Better to be the Vulture than the MeatJanuary 28, 2008
Mark on the markets
Better to be the vulture than the meat.
Ever since the sub-prime fiasco, we have heard many people complain how they were taken advantage of by the bank, Mortgage Company, Wall Street, rich people and George Bush. The “victims” of these bad loans, we are told, did not understand the terms of the agreements and signed them anyway. Now in certain parts of the country over two thirds of the homes being sold are distress sales (foreclosure). The vast majority of these homes are being sold for much less than the banks loan amount (short sale). Many of these mortgages were done at 95 to 100% loan to value. So the buyer really did not have much to lose. The bank or investor is on the hook for the short sale amount.
Because of all this bad debt in the marketplace, loans become much more difficult to get, even if you are a good risk. The ripple effects in the stock markets are amplified by the plummeting stock prices of banks and mortgage companies. People with money invested in the global stock markets see a 20% reduction in the value of their portfolios and a decrease in the value of their homes.
The Federal reserve has a 75 basis point emergency cut in short term interest rates to help the lack of liquidity, and the president attempts to get an economic stimulus package worked out with congress.
In the mean time homes are becoming more affordable, mortgage rates for purchase or refinance are at very compelling rates, and some stocks that had become very expensive are at more reasonable prices. There is a lot of opportunity for those who have understood the cyclical nature of the economy and markets, maintained liquidity in their investment portfolios, took some profits and managed their finances conservatively. Let the feast begin!
Mark Patterson is a registered investment advisor with MHP Asset Management LLC, and can be reached at 447-1978 or Mark@MHP-Asset.com
MHP Asset Management, LLC
P.O. Box 460, Conway, NH 03818
Phone: 603-447-1979 Fax: 603-941-0904 |
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