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The Fed has analyzed the economy, and they have spoken…and coughed and choked and has set us forth upon a path once again lined with money. Mine, yours, and all they could borrow from our children. Six hundred billion more this time around, but this time will be different they say, and this time its going to work, until it doesn’t, and then we’ll print more.

The stock and bond markets  2plus2four  love the idea of more new free money, as speculators and traders are clamoring over the news like an addict in need of his next fix. Never mind the fact that the Fed is not pumping more money into the economy because things are rosy. In every previous post-recession cycle, GDP growth would typically be over 5% by now, but this is not a typical business-cycle recession; it’s a deleveraging, credit-crisis recession, which take a lot longer to get through. That said, stocks can still go higher even though the economy stinks, as discussed in “Seeing the forest for the trees”.

This new QEII is designed to put additional liquidity into the financial system through open market bond purchases, thereby driving down interest rates and “hopefully” inducing banks to lend more.  tech99  Certainly, a lower interest rate environment is more conducive to recovery; however, unless banks lend more and businesses use these new loans to expand output and hire more workers, nothing will change other than we get another day older and deeper in debt.

Clearly they are trying to buy time for the consumer to come back to their old frivolous ways of spending. Unfortunately the massively over leveraged consumer is tapped out. Add that to the natural demographic cycle of the aging baby boomer who is well past their peak spending years, and you’ve got a long wait ahead. They could make money absolutely free to borrow, and people are not going to buy houses and borrow to buy other things they don’t need. In addition, businesses are not going to borrow more simply because it’s cheap. They don’t need more debt, they need more customers!

Sure, this new QEII will help push the markets to new heights over the short term, and for that we should all be thankful.  techfind  However, this new round of stimulus will also devalue the dollar, further lower returns for retirees to live on, and raises basic expenses for the average family struggling through this recession. However, more importantly as I have warned in issues past, it just creates another bubble just like we saw in 2000, early 2007…and we all know what happens to bubbles…they burst. Therefore investors should focus on the Sweet Spot in the market, but have their exit strategy ready.

Investor Strategy:

Although the risks remain high for the long term, all of this cheap money has created tremendous opportunities. After all, you don’t “fight the Fed!” Low rates are here to stay, so take advantage of it. Therefore investors who are happily on the path in search of reasonable returns and do not feel the need to be “all in or all out” can do extremely well.  businessearch  We continue to focus on bonds, preferreds and high dividend paying stocks, many still yielding 8-10%. In addition, our TDT™ Protected Dividend Strategy is tailor made for just this type of market.

Keith Springer, President of Springer Financial Advisors a SEC Registered Investment Advisory Firm, providing Wealth Management and Mortgage Consulting Services. For more information on how to build and maintain a solid retirement plan, please contact Keith Springer at 916-

Recently many areas of our state (and others as well) began the process of updating the FEMA Flood Insurance Rate Maps (FIRMs). These maps show the areas of potential flooding based on the 1-percent chance storm event. This has been known in the  incrediblethoughts  past as the 100 year flood and is also known as the Special Flood Hazard Area (SFHA).

When you get the amount of rain comprising the 1-percent storm the flood water will come to a certain elevation near your home, known as the Base Flood Elevation (BFE). The FIRMs were recently updated for many counties around the country because of stimulus funding. FEMA is required to assess its flood hazard map inventory at least once every 5 years. But, because of funding shortfalls, it has been over 15 years for some communities.

For those homeowners with a mortgage, purchasing flood insurance is mandatory in a participating community if the loan is federally insured or the lender is regulated by the federal government. Flood insurance is highly advisable even if you’re not required to purchase but are located near a stream or lake.

Remember, the 1-percent chance storm has a 1 percent chance of being met OR EXCEEDED in any year. Over the life of a 30 year mortgage there is a 26% chance of having a flood event that exceeds the base flood elevation. Mortgage insurance rates are generally less the higher above the base flood elevation your finished floor is located. Therefore, if you are four feet above the BFE the rates should be lower than if you were at or below the BFE. A $300 policy may well be worth the peace of mind it brings. Your homeowner’s insurance policy has an exclusion from any flood damage.

 

 

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