Boomer’s Blog

In the Chinese Zodiac, 2008 is regarded as the “Year of the Rat.” Those who bet on Wall Street are likely to agree. Some pundits however, and a great many more investors are recounting the most stellar mistakes of the year with a rueful cringe. Perhaps we’ll all fare better in 2009. This Chinese “Year of the Ox” is aptly named for the heavy load we’ll likely be carrying in our nation’s journey toward economic recovery.

Here are some of the more memorable blunders of the year, many of which are reported in Fortune’s “21 Dumbest Moments in Business 2008.”

1. Apple’s “Think and Glow Rich” App for Entrepreneurs: The geniuses at Apple have made a silk purse out of a dismal economy with the iPhone and its affordable interactive applications and games.  Most iphone apps cost around $5 and many are about as useful to enterprise as pet rocks. But this story may as well be torn from a chapter on psychic ability from Napoleon Hill’s century-old capitalist manifesto: “Think and Grow Rich.” Apparently, a stealth developer penetrated Apple’s channels with an application called “I am Rich” that sold at Apple’s store for $999.99. Eight users apparently bought the app, which produced nothing more than a glowing ruby-red image on their screens before Apple caught on to the hoax pulled the plug on their idreams.
2. Hopeless for Homeowners: In July, Congress passed a $300 billion “housing rescue plan” aimed at preventing an estimated 300,000 foreclosures when the plan took effect in October. Fortune reports that a mere 321 applications to the “Hope for Homeowners” program have been completed. And the Department of Housing and Urban Development says that the costly program has so far produced zero loan workouts.
3. Don’t Point that Bazooka at Me: When Mortgage servicing giants Fannie Mae and Freddie Mac hit the pavement in July, Treasury Secretary Henry Paulson convinced Congress that a federal funding boost would fix the problem. “If you’ve got a squirt gun in your pocket, you may have to take it out,” Paulson told them. “If you’ve got a bazooka and people know you’ve got it, you may not have to take it out.” Although lawmakers bought into the metaphor, in September, massive declines led the Treasury Department. Now the gun is pointed at American taxpayers.
4. The Man Who Would Be King: Treasury Secretary Henry Paulson’s three-page, $700 billion economic bail-out plan for Wall Street that included less transparency than former mafia kingpin John Gotti’s tax returns.
5. The Primetime Bailout Bonanza: Congressional debate and subsequent beleaguered approval of Paulson’s plan was a circus sideshow of its own. The 450-page final bill they approved contained more sugar and lard than a Paula Deen fruitcake. While the plan did a miraculous job of preserving Paulson’s ambiguity about how the money would be spent, provisions extending tax breaks for toy arrows and wool products are among the few aspects of the Bail-out that were comprehensible to the peanut gallery.
6. Real Estate Entrepreneurs Succumb to Fear: Amid the softening economy, and crises on Wall Street, many real estate investors lost their shirts in 2008 for one simple reason: They failed to execute strategies that are calibrated to meet the changing demands of today’s markets. Too often, when the entrepreneurial belt gets tightened, real estate marketing is the first budgetary item for cutbacks when it should be the last. Without consistent and effective real estate marketing, the “Big Picture” fades and even potentially profitable businesses wither up and die.

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Bloomberg.com: A Slice of Manhattan for a String of Beads?
Analysts say that, with the Fed-brokered purchase of Bear Stearns for about $240 million, JP Morgan stands to gain the firm’s six-year-old, 45-story office building, which currently is valued at $1.5 billion, or more than $1,200 a square foot. According to a JP Morgan spokesperson, the purchase also is prompting JP Morgan to reconsider its plans to build a $2 billion, 40-story skyscraper at the Ground Zero re-development site. Bear Stearns stands across the street from JP Morgan’s midtown Manhattan offices and offers underground access to Grand Central Terminal, where nearly 1,000,000 commuters travel daily

Reuters: Residential Rentals Soar from Grounded Markets
As the market for offices, retail space and lodging falters, and the foreclosure rate rises among homeowners, a Pricewaterhouse Coopers survey finds that demand for rental apartments is surging ahead, as a growing number of people suddenly find themselves competing for rental units.

Boston Globe: Tsunami Hits Wall Street
The Fed is scrambling to avert a total global financial crisis, but the turmoil on Wall Street already is hitting consumers, businesses and homeowners. The Standard & Poor’s 500 index is down 13.1 percent so far in 2008, and the dollar has plummeted against foreign currencies.

MarketWatch: Major Rate Cut Ahead
The Federal Reserve is expected to orchestrate a rare cut of one percentage point in interest rates before the policy-setting Federal Open Market Committee convenes amid economic turmoil on Wall Street.

Fortune: Mortgage Crisis Intensifies
A crisis that began in subprime lending is likely to continue its domino-effect, leveling markets — and the economy — until 2010, New York Times columnist and economist Paul Krugman predicts. This is likely to result in an average property value drop of 25 percent for homeowners, he says in this interview with Fortune’s Jia Lynn Yang about the economy, home prices, and the future.

MarketWatch: U.S. Home Builders’ Confidence Remains Low
The National Association of Home Builders and Wells Fargo housing market index remained at 20 in March, close to December’s all-time low of 18. Analysts say that the index shows that 20 percent of home builders have a positive outlook and that perception has held steady for nearly a year.

CNNMoney.com: Fed Strives to Neutralize Mortgage Turmoil
The Fed reports to consumer advocates that it is working to curb unfair lending practices to protect adjustable rate mortgage (ARM) holders by moving to ban lenders from issuing loans that borrowers cannot repay.

Studies: Lenders Remain Uncompromising on Mortgage Rates
Most homeowners who have trouble paying their mortgages remain unable to convince lenders to modify their loans, according to the California Reinvestment Coalition. The organization has been tracking homeowners who seek help with their mortgage problems woes, culminating in two reports: “The Chasm between Words and Deeds” and an updated version of the report titled “The Growing Chasm Between News and Deeds.” Both documents report on nonprofit home loan counseling agencies in California who are working to help families keep their homes. The latest word is that 72 percent of these agencies report that foreclosure is a very common outcome for people who seek their help, up from 57 percent in the first study.

Associated Press: Frustrated Homeowner Sells Creatively
A Colorado woman whose home has failed to sell for three consecutive Summers has decided to award her home to the winner of her essay challenge. So far, she’s made $5,000 in entry fee levies, with applicants all vying for her four-bedroom home valued at more than $169,000.