John Burley’s Blog

Big Congratulations to Obama on becoming the Presidential Elect.

When I was in OZ in February I was repeatedly asked who would be President. I stated that I thought it was a very unusual time in that all three (Clinton, McCain or Obama) would be a great President.

Obama’s win is HUGE for America. The election of an African American says so much about how far our country has come.

And although I did not vote for him I am very excited about his being elected.

He enters office at a tough time. The bottom of an economic cycle that was fueled by greed and is now being run by fear. I pray that God delivers him the wisdom to guide us through these turbulent times.

So again, congratulations to Obama. A great win!

God Bless,

John Burley

One of the greatest rights, privileges, and responsibilities we have as American’s is to Vote.

So today, make sure to get out and exercise your God given opportunity.

God Bless,

John Burley

Wow, what an exciting Ryder Cup!

As many of you know I have played golf since I was a very young man. It has taught me a lot about life and brought many challenges, joys and lessons.

In watching the Cup and listening to the interviews I learned some awesome Lessons to Follow.

Paul Azinger was the Captain of the US Team. And while the Captain does not play, and cannot win the Cup he can bring much. Here is what I learned from Captain Azinger and The American Win:

1) Stay on Point. This was a major theme for the US. Stay on what your doing NOW. In other words worry about the shot at hand. Don’t worry about what you just did wrong. Don’t worry about what is coming up. Stay on point. For me this means focusing on what is important and what we need to do now. Giving it 100% focus and doing it well, and now!

2) Team Building. Azinger focused on building his team. He brought in outside people to motivate, inspire, and personally coach his team. We as investors can do the same thing. We can build up our team (and ourselves). We can attend seminars, read books and listen to audio programs that will maintain our motivation, inspire us, and personally coach us to be better.

3) Buy into a Concept. He asked his players to “Buy into a Concept”. The concept, for the Ryder Cup team was based on breaking themselves into 3 sub-teams based on personalities and play-style (aggressive, outgoing, and solid). For us, we need to create our “Concept” and get our “Team” to buy into it. Starting out this could be as simple as we are going to do Quick Cash deals and my wife and I are going to “Buy into that Concept”.

4) Have a Great Experience. Win or lose. Fail or succeed we are going to have fun, embrace the moment and enjoy. As investors we need to make sure we “Enjoy” the process and what we do. And that we make it a great experience for our team and family.

5) Change the Culture. Design a Culture that works for you and your team. For the US, they changed from a culture that was not working to one that did in more ways than just winning.

6) Trust. They trusted each other (themselves) to do their jobs and Embrace the Concept.

7) Great Captain (Leader). Paul Azinger was a Great Captain. We each, whether we are a team of one or a 1,000 need to be a Great Leader. To me that means learning what we need to know to put together our Team’s Concept. Then guiding all to Stay on Point to our destination.

Bonus Lesson: Get the 13th Man on your side. For them it was the fans, family and outsiders rooting for them and supporting them. For us, it is getting the friends and family who want, on board to support us!

It was a great Win for the US. A group of men came together and played for honor and pride (they don’t get paid for the Ryder Cup). And yes, the players’ not the Captain decide the win. What Captain Azinger did was provide the Culture and Environment for the US to win. The “boys” did the rest.

For me it was amazing TV and time shared with the family along with some aswesome Lessons to Follow.

All my best to your success,

John Burley

So, in July U.S. home sales rose. But, the number of unsold homes hit new highs.

According to the NAR (National Association of Realtors) sales rose 3.1% in July to a seasonally adjusted annual rate of 5 million units (13% lower than last year). This is the third month in a row for increased sales.

And while that is encouraging, we need to remember that unsold homes still continue to rise.

Currently single-family homes listed for sale are at 4.67 million, the highest amount since they started tracking back in 1968. So, the increase in sales is good, but hardly anything to begin a party over!

And, it is estimated that 33-40% of those sales are from foreclosure based situations (pre-foreclosure, foreclosure, reo, short sale, subject2 or other distressed situations).

In many areas speculators and investors (notice I am not calling them all investors), are beginning to come in seeking the bottom. In particular California, Florida and Nevada (although not Arizona and Texas) are seeing increases in sales with prices off 25-50% from previous highs.

So, are we at the bottom? That is the big question. Imo most markets are not yet at bottom. Most still have 10-20% to give back before sales levels will exceed inventory increase levels. Which is when you have met bottom.

So does this mean I should not buy? Absolutely not. First off remember you are not buying the “market”. You are investing in a property (or small number of wisely chosen properties). Thus for the astute investor their are many incredible opportunities.

And for the advanced investor who is doing proper research I see this as definately a time to be buying.

For the non-advanced watch for the cons.

And make sure you don’t become one of those people who falls for the come to our seminar and buy our properties in Florida, Vegas, etc., people. Because those are RARELY deals.

I know that in Phoenix there are a couple of large marketing companies that SPECIALIZE in selling condo’s to Canadians (and other out of state/country people). From my research these properties are being sold for about 40% above true market value with the old (yet effective) guaranteed rent scheme.

They bring people in from out of town who “think they are good deals”. They are NOT.

It is an old game that people get suckered into all the time, so please when investing do thorough research and make sure you are buying good deals and not being sold bad deals.

By all means invest, lots of deals out there right now. Just make sure you do your market research so you don’t get burned.

And remember to make sure you have a proven “exit strategy” and are not just hoping to make a quick buck. Quick buck days of speculation are over for a long time. Stick to the fundamentals. Do your market research and profit.

Good Investing,

John Burley

This just out, and not surprising. U.S. thrifts lost $5.4 billion in the second quarter and set aside record amounts to cover losses from bad loans.

This following the record $8.8 billion loss in the fourth quarter of last year.

The 829 thrifts, it was announced, have also set aside an additional (record) $14 billion to cover (future) losses from bad loans.

John Reich, the thrift agency’s director, said that 98% of thrifts still have adequate capital to weather the housing and economy turbulence. “I look for glimmers of hope. The glimmer of hope here is that the industry as a whole is structurually profitable.”

The hope here is that the differences in (thrift) structure and reserves will prevent a repeat of the savings and loan crisis of the late 1980s and early 1990s. Reich cites banks’ stronger capital positions and a fatter federal deposit insurance fund as good news on this.

The report from the agency puts the numbered of troubled banks and thrifts at 117 (the highest level since 2003). And profits earned by banks and savings and loans were off by 86%, or $5 billion.

An fyi, is that thrifts differ from banks in that, by law, they must have at least 65% of their lending in mortgages and other consumer loans, exposing them to the persistent housing downturn.

The feds say they will continue to examine and monitor.

IndyMac, the largest bank failure in years occurred in July, was a thrift based in Pasadena, CA. They were the second-largest financial institution to close in U.S. history. It was taken over by the FDIC with about $32 billion in assets and deposits of $19 billion.

Eight other FDIC-insured banks have failed so far in 2008, compared with three in all of 2007.

The balance of this year and 2009 should bring more. Although, this news is bad, it is much better than the early 1990s.

As investors the bottomline is that the more this news presses the industry the sooner they will get “real” in a big way on pricing of reo’s and short sales. Then, investors can get to the business of buying, that makes sense. The markets can finally reach bottom and a recovery can begin.

Good Investing,

John Burley

A new film out I.O.U.S.A, backed by billionaire Peterson of the Blackstone Group paints a dire situation for America.

Buffet disagrees. He says, “It has been a bad idea to bet against the United States ever since the nation was formed in 1787.” He is, “Confident the country will be able to address its debts and remain prosperous.”

The movie says the $53 trillion in debts the nation owes could lead to an economic crisis if left unchecked.

My thoughts, the nation has some economic problems. It is a (natural) down cycle in the economy, many people are having the same sort of issues. With that said I agree with Buffet. I don’t forsee the bankruptcy or collapse of America any time soon.

And I am clearly reminded of the same doom and gloom prognosticator’s of the early 1990’s. You may remember the series on Bankruptcy 199_____ which told us how America was going to go bust. Didn’t happen then, not going to happen now.

Bad news is news. People like negativity.

As for myself and my company we will continue to look for opportunities, be fiscally responsible and do what we can to educate others and share our experience.

Take care,

John Burley

US housing starts (single and multi) fell 11% in July (from June) to an annualized rate of 965,000. Which is the first sub-million level since 1991.

The single family starts suffered even more. Down to 641,000 units. And, the single-family home building permits slid to 584.000. The lowest level since August 1982!

Most people see this as only bad news. I don’t.

Housing has to hit bottom, before any rebound can really begin. And this is a sign we are getting closer.

Less new properties, means inventory will grow less. That means that the demand will get closer to the supply.

Although we are not yet close to a bottom, this is good movement towards that direction.

So, while short-term it hurts, that is the way to a long-term recovery.

God Bless,

John Burley

In a repeat of 1994 several money funds’ have been shored up by their companies. In the US, money funds hold over $3.5 trillion and have built a reputation for stellar safety and liquidity. Though uninsured, they have always kept their share price ar $1 so investors don’t ever lose money. No retail fund has ever fallen below $1, “breaking a buck” as it is called.

The funds primarily invest in T-Bills, commercial paper, and IOUs issued by financially strong companies. With lots of those notes in trouble many companies have come in to prop back up the value. The Northern Trust and HSBC money funds are among those recently supported. And Legg Mason last month took a one-time charge of over $150 million to account for money it spent to shore up its funds. Wells Fargo, Bank of America and many others have done the same over the last year.

Shareholders today should be reassured that fund companies are stepping up to the plate to make sure the funds do not fall below $1.

What I see in this is that history is again repeating itself. So much of The Perfect Storm is following step-by-step with the last couple of crashes. I see lots of opportunities out there for the investor in the know. Although they take work, many real estate transactions are occurring in the 50-70% of (real) value range.

Good Investing,

John Burley

Had an awesome time at the John Burley Day Event last Saturday. Just under 100 of us from AZ, CA, Hawaii and a few other states spent the day going over opportunities for investing in The Perfect Storm, Money Skills, Quick Cash and Cash Flow Investing.

I had a great time. Saw some old friends, reunited with quite a few Burley Boot Camp Graduates and met a lot of new people.

The overall feedback was fantastic. I think we will do this again next summer. However, we have agreed Anaheim (and Disneyland) will be a better summer location!

Take care,

John Burley

Seen a lot of articles of late that list who is to blame for the real estate crisis. Some make good sense, some are just BS. So rather than looking to point fingers, lets take a look at the players involved and see what the reality is of the part they each played and why the down turn occurred.

#1 - Ignoring Reality. Markets Cycle.

Have for as long as man has tracked. Most markets go through 4 cycles in a “normal” 10-14 year period. Growth, Prosperity, Recession, Depression,…Growth, Prosperity, Recession, Depression,… This is a normal cycle, markets last turned down in the 1989-91 period. So, although we had a little bit longer than normal run, it is normal to have a down turn. I think 95%+ of people were oblivious to the signs and normal cycles. This was a huge contributor to the cause.

#2 - Lenders. Lenders got greedy, then they froze with fear.

They made far more loans to sub-prime borrowers than any other time in history. Anyone in the industry with basic knowledge and “common sense” knew that it would not work out in the long run and that the natural conclusion to all those loans was lots of defaults.

Then, when things got bad the lenders froze up (just like the “early 1990s”) and stopped doing realistic short sales, reasonably pricing REOs, working with borrowers to do Deed in Lieu’s quickly and/or foreclosing quickly. In essence, they “put their heads in the sand” and “hoped” it would get better. It didn’t!

#3 - Borrowers. Lots of borrowers got greedy, then they “hid” from the problem.

They borrowed more than they could afford and with terms that were destined to explode in their faces. Did some people get duped? We’re some mislead? Did some not understand what they were getting themselves into? Yes, of course. But, that imho is the very small minority. Most simply acted in a greedy manner and got caught.

And then for many when the problems first came, rather than making hard decisions and taking small losses or walking away they hoped the problem would go away and it got far worse.

#4 - Investors. Lots of investors got greedy, then went into denial.

They were buying properties that they called investments, but were really just speculating. 2200 sq. ft. homes with 4/3 that cannot rent for the adjustable payment are not investments by any sense of the word. They are speculation. And buying for appreciation and/or tax benefits is not investing, it is speculation. So, people got greedy, they wanted to get rich quick, and they blindly bought “hoping” they too would get lucky. This game, like musical chairs, always ends. And of course, most get left standing.

And then when it was obvios it was over rather than dumping, walking, aggressively dealing with it. Many just went into denial and hoped it would all go away. It didn’t, never does.

#5 - Federal Reserve.

Imho Greenspan kept interest rates too low for too long (during boom) and made money far too easy for lenders to get without enforicing/making sure that lenders were making viable loans. The result, ‘BOOM!”.

#6 - Regulators.

They went to sleep at the wheel. The federal and state banking-oversight agencies and mortgage regulators just turned a “blind eye” to what was going on. They could have enforced EXISTING charters and regulations and not allowed the loans to be made and resold in the massive manner they were.

#7 - Rating Agencies.

As problems started showing up they failed to adequately down grade riskier companies thus masking the problems that were coming. This caused the huge write downs to be much more of a surprise than they ever should have been. After all, its not like things suddendly were bad, they were bad for a long time it was just covered up.

#8 - Human Emotions.

Greed, Fear, and Ignoring the reality are probably the biggest contributor. The massive low down, no down, adjustable rate loans to speculators and sub-prime borrowers is a recipe for disaster and most doing the mixing knew it, they just chose to ignore it because they were…GGGGGGRRRRREEEEEEEEEEEEEEEEDDDDDDDDDDYYYYYYY.

Then when it got bad people went into fear mode, which is lots of non-action.

So who is to blame? Everyone involved played a part. And probably the biggest blame is blaming others for our own doing. At all levels, higher levels of responsibility are needed. Along with the reality of market cycles.

Just my humble opinion.

Good Ivesting,

John Burley