Solution to Problems

Problem: Housing numbers still not showing a recovery


Problem: Employment numbers still not showing growth

Problem: Companies are still not meeting downgrading Street expectations

Problem: GDP is erratic

Problem: Credit still depleting



All problems that are now in the second year since Oct 2007’s financial crisis. We all know the problems, but very few viable solutions have been presented. You’ll hear President Obama today talk about the crisis, greedy bankers, political splits, a call for joint reform, healthcare is still a problem, deficit still out of control, people are still out of jobs, and the list will go on. All finger pointing with no active plans to SOLVE the problem. I am offering a solution instead of hearing about solutions that do not work.



CUT THE CAPITAL GAINS TAX!



Yes that is right, if you cut the capital gains tax, it would induce a massive capital injection into US companies, which would give them capital to hire the unemployed, innovate, which will increase earnings, which then will offset the tax cut, due to corporations will pay higher tax dollars on higher revenue. Spending will increase because people will have more discretionary income due to more job creation. GDP will increase, there will be more of a balance in trade and will allow the government to BUY back debt which will decrease the deficit. This will increase confidence in the market place, and will allow people who are waiting for catalyst to buy homes get off the sideline and allow builders to build and inventory to be reduced, all because of a cut in investment tax rates.



This should have been done from the get go. Instead of all this hybrid stiff you see today. This would have put more money in peoples pockets directly and indirectly and none of this finger pointing and demonizing banks would occur. This is a viable solution to our great Nation’s economy. Pass it on!

Ronald Reagan just rolled over

What just was announced today, sounds were heard of Ronald Reagan rolling over in the grave. Today President Obama announced a Financial Distress Fee to the largest banks that have over $50B in assets to cover a $110B shortfall from the TARP bailout. All the blame has been cast on these firms , and they are getting penalized again for the use of taxpayer money. These banks have already paid back the funds plus interest and had to buy back warrants. All this resulted in the Fed making over $45B in profits. Let's all remember the banks were forced to take these funds, and what happened with AIG, GMAC, GM, and Chrysler? Banks have already been hit with a FDIC fee increase of 15 basis points on insured deposits. Once again this administration has taken this country into socialism and the heavy hand of the government is playing with people's minds. They are going to ride this bailout train till it crashes, but come November the polls will tell who will be pushed around and who does the pushing. Virginia and NJ have already made their statements heard, MA may be next with the running of Scott Brown. It is ironic as well, these large financial institutions were largely responsible for putting Obama in office with their large contributions. I wonder if Jamie Dimon (CEO of JP Morgan) and Lloyd Blankfein (CEO of Goldman Sachs) want their money back?

Complacency in the market

The theme this year has been so far the lack of volatility in the market place. The VIX has traded down to 19 mo lows and is breaking inter-day lows consistently. Does this mean the coast is clear and we have nothing else to worry about? With a new global economy, I don’t think so! There are Dubai like crisis potentials all over the place. Who is currently holding back that they are on the brink of severe loss or overnight shut down, whether it be a company or country. This newly phrased term so commonly used in markets today such as cautiously optimistic are being utilized by major players suggests to me that the artificially inflated markets have room to move downward. What will happen once Big Government bailouts start retreating out? The crutch we have now are not permanent implants. This administration is also set on overseeing innovation and free markets, which limit profits. The steep yield curve right now will have to start coming back which means lesser profits for lenders, and higher rates in the future. If we think demand for lending is limited now, wait till rates start heading upward, then again profits are affected. My opinion is VIX is not pricing in these factors, and we have become way too complacent.

Major changes hit lenders

To say the mortgage industry has changed is an understatement. Words of RESPA and Hud are dancing in the heads of all lenders currently. RESPA has enacted a major change in the way mortgages are applied for. Notably is the good faith estimates. The simple one page report with a summary of numbers and bottom line figures, are no longer in existence. A one page easy to understand document has turned into a 3 page survey that shows no bottom line to the consumer and is really a doctorial of things that could be shown by a numerical summation. It has caused much frustration throughout the industry. Also the process of loans has differed. A lender must now show a borrower upfront this 3 page good faith estimate and must receive a “intent to continue” before 10 days or your loan will be withdrawn. Rate locks cannot occur unless this intent to continue is issued by the borrower. Also make note for potential home purchasers is that a firm pre-approval that Realtors covet will no longer be issued, only pre-qualification notices can be issued to write contracts. This could have an effect on competitive contracts and offers. We all must adjust to new rules, but as much as lenders need to adjust, the public needs to be just as educated on the changes, which in my opinion is just not happening.