TigerSoft News Service
SWEETHEART 2008 HOUSING BILL:
1) IT BAILS OUT MORTGAGE LENDERS,
2) PROPS UP BLOATED HOUSING
3) PREVENTS HOUSING FROM
4) ADDS ANOTHER TRILLION DOLLARS
TO US NATIONAL DEBT, WHICH MAY
REALLY SPOOK STOCK MARKET.
(See Peerless Stock Market Timing
Chart at bottom of this page.)
5) HOME MORTGAGES THAT BANKS
DON'T WANT NOW BACK THE
by William Schmidt, Ph.D.
Author of TigerSoft Insider Watch Software
Tiger Software - Helping Investors since 1981
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Despite the decline in the housing market, homes
are still not affordable to millions of Americans. For
most Americans, the new Housing Bill will make them
less affordable. It will artificially prop up home prices
by preventing foreclosures and giving an UNLIMITED
line of credit to mortgage company giants, Fannie Mae
and Freddie Mac. They now handle 75% of new home
mortgages. That percentage will rise sharply, as the
limit on the size of the mortgages guaranteed by
Fannie and Freddie is boosted from $417,000 to
So, if you liked the Federal Reserve's $300 billion
bailout of central banks, you'll love this Housing Bill.
The US Treasury can now buy ALL Fannie Mae and
Freddie Mac home mortgages. Previously, the
Treasury had been allowed to buy only $2.5 billion in
housing mortgage securities. Now there are no limits.
The Dollar is now to be backed up by home
mortgages that banks cannot sell because nobody
More Affordable Housing?
(1) States will get $4 billion in assistance in buying
up boarded-up, foreclosed homes. They may offer
some of these to those who promise to fix them up.
(2) Down payments for FHA loans are dropped
to $3.0% from 3.5%.
(3) New home buyers are thrown a tax credit of
$7,500 in the new housing law.
The changes will help some people. But banks'
lending standards are now much tighter. The 20%
decline in home prices in California, for example,
means little when the median home price is still over
$659,000 in many suburbs of San Francisco, Los
Angeles and California. The central problem is
that housing prices are still way too high for most
working people. |Left to the free market, home prices
would certainly fall much more sharply. Such declines
would make homes more affordable. But Congress
is under too much pressure from banks to allow
a free market. So, risk has been nationalized
and profits have been subsidized.
Real Incomes Drop in US
as Wealth Concentration Accelerates.
Real incomes are dropping every bit as fast as
housing prices in the economic slowdown. With
gas prices now over $4.10 a gallon, someone
driving $12,000 miles a year, and getting 20 miles
per gallon, who is paying $2.00 a gallon more than
even two years ago, has $1200 less a year to spend.
Couple that with a real inflation rate of 6% to 7% a
year, and you can see the problem. Wealth is
just too concentrated to let ordinary working
people buy new houses. The richest 1% own
more than 90% of the wealth in the US. This is
the highest figure since 1928. In 1976, the top
one percent received 8.83% of the national
income. In 2005, it reached nearly 22%. The
average CEO now makes almost 400 times what
an average worker is paid. In 1980 the ratio
was 40:1. More than 45 million people in the
US have no health insurance. One in six children
live in poverty.
Speculative Housing Bubble
Housing inventories are still bloated, the most
"bloated in a generation". In Southern California,
real estate spokesmen talk of a year's inventory.
As in all speculative bubbles, prices zoomed
upwards into fantasy land. They rose for more
than ten years. People began to feel that they
could only go up, never down. Terms were easy.
Rates were low and you could speculate with
zero-down. In this environment, builders built
too much. And anyone who could remotely
afford a house, bought one. Few buyers
were left. Bids disappeared. Speculators
had to dump their condos and second homes.
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McCain and Swindler Keating
Charles Keating was convicted of racketeering and fraud in both state and federal court after his Lincoln Savings & Loan collapsed, costing the taxpayers $3.4 billion. His convictions were overturned on technicalities; for example, the federal conviction was overturned because jurors had heard about his state conviction, and his state charges because Judge Lance Ito (yes, that judge) screwed up jury instructions. Neither court cleared him, and he faces new trials in both courts.)
Though he was not convicted of anything, McCain intervened on behalf of Charles Keating after Keating gave McCain at least $112,00 in contributions. In the mid-1980s, McCain made at least 9 trips on Keating's airplanes, and 3 of those were to Keating's luxurious retreat in the Bahamas. McCain's wife and father-in-law also were the largest investors (at $350,000) in a Keating shopping center; the Phoenix New Times called it a "sweetheart deal." ( http://www.realchange.org/mccain.htm )
| Democrat Dodd's Sweetheart Loans?
"Countrywide made two loans at special rates to Dodd in 2003 to refinance homes in Washington and East Haddam, Conn.The loans were reportedly part of a "V.I.P." program that gave preferential rates to "friends" of the company's chairman and chief executive, Angelo Mozilo. In 2003 Dodd got a 4.25 percent interest rate on a $506,000 refinancing loan for his Washington town house, and a 4.5 percent rate on the $275,000 loan on his East Haddam home. Most people would have been paying
2% higher. So, Countrywide saved Dodd $15,000 a year.
Dodd claims if he had known he was getting preferential
treatment he would have walked away from the loan. As the leading Democrat on the Senate Banking Committee, it is
almost certain he knew what mortgages were going for.
(Source: http://www.huffingtonpost.com/2008/06/23/dodd-repeats-denial-of-mo_n_108725.html )
House Republican Leader, Boehner, charges that Dodd and Barney Franks have refused to let Congress investigate VIP loans from mortgage lenders and banks to members of Congress. He charges that Bank of America wrote much of the legislation.
Source. The stock jumped more than 50% as news of the
bill's provisions got publicity.
Bush and McCain Share A Moment Together.
| That is
the amount the US national government is now in debt.
The Bush Administration today estimated that the 2009 federal
deficit will be nearly a half a trillion dollars. This is $83 billion
more than what they estimated in February. Source.
The amount of money involved in saving the banks, homeowners
and housing industry may soon exhaust the country's ability to
borrow money, except at much higher rates. It's either that
or print billions and billions of more paper dollars. This will surely
weaken the US Dollar much further. Add in the $3 trillion
cost of the unnecessary and foolish war on Iraq, and you
see how rapidly the US is becoming a nation that is hopelessly
in debt. Wastefully, the US spends nearly a trillion a year on
its military budget, much more than all the other countries on
earth. Meanwhile bridges collapse and its working class must
hold two jobs to support a family. There is no solution because
the US constitution forbids taxing wealth as opposed to income,
and because sizeable wealth is often put overseas in secret
bank accounts so that income cannot be taxed.
If you like what Bush has done to the US, McCain is
certainly who you will vote for in November.
Don't They Make A Couple To Remember.
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BANK OF AMERICA LOVED THE HOUSING BILL