Texas Seniors Now Have Full-Fledged Reverse Mortgages
March 23, 2006 - Texas senior citizens now have the same options as seniors in the rest of the nation to convert a portion of their equity in their homes into tax-free income with a reverse mortgage.
"A 15-year battle is over, with financial companies now able to sell the same package of reverse mortgage loans as in the rest of the nation," reports business writer David Hendricks in the San Antonio Express-News today.
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Larger Reverse Mortgages Available to Seniors In 2006
Dec. 15, 2005 - Older homeowners will be able to convert a greater portion of the equity in their homes into tax-free income using a reverse mortgage starting next year because of new, higher loan limits, the National Reverse Mortgage Lenders Association announced today. Read more...
Read more on Reverse Mortgages
"Texas voters overwhelmingly approved a constitutional amendment allowing reverse mortgage lines of credit in November. But the U.S. Housing and Urban Development Department and Fannie Mae had to review the new law before agreeing to insure and buy the loans sold through banks, credit unions, mortgage companies and other brokers."
On March 17, the U.S. Department of Housing and Urban Development released a long awaited mortgagee letter that announces the availability of a line of credit option for FHA reverse mortgages along with the ability to fund on any business day of the month in Texas.
The line of credit option, which has been available in every state in the nation except Texas until now, allows a way for seniors to request a specific amount of money as needed while the balance benefits from a growth rate. The growth rate allows for the credit line balance to grow at a rate that is competitive.
Texas has been the only state that mandates that reverse mortgages are only allowed to fund on the first business day of the month. With the change of this mandate, seniors no longer have to wait sometimes up to a full month to receive payment from a reverse mortgage. Senior Texans will now be able receive their funds four business days after they close on a loan bringing quick and much needed relief to senior homeowners.
In addition to greater flexibility of how and when borrowers can receive money, F.H.A. has raised the minimum lending limit to $200,160 in Texas. This increase allows some seniors with higher value homes to receive a substantial amount of more money from their homes equity compared to last years lending limit.
Some of this report was provided by Griffin Financial Mortgage, LLC, headquartered in Fort Worth, Texas.
Thursday, March 30, 2006
Sunday, March 26, 2006
the bear market rally is ending
"The Elliott wave pattern and supporting technical evidence are clear and compelling— the bear market rally is ending," says Steve Hochberg in The Elliott Wave Financial Forecast.
"This strong potential is compounded by the four-year cycle, which is entering its hard down phase and scheduled to bottom late this year or early next. The downward cyclical pressure on stocks should be intense in coming months. The majority of stocks in the Dow have already entered the next leg down and the index itself should now play catch up. The absence of participation in many of the most important blue-chip stocks dramatically signals the weakening strength of the uptrend. Any further rise should be weak and brief.
"The all-time peak in 2000 was unprecedented in terms of extreme stock market psychology. The final upward twists of the current countertrend advance may not be generating an exact replica of that period, but it’s pretty darn close. Equity funds received $31.8 billion of net inflows in January, the sixth largest monthly total in history. The only bigger months were the first four of 2000 and January 2004, when the bear market rally was a few days from a peak. This surge represents a major capitulation to the uptrend. Discount brokerage firms are seeing record levels of activity and at Fidelity, net flows into stock funds surged $5.6 billion versus just $400 million in January 2005.
"Two more features of the 2000 all-time high—IPOs and corporate buyouts— are hotter than at any time since. In some areas, the latest stock market euphoria is even more vivid. After 213 years as a partnership of members, the NYSE is becoming a publicly traded entity. More than a century of seat-price records tell the story: exchange ownership is valued most highly at major tops. In 1999, the exchange made its first move toward a public offering, just prior to the bear market swoon. The success of the latest effort to get the exchange into the hands of the public undoubtedly heralds an even more dramatic reversal. The upcoming volatility explosion will make stock trading go out of style for a long, long time."
"This strong potential is compounded by the four-year cycle, which is entering its hard down phase and scheduled to bottom late this year or early next. The downward cyclical pressure on stocks should be intense in coming months. The majority of stocks in the Dow have already entered the next leg down and the index itself should now play catch up. The absence of participation in many of the most important blue-chip stocks dramatically signals the weakening strength of the uptrend. Any further rise should be weak and brief.
"The all-time peak in 2000 was unprecedented in terms of extreme stock market psychology. The final upward twists of the current countertrend advance may not be generating an exact replica of that period, but it’s pretty darn close. Equity funds received $31.8 billion of net inflows in January, the sixth largest monthly total in history. The only bigger months were the first four of 2000 and January 2004, when the bear market rally was a few days from a peak. This surge represents a major capitulation to the uptrend. Discount brokerage firms are seeing record levels of activity and at Fidelity, net flows into stock funds surged $5.6 billion versus just $400 million in January 2005.
"Two more features of the 2000 all-time high—IPOs and corporate buyouts— are hotter than at any time since. In some areas, the latest stock market euphoria is even more vivid. After 213 years as a partnership of members, the NYSE is becoming a publicly traded entity. More than a century of seat-price records tell the story: exchange ownership is valued most highly at major tops. In 1999, the exchange made its first move toward a public offering, just prior to the bear market swoon. The success of the latest effort to get the exchange into the hands of the public undoubtedly heralds an even more dramatic reversal. The upcoming volatility explosion will make stock trading go out of style for a long, long time."
Thursday, March 23, 2006
Bull or Bear Market?
Bull or Bear?
By analyzing long-term cycles, Harry Dent sees a strong rally ahead. Also using long-term cycles, Steve Hochberg foresees a major market decline. Here, we offer their bullish and bearish views to help you decide if the glass if half empty of half full.
"It is likely that the markets will pull back briefly and then head up more sharply from April into around August," says Harry Dent in his H.S. Dent Forecast. "The typical pattern in the second year of the four-year presidential cycle is for a rally in January, sideways movements in February and March, a stronger rally from April into August, and then a sharper correction into October. The second year is the weakest, with only minor gains. However, in the second term of a president, the gains tend to be much stronger, near 20% on average.
"The Fed keeps looking like it will raise interest rates one to two more times. However, we still think that the economy is set to slow, which will change the Fed’s plans, with only one more rate hike likely and maybe not that. The slowing in housing should be a strong plus for stocks, as money continues to shift from housing speculation back into stocks, especially large-cap growth and technology stocks. The only obstacle to the markets continues to be high oil and commodity prices. We continue to expect these trends to back off soon and help to stimulate the surge ahead in stocks.
"We expect a much stronger rally than is typical of the second year, as we are coming out of a very bullish long-term trading range pattern from 2004 through 2005 and the Fed is due to end a long tightening cycle soon. If we don’t see the markets start to accelerate by April, we will scale back our forecasts. For now, we still see more upside than downside this year, even if the markets are less bubbly than our very contrarian forecasts. Investors should continue to be fully positioned for a likely strong surge just ahead and be buying further on any short-term setbacks in March. The small-cap and tech stocks should lead the next rally, with large-cap growth finally coming on much stronger."
By analyzing long-term cycles, Harry Dent sees a strong rally ahead. Also using long-term cycles, Steve Hochberg foresees a major market decline. Here, we offer their bullish and bearish views to help you decide if the glass if half empty of half full.
"It is likely that the markets will pull back briefly and then head up more sharply from April into around August," says Harry Dent in his H.S. Dent Forecast. "The typical pattern in the second year of the four-year presidential cycle is for a rally in January, sideways movements in February and March, a stronger rally from April into August, and then a sharper correction into October. The second year is the weakest, with only minor gains. However, in the second term of a president, the gains tend to be much stronger, near 20% on average.
"The Fed keeps looking like it will raise interest rates one to two more times. However, we still think that the economy is set to slow, which will change the Fed’s plans, with only one more rate hike likely and maybe not that. The slowing in housing should be a strong plus for stocks, as money continues to shift from housing speculation back into stocks, especially large-cap growth and technology stocks. The only obstacle to the markets continues to be high oil and commodity prices. We continue to expect these trends to back off soon and help to stimulate the surge ahead in stocks.
"We expect a much stronger rally than is typical of the second year, as we are coming out of a very bullish long-term trading range pattern from 2004 through 2005 and the Fed is due to end a long tightening cycle soon. If we don’t see the markets start to accelerate by April, we will scale back our forecasts. For now, we still see more upside than downside this year, even if the markets are less bubbly than our very contrarian forecasts. Investors should continue to be fully positioned for a likely strong surge just ahead and be buying further on any short-term setbacks in March. The small-cap and tech stocks should lead the next rally, with large-cap growth finally coming on much stronger."
Tuesday, March 14, 2006
Bonds
The following should give you a little better grasp on one type of Bond
Bonds aren't for sissies.
They’re for anyone who likes a nice, reliable income stream and enjoys knowing that while their principal may fluctuate a little, it’s guaranteed (by the issuer). And bonds are a good place for some high-and-dry money while you wait for bad things to happen.
More on that last part in a moment. But first, let’s just review the nature of bonds. The typical bond is simply a debt instrument that promises to pay the holder a defined amount at periodic intervals (the “coupon”) and repay the principal at maturity. Bonds are generally issued at par, so they mature at face value and thus guarantee the invested principal. The quality of the “guarantee”, of course, varies with the issuer of the bond. If the Government of Canada tells you that it guarantees your bond, you can effectively view that warranty as absolute. The government has sweeping powers of taxation, you see, so it’s difficult to contrive a scenario in which you’d have to worry about not receiving your interest or principal.
Farther down the food chain, the guarantee on corporate bonds is as good as, well, the corporation issuing the bond. That’s a rather broad range of safety. You have your “AAA”-rated players, and then you have your neighbour Bubba Billy, who wants you to buy Bubba Billy’s High Interest Hot Tub Improvement Bonds, “cuz they’ll pay, fer sure!” [Compliance Disclosure: We don’t know your neighbours, or anyone named Bubba Billy. But if we did, this would not be a comment on the credit quality of any bonds bearing a coincidentally similar name.] So buying corporate bonds is different than buying government bonds of a sovereign nation, since the former requires monitoring the credit risks of holding a company’s debt. As a consequence of the higher risk, corporate bonds generally pay a higher income than government bonds of similar term.
Now, although bonds are safe harbour investments, they still have various risks. For instance, bonds hate both rising inflation and interest rate hikes. (The two are related, of course, since interest rate hikes are used in an attempt to cool the hot economic growth that creates inflation.) Bonds hate rising inflation because they make the purchasing power of both the coupon stream and the maturity value decline. Nothing happens to the actual dollar amounts – it’s just that the dollars don’t buy as much. And bonds hate interest rate hikes because they make the fixed coupon payments that looked good at the old rate look less valuable at the new rate.
So that’s a bit on how they work. There’s lots more to know, of course, and managing bonds can be every bit as complex as managing stocks. All that being said, bonds aren’t just for folks who want to clip coupons, or for those who want a guarantee on their principal. Bonds are a perfectly useful place to park money if you are being opportunistically defensive.
Take, for instance, the threat of H5N1. That’s the nasty strain of avian influenza that’s been making waves globally amongst such agencies as the World Health Organization. The essence of the issue is that global health authorities see H5N1 as a significant threat to global health. I’ll leave it to you to scare yourself silly by doing the reading for yourself (see the WHO website, or just Google H5N1), but it is sufficient to note that lots of folks who work in the disease business say there’s trouble brewing out there. Maybe even spooky Stephen King-novel trouble. That tends to spook the markets too, since both the reality of infectious disease and attempts at preventing it cause economic slowing. Remember SARS? That’s a much less scary virus than H5N1, but the responsible actions to contain its outbreak still had a significant economic cost.
Now, in investing, a good defense is also good opportunistic positioning. If you’re concerned about a slowing economy or a sharp economic shock, bonds are a smart investment choice. In the first place, bonds will make you money while you hold them. In the second place, the inflation and interest rate hikes that bonds hate aren’t much of a risk when growth slows. In the third place, money in bonds is liquid and fully deployable in the event that a fire sale shows up in other markets like stocks. And in the fourth place, if your paranoia about slow grow or shocks is misplaced, your bonds will make you money while you hold them in the first place.
Bonds aren’t for sissies. They’re a smart investment that can play a role in both the defense and offence strategies in your portfolio.
© 2006 John Caspar
Bonds aren't for sissies.
They’re for anyone who likes a nice, reliable income stream and enjoys knowing that while their principal may fluctuate a little, it’s guaranteed (by the issuer). And bonds are a good place for some high-and-dry money while you wait for bad things to happen.
More on that last part in a moment. But first, let’s just review the nature of bonds. The typical bond is simply a debt instrument that promises to pay the holder a defined amount at periodic intervals (the “coupon”) and repay the principal at maturity. Bonds are generally issued at par, so they mature at face value and thus guarantee the invested principal. The quality of the “guarantee”, of course, varies with the issuer of the bond. If the Government of Canada tells you that it guarantees your bond, you can effectively view that warranty as absolute. The government has sweeping powers of taxation, you see, so it’s difficult to contrive a scenario in which you’d have to worry about not receiving your interest or principal.
Farther down the food chain, the guarantee on corporate bonds is as good as, well, the corporation issuing the bond. That’s a rather broad range of safety. You have your “AAA”-rated players, and then you have your neighbour Bubba Billy, who wants you to buy Bubba Billy’s High Interest Hot Tub Improvement Bonds, “cuz they’ll pay, fer sure!” [Compliance Disclosure: We don’t know your neighbours, or anyone named Bubba Billy. But if we did, this would not be a comment on the credit quality of any bonds bearing a coincidentally similar name.] So buying corporate bonds is different than buying government bonds of a sovereign nation, since the former requires monitoring the credit risks of holding a company’s debt. As a consequence of the higher risk, corporate bonds generally pay a higher income than government bonds of similar term.
Now, although bonds are safe harbour investments, they still have various risks. For instance, bonds hate both rising inflation and interest rate hikes. (The two are related, of course, since interest rate hikes are used in an attempt to cool the hot economic growth that creates inflation.) Bonds hate rising inflation because they make the purchasing power of both the coupon stream and the maturity value decline. Nothing happens to the actual dollar amounts – it’s just that the dollars don’t buy as much. And bonds hate interest rate hikes because they make the fixed coupon payments that looked good at the old rate look less valuable at the new rate.
So that’s a bit on how they work. There’s lots more to know, of course, and managing bonds can be every bit as complex as managing stocks. All that being said, bonds aren’t just for folks who want to clip coupons, or for those who want a guarantee on their principal. Bonds are a perfectly useful place to park money if you are being opportunistically defensive.
Take, for instance, the threat of H5N1. That’s the nasty strain of avian influenza that’s been making waves globally amongst such agencies as the World Health Organization. The essence of the issue is that global health authorities see H5N1 as a significant threat to global health. I’ll leave it to you to scare yourself silly by doing the reading for yourself (see the WHO website, or just Google H5N1), but it is sufficient to note that lots of folks who work in the disease business say there’s trouble brewing out there. Maybe even spooky Stephen King-novel trouble. That tends to spook the markets too, since both the reality of infectious disease and attempts at preventing it cause economic slowing. Remember SARS? That’s a much less scary virus than H5N1, but the responsible actions to contain its outbreak still had a significant economic cost.
Now, in investing, a good defense is also good opportunistic positioning. If you’re concerned about a slowing economy or a sharp economic shock, bonds are a smart investment choice. In the first place, bonds will make you money while you hold them. In the second place, the inflation and interest rate hikes that bonds hate aren’t much of a risk when growth slows. In the third place, money in bonds is liquid and fully deployable in the event that a fire sale shows up in other markets like stocks. And in the fourth place, if your paranoia about slow grow or shocks is misplaced, your bonds will make you money while you hold them in the first place.
Bonds aren’t for sissies. They’re a smart investment that can play a role in both the defense and offence strategies in your portfolio.
© 2006 John Caspar
Thursday, March 02, 2006
Small Caps and Cycles
| Small Caps and Cycles... |
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"Roman historian Tacitus first noted that in all things there is a law of cycles; in that regard, not much has changed in the last 2000 years," notes Jim Oberweis , who explains cycles in small-cap stocks.
"Over the 1926-2004 period, small-company stocks have outperformed large-company stocks by a little more than 2% per year, on average. However, along the way there have been multi-year cyclical periods favoring small company stocks over large. From Dec 1973-July 1983, the stars were aligned for small-company stock investors. On average, small-stocks beat large-caps by 10.9% annually except for 1980, when both small-caps and large caps performed equally well.
"Satya Pradhuman, director of Small-Cap Research for Merrill Lynch, in his book Small-Cap Dynamics, points out that the single biggest long-term factor is economic growth. According to Pradhuman, smaller firms have greater economic sensitivity than large capsand thus tend to outperform large-caps when the economy experiences periods of rapid growth. To find a strong economy, look for sharply increasing industrial production.
"An appreciating dollar has historically correlated well with small-cap outperformance. Additionally, watch inflation. Inflation, per se, is not good for equities. In the short term, Pradhuman asserts that changes in market volatility should be closely observed. Periods of declining market volatility tend to favor small-cap stocks. Changes in market volatility affects the willingness of investors to assume risk; hence, when investor appetite for risk increases, small-caps tend to outperform.
"Predicting changes in the large-cap/small-cap cycle is challenging. One strategy is to simply remaining fully invested, pick good stocks, and accept the volatility of the cycles. Many, if not most, people try to emotionally guess (rather than fact analyze) the cycle and blow it. Many extrapolate the recent past and assume it will persist. Confidence tends to be highest when we approach the inflection point. When it seems like that either small-caps or large-caps will never come back into favor, it probably won’t be long before they do.
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