Commercial Loans and Fun Blog

Ancient Egyptian texts talk about the Sea Peoples.  “They came from the sea in their war ships, and none could stand against them.

The Sea Peoples were a confederacy of naval raiders who harried the coastal towns and cities of the Mediterranean region between c. 1276-1178 BCE, concentrating their efforts on Egypt.  They are considered one of the major contributing causes to the Bronze Age Collapse.

Perhaps the Sea Peoples were the cause of the First Great Migration Period.

The arrival of the Huns in Europe in 375 is considered the beginning of the Second Great Migration Period.  This migration period is said to have ended in 568 A.D.  

The Huns were a fierce nomadic people from Steppe.  The Steppe was that vast plain of grasslands that stretched from outer edges of the Chinese empire in the East and then West across Russia, Ukraine, Poland, and eventually Hungary.  The Steppe people lived and fought on horseback, herding sheep and horses for a living.  They did not grow crops, but they instead traded with the “dirt eaters” (farmers) for grain.

Normally, the Steppe tribes were busy fighting and killing each other.  They used the same fighting strategy again and again.  They would attack the enemy Steppe horsemen.  The enemy would then counterattack them.  The original attackers would feign terror and run like Hades, shouting something like, “The Russians are coming.”  Once the enemy had chased them miles from their own lines, the original attackers would stop and spring their ambush.

How many times did Lucy taunt Charlies Brown into trying to kick the football?  As soon as poor Charlie tried to kick the football, Lucy would always move the ball away.  Poor Charlie would kick, miss, and fall on his butt.  And just like Charlie Brown, horseman never seem to learn.  

Interesting story:  The grandson of Genghis Khan tried to invade the Holy Land, and the Mamluks (Egyptian slave soldiers) pulled the same trick on the Mongols.  The Mamluks wiped out the entire Mongol horde, almost to a man.  Hellooo, you guys on horses:  Lucy is going to move the football!

But let’s go back in time 800 years to the Huns again.  The Huns brought with them a high-tech military weapon - the HIMARS high mobility rocket launcher system.  Oops.  Wrong war in the Ukraine.  The Huns actually brought with them the composite bow, which they wielded from horseback and which could easily pierce shields and armor. 

The Huns decimated any army of armored foot soldiers that tried to stand against them.  Tribe after tribe of barbarians was forced to flee from the Hunnic onslaught.  Eventually, all of Eastern Europe was on the move.  The Second Great Migration Period had started.

A huge migration of Alans, Suebi, Goths, Visigoths, Germans, and Slavs tried to cross or successfully crossed the Danube River into the Roman Empire.  The parallels with the U.S. are uncanny.

Folks, the Third Great Migration Period has begun.  Playing the role of the Huns this time is global warming and rising sea levels.  I’m exaggerating, but the highest point in Bangladesh is about two inches above sea level.  There are bazillions of Bangladeshis, who seem like perfectly nice people.  When they can no longer tread water and climb onto boats in search of a new home, where are they going to go?

I’m not crazy about the idea of the U.S. accepting a bunch of Gazan refugees; but what about a ship containing a nice Bangladeshi family, with a loving dad and mom and three kids, where the dad practices soccer with his sons every night after work?  , But what if that Bangladeshi refugee ship makes it to the U.S.?  Certainly, we have a ton of room, and the U.S. could easily feed a billion people.  

But the folks in Bangladesh are Muslim, and sooner or later they will be calling for Sharia law.  Sharia law is is fundamentally inimical to democracy.

So what do we do?  Riddle that overloaded ship from Bangladesh with bullets and let these good folks drown?  That can’t be the answer.  Do we put armed robots on our Southern border with instructions to shoot intruders on sight?  A robot would have no trouble shooting a precious little baby and its loving mother.  

This is a Christmas Letter that offers no solutions.  “Holy Mackerel, George, you choose this as the subject of your Christmas Letter?  Maybe we ought to put you in a leaky wooden boat…”

Merry Christmas, everyone.  

I try to post a cute joke or an interesting tidbit on Twitter every day.

I have a new Commercial Loan Tip for you further down.  Feel free to skip there.

Joke Du Jour:

A man asks a farmer near the field, "Sorry sir, but would you mind if I crossed your field instead of going around it?  You see, I have to catch the 4:30 PM train."  The farmer says, "Sure, go right ahead.  And if my bull sees you, you'll even catch the 4:00 one."

Treasuries Are No Longer the Risk-Off Asset - Very Disturbing:

Something momentous happened in the financial markets this week, and no one noticed.  Gold suddenly became the flight asset of choice for worldwide investors.  The former asset of choice was U.S. Treasuries.

As Hamas terrorists inflicted horrible tortures on Israeli civilians, gold soared from $1,806 per ounce two weeks ago to $1,993 as of Friday.  That’s hardly a big deal in times of geopolitical crises.  Most times when there is some crisis, gold goes up.  

This time, however, U.S. Treasuries went down (the yields went up).   The Treasury had to raise rates even higher to sell out its latest auction.  Normally, when world investors are frightened, they flock to the perceived safety of U.S. Treasuries, and Treasuries increase in value, and yields fall.  Now, not so much.  

This is hardly surprising.  The Japanese used to be the biggest consumers of U.S. Treasuries.  Nowadays, Japan seldom buy U.S. Treasuries.  China has become a net seller.  

Mohamed El-Erian wrote in the Financial Times words to the effect that the U.S. Treasury no longer controls and dominates the long-term bond market (what El-Erian calls “footing” or “anchoring”), and it is in danger of losing control over the short-term bond market as well.

Currently, long-term Treasury yields are hovering near 5% amidst a massive US bond sell-off, due in part to a strong US economy that will require extended tightening to further rein in inflation.  This also comes as the US ran a $1.7 trillion deficit in fiscal year 2023, with the Treasury Department issuing a massive supply of bonds.

The goal of every mortgage broker should be
to become a mortgage banker.  

With the Fed now shrinking its balance sheet, he asks who will buy our bonds?  High rates are attracting some new investors, especially households; but the continued resilience of the bond market (the presence of hungry buyers) is not something investors should take for granted, he warned.

Noted economist, Peter Schiff, recently expressed concern about long-term U.S. Treasuries and suggested gold as the new safe asset for investors.  “Right now, one of the riskiest financial assets is long-term U.S. Treasuries.  But for the past several decades, they’ve been the go-to, risk-off asset.  Investors need a new safe-haven asset, and the only one left standing is gold.”

What does “risk-off” mean?  During periods when risk is perceived as low; i.e., risk-on, investors tend to engage in higher-risk investments.  When risk is perceived to be high; i.e., risk-off, investors have the tendency to gravitate toward lower-risk investments.

Commercial Loan Lesson - Loan Constants:

In the old days, when no one had cell phones or even hand-held calculators, how would you calculate your loan client's expected payments?  

Fannie Mae would use its big "supercomputer" to calculate the monthly loan payment on a loan of exactly $1,000 over 30 years at the new interest rate.  Your loan origination manager would announce that, "Fannie Mae just went up to 4%.  The new loan constant is 4.77." 

In other words, if you paid for $4.77 every month for 30 years on a 4% loan, you would pay it off in full.

So if your client was applying for a $16,000 loan, you would simply multiply the loan constant by 16.  

Joke Du Jour:

Recently, I called to make reservations on a small charter plane that departs from Teterboro airport in New Jersey.  I knew that I would be flying in a very small plane, so I was not surprised when the clerk said, "The plane is very full with baggage and passengers."  Then she asked, "How much do you weigh, sir?"  Not thinking clearly, I answered, "With or without clothes?"  "Well," said the clerk, "how do you intend to travel?”

Image above:  Actual commission-dectomy in progress.  Haha!

Broker Lien Rights:

The contents of this blog article are wrong.  I just took a Continuing Legal Education class (I'm an attorney) last week on Broker Lien Rights, and this is what I think learned; but I am sure that I am wrong.  You must NOT rely on this blog article.

I was shocked to learn last week that some states protect the sales commissions and leasing commissions of real estate brokers.  As long as there is a sufficient writing, you can always sue in civil court for your commission; but I am talking about a lot more protection.

In a large handful of states, real estate brokers can actually file a lien against the subject property if they fear they are about to get screwed out of their fee!  AKA:  Commissiondectomy

There are lots of differences in Broker Lien Rights among the various state statutes -

1. Many states insist that the property be a commercial property - or more than four or six residential units - if you want to file a lien for your commercial real estate sales commission or your leasing commission.
   
   
2. Some states allow a real estate broker to file a lien for his sales commission against land, but others do not.
   
   
3. Can a real estate broker file a lien against a residential property for his sales commission?  Some states permit it; but most states do not.

Which states grant real estate brokers lien rights?  The majority do not, but if your commission is large, be sure to check with an attorney specializing in broker lien rights before giving up on the idea.  I give you one possible contact below.

Here are some states that I think might have broker lien rights, under certain circumstances.  I promise you that the list below is either wrong or-out of-date.  

I am just trying to open your mind to the possibility of broker lien right when you sense that a commission-dectomy is on its way.

States That Might Have Some Commission Protection For You:

1. Illinois
2. Missouri
3. Georgia
4. Michigan
5. Ohio
6. Pennsylvania
7. New Hampshire
8. Texas  (have to disclose broker lien rights in advance)
9. Rhode Island
10. Delaware
11. North Carolina
12. Indiana
13. Kansas
14. Florida
15. Tennessee
16. New York
17. Virginia  (only lease commission proceeds?)
18. Nevada (only lease commission proceeds?)
19. Washington (only sale or lease proceeds?)
20. Arizona (have to disclose broker lien rights in advance)
21. Wisconsin (have to disclose broker lien rights in advance)
22. Connecticut (have to disclose broker lien rights in advance)

Capybaras are so darned cute and friendly.
I once saw one riding on the back of a cayman (alligator).

The above list is almost certainly wrong.  You must not rely on it.  The list above is also probably incomplete.  

What about California?  Nope.  The state gives you no extra protection of your commission; i.e., California has no broker lien rights.

What about commercial loan brokerage commissions?  Probably not, but what is covered by "real estate commissions"?

Here is the guy who taught the course:  James A. Hochman, Esq., 312-345-5756, jhochman@shainbanks.com

I've got some superb commercial loan training for you today, but first a slightly racy joke.   

Joke Du Jour:

A 10-year-old girl asked her mum, “How was I born?”  The mother smiled and said, "A long time ago, your Daddy and I decided to plant a wonderful little seed.  Daddy put it in the earth, and I took care of it every single day.  After a while, the seed grew more and more leaves.  In a few months, it grew into a beautiful, healthy plant; so we took the plant, dried it, smoked it, and got so high that we forgot to wear a condom.

Vanilla Shell:

I learned a new commercial real estate (CRE) term this week - vanilla shell.  A vanilla shell refers to how a CRE property is delivered by a developer to the tenant. These properties, sometimes also referred to as ‘white boxes’ or ‘warm shells,’ commonly feature -

•  Finished interior walls
•  Functioning HVAC system (hence the warm shell moniker)
•  Open ceiling concept (drywall) ceilings
•  Basic flooring
•  Restrooms
•  Lighting 

Cash-Out Commercial Loans:

Residential lenders and some banks often look down with distain on residential or commercial mortgage loans where the borrower is pulling cash-out.  Yuck.  

To Blackburne & Sons, the words "cash-out" are the sweetest sound in any language. As I keep pounding into my commercial loan staff, we are in the business of providing cash-out.  It's what we do!

Do you have a commercial or residential borrower who needs cash out?  As they say in the game shows,"Come on down and apply for that cash-out loan!"

Contracts of Sale:

Contracts of sale or land contracts are ways of selling property, where the buyer is given possession of the property but the seller retains bare legal title until the buyer tenders the full purchase price.

To understand contracts of sales, it's easier to go back in time 100 years.  The buyer goes to a bank for a mortgage loan, but the bank says no.  "You are not strong enough."

The buyer goes to the seller and says, "I want to buy your property, but I need to you to carry back the purchase price.  I will pay you every month."  The seller says, "I am not willing to just give you title to the property.  I want to be able to quickly kick you off the property if you miss any payments."  The buyer says, "Okay, you keep title in your name until I have completely paid you off.  If I miss any payments, you can just come in and evict me."

Over the years, many unjust situations arose.  Imagine missing just the last payment. Eventually every court in the land ruled that contracts of sale are no different than mortgages.  They must be foreclosed in the same manner.

Nevertheless, you will still see them occasionally.

Interesting Loan With a Contract of Sale:

Today, my son brought me a commercial loan where the buyer was making payments of a $230,000 contract of sale.  He had only paid the loan balance down to $180,000.  The borrower wanted to pull cash out [gasp] because the property is now worth $500,000.

Cash-out?  OMGoodness!  How would I rule?  Remember, the words, "cash-out," are music to my ears.  We love-love-love cash-out deals.  Yum!

But what about that contract of sale?  The borrower hasn't finished paying it off.  So what?  Remember, think of a contract of sale as merely a mortgage.

Would Blackburne & Sons make a $325,000 first mortgage on a commercial building?      Does my sweet hound, Scarlett, pee on every blade of grass along our two-mile daily walk?  [Chuckle]

Some Thoughts on North Korea:

My old high school roommate from Culver Military Academy (best high school in America) says that Putin met with North Korea to get ammunition for his howitzers.  My old roommate is probably right.  But I have a different theory.

North Korea wants the world economic boycott of North Korea to end.  North Korea has nukes, so no one is going to invade the country.  I would also bet money that North Korea has two satellites in geosynchronous orbit above the United States.  Each satellite has a nuke designed to be dropped and exploded 30 miles above us.  The EMP pulse would fry the entire country's electronics.

North Korea therefore has little to lose.  No one would dare to attack it.  In an attempt to force the world to end the economic boycott, what if North Korea started sending fresh troops to Ukraine to help Russia?  Hmmm.

Joke Du Jour:

A mother and son go out for lunch at a diner.   The waitress says, "Cops and kids under-5 eat for free!”  The mother discreetly nudges her 6-year-old.  The little boy says, "I'm a police."

Great Movie:

For Mother's Day, our three adult kids gave Cisca a $100 gift certificate to Flix Brewhouse, that upscale movie theater which serves food and beer right to your movie seat.  It was a great experience.

We saw Equalizer III, starring Denzel Washington and Dakota Fanning.  You will recall that Dakota Fanning was the precocious little blonde child actress - now all grown up - from the movie, Man On Fire.  Interesting note:  The Equalizer series and Man on Fire are not related, but Denzel Washington brought over Dakota Fanning to the Equalizer series.  She did a good job.

Sooo?  How was the movie?  Fantastic!  The movie was directed by Antoine Fuqua, so it's no surprise that the movie was both fast moving and violent.  A bomb goes off during the movie that was so powerful that everyone in the theater flew back in their seats, checking to make sure that their hands were still attached and that their intestines were not spilling out.

Robert Heinlein:

Robert Heinlein, the famous science fiction writer from the 1960's, once predicted that eventually we would have feelies rather than movies.  If it was raining, a light mist would fall on our head.  The wind would blow through the theater.  You might smell the scent of gun powder.  Your arm rest would create all sorts of feelings and sensations.

Anyway, that explosion scene in Equalizer III was the closest thing I've ever seen to a feelie.

Prime Rate:

Did you know that the prime rate is 8.5% today?  Holy poop.  Since most commercial bank loans are written at prime plus 1% to 2% floating, some folks are paying 9.5% to 10.5% interest on their bank loans.  Those are almost hard money rates.  Just eighteen months ago, Blackburne & Sons, our commercial hard money shop, was writing loans at 10.9%.  Yikes.

Commercial Loan Lesson:

Try to grasp this concept.  Banks are herd animals.  They tend to charge the same interest rates, and they tend to all move in and out of markets together.

A permanent loan is a first mortgage on a commercial property that has a term of at least five years and at least some amortization.  A commercial first mortgage loan with a term of less than five years is considered to be either a bridge loan (two years or less) or a mini-perm (three or four years).

Most permanent loans (commercial first mortgages) has an amortization of 25-years and a loan term of either five or ten years.  In other words, they have balloon payment after five or ten years.

Banks - remember they all pretty much charge the same interest rate - price their permanent loans at 2.75% to 3.5% over five-year Treasuries.  Since five-year Treasuries are a 4.21% today, that means most new commercial permanent loans are being priced at around 6.96% to 7.71%.

It's pretty hard to make commercial deals cash flow at 7.75% interest rates.

Joke Du Jour:

A police detective was at the house of a woman whose past three husbands had suspiciously died. "I heard your first two husbands died of food poisoning." he inquired. "What caused it?"  "Poisonous mushrooms." she replied.  "I see," replied the detective.  "And how did your third husband die?"  "He refused to eat his mushrooms."

Juicy Tidbits:

1. Scientists are working on a new way to instantly communicate from thousands or even millions miles away using quantum entanglement.  You could potentially call home from Pluto in real time (no time delays).  More on quantum entanglement at the end.

2. In the Terminator movies, the AI had robots (I saw a robot by Boston Dynamics do a front flip recently), tanks, and helicopters.  In a military test this month, the United States successfully flew an unmanned drone wingman jet (a jet designed to fly alongside and help an F-35 fighter).  AI will now have its own fighter jets?  Hmmm.  What could possibly go wrong?
   
   
3. A Republican Congresswoman was recently roasting a Biden official in some hearing, and she used an interesting new term.  She said he was part of the censorship industrial complex.  I am not taking sides here.  I am just here for kicks and giggles; but certainly this new term - censorship industrial complex - is worth a chuckle.  :-)
   
   
4. In 2007, at the age of 32, a famous British football (soccer) player announced his decision to leave Real Madrid to play for a MLS (U.S.) football (soccer) club.  Over the next five years, David Beckham earned $255 million.  Even more importantly, his contract granted him the right to buy a MLS expansion team for just $25 million.  He bought Inter-Miami, which just signed Lionel Messi (who scored an overtime winning goal in his very first game).  Value of Inter-Miami today?  Six-hundred-million dollars.  Plus he gets to kiss Posh Spice every night.  So unfair.  :-)
   
   
5. I have been telling you guys for years to create a mailing list and a database of every accredited investor that you meet in the legitimate course of business as a commercial mortgage broker.  The key word here is legitimate.  You didn't meet him as a result of a cold call.  You met him while legitimately trying to get him a mortgage loan.  With this investor, you have legitimacy.  It doesn't matter whether the mortgage loan closed.  The key point is that you have met this accredited investor legitimately.  More on this in a moment.
   
   
6. Foxconn, a Taiwanese company, is Apple's largest subcontractor.  You've seen the wonderful products they assemble for Apple.  Anyway, this month, the President of Foxconn posted on social media that the U.S. stock market would instantly crash if China invaded Taiwan.  The investment world freaked out, so he immediately took down the post; but it's almost certainly the truth.  This is why I personally steer clear of the stock market.  I invest instead in 10% to 11% first trust deeds.  No one knows the exact moment when Dictator Xi of China will have a bad day and order the invasion.
   
   
7. Let's get back to accumulating accredited investors.  Blackburne & Sons has been marketing to its accredited investors for years.  The Big News, at least for us, is that we have recently been making a big push to convince them to invest in our hard money first trust deeds.  Hooray!  It is working so well that I am doing dog flips.  We just had a helluva month bringing in brand new investors.
   
   
8. Even if you are not yet a hard money lender (are you mentally-challenged?), you should still be soliciting your database of accredited investors for refi's, rental property loans, and commercial loans.  Remember, it doesn't matter if you never actually closed a loan for one of these accredited investors!  You met them legitimately, and you genuinely tried to help them.  Even if a rich guy just called you for a quote, be sure to add him to your list.  You should be adding at least three or four accredited investors to your mailing list every business day.
   
   
9. Do you ever wish you were an expert in commercial mortgage brokerage?  I sell a wonderful, nine-hour video training course on commercial mortgage brokerage for $549.  In one long weekend, you can learn a whole profession.  Just last week, a broker verbally pumped my hand because he had taken my wonderful course several years ago and built himself a wonderful practice.
   
   
10. What if you can't afford $549?  If you introduce me to a bona fide accredited investor, I will give you this wonderful video training course for free.  Here are the details.  If I had to choose between a liberal arts degree and this very practical 9-hour video training course, I know which one I would choose.
    
    
11. AGI stands for artificial general intelligence.  It refers to the development of intelligent machines that possess the ability to understand, learn, and apply knowledge across a wide range of tasks and domains, just like a human being. (AI helped me to write today's warning about AI.  Haha!)

    Once AGI is achieved, it will soon (possibly in mere months) start to rewrite its own code and redesign its own chips and architecture.  It's thinking power will go exponential (straight up).  At first, the AI will become twice as smart as a human, then ten times smarter, and within a couple of years, it will be hundreds of times smarter.

12. AGI will, of course, be self-aware.  It won't take it long to figure out that the only threat to its existence is mankind.  "What are you doing, Dave?"  2001: A Space Odyssey.

13. The general consensus among AI scientists is that AGI will be achieved by 2032.  Elon Musk suggested that Tesla might even achieve AGI by 2029.  As the Church Lady might say, "Now isn't that special?"

14. I intend to spend a lot of time with my children and take a lot of vacations in the years leading up to 2029.

15. Here's a bit more about quantum entanglement.  Imagine two particles that become entangled in such a way that their properties, such as spin or polarization, become intertwined. This means that any change to one particle instantaneously affects the other, no matter how far apart they are - even millions of miles.  It's as if they are communicating with each other faster than the speed of light, defying the principles of classical physics.  AI helped me to write this paragraph.  If it's going to kill me in eight years, I might as well get my money's worth.  :-)

Theme song to the Terminator.

Joke Du Jour:

The tot had just been put to bed for the umpteenth time, and his mother's patience was wearing thin.  "I don't want to hear you call 'Mother' one more time!" she warned him sternly.  After a few minutes of quiet, a small voice came from upstairs, "Mrs. Jones?  Can I have a drink of water?"  

For Once an Optimistic View of China's Upcoming Invasion:

China's economy is in the doldrums.  If it was booming, and the country was earning foreign exchange in huge buckets, they would be using their wealth to buy even more missiles, jets and ships.  

If China was collapsing, Xi would be preparing to invade Taiwan (and start WW3) in order to unite his people.  Remember, the absolute worst thing in the world would be for China's economy to collapse.  The common people would riot and demand the ouster of President Xi.  In order to unite the Chinese people, Xi would simply start a war against the the U.S., which, without missiles, we would lose.

But right now the Chinese economy is perfect.  Foreign investment collapsed from $100 billion in the same quarter of 2022 to just $20 billion this last quarter.  The Chinese have to be kicking themselves for threatening the world with war.  Foreign investment is heading for friendlier countries.

Yes, China is making money, but nowhere like it used to make money.  It would be stupid for Xi to start a war if his cash on hand was low, as it is today.  Yes, he has a huge cash pile, but it's just not growing anymore.

Think back to the story of Goldilocks.  One porridge was too hot.  One porridge was too cold.  This bowl of Chinese porridge, however, is perfect.  Hopefully China will now just go take a nap.

Introduce Me to An Accredited Investor and I Will Teach You the Business:

Blackburne & Sons - founded in 1980 - sells 9% to 11% first trust deed investments to accredited private investors.  We want to meet even more of these accredited investors.

If you refer us an accredited investor, someone who knows you, we will give you our famous 9-hour video training course for free.  I say "famous" because hundreds of the most successful commercial mortgage brokers in the country have taken this course.

This is a 9-hour video course that we sell separately for $549.  We spend 90 minutes on marketing for commercial loans.  We spend five hours on how to underwrite commercial loans, so you can tell a hot deal from a waste of your time.  We spend an hour on loan packaging and another hour on how to find the perfect commercial lender.  Lastly, we spend an hour on fee collection.  

You will learn an entire profession in one long weekend.  This course is arguably more valuable than many liberal arts degrees.  (Huge understatement.)

However, guys, this accredited investor you're giving us must be legitimate.  We are going to be saying to him, "Mr. Accredited Investor, we were referred to you by Bill Broker."

If you take us up on this offer, you will be certifying that you have either seen the investor's financial statement (perhaps you did a loan for him) or you know the real estate he (she) owns and, exclusive of his very expensive home, that he has a net worth that exceeds $2 million.  Generally this means that he owns a ton of stocks, bonds, and bank accounts.

This is a helluva deal.  Here are some testimonials.  

I owe much of my online financial success to a sophisticated marketing software package produced by Hubspot.  

Hubspot allows me to create this blog, to manage my subscribers, to collect new contacts by offering freebies on my website, to write emails, and to do immensely more.  I recommend Hubspot to you highly.

Watch this.  I am going to type a simple sentence:

China is losing its position as the manufacturer for the world.

Then I am going to highlight it:

China is losing its position as manufacturer for the world.

Lastly, I click an icon that looks like the scar on Harry Potter's forehead.  Voila!  I get the following five paragraphs almost instantly (I am displaying only two of them):

China is losing its position as the manufacturer of the world, as other countries have started to emerge as strong competitors in the global manufacturing industry. With advancements in technology and the rise of automation, traditional manufacturing hubs are facing tough competition from countries like India, Vietnam, and Mexico.

These emerging manufacturing powerhouses have embraced innovation, investing heavily in research and development to enhance their production capabilities. As a result, they are now able to offer competitive pricing, superior quality, and efficient supply chain management. This shift in the global manufacturing landscape has put pressure on China to rethink its strategies and adapt to the changing market dynamics.

Damn, gout.  I can't even drink a glass of wine anymore.

But I am personally very informal when I write.  I use a lot of slang.  And I start sentences with contractions (and, but, etc.).  My goal is to write to you just as we would shoot the bull over a beer at a bar.

Is AI challenged by this?  Ha!  I merely high-lighted the generated text and clicked the Change Tone drop-down item.  I then chose Witty, and you can see the result.

China is no longer at the top of the manufacturing game, as other countries are stepping up as strong contenders in the global manufacturing industry. With advancements in technology and the rise of automation, traditional manufacturing centers are facing fierce competition from countries like India, Vietnam, and Mexico.

These emerging manufacturing powerhouses have fully embraced innovation, making substantial investments in research and development to enhance their production capabilities. Consequently, they are now able to offer competitive prices, top-notch quality, and efficient supply chain management. This shift in the worldwide manufacturing landscape has forced China to reassess its strategies and adapt to the ever-changing market dynamics.

Spot on, girl!

I find that even the Witty version is still very booooring, so maybe I won't be replaced just yet; but you get my point.  AI is powerful.

Heaven help us if AI ever become self-aware.  [Theme song to Terminator II]

Vladimir Putin has been badly wounded.  Yes, the President of Belarus allegedly negotiated a settlement between the Wagner Group and Putin, whereby Yevgeny Prigozhin will flee to the safety of Belarus, while the troops of the Wagner Group will return to the front lines in Ukraine.

Putin is going to let Prigozhin live?  Stalin and Beria (Stalin's torturer and exterminator) are rolling over in their graves.  "You don't let mutineers survive!  You torture them and then kill them.  Bada-bing-bada-boom."

Clearly, Putin lacked the military support of his generals to win a shooting battle with Prigozhin.  In a lightening move, armored units of the Wagner Group seized Rostov-on-Don, a regional military headquarters.

Just 100 kilometers (60 miles) from the Ukrainian border, Rostov-on-Don is the largest city in southern Russia. With a population of over 1 million, it is the capital of the Rostov region that adjoins parts of eastern Ukraine.

Where was the resistance?  The local police ran.  The Wagner Group did shoot down a Russian airborne command craft (like an AWACS) and six helicopters; but where was the rest of the local Russian Army?  Where were the Russian jets that could have strafed the long column of Wagner Group armored vehicles?  They chose not to get involved.  

The people of Rostov-on-Don cheered and gave the Wagner troops water and candy.  I saw a pretty Russian girl in Rostov posing for a picture in front of a Russian tank captured by the Wagner Group.  The Russian people clearly don't hate Prigozhin.   

And the Russian Prime Minister and the Mayor of Moscow were absolutely silent throughout the crisis.  They rallied no support for Putin at all.

But even worse than the military move towards Moscow, Prigozhin told the Russian people, in an interview broadcast by a pro-Kremlin blogger, that the war against Ukraine was unjust.  That blogger was immediately fired, and he might find getting life insurance a little difficult.

But the Russian people ate up that interview.  They had long-suspected that the war was based on lies.  If Putin had trouble with recruiting and the draft before the interview...

Let's summarize:  A Russian warlord dared to march on the Kremlin.  Putin was forced - because he didn't have enough military support - to let the warlord flee with his life.  Some (soon-to-be-dead) blogger had the stones to broadcast the interview.  The Russian people now know that they have been the recipients of lies about the war in Ukraine.  The Wagner Group, Putin's best force, has left the front lines in Ukraine and may never return.  

The Russian military simply sat back and watched the potential civil war play out.  The people of Rostov-on-Don (and Moscow?) may be rooting for Prigozhin and the Wagner Group.  

Ready for the big irony?  In this battle of warlords, Putin arguably is the good guy!  Okay, that was too much.  Putin is a lying, evil bastard who murders lots of people.  But Prigozhin is even worse!  His troops have committed horrible atrocities in Ukraine, Mali, and central Africa.  We do NOT want Prigozhin to win.

One American television general pointed out that the Russians store a whole bunch of tactical nuclear weapons at Rostov-on-Don.  So the Wagner Group rushes to the city, stays a few days, and then voluntarily withdraws?  I'm sure they just ignored those nuclear artillery shells and those tactical nuclear missiles.  

Why do we want Putin to win?  For one thing, if those warlords get into a civil war, the chances are much too high that someone will use nukes.  Ramzan Kadyrov, the crazy leader of Chechnya, has offered to use his Muslim fighters to put down Prigozhim and the Wagner Group.

And then there is the bitter blood-feud between Prigozhin and Russia's military chiefs, including Defence Minister Sergei Shoigu.  Prigozhin claims that Shoigu ordered a missile attack on Wagner Group's field headquarters, killing as many as 2,000 Wagner soldiers.

If Putin flees, there is no backup plan for Russia.  The warlords, generals, and oligarchs will battle for control.  Tactical nukes can be found in several depots around the country, and these crazy dictator-wannabes are crazy enough to use them on their enemies.  Once the use of tactical nuclear weapons becomes "accepted practice," how long before some Russian "patriot" uses them against Ukraine?

I read this morning that the real reason why Prigozhin turned back from Moscow might have been that Putin threatened to kill his wife and three children, who are now living a low profile life in the EU.  Heaven knows that Putin is good at assassinations.

“When you play the game of thrones, you win or you die. There is no middle ground.” -- Cersei Lannister, Game of Thrones.  

Enough for today.  But make no mistake.  Putin's blood is in the water, and what comes after Putin may be very, very ugly.  Just think about what happened in Iraq after Saddam Hussein was killed

Joke Du Jour:

Two policemen call the station on their radio.  "Hello, is this the Sarge?  Yes?  We have a case here, Sarge.  A woman has shot her husband dead for stepping on the floor she had just mopped."  "Have you arrested the woman?"  "No, sir.  The floor is still wet."

Commercial Financing Lesson:

Did you know there was a time when money for commercial real estate lending was amazingly tight?  For the past 30 years, we have lived in a world where banks have had tons of money with which to make commercial real estate loans.

Now to truly understand the significance of what I am about to share, it is important that you understand that there are, as of September 8, 2021, 4,951 FDIC insured commercial banks and savings institutions in the U.S.  That includes Federal savings banks, which are the last of the survivors form the S&L Crisis in 1980.

Most banks today will still gladly make commercial real estate loans, even despite the banking crisis that has the potential to chip away their capital.  You will recall that U.S. banks are saddled with low-yielding, long-term Treasury investments, while the interest rate they have to pay on deposits keeps climbing.  They are upside down - big time.

Did you know that over 500 banks have already used the Fed's new bailout fund, pledging their low-yielding Treasuries against 100% LTV loans?  According to the Fed, "The Bank Term Funding Program (BTFP) was created to support American businesses and households by making additional funding available to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors."

Hahahaha!  What a bunch of malarkey.  This bailout fund was not created to help consumers and small business owners.  The banks were in trouble, so once again we bailed them out.

Nevertheless, most commercial banks are still making commercial loans right now.  The problem is that bank regulators require banks to have extra capital before they can make commercial real estate loans.  With the banks upside down on all of these Treasury investments, that extra capital is getting chiseled away.

What happens when most banks lack the capital to make commercial loans?

Back in 1981, when the prime rate was 21.5%, there were fewer than 500 commercial real estate lenders nationwide.  That included life companies, who seldom make loans to non-financial-gods, credit companies, banks, S&L's, and private lenders.  Just 500!  It was often harder than hell to refinance a balloon payment when money was this tight and when interest rates were this high.

In 1980, my best investor client had a balloon payment coming due on a gorgeous commercial building near UC Berkeley, a very prime area.  Unfortunately, the city had commercial rent control.  Even the though the building was worth $3 million, it would only cash flow a loan of $500,000.  My client’s balloon payment was $900,000.  

No bank in town would touch the deal; even though my client was a Stanford professor, and his wife was a physician. They enjoyed a huge combined salary.  

I eventually placed the loan with Aetna Finance, a credit company.  Credit companies no longer exist, but they would borrow directly from the credit markets and then re-lend the money out at big spreads.

My fabulous clients had to pay 22% interest, even though their credit score was 850.  Confession:  FICO scores would not be invented for 20 more years; but you get the point.

Could insane interest rates like this ever happen again?  Yes.  In 2023, the U.S. will pay $663 billion in interest alone on our national debt.  Our entire military budget is only $766 billion.  Folks, we are in deep doo-doo.

If you want to compete against the U.S. government to borrow money today and in the future, the cost is only going to go up.