Saturday, October 17, 2009
Friday, October 16, 2009
It's happy hour so I will try to be brief. I wanted to share today's CNBC interview with Yale's Robert Shiller. Dr. Shiller in my mind is one of the strongest voices of reason when it comes to the financial markets and bubbles.
One of Dr. Shiller's consistent views on bubbles is that psychology is the key element as to how bubbles form and then burst.
He was asked about the current "rebound" in housing and his take IMO is right on the money:
So are we about to see housing bubble #2? This remains to be seen, but I am leaning the same way Dr. Shiller is which is the likelihood of this occurring is high.
I say this because this recovery has been too predictable given the horrible state of the economy. As Dr. Shilling explains, our addiction to bubbles is probably as powerful a force as the housing tax credit when it comes to explaining the powerful reversal in home prices.
The 800lb gorilla in the room when it comes to housing's future is interest rates moving forward. The risks of rates rising are extremely high IMO.
The main threat of higher rates of course is inflation. We are already seeing increasing prices as a result of a falling dollar. Oil has touched $77 in the past couple days. Gold remains firmly over the $1000 level. These are some of the "unintended consequences" when you print money in an attempt to keep the USA's debt bubble inflated.
The Fed eventually will be forced to address the falling dollar. What's the easiest way to strengthen the dollar? Why raise rates of course. Higher interest rates down the road could very well trigger another housing collapse.
Also, keep in mind that the Fed's quantitative easing fund is now down to a measly $3 billion. That's the equivelant of a penny when you have a deficit of over $10 trillion dollars like we do.
The question I have regarding the QE is this: If the Fed doesn't replenish the QE program, will the bond market sell off treasuries in an attempt to force the Fed's hand in terms of what their next plan of action is?
If the Fed does decide to extend the QE program, what will the dollar look like as a result? Something tells me a piece of toilet paper may be worth more than a greenback if this insanity continues.
The bottom line here is the Fed has no way out of this mess. If they decide to pull the liquidity from the markets, housing will once again get decimated because higher interest rates will rise and that combined with tighter lending standards will once again force prices to tumble.
If the Fed continues to QE, inflation is going to soar and $200 oil will be right around the corner.
IMO, Stay on the sidelines if you are looking to buy a house. The recovery we are witnessing in real estate is a nothing but a "housing bear market rally" and the speculators/bubble makers will once again take it on the chin.
Disclosure: Short treasuries via TBT in longer term accounts.
Thursday, October 15, 2009
The signs that we are slowly sinking into an economic depression are becoming rapidly evident.
Lets get real for a second: Most of the middle class in this country of people live paycheck to paycheck. Perhaps some have a few thousand squirreled away in the bank. This might buy them a month or so...nothing more.
The video below is a sobering reminder of what happens to many of these people when they lose their jobs. How many millions have to go on permanent camping trip before Washington puts an end to the fraud on Wall St?
Millions of middle class Americans are running out of options as Rome continues to burn.
Don't worry though, not everyone is suffering, Wall St is preparing to pocket record bonuses in the billions of $$$ courtesy of speculation using the US taxpayer as a backstop.
Again America: Where is the anger?
Wednesday, October 14, 2009
Before I start, I wanted to let everyone know that The Housing Time Bomb was just recently certified by the prestigious financial website Seeking Alpha.
I want to thank Seeking Alpha for their certification and I want to thank all of my loyal readers for being so supportive since this blog began a little over 1-12/ years ago.
I really didn't know what to expect when I started my journey into the blogosphere. What I do know is its been extremely rewarding. This voyage has far exceeded my expectations, and I look forward to many more posts!
Let's get back to biz!
You gotta watch this clip from MSNBC's Dylan Rattigan this morning. Dylan pretty much went postal on Tom Donohue from the US Chamber of Commerce.
Tom pulled out the typical Wall St "Capitalism talking points" when he was asked how America can begin to create new jobs. Mr. Rattigan simply didn't want to hear it today. Tom's answer was a load of crap and you will understand what I mean after you watch the video.
Let me add before you continue reading that Mr. Dononue's organization grabbed $20 million out of the AIG bailout kitty. Need I say more about this lying piece of garbage?
In response to Mr. Donohue, Dylan accurately points out below that NO ONE has been allowed to fail on Wall St, and the "safety net" of the taxpayer backstop has refueled the same wild speculation that led to the banking collapse in 2008.
If we don't change out bubble blowing ways, we will undoubtedly see another collapse that will be far worse then the one we saw last year because we are now trillions in debt.
There will be no money for a second round of bailouts this go around when the market rolls as a result of another speculative mania on Wall St.
Dylan is pissed and he has every right to be. All you need to do is look at JP Morgan's blowout quarterly announcement of a $3.6 billion in profit this past quarter for proof that Wall St is back to its fraudulent speculative ways.
I warned a few of you yesterday in the comments section a few days ago that the big banks could report blowout earnings this quarter.
Why wouldn't they be making a fortune? They are making a KILLING in the bond market, and they don't have to mark their bad assets to market.
The bankers will once again throw billions more into their pockets in the form of bonuses at the end of the year as the fraud rolls on. Meanhile the rest of Rome continues to burn.
The world is clearly starting to see right through this sham depite Wall St's profits: The dollar broke tesistance to the downside and is now hitting new lows for the year.
The thoughts by the leader of the Chamber of Clueless above almong with the others in Washington and on Wall St will eventually destroy this country. Just look at the currency folks. That says it all.
Today's developments only confirm that the elite remain firmly in power, and it's becoming increasingly obvious that they could care less about the little guy.
Are you angry yet America? If not now, WHEN?
Disclosure: No new positions at the time of publishing. Long precious metals via GLD and SLV in longer term accounts.
Monday, October 12, 2009
The numbers are grim:
"Affected are a range of young people, from high school dropouts, to college grads, to newly minted lawyers and MBAs across the developed world from Britain to Japan. One indication: In the U.S., the unemployment rate for 16- to 24-year-olds has climbed to more than 18%, from 13% a year ago."
"What's more, the baby boom generation is counting on a productive young workforce to help fund retirement and health care. Instead, young people risk getting tracked into jobs that don't pay as well, says Lisa B. Kahn of the Yale School of Management. That would mean lower tax payments for Social Security and Medicare.
Only 46% of people aged 16-24 had jobs in September, the lowest since the government began counting in 1948. The crisis is even hitting recent college graduates. "I've applied for a whole lot of restaurant jobs, but even those, nobody calls me back," says Dan Schmitz, 25, a University of Wisconsin graduate with a bachelor's degree in English who lives in Brooklyn, N.Y. "Every morning I wake up thinking today's going to be the day I get a job. I've not had a job for months, and it's getting really frustrating."ANXIETY AND FEAR"
"The sense of stasis in many Western countries is reminiscent of Japan, where talk of a lost generation has been around since as long ago as 1995. Some 3.1 million Japanese aged 25 to 34 work as temps or contract employees—up from 2 million 10 years ago, according to the Ministry of Internal Affairs."
This article was quite eye opening to me. I hadn't really taken time to think about the impact that our depression will have on young workers over the long term.
The fact that 46% of workers aged 16-24 are jobless is flat out frightening. How will these kids ever get ahead? How will they ever be able to earn enough money for a stable retirement if they lose a decade before the economy recovers? Even then, who is to say that the economy sharply recovers within 10 years?
Japan still hasn't recovered from its post bubble malaise and it happened over 20 years ago! America wasn't able to recover from the depression in the '30's despite the government trying everything under the sun to stimulate it. WWII finally got the economy kick started again towards the end of the decade.
You need to ask yourself: After a euphoric 25 year bull run, could we not see a 20 year bear now after such prolonged prosperity?
Another thought here is how in the hell are we ever going to pay off our trillions in debts without young prosperous workers from which to tax from? Also, who is going to fund the massive medicare and social security programs that will be dramatically drained as our baby boomers retire?
The Bottom Line:
I'll tell ya folks. The more I think about the future the more frightened I become. I see no way out of this fiasco without years and years of pain. NONE!
As I watch the dollar fall on an almost daily basis I can't help but think: Is it time to buy guns and gold and move up into the mountains? It's starting to look like this might be the best alternative.
The economy and our currency are both in a free fall and the elites in the ivory towers simply don't seem to care.
When is America going to rise up and say Enough?
Sunday, October 11, 2009
Steve Meyers is a 20 year veteran commodities and futures trader. You can find Steve here at his site which is called Grainbeltcommodities.
I believe Steve pretty much nails it here as he describes whats fueling the recent stock rally.
The United States is now a desperate nation that's in decline.