A Conundrum Becomes A Problem For Bernanke
Some housing bubble reports from Wall Street and Washington. “WCI Communities Inc. before the opening bell Tuesday lowered its 2006 earnings forecast on slowing demand for the company’s active-adult communities, towers and expensive homes in its Mid-Atlantic markets.”
“The company said orders, a key measure of future profits, fell 55.7% on a unit basis. ‘During the quarter, we did not see the seasonal lift in demand for homes in most of our Florida communities that we expected and demand for homes in the Mid-Atlantic region dropped from prior periods,’ said Chief Executive Jerry Starkey.”
“Starkey said the company used incentives and discounts ‘on a selective and fairly limited basis,’ but expects that to ‘moderately increase’ the rest of 2006, particularly in the active-adult and second-home products.”
“Struggling home builder Dominion Homes Inc. late Monday said it swung to a loss of $3.9 million in the first quarter. Revenue slipped to $61.8 million from $92.6 million as the company delivered fewer homes than in the year-ago period. ‘Home sales generally remained slow in the company’s markets,’ Dominion said in a statement, adding that it does not expect to be profitable in 2006.”
“Saxon Capital, Inc., a residential mortgage lending and servicing real estate investment trust, today announced its financial results for the first quarter of 2006. Saxon reported net income for the first quarter of 2006 of $26.4 million compared to $54.0 million for the first quarter of 2005.”
From Business Week. “Still more errors have turned up in Fannie Mae’s government-ordered review of its accounting, the mortgage giant disclosed Tuesday. It also said it doesn’t expect the review to be finished before the second half of the year.”
“The company also has said that it expects an upcoming internal report to show that its financial controls remained insufficient as recently as the end of last year.”
The New York Times. “If the Federal Reserve stops raising interest rates later this year, will the rest of the world go along? When Fed policy makers meet on Wednesday to set overnight interest rates, they will almost certainly increase them by another quarter-point, to 5 percent. And investors will search for any clues about a pause in further rate increases.”
“But a growing number of economists are looking at a different possibility: that changes in the global economy could keep pushing up long-term interest rates long after the Fed stops raising its benchmark rate.”
“The result would be a mirror image of the ‘conundrum’ that perplexed Alan Greenspan. Now, even as Fed bankers indicate that they may be near the end of their increases, the long-term interest rates that determine home mortgage rates and companies’ borrowing costs have crept higher.”
“Increased anxiety about future inflation has been partly to blame, analysts say. But long-term rates have edged up around the world, suggesting that global forces are at work.
“As economist Robert J. Barbera, sees matters: ‘It looks increasingly obvious that there is a boom on the globe today; it’s just not happening here. That in turn would suggest that the moderating activity here in the United States may not elicit lower interest rates. What was a conundrum for Greenspan then becomes a problem for Bernanke.’”
“An increase in global interest rates would not necessarily be bad news for Mr. Bernanke. Higher long-term rates would help cool down American economic growth, and the housing market in particular, without requiring the Fed to take more action on its own.”
Related links:
‘The tenative agreement ending Canada’s softwood trade tiff with the United States will boost profits ‘modestly’ for lumber companies, but that won’t save the industry from a financial slowdown. Profit levels in Canada’s wood manufacturing sector are expected to decline in 2006, concludes a study by the Ottawa-based Conference Board. A slowdown in housing construction, the strong loonie and sluggish prices will all weigh on the lumber sector.’
‘Larry Mizel and David Mandarich, the top two honchos at Denver-based home-building giant MDC Holdings, were rewarded last year with pay days that topped $40 million. During the same time, the company’s stock dropped 5.7 percent.’
Ben;…Kind of interesting that the USA lumber industry kept the soft wood out during this long bull run in housing….Now that the industry is clearly slowing they resolved their tarriff dispute…Hmmmm ??
This is one of the key factors that might end the Vancouver boom. If forestry products take a hit, Vancouver takes a hit because so much lumber industry stuff is HQd here.
there was an article i read about canada had no choice but to convert to lumber about 20 million acres of pine because of some infestation which will decimate the forest anyway within the next five years(?).
I love Wall Street analysts. They see what already happened, then make up a reason why.
Nice note from 1999: Not all analysts screw up.
The biggest risk (in the US) is that high levels of debt and falling asset prices might trigger debt deflation, a concept first developed by Irving Fisher in 1933. Fisher placed much of the blame for the Great Depression on the excessive levels of debt taken on during the boom years of the 1920s. Debt deflation — a spiral of falling asset prices, rising debt-to-asset ratios, forced asset sales, an increase in bad debts, and a decline in bank lending — can seriously amplify a downturn. And lower interest rates do little to stimulate the economy, because the overhang of debt discourages people from borrowing more. In the early 1990s the deepest recessions were in countries that had seen big increases in private-sector debt in the late 1980s, most notably Britain.
The Economist
Living on borrowed time - November 6, 1999
A debt deflation, while possible, is extremely unlikely. Of all the things the government excells at, printing money has to be at the top of the list. (In a sense, you could say more broadly that they screw up everything they are involved with, which is why I’m for a very limited government.)
See “Dying of Money” by Parsson. In 1928, Keynes predicted a hyperinflation as an ending to the excessive debt of the 20’s. With flying colors, the Fed prevented that problem. Bernanke’s specialty is ensuring that they don’t make that mistake again and if anyone believes in a soft landing, I wish them well.
The when is the hardest part and I’m thinking later rather than now but I’m not betting the farm on that.
A debt deflation, while possible, is extremely unlikely.
Says who? Supply is nothing without demand. Ever heard the expression “pushing on a string”?
Debt deflation, defined above as a spiral of “falling asset prices, rising debt-to-asset ratios, forced asset sales, an increase in bad debts, and a decline in bank lending” is something an activist government willing to tolerate inflation can prevent. The key to the spiral is that the debts in question are secured by assets, whose declining value sets off and perpetuates the chain reaction.
In a recession, people may not be willing to take on additional debt. But a rational person would always be willing to refinance existing debt on more favorable terms. If the government offered to make unsecured loans at very low interest rates to allow people to pay off their secured loans, that could forestall the “increase in bad debts” component of the deflationary spiral, allowing banks to continue lending.
Thomas,
I don’t see how refinancing can support price levels, because price is established at the sale, not at a refi. People will perhaps be more secure, but not secure enough to venture for another round of debt.
Second, the deflation problem is not that banks are unwilling to lend - that part is handled by the Fed - but that the real sector is unwilling to borrow.
In economic theory, this is called non-negative interest rate constraint - nominal rates are only zero or more, while in a deflation scenario real rates are negative. This makes any borrowing a losing strategy in a deflationary state.
“A debt deflation, while possible, is extremely unlikely.”
How are you measuring this probability? Your inference must not be based on historical data, because debt deflations occurred frequently in the US pre-Fed creation (1913), then again post-Fed creation (1930s), and recently in Japan and Germany. Are you simply assuming that the Fed has become so good at fooling sheep that deflation is no longer possible?
TJ & the bear ” Debt delfation” is extremely unlikely
Have you been in your cave the last 20 years…
Japan has 0% interest rates and a 18 consecutive falling real estate prices(avg decline 87%), as well as multible banks that have assets STILL not written down since 1989.
Since this isn’t Deflation
gee i was edited again
M3 velocity comment
and FED Resv. debts
Inspired, re-read this thread. Bunkferd made that statement; I simply spotlighted it in order to facilitate my response (hence the italics).
Read
Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression, Expanded and Updated Edition
by Robert R. Prechter
Prechter believes deflation risk is very real.
Suppported by superb research.
Plenty of charts to prove his point..
about $10-$15 on amazon.
A must read IMHO..
Also has a chapter specific to R/E. Not super great,
but it parrots much of what has been discussed on this blog.
“Suppported by superb research.
Plenty of charts to prove his point..”
I’m sorry, but I still don’t know if technical analysis “proves” anything.
I just finished the book… interesting ideas, but in the end I just don’t put too much stock in technical analysis. Just MO.
That said, there are a lot of interesting ideas in the book. Just wish it would have looked at more than technical analysis… mabye a little fundamental analysis as well? (there was minimal amounts I guess)
clouseau.
I’m sorry, but I still don’t know if technical analysis “proves” anything.
I don’t believe any absolute proof was offered.
If we all knew with absolute precision what is going
to happen today or tommorrow, we would all be
very, very wealthy.
Having said that, I find that for myself that the discipline
behind the thinking that Prechter offers is very useful
and helps put other types of analysis into perspective.
“‘It looks increasingly obvious that there is a boom on the globe today; it’s just not happening here.”
Perhaps there are some intelligent investors both here and abroad that can put 2+2 together. For example, just today, on page 121 of a 150+ page budget plan the debt ceiling was raised by $2.7 trillion. That would mean the debt ceiling would be set at approx. $10 trillion. Anybody else get worried when it’s only been about 2 months since the last time we adjusted the debt ceiling?
this is so similar to credit card. still owe a large balance, and can’t charge it anymore due to near credit limit. No problem. Call the credit card company and ask them to raise the limit. Boom. Now, I can spend some more. Not really worry about higher payment…lol
Let’s raise it to $15 trillion. I don’t think we’ve spent quite enough yet… but an extra $5T could really help!
Then again, $15 Trillion is chump change. What comes after a Trillion? Is it a Gazillion?
Better yet, Google is such a good company, let’s raise our debt ceiling to 10 googol!!!!! Why waste paper raising the debt ceiling every few months in a new boring report that nobody reads, when we can just go for the gold and hit 10 googol right away!
clouseau
Not even close.
The US Government just released its annual report on Medicare and Social Security. The net present value of the UNFUNDED liabilities of these programs over the next 75 years is $39 TRILLION. Now THAT is debt.
We are getting close to the Avogadro number! LOL
And I heard on CNBC yesterday that China’s domestic savings in banks were to the tune of 4T$ (around 32 T RMB).
How much is that per Chinese?
Do your arithmetic
$3080 for each man, woman and child.
Doesn’t include the stock market and house equity.
Got it. And the point?
nope Wall street’s happy DJI closes on 6 yr high again! Right in front of big Ben’s policy meeting!
Does any economist for these banks bother LOOKING at the govt. numbers…IE employment last Friday?
Table A-12 “Alternative measures of labor under utilization…www.BLS.gov…
bottom of page “total unemployed 8.2% april 2006 column.
I thought so….right in front of our noses…and I thought the Govt. was just lying!
Go sheeple! up up and away1
That is nuts, the debt of America (public and private) are out of control.
We all have heard about the inverted yield curve, now we are seeing negative equity traps of debts.
“Price of a mortgaged home is inverting below the mortgaged debt”. (Harpers/ May 2006)
that means a lot of folks have negative equities…and probably don’t know about it or don’t care…until their ARM reset or forced to sell due to whatever reasons…poor bastards.
No need to worry. RE never goes down in price. They’re not making any more land. We are only in a soft spot. People aren’t house hunting because of Spring allergies. (heard that one yet?).
Everyone wants to live in _____________(this area). I’ll just refinance to a fixed rate before my ARM resets. I”m okay because I have 15% equity. Homes around here always go up in the long run. I don’t have to sell because I’ll always want to live around here, so falling prices won’t matter to me.
Etc…
the one I heard today is…. “I’m good. I’m in for five years at a low rate and the market will be back by then, or interest rates will be lower, so if I have to sell I will make a boatload of money even with 6% appreciation a year… or I will refinance into a better rate. I won’t ever have to pay the reset. this is the best deal around!”
People aren’t house hunting because of Spring allergies.
Ah, you must have been recently speaking with Suzanne!!!!!!!!!!
It looks like the Yield curve has is again possitive.
not really its just priced in a 50bp move for tomorrow, since March 30th.
2yr Treas. has a flight to quality bid. OR wall street is right for once… “1 & done”
BJ the bear is right..someone must borrow this money to create it!
Except when the govt. send Companies money (ie. $40+milli) from out of the sky…
Can’t say more!
Okay, Inspired, I see you actually did figure out my earlier post.
BTW, it’s “tj & the bear”, a slight play on the name of that 1979 TV series.
Bernanke may pause at 5% but he won’t stop.
David
http://bubblemeter.blogspot.com
he won’t stop but inflation won’t stop either for the next 5-10 years or so.
I’m sure Helicopter Ben will stay safely far behind the curve and make sure the dollar drops much further.
Exactly. Another big move in gold today. The market isn’t afraid of BB.
But BB should fear the market.
“The company said orders, a key measure of future profits, fell 55.7% on a unit basis. “”“Starkey said the company used incentives and discounts ‘on a selective and fairly limited basis,’ but expects that to ‘moderately increase’ the rest of 2006, particularly in the active-adult and second-home products.”
Moderately increase. Right. Orders fell more than 50%, and they’re only going to “moderately” increase their discounts and incentives?
Sounds like someone ain’t looking at the real world yet….
A tough nut, that one. If they use incentives, and don’t get the corresponding bounce in orders, they break even or worse. I would guess they just don’t know what region or asset to target, but know some sort of increase is a given.
What is the net result if interest rates keep climbing and big g keeps printing money in the dark?…
ask the Germans; they know from experience how this ends.
From WW.itulip.com
KaPoom Theory
iTulip.com Hyperinflation Prediction - Update March 9, 2006
* National currencies are primarily valued by the relative economic strength among trading partners with floating currencies, except for the U.S. dollar.
* A major component of dollar strength is the unique demand for dollars due to the dollar’s reserve currency status.
* Dollar demand and thus price is supported by all nations trading with the U.S. and among each other as all need dollars for international exchange, especially for oil.
* If dollar reserve currency status declines, either gradually via euro diversification or suddenly due to an event that causes a loss in confidence in the future purchasing power of the dollar, dollar demand and value declines in kind.
* U.S. interest rates are low mostly due to demand for U.S. debt, denominated in dollars, from foreign central banks of nations, especially Asian, that seek to keep U.S. consumers borrowing at low interest rates to purchase their exports using strong dollars; Asian “vendor financing”.
* Ka: A random exogenous event (e.g., a stock market crash predicted in 1999 for year 2000 and recession predicted for 2001) intensifies disinflation created by Asian vendor financing, causing the Fed to shift from bubble fighting to anti-deflation polices.
* Fed responds with an excessive cheap money policy, targeting short term rates below the inflation rate.
* The Fed keeps interest rates too low for too long, creating a new asset bubble. But in what? We did not know in 1999. The answer: real estate.
* Poom: A random or not so random exogenous event that has not yet happened (the stock market crash we predicted for 2000 did not have the impact we expected) exposes the true level of risk to lenders that is inherent in this unbalanced system, causing lenders to loose confidence in the future purchasing power of the dollar and seek alternative reserve assets.
* Interest rates and inflation rise rapidly as dollar demand and value falls, import prices rise, and the Fed moves to raise rates to stem the tide or dollar repatriation.
* The first foreign central banks to move will be those with the least exposure to losses in national income from sales of exports to the U.S. or depreciation in the value of the dollars they are holding as reserve assets (e.g., France).
* Not surprisingly, the Fed disagrees: “To sum up, this analysis suggests that there is more to solving the conundrum of the recent low long-term interest rates than pointing to the behavior of official foreign purchases of U.S. Treasury securities. Indeed, there is little solid evidence suggesting a persistent relationship between the two. Furthermore, the structure of the Treasury market does not support the projection of a rapid rate hike in the event that foreign central banks retreat from the U.S. Treasury market.” The Long-term Interest Rate Conundrum: Not Unraveled Yet?
* The assertion of no persistent relationship exists between low interest rates and foreign purchases of U.S. Treasury securities contradicts the fact that Central Bank reserve diversification spooks currency traders, and will drive the dollar down, which is in fact finally causing U.S. inflation and interest rates to rise.
* The Fed continues to raise rates, but not to fight inflation caused by economic overheating. The Fed needs to demonstrate anti-inflation vigilance to foreign lenders so they will continue to fuel the foreign capital addicted U.S. speculative financial system, but raises rates at the risk of throwing the real economy into recession. Unfortunately, it’s a lose-lose proposition. Eventually the hikes, either too many or too few — the Fed never gets it right — will produce either a enough recession or inflation to spook foreign investors and start the Poom ball rolling.
* The mechanism of Ka-Poom Theory proposed in 1999 appears happening, albeit later than we predicted, and slowly versus suddenly. At least so far.
* The resulting inflation is an event 25 years in the making, and will be historic in its extent.
Economist: Hobin Hood in reverse in the 21 st century
Govt. & Banking cabal steal from all = give to themselves……”A wealth transfer…..US history riddled with this terrible sin upon all of us - cattle.
How much of the boom is due to the US having a 900B or whatever it is trade deficit?
Add up the deficits and the US is putting huge stimulus to the rest of the world. 600 billion of consumption is due to HELOC withdrawals or something like that. As that slows, consumption slows, the boom slows.
Plus I’ve heard there is a debate about how much of China’s real estate boom is sustainable. It’s easy to loan and easy to build but do they have actual tenants who want to live there? Or are they just building b/c that’s all they know how to do? Supposedly Shanghai has more office space built or under construction than NYC. Sounds reasonable!
You’re almost making US overconsumption sound like a virtue that is doing good for the rest of the world. You underestimate the levels of domestic demand driven production in the larger developing countries - India, China, Brazil, Mexico etc. Real estate booms and busts have been taking place in markets which have been historically isolated from the “world” i.e. US markets, so that’s a different point entirely.
Much of the world’s “boom” is irreversible, US or no US. Remember, the middle east is sitting on gazillions of assets ($, Euros, gold etc) which they can use to consume or invest. There are like 1B people on the threshold of “middle class”, which is that they can fuel a lot of demand for goods and services. Hey the rest of the world can also sell insurance to each other
If they had that much domestic demand, they why are they exporting 900 billion to the US? That’s alot of production. Take that away and alot of their investment led boom retracts.
900 billion is alot of stimulus.
Middle Eastern money is saved, not spent. It doesn’t add to the boom except through lower interest rates.
It helps to have a largely one way trade with a major consumer (junkie), and one may even argue that the US accelerated the industrialization of many countries. But now the ball has been set in motion and will continue to move regardless of the US.
Middle eastern money is spent way more than you give credit for, but with oil prices pushing $75/bbl more of it accumulates than can be spent
“why are they exporting 900 billion to the US?”
Because (apparently) Americans simply “must have” the latest picture-taking cellphone/42″ plasma tv/latest pair of overpriced jeans complete with the “in” brand name of the month/full surround sound home viewing experience/camcorder/personal organizer……. Today.
…. do you see where I’m going with this?
kind of like Hansl and Gretel - They’ll take a hit on their USD assets in the future so they can fatten us up and eat us in the future.
lol. Yep.
If they had that much domestic demand, they why are they exporting 900 billion to the US?
Currency pegs.
It was a rhetorical question.
Bottom line, they produce much more than they consume. If the US doesn’t consume their products, their economy goes into recession. They don’t have enough domestic demand for them to have a middle class economy.
I’ve read that China’s middle class is now at 200 million or thereabouts, and India’s is at an impressive number too. Combined, they equalled the US population.
That’s not even counting Japan, Taiwan, etc etc.
With barely 300 million US population, it looks like the rest of the worlds’ emerging middle class is poised to take over the buying spree if the States drops out.
Course, it could take them awhile to become the trained overconsumer the average American has become! They’ll have to get all these people used to becoming as comfortable with debt as we are.
Remember last winter when China did an about face on it’s “5 Year Plan” and said it was going to start focusing on the domestic consumer?
Our days as top dog in the consumer game may be winding down.
Remember when the Japanese consumer was the darling of everyone and then they suddenly disappeared? Who knows, could happen to us.
Shanghai has more skyscrapers than New York City. I believe 6000 buildings in Shanghai are over 50 stories tall. Also, Shanghai has twice the population of NYC.
Shanghai has 20M people? Even if so, how many can afford to live in skyscrapers vs. relative squalor? The average wage for the workers in China is something like $150 per month.
But that’s the beauty of it all- they’ve got VERY wealthy and VERY VERY poor all living in the same country!
It will take a while to bring everybody’s living standards up to what we
consider basic- ie. running water, electricity, etc.
When Shanghai’s wages have risen they can just move to the next part of the country and start from scratch there.
They could boom and grow for a good long time.
Shanghai’s been waiting since the 20’s to get to where they’re going now. They always considered that THEY were supposed to be Hong Kong (ie. the commercial center of the Chinese world) if only all the political turmoil of the 20 century hadn’t happened.
Business people from all over the Chinese world (Hong Kong, Singapore, Taiwan, etc) may be wanting to live in those new apts!
Yeah, all those skyscrapers, and most of them are sitting empty and will be for quite some time. Most of those 20 mil in Shanghai live in shantytowns. Don’t get caught up in the hype…for now, it’s a mirage.
No need to worry. RE never goes down in price. They’re not making any more land. We are only in a soft spot. People aren’t house hunting because of Spring allergies. (heard that one yet?).
As David Diarrhea (Lereah) puts his spin on it “the market is tapping the brakes.” More like a sideways skid - rollover and car on fire. LOL
More like one of those stunt cars that flies off the end of a ramp, catches fire, and lands head first in a pile of junk cars.
The Japanese are unwinding $200 billion of global liquidity between March and June 2006. As they pull money out of Treasuries, the Treasury prices should go down, pushing up yields, right? The end of the carry trade was expected to raise the long term US debt rates. What other factors could be at work? loss of interest from other Central Banks, such as China, Japan? I expect this to continue. Rates will go up for a long time.
I’ve been following this one, too. For reasons I can neither explain nor defend, I have the feeling that the Japanese fiscal and monetary butterflies now hatching will have a tremendous influence on our economy over the next 2-3 years.
True, the government loves printing money, but what really is the alternative to money market accounts when housing crashes? Gold? Yeah right, it is in a bubble of its own now…I recently sold all of my gold holdings. Sure, it may go up more in the short term, but going up over $100/oz in the last month in the lack of any really discouraging news (other than housing) seems like tech stocks all over again. Looking back at the early 1980’s runup, the greatest gains were at the end of the appreciation…just like tech stocks…just like housing. Perhaps international stocks are really the best way to play things now.
1) Bubbles aren’t about price increases, they’re about leverage.
2) You mistake a “bubble in gold” for the bubble in the dollar and fiat currencies. That bubble is imploding in slow motion. An increase in the price of gold is a side effect.
And by the way, the government doesn’t print money, the federal reserve does.
Wrong. It’s done by The Bureau of Engraving & Printing on behalf of the Federal Reserve.
All our Gov’t agencies so the poster is correct in saying the Gov’t prints money.
You are wrong about gold as well. Every asset class is prone to rampant speculation which drives the price up beyond fundementals. Gold included.
I think the gold price clearly shows where all this is leading to; there may be some steep declines in the near future but I’m sure it is only the beginning.
Bernanke, Trichet etc. , these guys are all the same. They will hyperinflate the currency (let the dollar and euro drop) and provide smoke and mirror statistics so most citizens never notice what is happening until it really hits them. It is the easiest solution, the only politically acceptable solution and of course the worst possible solution.
“I think the gold price clearly shows where all this is leading to;”
I will stop you there and refer you back to the last episode in US Federal Reserve history when gold took off like a rocket (the late 1970s), which was punctuated by G. William Miller’s short time as Federal Reserve chairman (when the $US’s future reserve currency status came into serious question) and was followed by Paul Volcker’s tenure, when goldbugs were turned into bagholders.
Volcker raised rates to around 17% as I recall reading, can Bernanke do this (politically) ?
Secondly, would some deflationist please explain to me (seriously because I really don’t have a clue) how the U.S. dollar becomes stronger during a deflation if the taxes dry up (due to recession) and the gov’t defaults on the debt? If they don’t default then they must be borrowing (printing) their way out of debt or something along those lines. I can see how the consumer folds but how does the gov’t print or default their way into a stronger currency?
” I can see how the consumer folds but how does the gov’t print or default their way into a stronger currency?”
They don’t. I think you’re confusing a few different ideas. (and so do I, so take this with a huge grain of salt)
remember, inflation means that the SUPPLY of money is increased. So let’s say there are only 10 Trillion dollars out there total, and someone “prints” 1 Trillion more dollars, then we have inflation. A side effect is that then each dollar out there is theoretically worth LESS, because we now have more of them. (think supply and demand. the more supply increases, the less things are worth) So inflation is really when the SUPPLY of money increases, but people use it to also mean when each dollar is worth less.
Over the last 20 years as example, the SUPPLY of money has increased rapidly, and that’s why a candy bar now costs 85 cents when it used to cost a nickle way back when. Because with more dollars out there competing for goods, it makes each dollar worth less. And there are WAY more dollars now than there were 20-30 yrs ago.
The US government is in the unique position to “print their way out of debt”(sort of). Unlike other governments, OUR gov’t debts are in OUR currency, even our debts to other countries. When Argentina owed us money, they owed us in US DOLLARS. So if their currency was worth less, they had to convert it to dollars to pay us back. Sucks for them.
We on the other hand owe other countries in US DOLLARS. Very nice for us. Thus, let’s say we owe France $1 Trillion dollars. We could pay it off now, and it would cost us $1 trillion dollars. But we could also theoretically just print $1 trillion tomorrow and give that to the French. Of course, this would make our overall dollar worth LESS, but we’d still be out of debt to the French. In fact, we can print as much money as we want!
Yay! However, by printing more dollars, each individual dollar would be worth less. You see? We’ve caused inflation by increasing money supply, but the side effect is that we now have dollars that are worth less. So that would suck for Americans because even though we now paid off France, our currency is weak and we can’t afford to buy things from other countries anymore.
now the converse is also true. If we decrease money supply, then each individual dollar is worth more. In this case though, we still have to pay back other countries the same dollar amount, which is worth comparatively more than before the deflation. but our currency will be stronger.
So we can EITHER inflate our currency, making our citizens poorer but helping us get out of debt easier. Or we can make our currency stronger but then our debts are more difficult to pay off.
There are other issues at hand here, though, which I’ve neglected. One problem with just printing our debt away is this:
We still rely on debt to fuel our economy and our gov’t spending. So if we try to make our currency weaker, then other countries will no longer be willing to loan their money to us! this is the problem now. Our currency is getting weaker and weaker because Greenspan et al “printed” more money (they really didn’t print it, they increased it’s supply using other mechanisms). this made each dollar worth less. Thus, all other things are getting expensive for us because our dollar is falling in value… the Euro is “stronger” now so it’s more expensive to buy from and travel to Europe, the Canadian dollar is stronger, Gold/Silver/Lead/commodities cost more, many household items cost more, in fact almost everything “costs” more…. because our dollars aren’t worth what they were in the past…
The only thing that isn’t costing a lot more now are chinese goods, because they keep their currency fixed to ours… if they let that float even Walmart cheapie stuff would be expensive to us.
hope that helps
So what do you see as the end game? I understand where you’re coming from. We have so much debt that if the country goes into a recession and taxes fall…the gov’t would have to raise taxes to keep from borrowing from growing even higher.
The other countries know this and would be reluctant to keep loaning more and more money in dollars if they perceive that we have lost control of the deficit and debt.
We could just print money and give it to them, saying, “there, paid in full!”. Then they’d have to spend it here or on stocks, etc. Plus they would be unlikedly to fund future deficits. So the dollar would collapse. The Gov’t could just print its own money and pay the deficit out of that, I suppose, further weakening the currency.
Interest rates might be sky high though.. Or would they? If the gov’t inflated, and printed money to fund deficits, would int. rates be sky high? 20% or so? Probably as people in the US rushed to get their money out and into something else.
So what do you think will happen?
If they default on their debt, someone who thought they were owed a bunch of money (dollars) no longer will be getting those dollars and either spending/re-lending them. It is fractional reserve banking in reverse.
I’m not saying this is what will happen, but it is certainly possible. I’m long gold… for the moment. I think of it as “selling” dollars. But there may be a point when dollars get scarce as everyone tries to pay their loans off at once.
To understand what is happening to gold prices, one needs to answer these questions:
1. Will the Fed continue to debauch the dollar at at least the same rate or higher?
2. Is there a massive short position in gold?
Some of us believe that the answer to both questions is yes and that gold will rise much further from here.
I think a large part of the answer is that the U.S. is “stuck” with having the world’s reserve currency, more or less whether we like it or not. In theory, I suppose, that should be a good thing. At least it gives us options. Imagine — what currency would you want to take that position other than US$? Euros? When the “member states” can’t agree from year to year on who should do what about their deficits — I’m not 100% convinced the EU will survive for another 50 years? Yen? Strong and stoic producers, granted, but not large enough to carry the world on its back. Yuan? I don’t think so. Any other candidates?
That, I think, is what it all gets down to. We are, so to speak, stuck with the clout.
the prelude to Volcker was nothing compared to the moneyprinting that has been going on in recent years.
Greenspan started printing like mad shortly after he took office; for him more money was the solution to every economic problem or crisis. The BOJ has been trying to print their way out of the deflation for many years. And the ECB had their printing presses working overtime right from the start of the euro.
If Volcker needed 17% interest rates to tame inflation, I think we will need at least 30% interest rates to kill the current inflation monster (even though it is still in its infancy). Helicopter Ben has no chance and he probably knows it; he will hyperinflate until he takes the US dollar and/or the US economy with him.
And because the banksters from the ECB and BOJ will not tolerate too much competition from a low dollar, they will hyperinflate just as well and do their best to keep real rates firmly in the red for many years to come.
Anthony - you sold your gold?
why did you buy it? Is it to make profits to report to the IRS only to get those same Fed Resv. notes. back.($700 /oz. les tax rate 25% - 75%… equals 525 USD left (M3 total in 2001 or 2005 dollars versus 2006 dollars?)
Sorry babe you miss the point for GOLD (period)
great trade!!
Gold needs to pull back to 525 to be even!
Sure hope you are right though!!
China is holding about a trillion dollars in non-performing loans. This is about 40% of thier GNP. Their economy isn’t as healthy as people think it is.
http://www.theaustralian.news.com.au/story/0,20867,19067992-36375,00.html
The housing bubble (any bubble) was driven by easy credit. I think that lose lending standards (exotic mortgages, no income stated, ARMs) are FAR more responsible for the surge in demand than low interest rate. Remember, interest rates have been flat or rising for a while,while housing prices have peaked.
So oversight of lending standards and a re-examination of bank risk is more important to bursting this bubble than a rise in interest rates.
Those loans have been around for a very long time. It was the rates nothing more than the rates. Rates hit a all time 40 yr low and people lost their minds. At 1999-2000 levels of pricing 500k would buy you a nice home the rate at that time was hovering I think and someone will correct me if I’m wrong around 8% planes go into the building administration figures out something to distract you. Drops the rate to 4%. Consumer with caviar dreams mentality looses his mind and instead of buying that 500k house which he qualified for earlier at the 4% rate and saving some cash figures he can no afford to live like Madonna and buys a million dollar home. Demand increase as the herd follows. Had nothing to do with the loans they were already there. But the interest rates made them prohibitive.
in most EU countries housing prices have increased FAR more than can be explained by just the decrease in rates.
Rates are part of the story but I’m sure loose lending and speculation without any risk for the home buyer (thanks to the governments) is the major part.
You’re all right.
mrincomestream is correct in that low rates got everything started; peterbob is correct in that the practical disappearance of standards threw fuel on the fire; and nhz is correct in that the self-reinforcing nature of a bubble eventually causes speculative valuations to defy all plausible explanations.
That’s right and the recent threat of 80% declines in the NASD and the low yields on savings made skittish investors move to RE as an investment… driving inventories artificially lower which threw even more fuel on the fire
just for the record I would like to add that the Dutch housing bubble started despite pretty high rates (they were aboven 10% in the early nineties). Some of the factors involved were a booming economy, lots of government incentives for homebuyers and builders and maybe the fact that rates started to decline.
The really low rates came more than 5 years later; this was like adding tons of oil to a raging fire and made it the biggest bubble ever.
Do you cut and paste this response any time someone mentions rates? Not a bad idea, really. I’ll write a few stock ones mayhaps myself
We agree here! Cheap and easy credit easy been the FUEL for most manias in history.
And cheap and easy FUEL has been the easy credit line for most of the economic equilibria in recent history.
Spot on.
Add to that the fact that lenders, with this new feeding frenzy going on, were dealing with stockpiles of (previously unsees) cash. They needed a way to make money on the money they had.
How did they do it? Find a way to increase the pool of people they could charge fees to…. in other words loosen the restrictions on who can get a stated/no-doc/0 down loan. Why would they care? They then sell the loan to Fannie/Freddie/Asian investor who’s clamouring for dollar-based debt. Lender sells the servicing rights to one of the big boys (Countrywide/Wells fargo/Washington Mutual) then it’s a case of rinse and repeat.
Add some egging on by the lagging media (blogs not included, naturally), a couple of late night slots for Carlton Sheets et al and, before you know it, 2/3rds of the population become real estate “expert investors” overnight.
Have to say, though, the savvy players who got in and got out early played this one perfectly. I can hear them laughing right now as they sit back and watch this one unfold.
Our economic expansions are usually done with debt rather than durable goods production. The hangover for the average person comes when the printing presses start cranking out the money.
Lets look realistically at gold…it has almost zero value industrially, as there are substitutes for it that are far cheaper. The same is not exactly true of silver (highest electrical conductivity) or platinum/palladium (catalysts used at some point in the production cycle to produce over 20% of all final goods). Gold is virtually never destroyed, as most of it that has ever been mined is still around…especially in central bankers vaults. The same can not be said about platinum or silver, as they are consumed and there are not vast stockpiles hanging around in some vault. Actual physical demand for gold is not even as high as the 1990s, and yet the price has risen by 25% since the beginning of the year. Just speculators setting themselves up for yet another fall.
We’ll see. Certainly gold isn’t an investment in any sense. But many people believe that it is the only global money. When there is no value anchor for the paper currencies, which can be printed ad infinitum, it might well be prudent to own some gold. In many countries where the banking system is not well developed or not trusted, people choose to hold their savings in the form of gold. Like any money, of course, it is only good if people believe it is good.
There is a reason there is gold in the vaults of central banks, and that is its traditional role as a reserve currency. Admittedly, this has become unfashionable in some circles but is now enjoying a new lease on life in others. Don’t think of it as an industrial commodity, though. The issue is whether or not it is good money.
Asians, in particular, value gold very highly as a reserve store of family wealth and to some extent for status (the same is true, to a lesser extent, for arabs). I’m talking about the worker bees, but there are lots of ‘em. If you hang out in the Middle East or any of the developed Asian countries other than Japan, watch how many female worker bees, or wives, head for the gold shops on payday. Not sure the total impact of that on total gold volume, but it’s far too much to be ignored.
“Gold is virtually never destroyed”.
So true. It’s been around for what, 3,000+ years? It is considered real money by millions of people around the globe. It is somewhat rare, a finite resource. It is beautiful, and is used to adorn the wealthier classes, called jewelry.
I view it as a store of value, an asset that will stand the test of time, cannot be manipulated by inflationary central banks or crooked CEO’s. I care not whether it is worth $300/oz or $1000/oz. I would rather hold gold than US dollars. An easy decision to make in my mind. It’s my own social security trust fund, and I can count on it.
especially in central bankers vaults
Are ya sure the gold is still there?
you couldn’t be more wrong; you are believing all the lies from the FED. Gold is NOT in a bubble, it is just the same as it ever was, a store of value.
The US dollar (and most other fiat money) is in an inverted bubble thanks to the money printers, THAT is what is driving up the Gold ‘price’.
http://tinyurl.com/lf6ze
exactamundo!
Watch what GLD does tomorrow if the Fed indicates a “pause”. I’m thinking of covering my HB shorts in the next 30 minutes, take the gain and re-establish the position tomorrow.
Yep, I covered my HOV today too. I’m waiting until 2:15 tomorrow; by that time either the “we’re going to pause” short-squeeze BS will have started by then and I just wait for it to run its course or I’ll see that it isn’t being squeezed at all.
To understand the gold price movements, one has to understand that there is a massive short position outstanding. As the price of gold rises, more purchases are added to cover short positions. That makes for a rather exciting market. The other obvious driver is the rapidly depreciating dollar. As each dollar is worth less and less, sellers of gold naturally require more dollars.
Don’t underestimate the ability of gold to rise considerably more from these levels.
Anthony — OT — I though gold had higher conductivity than silver. If not, why is Monster Cable “gold plated” instead of “silver plated?” Also, why would a higher-conductivity metal (assuming silver) be menaced by oxygen (tarnish)?
Buffett bought a lot of silver. Is he dumb? BTW, I own some BK.
we now know that Buffett already sold his silver stockpile some time ago and he hardly made money on the transaction. He is now talking bearish on the metals but the fact is that he missed a huge profit opportunity …
And for gold, did I mention that production costs are only running about $300/oz right now? Anyone who buys gold now is the greater fool.
The production of gold relative to existing supply is small though. I think 1% to 2%. So it doesn’t matter what the production is or its cost, the supply of gold is relatively fixed.
And it only costs a penny or so to print a paper $100 bill. So what?
exactly.
Nothing is certain in this manipulated paper economy, but the people who are trading their work or goods for fiat paper that costs nothing to produce must be bigger fools that those who are trading it for something where production cost is a major part of the price.
Many many many people in India and China are buying gold. I guess they’re all fools for trading in the dollars that are flooding their economies for something of value. All 3 billion of them. Fools.
The latecomers to this gold rush will suffer the same fate as the latecomers to California’s 1849 Gold Rush — they will be the next generation of bagholders after the sad saga of the condo flippers comes to a close.
It costs the saudi’s $1 a barrel to pump oil. That doesn’t stop oil from selling for $70 a barrel.
the reason gold is going up is because gold traders can see whats coming….the high debt levels combined with an asset price reduction plus the money printing press basically spell doom…just depnds on how much longer they want to prolong the recession that has to come to cleanup the excesses
The other reason gold is up so much in U.S.$. is that as the dollar falls the price of gold rises if everything else remains the same. At any one time, a change in the price can relect the dollar rising or falling just like it can reflect changes in purchase.
Saw a Freddie Mac tv commercial which stated 20% of the economy is housing related. If orders are dropping 50% that means 10% of our economy is at risk of vanishing. The people in charge of the global economy are probably just in panic prevention mode at this point.
I’m also in the debt deflation camp. Helicopter Ben probably isn’t a good enough pilot to fight deflation without sparking hyperinflation.
“Still more errors have turned up in Fannie Mae’s government-ordered review of its accounting, the mortgage giant disclosed Tuesday. It also said it doesn’t expect the review to be finished before the second half of the year.”
And where is Senator Kennedy sorting this thing out for us in front of the tv cameras? Oh, I see, because it’ll only have an effect on you and I and those lower down will get to just walk away after they declare a time out in BK laws for those under a set income level.
by the time it’s the second half of the year they will probably discover even more accounting problems and delay filing their records until 2012 or so …
Wall Street will be happy to make another filing/trading exception for their most precious darling.
“And where is Senator Kennedy sorting this thing out for us in front of the tv cameras?”
And this is relevant how so?
“And where is Senator Kennedy sorting this thing out for us in front of the tv cameras? ”
The last time I knew, this unfortunate country was be led (to hell) by a coward named Bush.
David Learah and Michael Hudson on NPR right now, it’s 89.9 in LA area…. very interesting
Missed it have to pull the podcast now
But gold is now going up against all assets, completely disconnected from the euro, yen, etc. and even disconnected against oil…sorry, I would rather have oil than gold. At least oil can keep you warm and power your life. What does gold do? No real intrinsic value, no dividends or interest. Just remember salt is a finite resource, too, and was traded for currency well before gold was.
and sea shells…I see infinite number of new future markets
But gold is now going up against all assets
No, it’s actually underperforming many other commodities- palladium, silver, copper, aluminum, even zinc! Euro and yen are paper, too - just like the dollar.
I would rather have oil than gold
I can put about $20,000 of gold in my jeans pocket. How are you going to carry around and store $20,000 worth of oil? Good luck with that.
Forget about gold. At the end of any crisis, somebody ends up with money (or gold) and has to spend it. Think cigarrettes, bars of soap, and candy bars.
I could soak up $20,000 worth of oil just following David Lereah’s trail around for a day with a sponge.
“Struggling home builder Dominion Homes Inc. late Monday said it swung to a loss of $3.9 million in the first quarter. Revenue slipped to $61.8 million from $92.6 million as the company delivered fewer homes than in the year-ago period. ‘Home sales generally remained slow in the company’s markets,’ Dominion said in a statement, adding that it does not expect to be profitable in 2006.”
Hmmh… we have been lectured here repeatedly (probably by a mole from Toll) about how the HBs would stay profitable through a housing slowdown, because they bought the land when it was cheap, and can keep selling profitably at a price that undercuts used home sellers.
So is Dominion’s situation different? Or is it the first bit of evidence that the story about profitability in the face of crumbling demand is just a “suburban legend,” with more negative earnings reports on the way from Dominion’s peers?
From Business Week. “Still more errors have turned up in Fannie Mae’s government-ordered review of its accounting, the mortgage giant disclosed Tuesday. It also said it doesn’t expect the review to be finished before the second half of the year.”
Good thing the NYSE gives them a pass on the rule that says companies who cannot produce earnings reports will be delisted, and that plunge protection measures are firmly in place to keep their stock price aloft.
But when the proverbial hits the fan, there will be a legion of lawyers ready to sue pension fund and endowment fund managers for violation of their fiduciary duties. How can fund managers legitimately invest in securities where there are no audited financial statements? That is flying blind and when the awful reality becomes obvious to all, there will be fund managers facing tough times. Does anyone know if fund managers can be held personally liable for violating their ficuciary duties? Seems to me that they can but I can’t remember for sure.
fiduciary, that is
Yep, the BAC upgrade today was pure PPT and a message to the market that FNM is Too Big To Fail. I bet it hits 55 again before it hits 50 again.
And where is the outrage? This is going to cost us all big time. A billion here and a billion there and pretty soon we are talking trillions.
“But a growing number of economists are looking at a different possibility: that changes in the global economy could keep pushing up long-term interest rates long after the Fed stops raising its benchmark rate.”
What noneconomists might be missing is that if the Fed stops now in the face of clear evidence of inflation (burgeoning gas and gold prices, not to mention long-term T-bond yields), then the bond market is likely to conclude that the Bernanke Fed does not seriously intend to fulfill its mandate to maintain price stability. This could result in a serious steepening of the yield curve, as equilibrium principles require an inflation premium on the long-term bond yield to reflect the eroding real value of future coupons. This is what brought G. William Miller’s tenure at the Fed to an early demise, and set the stage for Volcker’s more serious effort to get inflation under control.
So can we look forward to the return of the “bond vigilantes”? That’s a phrase you probably haven’t heard in a while.
I knew there were a lot of gold bugs here, but a sense of realism needs to be brought to the table. Yes, debt levels are running at record levels; yes, energy is through the roof; yes, there is a housing bubble and it is in the process of crashing as we speak; yes, there will be bank failures. But, to some degree these things have happened before, like the Great Depression and 1980s/90s S&L failures, the subsequent real estate busts, etc. But in none of this did gold skyrocket as it has so far this year (except in 1980). My bet is gold will continue to rise as individual investors get involved, but will come down hard once again within two or three years, or sooner.
Besides, despite much of the world being dominated by the US and its policy mistakes, there are some countries that actually have a balance sheet in the black…if you really believe in the complete “anihilation” of society, as many here seem to do, you should be buying guns rather than a worthless piece of metal.
these things have happened before, like the Great Depression
…
But in none of this did gold skyrocket
Homework assignment #1 - It became illegal to possess gold in 1933, and the price of gold was fixed at $35. How did this affect the price of gold in dollars?
1980s/90s S&L failures
Homework assignment #2 - The Federal Reserve and other central banks “leased” their gold to suppress the price throughout the 80’s and 90’s. Transcripts of fed meetings reveal that this is fact. How did this affect the price of gold?
you should be buying guns rather than a worthless piece of metal
I’ll buy a gun with my coins if that scenario ever came to pass. Good luck buying with paper.
you should be buying guns rather than a worthless piece of metal
I am doing exactly that…held gold funds as a hedge for years in the 80’s-Volcker destroyed that idea.
Pre-ban assault rifles and magazines tripled & quadrupled in price after 1989.
7.62×39 ammo has doubled in price in last 3 months.
The ban will return when GW is gone.
When the gov gets real concerned about civil unrest-prices will explode.
Time to load the locker NOW!!! Best to have and not need-than to need and not have.
I am amazed that people believe gold is in a bubble. Inflation-adjusted, the historical peak for gold is over $2000 per oz. Gold has a lot more upside than downside at this point in time. Also, I would argue that the price of gold does not fluctuate, it remains constant over time. What fluctuates is the pereceived value of fiat currency.
well, in my country possession of gold is still legal (although strongly discouraged by all the financial pundits) and possession of guns is illegal (but even high ranking justice officials get caught carrying illegal weapons).
for me the choice is easy
Maybe house sellers could offer a few gold Canadian Maple Leafs as an enticement to buy their house rather than free membership to the local golf club??
I know someone “investing” in both precious metals and real estate right now - what do you think this indicates? Is this dumb money or smart and dumb at the same time? LOL
How about confused??
Another rookie chasing what’s hot. Problem is RE is not hot, it’s on a lon term downword spiral.
Sadly, the Real Estate & Newspaper shills are doing there damndest to hide the fact. That and it takes months for the data to come out.
I’m still seeing wannabe speculators buying property in CA. That’s good. i’ll have a bigger pool of homes to buy from in a few years.
I don’t the media will continue to hide it much longer though. In the past two weeks there have been several examples of major media with not so flattering bubble stories. The story will be too good for them to pass up soon.
There are some really intelligent people on this blog, and I agree with nearly everything that has been said; I just think it is very foolish to put all your eggs in the gold basket. Sure, any commodity, stock, bond, etc. can do well in the short term, but the irrefutable fact is that gold has traditionally been a good store of value, but has underperformed everything but inflation over the last several hundred years. Who knows? Gold may very well go up to $2000/ounce, which would be similar to its inflation-indexed reading from 1980. But, I’m not willing to risk my entire life savings on it. Insured money market accounts (although we might test that “insurance” in the next couple of years), and international stocks from better-managed economies, I think, still have some merit.
Who said to risk your life savings on gold? Smart investors diversify. I wouldn’t risk my life savings on a house I couldn’t afford.
If gold becomes prohibited again, I’m not sure you would actually use it to buy many everyday things…it would be equivalent to using cocaine to pay for your groceries. And, of course, cocaine is far more “valuable” per ounce than gold, but if gold ownership becomes illegal, good luck buying many things before getting busted; and stock ownership in those gold mining companies…unless you are not reporting your SSN, if things really got that bad, I guarantee you that those would be seized.
If gold ownership becomes illegal, they will not get mine. No way. When FDR did it, only 20% the total gold stock in the US was ever handed over.
Also, the price would skyrocket beyond anything you could imagine.
cocaine is far more “valuable” per ounce than gold
If cocaine became legal, would its price go up or down?
If that becomes reality would enough people be sober enough for it too even matter. At that point I would definitely take the position of one could never have enough guns and ammo.
Nah if they try one of those confiscation stunts in the U.S. again, you just cash a handful of your Krugerrands or Eagles or Maple Leafs in Canada every so often. It almost goes without saying that the price of gold would be many thousands of dollars per ounce as a result.
Hold onto those gold coins a little while longer. Sooner or later you’ll be able to trade each one for a “luxury” condo.
But those gold shares are history if gold ever becomes prohibited. Way too easy to track ownership now compared to the 1930s. The only “safe” way to hold it is to actually keep the stuff yourself.
What is amazing to me about this whole discussion is how easily people accept the fact that the gov’t is free to strip them of ownership (guns, gold, whatever) with nary a question or raised eyebrow. The constitution has been marginalized and trampled for so many years it is like everyone has been beaten down and accepts that it is OK for the gov’t to tell the people what they can own instead of the reverse. Idealistic, but that is how the document reads and I personally would like to start having people point that fact out when making comments about gov’t “taking” stuff away from them.
that is what ‘Homeland Security’ was invented for, isn’t it?
Many EU countries (including mine) have there own Homeland Security laws now that make it extremely easy to strip citizens of all their rights (or goods) without even taking the case to court. Just accusing someone of supporting terrorists (without any evidence) is enough to bypass all constitutional rights.
Gold shares could become valueless anyway. After all, they are only paper. You need to own physical metal if you want any form of security.
With those additions, the inventory at month end totaled 25,215 listings, a jump of almost 21 percent from the same month a year ago.
Kirkland, Wash.-based Northwest Multiple Listing Service covers most of western Washington and encompasses more than 2,000 companies with approximately 26,000 sales associates.
So there is approximately one broker for every listing in the area now…
I believe some physical gold and silver as part of one’s overall assets is wise. At least 5 percent.
Sat my girlfriend’s son down yesterday. Handed him a nice pre-64′ solid silver .50 piece and a newer piece of crap sandwich minted .50 piece. Had him drop each one on the table in front of him. The silver coin makes a nice, pretty, high pitched “ping” sound while the other just “thwacks.” He was dumbfounded, didn’t even know there were solid silver coins in circulation years ago, but he sure as hell could readily discern that one was beautifully minted and much more valuable than the other POS in his hand.
Should one go all-out and invest everything in metals? I don’t think so. After all, it could retreat back to a much lower price. But given the insanity of asset bubbles, currency devaluation and other possibilities, a little might not hurt.
Definately not investment advice.
DOC
Actually, DOC I think that is pretty good advice. I’m just wary of people liquidating all their assets to buy gold…everything in moderation can be good.
I think very few people do that (liquidate all to buy gold) and that zero bloggers on this board do so. There is a huge difference between “putting it all in gold” and putting 5-10% of assets in the metal. The former is recommended by absolutely nobody I’ve read.
Note also that gold hit $700. I still think rates need to go higher, if the Fed is serious at all about inflation.
OT: Not to add to concerns, but Iran’s letter to President Bush may be a prelude to war. There is a tradition in Islam that before declaring war, one must “welcome” the enemy to Islam.
Oh for crying out loud.
I am almost horse screaming at my computer.
Mr. Bernanke is NOT EVEN CLOSE to stopping the rate rate raise.
THERE IS NO SUCH THING AS ‘HELICOPTER BEN’.
The housing bubble is just beginning to burst.
The 28 year old single girl still thinks it’s a good time to invest in Real Estate, even though she has $100,000 on her credit cards from buying SHOES in Orange County.
Folks, don’t get ahead of yourselves.
Just because you come here every day, just like I do, doesn’t mean the rest of the country does.
It will take the summer, and part of the fall for the message to get out to the 28 year old girl.
Mr. Bernanke will keep raising the rate until a CONSENSUS is reached.
WE AREN’T THERE YET.
PLEASE KEEP YOUR PANTIES ON.