Sequestration Advice and Explanation

I have the power of attorney for my Mom, and her financial dude just sent out an investment letter about what all this Sequestration stuff is all about.  I want to quote some of what he said as an explanation of what is going on and who will be complaining and raising the roof and why.

"I thought you would be interested in the following commentary from investment strategist Kate Warne.  She discusses the possible impact of sequestration, the automatic spending cuts that are scheduled to take effect March. 1.

WILL SEQUESTRATION CAUSE A RECESSION?

When Congress acted to avoid the fiscal cliff in early 2013, they merely delayed the implementation of automatic spending cuts - called sequestration - until March 1.   These cuts to defense and non-defense discretionary spending were designed to force Congres to agree to more targeted and appropriate spending cuts.  However, at this time it appears that little progress is being made to prevent these automatic cuts, although they could still be avoided at the last minute.

NO RECESSION LIKELY

The Congressional Budget Office (CBO) estimated the sequestion spending cuts will reduce economic growth in 2013 by 0.6% to 0.8%.  We believe the economy is on track to expand at about a 2% pace, so sequestration could reduce 2013 growth to around 1.2%.  In addition, these spending cuts don't all happen immediately, spreading the impact over time, and there's a lot of uncertainty about exactly how they will be implemented.

We anticipate you'll hear alot about high profile cuts in critical military and social programs.  Spending cuts are painful.  But we also know that the squeaky wheel gets the grease.  Everyone whose budget is cut has an incentive to 'squeak' as loudly as possible, in hopes of getting their spending restored in the future.  Without judging the specifics, critical defense and social programs aren't likely to be threatened long-term by these cuts.  In other words, it probably won't be as bad as each political party or the media would have you believe.

Spending cuts reduce short-term economic growth, but it appears the economy will keep chugging along at a slow pace this year even with reduced government spending.  There may even be a benefit.  Slower growth this year could produce a rebound in 2014, raising the pace of economic growth closer to 3% according to the CBO.

LOOKING TOWARD THE NEXT DEFICIT DEADLINE

Although the stock market could react negatively to spending cuts, it's likely the sequestration deadline will receive less attention than others on the horizon.  everyone's focus is likely to shift to March 27, the deadline for Congress to pass another funding bill.  Without another continuing resolution or broad spending agreement, there could be a partial federal government shutdown.  Many expect revisions to the sequestration cuts as part of any agreeement to extend funding for current government spending.  So even if sequestration occurs, some of the cuts could be in place for only a short time. 

RECOMMENDATIONS FOR INVESTORS

Over the past few years, investors have occasionally been surprised by the impact of politics on the financial markets.  Congress and other policymakers have repeatedly waited until the last minute to make necessary decisions--and in many cases have simply delayed important decisions.  As a result long-term investors have learned to pay less attention to these short-term triggers of potential market volatility." 

That's all I will quote as the rest is their opinion about how to invest.

I wanted to share this as an explanation about what all this sequestration is about.  The media likes to use "fall off the cliff" and "sequestration" terms to keep us on the edge of our seats, but they fail to actually tell us what that means.  Listening to an interview with Boehner last night, he said some pretty plain, down-to-earth things, and you could tell the interviewer was aghast that he would tell the Congress and President to quit sitting around bad mouthing everyone and not pass a budget in how many years now!!  He said to get up off your lazy butts and get the work done!!  That's what the Tea Party has been saying, and regular Americans who have to live within their means, have been saying.  Get to work, make a budget, stay within your means, and make the cuts that need to be made - such as foreign aid can STOP, giving money to the movie industry is wasted money, etc.  Let's make a budget to run the country, and not give to all those special intererests that have nothing to do with government.  We are in this pickle because each politician has wanted to bring home the bacon to their constituents and look good in the voters eyes, when in fact the voters want a budget and a balanced one at that. 

Well, I hope this explanation has been helpful in showing you what is about to happen in Washington DC and how it will impact our economy.  

I'd like to add one thing.  I've been invested in the stockmarket for over a decade and politics rarely causes a movement except for a day or too HOWEVER when USA was downgraded, my investments took a major nosedive:  over 33% lost in two days, and it didn't recover like in past years when Congress shenanigans caused movement.  But when we were downgraded because we have too much debt, that did impact the market and many people lost their retirements.  My Mom never lost anything as she stayed in guaranteed interest rate type investments, but she also doesn't get the big jumps when things are good like other type of investors get.  What I'm trying to say is that what Congress does on cuts and budgeting might not impact the pace of the economy much from day to day, but if we get another downgrade, which is rumored, that could impact investments.  So it is critical for the USA to start living within its means and quit being the Santa Clause to all the needy, the disenfranchised, the foreign countries, the world.  We need to attack how to get our debts paid off and start living in the black.

 It's the same with people.  Alot of people were living above their means, buying too expensive of houses before 2008.  When the recession hit, millions lost their homes, jobs, and credit scores plummeted to below 600.  All of a sudden those downgrades in credit scores kept millions of people from being able to buy a home.  Some were people who never had a home to lose, but were students in college running up loan debt.  They have been penalized because of those who did live outside their means.  Same here, if the government continues to run up debt, the downgrades will happen, and these will affect us more than any of their arguing, and political maneuvering.  We need for our representatives to put the pedal to the metal and sit down, make some cuts, and get the budget balanced.

Stop!! Don't Put These 5 Things Down Your Drain!

Just read a great article on RIS about the 5 things not to put down your drain, and sometimes they are referring to the storm drain.

1.  Grease.  It can clog your drains when it hardens and make sewage back up into your house!!  Yuck.  Keep a large can under the sink to pour cooking grease into and then when full take it to a full-service recycler.

2.  Motor Oil.  Don't pour it down the outside drain.  Those drain to waterways.  One gallon can contaminate a million gallons of water.  Again, take it to a full-service recycler.

3."  Fertilizers. Nutrient overload causes algae to bloom which removes oxygen from the water. That litterally chokes the life from vital water creatures that help improve the water's quality. To avoid all that, use ONLY the amount of lawn chemicals you truly need and only when and where you need it."

4.  Old or unwanted medicine.  Don't flush unused meds unless it specificaly says so on the bottle. "Instead, throw the medicine in the trash in a sealed bag with coffee grounds or find a responsible medicine disposal company. Many pharmacies partner with companies that will take care of your old prescriptions properly and some of those companies allow you to reutrn your medications to them directly. Go to DoYourPar.com/Columns for more resources. "

5. " Pet waste. Don't forget to scoop the poop as pet waste is considered raw sewage because it contains parasites and harmful microorganisms that can be transmitted to humans. When it rains, these parasites and bacteria can be washed into nearby storm drains. It is best to clean up after your pet and dispose of it in the trashcan."

Terri Bennett the author is a tv meteorologist, eco-expert and author of Do Your Part: A practical guide for everyday green living available at DoYourPart.com. send questions to terri@doyourpart.com 

Strangers in My House!!

After getting a call today for someone wanting to see a house, who only wanted to give me a first name, and no other information; then I asked if she was prequalified and she didn't want to answer that question either, I decided the public needs to know a few things.

Imagine you have a nice home that you are putting on the market.  It will house you and your family throughout the time it is on the market.  It will have all your furniture, treasures, clothes, family pictures, silverware and china, etc., in the home while it is on the market.  There are bad guys out in the world, people who would love to see what is inside a nice home and get a layout of the house in order to rob the house. 

Now suppose a complete stranger calls your realtor asking to see your house and all your realtor is able to get is a person's first name.  Would you want that stranger in your home?  Of course, not.  So when you call a realtor to see a home or get more information, don't expect them to celebrate the call and rush out to show the house if you aren't willing to give more information than a first name.  Be prepared to give your full name, email address and phone number.  Be prepared to tell whether you have taken the steps to get pre-qualified for a loan.  This tells the realtor you are serious, you are a buyer, that you will follow through on a sale once you find the perfect home.  It will also let the homeowner know that buyers are coming through their home, NOT BAD GUYS.    Realtors put their lives on the line when they take complete strangers out to see homes.  So don't get huffy with the realtor and refuse to give any information.  In the future, I will be more discerning.  I won't be a "pop tart" relator who is ready to jump up, run out and show houses to total strangers.  I'm going to know something about the person before I go show a house. 

Secondly, in Texas when I meet with someone for the first time, I am required to give them an Information About Brokerage Services.  I have to get them to sign saying I gave them the information.  This lady I showed today acted like I was getting a signed contract for the purchase of the property when I asked her to sign.  It took the whole houselooking trip before she finally put her name on the paper and tore it apart so I could keep her signature and she could keep the information.

Don't be afraid that the realtor will sell your name and address, they don't.  Don't be afraid they might send you other properties to consider.  That is their job, and if you don't want them, don't open the email, put it in spam or delete.  But don't think you are doing them a favor asking to see a house.  It takes time, gas, and unless you buy, it's a waste of time.  Why would they go out and waste the time for a perfect stranger.  In the hopes of making a sale, is why.  But they deserve respect from the buyer and they need information, and their sellers deserve it too. 

Thirdly, when you go to an open house, the sellers again are opening up their prized possessions for complete strangers to go through and brouse and look.  Don't be offended when the realtor asks for your name and some other information.  They need to show the sellers that real people with real addresses, phone numbers and emails came through the house; and should something come up missing, they have a list of people who might be responsible.  If you are guilty and not planning a robbery, you have nothing to worry about.  I'd think only the guilty would want to keep their names private.  Go to open houses knowing you will be asked to sign in!!  If you had your house on the market, you'd want the same courtesy.

Rentals in the Heartland

Destination Heartland!!!   That is where savvy investors should be heading according to the latest rankings for best real estate markets for investing in single family homes as rental properites.  

Many of the smaller cities have low unemployment rates, well below the national averag,e and they also have strong job growth.  Here in Amarillo we have high rental numbers because of Bell Helicopter bringing in new graduates, so almost all rentals rent quickly.  I have a realtor friend who has over 220 rental houses and he says he rarely has to advertise for more than a week.  Another landlord told me she didn't want to send me her "empties" because she usually fills them the week she gets the 30-day notice they will empty, so why bother sending them to a realtor.  In other words, it is easy sneezy to get rentals rented in Amarillo, Texas. 

Housing prices have bottomed out, also in some areas.  Here in Amarillo, actually our house prices increased last year, but compared to other parts of the country, our prices remain low, with the average being in the $150,000's.

The smaller markets are great places to rent out single-family homes because strong economic growth can quickly absorb the existing housing options.  Here in Amarillo there is a shortage of lots for new homes, so there are fewer homes to buy, so rentals are really hot!!

The lower the risk premiums of the smaller markets make them a saffer investment.  I'm not sure what this means exactly, but it was in an article I just read.

The interest rates are low, demand is high, so investing in rentals in Amarillo, Texas, just makes sense.