A Sacramento mortgage lender's vision

It has been a little longer than normal since my last post...sorry about that, interest in refinance due to lowered rates has spiked and all of our workloads have increased!

From the not-so surprising news of Lehman brothers declaring bankruptcy on monday (no potential investor wanted any part of it) to the very surprising 100% U-turn in Federal Reserve policy on AIG, this has been a very intense week. Not to mention the fire sale of Merril Lynch to BofA or the near-zero yield of 3 month Tbills.

The AIG scenario is interesting because as late as the day prior to the Fed announcing their $85 Billion emergency bailout bridge loan, Sec of Treas had been quoted as saying no such thing would ever happen. The stock market, predictably, did not take this very well at all and the Dow lost quite a few points. Profiteers such as Warren Buffet are pleased however, they will be able to leverage their liquid wealth to take advantage of the fire sale of AIG's assets. Tuesday saw no change in Federal Reserve interest rates...disappointing some traders, but no surprise to those watching CBOT futures.

Treasury Movements For the last few months, Tbills have been being printed like crazy, which is pushing supply up and demand down, though the latter is tempered by the "flight to safety", where investors flee the stock market in favor of [relatively] safe government bonds. Most shockingly, we have seen the yield on 3 month Treasury Bills at almost zero, which is an unprecedented event. Why is this so disturbing? Well when you lend someone money, to profit, you need to charge a margin at more than the rate of inflation (which official numbers in August had this at 5.37%). 3 month Tbills are paying .01% of the current inflation rate. Essentially, a guaranteed loss. But perhaps smaller than the greater potential loss than such wonderful investments as Washington Mutual, who is struggling to keep their depositors from fleeing en masse, and today announced it was soliciting buyout bids. Ironic considering how good ol' WaMu ran around acquiring every banking company in sight for the last few years.

In other news, you should check out our home page, we've added our affiliation with Jim Wasserman and his SacBee real estate blog to the footer, added limited spanish language support and a dedicated CalPers/CalSTRS page, dedicated page for real estate investors, and many small cosmetic updates. Enjoy!