Good news...if you like paying more

Mortgage rates have hit bottom...which way do they go from a bottom?

Click on the title above or the link below to review the entire New York Times article.

http://www.nytimes.com/2010/12/26/realestate/26mort.html?_r=1

Who's going to be next???

Coming soon to a town or city or state near you - failed pension funds!

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/40791768/

Going UP!

Rising rates, dropping demand - Happy Holidays!

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/40674451

Ron Paul to have influence over the Fed?

What changes could be in store? How will this impact, well, many, many things?

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/40638095//

Mortgage rates are starting to rise...more to come

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/40587006

Federal Government pushing to have Fannie & Freddie reduce loan balances...

We went to our favorite housing market expert, Kirk Nace, and asked his thoughts. He suggested we consider the following questions:

As balances are written down aren't those losses suffered by ALL taxpayers, not just the people who made or took out these loans?

When principal amounts are reduced and loans are "handed off" to the federal government, doesn't that mean tax payers will be even more on the hook?

When people owe less, what will stop them from selling for less?

How will that impact prices?

IF these programs are more easily accessed by those who are behind on mortgage payments, what are we encouraging people to do?

Click on the title above or the link below to review the entire Wall Street Journal article.

http://online.wsj.com/article/SB10001424052748703963704576005990436624546.html?mod=googlenews_wsj

Good news for those who like working...

Americans will NEVER be able to retire...

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/40563715

Piling on?

As if homeownership hasn't taken enough of a beating (oh don't worry, plenty more to come). Here's a list of 20 hidden costs to homeownership - enjoy!

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/40458216//

U.S. Underbuilt???

According to this nonsense there exists a deficit of single family housing - really? Can you tell me where single family prices are going up because demand is exceeding supply? I asked Kirk Nace, the top housing market analyst, his thoughts of this and he had this to share..."This is the type of nonsensical gibberish our elected officials, and the leaders of the real estate, mortgage and housing industries expect the public to accept, and far too often our nation of Sheeple simply accept it, as 'thought' is far too often foreign concept!"

Click on the title above or the link below to review the entire Real Estate Channel article.

http://www.realestatechannel.com/us-markets/residential-real-estate-1/real-estate-news-national-association-of-home-builders-nahb-single-family-housing-production-housing-shortage-underbuilt-housing-market-credit-crisis-3518.php

Wealthy Americans opting to rent instead of own their homes...hmmm

We asked Kirk Nace his thoughts and he responded with "What message is that sending about the future of the U.S. Housing Market? The savvy clients I have had the privilege of working with have been making this shift for over 5 years, we will see the trend continue as it is simply the financially wise choice in many cases."

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/40260336

Schilling predicts another 20% + drop in housing prices

We couldn't resist asking Kirk Nace to comment on this and in his typical sarcastic manner he simply said "No, really, you must be kidding me. I mean the National Association of Realtors, AND my elected officials told me things are getting better." When prompted for more of a response he simply suggested we go back to what he has been sharing for many years and that "we have at least another 25% to 35% to go and it has the potential to be a lot more than that if the government doesn't get out of the market and allow the pieces to fall until the collapse is complete at which time healing, or rebuilding could commence. Every time they put another band aid on, it only extends the suffering longer and causes even more pain!"

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/40431286

...and DON'T come back!

Recently I received an email from NAR (National Association of REALTORS) about a "Call for Action" regarding the Mortgage Interest Deduction or MID. Here is the email:

Dear Think,

The Mortgage Interest Deduction (MID) is vital to both home ownership and our economy. I'm disappointed that anyone in Congress - or on a Presidential Commission - would even suggest limits to the Mortgage Interest Deduction. Mortgage interest has been deductible for nearly 100 years, and the proposed changes will affect all 75 million home owners in the United States. We must act now to make sure the MID is not changed.

Ever since the Deficit Commission announced its conclusions, the news media have been buzzing about the report. And what do they emphasize? Proposals to limit or even eliminate the Mortgage Interest Deduction. I'm concerned because all this does is scare the public - and potential buyers - away from the housing market. The last thing the housing industry needs right now (and for the foreseeable future) is another bucket of ice water to be thrown on the market. People who hear these news reports don't differentiate between a proposal and a done deal. The just know that a tax provision they actually understand and rely on is under siege. This is just unacceptable.

I am asking you to call to your representative's office today to ask him or her to defend the Mortgage Interest Deduction from any cuts or reduction as outlined in the Deficit Commission Report.

Blah, blah, blah, blah blah...

So now that you've read the email, lets think about this for a minute...

• "The MID is vital to both home ownership and our economy." Really? Wouldn't a true housing bottom or perhaps jobs be vital to the economy and not a tax deduction that doesn't apply to most people?

• "I'm disappointed that anyone in Congress - or on a Presidential Commission..." Couldn't we just stop here with disappointed?

• "The proposed changes will affect ALL 75 million home owners." Really? Could you tell me how this change will affect those homeowners who own their homes free and clear? And do you really believe that ALL homeowners even qualify for this tax deduction?

• "I'm concerned because all this does is scare the public - and potential buyers - away from the housing market." So the public and potential buyers are only scared of the housing market because the MID might go away? A deduction in which if they qualify, they can pay $10 in interest and get $3 back (BTW if you give me $10 I will gladly give you $5 back)? You don't think that they might be scared because the job market is tight, lending is tight, and the fact that we have not reached a housing bottom yet?

• "They just know that a tax provision they actually understand and rely on is under siege." Come on are you kidding me? Do you REALLY believe that the public actually understands this tax deduction? And again how much do those homeowners who are free and clear rely on this? What about those who DO NOT own? How much are they relying on this?

• "This is just unacceptable." Yep! I agree that this email with this nonsense and lies is unacceptable. Please stop sending them immediately!

• "I am asking you to call to your representative's office today." Seriously??? You're asking a REALTOR to pick up the phone??? :)

Mortgage tax deduction GO AWAY . . .

Why should non homeowners continue to subsidize the foolery of home ownership by being subject to a different set of tax laws than those who have been sold on non sense like "The American Dream of Home Ownership" or "Your home is your largest asset?" I say let the deduction go away, allow mortgage rates and down payments to both escalate rapidly and thereby push real estate values, finally, to a true bottom. A bottom that will in fact be stable and will allow future growth based on certainty and knowing where things are and where they are going rather than the instability and uncertainty so prevalent in the housing market today.

In addition to rewarding the often uninformed choice to borrow money to buy a home by creating a tax credit for this insanity, tax payers further subsidize home ownership through our government's continued insistence on holding mortgage rates at levels not representing the risk involved with such loans AND by continuing to guarantee mortgages for people who have no real skin in the game (immediately force buyers to put down 20-30% and see what happens to the default rates!)

Will these changes be popular with the housing industry, the building industry or the financial industries? Of course not. Will they be beneficial to the good people of this country who are struggling to service an ever growing debt load? Extremely.

I have known Ouch! (Kirk Nace) for many years and during that time we have had numerous conversations relating to this subject. If we don't do something drastic, and soon, to change our course I am afraid Kirk will once again prove to be right and we will go the way of the FORMER USSR. Ending up as a series of smaller nation states who find survival only possible once they release themselves from the burdens associated with supporting a corrupt, inefficient, illogical, excessively bloated federal government.

How much does your state or commonwealth provide in tax revenue to the federal government? What do they get in return for these monies? How much longer can you and your neighbors afford this ridiculous expense?

Who says things are bad?

During economic downturn everyone suffers right? Well most people but certainly not our elected officials! It's a beautiful system eh?

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/40233691

It's no secret

Nearly 40% of American seniors, our so called baby boomers, are accumulating credit card debt with NO PLANS to pay if off. That's a lot of people with a lot of debt! This means that their estates will have to pay it and that our current economic nightmare is all but guaranteed to get even uglier before any improvement is possible.

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/40214649/

Foreclosure mess impact could be severe.

No Kidding!

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/40210972

Government auditors acknowledge home prices to keep falling

Duh, they could have asked Ouch! back in October of 2004 and saved us all a lot of time, money and pain!

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/40214421http://www.cnbc.com/id/40214421

Ortel: People losing confidence in government

11 minute video you should make the time to watch. Housing, politics, the economy and 2nd grade logic.

Click on the title above or the link below to watch this Bloomberg video.

http://www.bloomberg.com/video/64015526/

Housing prices could fall???

Wow, where have we heard this before??? Great info on future of housing prices in US, another 20% drop? Five more years until a bottom is reached? Has this author been speaking with Kirk???

Click on the title above or the link below to review the entire iMarketNews article.

http://imarketnews.com/node/21306

Banks push to foreclose

New York Times piece on short sales and why banks may choose to foreclose instead.

Click on the title above or the link below to review the entire New York Times article.

http://www.cnbc.com/id/39827922//

Get ready tax payers

Here is a well done piece on where the housing market is, where it's going and a hint at how ugly it will be for tax payers. When we asked Kirk Nace about his take on the piece he simply said "better than most, but the worst case projections are actually far closer to best case and worse case is 3-5x worse than these projections." He's been pretty accurate so far...Hmmm

Click on the title above or the link below to review the entire CNBC article and learn more about Housings Worst Case.

http://www.cnbc.com/id/39798920

Now hiring, no experience needed...or wanted???

Is it possible that this was the banks want ad?

"Do you need a job? Will you show up, shut up, and do as you're told? Do you know how to sign your name or can you at least fake it? IF you have answered "YES" to all of these questions, then we have a job for you..."

Click on the title above or the link below to review the entire Associated Press article to learn more about "Robo Signers."

http://finance.yahoo.com/news/Robosigners-Mortgage-apf-382327091.html?x=0

U.S. Housing Market Foreclosure-gate Doomsday Revolution Erupts

The Market Oracle Oct 20, 2010 Chris_Kitze

Posted on Wednesday, October 20, 2010 11:27:12 PM by An Old Man

Foreclosure-gate is heating up and the mad scramble for what's left of $45 trillion in real estate is guaranteed to leave homeowners homeless, pension funds unable to pay their pensions and even some of the biggest banks insolvent. A great housing goat rodeo was created when some of the 65 million mortgages on U.S. homes didn't follow proper legal procedures;

Fraud by homeowners who lied on their loan applications Fraud by banks who didn't follow proper legal procedures around the notarization and processing of mortgage documents Fraud by investment banks who packaged this junk and resold it to unsuspecting pension funds Pension funds promised returns to their pensioners they could never achieve

Lies, lies, lies and more lies. In this jockeying for position, the only thing guaranteed is Leona Helmsley's Law i.e. "Laws and taxes are for the little people." But the little people are starting to fight back in the U.S. and we'll get to that after we do a quick review of the situation at hand and how we got there.

This is how to fix Congress!!!

Below is an email that was shared with me, along with some comments. Thank you Samantha for sharing this with us!

Congressional Reform Act of 2010

1. Term Limits.

12 years only, one of the possible options below...

A. Two Six-year Senate terms
B. Six Two-year House terms
C. One Six-year Senate term and three Two-year House terms

2. No Tenure / No Pension.

A Congressman collects a salary while in office and receives no pay when they are out of office

3. Congress (past, present & future) participates in Social Security.

All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people.

4. Congress can purchase their own retirement plan, just as all Americans do.

5. Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.

6. Congress loses their current health care system and participates in the same health care system as the American people.

7. Congress must equally abide by all laws they impose on the American people.

8. All contracts with past and present Congressmen are void effective 1/1/2011.

The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves.

The pension system is ridiculous that they have.

Something to add is that they will always be prohibited from being a paid lobbyist when they leave office. Tom Daschle is someone that comes to mind...I am a big proponent of having a single payer system or at least the ability to buy into medicare. Tom Daschle who was beloved by many democrats starting making the rounds during the health care debate and was largely against this type of plan.

How does he pay his bills now...Health care companies that would go out of business or lose money with a single payer/universal/option to buy medicare at any age option.

Mortgage applications fall

As Kirk Nace told us would happen, mortgage demand is dropping...Ouch!

Click on the title above or the link below to review the entire BusinessWeek article.
http://www.businessweek.com/news/2010-10-20/u-s-mortgage-applications-fall-by-the-most-in-four-months.html

Is a 2nd wave coming?

Here is a well done, thought provoking piece on the future of the global housing market. Click on the title above or the link below to review the entire Taipan Daily article.

http://www.taipanpublishinggroup.com/tpg/taipan-daily/taipan-daily-092210.html

Are you paying attention???

Click on the title above or the link below to review the entire Wall Street Journal article. Then go back and re-read the 2nd link below, an article written over 18 months ago suggesting the same.

http://online.wsj.com/article_email/SB10001424052748704011904575538453320468516-lMyQjAxMTAwMDEwMDExNDAyWj.html


http://smashedfeet.blogspot.com/2009/03/national-mortgage-independence-day.html

The politics of foreclosure

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/39556948

Do NOT show short sales to a buyer ever under any cicumstance, it's just plain mean!

Yeah, we know several of you aren't going to like that we are sharing this, but if our objective is to help people you aren't doing it by showing short sales to buyers you represent!

If you want a solution or don't understand how to help either your short sale sellers and/or buyers, let us know and we can cover on KYA calls.

Click on the links below to review the entire Yahoo Finance articles.

http://finance.yahoo.com/news/Bank-exec-checked-only-date-apf-3679738570.html?x=0

http://finance.yahoo.com/news/Bank-of-America-delays-apf-4073054242.html?x=0

Real estate is NOT sacred, period!

Click on the title above or the link below to watch the Yahoo Finance video.

http://finance.yahoo.com/video/marketnews-19148628/thomas-barrack-says-real-estate-isn-t-a-sacred-chalice-video-22221358

NO WAY...the government to make the market worse???

Just like Kirk Nace has been sharing, the demand side of the equation is about to take another hit!

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/39419960

August 2010 new home sales 2nd slowest on record.

Average price now back to 2003 levels. Kirk Nace is still insistent that prices will ultimately bottom at 1996 to 1999 levels across the US and in most cases we are 25% + and 5 years + from getting there.

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/39342216

Warren who???

Warren Buffet says we are still in recession and will be for quite some time, but what does he know about economics and finance??? I mean he only has a positive net worth greater than almost anyone and our governmental leaders have been able to create the largest negative net worth in the history of mankind so we should probably listen to them huh?

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/39320992

The market is crashing???

Is Lawrence Yun on his way out at NAR? This article raises the possibility, and it would make sense...

Click on the title above or the link below to review the entire Business Insider article.

http://www.businessinsider.com/pending-home-sales-reconfirm-the-market-is-crashing-2010-9

Attitudes about homeownership have changed.

It's going to be a looong time before values recover and real estate is not a form of wealth building for most.

Click on the title above or the link below to review the entire Philadelphia Inquirer article.

http://www.philly.com/inquirer/business/20100905_U_S__housing_value_down_at_least__4_trillion.html

Should you be bearish or super bearish on the US Housing Market?

Click on the title above or the link below to review the entire New York Times article.

http://www.nytimes.com/2010/09/08/business/economy/08leonhardt.html?_r=2&adxnnl=1&emc=eta1&pagewanted=1&adxnnlx=1284027896-YYGhuRVX9J5E+DA0e/3hTg

Poverty rates growing

How long before 1 in 5 Americans is living below the line? 1 in 5 children are already there!

Click on the title above or the link below to review the entire Huffington Post article.

http://www.huffingtonpost.com/2010/09/11/poverty-rate-in-us-saw-re_n_713387.html

Bank repossessions set new record high August 2010

Yep it's getting better just like NAR and your politicians said it would...are you awake yet???

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/39175282

Housing starts on a rise???

CNBC All of the increase in housing starts was in multi family, single family starts actually dropped again and July's numbers were revised down. Gee, do you think builders are starting to expect that more people will be moving into multi family from single family???

Click on the title above or the link below to review the entire CNBC article.

http://www.cnbc.com/id/39287685

Now in Harrisburg PA and coming soon to your town . . .

I read the article below earlier this morning and thought of my friend, Kirk Nace. He has not only warned us of this for the past several years, he actually resides near Harrisburg. Take a few minutes and read over this then try to rationalize how we are on anything other than a path to hell . . .

A serious warning about muni bonds

"To disrupt our services because we can't make a bond payment would just be unconscionable. And as a leader I couldn't do it."

So explained Linda Thompson, the mayor of Harrisburg, Pennsylvania. She was explaining the city's refusal to repay part ($3.29 million) of the $288 million it owes for an incinerator it bought. The total obligation for the incinerator comes to roughly $6,000 per citizen of the city. It is a debt that can't be repaid and should have never been lent.

Unless you happen to live in Harrisburg, you probably didn't see this item in your local paper. And you probably wonder why we'd bother writing about it. After all, why should the impending bankruptcy of a small Pennsylvania city matter to you?

It should matter to you because it represents the next leg of the debt crisis – the failure of municipal finance. We were also struck by the logic of the mayor... who clearly views paying the city's debts as optional.

She knew the state of Pennsylvania would be forced to bail out her city. (If the state didn't intervene, it would be impossible for any other city in Pennsylvania to issue bonds.) And even if the state refused, the bonds are insured by Ambac, which means, in the eyes of the mayor, it's likely that no one will get hurt by her decision.

And sure enough, Pennsylvania stepped in last weekend. On Sunday, Pennsylvania Governor Ed Rendell announced a $4.3 million bailout for Harrisburg, saying missing the bond payment was "not an option." Rendell continued... "Harrisburg's financial future is still very cloudy, and difficult decisions still need to be made to return this city to financial stability. Allowing a missed bond payment, however, would not be a good decision."

That's how a $288 million loss can become irrelevant to an elected local official. Like a subprime borrower living in a house without paying his mortgage, the mayor of Harrisburg thinks paying for its debts is someone else's problem. She's bringing Obamanomics to city finance.

We have this warning to offer: When our elected officials no longer care about repaying hundreds of millions of dollars, the entire system of municipal finance is going to collapse. And the damage that's going to occur will be material to our entire country.

The system that exists today was created in the 1970s. The entire system is predicated on the lie that states won't allow losses to muni-bond holders. That's the only reason muni-bonds are insurable: The insurance companies know there will never be a claim. They have no reserves to cover the risk of municipal losses because there have almost never been any. Over the last 40 years, the default rate on investment-grade municipal debt was 0.03%, according to the credit-ratings service Moody's.

You can think of this system as similar to the subprime-credit bubble. No banker in his right mind would loan money to a person with no credit and no job who was buying a house in a slum. But once you took the credit risk away from that banker, he was happy to lend billions on deals like that because the risk became someone else's problem. Billions in bad debts piled up. Suddenly, it was the banker's problem again because he'd destroyed the entire system.

The same thing is about to happen in the muni-bond market: Nobody has paid any attention to credit quality because everyone believed the states won't allow cities to go bust. As a result, a truly stupendous amount of money has been lent to cities – cities that have no hope of ever repaying the debts. Specifically, municipal debt now totals $2.8 trillion – roughly 22% of our country's GDP. That's an all-time high. The amount of debt owed by cities has doubled since 2000. And the debts are now too big for individual states to guarantee.

Harrisburg is small potatoes. Mass transit systems are a much, much bigger problem. Almost every local politician in America has promised a subway, a train, or a bus to take his constituents to work for next to nothing – but running these systems is incredibly expensive. In Boston, the mass transit authority is now $8.5 billion in debt and has been paying $500 million per year in interest. Does that sound sustainable?

What about all of the stadiums and arenas built over the last 20 years? Politicians love to build these things as part of citywide "revitalization" efforts. But paying for them? That's somebody else's problem. Take the Meadowlands – the football stadium built nearly 40 years ago. It was torn down last year, but it has never been paid for.

The New Jersey Sports and Exposition Authority (aka the State of New Jersey) borrowed $302 million to build it and never repaid the debt. Today, it owes more than $800 million and spends $100 million per year on interest for a stadium that no longer exists. California has 380 different local redevelopment agencies, which collectively owe $29 billion.

This money will never be repaid.

When I warn people about muni-bonds I always get the same reply: "Governments don't go broke." Oh yes, they do. States face a cumulative budget gap of $140 billion in the next year – they don't have the money to guarantee these debts. Meanwhile last year, more than 187 tax-exempt issuers defaulted on $6.4 billion of securities – the most since 1992. These numbers are going to get bigger – a lot bigger.

You see, all of this credit was only made available because lenders believed (foolishly) that there was no risk in lending to cities and states... just like they handed out all those subprime loans, believing they would never default because "home prices never decline." But after a few city bankruptcies, that thinking is going to change – forever.

With less (or no) additional credit available, how will cities and states be able to refinance at a reasonable price? Just like when the subprime credit markets shut down, the whole system collapsed because no one could refinance. The same thing is going to happen with the cities and the states.

There's a very good chance that once the dominoes start falling, there won't be any way to stop them without a massive federal bailout.

Local governments are no doubt grateful for the billions of dollars that have poured into muni bonds over the past 18 months. But if some of those dollars are yours, you should know you're not getting adequately paid for the enormous risk you're taking.

A much safer – and more profitable – strategy is to avoid the usual income investments, like muni bonds, and look for high-yield opportunities your broker will never tell you about. We've put together a website detailing our favorites right now. Contact us to learn more.

Regards,

Porter Stansberry

How "Flippers" are impacting the real estate market . . .

I've been giving a lot of thought lately to "Flippers," you know the people buying up short sales and REO's and then reselling them.

If there was a higher bidder out there for these properties, why do the flipper end up with the properties? Is it possible that they are in fact the highest ready, willing and ABLE buyer? Key word here is able as there are fewer and fewer ABLE buyers today, what with the credit tightening, unemployment, etc.

When they buy a property it is counted as a closed sale. When they turn around and resell the property it is counted as ANOTHER closed sale. Where would today's housing numbers be if all of these deals were taken out of the count? So we have some properties selling multiple times and most properties not selling at all - perhaps those sellers should learn more about my buddy Kirk Nace's 6 Week Listing Strategy (http://www.6WeekListingStrategy.com )

IF short sale flippers went away, foreclosures would skyrocket even higher. What impact would that have on prices, on government (read this as tax payers getting screwed even more) bailouts, etc?

When flippers purchase REO's rehab and then resell them, someone is doing the rehab. Doesn't that help keep some people working?

When a short sale doesn't sell it usually becomes a foreclosure. This hurts the homeowner, it hurts the neighborhood, it hurts the lender, the mortgage insurer, the noteholder and countless others, yet we look at those who have created a business around buying distressed properties and reselling them as vultures or parasites. Imagine a world where nothing existed to clean up dead animals - they just pile up and rot, pretty nice image huh? it's a shame we don't have smellavision for you! Yes these flippers may be cleaning up the dead, and yes it's a valuable service.

It's always bothered me that these flippers get such a bad wrap, now that I've thought about it, I am simply shaking my head and realizing that they are serving several valuable functions and yet are unappreciated.

Much more to think about . . . you do think right?

www.cnbc.com/id/38959363
It’s NOT the economy stupid, it’s the mess in DC – couldn’t pass on this title!



http://www.csmonitor.com/Business/The-Daily-Reckoning/2010/0828/The-path-to-depression
Could the path we are following really be this simple to understand yet hard to accept?


http://www.csmonitor.com/Business/The-Daily-Reckoning/2010/0827/Too-much-mortgage-debt-Here-have-another-loan
Housing, jobs, consumer spending all point to further slow down, so why are politicians and Realtors trying to tell us things are improving?

http://www.latimes.com/business/la-fi-petruno-20100828,0,6008427.column?page=2
let housing prices correct naturally, STOP the government subsidies which are only causing more pain for a longer duration and spreading it among all tax payers.

http://www.reuters.com/article/idUSN2619995720100826
delinquencies continue to grow READ THIS AS FUTURE FORECLOSURES, FUTURE SUPPLY AND FUTURE DOWNWARD PRESSURE ON REAL ESTATE PRICES CONTINUE TO GROW!

http://www.businessweek.com/news/2010-08-25/sales-of-u-s-new-homes-dropped-to-record-low-in-july.html
existing home sales drop to record low, and there are liars and idiots claiming it’s a surprise

BUSY week for those of us who could say "I told you so!"

Sales of existing homes drop 27.2% in July from previous month - I told you so
Sales of new homes drop 12.1% in July from previous month - I told you so
US Real estate is not a nest egg or viable investment - I told you so
Politicians only make situation worse - I told you so
US Housing market in double dip - I told you so
Riots and revelotion occuring in USA - I told you so, oh wait that one hasn't happened . . . yet




http://www.cnbc.com/id/38820610
Housing in double dip – yeah, we told you it was coming – did you listen? If you want help email Kirk@KirkNace.com share your story and maybe you will be one of the lucky ones shown the best way to optimize your situation!

http://www.cnbc.com/id/38811394
NY Times – Your home is NOT a nest egg. Reality is that in the US real estate values have basically kept even with inflation since 1890!

http://finance.yahoo.com/news/Fidelity-401k-hardship-apf-2389751238.html?x=0&sec=topStories&pos=8&asset=&ccode=
AP if things are getting better why are more people taking money from the retirement plans?

http://www.businessinsider.com/the-15-states-with-the-most-underwater-homes-2010-7study this and come up with a half dozen or so questions you can ask the next time so rocket scientist Realtor, or seller who has been influenced by them, tells you that things are getting better


http://articles.moneycentral.msn.com/news/article.aspx?feed=MY&date=20100819&id=11912826
Quite simply the most well done piece I have seen yet, and I review 100+/day, on what would truly be in US citizens best interest, period – Kudos to David Stockman!!!

http://www.marketwatch.com/story/a-good-idea-for-fixing-housing-2010-08-20?pagenumber=1
Wall Street Journal writer discusses the reality of US housing supply/demand/pricing mix

This Is Why There Are No Jobs in America

By Porter Stansberry
Saturday, August 21, 2010

I'd like to make you a business offer.

Seriously. This is a real offer. In fact, you really can't turn me down, as you'll come to understand in a moment…

Here's the deal. You're going to start a business or expand the one you've got now. It doesn't really matter what you do or what you're going to do. I'll partner with you no matter what business you're in – as long as it's legal.
But I can't give you any capital – you have to come up with that on your own. I won't give you any labor – that's definitely up to you. What I will do, however, is demand you follow all sorts of rules about what products and services you can offer, how much (and how often) you pay your employees, and where and when you're allowed to operate your business. That's my role in the affair: to tell you what to do.

Now in return for my rules, I'm going to take roughly half of whatever you make in the business each year. Half seems fair, doesn't it? I think so. Of course, that's half of your profits.

You're also going to have to pay me about 12% of whatever you decide to pay your employees because you've got to cover my expenses for promulgating all of the rules about who you can employ, when, where, and how. Come on, you're my partner. It's only "fair."

Now… after you've put your hard-earned savings at risk to start this business, and after you've worked hard at it for a few decades (paying me my 50% or a bit more along the way each year), you might decide you'd like to cash out – to finally live the good life.

Whether or not this is "fair" – some people never can afford to retire – is a different argument. As your partner, I'm happy for you to sell whenever you'd like… because our agreement says, if you sell, you have to pay me an additional 20% of whatever the capitalized value of the business is at that time.

I know… I know… you put up all the original capital. You took all the risks. You put in all of the labor. That's all true. But I've done my part, too. I've collected 50% of the profits each year. And I've always come up with more rules for you to follow each year. Therefore, I deserve another, final 20% slice of the business.

Oh… and one more thing…

Even after you've sold the business and paid all of my fees… I'd recommend buying lots of life insurance. You see, even after you've been retired for years, when you die, you'll have to pay me 50% of whatever your estate is worth.

After all, I've got lots of partners and not all of them are as successful as you and your family. We don't think it's "fair" for your kids to have such a big advantage. But if you buy enough life insurance, you can finance this expense for your children.

All in all, if you're a very successful entrepreneur… if you're one of the rare, lucky, and hard-working people who can create a new company, employ lots of people, and satisfy the public… you'll end up paying me more than 75% of your income over your life. Thanks so much.

I'm sure you'll think my offer is reasonable and happily partner with me… but it doesn't really matter how you feel about it because if you ever try to stiff me – or cheat me on any of my fees or rules – I'll break down your door in the middle of the night, threaten you and your family with heavy, automatic weapons, and throw you in jail.

That's how civil society is supposed to work, right? This is Amerika, isn't it?

That's the offer Amerika gives its entrepreneurs. And the idiots in Washington wonder why there are no new jobs…

Regards,

Porter Stansberry

-----------------------------------------------------
Wow, is it any wonder that the sharpest people we know have been helping us see for years that we are headed towards "The Former United States of America?"

WSJ: Is a Crash Coming? Ten Reasons to Be Cautious

I have seen this a few times in the last 2 days, my comments are inserted in [CAPS]


Is a Crash Coming? Ten Reasons to Be Cautious • By BRETT ARENDS

Could Wall Street be about to crash again? [YEP]
This week's bone-rattlers may be making you wonder.
I don't make predictions. That's a sucker's game. [I GENERALLY AGREE, EXCEPT WHEN IT'S THINGS LIKE GRAVITY WILL CONTINUE TO WORK AND AS OUR FRIEND "OUCH!" HAS WRITTEN FOREVER, THE LAW OF SUPPLY AND DEMAND CONTINUING TO WORK - THANKS AGAIN KIRK] And I'm certainly not doing so now.
But way too many people are way too complacent this summer. Here are 10 reasons to watch out.
1. The market is already expensive. Stocks are about 20 times cyclically-adjusted earnings, according to data compiled by Yale University economics professor Robert Shiller. That's well above average, which, historically, has been about 16. This ratio has been a powerful predictor of long-term returns. Valuation is by far the most important issue for investors. If you're getting paid well to take risks, they may make sense. But what if you're not? [EARNINGS HAVE BEEN HELD ARTIFICIALLY HIGH AND AS THEY DROP THIS 20X WILL LOOK EVEN WORSE]

2. The Fed is getting nervous. This week it warned that the economy had weakened, and it unveiled its latest weapon in the war against deflation: using the proceeds from the sale of mortgages to buy Treasury bonds. That should drive down long-term interest rates. Great news for mortgage borrowers. But hardly something one wants to hear when the Dow Jones Industrial Average is already north of 10000.

3. Too many people are too bullish. Active money managers are expecting the market to go higher, according to the latest survey by the National Association of Active Investment Managers. So are financial advisers, reports the weekly survey by Investors Intelligence. And that's reason to be cautious. The time to buy is when everyone else is gloomy. The reverse may also be true. [MONEY MANAGERS AND FINANCIAL PLANNERS ARE BULLISH BECAUSE THEY MAKE MONEY SPEWING NONSENSE, JUST LIKE NAR AND ALL THEIR DROID REALTORS TELLING EVERYONE WE'VE HIT A BOTTOM IN THE HOUSING MARKET - WHAT A BUNCH OF SHI$%^!]

4. Deflation is already here. Consumer prices have fallen for three months in a row. And, most ominously, it's affecting wages too. The Bureau of Labor Statistics reports that, last quarter, workers earned 0.7% less in real terms per hour than they did a year ago. No wonder the Fed is worried. In deflation, wages, company revenues, and the value of your home and your investments may shrink in dollar terms. But your debts stay the same size. That makes deflation a vicious trap, especially if people owe way too much money. [THINK JAPAN NO APPROACHING 2 LOST DECADES AND REALIZE THAT IF WE CAN GET AWAY WITH JUST THAT WE WILL BE VERY FORTUNATE!]

5. People still owe way too much money. Households, corporations, states, local governments and, of course, Uncle Sam. It's the debt, stupid. According to the Federal Reserve, total U.S. debt—even excluding the financial sector—is basically twice what it was 10 years ago: $35 trillion compared to $18 trillion. Households have barely made a dent in their debt burden; it's fallen a mere 3% from last year's all-time peak, leaving it twice the level of a decade ago. [HELL A DECADE AGO WE HAD FAR TOO MUCH DEBT AND WE KNEW, AND DISCUSSED THAT IT WAS UNSUSTAINABLE!!!]

6. The jobs picture is much worse than they're telling you. Forget the "official" unemployment rate of 9.5%. Alternative measures? Try this: Just 61% of the adult population, age 20 or over, has any kind of job right now. That's the lowest since the early 1980s—when many women stayed at home through choice, driving the numbers down. Among men today, it's 66.9%. Back in the '50s, incidentally, that figure was around 85%, though allowances should be made for the higher number of elderly people alive today. And many of those still working right now can only find part-time work, so just 59% of men age 20 or over currently have a full-time job. This is bullish? [LESS THAN 3 OUT OF 5 US MEN OVER 20 YEARS OF AGE HAVE A FULL TIME JOB? YEP THINGS ARE JUST FINE OUT THERE, THAT NUMBER RIVALS THE 30'S]

7. Housing remains a disaster. Foreclosures rose again last month. Banks took over another 93,000 homes in July, says foreclosure specialist RealtyTrac. That's a rise of 9% from June and just shy of May's record. We're heading for 1 million foreclosures this year, RealtyTrac says. And naturally the ripple effects hurt all those homeowners not in foreclosure, by driving down prices. See deflation (No. 4) above. [ I WON'T TOUCH THIS ONE OTHER THAN TO SAY IF YOU AREN'T FOLLOWING WHAT KIRK NACE HAS BEEN SHARING FOREVER YOU WILL EVENTUALLY KICK YOURSELF, HIS PROJECTIONS, WHILE SOMETIMES A BIT TO CAUTIOUS, HAVE BEEN DEAD ON. HE IS NOW SAYING WE ARE 5+ YEARS AND AT LEAST 25% PRICE WISE FROM A BOTTOM. IF I KNOW HIM, AND I DO, I WOULD BET THAT WE ARE AT LEAST 7 YEARS AND 35+% FROM A BOTTOM, NOT BECAUSE I KNOW MORE BUT BECAUSE I KNOW HE TENDS TO BE TOO CONSERVATIVE IN HIS ANALYSIS.]


8. Labor Day is approaching. Ouch. It always seems to be in September-October when the wheels come off Wall Street. Think 2008. Think 1987. Think 1929. Statistically, there actually is a "September effect." The market, on average, has done worse in that month than any other. No one really knows why. Some have even blamed the psychological effect of shortening days. But it becomes self-reinforcing: People fear it, so they sell. [LOOKS LIKE WE MAY HAVE STARTED A BIT EARLY THIS YEAR . . . GOTTA LOVE SDS/SRS/SPXU THANKS KIRK!]

9. We're looking at gridlock in Washington. Election season has already begun. And the Democrats are expected to lose seats in both houses in November. (Betting at InTrade, a bookmaker in Dublin, Ireland, gives the GOP a 62% chance of taking control of the House.) As our political dialogue seems to have collapsed beyond all possible hope of repair, let's not hope for any "bipartisan" agreements on anything of substance. Do you think this is a good thing? As Davis Rosenberg at investment firm Gluskin Sheff pointed out this week, gridlock is only a good thing for investors "when nothing needs fixing." Today, he notes, we need strong leadership. Not gonna happen. [DON'T GET ME STARTED - REVOLOUTION/RIOTS/REBUILDING WITH A CLEAN SLATE IS THE MOST REASONABLE OPTION, PERIOD]


10. All sorts of other indicators are flashing amber. The Institute for Supply Management's manufacturing index, while still positive, weakened again in July. So did ISM's new-orders indicator. The trade deficit has widened, and second-quarter GDP growth was much lower than first thought. ECRI's Weekly Leading Index has been flashing warning lights for weeks (though the most recent signals have looked somewhat better). Europe's industrial production in June turned out considerably worse than expected. Even China's steamroller economy is slowing down. Tech bellwether Cisco Systems has signaled caution ahead. Individually, each of these might mean little. Collectively, they make me wonder. In this environment, I might be happy to buy shares if they were cheap. But not so much if they're expensive. See No. 1 above. [BUCKLE UP, IF YOU AREN'T HELPING PEOPLE WHO ARE HURTING YOU ARE MISSING THE CHANCE OF A LIFETIME.]

Who is it going to be?

The battle has begun, will ALL US taxpayers get stuck with the bill to subsidize home ownership, or will those who choose to buy carry the load themselves???



http://www.theatlantic.com/business/archive/2010/08/pimcos-gross-calls-privately-held-mortgages-impractical-and-unrealistic/61645/
PIMCO’s Gross wants the government (read that US TAXPAYERS) to assume all risk for housing market. Are you ok with that???


http://news.yahoo.com/s/afp/20100817/pl_afp/useconomypropertyfinancestocks
The future of Fannie and Freddie – what a mess!


http://www.bloomberg.com/video/62242848/
CEO of radar logic talks about a HUGE check US taxpayers are going to be writing – well done video

http://money.ninemsn.com.au/article.aspx?id=7944644
Well done piece, simple. Pay attention to the last few lines and ask yourself what is in store for US builders, their employees and their suppliers? Why build new when there are so many more affordable options


http://www.american.com/archive/2010/august/dropping-the-ball-during-the-only-game-in-town
Another well done piece on how The Fed is acting (or not acting) effectively

US taxpayers, falling home ownership, looong pipeline for future foreclosures and more ...

This was a busy week as the main stream continues to wake up to the reality we have been sharing for years - there is a LOT more downside ahead of the US Housing Market!

http://www.cnbc.com/id/38669791
NY Times why every US taxpayer should be concerned . . .



http://www.upi.com/Business_News/2010/08/11/UPI-NewsTrack-Business/UPI-51841281543407/
UPI buyers are simply waiting – duh!


http://imarketnews.com/node/17794
1 in every 397 US homes CURRENTLY in foreclosure process, and the number seriously delinquent is far higher!


http://www.foxbusiness.com/markets/2010/08/12/bank-repossessions-drive-july-foreclosures/
Fox Foreclosures higher than ever, but not as high as they could be. Banks are managing foreclosures because of over 5 million seriously delinquent loans


http://www.usatoday.com/money/economy/housing/2010-08-11-housing11_cv_N.htm
USA Today well done piece on Fannie/Freddie and the government’s housing policy. Watch for US home ownership rates to fall from a peak of almost 70% to a bottom of around 50-55% within the next decade


http://www.cnbc.com/id/38654640
Reuters record low interest rates do nothing to increase demand. Almost 80% of all loan applications are for refi’s NOT new purchases


http://www.businessinsider.com/after-signs-of-improvement-commercial-real-estate-prices-fall-sharply-in-june-2010-8
commercial prices fall as well. IF you have followed what we share here, and what Kirk Nace has been sharing forever, commercial markets follow residential markets. If you are paying attention you will know that commercial markets are much further from an ultimate bottom (at least 8-10 years) than residential markets (5-7 years.) THINK people THINK!

The winds are picking up . . .

For quite some time now we have been sharing with you that the US Housing Market has been in the eye of the hurricane, well it's starting to move out of the eye. Winds are building and the back half of this housing hurricane will prove to be very, very strong. If you haven't shorted housing (SRS) or the markets in general (we like SDS and SPXU) you may find yourself with a dislocated hip from having kicked yourself so hard at some point in the next 6 months or so (it will likely be after the upcoming elections.) In any event here are this weeks mainstream media articles of note . . .


http://www.huffingtonpost.com/2010/08/06/fannie-mae-home-prices-to_n_672776.html

Fannie Mae now saying prices will continue dropping - DUH!


http://www.reuters.com/article/idUSN0622002720100807

Reuters Govt officials acknowledge just how pathetic results of subsidized loan mod programs really are . . . here come a lot more foreclosures!


http://www.prnewswire.com/news-releases/majority-of-american-families-plan-to-spend-less-than-last-year-or-nothing-at-all-on-back-to-school-shopping-according-to-rbc-consumer-outlook-index-100025504.html

families not spending money on back to school? Yeah, the economy is rebounding . . . are you high? Look around at the people you know, how many are better off financially than they were 1, 3, 5 or even 10 years ago? Ok take a look at how many are not. Does that look like improvement to you? Forget the statistics and stories that politicians and Realtors constantly throw at you (we all know how famous those two groups are for honesty and integrity) look at your own experiences and observations. Hmmm


http://www.dailymarkets.com/economy/2010/08/04/imf-us-real-estate-sectors-could-bring-banking-crisis-20/

US housing market continued correction could create 2nd wave of financial crisis . . . could or will???


http://news.yahoo.com/s/usnews/20100803/ts_usnews/housingmarkettakesanotherstepbackwards

US News & World Report Home sales hit new low. After huge drop in pending sales from April to May, pending sales again took another big hit from May to June


http://www.bloomberg.com/news/2010-08-01/greenspan-says-decline-in-u-s-home-prices-might-bring-back-the-recession.html
Bloomberg Former Fed head Greenspan warns of double dip



http://www.forbes.com/2010/07/26/employment-recession-economy-finance-opinions-contributors-mallory-factor.html

Forbes.com Would the government really spin jobs numbers just for political purposes??? Duh! If all the people who the government claims have quit looking for jobs (because they are so discouraged) were counted in unemployment numbers, we would be closer to Spain’s 20+% unemployment rate than we are to the highly inaccurate 9.5% our political machine wants us to see. Stop and ask yourself, with all of this recovery that is supposedly happening, who do you know that is better off financially now than 1, 5 or even 10 years ago??? Now ask yourself the converse, how many people do you know who are worse off? Hmmm, what does that tell you about the real economy, not the fairytale being spun by those in Washington DC???

Which end is up?

Is your head buried in the sand while your backside protrudes skyward for the whole world to come along and kick? Tay appention, here are some more interesting links for you to explore as you attempt to grasp a portion of the reality that has become the US housing market, and to an extent represents both the national and global economies . . .


http://www.benzinga.com/10/07/404577/foreclosures-continue-to-dramatically-increase-in-2010

interesting take on future of US housing market, and possibly US economy in general



http://money.usnews.com/money/personal-finance/real-estate/articles/2010/07/16/6-reasons-the-housing-market-hasnt-recovered.html

US News & World Report You’ve heard them all from us before, so here they are 6 reasons the housing market isn’t recovering, summarized by US News & World Report



http://www.reuters.com/article/idUSN2924663420100729

Reuters Lowest interest rates on record lead only to refinances, not new sales



http://finance.yahoo.com/news/Foreclosure-activity-up-apf-648738451.html?x=0&sec=topStories&pos=3&asset=&ccode=

Reuters Foreclosure activity continues to increase . . .



http://www.bloomberg.com/video/61784926/

Bloomberg Co Creator of Case Shiller housing index says US housing is “dead in the water.”

And the beat goes on . . .

8.5 million US homes currently for sale
+ 11 million US mortgages currently delinquent
+ 12 million US properties currently held by lenders and NOT on market
+ 15 million US homes under water
+ 20+ million more US strategic defaults and foreclosures coming
__________________________________
ENORMOUS supply for MANY years to come



no more tax credit
+ more stringent lending requirements
+ dropping credit scores
+ high unemployment
+ lack of consumer confidence
__________________________________
Historically low demand for years to come
Even NAR and their typically "pie in the sky" estimates are only projecting 5.3 million sales this year (we will actually end up closer to 4.8 million if you are keeping score)

what do YOU think will happen when supply is high and demand is low for the next 5-7+ years??? email Think@TRGHelp.com and ask for access to our upcoming call on "Where the US housing market is, how it got there, where it's going, why and how savvy property owners can maximize their opportunities.

Here are a few new links . . .



http://www.time.com/time/business/article/0,8599,2003578,00.html

Time house prices slashed across the country as sellers are forced to become more realistic – LOTS more to come!

http://www.cnbc.com/id/38204299

CNBC major drop in US credit scores will lead to less borrowing/less demand and even slower absorption

More relevant info on the US Economy and Real Estate Market

Over the past week or so here are some of the articles that caught our attention . . . check them out and we would love your thoughts, email us Info@TRGHelp.com (if you aren't already plugged into The RESULTS Group's 100 Club where you can learn to effectively communicate this information you are missing out! http://www.trg100club.com/ )


http://realestate.yahoo.com/promo/housing-double-dip-appears-to-be-underway.html
Yahoo/Zillow housing double dip under way – duh!


http://finance.yahoo.com/news/Biggest-Defaulters-on-nytimes-3203153456.html?x=0&sec=topStories&pos=4&asset=&ccode= NY Times The wealthy are walking away and defaulting far faster than the rest of the country . . . what do they know that you should?

http://www.forbes.com/2010/07/07/housing-double-dip-personal-finance-real-estate-dip.html?boxes=Homepagechannels Forbes.com second dip in housings correction well under way . . . 11 MILLION homes currently delinquent!!!

http://www.businessweek.com/news/2010-07-06/rogoff-says-u-s-housing-won-t-come-back-for-a-long-time.html business week Harvard economist says US Housing “won’t come back” for a long time

Updates you should be aware of - real estate market is ready to become Humpty Dumpty

Below are numerous links to main stream media articles all supporting what we have been sharing for years . . .


http://finance.yahoo.com/news/May-pending-home-sales-tumble-apf-2024500274.html?x=0&sec=topStories&pos=main&asset=&ccode=
AP – home sales drop in May to lowest level on record - DID YOU SEE THAT, HOME SALES DROP TO LOWEST LEVEL ON RECORD!!!



http://finance.yahoo.com/news/Home-refinancing-up-but-rb-1215423766.html?x=0&sec=topStories&pos=4&asset=&ccode=
Reuters home buying demand at 13 year low - DO YOU NEED MORE THAN ONE REPUTABLE SOURCE?

http://money.cnn.com/2010/06/30/real_estate/discounts_on_foreclosures/index.htm?source=cnn_bin&hpt=Sbin
CNN Money foreclosed homes selling at 30% discount - THERE ARE OPPORTUNITIES DO YOU KNOW HOW TO FIND AND TAKE ADVANTAGE OF THEM?

http://finance.yahoo.com/news/New-home-sales-plunge-33-pct-apf-1718773153.html?x=0&sec=topStories&pos=main&asset=&ccode=
AP – new home sales now at lowest level since 1963!!! - OH YEAH, IT'S NOT JUST RESALES

http://finance.yahoo.com/news/Mortgage-rates-sink-to-lowest-apf-2118457054.html?x=0&sec=topStories&pos=main&asset=&ccode=
AP – lowest rates since before 1971 and still VERY low demand - DESPITE WHAT IS NOW LOWEST RATES IN 50+ YEARS (4.58% LAST WEEK) WE STILL HAVE RECORD LOW DEMAND - OUCH!


Interesting Fact:
There is a $600 trillion derivatives market which equates to over $1.7million for each of 350million Americans – wow!

Housing Double Dip a Certainty . . .

Click on the title above or cut and paste from below to hear Meredith Whitney's comments regarding a housing double dip. As we have shared here for a long time, this has been the eye of the hurricane. I personally believe that we are no more than 30-40% of the way through the housing correction here in the US. This ever evolving market has created enormous opportunities for savvy investors who understand what's happening and why it's happening. If you would like more information, read over other articles here, or if you don't mind spending a few dollars email Kirk@KirkNace.com and buy yourself some consulting time. A few hundred dollars spent wisely in this manner could save you tens of thousands, or more!

http://www.cnbc.com/id/37821204

US Housing Market Reality

A friend of mine has provided the following information to his consulting clients and others for the past decade. Take a look at the highlights of some of the old stuff here, and think about what this information could have done for you if you had access to it when we did . . .

US Housing Market Reality
May 2010 Wrong again . . . to date every time we have estimated the severity of the situation with the US housing market & economy, the global economy, etc we have been too conservative. This time is like the others, while we have shared until recently that we had reached the midpoint of the housing correction, we were wrong. We are no more than 1/3 of the way through it. Take a look at the pain, suffering and losses incurred thus far, double it and that is what still lies ahead of us. This of course creates enormous opportunities and many of our clients continue to position themselves to realize these once in a life time situations. Forget about the nonsense you are hearing regarding improvements to the economy. 1/3 of mortgage borrowers aren’t paying their mortgages, doesn’t it make sense that they are spending that money and therefore creating a situation wherein it appears the economy is recovering when in fact this is a last gasp before people are forced to be responsible?

March 2010 Discussions of a moratorium on foreclosures are becoming more frequent. Sad reality is if disgruntled home owners are told they can’t be foreclosed on, significantly more will stop making mortgage payments thereby only further “kicking the can” into the future. We are weeks away from seeing the impacts of the expiration of buyer tax credits and the Fed’s discontinuation of their supporting the housing market via their purchases of most mortgage paper generated over the past few years. Want to see what impact this will have? Ask yourself, how much money you would invest on mortgages secured by real estate in an ever declining market, where many of the borrowers have less than 5% of their own money in the game, low credit scores, face interest rates are near all time lows, there exists more pent up supply (shadow inventory) than will sell over the next several years combined, and foreclosures and delinquencies will continue to escalate until at least 1Q2013, longer if the government applies this newest band aid? My guess is you wouldn’t put what’s left of your retirement dollars in this type of investment. As pension funds continue to find themselves faced with the dire reality of not enough income and too many obligations they are beginning to become more and more aggressive in the investment vehicles they choose, thereby not only moving away from mortgage backed securities and other real estate related vehicles, but towards more risky options. Hmmm, good times ahead. We are now in the eye of the hurricane.

January 2010 New reports tell us foreclosures and serious delinquencies continue to hit record highs. While this spring will see the double whammy of an expiring buyer tax credit and the end of the Federal Reserve’s insane purchases of almost all newly originated mortgage related mortgage securities. click here for Reuters article With future supply growing faster than ever, buyer’s incentives expiring and the largest purchaser of newly originated mortgages winding down their purchase we will start to see the next leg of the real correction later this year.

November 2009 Supply and Demand is a Law, not a suggestion: Whether you believe in the law of gravity or not, it impacts you. Similarly, whether you believe in the law of supply and demand it too has an absolute impact. Let's start by looking at the supply side of the US Housing Market . . . In the 3rd quarter of 2009 almost a million homes in the US entered the foreclosure process, an increase of over 22% from the same period in 2008 click here for article This represents 1 out of every 136 homes in the country entering the foreclosure process during 3Q09, in some areas the number was as low as 1 in 20 homes entering the process during just this 3 month period!
During the same period, 3Q09, mortgage delinquencies across the country hit a new high click here for Realty Trac article having increased 58% from the same period in 2008! With unemployment continuing to rise, and maximum mortgage resets still not due for about another 2 years, which direction will this go?
Combined, this brings the total to almost 4 million homeowners who are either in foreclosure or at least 3 months behind click here for this article at the end of 3Q09.
Barry Sternlicht, CEO of Starwood Capital Group (who just cut a super sweet deal w/ the govt on distressed assets) stated recently that the total number of "Shadow inventory" could be as high as 12-15 million. While no one knows for certain exactly how many properties banks, financial institutions and investors are sitting on, we do know, for certain, that there are literally millions of people who have not made mortgage payments for months and in some cases for up to 3+ years without being foreclosed upon.
Ok, so what about demand?
According to The National Association of Realtors (notorious for misleading the public) the number of sales in 2010 should be approximately 5.3 million. This represents demand.
You do the math
With about 4 million homes 90+ days delinquent or currently in the foreclosure process, plus who knows how much shadow inventory, plus the rate of foreclosure filings and new delinquencies growing rapidly - what will happen to supply? for how long?
Even if we get to NAR's projected 5.3 million sales next year how will that level of demand even make a dent in the supply?
Bottom line:
US Housing Markets are at least another 5 years from a bottom and will return to price levels similar to those seen in 1996-1998.
Want to understand more about where we are and how we got here? Visit www.SmashedFeet.com
Now that you have been shaken and awakened, what are you going to do to improve your situation?

Don’t believe it? Consider this. . .


October 2009 Financial institutions currently own enough housing inventory to supply the entire nation’s housing demands for the next year and a half. This doesn’t include the inventory they already have currently on the market and listed for sale. There is another year and a half that they haven’t yet made available for sale. The amount they don’t yet own, but will be foreclosing on in the next few years makes the amount they currently own appear minuscule. 3Q2009 foreclosure filings were at the highest levels on record. As our dollar continues to weaken we are rapidly approaching a point where we will no longer be able to subsidize artificially low interest rates and guarantee mortgages where borrowers have little to nothing at risk. The next step is rapidly approaching, watch for the collapse of the dollar. A weakening economy, rising unemployment, rising interest rates and rising distressed inventories will have a significant negative impact on housing prices. The good news? From a pricing correction standpoint residential real estate is approaching the midpoint (commercial trails residential by at least 30-36 months in this correction.)

April 2009 Our clients were informed that multiple games are being played to manipulate both markets and the public’s perception of the economy. Expect a rebound to simply set up a stronger leg down later this year and well beyond.

September 2008 We alerted clients that the stock market correction was simply the first, in what we believe will be a series of steps towards an ultimate bottom and possibly a collapse of not only our global financial system, but the demise of the United States of America.

April 2008 We have seen lots of changes in just the past few months. Lenders and courts are overwhelmed with the number of defaulting loans. The properties that banks have actually foreclosed on and are just now selling were those where rates typically adjusted in the later part of 2006. With sub prime rate adjustments due to hit their peak in the 2nd and 3rd quarters of this year, and with borrowers frequently being 12, 18 even 30+ months delinquent before lenders and courts actually even initiate the foreclosure process it is probable that we won’t see a peak of bank related sales until at least 2011 or 2012, perhaps even later. I was just interviewed by The Wall Street Journal and asked who benefits from this process taking as long as it is and why does it take so long? Let’s ask ourselves a few questions:
Are there are fewer loans defaulting each month now than were being approved a few years ago?
When a loan was approved did the borrower have to be approved?
Did the property have to be appraised?
Did the borrower and property package have to be underwritten and ultimately approved by the investor who would own the paper?
Did this routinely all happen in 2-4 weeks?
Is there anyone relying on the income from servicing this loans who would not want them to go away?

December 2007 Sellers are finally starting to accept that the days of excessive real estate speculation are over and prices WILL in fact correct, unfortunately many sellers are still unable to accept that whatever price they will get today will be higher than any price they will sell for at any time over the next 10+ years. Lenders are still overwhelmed by the defaulting loans and associated properties nationwide. We are seeing lenders take 3, 4, even 6+ months to address offers on defaulted properties.

October 2007 In Lee and Collier counties (SW Florida, the rest of the nation’s crystal ball for housing) we have just started to see the number of foreclosure filings exceed the number of properties selling each day, this trend will increase until sometime in early 2009 by which time the number of foreclosure filings will have peaked. As lenders become more and more motivated to get or keep nonperforming real estate holdings off their books the prices they accept will continue to decrease putting a great deal of downward pressure on the overall market prices. This will result in prices most likely hitting a bottom by no earlier than 2011. They will then remain flat until the excessive supply which has been created, or built, is absorbed. Best guesstimates are this process, which will begin in 2011 will be completed by no earlier than 2015-2017 at which time we will potentially start to see prices move up. It is realistic to see prices back to today’s levels by 2025 at the earliest.

August 2007 There are now more properties going into default and/or being foreclosed on each month than there are selling in many parts of FL, AZ, NV and CA. This trend will gain momentum until 4th quarter 2008 or first quarter 2009 when foreclosures should peak. By late 2010/early 2011 the foreclosure wave should have worked itself out and prices will be close to a bottom. This could be extended if lenders are unable to manage the huge # of foreclosures and simply take their time to work through all of it. In that case, or if there is another extenuating circumstance (i.e. bad hurricane season(s) global economic turmoil, governmental intervention, war or terrorist episode) we will most likely see this process lengthened. Once a bottom is reached it now appears that we will stay relatively flat for at least 4-7 years at or near the bottom.
Meaning that we are looking at prices dropping steadily for about 4 more years and then staying flat until 2015-2018. It’s reasonable to expect that prices will be similar to those seen between 2000 and 2002 during this extended bottom, but as with all cyclical markets, supply will eventually be absorbed and demand will someday increase again forcing prices to escalate. This next escalation most likely will begin between 2015-2018 and will be slow at first as many people will be afraid to venture back into the real estate market. Their apprehension will create huge opportunities for those of us who will know when the bottom is approaching and when it will be over.

July 2007 we are seeing the number of traditional sellers willing to enter the market starting to slow down. In June 2007 we saw new listings slip back to levels of late 2005. While even this level is still resulting in approximately 4 homes coming on the market for every one selling each month, it is an indication that many sellers simply can’t see a way out and are hoping for better times ahead. Unfortunately, we are just beginning to enter a period that will most likely last 2-4 years during which the vast majority of properties that sell will be foreclosures where the lenders who end up in possession of the homes simply have no option but to sell and get the non performing assets off their books. This will result in a great deal of downward pricing pressure while we work through this. All indications are that we should see prices hit a bottom within the next 3-5 years. Demand has already returned to a level slightly higher than the pre speculative boom and will most likely stay constant over the next several years despite the difficulties still developing in the financing industry.

May 2007 we saw the rapidly approaching wave of foreclosures no longer on the distant horizon. There are currently about as many homes entering the foreclosure process each month as there are actually selling. These homes will only add to the downward pressures already on pricing from the continuing increases in housing inventory (new construction,) financing reform and the media’s gloomy picture of the housing industry. Builders and developers are continuing to struggle to stay in business, by offering huge incentives as attempts to avoid the inevitable. In many situations, the cost of construction (labor, materials, permits, fees, holding costs etc) have already reached a point where it equals the market value of the end product, effectively requiring that land receive little or no value simply for projects to break even. As pressure mounts from the federal government, lenders continue to tighten lending guidelines and programs effectively minimizing the number of people who can buy a home.

January 2007 we predict huge opportunities in pre-foreclosure, rehab/renovate and flip, and for new construction workout specialists, just to name a few. We also see savvy investors liquidating holdings in “high appreciation markets” and moving their money to “cash flow markets.” Opportunities exist today, and many more will be created to get guaranteed 8-12% returns on real estate investments while minimizing any down side risk. These opportunities, while not glamorous will be steady and consistent. Strong similarities exist when we compare real estate investment opportunities with the old fable of the Tortoise and the Hare. As in any correction many fortunes will be lost, and some enormous fortunes will be made.

December 2006 we predicted that the ever softening real estate market, already down 20%+ from the peaks would see an additional 4-6+ years of decline and in South Florida specifically an additional 25%+ reduction in prices. We are starting to believe that history will look back upon the upcoming years in a manner similar to the way we currently view “The Great Depression,” only this will be more significant.

April 2006 we forecast that at least ½ of builders and developers in South Florida will be out of business within 5 years. As demand normalizes they will be forced under by the weight of overly leveraged projects. As lenders see this coming they will begin to look for “workout specialists” who can take over failed projects and minimize the damage done to the lenders.

April 2005 we forecast that foreclosures would ultimately reach record levels due to the alarmingly high number of ARM’s and creative loans with negative amortizations and the like. This wave of foreclosures would put even more downward pricing pressure on the market due in part to the large number of appraisals that will be impacted by the flood of foreclosures.

December 2004 we predicted that many over appreciated markets would see prices correct at least 20-35% from the peaks. We predicted that this correction would last at least 3-5 years.

October 2004 we foresaw and again warned clients of decreasing demand and increasing supply in most of the over appreciated real estate markets across the country. Nowhere was there a more gross demonstration of this than in FL, NV and AZ. We informed clients that a pricing peak would occur in most areas within the following 6-12 months.

November 2001 we foresaw and warned our clients of the coming market where speculative demand fueled partially by artificially low interest rates, an unstable stock market, the events of 9/11 and a staggering over estimation of the baby boomer effect would create a rush to meet this demand with additional housing supply. The problem we foresaw at that time was that by the time land was acquired, plans approved and supply was actually made available the demand would have dissipated.

September 2000 we noted and started sharing that nationally, the real estate market was indicating a peak would occur within the next 6-12 months.

If you believe US real estate is recovering . . . read this (IF you can actually read)

according to the following article:
http://finance.yahoo.com/news/Mortgage-delinquencies-apf-3683370452.html?x=0&sec=topStories&pos=7&asset=&ccode=

mortgage delinquencies and foreclosures just hit record highs - read this as ever growing supply

according to this AP article:
http://finance.yahoo.com/news/Mortgage-Applications-Plummet-siliconalley-1293323636.html?x=0&sec=topStories&pos=4&asset=&ccode=

mortgage applications hit a 13 year low - read this as ultra low demand

What happens when supply surges and demand plummets?

In real estate it means that in 6-12 months prices drop, significantly. Gee, at least there is no worry about credit risks globally that will be pushing up interest rates. If you haven't studied the links to articles we have been providing you for the past several years you are intentionally harming clients and you are incompetent - most Realtor organizations will give you a plaque for that.

If you want to understand how and why these, and other, FACTS we have been sharing with our readers for years tell us sellers should do whatever it takes to sell now and buyers who are financing should buy now. The information is here, start at the beginning (first article on this site) and read forward. OR visit http://www.TRG100Club.com and request a complimentary month of membership OR run, don't walk, to McDonald's, Wal Mart or Home Depot and request an application - don't be surprised if they won't hire you, as a Realtor you probably possess very few actual skills and even less business savvy.

Outlook is "bleak"

Former head of IMF speaks about "bleakness" of US and global economies - you probably want to just ignore it and bury your head in the sand though huh???

Click on the title above or the link below to review the entire Yahoo Finance article.

http://finance.yahoo.com/tech-ticker/outlook-for-global-economy-is-%22bleak%22-former-imf-chief-economist-says-486167.html?tickers=FXE,TBT,EWZ,GLD,FXI,EUO,EEM&sec=topStories&pos=9&asset=&ccode=

This guy called the real estate bubble in 2002, what does he see today?

Hmmm...Ouch! one of our favorite contributors here on SmashedFeet also saw this coming and shared it with clients back then.

Click on the title above or the link below to review the entire Yahoo Finance article.

http://finance.yahoo.com/tech-ticker/housing-bulls-are-%22not-paying-attention%22-to-the-facts-says-dean-baker-483703.html?tickers=xhb,%5Edji,%5Egspc,xlf,tlt,tbt&sec=topStories&pos=8&asset=&ccode=

California is the New Greece

Governor Arnold begins to describe the "absolutely terrible" cuts and pain ahead for CA...it's a good thing CA doesn't show us what other states will eventually do...or does it?

Click on the title above or the link below to review the entire Yahoo Finance article.

http://finance.yahoo.com/tech-ticker/schwarzenegger-warns-of-%22terrible-cuts-absolutely-terrible-cuts%22-coming-in-california-483776.html?tickers=tlt,tbt,xlf,ncu,nvx,nkl,cev&sec=topStories&pos=6&asset=&ccode=

Foreclosures heating up in the high end . . . what it means to everyone else

As we have been sharing for several years, there will be phases to this foreclosure hurricane. According to the CNBC article (click on title above or cut and paste this : http://www.cnbc.com/id/36993480 ) foreclosures are starting to pick up in the high end. Sooo . . .

consider these questions:
When the house with a $1.5M mortgage is foreclosed on and sells for $850k, what happens to the value of the other homes currently on the market for $850k that pale in comparison to the foreclosure?

When the house that was at $850k must now drop to $650k to sell, what happens to the house that was at $650k?

When the house that was at $500k now pales in comparison to the house that was at $650k what will that seller have to do?

See the dominoes and how they will fall?

Oh, but wait, what happens to the already upside down homeowners in ALL these price ranges when they realize that they are simply getting further upside down and not only are they paying waaay more for housing than many others in their neighborhood, but they figure out that their tax dollars are subsidizing this entire mess (govt continuing to back shitty loans to unqualified buyers, allowing financial institutions to lie, cheat and steal while making record profits, etc?)

Hmmm

Batten down the hatches, the winds are picking up again, this hurricane is FAAAAAAAR from over!

Do as I say not as I do...

Did you know that Congress people and other politicians are legally permitted to conduct insider trading? Holy shit that is just wrong.

Click on the title above or the link below to review a Yahoo Finance article and learn why Congress Refuses to Outlaw Insider Trading for Lawmakers.

http://finance.yahoo.com/tech-ticker/congress-refuses-to-outlaw-insider-trading-for-lawmakers-478701.html?tickers=%5Edji,%5Egspc,%5Eixic,brk-a,brk-b,gs,xlf&sec=topStories&pos=9&asset=&ccode=

Riots in the streets of Athens

As Ouch! has been sharing with his private clients for the past few years, riots will happen, not just in Europe but we will see them here in the US. I know he is sharing that we could see it here within 12-24 months. For those of you who know him, you'll understand that he is excited by this because he fully believes that it will lead to change. As we have always learned, the bigger the breakdown, the larger the opportunity for the next breakthrough.

Click on the title above or the link below to review a CNN article on the riots in Greece.

http://www.cnn.com/2010/WORLD/europe/05/05/greece.strikes/index.html

Bloomberg article should serve as red flag for those who are buying into the nonsense of a recovery.

Click on the title above or the link below to review a Bloomberg article and think about our "recovery."

http://www.bloomberg.com/apps/news?pid=20603037&sid=a8o9QE6Ly6rg

Ok rocket scientists and brain surgeons - pay attention!

As more and more people buy into the hype that there is some sort of financial recovery I would like to point out a few things:

* Right now, today, more people than ever in the history of The United State of America, are NOT paying their mortgages.

* There are more homes which have already been foreclosed on being held off the market than have actually been brought back on the market and sold. What does this mean for future supply and therefore pricing?

* BofA is talking about going from it's current level of 7,500 foreclosures completed/mo now to 45,000/mo by the end of the year! Again what is the future of supply?

* Tax credit just expired, rates keep sliding up and now lending guidelines are going to be tightening again. What impact will this have on demand?

* These people are instead using some of this money to buy other things which creates the illusion that they are better off financially than they really are. Where will this pattern of spending more than we are earning end up?

* The government and the media report stronger retail sales, increased auto sales, etc - Is this because every single day more and more people are choosing to ignore their mortgage payments and instead spending these saved dollars elsewhere?

* Europe is a mess, many of the countries there are edging ever closer to the much publicized situation Greece finds itself in. What happens when these dominoes start to fall?

* The European issues are minuscule when compared to those we have right here in the United States. Do you think Ouch! has been right for all these years saying that we are moving towards "The Former United States of America?"

* We are growing ever closer to the day when we will default on our debts to the rest of the world. What will happen when we can't pay our bills, social security fails, medicare fails, welfare goes away, pension funds fail? Or will we first try to throw even more money at these problems and thereby create hyperinflation?

* Many states are starting to realize that their citizens are paying twice or more in federal taxes what the state and it's citizens are receiving in real benefits. With the states struggling to stay afloat financially, how long will it be before they stop sending $2 off to DC for every $1 of benefit???

* There is an ever growing movement of those who are disgusted by how wasteful our government has become. How long will it be before someone rallies this group behind the FACTS that our baby boomers allowed us to get into this mess, now they want services and feel entitled to have others foot the bill?

* When will people simply say "the hell with it, I'm not sending one more dime to any of the large financial institutions, insurance companies or the current government?"

* What if there was a large group who simply stopped working to support others and instead pushed for a system wherein those who created the messes we have today were held accountable?

Ok, Mr/s Rocket scientist/brain surgeon - are we really in a recovery?

Greece is junk...Who's next?

Click on the title above or the link below to review an article by the Associated Press and learn of Greece's debt crisis.

http://finance.yahoo.com/news/As-Greece-falters-fears-apf-3966475294.html?x=0

Good info, probably more conservative than reality will prove to be, as Ouch! believes we are still at least 5 years from a bottom.

Click on the title above or the link below to review a Businessweek article to learn Housing Rebound at Least 3 Years Away.

http://www.businessweek.com/news/2010-04-28/housing-rebound-at-least-3-years-away-ranieri-says-update1-.html

Just as Ouch! shared here on SmashedFeet, here comes the commercial leg down . . .

Click on the title above or the link below to review a Businessweek article to learn why Tourists May Leave Real Estate as Rates Rise.

http://www.businessweek.com/news/2010-04-27/-tourists-may-leave-real-estate-as-rates-rise-sternlicht-says.html

Bank Of America expecting to see foreclosures increase 600% read on...

Click on the title above or the link below to review an article by The Market Oracle to learn about the US Housing Market Crash Update.

http://www.marketoracle.co.uk/Article18742.html

Watch the 1st few minutes of this if you are one of those who thinks the economy and real estate markets are actually improving

Click on the title above to watch a video by ThinkBigWorkSmall.

CNN Money article on spike in new foreclosures . . . sounds more and more familiar

Click on the title above or the link below to review a CNN Money article on the foreclosure spike in the 1st quarter of 2010.

http://finance.yahoo.com/news/Foreclosures-spike-7-in-first-cnnm-2289163466.html?x=0&.v=2

Foreclosures rising

Foreclosure filings keep on rising, up another 16% from last year and 7% from just last quarter, the rate of rise is increasing - if you believe the worst is behind us please explain these facts? How can the worst be behind us if more properties are going into foreclosure than ever before and that number is growing???

Click on the title above or the link below to review the article by MarketWatch.

http://www.marketwatch.com/story/us-foreclosure-filings-up-in-first-quarter-2010-04-15?reflink=MW_news_stmp

Ouch! Thinks this is overly optimistic, but better info than most are presenting

Click on the title above or the link below to review an article by HousingWire and learn why Peak House Prices Will Return to Sand States After 2025.

http://www.housingwire.com/2010/04/09/peak-house-prices-will-return-to-sand-states-after-2025-fiserv/

Merrill Lynch accused of same fraud as Goldman Sachs

Click on the title above or the link below to review an article by Offshore Inn to learn Merrill Lynch Accused of Same Fraud as Goldman Sachs.

http://offshoreinn.com/investing/merrill-lynch-accused-of-same-fraud-as-goldman-sachs-tip-of-the-iceberg-of-fraud-charges/

Housing double dip coming in US

Click on the title above or the link below to review an article by MoneyWeek and learn how US housing market heads for a double dip.

http://www.moneyweek.com/news-and-charts/economics/us-housing-market-heads-for-a-double-dip-48006.aspx

WOW - Apparently banks are in such a mess they are foreclosing on the wrong properties!

Click on the title above or the link below to review an article by the St. Petersburg Times and learn how Bank of America forecloses on the wrong home.

http://tampabay.com/news/business/realestate/bank-of-america-forecloses-on-house-that-couple-had-paid-cash-for/1072632

Home ownership no longer the American Dream

Click on the title above or the link below to review an article from Mortgage Lending News and learn why Renting Is Now the New American Dream.

http://mortgagelendingnews.com/component/content/article/14-top-news/4875-renting-is-now-the-new-american-dream

Are people not paying their mortage, spending that money on shopping and thereby causing an artificial boost to the US economy? Hmmm

Click on the title above or the link below to review a CNBC article and learn if Mortgage Defaults May Be Driving Consumer Spending.


http://finance.yahoo.com/news/Mortgage-Defaults-May-Be-cnbc-1964280202.html?x=0&sec=topStories&pos=6&asset=&ccode=

David Walker speaks on how US can avoid triggering global depression

Click on the title above or the link below to review a Yahoo Finance article and ask yourself who will bail out America?

http://finance.yahoo.com/tech-ticker/u.s.-standard-of-living-unsustainable-without-drastic-action-former-top-govt.-accountant-says-458329.html?tickers=%5Edji,%5Egspc,dia,spy,tlt,IXJ,xlv&sec=topStories&pos=8&asset=&ccode=

Something to think about

Click on the title above or the link below to review an interesting article by Warren Buffet's partner Charlie Munger...worth the read per Ouch!

http://www.slate.com/id/2245328

New home sales drop to lowest levels on record!

Click on the title above or link below to review a Business Week article and think about Sales of New U.S. Homes Dropped to Lowest on Record.


http://www.businessweek.com/news/2010-03-24/sales-of-new-u-s-homes-dropped-in-february-to-lowest-on-record.html

New Home Sales Fall Again – No kidding!

Click on the title above or the link below to review a Reuters article


http://finance.yahoo.com/news/New-homes-sales-fall-durable-rb-3267311932.html?x=0&sec=topStories&pos=main&asset=&ccode=

Meredith Whitney discusses why housing double dip is about to begin.

Click on the title above or the link below to review a CNBC article to learn why the Housing Market Sure to Double Dip.


http://www.cnbc.com/id/35887306

Congratulations to all the Sellers who waited for the "Spring Market" -

Take a few minutes and read this article see why savvy property owners have been getting out for a loooooong time. Good news is, nationally, the correction is almost to it's midpoint. Bad news is today's loan modification program as outlined by our elected officials will only extend the time it takes to get to an ultimate bottom and will thereby increase the total pain felt by home owners.

http://finance.yahoo.com/news/Spring-Outlook-Housing-Sales-cnbc-429602006.html?x=0&sec=topStories&pos=main&asset=&ccode=

Buffett Is Now a Safer Bet Than Obama

The following article is by another one of the bright people Kirk Nace turned me onto . . .

Steve Sjuggerud
Thursday, March 25, 2010

It should go down as a historic moment...

But hardly anyone noticed.

The same day the health care bill passed, U.S. government debt lost its "risk-free" status.

That day, for the first time in over a generation, the U.S. government was a worse credit risk than a U.S. company.

Specifically, investors were willing to accept a lower interest rate to lend money to billionaire Warren Buffett's company, Berkshire Hathaway, for two years than to lend to the U.S. Treasury for the same period of time.


It shouldn't be possible... after all, the government prints the money... how can it be less likely to pay off its debts? But it makes sense on the other side, too. You can easily see how billionaire Buffett's company is less of an actual credit risk than our government, which is on the hook for tens of trillions of dollars of promises.

It's not even just the world's richest man who's grabbing lower interest rates than Uncle Sam... Heck, even home-improvement store Lowe's can borrow money at a cheaper rate than the U.S. government.

Here's how my good friend Porter Stansberry explained it earlier this week:

Congress says by spending an extra $1 trillion on health care over the next 10 years and raising taxes substantially (but only on the wealthy, of course), our annual deficits can be reduced... This has to be one of the most outlandish claims we've ever seen politicians make. It will so surely end up being a financial disaster that the bond market has actually begun to price government obligations at higher interest rates than highly rated private companies...

We believe the debt of nearly every government in the world will soon trade at a significant premium to the best-run private companies.

The reason is quite simple: As long as they don't have to pay for it, people will always vote for more government spending. That leads politicians to implement strategies that shield the true costs of government spending from the majority of voters – using debt and steeply progressive taxes. Today, roughly half of all Americans pay zero federal income taxes. As a result, it's not hard to win an election promising more things, like "free" health care.

This isn't really a political problem. It's actually an economic problem. There's a structural asymmetry between the people who approve the budgets (through elections) and the people who have to finance the budgets. Eventually, this will lead to a complete fiscal collapse. And it's going to happen a lot sooner than people think because the bondholders aren't stupid. They can see where the trend is heading. And that's why, as of today, it costs OBAMA! more to borrow money than Warren Buffett.

The problem is, once creditors begin to fear more and more paper will simply be printed to pay these debts (and, of course, that's what will happen), interest rates will rise. And they could rise suddenly. That would force governments to spend vastly more money on interest payments than they expect. That's the big problem right now in Greece, for example. I believe the U.S. will be spending close to 25% of its income tax receipts on interest by 2015. That's simply not sustainable.

The Obama administration believes the health care bill is "historic." Obama meant historic in a good way. The bond market recognizes it's historic in a bad way...

The passing of the legislation marked the first day in decades the bond market thought highly rated corporate bonds are a safer bet than the people who print the money.

The market decided a bet on bonds from our government is no longer risk free... It was a historic day.

The way to play it is simple, and you've heard it before... but it's right. Sell government bonds and buy gold (the currency that can't be printed).