The writing is on the wall. Dept of Labor shows 9.4% unemployment and this excludes part time workers that really need full time jobs. This excludes workers who have given up looking ofr a job and are just not inncluded in unemployment figures (maybe one day the rule-makers will change that).
We are losing share to a global market. Any talk about how globalism is bad leaves you branded a protectionist. Yet this is confusing to me....aren't we supposed to protect our country? Were not our elected officials supposed to protect the US WORKERS before they protect GLOBAL workers while simultaneously accpeting lobby money and "benefits" from those in favor of protecting global workers? For every worker hired abroad over a union or white collar worker here in the US we lose IRS and State income tax..and who pays more in taxes...WE do! Does the word Trade Defecit ring a bell?
For those who claim Bernanke will not raise interest rates, may I remind you that HE does not control LIBOR? May I remind you that the Fed recently warned against higher interest rates if we keep spenidng at the levels we are spending.
The basis of my prediction tha the 30 year mortgage on a singe family home, full income, 5% down, conventional fannie mae loan will have rates return to about 8.5% is based on the fact that we are at a turning point in the economic cycle. Never mind my assertion that rates can not stay low forever. The economic cycle we have gone through over the last two years mandates return to more logical risk level underwriting by mortgage banks. The last five years proved to Wall street, the Feds and Main Street that low rates with risk exceptions leads to massive foreclosures and delinquencies. However, lenders are face with preserving the current mortgage portfolio's value which depends on the homeowners willingness and ability to pay their mortgage. Take this away and consumers don't and can't refinance. They wait to buy a house. The second home buyer or vacation home buyer whose mortgage is larger than their house will not buy a second home or vacation home until the problem on their main home is solved. On and on and on. There are various reasons why rates will go back up to between 8 and 9% on Main Street Mortgages.
As far as commercial mortgages go, well Bernanke does not control LIBOR. And commercial is not a hot button for politicians like consumer mortgages is. LIBOR is a global element. Many many commercial mortgages are based on LIBOR. So when someone says the Fed will not raise rates please acknowledge that their are various interest rates out there. Commercial rates, Fed Fund rates, residential mortgage rates, rates on the 10 year treasury and 30 year treasury notes and so on.
As far as double digit interest rates go, I could see this happening within the next five years. I hope not! But if it does happen business owners will be wise to include this in the Financial part of their business plan. I suspect 2011 could be the year.
Prepare for these scenarios and if they don't happen you will be stronger than if you sit back and say it won't happen!
Charles Hennebeul*Founder of American Cash Solutions Inc* www.mybuildingfunds.com
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