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You Don't Bring Me Flowers Anymore
by Rob Kirby

Realty Reality Guest Essay by Rob Kirby, our Canadian Friend from Toronto
‘You Don’t Bring Me Flowers Anymore’
– Neil Diamond, Alan & Marilyn Bergman, c. 1977 [1]

The Barbarous Golden Snapdragon or Atalanta at the Race?

Ever find yourself pining for the good old days when the three golden words in real estate were location, location, location? Quite a golden concept wasn’t it? -- Ehhh, I mean that gold was actually openly used in a meaning implying value? Think about that again for a moment -- if you have the time of course! The term ‘gold’ was not being used in a pejorative sense? It was being used as an adjective and implied value. That was GOLD – the relic! That’s the same yellow stuff that Central Banks all over the civilized world can’t wait to get rid of, with the possible exception of the FRENCH. [2]

I apologize for the digression since we were talking about real estate. So… if a property’s location is said to be ‘golden,’ I ask:

 “Where do you think it’s going be located? Would you start looking on the wrong side of the tracks or in the worst end of town? Not freaking likely. Of course we’re talking top end here.”

Ripley’s “Believe It or Not” So Golden Rose of Texas

The other thing we can draw from the golden words, that being the location thing of course, is a property’s worth used to be largely determined by where it was situated. In those good old days someone would ring up a real estate agent, they’d qualify you as a buyer, point out an area that you were qualified to buy in and explain why it represented ‘value.’ The funny thing, Ripley’s believe it or not, this all made sense. How times have changed?

Lie-de-tek Pansies, GSE Bloom & Blush, or the Econometric Keynesian Daffy-Dill Weed?

Nowadays, you don’t need a real estate agent. The new metrics say it’s all going to be worth so much more next week, next month, next year, next life…….. I think you get the drift. Location is bonus. Heck, price tags and maps are irrelevant, that they are relics, too. In the new paradigm we have bar codes, GPS satellite navigation, drive by appraisals, and AVMs (Alternative Valuation Models). We also have favorable terms; zero down, zero interest, cash out, cash back, rent to own, wait three months to pay, don’t pay a cent, don’t pay for a year, motivated vendor, vendor take back and no points (all OAC -- On Approved Credit, of course!). All you need to get rich in real estate these days is a ‘friendly’ government certified appraiser willing to attest to an arguably predetermined loan amount and the URL of a virtual mortgage broker at LIE-de -tek Pansies.COM. What completes the daisy chain is the originating financial institution securitizing the bundled loan [5] and getting the liability “off their books” -- effectively right back onto the shoulders of the deluded tax payer, who bought the house in the first place under the American central bank policy (through the GSEs, of course) of 100% home ownership!

The Scarlet Pimpernel or Please Don’t Eat My Daisy Chain Blue Bonnets

By now, Dear Reader, one might be wondering what meaningful part the financial institution really plays in the whole transaction? Let’s review. First, they ensure (or insure, Reader’s choice) (for a fee of course!) that the financial institution assumes absolutely zero risk. To justify the charges, we are told over and over again how much we, as consumers, benefit from a strong banking system. Who’s to argue, especially if you happen to own bank shares? Second, if you cannot afford to pay your mortgage the first time around, then they saddle you with the burden of the liability as a purchaser/holder of the mortgage backed security the second time ‘through the loop’, for you guessed it - more fees. Because fees in real estate transactions are generally expressed in percentages, the higher the price of the transaction, the more profit financial institutions stand to make without incurring substantial amounts of additional risk. Now I ask, who benefits most from rising real estate values? Why “they” of course benefit! [3]

Leased Beamer Blue Bells, the Glass-Bottomed Fishing Boat with Two 455s? Or just a case of the 42 mortgage skidoo?

So now you might think I’m acting like some kind of big shot that buys and sells lots of homes. It’s a pretty safe bet that most of you know people who are partaking, and I’ll wager many of you are likely itching to give Lady Luck a try yourselves. Let me explain how it works. Some guy named Ronny Insomnia from CNBS (aka CNBC) helped me out a lot, when he told me how to maximize my credit rating - what a prince! There are only a couple of small problems. After my wife and I ‘strapped on’ 26 homes and 42 mortgages in the past eighteen months, we developed gastroenteritis, and cannot sleep at night! Then there’s the small issue of us not having any health care. We lost that when we were fired after our real jobs got out-sourced to India and Pakistan. Thank the Good Lord we had the satisfaction of training our replacements. On the bright side, we do have $30K (cash outs) in the bank, two leased Beamer 5-series (zero down, no payments for two years), 12.3 million in mortgage commitments (average 3.25% ARM) and a Winnebago, that we will own outright in 15 years -- currently sitting in the driveway. All in all, life is pretty good. Oh, did I mention the 75’ cabin cruiser dual 455 engined fishing boat I bought on my Visa Card, and that we’re both 63 years old? Excuse the tongue in cheek example for a moment and ask yourself this question: Are debt strapped Jane and Joe Six-Pack, who are struggling to make ends meet with their ARM in an historically low interest rate environment, ever going to make it if interest rates normalize? Interest rates will rise at some point, quite simply because they must. All national pastimes of mass hysteria and delusions have endings -- eventually.

Psychedelic Hallucinogenic Sunflowers Grow Around Leavenworth, Don’t They? Or is it just funny mushrooms I have been eating?

In other words, it’s not so much about location, location, location any more is it? It seems it’s more a question of psychedelic terms and inflation, inflation, inflation being the primary drivers of ‘value’ in today’s real estate market.  Perhaps this is all to be expected, seeing as how the financial services industry is one of the largest benefactors of the increases in real estate values?  Our economy is increasingly becoming service dependent with the financial services segment driving roughly 25% of GDP alone. The rapid increase in real estate values in general has been described by some intelligent folks as unjustified without a corresponding increase in national income. You be the judge -- have price rises been manic, or just simply meteoric? [4]

You can kiss my Grits, but you can’t kiss my Tulips!

If, Dear Reader, you want to dismiss my tongue in cheek example about the indebtedness of Jane and Joe Six-Pack above as ludicrous exaggeration, shall we look at the Histories of the Madness of Crowds as a National Pastime? Let us look at a real ‘documented’ case history to serve as a reminder how excessive things have been in the past in the real world – Tulip Mania! In 1559 Conrad Guestner brought the first tulip bulb from Constantinople (Istanbul, for you Modernists) to Holland. People in Holland (aka The Netherlands) fell in love with them because they were a status symbol, beautiful, exotic, rare, and hard to get. Speculators noticed the ‘love affair’ people had with tulips and got involved. By 1634, tulip mania had taken hold. People in middle class Holland were actively involved in the trade. At the crest of the mania in 1635, one single tulip bulb could fetch as much as:

• four tons of wheat
• eight tons of rye
• one bed
• four oxen
• eight pigs
• 12 sheep
• one suit of clothes
• two casks of wine
• four tons of beer
• two tons of butter
• 1,000 pounds of cheese
• one silver drinking cup

Beware the Black Dahlia in the Punch Bowl!

Depending on where exactly you live, we are talking somewhere between 25 and possibly as much as 100 thousand dollars worth of goods in today’s terms for a single tulip bulb. Perhaps, in some small part, this helps explain the age-old quandary as to how diamonds can be a girl’s best friend, but girls (or they?) simply cannot live without flowers. I sure hope the real estate market never loses its bloom. It could be the Black Dahlia that spikes Mr. Raines’s Punchbowl…

© 2004 Rob Kirby
Toronto, Canada
Email

Editor’s Footnotes –

[1] You Don’t Bring Me Flowers Anymore – a c.1977 collaborative song composed and written by Neil Diamond, Alan and Marilyn Bergman, and recorded by both Diamond and Barbra Streisand in the late ‘70s. For the melody, click on the title of the essay. For the lyrics, click this link: http://ntl.matrix.com.br/pfilho/html/lyrics/y/you_dont_bring_me_flowers.txt.

[2] It was the French taking their balance of payments in gold bullion that forced Mr. Nixon to close the USA gold window in the early 1970s, cleanly establishing legal tender fiat paper money the world over, c.1971. I guess they learned their lessons well from the Assignat at the time of the French Revolution, huh?
See: Fiat Money Inflation in France by Andrew Dickson White.

[3] They? – the banking cartel from the central bank, to Wall Street, to the GSE money pump, to the local pawn…. Ehhh…. Money laundering…. Ehhh…. Mortgage lending outfit. Also included are the banking cartel's other cast of characters including appraisal management companies and professional trade associations associated with real estate transactions, as well as the give away down payment philanthropies gearing toward 100% home ownership.

[4] FIRREA 1989, which lays the ground-work and set-up for The Sting, locking up all the realty appraisers in Leavenworth, Kansas should, when, and if the Big Boom occurs. In the game of Bailout, the lenders will get off Scott Free, and the appraisers will go to the Big Pig-Pen. If Jane and Joe Six-Pack aren’t in Debtor’s Prison, the central bank bailout of the GSEs will add more “strap on” paybacks to add to their money woes. FIRREA is the set-up for the real estate wisteria (hysteria). Oh, what a tale of woe!

[5] See Mr. Larry S. Levy's The Fraud of Appraisal Regulation.

Editor’s Comments from Ole Bear aka Gale Bullock

Rob Kirby also just penned the essay… Where Dogs Get Their Names, which was featured on Midas Bill Murphy’s www.lemetropolecafe.com. This is quite a succinct little piece on Gibson’s Paradox and the FED, as well as a macro-market lesson in global econ 101, linked of course to central banking, with just a touch of allusion to realty, via the Bank of England. Here is the link in the Internet Public Domain.

We enjoy Mr. Kirby’s tongue and cheek Canadian wit. The footnotes are mine, as well as the paragraph headers, and I made a few tweaks to the text along with the author’s intent. All the graphics and images are courtesy of your webmaster, Lady Mary Puplava – who by the way takes great pride in artistic license.

After I had read Where Dogs Get Their Names, I emailed Mr. Kirby to tell him how much I enjoyed his writing style and how much I liked the piece. Seems this Dude has a real understanding of realty in micro and macro market environments. His response to my initial email contact is basically the essay you have before you. I told Mr. Kirby to make some minor edit changes and we would present his email to me as a Guest Essay for Realty Reality. Voilá!

Two-Toned Analysis 

American cars in the 1950s came in two-tone colors for the beautiful people. I know, since I own a two-toned 1957 Mercury Monterrey Phaeton Four-Door Hardtop in White Whipped Cream and Sea Green Turquoise – the only way to describe the colors. The imagery of real estate linked to gold, golden apples, and golden location is but an application of the Golden Rule, which the banking cartel seems to have forgotten.

The Mythical Creature from Jekyll Island [being nothing Federal, nor a Reserve of any kind] and its Argonauts at the GSEs, in Congress, the realty valuation trade groups, and their Gestapo at the appraisal management companies [who drop appraisers who don’t email appraisal report assignments] indicates to me already that the paper trail for the game of bailout is already being burned in cyberspace to make pretty these bundled loans that Mr. Levy speaks of in The Fraud of Appraisal Regulation.

However, when the game of bailout begins and starts to get really nasty, we suspect a lot of realty valuation experts’ computers will be confiscated by the FBI…. And their Behinds end up in Leavenworth because of inflating the micro and macro realty markets.

The bright side is that this will create jobs in Kansas and Missouri, because quite a considerable amount of capital improvements will have to be made at Leavenworth, with the Feds, exercising their right of eminent domain to tear down houses and corn stalks in order to increase the capacity of the Pig-Pen. Grin! Black and White two-tone, ain’t necessarily my type of colors.

Very Big Ole Bear Grin!

© 2004 Realty Reality