Money Mondays: Barry Armstong discusses 2009 economy

Posted by Larry Holmes January 12, 2009 at 8:07 am

(NECN) – It’s Money Monday and joining Good Morning Live to talk about what we can expect from the economy in the new year is Barry Armstrong, host of “Money Matters” on WBIX and a financial planner with Securities America Advisors.

We continue to lick our wounds from a financially painful 2008. What should investors and homeowners do to recover in 2009?

On Friday we saw a dramatic decrease in the rate on the 15 year fixed rate mortgage. That mortgage is now available with a rate of 4.375%, and the 30 year fixed rate mortgage is now available at a rate of 4.875%. Both of these programs are available without points and modest closing costs. I would strongly advise people to take advantage of these rates now. They might get a little bit lower, but I would not count on it.

Investment portfolios have lost almost 50% during the past 15 months. Do you have any portfolio advice for 2009 and beyond?

There is a tremendous amount of stimulus being put into our economy. We have low interest rates, high levels of government spending, and low energy prices. If history holds true, then we will be experiencing high rates of inflation. Investors should anticipate that inflation, and plan accordingly.

What types of investments provide an investment hedge?

Investors can purchase inflation protected securities. These are available individually or in the form of mutual funds. In addition I feel that Real Estate Investment Trusts will provide an inflation hedge over the mid to long term.

What about really safe investments?

CDs and treasury returns and perhaps headed lower. The yield on the 10 year treasury is less than 2.5% and 5 year CD rates are in the range of 3%. They are safe, but I question as whether they will hold their spending value over the next 10 years. In addition the FDIC is going to start charging more for insurance in April.

When do you feel that the bad news will subside?

We are paying for past sins, and the scariest data that I observe is the rate of unemployment, and the weekly jobs report. I do not expect that data to improve until 2010, so I am afraid we could be in for another long year.