Opportunity To Get Ahead Of The Curve?

At the end of March, interest rates now sit at 6.32% average across the country for a 30-year fixed rate mortgage. While this is lower than a few weeks ago, they are still much higher than a year ago.

The cause is that the Federal Reserve has been raising rates aggressively over the last year to fight persistently high inflation. The Fed's goal of raising rates is to slow the economy and bring inflation back down to a normalized level or target goal of 2%.

Raising rates makes large capital expenditures for businesses or individual households more expensive, thus creating a situation where it is no longer affordable or makes good business sense to make those investments.

Fewer large investments or fewer new homes being built because the financing costs of making those purchases are too high will eventually slow the economy and thus bring inflation down.

While we all want inflation to come down quickly, it takes time for high-interest rates to flow through the system and change business leaders' and households' decision-making.

Furthermore, there is a rather big delay with the economic data that tells us how the economy is performing and whether or not large investments, home purchases, and overall spending is slowing.

This all means that when we realize business leaders-consumers have changed their minds about what investments and purchases are worth making, the economy is already slipping.

If we now look strictly at the household side of the equation, it seems clear that this group is heading toward tough times in the not-so-distant future, thus making the idea of a new home purchase much less likely.

First, we have high inflation. This is making everything across the board more expensive. Consumers' average cost of living is increasing, whether it be groceries, child care, transportation, or clothing. Continue reading "Opportunity To Get Ahead Of The Curve?"

Play The Current Housing Boom With ETFs

Unless you've been living under a rock, you know that the housing industry is booming. Inventory is low, and prices are high! Over asking is now a standard term and contingency waivers are the only way you win those bidding wars with other buyers. Oh, and not to mention, if you find a house for sale, you better see it the first day it is listed, or you can forget about ever getting a chance because the number of days on the market is essentially zero at this point.

So how can you invest in this market without having to deal with this headache of a situation and risk overpaying for an asset class that historically only goes up 2% year-over-year?

Enter the world of Exchange Traded Funds!

There are several Exchange Traded Funds that you can buy today that will give you access to the businesses that are not only performing well right now but are still drooling at the current prospects that lay in front of them. In particular, the home builders. Continue reading "Play The Current Housing Boom With ETFs"

The Debt Storm Is Coming

Matt Thalman - INO.com Contributor - ETFs


While we can debate until we are blue in the face the actual ins and outs of what causes recessions, most would agree that high debt loads play a significant role. If we look back at the 2008-2009 recession, this is very true. Or the dot.com bubble bursting, debt played a large role. Even go a little further back into history and look at the 1929 stock market crash and subsequent recession, mostly fueled by margin trading (investors trading with borrowed money, i.e., using debt to fuel larger trades).

At this point, not many people are talking about the United States current debt levels. Not only is the U.S. government's debt level out of control, but more importantly consumer debt levels are also out of control, and that is likely the more concerning issue.

When consumer debt gets out of hand, first we begin to see increased levels of defaults. That leads to reduced levels of credit as the institutions who lend credit begin to tighten their requirements to borrow. With less available credit, consumers begin spending less on discretionary purchases because they either can't get credit or have maxed out what credit they did possess. Lower spending leads to lower profitability for consumer facing companies, which then leads to a reduced number of jobs in those sectors. Continue reading "The Debt Storm Is Coming"