In my last blog, we defined toxic assets of banks. This blog will focus on derivatives. Simply defined, derivatives are financial instruments comprised of mortgages that have been bundled together and typically sold Over-The-Counter to customers worldwide, from Southern Oregon to Europe to the Middle East. During the height of the real estate feeding frenzy, derivatives where bought and sold with little or no regulation to banks, hedge funds and other sophisticated entities. Behind the policy of “no regulation” was the belief that the buyers of derivatives were sophisticated investors aware of the risks and complications inherent to a financial instrument of this caliber. Billions in bundled mortgages circulated the globe as investors chased supposedly secure investments in the rising real estate markets of California, Nevada, Arizona, Florida, and yes, Southern Oregon, including Grants Pass. And throughout this period, you can bet there were some Wall Street traders making a bundle over the bundling, knowing that their tracks would be covered by complexity. When the party came to an end and the real estate market began to fall, the derivates took a nose dive. Since then, derivatives have becoming perhaps the most perplexing challenge for economic recovery. And that is because no one knows whether these bundled mortgages represent a beautiful new home Grants Pass or a boarded up shanty in flood damaged New Orleans. Continue reading DERIVATIVES, TOXIC ASSETS, AND THE SOUTHERN OREGON REAL ESTATE MARKET, Part 2

Oh, those pesky derivates and toxic assets. When the real estate bubble burst, derivatives and toxic assets became the problem that wouldn’t go away. These two trouble makers have expanded in numbers and they continue to pose complications that threaten the recovery of the entire global economic system. But what exactly are derivatives and toxic assets and how do we get them under control? Their definitions are easy compared to the second question; how do we get them under control? The answer to this question is at the heart of any successful plan for economic recovery whether we are talking about a recovery in the Grants Pass real estate market, the Southern Oregon real estate market, or the national economy. Continue reading DERIVATIVES, TOXIC ASSETS, AND THE SOUTHERN OREGON REAL ESTATE MARKET, Part I