Blogs, Bernanke, and Beckstrom

Thought I would start off today with a digest of links and info for your perusal. On mortgages, there are at least three blogs I can now recommend: Oakland Real Estate, Sacramento Real Estate (CA is ahead of the curve on these things), and especially a tiny-but-growing blog from Lansing, MI – The Pacesetter Mortgage Blog – and I want to especially call your attention to a great post David Porter wrote about mortgage prequals. We have added Dave’s blog to our blogroll, and recommend it to you.

There are reams of data coming in on Ben Bernanke, and as far as I can sort it out, nobody really knows what the guy’s going to do. Alert Reader Gordon sent us 2 analyses from the Wall Street Journal, but it’s on their subscription site, which you have to pay for. We don’t steal content, so we’ll just quote a couple of graphs and link you to the subscription site where you can get the whole story.

From Arthur Laffer (a fellow I respect): “Ben Bernanke, Bush 43's selection for Fed chairman, stands on the shoulders of giants (in Mr. Volcker's case, this is literally true). Mr. Bernanke was my first choice for the Fed chair and has all the traits needed to be great. He's got his Ph.D., is incredibly scholarly, and has lots of practical experience, having served a three-year stint as a member of the Board at the Fed itself and as chairman of the president's Council of Economic Advisers. But above and beyond his résumé, Ben Bernanke has the temperament to be the Fed chairman. Anyone who has ever heard him speak knows he is careful and deliberative, and not prone to panic.

I have never witnessed or even read about an economy that comes close to the excellence of the current U.S. economy. In spite of all the rhetoric to the contrary, it just doesn't get any better. We need a Fed chairman who understands the importance of not rocking the boat, who is stable, solid and sticks to basics. Ben Bernanke is the right person at the right time.”

That’s encouraging.

From Edward Chancellor (a fellow I don’t like much): “The White House's announcement of a replacement for Alan Greenspan as Fed chairman has been awaited with growing suspense. Yesterday's nomination of Ben Bernanke appears something of an anticlimax. The stock market rose slightly on the news. Yet if the current chairman of the Council of Economic Advisers is confirmed by the Senate and takes over in late January, the markets will have plenty of time to reassess this initial judgment.

The former Princeton professor is deemed to have adapted quickly to the ways of Washington and Wall Street. Mr. Bernanke is being sold as a safe pair of hands. According to President Bush, he "commands deep respect in the global financial community." His nominee, the president added, was "the right man to build on the record Alan Greenspan has established." The favorable reaction of the markets supports Mr. Bush's first claim, while his personal record suggests that a Bernanke-led Fed would represent a continuation of the Greenspan era.”
So maybe I ought to revise my opinion. But so far, I’m not going to. Laffer is one of the gurus of the Say’s Law Supply-Side Revolution, but his support for Bernanke is incompatible with Greenspan’s recent moves, assuming (as he does) that Bernanke will continue the Fed’s current course.

For the uninitiated, we here at the Group continue to believe that the economy is not doing very well and that continued rate hikes will lead to a rise in inflation and a recession in the broader economy. We believe that Greenspan ought to have chopped rates recently rather than raising them. We believe that the current enormous rise in short-term ARM product rates (the rate on some 3-year ARMs right now is higher than the 30-year fixed) is unnecessary and harmful and that a downturn in housing markets will lead to a recession as sure as God made little green apples.

We make these analyses largely for our investors, who are looking at long-term rates trying to forecast what to do with real-estate holdings. Currently, we can recommend only a couple of things – there are still some good deals to be had in the foreclosure/flip market, though those are harder to come by and require cash and patience, and there are profits to be had in new construction, especially in houses above $250,000. Other than that, buy a house, pay it down, get cash in hand and wait. If the recession comes, the market will be flooded with foreclosures and “distressed” properties that can be had for a song.

No matter the market, there’s money to be made somewhere.

And finally, we promised this some time ago but only now got around to posting it: we have a guest article by Geoff Beckstrom, one of our clients and a blogger we like. First half today, second half tomorrow. Enjoy.

My Investment Philosophy and Rules

I worked as a stockbroker and investment advisor for six years before leaving the industry completely disillusioned. You can read my blog (not updated daily, but usually 3 times a week) at www.gbfx.blogspot.com

The financial media much like the sports media and news media takes advantage of the fact that most people believe what they are told and do not investigate the facts themselves.

First the disclaimer – None of this article is a solicitation to purchase or sell any security. This article is written for educational and entertainment purposes only. You are responsible for any gain or loss received from any actions you take financially.

Please note that I am only throwing in small tidbits I’ve picked up over the last 10 or so years in this industry. If you are interested in learning more please contact me and I’d be happy to answer any further detailed questions.

Now my investment rules-

Rule #1 – The answer to EVERY investment question is – “it depends”. What that means is that every investor must find their own investment philosophy and strategy. I have had a number of investing clients who after earning 15-20% returns in a single month, take all their money away from my management after a month when they lost 5%. Other investors have stayed with me after losing over half of their money in a high risk trade and more than made all of it back over time. You need to know your own personal financial intelligence and emotional maturity before you go into any investment strategy.

Rule #2 – The SEC is NOT your friend and Mutual Funds are NOT your friend. These two are in bed together and their interest is NOT to make you money but to make themselves money and to keep you as ignorant as possible. I’m not anti-government and I’m not anti-mutual funds. If spending 4 or 5 hours to study a stock before making a purchase is too much work for you and if you’re not willing to pay for the services of an investment advisor then mutual funds are perfect for you, one step better than keeping your money in the bank. I’ve never owned a mutual fund, I will never own a mutual fund and I don’t recommend to any of my clients to own a mutual fund. I know millionaires who became such from real estate, from hard money loans, from day trading and from starting their own business and selling a product and/or service. I have never met anyone who became wealthy from owning mutual funds.

Rule #3 – “Bulls climb the stairs but Bears jump out the windows”. Bull markets are going up, bear markets are going down. Markets drop must faster than they rise. I have made much more money when things have dropped than when they are rising.

To be continued….