Significant Economic Headwinds

We said on December 14th in 2015 Interest Rate Outlook, “In a just released interview, the Aden sisters cautioned that if “…asset prices …come back down, that’s going to cause significant economic headwinds. I’m of the camp that says, well, things aren’t quite as great as they seem to be, and in particular we’re going to have very limited abilities of the Federal Reserve side in particular to tighten at some point, to raise interest rates.”

“The Aden sisters refer to asset prices meaning the stock market, but could also include oil, commodities, real estate, and precious metals, though the latter move for different reason, primarily as protection from inflation and governments.

“Some analysts think the economy is growing very, very slowly, and any action to tighten by the Fed will be counter-productive. These people suggest instead that the FED will embark easing ala QE4, rather than tighten.”

The Aden sisters called the economy correctly. Last week the Federal Open Market Committee (FOMC) announced that interest rates would remain where they were. “To be sure, there are good reasons to be concerned about this unprecedented run of low interest rates…” After the decision, this sobering observation was offered by Fannie Mae Chief Economist Doug Duncan:By walking back its earlier statements, the Fed itself has become a source of uncertainty for the economy. Going forward, it will be difficult to take what it says, or rather signals, it will do on faith anymore. At this point, it is unclear what will move the Fed to begin a long process to normalization.”

Now the media would have you believe that December is the time for the Federal Reserve to raise interest rates. We are inclined to believe Ben Bernanke when he said rates would not be normalized in his lifetime.

Two things come to mind:

  1. In her press conference, Janet Yellen alluded to the idea that negative interest rates might be in our future. Meaning, instead of receiving some interest rate on your savings, you might be penalized for saving. Negative rates would force you to spend.
  2. As Michael A. Gayed, CFA at Pension Partner said “The real question is what in the world is so broken in the system which is preventing them from increasing rates on Sept 17?” Is the global economy so weak that a mere ¼% hike would send the world into a tizzy?

What to do? If you are looking to buy a house, have the 20% down payment required, have money set aside for emergencies and have debt paid down or have no debt, and you find the house of your dreams, then by all means, go for it. After all, over five million houses are sold each year at a minimum. You will be in good company.

If you are not in that position and if you need every bit of help available, including zero down, and the new lower FICO standards, then wait awhile until your finances are more secure. Too much leverage, without adequate backup savings, and you could get in big trouble if the economy turns down.

We specialize in buying properties from people who need to sell their house fast because of the threat of foreclosure, or just don’t want to pay those high realtor fees. We don’t want that to happen to you.

Coal to Cash Homebuyers, Inc. is here to help homeowners out of any kind of distressed situation. As investors, we are in business to make a modest profit on any deal, however we can help homeowners out of just about any situation, no matter what! There are no fees, upfront costs, commissions, or anything else. Just the simple honest truth about your home and how we can help you sell it fast to resolve any situation.

Give us a call today at 805-426-9988 to let us know what YOU need help with!

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