MY DREAM LAST NIGHT
5-6-04
I had a very unusual dream, even for me, last night. I believe that it is a result of the subconscious confluence of a number of concepts that I have been thinking about.
The start had to do with mortgages. In this scenario, every mortgage borrower and
lender has a “dynamic” mortgage. It changes terms with every change in events and
circumstances surrounding the contract. For example, if the general level of interest rates
rises then the mortgage interest rate would automatically rise…..likewise if they fell.
As real estate prices change, the mortgage principle would change right along with it.
Inflation or deflation would cause the mortgage to self-adjust.
As everyone in this world (in this scenario) has dynamic credit history so would these changes be reflected in the current interest rate being paid by the borrower. In fact, these rates would constantly be changing. Because it would make no difference to the lender, this mortgage could be readily assumable by anyone in their data base (presumably all
citizens as everyone has dynamic credit history in this dream). The amount of the loan
and the interest rate paid by the new borrower would be self adjusted for risk so the
lender would be indifferent as to who owns the real estate or owes the mortgage loan.
As with so many of my dreams, there was an “extension”- to all forms of contracts
including employment, marriage, licenses etc. Employees would always be paid according
to their productivity, dynamically adjusted up and down. Same with employers, they get
what they pay for,no less no more. In effect, every contract has an assumable coupon
where one person can take over for another. In the case of employment, if one were not
qualified, they could have the job but would not be productive so the pay check would be
zero. Same for marriages….there would be expectations filled or unfulfilled….no sweat,
just a dynamic change in circumstances. There could be no cheating of any type in this society as all would self adjust to be reasonable (jail, fines, rewards).
I think that I will reread “1984′!

Thank you for visiting the BlackburnInvestors.com blog. We have the information you need to make the best decision when it comes to buying a home. Please check back here frequently for updates about new homes.

Today the Dow Jones average was down 500 points at one point in the day.  Why is this?

Because “the market” was disappointed that the Fed did not do even more to boost the US economy.  But what about us in the real estate business?  Well, house are cheap, inventories are dropping and average days on the market is dropping and 30 year fixed rate mortgages closing on 3% can be purchased with 3.5% down.

Interest rate futures on the 30 year US Treasury bond increased from last Friday at $138 to $146 today!  Interest rates moves are the reciprocal of prices meaning that long term interest rates are lower than ever!  Step up to bat!

Interest rates are dropping like a rock!
Stock markets are crashing!
The US Dollar is declining fast.
The Federal Reserve cannot cut interest rates  any lower (as they are almost zero now) to stimulate folks to buy stuff and hire people at businesses.  Europe has problems that are more severe than ours.

Here is what is going to happen and is already happening:

Congress and the President are virtually deadlocked and the world is frightened of the US in that situation.  The world calls this “lack of political will”…to deal with problems.

However, we have what no other country has:  an independent Federal Reserve. But the Fed has already reduced the interest rates to about zero so that is not available to get people hired in new jobs or to encourage consumers to buy a bunch of worthless stuff….the backbone of the US economy.  They have but ONE CHOICE and they have already secretly started on this path….to flood the world with new $ bills making them worth less and less.  NOW that things are starting to reach a climax with rapidly declining stock markets and declining interest rates the plan will be accelerated FAST.  This will supercharge the printing of new US$s.

Common logic is that if we have lots of new pieces of paper, they become worth less and less.

BUT GUESS WHAT:  This will make the Florida economy BOOM because home prices will rapidly rise in terms of the US$.  People will need lots of these green pieces of paper to buy a house.  THEN GUESS WHAT:  all of the Florida real estate “negative equity” will go away as house prices rapidly rise.  THEN GUESS WHAT:  The builders and developers will come out of the woodwork and Florida will have a very low unemployment rate.

Good times will be rolling in Florida.

Buy now and borrow with long term fixed rate mortgages at very low interest cost …rates that are not now indexed for inflation but might very well be in a high inflationary environment.

She asked me whether a property here at the beach at the offer price.  She is a cash buyer so I told her that we may not be at the absolute bottom of the market but the price represents good value.

I told her that although the property is “a buy” today, the real money is made in a mortgage.  If you can borrow lots of money (secured by anything that doesn’t go down too much) for 30 years at lifetime rates you win big when you only have to pay back years from now when the US Dollar is worth a fraction of the value today.  The difference is PROFIT!

Corporate America is borrowing like there’s no tomorrow, encouraged by the Federal Reserve’s easy money policy. It may not be a credit boom yet, but as James Mackintosh, investment editor, warns, lenders look like they are…

Things are changing.  http://tinyurl.com/3ybl6fm

Around “9/11″ the US $ would buy 1.85 Swiss Francs…..today the $ buys only .935 Francs…the dollar has gone down that much!  If we do all our earning and spending in US $, who cares?

If we want to take a trip to another country.

If the US government wants to continue to borrow money from foreign investors and governments.

If we want to buy foreign cars.

If we want to fill our gas tanks.

The US is becoming a “low cost” country worldwide which is why call centers are now going into Mississippi and South Dakota instead of India where wages are increasing rapidly while they are going down here.

Declining currencies ultimately leads to inflation …meaning the price of “things” go up here. The biggest “thing” is residential real estate.