Well you don’t have to worry about AIG bringing down the Dow Jones Industrial Average anymore…the Ritz cracker just ate AIG. Yep, Kraft Foods will replace AIG in the Dow Jones next week. We’ve gone from insurance to mac and cheese. At least my 3 kids, all under the age of 4, will be happy.
And President Bush attempted to calm markets as well and indicated that the government bailouts of Fannie Mae, Freddie Mac, and AIG were essential to keep the economy sound. “These actions are necessary and important, and the markets are adjusting to them,” the President noted.
Adjusting? Panicking seems more like it, huh?
Washington Mutual continued to find itself a suitor today, but The Wall Street Journal reported that Citigroup didn’t want to get engaged just yet. Morgan Stanley is rumored to have been thinking about dating and possibly proposing to Wachovia Bank, but a few Asian banks—and perhaps that Chinese government itself, might come to the rescue of the firm.
Politics took center stage today as well. Republican Presidential candidate John McCain, seeking to put some distance between him and President Bush, said he would fire Securities and Exchange Commissioner Christopher Cox. The chairman of the SEC serves at the appointment of the president and in my view has betrayed the public’s trust,” McCain stated. “If I were President today, I would fire him.”
How does this affect Main Street? Well money markets are getting a little jittery these days. These funds invest in short-term corporate and government bonds, but they have taken a hit as of late due to significant redemptions. The Primary Fund RFIXX went below a benchmark of $1, which meant that if someone held money in these funds they would actually lost money, not make money. The Primary Fund had around $40 billion in withdrawals since last Friday. And Putnam Investments said it was now closing its $15 billion Prime
What good news was out there? In a move reminiscent of the Resolution Trust Corporation (remember the good ole’ days of the S&L Crisis), US Treasury Secretary Henry Paulson is developing up a plan to take the bad debts from banks and investment houses and package them up for an orderly sale. That sent stocks higher today, with the Dow Jones finishing the day up over 400 points.
So let’s get this straight. Mom and Pop don’t have much money anymore, but what little money they do have is now losing money in what some folks thought was risk free, a money market fund, for the first time ever. Major financial institutions like Morgan Stanley and AIG are teetering. Credit has tightened beyond all recognition and the thought of getting a loan that isn’t government backed is laughable.
But I still here from some Realtors that foreclosures are just gonna be here for just another year. Well, if you think they aren’t here for the next 3 years, in this economy with this type of financial turmoil, you might as well grab some of those Ritz crackers and have a pity party now, because it isn’t going to happen.
But it is the single biggest gift many of us will ever be given in our lifetime. Wherever the public runs one way, I say run the other. And I have made a lot of money because of it. When a sink hole drained a local lake in my hometown, where all the fancy houses were located, I made a low ball offer on a house a few days later when everyone was freaking out thinking the lake would be a swamp. As I type this, I’m staring over a beautiful lake with a magnificent view of the water. The story is true, by the way… just Google the words “sinkhole McLaughlin buy dry sell high” for a funny story on it.
So remember … in this market, you can now buy low, and not sell high, but sell fast. And that means less risk, less holding costs, and money in the bank. But you have to do more than read this and agree … you need to take action, too.
I’m loving this market more and more each day. The real estate market, that is.
Chris McLaughlin
Web: http://www.shortsalesriches.com/welcome
e-mail: info@shortsalesriches.com
Phone: (800) 452-7627
P.S.: P.P.S.: Nathan just told me he will be closing 20 homes within the next 30 days. Not bad for a kid that was home schooled with no formal education, huh? All the guys with the fancy education work(ed) at Lehman, Bear Stearns, AIG, Fannie, Freddie, and other banks .. hmm… kinda ironic ain’t it? Check his secrets out at: http://www.shortsalesriches.com/welcome
P.P.S.: Want to comment on this article? Go to the blog! It is located at http://www.shortsalesriches.com/blog.
