Searching For A Direction

Were you aware that regional presidents of the Federal Reserve sometimes say intelligent things with which a common-sense person can agree? Yes, it�s true, and several Fed presidents are at last speaking out against at least some of the Fed�s policies. Last Wednesday, two Fed governors stepped up to criticize the Fed announcement that it will keep rock-bottom interest rates for the next two years. They recognized that this decision effectively limits the use of one of the Fed�s main tools for fighting inflation, plus the rest of us know that it also hurts those who want to save money.

Richard Fisher, the Dallas Fed President, went further by noting how current government policies and programs, as well as the economic unknowns, are freezing business activity. He stated that �those with the capacity to hire American workers � small businesses as well as large, publicly traded or private � are immobilized.� He continued that �they simply cannot budget or manage for uncertainty of fiscal and regulatory reform� (full speech can be found at http://www.dallasfed.org/news/speeches/fisher/2011/fs110817.cfm

He recognized that the debt ceiling discussions only exasperated the issue. Anyone watching TV or reading about those discussions could see that neither Democrats nor Republicans had any idea what to do about the current crisis. The majority of the politicians were only interested in pleasing their base constituents rather than actually helping the country.

Any business person, regardless of size or industry, has to be nervous about the current fiscal environment. Most of us recognize that government spending will have to decline and taxes increase, but we don�t know when or how those will happen.

As a mortgage buyer, I�m in the same boat. Like nearly all note buyers, I use conservative assumptions when evaluating whether or not to buy a mortgage note. The real estate market has been hit hard and continues to fall, unemployment is still a major issue, and the government is intent on regulating everything that they can. This combination of problems makes it difficult to plan for the future and makes everyone nervous about what to do.

The recent economic news has been all bad. Even the stock market has been extra volatile and trending down. There is nothing to suggest that the fiscal crisis and economy will get better in the next year, or even after the 2012 election. The politicians don�t have the backbone to make changes that will surely anger much of the population.

Every month, I hope that each real estate note that I own continues to pay, and that being a mortgage note buyer stays viable. As always, I recommend to you to stay conservative with your investments, especially as they relate to real estate. Somehow we will get through this mess, but it�s going to be a very bumpy ride.

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