Business/Economic/Housing/Layoff News for July 30, 2010

America Sits Out The Clean Energy Race With China

“Unused Rooftops”: The Future of Solar Power

US Faces Water Supply Crisis

A New Spotlight on Japanese-Style Deflation

Euro nears level not seen since European bailout package

Another slap on the wrists of Banksters: Citigroup Inc. agreed on Thursday to pay $75 million to settle a lawsuit brought by the Securities and Exchange Commission that the bank failed to disclose $40 billion in subprime exposure to investors

The Great Ethanol Boondoggle

Goldman's Leading Indicator Plummets To A Seven-Month Low, Predicts An ISM Collapse Next Week

The New Normal: Americans Cutting Back — Even If They Don’t Have To

Henry Paulson calls for shrinkingFreddie Mac and Fanny Mae

More Foreclosures Expected as Housing Crisis Continues

Dr. Housing Bubble: Real City of Genius – The Westside of Los Angeles. Three short sales in Palms, Santa Monica, and Culver City. $100k to $300k in discounts in prime Southern California locations. Short sales still too expensive even with large discounts

6 Reasons Why The Housing Market Has Not Recovered

Don't Count on Housing to Lead the U.S. Recovery

MISH: Housing Bubble will Not be Reblown; Foreclosures Increase in 154 of 206 Metro Areas with Population Over 200,000


President of the Dallas Federal Reserve explains why there is no job growth in the USA

"A Modern-Day Depression": Rosenberg Sees "Tough Slogging" for the Economy

BP May Attempt ‘Static Kill’ of Well Before Aug. 1

Prudential Insurance Sued Over Veteran Life-Insurance Claims, Lawyer Says

SEC Brings GIGANTIC Insider Trading Case Against The Famous "Swift Boating" Wyly Brothers Of Texas

Investing Advice:Finding the Right Dividend ETF: Aristocrats and Achievers

OMB nominee got $900,000 after Citigroup bailout

Justice Department sues Oracle for fraud

Microsoft Working on iPad's Rivals

Google Develops a Facebook Rival

Fed's Bullard: Fed would act if recovery fails

U.S. Economy Grew 2.4% in Second Quarter, Below Forecast

Americans cut back on visits to the doctor

PricewaterhouseCoopers laying off 500 people in Tampa

New York state government to fire 1,000 workers

First Data pink slips 355 employees worldwide (50 in Omaha)

Business/Economic/Housing/Layoff News for July 27, 2010

Oil well just off course of Louisiana hit by barge this morning, 20 foot high oil spew still not capped, booms surrounding spill

US shopping center vacancy rates rose in 2nd qtr

Cap-And-Trade Advocates See Tougher Battle After Elections

Taleb: Government Deficits Could Be the Next 'Black Swan'

Unless women take control of Wall Street and America, 'The End' is near

The Illustrated Guide To Larry Summers' FinReg Hypocrisy And Hallucinations

The Government's Role in the Housing Bubble

Sickness, late pay, faulty equipment & lies . . . what it's like to be one of the non-inmates working for BP cleanup crews

With scores of coastal residents out of work after the spill, BP is hiring inmates to clean up its mess—and getting lucrative tax breaks in the process

Undersea oil plumes linked to BP Oil Volcano

As counties across the USA run defecits, more asphalt roads are returned to gravel

Derek Thompson of The Atlantic - "The Scariest Unemployment Graph I've Seen Yet"

James Howard Kunstler: "What Is It?"

London bankers buying up 1974 book on mechanics of Weimar Republic hyper-inflation

Head of Bush's TARP program for bankers, Neel Kashkari, wants to cut entitlements such as Social Security for the Middle Class

Cities looking at giving away land and cracking down on non-profits as a means to generate more revenue

Rochester schoolboard to give pink slips to 116 teachers

United Technologies to cut another 1500 jobs for remainder of 2010

Pennsylvania state government employee layoffs still coming

Must Read Of The Day - - - Roger Ebert: "BP's Tree Fell On My Lawn"

Business/Economic News - July 7, 2010 Edition

Gold hits 6-week low on China news
China promises not to dump US Treasuries or pile into gold

Mish:"Hussman Blasts Geithner, Bernanke, Keynes; Why Keynesian Stimulus Always Fails"

Which builders have the biggest Gulf Coast exposure?

BP Supposedly Ahead of Schedule on Drilling Relief Well by One Week

Peter Schiff: Jobs report reveals the truth about recovery

Wal-Mart's Sam's Club chain is teaming up with a lender to offer loans of up to $25,000 to its small business members

EU suggests raising retirement age to 70

The Economist looks at four letter word DEBT: "Repent At Leisure"

To Address Its Housing Shortage, Paris Cracks Down on Pied-à-Terre Rentals
Oil Trades Near $72 on Forecast Supply Drop, Europe Optimism

Louisiana and Scientists Spar Over How to Block Oil’s Approach

Next 10 days crucial to gulf spill

86 miles of Florida's coastline is now "oiled"

Foreclosures drop 49% in second quarter in South Florida

Can South Korea prevent the Housing Bubble from bursting there?

Harvard Professor, Ken Rogogg, co-author of "This Time It's Different", thinks USA not headed for Double-Dip Recession, but slow growth, a continuing slide in housing prices and unemployment

China Property Market Set for Healthy Correction



The 10 Biggest stock winners in 2010 for the first-half

States Are Projecting Massive Employment Layoffs

NASA sub-contractor to lay off 1,000 Space Shuttle workers

NY State Fair terminates union workers; thousands threaten boycott

Milan, MI city council refuses to hire for open positions as rumors swirl about a 200 person layoff at local auto supplier

Walk Away From Your Mortgage!

From the New York Times Magazine article "Walk Away From Your Mortgage" which this video is referencing:

John Courson, president and C.E.O. of the Mortgage Bankers Association, recently told The Wall Street Journal that homeowners who default on their mortgages should think about the “message” they will send to “their family and their kids and their friends.” Courson was implying that homeowners — record numbers of whom continue to default — have a responsibility to make good. He wasn’t referring to the people who have no choice, who can’t afford their payments. He was speaking about the rising number of folks who are voluntarily choosing not to pay.

Such voluntary defaults are a new phenomenon. Time was, Americans would do anything to pay their mortgage — forgo a new car or a vacation, even put a younger family member to work. But the housing collapse left 10.7 million families owing more than their homes are worth. So some of them are making a calculated decision to hang onto their money and let their homes go. Is this irresponsible?

Businesses — in particular Wall Street banks — make such calculations routinely. Morgan Stanley recently decided to stop making payments on five San Francisco office buildings. A Morgan Stanley fund purchased the buildings at the height of the boom, and their value has plunged. Nobody has said Morgan Stanley is immoral — perhaps because no one assumed it was moral to begin with. But the average American, as if sprung from some Franklinesque mythology, is supposed to honor his debts, or so says the mortgage industry as well as government officials. Former Treasury Secretary Henry M. Paulson Jr. declared that “any homeowner who can afford his mortgagepayment but chooses to walk away from an underwater property is simply a speculator — and one who is not honoring his obligation.” (Paulson presumably was not so censorious of speculation during his 32-year career at Goldman Sachs.)

Key West Citizen Yesterday: "Bankruptcy looms over Keys Builder"

Key West Citizen Disappears

Top Headline from Yesterday

No post on this blog has fanned hate email like my recent post about Cay Clubs. The responses to the blog, listed right below my comments were tame compared to some of the stuff I received via email.

So, in an effort to throw a little gasoline on the fires of "Haterz" of Rock Trueblood, I have to ask this question: What happened to the Citizen's above the fold and top of the fold headline from yesterday screaming . . .

Bankruptcy looms over Keys Builder

Cay Club develops financial problems

I would refer you all to this article by Robert Silk, except for one minor problem: the Key West Citizen's online story has vanished.

See for yourself. Check the lineup from yesterday's headlines.

We find:

Restaurateur collects donations for hurricane victimsPublished on Wednesday, August 22, 2007

Family fun day focuses on child safety awarenessPublished on Wednesday, August 22, 2007

Curfew will be enforcedPublished on Wednesday, August 22, 2007

'Keep off' signs go up on WisteriaPublished on Wednesday, August 22, 2007

. . . but there is no entry for yesterday's biggest and best story about Cay Clubs. And this was the top headline you would see as you walked past a paper vending box.

Again,

Bankruptcy looms over Keys Builder

Cay Clubs develops financial problems

Yesterday, online, the story was there.

Today, it disappeared.

As Colonel Klink from "Hogan's Heroes" would say, "Veeeeeeeeeeeeery Interesting!"

When I started this blog, one of my first posts was "Realtors Wag the Key West Citizen Dog".

In that short post I simply posited the idea we can not expect the Citizen to be too observant on Housing in the Keys as the majority of its revenue comes from Realtors.

Why I think yesterday's top story is missing from the online edition of the Key West Citizen

All it takes is a threat to yank advertising dollars. It's that simple. I saw this "cave in" attitude time and again at a Clear Channel radio station where I worked for a short spell.

Key West is such a small town that the paper is inextricably dependent on advertising revenue to make up for its tiny circulation. And no ad revenue is bigger than Real Estate.

I feel someone, somewhere, with ties to Real Estate interests made a big ass phone call to the Citizen and asked, cajoled, pushed or even threatened a Citizen bigwig with the loss of ad dollars if that Cay Clubs article wasn't erased online.

I just googled the headline. No luck. No one anywhere saved the headline and story to an online "memory hole" that I can find.

What was in the article?

Well, here's the flavor of the article in the first sentence by Robert Silk . . .

"The company that became synonymous with the frenzy of redevelopment that swept the Florida Keys in recent years is now scrambling to stay our of bankruptcy."

Here are some of the tidbits discussed by Silk about Cay Clubs:

• An SEC filing by Cay Clubs for its pending merger with Key Hospitality Acquisition Corp. shows a $1.2 million dollar loss for the first quarter of this year versus a $13.8 million profit, year over year, for the same quarter.
• The company owes lenders $91 million, $74 million of which is due in the next year.
• One lender has already notified Cay Clubs they are officially $9 million in default.
• Cay Clubs is in arrears by $10.5 million to about 140 owners of condos who opted for the "lease back" program (as documented in this blog which incited hate emails to yours truly).
• Cay Clubs spokesman Chris Brown says the company is still trying to negotiate with lenders.
• Cay Clubs is still trying to sell off portions of its holdings for cash.
• Of note . . . and something I was not aware of . . . Cay Clubs "owns" 150 single family homes . . . along with 6 resort hotels (the Citizen should have printed condotels), 900 boat slips, and restaurants and other businesses. (I am wondering if the single family homes are really condos the company was forced to take back?)
• More interestingly, the deal to buy and manage the Half-Shell Raw Bar, Turtle Krawls Restaurant, A&B Lobster House complex and other businesses on the waterfront has not happened. The owner of some of these restaurants, a Gene Smith, has refused to answer any Key West Citizen questions since March of this year.
• Cay Clubs bid to purchase the former Marathon Manors nursing home fell through in April and Cay Clubs walked away from the deposit.
• In May, Cay Clubs fired 80 workers in the Keys.

Last but not least, this language from the SEC filing:

"Without additional borrowing and/or the refinancing of existing short-term debt, Cay Clubs will have to change its current mode of operation and may potentially have to file for federal bankruptcy protection."

Now I don't know about you, but if the company is putting the above in fine print on an SEC document, I think it's the kind of language which should be blown up into at least a 20 point font and given to potential investors in their leaseback program. I feel this flare gun warning should be stapled as a top page on brochures and prospectuses to show just how forthcoming Cay Clubs is with the public.

As always . . . caveat emptor,

Rock in Key West

p.s. Robert Silk, you have a beer with your name on it at my club. Bring Rob O' Neal and the new business editor for the Citizen. You three are on my personal Honor Roll for trying to tell it like it is.

Condotels Are Going to Hell: Cay Clubs Gives "Investors" Another Reason Not to But a Condotel Unit

Cay Clubs Non and Late Payments to 140 Investors Shows the Downside of Investing in Florida Rental Schemes

I have been alluding to big "local" developers' growing problems in the Keys. And as soon as I find time, I will be showing photographic proof how badly their bets are going.

Many of these developers tore down longstanding hotels which had high occupancy rates and built expensive condos in their place which people could buy and have the condo-management team . . . assembled by the developers . . . rent out for income producing purposes.

In the past three months, my brother-in-arms blogger in the Keys, Cayo Dave, alerted me to the problems of out of town developer, Cay Clubs, was having in the Keys with his short piece Has Cay Clubs Bit Off More Than It Can Chew? In this piece, Cayo Dave explained how Cay Clubs was forced to cut 80 jobs in the Keys due to what Vice-President of Operations, Dave Rego, wanted us to believe was an upcoming merger with Keys Acquistion Company Corp.

Cayo Dave quoted Dave Rego on Cay Clubs's intent to "go public" (i.e. list publicly traded shares of a company on a stock exchange) with the following, "It is a down market. Several developers across the country are going out of business," Rego said. "We need to make sure we can prosper through a down market so we're one of the companies that stay in business."

But as Cayo Dave and I both believe, there is a major systemic change for reality based Real Estate pricing in this crashing market. You cannot keep the Ponzi Scheme alive if inventory continues to spike upward, prices continue to contract, and consumers are stretched thin and cannot continue vacationing in Florida . . . especially at higher priced Condo and Hotel prices.

I reprint parts of Cayo Dave's blog to show how he was having none of the "calming effect" b.s. from Cay Club's VP of Operations.

As Cayo Dave so eloquently explained,

Cay Clubs is now among the largest developers in the Florida Keys. The question that we should be asking: "Have they bitten off more than they can chew?. And what effects will it have on the Keys should Cay Clubs and it's new parent company become financially unstable?"

Cay Clubs, only recently formed in the past decade, is betting that people will continue to buy expensive second homes, boat slips, and condominiums. Plus, they recently acquired the Turtle Kraals, Half Shell, and A&B Lobster House restaurants.

Remember, during the go-go-go real estate craze of the past few years, hotels in Key West were being bought up, closed, and turned from transient rentals to condominiums. Now that buyers are nearly non-existant, what will happen to the hundreds of hotel rooms stuck in limbo? What if the whole enchilada goes belly up....will we be left holding the bag?

With most of the Cay Clubs holdings in Florida, aren't they particularly sensitive to market shocks? Since Florida is suffering the biggest declines in real estate, should we worry about one of the largest developers here in our backyard? Think about this: in only the past 2.5 years, Cay Clubs has aquired at least 8 Florida Keys locations.

Well, let's look at today's Miami Herald to see how one lucky couple feels after buying the b.s. "investment theme" by purchasing a Cay Clubs Condo in Orlando.

The story is titled "Housing's ills imperil condo deals"

And here is the heartbreaking lead paragraphs directly from the story as written by Douglas Hanks of the Miami Herald:

Horacio and Patsy Parra cashed out two retirement accounts last year to buy an Orlando condominium they couldn't afford.

At the time, they weren't worried. The developer, Cay Clubs Resorts & Marinas, agreed to lease back the $307,000 unit for 15 percent of the sales price -- enough cash to cover the mortgage for nearly two years.

But the Parras now expect to lose their unit to foreclosure, they say, because Cay Clubs owes them about $40,000 in unpaid rent.

Let's stop right there.

The Parras only paid $307,000 for the unit up in Orlando which their friendly developer, Cay Clubs, agreed to lease back for two years at 15% of the purchase price. (I italicized the word only as most condos in the Keys are selling for above $1 million.) Cay Clubs would then "rent" out the condo to vacationers and keep anything over and beyond what they were to owe the Parras.

Doing simple math in my head, the Parras should have received over $45,000 in "rent" on their lease agreement with Cay Clubs and are claiming they are owed about $40,000 in back rent now.

Seems to me Cay Clubs may have started making payments but suddenly stopped. Why?

Well, as an observer of Key West condotel conversions, I'll bet what has gone wrong in Cay Clubs inability to pay the Parras what they owe them is vacationers cannot afford higher Cay Clubs unit rents in a town where they are already paying $100 a day or more for tickets to Disney World. And another point is this: inventory of rental properties is flooding the market. If you want to rent in Vegas or Orlando, there is so much oversupply of rooms to rent you need only go to priceline.com and name the price you are willing to pay, or, you can try hotels.com and shop for lower rates. I've seen ticket books for hotels advertised on I-95 advertising Kissimmee motels going for $39 a night.

The Internet is the new boxing ring for hotels and motels to slug it out to attract customers. Room rates on the many websites I've been surfing are fast coming down. In Marathon, Islamorada and Key Largo, for instance, Cay Clubs have dropped their prices on some units to $89 a night on weekends. In the Keys, Cay Clubs is now undercutting big chain hotels, hoping to put some heads in their empty beds.

(Next week I hope to show photographs of a rental management company with photos of long-term rentals in Key West where three rentals are now offering "first month's rent FREE".)

In other words, like most developers, Cay Clubs's future outlook in 2004-2005 was one where Real Estate would keep its hyper growth curves going with a fully opened up fire hydrant flow of cheap and easy available credit. In 2004-2005, too, Cay Clubs was looking at non-stop growth in tourism. Hence, selling small-time "investors" on lease-back programs where the developer probably showed over-confidence in making back their downpayment in two years was not the kind of "slam dunk" move you'd expect from savvier developers who know Real Estate does go down and up in cycles . . . similar to the stock markets.

None of the genius developers . . . or homebuilders . . . who were overbuying at the Top of the Housing Bubble ever looked back in History at how all manias end. Instead, they buried their heads in the sands of Florida, kept repeating the mantra "Real Estate in Florida will continue to double every 3 to 5 years," and kept building condos like Woodpeckers on Crack.

The Herald further documents,

Fueled by investors' hunger for resort condominiums, Cay Clubs vaulted from a small start-up in late 2004 to a major developer whose 14 properties and marinas include eight in the Florida Keys. The firm, whose billboards dot the Overseas Highway, says it manages nearly 3,000 condominium units and more than 900 boat slips.

Now, the nationwide real-estate downturn has brought a cash squeeze that forced Cay Clubs to lay off dozens of workers, slow redevelopment plans, and ask roughly 140 buyers like the Parras to wait for their rent checks.

The 'money is just not available to make the necessary payments and continue to maintain Cay Clubs' long-term viability during this down market,'' Chief Executive Dave Clark in May wrote to condo buyers awaiting lease-back checks.

Uh-oh. We've got a problem Houston.

Again, I will bet stinking Smathers Beach seaweed to dollars that there is diminishing revenue, a shrinking pool of condo buyers, and less of a chance to borrow a big hunk of money at privately held Cay Clubs (again soon to go "public" in a merger) but we cannot access the privately held books to back up my hunch.

Still, for this company to come out and admit that 140 "owners" of condos are suffering from Cay Clubs inability to pay on time the rents their investment units generated is the stuff of lawsuit prone Real Estate Attorneys.

Then Clark of Cay Clubs lays this egg in the next few paragraphs of the Herald story . . .

Clark says Cay Clubs' finances have improved since then. It has sent rental checks to about 20 buyers to cover one or two months' worth of mortgage bills. The company hopes to refinance its debt, and a pending merger with a publicly traded holding company would bring an additional $47 million this fall. ''Our problems are fixable 100 percent,'' he said.

But on Friday, Cay Clubs disclosed that this year's sales slowdown forced it to accept less lucrative terms for the planned merger with Key Hospitality Acquisition, regulatory filings say. Clark and his top deputy, David Schwarz, agreed to receive 46 percent fewer shares in the new company -- a loss of $197 million in value based on Friday's share price.

The troubles that the Clearwater company faces symbolize wider concerns about South Florida's battered condominium market.

Real-estate analysts say too many developers depended on investors who stretched their bankbooks buying condominiums during the housing boom on the assumption that others would buy or rent them only a year or two later.

Faced instead with anemic demand for real estate, those investors are left scrambling to pay the bills, said Jack Winston, a condominium analyst with Goodkin Consulting in Miami. 'It's the same people: `Hey, let's invest in some real estate! We'll flip
it. . . .' Then, all of a sudden, they find they have to reach into their pocket every month to cover the mortgage. And it's a shock.''

The company hopes to refinance its debt? Hope in one hand, Mr. Clark, and spit in the other. See what you get in this market of Credit Implosion and leveraged buyout deals going bust leaving major Wall Street banks holding the bag for junk bonds they could not sell. There is a major liquidity squeeze here on Planet Earth, Mr. Clark, and all the easy money has fled these types of companies such as your Cay Clubs.

Still, Clark claims this problem is "fixable 100%" and he's banking on the merger going through and giving his company $47 million to rectify the late rents it owes 140 "investors".

However, I must ask Clark the following questions:

How does one expect to increase revenue in a declining tourist market (the Florida Keys are in a Tourist Recession the likes of which we haven't seen since 1990) and how does one stay cashflow positive? There is not only a shortage of buyers in this downturn of Housing, but there is downturn of "renters" by-the-night in this downturn of Tourism.

Does Clark think his units in the Keys will rent as easy in late 2007 as they did just 12 months ago? It appears that fast falling rental prices at Cay Clubs up in the Middle and Upper Keys are telling us a story of sweat stains under the armpits of Cay Club execs's Hawaiian shirts. At least they are trying to compete by slashing nightly rental prices.

Does Clark ever walk Duval Street in Key West's downtown and take note of all the businesses closing their doors forever?

Has Clark not seen the two or three cars in the overpriced Santa Maria Condotel's parking lot (Santa Maria is a non-Cay Club Condo with $350 to $450 a night rooms and units which start at $1.2 million for buyers who cannot do simple math) on weekdays, while nearby motels and small hotels still charging only $99 to $150 nightly have plenty of rooms rented? I think Clark sees the writing on the wall: overpriced condo rooms will not rent during the week, and will only rent as the "last option" on weekends when maybe all hotels and motels are "No Vacancy".

Moreso, Clark has probably read the stories of Santa Maria condo owners who lost their $200,000 deposits but who are battling the developers with class action lawsuits. That has got have Cay Clubs especially anxious to close their merger and IPO deal. My advice to Clark and others in Cay Clubs executive offices if they close the deal to merge: get those options, cash out the day your "lockup" provision ends, and whistle a sigh of relief you made it before the Big Crash I expect in credit markets.

Lastly, who in their right mind would invest in a Cay Club Condo after this latest fiasco as highlighted in today's Miami Herald? I hate to say it guys, but maybe you should have sold off a couple of Lexus's, a vacation home, you know, take a hit on your own to make good on your promises. Now your name is mud and you can't unring that Bad PR Clock.

Cay Clubs needs investors to buy and then not demand rental revenues owed them in this Ponzi Economy which depends on a selling an overpriced asset at continuing higher prices. An important part of the funding program for Cay Clubs expansion was this lease-back program. The buyers of Cay Clubs's units are actually the small lenders which make the developments fly in a market of Condo oversupply. What Cay Clubs needs most is not just a major refi of big loans, but they need small "lenders" . . . i.e., mom and pop investors" . . . to turn over their retirement money and not ask for any of it back until the market returns and makes Cay Clubs's bet look good.

As the Herald explains:

Clark, the former head of a development company that built the Mariner's Club in Key Largo, launched Cay Clubs in 2004 with the goal of creating a chain of luxury vacation spots in soughtafter destinations.

Instead of shouldering the development costs alone, Cay Clubs adopted a familiar strategy in South Florida: selling off rooms in resorts as condo-hotel units to individual buyers, who could then share in the rental revenue. That financing mechanism helped others, such as Miami's Four Seasons hotel, Key Biscayne's Ritz Carlton and the new St. Regis in Fort Lauderdale.

But Cay Clubs gave the strategy a twist: The developer would contract to rent units back from buyers for two years, refunding as much as 15 percent of the sales price upfront. In those two years, construction crews would convert the property -- typically an apartment complex or budget motel -- into a top-tier resort, according to sales materials.

Condominium converters often lease apartments back from buyers to free the new owners from serving as landlords. The programs aren't common among condo-hotel developers, but more projects are turning to the tactic as a way to woo buyers in a cold market, according to the National Association of Condo-Hotel Owners. The group lists 13 Florida condo-hotel projects offering lease-back programs, mostly in the Orlando area.

Yep, the words "lease-back program" are the words anyone with retirement savings ready to invest in Real Estate should run away from at sprinter's speed, in my opinion.

I have never read a Cay Clubs brochure trying to sell an investor on the reasons he or she should buy such an income producing condo. One thing I can assure you we will never read in such a brochure wold be the following in big bold print:

Oh. By the way, we might not be able to make those promised timely rental payments to you if market conditions turn against our company. The company comes first. If we go bust, you will have no one to rent and maintain your unit. Capiche? So late payments are part of the "promise".

And a second thought. Nobody ever said Real Estate was a sure fire investment, did they?

Can you imagine anyone wanting to buy a Cay Clubs lease back property today after reading this Herald piece?

Can you imagine anyone wanting to buy any Florida condotel property built by anyone else?

And this vaunted "lease-back" program. Can't go wrong there, brother, as everytime someone rents your condo, you'll receive a check in the mail at the end of the month.

That's not the emphasis Cay Clubs gave in their advertising? Oh, really?

". . . virtually two years of FREE appreciation" and 90% of Cay Club Condo buyers opt for the lease-back option.

From the same Herald article:

Ricky Stokes, a top seller for Cay Clubs, touted the lease-back arrangement in a May 2006 online presentation as providing ''virtually two years of free appreciation'' because, for most buyers, it would cover ownership costs for 20 months. Stokes did not respond to interview requests.

Company executives said about 90 percent of Cay Clubs' buyers chose to sign a lease with Cay Clubs. They included the Parras, full-time landlords who have acquired 20 houses and apartments within a half-hour's drive of their Castle Rock, Colo., home.

Last summer, they accepted an invitation to a Stokes Web talk from a company called the National Association of Women Real Estate Investors.

''This developer has put together an unheard of package for investors,'' read the e-mail from NAWREI, which received finder's fees for Cay Clubs sales. ``Immediate equity. . . . Guaranteed rental income. . . . Anticipated appreciation.''

Even with their large real-estate holdings in Colorado, Patsy Parra says she and her husband do not have the extra income to handle another mortgage payment.

But they took out four loans to buy two Cay Clubs units: the one in Orlando and another in a planned Las Vegas hotel. They counted on 20 months of lease-back payments to cover the $4,500 in monthly costs for both. After that, the Parras needed appreciation gains to make the investment work.

''I'd have to refinance to get the next five or six months of payments,'' Parra said. ``They were supposed to be very valuable.''

Other buyers depended on the lease-back cash to pay their mortgages, too. ''I have clients that are filing bankruptcy because they can't afford their payments,'' said Gene Denton, president of Select Market Real Estate, a Colorado firm that sold Cay Club units through Internet presentations.

NAWREI wrote to Clark on June 7 that Cay Clubs owed members nearly $240,000 in back rent, leaving members ``facing personal financial hardship including bankruptcy.''

I've said it before, I'll say it again,

"Never trust any stranger who looks at you

as just their next commission check!"

Look at how Cay Clubs had ancillary marketers hosting Web conferences under the auspices of people who collected a commission for every sale generated by buyers not even seeing the properties being discussed.

This is the stuff of " . . . and I've got some (swamp)land down in Florida I want to sell you" sarcasm you heard during the Great Depression. Here I was feeling sorry for the Parras at the beginning of the Herald piece and then I read they owned 20 rental properties in the Denver area before making the worst Real Estate investment of their careers.

Let's re-read what the Parras 'fessed to:

Even with their large real-estate holdings in Colorado, Patsy Parra says she and her husband do not have the extra income to handle another mortgage payment.

But they took out four loans to buy two Cay Clubs units: the one in Orlando and another in a planned Las Vegas hotel. They counted on 20 months of lease-back payments to cover the $4,500 in monthly costs for both. After that, the Parras needed appreciation gains to make the investment work.

''I'd have to refinance to get the next five or six months of payments,'' Parra said. ``They were supposed to be very valuable.''

The Parras were experienced Real Estate landlords. Yet, they let greed get the better of them. They overextended themselves buying two Cay Club condos, one in Orlando, one in Vegas. They used four loans to make the purchases happen. And then they banked on Cay Clubs making 20 monthly payments to them for rentals on both units to help them make the $4,500 in monthly mortgages.

And now they, the Parras, cannot make those monthly mortgages?

And they already own 20 income producing rentals in and around Denver?

Hello. You own 20 income producing rentals and you cannot afford $4,500 in monthly mortgage payments on two losers?

Can anybody here explain how these folks are poster kids on "How to Make Millions in Real Estate"?

Again, "Where Are the Adults?"

Okay, I'm not pointing my finger at Cay Clubs exclusively. Although they marketed the miracle of having your condo leased back and two years of rental fees coming into your account to help pay monthly mortgage, I had to shake my head in quiet agreement at this last bit in the Herald article:

Cay Clubs executives question how buyers unable to pay mortgages out of their pockets could have qualified for loans in the first place. A Cay Clubs spokesman noted that the Parras' mortgages bar putting their Orlando condo into a rental program.

Even so, the company makes no apologies for giving real-estate investors a place to spend their money.''I think anyone who has been doing real estate in the last four years has been selling to investors, not end users,'' said Mike Matte, Cay Clubs' acting chief financial officer. ``I don't care what company you're talking about.''

Analysts largely agree, blaming the current nationwide housing slump on investors abandoning real estate this year. A July report from Fitch Ratings blamed a spike in rental vacancies across the country on ``investors who are biding their time before putting single-family homes back on the market.''

Clark, the chief executive officer, said Cay Clubs will be able to weather the downturn. Cay Clubs is negotiating with lenders to refinance its $87 million in loans and may sell off land to raise cash as it awaits the Key Hospitality merger scheduled for the fall. Meanwhile, spokesman Chris Brown said Cay Clubs is making ''Band-Aid'' payments to about 20 buyers, including about $4,000 to cover a month's mortgage payment for the Parras.

But Patsy Parra said Friday that she has no cash to pay the mortgage in July or August -- a scenario she said she never anticipated.''When we first bought these condos, I thought everything was fine,'' she said.

``I never in my wildest dreams thought something like this would go wrong.''

So, the company makes a point that any adult who qualified for a loan, should have been able to make mortgage payments on their own in the first place. Point taken. Yet at the same time " . . . a Cay Clubs spokesman noted that the Parras' mortgages bar putting their Orlando condo into a rental program."

The company is claiming the Parra's mortgages barred them from putting their Orlando condo into the lease-back program?

Somebody didn't do their due diligence, or somebody flat out lied. Who's at fault?

Point taken away from Cay Clubs.

But then the CFO of Cay Clubs says,

''I think anyone who has been doing real estate in the last four years has been selling to investors, not end users,'' said Mike Matte, Cay Clubs' acting chief financial officer. ``I don't care what company you're talking about.''

Well no joke, Sherlock. You guys are pushing lease-back programs on the Internet in Webcasts to "investors" who are promised they will make back their monthly mortgage payments in rental fees you will collect and disburse to them.

You are trying to tell me Cay Clubs bears no guilt for the way they've marketed their condotels to investors, not end users?

Clark, the chief executive officer, said Cay Clubs will be able to weather the downturn. Cay Clubs is negotiating with lenders to refinance its $87 million in loans and may sell off land to raise cash as it awaits the Key Hospitality merger scheduled for the fall. Meanwhile, spokesman Chris Brown said Cay Clubs is making ''Band-Aid'' payments to about 20 buyers, including about $4,000 to cover a month's mortgage payment for the Parras.

And Clark still thinks "lenders" are going to refinance $87 million in loans in this new climate of crashing leveraged buyouts where junk bond financing has stopped abrubtly and the Wall Street Investment Banks are now left holding the bag and owing over $30 billion (at last count this morning) on unsubscribed to debt they were trying to sell investors?

In a time of sub-Prime meltdown and now a similar routh in Alt-A loans, does anyone think a company which can't make payments to small lenders, i.e., buyers of their condos, is a safe company to refinance?

Not I.

Like Cayo Dave, I think Cay Clubs is deep in the doo. I don't see how they can possibly work their way out of their own hole digging other than to not only sell off some land for pennies on the dollar, but also sell off some of their completed projects.

The tailwind Cay Clubs and other developers enjoyed in 2004, has now changed to a hellatious headwind. (Just ask the developers of 20,000 new condos coming on line in Miami during the next 18 months in an area that has 75,000 housing units on the market at this moment.)

I expect to see many big scale bankruptcies on condo projects all over Florida. Cay Clubs is just the most notable taking a hit in the Keys. If they don't close their merger deal quickly, I believe these guys will burn up any remaining cash and be bought out from vulture funds.

But it's not just Cay Clubs: the hard rain is going to fall on bigger developers with local ties. I see the evidence all over. This is only the beginning of the Housing Crash and Credit Market Crash. It will affect prime borrowers as well as those in the sub-Prime sector.

Action to take: do not buy Florida Real Estate in Florida. The worst is to come. Wait. Amass cash. Buy only those "safe" Blue Chip Big Cap names in stocks which can weather any major crash in markets. Buy gold, silver and oil as hedges. Keep working hard. Make yourself indispensable to your employer or work at marketing your self-owned busienss better.

Be prepared for Hard Times. And be prepared to profit when Hard Times bottom.

Adam Lashinsky's Blog: "Imagine this: Straight talk on the housing market."

Imagine this:

straight talk on the

housing market

Sometimes you run across a photo on the Internet which makes you laugh out loud and shake your head in disbelief and anger at the same time.

Eventhough the photo caption above of an expectant mother, smoking a cigarette, tells us she is worried about the effects of jackhammer noise on her unborn child, any sane person would "get" the real story not being told by the photo.

The woman is the bigger risk to her unborn baby, yet here she is casting accusations a construction workers.

In the same way, in Housing circles for way too long, homebuilders and Realtors have been telling a story which doesn't jibe with the pictures painted by bloggers all over the nation.

Every once in a while, you run across a blogger or writer on the net who sees through the bullshit and tells it like it is and makes it really funny to drive home a point. And you laugh out loud. And you want to share that laugh at the expense of a prevaricator or petty tyrant or crank who doesn't know when they are the cause of much humor.

Hence, today I reprint Adam Lashinky's recent CNN/Fortune Money blog which puts words into the mouth of Toll Brother's CEO, Robert Toll.

To show how Lashinsky and I think alike, I will add my comments in itlaics colored in purple under his comments printed in black italics.

So, what we have here is Adam Lashinsky and Rock Trueblood having a little fun at the expense of one of the biggest egos in Housing, Robert Toll.

(for the unedited version showing none of my comments, click on this link)

http://gowest.blogs.fortune.com/2007/07/25/imagine-this-straight-talk-on-the-housing-market/

July 25, 2007
Imagine this: Straight talk on the housing market

by Adam Lashinsky

Reading word of the debacle at class-act mortgage lender Countrywide (CFC), I couldn’t help thinking about a fascinating interview my colleague Jon Birger did recently with Bob Toll, eternal optimist and CEO of luxury home builder Toll Brothers (TOL). When I read the Q&A in the magazine, I was struck by how there seemed to be a sub-text to everything Toll said, a sort of What-He-Says versus What-He’d-Say-If-You-Injected-Him-With-Truth-Serum.

So with apologies to Jon and Bob, here is an imagined annotation to Toll’s responses, were he being more candid than the situtation allowed. (To read the full interview, follow the link above. I’ve edited it for space below. The bold are Birger’s questions, the plain text are Toll’s published answers, and the bit in italics is my contribution.)

How bad is it out there?
I don’t see the market getting better until, at the earliest, April of 2008. But I do think that when a recovery occurs, it will be much quicker than it has in the past because of pent-up demand.

Sounds good. Of course we all know there is no pent-up demand for homes. Everyone who wanted one bought one. Or Two. Or Three. Gosh, I loved the early 2000s. By the way, I just know Countrywide will predict no recovery until 2009. Most folks will find them more believeable than me.

I hope these guys have forgotten that I was once predicting that if Americans didn't buy a home in 2005, they would never be able to afford a house again in their lifetimes. I hope they also forget that I predicted a new landed gentry with those who owned, and those who would always be sentenced to rent from the new landed gentry. Why should I worry? Americans have short term memories. Jesus, Angelo Mozilo at Countrywide just said he doesn't see a turn around until 2009. Is he spending too much time at the tanning bed or what? How come he can't get on the same page as me and start spinning the proper spin?

Weren’t you worried about speculation in Florida and elsewhere during the boom?
There wasn’t anything we could do about it. We would make people sign in triplicate swearing up and down that they weren’t speculators, but we couldn’t control whom the builder next door was selling to.

Worried? Are you kidding me? We LOVED it. Do you realize how much our stock went up in three years?

Worried about the run up in home prices which caused a huge panic buying wave and made people all the more addicted to buying Real Estate, no matter what the price? Are you crazy? Our stock price rocketed, our board paid me more options and bonsues, and the mania allowed me to be King of the Universe for a few years there.

Some analysts think new-home prices would have fallen even further if not for all the incentives - high-end kitchens and the like - that builders are offering.
When you start selling homes for $400,000 that were $500,000, all the homeowners who paid $500,000 are going to be in your sales office complaining, saying, “Why are you doing this to me? Why don’t you just put a sign on my lawn saying, ‘I’m a schmuck?’ ” So you’ve got to give incentives instead of lowering prices because you don’t want to be rude, crude and barbaric to your clients.

Believe it or not, most are too stupid to realize that the giveaways are the same thing as lowering the price. Is America great or what?

Americans are to dumb to realize incentives not only lower prices, but also keep the median home price artificially high. If more homes were selling for a real price without incentives, homes in all neighborhooods . . . be them of new housing or old used housing . . . would have to adjust their prices downard, dramatically I might add. We can't weather reality based pricing. Hence, incentives help us hide our pain and nervousness and incentives helps us keep a straight face when we tell homebuyers and the press that prices are not coming down that fast or not coming down at all.

There’s been a lot of speculation that with homebuilder stocks down so much, they might be takeover targets for private-equity funds. Do you see that happening?

I think that every builder has been approached and had conversations, but obviously they haven’t gone anywhere. Say an LBO fund approaches a builder, saying, “Look, your stock was $50, it’s now $25. I’ll give you $30.” Well, why should I sell for $30 when every time the market has come back we’ve gone to new highs?

It’s a good negotiating position, don’t you think? Look, I’m a smart guy. I know that $30 is a GREAT price because we’ll never see another housing boom like the last one in anyone’s lifetime. Truth is, I doubt even the shopaholic private-equity guys would pony up for overvalued stocks like homebuilders right now.

If some private equity guy . . . who are having trouble finding money to borrow after the Bear Stearns debacle a few weeks ago dried up liquidity lending . . . wants to buy us out for $30 a share, I'll kiss his ass and be the Godfather of their children. I'd be happy to make them the last bagholder in line. I'm over this. I need a long vacation.

An Open Response to a Whiny Email Writer: 13 Reasons Why . . . Off the Top of My Head . . . There Is a Downturn in Key West Tourism and Housing

" If you and other crybabies would quit complaining about Key West tourism and housing, then maybe this town would get back to what it was a few years ago."

And that was just the warm up first sentence of a nasty email I received from a local reader of this blog.

Being an opinionated person who thinks for himself, it never ceases to amaze me how many"adults" love to blame me for their crowd mentality decisions to buy real estate or business at market highs.

The person in the above email was blaming me and others like me (I am guessing bloggers such as Cayo Dave and Sally O' Boyle) for his badly timed purchase of a Key West business suffering declining numbers.

I wrote back to this person that I did not know who he was in real life, nor do I ever remember wrestling a prospective Key West business buyer to the ground and forcing them to sign a piece of paper requiring them to buy a business . . . or home . . . at a market top.

I've been asking this question a lot lately: "Where are the adults out there?"

When I lost a good deal of money in the stock market at the turn of this Century, I examined my losses in minute detail. I blamed myself for not having taught myself value investing at a much earlier juncture in my earliest years of purchasing stocks. Instead of learning the true value of a company, I simply listened to unabashed cheerleading of stocks by analysts who . . . unknown to me . . . had interests in "pumping and dumping" those same stocks to sell at a top.

For instance, back in the go go days of the dot.com craze, buy side analysts, i.e., cheerleaders of stocks who were making these incredible calls for "Amazon to go to $600" or "Qualcomm target of $1000", were usually from the same investment bank which had issued shares of the companies in which they were making such outlandish calls. There was no "Chinese Wall" between analysts and their investment banker brethern all in the same bank. Hence, the inbred and vested interests of all in the same bank were put above those interest of small investors such as myself.

Had I listened to Warren Buffet, Anotn Van Den Berg, Sir John Templeton, or any other of the great value investors of the 20th Century, who were warning in 1999 about the insane pricing of Nasdaq stocks and what would surely befall investors who believed they hype, I would probably have a million dollars in my trading accounts today.

The dot.com Bust was my expensive education in "following the herd" and listening to sharpies with "vested" interests in keeping a Ponzi Scheme alive where the "Greater Fool" is the next buyer of the overvalued asset in question.

How am I responsible for your stupidity?

If you, the writer of that nasty email to me, are reading this, I want to tell you what you need to do to cut your losses short: educate yourself and admit it is you, not I and others who are trying to help educate you, who is the baby.

I don't even know what kind of business you are in, yet if you were smart, you'd go to town learning how to market your services or wares better than you are doing now.

As it is, the bar where I work has just expanded our size in a major down market. And we are kicking ass in the biggest block of Duval by paying attention to details our competitors give no thought to.

Our hard earned "winners" knowledge has come at the expense of taking notes, experimenting, using the Scientific Method and Scientific Advertising to crush our competitors. You can apply these same methods to whatever business you might be in.

Okay, I'll give you one secret: use headlines in all your advertising . . . and test those headlines over and over to see which work best.

As the DJ in our business, I use "spoken headlines" which I've tested over the years to make our customers laugh, think, and then try out new features in our club, or come back 2 or 3 times a night.

Every winning headline is something I've documented by asking customers and my co-workers, "Are you back because of A or B?" "Did your client come back because of A or B?" "Am I repeating this headline too many times in a night?" "Am I not saying that headline enough?"

Many times, locals will come in and chat for a second or two and tell me, "Yeah __________ Bar is already closed . . . ." and here my bar, in the same business, is kicking ass with 130 people inside at 2:00 AM.

The competitor just down the block has no cover charge, beers are $2.00 cheaper than our place, and still, I keep hearing how they are going to kick our ass when they get their new addition open. In fact, the head carpenter on the property at this bar I'm telling you about recently told me how their new bar was going to "put us out of business." And then he went on complaining about how our drinks are overpriced, how he would never pay a cover to come in any bar in Key West, and so on and so forth.

And I thought, "Yep, YOU, may not want to come in our place, but tell that to the hundreds of people who visit us nightly and who are staying longer." The reason we charge our price (on the mainland stripclubs charge 4 times what we charge at the door, and many charge more for beer and drinks than we charge) is we offer a superior product which people feel no problem paying for once they've seen what we've got. Once you come into our club . . . especially if you visited our two competitors . . . you would gladly pay four times what we are charging at the door and more than what we are charging for drinks for now.

Put it like this: let's say you have a choice of visiting Sloppy Joe's tomorrow night to hear the best generic Classic Rock band on the island. Okay, they might charge you $3.00 cover. Meanwhile, let's say I've got a maximum occupancy of a club space down the block of 300. I hire this little band called the Rolling Stones who owe me a favor from the 60s. I charge $1,000 per ticket. I sell out and have people massing on the sidwalks in such big lots that the KWPD has to close off Duval Street while Sloppy's sits empty.

It's a case of getting your money's worth. Would I pay $1000 to see the Rolling Stones for four hours in an intimate bar setting? You bet I would. And millions more Boomers would do the same.

Hence, you get what you pay for. You can demand more for a superior product. In fact, I will go so far as to say our competitors are stupid in having cover charges only on weekends for the same entertainment you can see free on the other five nights of the week. We don't play no games at our place. We don't have "All You Can Drink - $10" or "Heiniken - $3.00 a bottle" nights or whatever. Why? We don't need to. We've got the best show in town with the best looking entertainers.

Our competitors in this town will never come close to matching our growing business until they learn the hard earned "secrets" of marketing our business correctly. The way they market stamps "Loser" all over their name.

I am telling you this because I not only know you can survive during down times, you can thrive too. I know this as my club is doing just this right now. If you want to succeed like us . . . or the successful mom and pop coffee stand owned by some hard working Mexicans I know and love . . . you simply have to go to school on your business and execute it better than any of your competitors. If you spen your energy whining about outside factors you cannot control, you will not be in busines much longer. Period.

I love competition

What I don't like is for expletive filled finger pointing email from an insecure business person claiming I and other chroniclers of Key West's current downturn in Housing and Tourism are the main reason for your suffering. That's so ludicrous that I laughed many times at your email and wondered how it is, yet again, that another Key West worker/business owner can't understand they are doing something wrong.

Look, I've worked with many good people in this town who got fired for disobeying rules and who made it hard on the good employees who always show up to work on time, sober, and who don't rely on drugs or alcohol to get through a night. Still, to hear it from these employees who were fired, or who quit and badmouthed our club and who now want to come back, you'd think their problems were caused by outside "bad people" who threw them under a bus somehow.

It's like you, you are blaming your bad business on bloggers and negative people from Key West.

If I knew who you were, I would bet I could walk into your place and see 101 things wrong which I would change immediately to improve business. I'll bet you are like 99% of all businessowners who don't even have a monthly, quarterly or even yearly personal message sent to your best customers.

And I'll bet you don't treat customers like clients. And I'll bet you don't know the difference between the word "customer" and "client".

As it is now, there are dozens of things in my successful nightclub which I would be doing differently. But I don't own my club. I can only make suggestions. But the difference between you, the writer of that ugly email, and my bosses of my club is that my bosses are risk takers who never stop innovating and experimenting with the way we do things. We do a little something differently every day.

Sometimes my bosses do something and I go, "What in hell are we doing that for?" And then their suggestion works in Spades and kicks up revenue and earnings another notch. And I learn from their successes as well as their disappointments.

On the other hand, sometimes I or a manager will over-ride one of the bosses decisions which doesn't work, and our change in format, lighting, position of tables, whatever, works better than the initial decsion our bosses made. My bosses don't fight us. They don't feel like we've slighted them.

From my end, I never, ever quit experimenting with spoken headlines pushing our benefits of our club and the whole entertainment complex. What I make look or hear simple, took many years of experimenting in seeing what worked. I also keep our music fresher than any club in town . . . and this includes the dance club down the block, the big bar which hires bands and has a DJ on break, the new hip hop club down by Mallory Square, and all the gay clubs in town.

My next new idea for music is to have cards printed up with our business logo and the words, "Artist" and "Title" printed on the face of the card with a "Thanks for dropping by, DJ Rock" printed at the bottom with my signature in blue. Now this may seem like a small thing to those of you who have never deejayed, but let me tell you, since we've opened up the new addition of our club a few weeks ago with the best sounding PA in Key West and a deejay booth which is more accessible to the public . . . our numbers of clients who come to me to ask the names of songs has skyrocketed. If I as a DJ can take a 60 year old man and turn him onto a new "Gabriel and Dresden" trance fan, I know I am excelling as a DJ. If I can write that on an officially pre-printed card, it tells clients that we are so cutting edge that we are constantly breaking the freshest music in town and going the extra step to provide them with the knowledge of this new music . . . no sweat to the DJ.

I am not the reason we are so successful in this market downturn.

A good business takes teamwork. I am but a cog in the machine. But our machine runs better than our competitors.

Most importanlty, we know what business we are in and how we can keep getting closer to perfection in the selection of our Number One asset . . . which I'm not going to discuss here.

But I am going to give you, the writer of the scathing email to me, another ace suggestion: you need to find your Unique Selling Proposition of your business. You need to push that top selling USP in all your advertising...

And you need to execute better at whatever it is you do.

Here are 13 reasons why off the top of my mind there are fewer tourists in Key West

Again, if you are the owner of the business who cried about your problems and blamed me and others for your downfall and the downfall in Key West housing and tourism, you need to educate yourself.

Here are just a few things you might want to think about:

1. Nationwide, this is shaping up to be the worst Housing bust since the Great Depression. No less an authority than Angelo Mozilo, ( and this blog's first Real Estate Weenie of the Week) CEO of Countrywide Financial, the nation's biggest lender for home loans, said last week this is the worst crash in new housing since the Great Depression.

CEO Angelo Mozilo of Countrywide Financial also said last week:

• The housing market will not "return" until 2009. (Note: In 2005, he said the bad Autumn figures were just a bump in the road and that housing would come back and take off again in 2006. In 2006 he said the worst of the "slump" was already factored in and housing would bottom by 2007. Now it's 2007 and the "Moz" is warning the "return" is not in 2008 but 2009. You see how his cheerleading has been revised time and again?)
• Alt-A borrowers with better credit than sub-Prime borrowers are "starting to miss payments at a higher rate". What the "Moz" did not mention is that Alt-A borrowers are now growing in default at a faster growth clip (percentage wise) than sup-Prime borrowers. (Famous economist Ed Yardeni called Mozilo's confession " the first piece of hard evidence that the subprime mess may be spreading.")

2. If you paid attention this past week, the Stock Markets in the USA all had 5% or greater losses for the week. For the summer, retailer and restaurant stocks have been particularly hammered.

This past Thursday was a big down day. The news which moved the markets downward that day was new home home sales fell 6.6% this past June and that the National median price of all homes has fallen 2.2%.

(Please pay attention to the Key West's NAR sponsored ad in today's Key West Citizen . . . which I will run out and purchase in an hour or so . . . as it will contain the ad with many bullets of lying "facts" to get you to buy Housing today and which they have been running for months without any corrections whatsoever . Among their "facts" is housing median prices are going to go up this year. Never mind the new reality of numbers coming out of the Fed and elsewhere.)

3. America's Gross Domestic Product, or GDP, has been kept alive by the almighty American Consumer who has maxed out credit cards. We are a nation of negative savers and Nationwide consumer debt is at an all time historical high.

4. America's GDP has been kept alive by consumers tapping into what seemed a few months ago was an inexhaustible Housing ATM. Now, however, with declining home prices, many consumers owe more money on their home loans than their houses are currently worth in a declining market of prices. They are "upside down" on their loans.

Realizing that EZ Credit, Liars Loans and Home Equity Loans are drying up, you will begin to understand another important reason for the disappearing tourist: You cannot borrow from your house by refinancing yet again if your $555,000 starter home is now only worth $400,000 on today's open market. There's just no way it's going to happen. Hence, the "wealth effect" is turning into a "poverty effect". And when Americans can't borrow more to live a lifestyle they are accustomed to, they cut back on expenses.

One of the first things to always go is that "expensive" vacation far from home. Instead of Key West, well, if they are in Virginia, they might do daytrips to the beaches up there, Busch Gardens, Kings Dominion, etc. Vacationing close to home is the new reality this summer. Just read USA Today.

5. Margin loans for stock purchases are at an all time high. The majority of this margin (as documented in Barrons Weekly last week) in this market has been used by big time funds and firms, not individuals such as myself. This is a reverse from the days of the NASDAQ wipeout in 2000. Back then, everyone you knew was margined to the hilt and we were all going to become millionaires because "it's different this time."

Why is this larger misuse of margin by Wall Street important to understand? Because Wall Street uses black box modeling to buy and sell stocks. Hence, future downturns are likely to be more dramatic than past volatility if a panic to sell ensues. Firms selling millions of shares of an issue their black box says to sell will play havoc with our markets, crushing stocks which are assigned to companies which use Crack Cocaine Accounting.

6. Leveraged hedge funds are using Great Depression type margin of 10 to 1 or 15 to 1 on their overexposure to deriviatives in stocks, bonds and especially mortgage backed securities. A few weeks ago, we saw the first pop in Hedge Funds when Bear Stearns saw two of its hedge funds become basically worthless as their over-leveraged bets on Mortgage Backed Securities dressed up as CDOs went wrong. If you were a big investor, say a doctor, lawyer, or CEO of a company, who bet millions of dollars by handing all of your investment money to either of these two Bear Stearns hedge funds, today, you have nothing.

7. Peak oil is a certainty. And more oil is becoming nationalized while 3 billion new Capitalists are helping demand outstrip supplies. I feel $100 a barrel oil is just around the corner.

Goldman Sachs recently said they feel $100 a barrel oil will happen in the next 2 years.

Matt Simmons, respected oil analyst and writer of "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy" was quoted this week on Bloomberg TV saying he feels $200 a barrel oil is going to happen sooner than most analysts think. As oil prices continue to increase (we are only $1.00 and change away from another all time high) people see "vacation" drives or boat excursions as some of the first "expendables" when looking for ways to cut expenses from their housing budgets.

7. Boat repossessions in Florida are at an all time high. Inventory of used and new boats in marina yards are at an all time high. If you own a house, a car, and a boat, the first thing to cut loose is the boat when you are a strapped homeowner. Stocks for boat manufactureres are down 60 to 80% across the board. This is one durable goods sub-sector of the stock market which is actually in the crapper with homebuilder and lender stocks.

8. Last week a front page article in the Key West Citizen told of Scientists discovering raw sewage in the waters of our reefs. As documented on this blog and others by first hand observations, our reefs are dying quickly. Complaints are numerous on sightseeing snorkel trips to Sand Key and other nearby reefs which now look like moonrock instead of the heatlhy colorful coral which was flourishing and protecting many fish species just a short 15 years ago.

9. In 2004 and 2005 we had 8 hurricanes brush or directly hit the Keys. If you don't think foreigners and American tourists who lost deposits due to forced evacuations haven't traded stories on Internet travel sites, then you simply ignore one of the best "free" business research methods I know for any business anywhere. Find out what people are saying about our product or service. Go online.

10. Foreigners hate George W. Bush, and right now, America is the nation most feared on the planet thanks to an uncompromising, stupid, foreign policy directed by corporate policy. There has never been a time in my life where "The Ugly American" has been bigger in Foreigners minds. Thanks to Neo-Cons expending all the 9-11 good will the world sent our way, we no longer are a country where foreigners feel wanted, nor do they love us for our meddling in other countries.

11. As jobs get tighter in Construction due to the fall off in housing starts, you will hear more and more calls to boot immigrants out of the country. Indeed, without the immigrant workforce in Key West, whether illegal or legal, this town would fold as more businesses would not be able to find Americans who are willing to work for minimum wage or thereabouts.

11. Minimum wage increased, by law, from $5.15 to $5.85 just recently. This time next year, that will rise to $6.30 per hour. Two years from now, minumum wage will be $7.25. (Senator Ted Kennedy is calling for a minimum wage of $9.50 by 2009.)

This is the fastest rise in minium wage ever. And this will pressure inflation of prices on everything you buy at the store and if you own the store, from your suppliers. As minimum wage forces more cutbacks on businesses everywhere in the USA, unemployment will rise sure as the sun rises and sets every day. Get ready for massive layoffs and further rising prices.

12. The goverment has inflation clocking in at 3%, give or take a few percentage points. However, Austrian school economists see US inflation running at a current real rate of 8 to 10% at this time in history when oil and food stocks are seeing double digit gains in prices year over year for the past four to five years. Tell a local cab driver that "inflation is in check" (as the Fed would have you believe) after he or she has to fill up their gas tank at the end of every shift with Key West gas which costs 100% more than it did not even three years ago.

13. Lastly, fewer hotel rooms are on the market. And the new ones coming online will cost more to stay. Look at the Santa Maria condo/hotel. It is empty during the week. Its $400 a night rooms draw no buyers while a half-block away, rooms going for $150 at any of six smaller motels are busy. Although there are plenty of "vacancy" signs all over Key West . . . even during season this year . . . the hotel and motel rooms which are more reasonably priced were selling out during high season.

This week, the Key West Citizen ran a front page photo of the demolished Atlantic Shores with accompanying story of rooms which used to cost $175 during high season tells us the new prices of the new rooms will go for more than double.

Question: Do you think the owner of the Atlantic Shores is doing the right thing when he could simply look right across the street at those empty Santa Maria condos which aren't renting during the week?

A price wall has been hit. $300 to 400 a night in Key West is way too much. Tourists are voting with their wallets. A room is a room. You don't come down here to spend all your money on a room which sets you back 3 or 4 C notes a night. A room doesn't entertain you. It doesn't get you actively invloved with our beautiful outdoor surroundings. Who needs to overspend on a room when you can rent cheaper digs and use the savings to buy a four course meal at one of our 5 star restaurants, or pay for a couple of jet ski rentals for a few hours?

. . . and there are other factors I could quote to you, Mr. Whiner, the writer of the nasty email to me.

But I feel just these few facts I've stated to you will go right over your head. You strike me as the type who expects riches to come to you easily, as long as observers of failing economics will shut their mouths and not try to to warn others of the new reality. By blaming me, instead of market and ecological forces, for your downturn in business, you show an immaturity that sets you up to be fleeced by moneyed people who study markets, marketing, business and money.

All I can say is "educate yourself".

Smarten yourself up.

And always question authority.

Especially question those who look at you as their next commission check.

And don't believe a damn thing coming out of the mouths of our politicians . . . especially this dangerous bunch in power for the past 7 years. These guys have set you up . . . and tens of millions more hard working Americans . . . as their fall guys by using your ignorance against you.

Blame me all you want, but if you persist in your stupid prejudices and short sighted opinions, you will only continue to wipe out your wealth.

Be a man. Look yourself in the mirror. Admit your mistakes. I didn't bend your arm to buy your business in a declining tourist market with the worst Housing Crash since the Great Depression while oil and food prices are skyrocketing. I am not the cause of your pain. You are.

'Nuff said.

p.s. Buy any number of books from either Gary Halbert or Dan Kennedy on marketing. Put their smarts to work for you in your business. Quit blaming others for your immaturity and sloth.