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Money Does Grow on Trees!
by Troy Patton, CPA - Finance Geek
 The
latest quarter of investing has been downright tough. We have seen the major
indices fall from grace and all appears to be lost. HOLD ON! This too
shall pass.
The Fed
just lowered rates once again down to 2% on the Fed Funds rate. This will be
saving hundreds of thousands of families money on their home equity loans.
For
instance, the average family who has a $50,000 home equity loan will be saving
$1500 per year (since the Fed started lowering rates) if they are tied to the
Prime rate.
In
addition, the Government is going out to the orchard and picking money from the
trees and sending it to many families beginning in May. I am not sure if this
was needed or not, but I am glad the rates have come down a bit to put more
money in the family coffers.
We saw
the plunge of Bear Stearns and the subsequent steal of the company by JP Morgan.
Looking back over history, when the market hit bottom it was marked by the
demise of a large company or two. This was the case with Enron and Worldcom in
2002.
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In a
previous newsletter I discussed the 10 year Treasury hovering around 4% and I
thought it was too low. Well it got lower. The fear in the common investor and
institutions has driven it to 3.3% give or take a little. I fail to see the
value in making 3.3% for the next 10 years. Phooey! I would rather invest in a
solid company paying a dividend close to that amount.
This crowd-driven behavior will pass, and by my accounts nearly 25% of the
investments are sitting in cash and cash equivalents. As this cash finds its way
back to the market, we will see a surge in the markets getting back all that was
lost and then some.
The dollar has continued to lose some of its value with the Fed lowering
interest rates. However, the latest moves by the Fed have shown they can do some
maneuvering without lowering rates. In fact, I think the Fed will lower rates by
.25% or .50% at the next meeting and that will be the last of the rate cuts. The
US dollar will then rebound and we will see the market move higher.
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There is
higher inflation on the horizon and it remains to be seen how the Fed will act.
Much of this inflation is coming from commodities such as agriculture, oil, and
metals. This may ease a bit at some point, but will not go away in total. This
is why a strong dollar is needed to help curb the effects of inflation. The
recession in real estate will continue for the rest of 2008.
The opinions written within this publications are
the opinions of Troy Patton and are not intended as investment advice or an
offer or solicitation to buy or sell any securities. If you would like to
contact Troy Patton, he can be reached directly at 800-671-5872
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 Have
a finance question or a comment for me?
Send
it to
tony@financegeeks.com
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