A weekend topic starting with Morningstar. “Morningstar’s director of research defines an investment as ‘an expenditure that can reasonably be determined to have a positive expected return,’ whereas speculation ‘occurs when the return is too uncertain to be estimated, or if the estimate can be made, but is negative.’ At Morningstar, we think it is important to differentiate between speculating and investing. We generally emphasize the importance of diversified, low-cost, long-term investing, because that’s the surest way to accumulate wealth over time. But even we have to admit that there may be room in a portfolio for speculative investments that have the potential to generate extraordinary returns.”
“That is where ‘mad money’ comes in. Simply put, mad money is a small portion of your portfolio that you choose to invest in more-speculative but potentially high-returning investments–and it’s money you can afford to lose. The temptation of quick and large financial gains is difficult to resist, and mad money can possibly scratch this itch.”
From Wehoville in California. “I have been in real estate for almost 20 years, and I’ve learned that the number one way to build wealth in our country is through owning real estate. Simple as that. When I see that almost 80 percent of our city does not own real estate and is renting, that concerns me. If our citizens are not building wealth, over time they will be demanding more and more services to support them, putting more stress on our city.”
“A buyer does not need 20 percent down to purchase a home. There are programs that are available for certain income levels to purchase with zero percent down and zero closing costs.FHA loans are also very popular programs for first-time buyers where only 3.5 percent down payment is required. My passion is helping people build wealth, and I hope my Op-Eds will be a resource for the citizens of West Hollywood.”
The Los Angeles Times in California. “A glass-half-full, glass-half-empty sale recently closed in Beverly Park, where an Italian-inspired mansion called Villa Firenze sold at auction for $51 million. The deal makes it the priciest home to ever be auctioned off, but the final number is more than $100 million shy of its original price tag of $165 million.”
From AM New York. “RealtyHop released its monthly New York City price drop report, revealing that neighborhoods in Manhattan saw the highest number of price drops during March. Most of the neighborhoods that experienced the biggest price drops percentage-wise during March are located in the Bronx. Melrose South in Mott Haven North saw the largest price drops, with the median percentage price drop hitting 23.7%.”
“Neighborhoods in Queens, Manhattan, Brooklyn and the Bronx made it on the top five list for the highest median dollar price drops during March. Jamaica, Queens saw the highest median dollar drop of $250,000, translating to 8.1% of the property’s original asking price. East Harlem South saw the second-highest median price drop in dollar terms with a $156,000 drop which translates to 9.8% of the property’s asking price within the preceding 31 days.”
“RealtyHop’s report also includes the top five addresses still on the market with the highest percentage price drops and the highest dollar price drops in March. 59 John St., a penthouse condominium unit in Manhattan’s Financial District, had an enormous price reduction of 48.2% or $2,050,000 in dollar terms and is now listed for $2,200,000.”
From Bisnow New York. “The major players in the New York City coworking market have buckled under the stress of the coronavirus pandemic, giving back millions of square feet, needing cash infusions or restructuring. Across the country, 20% of all coworking space, or 25M SF, has closed. WeWork has been operating at a massive loss for years. It lost $3.2B in 2020 after a $3.5B loss in 2019 and a $1.9B loss in 2018. Its majority owner, Japanese investment giant SoftBank, has pumped billions in cash into the company to keep it solvent. Knotel, once valued at over $1B, filed for bankruptcy in late January.”
“Each of these major companies is poised to survive, but the effect their boom and bust has had on the market still lingers, said Neil Carlson, founder of a 20K SF coworking outlet in Gowanus, Brooklyn. ‘I think that even before the pandemic, there were a lot of people in business with unsustainable business models,’ he said. ‘They were overpaying for the core real estate … a lot of that was due to the distortion that WeWork created. They had billions of dollars of funny money on the consumer side, but also on the investor side. That’s a bigger structural problem, the venture capital and investment side impacted the startup and real estate side of things, too.’”
The Globe and Mail in Canada. “Archegos, which managed US$10-billion of client money, collapsed last week. It is the second major disruption fuelled by margin trading in as many months. ‘Leverage has created a large number of fortunes,’said George Ball, chief executive officer of Houston-based Sanders Morris Harris, a money manager. ‘Leverage has also created almost an equivalent number of economic debacles.’”
“As it stands, though, central banks have largely focused on unemployment, accepting higher leverage as a necessary consequence. Now is the time to rethink that, argued Gregg Gelzinis, associate director of economic policy at the Center for American Progress. ‘It’s important for financial regulators to lean against the wind,’ Mr. Gelzinis said.”
From Sunday Morning New Zealand. “A new documentary by building experts John Gray and Roger Levie has uncovered the shocking state of apartment buildings around New Zealand. ‘So more recently, it’s a whole plethora of building defects that we’re generally helping people to resolve – poor concrete, missing steel, it’s a long list,’ said Levie. His concern was that the problems would not be addressed until a disaster happened.”
“‘The big concern that we have is this one where a lot of investors buy into a building and they’re getting good returns. They’re really not motivated to understand how the building’s performing and in the end there will be a catastrophic event and we’ll stand up and look at that and say why didn’t we see that coming?’”
From Eternity News. “When it comes to Christians who rise and fall in a way that grabs the world’s attention, Bill Hwang is one of the most memorable. But you still might not have heard of Hwang, even though his meteoric plummet happened less than one month ago. Check out any financial website since late March, though, and ‘Bill Hwang’ appears. The reason is obvious when you discover that this wealthy Wall Street investor and son of a pastor might have lost somewhere between $US200 and $US100 billion. In a matter of days.”
“As The Wall Street Journal summarised: ‘The firm used borrowed money to buy substantial stakes in media and internet companies, including ViacomCBS. That position went south [in late March] after Viacom’s share price dropped, prompting Wall Street firms that had invested in Archegos to demand it make up some of those losses.’”
“Hwang moved to Las Vegas when he was a teen. He learned to speak English while working at McDonald’s and further studies in finance brought him to the attention of ‘hedge fund legend’ Julian Robertson in the late 1990s. Hwang helped Robertson break into Korean markets and things were going super-profitably until big losses in 2008. Then, in 2012, Hwang’s Tiger Asia firm pleaded guilty to ‘wire fraud.’ According to Bloomberg: ‘The [Securities and Exchange Commission] said the firm used inside information to trade in shares of two Chinese banks. Hwang and his firm ended up paying $60 million to settle the criminal and civil charges.’”
“Before the SEC ban ended, Hwang was able to return to Wall Street – as a trader for a family firm, not a major hedge fund. But his eye-watering loss a few weeks ago throw serious doubt about what sort of comeback Hwang might yet make in the world of high finance. ‘While reading the Bible, I realised that God likes setting a fair value,’ Hwang described his approach to investing, in 2019.”