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Interest Rate Cut again

Discussion in 'Uncategorized Threads' started by trim tab, Oct 31, 2007.

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  1. trim tab

    trim tab Active Member

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    Federal Reserve just announced cut in interst rate to 4.5%
     
  2. lumper

    lumper TS Member

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    THANK GAWD ... I heard that the ATA is also going to announce a cut as well in the very near future.
     
  3. oz

    oz Active Member

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    last time they cut the prime the price of houses went way up. a lot of thieves out there. oz
     
  4. lumper

    lumper TS Member

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    House prices aint going to go up, not right now ... they probably aint gonna go up for at least and I seriously mean at least another 6 to 9 months and more than likely nor for another 12 to 15 months.

    The housing market has yet to even hit bottom.
     
  5. grammie

    grammie TS Member

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    And in response,,,,the dollar dropped again in value,,,thereby creating inflation!!!! An interest rate cut in the face of rising inflation is nothing more than a bailout for certain groups!!!

    AKA Grammie.....
     
  6. Jeff P

    Jeff P Well-Known Member

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    Grammie...hasn't the sky hit the ground YET?? good god, man, it's been falling in your world for years.

    Even Lumper is smarter than you...he's spot on in his analysis of the housing market - though it might not recover until 2010.

    Oh, and Grammie? No one has figured out a way to affect the flight of a target in Arizona all the way from Alaska yet. You're still on your own.
     
  7. lumper

    lumper TS Member

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    Jeff ... recover as in what? Back to where it was 6 months or a year ago or hit bottom and began a nice slow steady rise? When I say 12 to 15 months which would put it at the end of 2008 or the middle of 2009 that is when I think the market will actually hit bottom and begin a recovery of sorts and that recovery will not be rising prices but holding level pricing. I will agree though that the next actual rising housing market will be mid late 2009 or even 2010.
     
  8. Jeff P

    Jeff P Well-Known Member

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    I think it might not bottom until very late 2009, or 2010.

    By the accounts I've read, there were 14 million homes sold in 2005 and 2006. Apparently half of those homes used the '2/28' loans that reset to a much higher rate after two years. So we're dealing with 7 million homes. The loans got crazier at the end of 2005, and crazier still during 2006. We're just on the first wave of the resets...

    So if even 2 million homes were sold in the last half of 06, they won't reset until the last half of 2008. Folks will pay the higher rates for a month of so, then it becomes futile and they give the house back. That gets us into 2009...and how long will it take to work through 2 million homes getting dumped onto the market?

    I've read this scenario a number of reputable places online. The only problem I have with it all is that I've NEVER met a person who actually has a 2/28 mortgage.

    Either way, we seem to agree its a tremendous problem!

    I sure would like to hear from some folks who have these loans...as a past economist and current CPA I find economics and economic theory interesting...

    jeff
     
  9. lumper

    lumper TS Member

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    Jeff ... by the time of 2009/2010 when the last of those crazy loans are hitting the market there will be bail out optional loans in place for them and most will snatch a different loan as soon as a decent one is offered. I am sad to say that our government will not allow that many people to lose there homes and than many mortgage companies to go under ... it just has to much impact on our economy.

    Just wait ... I predict in about 6 months or so there will be offerings of various loans available.
     
  10. Jeff P

    Jeff P Well-Known Member

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    You might be right...I'm already seeing some ads for loans I would consider replacements to the 2/28 problem.

    Lotsa folks gonna lose their houses, either way. A lot of folks up here in Alaska got into houses they had no business owning - people on half my income buying twice my house! Recipe for disaster.

    I guess we'll see! I still want to hear from someone with a 2/28, though.
     
  11. smsnyder

    smsnyder Well-Known Member

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    Grammie, what's it telling us with a 1/4 rate cut?
     
  12. smokerz

    smokerz TS Member

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    Grammie says : **And in response,,,,the dollar dropped again in value,,,thereby creating inflation!!!! An interest rate cut in the face of rising inflation is nothing more than a bailout for certain groups!!!

    AKA Grammie.....**

    And he's exactly correct.
     
  13. David Knapp

    David Knapp TS Member

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    Walrus please explain, what exactly are the variables. I am not being a smartass either


    David Knapp
     
  14. Dahaub

    Dahaub Active Member

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    That interest rate cut is called "throwing the dogs a bone." It's not rocket science and all ya have to be is my age to have lived thru several of these cycles in our economy to know that yes indeed this is a recession. Lots of folks will have it rough. Some shooters will have to stop traveling longer distances to shoot. Others will have to stop spending the extra money that we spend to cover the costs of this sport. Lots of others will face layoffs and uncertainty in the stability of their lives lets just hope this one doesn't last as long as the one in the 80's. Dan
     
  15. Bisi

    Bisi TS Member

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    I heard on the news tonight that 3rd quarter GDP rose at an annual rate of 3.9%. Dam impressive with the weakness in housing.
     
  16. Capt. Morgan

    Capt. Morgan TS Member

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    The cut in interest rates is good news for buyers and for the debt market but we began the day by moving considerable quantities of investment capital out of dollar-based vehicles and into European markets where the return is higher. I have not reason to doubt that investment brokers and financial advisers and managers across the country were doing much the same thing. If this continues (and I expect it will for at least 2 more quarters) there will be a general weakening in the supply of domestic investment capital headed to the domestic mortgage and loan markets.

    Gold futures are up and the dollar is doing very poorly against most other world currencies; this will encourage China and Japan (among others) to speculate and invest heavily in US dollars, of which they already hold over a trillion. When the dollar strengthens, these countries will then move some of that capital back into the US investment market and will eventually hold a larger share of the US debt overseas than they do now. In other words, foreign nations will own more of us than they already do.

    It will take longer for American investors to gain faith and move their money out of foreign vehicles and back into domestic markets so the money that is now leaving the US will stay out of US markets for the foreseeable future, and that's not a good thing.

    Morgan
     
  17. Jeff P

    Jeff P Well-Known Member

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    Damn, Walrus...that's a good, concise explanation.

    Morgan's got a good post - though with the markets near historic highs (you can argue 'near' or not - I think they are), I don't see where the American investor is short on confidence. I, for one, have no shortage of companies I would like to invest in. What I do have is a shortage of cash to take advantage of those opportunities. I'm fully invested, have been for several (very good) years. If anything, my mistake was not having enough cash to properly play the choppiness we have now! Spoke with the broker yesterday about the need to come up with $50-75k in cash by Christmas to be able to properly work the market.

    I also liked Dahaub's post...he's right. A lot of folks are going to have it rough. However, by my estimation, MOST of those folks are in for a patch of rough sledding completely of their own creation. Someone told them that they could afford a $500k house on a $20k salary, and not taking the time to figure it out for themselves, they drank heavily of the kool-aid.

    Now, they see the folly of their ways.

    Some lessons are tough ones, regrettably. However, one truism remains: If you don't owe anyone any money, you can't go broke.
     
  18. phirel

    phirel TS Member

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    Morgan- I understand how the lower valued dollar will move money from the US into foreign investment accounts, but shouldn't it also stimulate US exports? If this is true, these two factors could counter balance each other. I find economics both interesting and confusing.

    Also, the current so called housing crises is restricted to areas that saw dramatic price increases the last few years. In many regions, the housing costs did not escalate significantly in 2004-2006. These areas are now protected from a dramatic fall in housing prices. In the area I work, housing prices increased ca 5% per year in 2004-2006. It appears that in 2007 this rate of increase will remain close to 4.0%. The major change I see is the marketing time. From 2004-2006 the typical days on the market for a home was 30-40. In 2007 the days on the market increased to 40-100. Our "typical" upscale new home is a two story, 2800 square feet brick house, on a 2-4 acre lot or on smaller lots within a PUD (no exterior maintenance). Current price range is $350-435,000 depending on the interior finishing. Material costs are similar across the US. Our labor costs are a bit less but that does not explain why a $350,000 house in Western Virginia would costs 5-6 times more in other areas. We have essentially full employment and a steady population growth. The areas where housing costs are very high seem to have a staggering employment rate and a decline in population. I remain very confused about economics.

    Pat Ireland
     
  19. Tripod

    Tripod Well-Known Member

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    Iowa man!!
    Any fool can spend his way to oblivian.
     
  20. grnberetcj

    grnberetcj Active Member

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    Pat,

    Same real estate scenerio here in Delaware.

    The housing market will rebound in a short period but not in some areas. The hardest hit will remain in the states that have high taxes, low workforce and high entitlement programs.

    In my area there has been a "slow-down" in the home sales, but pricing remains high. The builders have just built too many, too fast and are now paying the price for that. The lower half of Delaware is still selling, especially by people who have bailed out of New Jersey/Penna. due to very high taxation and poor politics.

    Curt - Delaware
     
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