The Ironic Thing About The Double Dip Threat
- Date: 2010-09-17 - Word Count: 444
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The financial news is out and the news is not very good. Okay, it is terrible. Unemployment is still a disaster. Home sales are so slow that the numbers compare to last century, although that admittedly is only 11 years ago. Given all the bad news, the dreaded double dip is being mentioned not only as a possibility, but a probability. Well, what does that really mean from a practical point of view?
The old joke is you could line up a thousand economists and still not reach a conclusion. Much of the current discussion seems to verify this joke. Some are saying we are facing deflation while a flip of the channels leads us to another supposed expert claiming that we are facing inflation as our biggest threat. My personal favorite is the guru who suggests we are facing both! Huh?
This can all be confusing, particularly when you consider the impact on your day-to-day life. What exactly are you supposed to do? You need to stay abreast of developments, but the rather odd answer is there isn't a lot you can do.
Let's consider housing. The ability of Americans to own a home has often been cast as the reason we have such a strong middle class. Well, the last few years have seen the housing market take a beating unlike any we have seen since Mike Tyson was a young, hungry boxer. It has been a disaster. Now there is a growing consensus that housing could be in for more trouble.
So, what do you do if you own a home? Are you going to try to sell in this market? Only if you want to sell at the bottom of the market and lose out on any long term equity gain. No, your only real choice is to sit and wait it out assuming you are in a position to do so. In fact, the real move you should be making is to refinance your home to a fixed rate mortgage. Rates are in the 4.4 percent range, which can't last for long.
This scenario is found throughout much of the financial world. Think the stock market is going to crash? Okay, what are your investment alternatives? Bonds? Those might crash as well. Sit in cash? Well, you're not going to get much of a return there.
Ultimately, we will get out of this mess. The only question is how long it will take. The key is to buckle down and make sure you are positioned to limit the damage and take full advantage of the rebound whenever it does happen. In many cases, that means hurrying up and doing nothing.
The old joke is you could line up a thousand economists and still not reach a conclusion. Much of the current discussion seems to verify this joke. Some are saying we are facing deflation while a flip of the channels leads us to another supposed expert claiming that we are facing inflation as our biggest threat. My personal favorite is the guru who suggests we are facing both! Huh?
This can all be confusing, particularly when you consider the impact on your day-to-day life. What exactly are you supposed to do? You need to stay abreast of developments, but the rather odd answer is there isn't a lot you can do.
Let's consider housing. The ability of Americans to own a home has often been cast as the reason we have such a strong middle class. Well, the last few years have seen the housing market take a beating unlike any we have seen since Mike Tyson was a young, hungry boxer. It has been a disaster. Now there is a growing consensus that housing could be in for more trouble.
So, what do you do if you own a home? Are you going to try to sell in this market? Only if you want to sell at the bottom of the market and lose out on any long term equity gain. No, your only real choice is to sit and wait it out assuming you are in a position to do so. In fact, the real move you should be making is to refinance your home to a fixed rate mortgage. Rates are in the 4.4 percent range, which can't last for long.
This scenario is found throughout much of the financial world. Think the stock market is going to crash? Okay, what are your investment alternatives? Bonds? Those might crash as well. Sit in cash? Well, you're not going to get much of a return there.
Ultimately, we will get out of this mess. The only question is how long it will take. The key is to buckle down and make sure you are positioned to limit the damage and take full advantage of the rebound whenever it does happen. In many cases, that means hurrying up and doing nothing.
Related Tags: real estate, refinancing, economy, refinance, housing, recession, double dip, great recession
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