No more need for Freddie and Fannie

Do we really need a Fannie Mae and Freddie Mac? Do we need entities where the losses are paid for by taxpayers, but the gains received by shareholders?

While not in depth, this article argues that the Fannie and Freddie should be nationalized and then killed off by splitting them up into baby mae and mac (perhaps an iMac......sorry, had to say it) that are then made public entities owned by shareholders, not the government.

Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com

NYTimes: Illusions About Inflation

Mark Hulbert lays out why stocks are still a smart decision during times of inflation, even if people start dumping stocks because of their fear of inflation. This is a short and well written article that deserves your attention.

Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com

WSJ Op-Ed: Inflation is a Clear and Present Danger

Brian Wesbury is one of my favorite economists and he is saying exactly what I've been saying for months now. Interest rates must go up. I know that I am (and he) are not popular for saying this, but inflation is not steady right now and in order to avoid a revisit of the Great Inflation (70's and early 80's) we need to take action now.

This article lays out an excellent argument why the best medicine is in fact for the Federal Reserve to raise interest rates.

Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com

Reliving the S & L Meltdown

Another article on the Fannie/Freddie situation. Merrill Lynch just sold their mortgage securities to a hedge fund for 22 cents on the dollar - yet Fannie and Freddie are carrying these same securities on their balance sheets at full value? What? A good point is made in this article - the management of these entities have nothing to lose (the government will bail out anything they do) and thus they are going for broke, its time that someone stepped in and started an orderly receivership for these "government sponsored enterprises".

Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238

WSJ Op-Ed: When Henry Met Fannie

Treasury Secretary Henry Paulson has some tough decisions to make........uh, scratch that, he has some easy decisions to make and its about time they are made. For years Fannie and Freddie have run wild and are a major contributor to our current mortgage and housing mess, its to clean this thing up. Management at both need to be fired and the orderly resolution of these entities needs to be arranged.

You're going to be hearing a lot about these entities in the coming weeks and months.

Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com

True love means planning ahead: Ten Ways Husbands Can Help Their Wives Survive Widowhood

Powell does a great job of helping you see why it is important to plan ahead. No further comment needed - read this story.

Scott Dauenhauer CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com

The Endgame Nears For Fannie and Freddie

"The almost inevitable government recapitalization of Fannie Mae and Freddie Mac will likely wipe out investors—and management."

Excellent article detailing the shameful state of disrepair that Fannie and Freddie find themselves in. For years there have been calls for a tougher regulator for these entities whose mortgage securities provide liquidity to the market and have what most believe to be an implicit guarantee by the government, yet these calls went unanswered. Most likely it is because both were spreading the wealth on capital hill.

This latest "housing bill" was a smokescreen for the coming bailout of Fannie and Freddie, an attempt to cover past mistakes by congress.

This doesn't mean the market is going to hell in a handbasket - the fact that this article and many like it are available for anyone to read is evidence that this might be already factored into the market.

Its not going to be an easy road, but those who choose to travel it should be rewarded.....it just might take a little time.

Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238

The Private Mortgage Industry's Role in the Current Crisis

Jack Guttentag gives us a good synopsis of who is responsible for the mortgage crisis and why and then explains one of the primary drivers of the failures - the move away from PMI or Private Mortgage Insurance.

I for one hated paying PMI and was vocal about it, but only because it was so difficult to get removed. Turns out that PMI worked well, but Wall Street and lenders found ways around it (via piggyback loans - a combination of a 1st and 2nd) and this was one reason we have so many problems. Its a little deeper than that, but the irony is that reasonable lending standards combined with a down payment or a risk premium ala PMI works to keep a healthy mortgage market and to keep bubbles in check IF they are applied......of course they weren't applied.

There are some very good lessons here and a lot of blame to go around. There are also some interesting books out there on the topic.

As an aside - the government has a huge responsibility to monitor the banks and the loans they were underwriting, they failed miserably. Will the government take responsibility? Doubtful - but they will most like bailout there largest political donors - Fannie and Freddie........the little guy will however be stuck in a mortgage that likely 40% higher than the value of his/her home.

Ridiculous.

Scott Dauenhauer, CFP, MSFP, AIF
949-916-6238
www.meridianwealth.com

Gas is Cheaper Today Than In 1960

Very interesting article comparing gas affordability today to 1960. Its not going to make you feel any better about paying $4 for a gallon of gasoline, but perhaps it will give a little perspective on prices.

Scott Dauenhauer, CFP, AIF, MSFP

Rebekah's 2nd Surgery

Rebekah is going in for her second surgery. This surgery will be to close up the palate (which means no more spitting up through her nose!!) and to do a revision on her lip from a stitch that came out last time. The palate surgery is the more painful of the two and takes a little longer to heal, please keep our little girl in your prayers. Her surgery is scheduled for 11:30 am this Thursday, the 14th.

Scott Dauenhauer, CFP, MSFP, AIF

Ben Stein: Why Oil Will Keep Falling

Ben Stein thinks the price of Oil, which has fallen by about 20% in the past month from its high will continue to fall. While I don't get into these debates about short term pricing of securities or commodities (or markets for that matter) I do believe that oil prices in the 140 and above range are not sustainable. I've been pointing out in many blog posts that the price of oil was probably a bubble, but that like most bubbles it can't really be known until it pops and you will not know in advance when it will pop.

Oil may very well rise to 150 or high in the coming months or years, but as I've said before, it is in nobody's interest (including the oil producers) for this to happen. We need oil and there is plenty available and a lot more to be discovered, but as free people we will also find other ways to power our future (which will always include oil).

My advice is to continue to keep your wits and not to panic when oil does surge again.

Scott Dauenhauer, CFP, MSFP, AIF

Humor Break: The Surging Candidate for the White House.....Its Not Obama or McCain

A new candidate is emerging in the race for the White House and is surging in the polls. Will this candidate be salvation our country needs to solve our problems? For once in my life I feel that I can finally vote for someone who I truly believe in.

Normally I don't get into politics on this blog, but this candidate is perhaps the most important candidate in the history of our great United States.

Click the above link and get ready to vote for someone who truly has your interests at heart.


Scott Dauenhauer, CFP, MSFP, AIF

Cheaper fuel cell on the way

Piggybacking on the last article I posted.....another example of technological breakthroughs that will transform the country and the world over the coming decades.

Scott Dauenhauer CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238

Oil's Future: Scientists mimic essence of plants' energy storage system

In the past few weeks Oil has finally come off its highs, hopefully they will not return. In my blog over the past year I've highlighted the advance of technology in alternative energy sources and the vast resources of oil that the earth still has. This story is just one more nail in the long term coffin of high oil prices, the ability to use the sun to power our energy needs. This technology is not ready for prime time and if it actually works won't be widespread for decades, but it demonstrates once again that free people will find a way to solve their problems. We are on the verge of technological and biological breakthroughs this world has never seen and while it may not benefit us today, it will benefit our children and grandchildren. The world my great-grandchildren live will make today look like the stone ages.

A small excerpt from the referenced article:

"Requiring nothing but abundant, non-toxic natural materials, this discovery could unlock the most potent, carbon-free energy source of all: the sun. "This is the nirvana of what we've been talking about for years," said MIT's Daniel Nocera, the Henry Dreyfus Professor of Energy at MIT and senior author of a paper describing the work in the July 31 issue of Science. "Solar power has always been a limited, far-off solution. Now we can seriously think about solar power as unlimited and soon."


Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238

It’s Bad, but Remember We’re Dodging the Worst

Ben Stein writing in the New York Times opines about the economy over the past year and tells us that things are as bad as they appear. What is important to note is that we are not facing something that we haven't faced before - and at the end of the day we will move on to bigger and better things (and presumably bigger and better problems!).

Its a bit of a long piece and focuses mainly on his prognostications over the past year, he's been consistent in his view and his predictions have been reasonably accurate.

Scott Dauenhauer, CFP, MSFP, AIF
www.meridianwealth.com
949-916-6238