There are a lot of volatile cross-currents washing through the financial markets right now. If we were not sure about things a month ago, we’re hopelessly confused now. The big stimulus package, a new pile of national debt, a record drop in home prices over the 4th quarter of 2008, CitiGroup, AIG, and the auto makers all needing more money...it’s enough to make you want to hide under the covers with the lights off.
However, tumultuous times present unique (though fleeting) opportunities. And there are two major points I’d like to bring to your attention:
1) We have a ‘new and improved’ 1st time homebuyer tax credit! $8,000 dollars straight in your pocket just for buying a place! And you don’t have to pay it back! I know! It’s totally mind-blowingly awesome!!! As with all good things, this tax credit comes with some strings attached (buy a home costing over $80,000, earn less than $150,000 annually as a couple, haven’t owned a home in the past 3 years) but nothing constricting. The big difference between this credit and the $7,500 tax credit we had before is you don’t have to repay this one if you live in the home for 3 years. That’s like your boss giving you a $1.28 per hour raise for 3 years just for being a homeowner. Except your boss is America.
2) Bank stress testing is a’coming. As a nation, this is not one of our brightest ideas. The concept is that we’re going to send an army of regulators marching to all the banks in our country to comb their books and see if those banks could survive a “worst-case scenario” economy. If it is determined that the bank is in trouble, confidence in that bank will collapse (along with their stock price) and government intervention will be necessary. Basically, if regulators say a bank will fail, it will become a self-fulfilling prophecy as everyone jumps ship. My problem: it’s setting up some otherwise solvent institutions for failure by virtue of mob mentality. But such is the skittish nature of investors these days.
The moral of the story is that we are going through a very murky period. A single day can make a world of difference on everything, including asset values and mortgage rates. If you are thinking about buying a home, set up a time to talk with me so I can help you time these big market upheavals and find surprisingly good deals amongst them. Uncle Sam is trying to encourage homeownership in every way that he can. Now might be the time to start examining the options.
Wednesday, February 25, 2009
Sunday, February 15, 2009
Countdown to stimulus stimulation!
In a moment of profound unpreparedness, our brand-spanking new Treasury Secretary Tim Geithner spoke on Tuesday about the ’details’ of the upcoming stimulus package. After no ‘details’ whatsoever were declared, the stock market expressed their discontent by trashing the Dow Jones Industrial Average by 300+ points. Ouch-town, population you, Tim. Maybe it’s best to have the information before you tell the press that you want to release the information.
As I write this newsletter, the House of Representatives is hard at work debating the particulars of the upcoming stimulus bill. Senate is set to get their think tank a-rolling later this evening. The latest page count for the bill is 1071. To give you a base of comparison, reading this bill would be comparable to reading Pride and Prejudice, The Grapes of Wrath, and washing them both down with Machiavelli’s The Prince all in one day. Only more boring.
Where are the Cliff’s Notes when you need them?
If my high school English class was any indicator, I’m guessing that many of our fine representatives won’t read the bill word for word. At least some politicians are being honest about it. U.S. Rep. Emanuel Cleaver, a Missouri Democrat, was quoted as saying, “Regardless of party, we will all cast our votes with one hand and cross our fingers with the other.”
So, you’re basically telling me that we’re spending close to a trillion dollars on...something that the people who made it really don’t understand? Isn’t this how I, Robot started? It didn’t work out so well for Will Smith in that one.
Simultaneously, Barack and his Obama-nauts are trying to hammer out a mortgage subsidy program. To spare you the convoluted web of details, essentially what they are trying to do is come up with a standardized qualification and re-appraisal process that all banks can use to establish eligibility for loan modification. The talk of the program alone brought the stock market roaring back over 200 points towards the tail-end of yesterday. I’m a big fan of anything that government is willing to do to keep people in their homes and stop home price depreciation. Rock on, Barack.
Another immediately problematic trend is America’s newfound desire to save money. Between dwindling retirement accounts and severe job insecurity, consumers have retrenched and started to put their cash in their mattresses. It has gotten to the point where some in the administration wish to change the phrase ‘A penny saved is a penny earned’ to ‘A penny saved is a penny you’re not spending to generate commerce and jobs for your fellow Americans, you unpatriotic jerk’. Yikes.
As I write this newsletter, the House of Representatives is hard at work debating the particulars of the upcoming stimulus bill. Senate is set to get their think tank a-rolling later this evening. The latest page count for the bill is 1071. To give you a base of comparison, reading this bill would be comparable to reading Pride and Prejudice, The Grapes of Wrath, and washing them both down with Machiavelli’s The Prince all in one day. Only more boring.
Where are the Cliff’s Notes when you need them?
If my high school English class was any indicator, I’m guessing that many of our fine representatives won’t read the bill word for word. At least some politicians are being honest about it. U.S. Rep. Emanuel Cleaver, a Missouri Democrat, was quoted as saying, “Regardless of party, we will all cast our votes with one hand and cross our fingers with the other.”
So, you’re basically telling me that we’re spending close to a trillion dollars on...something that the people who made it really don’t understand? Isn’t this how I, Robot started? It didn’t work out so well for Will Smith in that one.
Simultaneously, Barack and his Obama-nauts are trying to hammer out a mortgage subsidy program. To spare you the convoluted web of details, essentially what they are trying to do is come up with a standardized qualification and re-appraisal process that all banks can use to establish eligibility for loan modification. The talk of the program alone brought the stock market roaring back over 200 points towards the tail-end of yesterday. I’m a big fan of anything that government is willing to do to keep people in their homes and stop home price depreciation. Rock on, Barack.
Another immediately problematic trend is America’s newfound desire to save money. Between dwindling retirement accounts and severe job insecurity, consumers have retrenched and started to put their cash in their mattresses. It has gotten to the point where some in the administration wish to change the phrase ‘A penny saved is a penny earned’ to ‘A penny saved is a penny you’re not spending to generate commerce and jobs for your fellow Americans, you unpatriotic jerk’. Yikes.
Tuesday, February 3, 2009
If you don't know where you're going, "speed up" may not be the best answer
Another Super Bowl has come and gone. Congrats to the Steelers for winning, and congrats to the Cardinals for putting on such a terrific back-and-forth contest. Arguably one of the best Super Bowls I’ve seen in recent history.
And at this year’s Super Bowl party, I heard plenty of people talking about the economy and the housing markets. Everyone, it seems, knows the correct way for our government to bail us out (and isn’t quiet about it) and wonders why the powers that be ‘just don’t get it’.
Guys and gals, the people who spend every waking second of the day studying this stuff don’t have a solid clue as to what to do about it. I’m not downplaying the economic ideals of the proletariat, but I am asking that all of you respect the interconnected complexity of this crisis we face. Every potential method of recovery comes with it’s own unique costs and benefits and will be riddled with various political agendas.
Add on top of that a sense of urgency that must be balanced with ample time to do due diligence. The upcoming stimulus package is a prime example of just that: we need to get it implemented as fast as possible to prevent more jobs from disappearing and more businesses from failing. However, if we don’t take the needed time to go through the program line by line, billions of dollars will be lost due to inefficiency, special interest groups, and general corruption.
Damned if you do, damned if you don’t.
One idea that is raising a lot of controversy is the ‘Buy American’ or ‘Hire American’ clauses that are attached to receiving funds from this stimulus. The idea is great: if we buy from or hire only Americans, we’ll stimulate our economy faster. The drawback is that the international community will see it as an act of Protectionism, which does not bode well for trade. We just got our first earful of angst from the world at the recent Davos International Economic Conference.
The fact is, big decisions are being made on Capitol Hill that will set the trajectory for the next few years. Hopefully, our governing body will prove to be patient and prudent enough to actually stimulate the economy and not just fund a bunch of dead-end special interest groups.
But only time will tell.
And at this year’s Super Bowl party, I heard plenty of people talking about the economy and the housing markets. Everyone, it seems, knows the correct way for our government to bail us out (and isn’t quiet about it) and wonders why the powers that be ‘just don’t get it’.
Guys and gals, the people who spend every waking second of the day studying this stuff don’t have a solid clue as to what to do about it. I’m not downplaying the economic ideals of the proletariat, but I am asking that all of you respect the interconnected complexity of this crisis we face. Every potential method of recovery comes with it’s own unique costs and benefits and will be riddled with various political agendas.
Add on top of that a sense of urgency that must be balanced with ample time to do due diligence. The upcoming stimulus package is a prime example of just that: we need to get it implemented as fast as possible to prevent more jobs from disappearing and more businesses from failing. However, if we don’t take the needed time to go through the program line by line, billions of dollars will be lost due to inefficiency, special interest groups, and general corruption.
Damned if you do, damned if you don’t.
One idea that is raising a lot of controversy is the ‘Buy American’ or ‘Hire American’ clauses that are attached to receiving funds from this stimulus. The idea is great: if we buy from or hire only Americans, we’ll stimulate our economy faster. The drawback is that the international community will see it as an act of Protectionism, which does not bode well for trade. We just got our first earful of angst from the world at the recent Davos International Economic Conference.
The fact is, big decisions are being made on Capitol Hill that will set the trajectory for the next few years. Hopefully, our governing body will prove to be patient and prudent enough to actually stimulate the economy and not just fund a bunch of dead-end special interest groups.
But only time will tell.
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