Christopher Thornberg of Beacon Economics #133

This week Bruce is joined by Christopher Thornberg. Christopher is an expert in the study of regional economies, real estate dynamics, and business forecasting. In 2006, he confounded Beacon Economics which is economic research and consulting firm that specializes in real estate markets, local economic development, and public and private policy issues.

Beacon Economics will be doing its first Los Angeles Forecast Conference in the last week of July. There will be a panel of CEOs representing health care and the financial industry who will be talking about the changes occurring in their industry. It will be their first annual event. They are partnering with the LA Chamber of Commerce and Pepperdine to make this event happen. Southern California is the economic center of gravity within this state, and the center of Southern California is Los Angeles.

Bruce asks if a company is looking to relocate would find California to be a leading option. There are some things you have to consider if you come to California. You have to worry about where your employees are going to live. Nowadays homes are much more reasonably price compared to a few years ago. Companies coming to California will be able to rent commercial property for a lower price per month as well. The prices have not come down as much as they should have though, because of the leasing situation, and because there are still some landlords who seem to be in denial about the shape of the economy. Residential and commercial property are two sides of the same coin, and yet they come at different stages of the business cycle. Residential leads the business cycle, and commercial lags it.

The commercial real estate market is about to feel the same hit that the residential market has taken, but it is taking more time to mature. Part of the reason the commercial market is taking longer to go down is because the banks are not pursuing bad debt. The banks have more incentive to be lenient towards people they have lent money to, because if you foreclose on a loan then you actually have to mark that loss down in your books, but if you do not foreclose then the FDIC will allow you to keep that on the books at face value. They call it extend and pretend.

In the residential market there are a lot of properties that have not begun foreclosure, and some people have not made payments for 18 months. There are some banks that are willing to delay the foreclosure process, and some banks just can’t catch up, and there is also a problem with moratoriums that are slowing this situation down. Christopher thinks that if you have a problem then you should be trying to work through it and move forward, but we seem to be fond of dragging this problem out. Some will tell you that you want this problem to be solved over time, because the economy is already so weak, but Christopher says that there is very little evidence that foreclosures significantly hurt the economy. Moratoriums on foreclosure make it a lot longer problem.

On Christopher’s website there is a quote saying, “It’s not what Wall Street troubles me to California, it’s what California troubles me to Wall Street.” When we had a big financial meltdown last year, many reporters called Chris saying “What does this mean for California?” Christopher laughed at this, because Wall Street has presented itself as the leader of all financial things, but that is nonsense. The stock market can change its direction in the afternoon if it gets afraid. California has been in a recession since 3rd or 4th quarter of 2007, yet Wall Street made many bad bets and it did not seem to affect the economy for close to a year. If you did have a true meltdown in the financial system then you would have massive deflation and things would be far worse than they are now. We had a depression expert in the Federal Reserve, and he wasn’t going to let that happen.

Trillion has replaced billion as the cost of solving problems, but Christopher says inflation does not seem to be a likely outcome of the spending we are doing. This is because a large portion of the money we are spending is being done through treasury bonds. That does not have an inflationary effect. What does have an inflation effect is the expansion of the money supply. The Fed, through its program of quantitative easing, has expanded its monetary base by 100 percent over the last year. If that money was to get into the real world then it would have an inflationary effect, but it hasn’t. Most of the money that the Federal Reserve has made has ended up in bank reserves. If the banks started lending that money then we would have an inflation problem, but Christopher thinks that if that ever happened that the Federal Reserve would start to get rid of that excess liquidity.

Bruce asks Christopher what the ramifications will be for 12 to 13 percent in California. Christopher does not think that unemployment is going to be a big problem. Unemployment is a lagging indicator. However, it does increase the amount of stress being put on the financial system. People over their heads in debt and underwater in their home but beyond that he doesn’t see a direct effect on the economy.

Bruce asks if he thinks lower wages will be an issue. Will renegotiation for lower union rates will come up? Christopher thinks it will have a little impact. Hours are already being cut for government and education jobs.

If California is one of the leading states in unemployment then it will affect migration patterns in the short run. The number one reason people move is for job opportunity. The number two reason is relative home prices. This means people will not have as much motivation to move into California for a while, but some people may start moving back into California because of the low home prices.

Builders couldn’t possibly be interested in creating building lots right now, so Bruce is worried that there will be a housing shortage around 2012 or 2013. Christopher thinks that is possible but he does not see us having an issue with single family housing. There are lots of lots ready out there, and as soon as someone sees the opportunity they will build. Christopher does think there will be problems with rental houses. When people start moving back, there will not be enough housing for low income families. Christopher hopes the state will make policy changes to encourage multi family production.

Bruce thinks that it might be a solution to give investors financing so that they can hold properties for a reasonable price because then the market would dictate what the rent would be. Christopher thinks we got into this mess because of too much financing but now there is not as much financing as people would like. Christopher wonders if there is a true market failure occurring right now or are people simply suffering from credit withdrawals. There was never too much financing for investors who buy and hold properties and eventually pay them off. The financing problems occurred when speculators and owner occupants got involved. If your goal is to find reasonable rentals, they are all over the place in Moreno Valley and San Bernardino, but the financing is not available for investors to get these homes. What seems like a sure deal to investors does not seem like a sure deal to the banks.

Bruce thinks that the number of bank owned properties is going to dramatically increase in the next year. Bruce asks if Christopher sees more price damage coming to California because of that. Christopher does not think that these bank owned properties are not going to really decrease prices but they will help hold prices down. There is pent up demand for housing. If you go to an auction, you will see people who want to buy foreclosed units. Bruce thinks that this is true in the short run.

Bruce wonders how we can have pent up demand when we have the most generous financing programs in existence. It is surprising to Bruce that there is this much demand when there are so many people who have been artificially allowed to participate before they were ready.

In Riverside and San Bernardino, rent is more expensive than the PITI payment. That has never occurred in California. This is occurring because there are many people who cannot qualify for mortgages because they already have a bad mortgage on their payment. Unemployment and foreclosures are at a record, so Bruce does not understand who is actually going to borrow the money to buy these homes.

Christopher thinks there are more potential buyers who smartly sat on the sidelines and waited for these opportunities to come up. There may be other people who are being co-signed by their parents. If you talk to bankers they will tell you that there are people coming through their doors who have a recent foreclosure, and they will look the other way because they know that these people have made a mistake and there is no point in turning down a potentially good loan. Bruce agrees with Christopher here.

Most of the mortgage market is being dominated by Fannie Mae and Freddie Mac. Unless Fannie and Freddie are willing to back mortgage product and buy them off of banks, there is going to be very little money available.

Current loan modifications in California do not change the principal balance. Christopher does not think these have any chance of working. You cannot expect to have a true recovery by simply modifying the payment. People are not fooled by these modifications. Even though we are modifying their payments, they are still in an incredible amount of debt. It will take many years for them to get rid of the debt they have taken on, and their credit score will heal faster than their equity position. In 2008, 7 out of 10 people who applied for a loan modification ended up in foreclosure eventually.

Bruce asks Christopher what he thinks will indicate that real estate is starting to get healthy. Christopher thinks that sales are important and mortgage delinquencies from the Mortgage Bankers Association. For California, about 9 percent of all mortgages are delinquent. That tells you that we are no where near the end of this problem.

We look forward to Christopher being on our panel for I Survived Real Estate 2009.

Christopher Thornberg is a founding partner of Beacon Economics. Dr. Thornberg is an expert in the study of regional economies, real estate dynamics, labor markets and business forecasting. He has been involved in a number of special studies measuring the impact of important events on the economy, including the NAFTA treaty, the California power crisis, port security, California water transfer programs and the September 11th terrorist attacks. Prior to launching Beacon he worked with the UCLA Anderson Forecast where he regularly authored the outlooks for California, Los Angeles and the East Bay as well as performing a number of specialized forecasts for regions and industries. Dr. Thornberg lectures on a regular basis at a variety of public and private events, has appeared on CNN, Fox News and CNBC and is widely quoted in the press. He received his Ph.D in Business Economics from The Anderson School and his B.S. in Business Administration from the State University of New York at Buffalo. He specializes in International and Labor Economics. Dr. Thornberg continues to teach in the MBA program at UCLA and previously held a faculty position in the economics department at Clemson University.

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David Kittle with the Mortgage Bankers Association #132

This week Bruce Norris is joined by David Kittle, the Chairman of the Mortgage Bankers Association. David began his mortgage banking career in 1978. He opened Associates Mortgage Group in 1994 and sold it in 2006. He is currently the Vice President of Vision Mortgage Capital.

Bruce begins by asking David if he chose a good time to sell his company and become the chairman of the MBA. David says that selling his company worked out well for him, and he does not wish that he had changed his plans. David feels that he has the opportunity to make a difference this year, and he is looking forward to it. Bruce agrees with David, and he feels that there are going to be a lot of important things occurring within the next 12 months, and it will be very significant to play a part in them.

Bruce was watching Ben Bernanke being interviewed by the congressional staff, and he noticed that there were a lot of empty seats. Bruce asks David if it is common for there to be many empty congressional seats when he appears before congress. David says that it can be because they can be busy with other votes and opponents.

There are a lot of important political issues being dealt with right now, and it can be easy for real estate and the mortgage world to be ignored because of things like health care and cap and trade. Bruce asks David and the Mortgage Brokers Association keeps mortgage and real estate issues a priority to the government. The MBA has staff members for government affairs who work with committees like the financial services committee and the banking committee to make changes occur.

Bruce asks what the differences are between the Mortgage Improvement Regulations Act and HR 3915. MIRA is actually an example of the MBA calling in a strike on itself. The MBA is saying that there is need for more regulation. Net worth needs to be increased for the brokers and make sure there is increased net worth for the lenders. The difference between a broker and a lender is that brokers have no skin in the game, few education requirements, and they have different disclosure practices. Because brokers have no risk, and they do not lend their own money, they need to disclose the yield spread premium that they earn on a loan. Brokers claim that they have no responsibility to anyone in a loan. MIRA is working towards improving truth in lending, so that there are fewer opportunities for predatory lending. They want to improve trust in lending, good faith estimate, and make sure that matches the HUD-1 at closing. The other legislative options are more confusing than MIRA, and they require more paper work. David thinks this is a bad thing because we need legislation to be simple, so that customers can understand. Under the Bush administration an act was created to take a one page good faith estimate and turn it into a four page estimate. There needs to be less paperwork and more transparency.

Bruce recently filled out a loan application that was 12 inches deep, and he is worried about how large the loan documents are going to be. There are four lines on the loan application in which the applicant must say whether or not they will be occupying the property, and David feels that is over the top. Over a year and a half ago, the MBA presented HUD with a new GFE and a new HUD-1 in which every line matched. You cannot have predatory lending until you lend. If we have complete and understandable disclosure at the closing table then there is less chance for someone to be preyed upon.

In one way, Bruce looks at the process of legislation as very slow, but then it scares him when he sees people trying to pass legislation quickly, because they can do it without having a complete understanding of what they are supporting. Bruce asks if there is a chance that Congress might pass legislation that will not do what we want it to because they are in too much of a hurry. David believes that we have a system that helps prevent hurrying from being a big problem. Bills are first read by people who can explain them to Congress, then they are sent to the House of Representatives, and then they must also go to the Senate. Groups like the MBA help protect U.S. citizens from bad legislation because Congress knows that the MBA is truly there to protect consumers and support transparency.

Bruce asks how transparency failed in 2005 and 2006 when there were very different lending policies. David thinks that just about everyone involved in the industry can be blamed in some way for the failures that occurred in those years. Bruce and David both feel that even the borrowers can be blamed for the failures because they borrowed money knowing that they couldn’t make payments. We cannot just blame brokers or any one specific group of people.

Fraud is rampant, but we are getting better at detecting fraud. The MBA has been lobbying for a new regulator for Fannie Mae and Freddie Mac, and it took this crisis for people to realize that these changes need to occur. For the last 16 years, the MBA has been pushing for a new Fannie Mae and Freddie Mac regulator and it took this situation to finally get it through. Same goes for modernizing FHA which finally happened this year. Many of our current problems would not have occurred if we had gotten a new regulator and FHA reform.

In about 35-40% of the overall country, in some areas it’s higher, FHA is still using a computer system called Cobalt which was developed before DOS and Windows. It is ridiculous for FHA to have equipment that is that old.

Fraud is getting worse because of the difficulties in getting mortgages and refinances. The FBI says there are two types of fraud: fraud for property and fraud for profit. Unfortunately, they are only investigating one type and one they won’t. Individuals who had the stated income loan will not be pursued. Bruce feels like we’re teaching the consumer that it was all OK.

Right now there are a lot of loan modification occurring, but a report has shown that 70 percent of the loan modifications done in 2008 are either delinquent or they have been foreclosed on. Bruce asks David if he thinks loan modifications are an effective way to deal with these problems. David says that loan mods are just one way to fix these problems. There are other ways to solve these problems such as short sales and deeds in lieu of foreclosure. You cannot modify a loan for someone if they lose their job or can’t pay.

Bruce asks if David thinks that the U.S. is headed down the right path to create more jobs. David thinks the best way to get this economy started is to take the $8,000 dollar home buyers tax credit, and expand it so that it is worth $15,000 and everyone can use it. Taxing small business would be the wrong way to go.

Bruce asks if this tax credit should be given to investors as well. David thinks that the program should be limited to owner occupants, any income, and price. On every purchase, regardless of new home or existing home, the buyer goes out after the closing costs and spends an average of $7,500 dollars on their house purchasing things like furniture. That money goes right back into the economy.

The U.S. is currently having trouble with appraisals which is affecting Realtors and lenders who are trying to make refi loans and purchases. David says the HVCC is an issue. MBA is currently speaking out on this issue and there is legislation for a moratorium being pushed right now.

In the 1004MC (market conditions report) the appraiser is asked to tell which direction the value of real estate is going in that area and it also asks the appraiser to come up with the median value. Market value is the common number that appraisers usually come up with. Median valued houses in California are almost all vacant REOs and every time there is a sale that is higher than that median value they consider it to be an anomaly. This is making it difficult to resale properties.

Bruce asks David where he thinks the real estate market is headed in the next year. David thinks that we will recover next year. In multiple places like Oklahoma City and the state of Alaska, property values are going up right now. Things are more stable in places like California, Florida, Nevada, and Arizona. David hopes that people are not afraid to make purchases because energy costs and health care taxes are going to go up. David fears that certain political issues in Congress might slow down the real estate market.

David says the shadow banking system is currently in bad shape because people have no confidence in the rating agencies. We need to find a way to ensure that investments are producing quality loans. We need to set the bar higher for people entering the mortgage business.


David G. Kittle, CMB, Chairman of the Mortgage Bankers Association (MBA), began his mortgage banking career in 1978 with American Fletcher Mortgage Company. As a top producing loan officer, he moved to the management side of the business in 1986.
Kittle opened his own company, Associates Mortgage Group, in 1994 and sold it in 2006. He currently is Executive Vice President of Vision Mortgage Capital, LLC a division of American Home Bank located in Pennsylvania.
Kittle is past president of both the Louisville and Kentucky Mortgage Bankers Associations. He is past Chairman of MBA’s Political Action Committee, MORPAC; former Vice Chairman of MBA’s Residential Board of Governors; and has served on MBA’s Board of Directors since 2004.
Kittle was elected Vice Chairman of MBA in 2006, became Chairman-Elect in October of 2007 and was installed as Chairman of the Mortgage Bankers Association October 2008 at MBA’s Annual Convention in San Francisco.
Kittle received his CMB designation in 2004.
He and his wife Ellen have been married for 16 years and have four children.
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Pat Combs with the National Association of Realtors #131

This week Bruce is joined by Pat Vredevoogd Combs. Pat is a Realtor from Grand Rapids, Michigan. She is the immediate past president of the National Association of Realtors. NAR is America’s largest professional association representing more than 1.3 million members involved in all aspects of residential and commercial industries.

In 2005-2006, Bruce had to change his hairstylist every few months because they would quit hairstyling and they would get into real estate. It seemed like everyone was getting a real estate license. Bruce asks Pat if this was true. Pat says that there were many people getting their license in California, Florida, and Nevada, but not in places like Michigan. The state you live in can greatly affect your perspective on real estate. In Michigan, real estate was in a down market while California and Florida were still booming.

Bruce asks if people are confused by the messages of profit being sent out by the media. When you listen to national news it seems like all markets are the same, and when Realtors work with buyers, the buyers expect this to be true. In 2006, the NAR released a lot of positive information, but many of its members were going through tough times. The NAR had to be very careful about which ads they used in different areas, because each market is different. They were once able to send the same general message to every market, but within the last few years they have had to do a better job of looking at each market individually in order to decide which ads were appropriate.

In 2009, there are multiple states going through a disastrous real estate market, and they are in a severe recession. Bruce asks if there is a tendency for new legislation to be made, in these kinds of economic scenarios, in order to fix the problem. Pat says that this does occur on a national basis. People once said, “If you can breathe, you can get a loan.” Right now, this is not the case. There are some good buyers who are having difficulty getting loans today.

Bruce asks if Pat was surprised when lenders decided that these new strict lending policies were okay. Pat claims that she was surprised by this. NAR partnered with The Center for Responsible Lending to do research on this subject and when they looked at the results of their research they realized that these lending policies were going to cause trouble. Pat testified before Congress in 2006 and 2007, claiming that these policies were going to cause trouble.

There are many groups within real estate who do not look at other real estate groups as partners. Bruce and Pat think that if these groups would work together that these groups could get much more done for the industry. The NAR meets with companies like Mortgage Bankers Association, Habitat for Humanity, Fannie Mae, Freddie Mac. Bruce asks Pat if investors like himself might have something to contribute to these meetings. The Rental Property Association and other major national associations do come together to contribute to these meetings.

NAR just celebrated its 100th birthday, it has 1.3 million members around the United States, it has a staff of lobbyists in Washington, D.C., and it also has relationships with 64 countries. These factors contribute to their ability to be heard in Congress.
Bruce thinks that the input NAR gives in congress is vital, because he doubts that many of the Congress members have the time to read through the bills they sign. NAR’s lobbyists are very well respected and well rated. NAR also has a great grassroots groups. There are Realtors involved in politics and they have the ability to influence members in Congress.

Bruce asks what NAR’s lobbyists do on a regular basis. NAR’s lobbyist help educate Congress. They can take a 400 page document and give Congress members a general idea of what it means and what effect it will have on the U.S. They really help educate.

Hastily created legislation can have unintended consequences. Bruce asks how the Home Valuation Code of Conduct has affected the market. Pat does not think that this legislation has really impacted the market yet. What Realtors are discovering is that all appraisals must go through a new agency that has been formed and this agency is using appraisers who are more desperate. These appraisers are doing appraisals for areas that they are not familiar with, and they are doing these jobs for very low pay.

Pat understands that this agency was formed because people wanted impartial appraisals, but you cannot do an impartial appraisal when you do not know the market. Pat has had trouble completing transactions because these foreign appraisers would appraise her homes at low prices while the sale was being processed. Bruce runs into this kind of problem every time he tries to sell a house. The appraisers are falsely comparing the value of his well fixed homes to vacant REOs. Bruce and Pat think that it would be best if HVCC was annulled. NAR members are meeting with people in Washington and New York to get this legislation changed.

Bruce asks how important the first time home buyer tax credit has been for business. Pat thinks that this tax credit has been fabulous, and she wishes that this tax credit was given to all buyers. In Michigan, first time buyers who were not previously interested in buying real estate are now occupying homes because of this tax credit. A lot of inventory is getting taken off the inventory. Now that those homes are being sold, the sellers are going to able to move themselves up in the market place. Pat also thinks that it would be good if the dollar amount of the tax credit was increased. This tax credit is different from the subprime deals, because people have to qualify for this credit and they must have a down payment. They can now use the $8,000 dollar credit as part of their closing costs, but it is troublesome to go through that process, and Pat has not seen many people doing that.

FHA is becoming more influential in the financing market. Bruce asks Pat if there are any changes she would like to see in that program. NAR is currently working to push the FHA’s maximum price limit increased. For years, no one in California could get an FHA loan because California’s real estate was too expensive. Pat and Bruce are using FHA on almost all of their sales. Bruce dislikes the program that restricts investors from quickly fixing houses so that they can be quickly resold. This program does not allow sellers to use FHA loans for 90 days after the house has been bought. There is a loan for owner occupants right now called the 203K. The 203K helps people buy homes that need fixing. Bruce asks if Pat has seen many of these loans take place in her market. Pat says that she has not. Right now, lenders do not seem to be even suggesting it.

Bruce asks Pat if she is afraid that Congress might try to take tax dollars from interest reductions. Pat is opposed to changing mortgage interest deductions. Every time Congress creates legislation to create money for one thing, they end up taking money away from something else. She knows that the current administration is interested in doing this, but she thinks that it would be a mistake to do that. This market needs as much help as it can get, and doing this might have a devastating effect on markets that are improving.

Pat is a native of Grand Rapids, Michigan and is a REALTOR with Coldwell Banker AJS Schmidt Realty. Pat was a broker/part-owner of AJS Realty before selling in 2006 to Coldwell Banker Schmidt.

Pat is married to team member Guy Combs and is the proud mother and step-mom to six great kids and grandmother of Ethan, Anna, Claire, Violet and Elsa.

Her career in Real Estate began in 1971 as an agent – then on to getting her Broker’s license and many higher education designations which are: ABR (Accredited Buyer’s Agent), CRS (Certified Residential Specialist), E-Pro, GRI (Graduate Real Estate Institute), PMN (Performance Management Network – Woman’s Council).

Many of Pat’s years were busy serving not only her clients but also her community and her professional associations. Here are a few things of note: 2007 President of the National Association of REALTORS, 2005 – 2008 Officer of the National Association of REALTORS, 2002 – REALTOR of the Year for the State of Michigan, 2002 – Chairman of the Michigan Real Estate Commission, 1997 – Regional Vice President – National Association of REALTORS, 1995 – President of the Michigan Association of REALTORS, 1990 – President of the Grand Rapids Association of REALTORS, and 1986 – President of the Michigan Woman’s Council of REALTORS,

For Many Years over the past 35+ years: Board Member of Baxter Community Center, Board Member of West Michigan Fair Housing Center, 4-H Leader (Horse Program), Cascade Township 4th of July Parade Float Contest Sponsor, Board Member of Cascade Township Foundation, Major Gift Chair for WGVU Public TV Auction, Guest on WGVU “Ask the Realtor” TV Program, and Testified before the US Congress and the US Senate.

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William Richards of UBS #130

This week Bruce is joined by the Hedge Fund Relationship Director of UBS, Bill Richards. Bill travels the globe spreading the good news about Hedge Funds. He serves as a director to seven nonprofit organizations. He has been working with hedge funds since 1983.

Bill has clients all over the world. Most of his contacts are made through emails, but his favorite way of meeting people is still face to face. In his younger days, when he was a security salesman, he would always go to see his business partners face to face. It is a much better way to communicate. Bruce asks if many people think differently about the subject because the younger generation is used to communicating via text messaging. Bill thinks that using messaging is not as effective as personal communication because messaging systems have a character limit. Bruce thinks that people react to people completely differently when they are face to face in comparison to when they are using messaging systems. When people meet in person, they do not just look at you as a client, they also begin to see you as a friend.

Bill has an annual meeting that he calls “The Best and the Brightest” where he discusses new concepts with interns. Julian H. Robertson Jr. from Tiger Management opens up the summer series of this event. 24 interns attend this meeting with Julian. There are about 500 summer interns around the world. Potential applicants can apply at UBS.com. This is a fantastic opportunity to meet some of the brightest people in the world. Next week the cofounder of Serious Satellite Radio will be speaking to the interns.

20 years ago there were not many people who knew what a hedge fund was. Bill made his first investment in a hedge fund during 1983 in order to support his oldest son in the future. Thanks to his investment, his son lives independently in Sacramento.

Bruce asks Bill what a hedge fund is. Anyone who wants to learn more about hedge funds should do a Google and search for Alfred Winslow Jones. A hedge fund is basically a safe insured investment which prevents you from losing too much in case your investment goes bad. The key to hedge funds is your net exposure. Most hedge funds average a next exposure of 30 to 40 percent. The net exposure is the difference between your longs and your shorts. The lowest net exposure that Bill has seen is 10 to 15 percent. Right now these markets are extremely volatile, so they are hugging close to shore.

In the real estate business, there are major changes in business rules that occur every month. Bruce feels that a hedge fund manager would need to have a crystal ball in order to predict how the market is going to change, because it can change very quickly. Bill says that hedge funds are a large global industry and that it gets a bad representation from the press. However, some of the world’s best investors such as Julian Robertson and Warren Buffet have been involved in hedge funds.

Bruce asks Bill how someone becomes involved in running a hedge fund. Most hedge fund managers have a good undergraduate education, they have are well educated in mathematics and accounting, some work experience, and they often go to popular business schools like Stanford or UCLA before going back to Wall Street for more experience.

Bruce asks if companies like UBS get their investors involved in some of the hedge funds. Bill says that UBS does do this.

Bruce asks Bill what hedge funds are typically invested in. Bill says that long-short equities are a great way to make money. People who do long-short equities try to find the best companies in the world and then they buy them. They also try to identify the worst companies and invest against those companies until they break down.

Bruce asks Bill what the difference is between hedge funds and real estate investment trusts. REITs are longer term investments. REITs assemble various commercial real estate properties, and then those properties are used for giving investors dividends. Bill likes hedge funds because they invest broadly around the world. Hedge funds also give the investor the ability to invest in countries that aren’t being hurt economically and financially.

Bruce asks Bill about how hedge funds are regulated. The new administration has made it clear that they plan to have all hedge funds register with the SEC. Hedge funds deal with prime brokers who are affiliated with investment banks and all of those prime brokers are regulated as well.

Bruce asks if Bill thinks that there is more regulation coming. Bill does think that there is more regulation coming, because of the recent problems that have come up.

Under the previous administration, hedge funds had the option to register with the SEC, but very soon they will all be required to register with the SEC.

Bruce asks if people are required to have a net worth requirement before they are allowed to invest in hedge funds. The two classes of hedge funds investors are 3C1s and 3C7s. The 3C1 has a minimum net worth requirement of $1 million dollars and certain liquidity requirements. The 3C7s have a minimum net worth requirement of $5 million dollars. Many hedge funds being created right now are adopting the 3C7 structure.

Hedge funds are allowed to freely invest in other countries. The investors travel the world.

Bruce asks if Bill has met some of the smartest people in the world. Bill has met some very interesting entrepreneurs. Bill suggests that anyone who wants to learn more about great investors should read “Julian Robertson: A Tiger in the Land of Bulls and Bears” and “Soros” by Michael Kaufman.

Bruce asks if people who invest in hedge funds are allowed to ask for their money back. Most hedge funds have a one year lock up, and then a quarterly liquidity after that which requires prior notice to get out of investments. They are not a market fund. They only use a portion of your assets. A lot of the best hedge funds are moving to a 2 to 5 year lock up.

Bruce asks how bad situations, such as the one with Bernie Madoff, affect the willingness of people to take on risk. Bernie Madoff was a massive blow to investors. Investors are now requiring more transparency from hedge funds.

Bruce asks if there was much speculation that occurred in the hedge fund world. Bill says that there was a large amount of growth in the Funds of Funds Business which may have gotten ahead of itself, but Bill thinks that most people who invest in hedge funds are sophisticated.

Bruce asks Bill what he thinks hedge funds are looking to invest in now. Bill thinks that the greatest opportunities in life occur when there are the greatest problems. Right now, hedge funds are looking for companies who are being penalized by the market. This is creating many opportunities, and there are multiple new hedge funds being created in Manhattan.

Bruce asks if investors around the world are more or less willing to invest than Americans are. Bill thinks that what makes America great is that we attract the best people from all around the world. He thinks that if everyone is agreeing then everyone is wrong.

Bruce asks Bill what he was able to take away from his experience during the Vietnam War. He says that there is no better place to learn about leadership than the U.S. military. Tough times create a tough individual.

Bill is involved in many non profit organizations. Bruce asks if the wealthy are very generous towards causes. Bill says that they definitely are. People with great wealth always give back to society when asked.

For more on UBS, visit UBS.com. Thank you Bill for a great interview.

Bill Richards entered the business in 1973 and joined UBS in 1995. As a Senior Client Relationship Manager in Hedge Funds, Bill manages the global relationships for UBS with some of the world's largest Hedge Funds. He works with over 105 Tiger Clubs which collectively run 125 billion dollars and represent one of the largest concentrations of overall Hedge Fund money in the world. He met Julian H. Robertson, Jr. of Tiger Fund in 1983 and continues to cover Julian for UBS. In 2006, Bill traveled to New Zealand, Australia, Brazil and Europe with Hedge Fund Clients of UBS. Bill thinks "we are still in the very early days of The Hedge Fund business and that it is one of the most important structural changes ever to hit the Asset Management Industry". He favors Long/Short Equity Hedge Funds which are based on the model first introduced by Alfred Winslow Jones in New York in 1949.

Bill has lectured at various Universities as well as at The United States Army War College. He was an Infantry Lieutenant in combat in Vietnam in 1969-1970. He spoke Vietnamese and served as a U.S. Army Infantry Advisor to the Vietnamese Military on The Cambodian Border. His non profit affiliations include The Vietnam Children's Fund (built 43 schools in Vietnam), iMentor (www.imentor.org) and The All Hallows School. Bill is an active supporter of 100 Women in Hedge Funds (www.100womeninhedgefunds.org). Bill is also part of the internal Speakers Bureau of UBS and a strong supporter of the Learning programs. Each summer, he runs the UBS speaker series called "The Best and The Brightest" and brings in 15 legendary managers speak to our Summer Interns in New York.

Bill appears on CNBC on Squawk Box, Power Lunch and in a year end "Outlook for 2008." Bill is also featured in a documentary called “Wall Street”, directed by Andreas Hoestli. The New York Magazine described this documentary as a worthy detailed investigation of how Wall Street operates.

Bill enjoys hosting private dinners with clients and takes this opportunity to further enhance his relationships with high profile clientele. He graduated from Denison University in 1967. He lives in Manhattan and rides horses at his farm in Upstate New York on week-ends. He collects art, rare books and wine.

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Marsha Norris #129

This weekend is the official launch of I Survived Real Estate 2009. We launch the event with special guest, 14 year breast cancer survivor, and inspiration behind the event, Marsha Norris. Aaron Norris also joins the show as organizer of the event.

Marsha discovered that she had breast cancer in 1995. Bruce asks Marsha what emotions she felt when she discovered her cancer. Marsha said that she felt fear, anxiety, and terror. Fortunately, Marsha is not the kind of person who dwells on negative thoughts for very long, so she quickly began to look for help. Bruce and Marsha went to four doctors before they found one that they were comfortable with. Marsha did a lot of personal research and reading on cancer as well. When Bruce and Marsha went to UCLA they felt like they were being treated as people rather than a disease.

Bruce asks Marsha how important she thinks her attitude has been in regards to her ability to survive cancer. Marsha thinks that her attitude has been crucial, because negativity immobilizes you. She had to be her own cheerleader. She kept thinking, “What can I do for myself, and where can I find people that will help me?”

Marsha thinks that it is important to believe in the choices you have made for yourself, rather than just relying on your doctor. Marsha believes in working with traditional medicine as well as complementary therapies. You have to be comfortable with what is happening and not just let the doctors take control of everything. You have to believe in what will work for you.

Bruce asks Marsha if most people who encounter cancer for the first time are very independent. Marsha thinks that most people are so fearful that they just hand their life over to their doctors. Sometimes Bruce and Marsha go to different doctors and they assume that certain things have already occurred. For example, some doctors have automatically assumed that Marsha has done the lymph node test, and when they discovered that Marsha did not do that they were amazed. Now Marsha is being told that in the future doctors will no longer even use the lymph node test, so many of the things that Marsha was stubborn about turned out to be unnecessary. Her instincts have proven to be correct over time.

Marsha is taking a new treatment now. Cancer takes people on an emotional roller coaster. Coming home from Marsha’s first surgery they went to Claim Jumper for a gigantic lunch. At that point, Bruce was feeling confident that they could handle what they were up against. Two days later, they were told that Marsha needed another surgery. That swing from feeling happy and relieved to feeling downhearted is very tough, and they have dealt with these types of disappointments for 14 years. It can be very emotionally draining.

There has been a new word that has emerged in Marsha’s place for treatment, and it is “remission.” In the past, remission has never been a word that anyone used. It is exciting to hear people say that they are in remission and it is important for people to have hope. Marsha has never taken traditional chemotherapy but she has spoken to people who are in chemotherapy. These people are completely drained, sick, and depressed. Marsha remembers one man who said, “I have nothing left to loose. I have lost my job, my home, and now there is nothing left other than my life.” Every attempt that Marsha has made to get treatment was an attempt to continue living, but many other people suffering from Marsha’s situation are getting treatment to prevent death. She has a much more hopeful outlook.

When Marsha started taking this new treatment she lost some hair, so she decided to shave her hair and get wigs. She took her friend Diana, and Diana almost started crying, but Marsha told Diana, “Don’t do that. I’m choosing to do this.” She told Bruce, “Its just hair, it grows back.” Marsha and Aaron have made fun of her wigs. Aaron named each of her wigs and given each one a personality based on their look.

When people hear that Marsha has cancer, they expect a certain demeanor that they do not receive. They look at her and say, “Well, you do not look sick.” This makes Marsha feel very good. Every day Marsha wakes up and thanks God for giving her another day, and for the little things that she is able to do again now that her right hand is no longer broken.

When Marsha came to the radio show, someone from the radio show approached her and told her that they know someone who has cancer. Bruce asked Marsha how often people approach her and ask her for help with a friend or relative with cancer. This has happened several times with her. She has been able to give advice to people using chemotherapy, and she has offered her time to talk to them should they need it.

Bruce asked Marsha if it is emotionally draining for her to talk to people who need help. Marsha said that it used to be but now she is glad to offer help to anyone who needs it.

Marsha currently has a couple oncologists and ten other physicians/therapists who help her. Bruce asks Marsha how important it is for her to have many different places for her to get help. Marsha thinks that it is very important because you need to treat cancer with multiple tactics. It is not all about medication; you also need nutritional support, massage therapy, acupuncture, and chiropractic help to relieve pain.

It can be overwhelming to watch Marsha’s daily schedule. She spends a large portion of her days taking care of her cancer needs, yet she continues to have a positive outlook. It can get exhausting taking supplements and having to eat a certain way all the time, but it becomes a lifestyle after a while. Every once and a while she has to get a burger.

There have been times where Marsha’s kids will ask if she still has cancer, because they cannot tell based on her attitude and the way she lives. If she feels good and acts good then everyone else feels better as well. Aaron is very proud of the way his mother is handling her cancer. Her strength, persistence, and stubbornness amazes him. There have been many times in which Bruce’s employees have cried in his office because of Marsha’s difficulties and that support is what makes the “I Survived Real Estate” event so important to Aaron. Every event they go to there are always people sending flowers and asking how Marsha is doing.

Bruce asks Aaron how people reacted to the event last year. Aaron said that many people were confused. He gets yelled at by people every month because people are expecting him to do advertising on the radio show. It was difficult to explain to people that The Norris Group and its partners were paying for the event so all TNG needed was for people to donate to or join the walk. This year the panel lineup is a real dream team and Aaron has been surprised by who decided to sign up.

Early in Bruce and Marsha’s marriage, Marsha’s father had lung cancer and he did not have a hopeful attitude. Bruce asked Marsha if her father’s reaction to cancer inspired her to act differently. Marsha said that when she saw him give up, she thought “I can’t believe that he is giving up so easily when he still has two sons to raise. If that ever happens to me, I will not give up like that.”

Marsha has learned a lot about herself through her experiences. She has discovered that she has a lot of inner strength. She does not let doctors push her around. She allows them to give her their opinion but always questions their judgment. Marsha enjoys her current oncologist because she is supportive, and she supports Marsha’s decisions.

Marsha has discovered who her real friends are through her experiences. She has had a lot of support from her family, and she has had a few friends who have not stuck around.

Marsha hopes that her family sees that they have the ability to withstand these difficulties as well.

If someone was recently diagnosed with cancer, the first thing that Marsha would tell them to do would be to relax, and start getting educated on their problems. Research your doctors and choose them wisely. Marsha also insists that people take the non-toxic treatments first, and use the toxic treatments as the last resort. Marsha takes baths with epson salt which helps take the toxins out of your body. There was a time where she was around multiple cancer patients and a doctor, and she suggested that the other patients try epson salt, but the doctor wasn’t supportive of her idea. Two weeks later, one of the ladies that she talked to about epson salt approached her and told her that she was feeling much better.

The event occurring on September 11 will be a formal event. For men, a tux is preferred, but not required. You can get involved by going to the website isurvived2009.com
You can donate to the walk or join the walk and raise the money to attend live for no cost to you while seats remain. If you raise 2000 dollars you can be a gold sponsor, and for 5000 you can be a platinum sponsor. Each seat is valued at $200 dollars so we ask everyone to donate or raise $200. That $200 must be made to our “I Survived Real Estate Walking Team” to count as sponsorship. Visit isurvived2009.com for more information.

Marsha Norris has four children, seven grandchildren, and has been married to Bruce Norris for 39 years. Marsha is a trained massage therapist and loves reading on holistic medicine, different massage techniques, and numerous other topics. She enjoys traveling and looks forward to seeing Alaska this summer.

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