Panama Investor Blog

Indians flee Dubai as dreams crash

As they flee they abandon their cars at the airport with the keys in the ignition. The construction and real estate party is over and Dubai is reeling. The bigger they are, the harder they fall. At least they can still go snow skiing!

Excerpts: from Daijiworld: Local police have found at least 3,000 automobiles -- sedans, SUVs, regulars -- abandoned outside Dubai International Airport in the last four months. Police say most of the vehicles had keys in the ignition, a clear sign they were left behind by owners in a hurry to take flight.

The global economic crisis has brought Dubai's economic progress, mirrored by its soaring towers and luxurious resorts, to a stuttering halt. Several people have been laid off in the past months after the realty boom started unraveling.

Faced with a cash crunch and a bleak future ahead, there were no goodbyes for the migrants -- overwhelmingly South Asians, mostly Indians - just a quiet abandoning of the family car at the airport and other places.

"The construction and real estate industry has been hit following the global slowdown and the direct fallout is that professionals working in the realty industry are rapidly losing their jobs," said a senior media professional, in-charge of a realty supplement in Dubai. "In fact, my weekly real estate supplement usually had 60% advertisement and ran into 300-odd pages. In the last seven weeks, it's down to 80 pages and with fewer advertisments," he added.

THE PARTY'S OVER

A friend sent this op ed to me and it is  written in such a clear fashion that I felt I should pass this on to my readers. It is not partisan and lays the blame on us all.

By Pat Buchanan

The Crash of 2008, which is now wiping out trillions of dollars of our people's wealth, is, like the Crash of 1929, likely to mark the end of one era and the onset of another.

The new era will see a more sober and much diminished America. The 'Omnipower' and 'Indispensable Nation' we heard about in all the hubris and braggadocio following our Cold War victory is history.

Seizing on the crisis, the left says we are witnessing the failure of market economics, a failure of conservatism. This is nonsense.   What we are witnessing is the collapse of Gordon Gecko ('Greed Is Good!') capitalism.

What we are witnessing is what happens to a prodigal nation that ignores history, and forgets and abandons the philosophy and principles that made it great.

A true conservative (Rep or Dem) cherishes prudence and believes in fiscal responsibility, balanced budgets and a self-reliant republic.

He believes in saving for retirement and a rainy day, in deferred gratification, in not buying on credit what you cannot afford, in living within your means.

Is that really what got Wall Street and us into this mess -- that we followed too religiously the gospel of Robert Taft and Russell Kirk? 'Government must save us!' cries the left, as ever.

Yet, who got us into this mess if not the government -- the Fed with its easy money, Bush with his profligate spending, and Congress and the SEC by liberating Wall Street and failing to step in and stop the drunken orgy?

For years, we Americans have spent more than we earned.   We save nothing. Credit card debt, consumer debt, auto debt, mortgage debt, corporate debt -- all are at record levels. And with pensions and savings being wiped out, much of that debt will never be repaid.

Our standard of living is inevitably going to fall. For foreigners will not forever buy our bonds or lend us more money if they rightly fear that they will be paid back, if at all, in cheaper dollars. We are going to have to learn to live again within our means.

THE PARTY'S OVER!

Up through World War II, we followed the Hamiltonian idea that America must remain economically independent of the world in order to remain politically independent.

But this generation decided that was yesterday's bromide and we must march bravely forward into a Global Economy, where we all depend on one another.

American companies morphed into 'Global Companies' and moved plants and factories to Mexico, Asia, China, and India, and we began buying more cheaply from abroad what we used to make at home: shoes, clothes, bikes, cars, radios, TVs, planes, computers.

As the trade deficits began inexorably to rise to 6 percent of GDP, we began vast borrowing from abroad to continue buying from abroad.

At home, propelled by tax cuts, war in Iraq and an explosion in social spending, surpluses vanished and deficits reappeared and began to rise.

The dollar began to sink, and gold began to soar.

Yet, still, the promises of the politicians come.

AN AMERICAN TRAGEDY

This is a must read, even if you are not an American. Many of the sobering statements in this article we have heard before, but they take on an even graver meaning when we make an honest appraisal of the downward spiral our country is in today.

Excerpt from James Quinn: “If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.” (Joseph Goebbels)

"A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship."

The average age of the world’s greatest civilizations from the beginning of history, has been about 200 years. During those 200 years, these nations always progressed through the following sequence:

• From bondage to spiritual faith;
• From spiritual faith to great courage;
• From courage to liberty;
• From liberty to abundance;
• From abundance to complacency;
• From complacency to apathy;
• From apathy to dependence;
• From dependence back into bondage

These words were written two years before George Washington became our first President. There is so much truth in these words it makes me shudder, especially since we are clearly in stage 7. An honest appraisal of our country’s downward spiral is necessary to begin the process of redemption. We have continually voted ourselves increased benefits, dependent upon the printing presses of the Federal Reserve to sustain our country’s ponzi scheme. We have pawned our future and the bill will eventually come due.

Read the rest of this important assessment here.

Panama condo sales down 80%

Wow! Right after the president brags about the economy in Forbes and local economists have stated that construction is the leader of Panama economic growth, this comes out.  Although this has barley gotten a nod in the local press, it is one of the most important stories of the year. Yes, those who read this blog knew it was going to happen almost two years ago, but what we didn't know is how severe the down turn would be and that the market has already has imploded. By early next year my guess is that most projects that are not fully sold and funded will not get completed.

From La Estralla

Investments in the construction sector were down by 35 percent in September and 78 percent in October compared to last year

The global financial crisis has started to put a premature end to the construction industry boom in Panama, and in 2009 the fall of this important industry is expected to be more pronounced. The local market has reached saturation point, and demand for new projects is falling.

As proof, in the month of September, investments in construction projects were down by 35 percent, compared to September 2007. The sale of projects in the month of October fell 78 percent compared to statistics for October 2007.

A study by the economist Osvaldo Lao for the Panamanian Association of Real Estate Agents and Promoters revealed that housing sales reached 1,766 in October 2007, while the number fell to just 438 this past October, the lowest monthly figure in the last two years. In housing complexes that cost less than $80,000 the fall was 75 percent.

For units costing more than $80,000 the fall in sales was 80 percent.

The housing sector of less than $80,000 proves to be the most marketable, with a turnover rate of less than 10 months.

Meanwhile, the turnover rate of housing valued at more than $150,000 can be as high as 26 months.

A total of 435 active projects with 14,342 available housing units existed in Panama during October 2008, an increase of 3 percent over September.

The report also revealed that the average cost of the housing units in the capital city last October dropped to $257,286, from $260,500 in September.

Tocumen and Arraijan are currently the most active zones. Beach and mountain projects are the hardest to sell.

Lao’s study suggests the need to clean up the market, as the presale percentage is too high, which could lead to the suspension of some projects.

The economist Juan Jovane believes that the main problem is that in 2009 “there will be no buyers, because the local market is saturated” and international buyers will stop coming.

Added to the fall in demand, Star sources say that banks have become stricter with their mortgages, offering them for only $1,200 a square meter and requesting buyers to pay the difference up front, a scenario that certainly does not help the real estate sector.

PRICES BY THE SQUARE METER

in 2008, average prices for construction square meters in the country increased by 11 percent. As investment in construction decreased for the past two months, prices for housing remained high. According to a study by the economist Osvaldo Lao, in the Balboa Ave sector the square meter of construction reaches $2,932 (compared to $2,612 in Oct 2007), while Punta Pacifica is quoted at $2,524.
Boquete is the only sector with a decreasing value, decreasing 3 percent to $1,390 a square meter. According to the study, Chorrera, 24 de Diciembre and Las Cumbres are among the most economic zones, in the mid-$500s a square meter. The value of Tocumen, Pacora, the mountain areas and Arraijan have rose the most, with 56, 53, 52, and 41 percent increases between October of last year and October 2008.

 

Oh no! Another shoe to drop!

And I am not talking about the shoes thrown at President Bush. I wish I had not seen this video from 60 minutes because it is really depressing when you see what the bright boys in the financial world conjured up that has yet to unfold on the world. According to this report we will not even feel the effects of this one for another year, about the time when things are really looking dark. It is also depressing that shows like 60 minutes are bringing peoples attention to the scams after the fact when everyone is screwed and can't do anything about it. The media has played right along as cheer leaders for the mortgage madness. Hat tip to Tomas for this uh, nugget.

You will have to view this on the CBS website.

Why gov't stimulus spending never works-Video

This is an excellent video that explains in a concise fashion why government stimulus never works. This is not complicated, but governments always make it out to be. With Reuters reporting that Obama may propose as much as $1 trillion (yes, trillion) of new spending, which would be in addition to the huge
expansion of government under Bush, there is a desperate need for more education on this issue.

Foot in mouth desease rampant leading to meltdown

I came across this post on the Chris Martenson blog and I don't know whether to laugh or cry. These are the same idiots at helm of our economy that is in turmoil. Myself and plenty of others were well aware and warning of the seriousness of the situation and yet those in a position to have all the data could not connect the dots. Does anyone seriously believe these fools can get us out of this mess?

Financial "Experts"
Alan Greenspan, October 2004:
"Improvements in lending practices driven by information technology have enabled lenders to reach out to households with previously unrecognized borrowing capacities. "

Alan Greenspan, 2005:
"There is a chance that housing prices could fall, but its effect on the economy will be "limited.

Alan Greenspan, May 2005:
"The use of a growing array of derivatives and the related application of more-sophisticated approaches to measuring and managing risk are key factors underpinning the greater resilience of our largest financial institutions .... Derivatives have permitted the unbundling of financial risks. "

Alan Greenspan, October 1, 2006:
"I suspect that we are coming to the end of the housing downturn, as applications for new mortgages, the most important series, have flattened out...I think that the worst of this may well be over. "

Henry Paulson, January 2007:
"The market impact of the U.S. subprime mortgage fallout is largely contained and that the global economy is as strong as it has been in decades. "

Henry Paulson, April 20, 2007;
"All the signs I look at show the housing market is at or near the bottom. The U.S. economy is very healthy and robust. "

Henry Paulson, March 2, 2008:
"I'm not interested in bailing out investors, lenders and speculators."

Ben Bernanke during Congressional Testimony March 2007:
"At this juncture, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. "

Ben Bernanke, May 5, 2007:
"We will follow developments in the subprime market closely. However, fundamental factors-including solid growth in incomes and relatively low mortgage rates-should ultimately support the demand for housing, and at this point, the troubles in the subprime sector seem unlikely to seriously spill over to the broader economy or the financial system. "

Ben Bernanke, October 15, 2007:
"It is not the responsibility of the Federal Reserve-nor would it be appropriate-to protect lenders and investors from the consequences of their financial decisions. "

Timothy Geithner, May 15, 2007:
"Changes in financial markets, including those that are the subject of your conference, have improved the efficiency of financial intermediation and improved our confidence in the ability of markets to absorb stress. In financial systems around the world, the capital positions of banks have improved and capital markets are becoming deeper and playing a larger role in financial intermediation. Financial innovation has improved the capacity to measure and manage risk. Risk is spread more broadly across countries and institutions.  "

Dubai, Panic in the RE market!

Now, all the bubbles have seemed to burst in the world property markets. Even Dubai with all its glitz and oil rich Arabs can't stand against this economic storm.

Excerpt: Dec. 4 (Bloomberg) -- The classified ads in Dubai read like an obituary for a real-estate market that until a few months ago seemed immune from the global credit crisis.

A Turkish investor, who identified himself as Sebat, took out 10 bright yellow ads in the Nov. 25 edition of Gulf News, the United Arab Emirates’ biggest newspaper, with the headline: “DIRECT FROM OWNER DISTRESS SALE!!!” Sebat said he used to be able to buy four or five properties at a time and sell them the next day for a profit of as much as 5 percent.

“There is panic in the market,” said Sebat, 52, who wouldn’t give his full name because he’s juggling 60 properties.

Read the rest at Bloomberg

 

Risk watchdog warns about Panama City real estate

Well, its not like we have been silent on this issue. About two years ago we produced a report seriously questioning the viability of all these condominiums being announced nearly every day in Panama City. I have posted many times about the problems I see coming for the real estate market even before we entered a world economic crisis. Now, Business Monitor International has issued their Watchdog Warning about the potential risk of the real estate market in Panama City. Of course the local developers and media are still silent on the matter as many millions if not billions of dollars are at risk if the cat got out of the bag, so shhhhhh. But the fact is that serious cracks have already started to show as several developers have told me that speculation has completely dried up and only "real" buyers who want to live in their units are coming to the table. Based on the many emails I receive on the subject, there are not a lot of these real buyers either right now and those who are looking to flip out of finished units are not having much success in doing so. Looking on many of the resale websites will pull up hundreds if not thousands of ads for Panama City apartments that are "nearing" completion or to be delivered in the next year or so. Of course many of these are duplicates and there is no way to really know because there is no MLS and no transparency in the market. Ask any real estate agent and he will tell you things are booming and sales are strong as ever, but he is telling his spouse a completely different story over the dinner table. The party is over and like many Panamanians who attend parties, they won't leave until the sun comes up or all the booze is gone. As long as there is hope they will continue to dance the night away.

Excerpts from Business Monitor International:
Back in the liquidity-drenched days of early 2007 (remember them?!), my colleagues at Business Monitor crowned Panama the ‘Dubai of Latin America’, on the back of a roaring construction sector fueled by record levels of investment and the onset of a major infrastructure initiative, the US$5.25bn Canal expansion project. Fast forward almost two years, and it would appear that Panama’s real estate sector could now go the same way of Dubai’s ailing property market. Whisper it quietly, but the words ‘bubble’ and ‘burst’ could become synonymous with the Central American country next year.

And that's the positive side of the story.

Will Florida attract the boomers?

This is an article about the prospects of Florida attracting baby boomers who were expected be retiring in significant numbers. The article points out that the economic turmoil will play a significant role in their decision making. People will probably have to continue to work past normal retiring years. Moving may not be an economic option with home values dropping so dramatically and credit difficult to acquire. Those that can afford to move will have a lot of options because now even exotic locals are becoming affordable where you don't have to deal with high property taxes and blue hairs.

Excerpts from the Herald Tribune;

At stake are hundreds of billions of dollars to be newly funneled into communities around the nation and world as the "mailbox economy" -- checks arriving in the mail -- rapidly swelled by boomers growing old.

As far as retirement destinations go, Florida is still the 800-pound gorilla. But even experts bullish on the Sunshine State's prospects think its share of older movers will decline by about 20 percent during the next two decades as other states take a bigger and bigger piece of the retirement pie.

Others also think that the numbers of stay-at-homers will bulge, pushed not only by comfort factors like friends, family or a trusted doctor, but by the financial pain inflicted by corporate downsizing, the real estate downturn and the current financial fiasco on Wall Street.

"The research we have done indicates 9 out of 10 people want to stay where they are as long as possible," said AARP spokeswoman Nancy Thompson.

John Stapleford, an economist with Moody's Economy.com who tracks Florida, says, "You guys down in Florida are just not going to see the tsunami you might expect."

The outcome is critical for Florida because that same housing boom-turned-bust has left the state with a large inventory of unused homes and condominiums.

While Florida real estate prices have come down hard since 2005, other costs continue to rise, Goodkin said.

"High insurance rates -- that is a killer," he said. "It is like having another mortgage on your house."

"The boomer parents were sort of sun migrants," said Gene Warren, a retirement consultant in Phoenix. "They wanted a nice, sunny place where they could sit around and wait to die."

Boomers are very different. "They are not so much sun migrants as they are amenity migrants," Warren said. "What we are seeing is that the baby boom generation took a look at how their parents did their retirement and have decided it is not all that their parents thought it would be."