery technology is rapidly improving and battery demand is growing even more rapidly. More and more of our “can’t live without” gadgets require batteries and electric vehicles will be taking a prominent place within the transportation industry during the next decade. My top picks in this sector are Advanced Battery Technologies(ABAT), Valence Technology(VNLC), A123 Systems(AONE), Power One(PWER), Ener1(HEV) and Hong King Highpower Technology(HPJ). These companies are all carving out their own piece of the battery market pie and will all be major players for years to come. Expect share prices to follow the integration of electric vehicles. Batteries will also play a large role in the integration of large-scale solar and wind installation with the commercial electric grid.

While most green stocks seem stalled right now, and solar shares have really tumbled, I am not discouraged. These are relatively young growth industries and there are plenty of growing pains left on the way to maturity. Growth is the key word. There is huge world-wide demand for the products produced by all of the companies named above and that demand is going to increase, not go away.

Time is on the side of green. As petroleum prices increase, alternatives will become increasingly cheaper. As infrastructure is upgraded to accommodate the new green technologies, their rate of adoption and integration will increase proportionally. Anyone who still thinks that solar and wind power and electric vehicles are passing fads is just not willing to face reality. It will take time to fully phase out petroleum and coal from transportation and power production but the writing is clearly on the wall and investors getting on the boat early will get the best seats and the most benefits.

Monday, October 25, 2010

Lighting news for investors

The lighting business is changing rapidly and that is creating opportunities for investors. Traditional companies are adapting rapidly or being left behind and new-tech companies are proving their worth or having short lives. Innovation is rampant and there is no clear technology or industry leader yet.

+Incandescent light bulbs are 130 years old, waste 90% of the energy used as heat rather than light and are on the way out in the U.S. The last plant making the bulbs in North America is closed. Companies in the lighting business are very much on-board with the change and ready to move forward.

+Rep. Joe Barton of Texas has introduced a bill to repeal President Bush’s energy efficiency standards but it is getting no traction. Others will try to get around the new reality in different ways-one German businessman is trying to sell incandescent bulbs as “heat balls”. Expect more creative sales techniques as the phase-out deadlines get closer.

+There is no single leader in the battle to replace the incandescent bulb. Compact fluorescents(CFL’s) are an established technology with a low price-point but contain mercury and other toxic components. LED’s are growing in popularity but are still quite expensive even though their long working life makes them cheap over the long-term. High intensity discharge(HID) metal halide bulbs have some advantage of their own for certain application. Combinations of the above are beginning to appear(halogen-CFL by General Electric). Organic light emitting diode(OLED) technology is just beginning to enter the lighting field and should have advantages in some areas.

+Research and innovation will continue. General Electric now has an LED bulb that uses jet engine technology to cool the LED’s instead of aluminum heat sinks. New technologies and new applications of existing technologies will allow new lighting products to come to market. There might never be just one “standard” type of light such as the incandescent bulb was for so many years. And that is not necessarily a bad thing.

Adapting firms that will retain a strong presence in the lighting industry are General Electric(GE) and Philips(PHG). The strongest player so far in the LED lighting field is Cree Inc.(CREE). Others in the industry are all jostling for position. A very large and unanswered part of the equation is consumer sentiment and how the public will spend its dollar/voting power. There will be more than a few winners and early investors, as always, will reap the greatest rewards.

Saturday, October 23, 2010

Rare earth elements are good investments now

Rare earth elements and lithium, usually pretty far under most investors’ radar, are making headlines lately. Because of China’s huge and growing domestic electronics and solar industries, they have needed to cut exports the keep Chinese businesses supplied. As China currently supplies more than 95% of the world’s rare earth elements, the diminishing exports are a cause for serious concern. The rest of the world is scrambling to find alternative supplies of these very important additives. Electric vehicles and the ever growing list of other battery-dependent products is driving the value of lithium.

Add to China’s reduced export quotas a growing tension about trade in general over allegations of currency manipulation and the stage is set for a lot of anxiety. That anxiety may be warranted is borne out by China’s total cut-off of exports to Japan for several weeks. There have also been rumors, denied by China, that the U.S. could be similarly cut off from rare earth supplies if they force the currency issue.

All of these recent happenings have been very good for the share prices of North America’s rare earth and lithium exploration, mining and production companies. Since rumblings of export reductions first emerged from China in the early summer, many of these U.S. and Canadian companies have watched their market values steadily climb. That climb should continue and possibly increase during the coming years as China further reduces exports and supplies of rare earth elements become even scarcer in the west.

There are many very small exploration companies, fewer mining companies and fewer still refiners for rare earth elements. Most I think of as background clutter because they are not traded on any major U.S. exchanges or as Pink Sheets. I track only a handful that are easily tradable in the U.S. with on-line software but always keep my eyes and ears open for new possibilities.

My personal favorite is Great Western Minerals Group(GWMGF). This is a very well positioned company that will probably end up being the only company outside of China to mine, grind and refine rare earths-real one stop shopping. Great Western shares have gone from $0.13 in mid-May to a new 52-week high of $0.47 this week. I expect this company to be a real player as China continues to choke off the world-wide rare earths supply.

The real rock star of the rare earth companies is Avalon Rare Metals. Shares of Avalon have risen from $1.09 in April to a new 52-week high of $4.87 this week. This is a solid, well managed company with a great track record and an established position. Its shares price should have many more new highs in the coming years.

Rare Element Resources has really seen its share price explode. REE has gone from $2.79 in August to an all-time new high of $13.71 this week. This is incredible considering what a struggle so much of the wider economy is going through.

Other companies on my personal radar are First Liberty Power(FLPC), Western Lithium USA Corp(WLCDF), American Lithium Minerals(AMLM) and Taseko Mines Ltd(TGB). Any of the much smaller and more difficult to trade exploration and mining companies could also hit a big strike at any time. Don’t be surprised if some of these rare earth and lithium specialists become buy-out target for the large multi-national mining companies looking to cash in on the coming rare earth shortage. I am watching this sector very closely.

Thursday, October 21, 2010

Manipulated markets can cause ruin

Today we have another guest post by Ron Robins, founder and analyst of Investing for the Soul. Ron’s post warns of some of the dangers of governments trying to manipulate currency markets. This subject is the current cause of much tension between the U.S. and China and is also driving uncertainty on Wall Street and the precious metals markets.

Market manipulations eventually led to Soviet economic collapse. Though not as overt as the Soviets, it is the manipulation of currencies and interest rates by major economic powers that has mostly led to massive misalignments is investment and consumption that pose extraordinary dangers to global economic health.

Ask anyone if they believe that the Chinese currency, the renminbi, is manipulated. Almost everyone agrees that it is. Are US interest rates manipulated? Again, everyone knows they are. (Not too long ago it was only the short term rates that were controlled. Now the US Federal Reserve [the Fed] is buying longer dated US treasury bonds to bring their rates down too.) Countries all over the world are manipulating their currencies lower to gain export advantages and maintaining near zero interest rates to spur domestic demand and cheap government borrowing.

It is basic economics that where markets are manipulated, supply and demand are distorted. And one distortion creates the need for a further distortion, and so on. The longer the distortions continue the greater the possibility of total market failure. We are near that point today with currencies and interest rates.

The Chinese have scored a major mercantile advantage by pegging their currency, the renminbi, at a relatively set and undervalued rate to the U.S. dollar. Not only have US exports suffered, but the exports of many other countries have suffered as well. Under US law, the Chinese should probably have been labeled a “currency manipulator.” However, by bowing to Chinese demands that they not be labeled a currency manipulator, President Obama’s administration is losing credibility everywhere.

So, Americans are waking up to find that not only does China dictate U.S. foreign exchange policy, but China indirectly influences its domestic economic agenda as well. Everything from employment policies (export expansion) to government funding needs (requiring Chinese funding) are all partly defined by the present exchange rate policies.

Increasingly, Americans realize that on the foreign exchange front they have been “checkmated”-as in the game of chess-by China. Should difficult economic times continue, or worsen, increasing American anger is likely at this arrangement. It could pass the breaking point and encourage America to act unilaterally against China. Currency turmoil might then embrace the globe.

However, one never discussed but possible reason why the US government has been afraid to label China (and Japan previously) as currency manipulators may be because the US itself may be acting covertly to manage the dollar exchange rate.

According to the US government’s own legislation, it can act secretly in currency exchange markets to affect the dollar’s exchange rate using the Treasury’s Exchange Stabilization Fund (ESF). The US Treasury say that the ESF, “with the approval of the President, may deal in gold, foreign exchange, and other instruments of credit and securities.” The ESF was established by the Gold Reserve Act of 1934 and then amended in the late 1970’s.

Also, the Fed engages in opaque currency “swaps” with other nations, and there is significant evidence of U.S. Treasury and Fed engagement in gold price suppression. Gold is the “anti-dollar” and barometer of confidence in the dollar. (See my August 24 column, “The Ethics of Gold,” at and

Another manipulation of the Fed is its control of short term rates-and now possibly long term ones as well-to smooth out the booms and busts of the economy. However, we see the falsity of this argument. After almost two years at a near zero per cent  federal funds rate the US economic quagmire continues-or worsens.

Induced low rates over the past ten years or so created a massive real estate boom and bust, discouraged savings, led to inordinate financial risk taking and moral hazard, unsustainable consumer debt, and now excessive, possibly uncontrollable government deficits and debt.

In their seminal work, “Growth in a Time of Debt,” published January 2010, Professors Carmen M. Reinhart and Kenneth S. Rogoff found that when government debt/GDP ratios exceed 90 per cent, economic growth rates fall considerably. According to the BIS, U.S. government debt/GDP will be 92 per cent by the end of 2010 and 100 per cent in 2011.

Furthermore, on September 1, the International Monetary Fund said, “general government debt in the G-20 advanced economies surged from 78 per cent of GDP in 2007 to 97 per cent of GDP in 2009 and is projected to rise to 115 per cent of GDP in 2015.”

Unfortunately, the present and future private deleveraging of debt in the U.S. and some other developed countries means potentially continued high-or higher-government deficits as economic growth is retarded or declines further. The Fed has said that to counter any renewed softness in US economic activity it will significantly expand its purchase of US government bonds and possibly other assets. This has the potential for fueling a huge expansion of the money supply and creating high or even hyperinflation.

The U.S. and some other countries are following a path whereby every manipulation begets further manipulation, and which then begets even further manipulation. With China, perhaps Japan again soon, and other countries controlling their currency values, the U.S. may be forced overtly or covertly to counter their currency manipulations. And with continuing economic difficulties, with interest rate policy having created a debt nightmare and becoming increasingly ineffective, the Fed may institute money proliferation policies that have the possibility of leading to high or ever hyperinflation.

If a vicious circle of manipulations by US authorities and other countries occurs, given time, it might rival some aspects of the soviet command economy-and with a possibly similar tragic outcome. Hopefully, Americans and others wake up before it is too late and realize that manipulated markets can eventually cause ruin.

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Tuesday, October 19, 2010

Is MERS nothing but a scam?

MERS stands for Mortgage Electronic Registry System. This system was set up by banks and other financial institutions specifically to save themselves time and fees when selling mortgages to each other. It was intended from the very beginning to make an end-run around the requirement in every local jurisdiction in the country to transfer and record the original mortgage loan paperwork with each and every transaction. The headline on their web site home page says “Process loans, not paperwork.” They seem proud of being “created by the real estate finance industry.” MERS “eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.”

The problem is all those local and state laws still on the books everywhere across the entire country that do require the preparation and recording of assignments when trading any mortgage loans. It seems like everyone just decided to look the other way while the financial companies made things much easier and cheaper for themselves. To make things even worse, by no longer properly recording the mortgage loan assignments state and county registrars are shielded from knowing who the true owner is. Mortgage loans transferred through MERS list MERS as the mortgagee even though they don’t hold title to the land.

Which brings up another problem with MERS. Many of MERS member companies have MERS carry out foreclosures in MERS’s name. This despite the fact that MERS does not own legal title to the mortgages. MERS therefore lacks legal standing to foreclose. Foreclosure courts have a very difficult time disputing this because the mortgage loan assignments are not recorded so the actual owner cannot be found.

All of the above is further complicated by the fact that MERS has no employees. This means all actions taken by the company are out-sourced to third parties. The third parties are usually document processing companies such as LPS or DOCX or large attorneys’ offices specializing in document processing. Yes, the same ones under so much scrutiny in Florida and around the country for questionable signature, verification practices and notary stamps.

Given the way the real estate crisis has played out during the past few years, it is hard not to wonder if MERS wasn’t a planned scam from the first. If the financial companies wanted to be able to sell and trade and securitize mortgages as quickly as possible without scrutiny, what better way than to remove those sales and trades from public view. The true legal owners of any given mortgage loan could no longer be tracked down through any public records. No government regulators could track how or when or how often mortgage loans were assigned. It was as if a huge segment of the mortgage industry got sucked into a black hole never to be seen again. Until people started to default on those “hidden”, “off-the-books” mortgages, of course.

Saturday, October 16, 2010

Real Estate Investors start to feel the effects of foreclosure fraud

There is a wide, deep, blue sea of foreclosure problems just starting to be explored. Investigations into foreclosure fraud by the federal government, state governments and the lending banks have had major effects on the real estate world. Until very recently there had been little to no change at the local level. That has changed during the past week.

Real estate investors and others purchasing property at courthouse auctions are seeing large portions of the daily docket cancelled. On some days the entire docket is cancelled and there are no foreclosure sales. This is a big change from dozens to hundreds of properties each day.

It can now be a last minute scramble to find a title company willing to issue insurance on foreclosure sales. Most investors have a deep network of title companies, but some foreclosed properties are just no longer insurable because of questionable titles. This situation is bound to get much worse in the near future.

As more news of foreclosure fraud and the questions it is raising reach the main-stream public, people will become more skeptical of buying foreclosed properties, with or without title insurance. And who can blame them. How many title insurance companies would be able to survive if they had to pay off on even one quarter of the policies written on foreclosure sales during the past two years?

There might actually be a kernel of good news hidden in this mess. Non-foreclosure real estate sales will look more desirable compared to foreclosures, even at a higher price, and closings will be possible. Prices will probably stabilize or even rise slightly as a huge amount of foreclosed inventory is removed from the market as (at least temporarily) unsalable.

This situation should give real estate investors, lenders and title insurance companies a chance to take a long, hard look at their business models and make the changes needed to move forward. Investors by nature tend to be very adaptable and take such changes in the business landscape in stride. Lenders and title companies will have to return to older, tried-and-true ways of financing and transferring property.

Thursday, October 14, 2010

New battery research yielding results

This is the time for battery companies to take the lead. Many of the emerging “green” industries are dependent on electrical power storage for success. Electric vehicles and intermittent renewable energy sources such as wind and solar need batteries or other types of power storage. Current battery technology has problems for which new research is developing solutions.

Lithium ion is the present battery technology of choice for its dense energy storage but heat produced during both charging and discharging cycles is a serious problem. Just remember stories of laptop computers and cell phones catching fire and notice how warm your digital camera battery is immediately after recharging. A few solutions aimed at this problem are beginning to appear.

Quallion, based in California, has developed a partial cure for heat build-up in Li-ion batteries for use in heavy-duty trucks to reduce time spent with the engine idling. Their design uses arrays of interconnected, smaller batteries that produce less heat individually and are easier to keep cool en-masse. The arrays are connected to allow continued performance even if individual cells fail. The Li-ion battery arrays weigh much less than a similar amount of storage using conventional lead-acid batteries. Using battery power for interior lights and cooling/heating while parked would significantly reduce the amounts of greenhouse gasses produced by the idling diesel engines of these over-the-road trucks.
Another coming change applies new research to the anode(negative side) of Li-ion batteries. Graphite is the present material of choice but has a limited capacity to hold lithium. The amount of lithium determines the amount of energy that can be stored in a given battery. Silicon can hold nearly ten times as much lithium as graphite but develops cracks after several charge/discharge cycles because of the expansion/contraction caused by the heat produced. Putting micron-sized pores in the silicon surface give enough room for expansion/contraction without cracking. This breakthrough will allow batteries of the same size and weight to hold many times the amount of power now possible. Much smaller batteries for large-scale uses, such as electric vehicles and buffers between solar/wind installations and the commercial power grid should soon be on the way.

Cathode(positive side) research is also bearing fruit. BASF is experimenting with a Nickel-Cobalt-Manganese(NCM) cathode material that could have wide applications. They claim up to 60% more energy storage capacity for same-sized batteries. This amount of increased storage could mean up to 50% more distance per charge for an electric vehicle. For consumer electronics it would mean greatly extended use time for laptop computers, cell phones, etc…

One of the older and better-established battery technologies might also make a comeback thanks to new research. Sodium-Nickel-Chloride(Na-beta) batteries have been around for a long time but like other types of rechargeables produce heat when recharged. It seems changing the shape of the battery from the traditional long cylinder to a flat pancake produces much less heat. An added bonus is the ability to deliver up to 30% more power. The materials that go into Na-beta batteries are cheaper and more easily available than those required for Li-ion batteries.

Another older battery technology is also being revived. GP Batteries received this year’s Battery Manufacturer of the Year-Alternative Chemistries award. They developed a new Nickel-Metal Hydride battery for use in electric vehicles.

Continued research and creative thinking is all of the above areas are needed. Battery storage plays an important role in the continued integration of greener/renewable energy sources into everyday life. Grid interface is a major problem for more widespread use of intermittent power generation like wind and solar. Better battery storage solutions are one way to move forward.

While battery company stocks have been lagging behind other “green” sectors, this situation will not last forever. Batteries have too large a role to play in the success of alternative energy production. The companies that best take advantage of new research will come out ahead in market share and stock share price. I watch several of the largest and most innovative battery companies closely and think they may soon follow the solar PV industry along the path of increasing share prices.

Thursday, October 7, 2010

Where does foreclosure fraud go from here?

The pile of federal, state and local officials landing on the country’s mortgage lenders is starting to get pretty deep. State Attorneys General, the U.S. Attorney General, governors, state legislators, U.S. Representatives and Senators, all are calling for lenders to halt foreclosure proceedings until the issue of fraudulent paperwork can be sorted out. Many of the same officials are also calling for criminal charges against guilty companies and individuals. Things, as they say, are complicated.

One of the stickiest issues is proving who actually owns the original mortgage loan note because the owner of the note has sole legal right to foreclose on the mortgaged property. After Wall Street decided to make more money by bundling mortgages together, getting them credit-rated and selling them as securities, they were subsequently often sold several more times. For many of those mortgages, no one knows where the original loan note is. Often enough no one is even sure who is supposed to own the note. The lenders are still processing the loans(taking the payments, or not), but do not have and cannot get the original notes. They are under tremendous pressure because of the sheer numbers of loan defaults – they have to foreclose so they can recoup something from the sale of the property.

The lenders turn to “paper-mills” that can’t find the original notes, either. But they guarantee delivery of requested documents within a deadline. So they manufacture a replacement document because they know the lender and the judge in the courtroom will be too busy to notice little discrepancies like forged signatures of attorneys and bank officers, inconsistent dates and improper notary stamps. It just won’t be a problem because the homeowners being foreclosed won’t be able to afford defense lawyers and won’t know enough to be able to defend themselves. And so things went for two years.

There were occasional but persistent stories right from the start about homeowners coming home from work to find the locks changed and the house empty, without receiving any notice from the lender. There were stories about homeowners finding problems with document dates and document facts but being ignored by lenders and judges. Most put these stories down to disgruntled, down-on-their-luck homeowners. After all, how could you possibly not know the bank was about to evict you?

It turns out that most of those stories were probably true. If the lender fails to tell you about imminent eviction(by officially serving the correct paperwork), how would you know? When the banks are so confused they are evicting people from homes that do not even have mortgages on them, it causes questions about what else the banks might be wrong about? When two banks both try to foreclose on the same property, what other mistakes are they making? The lenders are admitting in sworn testimony that they don’t read or verify the truth of the contents of foreclosure affidavits. They are proving with their actions they do not know who owns given properties.

So it seems foreclosures do need to stop for a while. There are legal requirements for foreclosure and the past few years has made a farce of those legalities. Everyone involved has played their part in undermining justice for the homeowners – the lenders, lawyers, judges, notaries and document-processing companies. Not a single person is trying to justify non-payments of mortgage loans, but legal requirements for foreclosure must be met.

If twenty people witnessed a murder and the guilty party was not informed of his Miranda rights and was questioned without a lawyer present, he would be set free. Those are legal requirements, not just niceties to attend to whenever there is time or nothing better to do. Homeowners deserve the same protection of the law. If a lender cannot prove ownership of the original mortgage loan note, does not properly serve the required notice, does not file the required documents with the court containing the required signatures, proper dates and notary seals, foreclosure should not be allowed to proceed. These legal requirements are not mere “technical issues” as some lenders have facetiously tried to claim.

Criminal charges should be filed against guilty companies and individuals. It will greatly slow down the country’s economic recovery. It will prolong the pain of a reeling housing market. It will cause many more financial institutions to go bankrupt(and rightly so). But it is a necessary thing. To do anything less would be to hold other values higher and more important than justice and the law.

Tuesday, October 5, 2010

REIT's for real estate investing

Almost every conventional financial adviser will recommend diversifying invested assets to safeguard against loss if one sector of the economy underperforms. The common advice is to split the sum to be invested into some combination of stocks, bonds, cash or CD’s, precious metals and real estate. The amount invested in each sector will vary with age, total amount invested, desired annual growth/income, and the beliefs of each financial adviser.

I am not a strong personal fan of that style of diversification. I do still believe in keeping at least a portion of funds invested in real estate. Real estate, in my opinion, should be looked at as a hedge against economic downturns and inflation, similar to the way most investors look to gold. Real estate should not be looked at as a way to get rich quick, but owning a few houses occupied by renters or owner-financed buyers can provide a steady monthly cash-flow with little work and possible tax advantages.

Most average investors either don’t have the funds or the willingness to own and manage their own real estate investments. There is an alternative available giving investors almost all of the advantages of owning real estate without having any management responsibilities. Real Estate Investment Trusts(REIT’s) were started in the U.S. in 1960 to provide a sort of mutual fund for real estate.

REIT’s must follow some basic rules. They must hold at least 75% of total investment assets as real estate and derive at least 75% of gross income from rents or mortgage/interest payments. A REIT must be jointly owned by 100 people or more and be managed by a board of directors or trustees. At least 90% of income must be distributed to investors as dividends.

Owning shares of a well managed REIT therefore has advantages even over most stocks. Not only does an investor get the benefit of rising share price but also of unusually hefty dividend payments. So far in 2010, REIT’s have been vastly outperforming all of the main market indexes. There are many to choose from and most specialize in one type of property: hospitals, assisted living communities, single-family homes, large apartment buildings, commercial retail, manufacturing, etc… This fact makes it possible to stay diversified within the real estate sector.

I ran a very basic stock screen to see what would turn up. I chose real estate, $10 to $500 per share, $10-million to $10-billion market capitalization, outperforming the 50-day moving average and outperforming the DJIA by 5% or more. This simple search gave me 15 REIT’s to choose from on October 4th, 2010. Five of these have increased share price by more than 20% since the beginning of the year.

The top performer is Saul Centers Inc.(BFS), up 30.8% YTD and closely followed by Avalon Bay Communities Inc.(AVB) with a 30% YTD gain. Developers Diversified Realty(DDR) is up 29% so far this year and Digital Realty Trust Inc.(DDR) is up 23%. Worst performing of the top five is Kimco Realty Crop.(KIM), which is up a mere 19.9% since January 1. The most expensive shares are Avalon Bay at $106, the cheapest are Digital Realty at only $11.91 per share. Remember, there is still a nice dividend to collect as well as the increase in share price. This is pretty impressive performance in the current economy!

If you want to diversify your investments into real estate but don’t want to be a landlord or have to deal with mortgage payments, or even the actual rehabbing and reselling of properties, consider adding shares of a few REIT’s to your portfolio. Do the homework, just like if you were buying a house. Look for proven past performance and high, steady dividends. Buy sectors you believe in: healthcare, commercial retail, etc… And like any other stock, don’t be an ostrich and just it ignore. Pay attention, check on it regularly and don’t be afraid to sell and invest elsewhere if performance starts to lag.

Saturday, October 2, 2010

Foreclosure fraud fallout for real estate investors

This post is for everyone involved in any form of real estate investing. Direct investors are those who buy properties and then either rent them for monthly income or re-sell them for a one-time profit. Indirect real estate investors(some of whom do not even think of themselves as real estate investors) buy shares of stock in companies that make mortgage loans, write mortgage or title insurance policies or REIT’s that manage large property portfolios. Be aware the developing situation concerning mortgage and foreclosure fraud is going to cause problems for nearly everyone involved in even the slightest way.

The seven largest mortgage lenders in the country are now part of a federal investigation into foreclosure fraud. More federal investigations will follow this first one. Attorneys General for Florida, California and Connecticut have now started their own foreclosure fraud investigations. These state fraud investigations will also proliferate, at least in the states with the highest numbers of foreclosures. At least one U.S. Senator and one U.S. Representative are now publicly calling for the responsible federal agencies to bring criminal charges against companies and individuals found responsible for foreclosure fraud. Foreclosure proceedings in many states are already grinding to a halt. Homeowners are not being evicted and sales are not being allowed.

Some of the repercussions are already being seen. Some lenders have halted foreclosure evictions and sales in some states. Some states have halted foreclosure proceedings by certain lenders. Law firms specializing in processing foreclosure paperwork are being investigated. Mortgage loan insurance companies are starting to sue mortgage lenders for improper procedures and for not following their own in-house risk-avoidance rules. Title insurance companies are starting to refuse policies on property sales by some lenders. When these types of companies start getting nervous and turning on their own, things tend to escalate quickly.

*Investors who buy property in order to produce rental income
Hopefully you have title insurance on all the properties in your portfolio. Even if you do have title insurance, be prepared for possible problems with properties bought as foreclosures from the lenders under investigation. If there are problems, be prepared for multiple stalling tactics from the title insurance company while they try to pass the buck back up the line. If you own properties without title insurance you are in a very tough spot right now.

*Investors who buy properties for re-sale
This would be a good time to minimize inventory on hand. The big seven lenders are in the hot seat now but that spotlight is going to get wider. Be sure to get title insurance on every property purchased and try to re-sell while title insurance is still available for your buyers.

*Real estate stock investors
This would be a good time to consider moving funds into other investment sectors. The developing foreclosure fraud investigations are without doubt going to impact the share price of mortgage lenders, title insurance companies, mortgage loan insurance companies and mortgage/foreclosure paper processing companies at a minimum. Some effect of this already seems to be showing up in the markets. Without meaning to sound like a “chicken little”, this is going to get really ugly.