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Capitulation- analogy & meaning. In response to my Knife Blog_Mike Rivera

By
Real Estate Broker/Owner with Mike Rivera, Saggio Realty Inc

In response to my Knife blog

From: Mary Ann Nietz 
And  Amber Grice

Not trying to say there is not a deal out there..   But i think this article has some good points to consider..   Everyone has an opinion about the market.. so far mine is how long did it take to come back after the big crash in the 80's?? the latest bubble burst in 2006 it is now 08....I do think basic economic should be considered..in this market.. But i also agree that there are a lot of deals out there too.. now we didnt understand the below

Capitulation (Lat. capitulum, a little head or division; capitulare, to treat upon terms), an agreement in time of war for the surrender to a hostile armed force of a particular body of troops, a town or a territory.

It is an ordinary incident of war, and therefore no previous instructions from the captors' government are required before finally settling the conditions of capitulation. The most usual of such conditions are freedom of religion and security of private property on the one hand, and a promise not to bear arms within a certain period on the other.

Such agreements may be rashly concluded with an inferior officer, on whose authority the enemy are not in the actual position of the war entitled to place reliance. When an agreement is made by an officer who has not the proper authority or who has exceeded the limits of his authority, it is termed a sponsion, and, to be binding, must be confirmed by express or tacit ratification.

huh?

A grice

OK,

Lets take the ABOVE and run with it.  It is used in the context to the capital markets.

Let me elaborate.

The analogy and its actual and contextual meaning in war or in finance.

Capitulation means surrender!

American Heritage Dictionary as the following:

ca·pit·u·la·tion (n)

1. The act of surrendering or giving up. Surrender.
2. A document containing the terms of surrender.

 

WAR- an agreement in time of war for the surrender to a hostile armed force. the force been the market which is hostile to all.


In Wall Street the term refers to the time when investors (all of them) sell all their stocks because they want out. The sole motivation for trading is to get out of the market and seek shelter in "safe" investments such as bonds or your mattress. The selling frenzy is painful, but relatively quick. Consequently, a sign of capitulation is mass selling that occurs over a brief time span.

This is what is sort of happening right now in the mortgage bond market such as bear sterns. A FIRE SALE
    so going back to the sentence below...  

The analogy from the world of stock brokers is that you are not at a market bottom until you see signs of "Capitulation".  Surrender and panic sell off, FIRESALES or the bottom. which we have might have not hit yet. Sellers continue to hold and if houses are losing 5 or 10 percent per month. it would be  stupid for most residential investors to purchase only to lose 20% - 40 percent of what they paid until final bottom. Which is your equity. When we do hit final bottom buyers in droves will feel confident about buying and the markets will hold steady or goes back up. 

The funds and buyers that I deal with are looking for product at 45% of current AVM. as is the Land bankers.

It provides a cusion agaisnt any more equity loss, but get them into a deal while the market is down.

AS AN INVESTOR THIS IS HOW YOU LOOK AT IT AND PROTECT YOUR DOLLAR.  I recomend NNN cash flows.

AS REALTOR YOU DON'T WANT TO HEAR THIS CRAP.

 As a individual person purchasing a single family home or condo for retirement or a business move it might be irrelevant to you.

And taking the good deals out there now at 75 or 60% of current AVM /LTV. Might be a slam dunk if you plan to stay. Especilly the Luxury resort product in south florida ( swfl). I belive Luxury product would be some of the first to gain its value back most aggresivaly.

Mike Rivera SR

239-770-6257

http://starcapitalgroup.blogspot.com/

StarCapitalGRP@Yahoo.com

 

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