Credit rating of the United States and problems??

[Joel Owens]

I was walking to my local branch manager today while waiting in line about the economy.

We were talking on issues of credit and he stated the current administration is like a kid getting the keys to a Corvette and not knowing how to drive. I mentioned the U.S.A already has one credit downgrade and with the fiscal cliff could happen again.

The banker stated he sees at least 2 credit downgrades in the coming 1 to 2 years for the United States. If that is case with our credit going down borrowing costs will increase for the United States. If that happens many of the so called cuts and savings will be offset by higher debt service the Government has. So at this point it seems our instability more than anything is affecting us as we are just spinning our wheels getting nowhere.

I am not part of any political party so I only want the discussion to be focused on credit and how that would impact our huge negative deficit and borrowing costs to balance the budget.

[Scott French]

You may be able to buy below replacement cost but looking at the property as an income stream, at least in my market, I see investors paying way too much for the return they will be able to achieve on these assets. When rates do rise, if they aren't prepaying, and it comes time to refinance, the values of these properties will have declined as the now artificially compressed CAP rates begin to expand, causing investors to need more equity to finance the properties. Their only hope is inflation, and continued government intervention in the MBS market, and the longer this goes on, the bigger the bubble gets and it grows exponentially.