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.
Filed under Business & Marketing | Comments (2)Trust Deed Investing a Creative Investment Strategy
Right now the mortgage industry seems to be in melt down but real estate investing has a proven track record of making great returns even during recessions, that is when properly leveraged. In short trust deed investing is basically when private investors loan money that has real estate offered as collateral against the loan. Trust Deed Investing is nothing new; banks and private individuals have been loaning money against hard assets like land and other real estate for centuries.
In essence trust deed investing is like taking the position of being the bank in a mortgage vs being the slep paying interest for 30 years.
I recently asked to review a website for Diamond Bay Investments who specialize in trust deed investing. They are currently advertising returns of 12%. Investments like these are not with out risks and you should of course consult with your financial advisers before investing with any company or investment.
That said trust deed investing has a high potential rate of return and it is protected by a hard asset (land, property, buildings) so it is worth considering. It is not a place I would advise anyone to put all their money but it is one underutilized investment option that is a great part of a long term balanced investment portfolio.
Filed under Wealth & Investing | Comment (0)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
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
Consider Northern Trust for Wealth Management
My primary goal here at this blog is to help the average person learn simple ways to build above average wealth. As you begin to build wealth the key is to make sure you have the right wealth management team. Northern Trust is a premier provider of banking, asset management and asset servicing to affluent families and individuals and leading institutions worldwide.
With a proven track record Norther Trust a company I can recommend with out any hesitation. They also offer some exception free financial resources. For more information visit their website and check out the Global Economic Research link. You work hard for your money and it should be hard at work for you. It should also be protected because as I have posted about before we have the potential to see a recession that could make 1978 look like the “good old days”.
Now I am no gloom and doom forecaster but it is more then probable right now that we are in for some tough times. Many entrepreneurs are used to going it alone, I have been guilty of it myself. Yet when it comes to investing, asset protection and preserving the future of your family’s future alone is a very bad choice. Rely on professionals and that is what you will find at Northern Trust Banking & Asset Management.
Filed under Wealth & Investing | Comment (0)What are you doing now that 2008 is here?
Don’t worry this isn’t one of my “get your financial butt in line” posts, well mostly not. I am just wondering what everyone is up to in general, like what you are watching on TV, etc. Personally I have been enjoying Celebrity Apprentice quite a bit. Check out this video showing what a snake that Omarosa is. Got to be one of the biggest sleezes known to man in my book. To me this is why so many people are looking to build a business of their own, to buy a business or just to find some way to be independently employed. I mean who really wants to deal with a corporate environment that has far more then its’ fare share of Omarosas.
I have also started out on a diet. Last year I elected to not go Elk hunting because honestly I was afraid I might die somewhere alone on the mountain. The last time I went I had a great but tough time. I came home with blistered and even bloody feet and was sore for a week. Back then old CostCutter was in much better shape. This year going out into the unforgiving wilderness alone seemed like a big risk. Since I am way to young to give up that type of life I am getting back in shape. Who knows, perhaps when I loose my weight I will come clean and say who I am.
Additionally I am breathing some new life into a few of my businesses with some creative ideas and looking to hire a few new creative and talented people. The search for talent is really tough right now, I just listened to this podcast on the shortage of talent in the market today and I have to really agree with the guest speaker. While real estate investing today seems to be a buyers market there is no question that in the talented and skilled employee market it is a sellers market. If you are good, have a proven track record and can deliver then today you call the shots. If you are in the market for a new position and are not finding a lot of opportunities I recommend you get in touch with a good executive recruiting firm.
On another note all together I really think the 2008 presidential race is off to an interesting spin. Ron Paul still seems to be shunned by the media despite basicly finishing in a three way tie with 10% of the vote while Rudy was at only 4%. Typical!
Today we focus on New Hampshire, I predict the following for the republicans.
1. Rudy does aweful and everyone says it doesn’t matter.
2. John McCain wins and his national numbers rock because people are lemmings.
3. Mitt Romney does OK and comes in second and they say it is over for him.
4. Ron Paul does far better then the 8% the polls say he can expect. Comes in third and gets ignored again.
Such is the stupidity of our media and the political process.
Moving on the the Democrats - Hillary has had a break down practically coming to tears because she was asked how her day was mostly because Barock Obama is now surging in New Hampshire and she is on track to loose again. Of course the news is making a huge deal of Barock’s massive support. His followers indeed love him, they laud his speeches and vision yet the news people can’t seem to find a single supporter that actually knows his position on any of the big issues. America, please wake up, support who you want but for the love of God know why you support them.
My personal view I think Hillary is a disaster for this country as our President, her health care plan, tax hikes and some other policies will only serve to make worse a recession that is flat out coming to hit us hard over the next few years. That said Barock is worse, he want to tax more, spend more and make government even bigger and more intrusive then Hillary. However he can speak very well, avoids the issues and is very likable. This is why Hillary is in trouble, even her supporters realize Barock is going to be harder for any Republican to beat and are picking the best candidate to win in November.
I personally think Hillary is unelectable and if she looses the primary (which I predict) Barock is probably a 2 to 1 favorite just in odds to win the presidency. In other words a Hillary loss in the primaries is bad for the republicans while her victory would be very good indeed for them.
My predictions for the Democrats in New Hampshire are as follows.
1. Barock wins by at least 10% of the vote and we hear all the liberal papers cheer how it is finally time, “for an African American president”. When the country has been “ready” for a long time and we are all really tired of being called racists in subversive ways by the communists running our press.
2. Hillary gets slammed, perhaps even damn near ties with Edwards. This is spun as the “end of Hillary by the right” and some how a “right wing conspiracy” or “anti women” thing by the left. The left leaning media will hold out all hope for Hillary and talk about how New Hampshire and Iowa “don’t really matter”. Of course they really don’t it is just that the media just spent the last 30 days convincing us how much they do indeed matter.
3. Edwards does ok in 3rd but the media talks about how that is “hope for his campaign” even though there are only four Democrats in the race. Idiots.
4. Bill Richards gets a clue and drops out.
So what are you up to in 2008? What do you think of our coming elections?
Filed under Politics | Comment (0)The case for investing in gold
Many financial advisers are not very keen on investing in gold because they claim it has a fairly poor record compared to let’s say the S&P Average or the Dow Jones. Indeed a case can be made for this but there is another lesser know case for gold that make you really want to look at putting at least some money in gold. The reality is that the Dow and just about any metric or fund or stock has at some point a 10 year period where it lost money or at least lost to inflation and against gold.
Gold has never gone down over any 10 year period in history except for the early 80s when gold along with silver and other metals were artificially manipulated by the Hunt Brothers and other groups. Smart investors did not buy during that period though, if they were really smart they sold off gold and bought in back in the mid 80s. Those investors did very well.
Now look I am certainly not advising you to put all of your money in gold or to take it all out of solid investments. I am also against any real heavy numismatic investments in gold coins. Yet to put 10-20% of a portfolio into gold or gold stocks or funds makes a lot of sense as a solid investment hedge. Gold has gone up quite a bit in the past five years so many investors are a bit skiddish about buying it at a precieved high. However there are a lot of factors in play right now that will most likely have a positive impact on Gold prices for a long time to come.
- The US Dollar continues to decline and the government seems to want it that way. To understand this factor you need to grasp that gold could stay level in the global market and still go up in dollars, simply because the dollar declines.
- The economies of China and India and other nations are putting more demand on gold as a consumer level commodity. As the middle class of these nations grow more demand for gold jewelry results in more demand for gold in the global market.
- Right now the demand for Gold is about 10% higher then the supply that is being produced.
All of these factors make gold an attractive alternative to conventional investments. Of course you should consult with your financial advisors before you buy, I am just saying have a look at gold as one way to protect yourself against what looks like a coming recession and an ever falling dollar.
Filed under Wealth & Investing | Comment (0)Your job is not secure
Let me be clear I don’t think you have a safe, secure job today if you work even say for the Post Office or even a State Government agency. I believe firmly with the toxicity of debt in both the consumer credit card market and the sub prime lending market a major recession is coming. We won’t die off, no one will jump from tall buildings on Wall Street and the dust bowel is not comming back but there also may no longer be “two chickens in ever pot”. Todays “chickens” are Plasma TVs and other do dads.
Right now there is over 1 Tillion Dollars in toxic debt in the consumer credit market, that is money that will NEVER get paid back. The American tax payer has had enough, we won’t bleed money any more. Social Security is getting to where you as a working member of society have you “own old person” to provide for, it will change and that will be good but short term it will hurt.
The dollar weakens almost daily now! Canada now has a stronger dollar then the US that has never happened. The weak dollar is supposed to help fix the multi trillion dollar trade deficit we have with the world, it does nothing of the sort. The biggest potential export markets for us are China and Japan and both artificially tie their currency to the dollar. When the dollar drops so does the Yen by an equal amount. All a weak dollar does is make your money worth less and less in the global market.
My point is this can’t all just stand as the house of cards it is today and there will come a time soon when some of the bills will have to be paid. When that happens there will not be enough money to pay it. At that point employers are going to feel it hard and tough decisions will have to be made. Your boss might love you but if it comes down to the company surviving and your employment he will have that hard talk with you about some measly severance package. Odds are in many instances he will then get to have the same talk with his boss and so on.
How bad will it be? I do not pretend to know but it will be worse then it is today, that I am sure of. My real point though is it doesn’t really matter does it how many people loose jobs? All that matters to you is if and when you loose yours! It can happen to the best of us, it happened to me and because I live by the things I teach and write about it just wasn’t that big of an issue.
My point is you need to live as though you are currently in the hight of summer. You must buget and make spending choices with the view that you are right now at the peak of your earnings, you must plan for a big decline that can come at any time. This does not mean that you live in fear only that you live free from illusions.
If right now this second you or your spouse lost a job and were unable to replace it quickly how long would your last before you started to go negative on paying your bills. How long till you lost your house or got evicted from your apartment? The average American could scarcely make it 30-60 days! Many are but one or two paychecks from bankruptcy!
How do people get in this position? The belief that a paycheck is an entitlement that’s how. It amazes me how entitled employees tend to be in relation to their employers. Just look at the auto and airline unions, they keep getting more and more from their employers but the problem is the airlines and the car makers no longer can pay the bills. They are putting their very security in jeopardy by always wanting more, more, more.
So what is the solution? - Here are ten things you should be doing starting yesterday.
First - Never see yourself as secure in your job, have a plan B. Always know which competitor or similar company would be best for you to go work for. Cultivate relationships within said company, don’t act like you are ready to switch if you are not but be on the radar.
Second - Build a big network of contacts in your line of work, I don’t care if it is packing boxes or running companies as a CEO. Build network of people around you that can help you if you ever need a new job.
Third - Live below your means! Nothing is more important, make sure you buy less house then you can afford. Buy a cheaper to own and maintain and fuel car that you really have to settle for. In short never buy what you can afford today, buy what you should still be able to afford with far less then you have.
Fourth - If you deep in debt get out now! If have home equity and large credit card debt refinance your house and pay off the cards, then cut them to pieces.
Five - Buy and own a home! Renting has a place but as soon as you can afford to own a home the right way do it. Buy smart, pay less then the house is worth, find a deal, there are always deals. Know this variable rate mortgages are the devil, if you can’t afford the home with a fixed loan, you can’t afford the home!
Six - Build a second income, in other words own your own small business. You know how to do, make or advise on something better then most people. Find a way, anyway to make money with it. Do private consulting, build online income (this is what I do) hell just by blogging you can make 500-1000 dollars a month, (I will show you how in the future). Someway, somehow develop a second and even a third stream of income.
Seven - Save money outside of just your 401K, IRA, etc. The golden rule is get to where you save 10% of your income in an IRA or other tax deffered acocunt. That money is locked away until you retire though. I am all for 10% going to retirement as long as you can save say 15%. If today all you can afford to save is 10% put 5 into a long term locked away account and 5% where you can get to it with out penalty if you need it. Build an emergency fund of at least 90 days of your current income before you lower your savings contributions to liquid accounts.
Eight - Plan on being fired, your company being bought, your job being downsized, etc. It may never happen but plan on it. The very act of viewing such things as a possibility will make you smarter in your decisions every day. It will also make you more level headed and able to stand the hardship if it comes. Again do not live in fear, just follow the boy scout wisdom of “be prepared”.
Nine - Educate yourself in and outside of your current employment niche. When I lost a job about 8 years ago it became an opportunity! I went from Sales Management into online marketing and became very successful. The reason was simple in my sales career I educated myself on how to sell all the time. At the same time I taught myself how to market on and off line. I took my sales knowledge and put it to use online with my new skills. This was my “secondary income” a tiny small business that was making me about 500 dollars a month. I turned it into a new career because I had become a learning sponge. Today I own companies because of this education I gave myself. Be it online, via books, classes, seminars, I don’t care what invest both time and money in educating yourself.
Ten - Be the supreme commander of your own life and destiny. Every day think about how you can do better for yourself, your family and your employer. Your job IS NOT a right, you salary IS NOT an entitlement. Get that into your head right now this second. Would you take a raise if it was enough to damage your companies future? If you can answer that with a yes you should be fired! See yourself as an independent contractor, self employed no matter what your job is about. You should get paid as much as you can with in reason, many are underpaid but many people are also over paid. Work hard enough to be able to demand and expect more.
The key here all goes back to one thing though, no job is secure today. That false belief has put many people into massive debt and financial ruin along with a retirement in poverty. Sure this post was an ass kicking but most of America needs one from time to time.
Filed under Personal & Home | Comment (0)