Filed under: Scandals, Entrepreneurs, Housing

A piece in the latest issue of BusinessWeek discusses an interesting trend among scammers, charlatans, and con-artists: they’re renting out virtual offices on Wall Street in an effort to enhance their credibility and project an image of success. For just $100 a month, they get a fancy address to put on stationary, a post office box, and a conference room they have the ability to use for occasional meetings — all shared with dozens, or even hundreds or other clients.

The president of one company that rents out virtual offices to businesses told BusinessWeek that “As much as our services help hundreds of small businesses brand themselves, there will always be crooks who try to misuse the polished facade for their dirty business.”

Maybe I’m a prude, but I would have nothing to do with a company using a “virtual office” for its address, even a legitimate one. I would argue that the goal of these set-ups is to mislead potential investors or customers — projecting an image of something that differs from reality. Even if the company is legitimate, a phony address is still dishonest.

In any case, investors shouldn’t be hoodwinked by a fancy sounding address. After all, Worldcom and Enron also had great addresses and pretty offices, and investors lost billions.

To avoid getting scammed — or just losing money on a bad investment — there are two things you can do: make sure you comprehend how a company makes its money, and make sure the returns offered aren’t too good to be true. As the managers of West Coast Asset Management wrote in their book The Entrepreneurial Investor, the people who really understood Enron’s business model did quite well — but ended up in jail.

And use common sense. One firm that was using a “virtual office” promised returns of 25-30% per month. That’s a better return per month than Warren Buffett earned per year. And if they could earn those great returns, why would they need your money? If it’s so risk-free, can’t they just borrow it from a bank for a lot less money?

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Filed under: Forecasts, Bad news, Consumer experience, Economic data, Housing

The Boston Globe interviews Warren Group CEO Timothy Warren whose firm tracks housing in Massachusetts. He recommends that it could take about 10 years before housing prices return to where they were at the peak in 2005.

Warren is a breath of fresh air when it comes to examining the housing market. Unlike industry-sponsored studies — such as this bubbly comment from the National Association of Realtors — Warren carefully tracks and analyzes data and his observations are not filtered by the need to use public pronouncements to spur real estate transactions.

But Warren’s loyalty appears to lie with objective data gathering and analysis, rather than having an ulterior motive. He thinks that the declining number of home sales is worse than the previous housing slump of the early 1990s. He notes that “In the 1990s, we’d just two years when the number of sales declined. We’re in the fourth year of declining sales in the current slump.”

He points out that the decline in Massachusetts’ median price doesn’t look as bad as it did in the ’90s, but he thinks that the downturn could last longer. As Warren stated, “if 2008 is another year of declining price, this would be the third year.” He noted that in the 1990s slump there was a very slow — six year — recovery. After prices stopped falling in 1993, it took six years for the Massachusetts median price to exceed its level before the slump started.

Using this logic, Massachusetts is likely going to hit bottom in 2009 and then take another five years to see real estate prices return to where they were in 2005 when the prices started falling. People ask Warren when the recovery will begin and he says, maybe in 2009. However, “after the recovery starts it might take five years.” That would mean Massachusetts housing prices would recover to their 2005 levels in 2014.

Warren’s five year recovery estimate seems optimistic to me — I’d give it a year more than the 1990s recovery period — or seven years. If my more conservative assumptions prove correct, then housing prices will bottom out next year won’t return to where they were in 2005 until 2016.

Warren fingers simple money for blowing up the housing bubble. And since we’re in the middle of figuring out how much damage the economic backlash from that simple money will cause — in terms of foreclosures, excess housing supply, and far tighter credit — it is somewhat encouraging that Warren thinks housing will ever rise again.

Peter Cohan is President of Peter S. Cohan & Associates. He also instructs management at Babson College and edits The Cohan Letter.

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Jamie found a NYTimes op-ed by a grad student and a professor from Cornell, outlining some research they did into alternate baseball universes. The goal was to find out how unlikely in fact was Joe DiMaggio’s 56-game hitting streak, played out in the 1941 season. No one since has even come close to that record. The math guys ran simulations of the entire history of baseball from 1885 on — 10,000 of them. For each simulation they put each player up to the plate for each at-bat in each game in each year, just care about it happened; and they rolled the dice on him, based on his actual hitting stats for that season. (Their algorithm sounds far simpler than whatever the Strat-O-Matic guys use.) The result: Joltin’ Joe’s record isn’t merely likely, it’s basically a sure thing. Every alternate universe produced a steak of 39 games or better; one reached 109 games. Joe DiMaggio wasn’t the likeliest player in the history of the game to accomplish the record, not by a long shot.

Read more of this story at Slashdot.

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Stanislav_J writes “All you wealthy Slashdotters superior start making alternate arrangements for stashing your millions. Switzerland’s storied role as discreet banker to the world’s tax-avoiding wealthy is under threat like never before, and this time the country ultimately may not be able to stop the rest of the world from prying into those legendary ’secret’ accounts, said to contain between $1 trillion and $2 trillion. A massive German tax-evasion scandal is putting pressure on the Swiss to cooperate, and the rest of Europe is also hardening their resolve to force change upon them. Per the article, ‘The official Swiss reaction has been self-conscious detachment, which they hope will deflate the issue,’ but even their own citizens are not too concerned about those outside their borders: 80% of Swiss support the banking confidentiality law, but that number drops into the 40s when it is applied to foreigners. Pressure is also coming from US pols — not the ‘let’s pry into everyone’s business’ Republicans, but the ‘make the rich pay their fair share’ Democrats, including Illinois Senator (and presidential candidate) Barack Obama.”

Read more of this story at Slashdot.

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