Paul Ferraresi

There are new bank fees coming your way just like the higher credit card costs that came after Congress did a credit card fix two years ago.

Some benefits under the new regulations….Banks cannot automatically sign you up for something you may not use, like overdraft protection. To make up for these lost fees, big banks will push new charges at you.

Do not just accept them. Fight back. Look for better deals, like online banks, community banks, or credit unions. Also, look at online brokers that may provide free checking and online bill paying. Some of these alternatives even pay interest on checking accounts without minimum balances.

Here are a few sites you can try out to find some better deals:

http://www.findabetterbank.com/

https://www.checkingfinder.com/

http://www.bankrate.com/

Also, take a look at Everbank’s money market that pays interest on checking accounts of 1.00% to 2.25%.

Watch for changes at your present bank, like higher minimum balances or additional conditions and restrictions on all accounts. Don’t let them nickel and dime you to death with these other fees. Be proactive and save money.

One last point….check out http://www.lowcards.com/to find the best rates on credit cards.

For years I have written in this blog about the financial crisis being set off by Fannie Mae and Freddie Mac. (See previous blogs on how George Bush put a warning out in 2001, 2005, and 2007 to Chris Dodd and Barney Frank about the house of cards that had been built. Even in 2007 both Dodd and Frank denied there was a problem.)

The following articles were sent to me by a friend who is a former banker. Disregard the references to Democrats, Republicans, or Individuals and just read to get the ideas. Make sure you are sitting down as you get “the rest of the story.”

There’s an interesting article below and some background in the attachments. This all takes a few minutes to read through, which is exactly what the liberals don’t want anybody to take the time to do.

Clearly the biggest financial holes sucking in money have always been Fan and Fred, but they were never addressed as part of any of the banking regulations, due to the political risk. Prior to it just being political risk, there were millions and millions of dollars of compensation at risk for the folks who ran Fan and Fred. Mr. Rains was the single largest contributor to the Obama campaign and his compensation was directly tied to the volume of loans that took place at Fan. He walked away with tens of millions of dollars, for having taken his company into a fate far worse than bankruptcy. He was not prosecuted, nor even vilified, because he was doing what he was being enabled to, by the democrats in Congress.

The articles below provide an interesting overview of what really happened to this economy. It has all been blamed on greedy Wall Street bankers and none of the blame in the mainstream media has fallen back onto the liberals in government. The process was put in place by Jimmy Carter and then really kicked into high gear by Clinton and then into overdrive by a Democrat controlled Congress, with Bush not being able to do anything about it. He was unable, because the critical changes were not passed as new laws, which he could have vetoed.

Fan and Fred were begun in the 1930’s to ensure liquidity in the mortgage markets. They began to be bastardized by Carter and continued to be, up until their collapse. Even now, the Dems want to essentially pay off all low income mortgages with our tax dollars, in order to ensure a voter base for the future. It’s so absurd that it would be laughable if it weren’t so incredibly destructive to us all.

If you know of anyone who is still an Obama supporter and is also able to read, please pass this along to them!

And now, you know the rest of the story.

Mortgage Article (PDF)

Banking Article (PDF)

ACORN Housing (PDF)

Also, feel free to further educate yourself by copying and pasting this link into your browser:
http://www.hennessysview.com/2008/09/15/franklin-raines-criminal-enterprise-and-barack-obama-his-accomplice

I hear so many people bemoan that “if only they had known about the stock market drop from 2007 to 2009, they would have avoided losses and saved their retirement plans.”

Hmmm. Seems like all the signs were there, especially the weak financials from 2001 to 2007 on Fannie Mae and Freddie Mac. Those two quasi-government agencies were the major reason for the housing crisis (isn’t it funny how in the new Financial Reform Law, Fannie and Freddie were not even mentioned, or anything done to reform them?!). And, yes, Fannie and Freddie are still up their old tricks.

Take a look at human nature – people in America rarely connect the dots or project into the future. In everyday life, they sadly state after a long dry spell….geez, it will never rain. Sure enough, soon after that statement flooding, rain comes. After a prolonged rainy season, people cry out “it will never be sunny again,” soon followed by a drought. All things in life move like a pendulum from one extreme to the other. Both extremes are only momentary, as also for the mid-point or average. The same is true in business, love, and economics.

In economics we go for long periods of robust growth and then into recession. During boom times, people think it will last forever; and during recession times, they think we will never get out of this…ever! Stock prices moves the same way. Getting the picture? Just like my days of playing baseball. My batting average was .302. Thus 30% of the time I got a hit. When I went into an “0 for 20” slump, I had confidence that I would probably get 10 straight hits (which I did) and got back to my average.

Note how the crowd invests at the top of the stock market. They take money from bonds and banks and pour it into the stock market (buying high). Soon after stocks drop, they pull money out of the market (sell low) and place it into cash or bonds (safe). As people bid up the price of bonds (buy high), naturally the yield (or interest rates) drop. At the same time, with the stock market and economy in distress, the Federal Reserve will try to stimulate the economy by lowering interest rates. The masses wanting safety continue to pour money into bonds. Soon the economy begins to revive and the Fed begins to raise interest rates. As interest rates rise, the price of bonds drop and the small investor dumps bonds (sells low), losing money. As the economy begins recovering, the stock market anticipates this and begins to rise.

Our heroes, after losing above in stocks and now bonds, see the market has gone up xx% and want to get on the train that has already left the station. Again, they buy in at the top and sell at the bottom. Do you have the picture?

Those people that have money in bonds and bond funds – BEWARE. Interest rates are the lowest in about two generations. Short rates, set by the Fed are at 0% to .25%. They cannot go lower. In fact, they cannot go negative! Duh! (Remember the pendulum.)

The economy will begin a slow recovery, rates will rise and bonds (safe) will get hammered. The experts are stating “this is a bond bubble.” The drop in bond prices in the future will make the stock market drop of 2007-2009 look like a cake walk. In a rising interest rate environment, those bonds with the longest maturity will suffer the most. Keep maturities short and/or do a laddering. My statement is not a prediction of impending doom tomorrow, but it is on the horizon. The signals for the 2007-2009 drop were showing up in 2005.

Get your advisor to help you. Another alternative, as stated many times, is to get into investments that rise when investments go up, but you do not participate in any drops in the market. Oh, they also grow tax-free, and you can withdraw the money tax-free – anytime, and when you die, the money transfers income tax-free at death.

Oh, one more thing…for ten years, tax rates have been real low and like a pendulum. Well, you know the story come 12/31/10.

Discipline or regret….

In a typical off-year election, the opposition party to the presiding President gains seats. All the polls show a potential power swing for the Republicans in both houses of congress. This will provide gridlock….which means nothing gets done….and is music to the ears of stock market investors. This music is because no further damage can be done to businesses via additional regulation or taxes.

But beware….a powerful lame duck Democratic congress could steamroll insurmountable legislation through from November to January. All of the bills passed in the last two years will require multiple years to restore business and employment back to the previous higher levels, unless they are overturned.

Be prepared, as an investor, to change your thinking pattern of investing over the next few years because of the following:
• The large monetary and fiscal stimulus that was previously applied is running out of steam. (Most of the money was used to shore up union jobs and pensions. Very little was used for any new jobs.)
• Tightening of financial conditions.
• Leading indicators slowing down.
• Public and private deleveraging.
• Higher taxes, more regulation, trade tensions.
• European countries have slowed economically.
• Corporate profitability blossomed due to reduced expenses, but that is over. Consumer demand has fallen off, so corporate profits will drop.
• Deflationary pressure is coming on not just for prices but also for wages.
• Since fiscal and monetary stimuli have been used to the full extent, then another financial crisis will only lead to excessive money being printed.

Watch for the stock market to move sideways for a while with periodic deep drops. Gold will stay steady. Look at dividend paying stocks and short term bonds. By all means, begin moving into tax free, not tax deferred investments that provide guaranteed protection against loss with upside participation.

Watch the stock market during the week before the election. It will tell you which party will win.

• INCOME (EQUITY) FUNDS

Seek a high level of current income for shareholders by investing primarily in equity securities of companies with good dividend paying records. The objective is to provide an income that gradually increases each year.

• INCOME (MIXED) FUNDS

Seek a high level of current income for shareholders by investing in income producing securities, including both equity (stocks) and debt (bonds) instruments.

BOND FUNDS

The types of organizations that issue bonds fall into three broad categories:

• Publicly or closely traded for-profit corporations

• The federal government and its agencies

• State or local government agencies. (This also includes non-profit organizations.)

Each of these is subject to somewhat different tax treatment. This tax treatment has an effect on the price of the bonds and the bond interest (coupon) rate. Bonds issued directly by corporations are fully taxable to individuals at both state and federal level. For that reason, the rate must be higher. Bonds issued by the federal government are frequently exempt from state income tax, but are taxable by the federal government. Bonds issued by state or local agencies are exempt from federal tax and may also be exempt from taxation at the state level.

• CORPORATE BOND FUNDS

These funds seek to generate a high level of current income by investing primarily in the senior securities of profit corporations. Some funds concentrate primarily on high-grade bonds and thus are able to provide shareholders with a greater degree of safety, but usually with less income than bond funds that may have a mixture of high, medium and lower grade bonds. Some of the portfolio may be in U.S. Treasury bonds or bonds issued by a federal agency.

• HIGH YIELD BOND FUNDS

These funds specialize in selecting rated bonds to insure the highest yield possible with a reasonable degree of safety. This type of fund appeals to individuals who seek high current income or desire to reinvest dividends and capital gain distribution, thus
compounding income at a high rate of return. Usually, these funds maintain at least two-thirds of the portfolio in lower rated corporate bonds (Baa or lower by Moody’s rating service and BBB or lower by Standard and Poor’s rating service). In return for a higher yield, investors must bear a greater degree of risk than for higher rated bonds.

• MUNICIPAL BOND FUNDS

These funds invest in a broad range of tax-exempt bonds issued by states, cities and other local governments. Interest obtained from the bonds is passed through to shareowners free of federal tax.

• LONG TERM MUNICIPAL BOND FUNDS

Invest in bonds issued by states and municipalities to finance schools, highways, hospitals, airports, bridges, water and sewer works and other public projects. In most cases, income earned on these securities is not taxed under state and local laws. For some taxpayers, portions of income earned on these securities may be subject to the federal alternative minimum tax.

• SHORT TERM MUNICIPAL BOND FUNDS

Invest in municipal securities with relatively short maturities. They are also known as tax exempt money market funds. For some taxpayers, portions of income earned on these securities may be subject to the federal alternative minimum tax.

• STATE MUNICIPAL BOND FUNDS

Either short term or long term portfolios of bonds. These work just like other municipal bond funds (see above) except their portfolios contain the issues of only one state. A resident of that state has the advantage of receiving income free of both federal and state tax. For some taxpayers, portions of income earned on these securities may be subject to the federal alternative minimum tax.

• U.S. GOVERNMENT INCOME FUNDS

Invest in a variety of government securities. These include U.S. Treasury bonds, federally guaranteed mortgage backed securities, and other government notes.

• GNMA OR GINNIE MAE FUNDS

Invest in mortgage securities backed by the Government National Mortgage Association (GNMA). To qualify for this category, the majority of the portfolio must always be invested in mortgage backed securities. In some cases, these funds make distributions that are both principal and income.

• INTERNATIONAL FUNDS

Invest in equity securities of companies located outside the U.S. Two-thirds of the portfolios must be so invested at all times to be categorized here.

• GLOBAL BOND FUNDS

Invest in debt securities (bonds) of companies and countries worldwide. Some funds invest in U.S. Bonds, others do not.

• GLOBAL EQUITY FUNDS

Invest in securities traded worldwide, including the U.S. Compared to direct investments, global funds offer investors an easier avenue to investing abroad. The professional money managers of each fund handle the trading and record keeping details and deal with differences in currencies, languages, time zones, laws and regulations and business customs and practices. In addition to another layer of diversification, global funds add another layer of risk – exchange rate risk.

• GLOBAL COUNTRY OR REGION FUNDS

These invest in the securities of corporations or governments in a specific country or region. Thus, the owner has two areas of risk that also means two areas of opportunity:

• Growth in market value

• Currency changes

Thus, it is possible for a “Japan Fund” to increase in share value and at the same time increase in value to a U.S. owner if the yen/dollar rate change is also favorable.

• PRECIOUS METALS/GOLD FUNDS

Maintain two-thirds of the portfolios in securities associated with mining or processing of gold, silver and other precious metals.

Others types of mutual funds include:

• Special area funds, such as chemicals

• Special philosophy funds, social purpose, etc.

FAMILY OF FUNDS

These are a group of the above funds all managed by the same organization. Their structure permits investors to switch funds from one fund to the other for a nominal fee or none at all. These can be suitable for use with a Market Timing Service or within a qualified retirement plan where the owner may want to switch the underlying investment without incurring new acquisition costs.

Mutual Fund shares are not deposits or obligations of, or guaranteed by, any depository institution. The value of the shares will fluctuate so that when redeemed, shares or units may be worth more or less than the original cost. Past performance does not guarantee future results. Please read and understand the prospectus for a mutual fund before investing.