Did you know that regional presidents of the Federal Reserve sometimes say intelligent things with which a common-sense person can agree? It’s true, and more Fed presidents are finally speaking out against at least some of the Fed’s policies. Earlier this week, two Fed governors criticized the Fed announcement that they would keep rock-bottom interest rates for the next two years. They recognized that this two-year announcement 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.
The Dallas Fed President, Richard Fisher, 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 went on that “they simply cannot budget or manage for uncertainty of fiscal and regulatory reform” (for the full speech, visit https://www.dallasfed.org/news/speeches/fisher/2011/fs110817).
He correctly stated that the debt ceiling discussions only exasperated the issue. Everyone watching TV or reading about those discussions could see that neither Democrats nor Republicans had any idea what to do about the current crisis. Most of the politicians were more interested in pleasing their base constituents than in actually helping the country.
Anyone running a business, 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.
Being a deed of trust note buyer, I’m in the same boat. Like most note buyers, I use very 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 makes it difficult to plan for the future and makes me nervous about what to do.
Recent economic news has been nearly all bad. Even the stock market has been extra volatile and trending down. Nothing suggests that the fiscal crisis and economy will get better in the next year, or even after the 2012 election. The politicians don’t seem to have the backbone to make changes that will anger much of the population.
For now, I hope every month that each deed of trust note that I own continues to pay, and that being a deed of trust 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.
Alan Noblitt, president of Seascape Capital, is a deed of trust note buyer in California.
