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September 30, 2008

What Would the $700 US Bailout plan have done to our economy? What are US Politicians doing Now About the Economy and How Will it Fffect Foreclosures?

Below is a freely syndicated article from ezinearticles.com that expresses the concern of the author about the US bailout plan, which didn’t pass as we all now know, and led to the biggest stock market overall drop since the great depression yesterday.

Barack Obama and John McCain are supporting a plan that some house representatives are pushing, the plan to raise FDIC bank insurance from 100,000 dollars to 250,000 dollars to ensure confidence with bank account holders. This is just one of the scenarios playing out currently.

After you read the article below, it’s no wonder why the $700 dollar US bailout plan didn’t get passed. The question remains, What will the US government do to prevent another great depression? We all know that the economy effects all aspects of business including foreclosures. What does the future have in store?

The US Bank Bailout Plan is Full of DangersI am very worried about the bank bailout plan being passed by Congress. It posed the risk of lowering the value of the dollar, busting the national debt, and may not even work. At the same time there are alternatives.

Because of this $700 billion plus bailout bill over the next two years you can expect to see the value of the dollar drop, bonds drop, and gold skyrocket. The question we need to ask ourselves now is how bad will the inflation get? Will it turn into a hyperinflationary explosion that will totally destroy the value of the dollar and wipe out the savings of millions of Americans? Will the Fed one day say we must fight inflation by raising interest rates to 20% or beyond like the Fed did in 1980 or will the Fed let the value of the dollar literally go to zero. These are the end game scenarios we are now headed to. I don’t know what will happen in the end, but am going to be prepare myself for either possibility.

Now Bernanke and Paulson said that if there were plan was not enacted the economy would collapse. On Saturday I watched FOX News do a morning special on the crisis hosted by Neil Cavuto. Bush gave a radio address in support of the plan and Cavuto’s attitude seemed to be “Bush is a great leader. If we don’t do this plan there will a Great Depression. We must support Bush so trust him and obey.” Hank Paulson appeared on Sunday’s Meet the Press and in response to serious questions about the plan basically said this is a crisis and this is the only choice we have. The talking points seem to be we must accept this plan or we will have a depression.

Well none of this is true. There are alternatives to simply buying all of the bad debt off the balance sheets of all of these banks. Not every bank in the country is bankrupt, but the problem is that so many of the largest banks are saddled with bad debts – and losses that are hidden due to accounting tricks – that banks have ceased to lend to one another. That is the essence of a credit crisis. There is a problem of confidence, but this is not the only way to solve it.

A banking crisis happened in the beginning of the Great Depression, but Franklin Roosevelt and the government did nothing like what is being proposed today. They did not bail out the banks. What Roosevelt did was declare a banking holiday. He shut the banks down. for about a week Then he had officials go into all of the banks and look at their financials to determine which banks were truly bankrupt, which were fine, and which could be saved with a little bit of money. When the bank holiday ended the banks that were bankrupt did not open back up and the ones that were fine did.

Confidence was restored, because depositors now knew if their bank was fine or not – and it didn’t require putting the financial future of the entire country at risk to do this. It cost hardly a dime. Yes some people lost money. A lot of banks went under, but the dollar didn’t go to zero and future generations weren’t saddled with debts. The credit freeze ended in a week.

The same thing could be done now as an alternative. But this is not a plan that Goldman Sachs or Morgan Stanley would like. And the bankers own Bernanke, Paulson, and the Congressional leadership . They are the top contributors to both John McCain and Barak Obama. In a time in which there are alternatives to what is being done none are being presented to the American people. It is a lie to say the only choice we have is to do what Paulson and Bernanke propose or we will have a Great Depression.

What is being planned does not have to happen. And we can solve this crisis without bailing out all of the banks and putting the solvency of the entire country at risk. We need real leaders and not pretend leaders. We need people to speak out. We need you to pick up the phone and call your Congressmen. You need to right a letter to your local newspaper. You need to act right now.

Saturday the Treasury Secretary presented his plan to Congress and put a “fact sheet” up on his website. I haven’t heard anyone comment on this, but inside of the plan is a request for total immunity from lawsuits. The plan states, “Decisions by the secretary pursuant to the authority are non-reviewable … and may not be reviewed by any court of law or any administrative agency.”

This is absolutely outrageous, as it puts the Treasury Secretary above the law. Even the President can be taken before a court – remember Bill Clinton. Nixon had to be pardoned so he wouldn’t have to go to court. Our whole system of government is based on checks and balances, but this bill takes all of that away when it comes to the Treasury Secretary. It is a mad power grab. Who knows what measures he may propose or carry out in the future with these new powers?

This is the dangerous road that the government has now put us on. The politicians and Federal Reserve are willing to put the savings of every American at risk to protect the banks.

According to the Wall Street Journal, “the central bank is taking on a potentially big risk: If these assets fall in value or default, it may be on the hook, because the Fed cannot claim anything other than collateral as repayment. Officials say the assets are safe and the move is a temporary measure to provide liquidity to the market.”

In other words the Fed could totally destroy its balance sheet and bankrupt the country – the Fed could risk putting the US dollar into a hyperinflationary death spiral.

We need to think ahead to this possibility and that is something that I am going to spend time thinking about this week. In short though you want to protect yourself by being out of US dollars and in other assets that will appreciate in value if the dollar declines – of course that means gold, and physical gold if it is possible. It also means stocks, foreign currencies, and even real estate – although I wouldn’t be a buyer of real estate until real estate bottoms, perhaps next year. And as for stocks in a hyperinflationary environment investing in foreign stocks would be better than investing in US stocks. What you don’t want is cash in savings accounts and money market accounts. That type of money should be in physical metals. Even if the worst case scenario doesn’t happen you can surely bet there will be a continued decline in the dollar, rise in inflation, and increase in gold prices over the next two years. Position yourself for that and you will benefit no matter what happens.

I have had a very uneasy feeling about the financial markets the past few days. One I’ve never had before. The feeling isn’t a fear of it dropping, but that somehow a lot of integrity has been taken out of the markets.

It is almost like you can’t trust the markets now, because of what the government has done and how it has acted in the past week. I almost no longer feel comfortable investing in the United States. By setting up this bailout plan and suddenly banning short selling in bank stocks the government has shown to me that it can and will do anything for the banks, will change the rules of investing with no notice, and is incompetent. This is very disturbing.

Let’s just take the short selling restrictions on bank stocks for instance the SEC announced last week. It seems like short selling is being used as a convenient scapegoat to distract people from the real cause of the banking crisis – incompetent management at the banks that made stupid investment decisions, a government that encouraged their reckless behavior, and a SEC that allowed them to play games with their balance sheets for years. People warned that Fannie and Freddie were doing accounting games for years and the regulators sat there and did nothing.

The truth is short sellers play a positive role in the market, by providing liquidity. Short selling is used by options traders, market makers, and long/short funds to hedge positions. For instance a lot of times when you buy an option a floor trader or market maker will have a short position on the other side to cover the option they created and sold for you. By banning short selling the SEC blew a lot of these guys up and for some reason I doubt they’ll get a bailout. But not only that they will take a lot of liquidity away from the bank stocks by banning short sales.

If bank stocks end up dropping again after this rally there will be no shorts to buy to close their positions on the way down. Another drop in bank stocks would end up being faster and much sharper than the one we have just seen. By banning short selling the SEC has made the financial markets even more dangerous and has proven itself to be totally incompetent. It doesn’t appear to understand markets and doesn’t know what it is doing.

After making its short selling announcement the regulators then announced that it was going to almost double the margin requirements for gold futures contracts. In an instant they changed the rules in the gold game.

It makes me feel very uncomfortable about investing and trading in the US markets when the SEC does something like this. Who knows what rule changes could happen down the road. It is almost as if they are taking the integrity away from the stock market. I’m short US bonds right now, having entered the position right on the gap up of last week, but if bonds go into a death spiral who is to say that the SEC won’t ban short selling of bonds?

It is very difficult to make investment or trading decisions in this type of environment. It’s like trying to go to bat with a blind umpire.

In the future I plan on buying more stocks outside of the United States. Many of the stocks I buy are mining stocks that also trade in Canada. In the future when I buy them I am simply going to buy them directly off of the Canadian exchanges instead of on one the US exchanges – mainly because of the potential danger of a falling dollar. There are also ETF’s on exchanges outside of the US that track the S&P 500 and individual stock sectors. If you live outside of the US you would be better off buying them in the future than buying US ETF’s.

By owning foreign stocks if the dollar declines in value against the currency of that country then I will benefit from a decline in the dollar. If I were to simply keep buying everything in the US and then one day in the future the dollar went into a hyperinflationary spiral I would be screwed. It is important to begin to diversify out of US dollars and securities.

Now there are many brokers in the US that allow Americans to buy stocks directory from foreign exchanges. Etrade now has this capability. Penntrade and Mytrack allow their customers to buy from the Canadian exchanges, while Interactive Brokers gives access to virtually every single major world market. If your broker doesn’t allow you to do this then you may want to consider moving to one of these brokers. As for foreign money markets and CD’s you may want to check out Everbank.com. It may even be worth considering opening up a foreign brokerage account to protect yourself from the risk of one day having to face capital controls.

It is time to think about diversifying yourself out of the US dollar.

To read more articles like this about investing in the financial markets and stock trading sign up to the free WallStreetWindow gold stocks newsletter.

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September 26, 2008

What Effect Does Low Interest Rates Have on the Foreclosure and US Housing Market?

Filed under: Uncategorized — americanforeclosures @ 1:20 pm

Here’s a good syndicated Ezine article about the effeect of low interest rates on the US economy, also when and how it will affect the foreclosure/housing market.

Before this week’s latest interest rate cut and rumors of a further government mortgage bailout, housing and real estate prices had been projected to continue falling for the next year or more. It will probably be a few more weeks before mortgage interest rates are affected (if they are affected at all), but one widely expected consequence of cheaper fed rates is that mortgages and other loans will become more affordable. If mortgage rates do decline, speculative buyers will see a clear opportunity to purchase real estate at deep discounts from last year’s high prices. Homeowners with variable rate mortgages such as ARMS may also use this opportunity to refinance into low fixed-rate mortgages.

As if to further encourage speculation, President Bush and members of Congress have spoken out repeatedly in support of government subsidies to bailout distressed mortgage brokers and home-owners. If such legislation passes with significant financial backing, investors will be encouraged by the implied security of future real estate purchases and the bill will keep the loan companies profitable and selling new loans. With risk removed by a government bailout, investors and landlords will be again encouraged to buy houses quickly while they are still under the bubble-market highs. If such demand spikes occur due to federal backing of the market, prices could rise fairly quickly between three months and nine months from now.

The primary risk involved with the interest rate cut is that investor demand for the U.S. Dollar will decrease and its value will continue to fall, perhaps at an accelerated rate. Stocks, commodities, and precious metals will continue to rise, as will the cost of living. The hopes of the Fed and Congress is that real estate prices and job creation will also rise. However, if house sales remain slow and if inflation causes business costs to rise faster than job creation, there is a serious risk of recession before the 2009 presidential inauguration.

In all, low interest rates may help home prices but it may not help consumers struggling to cope with higher general prices and expensive mortgages. Gas prices will most likely continue climbing as the dollar tests new lows against the Euro, and bio-fuel production is having a major effect on agricultural prices.

This article is written by John McDonald. More articles regarding real estate and market analysis can be found at his website.

September 24, 2008

What Happended to AIG and What Happens to Your Home Mortgage When Your Lender Goes Bankrupt/Fails?

Filed under: Uncategorized — americanforeclosures @ 7:32 pm

I’m glad that the U.S economy won’t be greatly hurt because the government is going to save AIG with a loan. Aside from this however, many people wonder what happens to a home owner’s mortgage once their lender does go bankrupt. Over 400 lenders in the U.S have gone bankrupt already. The answer is, the mortgage is passed onto another lender rather quickly. The new lender will take over the mortgage and can’t make any changes to it unless the original mortgage specifies that changes can be made. Read this article for more about AIG.

So Tell Me a Little Bit About AIG?

Why is the Federal Reserve working so hard to bail out AIG? Well, maybe you do not realize this, but AIG is a world-wide company, it is one of the largest companies on the planet. It insures nearly every building, airliner, ship, oil platform and re-insure lease agreements and deals around the World. They are a huge life-insurance company. They have a 10 Billion Dollar aircraft leasing business, they have the largest network of broker dealers and financial planners.

They are the ones who insure and re-insure in case of huge calamities, and have the ability to hold up entire economies if catastrophe strikes. They operate in over 100 companies, they even have insurance policies based on Sharia Law if you can believe that, and in China, it’s AIG or no one. See, how big it is? See why it’s so important to the world economies? If we allow AIG to go bust, the ripple effect will take out a huge number of companies.

They insured the deals behind Lehman Brothers and so many other investment banks. Can you imagine if all those policies simply stopped? No one would have insurance, no financial asset would be safe, every major company would have their financial credit rating downgraded. Our stock market would lose 2,000 pts and other world stock markets would simple collapse and trillions of dollars would evaporate in an instant.

The Japanese Stock Market was up along with other stock markets round the world as soon as news hit the wires that a deal to loan the company was reached. This loan will enable AIG to make good on all its obligations and insurance deals. AIG is not a company that is full of corruption, not even a little bit, it’s one the best companies on the planet in fact.

AIGs recent problems stemmed from exposure to runaway bubble games in the subprime lending fiasco, that took down some of the largest investment banks in the United States and still threatens regular banks in the US and Foreign Banks. AIG’s government backed “loan” is a god’s send to our trading partners right now and this move most likely saved the US economy from “certain death” in this Earthquake that rocked the financial world like a Hurricane the threatened to blow our house down. Think on this.

“Lance Winslow” – Lance Winslow’s Bio. If you have innovative thoughts and unique perspectives, come think with Lance; http://www.WorldThinkTank.net/.

September 22, 2008

Short Sales and Loan Modifications in Real Estate Foreclosures Explained. What Are Short Sales and Loan Modifications?

Filed under: Uncategorized — americanforeclosures @ 4:55 pm

A short sale happens when a lender such as a bank accepts a sale from a borrower or homeowner. This is usually the best option for home owners who know that they are going to lose their home. A Real Estate short sale enables the homeowner in trouble to “cut their losses.”

In order to meet the criteria for a short sale, it has to be proven that the market value of the homeowner’s house is comparatively below market value, the mortgage is close to or in default, and the short sale seller has to write a letter acknowledging that they are in hard times and explain why. The reason for your short seller status has to be a good one. You can’t just say “I don’t like my neighbors anymore.” The short seller’s assets will be checked in financial statements. If the short seller is found to have assets, then the seller may be required to pay back the difference after the sale, or not even become considered for the short sale at all.

The lender has to accept the short sale or else it will not occur. A buyer also has to buy the short sale in order for it to take place. After the short sale, the lender might be able to issue a 1099 form and demand that the difference be paid. However, many homeowners are now exempt from this because of the Mortgage Forgiveness Debt Relief Act of 2007. A homeowner who sells their home in a short sale will bear the consequences of having the sale show up on their credit report. Short sellers need to be careful because creditors may see the short sale as a “foreclosure,” and drop your FICO score the same amount as an actual foreclosure would.

Loan modifications occur when a lender modifies the loan so that the borrower is able to pay it. If a borrower has fallen behind on their loan, but thinks that they have a good chance of paying it back, then this is a good option for the borrower.

With foreclosures on the rise, and no slow down in sight in the near future, it’s important for homeowners to stay abreast on these issues and know what to do in case of crisis. If you’re a buyer looking to make a profit from short sales, you can visit www.americanforeclosures.com to get comprehensive pre-negotiated foreclosure short sales listings and information across the country in every state in the U.S.

Welcome to AmericanForeclosure’s Blog!

This blog is written and maintained by American Foreclosures based in Bergenfield New Jersey. We will continually provide you with the latest interesting foreclosure news, insights into the foreclosure industry, foreclosure tips, advice, and more. We provide you with the most up to date information about foreclosures available on the market. We are offering our comprehensive information about foreclosure listings for only a one time payment of 79 dollars. You don’t have to pay monthly and you can have in depth REO foreclosure information listings in the palm of your hand for this low price.  American Foreclosures offers valuable foreclosure information online. The listings include the foreclosed property address, property type, asking price, number of bedrooms, number of bathrooms and other details about the foreclosed property, contact information and photos.  Don’t spend money on websites that charge your credit card every month: spend money on your new property!  Order Now and start saving on foreclosure listings! 

September 1, 2008

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Filed under: Uncategorized — americanforeclosures @ 10:32 pm

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