My New Blog

All the questions we asked in the past few weeks were supposed to be answered by Congress passing a budget compromise. We knew it would happen at the last minute and details would be hashed out later, however, at least the government did not default and cause an economic calamity. So why the doom and gloom in the financial markets since last Monday? The compromise reached had everyone believing we would have a bounce-back rally in the stock market. On Monday, the rally lasted a few hours before things turned ugly. What happened? Was it a result of several poor economic reports which were released starting Monday morning? Was it due to continued fears regarding the debt crisis in Europe? Or was everyone scared that the employment report to be released on Friday was going to be extremely weak? On a positive note, the report actually exceeded expectations.

The answer is, some of all the above. Plus we can add the fact that we now have realized that the economy has slowed down and we are on our own. It means that we have survived the recession with massive government stimulus. The stimulus has been removed. Going forward, the federal budget cuts will be a drag on the economy. It is like having the training wheels taken off. Yes, that scares the markets but it must be done. Our economy must stand on its own two feet. Meanwhile, a great opportunity has just become even better. Rates are hitting the record lows reached late last year. Anyone who misses out on the opportunity to refinance or purchase at these low rates may well be sorry because when the economy does start growing on its own, rates will be significantly higher than they are today. We can't tell you whether you have just a few days or a longer period to take advantage of the opportunity, especially considering the downgrade of our credit rating, but those who act now will not be sorry.