Did you know that the regional presidents of Federal Reserve can sometimes speak intelligently with common-sense people? It is true. More Fed presidents are speaking out against some Fed policies. Two Fed governors criticised the Fed’s announcement earlier this week that they would maintain rock-bottom interest rates over the next two year. This two-year announcement by the Fed effectively restricts the Fed’s main tool for fighting inflation. Plus, the rest of us all know it hurts those who are trying to save money.
Richard Fisher, President of the Dallas Fed, said that current government policies and programs are causing business activity to freeze. He stated that “those with the capacity to hire American workers – small businesses as well as large, publicly traded or private – are immobilized.” He went on that “they simply cannot budget or manage for uncertainty of fiscal and regulatory reform” (for the full speech, visit http://www.dallasfed.org/news/speeches/fisher/2011/fs110817.cfm).
Correctly, he stated that the debt limit discussions only added to the problem. Everybody who watched or read about these discussions could see that neither Democrats and Republicans knew what to do. The majority of politicians were more concerned with pleasing their base constituencies than they were in helping the country.
No matter how big or small your business is, you need to be concerned about the current fiscal climate. We all know that government spending must decrease and taxes will rise, but we don’t know when or how.
As a buyer of deeds of trust notes, I am in the same boat. When deciding whether to purchase a mortgage note, I make very conservative assumptions. The real estate market continues to be hit hard, with unemployment still a significant issue. And the government intends to regulate everything they can. This makes it hard to plan for the future, and I worry about what to do.
Recent economic news is almost all negative. The stock market is volatile and trending downward, even though it has been relatively stable. There is no indication that the economy and fiscal crisis will improve in the coming year or after the 2012 elections. Many people are not happy with the changes made by politicians.
As of now, I hope that every deed-of-trust note I have continues to pay and that my status as a buyer is maintained. As usual, I advise you to be conservative when investing in real estate. We will eventually get out of this mess but it’s going be very bumpy.
Alan Noblitt is the president of Seascape Capital and a buyer of California deeds of trust notes.