I just received the 2008 tax valuation from my county treasurer. It’s clear that my local housing industry is feeling the effects of the national housing “crisis”, as the appraised value of my house increased less than 1% this year. Compare this to last year where the increase was 4.9%, and the year before when the valuation increased 6%.

Truthfully I’m not terribly disappointed about this, nor am I shocked. Other areas around the country are seeing the value of homes actually decrease, so I’m counting my blessings that my area isn’t yet in that boat.

Looking around the real estate market, there are a ton of houses on the market, and the area is certainly overbuilt. Commercial real estate is even more so. There have been strip malls built that have been vacant for 6 months or more, but curiously this has not deterred builders from building more commercial space.

The current state of the local market makes it attractive to buy a house, but I’d hate to have to sell one right now.

How about your area? Are your valuations still positive?

Real Estate housing, Real Estate

Failure is such a harsh word. I have to wonder why. After all, don’t we learn more from our failure than our successes?

Capitalism lives and breaths by failure and success, and the fact that you are given the opportunity to succeed is what makes America great.

For that, I’m sorry to say that I felt a little bit of relief to learn that the Senate today killed a bill that would have bestowed upon judges the power to cut interest rates and principal on troubled mortgages to help desperate borrowers trapped in sub-prime mortgages keep their homes.

The fact that naive people were taken advantage of on the front of our housing problem is frustrating, no doubt, and this will surely not be the last time you hear of that happening. But to think that those same people would gain more from this by allowing the government (and hence the all mighty tax payer) to come in and bail them out of bad decisions is a disservice to us all… in the name of capitalism.

To a certain degree, we all have a vested interest in the success of the free market. Your car, your toys, your house. Place upon an article a value and you will see the free market at work.

This period in time is teaching us all a very important lesson: no one should have a better understanding of your finances than you. Allowing people a get out of jail free card only white washes that lesson.

I’ve said it many times on this blog, especially when it pertains to our government, but most generally when it’s time to do “something”, it’s often more appropriate to do nothing at all.

I’m all for allowing people the opportunity to get ahead; to make of life whatever they want, by their own decision. Reinforcing the importance of your financial decisions is the job of the free market, not the government.

Eliminating failure from the equation will only bring the value of success to the same level.

Finance fiscal policy, government, housing

Goldman Sachs Group, Inc. (GS: chart, web, Y!) is in the business of providing investment banking, and investment management services, primarily to corporations and financial institutions.

Goldman has been one of the few big investment banking and financial services firms that has actually held up well through the the fallout of the credit crisis and the housing slump. It’s low involvement in small residential mortgages and favorable short trades among the rest of the sector has worked in its favor.

The black sheep mentality compared to the rest of the sector has held the stock price around $200, and it even saw $250 per share back at the end of October.

Is the other shoe about to fall?

Goldman has insulated itself against residential mortgage problems, but it does have some hefty exposure to corporate debt; a topic that has yet to make its way into the headlines, but fear it will has dragged GS down considerably.

Goldman has been on the receiving end of some critical analyst reports during the last week, all conveying the fear that the company will miss earnings in mid March.

Analyst Jeff Harte of Sandler O’Neill said Goldman’s share price will likely be hit harder than its competitors’ since it has been trading at a “considerable premium over peers for the firm’s apparent ability to outperform in a difficult environment.”

The day before, Deutsche Bank analyst Mike Mayo said he expected Goldman to bring in only $2.63 per share in the first quarter, down from $4.64 per share. He expects Goldman to take a nearly $3.5 billion writedown due to leverage loans and other investments.

Earlier this month, Meredith Whitney of Oppenheimer downgraded Goldman to perform, from outperform, citing the 40% premium its shares were trading at compared with its peers. -Source

The earliest downgrade by Meredith Whitney requires some clarification however:

“Goldman’s franchise remains well ahead of its peers with respect to market share but most importantly execution, and none of that has changed, in our opinion,” she writes. “We simply believe there is more probability of multiple contraction than multiple expansion in the current environment of weak/low margin capital market conditions.” -Source

I tend to agree with her. Goldman is probably the smartest and most savvy of the big boys on Wall Street. They’ve avoided the most volatile hot spots in the financial sector, and bet against their peers when thing really went south in the credit sector.

I’m looking to pick up some Goldman Sachs, but I think I’ll have to wait till it finds a bottom. I agree with Ms. Whitney that the premium in price has put a target on the companies back, and the reaction to any speculative bad news will be grounds for over reaction.

It will be interesting to see how the stock fairs after earnings, and I think we’ll gain some insight into whether the second shoe representing corporate credit problems will bear the weight of a work boot or a flimsy flip-flop.

How well will Goldman weather the second front in the credit storm?

Does GS make for a good buy here?

Banking, Finance, Stock Thoughts Credit, Goldman Sachs, housing, investment banking