Monthly Archives: November 2010

11/16/2010 The convenience of profit taking that quantitative easings have provided to the big bond fund players

What is(are) the true reason(s) behind Fed’s compulsive oppressive urge to do quantitative easings now?

a) The Fed wanted to lower interest rates further with no specific objectives hoping magically it will not trigger inflation and back fire on our economy
b) The Fed had a target objective. They were trying to create jobs for us hoping magically the money will somehow trickle down to the local communities but it is not their job to figure out how or whether it would indeed happen
c) The Fed tried to bail out their crony financial institutions again so that these banks could get rid off the dud securities in their portfolios and get additional cash injection
d) The Fed wanted to create market liquidity so that their bond fund buddies could sell the bonds to the Fed at historical high prices to take profits for themselves
e) All of the above
f) None of the above

Wait. Let me rephrase the answer choices again.

a) The Fed’s stupidity
b) Naivete
c) The Fed is being naughty again
d) Plain evil

I am usually the last person to believe a conspiracy theory. While I was dumbfounded by the need of a QE2 like many others, it suddenly hit me that how nice it would be if I were one of those well connected inner circle financiers running a major bond fund that currently owns a sizable portfolio of the US dollar denominated fixed income securities.

If I want to get out of my big bond positions whom can I sell it to smoothly without triggering a big market sell-off when everybody tries get out of the door at the same time?

Santa Claus seems to have arrived early this year.

As everyone already knows by now that the interest rate could not get any lower than it is now. Quantitative easings may just provide the excellent opportunities for the funds to get out of their major bond positions before the rates run up and the bond prices head lower. The liquidity that quantitative easings have created and will continue to create allows these bond fund managers to dump those dud hot potatoes to tax payers in bulk at the highest possible prices before they are doomed to collapse in the near future when either the Fed reverses its course or when the inevitable inflation starts to rear its head. Even if you are not in the inner circles of the Fed, you may want to get out of your bond positions while you still can.

Isn’t it convenient for those bond fund players who have special access to the Fed window? Conspiracy or not, one thing for sure is that we the taxpayers ended up buying all the bonds at the historically highest prices from these Wall Street fat cats. They’d be thumbing their nose at us and laughing all the way to banks again.

Shouldn’t we all find out who the bond sellers to the Fed are in these quantitative easings maneuvers? I think somebody may want to tell Ron Paul about this.

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11/06/2010 Equity Sharing vs. Cash Flow Sharing and FARJHO vs. SwapRent

This blog entry first appeared in InvestorsAlly.com blog on November 5th, 2010.

There seems to be still a lot of confusion on FARJHO and SwapRent among people who are new to the “equity sharing”, “fractional interest”, “partial ownership”, “shared equity”, “shared appreciation” and/or “shared ownership” concepts.

As mentioned before that both FARJHO and SwapRent represent the latest inventions of business methods with practical applications in the long evolutionary process of these “shared ownership” related economic concepts as applied to real estate properties and home ownership. Improved business methods, not economic concepts, are patentable under the US and many other developed countries.

http://www.InvestorsAlly.com was created to become the primary and secondary market for FARJHO/LLC member interests. InvestorsAlly provides a peer-to-peer matching service through a new improved business method based on the conventional simple “equity sharing” concept to own homes.

Among many other features, the key difference between FARJHO and all other previous methods employed by other companies are that FARJHO is an all equity based home sharing, while all previous other efforts before FARJHO were focused on a “equity down payment assistance” kind of concept to help potential home buyers to borrow mortgage to own homes. Under those primitive equity sharing schemes, homes could still be foreclosed when the the joint equity owners can not keep up with the monthly debt service and therefore the social stability factor was not introduced in all those earlier shared equity offerings that were available both here is the US and abroad before the introduction of FARJHO.

Since FARJHO/LLC structure discourage borrowing once the FARJHO/LLC is formed to purchase the homes. It would be an all cash deal for the newly created FARJHO/LLC to buy homes. There would not be any foreclosure possibility and hence the social stability could be achieved for the benefits of the tenant/partial home owners.

Individual members to the FARJHO/LLC structure could of course borrow before (and sometimes after) a FARJHO/LLC is formed in order to enhance the leverage of their own individual investments if they wish to. When they lose the monthly income capability they could simply drop off the FARJHO/LLC and be replaced by another new member without endangering the home occupancy status of the tenant/partial home owner.

http://www.REIDeX.com was intended to be the secondary market for a simplified consumer version of property derivatives or an innovation of a new breed of property “cash flow sharing” products, i.e. the SwapRent contract. We have been trying to work with the federal, state, county and city governments as well as some industry groups in this effort since 2007.

Unlike the conventional way of using a “shared equity” or “equity sharing” method to accomplish the shared appreciation objective, a SwapRent (SM) contract was invented to use a ground breaking innovative business method of mathematically quantifiable “shared cash flows” or “cash flow sharing” technique to accomplish the appreciation sharing objective of owning a real estate property. This has created tremendous flexibility in its implementation and commercialization.

For a review of the academic research background and theoretical foundations on SwapRent please visit the home site http://www.SwapRent.com again.

11/04/2010 What do Fed's quantitative easings and Jerome Kerviel's big bets have in common? Their last words: My bosses knew it all along and they didn't stop me.

Now that the QE2 plan has been announced, it may be time to have a quick update regarding how SwapRent could make QE2 redundant and be used as a prudent new innovative public policy management tool to help reduce the severity of the problems that an extremely debt oriented culture has misdirected our capitalism society into.

My hat’s off to the UK and a few other European governments regarding their recent austerity measures to reduce debts. After these European governments have reigned in the monetary expansion and restored fiscal disciplines perhaps it could be the perfect time for them to explore using the newly created third alternative economic policy management tool of SwapRent to pick up the role of stimulus and to better manage their countries’ economic recovery and steady growth.

This new third dimension of economic policy management possibility through directly controlling the domestic property value without using credit or debts may assist many Asian countries to slow down the fast pace of their economic growth and offer those central banks a free hand to raise interests rates in order to curb a potential inflation.

NGOs may also have a new way to assist governments buried in debts to stand up on their feet by demanding a non-debt based domestic economic stimulus program for those countries.

It is quite alarming to see how the Fed is on a self-destruction path to gamble away our country’s economic future as the rest of the world quietly watches these perceived experts leading our country into the economic abyss. The silence may be due to the fact that the rest of the intellectual communities may simply be too star stricken by these super star traders.

It appears simply very apparent to many of us that much of the need of a QE2 could be similar to that of a desperate rogue trader’s unstoppable desire to cover up unrecognized and unannounced losses already incurred on his book. It certainly makes you wonder about their inner circle’s desire to keep the secrecy of their activities at the Fed. It is so strange that it exists this way in a democratic modern world.

Any effort of theirs trying to use fixing unemployment rate as the excuse to disguise their real motive of hiding financial losses on their securities holdings from their previous QE as well as the Treasury Department’s broken coffer is really analogous to treating intellectuals like you and me as 5-year old kids.

As mentioned in an earlier blog post below, there is no other quicker way to have a wholesale destruction of our national wealth than the dollar devaluation triggered by their repeated big punts using money they don’t have now. Why do these incompetent people of the current Administration want us to believe that getting poorer as a nation and as an individual is better for us?

Intellectuals and academics will need to help dispel the misconception that a lower dollar is good for us Americans. What the Administration needs to focus on is to help our nation develop real economic competitiveness through enhanced productivity and innovations, not keeping blaming their inability to alter the exchange rate artificially to create fake and temporary competitiveness in an attempt to divert attention to their inability to tackle the real issues.

At this stage it does not look like I’ll be able to gather enough political influence on the holed-up decision makers of the current Administration about the SwapRent project which was predicted to be more a political issue rather than one about economic merits by the industry groups but I am very sure about what their children or grandchildren will learn from the economic historians.

It is just disheartening to see that no matter how hard each of us American work individually, all the wealth that we have created and will create is getting destroyed in a wholesale destruction due to the dropping dollar value caused by the unforgivable gross incompetency of these people at helm of the current administration.

11/02/2010 From elephant seal's colonies to emperor penguin's rookeries – a few thoughts on the FARJHO matching process

This blog entry first appeared at InvestorsAlly.com blog site on November 1st, 2010.

During InvestorsAlly’s pre-launch period we have received tremendous inquiries. However, as sort of expected, most of the applications have been from Aspiring Home Owners (AHO) rather than from Joint Property Investors (JPI). The ratio is more than 10 to 1.

As could be understood, that even if you run a business like match.com or eHarmony.com there are doomed to be some disappointed or disgruntled customers. Ugly girls and geeky men who have enthusiastically signed up at these dating sites hoping to get married in a month may be doomed to be disappointed. While the Internet technology service provides is a new additional venue and method for them to meet and to increase their chances of getting married, it does not guarantee any successful results.

Similar to the dating service, investors usually have the power to pick and choose the best properties with the most responsible, reliable and enthusiastic home owners to work with in a FARJHO deal. Home owners who want to have the investors’ interest in joining hands with them to help them purchase homes may need to try hard to woo these investors perhaps similar to how some men may have more motivation to hone their skills in pursuing the dream girls of their choice. No pains no gains.

Having said that, what our management would like to see less is that a few elite home owners with great properties get to lure and grab most investor’s attention. We will try hard to make it more evenly spread so that all home owners may get an equal chance but then again, the FARJHO service by design is totally based on free market principles. The free market forces will reign in the end. Management intervention may not be a good thing after all.

Anyone who has been to the Central Coast of California to stop by the state park at the beach near San Simeon to see the elephant seals will remember that a few dominant male seals usually get to breed many female seals alone in a colony. There are hundreds more other rejected male seals could not participate and only got to hang out together with other rejected male seals in a separate area along the beach. This is definitely not what we would like to see happen to the Aspiring Home Owners who are interested in the FARJHO business at InvestorsAlly.

What we prefer to see is more like the emperor penguin’s rookeries where male penguins like AHOs faithfully mate with a few selected female penguins like JPIs and perform the incubation duty where females go out to hunt for food. It is really what the FARJHO mating service was designed to achieve.

This problem could be a tentative growing pain for FARJHO since the capital availability from JPIs is currently quite limited from the tremendous demand generated from AHOs during the pre-launch test market period. As both the domestic financial institutions, pension funds, endowments and government agencies in the US as well as foreign investors get to participate in the near future in a significant way, the problem may get to correct itself. Let’s hope it would indeed be the case.

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