In my last post, I shared with my readers some soon-to-be-released research on the FDIC and its upcoming challenges. If you haven’t read it, you should.
In tonight’s reading I came across another significant fact worth sharing: According to the New York Times account, ” Fannie (Mae) and Freddie (Mac) now buy or guarantee almost two-thirds of all new mortgages. The Federal Housing Administration guarantees another 25 percent.”
Put another way, the Gov’t is financing 9 out of 10 new mortgages in the United States.
Hmmmm…….
With the S&P500 over 55% off its lows, one could say that the stock market has priced in a V-shaped economic recovery. Damn the torpedoes, baby!
But wait! How could this be? Is the recession really over?
Not so fast, partner!!
- We’ve got banks going broke, with more to come, and no money to lend in the meantime.
- The only reason that houses are selling at all is because the Gov’t is lending the money, plus giving 1st time buyers a free $8,000 for buying a house. (how else could houses sell with unemployment as high as it is?)
- And heck, if you bought a new car recently, you’d have received another $4500 as part of the cash for clunkers trade in program, also courtesy of Uncle Sam.
- Delinquency rates are home loans are still extremely high
- Oh, and did I mention there’s no jobs?
Seems to me that without all the Gov’t stimulus, GDP would be so far into the toilet, we’d be seeing the D-word instead of “The Great Recession”.
Despite this, the stock market is going no where but up. I don’t know about you, but I don’t see ANY part of this picture that says “sustainable economic recovery”.
What’s the point of this rant?
Do you honestly believe that decades of excess, speculation, and outright fiscal lunacy can honestly be undone in a year or two?
I don’t know about you, but I don’t buy it. If I was a betting man, I’d say how about a “snowball’s chance in hell?”
So what should you do if you are an investor? Same advice as yesterday:
- cut your living expenses to the bone
- raise as much cash as possible
- do as many seller financed purchases as possible (as seller financed deals are also the easiest to renegotiate if needed)
- focus on flipping short sales, as opposed to fixing & flipping REOs, because it can be done without the need to tie up any capital
Your comments are always welcome,
TRD
