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=
Friday, March 26, 2010
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).
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).
Tuesday, March 16, 2010
15 Reasons Obama is dead wrong about our upcoming DEPRESSION
As always, click on link above or cut and paste below. Well done, concise points. Take 2 minutes and review this!
http://www.businessinsider.com/15-reasons-why-barack-obamas-declaration-that-a-second-depression-is-no-longer-a-possibility-is-dead-wrong-2010-3#1-new-home-sales-are-plunging-1
http://www.businessinsider.com/15-reasons-why-barack-obamas-declaration-that-a-second-depression-is-no-longer-a-possibility-is-dead-wrong-2010-3#1-new-home-sales-are-plunging-1
Tuesday, March 9, 2010
Robert Shiller questions whether home ownership is a good idea.
Click on the title above or the link below to review an article by The Wall Street Journal and think about Should We Keep Subsidizing the Housing Market?
http://blogs.wsj.com/developments/2010/03/09/shiller-should-we-keep-subsidizing-the-housing-market/
http://blogs.wsj.com/developments/2010/03/09/shiller-should-we-keep-subsidizing-the-housing-market/
Pension funds making changes.
Click on the title above or the link below to review an article by The New York Times.
As we have shared for years, pension funds and other retirement vehicles are not going to be able to make payments millions of Americans are counting on, here is the first hint at that reality.
http://finance.yahoo.com/retirement/article/109020/public-pension-funds-are-adding-risk-to-raise-returns?sec=topStories&pos=5&asset=&ccode=
As we have shared for years, pension funds and other retirement vehicles are not going to be able to make payments millions of Americans are counting on, here is the first hint at that reality.
http://finance.yahoo.com/retirement/article/109020/public-pension-funds-are-adding-risk-to-raise-returns?sec=topStories&pos=5&asset=&ccode=
Are YOU missing out?
Click on the title above or the link below to review an article by The Wall Street Journal and learn why Borrowers Miss Out on Billions in Savings.
http://finance.yahoo.com/loans/article/108957/borrowers-miss-out-on-billions?mod=loans-home
http://finance.yahoo.com/loans/article/108957/borrowers-miss-out-on-billions?mod=loans-home
What if people start thinking that mortgage backed securities are not risk free? Rates will rise. No, really, are you serious? DUH!
Click on the title above or the link below to review an article by The Washington Post and learn about Fannie, Freddie risks.
http://www.washingtonpost.com/wp-dyn/content/article/2010/03/05/AR2010030501764.html
http://www.washingtonpost.com/wp-dyn/content/article/2010/03/05/AR2010030501764.html
Shakier than expected???
Click on the title above or the link below to review a CNBC article on how the hopes for a housing recovery anytime in the near future are NOT working out. Duh! Ouch! shared this with our clients and readers looong ago.
http://finance.yahoo.com/news/Housing-Recovery-Is-Looking-A-cnbc-1706073918.html?x=0&sec=topStories&pos=3&asset=&ccode=
http://finance.yahoo.com/news/Housing-Recovery-Is-Looking-A-cnbc-1706073918.html?x=0&sec=topStories&pos=3&asset=&ccode=
"According to Robert Shiller, real estate prices don't increase vs. inflation"
All of the forecasts here are based upon the author's assumption that real estate is a stable investment which largely tracks inflation. The follow-on assumption is that values broke out of this stable pricing pattern in a real estate bubble which started in 1990.
The basis of the primary assumption, the assumption that real estate is a stable non-appreciating asset, is taken directly from Robert Shiller. He is a leading expert on real estate prices.
"My data shows that between 1890 and 1990 real home prices actually didn't increase," Mr. Shiller wrote in Newsweek (Dec. 30, 2009), 'Why We'll Always Have More Money Than Sense.' If prices didn't appreciate for 100 years, it leads one to assume the break in that pattern is an artificial break.
If this assumption is correct, and who am I to argue with 100 years of history and Mr. Shiller, then it appears our friend Ouch! may be dead on with his prediction that nationally housing prices will return to 1996/1998 levels by around 2015, unless of course we see deflation which, again according to Ouch! may occur prior to a final burst of hyperinflation which will most likely be the proverbial straw that breaks the camel's back and leads us to what he is calling "The Former United States of America" (circa 2020)
The basis of the primary assumption, the assumption that real estate is a stable non-appreciating asset, is taken directly from Robert Shiller. He is a leading expert on real estate prices.
"My data shows that between 1890 and 1990 real home prices actually didn't increase," Mr. Shiller wrote in Newsweek (Dec. 30, 2009), 'Why We'll Always Have More Money Than Sense.' If prices didn't appreciate for 100 years, it leads one to assume the break in that pattern is an artificial break.
If this assumption is correct, and who am I to argue with 100 years of history and Mr. Shiller, then it appears our friend Ouch! may be dead on with his prediction that nationally housing prices will return to 1996/1998 levels by around 2015, unless of course we see deflation which, again according to Ouch! may occur prior to a final burst of hyperinflation which will most likely be the proverbial straw that breaks the camel's back and leads us to what he is calling "The Former United States of America" (circa 2020)
Warren Buffet comments on Housing Market.
Talking about the U.S. housing market, Buffet said there were three ways to cure the nation's oversupply.
"Blow up a lot of houses, a tactic similar to the destruction of autos that occurred with the 'cash-for-clunkers' program. Speed up household formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers, or reduce new housing starts to a number far below the rate of household formations."
"Our country has wisely selected the third option, which means that whithin a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious. Prices will remain far below 'bubble' levels, of course, but for every seller [or lender] hurt by this there will be a buyer who benefits. Indeed, many families that couldn't afford to buy an appropriate home a few years ago now find it well within their means because of the bubble burst."
So it sounds like Buffet is saying it's a function of supply vs demand, so simple yet sooo few actually get it! Amazingly, he also realizes that there is no good or bad market, and that every sellers who gets hurt by dropping prices equates to exactly one buyer who is helped, therefore a net neutral! Do you suppose Buffet has been paying attention to what Ouch! has been sharing fro years and years? Or maybe, just maybe there is a bit of simple wisdom in what Ouch! and William Wallace have been sharing here?!? Hmmm
"Blow up a lot of houses, a tactic similar to the destruction of autos that occurred with the 'cash-for-clunkers' program. Speed up household formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers, or reduce new housing starts to a number far below the rate of household formations."
"Our country has wisely selected the third option, which means that whithin a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious. Prices will remain far below 'bubble' levels, of course, but for every seller [or lender] hurt by this there will be a buyer who benefits. Indeed, many families that couldn't afford to buy an appropriate home a few years ago now find it well within their means because of the bubble burst."
So it sounds like Buffet is saying it's a function of supply vs demand, so simple yet sooo few actually get it! Amazingly, he also realizes that there is no good or bad market, and that every sellers who gets hurt by dropping prices equates to exactly one buyer who is helped, therefore a net neutral! Do you suppose Buffet has been paying attention to what Ouch! has been sharing fro years and years? Or maybe, just maybe there is a bit of simple wisdom in what Ouch! and William Wallace have been sharing here?!? Hmmm
Mortgage delinquencies keep on rising!
Click on the title above or the link below and review a Reuters article on mortgage delinquency rates.
http://www.reuters.com/article/idUSTRE62053E20100301
http://www.reuters.com/article/idUSTRE62053E20100301
Good basic info on short sales
Click on the title above or the link below to review The New York Times article and learn how Program Will Pay Homeowners to Sell at a Loss.
http://finance.yahoo.com/real-estate/article/109009/program-will-pay-homeowners-to-sell-at-a-loss?mod=realestate-sell&sec=topStories&pos=7&asset=&ccode=
http://finance.yahoo.com/real-estate/article/109009/program-will-pay-homeowners-to-sell-at-a-loss?mod=realestate-sell&sec=topStories&pos=7&asset=&ccode=
Friday, March 5, 2010
Listen closely to what Robert Shiller is saying and how it is being said . . .
Click on the title above or cut and paste link.
http://finance.yahoo.com/tech-ticker/housing-is-”in-a-precarious-state”-yale’s-robert-shiller-says-436306.html
Really listen to what he is saying, watch his body, hear his tones. Folks, we are in the eye of the hurricane and rapidly approaching a whole lot of pain in the housing market, on wall street, and around the globe. Bury your head in the sand if you must, there will always be a small number of people who see the silver lining and the opportunity. I see the financial pain leading people back to their families, back to their faith. When they hurt, they will return to that which is truly important. The opportunity to help good people in bad situations hasn't been greater in 75 years. What really is important to the 99% of our population who is financially worse off today than they were 1, 2, 3, 5 or even 10 years ago?
http://finance.yahoo.com/tech-ticker/housing-is-”in-a-precarious-state”-yale’s-robert-shiller-says-436306.html
Really listen to what he is saying, watch his body, hear his tones. Folks, we are in the eye of the hurricane and rapidly approaching a whole lot of pain in the housing market, on wall street, and around the globe. Bury your head in the sand if you must, there will always be a small number of people who see the silver lining and the opportunity. I see the financial pain leading people back to their families, back to their faith. When they hurt, they will return to that which is truly important. The opportunity to help good people in bad situations hasn't been greater in 75 years. What really is important to the 99% of our population who is financially worse off today than they were 1, 2, 3, 5 or even 10 years ago?
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