What To Do When a Shaky Hand Steers Monetary Policy

Exactly how stable are our markets and monetary policy?

Let’s illustrate it this way, Fed Chairwoman Janet Yellen was feeling so poorly while making a speech on monetary policy and inflation at the University of Massachusetts at Amherst recently that she had to quit in the middle and get medical attention.

I think her condition that evening fairly well reflects current markets and monetary policy: they’re shaky. Fortunately, Yellen bounced back very quickly and was soon making all the other appointments on her busy schedule.

However, in her abbreviated speech, she said something that seems quite simple on the surface, but more profound when you consider its implications: “[I]f the economy surprises us, our judgments about appropriate monetary policy will change,” she said…just before she had to excuse herself.

Surprise! Surprise!

Yellen was admitting that the most powerful and knowledgeable group of powerbrokers in U.S. monetary policy are in a position to be “surprised” by the economy. On top of that, she’s saying that they’ll just start “shooting from the hip” if any of these “surprises” pop up. I think we can all admit that when we’re surprised by an event, it becomes far less likely to make a reasoned response.

If the Fed doesn’t know what to expect next, what chance to the rest of us have?

This is why it’s so smart to bring stability and predictability to our financial planning. And frankly, some investment strategies are influenced far more easily by the moves that Yellen and others in positions like her make. (In fact, when she recently said there wouldn’t be an interest rate hike – good news, right? – markets went down, because they had been guessing in the other direction.)

For these reasons, First Trust Deeds have become a refuge that combines stability, predictability, safety and an attractive return. Evoque Lending investors, for example, are enjoying double-digit returns on their money, day-in and day-out, no matter how erratic other markets have been lately.

Our investors are able to choose the terms of their investments. These typically run from as little as three months to as long as 84 months. They receive monthly checks for the amount of interest they are earning. This dependable stream of income can be kept within one’s investment portfolio, viewed as disposable income or used to maintain a lifestyle, which is often the case with retired individuals.

Hard Money Loans: Eliminate Surprises

I also mentioned “safety” when I listed the benefits of First Trust Deed investing. We make California hard money loans – usually on Los Angeles real estate, Orange County real estate, San Francisco area real estate – and there are three elements that help assure the safety of your money:

1. The borrower’s equity in their property,

2. The borrower’s ability to pay, and

3. The borrower’s willingness to pay.

The first point on that list is something we call “protective equity.” We generally insist that borrowers have 40 percent equity in the property they are borrowing against. This is a healthy sum of money and it makes them very unwilling to walk away from their obligation to keep up payments.

Second, we thoroughly vet our borrowers to make sure that they have the financial resources to keep up their payments. We’ve been doing this successfully for more than 15 years, so we know exactly what to look for and have seen all the tricks many times before.

Finally, we understand that when all is said and done, people do business with people. We look at a borrower’s history to make sure that he or she is the kind of person our investors would want to loan money to. Of course, having sufficient equity in the property tends to make borrowers willing to keep up payments as well!

So if you’re ready to take part of your investment funds off the Janet Yellen Roulette Wheel, give me a call or drop me an email. There is much more to be covered on the topic of First Trust Deed investing and hard money loans in California and I’m sure you have questions.