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About Transparent
Pat Kitano authors Transparent Real Estate. I'm currently co-Founder, Managing Principal of Domus Consulting Group, a management consulting firm working with real estate brokerages, media/publishing companies, and Web 2.0 companies to develop social media strategies, and with venture investors on new business models.
Since graduating from Cal Berkeley (Geophysics) and Columbia University (MBA), I've been involved in four competitive industries - films, investment banking, internet technology and real estate.
I'm a regular speaker and commentator on real estate industry and technology issues and am always on the lookout for a "transparency" angle.
I welcome contributors... or just send interesting items to pat (at) TransparentRE.com
TRANSPARENT REAL ESTATE
Potential Cost of the Bailout? $8 Trillion?!
Today, the public seems to be greeting the Fed's new $800 billion bad debt repurchase and consumer credit support plan with a ho-hum. Maybe they think it's part of TARP, but it is an additional $800 billion of taxpayer money being allocated to staunch the credit crisis. And yesterday, the reported $300 billion + bailout of Citigroup was also met with the same ennui. The markets reacted positively, because these days "no news is bad news" and "good news is good news because it is so rare".
The public is being hit by a new bailout number daily... the media didn't seem to be doing any accounting. Well, CNBC did a swift calculation and produced a "potential" bailout figure of over $8 TRILLION. What's surprising are the potential backstop items that aren't specifically revealed to the public in their scope. The following table itemizes events that most of the public will recognize in yellow and the potential backstop and obscure items in blue:
|
|
Above the line: what you know about |
|
|
Nov 25 |
Special bad mortgage debt buyout |
$600 billion |
|
Nov 25 |
Consumer credit support |
$200 billion |
|
Nov 24 |
Citigroup bailout of bad assets |
$250 billion |
|
Sometime before Jan 20 |
Obama's fiscal stimulus plan |
$500-$700 billion |
|
Oct 3 |
TARP |
$700 billion |
|
Sept 16 |
AIG bailout |
$152 billion |
|
Sept 7 |
Fannie/Freddie bailout / backstop |
up to $200 billion |
|
~ |
Fannie/Freddie increased backstop |
up to $144 billion more |
|
July 30 |
FHA housing rescue bill |
$300 billion |
|
Mar 14 |
Bear Stearns bad debt backstop to facilitate JPMorgan Chase acquisition |
$29 billion |
|
|
Below the line: hidden backstops and obscure items |
|
|
Oct |
Fed purchases of commercial paper. $270 billion used as of 11/19 |
up to $1.8 TRILLION |
|
|
FDIC guarantees |
up to $1.9 TRILLION |
|
|
Fed Term Auction Facility to meet bank credit needs. $415 billion credit extended |
up to $900 billion |
|
|
Credit
extended to banks and broker dealers through Discount Window.
Theoretically unlimited line, $296 billion extended as of 11/19. |
$296 billion |
|
|
Unlimited temporary Fed currency swap lines with other Central Banks |
$165 billion |
|
|
Exchange Stabilization Fund to guarantee money market mutual fund principals |
$50 billion |
|
|
Treasury purchases of mortgage backed securities |
$27 billion |
|
|
Local community grants to repair abandoned homes due to foreclosures |
$4 billion |
That Bear Stearns bailout of $29 billion back in March sure looks quaint now.
Media Controlling the Markets - the "Geithner Rally"
The stock market is remarkably influenced by a media and PR war of horrendous economic news versus the rare snippet of good news. With such a dearth of good news, the government bodies have had to create their own and time their releases (I discussed this PR tactic a month ago). Obama's news release of the appointment of Timothy Geithner as his administration's Treasury Secretary at the last hour of trading Friday was received favorably and stoked the markets up 6% after the ominous collapses to new lows on Wednesday and Thursday. Calculated? Sure, but it shows how easily manipulated the markets are.
Now, Obama is signaling a "far more ambitious" stimulus plan to restore the economy and market confidence. He'll use the next suspense-filled 60 days to hopefully keep the markets maintained so he gets his running start on January 20 to take responsibility for, at the very least, a market confirmation of a bottom.
Now, Obama is signaling a "far more ambitious" stimulus plan to restore the economy and market confidence. He'll use the next suspense-filled 60 days to hopefully keep the markets maintained so he gets his running start on January 20 to take responsibility for, at the very least, a market confirmation of a bottom.
Is SEO Dead?
For real estate bloggers:
Last year, the SEO reason to blog was to get search engine traffic to your blogsite. For lead generation purposes, search engine traffic is not the most efficient; chances are slim that your blog will answer the question a Googler is asking. The best case was to get random readers to "follow" your blog.
Now, the "lead generation" reason for participating in the social media is to find people who will "follow" you. Strangers you don't know follow you, but you don't know why. Perhaps it's because you are providing information they need. Or looking to buy a house. Chances are much higher these "followers" are better qualified for your business than those pushed to you by search engines.
SEO is not dead. SEO still works because it "finds" your citations across the social media and then directs readers to you; Twitter seems particularly search engine friendly.
Conclusion: The social media creates contextual relationships based on common interest and purpose through systems of "followership" - blog RSS subscription, Facebook and LinkedIn friending, Twitter and Friendfeed following, Google Reader sharing. This informal, virtual referral system becomes the lead generation system. SEO's functionality is to fill in the blanks and randomly push people who might follow you.
Is Blogging Dead?
Wired magazine's article last month Twitter, Flickr, Facebook makes Blogs look so 2004 posits the "death of blogging". Why?
Scroll down Technorati's list of the top 100
blogs and you'll find personal sites have been shoved aside by
professional ones. Most are essentially online magazines: The
Huffington Post. Engadget. TreeHugger. A stand-alone commentator can't
keep up with a team of pro writers cranking out up to 30 posts a day.
In general, mainstream blogging in essence has lost its cottage industry status... the new blogs are professional, mass media properties. However, most real estate blogs don't aspire to be revenue generating entities based on online traffic, their mission is lead generation. With this mission, the objective for the average agent is simply to get as fast an online presence as possible in the least amount of time.We know building a content rich real estate blog, with how-to articles and tips, takes a lot of time. With so many agents already thinking that the blog is the new new website, I think the rules for real estate blogging are now being rewritten. Yes, blog articles can make fine reading, but what your clients really want to know is how the housing market is doing at this very minute, tips to save money, and secret stuff about their neighborhood. All in an easily processed sound bite. Instead of writing a how-to article or an explanation on the mortgage application process, just spend a few minutes citing and complimenting someone else (who you hopefully know and respect) who has done a fabulous job explaining it.
Over at HomeGain blog, I've posted nine tips on how to make your blog timely and content rich, without having to write long blog articles.
Blogging is not dead, it's changing.
Related articles: I delve further into the changing nature of blogging with the article "The Portability of Content" at MediaTransparent.com
Consumer confidence test
Would you buy a car from a company that may no longer be in business in as little as three months? Just the idea of a disappearing warranty makes me cringe.
The auto bailout is GM's sole hope and they're smartly promoting their campaign on YouTube:
Simply put, I believe an auto bailout would be throwing money into a black hole industry that needs a complete overhaul (umm, of course that's a relative statement at this point in time). However, letting them Chapter 7 would make American cars untouchable to most consumers. Best solution might be a merge, a purge and a government commitment to keeping a single united entity in business to maintain that consumer confidence.
The auto bailout is GM's sole hope and they're smartly promoting their campaign on YouTube:
Simply put, I believe an auto bailout would be throwing money into a black hole industry that needs a complete overhaul (umm, of course that's a relative statement at this point in time). However, letting them Chapter 7 would make American cars untouchable to most consumers. Best solution might be a merge, a purge and a government commitment to keeping a single united entity in business to maintain that consumer confidence.
HomeAway.com raises $250 million funding
What are the differences between venture backed companies Trulia, Zillow and HomeAway?
1. Monster investment
2. Business model based on subscriptions
3. HomeAway is really a Travel Site (yes, trick question)
Vacation rentals are not a real estate transaction play. HomeAway is dominating this market by acquiring its competitors, and presumably investors are paying for that market position.
Techcrunch states that "the financing is the largest minority investment of a U.S. Internet company in the last eight years, according to Venture Source". With a pre-money evaluation of $1.15 billion and 20x ebitda, it seems like an unusually wild bet in this recessionary climate. Maybe the investors think more people will leap at cheaper condo rentals over hotels.
1. Monster investment
| Company | Total capital raised |
| HomeAway | $459mm |
| Zillow | $87mm |
| Trulia | $33mm |
2. Business model based on subscriptions
| Company | Revenue base |
| HomeAway | ~$150mm - vacation rental owners pay subscriptions for listing |
| Zillow | $? - Advertising |
| Trulia | $? - Advertising |
3. HomeAway is really a Travel Site (yes, trick question)
Vacation rentals are not a real estate transaction play. HomeAway is dominating this market by acquiring its competitors, and presumably investors are paying for that market position.
Techcrunch states that "the financing is the largest minority investment of a U.S. Internet company in the last eight years, according to Venture Source". With a pre-money evaluation of $1.15 billion and 20x ebitda, it seems like an unusually wild bet in this recessionary climate. Maybe the investors think more people will leap at cheaper condo rentals over hotels.
How to be a Successful Mortgage Broker in a Difficult Economy
In difficult economic times, the 80/20 (or even 90/10) rule, where 80% of deals are done by the 20% top producing agents, kicks in. Simply put, the most efficient way for mortgage brokers to get new business is to ally with these top producing real estate agents for client referrals. How do brokers influence these agents to work together with them? Two obvious ways - 1) provide marketing value and 2) develop a quid pro quo lead generation relationship.
Why such a simple, even "duh" post? Later this month, I'll explain a system that gives mortgage brokers the tools to develop agent co-marketing programs with an ROI. I would like some feedback on the system, so if you're a mortgage broker, please contact me.
Global Fiscal Stimulus - Who Can Top China?
The global central banks' sharp dropping of interest rates is a natural monetary policy solution to the economy's woes, but over the weekend, FT's Munchau correctly states that fiscal policy - using government spending and tax incentives - will be the key to pumping the global economy.
The future of China (according to CNBC, it contributed to 27% of the world's economic growth) relies on a healthy economy and they anted up big yesterday with a $586 billion stimulus plan that amounts to 16% of its economic output last year. It makes the US's emergency $100 billion stimulus plan that Obama wants passed before January 20 look puny. But I'd expect that Obama is planning his own Big Bang plan. Every country is in - the G20 nations (including lynchpins China, Russia, India and Brazil) just met and committed to fighting the global recession (as they should, they are more susceptible to a crash than the G8).
Unfortunately, the continuing wave of bad news will undermine any investor and consumer confidence that the concerted effort that every government has now signed on.
Obama's Mission for the Global Economy
President-elect Obama now has the immediate and extraordinarily difficult mission
of fixing the national economy, and be rewarded with a legacy if he can
do it. One key is to rally global cooperation from the central banks
and develop unified credit market strategies for both countries and
banks. The world's reaction to the Obama presidency has been positive
and hopefully, Obama can help stitch together a global consortium that
will instill investor confidence (not all investors are American...).
The most stubborn global players have been the European central banks,
who have had internal conflicts on strategy, and they have been
reluctant to lower interest rates despite the fact inflationary
pressures have eased.Despite all the warnings from pundits that interest rate cuts are at best inconsequential, and at worst hyperinflationary, globally low interest rates will help the housing markets recover. It worked in 2002-03 to spark the housing boom after the tech bubble bust and 9/11. There should be no worries about recreating Bubble 2, the lessons have been learned and the Democratic administration will ensure regulation.
So tomorrow, the European Central Bank and the Bank of England are set to cut interest rates 50 and 75 basis points, respectively. If they trust a new American administration will be easier to work with, they may follow up this cuts with "dovish" language - we'll do what it takes - to instill market confidence. I believe one of the reasons why today's market dropped so sharply may be traders' warning that they won't tolerate measly action by the ECB and Bank of England. (Note- markets pessimistically tend to drop the day before important rate cut decisions). They are telling Europe to be aggressive rate cutters.
UPDATE: Wish I could embed this Financial Times video commentary on the recent history of ECB/Bank of England rates. FT should promote their content through blogs.
UPDATE (11/6; 6:00am PDT - Bank of England drops interest rate a whopping 150 bp. ECB cuts only 50bp as expected; it's more difficult for the ECB to reach consensus within the Eurozone. The global markets always seem to follow the US lead. I'm expecting a stabilizing day today as investors gain confidence in the unified global response.
Slideshow - The New Broadcasting Real Estate Brokerage Website
This is a slideshow presentation that accompanies last week's article The New "Broadcasting" Brokerage Website.