Volume 2, Issue 1
Table of Contents

Cover Story:
For RBD, It Was
a Very Good Year

Feature Stories:
Lessons Learned
Starting a small business can be a daunting proposition
Web Masters
RBD's online presence is a natural progression

RBD Round-Up:
How's Business?
The results are in from our
first survey
RBD Business Survey
What's your take on the rising cost of healthcare?

DEPARTMENTS:

Economic Round-Up
• The Smart Investor
How to minimize the affect of the Alternative Minimum Tax
• Economic Viewpoint
Interpreting the Inverted
Yield Curve
• Visitor's Guide
Tour busses in Rockland?

Retail Round-Up
• Where the Jobs Are
Tips for students looking
for work

Business Round-Up
• PSI Health Plans
Offer flexibility and
cost savings
• Marketing By Design
The top 15 campaigns of the last 100 years - Part 2

Ask The Expert
• The Human Factor in
Human Resources

Invest in Your Community
• Looking For a Better Way
Tomorrow's Workplace
offers help
• Leadership Rockland
Graduates class of 2007
• Youth Forum & Awards
Rockland Youth Volunteers Honored

Odds & Ends
• Letters to the Editor
• Rockland Newsmakers

Dedicated Section:
Rockland Business Association:

The President’s Desk
Heart-felt Congratulations
to Rockland's only B2B resource

RBA/United Way Golf Outing
A beautiful day for all

RBA Happenings
• Committee and Council Info
• Calendar of Events
• New Members

The inverted yield curve (where short-term interest rates are higher than long-term interest rates) is often a harbinger of lower interest rates and recession looming in the not too distant future.

Former Fed Chairman Alan Greenspan even got into the act recently by saying a recession was possible this year, although not probable. 

The inverted yield curve has had a good, but not perfect record of forecasting recessions. The Federal Reserve Bank’s most effective tool at slowing inflationary excess is raising short-term rates via the Federal Funds rate. Today’s inverted yield curve can be partially explained by huge foreign dollar inflows which have been purchasing longer-term U.S. Treasury securities, lowering long-term interest rates by as much as 1%, at the same time the Fed was raising rates by over 4% to keep inflation in check. 

The inflationary pressures the Fed saw were excesses building in the real estate market. Investors, speculators, flippers and aggressive lending by mortgage companies offering exotic mortgage products, which led to “irrational exuberance” and soaring home prices fueled by generational low mortgage borrowing rates. These higher short-term rates engineered by the Fed are now wringing much of those excesses out of the real estate markets. 

Many of the mortgage sub-prime (those with less credit quality) and adjustable rate mortgage borrowers are experiencing refinancing of their mortgages to much higher rates causing financial difficulties for some of the borrowers and mortgage lenders.

The Fed takes great pride in not bailing out various groups. Borrowers and some lenders in the sub-prime area, were getting large returns while knowing they were taking large risks. Real estate pricing and sales activity are now returning to more sustainable levels because of Fed policy.  Look for the Fed to lower short-term rates in the near future, if problems in the sub-prime mortgage market begin spilling over into the rest of the economy. RBD

Bruce Mason is the Chief Economist at Union State Bank. The foregoing (above) comments and information are for general information purposes only and the data included is from sources we believe to be reliable but we make no representation as to the accuracy or completeness of any such information. The opinions and views are solely those of our Economist and are not guaranteed nor should they be relied upon in making any investment decision.