Avoiding Predators. Even those with good intentions.

What do I mean by ” Predators ”  No doubt you have heard the mainstream media sources, ignorant and/or demagogic politicians speak regarding predatory lending practices.  Full disclosure:  I abhore such practices from anyone and in any industry.  Come this November, I will cross 31 years in my industry and in all honesty, I have only met  two persons I would classify in this category.  Call me naive, but the vast majority of the countless 100’s of people I have worked with, trained or affiliated with were by far good and decent people.   Before you scream, I too am most familiar with the term ” SubPrime Mortgage”.  This was in reality a seven year phenomena at most.  The industry has always had an outlet for the lesser qualified applicant and hard to place loan.  They are known as hard money loans.  These sources by there nature would charge premium rates for the added risk they assumed and to both the vulnerable as well as non-vulnerable, howver these clients had no other avenues and knew what they would receive.  In most cases, you would be hard pressed to finance more than 70% of value.  Not so risky from the lender’s perspective as we see today.  As an eyewitness to these events I can state that at the behest of Congress, Fed chairs, Lobbyists etc, in the late 90’s  it was determined as a business/social policy that every American had a right to a home and an attendant mortgage.  Thus was Subprime born.  By design they gave a decent rate for a two year period, presumably to allow for the cleaning of credit, job promotion, raise etc.  At this point the geniuses felt that a refinance could be attained.  As indeed it should as the client faced the potential adjustment into the 10-12% range rendering the property unaffordable.  I suppose a more compassionate writer might cry boo hoo, but as for yours truly, I recall my first note carried a 12.5% rate and I knew the details.  Time for us to grow up.  In fact I almost had to seek a new career as I watched rates trend upto the 20% range for a period.    The problem occured when the product developers failed to take history into account. Even your humble writer knows all to well that since home values have been monitored ( approx 100 years )  the average annual increase has floated between 3-5%.  You need not be a mathematician to know that the equity buildup to allow for the refinance two years hence would be impossible especially when you begin with 100% financing as in most of these cases. ”  Who cares said Dr. Greenspan.  I will keep the easy money flowing until I retire or until I am forced to raise rates.  Hopefully the debacle will occur on someone else’s watch.  Oops forgot I may have to hike rates.  I shall now lobby the Banks to offer 1% easy payment loans, thus insuring negative am and my successor will really be in the stew. Boy am I smart. So smart some lunatic publisher gave me $10 mil to write a book. ”  My friends we should be so lucky for being so inept.  Back to Dr. Greenspan.  ”  We will keep printing and dispensing money and more people will buy and values will rise forever.  The Banks and builders and of course realtors loved this.  We can always find someone on a street corner and get them into a home or put our family members in bigger homes.  No need to qualify them.  And best yet, we all get commissions.  As long as the easy money flowed, they were willing to put anyone into a home regardless of the capability of the person.   They, to their dismay, thought it would never end.  I guess they forgot  the ” Tulip Mania ” in Holland in the 17th century with bulbs selling for thousands in a bubble of bubbles.   I can only surmise, it was a form of ” Mob Psychology ” We all know the results.  The predators I name today are these same shameless sharks only now they promise to modify that stinker loan or help repair you credit.  My bottom line to you all, now more than ever, run fom these types,  seek hard for reputable professionals in any endeavor you may need and best to you all.


Inflation vs. Deflation? Some thoughts to consider.

Well my friends which is it and which one will be victorious?  In a perfect world, a small dose of inflation ie. 1.5% +- would be optimum.   To the unititiated on this subject , a stop at the Gas station cries out inflation quite loudly and painfully.  To those who purchased a home between 2004- 2007  the opposite is the case and the pain is also substantial.   Two competing forces leaving us all the worse for the wear.  Many pundits decry the Fed and Congress for the borrow/print/spending binge of the last three years.  A case can be made that it was both necessary and yet unnecessary.  I believe the latter to be the case as I have yet to see any visible evidence of any real success, excluding the reliquifying of the Banking system .  But the Banks now sit on an estimated two trillion dollars  on deposit with the Fed and are cautious to lend to say the least.  There are numerous reasons for this and we will comment at a later time.  So the point is the funds are out of circulation and in my opinion so long as they remain there, inflation of the magnitude I am hearing  ( Hyper ) seems unreasonable for now at least.  We are also faced with a real Unemployment rate in the area of 18% and of course so long as this remains, Wage Inflation , a key component in the inflation spiral is beyond tame.  Consider, attempt a request of a pay raise from your employer based on the current fuel price.  You get the point.   These two factors also have an impact on the Weaker Dollar indicator leading to inflation.  The bottom line here is many factors must align for this theory to turn to reality.  Yes I agree we have increased prices currently on many items and with the growing middle class in many former/still third world countries, this is to be expected.  The markets will ultimately balance these factors out with more supply to meet demand.  These countries still have a long way to go and we have the time to prepare to accomodate them.   I personally tend to fear the Deflation much more as it is a Monster to get under control.  Witness Japan for the past 20 years. Their bubble has been deflating for that long and they have applied far more ” stimulus ” than Uncle Sam and they have  only been able to  manage meagher growth. Believe me it is a Bear.  Many countries in Europe are in the same boat at this time and have very serious problems to unwind.  I believe as this progresses, we will see a far weaker Euro and a much stronger dollar.  This is good against the inflation fight but will not resove the deflation that the World is feeling.  True, private market demand is the best medicine to heal us all now.  In summation if you will allow me, herewith an albeit rudimentary and short  projection for the investment world.  My view is the China/European bubble will continue to deflate and with this I surmise a flight to the greenback and US Stocks and Bonds will see a mighty resurgence.   There are numerous caveats which I might employ as there are many land mines to pass along the way, but this is how I see it as of this moment.  Good life.

Thoughts on the lack of objectivity pertaining to our Media etc..

In light of the recents events surrounding the covert operation which ended the life of OBL, I have been witnessing much in the news that absolutely leaves me befuddled and bordering on distressed.   First of all, the major media no longer even feign at a pretense of objectivity as best as I can tell.  If I were less informed, I would have no choice but to conclude they work for the DNC.  The utter hypocrisy let alone the outright cheerleading is more than I can consume and still  maintain a modicum of sanity.  Do they not hear themselves or better still, have they forgotten what they said/reported when a President of a party with which they disagree was in command.  They apparently had a major problem under Bush with some tough questioning of the enemy.  Today we know this same tough questioning led to this ” capture/operation if you will ” ,  but evidently that is simply OK or better for them, simply to be forgotten so the cheering of the chosen one may proceed.  Secondly, our President and Attorney General decided to treat these types not as enemy combatants, but the same as US citizens with constitutional rights and given a day in court.  The ACLU and the Media demanded this and Obama and Holder concurred and demurred.   Well forgive me but what has changed that says these killers/combatants are no longer entitled to these rights and we have a green light to invade a sovereign nation and take them out?  Of course I will lose no sleep as to this result but the fawning by the press is more than I can stomach.  What utter and blind hypocrisy.  Or is it just blind ideology?  Likely both.   This new compliant media can best be described by me as an arm of the DNC.  I see no other alternative.  Thirdly, our media always requests, nay demands an apology if a competing voice makes a statement which upsets them or their chosen Pol.  I have heard only silence regarding the Left leaning Mike Malloy ( Radio Talker ) who in effect asked ” when will Seal Team 6 visit President Bush, who is reponsible for more death than OBL”. A death wish to a former President.  How charming for one so tolerant as he claims to be.   Has the earth’s Axis tilted or have I?  Obviously the vitriol will not go away anytime soon and the Nation is much the poorer for it.  As to the Media, shame on yourselves for the consumate Dereliction of  Duty you exhibit daily.  God Bless our Great Seal teams now and forever more.  We owe them a major debt.