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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: T L Comiskey who wrote (18273)	4/29/2003 4:57:19 PM
From: Jim Willie CB	Read Replies (1) \| Respond to of 89467

Eric Fry on investments, and real estate in particular - Today's investor faces the triple terror of a richly priced post-bubble stock market, a bubble-like bond market and a bubble-like housing market. - "Once you get to below 4% on the 10-year note, and you've got the beginning of a bull market in government - explicitly aimed at reflation - you ain't going to get double-digit returns in bonds," says PIMCO's Paul McCulley. And it's true, the current custodians of the US dollar are promising to print as many as necessary to reflate the conomy. - "Because modern central banks date from the 17th century," says James Grant, "virtually every monetary policy has been tried before, many more than once. Inflation has been given an especially thorough test run." - A central bank that promises reflation is like a spouse that promises infidelity...The promise is a guarantee. And that guarantee is trouble for bondholders, as Grant illustrates: "We should try to imagine ourselves in the shoes of a foreign holder of the 10-year Treasury...We have rubbed our eyes and performed a calculation. If the 10-year rallied to yield 2.5%, the implied 150 basis-point rally from the now-prevailing 4% would deliver a 13-point price rise in our holdings. We are, provisionally, delighted. But the dollar is not our native currency. We decided it is the part of prudence to sell some dollars to hedge our exposure. And we're not alone. Many other people reach the same decision. The selling snowballs and the dollar exchange rate slips. The gold price shoots up. Interest rates not under the thumb of the Fed begin to lift (as do prices of imported merchandise, reflecting, after a short lag, the weakened dollar exchange rate). All at once, a latent deflationary crisis becomes an actual inflationary crisis." - Very well, if inflation is resurgent, shouldn't real estate provide a kind of safe haven? Indeed, it may prove to be exactly that, assuming inflation flourishes like a bamboo grove. Even so, the housing-bubble contingent is not without legitimate cause for concern. - Merrill Lynch economist David Rosenberg notes that "residential real estate has quickly become the asset class of choice," making up 31% of household assets versus 23% three years ago. (Of course, the big jump has as much to do with falling stock values as with rising home values.) If home prices hold steady or appreciate, no harm, no foul. But Rosenberg estimates that a 10% drop in home prices would shave about $1.4 trillion from household net worth, or roughly 20% of disposable income...and that WOULD be a problem! - Furthermore, as Alan Abelson reports in this week's Barron's, Rosenberg sees a number of red flags. Namely: "Inventories of unsold homes are rising quickly and, measured in months, are now at their highest level since December 1996; The median number of months a home has been on the market has jumped to 4.8, from 3.8 last fall and the highest in nearly a year; New home sales have fallen sharply since the start of the year and are growing at the slowest run rate since August 2000."

To: T L Comiskey who wrote (18273)	4/29/2003 5:00:38 PM
From: Jim Willie CB	Read Replies (1) \| Respond to of 89467

Daily Reckoning on real estate, bunch of blurbs "No takers for homes," says a Denver paper. "Single family permits at 7-year low," comes the news from Southern California. "Hot housing market could be cooling," says USA Today. The housing market has been cooking for so long you'd think the thing would be done by now. And maybe it is. "The boom is over," says Celia Chen, at Economist.com. We've reported rumors of the end of the housing boom on more than one occasion in this space. We're not going to embarrass ourselves by reporting another one. Month after month, for as long as we can remember, the whole world economy has been sustained by American consumer spending. And for the last couple of years, American consumers have been sustained by credit - by mortgage credit, to be specific. Without it, even more people would be standing in unemployment lines - everywhere from Baltimore to Bombay. Thanks to lower rates and higher house prices, consumers were able to "take out equity" from their own homes. This cute little phrase perfumed the event like patchouli oil on a sweaty mortgage broker. But sooner or later, we keep saying, the whole thing is going to start to stink. The housing sector cannot continue to rise 3 to 4 times faster than the rest of the economy forever. Sooner or later, it has to cool off. Personal income rose only 1.7% last year - according to the Bureau of Economic Analysis - the first time since 1958 that the figure has been less than 2%. People whose incomes rise less than 2% cannot afford a 10% increase in housing costs, year after year, for very long. Sales figures for houses in the San Francisco bay area were down 15% from a year ago. In Southern California, they were down 7.5%. In the Rockies, the figures are worse - with Denver sales off 18%. Even in Richmond, sales fell 5% from a year ago. And in Massachusetts, housing sales for the first quarter fell 15%. Could be the war in Iraq, of course. Could be a fluke. Nothing to worry about. Nah...no reason for concern. Forget about it. and a note about California, and its pathetic financial straits... The Golden State, for example, doesn't seem to have an ounce of gold left in its coffers...nor even a wooden nickel. "California could completely run out of money soon," KFWB News reports. "Financial conditions are such that the state controller could begin the budget process by issuing 'IOU's' to vendors doing business with the state."

To: T L Comiskey who wrote (18273)	4/29/2003 5:32:08 PM
From: Jim Willie CB	Read Replies (3) \| Respond to of 89467

new Jackass article on 321GOLD on USA and Liquidity Trap here are the leading lines without flesh only 8 pages, my new format / jim 321gold.com "Japan, Argentina, Weimar, or Muddle?" Experts and other purported authorities have made frequent comparisons concerning the US Economy versus Japan. The consensus is that we will not travel the same agonizing path marred by contraction and slow motion destruction. We in the USA have far more similarities than we want to admit with the fading Asian powerhouse. However, critically dangerous differences will prevent the muddle process from occurring smoothly in our economy. We actually compare poorly in differences listed in this article. No, the USA is not as bad as Japan. WE ARE MUCH MORE DANGEROUSLY WORSE. Apply strong Weimar tools within a stubborn Japan quagmire, when addicted to foreign capital, and you risk shock-ridden Argentine outcomes, not a sloppy Muddle. For over two years American business leaders, financial leaders, brokerage analysts, media pundits, and investors have denied that the United States is gradually entering a Liquidity Trap bearing strong resemblance to the one that has ensnared Japan's economy since 1990. Neither Japan nor the USA might stumble in the Land of Muddle much longer. As our government and financial technicians seek to prevent a painful recession (which would surely feed upon itself), we are implementing much the same levers as the Weimar Republic in the 1920's. In their next panic, the Greenspan-led hacks running our Fed will plant the seeds of hyper-inflation, whose germination will be dictated by China. "Liquidity" is nothing but a deceptive euphemism for more "Credit." Disturbing parallels are slowly emerging in the geopolitical and financial fronts between the United States and Europe, with Iraq the new Weimar Republic, and the USDollar the new ReichMark. The Federal Reserve is notorious for overshooting, and owns a track record to prove it. The US Economy may soon be severely tested by a series of shocks. The prescription for an Argentine implosion shock is a combination of debt failures, weak export competitiveness, and sudden departure of foreign capital. Differences between USA and Japan are very unfavorable, relating to currency valuation, bankruptcy ease, saving propensity, foreigner debt ownership, financial engineering, monetization techniques, basic integrity, and intervention willingness : a) unlike Japan, US Economy cannot tolerate a declining USDollar b) unlike Japan, US Economy permits bankruptcies as a regular course of business c) unlike Japan, US Economy depends upon consumption & spending d) unlike Japan, much US debt is owned by foreigners, with a trade gap widening e) unlike Japan, US Structured Finance has created a megalith monster f) unlike Japan, US Federal Reserve is a monetization machine on steroids g) unlike Japan, US institutions harbor widespread corruption h) unlike Japan, US maintains a pervasive interventionist attitude