Since the financial crumbling of Wall Street began a few weeks ago, I have been inundated with phone calls and emails, mostly from old clients, asking my advice and my opinion on the current American financial situation.

Although I spent over 22-years as an investment broker; 8-years on television as an investment "expert" and was a partner in an investment firm, I DO NOT and legally CANNOT give my opinions publicly, on individual stock buying because I no longer belong to a firm or hold any type of investment license. With that being said, I am going to tell you what I think about the entire situation in general. Remember, this is my humble opinion.

Here goes ....

Don't Panic ... this isn't the first time the market has up-chucked, and it won't be the last. Think of this as an opportunity. Warren Buffett said, "Be fearful when others are greedy. Be greedy when others are fearful." Well, it seems everyone is fearful now so it's time to go shopping.

Please understand ... this began as a reaction when two government agencies ... Ginnie Mae and Freddie Mac, went broke.

SIDEBAR: Federal National Mortgage Association (FNMA or Fannie Mae), Government National Mortgage Association (GNMA or Ginnie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) are all "secondary market lenders". Often many retail lenders actually receive their funds from a secondary market lender. These secondary lenders have assisted the national mortgage market by allowing money to move easily from state-to-state. The movement of loan funds helps to avoid a situation where mortgages are only available in certain areas or states. Also, the secondary lenders have established regulations and guidelines that help the general public. For example, the secondary market will not recycle a loan from a commercial lender unless the new homeowner meets specific financial qualifications.

So ... you have these young-unsophisticated investors who want to buy a home but who should have never been allowed to buy a home, (that's what apartments are for.) They had no business owning a home in the first place, but a few years ago government programs began to lighten the restrictions and credit rating limits, so everyone could enjoy the American Dream and own a home. With prosperity comes wolves-in-sheep's-clothing and mortgage brokers began popping up all over the place; wanting people to refinance their homes and/or move into bigger homes, using/bending the rules that were set by these new government programs. A few (dirty, rotten, cheating) mortgage brokers told these young unsophisticated investors, that they could purchase a home, in fact they told them they actually "qualified" for a much bigger, more expensive home then they had originally applied for or even qualified for. So, in many cases, Mr. and Mrs. Young-Unsophisticated bought their dream home; maybe it was a 5,000 square-foot palace, with only a $2,300.00 monthly payment. After a few months, and after not reading the fine print, the (dirty, rotten, slimy) mortgage broker wrote into the contract ... the monthly payment ballooned to $5,000.00 per month, and then to $7,500.00 per month and up. Slowly but surely, Mr. and Mrs Y-S began to miss payments in order to keep food on the table and to keep the heat and lights on.

If you remember about four years ago, those stories were beginning to surface in the press. 60-Minutes, 20-20, FOX-NEWS, MSNBC ... all of these networks had programs and weekly features on how the public had been scammed and raped by greedy mortgage brokers, con-men who made a quick buck and moved on to other victims. In fact, there were so many of those stories and scams in the press, that the press stopped running them, but the foreclosures started piling up!

About three years ago some members of the U.S. Senate and U.S. Congress, who must have been watching and reading all the news programs, fired a warning shot over the heads of the U.S. Congress, but were told to "relax" by the U.S. Congressmen who were put in-charge of Freddie Mac and Fannie Mae. Obviously, those congressmen weren't watch television, or listening to radio's or even reading newspaper's or magazine's back then.

Now, flash forward to a few weeks ago ... the $%@# hits the fan ... no money is coming in to Freddie or Fannie to pay off all the bad loans. People who should have never been given a loan in the first place just couldn't make their payments and now Freddie and Fannie couldn't make any more loans ... they couldn't even pay their staff, so they closed. Banks are now sitting with hundreds and thousands of foreclosed homes on their books, and banks began to fold because they don't have those mortgage payment coming in and they can't sell any of them off because of the financial woe's in the bond market.

Now America has to bail them out ... and who is America? That's us folks!

So now what? I've heard everything I can stand to hear over the past few weeks ... WE'RE DOOMED! .... AMERICA HAS LOST IT'S EDGE ... BIN LADIN WINS ... and all sorts of other crap. I say, DON'T PANIC!!!!

I have always prided myself with looking for the silver lining in everything, and this is no exception ... in fact I am actually loving what I see already. The glass is 2/3 full. Am I nervous, sure I am. Am I angry at the fact that currently every American citizen will have to come up with about $3,000.00 to bail out some stupid and greedy politicians and Wall Street whiz kids? You bet I am! But what's done is done; let's not dwell on the negatives or we'll all have an aneurysm. Look to the bright side ... below are 10 things I see.

1. Gas prices have drastically dropped ... even greedy OPEC couldn't get the pump price to jump last week when they started cutting back supply. America has finally cut back oil consumption in a huge way ... almost 20% and dropping.

2. Auto prices are dropping. American's are buying better-mileage auto's and the auto industry FINALLY is revealing some idea's on the alternative oil-using cars that I believe they have always had. So the world is being forced into becoming "greener." It's either that, or walk. We better start using this technology now. Once we become a healthy nation (and we will) we'll forget, and start guzzling gas again.

3. I heard from a friend of mine at the Chicago Mercantile Exchange who says we are enjoying the best fall harvest in years ... so food prices should go down, especially with a weak economy.

4. Remember, it's Fannie Mae and Freddie Mac that were the cause of this current jerk in the market, yet the world panicked and created real "deals" in the entire stock market ... Fannie and Freddie are BONDS!!!!!!!!! NOT STOCKS. 

I suggest you begin to look for all the great opportunities that are now available in the Stock Market. Get some advice or do the research yourself and start buying quality stocks. If they go down a bit more, buy more. That's called "Dollar Cost Averaging." I used to explain to my clients ... if you believe in XYZ Corp, and you agree it was a great deal at $30 per share ... if nothing fundamentally has changed, and because of a hick-up in the market, the stock is now $20 per share ... buy more and see if you can average your cost to about $25 per share or lower; that way, when the market recovers, and it always has, and XYZ Corp goes to $50 per share, you'll have made more gains in the same about of time.

5. Now is the time to add to your IRA's or 401k's using quality stocks.

6. If you can only afford to buy one share of stock per week, DO IT! It's better than doing nothing per week!

7. I'll bet that if you go into a retail store right after Christmas you won't believe the bargains you'll fine. Suggestion; why not exchange gifts with your family on New Years Day this year? I have always thought about doing that but I have never done it ... this year I am really considering doing it, or just giving cash and gift cards.

8. Every time we have been through a crisis on Wall Street, things get cheaper ... clothes, food and yes, even homes will continue to get cheaper. This is the first time in my life that I have seen rates this low (and about to get lower) with so many bargains on the table.

9. With the entire world watching the American banking system, your money is very safe now. Make sure you have it in a FDIC insured account and make sure each account is less than $100,000.00.

10. With things being a little tighter for the next few years, why don't you join a service group or charity and give some of your time there since you might not be taking a vacation for a while. Trust me, you'll make some new great friends, you'll be helping a worthy cause (hopefully,) and you'll feel great about yourself and sleep better at night. Need some suggestions? Write me, I am in contact with hundreds of 501 (c) (3) organizations who can always use more help.

Remember, the above is only my humble opinion, but I am speaking from experience. I have heard that China is the new ruler of the world ... or England or France. Don't believe it folks. I remember when Japan was supposedly the world leader ...  and remember what happened there.

America is, and will continue to be the world leader. We will continue to be a big-brother to the oppressed and we have to ability to change overnight. We did it when this nation was born, we defeated our enemies when they were oppressing others in the world and we have heart; we are the biggest goodwill country in the world. Even as our economy is struggling, we are aiding countries with billions of dollars, because that's what we do. As a simple example of what I am talking about, Sears Holdings, who isn't having the best of years in this rocky economy is still giving 20,000 American Troops a $550.00 gift card for the Holidays this year. That's America at it's best.

If you're still scared, email me at JoeCantafio@aol.com, send me your phone number with a note and let's talk.

God bless you and God bless America.

 

What did you think of this article?

Liked
Disliked
No Opinion