As we enter midway through the 4th quarter, the only good news is that the market has gone up. The problem is that it makes no sense outside of the government stimulus we had earlier in the year. One of our many responsibilities at fi-Plan Partners is to look behind the curtain of Oz and see how real the wizard is. Unfortunately, this upside in the market is artificial. It is not the beginning of a bull market. It is the midway point of a double dip recession. If you have been reading my blog on our website (see link at top of this article), you know that I continue to look for hope only to see dark clouds of danger.
There is an excellent chance that a second wave of mortgage defaults is in the immediate future. To understand this better, read Mac Frasier's Article "The Eye of the Storm" in this eNewsletter or if you want to discuss this, call me to learn more about the Alt-A Mortgages and Option-ARM Resets. We believe it will be difficult for people to refinance these mortgages. And, by the way, as Congress discusses healthcare, these same government leaders are overseeing FDIC, Federal Reserve, Fannie May and Freddie Mac, all of which are having major meltdowns. Also, two weeks ago, Bloomberg News service reported that, “Citigroup and J.P. Morgan Bank were hoarding cash as if another crisis is on the way.” Keep your eyes on the dollar. Prior to President Obama’s Arrival in China, Liu Ming Kang, the Chairman of the China Banking Regulatory Commission, stated, “The continuous depreciation in the dollar and the US government’s indication, that in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation.” Our translation is that if the dollar goes much lower, expect the Chinese to demand higher interest rates to strengthen the dollar. Could we see another market drop back down to levels we’ve seen before?
At fi-Plan Partners, we believe the possibilities are greater downward than upward. We will keep you updated on what we see. Let us know your thoughts or what you are seeing in your industry or community.
