After a very interesting week for treasury rates, I have to ask the question, “should the Government cap interest rates?”  In essence, this is exactly what the Federal Reserve Bank is doing by buying up US Debt.  The issue at hand is that the more debt the Federal Reserve Bank buys, the more paper money they have to print.  No matter how hard President Obama and Ben Bernanke try to convince me, I will NEVER believe that this will not create inflation.  When you have a surplus of a good or service, or currency in this case, the value is going to decline.  If you don’t believe me, ask the home owners in Phoenix, Arizona.

Is it worth it to attempt to print our way out of this recession knowing that it may not work?  If the Fed keeps buying up mortgage backed securities and treasuries and the economy does not happen, then what?  So far, we have spent trillions of dollars trying to spend our way out of this recession and it looks no different than it did before the Stimulus Package.  I honestly hope that things turn around quickly, but I just do not see it.  Home prices remain low and downtrending, the unemployment rate continues to rise and retail sales continue to plunge.  Is there a silver lining that I am missing?

Ultimately, I agree that changes needed to be made.  That does not mean spend MORE money.  Every single day we hear of an addition to the stimulus package or Heaven forbid, a SECOND stimulus package.  I guess our government officials will continue to run head first into the wall and hope it eventually breaks down.  The definition of insanity is doing the same thing over and over again and expecting a different results.  Well, I can honestly say that the people trying to figure out how to fix this economy are insane.

President Obama has a press conference later today and I am sure he will paint a picture that is much different than reality.  The housing market continues to worsen, mortgage rates are likely to head higher and unemployment is continuning to rise.  How is this ANY improvement from where the economy was six months ago?  It’s not; in fact, it is actually worse!  I would not be surprised at all to see the stock market start to sell off throughout the summer and definitely into the fall.  This will cause Americans to realize just how bad things have gotten.

I hate to see this happen, but there is very little to prove that anything in the American economy has improved.  We continue to spend more and more money and now there is talk about ANOTHER stimulus?  Just what we need, let’s give money to people who are irresponsible with their finances!  On top of this, President Obama continues to alter the Making Home Affordable program in an effort to allow EVERYONE to refinance.  Next thing we know, he will create a 200% loan-to-value refinance.

The only way this economy is going to get better is to flush out the “terds.”  If we continue to prop up bad companies and individuals with very bad financial habits, we are just going to continue to spiral downward.  Let them fail!  They need to know that there are consequences for making bad financial decisions.  Right now, people and corporations know they are going to get bailed out, so why change any habits?

If you are wondering how much President Obama is saving you in taxes here are a few sites:

What’s Your Obama Tax Cut?

Obama Tax Calculator

2009 Economic Stimulus Tax Comparison Calculator

Obviously these links are not exact but they will give you a ballpark figure of how much the Obama Stimulus Tax Cuts are saving you.  Some corporations are even documenting your tax savings on your paystub so you might just want to look on your pay stub to see how much your “Obama Stimulus Check” is.

If in fact the dollar is strong, it would be wise to invest in American equities and the United States dollar so that is exactly the road that President Obama will take in the challenge.  Since March 22nd, here are his investments returns:

SPY – UP 11.8%
USD – UP 0.8%

While President Obama feels the dollar is strong, I believe the opposite therefore I invested in the commodities etfs of Energy, Precious and Base Metals and Agriculture.  Here are my investment returns since March 22nd:

DBA – DOWN 1.4%
DBB – UP 13%
DBE – DOWN 0.5%
DBP – DOWN 6.7%

I will be the first to admit that the president is whipping my rear end thus far; but I will always reiterate “one month a trend does not make.”  Don’t worry President Obama, I still have three and a half years to watch the value of the dollar decline as you and your adminstration continue to print dollars hand over fist.  I am still quite confident that the dollar will see great declines in the next few years due to YOUR actions.

Stay posted to Subprime Blogger to see the ongoing, up-to-date results of the President Obama vs Subprime Blogger investment challenge.

We all know that many banks and mortgage lenders are in horrible financial condition.  Now the government is forced them to lend at extremely low rates which is pushing people through their doors.  The problem is that many of these lenders are not ready for the influx of mortgage applications.  I honestly feel that we will start to see mortgage rates go higher due to the fact that lenders cannot keep up with the applications.

Not only are lenders struggling to go through all the applications, they are also struggling to fund many of these mortgage loans.  Almost every financially sound home owner in America has a desire to refinance at these low rates.  If only 1/5 of America does go through the mortgage application process, lenders are going to find it VERY difficult to fund these mortgage loans.  The only way to solve this issue is for lenders to turn away borrowers who are not elite.  If there is a second thought by the lender, it is likely the borrower will not get financed.

The next few months should be extremely interesting in the housing market, but I still do not see a bottom any time soon as the unemployment rate and new housing supply continue to rise.

If hardworking Americans continue to lose their jobs, how are they going to make their mortgage payments?  If mortgage rates were under 4% it would not matter if there are jobs being lost.  The only way that we will see a bottom in the housing market is when supply equals demand.  There is currently 12 months of housing supply which is still extremely high.  Unfortunately, the housing supply graph shows that we are still in an uptrend for supply.  If people are losing their jobs and housing supply remains high, who is going to buy all the homes on the market?

The only individuals who will have a chance to buy up some of these homes are investors or home owners with a great deal of money.  It seems that the later of the two is quite reluctant to put any money into another house in the current economy.  What have you done for me lately is a saying that many Americans use and think on a daily basis.  The current pscyhology of the housing market is that if you buy a home you could immediately see a 20% loss of value; it is almost worse than buying a vehicle in some housing markets.

Overall, mortgage rates trending lower is great for those who want to refinance and save money over the long run, but it is going to do very little to help create a bottom in the housing market.  If you have been financially smart with your money and have some extra cash saved up, now is one of the best times in history to get that low rate refinance that you have always wanted.

• Mortgage Rate Predictions
• Mortgage Rates Trends
• Refinance Sunday

I have a good friend who recently went through the refinance process on Amerisave.com.  He had hopes of getting a rate of under 5% as the Federal Reserve continues to inject trillions of dollars into the economy to force rates lower.  Let me preface his experience by saying he is considered a PRIME borrower with a credit score over 800, zero credit card debt and an abundance of cash in savings, checking, and 401(k).  He also has a stable job that produces six figures a year.  If anyone could get a lower rate by refinancing, it would be him.

After going through the process, he was sadly disappointed to know that the appraisal for his home was over 10% LESS than his purchase price and over 20% less than he expected.  He lives in a housing market that has yet to see a steep decline; well, that is what we thought.  The lender made the statement that the appraiser did everything he could to increase the home value, but it was still well below the purchase price.  He thought he was going to have well over 20% equity in his home, but this is not the case with the new appraised value.

In essence, the steep decline in the value of his home has caused the refinance process to come to a screeching halt.  This is all too common with home owners today.  I honestly thought this would change as Obama attempted to create a housing plan that would put a bottom in the housing market.  Well President Obama, looks like you and your administration need to go back to the drawing board.  If a PRIME borrower cannot get a desired refinance rate then who can?  I realize you want to redistribute the wealth, but those who have been financially responsible should be rewarded at some point!

• Savings, NOT Credit, is the Lifeblood of a Healthy Economy President Obama
• Obama Mortgage Bailout Plan – 64% of Americans Feel it is Unfair
• Americans Against the Obama Mortgage & Housing Bailout

So you understand how bad unemployment is but you think that low mortgage rates are going to put a bottom in the housing market?  President Obama, do you realize that if people do not have jobs, they cannot buy homes?  One would think you could put two and tow together, but I guess not.  I realize that it is not a direct correlation but there is a relationship.  Mortgage rates could be zero and it would not matter if the unemployment rate does not decline.

Yes, mortgage rates being low are a good thing for those who want to refinance, but that will not put a bottom in the housing market.  The months of housing supply is at the highest levels in history and is likely to rise if the unemployment rate continues to rise.  As stated earlier, even if mortgage rates were zero, this would not help to reduce the housing supply; more jobs and a lower unemployment rate will put a bottom in the housing market.

• Savings, NOT Credit, is the Lifeblood of a Healthy Economy President Obama
• Obama Mortgage Bailout Plan – 64% of Americans Feel it is Unfair
• Americans Against the Obama Mortgage & Housing Bailout

I know you are man of history President Obama as you have made history many times over.  If you look at the recent history of the United States dollar, how can you make the statement that the “dollar is still strong?”  If you look at a 40 year chart of the dollar index, it is a steady downtrend from 1985 until now.  In 1985, the dollar index was at 165 compared to the 83 today.  The dollar is still strong?  I realize that much of the dollar decline can be attributed to the Bush administration but do not tell me that the dollar remains strong when it is half of its 1985 value and likely to go lower!

With the national debt surpassing the $11 trillion level, how can you make the believe the dollar is still strong?  I tell you what President Obama, I will be willing to challenge you on your statement.  We will see the value of the dollar index start a long term decline within the next year.  This decline will last several years and will cause the dollar to test lows it has never seen in history!  The dollar index currently trades at 83.83, let’s see who is right over your presidential term.

I guess if you feel that the value of the dollar is so strong, Americans should continue to strongly invest in equities correct?  Well, I will be willing to challenge you on that as well.  I will invest in commodities such as Gold, Silver, Oil, Copper and Agriculture and you invest in the overall stock market.  To make this fair, you can track the SPY, the overall S&P 500 index as well as the dollar index and I will track the DBA, DBB, DBP and DBE equally.  These are the commodities etfs of argiculture, base metals, precious metals and energy.

On March 22nd, here is where we stand:

President Obama
SPY -  76.71
Dollar Index – 83.83

Subprime Blogger
DBA – 25.01
DBB – 12.89
DBE – 20.25
DBP – 32.77

Just to reiterate, you did make the statement that “the dollar is still strong” so you have no reason to think commodities will increase, but equities will.  I will enjoy this challenge President Obama.  There is no doubt you are much more educated and smarter than I so you should win hands down.  You also have control over the major decisions that affect the financial markets of this economy which also gives you a major advantage.  With that being said, I will still take the challenge.

• Savings, NOT Credit, is the Lifeblood of a Healthy Economy President Obama
• Obama Mortgage Bailout Plan – 64% of Americans Feel it is Unfair
• Americans Against the Obama Mortgage & Housing Bailout

If you have been irresponsible with your money in the past, what is going to change that today?  Did all the individuals who defaulted on their mortgage loans and built up huge amounts of debt decide that now is the time to take a finance course?  Do you think ANY of these individuals know how to compound the annual percentage rate on their EIGHT credit cards?  If they did, they would not have eight credit cards!

If Americans was getting financially smarter, we would not continue to see credit card spending up.  We would not see a greater number of foreclosures.  We would not see savings remain at the lowest levels in history.  This is why SAVINGS is the lifeblood of a healthy economy.  Those who are financially intelligent and know how to manage money SAVE.  Those who are financially ignorant and have no clue how to manage money buy on CREDIT.  So President Obama, why would credit be the lifeblood of a healthy economy?  Oh, thats right, because we need to redistribute wealth to those who do not know how to manage it!

• Best Prediction of the Stock Market and Economy – Unemployment Rate
• Americans Against the Obama Mortgage & Housing Bailout
• Will the Subprime Mortgage Crisis Cause Retailers to Go Out of Business?