Bricks and Mortar
There is so much talk, spin, fear and anticipation coming out of the “Big Bailout.”
Investors are buying call options on financials and banks. KB Homes, one of the nation’s largest homebuilders that just reported a 2nd quarter earnings of -$3.30 per share, saw its stock price up by 4.13% today following a recommendation by Jim Cramer. I have also read that Wall Street is looking to provide a new way around the short-sell ban, which according to CNBC.com, involves the use of derivatives. Oh yes, you know those creative “financial instruments” that Wall Street is so desperate to get rid of. Today, I also read that financial institutions, GSE’s and investors have a combined total of $11.3 trillion in outstanding residential mortgages, of which $1.15 trillion are non-performing or in process of foreclosure. So is $700 billion really going to be a magical “fix”?
Credit relief. Credit crisis. Credit crunch. Frozen credit. Credit rescue. Big bailout. Call it what you like, but here are some facts to consider.
In the past week, with all the talk of unclogging the frozen financial system, interest rates on the average 30-year mortgage increased from 5.78% to 6.09%, while the 5 year ARM increased by 30 bps as well. Employers cut an additional 88,736 jobs in August, which puts us on pace to lose over ONE MILLION jobs this year, of which, only one in six jobs lost have been in the financial sector. So where is the rescue and relief that everyone is talking about?
Personally, I remain partial to investing in bricks and mortar. Buy smart, buy low and invest for the long term. Avoid over-leveraging, say ”no” to all that easy money, and above all else, live within your means.
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Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor
very clear, factual, and to the point!