Another rate cut by the Fed best mortgages rates of all time may be now

Just yesterday I suggest looking into refinancing your home while rates are down and I also stated another rate cut was on the way, to wait for it and jump on it when it came.  24 hours later here we are, the market took a 400 point dump when it opened, the Fed panicked and cut rates before the end of the month meeting just as I said they would.    This is not an I told you so post though just another nudge to get going with a refinance if you are paying to much in interest, if you can make a smart move to pay off consumer debt (credit card debt) or if you were stupid and got into an ARM that will soon expire.

Right now I am finding rates are low a 5.125% on a 30 year fixed and todays cut is not even factored in yet.  Odds are you can get something in the 4.75-5.2% range with any type of decent credit assuming you have some equity in your home.  I don’t think you will see a better time in the next few years or perhaps the next decade.  Is this the absolute bottom for rates?  Who knows but it won’t get much better, my advice is to act now.

Also don’t fall for all the advertisements.  The best source to refinance a loan is most often your existing lender.  No one wants to loose a good mortgage client right now.  Last time I did a refinance I got all fees waived by my existing lender.  Remember if you don’t ask they generally won’t tell,  learn and use the phrase “is that the best you can do?” often.

Another financial advice website to check out

I was just asked to review a web site called Finance Genius. I have to tell you I like what I saw. Basically the site is an information portal that helps consumers with a combination of advice and what amounts to a brokerage approach in connecting consumer to different options for things like insurance, mortgages, student loans and Auto Warranty services.  With automotive warranties in particular I always advise people to shop outside sources, the extended warranties offered by dealerships tend to be over priced and then simply lumped into your loan so you get to pay interest on it.  My additional advice is wait until your included warranty is almost up before paying for an extended on.  Why pay for a warranty you may not use?

Like any site that is recommending various financial products my advice is to shop what they have and compare it to other options.  Always make sure you find the best deal you can but Financial Genius certainly looks like one of the good guys so if you are in the market for any of their services have a look around their site and see what they have to offer.   Remember my view is debt is bad but when it is necessary get the best deal, with the best terms you can find.  Sites like this one are good tools for finding those types of deals.

Now is the time to refinance your mortgage

Let me be clear that I think the continued suppression of interest rates by The Fed is a mistake.    All I believe is going to happen is more delay to the recession/depression we have to go through and right now delay simply means when it fully hits it will be worse due to the delay.

That doesn’t mean you can’t be smart and benefit from this.  If your interest rate is more then 3/4s of a point then current rates odds are in about a week or so you will get the chance to shave a point or more off it.  The Fed seems committed to yet another cut either in the next few days or at the end of the money the next time they meet.   I have the following advice for people in different categories.

1.  If your rate is above 6 percent odds are you can cut your payment a significant amount with a refinance in the next few weeks.  If you have the credit to qualify and if it saves you money, do it.

2.  If you have decent equity in your home 30-60K or more and if you owe 10-20k in consumer debt and if your rate is at, near or above 6 percent you may have the opportunity to refinance, pay off your debt and pay LESS or very little more each month on your house payment.  If so and if you are willing to cut up the credit cards you pay off, do it and do it now.

3.  If you were a dumb ass and got into a sub prime or adjustable loan see what you can do to get a conventional 30 year FIXED rate loan now.  There probably will not be a better time for a while.  As soon as even a hint of rebound in home sales come these rates will not be held so low any longer.

I am not a massive fan of cash out refinance for paying off other debts.  Many times this is something that gets abused.  If you plan to take this approach again it is necessary to make sure you get rid of that credit card that got you in the hole in the first place.  Yet there is no question that debt on housing is better then debt on credit cards.  I honestly believe for the home owner with equity, good credit and some unsecured debt this may be the best opportunity in a long time to consolidate bad debt into not so bad debt.  If you do it, look at it like a “stay of execution” and commit yourself to a renewed quest toward financial freedom.

Tax rebate checks may be on the way

In an effort to stimulate the economy the congress and the president are working to provide an economic stimulus package. One big part will be sending most tax payers some of their tax money back, to the tune of from 300-800 dollars per taxpayer may be even as high as 1600 per household. You can read an article by newsday.com to get more specifics about it.

In any event I have mixed emotions about this. As a Libertarian I believe that all income tax is theft in the first place and I really can’t argue with the government giving back money they should have never taken in the first place. However, in this instance while not totally opposed (I just can’t oppose less tax no matter how it comes) I have sever very big concerns/issues with this plan.

• Right now everyone is worried about the 2008 election. So even Mr. and Mrs. raise taxes (Barak and Hillary) are behind this massive retroactive tax rebate. Make no mistake this is buying votes by both sides of the isle.

• True conservatives are always saying lower taxes are good for the economy and liberals always say that is wrong. Yet now that we are in deep shit everyone agrees cutting taxes makes the economy better? All this means is they all know all the time that low taxes are good and simply keep up the graduated income tax as a way to distract us all with “class warfare”.

• In most instances I don’t see cutting taxes as “spending” yet in this case it is pure reckless spending. Why? How? Simple, no one in congress is talking about cutting any expenditures to fund this rebate. In other words they are still going to spend all the money they were going to spend and GET THIS our country is OUT OF MONEY. So where will we get the billions to fund this rebate? Well the fed will fire up the presses and just print more money at least symbolically. Honestly though our government will borrow it from foreign governments and increase out debt. In other words you kids get to pay back you debt on your 800 bucks with interest and will have to do so with a dollar that is weaker in the world market every day.

• This package is a very short term fix. The whole theory is most people will “blow” their money and dump it in the economy and that will beef up spending for a bit and put more money into the economy and the rising tide will then float all boats. The theory is sound most people will blow it (instead of saving or paying on debt) and it will make it “better” but our “boat” has big holes in it. Make sense? This move won’t reduce US debt, reduce toxic consumer debt, fix the housing market or reduce our massive spending deficit.

So how could this plan actually work? You only have to change the spending equation on the side of the government to make it work very well. Check this way out,

1. Require the government to give back at least the money they plan to right now.
2. Require that they also cut 2 dollars in spending for every dollar returned to tax payers

That’s it! That would “stimulate the economy”! Our nation is not in trouble because our people spend to little, it is in trouble because the government takes too much of our money and then spends far more then even what they steal from us. Fix that problem, yes cut taxes but cut spending by 2 dollars for every dollar you refund to us.

What does the sub prime melt down mean and who gets the blame

Right now all we seem to hear about in any economic news is the subprime meltdown and how it is responsible for everything. Now the sub prime meltdown is bad but it is also misunderstood in both cause and effect. Let’s look briefly at both sides

The Cause - Everyone wants to blame the lenders for this. To me they get say 20-40% of the blame at most, sure they were stupid and sure it is biting them in the ass right now, as it should but they are not the real ones to blame. Our nation is so fixated on passing the buck and not actually blaming the person who is guilty our grandparents may not recognize our nation if they were with us today.

So who should get the blame for taking rapidly accelerating ARMs, hybrid mortgage loans and borrowing to the absolute limits of their budgets? Doesn’t really take a genius to figure it out does it? The people that took out mortgages that were too high or had bad terms are to blame. That is your fellow Americans and or you yourself if you took out these loans. It is so ever loving easy to blame corporate America but in the end if you borrow money and can’t or don’t repay it the blame is on you, not the company that loaned you the money.

The Effect - The news about the subprime market makes me think of El Niño. Remember El Niño the weather pattern back in the 90s that we blamed for everything. To me that is the sub prime meltdown today. A stock goes down, blame the sub prime lenders. A company lays off workers blame the sub prime market. To many illegal aliens are crushing our educational and health care systems, blame it on the subprime market. Our nation has over spent and is in a 58 trillion dollar hole just for social security alone, blame it on….OK you get the point.

The reality is the subprime bust is bad, very bad but it is also being used as an excuse for other problems in the market. Even the lenders are probably more effected by toxic unsecured (credit card) debt then bad sub prime loans. Yet make no mistake lending institutions are going to loose an estimated 300-400 billion or more before the whole thing comes to an end. Some banks will get bought by other banks, some will flat out shut down and all and all this is going to be another reason for the coming recession or more accurately depression.

Yet when it hits don’t let the talking heads on the idiot box tell you it all because of the greedy sub prime lenders First they are taking a bath you would not believe right now and getting what they deserve, lost money and some going under. Next the real reason for our recession is the US Government is spending far more money then we have and has been for 35 years, the bills are coming due.

So what can you do about all this?

First I advise you to read my post from yesterday about the overall weakness in the economy and watch the video with Comptroller General David Walker to get some specific understanding of what our real problems are and to learn some ways you can protect your assets.

Second I recommend you visit MorCap Fund Advisors, LLC and read their excellent article on the subprime meltdown to better understand it and its’ impact our our economy.

Teaching kids to invest and think smart about money

I know a lot of adults that are doing what they can to teach kids about investing and saving money. The most common way is the good old fashioned piggy bank.  There is something to be said especially with younger children to putting some change in a piggy bank.  It is a good start but it is also quite limited.  With the good old pig you always can open him up and raid the savings and the savings lack any type of leverage.  You earn no interest and little Johnny’s or little Dorothy’s pennies end up worth less ever day, unless they are solid copper that is.

My view is it is important to have kids open their first bank account as soon as they are old enough to grasp the concept.  A Roth IRA with some monthly contributions should be set up by age 12 and money should be discussed from a positive outlook.  Don’t teach your children things like, “money is the root of all evil” as that is not the proverb anyway.

People that do well with money come from homes that discuss and value money.  Now of course you must teach ethics, family values and over all life lessons as well.  Your kids shouldn’t worry about money or believe it is the end all be all.  Yet they should understand it and its power, both good and bad and you should teach them the Building Wealth Philosophy as early as possible.

One of my favorite books for parents helping kids learn to invest is Rich Dad Poor Dad for Teens The Secrets About Money–That You Don’t Learn in School!  To me this book is an absolute must read.

One way or another make sure you are making things like money, avoiding toxic debt, savings and investing positive topics of discussion with your kids.  I am not saying your kiddos first words should be leverage and interest over mamma and dada but you get the point.

Building Wealth the Trump Way

As you know I am big on three big things; cutting costs, reducing debt and building wealth. The reality is you could simply call that entire formula building wealth as no wealth building formula excludes debt reduction or cutting expenditures. As a long time fan of Donald Trump I was therefore really excited when Donald Trump came out with a new book called, Wealth Building 101 so of course I picked up a copy right away.

Rather then a book by Trump this is a book by some of his personal advisers and a team of hand selected experts. The book was then edited by Trump to gain his final approval. What I really liked is that Wealth Building 101 is not the typical Trump book that is just focused on business owners or even just business people.  This book is full of advice that will help anyone build and preserve wealth even if they are just a routine employee that works hard and wants more for themselves and their families.  As books go I recommend this one highly.

A book and the comming recession or depression

I am a pretty upbeat guy so a lot of my friends ask why I am so sure that our economy is in the toilet. The answer is pretty damn simple! We are as a nation in debt way over our heads just at the consumer level, our government is trillions of dollars in debt with China along with a massive trade deficit and on top of that the mortgage and real estate markets are in the hole as well.

Yet my reasons are bigger then that! More because I am a student of history. I really suggest you read a book called The Forgotten Man to learn about how similar both our situation and our governments moronic reaction to it are to the years leading up to and during the great depression. This book is a fascinating and enlightening read.

It is very important for us to understand the history of our welfare state, how so many once proud Americans ended up on “the dole” because the coming problems may cause a worse knee jerk reaction. Always remember once the government creates a tax, a department or a program it never ever goes away. Check out The Forgotten Man today and plan well for the tough times to come.