As we have seen over the past few weeks it is getting harder every day to forecast what will happen next in today’s economy. The government continues to put together and implement different ideas and plans in order to shore up confidence in Wall Street; however we haven’t seen many positive effects from these efforts yet. The DOW feels more and more like a bad roller coaster ride and the bond market has been reacting in ways not typical of a traditional market.
I wish I had a crystal ball and the ability to forecast exactly what will happen next. Since I do not have a crystal ball I will try my best to share with you my own opinion of what we are seeing and how this will all play out…
We all need to be patient! This is the greatest financial crisis we have dealt with since the Great Depression and it is not going to be fixed overnight. If the government pumps money into the banks on Tuesday, we cannot expect to see the credit markets open up and return to normalcy on Wednesday! Additionally I’m getting a little tired of the stock market reacting unexplainably to different earnings projections, projected index’s and statistics, and other weekly reports the stockbrokers salivate over. If the analysts making these projections are supposed to be experts in their individual fields, why are they always wrong? Just one time I would like to see a report saying; “the consumer pricing index numbers were issued earlier today, and the analysts were 100% correct with their forecast and the market reacted according to these expectations”. Too much of the trading in the market
today is being based off of emotion; we need to get back to the fundamentals.
Another reason the market is constantly dipping is due to the fact we are in the middle of a deflationary period. Yes, there are liquidity problems for short term credit and inflation is absolutely a risk with all the money the Federal Reserve continues to print. However, we cannot expect the cash injections of the government or private investing to really make a difference until we begin to feel confident in the values of our assets. Housing values are obviously dropping, but over the past few weeks we have seen many different commodities (oil, copper, wheat, corn) fall in value as well. Many investors are waiting for the marker to hit absolute bottom before they jump back in and inject their own contribution. Keep in mind we will not have a real good idea of asset values until we elect a new President. Whether it is McCain or Obama, both of them have very different ideas on ways to shore up asset values. Until we have a better understanding of who will be in office and which direction they wish to proceed there will be uncertainty and instability in
the markets and on Wall Street.
It is also important to remember the United States has created three trillion dollar financial crises over the past three decades. We had the Savings & Loan crisis in the late 80’s, the Tech Boom and Bust in the late 90’s, and now the Housing Crisis in 2008. Each time we were warned this one is a little different and gloom and doom trickled down throughout the nation. The financial market is cyclical and it will figure itself out, this one just might take a little more time due to the addition of complexity throughout the global marketplace. Again, be patient!
I understand being patient might not be an option for some people. Maybe you are already retired or closing in on retirement and are gravely concerned about your life savings. Instead of being patient, my advice is to be educated! That doesn’t mean stay glued to the financial news on the television, this might be the worst place to stay in touch with what is happening. Instead, who do you trust who can answer questions regarding your specific situation to your satisfaction? Is it your financial advisor, banker, mortgage banker, accountant, or a friend or family member? Speak with someone you trust who can help you by understanding what you are going through specifically, not an analyst on television firing off vague answers that will encompass a number of different scenarios. Knowledge is power and in today’s Information era we all need to take accountability for the information we use to help us with difficult decisions.
Real estate agents, we need to calm our clients down and help them understand there are loan programs out there to help them purchase a home or refinance their current mortgage. Right now long term credit is easily accessible in the market and acquiring a 30 year fixed rate loan is absolutely possible! What is the best way to keep our clients calm and help them make wise decisions? Stay educated! Take advantage of all the tools available to you in order to effectively communicate with your clients what is taking place in the market and how it affects them individually.
For me at Waterstone Mortgage, it is business as usual. Yeah, interest rates are a bit volatile and they have increased in the last week. Don’t worry; they will come back down in a bit. Once a little more certainty is back in the economy more investors will pull their money out of cash and put it back into stocks and bonds. Waterstone did not participate in the subprime market, due to this we are very attractive to our correspondent lending partners and we are not having any problems closing and funding loans for qualified borrowers. I have heard some absolute horror stories from real estate agents over the last couple of weeks regarding their client’s deals falling apart at the last minute. Always know you are welcome to call me if you have questions about loans you have in progress, or clients who need help obtaining financing. After all, taking care of our clients is the number one priority for all of us. The best way to succeed in today’s market is to stay educated and surround yourself with professionals who are capable of helping your clients in an erratic market.
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