My New Blog

If there is a knock on your door today and you are not in the U.S. illegally, it may be the Feds to ask you a few questions about any dubious real estate transactions you may have been involved in between 2004 and 2007. In March “Operation Malicious Mortgage” produced 144 cases nationwide with approximately 400 individuals charged, including real estate developers, brokers, agents, appraisers, lenders, lawyers and so-called straw buyers. Also, 19 companies, including mortgage lenders, investment banks, hedge funds, credit-rating firms are being investigated. Three types of crimes were targeted: lending fraud, foreclosure rescue fraud and mortgage related schemes. The two party guys over at the now defunct Bear Stearns, known for their Vodka toasts when they knew the 1.8 billion dollars in funds were evaporating, are celebrating their first 24 hours after being arrested for various types of fraud. J. P. Morgan Chase bought the 80 year old firm for pennies on the dollar, with a little nudging from the Fed in May. Money Magazine voted Bear Stearns “The Most Admired Securities Firm” in 2005. They were admired for their “quality of management and business innovations”. The two funds the party guys managed were directly tied to the subprime market and affected various retirement and mutual funds from us everyday people. Maybe they should have tried tequila.

FYI: Do you think oil prices will come down? Last week a reader forwarded an interesting link on why oil prices cannot continue their upward hike. (Thank you, Ralph!) The link is as follows:http://moneynews.newsmax.com/david_frazier/frazier_oil_price_slide/2008/06/12/103910.html

Three years ago if any of the above went into a bar the banker would have gotten preferential treatment, paid the tab and taken everyone to the Ocean Club for dinner. Today, the banker, if he has a job,is probably in rehab. The oil rigger and the farmer are too busy to imbibe.

Bankers have been the cornerstone of the economies since the beginning of bartering or exchanging money for goods. Simple bartering morphed into the exchange for money for a home and exchanged again with investors, who exchanged it again and again. The jubilation of the stock market in April and May was slapped back down this week with the realization the mortgage crisis is far from over. The fear of the losses and the hesitation of investors to back mortgages have sent the stock market to its lowest ebb this year. Although many people are chattering about the Bank of America and Countrywide merger and wondering if Ken Lewis, President of Bank of America, has lost his mind or speculating that the Fed is doing a “behind the scenes” handshake, it is for the best. Countrywide’s demise would have had a disastrous, far reaching effect on our economy.

With oil prices continuing to climb it is forcing all of us to rethink our travel plans during the day. The internet has been a source for “mall shoppers” who do not want to make the car trip. More people are car pooling or using public transportation. Sales of scooters have surged. Those of us that are still driving (I drive because I do not look good in a helmet) need to pay attention to the small alternative vehicles that are sharing our roads.

Farmers in the United States are enjoying a change in status (if the fields can dry out to plant). North and South Dakota are quietly emerging as a force in food and oil. The once stagnate and in some areas, dying, economy is booming with the overwhelming need for food and oil. Technology in agriculture has been key in the development of food sources. Countries such as India, encouraged farming in the 1980’s but when there economy become dependant on the sciences, they overlooked the farmers and did not give them allocations or encouragement to utilize newer techniques and equipment. They are now scrambling to try to feed themselves. But if you are looking for cheap food…..grow it yourself.

FYI: The Arizona Senate, in a late night surprise, passed The Licensing Loan Originator Bill. Senate Bill 1020 states that loan originators must have 3 years of loan origination experience or pass a course before being licensed. The Department of Financial Institutions will require an exam with a passing grade. Janet needs to sign it, but she has already stated she is in favor of the bill. Effective date January, 2010. Stay tuned for more information.

Our annual vacation to San Diego and the beach in our SUV with the kids and dogs has been replaced with a sleepover near the pool. As you may remember our SUV is parked in the front yard keeping guard over our neighbor’s gnomes.

Why did the gas prices go up? There are several reasons. Economics 101 (yes, I slept through that class, too) - Supply and Demand: The global population has tripled over the past 72 years and growing by 75 million people per year with 60% of the world’s population residing in Asia. The economy in Asia has exploded and with success comes the need for bright shiny automobiles. Do you think the oil companies control the oil? We should have stayed awake. Governments control the oil. OPEC, consisting of Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela, controls half the world supply of oil. Russia is quickly getting their untapped reserves into production. See anyone there you would want to invite for your sleep over? Inflated oil prices, much like the housing boom in 2005 (stay with me on this) has a negative effect on the economy. We have experienced oil spikes in the past but they always came back down to a manageable cost. Another reason is the “futures trading” on the stock market. For a really good time, instead of going to Gila River and playing the tables, bet the oil prices will continue to rise. It is legalized gambling on the future of oil.

Gas prices affect the overall economy with us spending more money on necessary items and our incomes not keeping up. It is called inflation. The Fed is responsible for keeping inflation down and to accomplish that in the past, they have raised the Fed rate.

FYI: Mortgage News: FannieMae announced earlier in the week they will no longer accept lease agreements on current homes. The borrower will have to be approved with both payments and have 6 months reserves. The timeline is soon and the guidelines are forthcoming. “Buying and Bailing” will be curbed.

Diane Gerdes

The week started out with the stock markets doing the happy dance after May’s surprising increase in retail spending. We were out shopping with our government rebate checks at Wal-Mart and Costco. The markets also loved the hawkish remarks from Ben Bernanke, Fed chairman, about the economy and the dollar, sending the stock market on a three day spree. Today, things got ugly. Stocks took a nasty spill after the employment numbers told the story of the unemployed, the highest level since October, 2004 and the scariest increase in 22 years. Another jump in oil prices had the soothsayers rethinking the Fed statement earlier of raising rates. After a month of quiet time, the financial institutions got back in the news with Lehman Brothers, having lost over 53% of their stock value since last year, whispering the Bear Stearns mantra of bail out.

FYI: The home decorator network has come up with a great idea for our expensive, top of the line SUV, painted horn winged red with the brilliant yellow striping that we can’t sell, and the car dealers will not take on trade for that nifty used golf cart we have had our eye on. Park it in the front yard, plant a tree on the luxurious Italian leather, open the specially designed sparkled oval sunroof, and sit outside in the evenings and listen to the Bose stereo system. Our neighbors only have gnomes in their yard.