Housing Prices

RickAckerman's picture

Our good friend Doug B., a financial advisor based in Boulder, CO, has done well for his clients by keeping them heavily weighted in bonds. In the essay below, he explains why he intends to stick with this strategy even though many of his peers expect a rebounding stock market to outperform fixed-incomes in the years ahead.  For Baby Boomers in particular, the deflationary trend that buttresses Doug’s strategy holds stark implications.

Guest Post: Is Gold Still The Answer For Investors?

Though late to the party as usual, the proverbial man on the street – along with members of mainstream media and Wall Street heavyweights – is finally waking up to the decade-long, 700% increase in the price of gold, joining a growing buzz around the monetary metal. From questions whether gold is in a bubble to predictions that soaring prices are just around the corner, one thing is clear: a new phase of awareness for gold is upon us. How far might it move before these troubling times are over?

Frontrunning: November 8

  • Japan Bought 300 Million Euro Worth of EFSF Bonds, Official Says (Bloomberg) - don't spend it all at once boys
  • Italian Vote Will Test Berlusconi’s Majority (Bloomberg)
  • BOJ Should Seek 10-Fold Easing, Yen at 100, Ex-Board Member Says (Bloomberg)
  • France unveils five-year €65bn savings plan (FT)
  • China’s exporters see slowing growth (MarketWatch)
  • Financing Markets Tighten Spigots (WSJ)
  • MPs demand ‘radical overhaul’ of BOE (FT)
  • Obama to attend Asian economic summits (WaPo)
  • China wealth fund prepares to restructure (MarketWatch)
  • Schapiro Floats Money-Fund Fix (WSJ)

Michael Krieger Explains Why It Takes Only 5 Minutes

"Nothing has changed and absolutely nothing has been accomplished.  There is no “solution” to the crisis that will not result in massive pain, confusion and wealth decimation.  The reason is patently obvious.  At least half the continent is completely and helplessly bankrupt.  There are only two outcomes to the entire situation.  Either the sovereign debts are written off aggressively and the banking system declared insolvent and restructured or the ECB decides to turn on those printing presses to the tune of trillions and destroys the purchasing power of the union in Zimbabwe-like fashion.  People will read this and think I am exaggerating .  The phrase “it takes 5 minutes” keeps running through my head because all it takes is a small amount of time to see the situation for what it is.  I am not that smart.  This is obvious.  The scary thing is that it is abundantly clear that the vast majority of U.S. investors have not bothered to take the 5 minutes necessary to understand how extreme and binary the outcomes to all this is.  Their clients will suffer massively in the months and years ahead as a result of their laziness and lack of macro curiosity. " - Mike Krieger

Guest Post: Want a Truly Healthy Housing Market? Here Are the Five Essential Steps

Everyone exposed to losses in the corrupt, speculative apex of malinvestment known as the U.S. housing market doesn't want a truly healthy housing market, they just want a return to the bubble era. Sorry, folks, ain't gonna happen. (And yes, I own property, too, but it is what it is.) Bubbles do not reinflate, even with the Fed chanting its Keynesian Cargo Cult mantras ("zero interest rates forever!") and waving dead chickens over the embers. The conditions which inflated the bubble cannot be called up by incantations; faith in the system has been destroyed, and only the complete socialization of the mortgage market by the forces of Central Planning--the Fed and the Federal government's Socialized Mortgage Makers, Fannie and Freddie-- have staved off the complete collapse of prices which would have wiped out the banks and cleared the market via actual capitalism in practice, i.e. a transparent marketplace which is allowed to discover price. Despite the fact that a truly healthy housing market is anathema to the Status Quo and current property owners sitting on huge mortgages, let's lay out the necessary characteristics of such a housing market. A lot of this will strike many of you as counter-intuitive, but that only highlights the pervasiveness of the speculative propaganda that slowly hollowed out our culture's previous understanding of housing and replaced it with a devilishly magnetic financialization model.

Renting: The New Buying; A Primer On Housing 2.0

Wondering why the future for housing as an asset is so bleak, why median housing prices continue to tumble and recently saw their biggest three month drop ever, and why there is no bottom in sight? Simple: the American public appears to have woken up to the reality that homes are no longer a flippable asset, and in fact continue to drop in price, an observation that is obvious to virtually all now. So what happens next? Why renting of course. Here is Morgan Stanley explaining (granted in a pitchbook for REITs but the underlying data is quite useful) why the Housing 2.0 paradigm is all about renting.