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Volume 2, Issue 7 | Date: August 3, 2018

PRIVATE CLIENT NEWSLETTER

You are receiving this letter because you are either a high-net-worth client of Blackburne & Sons Realty Capital Corporation (since 1980) or you once applied for a commercial real estate loan of $1 million or more using C-Loans.com or CommercialMortgage.com. Blackburne & Sons and C-Loans, Inc. are sister companies.

Today we’ll discuss the cause of the next Great Recession. The seeds are already being sown. Today we have lots of cute, clean jokes, some funny pics, and a super-cool video of a mini-twister hitting a Little League game. Removal Instructions are below.

Joke Du Jour

A therapist has a theory that the more often couples make love, the happier they are. So he tests it at a seminar by asking those assembled, "How many people here make love 2 to 3 times a week?" Half the people raise their hands, each of them grinning widely. "How about once a week?" A third of the audience members raise their hands, their grins a bit less vibrant. "Once a month?" A few hands tepidly go up.

Then he asks, "OK, how about once a year?” One man in the back jumps up and down, jubilantly waving his hands. The therapist is shocked as this lone aberration disproves his theory. "If you make love only once a year," he asks the wildly grinning man, "what are you so happy about?” The man yells back joyously, “Tonight’s the night!"

You Are Now a Private Client of Blackburne & Sons

Please be sure to tell us when you call. "George asked me to mention that I am a Private Client of the firm.” My loan officers are trained to snap to attention. Our commercial mortgage office number is 916-338-3232.

Are Humans a Bunch of Sicko's?

Want to Speak With a Loan Officer From Blackburne & Sons?

Blackburne & Sons, our private money commercial lending company, continues to seek slightly-flawed first mortgages between $100,000 to $1.5 million on standing commercial properties nationwide.

To apply for a private money commercial loan from Blackburne & Sons, please find your favorite loan officer below:

Tarot Cards Joke

A woman visited a psychic of some local repute. In a dark and gloomy room, gazing at the Tarot cards laid out before her, the Tarot reader delivered the bad news: "There is no easy way to say this so I'll just be blunt: Prepare yourself to be a widow. Your husband will die a violent death this year."

Visibly shaken, the woman stared at the psychic's lined face, then at the single flickering candle, then down at her hands. She took a few deep breaths to compose herself. She simply had to know. She met the Tarot reader's gaze, steadied her voice and asked, "Will I be convicted?”

- Today's Observation -

Seeds of the Next Great Recession

We all know that another great recession is coming eventually, but its anybody's guess as to when it will hit. It could be next year, next decade, or even three decades from now. This week I think I have at least figured out what will be the cause of the next great recession.

You guys have no doubt heard of the Monetarist School of Economics, headed once by the late Nobel-prize-winning economist, Milton Friedman. Friedman famously said back in 1963, "Inflation is always and everywhere a monetary phenomenon.”

Then there is the Keynesian School of Economics, which says that the Federal government should prime the pump to get out of bad recessions. Even though I am a Republican, I think that President Obama and Treasury Secretary Timothy Geithner did an incredible job during the Great Recession to save this country from a full-blown deflationary depression. They successfully used many of the fiscal policies suggested by John Maynard Keynes.

My greatest kudos, however, go to former Fed Chairman, Ben Bernanke*, who performed some amazing miracles during the Great Recession. At one point, during the nadir (low-point) of the crisis, the commercial paper market completely froze up. Our largest corporations don't borrow from banks to meet short-term cash flow needs. Instead, they issue short term bonds (30 to 270 days) directly to the commercial paper market, where life insurance companies, pension trusts, bond funds, endowments, and family offices (some people are so filthy rich that they actually create a little company whose sole job it is to invest their money) buy the short term IOU's issued by S&P 500, investment-grade companies.

By late-2008, investors became so terrified that they stopped buying commercial paper altogether. Our largest corporations, companies like a Federal Express or a Lowes, needed to be able to roll over their short term debt and to sell new short term debentures (unsecured corporate bonds) in order to meet payroll. Suddenly these gilt-edged companies couldn't raise a dime. Can you imagine a world where most of the companies in the S&P 500 had to layoff half of their workers because they lacked short term cash flow? Directly or indirectly, tens of millions of workers would have been thrown out onto the street, and the economy would have collapsed. [Oh, my gosh, did the U.S. collapse? See below.]

They Found a Woman's Arm in a Florida Alligator Last Month

Invest in 7% to 12% First Mortgages

You probably have money set aside for your retirement and for the cost of college for your children and grandchildren. It shouldn't all be invested in the stock market. In California, the first trust deed investment business is huge. A recent law change - the JOBS Act - now allows accredited investors nationwide to also invest in these same first trust deeds and first mortgages. Click here for more information.

Ice Cream Joke

"New York's State Assembly is considering a new bill that would legalize alcoholic ice cream. 'That's great news,' said a five-year-old having a rough day. Just a little something to take the edge off, Ma.'” — Seth Meyers

Seeds of the Next Great Recession

- Continued -

So what did the courageous Ben Bernanke do? Our friend Ben just sent out an announcement. "The Fed is hereby guaranteeing all commercial paper." Bam! Just like that the commercial paper market immediately began to function again. America was saved. Courageous? The Fed did NOT have the authority to guarantee all commercial paper (oopsie), but Bold Ben just did it. God bless him.

But there is another school of economic thought called the Austrian School of Economics. The Austrian School rejects mathematical modeling and believes instead in the concept that social phenomena results from the motivations and actions of individuals. It's called the "Austrian School" because the original proponents of these ideas in the mid-20th century were three Austrian economists, each building on the work of the others. Frederich Hayek, the 1974 winner of the Nobel Prize in Economics, is arguably the "Champion" of the Austrian School. The causes and remedies suggested by the Austrian School received great praise from economists during the Great Recession. In other words, they were largely proven right.

Okay, time to wake up again. Good stuff coming. According to the Austrians, recessions and depressions occur after lots of companies and the investing public makes some serious malinvestments (bonehead investments).

Mal is Latin for bad. A malinvestment is an investment that doesn't generate enough return to service and pay down the debt taken on to make the investment. For example, let's suppose that I borrow $20 million to build a buggy-whip manufacturing plant. It is unlikely that I am going to be able to sell enough buggy-whips to make monthly payments of $200,000. My company is going to go bankrupt, and the lenders who loaned me $20 million are suddenly going to be a whole lot poorer. If too many banks and investors make bonehead investments; e.g., see-through office buildings, dot-com stocks, bitcoins, and subprime real estate loans; suddenly the economy is in a recession or depression.

Okay, now to the point of today's article. Do you remember how the banks packaged up subprime residential loans, got them rated by the (lying, disloyal) rating agencies (Fitch, Moodys, etc.), and then securitized the loans? The banks were pushing junk, but they didn't care. They were immediately selling off the bonds to trusting investors. As long as the bank didn't get caught with a lot of subprime loans in its portfolio when the music stopped, the bank was golden. "Too bad, sucker!"

After the Great Recession hit, and tens of millions of Americans who were invested in residential mortgage-backed securities lost tens of billions of dollars, the Federal government passed the Dodd-Frank Act. Under Dodd-Frank, any bank involved in the selling of securitized bonds was required to retain 5% of all classes of the bond (AAA, AA, A, BBB, and the junk). The idea here is that no bank would want to own 5% of the first-loss piece if this unrated piece was gawd-awful.

Wall Street has now come up with a new way to trim unsuspecting investors out of their money. The Big Boys are now securitizing adjustable-rate junk bonds and selling the bonds to the public. An investment broker recently offered me some adjustable-rate junk bonds yielding over 4%! Some of these tranches are even rated AAA, just like Wall Street turned subprime residential loans into AAA bonds! Here we go again!

Camping Tips Joke

Q. What equipment will I need to go camping?

A. You need a tent. Tent sizes are measured in units of men, as in "a three-man tent"; this tells you how many men are required to erect the tent if they are all professional tent engineers. Even then, the tent will collapse under unusual weather conditions, such as nightfall. You will also need a hatchet, for the spiders, and a credit card, for the motel.

Q. How much food should I take?

A. A lot. You'll be providing food not only for your family, but also for the entire raccoon community. When I was a boy in rural Armonk, our garbage cans were regularly terrorized by a gang of brilliant criminal raccoons. I recall being awakened at 3 a.m. by loud noises and looking out the window to see, by moonlight, my father, a peace-loving Presbyterian minister, charging around in the bushes, wildly swinging a baseball bat and saying non-Presbyterian words. Of course, he did not get the raccoons; you NEVER get the raccoons.

Need a Commercial Real Estate Loan?

C-Loans.com is a commercial mortgage portal. It will take you just four minutes to complete your mini-app. Then C-Loans will sort through its databank of 750 commercial lenders and produce for you a custom-generated Suggested Lender List containing twenty to thirty lenders who are perfect for your particular deal. You put a check mark next to six lenders and then press, "Submit." Within minutes hungry commercial lenders will be contacting you with offers.

Oh, Nooooooo!

Seeds of the Next Great Recession

- Continued -

Now please get a barf bag handy. The industry appealed last year a ruling by a lower Federal court that held if a bank is going to sell securitize junk bonds, the bank had to retain 5% of all classes of the security (to insure that the bank is not selling unconscionable investments). Well, the Federal three-judge Appellate Court just reversed the ruling of the lower court! The issuer does NOT have to eat a healthy portion of its own cooking. In effect, banks can sell as much of this potential poison as they want.

This is going to be awful. The public will be unable to resist adjustable-rate, investment-grade (!!) bonds in a rising interest rate environment. The early offerings will be okay, but then - as things inevitably happen - the quality of the junk bonds going to these pools will greatly decline, until finally - bam - the Second Great Recession will be here.

What has been will be again,

what has been done will be done again;

there is nothing new under the sun.

~ Ecclesiastes 1:9

* In 2007, I published a financial novel entitled, The Reverse Multiplier Effect, about a horrible deflationary depression. In my fictional story, Fed Chairman Ben Bernanke is a bona fide hero. Then real life happened, and Ben Bernanke proved to be an even bigger hero. I would vote for one more head on Mount Rushmore.

Telephone Number Joke

(This young woman tells the story.) During a conference, I was pleasantly surprised to be seated next to a very handsome man. We flirted casually through dinner, then grew restless as the dignitaries gave speeches. During one particularly long-winded lecture, my new friend drew a # sign on a cocktail napkin. Excited, I wrote down my phone number. Looking startled for a moment, he flipped the napkin over and drew another # sign, this time adding an X to the upper-left-hand corner.

If You Cannot Find the Perfect Commercial Lender on C-Loans, Then Try Our Second Portal

We actually own another commercial mortgage portal, CommercialMortgage.com ("CMDC"). I paid $100,000 just for that domain name. Ouch. Actually it was very worth it. Anyway, CMDC is a much easier and faster commercial mortgage portal than C-Loans. In addition, CMDC enjoys over 3,000 different commercial lenders.

So why shouldn't you just always use CommercialMortgage.com? Unlike CMDC, C-Loans.com actually allows you to submit your commercial loan to dozens and dozens of commercial lenders, six lenders at a time. But if C-Loans doesn't produce just the right lender, then you should move on to CommercialMortgage.com.

And best of all, both our our commercial mortgage portals are 100% free.

Bath Toys Joke

"I could tell that my parents hated me. My bath toys were a toaster and a radio.”

Don’t Be Afraid of Our 9% First Mortgages

We have been selling them for almost 40 years. I strongly urge you to get on our email list of private mortgage investors. Feel free to just watch for five years. We sell exclusively by email, so no one is going to call you. The you’re finally ready, you will invest alongside of a dozen other private investors, typically retired business owners. The loans are serviced by Blackburne & Sons. We recommend that you start with just $5,000. Click here for more information.

Civil War Joke

"I come from a stupid family. During the Civil War, my great Uncle fought for the West!"

I Hope Her TSA Agent Has a Sense of Humor

- Here's Why You Want to Stay Close to Blackburne & Sons -

Founded in 1980, Blackburne & Sons is an old-time syndicator. There are very few of us left. The Tax Reform Act of 1986 pretty much nuked the whole syndication industry off the face of the Earth. Because you know a syndicator, you now have access to some special money.

If you need a fix and flip loan, a buy-to-rent loan, a bridge loan, or even a permanent loan on, say, your single-wide trailer park in Georgia, we'll make you a private money loan. We've been syndicating hard money loans for 38 years.

If you have some dough set aside for your kid's college, and you want to be extra careful with it, we'll put you into a first trust deed investment (6% to 9% yields) on, say, a nice 8-unit apartment building in San Jose, California.

Let's suppose you are richer than Crassus, and you want to speculate in 11% and 12% first trust deeds. We've got them.

Do you find yields of even 11% to 12% too tame? Want a chance to earn 16% or 17%? We put together syndicates to make preferred equity investments.

Are you a wise investor? We put together syndicates to buy investment properties for all cash. (This strategy has my strongest recommendation.) Because you would own the property free and clear, you should be able to weather just about any recession. Right now we are buying industrial buildings close to downtowns in big California cities.

We have not yet raised equity capital for a developer, but if someone brought us a development deal on a small, multi-tenant industrial building located within a mile of downtown of a large California city, we would definitely take a look at it.

Do you own any first mortgage notes? Want to sell a note at a discount? Better yet, why not simply borrow against it? This is called a hypothecation, and we do 'em.

Please be very wise and play close attention to the following:

Because every loan we make is a new syndicate (as opposed to a fund investment), Blackburne & Sons is always in the market.

When the stock market has fallen by 40%, when real estate values are falling like a knife, and when your own bank is too terrified to lend you a dime, Blackburne & Sons always has a group of savvy investors willing to lend - admittedly at a price - when blood is running in the streets. We are one of a tiny handful of lenders who remained in the market, making loans, every single day of the Great Recession.

So stick close to us. Syndicators are pretty rare, and now you know one.

Video - Mini-Twister Hits Little League Game

Blankets and lawn chairs sucked into the stratosphere.

Sweet Apartment Loan Program for "A" Deals

You're probably used to thinking of Blackburne & Sons as a subprime commercial lender, but since our acquisition of CommercialMortgage.com (I paid more than a house), some of the nation's largest commercial mortgage investors are giving us wonderful opportunities. Please be sure to check out our great new apartment program.

To apply for an apartment loan from Blackburne & Sons, please find your favorite loan officer below:

The U.S. Needs More Children. This Mother Should Be Canonized.

Final Funny

Little Johnny's father asked him what he wanted for his birthday. "A baby brother," he said. Later that year, his mother came home from the hospital with a baby boy.

Little Johnny was delighted. "And what would you like this year for your birthday?" his father asked. He said, "If it isn't too uncomfortable for mommy, I'd like a pony."