assets

Auctions and Trends in the Market –

Do you tend to buy stocks or real estate when the market is improving? And sell when the market is worsening? If so, join the crowd. This action, of course, creates its own “feedback loop”, also called “price-to-price feedback”. When the feedback stops, markets often turn around, or a speculative bubble bursts. Astute traders include watching stock volumes during trading days, although they must make allowances for things like summer vacations, the day before a 3-day weekend, etc. Why would anyone expect real estate prices to increase, given typical supply and demand activity?

Click here for information about Non-Purpose, Non-Recourse Loans

It is generally accepted that the high-end real estate is feeling the brunt of the credit crisis right now. Given the higher unemployment, the uncertainty about the future of expensive properties, and the loss of a liquid jumbo lending market across the nation, I have yet to see any analysts bullish on properties worth more than $1 million. The “lower” end properties, however, are benefiting from low interest rates, renewed attention from mortgage investors and the US government, and demand for foreclosure sales. Interesting times…

What happened Monday in the markets? Well, after an ugly Friday afternoon, fixed income securities came roaring back with prices improving and rates inching lower. Most investors had intra-day price improvements. Locks and originations are down somewhat, which helps, The Fed was in doing their usual buy-back of securities, and the stock market losing a little steam didn’t hurt bonds either. For mortgage-backed securities, a 4.5% coupon security (which would contain 4.75-5.125% mortgages) is priced at about a .5 discount. But by the time an investor adds their servicing released premium of 1-2 points, suddenly the secondary market is paying .5-1.5 over par for these loans. There is still profit in originations!

We have the 2-yr auction today. Who will pony up to buy a piece of the $42 billion and earn about 1.02% for two years? We’ll see, but many expect it to go well. Ben Bernanke has been nominated by Obama for a second term as Federal Reserve Chief, which is helping to calm markets. We will also have the S&P/Case Shiller Index, and at 7AM PST we’ll have the Consumer Confidence numbers. Mortgage prices are roughly unchanged from Monday afternoon, and the 10-yr is chopping around 3.50%.

As noted above, Bernanke has been nominated for a second term. His nomination for a second four-year term, which would start in late January, requires Senate approval and was endorsed by the head of the Banking Committee, Christopher Dodd. So don’t look for too many surprises during the process.

Do you remember how there was a public opinion period for the HVCC, which passed, and then when HVCC was put in place everyone was upset? Well, apparently the Fed is addressing how mortgage loan officers are paid. Given that a loan originator or mortgage broker is any person who for compensation or other monetary gain arranges, negotiates, or otherwise obtains an extension of consumer credit for another person; you’ll have to check out the website below. I don’t have the attention span to go through the entire document, but it doesn’t look good!

Bank of America has agreed to pay $150 million to settle a lawsuit alleging Merrill Lynch executives mislead investors about the bank’s condition. The suit targeted a number of Merrill Lynch executives and board members, including the former CEO. We all remember that Bank of America formally acquired Merrill Lynch at the start of the year after agreeing to buy the struggling investment bank last fall.

In news that surprised no one, Taylor, Bean & Whitaker filed for Chapter 11 bankruptcy protection and said it may liquidate, three weeks after it closed its mortgage lending business. TBW said it plans to operate on a scaled-down basis as it works to recover, restructure and possibly liquidate its assets is not an easy task with more than $1 billion of both assets and liabilities, and between 1,000 and 5,000 creditors.

Click here for information about Securities Based Lending / Stock Loans

Investing For Small Business

Whether a sole-proprietorship, partnership, or a limited liability corporation, all small business owners know that they are already investors in their own business.

With so much involved in the day-to-day operations of running a business, many small business owners place investing in the back of their minds. However, this can be a dangerous way to operate. After all, when you’re the boss, you’re also in charge of your own retirement plan and in finding ways to reinvest in the company without damaging the capital you’ve already built.

Click here for information about Non-Purpose, Non-Recourse Loans

Here are a few key tips in small business investing:

Your business is part of your portfolio.

When deciding on an investment strategy for your small business, do not neglect to consider your business as a part of your investment portfolio, since you may be able to tap into some of your existing equity or value in order to make new gains.

Tone down the entrepreneur.

When considering your investment strategy for your small business, consider risk. While the entrepreneurial spirit can make a person a successful business owner, it may also make them a horrible investor by encouraging them to take on too much risk. Slow down and understand when and where to be aggressive in your investments.

Strategize for capital preservation.

While your personal portfolio may be built around simple growth, your small business investment portfolio should strategize for capital accumulation and preservation. That way, when lean economic times come, your small business can lean on its portfolio to help generate income.

Diversify outside your business.

Small business owners may want to invest in their industry; after all, it is the industry they know best. But try to avoid putting all of your investments in one industry. If the industry falls on hard times, your business and your portfolio will both take a beating.

Allocate your assets.

It may be tempting to put all of your money in one place, but you need to properly allocate your assets to make them work for you. Stocks can make you a lot of money in the long term but can be risky short term; bonds are less volatile than stocks but also have a lesser yield, and cash in the form of savings and money market accounts do not earn much in comparison. Talk to a financial planner about properly allocating your assets to make your money work best for you and your goals.

6. Talking with a financial planner.

This is probably one of the most important you can make. When making decisions on how to build your small business investment portfolio, consult someone who is as good as his or her job as you are at yours. Your financial planner can look at your business, manage risk, and help you to define goals that make sense for your business. Talking to a financial planner will ensure that you create an investment portfolio that makes good financial sense now and for the future.

Click here for information about Securities Based Lending / Stock Loans