Sunday, May 24, 2009

The Greatest Depression?


I never thought I would see Gerald Celente in the mainstream media. Seeing him on Fox News was a pleasant surprise. I am glad to see that the "doom and gloom" crowd that discuss our economy are finally getting some airtime. The depression is coming folks. Its time to prepare for it.

IMO, Gloom and doomers are simply realists when it comes to the economy. If things suck they suck! It is what it is! I would much rather hear the TRUTH around how things really are in the economy versus some"green shoots" theory that has zero chance of happening right now.

Get prepared and please start listening to people like Mr. Celente. 5 years ago many of us would have thought Mr. Celente was insane for prediciting such horrors. In this new scary world that we live in, the labeled "insane" are now "sane" .

The MSM will tell you to listen to Timothy Geithner and Mr. Bernanke at the Fed when you have questions around the economy.

This is just about the worst advice that anyone could get. Look at how many times these two have been wrong. Wake up!

I will have a detailed post up tomorrow night. China appears to be very worried about buying treasuries.

Enjoy Gerald!


CT-Hilltopper said...

I don't know how it's going to hold off until 2012.

I feel it coming soon.

I went to the Memorial Day parade in my town today, took my kids. It was so bittersweet this year. Even the kids remarked on it, things just seemed "off". There wasn't anything you could put your finger on and say "aha! that's it, that's what's screwed up", but something was definitely off.

IT's like that old song by CSNY:

"There's something happening here
What it is ain't exactly clear..."...

I mentioned in your previous post, Obama came out in a C-Span interview and admitted that the United States is insolvent. Not that this is exactly news, the US has been insolvent for a long time, but to my knowledge, this is the first time that someone in authority has admitted to it (to my knowledge).

I'm afraid Celente is right, but I just don't see things holding off as long as he does.

John said...

I was able to sell my house in CA recently at a very nice profit. The people buying it thought they were getting the deal of a lifetime. My mortgage was pretty low and very manageable, but I believe the housing market (and many other markets) is still heading lower. Now I'm well positioned with a lot of cash and precious metal holdings. There may be even better bargains in housing to come. I have to admit though, I had some "seller's remorse" at first. After all, I could be wrong and may have just sold at the housing bottom!

ZMonet said...

John -- If you made a profit, don't have any remorse. Being in CA, you're lucky to be getting out having made money (I think just a few people would trade places with you) and it is more than likely that time will prove you correct.

Despite agreeing with all of you on the insolvency of the country, I, unfortunately, am going to be buying a house in the next 9 months. My wife has held off 2 years (after we sold, for a profit, when we saw the foreclosures coming into Northern VA) and we are now about to have our first little one. You think the economy is powerful? Try negotiating with a "nesting" woman who has waited two years. Anyway, we'll hold off for a bit longer, at least until the end of our lease -- we have to move so our only option is to move our considerable stuff to another rental.

My only solaces: (1) we haven't bought yet; (2) we don't plan on buying above our means; (3) our jobs are about as solid as you can get and we could afford the mortgage on one of our salaries (although not easily, but certainly for a couple years); and (4) the house we'll buy we could easily live in for the remainder of our lives.

Yes, we might be reaching the final chapters of our country's economic doom, but then again there might be another way to scrape by and defer the real pain for much longer. Unfortunately life events and my own impatience probably isn't going to allow to me wait.

Hope everyone had an enjoyable long weekend.

Jeff said...


Its tough to see how this all plays out timing wise.

The Fed won't go down without a fight. A lot of it depends on how long they can keep the FCB's buying our national debt.

I was out in the city last night and everyone was complaining how dead it is out there.

Cab drivers say everyone walks places now. The steakhouse I was in has been laying people off because things are so slow.

You see signs of it everywhere. It will be interesting to see how it play out.

Jeff said...

Regarding housing:


Consider yourself to be blessed. Take the money and run. This is the peak buying season and you gout out. Congrats.

You should feel no remorse because lending rates will be soaring down the road as we issue trillions in treasuries to fund our deficits.

Jeff said...


Hold out man!

Buy the wife a nice piece of jewelry or something.

Perhaps you can rent a house? If you must buy you gotta stay at the low end of the market. 250-300k and under.

You will be comitting financial suicide if you pay 400k or more for your house(unless its marked 50% or more off) because mortgage rates are going to soar.

Anything 250k and under is still moving because people can qualify and FHA has pretty loose lending standards.

HOuses will get much cheaper down the road. I understand the wife pressure. that can make your life miserable.

Good luck with whatever you decide to do.

Jeff said...


Picked this up for you...Food for thought. From the NYT:

"“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”

Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.

“We’re right in the middle of this third wave, and it’s intensifying,” said Mark Zandi, chief economist at Moody’s “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast

From November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home increased more than 473,000, exceeding 1.5 million, according to a New York Times analysis of data provided by First American CoreLogic, a real estate research group. Those loans totaled more than $224 billion.

During the same period, subprime mortgages in those three categories increased by fewer than 14,000, reaching 1.65 million. The number of similarly troubled Alt-A loans — those given to people with slightly tainted credit — rose 159,000, to 836,000.

Over all, more than four million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier.

Under a program announced in February by the Obama administration, the government is to spend $75 billion on incentives for mortgage servicing companies that reduce payments for troubled homeowners. The Treasury Department says the program will spare as many as four million homeowners from foreclosure."

ZMonet said...

Thanks for the feedback Jeff and I saw that NY Times article today. Some thoughts on your thoughts...

Let me preface everything by saying that the optimal situation would be to wait this all out and wait for housing prices to start rising again. Also, for some perspective, the quest for my wife and I to buy a single family home began in 2003 when we sold my wife's 800 square foot place for about 250% what she paid 4 years earlier. At the time, we both decided we would live below are means and buy a townhouse further out from the city. I thought the downturn was coming any second and I thought it would be a good place to wait it out. My wife wanted a SFH at that time, but we agreed to save money for a house, make renovations through a lot of sweat equity and see what time brought. Then in 2007 I saw a wave of foreclosures hitting the townhouses and my wife was interested in moving to Maryland (from Northern Virginia) to see how we liked life in the suburbs/country. We were able to sell our townhouse for a slight profit (no real profit if you count the sweat equity) and move into a SFH, probably valued well over $1.2 even today -- 10 acres, dock on Chesapeake, 3000+ square foot brand new high end home, swim spa pool, etc., because the SFH rental market in the area was so bad and we were willing to commute the 30+ miles to work. At the expiration of the initial lease term, my wife agreed to extend for another year. However, now that lease will end in April 2010 and our landlords are ready to move back to their house (their dream retirement home). The only option is to move into another rental home and we would have to downgrade significantly. Rent is $3K/month and I haven't seen a similar house on the rental market, let alone for anything close to that price.

Is it a "hardship" to move into a lesser home? Certainly not. If it were just me, what would I do? I'd rent some 1000 square foot condo and continue to wait it out. But that isn't where I find myself...

So, again, acknowledging that this isn't my first choice (but it isn't like I'm threatening divorce if we don't go my way), we plan on buying something in the $500K-$700K range. I know, I know, that seems asinine if that is the exact segment of the market that really hasn't seen much depreciation, but here is my thought process:

(1) I take it as a given that we will lose money, especially in the short/mid term.

(2) If we buy in the $250K-$300K range (I don't know where we are finding anything very nice in the DC Metro area -- not even where we are looking in Anne Arundel and Calvert Counties), then a) we wouldn't like the place very much; and b) we'd be looking to move in the next five years.;

(3) buying a home we can live in for the next 20+ years, as long as we can make the payment, allows us not to worry so much about home value. Where do you think home prices will be in 20+ years? Nobody has a good idea that far out;

(4) home price are sticky. As interest rates rise (and I've watched the 10 year, like you, in horror), it seems to me that there is a time period where homes actually become less affordable before starting to catch up. I'd hate to rent another year or two (and believe me, that is about as long as the hold out would continue) only to find that it is "wasted" because homes are no more affordable. True, I'd be buying at a lower price and could always refinance, but when are rates going to go down again? More likely inflation, even on houses, kicks in before that happens;

(5) Even if we put down 20%, we at least for the time being until this administration makes changes, have the option to walk (although not something we would ever want to do); and

ZMonet said...


(6) going back to the first paragraph and connected to #5, my wife made about $150K on this bubble by buying a condo. This was a ponzi scheme anyway. If we give it back, so be it.

Sorry for the book. Just some thoughts. I know that if a $600K house we were going to buy today was valued at $500K next year, we'd obviously save $100K by waiting, but does it really matter so much for someone who has a 20-30 year time frame? Again, I obviously concede that paying less is better, but in the grand scheme of it all does it matter so much? I know I raise a number of issues, but I'd love to get your thoughts on that one. It seems like we might be better off looking for our long-term home (i.e., our "forever" home than a home we would want to leave in 3-10 years.

And finally...if all of this implodes, does any of it really matter all that much anyway? I don't think we'll repeat the 30s...there will be anarchy because people won't be able to deal. In that case, I'm moving to a family cabin in the Shenandoahs, farming and living a MUCH simpler life.

Geez, when did buying a home become such a very real financial land mine? And remember, I'm still looking out into 2010 for this home purchase -- a lot can happen between now and then.

Jeff said...


It all depends on your financial situation.

If you make big bucks and have a boatload of money in the bank then go for it.

Losing a few hundred grand isn't worth the wife yapping in your ear all day.

Is your job stable? Does the wife work? If you plan on this being your last house and you have the ability to finance a nice retirement then go for it.

I think you will see your bond market implosion by 2010 anway so it may not matter. If rates jump to 10% in 6 months as we fight inflation, you will get slaughtered because no one will be able to afford to buy that 500k off of you.

The 500-750k area in housing is where the next implosion occurs. The jumbo loans are supposed to be the next area that falls apart.

Foreclosures on prime loans are exploding.

If you could stretch it 2011 i think you are going to find a whole lot of deals. Most sellers in this area have not gotten through the denial stage yet like they have in Nevada and Florida.

I wish you the best with whatever you decide.

I know its a tough decision.


teddy bear said...

US mortgage market is in the middle of 5 year ARM Reset period (2007-2011, 60 months)

eye of the cyclone just passed over? ;)

ZMonet said...

Thanks for your insight and open mind Jeff. You're right, this isn't an easy decision and one I'm torn on.

In answer to your questions, my wife and I both have high level fed. gov jobs, which means that are jobs are fairly stable but we don't make a mint. My wife makes close to 50% of our income (which means she has 75% say in what we do lol). As for financing a "nice retirement" can anyone right now be sure about financing a nice retirement? My plan is to work until I die. Although frustrating at times, I thankfully enjoy my job. If I get to retire, all the better.

What do you mean by: "If rates jump to 10% in 6 months as we fight inflation, you will get slaughtered because no one will be able to afford to buy that 500k off of you." How would I get slaughtered if this is my 20-30+ year house? Do I really care if my $500K house is worth $1 million or $250K in 2011 if I'm not looking to sell? Sure, it would be depressing to see my neighbor buy their house for half of what I paid, but wouldn't financially impact me in any serious way I can think of.

I'm kind of curious how far people will go to back up their feelings. Are there people living in $500K+ houses who are reading this blog who are seriously looking to sell and rent? People told me I was absolutely insane when my wife and I did that. Any of you actually own houses or is everyone on here really a renter? Or maybe you don't live in a bubble area?

ZMonet said...

Interesting Washington Post article on real estate in the Metro DC area:

Jeff said...


I hear ya man. Tough one.

I know of many people that sold at the peak that are now renting.

I sold in 2005 and have been renting ever since and I live in the Baltimore area.

I am renting from someone who couldn't sell.

All you need to do is look at the # of overall home sales when asking what people at all income levels are doing.

There are no home sales for the most part unless its a foreclosure or under $250k.

I believe everyone will continue to wait. Its a stalemate right now between buyers and sellers. However, the sellers are bleeding while the buyers are very solvent.

Always remember it takes a decade before prices ever come back. You really shouldn't be in any rush IMO.

Try to find a foreclosure if you must do it. they are starting to explode upwards in MD.


Jeff said...


thats one of my all tim favorite

We gotta long ways to go don't we?

On the Money said...

Perverse pleasures indeed! Life as we know it is gone and it's just a matter of time before the inevitability of this becomes even more apparent - more beggars on the streets ... some of whom may be (or have been) your neighbours ...