Guest Blogger – Charlie Tobias of Express Title Company

GOVERNMENT v. ECONOMY

 REVISITED 

Welcome to 2010. I took some time off last month to prepare for the new RESPA. In addition to our seminars that we gave our web page now has a Quick Quote so you can get all of your closing costs to prepare your GFE. Visit us at  www.expresstitle.com.  

My first piece last year was a 3 part series titled as above. If you recall, the essence of the series was that the government would be caught in a tug of war with the economy for the year in order to right the ship. So let us take a look and see where we are today.

The theme of 2009 was deflation and the Federal Reserve pulled out all of its tricks to inflate the economy. The DJIA hit a low in March of about 6700 and ended the year at about 10,500. Most commodities bulked up last year as well. While wheat, corn and natural gas were down, gold, coffee, oil, orange juice and copper were all up. GDP in the third quarter reversed direction as well and was up about 2.5%. Housing prices have stabilized in many parts of the nation, as well. Bernanke even said the recession is over. Looks like the government won.

Not so fast I say. To achieve the above, the government had to borrow or guaranty about 10-14 trillion dollars of debt. This is about equal to one year of our GDP. It is predicted that our national debt will equal 100% of GDP by the years end. Furthermore, 3.5 trillion dollars of debt must be issued in the next 12 months; 1.5 trillion to finance our budget deficit and 2 trillion to repay debt that matures. Unemployment remains at multiyear highs between 10-15% (depending on which figure you use) with jobs still being shed rather than gained. One of every four homes has negative equity. One of every seven mortgages is in default. Foreclosures remain at record levels and will continue to mount. When viewed on a chart, the number of Alt A, Prime and Subprime loans that will reset looks like two mountains. We have just hurdled the first mountain and are about to hurdle the second mountain which peaks in the last quarter of 2011.

The banks are still having problems as well. There were just shy of 150 bank failures last year with that number expected to double this year, according to the FDIC. Credit remains on the decline. The FDIC, FHA, Fannie and Freddie are broke. Congress passed legislation before the holiday agreeing to fund Fannie and Freddie any amounts necessary to keep them solvent. (Why can’t I get that?)

A record 37 million people received food stamp assistance. The number of food stamp recipients in Maryland increased 35% in 2009.

Furthermore, with all of the debt we must sell and with the central banks of Australia and China raising their rates recently, I expect our interest rates to rise this year as well.

On the face of it, it appears that the government is winning but the fact is the economy is still kicking our butt. As Bette Davis said, ”Fasten your seat belts. {2010} is going to be a bumpy {ride}!”

 STAY WARM and HAVE A GREAT WEEKEND. 
Express Title Compny
6110 Executive Blvd., Suite 300
Rockville, Maryland 20852
P 301-231-8200
F 301-231-8201
www.expresstitle.com

CHARLIE