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Lenders Continue to Fuel Housing Bubble MoneyNews(Headlines - scroll down for full stories) 1. Housing Bubble Toil and Trouble 2. For Consumers, Healthcare Cost Comes Before Quality 3. Survey: Americans 'Financially Illiterate' 4. Soros, Buffett Shake Up Portfolios Story Continues Below 1. Housing Bubble Toil and Trouble Is it a "housing bubble" or a "mortgage finance bubble"? Whatever name you give to the phenomenon that is fueling skyrocketing home prices around the country, some investment managers believe this potential bubble is the unstated reason why the Federal Reserve's Open Market Committee has shown no signs of slowing down its measured pace of interest rate hikes. "One of the big changes in the housing and mortgage finance market has been that lenders are more willing to loan money for the purchase of homes with no down payments and with interest-only for the first five years," explains Tom Wirth, CFA, senior investment officer at Chemung Canal Trust Company in Elmira, NY. "Furthermore, these lenders know that many of the borrowers are only in it to flip' the home for a profit, and the Fed understands that this could have a disastrous long-term result." Wirth, who oversees the management of $1.3 billion in assets, believes that if the air can be let out of the bubble, the economy can continue to slowly grow at a reasonable pace. Taking into account interest rates as they compare to GDP growth and the most recent CPI data, Wirth says, "The impact of the latest Fed rate increase is that it brings the Fed Funds rate in line with the GDP growth rate which is one indicator of a neutral' interest rate policy, particularly because the overnight interest rate exceeds CPI." In MoneyNews' Financial Intelligence Report "The Inflation Lie", editor Jarret Wollstein details why he believes the core rate is much higher - likely 5 to 6%. For more info on this report, Go Here Now. How does this translate into the current stock market climate? In Wirth's case, it means continuing to underweight financial stocks, as he believes that the current rate environment will maintain its squeeze on bank margins. Wirth is also heavily weighted in industrial stocks an area he believes will benefit from the strength of the global economy. Editor's Note:
2. For Consumers, Healthcare Cost Comes Before Quality For decades, American healthcare consumers have struggled to balance the need for quality treatment against the burden of paying for it. Usually, a big payout was viewed as a necessary evil to receive high-quality coverage. But that mindset could be changing, as a new consumer health care study from Consumer Reports suggests. In it, the numbers imply that healthcare consumers are becoming more price-resistant and willing to sacrifice choice of providers for lower costs. The study also says that, by and large, Americans remain satisfied with the quality of their healthcare plans as long as costs are manageable. This, the report points out, suggests that consumers still favor HMOs over PPOs (preferred-provider organizations). In the study for which Consumer Reports interviewed 35,000 of its readers on their healthcare preferences 64% of survey respondents were completely satisfied or very satisfied with their health plan. HMOs rated slightly higher than PPOs in overall satisfaction, primarily because of lower out-of-pocket expenses for patients. But access to care appears to be a greater problem for those in HMO plans. About 29% of respondents and their family members in HMOs experienced difficulty getting needed medical care, compared to 23% in PPOs. Similarly, 17% of HMO users had trouble getting a physician appointment, compared to 12% of PPO users. However, billing errors appear more prevalent among PPO plans. PPO enrollees complained that they had to call or write to the plan repeatedly to solve a billing problem and that this took an unreasonable amount of time. About 63% of PPO users had to contact their plan about a bill or claim status, compared to 26% of HMO users. Blue Cross-Blue Shield dominated Consumer Reports' lineup of the best PPOs, while Kaiser Permanente occupied five of the top 20 slots in the HMO ranking.
Editors Note:
For More Information on These Reports Go Here Now.
3. Survey: Americans 'Financially Illiterate' New research shows that many Americans are financially illiterate, making them ill-informed stewards of their 401(k) and pension investments. Surprisingly high numbers of people don't comprehend basic financial concepts, indicating the need for employers to educate their workers with onsite seminars, Web-based tools and access to financial advice. Over 52% of respondents understood that individual stocks are riskier than stock mutual funds, while 67% understood compound interest and 75% understood inflation, according to a University of Michigan survey of 22,000 Americans over the age of 50. A paltry 34% of respondents comprehended all three concepts. Annamaria Lusardi, a Dartmouth College economics teacher who analyzed the data, notes, "People have difficulties even knowing which type of plan they have defined-benefit or defined-contribution. Workers might need some help in making sound savings and portfolio decisions." Editors Note:
4. Soros, Buffett Shake Up Portfolios It's summer and the living is uneasy at least if you're a billionaire who thinks his investment portfolio needs some fine-tuning. So it goes for George Soros and Warren Buffett, the Mantle and Mays of Wall Street. According to a filing with the U.S. Securities and Exchange Commission, Soros has increased his holdings in Pioneer Natural Resources (PXD) by more than 100%. According to a recent edition of Forbes.com, Soros Fund Management which was founded by the legendary financier reported in the SEC documentation that it owned 3.99 million shares of Irving, Texas-based Pioneer, as of June 30. That was up from 1.52 million shares at the end of the first quarter. Forbes' Greg Levin also reports that Pioneer Natural Resources, which produces oil and natural gas in North America and Argentina, has an asset of its own a human one. On Monday, Pioneer filed a change-of-management 8-K with the SEC, announcing that Frank A. Risch was appointed to the board of directors as an independent. Also named to the audit committee and the nominating and corporate governance committee, Risch knows a bit about the petrol business: After nearly 38 years with oil colossus ExxonMobil, Risch retired as vice president and treasurer in June 2004. Soros has also beefed up positions in Adams Respiratory (ARXT) and Auxilium Pharmaceuticals (AUXL), as well as discount carrier JetBlue Airways (JBLU). The Oracle of Omaha has been busy, too. Newsmax's financial newsletter editor and chief trader Andrew Wilkinson has been tracking Buffett's investment portfolio for weeks now. He reports that Berkshire Hathaway recently filed its 13F files with the SEC and has made a couple of changes to its portfolio. For starters, Berkshire has no longer reported on its holdings in H&R Block or Torchmark Corp. Instead the company commented that it would treat these holdings as confidential. Three new additions seem to be: Home Depot (HD), printing company Lexmark International (LXK) and Lowes Companies Inc. (LOW). Buffett has also reduced shares in SunTrust Banks Inc. (STI). SunTrust doesn't appear in the previous filing with the SEC, as Buffett applied to keep this holding blacklisted for a year in an effort to prevent a compromise of his stock acquisition. Buffett has also added Tyco International (TYCO) to the Berkshire portfolio.
Editor's Note:
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