Saturday, April 23, 2005

And You Thought You Were Sitting On Equity

No one can question that some people are making a lot of money from the housing boom, in fact let's look at the real winners. This Forbes table lists some big paychecks for the CEO's of major corporations. I'll skip Wells Fargo, Capital One and the other banks, they make that much every year.

Angelo Mozilo of Countrywide Financial, No. 9 at almost $57 million.
His firm is leading the nation in subprime lending and pushing the envelope on all those interest only, negative amortization loans. And it's not even a bank!

Robert "I raise prices every week" Toll of Toll Brothers, No. 13 at $50 million.
And that's on top of hundreds of millions in stock sales, right before the firms' stock started falling.

Bruce Karatz of KB Homes, No. 20 at $38 million.
I didn't know swinging a hammer made you so much dough.

Larry Mizel of MDC Holdings, No. 28 at $34 million.
A subsidiary does a little lending too, just to wet the beak.

Edward Linde of Boston Properties, No. 48 at $24 milion.
He runs a REIT, and we'll get some news out of that industry this coming week.

I probably missed some, but you get the idea. When we look back, it'll be nice to see where all that money went.

16 Comments:

At 3:39 PM, Blogger John Law said...

insider transactions...

MOZILO, ANGELO R.
http://finance.yahoo.com/q/it?s=CFC

TOLL, ROBERT I.
http://finance.yahoo.com/q/it?s=TOL
he sold about $200,000,000 in stock on feb 24th of this year! this is like what lowenstein described in "origins of the crash" about tech insiders!

KB homes
http://finance.yahoo.com/q/it?s=KBH

this is crazy.

 
At 5:03 PM, Blogger Ben Jones said...

Yeah John, I have some posts way back on the Toll numbers. The brothers made billions these past few months.

Mozilo, man, what can you say about him and CFC? Just shake my head.

 
At 5:21 PM, Blogger John Law said...

can you find that post again and link it? thanks.

 
At 6:11 PM, Blogger Ben Jones said...

Here you go John,

http://thehousingbubble.blogspot.com/2005/03/toll-brothers-sell.html

And here is one on Mozilo.

http://thehousingbubble.blogspot.com/2005/03/insiders-selling-at-countrywide.html

 
At 6:25 PM, Anonymous Anonymous said...

Ben - Here in Los Angeles there is a huge Real Estate seminar coming up with Trump, etc. On the local news radio channel, KFWB, "Rich Dad" author Robert Kiyosaki plugs his appearance at the seminar by telling the audience that "A real estate bust is good for the professional investor and bad for the amateur." Upon hearing this ad I was amazed at the sea that they would have to undergo to change their advertising. They have seemingly gone from "making money in real estate is easy" to "there's going to be a bust and I will scare you into attending."

Interesting. Verrrrry interesting.

 
At 6:27 PM, Anonymous Don said...

Robert Kiyosaki knows what he's talking about too. I've read nigh on everything he's published.

I'm sure he's not gonna loose a dime on the RE bubble, and will make out like a bandit.

 
At 7:16 PM, Blogger Sunny said...

Don, are you sure we are talking about the same Robert Kiyosaki?

 
At 7:29 PM, Anonymous Don said...

We sure are. I gave that website you linked a cursory overview, and it sure sounds like someone has an ax to grind. Here's an example of the author missing the point entirely:

In fact, Kiyosaki is spouting nonsense. The federal income tax rates on earned income, passive income, and portfolio income are the same—not 50%—but your overall rate can get to that level when you add state income taxes. The distinction between the different types of income involves whether the losses from one category can be deducted from income of another category.

[end quote]

K, so the total taxes on wages (earned income) are: federal income tax + state income tax + social security tax + employee medicare tax + employer medicare tax + unemployment insurance.

Show me how that's equal to the taxes on unrealized capital gains please?

Yeah, we're talking about the same guy, but I seem to have gotten a lot more out of it than the author of that tirade.

 
At 7:34 PM, Anonymous Anonymous said...

Yes Equity. Absolutely Equity but on the negative side. It's like the negative growth story or the lovely euphimism corporate executives use when they loose money. Lack of visibility. Call it lack of visibility of equity. Now you see. Things are much much better.

 
At 7:58 PM, Anonymous Don said...

Hey Sunny, been digging in that article, I sure am going to read it all :)

The author is rising in my esteem.

 
At 8:03 PM, Blogger Sunny said...

No worries, Don. Kiyosaki appears to be a good motivator and if he got some people to invest in real estate early on and they made a killing, thats excellent.

But frankly, on the analytical side of things I think he's ignorant. The reason he won't lose money on real estate is because he has little investment in it and his dollars come from books and appearances. It just goes to show you that analysis can't always win the day and charisma can carry you a long way.

 
At 8:25 PM, Anonymous Anonymous said...

Those who can, do. Those who can't, teach.

In other words, I am always skeptical of people who make their living offering advice. Why isn't he making a living doing all the wonderful things he learned from his "Rich Dad"?

By the way, if I hear one more ad for that RE conference, I am gonna scream! I am amazed to think of the number of attendees. The LA convention center is HUGE!

 
At 8:30 PM, Blogger John Law said...

(Those who can, do. Those who can't, teach.)

this phrase was obviously coined by someone who never tried to teach.

when this is over, all these insiders will have the heat on them for selling. they'll probably just say that they were told to diversify and whatnot.

 
At 8:44 PM, Anonymous Don said...

(Those who can, do. Those who can't, teach.)

My Dad loves that phrase, and he extends it with "And those who can't teach, teach teachers".

To put it in context, he has a Ph.D. in education and is retiring this summer from somewhere around 35 years as a professor of education.

 
At 6:36 AM, Anonymous Anonymous said...

This is the anon who posted the line about teaching.

I have the utmost respect for someone who teaches, for example, first grade. I just thought the line fit so perfectly to describe the teachers of financial how-to-get-rich schemes, like how to flip houses or how to day trade stocks (oh, wait, I think they're extinct).

 
At 1:53 PM, Anonymous Anonymous said...

To his credit, Kiyosaki has made these points before - that the real money is made in bargain shopping after the bust (e.g. the late 80s), and that no one should ever buy an alligator (i.e. a property with negative cash flow, bought solely in hope of price appreciation).

 

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