The Reality of the Widget Salesman

Are you getting your opinions about the stock market from unbiased reousrces? Do the Wall Street cheerleaders really believe their opinions or are they just hoping eveyrthing works out?

As I sit here watching CNBC (financial television), I just stay amazed at the run away bullishness of this market. Should it be a real surprise? Just ask all of these money managers who talk about the markets on CNBC. They see nothing but clear sailing the rest of the year. Just keep in mind about the opinions of money managers.

The majority of these money managers can only purchase stocks. A bear market would be the worst case scenario. Thus, it will always be a bull market regardless of what the tape says. Besides, why would they shoot themselves in the foot and offer anything negative?

For example, let’s take the story of the widget salesman. The only thing that he can sell is widgets. Besides the money that he makes selling widgets, he also makes plenty of money as long as his clients hold onto those widgets. Well, let’s say that something happens to the widget market. Widgets lose some of their popularity. People don’t want them as much.

As a result, he will go announce that this weakness is temporary. After all, he doesn’t want to lose any current customers. Second, he will talk about what a bargain widgets are so that he can still sell them.

The take away from that story is that the salesperson can only sell stocks. The salesperson depends on widgets always being a good deal because that is his only income source.

The same applies to money managers or financial advisors who depend on stocks. Remember the opinion that you here in the media might just be desparate hope rather than a solid opinion.

Congress Proposing Legislation to Once Again Protect the Credit Industry

Let's take a look at this nonsense. First, the mortgage industry is allowed to make big bucks writing these sub-prime loans for the past 3 or 4 years. Anyone with common sense would recognize that a problem is going to be created by allowing a mortgage to be written for 100% of the home value, no money down, and no documentation nor income verification. It is a very risky loan that posses potential problems for the consumer.

Now we pay the price for the greed that has been displayed by the mortgage business. Of course, this type of borrowing has been great for the economy on the short-term. As a result, why would Congress ever step in and tighten the lending standards?

Now, Senator Schumer wants to bail out these sub-prime loan holders with hundreds of millions of dollars. So, what is he really doing? Is he proposing something to protect the American Dream or is he proposing something to protect the mortgage industry?

Think about it for a minute. This legislation will keep subprime lenders solvent by helping these mortgage holders pay their monthly mortgage payments.

How about another idea to consider. Force the sub-prime lenders to go in and reconstruct these loans for the borrower at reasonable fixed interest rates. In addition, force them to do it for free. If needed, Congress could subsize the costs of this process. How about the sub-prime lenders coming in and paying the price for their greed? As taxpayers we should not take on the burden of bailing out these home buyers. Thes subprime lenders should pay the price.

Another example of Congress watching out for big business when they should have been regulating big business a long time ago.

RENT-A-CREDIT SCORE

So, you need a higher credit score to qualify for a mortgage loan?

An internet company will increase your credit score by making you an authorized user on another person’s credit card. By being an authorized user on a person’s card with excellent credit, all of the good credit information will be transferred to your credit file.

As a result, your poor credit score will get an increase due to borrowing the credit history of someone with good credit.

There is also big dollars in it for the people who are willing to allow this company to use their credit cards by adding add authorized users. They get a hefty fee for each added authorized user.

Although the Federal Trade Commission is looking into, they have not filed any legal claims against the company. However, the Nevada Mortgage Lending Division states that anyone associated with this scheme “will be subject to administrative action and potential criminal penalties.”

Adam Wheeler who runs this unethical scheme states his business is “legal” but he conceded that “some people might say it’s unethical.” He also said he does not “condone fraud against mortgage institutions.” If clients are going to lie to lenders, he says, “that is not good.”

Well, Mr. Wheeler it is probably not good if you help those people lie to those lenders either. That is a story from the “I just can’t make this stuff up department.”

Let's Just Give Them Some More Money.....Again

Senator Dodd said this week that Congress needs to provide aid for about 2.2 million sub-prime borrowers. So, let me get this straight. Senator Dodd wants to use our tax money to bail out someone who took out a mortgage that they couldn't afford, enable them to live in a house that they shouldn't be in, to help those who were casulties of a horrible mortgage system that Congress has enabled, and to help those who don't read the fine print.You know let's not give them aid.

Let's just pay off their mortgage. In fact, let's help out those poor sub-prime lenders because they might be in jeopardy of loosing the billions of dollars that they made while practicing predatory lending.

The problem starts at the top. We don't have leaders in Congress that work to protect the people of this country. We have politicians who close their eyes when it is convenient and point fingers when situations come unglued. It was convenient for politicians to close their eyes to a mortgage industry that through predatory lending was helping to pump a great deal of money into the economy and increase economic growth.

When did it make sense to throw credit underwriting standards out the window and issue mortgages without even verifying income or looking at tax returns. Senator Dodd, where were you 3 years ago. Could you not see this coming?

I really do regret that millions of sub-prime borrowers are going to be hurt in this mess. My heart goes out to anyone in this situation. At the same time, Congress is suppose to enable laws that protect consumers from their greatest enemy....themselves.

This is why gambling is not legal in every state. This is why pot is not legal. This is why there are speed limits.What we need is reform on all levels. The debt industry is out of control. Until we get politicians that think like leaders and not like politicians, these problems will continue to surface. Maybe I am being a little ldealistic. It just seems that most of these problems are real easy to fix.

Jim Cramer Doesn't Have a Bearish Bone in his Body

Dear Bob:

Just wanted to say thank you for your sanity. I was listening to Cramer on MSNBC (not sure why)and he is calling everyone suckers who are bailing or getting out of stock and of course his advice is to buy now. Might be good advice for some or really bad for others depending on where you are. Just made me want to look to see what you had to say and sure enough, you had a response. Always the voice of reason.

I always appreciate the kind words. Sanity is a strong word. My wife might disagree with the sanity remark.

The only thing that I am doing is looking at market risk. You can have high levels of risk in the stock market for a long time and nothing bad happens. However, high levels of risk always have a reckoning day. Until then, it only matters when it matters.

Are we starting to see risk matter? It is a little to early to say. As I have said many times, one week of stock market declines does not make for a bear market. On the other hand, it is prudent to know your risk level and be realistic about what stock market investors will face at some point.

When listening to people like Jim Cramer, always remember one thing. It is all about the ratings and being bearish is a ratings killer! Plus Cramer works for a company that is owned by GE (a publically traded company)

Although Cramer with all of his screaming and drama can be bearish on a particular stock, I guarantee you that you will never hear him be negative about the stock market in general or the stock of General Electric. At the end of the day, he has to be a yes man and do everything that supports the parent company that hosts his show!

The Bank of UnAmerican

Until the other day, nothing surprised me when it came to the credit industry. Well, that all changed after reading an article in the Wall Street Journal about the Bank of America's newest credit card.

The article reads:

"The new Bank of America program is open to people who lack both a Social Security number and a credit history, as long as they have held a checking account with the bank for three months without an overdraft. Most adults in the U.S. who don't have a Social Security number are undocumented immigrants."

This has many thing wrong with it on so many levels. For the record, I am for giving anyone a chance in this country to become an American citizen and lay claim to the American dream. Further, I support a program that deals with the illegal immigrants in this country fairly providing them with the opportunity to become American citizens.

I had so many titles for this article.

"The New Payday Loan from Bank of America."

"The Crime Rewards Card from Bank of America."

If they are giving out credit when no credit report or social security card exists, then there is something in it for them. Just like every other player in the credit industry, they are depending upon human nature to take over. Human nature is to make mistakes when it comes to dealing with your money. As a result, the credit industry makes you pay dearly for it. Just try being one day late, and you will pay the maximum interest rate penalty forever.

It is difficult enough for English speaking Americans to understand the credit system. As far as illegal immigrants, I would imagine it is even tougher to understand. This is a system that is setting up good people to fail. As a result, the bank makes the money on higher rates and fees.

Is this really about helping an "underserved community" or about making money by in a sense issuing payday loans?

I was curious as to the terms and conditions on the account. In an attempt to find out, I called Bank of America. The first lady argued that they would never have a program that gave credit to someone without a social security card. The next lady said she knew what I was talking about and would send me to someone for more details. The next lady said the same and then cut me off.

I finally called a branch in Los Angelas where they are starting the pilot program. In her own words she said, "We don't have terms and conditions for this program. We set them up when we set the account up for each person." She couldn't tell me how high the rates would be or the fees and penalties.

However, she said that the bank was "trying to serve the underserved community." Bless her heart, she really believes that to be true. Of course, they have the perfect person there to set up these accounts. She said she understands the market because she is married to an immigrant.

This is just another aggressive scheme put together by a Bank that is more about excessive interest rates and penalties and the almighty bottom dollar.

Oh and did I mention..... They want to help out those who are breaking the law. The irony is that the common day criminal couldn't walk into the Bank of America and get a credit card. The common day criminal has a social security card that reports a crime. As a result of a crime reported on a credit file, their credit is shot with no options to getting a credit card.

However, if you are an illegal allien living in Las Angelas, it doesn't matter.

Letter to Texas House Representative Charlie Geren

Dear Representative Geren,

I understand that you were denied an insurance policy due to the inaccuracy of your credit score. Due to a low credit score, the insurance company that you applied felt you were too much of a risk and as a result would not accept your application.

That actually surprises me. I thought that most politicians had a way around the system. Well, since you are experiencing the same problems of your voters and getting a taste of how the world works outside the capital, let’s take this opportunity to let this unfortunate mishap turn into a positive for all of us.

You might not be aware of some of the problems in the system of credit and credit scoring. As a State Representative you potentially yield a lot of power. Your colleagues in Washington have passed the buck to the states to pass the tough laws against the credit industry. This way they can still sit in the even more unrealistic world of career politician land and not have to do anything that disrupts their relationships with the credit industry who like to pay lots of money in campaign contributions. It is quite the cozy relationship.

Being a Republican you especially have a great opportunity to make a difference. Unfortunately, at least in Congress, it is the Republicans that love the political contributions from the credit industry. Unfortunately, they have lost power and now the Democrats (who have no love for the industry because the industry shows them no love) are actually starting to do something on a Federal level.

While that taste of reality is still fresh, take this opportunity to start a movement on the Texas state level that shuts down the anti-consumer practices of the credit industry. How about some new legislation that helps us out with unethical debt collectors? How about some help with usury laws on interest rates? How about some action on credit scoring?

You see in the real world consumers are struggling to get out of the debtors jail that politicians have helped build through the years.

You had mentioned that your score was low only because of inquiries of 4 major credit transactions. There is a low probability that those inquiries that you had during that time period would have done enough damage to lower your credit score to the levels were people are denied based on credit scores. Thus, you probably have many mistakes on your credit report that are bringing that score down. Of course, with better legislation, that also might not have ever happened.


Sincerely,


Bob Brooks

How you Can Lower Your Credit-Card Rate

"How you can lower your Credit Card Rate" headlines the personal journal section of the Wall Street Journal. This article makes it sound easy. Just call the card company and tell them that you are going to move your transfer your balance and take your business elsewhere.

This was the meat of this headline article. Well, unfortunately, that is not the whole truth of the matter. Yes, if you have a good credit score, you have options. If your credit score is the 700's there is no reason why you should be paying anything higher than 6% on a balance transfer. The programs are out there. Of course, be careful of the 0% transfers. Those are filled with loopholes.

Yes, you should call them and tell them you are going elsewhere. They don't want your business to go because they know you can move it with ease.

Unfortuantely, it doesn't work that way with a lower credit score. They know that a consumer with a lower credit score does not have transfer options. Thus, there is no incentive to do the consumer a favor.

So, if you are in that unfortunate situation, here are a few tips:

1) Go ahead and call and make the request anyway- you never know someone might just lower it for you and you never have anything to lose.

2) If not, tell them you are committed to improving your credit score and your interest rates. Ask them what needs to happen to lower your interest rates. Some companies will lower your rates based on future good credit behavior. Time ends up being the real cure when it comes to high interest rates!

Above all, never attempt to negotiate the balance of the debt. The only thing negotiable with a credit account that is current is potentially the interest rate. If you ask about the balance, they will consider you a risk and you might end up in collections with a charge-off. I have known that to happen.

Finally Regulators are Going After the Equity Indexed Annuity Market

I have said for many years that the equity indexed annuities are one of the worst products for investors on the market. They represent the epitimy of irresponsible marketing. Below, is a note from the COO of Allianz Insurance Company. They have made billions of dollars selling these irresponsible products to unsuspecting investors.

They are pitched as the solution to all problems. You can make stock market returns without ever losing your principles. The agents have been getting rich selling them with commissions as that are paid out as high as 9%.

This is a long time coming and much needed in an industry that needs more regulation.

Remember, if is sounds to good to be true it is to good to be true.

From the COO of Allianz


I want to inform you about a developing situation that is generating significant media coverage about Allianz Life Insurance Company of North America. Earlier today, the Minnesota Attorney General's office filed a lawsuit against Allianz for alleged sales of unsuitable deferred annuities to senior citizens.

We strongly disagree with these allegations. I want you to know that we are confident that we have complied with Minnesota law and will vigorously defend this position. In her press conference, the Attorney General stated that her office had been in negotiations with us. However, we made repeated attempts over the past several weeks to meet with the Attorney General's office to provide additional information that could have prevented this action and our requests were flatly denied.

We are communicating to the media that our annuities are high-quality products that serve a range of consumer needs. More than 99 percent of our annuity policyowners have never filed a complaint with Allianz - a consumer standard of which all of us can be proud. We value all of our distribution relationships and we are committed to supporting you and will keep you updated on this situation as it evolves.

Doug ReynoldsCOO

$ 8,680,224,380,086.18 Reasons Why Debt Should be Number 1

Truecredit.com commissioned Roper Public Affairs & Media to gauge Americans’ thoughts about New Year’s resolutions. Four out of ten that were surveyed chose losing weight and eating better as the number one resolution for 2007.

Debt reduction came in second.

It gets even better. 48% of those surveyed say that losing ten pounds would be very or somewhat difficult for them in 2007, while 31% say paying off all their credit dcard debt would be difficult. (According to the Press Release)

Denial has taken on a new meaning. Although surveys are a small representation of the opinions and feelings of a large population, it is in many ways representative of the biggest problem in this country. This is a country in denial. As of December 29, total debt in this country amassed $ 8,680,224,380,086.18. Yes that is trillions of dollars.

There was one other little interesting tidbit of information. The jump in debt from December 28th until December 29th was the largest jump on record. (www.minyanville.com)

Since September 2000, the National total debt has jumped 53%. Of that total, personal debt in this country for the same time period jumped 43%.

It just seems like everyone is living in a fantasy world where financial decision making has no consequences.

Maybe the rationale is less time at McDonalds means more money saved to pay off debt and less calories consumed.

When $6.95 isn't so Free!

I love to listen to sattelite radio. It is a great way to get caught up on the news on the way to the office. It is also a great way to listen to Prudent Money (Sirius) every Saturday morning at 10 am central. (sorry for the plug)

However, I don't like listening to the commercials. It seems that most of these commercials that are aired on Fox and CNBC tell you the lastest way to get rich. This latest and greatest program will give you financial freedom. It is fast and it is easy.

"I made $ 5,000 a month just working part-time. It was easy."

"I applied these techniques for buying and selling real estate and in a few short months was financially independent."

Now these ads are enticing. You desparately want to believe that they are true. I would love to believe that someone was going to plant a money tree in my backyard. However, that is probably not going to happen.

You decide to go ahead and order the book and tape because you have nothing to lose. IT IS FREE!! This is the best part. They are going to give you this tape and book.

However, there is a small shipping and handling charge.

So, I decided to call a few of these life changing program call centers to hear the sales pitch. I called two different call centers. Both of these call centers for two different programs said exactly the same thing and in the same order. Keep in mind, that they were supposedly two different gurus who had written two different books.

Here was the best part of the conversation - What is the shipping and handling? She replies, it is a small charge of $ 6.95. So, let me get this straight. I am going to pay them $ 6.95 for the free items that are worth $ 50?

Here is the real deal -

1) There is no magic solution that is going to make anyone rich over night. If so, everyone would be doing it.

2) Nothing is free

Finally and most important..... This is a heck of a method to sell product. It probably costs a 3 or 4 dollars to make and ship the product. After all of their advertizing is covered, they are probably making a pretty nice little mark-up on that product that they are giving to you for free.

In addition, the free book and tape probably ( this is pure speculation on my part) give you the opportunity to actually buy something from them.

When you hear this sort of thing, just know it is nothing more than a marketing gimic designed to conveniently put dollars in their pocket.

When Sales are Down - Just Put Christ back into Christmas

"We, quite frankly, have learned a lesson from last year," Linda Blakley, a Wal-Mart spokeswoman, told USA Today. "We're not afraid to use the term 'Merry Christmas.' We'll use it early, and we'll use it often."

Bill O'Reilly - November 2005 - "I am 100% convinced...that the policy of not advertising, using the words, "Merry Christmas: will hurt the bottom line of these stores. It will hurt their sales."

Is it just me, or is it just to convenient to not have a backbone and do whatever possible to save Christmas retail sales this year?

Wal-Mart has had a teribble year. They have had a tough time hitting sales forecasts. In fact, these are some of the worst sales numbers in 6 years. Last year, they thought it was a great idea to be non-religious specific and instruct their employees to not say Merry Christmas.

To begin with, it was a stupid idea to take this action. Regardless of your religious beliefs, Christmas is a national holiday event. They were very passionate about going this route. Now all of the sudden when sales are declining, Christ makes it back into the stores?

I hope that the rest of America sees this for what it is worth. A company that has no moral backbone. I would have much more respect for Wal-Mart if they had stuck to their guns and their original beliefs back in 2005. Now, they do whatever they have to make sure that sales come through the doors at Christmas. It is a sad representation of what is happening in America.

Maybe next year if sales are better, they can just instruct their employees to say

Merry X-Mas

The Irresponsible Mortage Industry

A recent advertisement read:

“Are you Paying to Much for Your Mortgage?”

Then they show how you can pay $ 1,698 for a $ 510,000 mortgage.

Most consumers don’t understand how mortgages work. In today’s cash crunched economy, consumers are nlooking for ways to reduce their expenses. There are also those who are buying into the real estate boom and attempting to buy more house than they can afford.

Well, there is a industry that claims to solve all of those problems. It is the Loan Shark Mortgage Industry. Since people don’t understand the ins and outs of mortgages, they go to the “professional” to get advice on mortgages. In reality, they walk into the sharks den and get sold a horrible product that will only make things worse in the future.

These companies are marketing these irresponsible mortgages and taking advantage of people who are in hopes of buying a house when they can’t afford it or people who are in cash flow trouble.

There are some good people in the mortgage business. Alice White is someone that I confidentally recommend for anyone who is need of a mortgage. The problem is that people like Alice are far and few between.

Keep this mind when thinking about a mortgage.

You don’t pay too much for a mortgage unless your interest rate is higher than the current market for interest rates is paying. Don’t fall for the “pick a payment” scheme

Be Careful the Headlines that you Trust

When reading anyone's opinions about finances, always have one question in the back of your mind. What is the agenda? For instance, here is an opinion made by an economist about the real estate market.

"The bad news is just about behind us. It appears that we have bottomed out."

That certainly is good news coming from the Chief Economist with the National Association of Realtors. I am sure that there is no agenda in that statement.

Let's consider another opinion about the United States Economy.

David Walker who is a comptroller has this to say about the United States Economy.

He describes the fiscal health of the economy as “a ship of state on a disastrous course that will flounder on the reefs of economic disaster if nothing is done to correct it.”

Credible? Agenda? Well, David Walker is the Comptroller General of the US Government. He is not an elected official. He has a secure 15 year term. He can speak the truth without reprucussions. He is one of the few Government officials who doesn't have to play politics. In fact he is going around the country warning people that we possibly are going to face a "financial tsunami."

He sees the real truth and he is the Chief Accountant/numbers cruncher for the US Government.

Now that we are out of the season of politics, make sure that you pay attention to the other side of the story. Beyond the agenda, there are some major problems that spell risk for your money.

Refinancing? Buying a New Home? The Big Banks want to be Your Friend

With the slump in real estate and increase in interest rates, the borrower/consumer now find themselves in the driver’s seat. Banks are seeing their revenues starting to slow and they want your business. So, they are willing to offer all types of incentives to gain your business.

Bank of America encourages you to apply with them and then go shop around. If you find a better deal, they will pay you $ 250.00 towards the closing costs of a loan with another company. Of course, it might take Congressional intervention to get that check. (Opps!! just thinking out loud and writing at the same time)

Charles Schwab said that they would give their current clientele a .25% discount on the rate for a new adjustable rate mortgage (awful choice) or home-equity loan. Amazingly enough they will give you a lower discount if you take out a fixed loan. Think through that with me. They will reward you more for taking out a loan that is not in your best interest and long-term better business for them and they will reward you less for taking out a loan that is much better for you.

Big banks (as I have stated many times) are not out to do you any favors. They are out to make money as fast as they can. This is evident through the way they take advantage of customers through credit cards and the bait and switch tactics used through many of their programs.

If you are buying a home or re-financing, go with someone that is not a marketing machine with dicey offers. Go with someone who can consult and be a trusted resource.

There are two ways to start. The smaller regional banks work hard at getting your business the right way. Many of the regional banks take the “hand shake” approach and treat banking customers the right way.

Go with a referral from a trusted resource. Alice White has been a frequent guest on my show. I have known her for over 25 years. Just last week she was able to save a Prudent Money reader almost a full percentage point off of what another broker was offering. She can be reached at alwhite@firsthorizon.com or 972-335-2252.

These are big decisions. Make sure that they are prudent decisions with a trusted resource. You don’t have time to over spend with another marketing ploy.

resources for this blog: www.minyanville.com and the Wall Street Journal

New Bible Version Takes Out All References to Money To Make A Point

“A new Bible translation is causing controversy after it cut out difficult parts surrounding economic justice, possessions and money. The new bible version, released by the Western Bible Foundation in the Netherlands, has created a storm by trying to make the Christian gospel more palatable. According to Chairman Mr. De Rijke the foundation has reacted to a growing wish of many churches to be market-oriented and more attractive. "Jesus was very inspiring for our inner health, but we don't need to take his naïve remarks about money seriously. He didn't study economics, obviously." According to De Rijke no serious Christian takes these texts literally.”

This is disturbing.

Let me dissect this one. Christ’s remarks on money were naïve? Christ didn’t study economics? Well Christ didn’t need to study economics and his points about money were very direct and on point. Yes, there are different interpretations based on the meanings of Greek versus how we interpret it today.

This is nothing more than making Christianity easier and watering down what it means to be a Christian. You can't pick and select what should or shouldn't be in the bible. Money is signficant.

Christ was very clear. You cannot have two Gods. You either worship money or God.
Putting money over God is in my opinion the biggest single problem that we have today as Christians. Money has its influence over almost every element of our life. It is easy to put money over God. This is why money is written about more than any other subject in the bible.

Take away the teachings of money and you take away one of the central messages of the bible.

How you manage your relationship with money determines how you manage your relationship with God.

Tax Issues and a Trusted Source

I get many questions about tax situations through Ask Bob. I want to make sure that you aware of Dan Pilla. He considered the foremost expert on the IRS.

The Associated Press once said, “Dan Pilla knows more about the IRS than the Commissioner.” He has been on Prudent Money numerous times. For those listeners who are dealing with IRS issues, there are several resources.

First, there is Dan’s latest book The IRS Problem Solver. It is one of the most excellent resources that I have found on dealing with the IRS. It covers everything.

Second, Dan has an excellent web-site that is packed full of information along with a consultation service that is very reasonable.

Third, Dan is having a Taxpayer Defense Conference that might interest you.

WHAT WILL YOU LEARN?
1. How to Protect Yourself from Aggressive Audit and Collection Tactics.
2. How to Challenge Tax Audits
3. How to Stop Wage Levies and Bank Levies, and Lift Tax Liens
4. How to Negotiate Reasonable Payment Terms with the IRS.
5. How to use the U.S. Tax Court to Your
6. How to deal with Delinquent Tax Problems.
7. How to Avoid Audits and Enforcement actions.

As a registered attendee, you can receive - at no additional cost - a personal, private consultation with Dan or a member of his private network of attorneys or and accountants who specialize in IRS issues. You will walk away with specific answers to your specific IRS questions and problems. Often, this consultation is all you need to solve your problem.

Goldilocks or the 3 Bears - Major Crossroad for the Markets

There are two theories concerning the future of the economy. One theory could have a devastating impact on the stock market and the other would potentially just be a minor event.

Regardless of your opinion, the majority opinion is that the economy is slowing down. The question is how slow will it go?

There is the soft landing theory. This means that the economy is going to slow down just perfectly without any problems. This is the Goldilocks economy.

Then there is the hard landing. This means that things didn’t go so well and we end up in a recession. This would be the 3 Bears scenarios.

The Goldilocks economy is not much of a threat to the stock market. The hard landing scenario indicates a decline on the average of 30% or more in stocks creating a mean bear market. That is based on historical data.

You definitely want to be standing on the right side of the fence on this one. Keep in mind that out of the last 16 economic slowdowns, only 1 (1994) ended up being a soft landing. I would imagine that the majority were predicted to be the best case scenario. That seems to be status quo for most economists.

Today the question of Goldilocks and the 3 bears is extremely important. The stock market (as represented by the S&P 500) is at a major point. There is a good probability that this ends up being a major stopping point for the 4 year bull market. It is important to watch what the stock market does at this level. Depending on where this market heads over the next 3 to 4 months, it could be a predictor of either the Goldilocks or 3 Bears scenario.

The stock market is a great indicator of the future. Thus if the 3 bears scenario is in our future it should be reflected in the stock market before a recession occurs with a mean bear market. If the stock market continues to act well, then it would be potentially predicting a soft landing for the economy. This would indicate a continuation of a bull market that started back in October 2002.

The moral of the story is - Be Careful How you Eat Your Porage!

I Pity The Fool and other Scientific Indicators

I felt compelled to bring you an excerpt from a site that I follow throughout the day http://www.minyanville.com/. I have spoken about the scientific approaches to managing money. This is one of the big time indicators that you can use for the Gold market. Of course, I am just kidding.

This is pretty funny stuff. Mr. T debuted with his reality tv show last night. As one might expect, it didn’t go over very well. It appears that Mr. T and his Gold Chains have some influence over the Gold markets every time he hits milestones in his career.

I bring you the Mr. T Gold Indicator Key


1. 1981 - With gold at all-time high, Mr. T lands role in Major Blockbuster, Rocky III.

2. 1982 - Gold rebounds from sharp sell-off, but peaks as Mr. T lands role in hit TV series The A-Team.

3. 1987 - The A-Team is canceled, its final episode airing in March 1987... a final farewell for Mr. T?

4. 1996 - Mr. T returns to star in comedy cult classic "Spy Hard," as "Helicopter Pilot."

5. 2006 - Mr. T returns to television as star of reality show "I Pity the Fool." Series roundly panned by critics suggesting appetite for society's symbols of gold has peaked.

A Bubble is a Matter of Perception or a Matter of Reality

A Bubble is a matter of perception writes one writer regarding real estate. She claims that real estate is not in a bubble because prices on real estate cannot go down 50% over night.

She writes, “A bubble is a market in which the value of the key asset is inflated based on speculation and psychology. Because of this, true bubble markets can burst overnight when something happens to shatter the perception of value.”

The first part of her sentence describes the residential real estate market. The price of residential real estate became initially inflated because of two reasons. First, the barriers to entry were removed. The mortgage industry made it to where just about anyone could get a mortgage whether they truly qualified or not. Interest rates were falling to historic lows. This increased buying activity.

Second, as a result of the first reason, investors started jumping on the increase in activity and spurred the speculation by flipping houses and properties.

Increased buying increases the prices of the real estate. Thus it was created through cheap money (low interest rates) and easy to get mortgages with choices of payment.

True bubbles can burst overnight. However, it took 25 months for the stock market to deflate from its bubble. That didn’t happen overnight and that was a bubble.

She calls it a corrective cycle. Thus indicating that this is just going to go through normal times and then real estate will start going back up. There is a big difference between this time period and other cycles.

In the past, we weren’t dealing with the irresponsible lending and borrowing that has taken place. Over 2 trillion dollars worth of adjustable rate mortgages will be coming due over the next two years. Just the small amounts of ARM’s that have come due recently, have dramatically increased the foreclosure rate. As this happens, real estate prices should continue to be under pressure. In addition, rising interest rates have also dampened real estate buying.

Buyers typically don’t buy while prices are falling. They wait for a better deal. They also buy much less in rising interest rate environments. Finally, people that walk away from mortgages because of rising interest rates and the inability to pay force pressure on markets. Thus, real estate could fall a lot lower before it starts recovering making it look like a bubble rather than the perception of one.