Arizona Cash Flow Club

Are You A Real Estate Investor Or A Speculator?

2009-01-04T22:23:00.000-08:00

Are you a Real Estate Investor or a Speculator?
If you follow these items you too can make moves with the best of them! (to view a Real Estate Investment analysis click copy-of-fmrrworksheet)

Determine Level of Liquidity - liquidity is the ability to quickly convert an investment into cash, without losing any of the principal that you’ve invested.

Determine Level of Marketability - marketability is the ability to convert an investment into cash quickly, at any price.

Determine the Impact of Leverage - leverage is the use of borrowed funds to finance a portion of the purchase price of an investment. The ratio of borrowed funds to the total purchase price is known as the loan-to-value (or LTV) ratio. A high LTV would result in high leverage, while a low LTV would result in low leverage.

Evaluate the Investment Management Issues:
1. Asset Management - this is where you monitor the financial performance of the investment and make changes as needed.
2. Property Management - involves the overall day-to-day operation of the property and the physical maintenance of the building or buildings.

Consider the Tax Impact of Your Investment Decisions: This includes such issues as:
1. Classifications of passive
2. Active and portfolio income and losses Capital gains taxes Income taxes
3. Tax Credits, Tax deductions, Tax Deferments

Evaluate and Reduce Investment Risk - risk is the possibility of losing either the principal invested and/or the potential income from the investment. We help you reduce investment risk in several ways
Risk Analysis - This is the process of evaluating alternative investments based on their level of risk
Shifting risk - structure your leases and rent agreements to shift the exposure of increasing costs to the tenants. This can include shifting the risk of rising interest rates, operating expenses or tax increases.

(The Biggie) Due diligence prior to purchasing an investment property - Due diligence is the process of examining a property and related documents such as appraisals, inspections, environ mental surveys and title work in order to reduce risk.

Make sure to Review the (copy-of-fmrrworksheet) Investment analysis. If you would like to receive a analysis specifci to your property, feel free to contact me.. Your Mortgage Planner, William Doom, CMPS. 1.888.271.3437 x7

FOMC Cuts Rates To Target Zero

2008-12-17T21:51:00.000-08:00

The Fed has taken Historic Action and has established a Target Range vs. a Flat Rate.
Target range for the federal funds rate of 0 to 1/4 percent.

(This should be interesting for Prime? Credit and Money is NOW Cheep. Didn’t we do this in 2001-2003?)

Given the overall decline in the U.S. Economy, the FED announced that it is determined to use every tool possible to pull the economy out of the current recession. The FED is sticking to its guns and will continue to purchase Government debt and MBS as one of the Monetary Policy Tools.

“over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant.”

Interest rates change constantly, but it is important to know that rates are cyclical. If rates are currently at historical lows then we know there is a strong probability rates will go up again, and vice versa. Certain economic indicators such as unemployment data, consumer price index, retail sales data, and consumer confidence all have an effect on mortgage interest rates. But the key factor to watch is the relationship between stocks and bonds.

As always if you are thinking of Refinancing or Purchasing feel free to contact me for your No Obligation Mortgage Plan William Doom, CMPS Your Mortgage Planner. (1.888.271.3437 x7)

Image Parsing the Fed Statement
The Wall Street Journal Online
December 16, 2008
http://online.wsj.com/internal/mdc/info-fedparse0812.htm

What Can You Do?

2008-12-15T12:23:00.000-08:00

As 2008 comes to a close, it’s difficult to find encouraging economic news. In a Harvard Business Review article about 12 years ago, the featured case study in which a methodology for making accurate market conditions was showcased. An oversimplification of the methodology is that the more people that are in agreement, the stronger the likelihood of accuracy.

I have developed the stomach to read through 18+ newspapers and business news sites every morning. There is a consistent prediction that there will be a honeymoon period after Obama takes office that will dissipate towards late summer when the aggregate loss of jobs, credit and wealth will cause an economic crisis that makes our current situation look pretty mild.

The United States is likely to undergo a financial collapse much like the Great Depression. Massive unemployment didn’t reach double digits when the market collapsed in 1929. Unemployment took until 1932, three years, to go from 3.2% to 25%. As the year progresses, there will likely be decreased access to goods, services and food. Some of this will be due to stores going out of business making purchasing more inconvenient. Some will be due to suppliers and transporters going under.

Most Americans will see radical cut backs in local services and social safety nets. Unemployment and food stamp programs will be overwhelmed. On November 27, 2008 headlines included the fact that the number of Americans on food stamps is poised to exceed 30 million for the first time this month, surpassing the historic high set in 2005 after Hurricane Katrina. Reduced tax revenues will eliminate funding for many state and local programs. The federal government will have to withdraw some of its commitments simply to keep people from starving in the streets.

In addition, climate change is accelerating. Ice caps are smaller than they have been in thousands of years. Methane being released by permafrost areas thawing are exacerbating the problem. Recent devastating floods in Brazil are being attributed to climate change. Significant increases in jelly fish populations and swarming world wide are attributed to climate change. In addition to occasional human deaths, increased jellyfish populations and swarming damages fish populations, fisheries, fish farms, marine mines, desalinization plants, ships, nuclear power plants, and business at beach tourist destinations. Climate change will mean severe unpredictable changes weather systems. We can expect to see increasing heat waves, record high temperatures, and heavy precipitation (floods and hurricanes).

As much as some might wish they could, mentally “refusing to participate in the recession” is tantamount to sticking your head in the sand. Running around like Chicken Little is no better. When you are panicked, you will not see opportunities and can not coherently plan and contingency plan.

When there is disruption there are always opportunities. Many in the real estate industry professionals have moved to mortgage mediation. At some point, that will dry up too. The number of people who are stopping making their mortgage payments so they can negotiate lower payments and lower principal is rising rapidly. Because many lenders are even now only issuing forebearances, homeowners end up in default again, typically less than a year. Lenders will be under exponentially more pressure as mortgage mediation gets more sophisticated and reductions in principal trigger more investor lawsuits. At some point the sheer number of foreclosures dragging down enough banks will hit a tipping point where people find it feasible to simply stop making mortgage payment knowing it may be years before they are evicted from their property.

One of the big differences between the Great Depression and our current systemic financial system failure is that the middle class is extremely well educated and resourceful. The massive layoffs will spur many to start their own businesses. Small businesses weather economic storms better because they can be more flexible in responding to changes in the market, thus having a better chance of remaining viable.

Those countries, including the United States, Great Britain, China, and India, that allowed themselves to be infected with economically deadly Affluenza are about to be cured in a most unpleasant way. One of the benefits of the implosion of our morally ill consumerism economy will be the resurgence of community. Humans are designed to need each other. Consumerism isolated us and gave us the illusion that anyone can make it on their own.

To quote Sharon Astyk “We will endure, sometimes even find ways of loving our new lives. There will be acts of remarkable courage and heroism, and acts of the most profound evil and selfishness. There will be enormous losses - but we will also discover that most of us are more than we think we are - can tolerate more and have more courage and compassion than we believe of ourselves”.

Jim O'Neill Is Insane

2008-12-02T07:06:00.000-08:00

In a November 27 London Financial Times article, Jim O'Neill, Chief Economist at Goldman Sachs said that "At its 2007 peak, US domestic consumption reached as much as 72 per cent of the country’s overall gross domestic product, which is more than 20 per cent of global GDP". He estimates that US domestic consumption is on its way down, forecasting 65% or less of GDP in a few years.

Jim O'Neill went on to recommend that "To avoid global [financial] pneumonia, what we need is shopping in Berlin, Frankfurt, Beijing, Shanghai, Delhi and Mumbai". Jim O'Neill's suggests that if China's policies continue to stimulate increased consumption and develop a formal social security system to "reduce China's huge savings rate", that if Indian policymakers boost infrastructure spending to escalating urbanization and unleash massive consumption, and that Germany celebrate the 20th anniversary of the fall of the Berlin wall by giving its people a surge in consumer spending it will help make up for the contraction in US consumption, stabilizing the world economy.

How can anyone active at ground zero of the biggest rip-off of the American people in history and an engineer in a global financial deleveraging disaster precipitated by reckless lending, careless borrowing and overconsumption tell other world governments to implement policies to keep money cheap and people borrowing so they too can financially implode be considered to be of sound mind? The man is irrational and arguably insane.

When Alan Greenspan suggested that Americans use exotic loan products to tap the equity in their homes in February 2003, the voice of America said "Whoo Hoo! Honey, our home equity is now an ATM. We can buy what ever we want and not have to save for it! It's like we're RICH!" It was addictive. It was competitive. The more you had, the more you wanted, and you could finance it all.

Consumption funding sources became so strained the American government issued the absurd 2008 income tax rebate in an effort to stimulate even more spending. Unfortunately the piper eventually gets paid. The rude awakening began on September 7 2008 when Fannie Mae and Freddie Mac went into receivership. The rude awakening turned into the nightmare of the onset of a systemic financial system failure, one that will take years to complete, on September 17, 2008 with the first requests for industry bailouts. And Americans have just barely begun to pay.

Excessive consumption has resulted in ecological devastation. The 2008 World Wildlife Fund Living Planet Report states that the world is heading for an ecological crisis far worse than the financial crisis due to excessive consumption. Humans are using an estimated 30% more resources than the world can replenish each year. The report predicts that by 2030, if nothing changes, mankind would need two planets to sustain its lifestyle. Since we don't have two planets, we have a problem.

Instead of listening to irrational and arguably insane people like Jim O'Neill, the world needs to closely examine the values and belief systems underpinning the American economic model that has failed so miserably. Excessive consumption is a moral illness. It is called affluenza; affluenza, n. a painful, contagious, socially transmitted condition of overload, debt, anxiety and waste resulting from the dogged pursuit of more.

Social pressures, advertising, culture, and government economic policies all work together to perpetuate excessive consumption. Calculated manipulative advertising and marketing campaigns, reinforced in all forms of media, are designed encourage wants and give the illusion that through consumption people can satisfy non-material wants, such as belonging and being valued. The result is a population with subjective feelings of happiness and satisfaction can be maintained only by continually ratcheting up the pleasures to be had by consuming.

This architected consumer society leads to the decline of the community as well as the isolation of the individual. The need for conspicuous consumption to demonstrate wealth, power and superiority becomes an emotional trap. Possessions and demonstrations of wealth becomes a mask to hide an inner vacuum of misery. Excessive consumption leads to people have a lower satisfaction with their lives, a greater tendency to compulsive spending, higher incidences of depression, higher incidences of self-medicating with mood-altering drugs and excessive alcohol consumption, higher incidences of overeating and obesity, and a prevalence of lower ethical standards.

Reducing excessive consumption does not necessarily mean a reduction in the standard of living. A home with sanitary running water, heating, and air conditioning is still a luxury for the majority of the world population. Having one with 7,500 square feet with packed walk-in closets, the latest in electronics, a wine cabinet, a boat/ATV/RV, a riding mower, and weekly maid service for an "upper middle class" family of 4 is absurd. How much do you need, really? And how up to your eyeballs in debt are you, really? At what point do you have enough so you aren't consumed with scratching and clawing for more?

Instead of irrational and arguably insane Jim O'Neill's recommendation spread affluenza to emerging economies, the developed economies need to lead the world in lowering consumption expectations. Yes, it will be a bitter pill to those who find their identity in materialism and those obsessed with greed. However, it's a price that must be paid, and it will be paid either now or later. Paying it now it is a small price to pay for providing a future to our children. Paying it later means we did not change our path and consequently destroyed the economy world-wide, consumed all natural resources, and destroyed the environment to where there is nothing left for our children.

Lowering consumption expectations will reduce the pressures of competing in the economy, ward off materialism and greed, facilitate a return to community, and help re-establish a healthy moral identity. Lowering consumption expectations will help shift cultural values to emphasizing who you are rather than what you own. Lowering consumption expectations to take back our communities is not just imperative culturally, is imperative to the future of our species, to the future of our world.

TALF – Term Asset Back Loan Facility

2008-11-25T20:05:00.000-08:00

Image via WikipediaHenry “Hank” Paulson announced today they are using Tarp money to target consumer loans (credit cards, car loans, Home Loans) immediately.

The Name of the entity “TALF” – Term Asset Back Loan Facility. Six Hundred Billion will be allocated to Fannie Mae, Freddie Mac, and Ginnie Mae. The auto, student, and small business loan markets will receive $200 Billion to help thaw the markets. This announcement and injection gave the FNMA 30-YR 6% a HUGE boost this morning pushing it up over 115pb.

Mortgage Securities appreciated the injection and in return we saw rates drop across the board. This could be the first leg in the credit thaw. The TALF announcement overshadowed the negative GDP decline of -.5%, which is result of constriction in consumer spending (the largest in 28 years). The drop in rates is a positive, this should be first step in credit availability and hopefully will eventually lead to easing guidelines which will make it easier for homeowners to purchase and refinance. The credit may be in the market, guidelines are still tight.

Phoenix Real Estate Foreclosure Stats

2008-11-18T10:41:00.000-08:00

Current Real Estate Stats for Phoenix Metro Area.

Great REO Foreclosure Site
www.REOPHXBlog.com

Information Provided by
Your Mortgage Planner

Loan Limits Jumbo vs. Conforming

2008-11-12T10:53:00.000-08:00

For the 4th consecutive year, the government has set the conforming mortgage loan size limit at $417,000.
A conforming mortgage is one that, quite literally, conforms to the mortgage guidelines set forth by Fannie Mae or Freddie Mac.

The 2009 conforming loan limits, as released by the government, are:

1-unit properties : $417,000
2-unit properties : $533,850
3-unit properties : $645,300
4-unit properties : $801,950

Loans in excess of conforming loan limits are more commonly called “jumbo”, or “super jumbo” home loans, depending on their size.

Out-sized mortgages like these are often more costly than their conforming-mortgage counterparts because jumbo loans are not guaranteed by the U.S. government like Fannie Mae loans are.

There are loan limit exceptions, however.

Left over from the Economic Stimulus Act of 2008, specific, “high-cost” areas around the country have their own conforming loan limits, not to exceed $625,500. There are 59 designated high-cost regions in the U.S., most of which are in California.

Loan limits are re-assigned each year, based on “typical” housing costs around the country. Since 1980, as home prices have increased, so have conforming loan limits. As home prices have fallen in recent years nationwide, however, the conforming loan limit has not.

For more up-to-date Mortgage and Real Estate visit Your Mortgage Planners Blog www.yourmortgageplannersblog.com

What is a Self-Directed IRA?

2008-10-26T15:31:00.000-07:00

A self-directed IRA is legally no different from any other IRA. The term “self-directed” simply indicates that you, the client, choose your IRA’s investments. Most brokerage houses and banks that offer “self-directed” IRAs limit clients to the scope of their own investment products. Non-Traditional Custodians do not need to impose the same restrictions. What this means for you is MORE CHOICES & MORE FLEXIBILITY for your retirement savings plan.

What can a Self-Directed IRA invest in?
The rules governing what an IRA CAN invest in are exclusive - not inclusive. That is, the rules only specify where you CANNOT invest. Therefore, there is a virtually unlimited array of possible investments that fall well within the permissible boundaries.

The IRS only defines the following assets as excluded (prohibited):
- Life insurance contracts (e.g., a life insurance policy on the life of the IRA owner);
- Collectibles (e.g., antique rugs, cars, stamps, furniture, etc.);
- Capital stock in an "S" corporation.

Examples of investments allowed (specialized assets) within self-directed IRAs
Self-directed IRAs offer you, the investor, tremendous flexibility in choosing investments for your retirement savings.

Investing in real estate through your self-directed IRA may be the key to turning those dreams into reality. While most self-directed custodians accommodate traditional investments such as mutual funds and stocks, specialized companies also allow clients to invest in all forms of real estate (e.g., raw land; rental properties; commercial properties; even real estate-related private entities, such as limited liability companies, that invest in real estate).
Additionally, investments called private placements, such as those associated with funding a startup company. Many people are shocked to learn that they can use the 401-k from a former employer to help start a new business.

Why hasn't the self-directed IRA business been publicized?
Because of their efficiency and profitability, traditional IRA providers control about 97% of the IRA industry. Their huge marketing budgets allow them to maintain a strong public presence, although recent guerilla marketing techniques through the national media are now giving much-needed exposure to the valuable self-directed service industry. The true self-directed industry has the remaining 3% - but rapidly growing - share of the IRA market.

Many feel that the cat has been let out of the bag for the IRA marketplace. The recent publicity surrounding possibilities within the self-directed industry has started a brush fire that will rapidly sweep across the U.S. A recent national publication suggested that all Americans should have 25% of their retirement savings in real estate. That would represent a growth of 1,150% over the current level of 2% of the $3.7 trillion in retirement savings that is currently in IRA assets. It is also estimated that overall, IRA assets will grow by as much as $2 trillion between 2004 and 2006 due to the retirement of the baby boomers. Clearly, the self-directed industry is on the rise. The time to join this growing movement is now.

For more information, please contact

Your Mortgage Planner - William Doom, CMPS.
www.MyEquityPro.com

The Pros and Cons Of Making A 401(k) Hardship Withdrawal

2008-10-03T12:08:00.000-07:00

As household budgets get pinched and credit markets tighten, a growing number of Americans are making “hardship withdrawals” from their 401(k) plans.

One major fund group cites a 15 percent increase in activity from this time last year for various reasons including staving off foreclosure and medical emergency.

However, 401(k) loans should only be made with careful consideration.
On the positive side, 401(k) loans don’t require a credit check. This is helpful feature for people deep in debt, and who may have missed a payment or two to their creditors. With no credit score requirement, a poor payment history won’t disqualify a plan participant.
In addition, most 401(k) loans can be arranged with just a phone call and a small stack of paperwork. There’s no “qualification process” like applying for a credit card or a mortgage. Money can be available, therefore, in as little as a day.

But there are negatives to 401(k) loans and the biggest one relates to taxation.
If you take a 401(k) loan and can’t repay according to its terms, the IRS taxes the loan as ordinary income and slaps on a 10 percent penalty if you’re under 59 1/2. That can be very costly for a lot of people.

But, even if you do repay the loan on time, it’s still gets expensive. This is because 401(k) loan repayments are subject to double-taxation.

The first taxation occurs when the loan is repaid because the payback is made with post-tax paycheck dollars. A person in the 25% tax bracket, for example, would need a $1,333 paycheck to repay a $1,000 loan — the missing $333 goes to taxes. And the second taxation occurs at retirement when the funds are finally withdrawn. The IRS taxes that money as ordinary income.

Now, this isn’t to say that taking a loan against your 401(k) is bad, it just may not be the best possible route for a person in trouble. Especially because of the costs. If you’re planning to withdraw from your 401(k) for hardship, be sure to talk with a qualified financial professional first.

If you’d like a referral to a trusted professional, call or email me anytime.

New Mortgage Guidelines Put Limits On Residential Real Estate Investors

2008-09-27T21:17:00.000-07:00

Before the Goverment aquired Fannie Mae it altered mortgage guidelines for real estate investors 9/05/2008. It was Fannie’s 22nd update this year.

The first part of the guideline change limits the number of properties owned by any one person.
Fannie Mae will now decline any mortgage application for a second home or investment property if the mortgage applicant already finances, or will finance, more than 4 properties in total.
The former guidelines allowed for 10.

There is a loophole, however. Fannie Mae will not count properties against the 4-property limit if they are held in the name of a corporation. This holds even if the real estate investor is the sole owner of said corporation.

Investors, therefore, should consider moving their properties into a corporate structure to avoid triggering Fannie Mae’s 4-property limit. Investors often take this step for liability and taxation reasons, but it’s now a good idea for mortgage approval reasons too.

The second part of the guideline change cannot be so easily avoided. Fannie Mae is assessing new, loan-to-value based loan fees on all investment property mortgages.

Loan-to-value less than 75 percent : 1.75% loan fee
Loan-to-value 75.01-80.00 percent : 3.00% loan fee
Loan-to-value 80.01-90.00 percent : 3.75% loan fee

These fees are mandatory and are in addition to any whatever other risk-based loan fees Fannie Mae may assess. Currently, those fees amount to a half-percent at minimum for real estate investors.

Since its Fannie/Freddie takeover, government officials have not addressed whether mortgage guidelines will be rolled back to “a looser time”. If they are, it would be a big deal for real estate investors because, as many are finding out, low rates don’t matter much if you can’t qualify for them.

If you’re currently in the market for an investment property (or two), consider that it may be cheaper and simpler to purchase over the near-term versus the long-term. And consider moving your existing properties into a corporate structure first.

If you are thinking of purchasing or refinancing an investment properties feel free to contact me William Doom, CMPS. For a FREE Mortgage Investment Analysis. Stay up to date on the Mortgage Market read my Blog http://www.yourmortgageplannersblog.com/

Yes Virigina, We Do Have To Bail It Out

2008-09-24T18:03:00.000-07:00

There has to be a bailout. It just needs to have accountability and legal recourse, as has been reflected in ongoing developments such as explicitly not rewarding (and preferably penalizing) those responsible for this melt down, not letting companies whose practices created this mess get bailed out without losing some ownership, and limiting executive pay for those receiving bailout money. This bailout will likely cost the taxpayers substantially more than $700 billion. Many current estimates are about 2 trillion dollars.

We have allowed blaming of the greedy lenders and dishonest borrowers to distract us from the real cause of this financial system crisis - the structured financial system and rating agencies on Wall Street. As was reported in the March 14, 2003 OFHEA report which I have cited before, Wall Street selling mortgage backed securities and creating derivatives with them (stripping out layers of risk) without visibility into risk that are rated if they are guaranteed by the Government, and as they have in the past, expecting to rely on a government bailout when it all comes crashing down, was cited as the primary concern for a potential systemic financial system failure. One where credit markets would crumble. We are there. Indymac and other banks that have failed have not failed because of bad assets. They have failed because of liquidity problems in the credit markets. They can't sell the loans they make on the secondary market so they can't make more loans. Can't make loans, out of business.

Kevin Hardin, Director at Mortgage Mediation Group illustrates how mortgage backed securities derivatives work with:

By third quarter of '06 we had some $12 Trillion in mortgage debt in this country and by middle of '07 we had some $40 Trillion in securitized contracts (MBS [mortgage backed securities], CDO [collateralized debt obligations] and CDO Squared) backed by those $12 Trillion in mortgages. Duh!! What kind of new math is this? Ok, you take $12 Trillion on mortgages and securitize them, OK. But then greed sets in and you take the subordinate pieces of these Rated (Moody's, Fitch and S&P) MBS's and then you re stack them up and re tranche them and re rate the newly formed senior pieces and print $20 Trillion in new paper! Yeah Greed! But Wait!, we are not done. Greed continues and we take the subordinate pieces of those CDO's and re stack, re tranche and re rate them and create CDO squared instruments and there goes another $10 Trillion plus. Gotta love that math. In order to feed this pipeline these structured finance guys went to the servicers and improved the pricing and told them Push Push Push new products. The servicers did not create these products. You can't sell Coke till they make Coke. The structured finance guys created the sub prime and non prime products i.e. extended Option Arms, I/O on Arms, No Doc, Stated Stated, Sub Prime 0 down 500 FICO, etc. The servicers said Yeah!, the originators said Yeah! and the mortgagors said Yeah!. Everyone goes down the road thinking, Hey!, property will continue to increase in value and these loans only constitute 15% of the total originations and currently we are only on a 6% default rate.

If you're feeling your eyes have glazed over, you're not alone. It is complex, but it can be understood. Really. Kevin also adds that the biggest victim of this derivatives fiasco is not the United States taxpayer. It is China, Asia, Middle East, and Europe who bought approximately 60% of the $40 billion of worthless derivatives created by Wall Street.

Deregulation does not work when moral hazards are present. A precipitating factor in the S&L crisis that lead to the Resolution Trust Corporation in the early 90s, which cost taxpayers $160 billion was misconduct by loan originators, propelled by greed. We did not learn from our mistake. Arizona, which finally passed legislation requiring licensing of all lenders in July 2008, was one of a handful of states where convicted felons flocked to commit more felonies in the lending arena. Where there is great risk for moral hazard, as there is in loan origination and complex financial instruments such as derivatives, there needs to be adequate regulation and oversight to ensure the welfare of the general public.

We have a double whammy - a financial system crisis and a national fiscal crisis. The national debt of more than $31,000 for every man, woman and child is rapidly becoming unmanageable on its own is now compounded with the expense of financial system crisis bailouts. One of the contributing factors to our national fiscal crisis is that Americans have become complacent. Many have come to expect our government to take care of us providing for us in old age, ensuring we have medical care, and ensuring against all natural disasters. We have been willing to be pacified by our elected officials telling us that the government owes us and will take care of us. That is not a democracy, that is socialism. We have committed to social security and Medicare payments, a.k.a. entitlements, that as baby boomers begin to retire en mass, we can not afford.

We have allowed our elected representatives to cater to the agenda of business and political lobbyists instead of listening to their constituents. This wasn't difficult because their constituents are by and large silent. Do you know who your representative is in the House and/or the Senate? Have you ever written about any issue? Do you just toss the periodic sugar coated, self serving reports they send from Capital Hill. We as citizens in a democracy have a responsibility to participate in our government. We have a responsibility to educate ourselves about the issues and let our elected representatives know our stand. As in of, for, and by the people.

We not only stopped holding our business and political leaders accountable, we have come to expect that they will be corrupt. The House of Representatives has introduced resolutions to impeach EVERY SINGLE President since Jimmy Carter. That's a generation that has not seen a President who hasn't been accused of criminal conduct! Americans need to make our most serious deficit, our leadership deficit, a national priority. We have forgotten that leadership is NOT about money and power. Leadership is about service and responsibility. We need to stop buying the bill of goods that our elected officials will go to Washington and bring home the bacon so we can be comfortable and not worry. We need to listen to those who tell the truth, especially when it is unpleasant. We need to call for leaders that be faithful to the best interests of the American people, not business and political lobbyists who typically line their campaign coffers.

We DO NOT have a train wrecked economy. It takes two consecutive quarters of negative GDP for a recession. Preliminary 2nd Quarter 2008 Real GDP released August 28 grew by 1.4%, more than what was estimated. We have only had one negative Real GDP quarter (4th Quarter 2007 down .9%) in the last year an a half. Unemployment rose from 5.6% to 6.1% in August, mostly in manufacturing and professional and business services (which would include most everything related to the real estate industry). Employment in mining, healthcare, and government grew. The Household Debt Service Ratio actually dropped in the 2nd Quarter 2008 to the lowest levels since 4th Quarter 2004. Although we have a Wall Street originated storm in our financial system and a fiscal crisis due to entitlements we can not pay, our economic fundamentals are still strong.

Our inflation is primarily driven by oil prices increases that are rippling through the economy. We've known that we needed to get off of our oil addiction since the oil embargo in the mid-70's. Every time there's been a significant increase in oil prices, it has rippled through the economy then settles. At some point it will be pain enough that efficient alternatives will emerge. This is an opportunity for innovation.

So what can you do?

Americans need to take responsibility and hold themselves accountable for their civic duty to educate themselves about issues and have their voice heard in their government via their elected representatives. We live in a democracy, not a socialism. As citizens, we are responsible for participating in our government.
Americans must hold our law enforcement agencies accountable to investigate, arrest and recover hundreds of millions of compensation to those that carried on the criminal acts that contributed to this meltdown, including market manipulation and crimes by ratings agencies. You do this by writing to your elected representatives in Washington here and stating your position.

Americans need to more sanely regulate and enforce existing regulation in financial markets to prevent another fiasco at the expense of the American taxpayers. You do this by writing to your elected representatives in Washington here and stating your position.

Americans need to hold their representatives accountable for finding a solution to the social security and medicare entitlement dilemma, stopping the pork barrel spending, and casting their vote according to the voice and best interest of their constituents instead of the political and business interests of the lobbyists. You do this by writing to your representatives in Washington, stating your position here, and monitoring the actions of your elected representatives.

Americans need to continue to reduce consumer debt and re-learn to pay themselves first (save). If your parents were survivors of the Depression (as was my father), you were taught this all your life.

As Americans, we need to wake up, take responsibility for our current condition, and take charge of our destiny. As Americans, we need to take our country back to navigate out of this horrendous financial mess, solve our entitlement problem, and insist regulations be put in place to prevent another Wall Street originated disaster. As Americans, we need to refuse to spend our time, energy, and brain cycles being paralyzed by economic fear. Instead we need to focus on using our collective creativity, talents, and resources to revive our economy with thrift, innovation and entrepreneurialism and to make our voice heard in our local and national governments.

Life is a series of great opportunities brilliantly disguised as impossible situations.

- Charles Swindall

All that is required for evil to prevail is for good men to do nothing.

- Albert Einstein

In God We Trust

March 14, 2003 Prognostication Comes True?

2008-09-16T11:57:00.000-07:00

Yesterday was a shock. Lehman Brothers bankrupt, Merrill bought out by Bank of America. The market plunge figuratively wiped out retirement accounts of many who had not moved to cash. According to Wall Street, AIG is such a big player in insuring risk for institutions around the world that its failure could undermine the global financial system. Not surprising, the world’s central banks rushed to inject cash into the American banking system to keep money markets world wide from seizing up as fears grow. Today they injected more with AIGs downgrade and liquidity problems. Today Goldman, viewed as the strongest of the Wall Street independents, is reporting weakness with revenues and profits plunging 70%. This morning the Fed ignored calls for a rate cut, driving markets lower. Stock market volatility is reported to be at a 5 year high.

The Office of Federal Housing Enterprise Oversight (OFHEO), which oversees Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, published a report on March 14, 2003 titled Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO. When you read through this and subsequent regular OFHEO Reports to Congress at www.OFHEO.gov, it doesn't take long to understand that our elected representatives have turned a deaf ear to the consistent OFHEO warnings about the risk of ongoing GSE activities to financial markets.

Are we facing a systemic worldwide financial system failure? Looks that way to me.

In God We Trust

What a Week!

2008-09-14T18:36:00.000-07:00

What a week this has been! Fannie Mae and Freddie Mac went into receivership, hurricane Ike slammed Texas, and Lehman Brothers looks like it will be the next investment bank to require a bailout.

While the American taxpayers are now guaranteeing 5 trillion in loans, the fact is that the default rate only about 1.96% (Freddie at .81% and Fannie at 1.15%), adding about 98 billion to the national debt. Hurricane Ike is expected to cost taxpayers about 25 billion. A Lehman Brothers bailout is expected to also run about 25 billion.

This takes our national debt from about 9.682 trillion to 9.830 trillion, or from 68% of our GDP to 69% of our GDP in just one week. The national debt to GDP graph http://zfacts.com/p/318.html shows that at 69% we are close, if not hitting a higher national debt to GDP ratio than we have had since about 1952 when we were paying off World War II.

Most don’t think the US is headed for a depression or worse, bankruptcy. Some think that bankruptcy would be the vehicle to replace the dollar with the Amero to give birth to the North American Union. Fiction or not, many of the predictions are just a little too accurate to not be just a tad scary.

I think we as Americans need to take back our country. We need to get a back bone and stop tolerating corrosive immorality and lawlessness in our government, in business, and in the media. We need to remember the values of our Founding Fathers. We need to take responsibility for ourselves, our communities, and our destinies.

In God We Trust.

What to Do About the Leadership Deficit

2008-09-06T19:46:00.000-07:00

According to Dave Walker, former Comptroller of the

United States

, the forth and most serious deficit in the

United States

is leadership. How did this happen?

Over the years we have been subconsciously conditioned to stop holding our leaders accountable. We, as a people, have come to expect our business and political leaders to be corrupt and immoral. What was once upon a time unthinkable has become status quo. How?

A resolution was introduced into the House of Representatives to impeach George W. Bush charging that the President manufactured a false case for the war, violated U.S. and international law to invade Iraq, failed to provide troops with proper equipment, falsified casualty reports for political purposes, that Bush illegally detained without charge both U.S. citizens and "foreign captives", violated numerous U.S. laws through the use of "signing statements" declaring his intention to do so, and failure to comply with congressional subpoenas.

Bill Clinton was impeached on December 19, 1998 by the House of Representatives on grounds of perjury to a grand jury. President Clinton was acquitted of the obstruction charge by a 50 to 50 vote in the Senate.

There was a Congressional resolution to impeach George H.W. Bush in 1991 charging violations of the Constitution, Federal law, and the U.N. Charter.

By the end of his term, 138 Ronald “catsup is a vegetable for school children” Reagan administration officials had been convicted, had been indicted, or had been the subject of official investigations for official misconduct and/or criminal violations. In terms of number of officials involved, the record of his administration was the worst ever. The Reagan Administration was also the first to have increased the national debt faster than growth of national income and was the Administration that shifted the bulk of the tax burden from the very wealthy to the middle class. In 1983 there was a resolution to impeach Reagan on charges of an illegal war against Nicaragua, unilaterally starting a war in Grenada, and abuse of power in the Iran arms scandal.

We have not had a President who has not had an impeachment resolution since Jimmy Carter! It has been 27 years since we have had a President with enough integrity not to be charged as a criminal. Good or bad, our nation’s President is a role model. What I don’t get is why Americans aren’t outraged.

Our moral identity has shift so far out of balance Americans have almost forgotten what we are supposed to, as human beings, hold up as a measure of acceptable conduct that ensures our health, wealth, and pursuit of happiness. Our moral identity, the standards by which we define a worthy and acceptable individual, has been corrupted by our leadership and the media we allow to penetrate our culture. Moral self-concepts emerge in young childhood and become self-conscious through middle childhood and into adolescence. In youth and young adulthood, the moral identity integrates and consolidates. None of my children, now 28, 26 and 23, have witnessed a presidency that has not been a daily front page Washington Post scandal. The moral identity embodiments I grew up with of Truth, Justice, and the American Way have give way to greed, glorification of violence, and sexual exploitation of men, women, and children.

The fact is that everyone stands under the moral obligation, including business and political leaders. We as a country have failed to maintain our own sense of accountability to civic duty. We have failed to rebuke those in our community who violate moral, ethical, and legal standards of conduct in a timely manner. We have failed to hold our business and political leaders accountable. If we want this country to remain a democracy, we need to seriously evaluate the strength of our own moral compass, be accountable to and exercise our civic duty, and most importantly, become truly outraged at the irresponsible, immoral, and illegal conduct of our business and political leaders.

In God We Trust

New Way to Fight Foreclosure

2008-07-20T18:30:00.000-07:00

There’s a new strategy for fighting foreclosure and people are winning. Despite all the hype about lenders wanting to help homeowners avoid foreclosure, most borrowers know that’s not the reality. Arizona Cash Flow Club is helping people get educated about how they can potentially force their lender to renegotiate loan terms.

During the lending boom most mortgages were sold. In the rush to turn these over as fast as possible many of the new lenders did not get the proper paperwork to show they own the note and mortgage. As a result, approximately 40% of lenders who are now moving to foreclose on homeowners don’t have the proper paperwork to prove they have a right to foreclose.

Arizona Cash Flow Club is providing the steps and template documents consumers facing foreclosure need to follow to ensure their lender can prove they have the right to foreclose on the www.ArizonaCashFlowClub.com website. This process is not intended to help people get their house for free. The goal is to delay the foreclosure and put pressure on the lender to negotiate. People are winning in court against lenders who can’t prove they own the note.