Bits Bucket And Craigslist Finds For February 25, 2008
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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IOU- Nothings…
http://www.wrisley.com/viewpoint.htm
” A great many self-appointed monetary historians on the Internet indict the Federal Reserve System as a collection of gangsters aiming to destroy us all. That’s hardly the case. The banks were given their legendary power to create debt-based currency by the U.S. Congress. It was Congress that gave up its Constitution-mandated authority to maintain a system of honest money. If there’s fraud going on among financial institutions we’re justified to pin the blame squarely on Congress. Congress created the Federal Reserve and it can dismantle it. The Constitution says so.
What are we waiting for?”
Because the spinless bunch of dweebs would have to be responsible for something, that’s why.
If you really believe that we are about to have hyper inflation wouldn’t the rationale thing to do be to go out and buy the most expensive house you can afford (and not wait for any more decline) and load up on any sort of debt you can get your hands on? Pay it all back with worthless dollars? I’m concerned about inflation, but not scared. If anyone is sure about this, are you putting you $ where your theory are???
Yes, but that wouldn’t sell the gold coins most of them already own, now would it.
Why buy a depreciating asset as a hedge?
There are plenty of objects that will hold their “true value” under your scenario. You could buy any of those.
Agree. Raw land makes more sense than a building, as far as hedging against inflation.
Because the best thing to have in hyperinflation is a fixed rate liability and a home is the cheapest place to get one.
I don’t know this seems to make scense, going forward, buying land maybe a better idea, but it’s pretty clear the gov is dead set on hyperinflating there own worthless asses along with all the deadbeat FB’ers out of there fiscal incompotence…The problem is with out hyperwage inflation noone can afford all the McMansions out there….
“Agree. Raw land makes more sense than a building, as far as hedging against inflation.”
On top of that, I am sure there are any number of home builders holding on to raw land that they would gladly sell at a discount to last year’s price. Since a RE bottom is at hand, this would certainly look like a smart move in a few years from now.
I fail to see the alure of raw land, Ted Turner has the most and what good is it doing him? As a hedge against inflation it’s worse than gold; it costs you money in property taxes (which don’t increase it’s value, pure expense), you can be liable for what happens on it, people can trash it or take advantage of you, it’s value is completely subjective based on locally elected nimrods and morons, and it’s not very liquid. As a “rip off the banks” alternative to what I mentioned before, it requires the highest % down payment. Stocks and bonds are investments, gold is an asset, land is wild eyed speculation unless you’re a developer or farmer, then it’s inventory or a capital asset.
Everything has faults. Gold is possibly manipulated by governments/large banks. Gold is also more likely to be confiscated enmasse (IMO) if ever we experience large scale economic duress as in the 30’s. Gold is a convenient target for governments.
Land has its problems too, you make some valid points. I consider land to be decent as a storage of wealth plus it’s a natural resource that can be generally productive. Wildlife can provide food, earth can be planted.
With regard to inflation, it maintains its value pretty well. Unless you buy land near urban centers or touristy spots property taxes are very little.
Nothing is perfect, my main point was that land is a better storage of wealth than a building+land. The building will generally rot, land generally won’t.
This is why we know that the dollar will eventually become worthless. The only question is *when* I think that this crash will cause the world to lose faith in the dollar. Usually once inflation hits 20% hyper inflation takes care of itself. Once people begin to *expect* inflation then it causes the value of the dollar to fall further. The question is, can the government control inflation expectations? I don’t think they can.
What you many not know is that since that time they have changed the calculation that they use to determine the Consumer Price Index. If we apply the 1980’s CPI method we find that today we have 12% annual inflation.
An even more accurate measure of inflation is to look at the money supply, M3 is growing at 16% per year (this is the primary cause/definition of inflation).
In other words we are currently experiencing between 1 and 2% MONTHLY inflation.
The only difference between 1980 and today is that people “expect” inflation to be around 3% annually due to government/media lies and so they do not demand pay increases and cost of living adjustments. By managing public expectation the government / banks can steal wealth from the people while the people still falsely believe they are making a profit.
Another difference from 1980 is that wages a falling instead of rising. This means that the average family is taking a 10% pay cut per year in terms of purchasing power!
The very last chart is particularly disturbing. The banks have lost so much money that they no longer have “real” reserves. They have to BORROW their reserves! This is the first time in the history of the Federal Reserve System that this has been the case.
RE: This means that the average family is taking a 10% pay cut per year in terms of purchasing power!
Your numbers explain the evolution of the HELOC/REFI craze which gained momentum and exploded during the Bill Clinton era.
To cover the continuing loss in earning power, people resorted to credit cards and when the balances became unmanagable-they’d refi the house or take out a HELOC.
This is why the commentary about the economy being so great during the Clinton years is so much BS.
“Your numbers explain the evolution of the HELOC/REFI craze which gained momentum and exploded during the Bill Clinton era”
So the 2 million foreclosures in 2007 and 2008 are to be blamed on Bill Clinton? I guess I can count you in the 28% approval rating for the Bush man. .
David Cee, just because someone points out the lies about Clinton doesn’t mean they approve of Bush. Anyone with any kind of objectivity will blame every president expect JFK clear back until 1913.
RE: So the 2 million foreclosures in 2007 and 2008 are to be blamed on Bill Clinton
The Wall Street gangsters had to start somewhere to test the waters for their MBS’s, CDO’s, MDI’s, CVS, SRV’s et. el.
Slimbag Al with his 0% money simply played into their hands and allowed them to perfect their scams.
just because someone points out the lies about Clinton doesn’t mean they approve of Bush
Nonsense. Everyone knows that if you are against my guy, you must be “for” the other guy.
“Anyone with any kind of objectivity will blame every president expect JFK clear back until 1913.”
I blame every president. I think they all had some input to get us where we are now.
Texas State Constitution did not allow for home equity loans(with only a few exceptions) until 1998 when Gov. GW Bush signed a state amendment abolishing such limitations.
This is why the commentary about the economy being so great during the Clinton years is so much BS.
FWIW, I got great pay raises when Bubba was the prez. I’ve only had 3 small pay raises since 2001.
RE: I’ve only had 3 small pay raises since 2001.
NAFTA…your gift from Bill.
My old job (the one wioth lots of pay raises) didn’t go to Mexico. India maybe, but not Mexico.
This hyperinflation scenario frightens me. Since posters here are basically the only financially-knowledgeable people anywhere that I trust, could I humbly request an opinion or two from the group? I am 35 and have a little more than $300k in a Vanguard IRA, currently 100% in the treasury money market fund, earning a pittance each month. Are there any mutual funds, anywhere, that seem like a good, conservative bet for long-term capital appreciation? I would really appreciate any ideas.
i recommend vanguards Energy Fund, and Vanguards Mining/Precious Metals fund; great hedge against inflation.
I thought their PM fun was closed.
In every last hyper-inflation scenario of the past, including going back as far as the Ancient Roman Empire, only one financial item has withstood it’s destructive powers…
Gold
Sorry. Silver did too.
Do you want to take a second shot on that Delphic pronouncement?
The Denarii in question were Silver.
Next…
One stable fund and a hedge against inflation is the Permanent Portfolio Fund. Lots of gold & other previous metals, plus Swiss franc & other stable currencies. It’s as much of a sure bet as there is.
The question is, can the government control inflation expectations? I don’t think they can.
You don’t? Google “Paul Volcker” and come back to us. Oh also take note who appointed him.
The reality is, we are stuck with Bernanke instead of Volcker and ’ssshrubery instead of Lincoln.
Got to play the hand that’s dealt to you.
“In other words we are currently experiencing between 1 and 2% MONTHLY inflation.”
I have to call bullsh*t on that. Some foods have gone up, but food is around 5% of household expenses. Gasoline shot up to $3 but has hovered there for a while. Where are the large and ongoing price increases, and what portion of household income do the represent? And if Americans have to use less credit, won’t inflation be offset by decreased debt service?
Food costs for a family of 4 are between $300 and $600 per month IF you cook for yourself and practice some hedonistic substitutions. That means food represents at least 15 to 30% of the median household after-tax income. ($2.50 to $5.00 per day per person)
Gas prices have stayed around $2.75 to $3.25 for the past year, but in that time I have seen a major shift to 10% ethanol which means a reduction in gas milage for the same price. In the same time Oil has gone from $65 to $100.
If the money supply is growing at 10% to 16% then we are seeing that much inflation. If the 1980’s CPI formula is being used correctly and reports 12% inflation then todays inflation is near that of the late ’70’s early 1980’s. There is also about an 18 month delay from the increase in the money supply to an increase in prices. This is born out by the fact that a year ago the money supply was growing at 12% and today the 1980’s CPI is at 12%.
Another place where you can see the 15% inflation is the devaluation of the dollar against a basket of currencies that are themselves inflating at 5 to 10%.
The reason why most of us don’t *see* the inflation is because most of the inflated money has gone into housing and derivatives and overseas. When the money comes flooding back to the US the price inflation will be rapid and without much warning.
“When the money comes flooding back to the US the price inflation will be rapid and without much warning.”
I really enjoy the technical explanations of your posts Virginia Tech Dan. I was wondering if you could further explain how inflation will happen w/the return of the US$ to our shores. I was expecting deflation as I imagined the foreign purchases to be driven by bargain shopping and bottom feeding.
CarrieAnn,
Hyperinflation is really driven by demand instead of supply. If no one wants it, then it has no value regardless of the supply. When foreign countries decide that the U.S. cannot repay its debts (without printing money) then they will not want the dollar and will sell them to the last people who still “want” them, U.S. citizens. At the very least they will greatly raise the cost of imports for the U.S.
This is why inflation stays under control until, like a dam breaking, you get hyperinflation. In other words, the dollar crash will be like a stock market crash that gets set off by some small event and falls rapidly.
The point is that we have seen a huge growth of the supply of dollars over the past X years, but that the money has mostly flowed into big-ticket items (mortgages, CDO’s, derivatives, etc). The rich are the ones getting the new money and because they have very limited demand for everyday goods every day goods have not gone up as much.
Also consider the wage inflation going on in China. Our wages are flat, but China is seeing 10% wage inflation.
Hyperinflation will come like a thief in the night. It is a matter of when, not if. Therefore, everyone needs to be prepared for the possibility.
Sell them for what exactly, O Great Financial Genius?
You sell the holdings to the US citizens, and they will give what exactly? More dollars.
Cr@p, there goes that theory.
The sum total of foreign holders cannot dump their dollars. One country may sell the dollars to another but they all cannot dump them. They may attempt to buy US assets. However, someone would have to be willing to sell them those assets.
What’s insidious also is the mfgs. are repackaging product to make you think you are getting the same..I buy a loaf of bread and it is 10 or 12 oz as opposed to a pound. Paper products are less length in the same number of rolls etc..We are getting less but paying the same price.
Same thing with cereal and all other goods. Was it 60 minutes or a Consumer advocate that pointed all that out, that we were paying the same and getting less, with repackaging. But it is all legal, they do not have to disclose that more air is included in product.
Around here (central FL), ammo went up 8% in roughly the past six months.
What’s the going rate for a black helicopter?
No way is food 5% of our income. We gross $3200 month and have 2 kids - easily spend about $700 month on food. That’s not eating out and preparing all our own meals. We shop in bulk at Costco and also save money at Trader Joe’s. but we do buy organic vegetables and fruits (for the kids, it’s probably too late for us).
I agree, sfrenter. I can’t go to the grocery store and not spend under $50. Bread is almost $5 a loaf, milk $4/gal, fish $8/pd, eggs $3/doz. True, we buy organic and fresh local produce, but we’ve had the same shopping habits for years. We’ve got a big garden planned and have framed our greenhouse, but we still have to budget $900/mo for groceries. I wish we had Costco and Trader’s Joe’s in our area.
For a family of five, we easily spend between $800 and $1,000 on groceries and household items per month — that does NOT include eating out. We also buy good food and organic produce, which isn’t cheap.
What the heck are you guy eating? We spend about $450/month for a family of four, and I shop at a regular grocery store. I’m sure I could do better if I frequented Aldi’s.
What happened in 1963? Is that when banks quit redeeming silver certificates? I know they quit redeeming gold domestically in I think it was 1934. And then in 1971 Nixon closed the gold window internationally, but what exactly happened in ‘63 that the article refers to?
JFK issued a presidential order which threatened the existence of the FED. He was assassinated in Nov, 63′. The first act of the Johnson administration was to rescind that order. You do the “math”.
http://www.john-f-kennedy.net/thefederalreserve.htm
I thought it was the Cubans? or the Mob? or the CIA? or the Russians? Now we have to add the FED?
Quick — somebody notify Oliver Stone…
Please, could it not have been a cuban CIA agent that had infiltrated the Mob and was hired by the FED owners? I think we are on to something here!
Not an implausible scenario folks. The $$ and power afforded certain people and organizations due to the existence of the Federal Reserve make the mob’s money look like your 8-year-old’s allowance, and the Cubans’ power look like your local HOA.
And keep in mind that these folks have lots of ties in the media.
You could redeem Silver Certificate banknotes for actual Silver (in granule or bar form) until around June of 1968.
After that, they became just another federal reserve banknote.
Bernanke & Bush Fail….
http://www.bloomberg.com/apps/news?pid=20601103&sid=aSxn5qjpMC9E&refer=us
I find the press’ lack of economic reasoning deplorable. Since when was it the job of anybody in government to ‘avert’ recessions? Are we supposed to perpetuate the ’selling houses to each other’ economy, or are we going to get on with more productive aims? It seems to me that regearing our economy should be the policy challenge, if these guys want to be social engineers.
“Since when was it the job of anybody in government to ‘avert’ recessions?”
Never. But it also shouldn’t be the job of anybody in government to engineer things so that recessions come about, either. Or jigger things like the biofuels industry, so that the cost of foods like milk and bread skyrocket, along with oil.
Agree Ben on the need to regear / refocus our economy.. Problem is, the average J6P has no clue what the real drivers are for our economy… I’m sure they’d be horrified (okay that’s a stretch) if they did…
Who makes the dough in the “I buy your house, you buy mine” economy ? Who’s driving these bailout plans ? That’s a simple economy to manage and one that makes everyone feel good.. well, until it doesn’t, like right now.. The healthy, regeared economy will require some bumps and bruises to attain… Not sure the average J6P has the fortitude or patience to see that through.. We’re a soundbite, give it to me now and make me feel good / important nation..
‘Who’s driving these bailout plans ? ‘
The press and politicians are feeding you guys what gets you excited. Look at how every time any plan gets mentioned on the AP, it gets posted here fifty times.
“Look at how every time any plan gets mentioned on the AP, it gets posted here fifty times.”
LOL! Ad nauseum.
Okay…but we can either sit back and let the PTB roll us over, or we can mobilize and try to change things.
This is not about being “victimized” or hand-wringing. This is about being aware of what’s going on and understanding the potential obstacles to our own well-being. It’s about getting something done — trying to preserve what little is still functioning in our economy, and trying to direct resources away from losing bets.
Otherwise, we are no better than the apathetic sheeple who refuse to do any of their own work/research, but want to whine all day when “something bad” happens to them.
Bailouts for housing and banks, doomsday around the corner, gold climbs to $50 gazillion a gram, widespread starvation, the re-emergence of the bubonic plague….. Now that all the boogeymen have been wheeled out for the day can we get to housing?
The Chief Realtards will wheel out their propaganda today. Whisper number is a 1.4% drop in sales volume over December and a supposed “first time decline in prices in 4 decades” according to Bloomberg. Didn’t last months release indicate that prices declined for the first time since record keeping began in 1968?
Well, It’s all because of housing (prices specifically)… all of it.. the whooooole thing..
It seems to me that regearing our economy should be the policy challenge
There are many ways to regear an economy, most of which would just make things worse. The comments between Ben’s original post and here illustrate a lack of agreement on what is happening & how to improve things. The housing bubble is only a part of the fix we’re in.
It isn’t the government’s job to avoid recessions, but it is their job to keep the peace.
I think it is very easy to overlook how close to the edge a lot of people are in this economy. The Middle Class is shrinking, but most just haven’t realized it yet. They have been able to maintain their place in line by supplementing their income thru borrowing.
As this easy credit is removed, we will see some desperate people do what they always do….take desperate measures.
The statistics show that Americans Wealth has increased by trillions over the past few years. They also show that their debt has grown just as dramatically. As most of us on this blog know, this is fluff. No real wealth, but very real debt.
We are entering dangerous territory, as we will soon have to come to terms, that for most of us our standard of living will be going down. We have already mortgaged our future with borrowing to buy oil and trinkets from China.
To give the appearance of doing nothing is not a very good option. But it is also obvious that there are no easy answers, and what worked in the past won’t work as well when people are already up to their gills in debt and the problem is nationwide.
RE: The statistics show that Americans Wealth has increased by trillions over the past few years.
Wealth created where?
The hundred bucks Big Louie’s Pawn shop will give somebody for their 3 year old 52in. big screen TV?
Americans have no savings.
A few years back, Alan Greenspan offered his personal anecdotal observation that Americans were indeed getting wealthier. Who remembers this (paraphrased) quote?
“Americans are better off today because when I was young very few families had only one car, nowadays many families own two cars.”
There ya go, one of that Fed chairman’s personal yardsticks to measure our wealth is the number of cars we own (or lease). Great, just great.
“The hundred bucks Big Louie’s Pawn shop will give somebody for their 3 year old 52in. big screen TV?”
Joe6p pays $2,000 for bigscreen, $40k for the SUV, can’t sell either in the newspaper. Gets rediculously low offers for way less then he owes.
Joe then takes his heavy 15 gram, 10karat high school class ring (paid $200) to a coinshop to sell. Gets $300 “scrap/melt” price.
Scratches his head.
DOC
“Joe then takes his heavy 15 gram, 10karat high school class ring (paid $200) to a coinshop to sell. Gets $300 “scrap/melt” price.”
Ooops, miscalculated…should’ve read, “gets $200 scrap/melt price.”
DOC
I can see a scenario where wives get kudos from husbands, for the foresight of buying schlocky 14k gold jewelery from Zales, years ago, for 5x melt, which might be their only wealth, when hyperinflation rears it’s ugly head, in the not too distant future…
‘Since when was it the job of anybody in government to ‘avert’ recessions’? ‘I find the press’ lack of economic reasoning deplorable’.
Never has been, but that has never been a deterrent. Coupled with the fact it is an election year, which will bring out the bleeding hearts and do gooders en mass. The out come will be just another delay in the inevitable. Forget about the general medias knowledge of economics, journalism schools are a sad case. You would think that if that was you line of work you would desire at least a basic understand. It is entertaining/educational to watch it all unfold though.
There was a recent poster who shared he learned more on this blog than he did earning his masters in finance. I thought that honest comment spoke volumes. Perhaps he was just starting out in his career and was learning from those with years of experience. Certainly the fraud, the misrepresentation of risk to investors, and off the books holdings were all eye openers to those outside the industry.
I can’t help but think that if this blog taught so much to someone w/this gentleman’s schooling, I’m not feeling much expectation for others who are not steeped in financial surroundings. I think for many it was difficult to wrap our minds around the fact that this once great country was going so far off the tracks.
The fundamental issue with business and finance programs is that they “prepare” students to work in a vacuum, with the illusion of mistakes having zero practical implication. Any successful hot dog cart vendor has better understanding of the economy than a Wharton graduate who never ran a business.
Thank you, thank you, thank you.
Always, I mean always, talk to the street vendors in NYC. You will get a much clearer picture of what’s happenin’ in the city than all the statistics in the world put together.
“I can’t help but think that if this blog taught so much to someone w/this gentleman’s schooling, I’m not feeling much expectation for others who are not steeped in financial surroundings. I think for many it was difficult to wrap our minds around the fact that this once great country was going so far off the tracks.”
No kidding. I think the headline speaks for itself:
“U.S. existing home sales fall to lowest level in nine years”
http://www.bizjournals.com/sacramento/stories/2008/02/25/daily4.html
Press loves command economy.
I can’t wait for the next five year plan to be released from the Gosplan! Wait, wrong country and century..
Imagine if you will a plan that would pay the proles just to maintain empty houses. Much better than paying the unemployed to carry balloons to scare away roosting pigeons. I’m just saying there’s always a way to keep people occupied and paid in a fiat monetary system. A command control economy just takes it that extra 100 yards further.
Have you ever seen Fritz Lang’s Metropolis? Keep the masses busy.
1921 - fed , but otherwise NO gov bail
biggest drop in cpi and almost instant recovery
creative destruction is the key element to a market economy
pols ,especially lefty pols fight this concept at our peril
Right on par with the deplorable lack of economic reasoning in the Press is the deplorable lack of econmic reasoning among the Electorate. The Democrats and Republicans have proven themselves time and time and time again, incapable of managing local, state, or Federal budgets or economic policy. The prevailing tactic among politicians seems unaffected by time or geography. “Promise them bread and circuses” was a great platform in ancient Roman times, and “Promise them jobs and lower taxes” wins elections here in the U.S.A.
Evidently American voters and politicians all suffer from Economic Attention Deficit/ Hyperactivity Disorder. They cannot associate events that are happening now, with their previous behavior. They just keep
doing the same wrong things over and over, and then are shocked and dismayed that the results are so dismal. No country in the world has ever been able to pay its citizens for not working, to directly reward irresponsible and self-destructive behavior, to open its borders and Treasury to all those who would walk in, to relocate its employers and manufacturing overseas, to promise a life of comfort and ease, and meddle in countless aspects of everyday life; and even ENDURE, let alone PROSPER. The simplest minds should be able to grasp that out country cannot simply print trillions of dollars out of thin air, by creating entitlements, and current deficits, without debasing its currency. When you see gold and silver making new highs, you are seeing the debasement of the dollar. When you see the Fed lower overnight interest rates, followed by the “market” raising longer term interest rates, you see the consequences of deficit spending. But you do NOT see this discussed in the MSM at any length, because the People don’t want to hear it. They want to hear resons why if candidate Tweedle Dee is elected, things will turn around. As opposed to, if Tweedle Dum gets in, things will get worse. People like Ross Perot or Ron Paul are dismissed as crackpots without a ghost of a chance anyway. So, in the end, the American electorate gets what it deserves; a short sighted crash course on how to try to finagle taxes and spending; to avert economic disaster.
I’ve read at least once over the years that the average attention span of Americans (more likely “people”) is about six months relative to a major event, once that event has occurred. In other words, people peek out their windows before opening the door for about six months after there was a once-only shooting in their neighborhood.
Unfortunate as it is, I suppose that may be why so few people seem to remember past recessions and the fact that they would have been explained at some point to have part of the economic cycle - the emphasis being on “cycle,” just as seasons are a cycle. I remember most recessions of the past 40 years pretty clearly and in particular I remember the effects of the 1973 oil embargo, the S&L crisis, the dot-com bust (of course). I wonder if the MSM doesn’t try just that extra bit harder to distract the sheeple from recalling those events, so that they also won’t recall, or reason, that recessions happen from time to time just as predictably as do booms.
I liken this to forest management. Every year trees and vegitation grows and dies. If the excesses are allowed to build up by trying to prevent a forest fire it only lengthens the time until the forest fire happens. The fire is also an extremely bad fire due to all the excess that were sitting around. We have an economy where recesssions are bad and the government will do anything to prevent one. This has allowed the excesses to grow until when we have a recession it will be a really bad one!! IMHO I am not sure the Government can prevent this forest fire!!
Good analogy.
Yes, excellent analogy.
Well, there is the Employment Act of 1946: http://en.wikipedia.org/wiki/Employment_Act
Politicians want to get re-elected, so that makes avoiding a recession a priority.
Kerry for FED BAIL-OUT!
Read it and weep, fellow HBB blogster’s.
http://www.bostonherald.com/news/opinion/op_ed/view.bg?articleid=1075691
“Every mortgage revenue bond loan for a new home produces almost two full-time jobs - $75,000 in additional wages and salaries; and $41,000 in new federal, state and local revenues, according to the National Association of Home Builders”
At least he’s getting his information from an unbiased source.
Wow every mortgages creates 2 jobs? So let’s assume those 2 jobs average 40k per year. Then that means the loan has to generate 80k in interest just to break even. That’s a helluvalot of interest.
If a couple snagged those two jobs making a combined $75K, they still couldn’t afford to buy a home anyway.
hd74man
I think you do enough crying for you and me…
RE: I think you do enough crying for you and me…
LOL-Always willing to help out, Ben!
Too bad nobody listens.
Test
signs? just signs?
http://us.rd.yahoo.com/finance/finhome/topstories/apf;_ylt=AhByAMoqAJlzU5TfN42ceV.7YWsA/*http://biz.yahoo.com/ap/080225/recession_watch.html
I love how the sage economic prognosticator, Sir Alan, whips out recession percentages in his “do you still love me” speeches… like he’s got the recession thing wired and plugs all the pertinent numbers into some fancy model that the rest of us would be confused by.. “I know I said that the chances of a recession were exactly 33% a few months ago, but now the chances are exactly 50% ?.. and yes, next month, they’ll be at 60-70%…” Do us a favor and give it a rest Alan…
Nothing like an economist looking at lagging indicators telling us what’s going to happen.
Alan Greenspan is a doddering old twit whose knees are shot from kowtowing to his masters and his own over-inflated self importance for the last 20 years.
He is a man that has perfected the act of sitting on his hands whilst convincing the world he has been hard at work.
Wealth effect? Productivity miracle? Irrational Exuberance? Get an ARM? This man is the equivalent of Sam Lowry’s boss in the movie Brazil.
Congress to examine housing proposals… Oh Boy! These clowns are going to really gum up the works. $20 billion sounds a little low to me.
Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, has proposed the creation of a federal corporation, funded with as much as $20 billion, to buy distressed mortgages and help struggling homeowners refinance into affordable loans.
http://biz.yahoo.com/ap/080224/housing_crisis_congress.html
Taxpayers buying toxic mortgages ?… What a crock… I’ve mentioned this before, but, if anything, the taxpayers should loan the Wall Street Thugs some money and let them keep those toxic mortgages, CDOs and MBSs on their own books.. We should set a low teaser rate and have it reset in a few years …. that’ll keep the bonuses in check …. after all, what goes around…
Now that’s the best “bailout” plan I’ve heard in a while.
Reminds me of a line in the Godfather when the great Marlon Brando called Joseph Tatallia, after the meeting of the 5 families, “a pimp”… Make no mistake about it, Sentator Dodd is a pimp…
This is your chance…
Write, e-mail, fax and CALL your politicians — call them every day, if you can. Tell them that taxpayers will not stand for bailing out Wall Street and FBs.
You can find your representatives’ contact information here:
http://www.congress.org/congressorg/home/
http://www.nobailout.org
new site for the anti-bailout crowd
Thanks, auger!
I am taking the direct approach. I have found plenty of legal loopholes to reduce my tax rate. With left over $ I buy stock funds, stuff my 401k and IRA, buy precious metals, and series I bonds. Not taxable until I sell any of them. And by the time I sell, we will be through the socialist dark ages and Hillary will be long remembered
Probably not Hillary.
Maybe Barack, but I’m voting for Ralph Nader.
Not Hillary, maybe Barack.
I’m voting for Ralph Nader.
He’s as good as voting for Al Gore or Ho Chi Minh. Ok.
Let them fund this bureacracy with the money earmarked for their retirement fund, then when it looses tons of money, the Congress will see it and fix it right.
Things are never going to change until we make it “their best interest” to be fiscally responsible.
Let’s say MBSs are trading for $.50 on the $1. So, Dodd wants to buy the loans, refi all the loans to reflect the $.50 on the $1, and then resell the bonds. Take the money from the resell of bonds, and repeat.
Can’t work. There are trillions of dollars of these bonds out in the market. Selling them at current market would force the current holders to book $1 trillion to $2 trillion in losses.
The holders simply can’t afford to sell them at current market.
Hasn’t Congress noticed that monies are drying up for other valuable projects like higher education and public works? Where are they going to come up with a spare $20 bn to buy up toxic mortgage debt? Oh, I forgot, the Fed has a printing press that serves such purposes…
Exactly, PB.
“$20 billion sounds a little low to me.”
No worries, they will just add 2 zero’s later.
zeros are free!
You guys in CT really need to get this clown dodd out of office, he’s as bad as chuck schuemer here in NY…
Does any one know where you could buy gold bars? I am near Louisville,KY. Would like to buy from local dealers.
I think gold would be the safest investment.
Of course it is. Just like a house is the next greatest infestment.
Gold is not an “investment”. It has no yield. It is at best a way to freeze assets, at worst a speculative play on the commodities bubble.
Really? So any stock that pays no dividends is not an investment? Only Treasuries paying less that the rate of inflation are ‘investments’? That 45% gain in gold the last six months isn’t real? Thanks for clearing that up.
‘So any stock that pays no dividends is not an investment?’
Strictly speaking, no. It’s a speculation that the prices will rise. IMO, we should eliminate the double taxation on corporate profits so these companies can/will/ get back to a return based model.
keyword: Speculation> housing, commodities, tech stocks, tulips, Las Vegas, etc.
Investment?
Dang it - let’s put this thing to rest right here.
From dictionary.com (I’m sure definitions in other sources are similar):
Note the part “or appreciation in value.”. So something doesn’t have to be interest-bearing in order to be considered an investment. Stocks are most definitely investments, even if they don’t bear dividends. And houses can be investments if you buy them for the purpose of gaining a profit.
Just becomes something loses value doesn’t mean it’s not an investment.
Definitions are overlapped sometimes. What’s the difference between speculation and investing?
ben,
i support your elimination of double taxation on corporations. furthermore, i would like to adopt a three or maybe even five your holding period to benefit from the long term capital gain tax rate.
both of these would do great things in eliminating speculative invesments which may reduce the formation of economic bubbles in the future.
But, we’re assuming that the price of a stock has changed because the company has become better*. So, ‘Ben’s Homologated Widgets’ is now trading at 4x what it was 5 years ago because the company is now much larger.
Another way to look at it is that your money has been used to help the company grow. In contrast, there is no ‘investing’ in gold. Gold’s value may go up and down, but that is based on speculation and crowd psychology: e.g. now people value gold more than the dollar.
* Obviously, stock prices are also driven by speculation.
Perhaps Gold investment could be framed as a hedge against a falling dollar as opposed “a speculative play on the commodity bubble”?
If a poster’s comment/question cuts against one’s worldview/investment position there is no need to frame the response to reflect that. Using terms like speculation & bubble are buzz words for “risky” and normally are used in an attempt to sway opinion. Give facts instead of hyperbole.
If your opinion of Gold is that it is a bad investment then offer facts to support this conclusion.
I would offer that it has historically been a store of value. I would also offer that not every country’s population views gold like americans do. Perhaps the views of the other 6 billion people in the world should be considered before offering an opinion on it’s merits as an investment? Gold has not held a constant value as measured in dollars across all timeframes so naturally this statement does have it’s weaknesses. In this day of competitive devaluations I would think it prudent to have some since no one KNOWS what is coming. I certainly wouldn’t dissuade someone from taking a reasonable position in it unless I knew with 100% certainty that the trend of the past 90 years, that of constant loss of purchasing power, was going to permanently reverse. Just my $.02.
Once again I look at gold/silver as insurance….divesify,and have your 5-20% Networth. That being said it does appear my policies value keeps increasing… Also I’ve seen the quote..
” Always have enough gold to bribe the border guards..”
‘ What’s the difference between speculation and investing?’
Just like ‘obscenity’, I know it when I see it.
Actually, I think it was “hard-core pornogrpahy”.
“Definitions are overlapped sometimes. What’s the difference between speculation and investing?”
Agree that they do overlap. I would say that investing is inclusive of speculation - i.e. when you invest in something, there’s at least some component of speculation.
Treasuries are investments with a low level of speculation. There is some speculation nonetheless - there’s always the outside chance that the government will not pay up, due to whatever reason (financial meltdown, nuclear war, whatever). Even aside from that - you’re speculating that the value of the dollar won’t sink faster than the rate of the treasury (proven to be wrong over the last year).
Same with CD’s - the bank may go belly up before your CD expires. Small speculative component, but some nonetheless - amount depending on the bank.
Stocks have a larger speculative component - even stocks like GE or IBM. You’re speculating that their growth will continue or increase. If it doesn’t, the price goes down and you lose money.
Stocks like Google, pets.com, etc. obviously have a big speculative component.
“Perhaps Gold investment could be framed as a hedge against a falling dollar as opposed “a speculative play on the commodity bubble”?
If a poster’s comment/question cuts against one’s worldview/investment position there is no need to frame the response to reflect that. Using terms like speculation & bubble are buzz words for “risky” and normally are used in an attempt to sway opinion. Give facts instead of hyperbole.”
Suppose I should have considered the incendiary nature of such a comment. It does suprise me to be criticized for using the word bubble on this blog. Guess we should all be sensitive about the emotional investment of home owners too. Actually it does not go against my worldview to have some assets in gold and silver. I have, I do and I will. I don’t, however, do this to “profit”. I expect no dividend or appreciation in the long run. Gold is not a “productive asset” unless you snapshot short term market fluctuations. I am sorry, but I contend that it is not an investment outside of the way that term is used by speculators.
Frankly, I’m not angry at anyone who wants to own a bunch of gold, or anyone who wants to own a bunch of houses, stocks or whatever. What I’m angry about is that the presence of sound investments, as in those likely to provide true appreciation or dividend eludes me. My gold is not providing true appreciation. I am an able earner and saver, but the best I can manage “investment wise” these days is to try to minimize erosion.
Every thing you *own* becomes part of your wealth. If you are earning 5% on an *investment* you are better off buying a life time supply of shampoo, socks, etc than earning 5% on dollars that are depreciating at 12% per year. In a way, Gold earns 12% against the dollar while a high-yield savings account earns -7 to -10%.
Having your money in dollars is a *speculative* investment. The value of the dollar depends upon people’s trust and can fall to 0 in 18 months (or less) just like stocks.
A benefit to getting your gains by purchasing consumables in advance is that you do not have to pay income tax on your “gains”.
The last time I bought silver, in August 2007, it was $11.70 per ounce. Today it is $18.12 an ounce. I’ll take the 55% gain in 6 months over 99.44% of the “investments” that were offered on the Street then or now.
I think gold would be the safest investment.
I’d go with Silver Dollar Eagles to stash in your home safe.
More potential upside and will be easier to use if the SHTF and the FED’s toilet paper currency is rejected by merchants.
Buy an AK type rifle too-while you still can.
NYCityBoy said this to me. Is Gold a commodity or a currency? If you think it’s largely being traded as a currency as a hedge against a continuing falling dollar, then it’s a good buy. If it’s a commodity, then it’s increase in price isn’t really justified. There is no true answer to this, only your best estimate. The future will decide.
As for buying gold, you don’t need to actually buy it. There are stocks like Streettrack Gold which will strictly move up and down on the value of Gold.
And yes buying something that you expect to increase in value is an investment. It might be more risky than some, but an investment none the less.
here is a list of gold dealers from the US Mint.
http://www.usmint.gov/mint_programs/american_eagles/index.cfm?flash=yes&action=lookup
If you are serious about this then goto kitco.com and look up the “spot price”. Then call around to established bullion dealers, sometimes coin shops, and see what premium they want over the “spot price”. Convert your paper currency to a cashiers check and head on over. Purchases over $10k can be reported to the feds.
Maria - in case no one answered your specific question, there are two ways that I know of to buy bars - online or at a brick and mortar shop. As for online dealers, I’ve read good reviews about Kitco; personally, I’ve used Blanchard and been happy with them; I’m sure there are several others. Blanchard took my commitment by phone to book/commit the sale price. I mailed them a check and they sent the metal by registered mail. Very easy.
https://online.kitco.com/sellprice/selling.html
http://www.blanchardonline.com/market_news/
I enjoyed working with Paul Thurber at the latter.
Locally, I found this in Google:
http://www.mostlycrowns.com/
If you call them, I’ll bet they can tell you where to find what you want.
Countrywide Puts an End to Ski Junket
http://tinyurl.com/36uq5y
The three-night gathering, which was to include business meetings as well as skiing, drinking and sampling expensive meals like $140 caviar and Kurobuta pork osso bucco at the Spago restaurant, had already drawn negative press. “Let ’Em Eat Kobe Steak,” a headline in The New York Post sneered on Saturday.
And the powers that be want to bail out these corporate clowns??? At least CW could have invited some of their many FBs to the gathering to tell some sad tales, which may have dulled the bad press and then the conference would have received government subsidies. (sarcasm off)
Conspicuous consumption is losing its cachet.
It always does in a down market.
In 2002, Morgan Stanley fired a banker who dared give an interview about his “custom-tailored” suits in the weekend section of the WSJ.
When Ma and Pa Middle-America periodically wake up to the looting, it is not considered good form to wave the loot in their face.
In this 22nd issue of the GEAB, LEAP/E2020’s experts try in particular to anticipate very specifically what will come out of the collapse of the US real economy for the United States themselves and for the other regions of the world. Meanwhile our team presents five sets of strategic and operational recommendations helping to protect oneself from the upcoming deterioration of the global systemic crisis.
On the occasion of the second anniversary of the publication of our famous “Global systemic crisis Alert” which toured the world in February 2006 (4), LEAP/E2020 wishes to remind that we are now resolutely stepping into an era with no historical precedent. Our researchers insisted on that many times in the last two years: any comparison with the previous crises of our modern economy would be fallacious. It is neither a “remake” of the 1929 crisis nor a repetition of the 1970s oil crises or 1987 stock market crisis. It is truly a global systemic crisis, that is to say a crisis affecting the entire planet and questioning the very foundations of the international system upon which the world was organised in the last decades. (Cont’d)
http://tinyurl.com/2w3vtq
I sure hope this thing unwinds a bit slower!
Leigh
Think these guys are more or less fundamentally right.
Who knows the timing of all of this, but in any event i am much more interested in a return of my capital than a return on my capital these days and anecdotal evidence over the past few months (from friends/ neighbours) is that a whole lot of real money is being lost in the stock markets these days, even though the Dow is only down about 10% from it’s highs.
RE: 22nd issue of the GEAB
Very grim…
Gloom and Doom. This is getting scary.
LA delayed:
The downtown Los Angeles skyline is still dotted with construction cranes, but not as many as developers once promised.
More than a third of the approximately 110 residential projects proposed for downtown — including the 50-story Zen tower on 3rd and Hill streets, the Mill Street Lofts in the industrial district, the multitower Metropolis off the 110 Freeway and the conversion of the former Herald Examiner building — have been delayed or put on hold amid the rocky real estate market.
http://tinyurl.com/2wkyhv
I hope the Grand Ave project is one of them (mixed use). KB Homes commercial division is the culprit.
Downtown Los Angeles needs to incorporate light rail, before it redevelops. That’s govt., always thinking backwards.
What?? I thought they had rail all over the place now. Granted I haven’t lived there in years, but I couldn’t believe all the lines now, out the Pasadena Fwy, to Long Beach, SFV etc. Don’t they run to downtown?
What?? I thought they had rail all over the place now. Granted I haven’t lived there in years, but I couldn’t believe all the lines now, out the Pasadena Fwy, to Long Beach, SFV etc. Don’t they run to downtown?”
The 4-5 metro lines radiating out from dtwn LA have at least one cental hub station I know of. It is at corner flower and 7th st underneath some stylish old historical bank building and is difficult to detect off the street as the entrance is somewhat hidden. It is a deep station going at least 5-6 stories beneath the ground probably like the ones in NYork. I never take metro except the blue line a few a times but the blue line snakes from 7th st station south along flower ave and goes all way to Long beach. There is also a line which snakes out to hollywood terminating at Sunset/Gower. The ones going NE to Pasadena and points east of dwtn i am not familiar with but there is a metro system in place in LA, though most LA residents never use it, preferring their autos. The numerous LA poor/youngsters/ immigrants and some dwtn LA office workers use it.
“More than a third of the approximately 110 residential projects proposed for downtown — including the 50-story Zen tower on 3rd and Hill streets, the Mill Street Lofts in the industrial district, the multitower Metropolis off the 110 Freeway and the conversion of the former Herald Examiner building — have been delayed or put on hold amid the rocky real estate market.”
Someone was peddling dwtn condos on LA Land blog. One condo being peddled was a a 500 sq ft shoebox for only $300.000, plus HOA of 500-600 a a month .
this is why LA DWtn developments are in stall. Demand for dwtn condos has fallen off a cliff. I predicted this more than 2 years ago as i saw all the massive dwtn contruction along Grand ave, staple areas, along wilshire west of 110(vero), lofts, condos going up all over. The projected Grand ave project at 1st/grand adjacent to civic center/disney hall) is dead in the water.
All those projects started 2-3 years ago are now coming to market and there is abundant over supply in LA condos. Problem is there is oversupply all over LA in such areas as SFV, dwtn Long Beach, northeast LA, Pasadena , ect. and this is resulting in condo prices freefalling at YOY % rate faster than Sfhs.
I predict that a decent Long beach 2/2 1000+ sq ft condo along the upscale parts of Ocean blvd (decent part of dwtn LB, not the hood parts a few blocks north of ocean )will be available for around $200,000 this year as an REO. Problem is HOA’s.
What’s your prediction for your average 800 sq ft loft in DT LA in 2 years. I think they are at around 400k now..asking at least. There are so many just sitting at 90 days plus. I don’t know for sure why they aren’t being reduced fast enough to sell. I’m guessing either the builders agreed to not reduce or there are a lot of resales that were purchased after 2005 and the sellers will never be able to sell at market price. My price prediction for a 800 sq ft loft in 2 years is 200-250k.
This was plucked off on land land blog by some poster selling LA Dwtn condos :
His take:
“To be fair, you can get a decent condo in Downtown LA for $430,000 or LESS. Since my specialty is Downtown condos, here’s what I can throw out for people to compare:
‘MLS 07-237373: It’s around 800 s.f. but HOA dues are $660/mo. Located on 1100 Wilshire, definitely an upgrade.’
‘MLS 06-143073: or move to Bunker Hill at 800 W.1st and 700s.f. of living space. Though $625 HOA is still taxing…
‘MLS 08-245793: ok this Bunker Hill studio at 800 W.1st sounds like it will fit the bill. Although only 480s.f. , it ONLY lists for $387,000 but I guarantee you can get it for $350,000. HOA is better at $400… a family working hard to make $87,000 and can only move into a 480s.f. studio? Well, if it’s all about location, that family will be living in Bunker Hill and attending the new school that’s being built on Beaudry.”
My Take:
I am a location specialist so i will comment om location:
1100 wilshire is a crap location. 800 w 1st best cleanest part of dwtn LA . It is the northwest quandrant directly west of civic center and east of 110/figuroa st. Any site along beaudry is crap. Vero lofts 1234 wishire blvd is an exteme crap location and no condo/loft worth $200,000. Any condo/loft in fashion or warehouse district(east/ southeast quadrant) is in a crap location and should be priced at $200,000 . Little Tokyo/ Alameda /1st st area is a halfway mixed good/bad area and should be priced at around $300,000.
Southern Cal is overdue for a big earthquake. The Long Beach quake of ‘33 was only 6.4, but it devastated the downtown area, Compton, and Huntington Park. Now with liquefaction, even a 5.0 could be deadlier in the same spot will the increase of population and freeways. There are more earthquake faults than tourist in the LA/OC area, so any large quake will likely further slow the real estate market. Large earthquakes usually occur after major rain/melting snowpacks in the Sierras, and coupled with the solar cycle 24 beginning this year, I would not be surprised to see not just one, but several (large) quakes in California by spring of next year. If you are in CA, watch the classified for missing animals (pets have a tendency to run away just before a quake) and be sure to back up your computer files as the solar storm plays havoc with geomagnetic energy (do you remember that the power was knocked out in Quebec, Canada in 1989 from a big solar flare?)
belt cinching:
Until recently Shannon Palmer, like many Americans, spent money freely. She assembled a nice wardrobe, took four vacations a year, and ate out often. But now, as she listens to economists discuss the likelihood of a recession, she recognizes the need to get her own finances in order.
Looking at things differently is a theme running through conversations of Americans at all income levels these days as they review their spending habits. Nearly 2 out of 3 consumers intend to reduce indulgent spending in 2008, according to a new survey by HSBC Bank USA. Four out of 5 want to increase the amount they save.
http://www.csmonitor.com/2008/0225/p13s04-wmgn.html
“Martha, the cow has gotten out. Close that dang barn door!”
Hire someone to chase the cow!
I’ll give this young lady credit in seeing the obvious and taking a look in the mirror… not sure she represents the average consumer, but I wish her well..
I think we will be seeing a whole lot more of this in the near future. Saving money will become the new “In” thing for those that are capable of doing so with small cut-backs in BS spending.
Many will have to have a purge of debt through Bankruptcy before they can join the “savers club”, but like Jingle Mail, this too will be seen as a prudent business decision for many millions of consumers.
Right now, it feels like saving money is the only way to grow your savings. Everytime BB lowers rates, we cut out an expense so we can grow savings by adding more.
Of course it’s all being inflated away…so we save more….
your best be is to save in the form of known future consumption. If you eat pasta once or twice per week, buy a year long supply. You will earn 10%+ and will not have to pay income tax on it. Plus when the SHTF you have a much better supply of food than most others.
Coffee. Chocolate. Sugar. Cigarettes. And sweet, sweet boooooze.
Olive oil, too.
Great advice, but what do you do if you live in a little $hitbox apartment where space is at a real premium? I’d rather have a house to LIVE in(as opposed to seeing it as an infestment), but have not bought due to reasons discussed ad infinitum here on this blog.
SR
Seattle Renter: get creative with storage space: under beds, under the couch, back and bottoms of closets. Living in Seattle, you should have a supply of food and water, a stash of cash, and a bicycle in preparation of earthquakes. You live in a very vulnerable area for natural disasters. Don’t forget to get extra pet food, too.
Saving? Spending on things that matter? Not indulging in luxuries??!! I think it’s time that Bush started censoring this type of un-American pinko talk. Maybe send in the Army.
Just kidding of course
I’m young and I feel mostly secure in my job, but I have a good deal of debt on my back,” says Ms. Palmer, a publicist in Andover, Mass.
LMAO…
A “publicist” who feels ‘SECURE” in her job…in high cost, foreign oil dependant New England no less.
Talk about delusional.
Probably yet another “young professional” with no savings whatsoever.
That one goof paid her banks $140 in penalty fees last year. Nice, maybe instead of yammering on her cell phone she ought to read a bank statement once and awhile.
euros welcome:
NEW YORK — “Euros Only” reads a handmade sign in Billy’s Antiques & Props on East Houston Street in Manhattan. But that’s really just an attention grabber. Actually, owner Billy Leroy explains, the store will accept Canadian dollars and British pounds, and U.S. dollars, too.
http://tinyurl.com/37gr99
all that glitters:
Feb. 25 (Bloomberg) — Gold rose in London to within 0.2 percent of a record on speculation the dollar will resume its decline, spurring demand for the metal as an alternative to stocks and bonds. Platinum also gained.
Gold has advanced 14 percent this year, and last week climbed to a record $953.91 an ounce as the dollar fell to a three-week low against the euro.
http://tinyurl.com/39j7yx
This is not a political post, but an interesting observation.
From the article:
Since the Ronald Reagan boom began in 1984, the year the American stock market doubled, Americans have enjoyed a quarter-century of rising wealth. Even the collapse of the Internet bubble in 2000 did not interrupt the upward trajectory of household assets, as the housing price boom eclipsed the effect of equity market weakness. America’s success made it a magnet for the world’s savings, and Americans came to believe that they were riding a boom that would last forever, as I wrote recently [1].
“Americans regard upward mobility as a God-given right. America had a double founding, as David Hackett Fischer showed in his 1989 study, Albion’s Seed . Two kinds of immigrants founded America: religious dissidents seeking a new Promised Land, and economic opportunists looking to get rich quick. Both elements still are present, but the course of the past quarter-century has made wealth-creation the sine qua non of American life. Now for the first time in a generation Americans have become poorer, and many of them have become much poorer due to the collapse of home prices. Unlike the Reagan years, when cutting the top tax rate from a punitive 70% to a more tolerable 40% was sufficient to start an economic boom, no lever of economic policy is available to fix the problem. Americans have no choice but to work harder, retire later, save more and retrench.
This reversal has provoked a national mood of existential crisis. In Europe, economic downturns do not inspire this kind of soul-searching, for Europeans, richer are poorer, remain what they always have been. But Americans are what they make of themselves, and the slim makings of 2008 shake their sense of identity. Americans have no institutionalized culture to fall back on. Their national religion has consisted of waves of enthusiasm - “Great Awakenings” – every second generation or so, followed by an interim of apathy. In times of stress they have a baleful susceptibility to hucksters and conmen.
Be afraid - be very afraid. America is at a low point in its fortunes, and feeling sorry for itself. When Barack utters the word “hope”, they instead hear, “handout”. A cynic might translate the national motto, E pluribus unum, as “something for nothing”. Now that the stock market and the housing market have failed to give Americans something for nothing, they want something for nothing from the government. The trouble is that he who gets something for nothing will earn every penny of it, twice over.”
Full text is politically slanted:
http://www.atimes.com/atimes/Front_Page/JB26Aa02.html
“Unlike the Reagan years, when cutting the top tax rate from a punitive 70% to a more tolerable 40% was sufficient to start an economic boom…”
————————————
I challenge the assertion that tax cuts are what propelled the growth since 1982.
Look at any chart showing credit trends over the years, and you’ll see that credit expansion took off around 1982. Lo and behold, so did asset prices.
IMHO, working people are no better off than in the 70s. The credit bubble (begun decades ago & reaching a “blow-off top” during the 2001 to 2005/6/7 period) masked our real situation. There seems to have been a strong deflationary force due to globalization and “consumption saturation” that began some time in the 60s or 70s.
Maybe Carter was right????
look at countries that lowered or eliminated cap gains
up ,up and away
will europe and free sht countries sit in the dirt
Some countries go easy on cap gains precisely because of inflation, which accounts for a pretty good portion of said cap gain. In order to keep the wheels of the economy in motion, and to encourage investment, cap gains taxes tend to be low in such countries. The fact that inflation exists is widely known and accepted as long as it falls within a band (which could be upwards of 5%).
“will europe and free sht countries sit in the dirt”
I assume you mean “while”?
Anyway…what planet are you living on?
“Maybe Carter was right????”
Carter was in fact right. Carter appointed John F. Kennedy aide Paul Volker.
“Look at any chart showing credit trends over the years, and you’ll see that credit expansion took off around 1982. Lo and behold, so did asset prices.”
and college tuition. Due to the ready availability of education loans colleges stoped balancing the books and containing costs.
Exactly. Debt has fueled much of the “growth” since Reagan entered office.
When Barack utters the word “hope”, they instead hear, “handout”. A cynic might translate the national motto, E pluribus unum, as “something for nothing”. Now that the stock market and the housing market have failed to give Americans something for nothing, they want something for nothing from the government. The trouble is that he who gets something for nothing will earn every penny of it, twice over.”
Interesting observation… and probably very accurate as well… thanks for posting …
You’re welcome Matthew.
Leigh
Replace wealth with debt and the article makes much more sense. FRN are not wealth no matter what anyone says.
This is a VERY political post. It is a direct and misguided attack on Barrak Obama, calling him America hating and using the completely debunked crap about his “Muslum” schooling.
Then it throws in complete BS about Reagan and the “growth’ in American’s wealth.
If you want to post right wing propaganda, please label it as such, this was not an “observation”.
Agree! Right wing propogranda. Both parties suck.
Reagan to Bush II = Debt and Consumer Timebombs!
Ed,
At the end of my OP, I said the full text IS politically slanted!
I do not endorse the article, but found the excerpts I posted an interesting observation (from the viewpoint of the author).
Best,
Leigh
http://www.atimes.com/atimes/Global_Economy/JB26Dj06.html
The Mogambo Guru!
This guy is a hoot!
Leigh
No doubt….one of my new fave writers.
Check out the most recent one that talks about the “401-Keg.” Also a hoot.
HBB BANK
Probably a very foolish question, but based on various posts, there seems to be a need for a safe place for people to keep money, metals, etc.
What would it entail for us to open a bank (a bit like a communal vault, really)? We could have 100% reserves, and the ability to store metals and anything else people might think of value.
We could make loans of varying risks and match loan duration to CD duration, etc.
For those just looking for storage, we’d have to charge storage/handling fees, but that still might be better than keeping cash & gold in mattresses, etc.
Just piggy-backing on Captain Crunch’s “Savers Stike” where we pull money out of fractional reserve institutions.
Legal issues? Idea?
If Captain Crunch reads this, maybe you could explore the idea on your site?
Ya know, that thought has passed through me noggin on more than one occasion!
You’d be run out of business by competition. I researched this (not like Suzanne) for many years. Because a full reserve bank would have more “realistic” interest rates (since people loaning the money for a home would have their money held for that long, or until they sold the loan to others). If Dada’s Full Reserve Bank was offering loans at “only 14%” versus BofA who was offering loan at 5%, who would get the loans furnished? Probably not me.
I do think a FRB makes sense in many ways, though, especially like a debit/checking account. Deposit USD/EUR/Gold, etc, and have it automatically put on the books as gold ounces (or dollars, or whatever). Use the debit, and have it withdrawn as gold ounces and converted to whatever.
FWIW, I do believe that a small percentage of the population today controls the money, but I believe a slightly larger percentage of the population can slaughter (financially) the previous money rulers. Us savers, and hoarders, can REALLY hamper the false economy by embracing deflationary policy to undo 90 years of inflation.
One problem: I’m on a saver strike, but the best way to strike is to amass many dollars over other goods or investments. I’m fearful of selling my gold/silver/houses to buy dollars to hoard, due to the years that people said “Dollar prices always go down!” I’ve been conned (khanned?) about the dollar, just like we’ve been conned about housing prices.
If enough of us hoard dollars, even sell gold and assets for dollars, we’d cause deflation, causing those dollars to go UP. But the minute we start selling dollars for assets, the bubble would pop. Amazing thought, isn’t it?
BTW, I’m in Ft. Lauderdale sitting on the intercoastal today, sipping coffee and ready the Sun Sentinel from Sunday. “Foreclosure” is the front page, hah!
I have thought about this as well, but every time a “gold bank” opens up it gets shut down on false charges of money laundering etc. What you are suggesting will be needed in the future, but it is very dangerous now. It create one high-profile target for looters (and the government). One charge of money laundering and they will seize all of the assets and never return them.
FYI: money laundering should never be a crime. Even if you accept that selling drugs, illegal guns, and other illegal economic activity the crime is where the law was broken, not with how the stolen/illegally earned money is used. Any time you pull out more than 10K or make a 10K purchase in cash the store is REQUIRED to report you. Economic freedom is the foundation of true freedom.
How could a full-reserve bank make any loans at all? By loaning its wealth it would be depleting its reserves. My idea of a full reserve bank is a chest of gold pieces buried in a backyard.
It lends money like a property management firm rents houses. You put your money in a CD that you cannot touch for X days. The bank can then lend that money to someone for X days. The bank takes a small cut for doing the match making.
Thank you, Dan.
Agree with what many of you said, especially regarding confiscation or looting. This is soooo tin-foil-hat, but was thinking something along the lines of that silo house someone posted last year or??? It’s extreme, I admit, but cash in mattresses or in coffee cans buried in the backyard certainly isn’t any safer, IMHO.
For sure, it would not be like your local “neighborhood” bank. More like a fortress, because there would be real money (cash & valuable assets) in there. The bank would be under the full control of the depositors.
Anyway, I think it’s worth mulling over, even if we just buy a distressed bank for the physical buildings/vaults, alone — a less extreme version.
I definitely sense a need here.
Opportunity is knocking!
http://www.safehaven.com/article-9556.htm
“This is a liquidity crisis. In a systemic deleveraging, assets plummet in value as lenders call in their loans and tighten lending standards. They’ll suck up cash like a fire sucks up oxygen. Cash will move from being king to emperor.”
Nice one, Leigh
Question for everyone who thinks that gold/silver are in a bubble (or will eventually be). On what basis do you think that the DOLLAR will hit some minimum value? If the dollar supply keeps growing at 16% per year, then the price of Gold must keep going up right?
I believe that home prices will keep falling UNTIL the the dollar starts to drop off of a cliff. Once the dollar starts falling people will see that owning physical property is the only way to save their wealth.
I would argue that our government has every incentive to encourage hyperinflation (drive the people to poverty, but the government can still buy what ever it wants). Deflation would cause the banks to fail and make our national debt unpayable. With deflation then tax collections will fall at the same time as government spending goes through the roof for bailouts (leading to inflation).
If you expect hyperinflation then having debt may not be such a bad thing if you use that debt to buy gold/silver/marketable property. The only risk is that lenders will make it very hard for you to pay them (choosing to foreclose rather than accept payment in devalued dollars).
Thoughts?
The dollar has already dropped off a cliff. Currencies are not stocks; they aren’t supposed to fall 10% in six months. The USD will fall to its’ inherent value of 0, unless it is replaced first (amero, anyone?). All fiat currencies do this.
As for PMs being in a bubble, IMO they have only begun to recover from the commodity crash of the 80s. No one knows how high PMs, or oil, or wheat will really go because the baseline prices of the last 20 years were skewed to extremely low levels. All I know is they will go much higher, at least to the inflation-adjusted highs before the 80s crash.
Right now home prices are falling much faster than the dollar is falling and people still *expect* that the dollar will be worth something. Once that expectation is gone and J6P realizes that dollars will be worthless then he will want more dollars for his house.
Those of us who are saving our down payment in PM will be ok, but if you think you can wait for prices to level out for a year before buying then you are making an assumption against hyperinflation. The best home prices will be at the intersection of falling prices and hyperinflation.
If you were a bank and were expecting hyperinflation then you would delay foreclosure and hold on to your inventory wouldn’t you. Hrmn…
VTD,
This is something to think about. I’m not convinced about the banks keeping homes through hyperinflation.
1. What about savings
a) for a downpayment? In hyperinflation, can people save? Is the First time buyer screwed? That’s the situation we’re in now.
b) Do savings rates fall during hyperinflation?
2. I assume interest rates would be astronomical.
a) Banks would have to pay a higher interest rate or lose customers. But at the same time they are holding foreclosed properties that aren’t producing returns and are even losing money.
b) The higher interest rates make borrowing more expensive. Rising interest rates increase the cost of buying, not necessarily the price paid for the home.
3. Wouldn’t hyperinflation devastate the economy, high unemployment, meaning a smaller pool of qualified buyers.
Admittedly, I don’t know much about hyperinflation environments, I could be missing some big drivers.
Good point. With shrinking profit margins and slowing demand businesses will be forced to cut employees. As a result, unemployment will increase.
Hyper inflation will destroy the economy. If you think the economy would simply “adapt” to hyperinflation (via higher interest rates) like it has “adapted” to 4-15% inflation then you are very mistaken. Hyperinflation would be the complete break down of the means of exchange. People will be bartering instead of using dollars to purchase real estate. MLS prices would have to change multiple times daily. Hyperinflation is the complete lack of trust in the dollar. Higher interest rates mean that people maintain long-term trust. In other countries that went through hyperinflation a “long-term” loan would be a few weeks.
In the early stages of hyperinflation you might see something like what you described, but once it becomes clear that there is no end in sight a new currency will be needed. At this time you will not be able to buy property without a substantial premium (to give the seller time to buy something like gold/silver that will hold value). I remember hearing stories from Germany where lenders would hide to avoid receiving payment preferring to take take the property instead.
I believe that banks would rather hold on to property which has real value than sell it for depreciating dollars which do not have real value. Note that this is only the case once someone knows and bets on hyperinflation. The banks/gov. control hyperinflation and so can plan accordingly.
Someone above suggested burying yourself in debt and paying it off with depreciated dollars. This will work if you think you can time the market AND if you buy marketable items with your debt. Otherwise you will be screwed. Now if you can burry yourself in debt, hide your assets, and go BK if the hyperinflation is slow in coming then you win both ways.
Ahhh. This is a little more cataclysmic than I imagined.
“bury yourself in debt, hide your assets, and go BK if the hyperinflation is slow in coming then you win both ways”
This is a good hedge fund strategy.
Once that expectation is gone and J6P realizes that dollars will be worthless then he will want more dollars for his house. ”
This would be the endgame. If J6P truly understands the inflationary spiral and begins to front-run it, the game is up for the Fed. Hyperinflation will bleed into everything else before real estate, and buying a house will be the last thing on anyones’ mind. IMO the economy will collapse before hyperinflation could restore real estate prices.
“”Hyperinflation will bleed into everything else before real estate, and buying a house will be the last thing on anyones’ mind.”
Good point. Besides the “reverse psychology” is just getting ramped up IMO. It may become so entrentched–people will feel a “revulsion” to it mached by the ” mania” they felt toward it during the run-up.
DOC
I’m not so sure the dollar will fall off a cliff. Gold seems to be rising in all major currencies, as opposed to oil, which I heard has been relatively flat in euros.
My take on it is that, in a free market, gold and silver of accurate weights/measures are the preferred forms of “money.” This is because they best embody the three attributes of money: medium of exchange, store of value, unit of measure.
What we are seeing is a by-product of the Internet and the information readily available to people, especially regarding the history of Federal Reserve notes. Fed notes were traditionally something that one could exchange for dollars; they weren’t the actual dollars themselves. But the Fed (with considerable help from media and public education system) convinced us that the slip of paper was the real “dollar.”
So anyone with an ounce of sense would prefer to use as money something that cannot be counterfeited or printed/created at will. In the Internet age, businesses such as goldmoney have sprung up to capitalize on this trend.
It requires a bit of cutting through the matrix to see what an utter illusion our current “dollar” is. It literally is like the Emperor’s New Clothes.
I generally keep about US$1000 on me at all times, as well as a few ounces of gold (free ounces, I call them, clinking freely in a little suede pouch).
I love to put $1000 into someone’s hands, along with 1 ounce (2 ounces last year, 3 ounces the year before, 4 ounces 5 years ago) and ask them which feels like it has more value.
99% of people who I ask hold up the gold, which always surprises them as they lift their hand to make a selection. Heavy. Solid. Beautiful.
In the past 5 years I’ve sold probably 1000 gold dimes (0.1 ounces) to people immediately. I take paypal. I sell at a high margin (about 20% over spot), and I guarantee a buyback at the price I paid within 180 days. So far I’ve bought back about 10 dimes total.
As I meet more people, introduced by previous friends who purchased gold from me, I run the same test. “Which is worth more?” I’ve even helped some people buy a few dimes so they can hear them clink in their own suede pouches. It amazes me how quickly people return to gold when they’re introduced to it for the first time.
The jewelry industry in America is pure junk. 10k, 14k? Jewelry? I don’t want tin on my fingers. My DW wears 22-24K earrings, wedding band, bracelets, anklets, necklaces, and more. I want to be the first guy in America with a 24K gold crown (let the rappers wear worthless diamonds, I want a crown!). Anyone interested in buying a few dimes of gold for the “low price” of $125 per coin?
‘My DW wears 22-24K earrings, wedding band, bracelets, anklets, necklaces, and more.’
All at once? How does she move? Did you hire a team of respectful white-clad Guatemalan illegal immigrants to haul her around in a wheelbarrow? That’s what I’d do, if I were you. She could have a little special pouch made on the side for candy and fish sticks and pencils and things.
And I TOTALLY, unreservedly, completely approve of your desire for a big gold crown, although it’s gonna hurt your neck in short order. I myself simply adore tiaras. Although mine don’t even have any ‘worthless diamonds’ in them, just a bunch of sparkly rhinestones. I like them fine, and often wear them kayaking or hiking around. Those unsophisticated frogs and trees can’t tell the difference anyway.
ROTFLMAO!!!
“I love to put $1000 into someone’s hands, along with 1 ounce (2 ounces last year, 3 ounces the year before, 4 ounces 5 years ago) and ask them which feels like it has more value.”
I took my girlfriend’s son aside and handed him a sandwich quarter and a 1958 solid silver quarter.
Had him drop each on the table seperately. He got a real kick out of the “ping” the nice silver coin made over the “thwack” the worthless one made. It was a nice feeling to enlighten him in the meaning of “intrinsic” value in such a simple way.
DOC
If you would like to hear the sweetest sound imaginable…
Take a 22 or 24k 1 oz Gold coin and balance it on the nub of your index finger and ding it with another piece of metal.
It sounds like a golden tuning fork.
Oh yha, well you should try sex on a granite countertop instead of your traditional oak kitchen table!
Wouldn’t that make your bum cold? And you might accidentally kick down one of those hanging copper pans that seem to be required accessories to the granite counter-tops, and thereby injure someone.
Oh, the perils of succumbing to consumerism…you have to think these things through, roundsparrow, and not just get all impulsive-like.
Spread a little olive oil on the granite for extra action!
For a real charge, try sex while leaning against an electric fence.
Oh man, you guys are shocking- LOL, cracking me up!
Gold dimes, My first introduction to gold dimes was back in 1978 I think, My father and one of his business partners were having coffee-talking aboout gold. He offered me a 2 for 1 special. 2 gold dimes for the price of 1 ($20). I thought he was crazy and looked at my dad as is he for real? I took the deal (I was 9 at the time- I worked construction for my father so I had my own money). I still own those 2 dimes!!! That simple gesture made me an investor in gold and I have followed gold on and off through the years since.
“believe that home prices will keep falling UNTIL the the dollar starts to drop off of a cliff. Once the dollar starts falling people will see that owning physical property is the only way to save their wealth. ”
I think right now money is being lost faster than its being made? In the future I would rather own RE than treasuries UNLESS the treasuries pay above inflation, when that will happen is anybodies guess.
cactus - house prices will keep falling until rents are more expensive.
Hey, I think you are the one in my Ahwatukee neighborhood. Did you see a nerd with prescription glasses and a bike helmet mountain biking Saturday afternoon in the Chandler / Ray / 48th street loop? That was me. I needed that getaway from Maryland. Was back home in my permanent residential area this weekend.
If we get hyperinflation consumer confidence and overall demand will get crushed. Falling home equity and rising cosumer prices spell disaster for the US economy. Business profit margins will also get crushed. Rising producer costs and slowing demand is the worst possible outcome. The stock market will plummet and interest rates will increase beyond belief. Insolvencies will balloon and we will go into a depression not a recession.
Asset prices almost always shoot to the moon in hyperinflation (Zimbabwe’s stock market was the best performer the last three years running), they don’t frequently increase in real terms, but they do zip up in nominal terms.
Home equity would zip up, too, but lenders would be crushed, until they stop collecting and go after the assets, and you thought countrywide played games with payments now.
The big problem with hyperinflation is that transactions effectively stop and everyone is reduced to spending a huge portion of their day ensuring that they have food, shelter, etc. This cuts gains from trade to zero, and reduces everyone to the living standard of an illegal alien today (working on the corner for daily living needs).
What you’re describing are mostly deflationary impacts (falling nominal asset prices, and increased insolvencies).
greenspan mumbles:
.S. economic growth has stalled and recovery may take longer than usual, former U.S. Federal Reserve chairman Alan Greenspan said on Monday.
“As of right now, U.S. economic growth is at zero,” Greenspan said at an investment conference in Jeddah, Saudi Arabia’s second-largest city. “We are at stall speed.”
http://www.cnbc.com/id/23331438
“Stall Speed”
As long as we just have a speed problem, we are OK. The only concern should be a combined speed AND altitude problem. I have total faith in whoever’s nephew has been setting the altimeter recently.
What happens to airplanes when they reach “stall speed”? Not to suggest this has anything with economies…
In a “power on” stall, the plane (propeller driven) would roll to one side and sharply nose down.
But if you held back on the stick, and kept the nose up, you could very likely encourage a flat spin, whereby only one wing is flying. I think that is where our economy is now.
Or get a pusher (canard) plane, don’t have to worry about stall!
I’ll go a little further than Joe. If the aircraft is designed for stability and you ease the controls, then the nose drops a bit and forces you to increase speed. Rather boring. As Joe mentioned, if you keep trying to hold the nose up then you get into a lot of trouble. Never experienced this one as I do like living.
If you have an aircraft designed for maneouverability, even if you ease the controls you can get into a spin. In a spin, the nose drops and the aircraft follows a path that looks like you’re flying down a tornado. It feels very weird; you have to ignore most of your senses and follow procedure to get out. Much more FUN.
“As Joe mentioned, if you keep trying to hold the nose up then you get into a lot of trouble.”
Doesn’t ‘keeping the nose up’ pretty much summarize the Fed’s game plan at the moment?
Doesn’t ‘keeping the nose up’ pretty much summarize the Fed’s game plan at the moment?
I thinks so. Holding the nose up when there is no lift is denying the reality of the situation, the plane is going to lose altitude either way. The sooner you realize that, and point the nose down, the longer you have to trade altitude for speed before hitting the ground.
PB,
Well, stall speed is just a benchmark number for a plane. You can stall with an airspeed well above the stall speed, and not be stalling even with a nearly 0 airspeed.
Wikipedia has a pretty decent introduction to stalls if you want more.
Probably covered yesterday, but the local paper SGV Tribune’s front page yesterday had a woman at her front door wondering why she was losing her house. She paid 129k 10 years ago. She and her husband sucked out 300,000 equity and now her payment is going to 4k a month. Poor thing. Gosh, she doesn’t know what happened. So they blew through 300k and will probably never pay it back. Why do people feel sorry for these idiots?
I don’t see how any type of bail-out, or rate freeze or any other “plan” is going to stop the inevitable. I don’t have a degree, no education in financials, just your average jane6pk. It’s not that hard. THERE ISN’T ANY MONEY.
“She paid 129k 10 years ago. She and her husband sucked out 300,000 equity and now her payment is going to 4k a month. Poor thing. Gosh, she doesn’t know what happened. So they blew through 300k and will probably never pay it back. Why do people feel sorry for these idiots?”
Bet the house and garage is full of useless crap they bought with all the $$ they borrowed. God forbid they had used that money for furthered their educations. Oh wait, I forgot…education means STUDYING AND HOMEWORK. The horror!!
Sarcasm off.
DOC
Treasure coast SFH and condo’s sales above $25k
http://tinyurl.com/29lpwe
#1 Posted by rnelson on February 25, 2008 at 9:38 a.m. (Suggest removal)
23 sales and 42 foreclosures. Another great week in MC last week. Anybody who says we are at the bottom of the bubble is nuts.”
LOL
Visa IPO!
Visa sets possible record $18.8 billion IPO
“NEW YORK (Reuters) - Visa Inc, the world’s largest credit-card network, on Monday said it may raise up to $18.8 billion in its eagerly awaited public sale of shares, which could make it the largest initial public offering ever.
The company filed with the U.S. Securities and Exchange Commission to sell 406 million Class A shares at $37 to $42 each, resulting in proceeds of $15 billion to $17.1 billion. It said it might sell another 40.6 million shares to meet demand, boosting the potential size of the IPO to $18.8 billion.
A successful IPO would surpass the $10.6 billion offering in 2000 by AT&T Wireless Group.”
Not sure what to make of this one!
Leigh
Not sure what to make of this one!
My take: Visa know that the storm is coming. It’s a good time for them to cash out.
Oh yeah! I’ve been waiting for something like this. VISA is trying to “partner the losses” that it sees coming. Anyone who buys into this is a idiot. They will looooooossssseee sooooo muuuuucch mooooooonnnneeeeeyyy. LOL.
Roidy
This smells a little:
1. These guys need money.
“A successful Visa IPO would be a boon for member banks including Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., which have suffered big credit losses and are gearing up for more as consumer credit deteriorates”
2. $5b for legal costs and general corporate purposes?…What the..?
“At a midpoint price, Visa could raise about $15.6 billion….More than $10 billion of the IPO’s proceeds will go to the member banks. The rest will go toward Visa’s legal costs and general corporate purposes”
I may be ignorant. If anyone could shed some light on those corporate costs….
Countrywide Puts an End to Ski Junket
http://tinyurl.com/36uq5y
gus - if you notice, it only says Countrywide….
All’s fine in Detroit, apparently:
http://www.detnews.com/apps/pbcs.dll/article?AID=/20080225/BIZ/802250319/1148
Come on GM!
Really?
I suggest they build a tunnel to connect those condos with GM’s H.Q.
Considering whether housing prices will fall to fair value in the next year or two, or will remain elevated (with or without the help of a government out to screw younger generations any way it can), I had this thought:
The 1990s stock bubble has yet to fully deflate, and stock prices remain high.
The reasonsing: executives feel free to continue to transfer ever-greater portions of the value of companies to themselves, while paying very little in dividends, despite a tax change designed to encourage them.
Meanwhile, trailing PEs have remained high despite record profits as a share of national income (with less and less going to wage earners), something that is probably not sustainable, and forward PEs are inflated based on the assumption this will continue.
It may take another big bear market or more to restore stocks to fair value. So at least some people may be willing to stretch as far as the mortgage lender will let them for years to come, based on everything seeming a bargain compared with peak prices.
1990s stock bubble has yet to deflate.
How about the 1980s? Isn’t that where it started? Think back to the 1980s. There was no internet. To take vacations we had to pay a travel agent instead of Expedia. To find directions we had to use a map instead of GPS. To buy a stock we had to go to a broker instead of an on-line stock trading company. To get a date we had to go to bars instead of an online dating service. To look for a job we had to network or read classifieds instead of on-line search sites. To find good restaurants we had to rely on word-of-mouth or drive around to find full parking lots instead of read reviews. To find an apartment we had to drive around and talk to various tenants instead of read on-line reviews. To check for the weather we had to watch the 11:00 evening news.
I met my best girlfriend on a dating service. I watch my investments and use stock screeners on line. I book my vacation trips on line. I rate apartments on line before considering my next consulting gig, and believe me, I live in the best apartments in Phoenix and Baltimore. I keep track of my 401k on line. I learned Java and C++ on line.
Don’t discount me - I’m a doom and gloomer, but I recognize that technology has improved markedly since the early 1990s. Only nerds such as myself has had access to internet (remember Mosaic?) in the early 1990s. Life is much more improved. Most importantly, productivity has improved. So I don’t buy the assertion that the 1990s “stock bubble” has to “fully” deflate.
I want to buy a truck to serve as my Get out of Dodge vehicle in the event of severe economic unrest. Does anyone have any recommendations? Most important factors include: room for the family (4), off-road, reliability, and value. Which car manufactures are hurting the most and most willing to make a deal? I do not want to “wait” because things can unwind very quickly.
Get a used Jeep Cherokee. They are cheap. They are metal. Parts are easy to come by and dirt cheap. Every mechanic can work on it.
Having had one, I can say there’s a reason Jeep Cherokees are cheap. Mine literally fell apart, though I have a friend that loves his. In fact, mine caught fire while on the way to the dealer to trade it in (I think it knew and was getting back at me). I have a Toyota FJ Cruiser that I love, lots of room and it’s the best 4×4 on the road. Also Toyota Tundra, good mileage for a truck (20 mpg) and rides like a car, very nice, good 4×4. I have one with a camper on it which I live in when I’m in the backcountry and the weather’s bad. If you’re worried about getting out of Dodge in a crises, a camper would be a good thing to have, though it will decrease your mileage. You can buy a used one pretty cheap. Mine has all the comforts of home, and I actually prefer it to a home, as you can move it when you don’t like the neighbors (cattle, rattlesnakes, etc.). Easier to keep clean, too.
Subaru Forester or similar all-wheel beater. Trucks aren’t going to make it through muddy rockslides, rutted-out timber trails, or stalled traffic on the interstates. The real “out there” doesn’t look ANYTHING like a Jeep commercial. Get something small, inconspicuous, and capable of ridiculously good mileage. Unless you have a 250 gal tank of diesel stashed somewhere–which you don’t– you’re not going to find a fueling station (especially one that carries diesel,) anywhere near where you want to be. The smaller, the cruddier-looking, the better; so you don’t get hit on the head and dumped by the roadside. All those Toyota Tundras are a joke…they practically SCREAM “clueless city dum bass.” For a hurried escape, I’d outfit the family with motorcycles, leathers, and a good pair of hiking boots. Or if you’re really serious, endurance horses.
Well, “escape” is a 7 hour drive (400 miles) and can be done on a full tank, 26 gallons at 15 miles per gallon. I plan to keep some extra gas in the back in 5 gallon jugs and I plan on hauling some supplies. A smaller vehicle is good if I didn’t have a family.
You can call me paranoid, but in the off (err.. likely) chance that we will eventually end up with hyperinflation you will not want to be anywhere near the cities. Shelves and gas will be sold out within days of the realization by J6P that things are going down.
If there is no hyperinflation then I will still want a truck for hauling things so there is no loss. I just realized that having gas, but no means to haul or navigate around road blocks and stalled cars (other people who ran out of gas) will be a big problem.
My civic is good for getting around town in *normal* and *stable* times, but is a very bad choice if TSHTF.
Get a winch if you plan to remove stalled cars out of the way.
Don’t rely on a gasoline engine. Gas deteriorates rapidly in storage. Diesel can last for months or years in storage, plus its less likely to explode in storage or when carried in portable tanks. Diesel for vehicles is pretty much the same as No. 2 heating oil, tho I don’t know how much difference the new ULSD fuels would make in this equation. Older diesel engines can run on ULSD or No.2. You could safely store hundreds or thousands of gallons of diesel or No. 2 at a country place. For that matter, you could cache a supply of diesel somewhere on your route, and it would keep for months/years in storage unlike gasoline. Agree with not relying on filling stations in general, they need frequent replenishing & usually depend on external sources of electricity to function at all. Hospitals typically have tanks holding thousands of gallons of diesel on their property for emergency generation capacity, and no one thinks this is a safety or health problem. If your country place is road-accessible, you can easily get the local oil company to deliver all the No. 2 heating oil you can pay for direct to your homesite, no need to haul it in yourself. Clean vegetable oil can be substituted for diesel in a pinch, but there is no substituting gasoline/ethanol. You can heat a home with diesel or No.2. I don’t know of any diesel powered vehicle sold in the USA that gets (1) very good mileage, (2) can go offroad & (3) can carry 4 people. Just pick 2 out of 3 to be practical. There may be perfectly good turbo diesel powered vehicles that would meet all 3 of your requirements, none is available in the USA at the moment. The only advantage of gasoline over diesel is that gas engines tend to be easier to start & run at temps below -20 F. Diesel can turn to jelly at these temps.
Be sure to have spare parts available for whatever vehicle you choose & get the ability to diagnose & repair as many potential vehicle problems as you possibly can. On time deliveries of spare parts are unlikely in the scenario you envision. The best mechanic can’t do much without the right parts. There are many web sites for truck & Jeep fans like me where you can get more information. I have read a lot about Jeeps breaking down more often than an average pickup. This may be due to owners giving Jeeps harder use than average owners might give, or may be a quality issue for Chrysler, which is not known for high quality in any case. If you think you might have to go offroad, get some practice before you need it & scout out alternate routes to your destination during leisure time.
I like the FJ too. Would love to get a used one at a good price.
My FJ had 7,000 mles on it, so was used. I got it for 7k under what the guy bought it for new, it had everything. I put a top rocket box on it and a bike rack on the rear. It’s really really awesome in the backcountry, I had a Land Rover and it can outdo it for getting out there (I stay on old roads, BTW, no new tracks).
Losty, maybe yours caught on fire because you are so stylin? Or maybe it caught on fire because jeeps bite. Not in a good way. Even if they are cute. I drove a jeep around in college days, for awhile. It had antelope antlers I had found in the desert and stuck to the front roll bar, because I thought that was funny, like some sort of cattle baron cadillac, except this was little antelope antlers wired to a jeep, with Christmas ornaments dangling on them in the Holidays, driven by a poor college girl, and some people at my dorm even took that seriously and put some antlers on their vehicles. An early lesson in how people like to behave. I also glued some fish skeletons to the side, but that did not become trendy, for some reason, and they soon fell off, because I only used washable Elmers glue. My point is, jeeps are annoying. They are the goats of the vehicle world, except they cannot levitate. Oh, wait, no..I remember one time it did, but I’ll tell you later, because I have to pretend to work now.
It had a mere 85k miles on it, too! I was in DeBeque Cyn on my way to Junction when it caught (Colo.). It was a wild drive, cause I refused to stop in the tight canyon. People would drive up next to me and yell, “You’re on fire!” and I’d nod and say, “So I’ve been told.” I was secretly hoping it would burn big time, I’d jump out and then I could collect the insurance. Instead, it just burned a hole in the bottom of the vehicle. So see, I think maybe all humans have a bit of the arson mentality when the conditions are right - LOL.
And BTW, I think I saw that jeep with the antelope antlers -or maybe it was jackalope antlers…Har har.
I also had a Jeep Cherokee that caught fire in the parking lot at a Jimmy Buffett concert.
Dealership said they’d tow it (had the overheating problem with it before & they were supposed to have fixed it). They ended up dumping it somewhere between Irvine and LA (where I lived) without telling me. Said I had to tow it the rest of the way.
Needless to say, I’ll never buy a Jeep again — and would recommend against anyone else we know buying one, too.
Oh man, your story even has mine beat. Jimmy Buffet concert - abandoned on the highway by the towing company…
I love my 99 GC. The only problem I have had was with the front rotors and I replaced those easily. Get 4WD and a hitch so you can pull a trailer or toy hauler with your stuff.
I would forget about the SUV route. In the scenario that you are describing, every idiot owning a 4×4 Explorer will be racing with you to the mountains.
I’d get a used F150 ext cab 4×4 pickup. I am a Chevy man myself (and own a ext-cab Silverado 4×4 truck), but the Fords are cheaper. The bed will come in handy to hold water, gasoline, and suitcases. The ext-cab is comfortable enough for part time use, especially by children. As someone else said, parts for the American pickups are plentiful and cheap, and should you breakdown, you’re never too far from a vehicle you can steal parts from if need be.
Toyota pickups are a joke. Totally screams urbanite asshat.
Something you didn’t mention is guns and ammunition. In my hurricane evac kit is 48 bottles of water, 10 gallons of gasoline + full tank should go about 600-700 miles, tow straps, cum-a-long, shovel, a large caliber pistol, and a couple boxes of bullets. At worst case, the bullets could help destroy the tires of some SUV driving misfit
Jeeps are a joke too. Consider the clearance. A majority of SUV’s have marginal off road performance, but a full size truck isn’t ideal because of the length for crossing ditches, etc, but if you have a lift kit and large tires you should be fine.
“Toyota pickups are a joke. Totally screams urbanite asshat.”
Well, you should come out to rural E. Utah and also W. Colo. where they are fast becoming the p/u of choice. In fact, a lot of the ranchers I know now drive Toyotas. You know not whereof you speak, Moman.
(Hey, don’t take it personally. I actually had a disclaimer in there just for you LiU because I like your posts.)
Toyota Tundra 1.0 was a truck meant for people who owned Camry’s to buy and most of them were bought by city dwellers. 2.0 is a better truck yet I have yet to see one at a jobsite or doing any serious work. Toyota underestimates the loyalty that GM and Ford owners have for their trucks. IME, it’s been the people without brand loyalty buying the Toyotas. Heck, even Nissan realized it can’t compete with the Titan and will sell a variant of the Dodge Ram in 2010. The Tundra will ultimately be a success but do not expect GM and Ford to let it get a strong grip in the market. There’s a reason for the “This is our country” theme song for the new Silverado, and it’s trying to play up patriotism in buyers. Of course, this logic doesn’t work with people who already own foreign cars and preach about Detriot junk without having any recent experience with the products.
Hey, no problem, my dad was a Ford man and I used to have an old beatup Dodge, loved it. my first vehicle, paid $400. My previous p/u was a Toyota T100, sold it at 250k miles and it was still going strong then, only repair was a new clutch.
And BTW, Toyota had a recall not long ago for about 15,000 Tundras, something about the axle or some such part not being tempered right. And I just reread your post - hmmm, hurricanes, you must be in Florida or thereabouts?
Yes, 2/3 in FL and 1/3 in MO. One with hurricanes, other with tornadoes, and both with pickups and housing bubbles.
Get a diesel.
All the trucks and ideas mentioned above are good. Get the type of truck from the dealer/repair facility that is closest to either where you wish to relocate or where you are located. My advice would be to get either a GM or Ford. There is not a mechanic in the country that cannot fix one of these.
Be careful about that choice. My husband’s work includes some mountainous off road site work. He often comes home w/stories of people who bottomed out their trucks and even one of a broken axle on the mountain. This even after the ruggedness of the vehicle vs the job was questioned before the ascent. (Talk about a subject for male pissing contests!)
He has suggested many do not understand what it takes to make a vehicle rugged. As mentioned above, ground clearance is also a major issue.
I was looking at photos of a truck this weekend that was destroyed coming down off a mountain. I think the brakes failed. The guys partner tried to get in front of the vehicle to slow it down (ballsy) but the runaway vehicle ended up going off the road, downhill into a grove of trees at a pretty major clip. There was nothing salvagable at all on that truck. The staties that showed up after told the partner it was a miracle the driver even survived after seeing what was left of the truck.
For a large family with some luggage go with a Subaru Forrester or Outback with Turbo. If you want to move really fast and leave the luggage, Subaru WRX STI hatch with NAV. The WRX STI is insanely fast.
If money was not an issue, I would go with a Toyota Land Cruiser. By far the nicest, most reliable, most rugged 4X4 on the planet… and there is a very active aftermarket to make it even more off-road worthy. Check out ARB, an Australian company that makes snorkels, bull bars, lockers and suspension kits, etc. A two or three year old Land Cruiser will get you anywhere you want to go and is extremely dependable.
If you want something more affordable, a 4Runner, FJ, or quad-cab Tacoma would also work… I wouldn’t go with the Tundra or Sequoia until Toyota has worked out the bugs.
My truck would be my back and a 50 pound backpack, on it.
I can walk up to as many hiding spots off-trail as i’d like, in the High Sierra…
And as an added bonus, there’d be almost no comptetition from the hoi polloi, as they got their exercise watching reality tv, and are also terrified of bears and deer and marmots and everything else that moves.
So true. I’d also have my rifle fully visible as I’m more unnerved by the 2 legged animals on the trail……
But since we’re talking Jeeps and FJs. My ‘98 Cherokee has 250K miles on it without fail. I’ve replaced the alternator, radiator, some oil and oil filters and that’s about it. Best engine out there, IMO.
Also own a ‘79 Toyota LC FJ55 that I hope to convert to diesel soon. That thing is a beast and would be my “Mad Max” era vehicle.
The new FJ is growing on me, just wish they offered it in a power diesel….
Get a decent mountain bike, extra tires, and a little trailer. You won’t have to worry about gas, you’ll be able to go where a truck can’t, it’s silent and quick.
Sleepless prob. already has an MTB, knowing him. The FJ is not a good urban commute vehicle, IMO, as it has rather poor visibility out the rear and sides.
Yes I do own a mountain bike and today would have been a good day to be on it….
The only thing out there that scares me is the griz, they’re beautiful, but I’m lower on the food chain. But I’ve never seen a griz in the desert.
I love my 97 cruiser. Has something like 160K miles on it. We bought it used five years back. We looked at used Lexus SUV’s too. They are the same, but tend to be cheaper than the LC used since most people are under the impression that you need Lexus parts for them.
We have a piece of rural vacation property. Other than the cruiser, the only things that have made it to the top are dirtbikes and atv’s. Also my friend’s very old jeep.
Bank’s Suit May Hurt Deal for Clear Channel Unit
“…The deal in jeopardy is Clear Channel’s $1.2 billion sale of its television unit to Providence Equity Partners, a media-focused buyout firm. Providence began to balk at the price, citing deterioration in the business and the economy, prompting a lawsuit by Clear Channel. Yet by late last week, the two sides had struck a deal in principle to lower the price by $100 million.
But now comes a new bombshell. Wachovia, one of the three banks financing the deal, is now refusing to commit. It even sued its client, Providence, in a North Carolina state court on Friday, contending that the new agreement has voided its previous commitment. Goldman Sachs and UBS, the two other banks, have committed to finance the new transaction, which now calls for Providence to borrow less money at a higher interest rate….”
NYT
http://tinyurl.com/3dr9pq
Wachovia sues to keep away from another $3B in writedowns. Finally some risk analysis.
Smaller banks seize chance to take on big boys
By Lina Saigol in London
“…Private equity groups have been unable to raise the debt needed for large buy-outs for more than six months as big international banks struggle to offload$150bn of leveraged buy-out debt on their books.
UK companies looking to make foreign acquisitions have been increasingly financing deals through lenders in the country where they are making them, says David Brooks, head of M&A at Grant Thornton corporate finance. “Many companies are encountering a more welcoming attitude to lending [in these markets] than at home.”…”
http://tinyurl.com/2s692o
FT
If interested in emerging market banks, BLDRS Emerging Markets 50 ADR Index symbol ADRE.
This young lady has it correct.
Michelle Singletary
Washington Post
“…If you have a jumbo mortgage and a half-percentage-point difference is going to mean a great deal to you financially — that is, it will free up money you need to pay for essentials — you’re in too much house.
It means you are living above your means. Cornering mortgage professionals or other real estate experts at parties to press them for the best time to refinance your huge mortgage is nonsensical. You need to be asking when you should sell. ”
http://tinyurl.com/yr5ray
Ha! The time to sell was 2005…
Next hot investment, time machines.
Easy, I’ve already looked into it for myself.
On the Scientific Status of Economic Policy: A Tale of Alternative Paradigms
Date: 2008-02-14
Giorgio Fagiolo
Andrea Roventini
“…First, we claim that policy rules actually implemented by central banks and other institutions are seldom backed up by sound theoretical models.
As recently discussed at length in Aghion and Howitt (2007) in the context of growth policies, the most frequent situation faced by an advisor asked to deliver policy recommendations is one where standard textbook recipes turn out to be useless. A case-by-case approach, where one relies primarily on instincts and common sense, is instead to be preferred (Aghion and Howitt, 2007, p.2). As far as monetary and fiscal
policies are concerned, things are not that different….”
(footnote 2: This stance strongly contrasts with that of many policymakers. For example, Alan Greenspan has argued
that \despite extensive e®ort to capture and quantify what we perceive as the key macroeconomic relationships,our knowledge about many of the important linkages is far from being complete and, in all likelihood, will always remain so” (Greenspan, 2004, p. 37). An extremely pessimistic view on the possibility of taking any economic model seriously econometrically is in Summers (1991). On these points see also Mehrling (2006).)
Caution pdf
http://tinyurl.com/32xtfm
It is funny that the entire banking world is looking at the “bailout” of the monolines is needed as a result of the guarantee of CDOs.
What happens when a city and counties debts are insured by the same monolines?
“Vallejo budget crisis has some city leaders discussing bankruptcy
“…Two members of the Vallejo City Council plan a public town hall meeting Thursday where the city’s residents can take part in a discussion about the city’s financial woes.
One of the members — Councilwomen Stephanie Gomes — said earlier this week the city is “teetering on the edge of bankruptcy.” …
Feb 20, 2008
http://www.mercurynews.com/breakingnews/ci_8313265
The new reality TV show ‘Monoline Deathwatch.
I think this is a VERY big issue that hasn’t been considered enough, not yet.
Finally a number comes in better than expected!
ECONOMIC REPORT
Home resales slip 0.4% in Jan. as inventories climb
By Rex Nutting, MarketWatch
Last update: 10:12 a.m. EST Feb. 25, 2008
WASHINGTON (MarketWatch) — Resales of U.S. homes and condos dropped 0.4% in January to a seasonally adjusted annualized rate of 4.89 million even as inventories of homes on the market rose, the National Association of Realtors reported Monday.
It was the lowest sales pace since the real estate group began tracking combined sales in 1999, but was stronger than the 4.80 million pace expected by economists surveyed by MarketWatch. See Economic Calendar.
Resales were down 23.4% compared with the previous January.
The inventory of homes on the market rose 5.5% to 4.19 million, representing a 10.3-month supply at the January sales pace. The inventory rose 18.4% compared with January 2007.
http://www.marketwatch.com/news/story/economic-report-home-resales-dip/story.aspx?guid=%7BE32F9533%2DEF9D%2D401D%2DBF60%2D487034CEA51B%7D&dist=hplatest
And the market actually rallied somewhat on this “good” news. Amazing.
A Greater Fool and his monies are soon parted.
Late day rally!
We’ve hit bottom in RE and the banks are saved! Plus we’re getting that big check in May! Woohoo the bull is back!
Time to buy a house, some tech stocks, and a Venti Frappachino!
Sarcasm off.
BILL DONOGHUE
The ultimate sell signal
Commentary: Resignation of top GAO official directly impacts your portfolio
By Bill Donoghue, MarketWatch
Last update: 6:25 p.m. EST Feb. 24,
SEATTLE (MarketWatch) — The resignation of America’s unheeded and under-funded chief accountant and watchdog, along with the billion-dollar bullhorn he’s been given, are the ultimate sell signals for America’s stock investors
http://www.marketwatch.com/news/story/ultimate-sell-signal/story.aspx?guid=%7BD566230C%2DF9D9%2D4384%2DB64E%2DE9B480D2B23F%7D&dist=TNMostRead
new Gallup survey
“Which one of the following do you think is the leading economic power in the world today: [see below]?” Options rotated
2/11-14 2008 5/18-21 2000
% %
China 40 10
The United States 33 65
Japan 13 16
The European Union 7 4
India 2
Russia 2 2
http://www.pollingreport.com/trade.htm
Interesting in that the EU is the worlds largest economy
AP
Stocks Higher on Hope for Housing Bottom
Monday February 25, 11:16 am ET
By Joe Bel Bruno, AP Business Writer
Wall Street Moves Higher As Investors Hope Housing Slump Might Be Nearing Bottom
NEW YORK (AP) — Wall Street turned higher Monday on hopes that the worst housing slump in a quarter century might be nearing a bottom, a trend that could be the catalyst needed to revive the badly beaten financial sector.
http://biz.yahoo.com/ap/080225/wall_street.html
That’s quite a stretch.
So, I turn on the TV this morning, and what do I see:
- First, a half-hour long advertisement/show from REDC, some group auctioning off 500+ foreclosed homes in the DC/NoVa/MD region. Now, I have no idea how “honest” they are and if the bidding is full of fake bidders to drive up the price, but it was amusing to see houses going for 75% off their peak price! Hahaha - wait, I thought Real Estate only goes up!
- Next, after that show, there was an amateurish show run by the local slimebag outfit called E-Mortgage Solutions. These scumballs sold plenty of toxic loans while telling people to avoid downpayments and to “take all the money out of their house and put it in investments, like other houses and stocks.” Yeah - how’s that working out for you?
Anyway, this show was about FORECLOSURES also! Hmm… I wonder how many former customers the E-mortgage slimeballs foreclosed upon in that show? They went around the neighborhood, looking at various foreclosed homes, while trying to convince people how great a deal they all are. Right… they couldn’t hide how many had been gutted, and there was the one that stuck horribly (probably black mold or something in it)… yeah, great deals! And I bet the banks STILL won’t lower the prices to something reasonable. All of this brought to you with production quality barely a step above the Blair Witch Project.
If we keep talking about foreclosures on national TV, the sheeple will eventually wake up! Scary!
Wall Street is still doing the wedge thingy. Hmm, how long can this last? Shouldn’t break one way or another and soon?
Roidy
Oh Connie Lee why can’t you stay true.
Ok Aladinsane we need lyrics to Connie Lee.
Wouldn’t Stagger Lee be more appropriate?
ha
Thanks I’ll work on the lyrics while the folks in NYC get Connie Lee ready to get into the Muni insurance business.
That bad man killed Billy DeLyon for a five dollar Stetson hat. Oh cru-el Stagger Lee.
The comments are not as optimistic as the byline. Several of the economists suggest what is often discussed here: Prices have a ways to drop before they make sense in terms of affordability.
What I cannot understand is why so many current buyers are willing and able to catch falling knives. ‘Tis a puzzlement.
February 25, 2008, 11:07 am
Economists React: Some Hope for Home Sales?
http://blogs.wsj.com/economics/2008/02/25/economists-react-some-hope-for-home-sales/
This thread is even more gloom and doom than usual. I find this disturbing, because this site has been dead right in so many of it’s predictions. However, there seems to be a shift in attitude here lately - talking, in all seriousness, about having a good truck when the SHTF? Stocking up on canned goods and water? It reminds me of a lot of the peak-oil hysteria sites, which is unfortunate because Ben himself seems to remain the voice of reason even while many posters get worked up about Mad Max-style scenarios.
Many folks here also talk about their massive savings and retirement accounts, good investments, etc. You DO realize that in the face of a massive economic event such as hyperinflation or massive devaluation of the dollar, all your work in building up these nesteggs would be flushed down the toilet, right?
Even if you have massive investments in gold, foreign currency, etc. you would still be only slightly less screwed than the average FB or person with no savings. I don’t think heading to the hills to grow your own food is not going to be a viable option for anyone.
Just sayin’ - if there is a massive currency collapse, we’re all in this together…
Peak oil is geology, not hysteria. As for ‘we’re all in this together’, that sounds like the bailout talk offered by politicians. When you say ‘we’re all in this together’ I hear ‘re-distribute from those that were smart to those that were not’. I don’t want to be in your, or the government, lifeboat, thanks. I will take care of myself.
An Ancient Roman Gold Aureus was worth 25 Denarii around 2,000 years ago, by 300 a.d., it was worth 833 Denarii, by about 330 a.d., it was worth around 3,300 Denarii.
We’ll see the very same thing here, just replace Denarii with Dollar.
“As for ‘we’re all in this together’, that sounds like the bailout talk offered by politicians. When you say ‘we’re all in this together’ I hear ‘re-distribute from those that were smart to those that were not’. I don’t want to be in your, or the government, lifeboat, thanks. I will take care of myself.”
Do you really realistically believe that in the event of something like hyperinflation and or a peak oil doomsday scenario you will really be able to take care of yourself completely, without help (or hindrance) from everyone else? Oh, silly me, I thought we lived together in some form of society. This entails you having SOME degree of responsibility to and for your fellow man, even if you would prefer this not to be true. You say that you will take care of yourself, but I highly doubt that you will be able to grow ALL your own food, or ,say, take out your own appendix, if it comes to that. You talk tough, but I bet it’s safe to assume that there are a number of circumstances in your day-to-day life in which interaction with other people is unavoidable. This would not change, and would in fact increase in a crisis situation. So, should the S indeed HTF, you WILL be relying on others in a number of ways that you are unable to presently foresee. Money may have served as mediator for many of these interactions in the past, but if our currency is completely devalued, that will no longer be the case. From the tone of your comment I hope for your sake you aren’t planning on relying on personal charm to aid you in these situations.
Free markets are the most efficient and speedy way to get that help. Get the middleman (the band of theives calling themselves “government”) out of the way and help is immediate. I sell some of my gold coins for the skills of a tailor, a farmer, a surgeon…
On Peak oil, i agree. Add peak oil to the next 8 years of socialism in the U.S. and we are in a heap of sorrow. However, most doom and gloomers assume all variables will stay the same. There is no way to measure unknowns, so they leave them out. But unknowns happen. The fact is no large oil fields have been discovered since 1965. Demand is increasing at a 3% rate while production is increasing at a 2% rate. It takes millions of years to create oil in the natural process.
The easiest way to react to this is to buy precious metals bullion and hold a variety of oil-related stocks. I still assert that urban areas will be the places where survival will happen - not rural areas. The concentration of intelligence and jobs are in urban areas.
Right with ya Bud, what will be most valuable if the SHTF is real skills (negotiating and physical). Water, food and a good truck will only get you so far, one needs to provide a service or good that will be in demand.
Personally I don’t subscribe to the doomsday scenario, but I’m just saying you need to get ahead of the demand to make it in your “new economy”.
Every time the end times are discussed on this blog I try and tell people that in the post apocalypse world one of the most valuable commodities will be a box of Huggies. Nobody ever listens to me because I am partly crazy, but only partly. My wife would throw a can of spam at my head and yank the AR-15 out of my hands and shoot me if I refused to trade a few ounces of gold for a clip of Huggies.
This is a very good example of where saving in the form of future consumption will benefit you no matter what. Buy a 2-3 year supply of diapers once your baby is born. You will earn 5-15% on your purchase tax free and if TSHTF then you will be in a very good position.
I used to disapprove of Huggies, and all disposable diapers–man, can they fill a landfill! And they NEVER decompose. I changed most of my siblings bums into and out of cloth diapers, after all, and they were fine, right? And I survived. Well! But then I babysat my little nephew for awhile, and now I know better. Those things are worth their weight in GOLD. Even post, not pre action. Who knew a little kid could emit so much, um, substance? It’s like one of them time/space warps, ending in a Huggies. So, yes, stock up on Huggies, and also learn to brew beer, is my advice.
Collect seeds. Grow tobacco. Have a plan with your family on where to meet in case of emergency. Have an alternative route home if you drive on a freeway. As posted earlier, when TSHTF changes happen suddenly. There’s nothing wrong with being prepared. I don’t like what I’m seeing/hearing, and yes, I’ll do whatever to help my neighbors, but I have to take care of number one first. I have a healthy distrust of the gubmnt, and I have a healthy distrust of you.
Me??? You don’t even know me!!! Hey, I’m OK!
Oh, reread that, though you were speaking generically to all readers. Did you mean Olygal?? She’s super OK!
Investing needs to be non-emotional and based upon risk calculations. Those who fail to consider certain risks are swimming naked if those risks ever do happen. Most people have a natural aversion to consider “The end of the world as we know it” because it would represent more than they feel they could handle.
I am certainly hoping that we do not get hyperinflation this go around because I am no where near prepared enough. History shows that no fiat currency lasts forever.
My advice is to hope for the best, but plan for the worst.
What does everyone think the probability of hyperinflation in the next 5 years is? 1%, 10%, or 50%? Everyone here pays insurance premiums against risks far less than this so it makes perfect since to arrange your finances with some “insurance” in place.
A truck can be a very useful tool that can make you money in the “new economy” by helping people move, etc. A civic will get you from point A to point B but provide very little economic utility other than as transportation.
Those who choose to ignore the potential for hyperinflation are like those who ignore the potential for home prices to fall. If something cannot go on for ever, it wont.
“A truck can be a very useful tool that can make you money in the “new economy” by helping people move, etc. A civic will get you from point A to point B but provide very little economic utility other than as transportation.”
Not really, if gas shoots up to crazy amounts per gallon. People will quickly realize that they DON’T need that flatscreen tv and all that other junk if moving it is going to be prohibitively expensive.
Maybe a good bicycle and getting in shape enough to make it up a hill on one (a stretch for many Americans) would be a better investment?
I love renting a powerful Mustang (have one for this week), for nostalgia and the thrill. But I own a Toyota economy car. Small cars are the future. If I cannot rent a Mustang in 3 years when oil is $200 per barrel, I will just buy a 2008 model and garage it. Use the beast sparingly to get some of my thrills I crave.
Bill - I know you’re of the athletic bent. Get a high end road bike and learn to go screaming down technical descents at 40-50+ mph - there are some good ones dropping down to your beloved California coast and also in the Appalachians not far from where you are now. AZ Slim can second me on this as I’m sure she has gone balls-to-the-wall (as it were) down Grant’s Pass or Mt. Lemon in Tucson. Beats the hell out of driving a car fast, with no incremental cost.
You have obviously never driven or owned a real sportscar (i.e. German / Italian made) or you have no masculine soul. No other explanation possible for such a naive comment.
…”Beats the hellout of driving a car fast…”
and yes, I own an expensive bike or two as well.
My mountain bike buddy can attest to it - my eyes get big as saucers on some of those descents. My turf is in the phoenix metro area in winter and the White Mountains in the summer and fall. But alas, I have been working too much overtime and not enough time to bike.
i agree with both of you (Peter and Paul - and what about Mary?). I have a low end road bike and a high end mountain bike. I like both styles (road biking and mountain biking). And yes, I’ve done the Mt. Lemmon descent alongside the ski trail. Ever try Peppersauce? It’s on the other side of Mt. Lemmon past Oracle (the town). It has a part I really hate going downhill on (Jackhammer).
VA Tech Dan - I always enjoy your very literate posts.
We can’t start talking about the probability of hyperinflation until we define it. Like many English language words and phrases over the last dozen or so years (such as pun, racism, begging the question, infamous, and so forth), the meaning gets stretched and watered down until it loses its original intent.
Hyperinflation traditionally referred to a situation in which prices have been increasing exponentially for some time and inflation is well into the triple-digit range. Zimbabwe has hyperinflation; the last good examples I can think of in the Americas are Bolivia and Peru, with Argentina and Brazil coming very close at times.
Hyperinflation is by definition not sustainable and has to result in the collapse of the currency. The two are linked.
But today, most people think inflation of 10% or so is hyperinflation, just like they think that not being able to afford to eat expensive food or drive new cars is “poverty.”
People need to get better religion, and I say that in the most secular way I know how.
“People need to get better religion, and I say that in the most secular way I know how.”
Paul, you lost me there, are you talking about morals or are you saying we should start going to church (BTW, I go to church everyday - the Church of the Holy Redrock).
The church is the antithesis of religion. I’m talking about a non-materialistic outlook on life and not fearing difficulties or death. Conscious faith is freedom; emotional faith is slavery.
Gotcha. I’m sure you’ve noticed the sign as you enter Boulder, Utah, “Freedom from Religion.” I take that to mean freedom from legalism/dogmatism, not freedom from spirituality.
The Wall Street Journal Home Page
HEARD ON THE STREET
Goldman’s Profit Magic May Be Fading
Leveraged Loans Likely To Weigh on Earnings;
Stock Could Fall Further
By KATE KELLY AND PETER EAVIS
February 25, 2008; Page C1
At a recent investor meeting, Goldman Sachs Group Inc. Chief Executive Lloyd Blankfein made a wry apology for arriving late.
“This is the wrong time to keep shareholders waiting,” he said, according to people with knowledge of the matter. “Maybe I should offer to wash your car or something to make up for it.”
http://online.wsj.com/article/SB120389538601089151.html?mod=todays_us_nonsub_money_and_investing
Gradual home price drop good: Yale’s Shiller
Thu Feb 21, 2008 7:46pm EST
“There’s nothing troubling about a gradual correction of home prices. If we keep our incomes at the current level and home prices go down we are richer, we can buy more housing,” Shiller said.
“On the other hand, if they fall suddenly and fast then that can bring on recession and that is the worry right now.”
A housing boom that lasted nine years is now unraveling.
The economy is “probably on the brink of recession,” Shiller said.
Logical conclusion: Shiller is indirectly suggesting that home price declines are not gradual at the moment.
http://www.reuters.com/article/domesticNews/idUSN2126522720080222
RE: Shoddy Construction in Florida
I was able to take a nice R&R weekend in north Florida. I feel sad for rural landowners because this state has become one large metropolis. Many rural areas are dotted with subdivisions in the middle of nowhere with the traditional cookie cutter houses that don’t blend into anything. The house I looked at (out of curiosity) had the cheapest possible interior components, traditional great room with bedroom on one side and kids rooms on the other. Must be nice to hear the TV in the living room from the bed in the master bedroom. Also noted general lack of any type of efficient appliances and the layout of the home would suck energy in the Florida climate.
Other notes: There is plenty of Florida land left to build on (whoever said we were running out of land?). Listened to a lady with a screaming kid in the back of a Ford Expedition mention that gas prices are killing her (ever think of a smaller car), and also noted a lot of rougher looking hobby farms.
Exeter, I also stopped in a Tractor Supply store. The prices have certainly gone up in the past year. I can’t believe any hobby farmer would pay $12 for a bale of hay. I remember giving bales of hay away a few years ago after halloween displays were removed. I didn’t see any starving horses, but noticed a lot of trucks and horse trailers for sale along major highways.
interesting that you mention starving horses. since this thing started there is a huge increase in starving and abandoned horses all over the country.
the bottom has fallen out of the market. these days you can’t even give a horse away - just like houses - a liability not an asset.
Here is direct evidence that all Fools should take Econ 1 before musing about housing bottoms. This Fool only discusses supply side considerations, completely ignoring the demand side. It is credit constraints, such as a lending requirement that households can actually repay their loans out of their permanent incomes, which implies further drops in home prices are necessary to restore equilibrium.
Why Housing Prices Are Nearing Bottom
By Marko Djuranovic February 25, 2008
http://www.fool.com/investing/general/2008/02/25/why-housing-prices-are-nearing-bottom.aspx
Florida Association of Realtors stats out for January:
http://media.living.net/statistics/statisticsfull.htm
The usual big drop-off in sales in January. This time though it brought it to the lowest monthly total for Florida since 1995! And the third-lowest month since they started posting stats in 1993.
Prices only down only slightly though - look for Florida realtors to call another bottom (despite the fact that YoY prices are still down 15%, and that normally median prices start *increasing* about now, and decrease in the fall).
Top-ticking the feng-shui movement:
http://www.msnbc.msn.com/id/23300489/
Transcript: George Magnus of UBS
Financial Times
Published: February 25 2008 14:18 | Last updated: February 25 2008 14:18
FT: Do you have a back-of-an-envelope calculation as to how big the total hit could be in the credit world?
GM: Well, looking at the losses in subprime and collateralised debt obligations and related instruments, including the spillover into leveraged loans, for example, certainly colleagues and I think that it’s something of the order of about $500 or $600 billion, which would make it on a scale of the banking crisis of Japan between 1990 and 1994. But I’m afraid we’re still counting, because on top of all of these problems that we’ve had, of course, the US economy is in or close to being in a recession and the European economy is clearly slowing down very significantly. And, of course, we have all the vanilla credit-cycle problems of credit cards, consumer loans, corporate debt, corporate loans, and these things will, obviously, have to be built on to the estimate, so I don’t know. If you want to take a sort of a round number, something close to $1,000 billion at the end of the day is not an impossible number.
FT: So a trillion dollar meltdown.
GM: Of that order…
FT: But what about people who say to me right now, well, after LTCM [Long Term Capital Managment] there wasn’t really a sweeping regulatory backlash, even after 87 there wasn’t anything that dramatic in terms of changing the way that finance is done? Do you think that that is different from the situation now?
GM: I do. And I think Long Term Capital Management, the 1987 stock market crash, 9/11, possibly other instances like the Mexico crisis in 1995, these all felt like the end of the world in financial markets, but actually they weren’t. They left no lasting economic damage, and the losses were actually containable within either an institution, or a narrow part of the financial system. I think this is different: a) because it’s big; b) because it’s widespread; and c) because it is about solvencies, not just about liquidity. And solvency requires a totally different policy approach than just a liquidity problem. ”
http://tinyurl.com/2ml2qu
Wow. I’m surprised he wasn’t struck by lightning after that.
Interesting info from a DC area realtor’s blog http://blog.franklyrealty.com/
The Theory Behind Short Sales: Banks would be better off to accept a loss now, versus going through the legal expense of a foreclosure, just to end up selling it for less later. Win win, right? Wrong. Read on.
Bank Trick 1: “Sure, we will consider a Short Sale, IF YOU KEEP PAYING US.”
Yep, a bank sees a desperate seller, and a potential $50,000 loss. They then mislead them into thinking that they might consider taking a bath on the deal IF the owner keeps paying their mortgage. The bank then ignores offers for 2-4 months in order to squeeze out another $2,000 x 4 or $8,000 profit. Brilliant. The bank then takes it over after foreclosure and sells it for $10,000 OVER the Short Sale List price. $18,000 better off, NOT doing a Short Sale.
Bank Trick 2: Sometimes the bank has mortgage insurance and it is CHEAPER for them to let it foreclose versus allowing a Short Sale, which is NOT insured.
For example, I was at an NVAR short sale class and a Realtor asked the speaker, “Why after 60 days, calling 2 times a day (120 calls) with a full price Short Sale offer, did the bank not call us back?” The speaker claimed it was due to an overworked staff.
I asked:
Did they tell you they would consider a Short Sale IF you kept paying $3,000 a month? The answer was Yes.
Was the home bought with Mortgage insurance? The answer was Yes.
Bingo! Why eat $50,000, by accepting the low offer, if the bank a) gets $3,000 a month and b) is insured against a foreclosure and NOT a Short Sale.
She was pissed. She realized that she had been “had.” But this goes on ALL THE TIME. It can take MONTHS to hear back.
Another example:
A seller in Clarendon 1021 tries to sell his property and profit $30,000 at $600k. (Yeah right!)
Then he drops it to $570,000. No bites, but the foreclosure is pending!
They SLASH it to $530,000
(sidenote, I get flooded with calls from friend that want to pick it up for a steal at $470,000! I said that it was impossible… since I’d buy if that price was a possibility.)
It sits for another month, then the listing disappears after 100 days!
A month later it is “bank owned” and listed for $560,000
It sells for $540,000 in 26 days.
The moral here is banks are not dumb and the market isn’t so horrible that they will take all these lowball offers. They sold it for $10,000 OVER the previous list price (which probably had lower offers).
Short Sale Statistics:
Reston homes from $300k to $400k.
- 20 Active “Short Sales” in Reston (watch out for “Not a Short Sale” listings)
- 73 were Withdrawn, or Expired.
- 3 Under Contract (1 under contract since Nov 2007! Many UC do not close.)
Only 3 sold in the last 24 months. 3 closed sales in 100 attempts!
Dropped From $480k to $400k, sold at $400k (Full list)
Dropped from $430k to $400k sold for $380k (5% under list)
Dropped from $380k to $350k sold for $345k (2% under list)
Arlington Short sales.
- 25 Actives
- 37 Withdrawn
Only 3 have sold in ALL price ranges in all of Arlington in the last 2 years.
Listed at $335k, sold for $335
Listed at 700k dropped to $620, sold for $600k
Listed at 480k dropped to $420k sold for $420.
In Alexandria, only 8 have closed in 2 years out of 80 attempts.
(most were at list, or 2% under list, some were $20k over list)
I show this, so you don’t think “Wow, they are desperate, we can now lowball. These 3 were the ONLY successful ones. Probably because they gave the bank a real offer.
From the “Phew, I’m glad the housing bust is over” department:
Bargain hunters may toss a lifeline to housing
http://news.yahoo.com/s/nm/20080225/lf_nm/usa_housing_spring_dc
“…In Boston, a sense of urgency is also returning to the market, according to John D. Murray, a broker/Realtor with Realty Executives Prestige Properties.
A buyer he represents was the winning bidder at the asker’s selling price for a condo in the city’s upscale Back Bay neighborhood. At least three competing bids surfaced…”
Well Ben, while you were staying out of the snow in your cozy home yesterday, it looks like the auctions went on as scheduled:
http://www.azcentral.com/news/articles/0225auction0225.html
“Home bargains few at auction
“For Kelly Manzeck, 34, there with her husband, Kevin, and their two young daughters, it was the perfect place to buy a vacation home. They had visited the properties in Flagstaff, taken pictures and selected just one they’d bid on. The three-bedroom, two-story condo was listed at just over $500,000. The Manzecks, of north Scottsdale, picked it up for $383,000 - about $50,000 less than they were willing to pay for it.
“We just loved it,” Kelly Manzeck said of the home.
Many others left before the bidding was even over, as prices rapidly climbed in $1,000 increments out of their range. Gin Friedland of Flagstaff had her heart set on one property in Flagstaff Ranch, but ended up leaving before it even got on the auction block because a similar property went for much higher than she was willing to pay.
Friedland, a 61-year-old real-estate agent, said she and her husband were going to buy in the community a year ago, but were unable to sell their existing home in the sluggish real-estate market. She came to the auction looking for a deal.
“They’re going too high,” she complained, as she jotted down selling prices. ”
Ah geez Ben, you could have photographed the knife-catchers and posted them on the website for everyone to enjoy!
This cute young family lives in a 5BR, 3.5 bath, 4300 sq ft “house” in Scottsdale. Perhaps felt the need for something where they could actually stay in some form of human contact with their young children while indoors.
34 years old and is buying a “vacation” home. *Sigh* Maybe I’m just immature at 37….
Isn’t 150 miles a little wimpy for a family vacation-home trip?
-Little girls in makeup.
-Teens having sex and doing drugs at a younger age.
-20-somethings in condos.
-34 year olds in vacation homes.
They grow up so quickly, don’t they?
Next you hear of 31 year olds retiring (but on $20,000 per year).
Even in one of Canada’s most overheated real estate markets, developers still get into trouble with pre-sales…
———–
Construction at a standstill as Mount Pleasant condo development goes into receivership
Sophia Condos Vancouver
Courtesy of VancouverRealEstateDirect.com
Saturday, February 23 - 04:40:17 PM
Claudia Kwan
VANCOUVER (NEWS1130) - It’s another blow to the hot pre-sale market for homes as another group of buyers is wondering when, if ever, they’re going to get the condominiums they were promised.
Construction has shut down at the 81 unit Sophia development in Vancouver’s Mount Pleasant neighbourhood now that it’s in receivership.
Brian Thompson’s real estate agency was responsible for marketing the building to buyers, and says even they were taken completely by surprise by Bill Eden of the Eden Group’s decision to pull out because of financial problems.
If another developer is asked to take on the project, it could decide to boost prices by 20-25% to bring them to current market value–that’s an extra $80,000 on a $325,000, 1 bedroom apartment.
Eden Group shelved two Vancouver projects in November before the ground was ever broken, citing rising construction costs, although The Mondeo in Burnaby was successfully finished in 2007.
Peter Simpson with the Greater Vancouver Homebuilders Association says he’s very disappointed by this news, and by the situation the buyers in The Sophia are facing.
He says this is another reminder of the need to buy from a reputable company–and that doesn’t only mean companies with a long history.
Simpson says, “If they’ve been around for five years but during those five years they’ve produced well-designed buildings and delivered them to happy customers at the originally agreed upon price, that’s what you need to look into.”
He confirms Eden Group is a member of his association, and they’ll be looking at disciplinary action if necessary.
He also points out their developers have been delivering on their projects despite dealing with a rise in construction costs.
The Riverbend development in Coquitlam previously raised fears about pre-construction sales.
The developer in that case was accused of fraud.
I saw this on a Catholic Supply web site (don’t ask!):
http://www.totallycatholic.com/Stjoekits.htm
It’s a “St. Joeseph Home Sale Kit”
The website warns: “Don’t be fooled by secular companies selling these!”