Friday, April 22, 2005

Jim Rogers On The Housing Bubble

Famed investor and writer Jim Rogers took some time for a few questions from The Housing Bubble blog this morning.

Q: What are your general thoughts on the concept of a housing bubble?

JR: We are in one in much of the US and in some other countries partly because interest rates were driven too low and too much money has been printed.

Q: As someone who is familiar with international trends, have you observed home price imbalances in overseas cities?

JR: Yes.

Q: Fannie Mae and Freddie Mac are at the center of a storm right now. Do you think the firms pose a risk to the financial system?

Yes. I am short FNM.

Q: There are a great deal of mortgage backed securities out there. Do you see any problems for the values of the MBS's or for the holders?

JR: Serious problems for both.


Q: How do you see commodities reacting as housing prices ease or even decline?

JR: The commodity bull market has another 9-18 years to run. There will be consolidations along the way as there always are and have been in every bull market in history.

Thank you Mr. Rogers!

23 Comments:

At 10:40 AM, Anonymous Anonymous said...

Off topic but Housing bubble related.

http://money.cnn.com/2005/04/22/real_estate/justice_realestate/index.htm?cnn=yes

Antitrust investigation of full priced realtors.

Great blog keep up the good work.

 
At 10:44 AM, Blogger John Law said...

I've emailed him a few times. he's a man of few words. he's too the point though.

his books are pretty good reads. I'd recommend "hot commodities." real easy read but has great information.

 
At 10:53 AM, Anonymous Don said...

Check out Roach's latest:

http://www.morganstanley.com/GEFdata/digests/latest-digest.html

 
At 11:09 AM, Anonymous Anonymous said...

Two other articles:

Are lender too liberal? (*now* they ask):

http://money.cnn.com/2005/04/22/real_estate/financing/lendingrisk/index.htm

Game plan for an insane market:

http://money.cnn.com/2005/03/23/real_estate/homeguide_gameplan/index.htm

 
At 11:43 AM, Anonymous Anonymous said...

anon said ...Off topic but Housing bubble related.

http://money.cnn.com/2005/04/22/real_estate/justice_realestate/index.htm?cnn=yes

Antitrust investigation of full priced realtors.

I really don't find this off topic of the bubble. The bubble is about many things and greed is one of them. Greedy realtors (Sorry, that Realtor tm)that protect their market. If Re/Max, Prudential, Century 21, and all those other wonderfully helpful middlemen were really interested in helping little old homeowner buy the best deal, don't you think that the first place they'd send them would be a FSBO??? Most FSBOs would be happy to give 1 or 2 % to a broker with a readily, willing, and able buyer.

Instead, brokers boycott FSBOs with their sheeplike clients.

RE brokers don't make money on their high level of service. They get listings under their belt and then just let the houses sell themselves.

Realtors don't sell houses, houses sell houses! It's the seller that re-paints and cleans the place from top to bottom, not the broker. What do they do for their money?...rien, nada, absolutely nothing!

Am I jaded or have been stung? Nope. I'm just not a sheep. Sold all my homes FSBO...for good reason too. Why share my equity with a broker, when it's MY tool for bargaining with a buyer?

 
At 12:26 PM, Anonymous LV_realprop said...

http://money.cnn.com/2005/04/22/real_estate/justice_realestate/index.htm

Just woke up and saw this....you all will prolly run into it...looks interesting.....

 
At 12:34 PM, Blogger John Law said...

if FNM is really as bad as some think, and the bubble bursts, it may just be the short of the decade.

 
At 1:00 PM, Blogger Ben Jones said...

John,
I was surprised JR was short Fannie. It takes guts to bet against the institutions with real money.

 
At 1:41 PM, Anonymous Anonymous said...

Ben,

Not so hard "to bet against the institutions with real money" when you have many many millions (or does he have billions?), then gambling a couple of percent is no big deal.

It's just like someone with $100K savings gambling $1K. A drop in the bucket.

 
At 1:44 PM, Anonymous Anonymous said...

roger was right on the money on most ..but on the commodity issue- where he made a killing and now perhaps wants out - he appears to be bullish.

If global low interest has stirred up the housing market, by what mechanism it didnot do so for the commodities? i believe that if "real" high interests are in the offing, stocks, bonds, commodities all will tank...

 
At 1:50 PM, Blogger John Law said...

(John,
I was surprised JR was short Fannie. It takes guts to bet against the institutions with real money.)

I heard him say somewhere it was a $5 stock.

 
At 2:42 PM, Blogger stockmania said...

Great job on getting Rogers' input !

More confirmation of the housing bubble from a real pro.

housingbubble.com

 
At 7:11 PM, Anonymous Anonymous said...

Talk about some terse responses. Can you imagine the babble that Greenspan would have given? Rogers has been short since at least October/November when FNM was at $75. The fact that he is still short is telling.

 
At 8:04 PM, Blogger Ben Jones said...

(Talk about some terse responses. Can you imagine the babble that Greenspan would have given? Rogers has been short since at least October/November when FNM was at $75. The fact that he is still short is telling)

The terse nature is my fault. I only asked for an email interview, and no give and take. I didn't edit.

Yeah, there is great insight. I was blown away by his answer to the MBS question. Everybody talks about the homeowners and fannie, but what about all those bonds out there?

To be openly short at $52/share, that takes guts considering it's 90%+, institutionally owned.
Good comment, thanks.

 
At 9:25 PM, Anonymous Anonymous said...

Ben you've done an outstanding job assembling this blog. Blog of the Year! Querying Jimmy Rogers was a stroke of genius. Hopefully I can add some interesting info to the board:

I'm worried about the risks of MBS myself. My retired parents have a pretty good chunk in one they purchased 3 years ago. Worried about the risks of holding this one until maturity (another 20 years) I called Schwab to find out what risks were really involved. Surprise answer. The underlying mortgages in this portfolio have experienced such a significant degree of refinancing that all of the remaining principal on the MBS they hold will be repaid within the year. No risk on that one. But here's the interesting part: Schwab said the MBS's that have been recently issued are full of junk mortgages to highly leveraged subprime borrowers that will experience a much higher rate of default than is priced into the new MBS's being issued. Based on that analysis it would seem that different MBS's have dramatically differing risks. If they risks on the more recently issued MBS's come to "bear" it may well cast a pall on the entire MBS biz.

 
At 3:36 PM, Anonymous Anonymous said...

Hi, I am a Realtor and I don't show FSBOs, not because of the commission, but because of legalities and dealing with uninformed sellers who aren't familiar with disclosure/real estate law. There are so many gray areas and working with a homeowner who isn't a Realtor just isn't worth it. I don't want to get sued and I don't want the Buyers I am assisting to be unprotected. I'm in this business to help people find their ideal home. But, I have many expenses including insurance for lawsuits, so yes, I do need to get paid. There are too many other homes to choose from that are represented by professionals.

 
At 8:30 PM, Blogger Ben Jones said...

(Schwab said the MBS's that have been recently issued are full of junk mortgages to highly leveraged subprime borrowers that will experience a much higher rate of default than is priced into the new MBS's being issued)

The MBS world is complicated. The re-fi's did change the landscape and the high risk loans are now the norm. Even most jumbo loans are interest only.

I suggested Fannie may be sued for cherry-picking pools it wanted to keep and selling the rest. Many loans in CA are so bad, the GSE's can't buy them. Then there are the guarantors, many of whom have derivative hedges and are in trouble. See past posts on MBIA, Doral Financial, AIG and GM.

Thanks for commenting and your personal MBS info is a big help.

 
At 8:33 PM, Blogger Ben Jones said...

(I don't show FSBOs, not because of the commission, but because of legalities and dealing with uninformed sellers who aren't familiar with disclosure/real estate law)

Thank you, we need comments from industry professionals.

 
At 7:42 AM, Anonymous Anonymous said...

(Hi, I am a Realtor and I don't show FSBOs, not because of the commission, but because of legalities and dealing with uninformed sellers who aren't familiar with disclosure/real estate law....)

Unfortunately, this view is indicative of a dinosaur industry. Here is why we can't do it that way, so we'll have to keep charging 6%. Every other industry has to become more efficient to survive. The time will come for real estate as well.

 
At 12:46 PM, Blogger Ben Jones said...

(this view is indicative of a dinosaur industry)

You may be right and even the RE profession is heading that way. I have had many comments that said you can bargain the commission down already, as too many realtors fight over the same number of deals.

The 6% commission may get killed in the wake of this situtation.

 
At 8:59 PM, Anonymous Anonymous said...

The U.S. imports too much oil.
The U.S. imports too much capital.
Foreigners hold 43% of all U.S. Treasury bills.
The U.S. trade and federal budget deficits are too large.
The U.S. housing market is in a bubble.
The Bank of Korea will place more of its reserves in nondollar assets.

Get out of Debt and invest in Canada!!!! This is a safe haven!
"The October 1987 stock market crash began with a currency crisis."

 
At 9:57 PM, Anonymous sam sung said...

..and they are heeding the warnings in ASIA.

http://www.atimes.com/atimes/Global_Economy/GD20Dj01.html

 
At 10:11 PM, Anonymous sam sung said...

>>(I don't show FSBOs..)

yeah right! Here is an Agent spinning the cost of risks way out of proportion, that is the real 'gray area'!

When this person talks about 'insurance for lawsuits', is this title insurance or does it include something else ?

All you need is a decent attorney, who covers title search (ensure the seller is the rightful owner), advises you on title insurance (just in case this due digilence fails, happens one in a million) and charges a nominal $500-1000 per deal. I know because I have done it multiple times.

Real Estate agents spook would be buyers about FSBOs with the words like 'getting sued' etc...as if they are covering their clients back.

Agents exist..because they have tried everything else and given up. I will shudder to take judicial counsel from them.

good luck

 

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