Ever Try To Give A Cat A Bath?

That's what the Federal Reserve is doing with interest rates. They are holding rates (the cat) underwater no matter how much the cat hates it. Cats will lash out, and so will the markets and when they do its usually bloody.

 In the past, this was the Nation of stability, where the words, "Backed by the full faith and credit of the United States Government" used to mean something. When I look at that statement I unfortunately feel that there isn't as much "faith" as there used to be, and too much "credit" issued by our fearless leaders in Washington. When those two factors fall out of balance it doesn't bode well for Joe Six Pack and Margaret Margarita...

 Under current market conditions, it costs money to save it. How backward is that? Because interest rates charged to preferred borrowers (JP Morgan Chase, BofA, Goldman Sachs, etc) are almost nothing, they will provide next to nothing rates for their customers who are actually trying to do the responsible thing...SAVE. With gas, food, metals and other commodities on the rise, costs will get passed through and finished goods prices rise. Everybody knows that rising prices equal inflation, except for our buddies at the FED. They contend that if we take food and energy costs out of the equation, prices are stable. Nobody has informed them that if take food and energy out of our lives we are cold, starving, and stuck where we are. They are necessities.

 When the inflation rate exceeds the interest rate given to investors who try and save, they lose money by having it on loan to somebody. They lose money by simply holding onto it. That doesn’t sound like a very sound investment strategy and Bill Gross of PIMCO agrees.  He punted all his government bonds (loans to Uncle Sam) because the risk wasn’t worth the reward. Warren Buffett refunded all his short term debt into long term debt knowing he would have to pay more to secure funds at a future date. These guys have a pretty good track record, something about being self-made billionaires.

 It might be one thing if America was the perceived rock that it has been in the past. Unfortunately, Mr. Greenspan (ex-chief of the FED) thought free money was a good thing. Equate it to drinking endless amounts of grain alcohol. Nothing good can happen and didn't. Such thinking help blow up the housing market, leaving us severely hung-over and almost dead. Free money is almost never a good thing. Interest rates gauge risk, and provide reward. In these economic and some would argue political times, we have lots of risk and almost no premium (reward). If you have the chance to invest in something that looks a little shaky and pays you 10% percent, or the chance to invest in something a little less shaky that pays 1% which do you choose? I choose 10% on the odd chance that everything else being more or less equal, I get more money back.

 The main buyer of US debt is ourselves...the US taxpayer. If I promise to pay myself 100 dollars next week, because I can’t make my payments today, what are the odds that I'll meet that commitment to myself? Am I going to send a leg breaker to take the money out of my own hide, or do I give myself another pass and just write myself another IOU? If you chose the latter, you too could work well in Washington.

 The markets are the cat in a bathtub, and the tax payers are the bloody hands still holding onto it. Markets will force rates to rise whether the Fed likes it or not, one can't hold onto the cat forever. Eventually the Fed will be the only buyer left. The private sector is going to leave the US debt markets and invest where they can MAKE money not volunteer to lose it. The more disparity there is between US rates and rates with competing investments, the more the cat flails and the more damage done in the future. Pretty soon, we will bleed out from inflation. We won't have any money left for food and energy, so the Fed will finally be correct.... It doesn't matter what those prices do, we can't afford them. The only way to stem inflation is to raise rates and make loaning the government as competitive an investment as anything else. They will have to provide a return on investment.

  Eventually the cat will escape and the markets will be allowed to function in a logical manner without excessive tampering. When this happens rates will go up, in fact rates are going up now!! Do something about it. If you are looking to purchase something with borrowed money, do it now!! This goes for property tax loans and mortgages. They will NEVER be cheaper than at this point in time. If you are able to purchase a house, by taking advantage of the short time left you can buy much more house and enjoy your investment everyday as opposed to watching the flailing cat shred you limb from economic limb from inflation and poor policy.

If you are behind on your property taxes in the State of Texas, call Tax Loans USA at 800-719-4096 today and let us help you get to where you want to be. Conversely, if you are ready and realize the time is now to buy that house, call The Associates at 817-500-5008 and let us help finance your dream home.

Throw In The Towel....Everybody Else Is

http://www.bloomberg.com/news/2011-03-08/u-s-home-sales-accelerate-as-prices-decline-amid-rebound.html

   Debating the future of interest rates is now left to fools. The markets are speaking loud and clear, and rates are going to continue to climb. The best thing one can do if they are considering going into any kind of extended term debt is lock in now! One might be able to save a quarter point here or there, but you risk losing halves and whole points. In equity trading its called chasing an eighth and it costs you dollars. Not a sound strategy since 12.5 cents < $1.00.

  Rates are going to climb for a few reasons:

Inflation and Economies of Scale: What, the Fed says there is no inflation as they keep pumping billions out to large institutions. You may never see a dollar of it, but you are seeing the effects. Check oil and food prices. They are screaming...surprise, surprise. They are screaming because speculators and national governments have nowhere else to spend the money the Fed has been so kind to give them for the low price of next to nothing. The next time you see a Fed official or a Treasury official, you can thank them for crushing your spending power and putting the average consumer in a worse place than they were 6 months ago. The only upside to their strategy is that the unemployed don't have too many places to go, so they aren't burning gas at the same rate. To many dollars chasing too few goods is the definition of inflation. Typically it is an entire economy (all inclusive, you, me and them) that has too many dollars. The script changed this time. They improved it in their eyes for our salvation. Now it's too few institutions with too many dollars chasing too few goods thereby causing serious harm (to you and I) for benefit of too few citizens (Chase, Goldman, etc), which leads us to Economies of scale.

    Simply put, he/she with the most capital (money) wins. Any large economy or company can sustain price shocks or price their goods below market value. They can't do it forever but they can outlast their competition and force them to commit to things that they would rather not do. Again, food and oil example. Smaller countries and companies have to participate and perpetuate the price runs because they lack the capital to hedge for the longer term. They are living "check to check" without adequate reserves. When nations (China) enter the trading pits, they have they capital to corner or at least jam markets. When they do, everybody has to play for fear of losing out on the resource. Throw India in the mix, and you have a bidding war. Where there is a bidding war there are speculators in between and price runs get exaggerated. Eventually the Fed will have to pull some of the money in before anymore nation get toppled due to resource riots. They need to raise rates to absorb the money supply. It is the first move against inflation! When the rates to direct borrowers go up, they get passed through to you.

Regulation: All politics aside (I have little positive say here), new regulation of any kind costs you money! The added "safety" of a regulated or over regulated market creates barriers to business. That costs money. Extra people in compliance and the lawyers required to deal with the regulators are not provide free of charge by the government. I'm not saying that there were and still holes in the law left to exploited, there are. I'm simply saying that the new Dodd-Frank laws are going to cost a ton of money and that will be passed on to the consumer in the form of new fees and higher interest rates.

Regardless, if you are fortunate enough to be in a position where you can expose yourself to increased debt or have no choice....the time is now. Lock in that loan and save yourself money. Six months from now could be too late and you could be paying thousands more. If you need a property tax loan, or refi, or finance a new home purchase, call the professionals at Tax Loans USA or The Associates Mortgage Company respectively. 800-719-4096 and you can get you everything you need from professionals who value you and your time.