Think of the bond market like the Titanic.
So far, so good. Pretty smooth sailing laTely ….
But there is a VERY BIG iceberg and its dead ahead. The only difference it's that it's not in the fog … its right out there for anyone with eyes to see.
It's time to make sure you have a place in a LIFEBOAT.
If you're a mortgage or RE professional, that lifeboat is an income that does NOT depend on interest rates in single digits. Because they will not be in single digits much longer.
The iceberg is so close that there's no question that we'll hit it … the only question is which side do we hit?
The iceberg is UNSUSTAINABLE GOVERNMENT SPENDING and it has very sharp edges on BOTH sides …. on one side is the Federal Debt Ceiling and on the other side is Stagflation. I originally wrote about this on Memorial Day 2011, there was a battle in Congress going on over whether or not to raise the debt ceiling.
Bnet.com had a good article on the subject back then. The title is “Smash the Debt Ceiling and the Roof Falls In On Housing”. It's now March, 2012, and Congress is facing ANOTHER battle over the debt ceiling which, of course, is now much higher than they expected. As long as the government continues to spend more than it receives, it's only a matter of time before inflation will become a BIG problem, and the inflation premium will drive rate to double-digits.
If we keep raising the debt ceiling, who buys the bonds to finance the huge deficits that stretch forever into the future? Just a few years ago the unfunded liability of Social Security was in the vicinity of 3 TRILLION and the unfunded liability of Medicare was over 26 TRILLION. As of early 2011, the combined unfunded liability of those two programs along had risen to 96 TRILLION. As I write this article in March 2012 it stands well over 100 TRILLION … and all the analysts agree that the Obamacare program will make it worse. The cost overrun estimates are just now starting to come in and they are STAGGERING.
And These “Unfunded Liability” numbers DO NOT EVEN COUNT the massive debt that is ALREADY on the books. So back to my last question … who buys the bonds if we just raise the debt ceiling and keep on spending?
You got it … the Fed.
For a sobering read on what happens when governments finance their debt by printing money or the electronic equivalent (as the Fed and the European Central Bank are doing right now) I suggest you read “When Money Dies”. It's an eye-witness account of what happened during the Hyper Inflation in Weimar Germany from 1921 to 1923. as told by reports from British diplomats stationed in Germany and memoirs of local residents.
Think of the “stagflation” of the Jimmy Carter years multiplied by BILLIONS. I'm not exaggerating … it took a 1 mark stamp to send a letter across Germany as 1921 opened. It took 40 BILLION marks to send that same letter as 1923 came to a close. The German Mark was completely destroyed in 2 years once confidence collapsed.
If the Fed continues to create dollars out of electrons to make a market for all the debt spewing from the Treasury, we will be WISHING for a return the 13% (official) inflation rate we experienced in the late '70s. (That's when the 30 year mortgage rate went to 18% …. yes, 18% …. really)
None of us will be able to earn a living in the mortgage business when that happens.
If you know you're a winner, then you know you can win big again if you can just find the right horse to ride and the right race to ride …. but you probably have to stop thinking of yourself as a mortgage loan originator, or as a real estate agent.
William James wrote that: “The greatest discovery of the 20th Century is that we can change the way we LIVE by changing the way we THINK”. As I said in the 'GET REAL' Memo, if we're willing to change your mind and think of yourself as a “solution provider” instead of a mortgage originator or real estate professional, then the local online marketing industry is a place where we can get back to the great income, the personal freedom, and the FUN that we all used to enjoy in the mortgage and real estate industries.
$ 78 BILLION dollars in local ad spending is shifting from traditional media to the Internet over just the next few years. Local business owners know they need to make that move, but they do not know what do …
Now, when 49 million business owners do not know what to do, that's a BIG PROBLEM … and a BIG PROBLEM means a BIG OPPORTUNITY for those who can provide the solution. Change is an inevitable part of life. Those who embrace change and learn to adapt can re-invent them into exciting new online careers ….
… even old Baby Boomers like me who are a bit “technology challenged” because there are plenty of sharp young techies out there who understand online marketing, but there are not a lot of great communicators and connectors, who can help equally tech challenged local business owners make this big shift into the 21st century.
The skill set and mindset of successful real estate and mortgage professionals is particularly well-suited to the local online marketing industry. And it is a wide open opportunity right now. There are a lot of very entrepreneurial ways to participate in this latest “online goldrush”.
I prefer being the “connector” between the needs of the local business owner and the solution providers that I work with, but others love the techhie stuff involved in video SEO, SMS text marketing, mobile apps for local buzz, creating Facebook Fan pages. … the list of ways to play is endless.
Mortgage rates Are going up … a lot. The Titanic IS going to hit the iceberg. It's only a matter of when. And when that happens it's going to really slow things down in the RE and mortgage industries.
You Will want a lifeboat.
But the good news is that a new day is just now dawning and revealing huge new opportunities in new industries being creating almost daily by the Information Revolution … like the local online marketing industry that did not exist even two years ago, but which presents such a huge and juicy opportunity now.