As Washington and Wall Street (What’s left of it) fumble and stumble with a solution for the toxic assets, perhaps it’s time to call in Larry the Liquidator
Did he see it over 20 years ago?
Is this your advisor?
Billy Ray and Louis versus the “Don’t Worry, Be Happy” crowd.
Suffering big losses in the markets like this person in the chair? Watch video and keep CNBC-TV on.
Peter,
Interestingly enough, these movies were all done at or near the peaks of each market.
Wall Street – 1987 Stocks
Boiler Room – 2000 Stocks
Trading Places – 1982 Commodities/ Precious metals
??????????? – 2020 Commodities/ Precious metals
Exclusive video of trader getting mad at co-worker who put him in Lehman, Citi and other bank stocks http://www.youtube.com/watch?v=n9_nGwVV_gw
Stockbrokers Beware! http://www.youtube.com/watch?v=vRpqD2NYzVU
Peter,
I really enjoy reading your insights and appreciate the information through other sources you pass along.
Question: If the 10 year bond is beginning to deflate as the charts suggest, would that also mean that mortgage rates which share a relationship with the 10 year are also going up despite a weakening economy?
Yes Mark. And that’s not good for the fragile mortgage situation.
let that be a clear positive statement of what tod do … if you can;t eliminate your mortgae lock in now as low as you can get for as long as you can get …. cuz they won;t get any lower …. but definitely if you can pay off all debt now if possible.
the prophet
Thank you both. I have no mortgage but I know one investment house (whose former leader just lost his job) which are offering a floating 2% interest rate on mortgages (assuming you qualify). I’m not sure if they are tied to Prime or the 10 year. The pitch is that interest rates are likely to stay low for a long time because of the economic situation. On the surface, that would make sense. However, I have some serious doubts given what appears the threat of China selling our dollars if they don’t get a better interest rate on all the money they loan us.
Could either or both of you briefly explain the practical difference, if any, of a mortgage rate tied to the 10 year vs Prime and what is likely to occur to rates tied to either over the next 6-18 months? Thank you in advance.
OIL DIVERGENCES – West Texas & Brent
Came across this informational gem on one of the websites mentioned here.
http://jessescrossroadscafe.blogspot.com/2009/01/west-texas-intermediate-benchmark.html
Mark, sorry, I’m not sure I understand the question … I’m also not very good with timing much of anything … in terms of interest rates …0 – .25 fed rate is as low as it can get … as people’s wealth degrades and a full understanding of the carnage resulting from the correction in the stock market (whihc isnt over)…. i know its simplistic but if you take a line from 30 years ago and continue the normal growth in the market as opposed to the aberrant curve starting around 95 … the proper value for the dow and s&p is about 7000 and 700 respectively …. of course IMO that would be based on the economic conditions be normal. Since then they have run hog wild … I personally see what should be a correction of depression type levels from the 7000 it should be in a normally function economy, to as aresult of the hangover from the binge of post 95 to sub 4000 with a possibility of it going to 1500. I know … sounds crazy doesnt it!
the first lesson of economics … is supply and demand … and money is a commodity (both fiat and gold) …. there is a large demand for money while it is perceived to be of value … indeed the price of gold suppressed to 250 was indicative of the value based upon a relatively low demand and a supply controlled by the central banks to ensure little interest in gold/silver as a medium of exchange.
the US$ was the most demanded fiat currency in the world and at this point in addition to having generated an insane supply, the world’s appetite (demand) as a safe haven currency is becoming reduced and IMO at an accelerating pace.
When there is an over supply of any commodity (US$ included) and reduced demand … it’s price must fall or its supply contracted until an equilbrium is reached. Contraction at this point as Mr. Bernanke well understands would result in an even greater halt on economic activity. Interest rates are simply the cost of money and their is an unusual conundrum here …. there is little demand to take on new debt at every level but government, there is also little desire on the parts of banks/business to lend unless you can essentially prove you don’t need it … we will see risk increasingly factored into the supply of credit since traditional store of values … most importantly real estate is deflating as demand shrink and supply increases …. this analysis in large part leads to my pessimism in the markets …. That risk will occur also in terms of foreign ownership of US treasuries … the more percieved risk the more the interest rate will be to hold US denominated currency … he truly is caught between a rock and a hard place.
The conditions leading up to the 30’s are similar but not as bad … worse than that fact is the general population is further removed from an agrarian upbringing and fewer and fewer people are generalists/handypersons/home economists/ as at that time. Simply put people lived a simpler life so the adjustment to very difficult economic conditions would not be as severe as today …. they also had far more skills in adapting broken things into useful things.
sorry Susan if you are reading this for the doom and gloom … but …. I can not deny my perceptions of reality and I am at times inclined to share them.
I am personally optimistic however in being capable of being a blessing to others through my skill sets, my preparation for what I believe is a human crisis in North America in there journey to joining the rest of the world … we have had it so good for so long (some might say too good and our willingness to live such lavish lifestyles at the expense of all of humanity and the earth has caught up with us) and my willingness to share with others the fruits and talents I have been blessed with … why I have said before … if you prepare for the worst you will always be in a position to succeed and in the worst case scenario you will be in a position to aid others less prepared than you.
One other comment about the nature of inflation … many scholars have said it is linked to the money supply and I agree with them …. it has nothing do with higher wages, or higher costs … it is a function of the money supply.
Philosphically speaking … when one considers all the advancements in our society and how most items demanded by the public have become cheaper over time, be them cassetes, vcrs, tvs, plasma tvs, cars are more fuel efficient, cheaper to produce, methods of forestration improved, higher yields in farming … etc etc … with all of these improvments increases in efficiencies, longer life spans …. all the good things and most of all access to computers etc etc … how can everything go up in price ….
simple for some time the value of fiat currency in the US has been declining …. get ready for the big decline … why so much is said about holding physical gold and silver …. they are a timeless store of value (there worth and relative difficulty to counterfeit and t he fact you can hold a lot of value in on ounce) … and in addition to what I believe has been a suppression of their price by central banks to make fiat currency popular they have intentionally made it difficult and cumbersome to hold in your hand even a small quantity …. nothing is made or loss until it is realized and there is always a risk when someone holds something on your behalf …. FDR made the holding of gold illegal by private citizens … very quickly the paper holdings you have can be confisicated through a bill …. I even think is you have family outside of this country … setting up a safety deposit box there is the rational thing to do.
I know … i’m insuinuating that government is ruthless and lies to it citizens … sorry once again about my negativity.
all the best to all and PG, please just ask me to stop and I will … should these types of post be unwelcomed … in the meantime thanks for allowing me to share my thoughts with those who may have an interest …. my soul is at greater level of peace because of it.
the prophet
Thank you for your reply. Interesting read.
. Sorry about any confusion: Would you refinance your 6% fixed mortgage for a floating 2%? Would your answer vary depending upon the instrument to which it is tied whether it be Prime or the 10 year bond? I understand your answer in no ways implies investment advice (Spoken like a true lawyer) Thanks again to you and Peter.
I’ll give it another shot for you and Peter
If I had a mortgage – most important thing is it is open to pay as much as fast as I want with no penalty …. after that I would try to negotiate a floating rate which within a certain timeline could be fixed on a long term rate at apredefined % … of course i try to get the best of both worlds, failing that I would probably look to have a short term with alower rate … and reevaluate in 6 months … i tend to think the rate increases won;t happen that fast but will be on the horizon. I wouldn’t really want to lock in at 6 right now … but I do believe that will be a great rate as a borrower in 5 years.
BUT … if possible find a way out of any debt … that is my biggest piece of advice … I would not own a house now if I had debt on it … I’d sell even in these lower prices (again I believe they will go down further. If I could find someone who would buy my house now and lease it back … I would do that because I do feel the worst is yet to come.
the prophet
A Sign of The tTimes:
Orange County California Register Saturday Jan 21, 2009:
“Starting Sunday, California will delay sending taxpayers refunds and paying vendors for their services, Controller John Chaing told a Dana Point audience. The state has a $42 million budget shortfall Chaing said, . . .” Government worker’s will be furloughed. . . . with unemployment growing, the budget is expected to shrink even more due to loss of tax revenues. . . By law California cannot file for bankruptcy. “The California Constitution outlines education as the first priority in the budget. , with debt service second, but . “Debt service is more important because if we default – everything goes underwater here in California.
mark _ I would lock in rates down here versus float as we could see much higher rates even if the economy doesn’t get better
Mike – I love you mike but how many years have i told you to leave the ‘People’s Republic of California” -LOL
Miss you so much Mike. You were the best client and friend I ever had. Say hello to your better half.
Ahhhh, thank you again.
REAL ESTATE AND SOME UNCONVENTIONAL THOUGHTS
Question: Is now a good time to buy residential real estate and if so, what would be the preferred financing arrangement?
Answer: It depends upon whether you are a ‘Cash Purchaser’ or a ‘Traditional Borrower’ with perhaps 20% down and requiring a mortgage with a duration of 20 or 30 years. The ‘Cash Purchaser’ will probably have better opportunity ahead and there’s everything to gain by delaying a purchase. Commercial real estate has a good ways down to go.
The ‘Traditional Borrower’ is on the other end of the spectrum considering that the cost of financing can run as much as the cost of the home over the life of a mortgage. Now could be the time to buy a residence simply for the sake of availability and ‘The Cost Of Financing’. For qualified borrowers, mortgage money is available and the cost of financing is near historical lows. Just as important as the cost of the residence, is the cost of a mortgage and maybe even more so.
Consider that the monthly amortization payment nearly doubles on a 14% fixed rate mortgage -vs- a 6% fixed rate mortgage. The total cost of a residence is the purchase price plus interest expense over the life of the mortgage and long term money can be purchased very cheaply, right now. If you do some googling to look at bank rate tables and monthly amortization payments you’ll see what this is referencing about the cost of higher interest rates. Think mortgage interest rates couldn’t go to 14% per annum? That’s what they were in 1984 and financing was scarce as the markets were still recovering from the inflationary bout in the late 1970’s. If interest rates were to return to such levels, real estate would decline further, perhaps precipitously, but a purchaser today would have his residence with financing that may not be available in the future.
Fixed rates -vs- variable? Why would anyone choose to speculate on the possibility of interest rate fluctuations when there’s advantage to lock in fixed rates at a steadily determinable cost of living in a residence?
Can someone please refresh my memory on silver coins – I have some I got from my dad. What year should I be looking for? Do you think its a good idea to hold some silver dollars? One last question – anyone heard of Philharmonic gold coins?
Thanks much!
susan