Investing and Self-Storage With Hunter Thompson #634

Bruce Norris is joined this week by Hunter Thompson.  He is a full-time real estate investor and founder of Cash Flow Connections.  Since starting CFC, Hunter has helped investors out to allocate capital to over 100 properties, which have a combined asset value of over $350 million.  His experience includes investments in self-storage facilities, residential mortgage notes, mobile home park, single-family acquisitions, hard money loans, office buildings, and multi-family real estate syndications.  In connection with these investments, he has worked with some of the most experienced and well-respected asset teams across the U.S. and Canada.

Bruce and Hunter will discuss how he got started in real estate at such a young age, his model to go left when others go right, how he looked for opportunities in the real estate market, the European debt crisis, the position in the marketplace where he was heavily drawn, the first product type he funded and how it has changed, self-storage, mom and pop versus best in class, and much more on the real estate radio show.

If you want more information, you can visit his website at www.cashflowconnections.com. If you are interested in the self-storage business, send him an email at info@cashflowconnections.com and he can send you a free e-book.

The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.


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The Norris Group team #207

This week on The Norris Group Real Estate Radio Show, Bruce Norris interviews Greg Norris, the property manager and buyer for The Norris Group, and Craig Hill, hard money loan and trust deed investment lead for The Norris Group. Transcription will be available next week.

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Jon Daurio Joins Bruce Norris on the Real Estate Radio Show #206

This week Bruce is joined by the Chairman and CEO of Kondaur Capital Corporation, Jon R. Daurio, Esq. Bruce and Jon discuss the process Kondaur Capital goes through when placing bids on large pools of distressed assets, how quickly his team can respond, if there's assurance of no issues on purchases, loans in the MERS system, dealing with FHA and HUD properties, why Jon doesn't do short sales, dealing with owners in the property, how Kondaur is so different from their competition, the network of people involved, and so much more.

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Jon Daurio Joins Bruce Norris on the Real Estate Radio Show #205

This week Bruce is joined by the Chairman and CEO of Kondaur Capital Corporation, Jon R. Daurio, Esq. Bruce and Jon discuss how Jon got into the mortgage business, his various positions and roles, and how he ended up working in the distressed market.  Many very large players have entered and exited the market because it isn't an easy field.  Kondaur has to very accurately predict future selling prices when doing due diligence when valuating assets. Kondaur rarely puts a house on the property where it's not move in ready. Jon talks about how often these large asset pools are available and how it's changed over the last three years and much more.

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Mike Cantu, Tony Alvarez, and Rick Solis #200

This week, The Norris Group celebrates its 200th episode! Thanks everyone for your continued support for our work. Our goal is always to provide the best information to help you in your California real estate business. This week, we have a special show featuring three of our favorite guests: Tony Alvarez, Mike Cantu, and Rick Solis. The four discuss what they would do if they could do it all over again, what they've been working on in the current market, and the different business models they all have. The three also talk about price and rent declines.

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John Schaub Joins Bruce Norris on the Real Estate Radio Show #198

This week, The Norris Group returns to its regular programming. This week, Bruce Norris is joined by best selling author and real estate investor with 35 years of experience, John Schaub. Bruce and John talk about how John has survived through three recessions in his career, how he sleeps well at night, what accountants think about free and clear houses, why the current market is a great time to buy, buy and hold vs. buy and sell, where and how John buys, what he likes to buy, and, of course, much more. Bruce Norris and John Schaub are speaking together next week in San jose for the first time ever. The Norris Group has also won another Gold Marcom award for the radio show. Thanks for your support.

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Ivan Choi Joins Bruce Norris on the Real Estate Radio Show #192

This week Bruce is joined by current president of REOMac, Ivan Choi. Ivan discusses the difference between a mortgage banker and a mortgage broker, the ease of obtaining funds in the current market, the current state of foreclosure inventory, shadow inventory, fear in the servicing market, and much more.

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Peter Wayman Joins Bruce Norris on the Real Estate Radio Show #190

This week the Norris Group continues with radio interviews leading up to I Survived Real Estate 2010: The State of REO. On the radio show this week is Senior REO Sales Director for Freddie Mac, Peter Wayman. Peter and Bruce talk about Freddie Mac's internal REO strategies, loan modification, and opportunities for bulk buying with Freddie Mac.

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REO Mentor Tony Alvarez #182

This week Bruce is joined this week by long-time real estate investor and now author of "Breaking Into the REO Business," Tony Alvarez. Bruce and Tony discuss one of Tony's first speaking engagements with the Norris Group, why he wrote a book, Tony's introduction to the business of investing in real estate, his family, the concept of his new book and why it's different, why Bruce bought his foreword, the psychology of REO and the agents involved, and so much more.

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Appraiser and Investor Rick Solis #177

This week Bruce Norris is joined by California real estate investor and appraiser, Rick Solis.

Rick and Bruce talk more about investing from 2001-2007, what was working and what was not, different skill sets that made a big difference, what Rick did in a downturn, Bruce Norris and the auction business, what Rick would have done differently in a boom, how Rick is buying properties now, competing with other investors, bad investors ruining it for the rest of us, and much more.

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Appraiser and Investor Rick Solis #176

This week Bruce Norris is joined by California real estate investor and appraiser, Rick Solis.

Rick has been in the business since he was 20 years old. Rick does most of the appraisals for The Norris Group's hard money loan division and also helps train investors at The Norris Group's REO Boot Camp.

Bruce and Rick discuss the changes in the appraisal industry since Rick started, why he likes working with hard money lenders, the misconception of appraising being easy because of systems like Zillow, cost-basis appraisals, different property features that add value and those that don't, and much more. The full transcription can be found in the archives at thenorrisgroup.com

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Bill Shipp Joins Bruce Norris on the Real Estate Radio Show #175

This week Bruce Norris is joined by California real estate investor, Bill Shipp.

Bruce and Bill discuss his success rate of offers and purchases, his work process, how he has much of his business on automatic pilot, working with a construction crew, Bill's ongoing education, funny stories on rehabs, how to learn construction, bulk buying, and much more.

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Bill Shipp Joins Bruce Norris on the Real Estate Radio Show #174

This week Bruce Norris is joined by California real estate investor, Bill Shipp.

Bruce and Bill discuss how he got in the business, how he buys houses, when he got started, how he works with Realtors in transactions, how he dealt with working in the current market, buying strategies, and much more.

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Greg Norris of The Norris Group #158

Bruce Norris is joined by Greg Norris, Porject manager at The Norris Group in charge of REO and trustee sale acquisitions. Bruce and Greg discuss some of what The Norris Group is doing, how Greg learned the skills necessary to be successful, and what it takes to be a competitive California real estate investor in the current market.

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Mike Cantu and Tony Alvarez #154

Bruce Norris is joined this week by California real estate investors Mike Cantu and Tony Alvarez. The three discuss what they would do if they needed to start all over again after losing everything. They discuss how different strategies work for different people and personality types. Thank you Mike and Tony for your time. Happy holidays all.

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Mike Cantu and Tony Alvarez #153

Bruce Norris is joined this week by California real estate investors Mike Cantu and Tony Alvarez which talk about how they got started, goals, and creating wealth. They also discuss early struggles in the business and how they got past downturns. Tony and Mike will be guests next week as well.

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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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Tommy Williams with the National Auctioneers Association #118

Bruce Norris is joined once again by past President and current Chairman of the Board for the National Auctioneers Association and co-founder of Williams and Williams Auctions, Tommy Williams.

Bruce starts by asking if there is a different process in selling real estate and cattle. Tommy says there is a slight difference but he’s hoping the audience will still understand. He says cattle auction goes a little faster and is a little more entertaining.

Auto auctions generate close to 50% of the proceeds for auctions. The end buyers are typically dealers. There are both dealer and public auctions but some are only available to dealers.

July 13-18th is an auction reunion in Kansas and Bruce asks who attends. Tommy says over 1,000 auctioneers will attend and bring families. It is the best and main time of year to attend education for the auction industry. Over 60 seminars will be available.

Bruce asks about Tommy’s family history in the auctions business. Tommy says there was a little family history but he fell into it on his own. Tommy’s son Dean is an attorney and didn’t plan to be in the auction industry. Tommy moved the business from Illinois to Oklahoma and Dean visited while in school and ended up later partnering. Tommy says he has six grandkids and he thinks a few might be interested in the business.

Bruce talks about the model Williams and Williams has chosen and how it is different from other auction houses. Tommy says online auctions are a very viable way to sell items and Williams and Williams does conduct online auctions. However, Tommy says a property will earn 10% more on the lawn then it will bring online or in a ballroom setting. It’s significant and matters. There is more expense in having these types of auctions.

Tommy describes the difference between absolute and seller reserve auctions. Tommy says the absolute auction is by far the best and motivates the buyer to the ultimate level of bidding. It also attracts the most attendance which is key for the best price. Tommy says many can’t stomach absolute so more are sold with reserve.

Tommy says it not impossible for very experienced auctioneers make mistakes. It’s complicated and not as easy it may look. Advertising has definitely changed over the years. The newspaper has dropped in value each and every day and online advertising has gotten more important. The auction companies track the marketing process very carefully to see where most people are seeing the information.

Tommy says when the word “sold” is uttered, in an absolute auction, it is the most binding contract you can enter into. It is different in a seller reserve. Bruce talks about dealing with deposits in real estate now and how difficult closing can become. Tommy says he thinks 10% down should be at stake to make sure the buyers are truly qualified. Tommy says he doesn’t like the current way real estate is sold because of these issues as buyers can tie up your property will no ramifications if they don’t come through.

Tommy describes how the auction business is commissioned. Williams and Williams gets commissioned directly from the seller. Some lenders require, however, a buyer’s premium. Many more auctions are charging buyers but Tommy actually likes charging the seller. He thinks the buyers see the auction in a more positive light and the premium isn’t seen as a tax on their purchase.

Bruce asks about Tommy dealing with lower priced areas. Tommy says there are minimum fees that must be charged. There does become a point where auctions can’t sell a property because it doesn’t cover the fees.

Bruce talks about lenders not foreclosing on properties because there is more owned on the property then it is worth so lenders don’t do anything with it. Tommy says this issue is really serious and most people aren’t hearing about. Tommy says he’s seen some neighborhoods where 80% of the neighborhood is vacant. There’s almost no choice but to tear them down as they become magnets for vandalism, squatters, and drug labs. Bruce says it doesn’t even have to be an old areas and Tommy sounds surprised. Tommy says that’s why these homes have to be given occupants whether they are investors or owner occupants. Empty properties are not good for neighborhoods.

Bruce talks about Orange County and the FDIC leasing space to set up shop to deal with assets. He asks if Tommy has heard of that and if Williams and Williams were involved in the RTC situation. Tommy says they were slightly involved with the RTC but dealing with government is difficult. Tommy had not heard of the offices being rented in Orange County. Tommy is worried the FDIC will warehouse the properties and it will make the problem worse.

Bruce brings up a new term he saw on the Williams and Williams website called “auction referral cooperative.” Tommy says this is a way to establish a network of like-minded auctioneers that refer one another. There’s no financial obligation and they are simply looking for other auctioneers of the same mind and there’s a referral fee involved.

Thank you Tommy as always for joining us on the show. We look forward to seeing you again this year on September 11th, 2009 for I Survived Real Estate 2009. See more on Williams and Williams at Williamsauction.com.

Tommy served as President of the National Auctioneers Association in 2008 and is current Chairman of the Board. Tommy also graciously took part in I Survived Real Estate 2008 last year.

Thomas L. Williams is a graduate of Penn State University (B.S. Animal Science) and the Certified Auctioneers Institute (CAI). Representing the third generation of Williams family auctioneers dating back to the mid-1800s, Williams is also a graduate of the historic Reppert School of Auctioneering. He has over 40 years experience in real estate auctions, land development and real estate investment. He currently serves as President of the National Auctioneers Association.

A founding partner of Williams & Williams, Williams served as president from 1986-2000, and became board chairman in 2001. He also co-founded and served as managing partner of Lowderman & Williams Auctioneers from 1965-85. He has conducted over 10,000 auctions in all 48 of the contiguous United States and Canada, and is an advisor to auctions conducted throughout Western Europe, South Africa, Australia and New Zealand.

An avid cattleman, Williams also owned and operated Bradmar Angus Farms from 1965-85, after which he continued to serve as a herd and genetics consultant for many of the nation's premier Angus cattle breeders.

Williams is a licensed auctioneer and real estate broker in over 20 states, and an active member of the National Association of Realtors.

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Tommy Williams with the National Auctioneers Association #117

Bruce Norris is joined this week by past President and current Chairman of the Board for the National Auctioneers Association and co-founder of Williams and Williams Auctions, Tommy Williams.

Bruce starts the interview by asking what auction companies miss out on when they aren’t members of the National Auctioneers Association. Tommy says non members miss out of networking, best practices, and education which furthers their professional endeavors. April 18th is national auction day and Tommy would like auctioneers to make communities aware of the benefit that auctions bring to the community. Auctions have the huge benefit of establishing market value on a certain day for numerous products and assets. They also might highlight their charity work in the community through charity auctions. Tommy feels the media picks up too much negative information about auctions and doesn’t highlight all the positives.

Bruce says he read that auctions raise as much money for charities that is sold in real estate and Tommy says that is true. Tommy says auctioneers bring a very important piece of expertise to nonprofit organizations.

Bruce asks if Realtors view auctions as competitors or partners and Tommy thinks too many see auctions as competitors. Tommy says there is fear that auctions establish market value and sometimes people don’t want to really know that actual value. The real estate community wants to not take the hit. Bruce says he’s baulked at final bids before and most times he paid for not selling at that time. Tommy says all of us have been in that situation. Usually, the public will tell the truth and auctions are the best barometer for prices and it will also tell you where price trends are going.

Bruce asks if women are getting more involved in auctions. Tommy says this is a growing trend as it used to be a male dominated field. Tommy says 20-30% of classes for auctions are now women.

Bruce asks about legislative issues that are affecting auctions in general. Tommy says that when legislation postpones the sale of assets it usually means there will be net price deterioration. Real estate is very fragile and unattended and vacant homes tend to lose value.

Bruce says Fannie Mae and Freddie Mac postponed auctions for their properties but in April have started back up. Doing this moratorium cost them money. Tommy says their unwillingness to accept market value has cost them millions. The more they postpone, the worse it will get.

Bruce says he read the auction magazine that in the last few years $270 billion worth of assets were sold. Tommy says this is not a record but getting close. There’s been steady growth in the total dollar sold at auction. 2008 saw prices for assets decline so volume went up but prices were down due to devaluation. So in volume, 2007 and 2008 were record setting years.

Bruce talks about trustee sales and how the lack of advertising doesn’t help the cause. Bruce asks if the National Auctioneers Association has any intent to try and get involved in the trustee sale process. Tommy says that was one of his main goals as President was to do away with the traditional foreclosure process. If the home was sold at the trustee sale to an end user it would save the mortgage holder at least $15,000 in transaction fees. This is not including price declines. This would be of huge benefit to the mortgage industry as a new loan with a new end user would immediately take the property.

Bruce talks about current laws and issues of cities hiring people solely to write fines to homes that are considered blight and that are violating codes. Tommy worries that these types of laws only makes lenders not excited to loan which further exacerbates the lending policies we currently face. No one will want to lend in these areas.

Bruce asks Tommy if he’s nervous about a shift in the American perspective. Tommy says he is concerned that capitalism and private enterprise is something that Americans are now wondering if they should be in favor of. Bruce says he’s concerned as well for some of the things that he’s seen and hopes we can solve some of these issues soon. At “I Survived Real Estate 2008” several solutions were presented but none have been implemented. Bruce things banks could save themselves so much time and money by doing so.

Tommy talks about his pre-foreclosure auction concept. Some Realtors are doing something very similar without approval. Tommy says they’ve implemented something very similar in their company and they’ve tried it out with consumers. As soon as a consumer was falling behind, Williams and Williams worked with the consumer to present the property to the public as well as possible. The final offer was presented to the lender. However, the loan servicer is typically the decision maker and is far removed from the actual decision maker. The goal needs to be lenders getting rid of this stuff as soon as possible to get things moving. This particular solutions gets a new person in the home right away.

For more information visit williamsauction.com or thenorrisgroup.com. Join us next week for part two with Tommy Williams.

Tommy served as President of the National Auctioneers Association in 2008 and is current Chairman of the Board. Tommy also graciously took part in I Survived Real Estate 2008 last year.

Thomas L. Williams is a graduate of Penn State University (B.S. Animal Science) and the Certified Auctioneers Institute (CAI). Representing the third generation of Williams family auctioneers dating back to the mid-1800s, Williams is also a graduate of the historic Reppert School of Auctioneering. He has over 40 years experience in real estate auctions, land development and real estate investment. He currently serves as President of the National Auctioneers Association.

A founding partner of Williams & Williams, Williams served as president from 1986-2000, and became board chairman in 2001. He also co-founded and served as managing partner of Lowderman & Williams Auctioneers from 1965-85. He has conducted over 10,000 auctions in all 48 of the contiguous United States and Canada, and is an advisor to auctions conducted throughout Western Europe, South Africa, Australia and New Zealand.

An avid cattleman, Williams also owned and operated Bradmar Angus Farms from 1965-85, after which he continued to serve as a herd and genetics consultant for many of the nation's premier Angus cattle breeders.

Williams is a licensed auctioneer and real estate broker in over 20 states, and an active member of the National Association of Realtors.

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David Rosnick #116

Bruce Norris is joined this week by David Rosnick, Economist at the Center for Economic and Policy Research.

Bruce talks about reading several years back that the Baby Boom generation was worth trillions and in great position to retire. David says the Baby Boomers have a fair amount of wealth and every generation typical has grown in wealth over the years. Baby Boomers, however, have been recently hit by the stock market and housing bubble that has caused some great losses.

In a recent report written by David and his team on this very issue, it says the Baby Boom situation looks much bleaker than 8 months ago. Bruce asks how they are coping with this fact. David says the Baby Boom generation has been witnessing the trend for two years. Last summer the savings rate started to increase and consumption has really slowed. The full effects of this contraction in spending and consumption has yet to fully hit the market. David says he’d like to see the government continue the money stimulus and look into subsidizing shorter work weeks, vacation, and sick leave.

Bruce asks if the wealth members of the Baby Boom generation would be harder hit by stock prices and the poorer be more affected by the real estate declines. David says the wealthiest are indeed more likely to own stock but are also more likely to be home owners. The bottom 1/5 of households could get completely wiped out with foreclosure.

Bruce asks David how he feels about recent solutions presented by the government such as the cramdown. David says he’s not so concerned but would like to see the homes go back to the bank and perhaps the individuals getting to stay in their homes and pay market rent. David says the bank doesn’t want to try to take it over and sell the property in this market. By keeping the homeowner in the home, it’s a win-win situation. Bruce brings up that the prices are very skewed in California. David says the bank just needs to decide how they want to take the loss. By not making this mandatory the banks would not participate as they are being a stubborn. Bruce asks how the lenders would react if this was made mandatory. How much would then be available for lending? David says there will always be solid prospects and that it wouldn’t really matter.

Bruce asks David about people stating their income and if they should be held responsible for that. David says that lenders were more responsible for that as he understands it. When real estate was headed up, it didn’t matter and no one cared. This is an example of an unsustainable home bubble that people refused to acknowledge.

David created a housing cost calculator which compares owning vs. renting the same home. Bruce asks if the price to own is much more than renting. David says historically it hasn’t been that different. David says when it went way out of whack that it was almost guaranteed that there would be loss.

Bruce asks if bubbles ultimately benefit people. David says bubbles that are uncontrolled is a problem. Bruce says many were refinancing and spending the money. There must have been a short-term streak of wealth. David says people thought they were very wealthy and savings rates went way down.

Bruce asks if there should be some acceptance of risk when any investment is made. David says experts gave people a lot of bad advice and since there was a lack of an alternative voice, it wasn’t very fair. People were told that real estate was the way to wealth. Bruce asks if people should absorb that risk or if there is a backstop to save them. David says Social Security and defined benefit plans act as that backstop. Personal savings is only one alternative. David explains the difference between defined benefit plans versus defined contribution plan. Bruce says that guarantees of payout were as good as investments made. David says the bubble market really hurt these potential retirement funds. When things get so out of line, people make bad planning decision.

Bruce asks if defined benefit plans for cities like Vallejo that just declared bankruptcy will ever see that money. David says in California he’s not sure who is getting what. Bruce says that defined benefit programs typically have a projected return rate and almost all have seen losses. David says that those promises will most likely not be able to be upheld because of the economy.

Bruce asks David is he is afraid for seniors as they retire. The Baby Boomers encompasses the 45-64 age range. The older baby boomers are about to retire so there’s a little more concern there. The younger Baby Boomers have a little more time to get back on track. Overall, they aren’t looking good so far. He says the lower 1/5 could be completely wiped out because of foreclosure.

Bruce asks if we should be worried about the Social Security Program since the baby Boomers will have less population paying for benefits as they retire. He says it’s nothing urgent but today the health care costs are getting worse and are more of an issue as Medicare and Medicaid need to be helped. David says socialized medicine might be a possibility since it’s worked in other countries. We have the best medicine but the worst delivery system.

In David’s report entitled “The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble,” David says the net worth of Baby Boomers that owned a home was less than those that were renters in 2009 which is surprising. David says wealth isn’t just in equity and the housing and stock bubble real caused a problem.

More on this report at the Center for Economic and Policy Research at cepr.net. Next week join us as we welcome back Tommy Williams, co-founder of Williams and Williams auction company.

David Rosnick is an Economist at the Center for Economic and Policy Research in Washington, DC. He has a Ph.D. in Computer Science from North Carolina State University and an M.A. in Economics from George Washington University. He has written numerous policy papers including "The Burden of Social Security Taxes and the Burden of Excessive Health Care Costs" with Dean Baker, March 2005; "Poor Numbers: The Impact of Trade Liberalization on World Poverty", with Mark Weisbrot and Dean Baker, November 2004; “NAFTA at Ten: The Recount,� with Mark Weisbrot and Dean Baker, March 2004; and "Black Swans, Conspiracy Theories, and the Quixotic Search for Fraud: A Look at Hausmann and Rigobon's Analysis of Venezuela's Referendum Vote" with Mark Weisbrot and Todd Tucker, September 2004; and "The Forty-Four Trillion Dollar Deficit Scare," with Dean Baker, September 2003.

He is the architect of a growing number of calculators including CEPR's Accurate Benefits Calculator which compares current-law Social Security benefits to the Bush Plan based on "Progressive Indexing." He also created the Housing Cost Calculator, which compares the cost of owning a home relative to renting for a potential new homeowner. It gives homebuyers a sense of how the current bubble in the housing market might affect them. Prior to joining CEPR, he worked as a Research Associate (postdoc) at the North Carolina State University at Raleigh Department of Computer Science.

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