Is Everything Going To Hell In A Hand Basket? Will Lassie Save Timmy? And Other Questions

Posted @ 3:05 pm - Filed under Cool Info

Are you gonna be able to get a loan with less than 30% down and only a 798 FICO score?

Is the stock market about to tank?

Is Mr. Bernanke, chairman of the Fed, finally ready to start cutting interest rates for its member banks?

Is this correction just getting started — or getting primed for the real free fall?

Are median prices about to bring back memories of 1988?

Will interest rates, as the mainstream media has been screaming from the mountain tops for over 5 years now, finally poised to go through the roof?

Will Lassie find Timmy in the abandoned mine shaft before he runs out of air?

Let’s take ‘em one at a time.

What about getting a real estate loan now?

I have never, ever, without exception advised any investor to buy property using 100% financing. My clients will tell you as much. That said — you can still do it. You wouldn’t think so, reading all the ‘end days’ reporting going on, but it’s true nevertheless. And there are still lenders reaching out to the inexperienced borrower.

Will a middle school teacher be able to get a stated loan (no income verification) showing a salary of $98,500? Come on now. It was stupid when they were doing it, and it would be stupid now. The difference between now and then? The lenders can’t look the other way, knowing they can sell the loan to the secondary market. Ain’t happenin’. Oh, and the borrowers aren’t jumping for joy any more either.

And that’s a good thing. We’re also weeding the wannabe investors out of the equation. Another good thing.

Is the stock market gonna be stalled for the next few years as we see the last 3,000 point run-up disappear?

From July of last year when the DOW was about 11,000 it’s gone pretty much vertical — hitting 14,000. It’s not done that for such a prolonged period before. The market was due for some profit taking. Duh. My crystal ball remains as cracked as yours. Force me to say which way this will go, and I’ll go out on a limb and say — way up. How ’bout another 2-5,000 points in the next 3-4 years? I’m betting it goes in that direction — but it’s still just an educated guess. The Wall Street dude I follow, Max Whitmore, has been calling these ups and downs for 40 years — and has been uncanny. A recent example is his call, in the middle of last April for the S & P to rise to 1520-40. There were many scoffers. It went to 1552 before it finally pulled back. Read what he has to say about the recent stock market activity and see if you don’t feel a little better.

How ’bout Mr. Bernanke? Is he gonna cut rates — finally?

My guess is as good as yours. However, the market has bet overwhelmingly he’s getting the cutting board out. In the last six weeks Fed Fund Futures have gone from 0 to 100 as quickly as you can watch it happen. Haven’t heard about this? You can read about it over here — empirical evidence that the market is betting — with cash — that the Fed Funds rate is gonna drop — more than once. Dan Green says on August 1st the probability of these cuts crossed the ‘100% chance’ line. At least that’s what traders are saying — in unison — with their own cash.

This also means, as is already evident, that the bond market (specifically the 10 year bond) will go up in price. This means a drop in yield — which we’re already seeing. Ultimately this results in lower mortgage rates — again, already in evidence. Maybe all the traders are getting wrong. It’s possible of course, but not likely. Remember, they’re betting real dollars from their own Levi’s.

What about the current correction in the real estate market? Long term, short term, what?

Nobody knows — and that’s a fact. Numbers all over the map are beginning to show a reduction of supply. (I’m sorry I misplaced the links for this gem, but that’s how it goes sometimes.) It could be a blip on the radar, or a real trend. The fact it’s being reported in multiple markets is at least somewhat encouraging. This is a wait and see topic. Still, with rates and prices dropping, buyers are apparently beginning to realize that ain’t a bad combination plate to order. Again — who knows?

I don’t.

I do know this: Every time something negative and big happens, we read all the predictions of worst case scenarios being just around the corner. You get all upset, then not much happens. But they got you to read it, or listen to it, didn’t they? Crying wolf should just about be transparent for the public by now, don’t you think? It’s like the internet site saying, “The two ways to absolutely lose weight — and keep it off — guaranteed monster breakthrough.” You excitedly click the link to see what they are and find…………..Eat better……..Exercise more.

Can we please start treating what the mainstream media puts out as the drama queen screaming for attention it is?

Are prices about to take us Back To The Future — reminding us of 1988?

It could happen. Highly unlikely, but it could happen. It would be a first, but it could happen. There’s never been a national real estate collapse of 30% or more in prices in American history — but it could happen. What’s highly likely? Flipping a coin will be just as reliable as anything I could say on the subject. Based on my experience, calling most of what’s about to happen, highly likely is farcical. We’ll all be geniuses though — in hindsight — after the fact.

If I thought prices were about to take that kind of tumble, I wouldn’t be budgeting six figures to go into Boise — before the end of this year. 10% of that money has already been spent. If prices dropped nationwide I’d be just as well off taking the hundred grand to Vegas and putting it all on black at the roulette wheel. I’m not a gamblin’ man — and I don’t think prices are gonna go down that much further. Only my opinion — nothing else. But I’m putting my money where my mouth is. There are builders there who want to give me some of their product as compensation — at today’s values. If they get serious, I’ll do it in a heartbeat.

Will interest rates finally go through the roof like the media’s been saying since…….what seems like a decade?

The current change in underwriting is being labeled as a credit crunch — fair enough. I refer you to the almost erie behavior by traders on Wall Street, mentioned above, who are emptying their pockets betting on the Mr. Bernanke lowering the Fed Fund Rate. 100% chance they say. They can all be wrong. Not likely, but it could happen. Inflation is low and this bodes well for future interest rates. Due to the recent mini correction in the stock market, the 10 year bond has dropped half a point. This is in the face of repeated warnings by many that the opposite was poised to happen. No wait, that’s wrong. There was an unseen loop on their ‘rates are going up’ tape.

Will Lassie find Timmy in time to save his life?

I know the answer to this one — guaranteed. Timmy will be found just before the last commercial and in time to be home while his parents (I loved his mom — June was hot.) tied everything up in a perfect story-ending bow. Lassie barked, Timmy hugged her, and you knew the show was over ’till next week.

And that’s the only question for which I have a definitive answer. The rest are merely educated guesses at best.

Bottom line? I’ve seen two worse times than what we’re living through now — at least so far — and when I say worse, I mean by orders of magnitude. In the early ’90’s I literally took a year off. It might as well of said, “Gone fishin” on my office door. I’m a realist, and from my experience, gut, and what other experts are pointing out, (using empirical evidence) their conclusions seem absolutely plausible.

Plausible? Yep — that’s why we call it an educated guess. And my guess is, we’re not going to hell in a hand basket any time soon. You’ll know when I do think that though — by the sign on my office door. I don’t plan on going fishing any time soon.

This entry was posted on Monday, August 6th, 2007 at 3:05 pm and is filed under Cool Info. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.