Recruiting Coup

After some cajoling (mine) and wine (his), my beach buddy C-Note has agreed to occasionally share some wisdom from his many years as a financial consultant and brokerage manager. While he cautions that these are only his opinions, I'd take 'em over a grain of salt any day, unless of course he thought salt commodities were a good investment... Moreover he shares my belief in the long haul, whether it's real estate or the stock market, even as both worlds are suffering the effects of too much media hysteria. So whenever C-Note and I bump into each other on the virtual elevator, I'll be pushing him for the goods...






Yo yo yo, C-Note, whaddup?

What's up with the "whaddup"?! You're less street than me and I'm from Detroit. Promise me you're going to come up with a different name for me soon.

You're right, C, what flies at the beach after a bottle of wine doesn't quite wash here online...

Speaking of things coming out in the wash... Whether or not we've entered a recession, compared to a few months ago everything seems unsure, as opposed to particular sectors or indicators. It's hard to know what to worry about. What are you most concerned about in the U.S. economy?

The unwinding of the credit bubble and crunch (to mix descriptors) is of concern because we've never been through anything quite like it before. Delinquencies could spread to credit cards and auto loans at the consumer level. At the corporate level, the widespread use of financial "derivatives" as well as the broad dispersion of sub-prime loans, could spread the contagion into surprising sectors such as insurance companies.

Near term, I am concerned that the news media's hyper-focus on recession will prove to be a self-fulfilling prophesy. Consumers and businesses alike could slow spending in a wait and see approach, and there it is...recession. With that said though, a little more discipline on the part of consumer borrowing and spending is long overdue.

Long term my biggest concern is the quality of education and subsequently the quality of the labor pool. I fear the future working generations will be polarized....a fraction will be highly educated, creative and innovative, adept at technology, and astute and successful far beyond their parents greatest hopes. The larger fraction will have debased language skills, poor scientific literacy, and be unable to make change at the coffee shop without the help of the POS system.

Hey, we missed my floor... why are you holding down the "close door" button?!

Sorry about that, C-Note, but hey, gives me time to ask another question... Mortgage interest rates have been low for so long that the term "historic lows" is cliche. Where do you expect consumer mortgage rates to go in the next six, twelve and twenty-four months? What factors are you watching?

While a cliché, rates are low and still quite attractive. I expect a push toward higher rates as lending standards tighten and some inflation (energy, agricultural commodities, base metals, etc) works it's way into the system. I doubt we would reach double digit mortgage rates over the next year or two but I think the bias will be upward. The confusing factor will be the behavior of the lending institutions. Will Wamu, for instance, be willing and able to originate new loans in response to demand? Will they have the capital? Will they retrench into a survival mode? Again, many unknowns.

Here's my floor, gotta run.

Can't wait to run into you again there, buddy. I've got more questions, like--

Matt, have I mentioned my new year's resolution to take the stairs for exercise?