Saturday, January 2, 2010

A Bit Of Business

Most of you don't know, but prior to becoming a full-time mom, I worked 8 years in the investment business; I was a "boring" Finance Major and get a thrill from math and numbers. Weird, huh? I admit it. As a result, I keep up with the state of the financial markets and political happenings (since political changes impact the economy greatly) regularly. I guess you could say I have made it a handy hobby. In addition, my husband (Chappy) works in the investment, our poor kids don't have a chance. (Big Smile) We are constantly talking economics and politics (drives them nuts!).

There is a projection I am concerned about and want to share for your information. I do not have a crystal ball, so take this information for what it is worth---it's free, afterall:

First, recall the government raises money by issuing treasury obligations.....debt. Last year, we issued 2 trillion in treasury obligations. The current projection for 2010 is close to 2.5 trillion. Unfortunately for the U.S., foreign investors are getting tired of our low rates. (The current 10 year treasury is trading in the 3% range). To attract investors, and counteract our rising deficit, rates must increase.

What does this mean to you???
Real estate rates are based on the 10 year treasury. If rates increase from 3% to the 5% range, as speculated, the 30 year mortgage rates will go from the current 5% range to 7%....and possibly 8%. Wow, how long has it been since we have seen rates that high? Some project the rate jump may happen by mid-year. This is a big deal since most Americans list their biggest investment as their home.

If this is the future, it would be a good idea to refinance home loans and lock in the current lower rates. Also, we should make sure we are living in homes we can afford, paying off credit cards, avoiding taking on additional debt, and preparing for what might be to come by educating ourselves on current financial/political changes.

Assume for a moment that rates increase and cause the housing market to sharply plummet (sound familiar?)causing a double dip recesssion. Possibly, the government would be forced to decrease real estate mortgage rates once again to fuel the housing market .....OR, would they? What about the foreign investors who are demanding higher rates? uh-oh. See what a mess this is fast becoming?

Another problem is INFLATION. It is coming. Whenever spending gets out of control, INFLATION is right around the corner. Rising unemployment appears to be conflicting with, possibly holding off, inflation at the moment, but for how long? I would guess not too much longer. If we have inflation, the dollar's value decreases. Hence, what you can buy today is MORE than what you will be able to purchase with the same amount of cash in the future. If you have cash, you might consider buying hard assets such as real estate, especially since there are some VERY good buys right now in real estate/property due to foreclosures and short sells.

To sum up, uncertainty is ahead. I would advise everyone to make it your business to be aware of what is going on in our nation and how it is affecting our economy and you. If it seems too difficult to comprehend, go out and purchase the "Uncle Eric" books from your local bookstore.....the first book in the series is called: "Whatever Happened To Penny Candy". The "Uncle Eric" books is a series of books that teaches Economics 101 on a level anyone can understand. I have used the books to successfully teach our children about the economy at home.

Please do not hear me cheering for the Republican Party or the Democratic Party. I don't see this as a partisan issue at all. Sadly, through the years, both parties have failed their constituents miserably by using their elected power/control to make decisions that have too often been politically motivated instead of prudent for the future of our nation.

Please consider this information and feel free to comment with your thoughts on the subject. We may disagree on some points stated, but I am certain we can all agree spending money we do not have when we are already burdened by a tremendous deficit is not good. Read the following verse and open your heart to hear how the scripture speaks to you and your family.....then pray continually:

"And all these blessings shall come on thee, and overtake thee, if thou shalt hearken unto the voice of the Lord they God. Blessed shalt thou be in the city, and blessed shalt thou be in the field. Blessed shall be the fruit of thy body, and the fruit of the ground, and the fruit of they cattle, the increase of thy kine, and the flocks of thy sheep. Blessed shall be thy basket and thy store. Blessed shalt thou be when thou comest in and blessed shalt thou be when thou goest out. The Lord shall cause thine enemies that rise up against thee to be smitten before thy face: they shall come out against thee one way, and flee before thee seven ways. The Lord shall command the blessing upon thee in thy storehouses, and in all that thou settest thine hand unto; and He shall bless thee in the land which the Lord thy God giveth thee. And the Lord shall make thee plenteous in goods, in the fruit of they body, and in the fruit of thy cattle, and in the fruit of thy ground, in the land which the Lord sware unto thy fathers to give thee. The Lord shall open unto thee His good treasure, the heaven to give the rain unto thy land in His season, and to bless all the work of thine hand: and thou shalt lend unto many nations, and thou shalt not borrow."
Deut. 28: 2-8, 11, 12

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