Bubbles

Quote- No, Headlines- For The Week

Something different for readers this week. Instead of a quote, here’s two news headlines which made my eyes roll upon spotting them this weekend…

“Dow 20,000 here we come: It’s different this time”

-MarketWatch.com, November 22, 2013

“It’s different this time.”

I’ve lost count how many times I’ve heard this phrase uttered over the years as some asset bubble was being inflated.

It’s not just me either.

From Michael Kling on the Moneynews website back on May 23, 2013:

Time and again, as stock prices continue rising to unsustainable heights, stock enthusiasts have preached, “This time is different.”

And it’s not just stocks either.

From Charles Hugh Smith on LewRockwell.com this past Halloween:

Defenders of current real estate valuations can draw upon an array of justifications, but they boil down to the same one used to justify valuations in every asset bubble: this time it’s different.

As for my two cents? Like I commented on a Chicago Tribune article last week, it’s my belief that after the economic crisis reared it’s ugly head in the fall of 2008, home prices nose-dived, and the “Great Recession” took hold, Washington and the Fed only managed to paper over the situation and monetary policy was designed to inflate a new asset bubble (or two, what the hell) to “save” the U.S. economy and larger financial system. Subsequently, we find ourselves immersed in QE Infinity and what some of those who correctly-predicted the “Panic of ’08″ and housing crash see as new bubbles forming in residential real estate and equities.

I don’t envision this ending well.

Speaking of the Tribune, here’s another headline that made me cackle in disbelief.

“Breakthrough deal curbs Iran’s nuclear activity”

-Chicago Tribune website, November 24, 2013

All I can say about this hopium-infused headline is that I expect one of two scenarios down the road:

1. Downtown Tehran packed to the gills as the Islamic Republic of Iran parades its first nuclear weapon for the entire world to see. Those in the know understand state actors in this region of the world can only salivate over the prospect of having a nuke in their arsenal- Iran included. Realpolitik, people.

2. A mushroom cloud over an Israeli or U.S. city. If the technology/opportunity presents itself, an electromagnetic pulse originating from a nuclear device detonated in the atmosphere over one of these countries (more bang for the buck).

Of course, all bets are off over these two scenarios taking place if some one (the Israelis?) take out Iran’s growing nuclear capabilities with military force.

Question is, is that even possible anymore given the time Iran has had?

Again, there’s others who think the claim that the interim pact reached betwen Iran and China, France, Germany, Great Britain, Russia, and the United States “curbs Iran’s nuclear activity” is one big joke.

Enter Saudi Arabia’s Prince Alwaleed bin Talal, “the world’s foremost value investor” with a net worth of $20 billion as of March 2013 according to Forbes magazine. Here’s what the Saudi royal had to say about a potential deal with Iran. From Jeffrey Goldberg on Bloomberg.com Friday night:

“There’s no confidence in the Obama administration doing the right thing with Iran,” he told me, with a directness that would make Benjamin Netanyahu blush. “We’re really concerned — Israel, Saudi Arabia, the Middle East countries — about this.”

It is quite something for a Saudi royal to state baldly that his country is part of a tacit alliance with Israel, but Saudi leaders, like Israel’s leaders, are frantic with worry that an overeager Obama will accede to Iran’s desire to become a threshold state, one whose nuclear program is so advanced that it would only need several weeks to assemble a deliverable weapon. Alwaleed, like Netanyahu, the Israeli prime minister, believes that Iran, in its ongoing negotiations with the world’s major powers, will pocket whatever sanctions relief it gets without committing to ending its nuclear program. “Why are they offering relief?” he asked. “Keep the pressure on. Sanctions are what brought about the negotiations to begin with! Why not keep the pressure up?”

Obama, Alwaleed says, is a man who is in desperate political straits and needs a victory — any victory — to right his presidency. “Obama is in so much of a rush to have a deal with Iran,” he said. “He wants anything. He’s so wounded. It’s very scary. Look, the 2014 elections are going to begin. Within two stamonths they’re going to start campaigning. Thirty-nine members of his own party in the House have already moved away from him on Obamacare. That’s scary for him.”

(Editor’s note: Italics added for emphasis)

Note Goldberg’s headline for his Bloomberg piece:

“Iran Is Playing Obama, Says Saavy Saudi Prince”

Iran is “playing” Obama and many others, judging by the buzz being reported in the mainstream media this Sunday.

Not me. I just can’t see Dow 20,000 being sustained just yet or Iran’s nuclear aspirations being curbed through diplomacy any time soon.

Sources:

Kling, Michael. “New Yorker: No Stock Bubble- This Time Is Different.” Moneynews.com. 23 May 2013. (http://www.moneynews.com/InvestingAnalysis/stock-market-bubble-different/2013/05/23/id/506002). 24 May 2013.

Smith, Charles Hugh. “What Real Estate Bubble? Oh, You Mean the One That’s Bigger Than the 2007 Bubble?” LewRockwell.com. 31 Oct. 2013. (http://www.lewrockwell.com/2013/10/charles-hugh-smith/what-real-estate-bubble/). 24 Nov. 2013.

Goldberg, Jeffrey. “Iran Is Playing Obama, Says Savvy Saudi Prince.” Bloomberg.com. 22 Nov. 2013. (http://www.bloomberg.com/news/2013-11-22/iran-is-playing-obama-says-savvy-saudi-prince.html). 24 Nov. 2013.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Peter Schiff: If Fed Starts Tapering, U.S. Will Be Back In Recession

Time to talk money this morning. Only one “crash prophet” had anything notable to say in the past couple of days. The CEO and Chief Global Strategist of Euro Pacific Capital, Peter Schiff, appeared on CNBC’s Closing Bell last Friday. Schiff, who is credited with predicting the U.S. housing bust and economic crisis that reared its ugly head late in 2008, told viewers:

If the Fed begins to taper- which I don’t think it’s going to do- we’ll be back in recession. It’s not going to be good for stocks. The whole rally is based on QE. That’s why the Fed’s going to keep the monetary spigots open. Because they want to keep the phony recovery, and they want to keep inflating these asset bubbles in the stock market and in the real estate market. But the problem for the market is, the more the Fed succeeds in pushing up the market now with QE, the further it’s going to fall once the QE stops. Because it has to end eventually, otherwise the dollar is going to collapse, and it’s not going to matter what your stock portfolio is worth, because you’re not going to be able to buy anything.

When asked about the Fed not planning to start tapering until the economy is fundamentally better, Schiff replied:

It will never get better fundamentally until they stop QE. QE is preventing the economy from fundamentally recovering from the damage. So the Fed is going to keep doing it. Again, it’s like a drug. The QE keeps us high, but if we lose the drug then we go through withdrawal. We’re never going to have a genuine recovery until the Fed lets us have a real recession. So when they take away the QE, then we’re going to go right back into recession. It’s even going to be bigger than the one in ’08 and ’09, because a lot of damage has been done structurally to our economy, because the Fed has interfered with the recovery with all the QE.


“Fed Taper Will Trigger Recession”
YouTube Video

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Marc Faber: ‘We Are In A Gigantic Asset Bubble Around The World’

Time to talk money. Dr. Marc Faber appeared on CNBC’s Squawk Box this morning and touched on financial topics including the Federal Reserve’s Quantitative Easing program and asset bubbles.

On QE, where the Fed currently puchases $85 billion of longer-term Treasury and agency mortgage-backed securities each month, he Swiss-born investment advisor and money manager told viewers:

Every government program that is introduced under urgency and as a temporary measure is always permanent. And, in my view, the Fed has boxed themselves into position where there’s no exit strategy. The question is not tapering. The question is at what point will they increase the asset purchases to say 150, 200, a trillion dollars a month. That is the question.

Shakespeare couldn’t have put it better.

The publisher of the monthly investment newsletter The Gloom Boom & Doom Report also chimed in on asset bubbles. Dr. Faber warned:

You said earlier on there is no inflation. Inflation can be in consumer prices. It can be in commodities. It can be in wages. It can also be in assets. And we are in a gigantic asset bubble around the world…

So I think that one day, this asset inflation will lead to a deflationary collapse, one way or the other. We don’t know yet what will cause it.


“The world is in ‘gigantic asset bubble’: Faber”
CNBC Video
ANY CHARACTER HERE

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Jeremy Grantham’s Latest Investment Advice

It’s been a while since I’ve blogged about Jeremy Grantham, the co-founder and chief investment strategist of Grantham, Mayo, Van Otterloo & Co. (GMO). To be fair, the British-born investment advisor has been taking a break from his popular quarterly investment letter that’s published on the GMO website. For those of you who aren’t familiar with Mr. Grantham, he’s designated one of this blog’s “crash prophets” along with Marc Faber, Jim Rogers, and Peter Schiff due to his special talent for correctly-calling the direction of the financial markets. He so good that individual clients have included Secretary of State John Kerry and former Vice President Dick Cheney.

Grantham was the subject of a September 20 article in The Wall Street Journal in which Ian Salisbury asked him about investment-related topics, such as the depletion of natural resources on Earth. From the Q and A session:

Q: What are investors supposed to do?
A: The investment implications are, of course, own stock in the ground, own great resources, reserves of phosphorous, potash, oil, copper, tin, zinc—you name it. I’d be less enthusiastic about aluminum and iron ore just because there is so much. And I wouldn’t own coal, and I wouldn’t own tar sands. It’s hugely expensive to build coal utilities, and the plants they have to build for tar sands are massive, and before they get their money back I suspect that the price of solar and wind will have come down so much.

So I wouldn’t use that, but I think oil, the metals and particularly the fertilizers, I would own—and the most important of all is food. The pressures on food are worse than anything else, and therefore, what is the solution? Very good farming, which can be done. The emphasis from an investor’s point of view is on very good farmland. It’s had a big run. You can never afford to ignore price and value, but from time to time you can get good investments in farmland, and if you’re prepared to go abroad, you can do it today. I wouldn’t be too risky. I would stay with distinctly stable countries—Australia, New Zealand, Uruguay, Brazil, Canada, of course, and the U.S. But I would look around, in what I call the nooks and crannies. And forestry is the same. Forestry is not a bad bargain, a little overpriced maybe, but it’s in a world where everything is overpriced today, once again, courtesy of incredibly low interest rates that push people into investing. A wicked plot of the Federal Reserve.

Grantham also shared with Salisbury where he thought stocks were heading. Basically, not only does he think equities can go “a lot higher than this” with Fed backing, but they could even reach bubble territory.

It’s a really good, insightful interview, capped-off with a discussion about unbridled American optimism, which you can read in its entirety here on The Wall Street Journal website.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Salisbury, Ian. “Our Chat With Jeremy Grantham.” The Wall Street Journal. 20 Sep. 2013. (http://online.wsj.com/article/SB10001424127887323665504579032934293143524.html). 24 Sep. 2013.

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Over 35 Percent Of Chicago-Area Homeowners With Mortgages Still ‘Underwater’ Last Quarter

Back when the U.S. housing bubble was rapidly-inflating in the early- to mid- 2000s, a number of my “contemporaries” here in the Chicagoland area decided to take the plunge and buy homes.

They just didn’t expect that plunge to also include local housing prices.

Many of these individuals took out mortgages, and as the values of their single-family residences plummeted in the subsequent years, they soon went “underwater,” meaning they owed more on their loans than their properties were worth.

Well, the “Underwater People” (not to be confused with the album by The Samples or local band by the same name who I used to go watch in the 90s) are still here, contributing to a depressed Chicago-area housing market in which single-family home prices were down in June about 28 percent from their peak in September 2006 (S&P/Case-Shiller data), according to ChicagoRealEstateDaily.com on August 27.

This past Sunday, I spotted the following about underwater mortgages in my Chicago Tribune. Mary Ellen Podmolik wrote:

A lack of inventory is frustrating potential Chicago-area homebuyers, and a report last week from Zillow explains why some homeowners might like to sell their properties but can’t. Despite improving home values, 35.4 percent of Chicago-area homeowners with a mortgage were underwater at the end of June, meaning they owed more on their loan than the home was worth, Zillow said. That means those homeowners would have to sell their properties through a bank-approved short sale.

I took a look at the Zillow data this morning, and the picture it painted of the Chicago-area housing market isn’t very pretty as it concerns negative equity. From their August 29 press release for the just-published Second Quarter Zillow Negative Equity Report:

• Percent of homeowners with mortgages in negative equity in Q2 2013= 35.4% (Podmolik already noted)
• “Effective” negative equity rate, including homeowners with 20 percent or less equity in Q2 2013= 50.7%
• Forecasted negative equity rate in Q2 2014= 33.2%

A little improvement being predicted for next year.

One more glimmer of hope for Chicago’s “Underwater People” that I spotted in that press release:

Minimum number of homeowners expected to be freed from negative equity by Q2 2014= 38,268

Of course, these projections assume Fed funny money keeps flowing and blowing up the prices of real estate and paper assets.

You can read that entire press release from Seatlle-based Zillow- which discussed the negative equity rate nationwide- on their website here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

“Home prices up for 8th straight month.” ChicagoRealEstateDaily.com. 27 Aug. 2013. (http://www.chicagorealestatedaily.com/article/20130827/CRED0701/130829853/home-prices-up-for-8th-straight-month). 4 Sep. 2013.

Podmolik, Mary Ellen. “Problems still rampant in mortgage servicing industry.” Chicago Tribune. 30 Aug. 2013. (http://www.chicagotribune.com/classified/realestate/ct-mre-0901-podmolik-homefront-20130830,0,7902179.column). 4 Sep. 2013.

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Jim Rogers Warns Coming Stock Market Downturn ‘Will Be Worse Than 2001 And 2008-2009’

Catching up with the “crash prophets,” on Monday I blogged about what Dr. Marc Faber was up to these days. “Doctor Doom,” as the financial news media likes to call him, issued this warning:

And I believe that one day, this financial bubble will have to adjust on the downside. Either it will adjust on the downside because we have an inflationary burst, or we have a collapse of the system.

Another “prophet” had been making the rounds as well. Along with a similar warning.

In an interview with FutureMoneyTrends.com that was published on YouTube.com on July 20, well-known investor, author, and financial commentator Jim Rogers talked about a number of finance/investing topics, including where the United States was heading (hat tip Trade The Newsroom website). From the exchange:

FMT: Is there a sense that the recovery is sustainable in the United States?
ROGERS: This is the only time in recorded history that we’ve had all the major central banks in the world printing money and debasing their currencies at the same time. So there’s a flood of artificial money floating around. And the people getting that money are having a good time and certainly making a lot of money. But overall, the situation is not improving. In fact, the situation is degenerating because there’s debt piling up everywhere, staggering amounts of printed money out there. This is going to end very, very badly. I’m not the only one who knows it. But at the moment, many people are having a good time.
FMT: Do you feel comfortable buying stocks? Is Bernanke kind of giving us a floor here?
ROGERS: Floor? No, there’s no such things as a floor. Because when it ends, the whole thing is going to collapse. It’s going to be worse than 2008, 2009. But I own some shares. I bought some shares this week, as a matter of fact. Not in the U.S., but I own shares, and I bought more. But again, I’m very worried because I know it’s going to end, and end badly.


“Jim Rogers EXCLUSIVE Interview with Future Money Trends July 2013”
YouTube Video

The former investing partner of George Soros repeated his warning of an unhappy ending for the current bull market in U.S. stocks while attending the fourth annual Innovative Alternative Investment Strategies conference in Denver on July 23. Evan Simonoff wrote on the website of Financial Advisor on July 25:

Speaking of the current bull market in U.S. equities, Rogers told advisors, “Enjoy it, but be prepared. I do know it will end, but not when. We’re getting close to the end.”

The day that happens won’t be a pretty one. “When it ends it will be a big mess,” he continued. “This will be worse than 2001 and 2008-2009.”

(Editor’s note: Italics added for emphasis)

Simonoff added that Rogers, who has a new book out entitled Street Smarts: Adventures on the Road and in the Marketsicon, is starting to invest in Russian stocks, something I blogged about back on February 5.

As for commodities, which the CEO of Rogers Holdings and Beeland Interests, Inc. is most often associated with these days, Simonoff noted:

Water remains a more attractive commodity, though Rogers added a caveat. “Don’t own it,” he warned. “Politicians will hang you in the public square. Find a way to transport, clean it or filtrate it and you will be a hero in the public square.”

The Financial Advisor piece is very revealing as to how Jim Rogers surveys the current investing landscape, which you can read on the publication’s website here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Marc Faber: ‘One Day, This Financial Bubble Will Have To Adjust On The Downside’

I can’t believe it’s been almost an entire month since I last updated Survival And Prosperity’s “Crash Prophets” page.

Actually, I can, it’s been that hectic.

At least the blog’s off-and-running again.

Now, don’t expect too much from “crash prophet” Jeremy Grantham any time soon, as he’s off playing hooky from GMO’s Quarterly Letter, but there will be plenty on the latest investment activities and recommendations from Dr. Marc Faber, Jim Rogers, and Peter Schiff.

Speaking of “Doctor Doom,” as the financial media like to call him (along with Nouriel Roubini and Peter Schiff), Faber was recently interviewed by Hong Kong-based media, research, and consulting group The Prospect Group about the global economy (hat tip Trade The Newsroom website). Like myself, the Swiss-born investment advisor and fund manager has been consistent in his warnings of a coming financial crash. The publisher of the monthly investment newsletter The Gloom Boom & Doom Report warned viewers:

In general, if you look at the world, say compared to the 1950s, 1960s, and even 70s, it’s very clear that financial markets- official and less official- have grown disproportionately compared to the real economy. In other words, you have, say, a global GDP of- I don’t know what it is- $60 trillion or whatever it is. And you have financial markets that turn $60 trillion around in a week or less.

And I believe that one day, this financial bubble will have to adjust on the downside. Either it will adjust on the downside because we have an inflationary burst, or we have a collapse of the system.

We don’t know exactly how the end game will be played.


“Marc Faber on shadow banking, market psychology, & the global impact of American monetary policy”
YouTube Video

“We don’t know exactly how the end game will be played.”

I know one thing for sure.

The unwinding will be real painful.

Especially for those who never saw it coming, or did see it but didn’t do anything to prepare.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Peter Schiff On Gold: ‘Take Advantage Of Other People’s Foolishness’

Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital, is a known gold bull. And despite gold’s hammering in recent months, the yellow metal continues to shine in his eyes. Here’s what Schiff, who’s also the CEO of Euro Pacific Precious Metals, had to say about gold’s prospects in a June 27 entry on his YouTube video blog, The Schiff Report:

I think there are more reasons than ever to buy gold. I know I’ve said that before and I’ve said it when gold was higher. Of course I also said it when gold was lower. But, I don’t think people should be worried. I think people should take this opportunity for what it is. If you’ve already purchased all the gold that you can afford, then don’t worry about it- it’s just a bunch of noise. What do you care if some fool decides to sell money at a loss, when they own a commodity that will probably be far more valuable in the future. But if you’ve had a more gradual approach- if you’ve only taken a partial position- you should continue to move into the market. Don’t be distracted by the noise. Don’t be worried about what these naysayers are saying. They don’ understand the fundamentals now. They didn’t understand the fundamentals 10 or 12 years ago. They didn’t understand them 2 years ago. The fact of the matter is, the economy is not recovering. The recovery that Ben Bernanke believes he has created is 100 percent dependent on QE. And, in fact, all he had to do was talk about taking away the punch bowl. He talked about it- he didn’t even commit to it- and the bond market has already collapsed. Mortgage rates have already risen now from under 3.5 percent to 4.5 percent. And that’s just the beginning. I think interest rates are going to keep on going higher. They’re going to deflate the bubbles that Ben Bernanke had been desperately trying to reflate. And the only thing that can save the markets from collapse will be the Fed coming back with more QE. It’s not the right thing to do. It’s the wrong thing to do. But the Fed always does the wrong thing. And the Fed always gets the economy wrong.

So again, all I can is, tune out the noise and take advantage of other people’s foolishness. Take advantage of the speculators. And you know, there’s a lot of people shorting gold right now. And maybe they think they’re making money. But let’s see how much money they’ve made when they cover their shorts. Because it’s easy to sell it. It’s not going to be so easy to buy it back. Because once the momentum turns, and everybody figures out the truth, where are the new sellers going to come from? I know where the sellers are now. They’re the speculators. But who’s going to sell the gold when they have to cover their shorts, and how much more expensive is it going to be? They may be laughing now, but I think the longs are going to have the last laugh. There’s an old poker expression, “Don’t count your chips while you’re still sitting at the table.” Well there’s a lot of shorts that have a stack of chips, and they’re busy counting them. But I think when the game is over, they’re going to be wiped out, and the longs are going to have all the chips in front of them.


“Is Now the Time to Sell Gold?
YouTube Video

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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CNBC Tries Calling Out Peter Schiff Over Gold Price

Anyone remember those “Peter Schiff Was Right” YouTube.com videos that went viral right after the U.S. housing bubble popped and the global economic crisis really reared its ugly head in the fall of 2008?

Here’s probably the most popular one out there.

Well, I’m convinced a clip or more of Thursday’s installment of the CNBC show Futures Now, hosted by CNBC Reporter Jackie DeAngelis, will be included in a future “Peter Schiff Was Right About Gold” YouTube video. From an exchange between DeAngelis and the CEO and chief global strategist of Euro Pacific Capital:

SCHIFF: You’re talking about investors’ demand for gold going down. I would disagree. Because I own a gold company too, Euro Pacific Precious Metals. And we’ve never had more demand from our clients in the history of my company than we have now. I would say speculators, speculative demand, is what went down. I think a lot of people who came late to the gold rally were speculating in gold. They were simply buying it because the price was rising. They wanted to hop on that train. They use ETFs. They use futures markets. So I think the speculators have been flushed from the market in this pullback. But the investors- they’re still there. Because all of the reasons they’ve been buying gold for the past 10 or 12 years- those reasons have never been stronger. And so investor demand continues. We’ve flushed away the speculative demand. But I think the speculators will come back in the next rally.
DEANGELIS: Alright. Well, Peter, let’s step back for a second because you kind of jumped in there on the conversation we were having and I definitely appreciate your opinion on that. But I want to talk about the gold price that we’re looking at right now. $1,383.60. That is the price that we’re looking at at this point. We’ve had you on the show multiple times before, you said that gold was going to skyrocket, you say it’s going to be a bumpy ride and you can’t tell us exactly how we’re going to get there. But tell me today, Peter, why have you gotten it wrong?

(Editor’s note: Bold added for emphasis)

SCHIFF: I don’t think I have gotten it wrong. You just said I said it would be a bumpy ride. Look, it’s been bumpy, but I’ve been on this ride since gold was under $300 an ounce. It’s not like gold is down from that point. It’s off its highs. But I think what’s going on right now is you’ve got a false narrative out there that the U.S. economy is improving. It’s not. All the data points have been negative. A deluge of negative data came out today. The only evidence of a rebounding economy, is the stock market going up, or the real estate market going up. But that’s not because the economy is sound. That’s because of all the cheap money created by the Fed. That’s the same reason why stock and real estate prices were going up in 2006 or 2007. It is a bubble. The economy, meanwhile, is actually getting worse. And all this talk about the Fed getting ready to take away the punch bowl is all talk. They’re going to spike it even more. They’re going to up the size of QE. But people who are speculating of an early end are getting it wrong. Gold is going through a correction. All bull markets have a correction. It is a buying opportunity.


“Schiff: Gold a Generational Buy”
CNBC Video

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Robert Shiller: 10 Years From Now, ‘Home Prices Will Be About Where They Are Now, In Real Terms’

I can’t believe it’s been 8 months since I last blogged about Yale economist and housing expert Robert Shiller. Back on September 18, I wrote that Dr. Shiller, who was out there in the mid-2000s warning anyone who would listen about the housing bubble and subsequent crash, wasn’t sure residential real estate in the United States had bottomed-out just yet, noting there already had been 4 attempts at a housing recovery since the subprime crisis struck.

On April 30, Robert Shiller appeared on Yahoo! Finance’s business show The Daily Ticker. Speaking to host Henry Blodget, Dr. Shiller had this to say about where he thought home prices were heading:

BLODGET: And so you have studied home prices going back hundreds of years. You’ve watched the bubble form here. You called the top of that. You called the crash. What do you think will happen to house prices over the next 5 to 10 years?
SHILLER: Yeah, well I wrote several New York Times columns about this. I think it’s hard to say. It could go up. It could go down. You know, in the 20th century, typically, in a decade, real inflation-corrected home prices went up 15 percent or down 15 percent. Usually not because of any bubble or anything like that. It’s just supply and demand, right? The existing home stock might be in the wrong location and the economy is moving somewhere else. So it loses value. Or, then it might be some new interest in owning a home. These things are hard to predict.

But my guess that is, 10 years from now, home prices will be about where they are now, in real terms.

Dr. Shiller also had this nugget for real estate investors:

So it looks like there’s a tilt toward rentals. What that suggests to me that if you want to invest in housing, you want to look toward housing that is suitable for conversion to rental.

You can watch the entire interview on the Yahoo! Finance site here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Wednesday, May 15th, 2013 Bubbles, Housing, Inflation, Investing No Comments

Peter Schiff Warns Of ‘Phony Jobs In A Phony Economy’

“Total nonfarm payroll employment rose by 165,000 in April, and the unemployment rate was little changed at 7.5 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, food services and drinking places, retail trade, and health care.”

-U.S. Department of Labor, Bureau of Labor Statistics, May 3, 2013

Peter Schiff, the CEO/Chief Global Strategist of Euro Pacific Capital who correctly called the U.S. housing bust and “Panic of ’08,” was critical of the latest U.S. jobs report in his latest entry on The Schiff Report YouTube video blog. Schiff pointed out:

The fact of the matter is, all of the jobs that were created, the reason they were created was because of QE. QE is the only reason we’re creating these jobs. And if the Fed ever were to taper it back, the jobs would disappear. As a matter of fact, the Fed is going to have to up the size of the QE to sustain these jobs. Just like with any drug, you develop a tolerance. And so the more you use, the more you have to use. So we’re going to need ever-increasing doses of QE to maintain these phony jobs.

Meanwhile, the data itself, was not even good.

(Editor’s note: Schiff’s look of disgust after saying this= priceless)

I mean, sure, it beat expectations. Because the bar had been lowered so much. It only created 165,000 jobs. All of those jobs were in the service sector. We didn’t create one manufacturing job. Zero. So we’re not creating the jobs that make us richer. We’re creating the jobs that are actually going to drain our wealth because we’re borrowing money to create them…

The bottom line is the media is going to cover this- the unemployment rate has gone down to 7.5 percent. It’s like a four-year low. We’re creating jobs. They’re going to say that things are getting better. They’re not. They’re not getting better, they’re getting worse. Government statistics don’t tell the whole story. In many cases, they tell the wrong story. And eventually, of course, when the music does stop, these jobs are going to disappear. Along with the phony economic growth that went along with it. One way or another, it’s going to happen.


“Jobs And Stocks — Behind The Numbers Lurks A Bubble Disguised As A Recovery”
YouTube Video

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Redfin CEO Identifies Most- And Least-Vulnerable Metro Housing Markets To Experience Another Bubble

Last week in my Sunday paper, I spotted yet another great article by Chicago Tribune real estate reporter Mary Umberger. It was an interview with Glenn Kelman, chief executive officer of Redfin, a real estate brokerage doing business in 20 U.S. housing markets.

Apparently, Redfin recently ranked 15 major metropolitan areas it perceived as most- and least-vulnerable to experiencing another housing bubble. Kelman told Umberger:

We’ve looked at several factors: income to home-price ratios, ratios of sale price to listing price, the frequency of flips (resales within 18 months of purchase), incidences of bidding wars, and rates of going under contract within two weeks of listing.

From looking at those things, we think there are four markets that are in mini-bubble territory, at risk of price correction: Washington, Los Angeles, San Diego and San Francisco.

At the other end of the list, the least likely to see a correction is Atlanta, followed closely by Chicago, Las Vegas and Dallas.

A new housing bubble. Something I’m starting to hear more of these days.

Anyone remember “crash prophet” Peter Schiff’s warning from last September? I blogged on September 18, 2012:

In his September 14 entry on the The Schiff Report YouTube video blog, Schiff, who correctly-predicted the bursting of the U.S. housing bubble and 2008 global economic crisis, explained to viewers what QE3 was really about:

This is the plan that Ben Bernanke has. Ben Bernanke’s plan to revive the U.S. economy, and create jobs, is to inflate another housing bubble. That’s it. That’s what the Fed’s got. That’s what it came up with. As if the last housing bubble worked out so well for the economy, that the Fed wants an encore.

You can read Umberger’s entire exchange with Redfin’s Kelman on the Tribune website here. Interesting stuff.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Wall Street Legend Stanley Druckenmiller Warns Stock Market Rally Coming To End, Financial Storm Coming

Well-known investor Stanley Druckenmiller is warning these days that not only is the stock market rally coming to an end, but that a financial crash is fast-approaching. For those of you not familiar with Druckenmiller, from the Forbes magazine website:

• Started Duquesne Capital Management in 1980 with $1 million. Closed down $12 billion hedge fund in 2010 “and returned investors’ money, citing frustration with his inability to deliver high returns.”
• Hired by legendary investor George Soros in 1988 and together the two reportedly made $1 billion in a day by shorting the British pound in 1992
• Went back to running Duquesne in 2000, which reportedly made money for its clients during the 2008 global economic crisis
• His estimated net worth in March 2013: $2.8 billon

Yesterday morning, Druckenmiller appeared on CNBC’s Squawk Box. Discussing the recent performance of equities, he told viewers:

You’ve got a great supply-and-demand situation for stocks right now. But, I’d analogize it to the hamster on the wheel. It was easy to know when QE1 and QE2 were going to end. This thing will probably end, even though I think QE is going to go on forever just because all the lobster are about to get in the pot. And maybe we’re in the 7th or 8th inning. But, they’re going to get boiled at some point. But right now, supply-and-demand looks great.


“Druckenmiller: Don’t Know When, But It Will End”
CNBC Video

Last Friday, Druckenmiller sat down with Stephanie Ruhle on Bloomberg Television’s Market Makers. He warned viewers of an approaching financial “storm,” stating:

Currently, Stephanie, I see a storm coming. Maybe bigger than the storm we had in 2008 to 2010… The basic story is, the demographic bubble I was looking at way back in ‘94 that started in 2011. We are right at the first ramp-up of this thing…

Something remarkable has occurred since 1994 until now, which is entitlement spending. Or let me say transfer payments, to be a little more correct. Transfer payments which were 28 percent in ‘60. And were 50 percent when we were in the budget mess in ’94. Lo and behold, they’ve gone up to 67 percent of government outlays. But, they haven’t gone up because of demographics. They’ve gone up because the seniors have a very, very powerful lobby. They keep getting more and more transfer payments from the youth. But the demographic storm is just starting now…

So, what’s going to happen, we now have a working popular of- this is how entitlements work- where the current workforce is paying for the benefits of the seniors. Since 2000, we’ve have about 4.5 to 4.8 workers for every retiree. By 2050, that number will drop to 2.4 workers per retiree. Another catchy way of saying it is that by 2030, the average population of the United States is going to be older than the average Floridian right now.

Druckenmiller later said that he’s not out to bash senior citizens, but instead:

What I’m against is current seniors stealing from future seniors.


“Druckenmiller: I See Storm Coming, Bigger Than 2008”
Bloomberg TV Video

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Peter Schiff: Fed Creating Another Housing Bubble, ‘Day Of Reckoning’ Early In Obama’s Second Term

First it was “crash prophet” Jeremy Grantham warning:

Courtesy of the above Fed policy, all global assets are once again becoming overpriced.

Now, Peter Schiff is saying the same about housing.

And that America’s “day of reckoning” is right around the bend.

From a March 1 entry posted on The Schiff Report YouTube video blog:

The Fed influenced the housing market during the bubble predominantly by influencing the short end, making it easier for people to take out ARMs. Today, the Fed is influencing the housing market not predominantly by influencing adjustable rate mortgages, but by outright buying 30-year fixed-rate mortgages to drive mortgage interest rates down to record lows. But in both cases, it was the Fed’s interference that inflated the prices, inflated the bubbles, and there’s going to be a disastrous consequence when this bubble bursts. Although this bubble, is not going to be, I think, as large as the previous bubble. I think the consequences will be much bigger, as the Fed is not going to succeed in elevating home prices. But what they are succeeding at doing is transferring significant percentages of bad mortgages from the private sector to the Federal Reserve. In fact, the federal government has never been more involved in the housing market than it is today. Not only does the government insure over 90 percent of the mortgages, through the FHA, through Fannie, and Freddie. But now the government owns the mortgages. The Federal Reserve is financing them. The Federal Reserve is buying $45 billion worth of mortgages every month. So the government is the housing market…

Now President Obama, we’s got a bigger bubble going during his presidency, and he ain’t getting out of Dodge either. Only this time, I think, the bubble is going to burst not late in his second term, but early. And the difference is going to be- there are no more bailouts. This is the last bubble. This is the biggest bubble. In my book, The Real Crash: America’s Coming Bankruptcy: How to Save Yourself and Your Countryicon, I call it the “government bubble.” That’s what we have. This is the final bubble, and there is no bailout. We’re finally going to have to deal with the consequences of our profligacy. And the problem is, because we’ve kicked the can down the road for so long, right? We’ve papered it over with so much inflation, that the problems have gotten that much worse, which means when we finally are forced to confront them. And again, we’re going to be forced to do it. We’re not going to do it on our own. We’re not going to voluntarily check into rehab. We’re going to have to be forced to do it, because we’ve hit rock bottom, and the world has done an intervention. This “day of reckoning” is coming. And it’s not because of the sequester. Everybody is making a big deal about how painful this sequester is supposed to be. Well this is nothing compared to what’s really going to happen when we really have to swallow the bitter tasting medicine to restore health to an economy that is virtually going to be on its deathbed as a result of all the bad medicine that has been forced-fed it over the years by the Federal Reserve, by Congress, to mask the symptoms while the underlying disease gets that much worse.


“Bernanke Almost Comes Clean On ‘Exit’ Strategy”
YouTube Video

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Jim Rogers Warns ‘Horrible Headache’ Coming For U.S. Between End Of 2013 And 2015

Investor, financial commentator, and author Jim Rogers recently appeared on the Yahoo! Finance show The Daily Ticker. Lauren Lyster interviewed the former investing partner of George Soros, who talked about a number of money-related topics in video released this morning. This included:

• Noting that gold and silver coins are “hot,” but he wouldn’t rush into them right now- “Don’t sell your gold and don’t sell your silver.”
• Predicting turmoil in currencies- “There is not a sound currency anymore.”
• Reiterating his belief in agriculture as a good investment- “I would rather own agriculture than anything.”
• Revealing he was interested in Russian rubles, Chinese renminbi
• Thinking about buying Japanese yen again
• Investing his family’s “human capital” in Asia
• Comparing America’s future to the decline of the U.K.
• Comparing China to America in the early 20th century
• Predicting China will have its share of setbacks like the U.S. did in the 19th century
• Declaring U.S. higher education a bubble
• Revealing he was “optimistic” on Russia and had invested there. Talked about how to do it.
• Revealing he had invested in North Korea. Talked about how he did that as well.
• Claiming U.S. stocks are going up because of money printing by central banks- “I mean, this is staggering what’s going on. It’s going to end so badly for all of us. We’re all going to wake up one day with a horrible headache. Probably 2014, 2015. Or the end of 2013.

Awesome exchange between Lyster and Rogers, which you can watch on the Yahoo! Finance site here and here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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