My New Blog

This week the markets did the happy dance when it appeared the frog had been kissed and turned back into the handsome, moneymaking prince of yesterday. New housing starts are up, resale housing is on the upswing, consumer spending increased slightly, and mortgage rates are near historic lows. A surprise increase in profits from Best Buy (because we cannot afford to go out anymore so we watch T.V and the plasmas are cheap, cheap, cheap) and ConAgra, the makers of Chef Boyardee, ( a weekly splurge of steak has been replaced with $1.50 canned pasta or fake pizza) got the markets hopping. The Dow Jones Average rallied up close to the 8,000 mark, a 20% increase since the 12 year low of March 9^th before retreating back downward. So what exactly is the Dow Jones Industrial Average? The U. S. stock market was formed in 1896 with 12 stocks representing the average of the buy-sell of all stocks. In 1928 it was increased to 30 stocks. Today, the 30 companies consist of such corporate monsters as Chase , Bank of America, General Motors, Exxon and Wal-Mart. The average in 1896 started at 40.94. Before the crash in 1929 it was 381.17, rising to 1,000 November 14, 1972. The last 14 years have demonstrated a startling increase with the DJIA reaching 5,000 in 1995 to over 10,000 in 1999. The high was in October 9, 2007 when it reached 14,164.53. The soothsayers are worried that this week’s jump is temporary. With all of the chaos in the financial sector they are praying that the market doesn’t croak. (Sorry, I couldn’t help myself)

FYI: Do you think you look good in stripes or pink boxers? You will find out if you decide to participate in the latest scam: Offering to help naïve first time home buyers purchase a home if they sign over their $8,000 tax rebate.

BY DIANE GERDES

What happens if a company contributes to the worst financial year in the history of the world? Why, give big, fat bonuses to your executives! AIG is standing by the “deserved” 170 million dollar bonuses since Christopher Dodd and Timothy Geithner unknowingly placed a loophole in the stimulus bill to allow for the substantial payments. Citibank will also be paying out bonuses next year from an agreement that was signed just days before the stimulus bill was passed. Why? Because, again, if you have the worst year on record, you pay huge bucks to retain the people that are not performing. In a true cartoon reaction the law makers ran back to the couch to pass yet another bill adding a 90% tax to any bonuses paid to employees that are recipients of the stimulus money. Our fearful leaders must have drunk a little too much Duff beer, since the new tax will be accessed on hard earned incentives effecting cashiers to bank managers. Somebody please call Homer and Bart to teach our legislators to read and get a little common sense.

Realtors and Lenders did the happy dance on Wednesday when the Fed announced they are going to spend upward to a trillion dollars to purchase mortgage securities and longer term treasury debt. The 10 year bond, the index that governs our 30 year fixed mortgages, had the biggest one day drop in its history. Lenders expected the interest rates to settle in the low 4’s. Instead, interest rates dropped for 45 minutes until they started to go back up. The big, bad banks are gobbling up the spread and not sharing with the American home buyers or home owners. With so many banks and lenders now out of business, mortgage rate hedgers at the institutions that are left, are pocketing the profits. Probably to pay their bonuses. D’oh!

BY DIANE GERDES

Wall Street is ending the week better than expected in spite of the not so perky economic news. The stock market made modest gains after a scary ride downwards. Tuesday’s auction for the treasury bonds was successful, so that should keep our interest rates low. The soothsayers were shocked, shocked that the notices of foreclosures increased nationwide in February with the new additions of Idaho, Georgia and Oregon rounding out the top 10. The major banks, Chase, Bank of America, Wells Fargo, and Citibank, all proclaimed that they expect to make a profit by the end of the year. Huh? How can they be in a profit position if the foreclosures are increasing? We shouldn’t worry our pretty little heads about the how’s and why’s of the banking industry. After all, really smart men are in control. These same men built a global house filled with pretend securities and hazy accounting. For the banks to receive TARP bailout funds from the Fed, they are required to disclose where the money is going, pare down executive bonuses, and agree to modify loans. Some of the banks are returning the funds because they do not want any strings attached. Since we can’t handle the truth, A.I. G., the insurance giant refuses to provide the details on their distribution of the 160 billion dollars of tax payer’s money that the Fed’s pumped into it to keep the company from toppling over and crushing the world’s battered financial system. Servicers are turning down home owners for loan modifications because the investor, who wants to stay anonymous, will not permit it. The terms and conditions of the agreements made between the banks and investors and our home financing can’t be that complicated. Give us the opportunity to communicate directly. Americans are not made of plastic; therefore the banks and corporations should not continue to manipulate us. We are allowing them to play make- believe with our country, our economy and our lives.

FYI: Thinking of changing careers? The movie box office is booming. Year to date the box is up nearly 20%. And that is without spending a week’s pay check on popcorn and a diet coke.

BY DIANE GERDES

Our great country’s legislators peaked over their Ivory Towers long enough to embrace President Obama’s one-size-fits-all foreclosure prevention loan modification and refinance program. Again, it was not a mandate, but a series of suggestions with guidelines and incentives for both servicers and borrowers. Vikram Pandit, CEO of Citigroup, stated that their company would comply: as long as it was okie dokey with their investors. Enhanced refinance guidelines for Fannie Mae and Freddie Mac loans that are current and not at risk for foreclosure, will allow only up to a 5% negative equity position. The architects of this program must have their heads in the clouds because this will not help many families that purchased after 2004 in Arizona, Michigan, Florida, California, and Nevada. They must have been too high to include the Jumbo Loans. Nor does the foreclosure prevention program have a provision for those that have lost their jobs. With unemployment at the highest level in 25 years, it seems that it would have been prudent to put in a 90 day house payment waiver if you could prove you were let go or escorted off your job site. The nice senators and congressman will go home to their elegant castles that they probably financed from a “friend of Angelo” loan at a much lower rate that is only offered to those that wield influence. It was disclosed yesterday that Franklin Raines, former head of Fannie Mae, received a mortgage with a discounted payment from Countrywide. He was quoted as saying he did not know he was receiving preferential treatment. If he was not aware of his low percentage rate, maybe that is why Fannie got into such trouble. He is probably one of those people that has not heard of the internet. Speaking of Countrywide, the former management team led by Angelo Mozilo’s right hand guy, Stanford Kurland, started their own company called Pennymac or Private National Mortgage Acceptance. They purchase beleaguered mortgages from banks that the FDIC has taken over for pennies on the dollar; then modify the loans with reduced interest rates and slashed principal. The may be bottom feeders, but at least they are down here with the rest of us.

FYI: Under the new law, qualifying families that purchase a home this year before December 1st can claim up to $8,000, or $4,000 for married individuals filing separately, on either their 2008 or 2009 tax returns.

If your first time home buyers close on their new home before April 15th; and they have already filed, they can amend their returns to receive their tax credit, now! If they haven't filed they can still claim their credit. Call your accountant for more details.

BY DIANE GERDES