Archive for ‘The Fed Must Die’

August 5, 2011

News Article for August 5th, 2011

GDP/Debt ratio 11th worst in World

The TGB Report | Thomas G. Brown

The Bureau of Economic Analyst has revised the Gross Domestic Product Number to $14.53 trillion dollars. Now with the debt ceiling raised after the shame that where the debates the total Federal Debt as of 5:00 pm August 4 stands at $14.57 trillion dollars. This means that government debt obligations swallow 99.7% of the GDP. To put this in perspective with other countries let’s look at some numbers according to the IMF.

Japan 225.9%
St. Kitts and Nevis 196.3%
Lebanon 139.0%
Jamaica 135.7%
Greece 130.2%
Eritrea 129.7%
Grenada 119.1%
Italy 118.4%
Iceland 115.6%
Barbados 111.6%

So the President and those who have voted in favor of this increase in debt should be ashamed of themselves. The have now put us one step closer to financial ruins as a nation. In addition to kicking the can down the road to start the reduction of our debt through real cuts they have set us up for dictatorship.

Congressman Ron Paul 2 days ago stated “Perhaps the most disturbing aspect of this deal is the “Super Congress” provision. This is nothing more than a way to disenfranchise the majority of Congress by denying them the chance for meaningful participation in the crucial areas of entitlement and tax reform. It cedes power to draft legislation to a special commission, hand-picked by the House and Senate leadership. The legislation produced by this commission will be fast-tracked, and Members will not have the opportunity to offer amendments. Approval of the recommendations of the “Super Congress” is tied to yet another debt ceiling increase. This guarantees that Members will face tremendous pressure to vote for whatever comes out of this commission– even if it includes tax increases. This provision is an excellent way to keep spending decisions out of the reach of members who are not on board with the leadership’s agenda.”

This committee eviscerates Article I section 7 which states the following: All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

Why Gold and Silver Prices Will More than Double Again Even From Current Prices

The Underground |

Those that are familiar with my writings about gold and silver for the last six years know that I have said gold was cheap at $500, $600, $700, $800, $1000 and $1,200 a troy ounce and know that I have said silver was cheap at $11, $12, $14, $16, $25, and $30 a troy ounce. Today, I will reiterate that gold is still cheap in the $1500 to $1600 range and that silver is still cheap in the $40 range because the largest movements in gold and silver prices as well as gold and silver mining stocks have still not happened and will materialize over the next four to five years. Again, this doesn’t mean that gold and silver can’t or won’t correct or consolidate again in the future because both PMs always do. I have written publicly so much about this topic over the years (and even in much greater depth to my subscribing members) because I truly believe it is insanity not to participate in one of the best ways to invest in gold and silver today – the ownership of physical gold and physical silver.

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High-Speed Train Wreck

City Journal | Cynthia Ward

In October 2008, Joseph Vranich, a preeminent authority on high-speed rail in the United States, testified before a hearing of California’s State Senate Transportation and Housing Committee. Vranich, the best-selling author of Supertrains and a 40-year advocate of high-speed rail, had come to offer his thoughts on the state’s plan to build a high-speed rail line from Orange County to San Francisco. “This is the first time I am unable to endorse a high-speed rail plan,” he told the senators, saying that he found the California High Speed Rail Authority’s work to be “the poorest I have ever seen.”

It’s fair to say that the vast majority of California voters never heard what Vranich had to say. Instead, they relied on faulty and unverified information on their ballot statements, where high-speed rail proponents touted the environmental advantages and fiscal benefits of the state’s plan. Less than a month after his testimony, voters approved Proposition 1A, authorizing Sacramento to sell a few billion dollars in bonds for a project most experts, now including the state’s nonpartisan Legislative Analyst Office and the University of California, say will cost tens of billions of dollars more than the official $43 billion estimate.

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Gold: the clearest sign yet

Sovereign Man | Simon Black

Here’s some food for thought that I’d like you to chew on for a bit.

The debt ceiling debacle has been settled… President Obama is celebrating his 50th birthday, no doubt dancing a little jig that a major crisis has been averted, and equity markets in the US have begun to move off multi-month lows.

Investors can safely say that the US will not default, and the rating agencies have even maintained America’s AAA credit rating, albeit with a warning that the US may be downgraded within the next two years. Yields on the Treasury’s benchmark 10-year note have fallen from 3% last week, to just 2.6% yesterday, and the Dollar Index is off its lows from earlier this week.

Here’s the question: with all of this good news and calm in the world of the dollar, why does the price of gold keep going up, 5 out of the last 8 sessions?

This may be the strongest indication yet that a major shift is taking place in the global financial system. I first started talking about this in December 2009 when I wrote:

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The 2011 Gold Season is Just Around the Corner

US Global Investors | Frank Holmes

The ongoing debate in Washington prompted increased Fear Trade activity in gold this week. The issue over raising the federal borrowing limit caused the yellow metal to remain around its all-time high of $1,600 per ounce this week.

Gold has now increased for 124 months straight, says Deutsche Bank. The rally is in its 11th year, lasting nearly three times as long as other historical rallies going back to 1971. If the metal rose to $2,100 an ounce, it would represent the most powerful percentage increase in history, according to Deutsche Bank.

I believe what’s happening in the market today is a short-term driver of gold prices spurred by ETF investments. While Deutsche Bank believes a “market friendly resolution to the U.S. debt ceiling may trigger a short-term correction in the gold price,” fundamentals seem to be in place to keep gold prices elevated over the long run. Even in many economic scenarios today, Deutsche Bank believes gold prices “appear irreversible.”

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A Good Debtor

The Daily Reckoning | Bill Bonner

08/04/11 Poitou, France – We’re spending the month of August out in the country. This is the house where most of the children grew up – a huge, stone, shambling place, built in the 16th or 17th century and rebuilt at the end of the 19th. The floors are like roller coasters. The ceilings sway like an old mare’s back. The plumbing snorts and gurgles.

What fun to be back! More below…

Meanwhile, in the world of money, life goes on. It has its ups and downs, too, just like our hallway. And we are now in one of its down phases. Stocks have fallen for 8 of the last 9 sessions…with a small rise in the Dow yesterday to break the trend.

This long stretch of losses should give rise to a bounce back in the short-run. But a long stretch of losses is still what the stock market needs. Somehow, it has to get from where it is down to where it should be. Stocks should be cheaper. Markets go up and down. It started down more than 10 years ago. But it has never completed its rendezvous with the bottom. The bottom for this bear market – the one that began in January 2000 – is probably down around 5,000 on the Dow. So, we have a long way to go…and probably a long time to get there.

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Why a Debt Default Would Be Wonderful |

While it is likely that the two parties in Congress will reach a deal before the August 2 deadline, I can’t help reflecting on how wonderful it would be if they didn’t. While Congressman Ron Paul has correctly pointed out that the government has already defaulted at least three different times in its history, and continues to default every time it prints new money, it is not quite the same as an “on-the-books” failure to make a timely payment. That is exactly what America needs.

Politicians, mainstream economists, and the media tell us that a U.S. government debt default would be catastrophic. Treasury bonds would be downgraded, interest rates would soar, and the massive government spending that has supposedly fueled the present (jobless) recovery would be severely curtailed, plunging the U.S. and possibly the world back into a deep recession.

Perhaps that is true. However, a debt default by the federal government would still be a blessing to American society for several reasons.

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The Real
Banking Crisis

Market At a Glance | Eric Sprott & David Baker

Although the adjacent questionnaire is facetious, it does ask the right
questions. If you’re a wealthy European depositor today, what do you
do with your money? Do you really continue to keep cash in a Greek or
Italian bank account?
European bank depositors all face a tough decision today – to withdraw
their deposits, or not withdraw and take their chances. Their response
to that decision may determine the financial future of the Eurozone.
Since 2008, EU Government bailouts have transformed a traditional
banking crisis into a full-blown sovereign crisis. The European Central
Bank (ECB) has managed to keep the Eurozone banking system
going for now, but the constant threat of depositor bank runs makes
its future extremely uncertain. A bank run on deposits forces banks
to liquidate assets to raise cash. Governments and central banks will
go to extreme lengths to avert such a scenario, because a liquidation
reveals what an asset is really worth – and they are likely worth far
less than what the banks are claiming they’re worth on their balance
sheets today.

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Newsletter August 5th 2011

April 29, 2009

Where we are going Finanically

Thomas G. Brown |

Let’s talk about the role for the Federal Reserve and it’s ability to create money out of nothing. Let’s not view them a entity which works to create monetary policy to protect the economy but more of counterfeiter who can pump out large sums of fake money. This fake money is then distributed to the folks at the top of the food chain. These folks can then take this new money which has increased the amount of purchasing power they have and spend it on capital goods they would otherwise no be able. As this group purchases goods and services the prices of said good and services increase. This has nothing to do with the owner of firms being greedy or shady but the fact is the product and service is becoming less available and more money is required to purchase these sane products. As the money makes it further and further into the monetary system the value of the dollar decreases as the price of goods and services increases. This is exactly the road we are heading down with the Government pumping out billions of dollars with the purpose if spending our way out of bad fiscal policies that started this slide form recession to full blow depression. Commodity, manufacturing, anything with true intrinsic value will have there prices skyrocket making there purchase hard if not impossible by most in the middle class.
This Will be worst than the great depression of the 1920’s and may last twice as long if the government decides to continue to manipulate accounting tricks (mark to market) in an effort to hide or do away all together the toxic assets they had so recklessly got involved in. My recommendation is get into tangible goods,(silver, gold, being the simplest ) sit on the side lines of the stock market while it goes through this bear of a time. I don’t see any value (5%) dividend and P/e ratios of 10-15 without this stocks seem over bought even at present rates.

Hope my rambling was more than me ranting on the failings of the market and brought some answers to those folks wondering what to do. As for getting started with gold and silver coins I recommend heading down to the State College Coin Shop off Atherton on the way to the Nitnnay Mall. His shop is up on the hill past Tubbies in the back of the Antique shop. The owner’s name is Dave Kreamer, he is open 10 am – 6 pm on Monday’s with appt made through calling 814.234.0849

March 24, 2009

Hyper Inflation

We have had lower gasoline prices as well as an ease in the cost of food products. In addition there have been folks from government and also the fine talking heads on the TV pointing to the fall of 2009 as a recovery period. Jim Rodger’s one of the greatest minds in commodities has the best idea to get us out of this mess. The governments plan is to pump more and more cheap money to create or stimulate. Now lets look at this from a logical stand point. If we pump up more money into the economy we will create a glut of funds which will increase commodities prices, food prices, any consumer products that will put more pressure on consumers who’s income will not keep pace. This disparity will make for shortages in all sorts of sectors, oil, food, clothing, the purchasing of anything that is needed day to day life will be so unattainable due to the devalued dollar and the cost of production of these products that shortages are inevitable. As Jim Rodgers said on CNBC a month or so ago the best solution he could come up with if he what tapped to be FED chairman would to abolish the FED and resign.

December 23, 2008

We can fix this and all other Financial Crisis

Thomas G. Brown |

Glad to see the unconstitutional bailout has been so greatly monitored that no body knows where the money has gone. Let’s give money to banks and other institutions we ….errr the bright bulbs in Congress classified as banks and just trust they will do the right thing. So far we have given them 188 billion in Federal Reserve notes according to a report by the AP.
Why did our government give in to the sky is falling song and dance that the bankers put on to get their hands on tax payer funds. Well there are many theories, Helicopter Ben is an ex chairman of Golman Sachs and wanted to help his friends out. (valid) Also, an the more criminal….yes I said it more criminal than stealing from the public to pay your friends back is the incompetent and just plain dumb law makers. The Get Along Gang in Washington have at best a third graders’ grasp of how a free market economy should work and what monetary policy work time in and time out. This policy if course is sound money in the form of gold and silver. Gold and silver won’t be subject to the para-government scam that is the Federal Reserve. This private banking system prints money out of thin air with nothing backing it except debt. Money created through alchemy is n’t worth spit. Gold and silver are a tried and true unit of value due to the simple fact that the earth determines how much is created. Like land you and more importantly the Fed can not create anymore gold or silver. I suggest folks who want this financial nightmare to end sooner rather than later look at Congressman Ron Paul’s (R-TX) Repeals the Federal Reserve Act. This simple act would go a long way in preventing future bubbles from occurring due to bad money policy.

In closing I want to leave you with an expert from Richard Russell’s website today. Mr. Russell has been watching the markets for over 50 years and has been through all the markets ups and downs since the great depression. ( 858) 454-0481).

Finally, I believe the worth of fiat money will come into suspicion in the years ahead. Fiat money will be blamed for the predicament that the world is in. We never could have produced “bubbles” without fiat money or inflation-minded central banks. The discipline of gold will be missed and rediscovered.

December 5, 2008

Prescription for America

Thomas G. Brown |

What if there was a way to root out the disease of corruption in politics and the anemic state of our national debt with a quick shot. Let’s not forget about the gangrenous approach to our WAR ON TERROR. Well, there is in a matter of speaking. On April 22nd 2008 you as Pennsylvanians can help the start our path to recovery by voting for America’s doctor. Who is this man? Well, he’s the only person running for President on the Republican or Democratic ticket that wants to pull our men and women completely out of Iraq. He is not proposing just pulling out “combat” troops and a wait and see on the rest he is talking about pulling all troops out of Iraq, which is the only way Iraq will start to rebuild. We shouldn’t have gone in there and we shouldn’t continue this error in judgment.
As the corruption, one just has to look at the questionable actions of the many candidates now running for office. One is reported to have used city money to pay for security while visiting his mistress. Others flip flop on issues and play the blame game, instead of really tackling the issues they attack each other. Don’t you want someone who follows the laws as prescribed in the Constitution and not another fool who believes he or she is above the law?
As for the National debt, I’d take a look at how much these folks are wasting in campaign money. I mean this is money they had to at least do a little foot work for and they still throw it away. Now image how easy it would be for these candidates to do the same with taxpayer funds they had to do zero work to obtain. I submit this task to you the American people. Please help this pandemic before it cripple and possibly kill our Republic. Help us to restore the Constitution.
At the beginning I said their is a doctor that can correct the ailments of the U.S. currently faces. The man I speak of is Congressman Dr. Ron Paul R -TX. Take a look at his record and stance on issues such as the war, economy, and limited government. A grassroots campaign effort not seen in decades and join the Ron Paul Revolution.

September 28, 2008

Don’t Trust Them

Thomas G. Brown |

I have always thought that trusting those who got you into a mess are probably not the best folks for the job of getting you out of this mess. To me it is equal to allowing the fox to guard the hen house after a few go missing. This $700 billion dollar boondoggle is nothing more than socializing the financial industry and giving over more power to the federal government. In addition this will do nothing except push are fiat currency further down the toilet. If we want real change an a better economy we have to do two things. One, abolish the Federal Reserve. This is not a government agency but a private entity that charges the US government the privilege of printing our currency. We should… we must go back to backing our currency with gold or silver. This will protect us from inflation, wasteful spending by government, in addition this will force government federal, state, or local to ask if we want to pay for new services due to to the fact that there would need to be a tax. Article I section says straight out gold and silver are money not a bill created out of debt.
Two, is to allow businesses to fail. Get government out of rewarding failure through a bailout. The Great Depression was prolonged by government intervention. We have spent $450 billion in bailouts so far this year and want to add at least another 700 billion dollars. Let’s boot the folks in congress that vote for this socializations of our economy and elect folks who are going to embrace the constitution.

July 31, 2007

How we got into the Housing Market Mess

Thomas G. Brown |

Do you ever wonder why prices of homes increase substantially from 2002 to 2006. Well there are several key reasons which all stem from a sole source. This super factor is the Federal Reserve and it’s loose monetary policy. The Federal Reserve in an effort to give the economy a B-12 shot. This shot however turbo charged the housing, credit, and financial markets which looks and feels good short turn but continued used of these policies leads to a hell a withdrawal. This reminds me of the Seinfeld where Elaine takes care of a guy who’s a heroin addict and Mr. Petermen says “Elaine you better get your self a poncho your gonna need it.” Well enough with the silly TV References and back to the show.

As they fired up the printing press and had it working overtime to create a flood of cash their plan for boosting the economy a whole host of other unintended issues arose. The home defaults, mortgage companies went belly up, contractors, builders, and developers lost or are in the process of losing there jobs and businesses that all popped up under a money tidal wave.

The first link in this chain is the ability of more folks to purchase homes due to the low cost of money which created low interest loans. The increase in demand for homes started the increase in price of homes. This started a whole chain of events that has lead to the our current situation of defaults and corporate bankruptcy and future unforeseen crisis. Builders and developers see the price of homes increasing and say to themselves, “hey I can make more cash”, which is not bad if the prices where not caused by a fiat paper being created in ever greater numbers. So they take out loans and start building more homes and condos, mainly in hot spots like Southern California and South Florida. But, they did this in most real estate markets across the country. As these new properties started being built the mortgage brokers decided to get creative and offer (ARMS) Adjustable Rate Mortgages which offer rates at super low rates for a few years and then they reset. These rates where as low as 1% and this opened up a whole new can of worms. Folks started taking out second, and third mortgages to purchase second homes and to purchase homes and condos to “flip” for a profit. Well went this started to really take off and more homes and condos where built. The ol’ gang down at CNBC’s started babbling like idiots started to rant on and on about the great money to be had in investing in the housing market. So more people go into the business of flipping houses, becoming mom and pop property developers as well as starting mortgage companies. Why not the money they loaned was not theirs they came from Wall Street investment banks who wanted in on this pot of gold. They purchased the loans, bundled them up and sold them as investment bonds. Well the bonds where a hit with hedge funds, mutual funds, and Wall Street in general. So the loans got more creative zero down ajustable loans, negative amortization loans. Who cared the homes where not being bought to live in they where going to be resold at a profit as prices sky rocketed through the roof. More condos, and homes being built and not just regular family homes but homes with all the bells and whistles, condos that where bigger then the average American home. Who cares, we are going to make a ton of cash.

Well the money was cheap and plentiful and there where more and more properties going on the market who could loose. Well, I see who can loose the contractors, developers, mortgage firms, the folks purchasing with shaky credit, those who “invested in this sure thing”, and the poor little guys on Wall Street!!! First to go was the sub prime loans as the rates adjusted and these owners struggled to make their monthly payment. The housing prices and the cost of living may have gone up and up but household income remain almost at a stand still.

After this the next set of victims where the set who thought they would make it rich offering sub prime loans to the first casualties. That is to say the mortgage brokers and companies the largest of which was New Century. As, the rates began to reset on the mortgages of peoples second home and properties they wished to make money on by selling. More defaults notices where sent out do to the decrease in price often lower then the price paid for the homes. This softened the housing market demand and the bond interments created to purchase these loans started to dip. This has not been fully noticed yet but in my opinion will show it’s final path as the market plays out. Developers are starting to default on their loans and more people who have deposits down on condos not yet built are walking away from deals instead of paying for something that is worthless then the original price. Many people have been effected by this mess and will continue to loss money, homes, and jobs created by the Federal Reserves need for a growing economy.

Sooner or later the next card in this house will be removed and we shall see more effects of the great economic boom that was created. What is the next card, I’m not sure but I have a sneaking suspicion that it has something to do with the Federal Reserve need to increase interest rates to stop the devaluation of the dollar and the inflation of consumer goods and services while wages sit still. This should be quite a show from the side lines but if your tangled in this web good luck and it’s only money not the end of the world.

Posted by Thomas Brown at 4:39 PM

June 22, 2007

Replace FED with Silver Standard

Thomas G. Brown |

The case for a return to a gold or silver standard is one that has been overlooked, ignored, or all out scoffed at by those in charge of the money supply. Who are these people in charge? Well according to the Constitution this should be the Congress. But, our current system allows a quasi private bank deal with the money supply. This is the exact opposite of what our founding fathers intended and has created what they feared a central bank that produces fiat money.

Our current system has the Federal Reserve, essentially a private bank which sells paper money that they create out of thin air to the Federal Government. The government buys this money with Treasury bills which offer interest. Now the government has no money to pay off the bill so they pay down on the interest only. Where you might ask does the government come up with the scratch for interest if it can’t create it’s own money. Simple the Federal Income tax. What you thought we used that money to pay for public services…, no my friend the bulk of these funds go to pay the interest on our governments loans. And who receives the interest payments.

When a country gets away from real money that is gold and silver the money ceases to maintain value and eventually becomes worthless. The money we carry around today has nothing backing it just a hope by the government that you have faith it’s worth something, Faith is something for a church or a synagogue not for a money supply.

The number one reason for a currency backed by silver or gold (i prefer silver as it’s an industrial metal) is that you can only create as much as you have in reserves. An easy example would be the Treasury holding 100 oz of silver with a current value of $14 an ounce. We’ll that wound allow you to have $1,400 in money out in circulation. If the value of the silver goes up a dollar will get you less silver thus the money supply will be tightened. Conversely if the value of silver drops a dollar will buy you more silver which will loosen the money supply. You will not have to rely on the Federal Reserve Chairman and the Open Market Committee to set interest rates to do this fuction.

In addition the bubbles we have scene in the markets will be reduced in destructive nature in that a central bank will not have control over money supply but the market will dictate how much money could be put into circulation.

With this system the IRS could be eliminated as we would not need the income tax to pay down the debt. You might be asking, how would we pay for services the government provides? Easy, there already taxes that tax care of these services such as roads, defense, and the like. These taxes are voluntary taxes such as sales tax, taxes on cigarette taxes, alcohol taxes, taxes on gun sales, licenses, permits, and the like. These are all taxes you can opt out of by not participating. If you don’t want to pay for a fuel tax, then you can ride a bike, if you don’t want to pay for a cigarette tax don’t smoke.

In closing the Silver(or Gold ) Standard is the a wise choice for many reasons. I hope someday we go back to this monetary policy and create a stable economy once again.

May 7, 2007

Why a gold Standard over Current System

Thomas G. Brown |

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation” These words state with absolute clarity why Central Banks and further the Federal Reserve are nothing more that a way for governments to continue deficit spending. By the way the quote was not from some nut from Iowa who lives on a compound. These words come from 1966 article written by young economist by the name of Alan Greenspan. Yes, the same fellow who years later would turn his back on this idea when he took over the Federal Reserve under Ronald Regan.

The monetary system of today is nothing compared to the gold standard days pre-1913. When our currency an for that matter the currency of other nations was backed by gold governments as well as private industry had to be fiscally conservative when it came to spend. A government could not just produce money out of thin air to pay for its various welfare and warfare programs. A government could only spend as much as it had in reserves in terms of gold. If they wished to spend more the government had to tax its citizens who would most likely take notice and demand more fiscal responsibility.

Governments are reluctant to convert back to such standards as this would strip them of the power they have come to expect. How would they get their pork barrel projects paid for if they where confined to a set amount of money? Yes, an actual budget they would have to follow. Currently the U.S. through the Federal Reserve can monetize their debt in effect creating funny money out of thin air.

That is issue Treasury Bonds in which they sell to the public, companies, and

foreign governments thus creating money by doing nothing more then selling paper with a government guarantee to pay a set interest. This works ok in the very short term but as more and more bonds are sold our liability to our borrow grows. As this happens our ability to pay decreases and we are forced to create more money. This cycle creates compounding in the negative an grows or debt and reduces with each passing day to repay these loans.

Normally a country would only get away with this for a short amount of time before its creditors pulled the plug. The U.S. is in a unique situation in that the dollar is the reserve currency of the world. Being such we can get away with reckless monetary policy for an longer period of time.

In addition a growing amount of our debt is being carried by foreign governments and at this point it is advantageous for them to continue this scheme. Take China for instance, they sell us products we used to manufacture and then turn around an purchase our debt. As long as they can sell goods to the U.S. this is a good situation for them and other countries who are participating in this operation. But in the near future the dollar is going to fall below the other currencies and it will become more and more expensive for the U.S. consumer to purchase imported products and goods. As the purchasing power of the dollar continues to fall so to will the standard of living in America which is already showing signs of decline.

The money created by the Federal Reserve system is the equivalent of unrepresentative taxation . As has been stated by many great economic minds, the middle class is being squeezed to the brink of extinction by this current fiscal system. We have groups who work to save endangered snails, and lizards but no one to protect us from the welfare state and its money policies which I only hope is done out of ignorance and not malice.

January 9, 2007

The Effects the Real Estate bubble is having on the Economy

Thomas G. Brown |

It is interesting to see the residential housing market take on some of the characteristics of the tech bubble of the 1990’s. Everyone and their cousin jumped in head first to get rich through the act of flipping houses with “shaky” financing. Adjustable Rate Mortgages (ARMS), Interest only Mortgages and a host of other creative ways to buy homes for next to nothing up front. It all seemed like a viable way to finance home that would be owned short term. But as this pool dries up not only will these folks break there preverbal necks but the damage will and is being felt throughout the economy.

Let’s look at the numbers from the National Association of Realtors to see the signs housing is slowing down by comparing October numbers from 2005 to this year are as follows, inventory in the market shot up 26% from 2,846,000 to 3,854,000. This indicates that homes are harder to unload onto the market then they where just a year ago. So those folks who purchased homes in a mad dash to millionaire status are stuck holding the bag i.e. mortgages that are only going to increase in cost while the property itself will most likely lose value. This inability to sell quickly requires owners to pay mortgages longer than anticipated for homes they have no intention of living in, eroding any potential profits day by day.

In addition the median sales price of existing homes has decreased 3.5% during the same time period of October 2005 to October 2006. The median price dropped from $229,000 to $221,000 nationally. This looks like it will only get worse in the coming months ahead as an additional $1 trillion in loans are set to readjust in 2007.

As I stated at the beginning this will effect more than just the home owners. We will see it in unemployment numbers starting with construction and in related jobs. With all this money being lost their will be less for the American Consumer to spend on goods and services. Today the number of US unemployment claims where released by the Labor Department. At 357,000 they are highest in over a year.

Let’s look at two national home builders to see what they can tell us about this situation. The nation’s largest luxury home builder Toll Brothers chart shows the RSU is trending bearish as it hovers just below 70 at 68.59 as of 11:59 am today. In addition the stock is rising but on decreasing trading volume. Leading me to believe that we are seeing a slow down in the building of new homes and the housing market in general.


We can also look at the seventh largest builder of home in Beazer Homes USA, Inc shown below. The volume of this stock is low and the Relative Strength Index seems to be pointing to a bearish reading that continues above 50. The price as I look at it at !:14 pm is increasing but at a relatively low volume 2.5 million.

In addition to the charts we have the CEO of Toll Brothers, Robert Toll stating on a conference call on November 7, 2006 (Bloomberg Caroline Blaum) that buyers have lost confidence in the home market.

This will also reduce spending by consumers creating a fun little cycle…….like the circular motion of water down the toilet bowl. Well the next couple of months and years shall be interesting to watch (if your into horror shows). Have a cocktail and a good Thursday.