JohnsBlog (articles, news, thoughts, advice)

Today was the first time I saw that terrifying term...Global Recession....scary stuff

The Fed, along with the Central Bank of Europe and UK Bank cut their funds and overnight rates by .5 this morning, in an action attempting to unfreeze credit markets.  The reaction?  An initial boost to stock, and then another landslide, down 200+ points on the day so far.  It is likely that we'll see another .5 decrease in the rate at the Oct 28-29 Fed meeting scheduled.  With the stock market seeing substantial losses in just a few days, it should be very interesting to see where the market is, because with this volatility, things could change drastically in just a couple weeks. 

There are several oddities occurring which signal some trouble.  For one, wholesale lenders are consolidating their business structures, cutting off many brokers (CitiMortgage announced yesterday they'd be cutting 8,000 brokerages out of their clientele), and eliminating programs while making stricter guidelines on remaining programs at an alarming rate.  It seems investors are so terrified of taking on bad debt that pretty soon lenders will be asking for fingerprints, hair samples, and dental records of borrowers before they offer a loan. 

Another oddity lies within the rates.  Right now rates are lower than they've been in a while, and should go even lower with the election around the corner (when we discover who will inherit this mess) so it's a great time for squeaky clean borrowers to refinance, even drawing cash out of their homes for investment purposes.  The crazy thing I'm seeing is several lenders are offering the same rate for both a 15 and 30-year fixed rate mortgage.  In my time in this business, a 15 year has always presented less risk,and has therefore resulted in a lower rate, however it seems banks and investors are so confused about risk, pricing, and current market conditions, that their pricing departments aren't even sure what to do. 

Keep your hands inside the car, people, and please make sure your safety harness is firmly in place, this is gonna be a crazy ride over the next month.  I'll keep you all updated to new news as soon as I hear it.

Recently something occurred that hasn't happened in more than 4 years.  The stock market has fallen below 10,000 for the DOW.  With several days sporting losses of 500 points or more, things seem to be getting worse, not better for investments and the economy as a whole.

The recent $700billion bailout bill has been signed, but it's been said many of the effects may not be seen for months.  With such turmoil in the marketplace, I and many of you are left wondering what will this country look like in a few months?

The Fed, who as recently as 2 months ago said the funds rate clearly needed to be raised to stave off inflation, is now prepared to make yet another rate cut, which could be bad for inflation, however it seems they're working with global communities to cut rates, because if everyone else cuts as well, the dollar won't lose ground to any foreign currencies. 

Im not normally a doom and gloom person, I always think it a better idea to not only weather storms, but to seek opportunity in them.  As Warren Buffett said "Be fearful when others are greedy & greedy when others are fearful", and I believe this to be the truth.  Sure, many people cannot afford their housing payments or monthly debts, and I'm certainly not above the middle-class American either.  I've seen things tightening up and my own finances aren't as certain as they once were, but I see the opportunity here!!!

Think of this...with the funds rate lowered, money is cheaper to obtain.  Right now mortgage interest rates are in the mid-5%'s, and the prime rate is helping keep even credit card rates low.  If you could pull out equity in your home, or take a low-interest rate loan, and plunge it into other investments, when this thing swings around, there will be many rewards to reap.   Historically, the stock market returns 8-10% on investments.  Right now it's losing money, so many stocks are cheap and discounted.  If you can take a stock that's currently down, you can be there when it rebounds and make a killing.  It's about timing, and now's the time to get in...interest rates are low, gas prices are coming down, and in a month a new President will come aboard trying to right this ship.  If they do, and the market recovers sooner than later, there will be some that made money and are doing better than they ever expected, and those still with their heads in the sand, waiting for the storm to pass.

and the stock market reacted with a 600 point loss at about 150pm EST.  The failure of this bill to pass could have major economic ramifications, as there are rumors that several financial institutions were relying on this act to stay afloat....if they don't change this and get it through in some form, things could get extremely interesting in the next few days....hold on tight folks, it could be a bumpy ride. 

Here's an article from Bloomberg, breaking the news:

http://bloomberg.com/apps/news?pid=20601087&sid=aw4zWIp05Sq8&refer=home

A little bit of a collage of what's been going on...completely random, but hey, I've got a case of the Mondays.

Dow's down 300 points today, mortgage rates are looking good, and hopefully will continue to look better and better heading into Fridays jobs report.....time to refinance if you can qualify people...these rates aren't going to last forever.  Citi is spending $2.16Billion to acquire pieces of Wachovia, who is on shaky ground due to mortgage lates (that's what you get when your major product is the option-ARM).  $690Billion has been infused into the banks, and hopefully we'll see a positive result from the bailout as everyone hopes, rather than a complete waste and tax increase, which is a scary possibility. 

The Eagles lost...to the Bears...after going toe to toe with Dallas, and destroying the Rams and Steelers, it seemed like Andy Reid and the rest of the staff forgot how to call plays.  Jim Johnson forgot how to Blitz, and they just looked bad...what's worse, they made the Bears look like they have a good offense, which everyone knows is far from the truth...it was a sad moment, but I think Andy Reid and co. are just making sure Philly fans don't get too excited...they've always got to find a way to let us down!

Saturday, I was fortunate enough to attend the last NHL game ever played at America's showcase, the Spectrum in Philadelphia.  Flyers won 4-2, but what made the day really special was the lineup of captains that were present, the passing of the torch to Mike Richards (who responded with 2 short handed goals), and the tributes by former Flyers, as well as Wayne Gretzky and other greats, and finally the half-Lauren Hart, half-Kate Smith "God Bless America" that sends chills up my spine every time I hear it.  Having so many great memories in that building growing up makes it hard to say goodbye, and I actually shed a tear or 5 during the ceremony.  I met with Ed Snider for a couple minutes which was nice, and the day was perfect....farewell Spectrum, what a nice last game.

So we've got the market and sports set aside, I'd talk about Fridays debate, but that'll be another day...I'll keep the updates coming as this will surely be a busy week w/a historical bailout, the election season in full swing, stocks markets going wild, and an employment report due Friday that's sure to further shake things up.

There's a ton of talk by financial "experts", politicians, and leaders of all sorts discussing the recent suggestion by treasury secretary Henry Paulson and Fed Chair Ben Bernanke to infuse $700 billion into the financial mess as a bailout of magnanimous, unprecedented proportions.

There have been reactions ranging from the "finally, thank you!" to the "NOOOOOOOOOOOOOOOO!!!!!!!!!!" and I'm not sure where I stand.  I'm not one to easily trust anything the government does, as I believe many are self-centered egomaniacs out for their own agendas, but half of me thinks they may be trying to help!  It is certain that a bailout of private corporations is not only unethical (saving those who ripped people off to make their billions?)but un-American, as it contradicts the very system we've reveled in, that of free capitalism.  Clearly something needs to be done, though, right?

If not, this country's economy, including its' workforce will continue downhill for a very long time, possibly even leading us into another depression.  As much as I'm not one to trust the government, I'm also not a big fan of poverty and widespread suffering.  It seems there may be no other option than to listen to the Fed and treasury, while making appropriate changes to their original plan...I don't think any CEO of a failed company should walk away with anything, period, not a dime.  I also think any recovered profits as a result of the bailout should ultimately go back to taxpayers, as we are the ones shouldering most if not all of the risk involved with this plan.  The potential downside of this bailout is enormous, ALMOST as bad as what could happen if they do nothing, so I think it all comes down (as with most things) to the lesser of 2 evils.

I'll keep everyone updated as more news comes out about this, and in the meantime feel free to ask questions or share thoughts, I'm all ears.

As I think back, I'm searching for a time when American citizens and taxpayers were responsible for the well being of a corporate venture.  I think of all the small businesses I've seen come and go, the small business that I've seen turn into mega corporations, and the venture capitalists who put everything into a great idea, only to see if fall apart.  There has always been a free market system, a system where anyone can make it with hard work, ambition, and great ideas.

If ideas didnt pan out, if a market couldnt support a business, that business went away to be replaced by another.  In this current financial market, however, it saddens me to see this free market system tempered with by the government.  Why is a financial giant with a high 6 figure CEO worth more than the corner grocery market?  Could capital, and an abundance of capital for a small minority lead our country into a market full of socialist ideals and actions?  With the recent acquisitions of Fannie Mae and Freddie Mac, the answer is YES, a great big, resounding YES. 

Treasury secretary Henry Paulson is putting money ahead of the principals our government was created on, and our country alike.  Now with talks of government intervention to stave off a complete collapse of AIG (a day after Lehman Bros declared Bankruptcy) Paulson is taking things further...he's taking things TOO far. 

How many companies will the government bail out?  How much will we see an increase in taxes to cover these financial giants losses?  How much will the average middle class citizen suffer because of the mistakes of a multi-billion dollar money sucking, greed-driven company?  That is yet to be seen....Im not sure what can be done, but something needs to happen, some action needs to be taken....what do you think?

Im happy to announce that I just joined Louviers Mortgage Corporation as a Senior Consultant.  You can learn about us on the web at www.louviersmortgage.com. 

I learned a lot in my years at Stonebridge and made a lot of great clients and partners who I am fortunate enough to also call friends, so departing was a bittersweet decision.

I feel that with Louviers there will be greater opportunities, more room for growth, and the same solid team of support around me that has allowed me to provide exceptional service and great mortgage programs to all of my clients.  Come see me in the office at 4839 Limestone Rd in the Stoney Creek Plaza!

I will apologize in advance if over the next week or so I am delayed in responding to phonecalls and e-mails, as I have a ton of catching up to do and things to learn with this change, but you can rest assured that you are my priority and I will get back to you as quickly as I can!

DELAWARE COMMUNITY BAND DAY

SATURDAY, AUGUST 23
12-6:00 PM
ACADEMY LAWN

The Diamond State Concert Band and the City of Newark are proud to announce the first Delaware Community Band Day. Five bands from the region, two Delaware and three Maryland bands, will perform in succession for more than five hours! Each community band is a volunteer organization comprised of 20-60 people of all ages who love to play music and perform for the public. You can expect to hear old favorites, big band and swing music, Broadway show tunes, movie scores, concert band classics, and patriotic songs. Come to hear the music, shop downtown Newark, and relish one of the final weekends of summer. This inaugural concert is made possible by the

Delaware Division of the Arts.

For more information, contact Dana Johnston at 366-7020.

Well last night was quite an interesting night in the Olympics.  First off, this is off topic of anything mortgage related, I just find these athletes, many of them extremely young, to be unbelievable. 

First I caught the women's gymnastics squad doing uneven bars, balance beam, and vault...all I can say about this, is I dont know how they train, because Im fairly sure any attempt at trying anything they do would surely result in a hospital visit for me!  They're amazing.

Next up was swimming....when I saw that the French stated they would smash the American team, because that's what they came to do, I was slightly surprised at the cliché portrayal of French arrogance...then when the competition ended, the Americans had a gold medal around their necks.  I was talking to a friend of mine about this, and he pointed me to www.google.com for a hilarious finding.  If you type in the search field "French military victories" and click the "Im feeling lucky" tab, the results are hilarious.  Nothing against the French culture, as I was a French minor in college and love the culture, language, and history, but this is just funny!

Anywho, hopefully the rest of the Olympics are entertaining, hopefully men's basketball can stop being a perennial disappointment and come home with gold, and hopefully Phelps can break the gold medal record (Im sure he feels the same way so he can cash in on his $1 million endorsement bonus from Speedo!).

Jobs report comes in as poorly as expected...unemployment up to the highest level in 4 years...this signal is further evidence of a slow down in the economy, and can be seen as the most poignant number pointing to the belief that we are, in fact, in a recession.

This report puts economists and the Fed, who was largely expected to raise interest rates sooner than later, in a difficult position.  They certainly cannot lower rates due to inflationary pressures that have weighed heavily on consumers recently, but they now feel pressure against raising interest rates due to the extreme slowdown in the economy...it's a tough situation and anyones guess what they'll do, but one things for certain...the way things are going, doing nothing is not an option. 

In one corner we have Senator Obama calling for an immediate stimulus package #2, giving people $500 to spend...however, I'm not sure this has a huge effect...the last stimulus check is now nearly forgotten, as many Americans used it to simply pay bills.  His plan on getting the funds for this check?  Windfall profits tax.  His opposition, McCain, argues taxation will surely force more jobs overseas...I tend to agree. 

Fortunately for the economy, we're seeing a nice reduction in gas prices.  If this continues we might see economic relief as the dollar will gain ground and inflation will slow down substantially.  I guess only time will tell if this being an election year has anything to do with the craziness...I just hope things arent being covered up until after the election...that's a scary, scary thought.