12/07/2005
That was the name of a fun dance tune when I was in school. Now, sadly, it’s the story of our future. Alan Greenspan, who has precious few public speeches in him before he enters retirement, has chosen one theme to hammer home. It’s time for all of us to stand up and pay attention because this man knows our economy like the back of his hand and his track record is stellar. And, at this point, he has nothing to lose by speaking his mind.
Last week, Greenspan took the opportunity to talk, once again, about the budget deficit. Now, you know that I have been talking about the budget deficit for some time now, but I would like to share Greenspan’s thoughts on the subject.
Greenspan said that U.S. deficits will soar with the imminent retirement of 84 million baby boomers. He suggested that Congress should consider cutting Social Security and Medicare benefits because the government probably has promised more than it can afford, especially in health benefits.
Greenspan went on to say that if something isn't done to trim the costs of benefits to retirees, the resulting budget deficits would "cast an ever-larger shadow" over the future living standards of Americans. "In the end," he warned, "the consequences for the U.S. economy of doing nothing could be severe."
That’s pretty scary and straight talk from someone who has spent nearly the last two decades specializing in cushioning the blow of his words with doublespeak.
And that wasn’t the end of the concern over our impending problems. President Bush used a speech on Monday of this week to slam companies about how they need to live up to the promises they made to employees in the way of pensions. Translation: “Look folks, I tried to fix Social Security, but I couldn’t get any traction. So now, I am trying desperately to fix the future by pandering to corporate America to uphold the promises they made because the government is going to break the promises it made.”
I’m getting a very lonely feeling. In the last several days, two of the most powerful men in our country have dealt us a 1-2 punch to put us all on fair warning that our futures are in grave danger. But all the politicking, posturing and compromises will lead to nothing more than a watered-down, do-nothing sham that will waste time and money.
So what do we do? Greenspan has told us that our benefits will be cut and our taxes will be raised. Bush is putting us all on notice that the pension crisis is too big to be solved by government. So Bush is basically begging corporate America to live by the code of honor. Face it, folks, we have one damn big problem. And in the final analysis, it’s our problem. Politicians may bite their lower lips and tell us they “feel our pain” but they don’t have a clue.
The end of the year upswing seems to be showing signs of resistance. The indexes are looking skyward, to be sure, but the closing numbers don’t seem to be reflecting the sentiments of the daily activity.
We are enjoying some nice gains as our well-timed “buy signal” has proven the Fabian Plan is doing its job, as usual. We are looking at a good solid market with some stellar fundamentals that may very well carry us through the holiday season.
We are, however, vigilant, as we are extremely aware of the underlying trouble areas plaguing the overall economy. We are basking in a short-term upswing, but we are at the ready for the other shoe to drop in the markets as the average investor becomes acutely aware of the fundamental problems we see looming on the horizon.
Warning shots from Alan Greenspan, a weak housing sector, higher interest rates, budget deficits, trade imbalances, soaring medical expenses on an aging population all come together to create an economy that is riddled with the potential for a bear market that can rise and roar in a heartbeat.
The market looks good for now and I am riding the crest of the wave with a 100% investment in the sectors that are poised to rise higher than all others. Am I committed to this market? Yes, for now. As soon as it turns, I’m on the sidelines to protect my gains. That’s how the big gains are made—and kept.
It’s true. We do need a miracle, but don’t throw up your arms in frustration. There is a real-life miracle that can help you get the future you deserve, without relying on anyone but yourself. In fact, my dad used to call this miracle the 8 th Wonder of the World. It’s called compounding. Basically, it’s when you take a little bit of money and you turn it into a lot of money over time. How? Simple. Compounding requires only three crucial elements:
That’s all compounding needs because profits will earn profits over time. And those profits will earn profits, so you are constantly growing off of a bigger base. The key to compounding is avoiding bear market losses, the kind that can eat up 35% of your portfolio’s value. In doing so, you can make and keep a fortune.
Let me explain. 28 years ago, we launched an investing service that, aspired to achieve the goal of compounding. Was it successful? Indeed! So successful, in fact, that just $100K invested at the beginning of the service would now be worth $3 million. So successful, in fact, that we now call that flagship service Successful Investing.
Folks, I urge you to check out Successful Investing. We’ve heard the speeches, the finger-pointing, the buck-passing, the administrations that come in and go out and nothing ever happens except we all move closer to a diminishing fate. Come on! This is your future we’re talking about. The sooner you take control, the better your future will be. You can do this, and I can help you. Go ahead and try Successful Investing with no risk to you for 6 months. You get the buy recommendations, you get the sell signals. You get my thoughts on the markets. And you get it all with my all your money back if you don’t love the service after 6 months guarantee. Go ahead, take control of your future by clicking here:
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The walls seem to be closing in on the real estate market as little fires keep popping up. Last week we saw that mortgage foreclosures increased a staggering 18.6% from September to October--a daunting statistic. Additionally, interest rates are climbing and huge percentages of the population are still embroiled in risky mortgages that are costing them more with every passing month. I just read that 67% of the mortgages sold last year in San Francisco were interest only loans and 32% of loans in New York City were interest only, as well. Scary!
Now, we add to the list of concerns for the overheated real estate market an unsavory outcropping of the legendary housing boom: Mortgage scams. That’s right. What used to be nothing more than a blip on the radar, mortgage scams have skyrocketed over the last couple of years and annual FBI reports have actually tripled this year alone.
How do mortgage scams work? Well, you can pretty well name your poison as there’s something for everyone here. Much of the deception emanates from borrowers themselves, as they will lie on their mortgage applications in order to get the loan. Complicit mortgage brokers will frequently encourage borrowers to “crowd the truth” in order to help them finance the home of their dreams that may have soared in value over the last five years.
This is just the tip of the iceberg. A booming housing market, one that has seen huge price appreciations has kept the industry busy making money, but, trust me, as soon as the business dries up and the mortgages turn sour, those lenders will go on the attack like angry dogs. The borrowers who signed their life away will be in a heap of trouble if they can’t stay afloat and it’s going to bite the whole economy in the proverbial butt. It’s the classic smoke and mirrors situation. As long as everyone’s making money, they’ll look the other way with a wink and a giggle. The mortgage scams are going to just exacerbate an already problematic situation.
Borrowers are not operating in a vacuum. They are aided and abetted by an industry that just can’t get enough of a good thing. Remember the stock brokers who were beating the drum in late 1999 and early 2000? Many of today’s mortgage brokers are the exact same breed. They see the handwriting on the wall. They know they are in the last few seconds of basking in the land of milk and honey with easy profits and big deals. They stand to lose nothing by encouraging borrowers to say whatever they have to say to get into a home. Heck, they could even justify that action by saying they’re just helping families live the American Dream. In the meantime, they’re just digging every one of us into a deeper hole by enabling people to take on a loan they have no ability to fund.
Think about the stock market decline of April, 2000. You know what made that market so volatile to the downside? It was all the people who had to cash in their stocks to get out of margin calls. Why? Because they were overextended and ill-prepared for a down market. Just like so many of the homeowners out there today! Add to that situation an element offraud and you have one mother of a downturn.
What can you do? Well, if you plan on staying put, make sure you are in a safe mortgage—one that you can afford even in a weaker economy. One way to accomplish that goal may be a refinance. If so, I encourage you to contact Josh Lewis, “The Homebuying Coach”. Josh is one smart mortgage broker who will steer you in the best possible direction for your situation. He is experienced, trusting and the most knowledgeable person I know in the industry. If you would like solid advice from a true professional, give Josh a call at ( 800) 218-9217 or via email at jlewis@stearns.com. (Josh Lewis is a proud sponsor of Making Money with Doug Fabian)Dear friends, I am loving this market. We are making money and we are making the most of our gains by getting into the ETFs that are rising above the market tide. It’s just a beautiful thing and I am really excited about enjoying the holidays knowing that my picks are doing their job. Having said that, I am ever vigilant of that same tide and I have my eyes fixed on the horizon. Never let your guard down. Never, ever get complacent. And remember this:
"The future doesn't belong to the faint-hearted. It belongs to the brave."
-- Ronald Reagan