Stocks, bonds, gold — all bounced around last week.<\/p>\n
And as we mentioned on Friday, Americans continue to turn into “neo-serfs.”<\/p>\n
“Wall Street is running a new profit game,” writes Shabnam Bashiri at
\nSalon.com, “by buying foreclosed houses and renting them back to their
\nformer owners.”<\/p>\n
Yes… nice business. Even better than it looks. It’s why the rich
\nget richer… and the 1% are way ahead of the other 99%. Writes Bashiri:<\/p>\n
Every day, it seems a new report comes That’s because the housing “recovery,” The Blackstone Group, the biggest Property records show that many of the Gone are the days of calling up your “Paycheck to paycheck.” That’s the way serfs live. In someone else’s Got a health problem? Oh, yes — check into someone else’s health system.<\/p>\n Want an evening out at a restaurant? Put it on a credit card; let someone else pay for it.<\/p>\n Serfs<\/strong><\/a> We saw an ad for a new Smart car. “Just $199 a month,” said the ad.<\/p>\n People don’t own cars anymore. They just lease them… or not even. A Some young people we know don’t own anything. They say it’s You want a smart financial strategy?<\/p>\n Look at Blackstone. One of the houses it bought — probably much like Do the math. If they bought the house in 2005, they probably had a 6% Now the suits take over. Thanks to the conniving of other suits at the Fed<\/strong><\/a>, That gives them a monthly capital cost of less than $300 per month. Everybody comes out ahead. The former homeowners don’t have to move. But wait. It gets better. Because Blackstone is not counting on a real bull market<\/strong><\/a> in housing. Nope, the geniuses at Blackstone are making a big bet on interest rates.<\/p>\n At no extra cost, they have gotten a free “put option” on the bond And this payoff is practically guaranteed. Blackstone’s got its money-printing friends at the Fed to make sure it happens.<\/p>\n
\nout praising the ongoing housing recovery. In Georgia, home prices are
\nup 5% over last year, a year in which we also had one of the highest
\nforeclosure rates in the country. Seems a little odd, doesn’t it? Don’t
\nforeclosures usually drive down the market?<\/em><\/p>\n
\nas they’re calling it, is fueled almost entirely by Wall Street private
\nequity firms, hedge funds and the Fed’s unwavering support. After
\ncreating a massive bubble in home prices that eventually burst and
\ncaused our economy to go into a tailspin, these guys have decided to
\ncome back for more and figured out a way to profit off their destruction
\n— by turning foreclosed homes into rentals and securitizing the rental
\nincome…<\/em><\/p>\n
\nplayer in the new REO [real estate owned] to rental market, has spent
\n$2.5 billion in the last year purchasing 16,000 homes, a number that
\namounts to over $100 million per week.<\/em><\/p>\n
\nhomes Blackstone has acquired in Fulton County over the last few months
\nwere purchased on the courthouse steps at the monthly foreclosure
\nauction, or through short sales — when a lender agrees to accept less
\nthan the amount owed on a loan. The vast majority of these homes are not
\nempty, but occupied by homeowners who fell behind during the Great
\nRecession…<\/em><\/p>\n
\nlandlord to let them know rent will be there on the 7th instead of the
\n1st this month. As more and more Americans live paycheck to paycheck,
\nand wages continue to decline or remain stagnant, paying rent a few days
\nlate could lead to a negative credit score, impacting their ability to
\nsecure resources and move up the ladder of the middle class.<\/em><\/p>\n
\nhouse. On someone else’s money. Often driving in someone else’s
\nautomobile. And sometimes even sitting on someone else’s furniture.<\/p>\n
\ndon’t necessarily live poorly; they live badly. Because they’re not in
\ncontrol of the resources they need to live well. They are dependent, not
\nindependent.<\/p>\n
\nlot of young people use Zipcar — a car-sharing service by which you
\n“rent” a car using your iPhone. You never go to a rental agency or see a
\nrental agent. You get a code via iPhone. You use the code to unlock the
\ncar. Easy. Peasy.<\/p>\n
\n“liberating.” But that is something else. Not owning anything can be a
\nsmart financial strategy. But not owning a house because it was
\nforeclosed… and not owning a car because you can’t afford one… does
\nnot sound very smart.<\/p>\nThe Suits Take Over<\/h3>\n
\nthe others — was bought for $90,000. It has a mortgage on it of
\n$200,000. The former owners are still living in it. Instead of a
\nmortgage, they’re now paying rent. Now they’re serfs.<\/p>\n
\nmortgage. Six percent of $200,000 is $12,000. Add in another, say,
\n$3,000 in amortization and charges… and they probably had a monthly
\npayment of about $1,250.<\/p>\n
\nthey are able to borrow 30-year money for about 3.5%. Let’s add another
\n$10,000 to their purchase price (closing, taxes, maintenance) to make
\nthe math easier.<\/p>\n
\nAnd because these guys have big hearts as well as big wallets, they
\nreduce the renter’s monthly payment to only $1,000.<\/p>\n
\nThey save money each month. And Blackstone — which may have only about
\n$10,000 of its own money in the deal — earns (are you ready for this?)
\nas much as $6,000, net, per year. That’s about a 60% rate of return on
\nits cash.<\/p>\n
\nmarket. That’s right: They’re short the bond market in a major way. When
\nbond prices finally fall (perhaps this process has already begun),
\nBlackstone is going to get another big jackpot.<\/p>\n