Philadelphia, August 20, 2007
Financial Freedom Radio aired its 22 Episode Friday and took a daring position on the future retirement of many baby boomers!
Dr. Raymond Jewell, Host of Financial Freedom Radio talked about the mortgage market and how many investment firms, have heavily invested in bad mortgages that plague the investment and credit industry today. Dr. Jewell said, "Many investment companies, within the investment community that manage retirement funds of hard working Americans, put money into worthless mortgages, paper that has no value. These mortgages were thought to be a great investment and bring great wealth to these companies that bought them. Instead they will end up being worthless and could easily tank these companies that spent huge amounts of money for them."
According to James Cramer of CNBC, "Because the people who ultimately bought the bonds backed by what now look to be billions in bogus mortgages are those who run most of the big pension-, hedge-, and stock-and-bond market mutual funds in this country…Some manager, however, borrowed huge sums to buy tons of these mortgages to turbo charge their results. And the most aggressive managers bought billions in mortgages given to less creditworthy individuals, the so-called sub prime loans you keep hearing about,"
"None of this mattered though until June 2007, stated Cramer because of what is known in the trade as the "marks" — the value of a stock or bond as it's "marked" by a firm. Many of the mortgage bonds were priced too high, he explained, because nobody thought that large numbers of borrowers would ever elect to walk away from their homes instead of pay the interest that backed the bonds."
What will this do to retirement funds in America? Well if there is no value within these mortgages that they paid billions to purchase then the investment company will have to come up with the money when it is demanded from somewhere. Who will lend them money based on worthless investments? Where will the money come from? You get the picture, either the Government will have to step up to the plate, or the people will have to suffer the loss.
According to Cramer, "What's more, the firms such as Bear Stearns that bought the bogus loans don't have the money to pay up".
This is a clue that perhaps there might be a "storm a-brewing" around Wall Street. "Time will only tell but the problem is greater than we all imagine, it runs deeper than what is being talked about on the surface. With all of the projected defaults on the loans and the huge amounts of new home inventory on the market, that is unsold, this could become as big as what we went through in the early 2000's with the corporate scandals. It's serious stuff right now and should not be taken lightly."
"There are many known variables that must be considered. The baby boomers are not going to be selling and buying homes as before, their next move will be to a retirement home or downsizing to a smaller home where they will stay. Who will purchase these older homes that will begin to flood the market? As these homes come on the market there are not enough younger people in large enough numbers to purchase these homes so the market is likely to shrink causing home values to roll backward making the homes that were mortgaged at the higher rates more likely to end up in default. This is serious stuff." said Dr. Jewell.
"Right now there are approximately 4 million new construction homes unsold on the market, add to that a projected 7 million defaults on loans which will cause simply more unoccupied homes on the market. All of this can't be a good thing with the baby boomers all reaching their retirement age and slowly moving through time for the next twenty years. There has to be fallout." Remarked Ray Jewell.
To learn more about Financial Freedom Radio tune in every Friday 9:00 AM EST of download past episodes. You can also download through i-Tunes into your i-Pod. Listen weekly and learn what the financial institutions and financial planners will never tell you.
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