Is the 'Bailout' Working?

Some evidence of the US Government's activity affecting our markets in positive ways:

Yesterday, a statement from FHFA Director James B. Lockhart:

“The Federal Reserve Board’s announcement that it will purchase debt of the Federal Home Loan Banks, Fannie Mae and Freddie Mac as well as the mortgage-backed securities (MBS) issued by Fannie Mae, Freddie Mac and Ginnie Mae is a very positive step. This $600 billion program should be a major boost to the mortgage and housing markets. By providing more liquidity to the market FHFA expects these actions to help reduce the large interest rate spreads between mortgages and Treasuries, resulting in lower mortgage rates over time, assisting homeowners and home purchasers.”

And then, a press release:

FHFA URGES SERVICERS TO TAKE PROMPT ACTION ON LOAN MODIFICATIONS

And then, the announcement of a new report: "Monthly Foreclosure Prevention Report" which promises to detail the efforts to slow down the flood of foreclosure activity.

STRONG moves are being made to stop foreclosures from happening in such large quantities, as the downward spiraling momentum they bring is causing rot within our nation's housing stock. Property inventory declined this month for the first time in months, quarters, over a year? Let's hope it is the beginning of a trend... There was a 39% decrease in foreclosures in California, month over month, largely due to the cancellations and the moratorium imposed by the government, which is being followed by most major lenders and loan servicers.

Decreasing inventory causes a shift in supply/demand equilibrium. Are we nearing a bottom? Is it time to be thinking about investing in real estate?

Some Painful Medicine from Peter Schiff

Some interesting retrospective views in this collection of Peter Schiff interviews on various financial circuits. Why post this? There's nothing valuable or encouraging listening to somebody who can look back and say "I told you so", but we really need to be careful when we listen to people who are in agreement on things that obviously want to believe. Listen to that voice that stands against the pack, and just give it a thought or two. Its very interesting to hear people laughing at Schiff as he made his forecasts.



I am optimistic, but cautious. And also realistic. We will hit a bottom, and we will recover. We are still adjusting to this environment, and there are some violent corrections going on that are going to damage a lot of people. A long bumpy road is ahead, but we'll get there.

401(k) Seizure? Time for a Dose of Reality

Another vein of panic running through the foundation of the economic and financial stability - whatever amount of it is left - is a concern over an impending seizure by the government of 401(k) balances to be used for some nationalized program used for bailout funds. The Wall Street Journal ran an editorial on Friday, allowing this widespread concern to proliferate.

You can disregard any fear over this - it ain't gonna happen.

According to George Miller (D-CA), who is chairman of house Committee on Education and Labor, this is nowhere near the intention or goal of Miller, or anybody else in congress.

Miller's hearings on 401(k) legislation have the following objectives:
1. Expose excess fees that Wall St middlemen take from workers accounts
2. Bring young and low wage workers into the system
3. Ensure that retirement accounts have diversified investment options with low fees
4. Ensure workers have access to reliable independent investment advice
5. Reduce vesting periods and portability of 401(k) accounts

Congressman Earl Pomeroy (D-FL), member of the House Ways and Means Committee, says he is against anything of the sort, and suggests that this concept was born out of political gaming, pushed by conservatives as a threat of what a Democratic leadership landscape might bring.

Speaker of the house, Nancy Pelosi, says "we would never even consider a proposal to seize retirement assets." in a statement issued to Ric Edelman, financial planner, when asked specifically about this topic.

One of the voices pushing this concept, Teresa Ghilarducci of New York's New School for Social Research, who is referenced in the Wall Street Journal piece, even claims in an interview with Edelman that her comments were taken way out of context. However sour on the concept of 401(k)s, she admits she was never suggesting that the government take the funds under control.

If you want more information about participating in 401(k) plans, please contact your plan administrator at work, or your financial planner. If you would like a referral to a financial planner, please contact me.