Stock and Money

Congratulations to the Super Bowl Champion New Orleans Saints, the City and its fans. It was a terrific game and it's nice to see the city of New Orleans celebrate, after going through a period of hard times. And the Halftime Show put on by The Who, reminded us that father time is relentless and takes it toll.

Stocks have fallen sharply the past three weeks with the Dow losing 700 points along the way, which has helped to keep the interest rates steady. But if Stocks are are showing some positive technical signs of a turnaround and potential rebound higher. This would be a negative for Mortgage rate. This would be what everyone would be fearing the rise of rates!

On Wednesday, Fed Chairman Ben Bernanke is scheduled to testify before the House Financial Services Committee to discuss the Fed's plan to withdraw emergency stimulus from the economy - including the $1.25T Mortgage backed Security purchase program. do you think releasing this extra money is a good idea for the country or should we leave thing alone to see if the country can make it on its own with out any more pumping of cash.

Positive Not Negative

I dont know about you, but for me this has been a very long week, by Tuesday I was hoping it was Friday.

My office has been busy and so its been a bit crazy. What I have noticed this week here In Tampa is that things are going to get better. As you all know we have been hit pretty hard, our prices here have dropped over 25%, my home has lost 50% of its Value in just 18 months! and so yes its been bad.

But my fellow Americans I do see a light at the end of the tunnel.

I know we all watch the news, "new homes fell by 10%" "existing homes sales fell by 10%" "this is the worst its been in the last 25 years", well you know what, I AGREE, but enough with the bad news.

how about some good news! how about the fact that now our median price here in Tampa is $140,000 from the $245,000 two years ago, and now first time buyers and people with lower income can BUY HOMES, how about the fact that homes are starting to move and we are having some closings, how about the fact that my subdvision sold 3 homes in just this past week. I know its bad out there, and I know that people are going through very hard times, I get it! but I think that we should also share some good news with people so that they can start to feel confident again and start buying homes. I might be off base on this one, but I think its time to search for some good news in all this negative press, or we will never get buyers out to buy homes.

I am sure we will hear about the Market tanking today by over 200 points, how about the fact that it was at 8000 points a few months ago, I think we need to start seeing the positive in the negative.

My daughters 2nd grade report card had 5 A's and one C should I look at the negative or should I praise her for all her "A"s

Enough with negative press :

How about the fact that interest rates are the lowest they have been in years!!!! thats positive news.

How about the fact that our country DID NOT just go through a devasting earthquake like Hati just did.

We can look for the positive always!

Stop the Negative Press

I dont know about you, but for me this has been a very long week, by Tuesday I was hoping it was Friday. My RE/MAX office moved locations and so its been a bit crazy. What I have noticed this week here In Tampa is that things are going to get better. As you all know we have been hit pretty hard, our prices here have dropped over 25%, my home has lost 30% of its Value in just 18 months! and so yes its been bad. But my fellow Americans I do see a light at the end of the tunnel, I know we all watch the news, "new homes fell by 10%" "existing homes sales fell by 10%" "this is the worst its been in the last 25 years", well you know what, I AGREE, but enough with the bad news, how about some good news! how about the fact that now our median price here in Tampa is $140,000 from the $245,000 a year ago, and now first time buyers and people with lower income can BUY HOMES, how about the fact that homes are starting to move and we are having some closings, how about the fact that my subdvision sold 3 homes in just this past week. I know its bad out there, and I know that people are going through very hard times, I get it! but I think that we should also share some good news with people so that they can start to feel confident again and start buying homes. I might be off base on this one, but I think its time to search for some good news in all this negative press, or we will never get buyers out to buy homes.

Ok, so let me get on the bandwagon of the 75 billion dollars being spent to save our houseing market. Many opponenets to this bill are saying that we are rewarding bad behaivior and that we should not be bailing out people that have been iresponsible and negligent. Well here is my two cents on it for what its worth, while I do agree that there have been a few negligent and careless folks out there, we also have hard working people who for one were taken advantage off by there mortgage broker on these payoption ARMS, number two we have people out there that have lost there jobs not through any fault of there own but because our economy is in crisis right now, number three, we have people that purchased homes on the high end of the Market ( like myself) and then the floor caved in and we lost our value. I could go on and on, folks all these examples plus many more came through no fault of the individula but through the fault of greety brokers, greety banks, and if I must say some greety realtors, now we are all paying the price, and something has to be done about it and I believe our president took a step forward in helping these homeowners. If we can help automakers who for years have been careless, if we can help banks who for years have been greedy, if we can continue to pay CEO's who have been worthless, then come on folks we can aford to help the average Joe who is dying out there.

The Holiday's

All year I have been writing about mortgages, and real estate, and the economy. Well I thought I would change my ways just for this month, it is a special month isn't it? This is the month where we treat each other nicer, where we think about the homeless, where we think about what we did or didnt do this year, its the month where we are more patient with people.

My thoughts are as follow, yes that is all fine and dandy and we should continue to do these thing, actually we should try to do these things all year round instead of waiting for December.

Ok to my thoughts, this year I have read articles and seen actions pass in which people at work places, schools, airports etc. are not being allowed to celebrate Christmas as they want to.

Just becuase it insults some one else or it has to do with religion. Let me ask your opinion, why is this happening, are we now going to change the word Christmas to december 25th is gift day. Lets get something clear here!! this holiday came about for one reason and one reason ONLY, to celebrate the birth of our savior Jesus Christ, hence the word "CHRISTmas". I can continue to ramble on but I think I have made my point, and to end my point of view here is my suggestion

anyone that is against Christmas, calling it christmas, or anyother silly idealogy, lets CANCELL THE HOLIDAY AND MAKE IT only for Christians and people that believe in christ and christmas everyone else get your asses to work, dont ask for time off, and december 25th for you will be just another day!!!

The 'Mark to Market' Accounting Rule:What it is and why it is important to you now!
The financial crisis we are in today was not caused by mortgages or housing, although they were both catalysts. The real reason was an accounting rule called "Mark to Market" (also known as FASB 157).

Few people have a strong grasp of this rule, and even those who do have a tough time explaining it on air due to time restrictions. So let's take a few minutes to break it down, so you can have the inside track on this very important concept and understand why it represents some great opportunities.

Why does 'Mark to Market' exist?

Let's go back to the stock market crash, which occurred between 2000 and 2002. With the S&P down 49% and the NASDAQ down 71%, many people lost much of their life savings and they were very angry.

Companies like Enron and Arthur Andersen were able to find ways to make their books look more attractive, which was reflected in an artificially inflated stock price

Both the public and Congress had a call for more transparency in business and hastened the passage of "Mark to Market" accounting.

This is the notion that all assets should be valued as if they were sold on a daily basis. Under the letter of the law, failure to do this conservatively can now result in jail time.

So what's the problem?

Before we get into what this means for banks, let me make a quick analogy using a scenario that should make perfect sense to you my clients.

Let's imagine that you own a house in a neighborhood where all of the houses are priced at around $300,000. Unfortunately, your neighbor, who owns his home free and clear, falls ill and needs emergency cash quickly. Because he is under duress, he must sell the home for $200,000 in order to get the cash he needs right away, even though the home is worth considerably more.

Now would this mean that your home is now worth the same $200,000 that your neighbor sold his for? Of course not, because you are not forced to sell under duress. It just means that your new neighbor got a great deal.

However, if you were a publicly traded company and had to abide by Mark to Market account rules, you and the rest of your neighbors would now have to say, by law, that your home was worth only $200,000 - not the $300,000 you would get for it if you actually sold. So what's the big deal? Read on.

Let's say we decide to start a bank . . . call it XYZ Bank. We raise $2 Million to open our doors. Remember that our capital account is $2 Million. Banksmake money by taking in deposits and paying low rates of interest to those depositors (maybe throw in a toaster too). We then take that money and make loans with it at higher rates. We keep the difference.

So, we turn the $2 Million worth of deposits into $30 Million worth of loans. This puts our ratio of loans to capital (our Capital Ratio) at 15:1 ($15 Million in Loans to $1 Million in Capital). This level is acceptable, as long as we can shoulder some losses and recover.

Because we are very conservative here at XYZ Bank, the loans we make require a minimum down payment of 30%, a credit score of 800 or better (that's nearly an 850 which is perfect), proof of income and assets, a reserve of at least two years of mortgage payments (normal is two months) and income requirements that only allow 10% of monthly income to cover all expenses (normal is 40%).

We do this and our loans perform perfectly. We make lots of money. Nobody is paying late and our clients are sending us holiday cards. They love us . . . it's a party. You and I are celebrating as we see our stock price soar.

But real estate values decline and, even though all of our loans are paying perfectly, we must re-assess the loan portfolio to account for the decline in real estate values, which leaves us with less of an equity cushion. We had a minimum 30% down payment, which means the loans were 70% of the value of our assets - until we account for the decline in the market. Now, our position goes from 70% to 90%. That's riskier and, therefore, worth less than when our loans had a 70% safety position.

Our accountants tell us that we must "Mark to Market" or risk jail. They say our value is now reduced by $1 Million. Whoa!

We must take or write down this loss against our capital account. It is a paper loss - we don't write a check, we have no late payers, no defaults, no bad business decisions. Still, we must reflect this $1 Million paper loss in our Capital Account, which drops from a $2 Million to $1

does this make sense? more to come , stay tuned

Think the spike in regulation is just a fluke?
Think again. Moves to increase oversight
of financial and housing markets are just the start.
The era of big government is back...big-time.
Look at the bill that Congress just passed
to beef up the Consumer Product Safety Commission.
It gives the agency power to set tough new standards
for everything from toys to fax machines to pajamas.
Next year will see a much broader reg push,
one that gives Washington a far more active role.
Many states are also pressing ahead with new rules.
The shift is a backlash to the Bush years,
when regulators were reined in by the White House.
Democrats will lead the regulatory drive.
They are almost certain to have bigger majorities
in Congress after the Nov. elections (see page 3).
But McCain as well as Obama wants it.
Both see a need to set new standards on energy,
the environment and safety...and to curb excesses.
Obama, however, sees a bigger role for government.

Limits on emissions of carbon dioxide and other gases are a safe bet.
Expect a bill imposing a cap and trade system with pollution limits that are costly
for producers and users of coal, electricity, metals, chemicals, autos and airplanes.
Additional green rules are also likely. The Environmental Protection Agency
will get more staff for both research and enforcement. Democrats say Bush’s aides
squelched or watered down many rules, and they’ll want to take a fresh look at some.
Senate Democrats will demand promises from EPA nominees before confirming them.
Other probable areas: Labor. Democrats will push laws making it easier
for unions to organize. And they’ll insist on more enforcement of wage regulations.
Food and drugs. Recent controversies over unsafe drugs and foods
will lead to a beefed-up Food and Drug Administration. Congress will pass legislation
giving the agency more power to regulate advertising, order recalls and levy fines.
Workplace safety. Some Labor Department agencies will get the go-ahead
to give greater scrutiny to standards in use in several industries, especially mining,
building, chemical plants, oil refineries, food processing, logging and freight yards.
Companies that run afoul of rules can expect fines and even criminal penalties.
Human resources. Democrats, through either legislation or regulations,
will expand the Family and Medical Leave Act to cover adoptions and other events.

And more financial industry regulations are coming. Limits on speculation
in oil markets are possible if prices spike again. Plus increased regulation of banks,
insurance companies and stock markets is likely as a reaction to the credit crunch.
With the economy expected to grow 1.5% this year and next, businesses
and consumers stung by gas prices, real estate and credit woes must wonder:
Where is the growth coming from? Weakness seems to be nearly everywhere.
Exports, federal spending and rebate check shopping are feeding GDP gains.
The weak dollar helped boost exports by a bit more than 9% in the second quarter.
Federal spending...up nearly 7%. Consumer spending...a better than expected 1.5%.
What’s not rising is business spending on new equipment...down 3.4%.
One sweet note for everyone: Inflation is in check. Although energy
and food prices have soared, underlying inflation...measured using GDP figures
and the best available gauge of price pressures in the economy...rose just 2.1%
in the last quarter. That’s close to the Federal Reserve’s long-term goal of 2%.
When the Fed meets next, on Aug. 5, it will keep interest rates steady.
Monthly job losses should taper off into the fall, maybe even reverse,
with tiny monthly gains in employment. For the year...a net loss of 500,000.
Seeds of a recovery lie in easing oil prices, a trend we expect to continue.
By year-end, look for oil prices at about $110 a barrel. Come 2009...
averaging at or near the $100 mark, though there’ll be plenty of ups and downs.
That’ll take close to 40¢ a gallon off gasoline pump prices by late Dec.,
putting the national average at about $3.50. In 2009, we see a further decline
and an average for the year of roughly $3.40, 20¢ less than the average this year.
Figure on paying about 50¢ less for a gallon of diesel by New Year’s.
The 2009 yearly average should run near $4.15 a gallon, 15¢ below this year.
It’ll take longer for users of heating oil to enjoy any downward movement.
Retail customers will have to pony up about $4.50 a gallon by Dec. Next year,
however, the average for the year will be 15¢ a gallon or so lower than in 2008.
Consumers will put the savings into dining out, shopping and home repairs,
while firms will ponder adding workers and investing in new plants and equipment.

There’s no magic in the oil price decline: There are no shortages. And demand is softening.Oil producers are watching anxiously as individualsand firms permanently adopt energy saving measures.Drivers who converted to hybrid cars, for example,won’t return to gas-guzzling SUVs and pickup trucks.The drop in gasoline prices may spur a bit more driving,but not enough to return pump prices to previous peaks.