Why this recession will not turn into a depression.

1-Definition
Before the Great Depression of the 1930s any downturn in economic activity was referred to as a depression. The term recession was developed in this period to differentiate great depression of 1930 from smaller economic declines .
You should be able now to determine the difference between a recession and depression:
A depression is a severe downturn in the economy.
A recession is an economic downturn smaller than 1930s downturn (The great depression).
The economists didn’t have a unique definition for recession and depression but all of them look at the changes in the gross domestic product (GDP) like major variable to study first. A depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn where real GDP declines less than 10 percent. We still in need to study the changes in other variables like unemployment rate, business activity, the average length of the economic downturn , The consumer confidence…
2- Differences:
2-1-The GDP
During the great depression the GDP contracted by 28% between 1930 and 1932. In this actual economic downturn the GDP is up 3.5 % .The Commerce Department reported that the nation's gross domestic product GDP rose at a 3.5 % annual rate in the July-through-September 2009 quarter which followed a 6.4 percent rate of contraction in the first quarter and a 0.7 percent decline in the second. With all those rates of our GDP during 2008 and 2009 we still far enough from the 28% down of the great depression GDP.

2-2- The unemployment
During the Great Depression, the unemployment rate hit 25% However, the fact that the recession is now at her end, and the unemploymet rate still less than the half of the unemployment Great Depression rate.

2-3-The people confidence
During the Great Depression the people lost confidence in banks system and in stock market because they didn’t find the regulations at this time to let them avoid the fear and the panic that worsened the situation.
In our recession now we got a big benefit from all the rules and regulations created after the great depression .These included the creation in 1933 of Federal Emergency Relief Administration, the Civilian Conservation Corps, the Reconstruction Finance Corporation, and the Tennessee Valley Authority. Congress also gave the Federal Trade Commission broad new regulatory power, then in 1934 Congress authorizes creation of the Federal Communications Commission, the National Mediation Board and the Securities and Exchange Commission. the Securities and Exchange Act and the Trade Agreement Act, and all modifications and upgrades and other regulations from this time until now.
On October 3, 2008,the federal deposit insurance corporation FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor, per deposit category, through December 31, 2013. so no panic, no fear, no rush to the banks like what happened in the great depression.
All those regulations were created based in learning lessons of the 1930s great depression in addition the Unemployment insurance, the Social Security payments and larger government at the federal, state and local levels, the $787 billion stimilus keep money flowing into the economy even as consumers and businesses pull back on their own spending.
The Federal Reserve has pumped trillions of dollars into the economy .the central bank has never tried before.
During the great depression The government imposed limits that killed international trade. Learning from this lesson and dropping the strict protectionism of the 1930s the government policy now is helping the GDP to rose and to be in safe side.
The 3.5 percent up of the GDP can clearly predict the end of this recession very soon.
At the end I say :Above the dark clouds, there is a bright blue sky, keep smiling it can shine on you.this recession will not turn into a depression.
Mona Ata

The impact of $787 billion stimulus on the real estate

The $787 billion economic stimulus package divided the people on two categories:1- pessimists who see the glass half-empty ,2- optimists who see the glass half-full. I am related to the second category based on hope and facts.
The housing industry broke first and I don’t see any recovery for the struggling economy without giving special consideration to the housing industry that own the major potential to reignite the market and prop up the industry.
4 things in the stimulus plan will have a direct impact on the housing industry:

1- The stimulus package has a provision to change last year’s first time home buyer’s $7500 credit to a credit of $8000 which won’t need to be repaid. Last year’s stimulus package required the credit to be repaid over 15 years .
A refundable tax credit for a home purchased in 2009 will bring new buyers into the market and decrease the number of foreclosed homes offered for sale.

2- The stimulus bill does temporarily increase loan caps for Federal Housing Administration, Fannie Mae and Freddie Mac mortgages from $625,000 to $729,750.
This loan caps change will be a big help for buyers in expensive areas. It will reduce the cost of borrowing and increase the demand for expensive existing and new homes.

3- The stimulus plan is increasing the loan limits for reverse mortgages.
Seniors are the most affected category in this struggling economy .they have lost so much of their savings and they didn’t have the ability to go back to work. The HFA Home Equity Conversion Mortgage(HECM) is now $625,500 while conventional loan limits are at $417,000.

4- interest rates have come down 125-150 basis points.
Low interest rates is a big help to reignite the market.
Finally I invite you to be see the glass as half-full. Your optimism can become a major factor in helping the recovery of our economy.
Mona Ata

Why after almost 100 years Mr. Ponzi is rolling in his grave.

Sorry Mr. Ponzi, I feel you rolling in your grave now . Almost one hundred years ago you were caught by the government before the collapse of your company. Shame on us today, since your arrest nobody has been caught before the total collapse of his fraudulent company.Charles Ponzi, emigrate from Italy to the United State in 1903, was one of the famous charlatans ( swindlers ) in American history .He started his own company, the Securities Exchange Company, to promote the scheme that involved paying high returns money to investors out of the money paid by subsequent investors. Ponzi pleaded guilty to fraud, and was sentenced to five years in federal prison and nine years in state prison.The scheme is named after him (Ponzi Scheme), it’s a widely known description of any scam that relies on a "pyramid" of "investors" who contribute money to a fraudulent program (from Wikipedia) .Steal Alec to give Paul then steal Paul to give new victim and……The today's scheme is more sophisticated but still fragile and the catch is one of three things will happen:1- The consumers will panic after a media attack to the fraudulent company or enterprise and they will rush to withdraw their deposits that do not anymore exist in the same original amount because of the abundant paid out.2- The total collapse of the scheme under its fraudulent program when promoters try to run away with money after starting having problems.3- When legal authority does its duty before the collapse of the company or enterprise and that’s the easiest way because the scheme needs ads and promotions to attract investors. At this point it attracts the legal authorities too .They examine the account record and discover the fraud before the total collapse.The number 3 above raises a lot of questions about today's famous Ponzi Scheme.* Where was the legal authority here and abroad when Bernard Madoff constructed his Ponzi Scheme?* Why the amount of fifty billion dollars of fraud game that last very long time was not detected before the collapse of the company?* Why the fraud globalization in Madoff Ponzi Scheme game was successful but the globalization of the legal anti fraud authorities failed?Bernard L Madoff is under 24-hours house arrest in 50 billion dollars fraud. Good for him but for us we can see so many legal actions that give us hope:1- The arrest of Mr. Bernard Madoff and the questioning of SEC Chairman and Staff. SEC is the Securities and Exchange Commission ,it's the legal agency to investigate fraud and suspect money managers.2- SEC Chairman Christopher Cox said he is "gravely concerned by the apparent multiple failures" by staff to look into claims about Madoff's business and to seek formal authority to investigate.3- The selection of Mary L Shapiro to the head of SEC by president-elect Barack Obama.Schapiro, a Wall Street regulator for 20 years with a reputation for tenacity, will likely do the change in the SEC agency and let the system work aggressively and be able at anytime to prevent failures of our market discipline.
Mona Ata

What 4.5% interest rate can do to the housing market?

Treasury Secretary Henry M. Paulson has been criticized by members of Congress for using the bailout money to shore up Wall Street banks while doing nothing for homeowners facing foreclosure
Financial industry lobbyists are urging the Treasury Department to consider a plan to purchase mortgage-backed securities in the hopes of driving mortgage rates to as low as 4.5% in hope of stabilizing the housing market.Under the proposal, the Treasury Department would seek to lower the rate on a 30-year mortgage to 4.5%,
The National Assn. of Realtors has been pushing this plan under which the federal government would spend $50 billion to lower mortgage rates. It says doing so would yield about 500,000 more home sales.
The National Assn. of Home Builders is leading a new Fix Housing First coalition to push for aid to the ailing sector, including a tax credit of up to $22,000 for anyone who buys a home before the end of 2009.
The 4.5% mortgage rate on a 30-year fixed will push the home prices up. It’s normal in the economical equation: With more demands prices will rebound.
The plan will help anybody looking to buy a home with the new low mortgage rate and the additional tax credit, and will encourage the refinance for the home owners by keeping or selling and buying new homes to get the profit from this plan.
The housing market will bloom again, but as with all true disasters, a series of mistakes are made that caricaturize the crises. Analysis provides us with many lessons ,one of the lessons will keep the people who their credit was destroyed by this disaster without a solution .They will try to get loans ,but the banks will be more severe with the qualifications after all what happened to the banking and financial services.
Mona Ata

Is that good time to invest in real estate?

"Be fearful when others are greedy and greedy when others are fearful…Warren Buffet"
**Real estate investing is not easy, but it is simple. Anyone can do it. But not everyone will succeed. The reasons why many people fail. It’s not because of the real estate itself. It’s because something is missing in the rules to follow before taking decision to buy or sell or invest in real estate. Here are some points to consider if you are debating shopping for a property to own and invest:
* Let your project be in your Major Plan for your life goals. It is a formal contract between "the visionary" you and the "daily working" you and let it be exactly what must be done to achieve all your major objectives.
* You will avoid making decisions based on fear, greed, and hope.
* As real estate prices fall, the income you get per dollar invested rises. This means greater cash flow and the ability to deliver bigger dividends to your investors.
* When the market is down. When the real estate prices fall down, There are people selling properties that have to sell, forced by the bad economy and the falling of their financial plan. If you invest now venture out and strike a deal after making careful decisions based on your situation and the area you need to invest in .Slow down and study all details but don’t end up without buying or selling if something meet the criteria of you major plan.
* You are making an investment only if there is a reasonable probability that you will be able to make money when you sell. Buy every property with that in mind.
*In good economy people like to change their old house and buy a new one. Sell the current one first then buy the new one. The economy can change and you will not be able to sell this additional house.
* Be sure to use those formulas in your search and study. Capitalization Rate , Net Operating Income , Gross Rent Multiplier. Scheduled Gross Income, Effective Gross Income, Performa and current.
* Investing in real estate as is buying into an investment that "pays for itself" and because pieces of his investment are returned sooner and the expectation of additional gains through amortization in real estate investment. Don’t keep a property with no hope to do some or little money.

* Put your financial situation first when you want to invest. Look at the potential real estate purchase or sale, check it against your goals and your major plan, and make your decision based on whether it moves you closer or further away from your goals.