Market update

Where is the recovery? Are we there yet? There are signs we are improving and some economic recovery is underway but there are other indicators signaling we may need more time. The media headlines announcing layoffs and closures are beginning to dim and hiring is beginning in some industries. Target announced today it is adding 9,000 jobs and if you work 20 hours a week, you receive full medical benefits, a 401k, life and disability insurance. Target believes unemployment has peaked for them. It is a fact that unemployment continues to rise even after the economic recovery is under way.

The media has been writing about the best quarter results we just had. In reality, the quarter was good because we declined to a market bottom (I hope) on March 6th.  By example, the Dow is down 3.7% year to date but was up 11% for the quarter.  The S&P 500 is up 1.8% year to date and is up 15% for the quarter. While the quarter rebound numbers are encouraging, it is the outlook for the end of the year and next year that I focus on.

“Knowing is not enough; we must apply. Willing is not enough; we must do.” Bruce Lee

Refinance Rules Changed July 1, 2009

The new Home Affordable Refinance rules were passed in March but did not impact the market very much. Under the March guidelines, homeowners could borrow up to 105% of their home value. Today, the loan to value amount is increased to 125% to those that use Freddie or Fannie loans. These new limits help those who owe more than their homes are worth. I am hoping they also make 40 or 50 year mortgages common. I support whatever it takes to help people stay in their homes and bring the payments into a range they can afford. We do not need more foreclosures diluting real estate values. The next wave of interest only loans and adjustable mortgages set to adjust is going to hit in July, August and September. I believe this wave will be the Alt A and documented loans but perhaps, at this time, homeowners may have lost their job and cannot afford to pay an increased monthly payment. If their loan cannot be modified, they will go to foreclosure.

 

Blog updates

Are you subscribed to our blog? We have been busy blogging trying to keep you up to date in areas of interest. These are the most recent titles we have posted this quarter: Property tax and loan modification scams, Orange County Home prices will still decline as median price rises; FDIC Extends Coverage Limit and New Credit Card law; Pension lump sum distribution rule changes; Zillow estimates; Helping Seniors with Daily Living; Market gains since March low; and Ways to save money.

We welcome areas of interest from our clients.  If you have a question about something or think others should be aware of a new scam, etc. please let us know.

“In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.”––Teddy Roosevelt

Credit Card interest rates rise

Citi raised interest rates on up to 15 million credit cards today. I expect more banks will follow suit as they begin to adhere to the new guidelines dictating when they can raise rates. Make sure your credit card bills are paid on time as you leave on vacation this summer. Making even one payment late gives the company a reason to cancel your card and new cards are harder to obtain right now.

California’s Budget Woes

California's state controller is ready to issue more than $3 billion in IOUs this month as the state's budget stalemate wears on. The IOUs are technically called individual registered warrants. It's not the big companies that will suffer most from getting a promise instead of cash, but small businesses that rely on state contracts.  It's also unclear if some of California's biggest banks will accept the IOUs.  Currently only Bank of America has confirmed that they will honor the warrants.  IOUs will also be sent to California counties, which now must find other ways to fund a wide array of social programs.  Governor Arnold Schwarzenegger declared a fiscal state of emergency July 1. State offices will be closed three days a month to conserve cash.

How does this affect California bonds?  Right now, the market still believes that bondholders will be paid in cash on a timely basis. In California, bond interest payments are 2nd on the priority payment list after education funding.  Let’s hope that the state legislature can cut spending and balance the budget soon.

 

Wishing you a relaxing, stress-free enjoyable Summer!

Sandy, Carol, Joanne and Erin