Tired of paying that high interest rate? Ready to move into a new house? Now is the time to apply for a mortgage because rates are incredibly low! If you are thinking about refinancing or moving into a new home make sure you take advantage of $250 off closing costs by coming to me for your mortgage. This is the best deal in town coming from the Best Bank in Town.
Great Afternoon!
It has been a while since I have sent out an email and I am going to try to be more consistent about it. In my last email I promised I would discuss velocity of money and that is what I am going to do. However, first I am going to talk about the economy and some current events and factors that are affecting the market… and of course the Panthers!
We are getting towards the end of the regular football season and there are playoff talks now. If anyone saw the Monday night game, the Panthers beat the Bucs to take first place in the division. If the Panthers can win the next three games, they will have the number one seed going into the playoffs and home field advantage all the way through.
My mailing list is growing quickly. If you know someone that wants to be added, just let me know and of course if you want to be removed let me know that too. Check it out in my blog at Jmassachi.blogspot.com. Start some discussion and let me know what you think. Feedback is appreciated.
Onto the show…
The Government's Triple Detroit Investment
The big talk this week in the news is the Big Three in Detroit. Yesterday, the house approved a $15 billion loan to GM and Chrysler with specific details of what they want to see these privately held companies accomplish by the end of the first quarter 2009. While $15 billion may not seem like a lot of money after hearing numbers over the past few months thrown around such as $700 billion, $850 billion, and $3 trillion. I promise you, all of those numbers are HUGE. The reason the government gave for saving the automakers is mainly the jobs that it provides. It is not just jobs in Detroit that build the cars that are at risk but jobs in all fifty states that are related to the auto industry that are at risk if the Big Three fail. I will follow up with this in my next letter. This is heavily related to my next topic which is velocity of money...
The big talk this week in the news is the Big Three in Detroit. Yesterday, the house approved a $15 billion loan to GM and Chrysler with specific details of what they want to see these privately held companies accomplish by the end of the first quarter 2009. While $15 billion may not seem like a lot of money after hearing numbers over the past few months thrown around such as $700 billion, $850 billion, and $3 trillion. I promise you, all of those numbers are HUGE. The reason the government gave for saving the automakers is mainly the jobs that it provides. It is not just jobs in Detroit that build the cars that are at risk but jobs in all fifty states that are related to the auto industry that are at risk if the Big Three fail. I will follow up with this in my next letter. This is heavily related to my next topic which is velocity of money...
Velocity of Money - How The Economy Works
Velocity of money has nothing to do with how much ads cost in NASCAR. Or maybe it does. Money travels around micro and macro economies faster than most people understand. It is not you buying an item on EBay from someone in London, it is you buying a soda at Wal Mart. When you buy that soda the money gets distributed around the world multiple times. You buy the soda, Wal Mart pays their vendor, the vendor pays the wholesaler, the wholesaler pays the distributor, the distributor pays the soda company, the soda company pays their vendors which include sugar, water, and the hundreds of other ingredients that go into making one bottle of soda. Before you know it, part of your $1.50 soda is somewhere in Colombia on a sugar cane farm. Here is where the complicated part comes. Where does it go after that? Well the farmer then can plant more crops for next season to make sure you have soda in Wal Mart.
What happens if we skip some of those steps and go straight from the sugar cane farm to the soda company to Wal Mart? Now we have three steps in the middle that are out of jobs and those people may not be able to afford a bottle of soda at Wal Mart. That is how a recession happens. Money needs to float freely through the economy in order for it to work. As soon as one process gets removed there is bound to be another then another.
How does the economy spark back up?
When a new distributor comes along and tells Wal Mart that he can simplify their process so less of their energy goes toward getting soda and more goes towards selling it all of a sudden jobs are created and people can afford to spend money and buy those sodas that they are making, distributing, selling, and eventually consuming themselves. That is just touching the surface of how things work but a good example to think about. This is one of my favorite things to discuss so let me know if you want more information.
Financial Update
Since the DJIA highest close ever on October 14, 2007, the market has lost over 38% of its value. Why? A lot of people are still talking about being in a credit crunch. That is not the problem. The true problem is a liquidity crunch. There is simply no cash to be had, it is all tied up in bad investments OR it is being held because there are no strong investments to put it in right now.
Despite media reports, banks are still lending money. Car loans, credit cards, and mortgages are all still readily available for qualified buyers. Sure it might be nearly impossible to buy an investment property with no money down and no closing costs with no credit and no assets like it was back in 2006 but it is not impossible to buy a house to live in for a typical home buyer. Don't let the media fool you, there are still loans available and at low interest rates!
The Federal Reserve is meeting next week. The last time they met they cut the Fed Funds rate to 1% which gave the market a slight boost. There are talks of lowering the rate again by .5%. That would put short term money based on Prime Rate at 3.5% for qualified borrowers. It seems as though the fed is not worried about inflation (as much) these days because of the prices of commodities going down. Just this week oil hit a four year low at less than $40 per barrel which equates to gas well under $2 a gallon. I don't blame gas prices for this recession but I do believe it was high gas prices that drove the economy into a downward spiral as fast as it did. Could lower gas prices be what we need to spark the economy again? Only time will tell.
Mortgage rates are lower right now than they have been for years. If you are looking to refinance with a solid bank at a great rate and low closing costs BB&T Home Mortgage is the way to go. BB&T has won the JD Power award again this year. It is our second year in a row winning the award for the servicing of our mortgages. BB&T does not sell the servicing to anyone. Remember, I am not simply a loan officer at a big bank, I am a Mortgage Advisor looking out for the people who trust me to do so.
Please forward this message to people you know, maybe they want to be added to my mailing list.
Thank you for your attention!
Your money-moving mortgage advisor
Jon's Mortgage Spotlight
30 year fixed mortgage
BB&T has over 400 different mortgage products that we can offer to our clients. The most common is a 30 year fixed mortgage. Why? Right now, especially, because rates are so low this makes the most sense. The spread between a 15 year or even a 10 year mortgage is small enough that it makes more sense to spread the debt out over 30 years and take the additional cash flow and invest in a SAFE investment at a higher rate of return than the rate spread. If you need more information about terms, rates, or investments please let me know.
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