This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Morici: As Fed Meets, Ordinary Folks Should Trim Spending

NEW YORK ( TheStreet) -- Wednesday, the Federal Reserve is expected to indicate when and how quickly it will pull back from its easy money policies. Americans can expect mortgage rates to climb, selling homes to get tougher and interest rates to increase on credit cards, auto purchases and home equity loans.

The Fed has been purchasing $85 billion in mortgage-backed securities and longer term Treasury Bonds -- economists call this quantitative easing.

These purchases have fueled, until recently, rock bottom mortgage rates and a much heralded surge in housing prices. The latter could well prove unsustainable, because Wall Street speculators have been doing a lot of the home buying, even as the demand for home ownership is the United States is actually waning. More Americans are choosing to rent -- many young families, saddled with huge student debt and earning less than their parents, can't consider purchasing a piece of suburb heaven.

The Zillow Survey of 105 economic forecasters, in which I participate, has the surge in housing prices slowing significantly in 2014 and 2015. This deceleration could turn into a housing market collapse if the Fed pulls back on easy money too quickly, and many more homeowners could owe more than their homes are worth.

Car sales and prices have been booming, as Ford (F - Get Report), GM (GM - Get Report) and others have offered customers with good credit scores quite reasonable rates on new car loans. Their financial affiliates will face much higher costs for funds, and automakers will have to pass along higher interest rates to customers and trim incentives.

If you genuinely need a new car, this may be the best time to get that good deal on financing. Especially because auto loan rates will hit the used car market hard, lowering your trade in value.

Stock prices have soared -- investors can't get much interest on bonds, and dividend yielding stocks have been the best alternative. As the Fed pushes up interest rates, well-rated corporate bonds and the debt of the better-run state governments will become attractive, and stocks, especially dividend paying stocks, will lose their appeal.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
F $14.55 0.00%
GM $36.22 0.00%
AAPL $118.88 0.00%
FB $105.74 0.00%
GOOG $748.28 0.00%


Chart of I:DJI
DOW 17,812.19 +19.51 0.11%
S&P 500 2,089.14 +2.55 0.12%
NASDAQ 5,102.8080 +0.33 0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs