I am one of the 1.7% of
the Money Managers that was correct in 1998. At that time,
I told my clients to exit the stock market, and sell all securities.
It is now March of 2004,
and my advice to you is to sell all stocks and bonds. Once again, I
charge myself with the
task of issuing a warning to good people under the influence of stock-pushing
analysts and
office-seeking politicians. Many people think we are in a bull market
in stocks again while
others believe we are in a bear market rally that is going to end shortly
and wreak havoc
unseen since the early part of the 20th century. What I would like
to throw into the mix is
the idea that the entire �Game� is about over.
Let�s take a look at some
rounded numbers:
Source: http://www.publicdebt.treas.gov/opd/opdint.htm
The US
(not including funds
that go specifically to Social Security and Medicare)
The US
(based on $128 Million
spent during the first trimester of fiscal 2004)
Assume for a moment that
the statistics above are reasonably accurate and hold constant
for a few years. Also assume the service on debt goes up a mere 1 percent
per year. By
the year 2011, 100% of the revenue the government receives will go
straight from the
taxpayer�s pocketbook to the holders of US debt instruments. There
will be no money
for any governmental function in the
The debt owed by
really nothing anyone can do about it. Alan Greenspan has just warned
lawmakers that
the Social Security system � which currently enjoys a budget surplus
that it donates to
the country�s general fund � will become over subscribed and begin
operating in the red
by the year 2008. Consequently, the influence of the Social Security
surplus won�t even
help for much longer.
If I, as a veteran of 30
years on Wall Street, am smart enough to draw this conclusion,
what are the odds that the Japanese are smart enough to figure this
out? How about the
economists over in the European Union? The quick answer is, �Of course
they know.�
However, through some manner by which the human psyche operates, our
leaders have
decided that you and I aren�t supposed to know that we are a Bankrupt
Nation. So far,
they have done a great job.
The people running Enron
were saints compared to their counterparts in
and
really think they can inflate their way out of this?
Do they really think you
and I will pay $5 per gallon for gas and $5 for a gallon of milk
and accept their artificially-low inflation numbers, all the while
telling us that gold and
silver are relics not worthy as mechanisms to preserve wealth? I mean
even they must
have a limit as to what they believe they can push. As unimaginable
as it is however,
current indications are that they will push it right to the very limit
and then go beyond the limit!
The cascade of electronic bits and bytes will have melted into a digital
heap. News anchors
will be dumbfounded. Guests appearing on stock-pushing financial programs
will be
dumbstruck. The gorgeous financial babes will forget to don their makeup
and no one
will notice. The entire world will be thrust into a state of mourning.
The banks will not open.
There will be civil unrest.
To be terse, the
�How are you preparing for this eventuality?
You say it cannot happen;
that our leaders are too smart to let it happen! I say our leaders are
self-serving, and cannot stop it, even though they knew how! The only
way out of this mess
would have been to tighten our belts several years ago, letting the
recession work its painful
course. However, our leaders spent their time and effort committing
massive governmental
accounting fraud. They cooked the books! Have I painted a bleak enough
picture?
Do you own any physical
gold and silver? Is it stored in a place where you don�t have to
ask permission to retrieve it?
There won�t be many casual
survivors over these next few years. What there will be are
massive winners and massive losers. Regardless of their efforts, will
those holding the
house of cards together be able to stretch the deception long enough
to put George Bush
back into office? Asking this question should provoke two responses.
If you have already seen
this coming and made the preparations that you feel are necessary,
then the answer to this question is muted. However, if you haven�t
moved to protect yourself
for what is coming, the answer to this question will have considerable
impact on you.If it
were me, I wouldn�t wait to find out. It�s my opinion that it will
be better to buy gold now,
rather than to be one day late. What will count is that you own real
money, gold and silver.
Remember that gold is the asset of last resort.
It is the only asset that
is not backed by someone�s promise to pay.
REMEMBER:
Gold Never Lies.
Harvey Gordin
USA Gold Vault
* * * *
Posted on Sun, Mar. 07, 2004
U.S. housing boom poised for a bust
Whether later this year or next, the real worry is will it just pop or slowly deflate?
By Ken Moritsugu
Inquirer Washington Bureau
WASHINGTON - A three-year home-buying frenzy has set the soaring U.S.
housing market
up for a likely fall.
Driven by the lowest mortgage rates since John F. Kennedy was president,
people are buying
more homes in a sluggish economy than they did during the late-1990s
boom. Prices have risen
faster over the last four years than at any time in the previous decade.
The housing boom has been a windfall for many: home builders, remodelers,
real estate agents,
furniture and paint store owners, and homeowners. In many markets,
the stunning increase in
home values has been the only good financial news for owners faced
with slumping stocks and
slow wage growth.
Yet the good times might end soon, painfully for some. Economists worry
that a housing bubble
might have developed, similar to the steep climb in stock prices in
the late 1990s.
Federal Reserve Chairman Alan Greenspan warned again this week that
interest rates could not
remain so low forever. Many economists think they might start to rise
late this year and next year.
When they do, it will be the equivalent of sucking oxygen from a raging
fire. Home sales will slow.
Price increases will tail off - and could reverse in some markets.
Jan Hatzius, an economist at Goldman Sachs investment bank in New York,
thinks the
national average home price could fall for the first time in the history
of the House Price Index,
which dates to 1975 and is published by the Office of Federal Housing
Enterprise Oversight,
an agency responsible for mortgage market oversight.
The fall, should it happen, would be a reverse of the housing boom of
the last few years -
a boom fueled by the simple mathematics of mortgage interest rates.
The benchmark 30-year fixed-rate mortgage stands at 5.59 percent, down
from 8 percent
in 2000. At 8 percent, payment on a $100,000, 30-year loan is $734
a month. At today's
rates, the same monthly payment would cover a $127,000 mortgage loan,
permitting buyers
to spend more on houses with the same income.
Home sales have exploded as a result, setting records for three straight
years. New-home
sales grew 10.7 percent in 2003, powering them through the one million
mark. A 9.6 percent
rise in existing home sales drove them over six million, also for the
first time in history.
The House Price Index, which covers existing home sales up to about
$400,000, rose
8 percent last year and has risen at least 7.5 percent annually since
2000. By comparison,
prices rose only 5 percent a year in the late 1990s.
Reports of spiraling prices may come as a surprise to homeowners in
markets such as
Charlotte, N.C.; Dallas-Fort Worth; Detroit; and San Jose, Calif.,
where prices have
been rising about 3 percent a year, or even less.
Those moderate increases have been more than offset by the explosion
in prices
elsewhere, notably in congested parts of the East and West Coasts.
Prices rose
16.6 percent in Miami last year and 11.4 percent in Philadelphia.
Economists draw a parallel between today's high housing prices and a
high price-earnings
ratio for a stock, usually a sign that the stock is overvalued and
due for a fall.
For housing, the "earnings" are the rent that could be collected on
a home. Home prices
have been rising much faster than rents, pushing the price-rent ratio
far above its historical
average. That suggests that either prices will fall or rents will rise.
"Nothing can go up forever," said Jeff Culbertson, the Sacramento, Calif.-based
president of Coldwell Banker Northern California.
The stock-market analogy goes only so far. Housing bubbles do not usually
pop,
they deflate, sometimes seeping air for years. As the real cost of
buying a house rises
with mortgage rates, sellers usually are reluctant to lower prices
to what buyers can
afford. Houses can remain on the market for months or years before
sellers accept
reality and take their losses.
Some people decide to pull their homes off the market and stay put because
they
cannot afford to take a loss on a house they bought at top dollar or
on which they have
spent hundreds of thousands of dollars adding a master suite and luxury
kitchen - figuring
somebody else would bail them out for the granite countertops and the
whirlpool bath.
If they do move, their new mortgage will carry a higher rate, limiting
how much
new home they can afford.
Fewer homeowners will be able to tap their homes for cash by refinancing
mortgages
or taking out home equity loans or lines of credit - with annual interest
rates now as
low as 3.5 percent.
Higher rates also mean some lower-income families will no longer be
able to afford homes.
Low rates have enabled many to buy homes, driving up the proportion
of U.S. households
that own their homes to a record 68 percent.
In areas where new construction has kept a lid on prices, the pool of
prospective
buyers has shrunk. Once mortgage rates rise, demand for homes could
plunge.
"What happens next year and the year after?" said Edward Leamer, the
director of the
economic forecasting center at the University of California-Los Angeles
business school.
"Who's going to buy new homes two years later?"
The home-building industry, a major generator of jobs in these regions, could collapse.
The biggest outstanding question is whether the housing market will
deflate rapidly or at a
more leisurely pace.
"What we would ask for is kind of a slow slowdown," Culbertson said.
"We don't want
interest rates to all of a sudden pop up a percent or a percent and
a half."
Should the pop be sudden, the broader economic consequences of a housing
market
slowdown could be severe, depending on how strong the rest of the economy
is.