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US Real Estate Is In Big Trouble

Posted by AGORACOM at 9:38 AM on Wednesday, March 30th, 2011

I’ve been relentless in my blog / twitter posts that – contrary to fluff predictions – US real estate was nowhere near a recovery.  Why? I don’t need charts, graphs and stats to tell me

  • Americans are either broke or sitting on their cash.
  • Americans don’t have access to credit
  • “Shadow” Inventories Aren’t Very Shadowy (my word)
  • Americans aren’t stupid and are not buying into US government fluff statistics

What I do need a chart for is to illustrate the proof is in the pudding.  US real estate continues to remain in trouble – and god help homeowners if the Fed doesn’t come through with QE3.

Courtesy of BusinessInsider.com

CNBC Reporting No QE3 … I Doubt It … The Real Danger Is A Delay In QE3

Posted by AGORACOM at 9:10 AM on Wednesday, March 30th, 2011

This CNBC guest and all the talking heads are making the case for no QE3. You should watch the video to understand their arguments and factor them into your decisions.

I personally find it hard to believe QE is coming to an end. Why? American small business continues to have no access to gazillions sitting in vaults of big banks, US housing is crashing (new home sales and existing home sales) and US consumer confidence is sitting at a 3-month low. If interest rates begin to rise from the lack of US bond purchases, things could get out of control pretty quickly.

DELAY TO QE3 IS MORE LIKELY … AND WOULD CAUSE HAVOC

The threat I do see comes from a delay in QE3. As things stand on the surface, Bernanke is going to find it difficult to get support for QE3 amongst other Fed Presidents. After all, the stock market is up and the White House is talking up a healthy jobs environment (bull). Moreover, inflation is on the rise even by a manipulated CPI view … how can Ben justify QE3?

He may not be able to. If not, look for the following effects:

  • Climbing interest rates
  • Stronger US Dollar
  • Plunging Stock Market
  • Plunging Exports
  • Plunging Real Estate
  • Plunging Consumer Confidence
  • Plunging Gold
  • …. QE3

Make no mistake about it, this is a real threat, unless you believe the true US economy (not the propaganda statistics) is ready to stand on its own two feet. I don’t see it.

QE2 comes to end on June 30th. The signals on QE3 will come loud and clear in the preceding two months, so be ready to act and adjust your portfolio accordingly.

UPDATE: This David Rosenberg Quote Via ZeroHedge Demonstrates Both The Risk Of A Delay AND Just How Fast The Markets Could Pull Back If QE3 Didn’t Materialize:

QE3 WILL COME BUT NOT AS EARLY AS MR. MARKET WOULD LIKE

Portfolio managers as a group are running their funds overweight equities by an average of 67% relative to their typical benchmarks. And polls show that one-third of them believe QE3 is coming this summer. We already know that this Bernanke-led Fed is willing to be extremely aggressive, but as we saw in 2010, the hurdle is high for quantitative easing. We need (i) signs of a double-dip, (ii) a stock market correction of at least 15%, and (iii) deflation, not inflation. How on earth will the Fed be able to do anything at all by then if headline inflation is running north of 4% and the other central banks of the world are either snuggling policy or moving in that direction ? unless the central bank really wants to trash the dollar. We are certainly not inflationists and still see deflation in credit, real wages and housing

VIDEO: Marc Faber On CNBC …. QE3, 4, 5, 6 ….

Posted by AGORACOM at 9:10 AM on Tuesday, March 15th, 2011

Faber on Japan, the Fed and QE ….. For those of you who think Faber is too pessimistic, he does view the current Japanese sell-off as a buying opportunity but says all bets are off if a meltdown takes place.

Further QE means greater inflation, higher gold / silver / commodities, which is bullish for TSX Venture Juniors and the TSX in general.

Vicious Money Printing Cycle = Junior Resource Stocks

Posted by AGORACOM at 8:36 AM on Thursday, January 13th, 2011

“Quote the chairman: “This fear of inflation is way overstated. We’ve looked at it very, very carefully. We’ve analyzed it every which way… We will not allow inflation to rise above 2% or less… I am 100% certain i can control inflation.” Presenting the Jefferies global commodity index (CRB) which just hit a 27 month high.” Tyler Durden – Zero Hedge

The downside to printing money for the purposes of stimulating the economy is that commodities rise, which makes things more expensive, which leaves people less money to stimulate the economy.  Nonetheless, Ben Bernanke and The US Fed continue to claim inflation is under control.  The data below clearly shows otherwise.

American disposable income is getting chiseled away at the gas pump and grocery store.  Their pocket books don’t lie and they certainly won’t stimulate the economy by purchasing real estate and “stuff”.  The ironic thing is that Bernanke will use the lack of consumer spending as a reason to keep printing money, which will lead to further inflation, which will lead to decreasing discretionary spending, which will lead to further deferral of “the recovery”, which will lead to more money being printed.

The answer to staying out of the vicious circle?  Gold, Silver, Junior Resource Stocks.

Chart below courtesy of the good people at ZeroHedge.com

According To 60 Minutes, Each US State Is A Fiscal Banana Republic

Posted by AGORACOM at 9:57 AM on Monday, December 20th, 2010

Good morning to you all.  The fiscal crisis at the US Federal level is well-documented but – outside of the most astute readers amongst small-cap investors – many are unaware of the depths of financial despair faced by almost every US State.

Don’t feel left out any longer, we’ve got the following 60 Minutes clip that you need to watch over hot cocoa in these next few days.  After watching it, you may have to crank that up to Eggnog.

Most importantly, make sure you take these facts into consideration when planning your finances in 2011 and beyond.  Further money printing is going to have an impact on the US financial scene, the price of gold, etc.

Hat-tip to Eric Jackson Via Twitter

Regards,
George

US Federal Reserve Heroin Injections Are Going To Kill The Patient

Posted by AGORACOM at 1:59 AM on Monday, November 8th, 2010

David Stockman, Former White House Budget Director Under Ronald Regan, tells it like it is.  As a test of his credibility, he doesn’t believe the new Republican Congress is going to solve the problem either …. though he does believe Ron Paul’s anticipated oversight of the Fed is going to finally lead to real debate.

Take 4:34 and watch this video.

Gold $2,000 Much More Likely Than Gold $1,000 Was 3 Years Ago

Posted by AGORACOM at 4:38 PM on Thursday, November 4th, 2010

This Is A Dynamic Image, So Price May Differ From Original Post Date

At the risk of celebrating too early as I watched gold sky-rocket this morning, I waited until the end of day to have gold confirm a $35 rocket ride and a closing price of $1,384 and change.  I won’t go into the QE2 analysis – because you (should) know that story very well by now.   In case you don’t, here is a quick link to Google’s QE2 + Gold news articles.

When I first started this blog, one of the topic categories I created was “Gold $1,000” in February of 2007.  It was ambitious because gold was trading in the $650 range, yet here we are trading 113% higher after 45 months.  Today, I’m officially changing the name of the category to Gold $2,000 and feel more confident in that number being reached than I was about gold hitting $1,000 back in February 2007.

Why Is Gold A Better Bet To Hit $2,000 Than It was To Hit $1,000?

I will quote from one of my previous posts as the foundation for gold appreciation remain intact and even stronger than before:

Gold is now silently being recognized as the world’s reserve currency. Fiat currencies are being printed at will with no accountability. This paper inflation is weakening the purchasing power of world currencies, and the risk of rendering them worthless is rising. Nations have elected to print and spend instead of stimulate economies through investment, tax reductions, and technological advances. Gold is now seen as a safe haven. Our conservative investment portfolio has a concentration in Gold, Mining Stocks, and Silver in anticipation of this fundamental expectation, and in response to technical analysis charts. We believe Gold is going much higher over the coming years. (Via Technical Indicator Index)

Bottom line? Most world Governments are broke. They’re broke at the Federal, State and Local levels. The response has been to print and borrow more money. You don’t need a fancy graph or chart to tell this is going to end badly. Rather, just imagine what your grandfather would say if he was sitting beside you right now. When you’re broke, you cut spending, stop borrowing and sell assets to pay down your debt. You make sacrifices and start all over again as best you can. As an individual or small business, this is what your lenders would force you to do.

Governments are no different except for the fact they can photocopy as much money as they need. That’s fine and dandy in the short-term – but how much confidence would you have in the long-term prospects of someone that kept handing you photocopied IOU’s?

If you understand this concept, then you now understand why investors are losing confidence in currencies and turning to gold.

AMERICA IS FINE WITH THIS SCENARIOSO EXPECT MORE AND MORE

To this, I will add the following new revelation – the USA is just fine with this entire scenario for one very powerful reason … they would never be able to make interest payments on their debt if Treasuries dropped and rates increased.  Never.  See, as long as a person/government can continue to make its monthly payments, creditors won’t call in loans no matter how nervous they are about the debt owed to them.   Make the monthly payments and everyone prays for another day.

Stop making the payments – and all hell breaks loose.  Treasuries start selling off like wildfire and interest rates rocket.  This very scenario happened to Greece in May when rates went from 7% to 22% in one day before the EU saved the day (temporarily).

DEVELOPING NATIONS ARE HUGE BENEFICIARIES OF QE I AND II – NO MATTER HOW MUCH THEY COMPLAIN

On the flipside, a huge beneficiary of QE1 and 2 have been developing economies.  Why?  American institutions are borrowing money at ridiculously low rates and putting it to work in developing economies that are actually growing.

Yes, these developing nations are publicly bitching about the risk of “heating up” from inflation – but they have two significant internal controls to keep a lid on things.  Tax rates and government spending.  As things heat up, they can simply raise taxes and lower government spending, leading to fiscal utopia.  Citizens won’t mind because they’re making a boat load of money from $USD inflows.

You might be wondering why I didn’t add interest rates as a third inflation control tool for developing nations.  I’ll leave that answer blank for now and look forward to seeing your responses below.

CONCLUSION – GOLD, GOLD GOLD

The gravy train can only stop once the US economy begins to achieve actual GDP growth, lower unemployment and rising real estate prices.  When that will happen is anyone’s guess. Until then, this mad cycle will continue …. and gold will climb.

Now you know why Gold $2,000 is much more likely to happen than Gold $1,000.

Regards,
George


QE2 = $600 Billion … Until QE3 In July 2011 …

Posted by AGORACOM at 2:41 PM on Wednesday, November 3rd, 2010

WASHINGTON (MarketWatch) — The Federal Reserve pledged on Wednesday to start a controversial new billion bond-buying spree to rescue the economy from its current doldrums.  The Fed said it would buy up to $600 billion in long-term Treasurys until the end of June 2011, about $75 billion this month, in a strategy called quantitative easing.

This is the second time the Fed has engaged in quantitative easing, as it snapped up $1.7 trillion in mostly housing-related assets December 2008 and March 2010.

The Fed’s new move comes because the central bank disappointed with the slow pace of growth and worried that the high 9.6% rate of unemployment might put enough downward pressure on inflation to tip the economy into deflation or a period of a sustained drop in prices. The Fed said that the recovery has been “disappointingly slow.”

The Fed purchases are designed to bring down yields on government bonds believing that lower rates could always give the recovery a boost.  More broadly, the Fed wants to prompt private businesses and investors to begin to act with more confidence and help get the economy’s juices flowing. “They are trying to break through the fear,” said J.P. Morgan Chase economist James Glassman.

Doubts persist about whether the plan will work, but many feel the Fed had little choice but to act.

The Fed’s favorite policy tool, the target federal funds rate for interbank lending, has been about as low as it can go, in a range between zero and 0.25%, since December 2008.  The Federal Open Market Committee voted 10-1 to use the credit markets tools.

Still, some observers fret that the move will boost asset markets and not the broader economy.

Full Article At Marketwatch

WHY QE2 IS CLOSER TO $1 TRILLION

UPDATE:  BusinessInsider.com added some great insight that makes QE2 Closer To $1 Trillion

“But there will also be a reinvestment of $250 to $300 billion from payments associated with other securities it already holds. That makes QE2 feel a whole lot bigger, and closer to the top end $1 trillion number that was mentioned.”

Peter Schiff Video From New Orleans: Dollar, Silver, Gold, GDP, QE2, Elections

Posted by AGORACOM at 3:16 PM on Saturday, October 30th, 2010

You simply have to love the fact that you can’t be at the New Orleans Investment Conference – yet you still have an ability to watch Peter Schiff provide commentary from his hotel room.  Here is his latest 10-minute video.  Grab a cup of coffee, sit back and watch.  Leave me your feedback in the comments section below.

Regards,
George

John Embry Sees Hyperinflation And $50 Silver Thanks To US Fed

Posted by AGORACOM at 5:14 PM on Friday, October 29th, 2010

Image Via The Globe & Mail

John Embry has been pretty spot on over the past few years with respect to the price of gold, metals, mining companies and massive US bank failures as a result of poor policies at the US Federal Reserve.  Given the fact we are heading straight into QE2 to the tune of $100 Billion per month, it is no surprise that Embry continues to believe the strategy is doomed to fail.

Excerpt Via The Good People Over At ZeroHedge:

In a recent interview, John Embry is confident the current Fed policy will lead to hyperinflation, and that he would not be surprised if silver hit $50 within the next few months. (I guess my blog category title is going to have to change from “Silver $30”)

On hyperinflation Embry stated:

“I’m another person that worries hugely about hyperinflation, I mean the monetary path that they appear to be following, I guarantee you will lead to hyperinflation.

Regarding gold:

I think we are still on track post the US elections and the next FOMC meeting, if we get some indication of considerable QE on the horizon, I think that will be fuel again to send the gold price up from here and to get it to 30%+ return for the year.

On a gold squeeze:

I think it could very well happen this time because the physical market is robust, and I’m told there’s not a lot of physical gold available right now…We could very easily overrun the shorts at Comex and force them to cover, even though they have extraordinarily deep pockets. If that happens, we are going to see some really spectacular price moves as a result….I think that’s why when these things move, all the gold stocks, I think you’re going to feel like your hair’s on fire they’re going to move so fast.”

On Precious Metal manipulation:

….. read the rest of the story over at ZeroHedge.