Why The Spreads are Getting Wider

On Friday, the 10 year Treasury note fell to its lowest level since September 2005, 4.01%.  Typically 30 year fixed mortgages are tightly associated with the 10 year note.  As the 10 year Treasury moves, so does the mortgage rate.  But the gap between these two rates have widened substantially in June the difference between the 10 year and 30 year fixed mortgage was 2.22% last week as opposed to just 1.52% in June.
Why Did They Move Together To Begin With?
The reason they move together is because of perceived risk.  Treasury Notes are considered very safe investments.  The Federal government has never defaulted on its bonds.  Investors in mortgage backed securities assumed the same.  They thought people basing a security on individuals paying their mortgage in a timely fashion was a very secure investment. 
 

Why Is The Spread Getting Wider?
Uh…well…not so much.  With a foreclosure nightmare occurring right now, these mortgage backed securities are nowhere nearly as safe as the 10 year Treasury.  As a result the spread has widened siginificantly!  Risk = reward.
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Dollars & Sense Education – Raising Your Financial IQ!
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Interview By Nina Smith at BlogHer

Nina Smith published a 10 Money Questions Interview with me on Friday at www.blogher.org.  Enjoy!

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Dollars & Sense Education – Raising Your Financial IQ!
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nicole@daseducation.com
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Subprime Mess Only Getting Worse

So over the past year the subprime mortgage industry has gone straight down the tubes.  So what is on the horizon?  Much worse. 

This weekend’s WSJ had an excellent artice about the subject. Even more mortgage resets are coming due in 2008.  Bank of America estimes $85 million in subprime mortgages will reset in the first quarter of 2008, $101 million in the second quarter.  Falling home prices and tighter lending standards mean borrowers who can’t afford the increase have few options when it comes to getting out to the debt obligation.  The Mortgage Bankers Association estimates that 1.44 million homes will enter foreclosure in 2008, that up from 705,000 in 2005. 

The housing slowdown is emerging as a major issue in both the presidential and congressional races as this issue could push our economy into a housing fueled recession.  What will happen?  Only time will tell.   

Please contact Dollars & Sense Education to bring our seminars to your company or organization!

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Dollars & Sense Education – Raising Your Financial IQ!
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nicole@daseducation.com
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Landing a Loan for Women Owned Businesses

A recent Entreprenuer magazine talks about women owned businesses and landing loans.  Dana Spain-Smith, a Philadelphia businesswoman, made some excellent suggestions.  Spain-Smith recently took an interesting approach when seeking a 3.5 million dollar loan.  She bid 3 banks against each other.  You must remember, banks are in competition for your business.  Everything is negotiable.  She ended up with a line of credit against accounts receivable and a loan against personal property.  She landed a lower than average rate with no prepayment penalty and no required deposit balance.

There is no fundamental difference between what works for women and men but sometimes out demeanor and sociological norms can create differences.  Women be aggressive and fight for the best terms.

Please contact Dollars & Sense Education to bring our seminars to your company or organization!

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Dollars & Sense Education – Raising Your Financial IQ!
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nicole@daseducation.com
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Money Magazine: What Should You Tip?

Money Magazine did a poll in the December 07 issue of what you should tip for the holidays to the people who serve you throughout the year.  They sound fair to me…I would be curious to see what others think.

 Here were the results:

Mail Carrier $20
Hairdresser $20
Cleaning Person $75
Occasional Babysitter $25
Full Time Nanny $270
Gardener/Yard Worker $50
Newspaper Carrier $15
Garbage Collector $20

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Dollars & Sense Education – Raising Your Financial IQ!
http://www.daseducation.com
nicole@daseducation.com
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Last Week’s Roundup

Some great articles!

How To Put Your Personal Finances On Autopilot
http://www.bargaineering.com/articles/how-to-put-your-personal-finances-on-autopilot.html

Beating The High Cost of Weddings
http://www.getrichslowly.org/blog/2007/11/08/beating-the-high-cost-of-weddings-how-we-did-it-and-how-you-can-too/

Kiddie Tax Loophole Soon To Dissappear
http://www.freemoneyfinance.com/2007/11/kiddie-tax-loop.html

12 Ways to Save on Insurance
http://www.freemoneyfinance.com/2007/11/12-ways-to-save.html

Napoleon Hill: Six Ways to Turn Desire Into Gold
http://allfinancialmatters.com/2007/11/06/napoleon-hill-six-ways-to-turn-desire-into-gold/

How to Get Rich on 20K a Year
http://www.freemoneyfinance.com/2007/11/how-to-get-rich.html

Use the Rule of 72 to Figure Out Compound Interest
http://genxfinance.com/2007/11/07/use-the-rule-of-72-to-understand-compound-interest/

Your Secret Credit Scores
http://www.fivecentnickel.com/2007/11/06/your-secret-credit-scores/

Please contact Dollars & Sense Education to bring our seminars to your company or organization! 

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Dollars & Sense Education – Raising Your Financial IQ!
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nicole@daseducation.com
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Know Thyself – What is Your Money Personality Type?

I have written a couple articles such as this one and this one on the psychology of money.  There is the MBA finance chick side of me who looks at sheer numbers, then there is the realist who says wealth building isn’t all about the numbers it is even more about personality and psychology. 

 SO what are the money personality types as I see them:

Slow and Steady Wins the Race – These folks are the ones that follow all of the rules.  They max out their 401Ks, IRAs, have 529s for their children, an emergency fund, pay their credit card bills in full.

Get Rich Quick – These folks really want to be rich but don’t have the discipline for long term wealth building.  So instead they typically try to build wealth with the “investment of the moment”.  Sometimes this strategy works, but most of the time it doesn’t.

I Could Be Hit By a Bus Tomorrow – These people are the folks that aren’t so focused on wealth building period.  Its just not on their radar.  They can range from simple to extravagant folks, the common thread being they are way more interested in living life than thinking about money.  Fortunately, most of them never get hit by a bus.  Unfortunately, this means they never planned financially for not getting hit by a bus.

Nervous Nellie – Nervous Nellie is a hybrid of Slow and Steady Wins the Race and Get Rich Quick.  Nervous Nellie is the type of individual who knows what the rules are: invest in Retirement Accounts, 529s, etc.  But gets really nervous when the market is unstable.  This is the investor the buys high and sells low because they think that the world is ending when the DJIA loses 5%. 

Broke as a Joke – This person is broke they don’t think about money because they are barely covering expenses.

I would love to hear your thoughts on this subject and see if any of you have identified other money personality types.  In a subsequent entry I will talk about how these folks should invest differently!

Please contact Dollars & Sense Education to bring our seminars to your company or organization! 

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Dollars & Sense Education – Raising Your Financial IQ!
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nicole@daseducation.com
215-499-3834