New Forum Up And Running
posted by Raphael Blogger @ 12:28 AM
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THE REAL ESTATE BLOG
Learn About Mortgaging And How To Profit From The Upcoming Real Estate Crash!
Wednesday, May 16, 2012
Saturday, May 12, 2012
Review of Forecast
So its been nearly seven years since my previous blog post (hey, I was on vacation), and all I have to say is... TOLD YA! The real estate market got totally PWNED. We're in the midst of a global debt bubble now, many governments have toppled, and there is uncertainty in countries who were victimized by this crash (by those who created it). Conspiracy?
posted by Raphael Blogger @ 2:54 PM
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Wednesday, November 09, 2005
The Sinking U.S. Dollar
The markets are very smart and adjust to new info quickly. They know things the average person doesn’t, and they exploit this info and profit from it. Here's some of what's being priced into the U.S. dollar currently.
HERE'S WHAT THE FOREX MARKET KNOWS THAT YOU DON'T!
The US Dollar is tanking and will more than likely continue to weaken (especially hard after year 2010) because of the economic problems plaguing the US economy which are covered up by Fed economists, the media, and the carefree attitude of the American public. This will have a MAJOR negative impact on the US and Canada (of whom the US is the largest trading partner).
POINT 1:
U.S. federal budget deficit (national debt) is around $8 trillion and continues to grow WITH INTEREST each year. This is just the money the U.S. government has put to uses like,
i] "Health and Human Services" - roughly $565 billion set aside for budget in 2005 (the largest spending sector)
ii] "Department of Defense" - roughly $460 billion budgeted for 2005 (second largest)
iii] "Tresury Department" - roughly $380 billion, which includes interest paid on debt like T-bills and long-term bonds (third largest)
POINT 2:
U.S. consumer debt (credit card debt, mortgage debt, student loans, car loans, etc...) is at an ALL TIME HIGH which the average house hold carrying an average of 8 credit cards and 50% of credit cardholder sending in just the minimum payment or slightly more than the minimum payment, but not paying balances in full each month.
Also, U.S. consumers tend to get too many loans against the value of the equity in their homes - in effect, SHRINKING their equity in their homes and increasing the amount of debt they owe the banks (with interest, of course).
If someone wants an iPod and a 50" Plasma screen TV they'll more than likely not have the cash to buy it outright so they'll either buy it on their credit card, or if the credit cards are maxed out they'll roll-over the card debt into their home equity, in effect "wiping the card clean" for new use, or get a line of credit against their home equity.
IT'S JUST TOO EASY GETTING CREDIT IN THE UNITED STATES. And this is NOT exactly a good thing!
POINT 3:
The U.S. trade deficit (the EXCESS of FOREIGN goods it IMPORTS over the amount of domestic goods it exports to foreign countries) is also at an ALL TIME HIGH. Currently hovering around $11 TRILLION.
The U.S. used to be a SELLER goods to other countries in the past. Now it has primarily become a BUYER of goods from other countries because the standard of living in North America has risen so much that more and more goods are needed to support it. Like, for example, where having just one car was a big deal some time ago, the needs (and wants) of consumers has grown so great that having TWO CARS is considered average now. And these cars are primarily low-priced FOREIGN cars made in Japan.
Three major problems are evident here:
i] U.S. consumers let their greed and ego get the best of them and this leads them to do (foolish) things which are NOT supported by their personal economic conditions
ii] As a result they get into further and further debt, but think nothing of it since everything is "financed" (with interest) and the "monthly payments are so low"
iii] As a result US dollars go to FOREIGN economies, like China and Japan
POINT 4:
U.S. workers are losing jobs to foreign competition, like the new economy of China for example, where goods can be produced cheaper since labor is cheaper.
For example, a U.S. raw materials like cotton to China and gets back finished goods (of high quality we might add) like t-shirts, and it’s done in the most economic way to the U.S. consumer and the manufacturing plant.
However, as a result, the Chinese make money, while the U.S. consumer spends money, and the American guy who could’ve been given the job no sits unemployed because it went offshore to China.
POINT 5:
This brings us to the next point, off-shoring / outsourcing of jobs from the U.S. to foreign countries like China and India where workers will (in most cases) HAPPILY perform the job for a fraction of the cost it would cost if American workers were hired to do it. Therefore, the U.S. IS LOSING HIGH-PAYING JOBS (which have traditionally been the factory-type, “industrial age” jobs, and is supplementing them with low-paying “frontline” jobs (like working in McDonalds).
POINT 6:
The U.S. government passed a law called the “Employee Retirement Income Security Act (ERISA)” in the 1970’s. As a result of this law the idea of “social security” has been removed from the U.S. economy. Under the old law a person would work for a company (usually for life since the pay standards of old jobs where much higher, thus, workers didn’t have to frequently change careers to make ends meet) retire and expect to be taken care of by the company through pension which the company was required to set aside for it’s aging workers till death or till the company itself went bankrupt. Under the ERISA law a company is only required to meet a certain percentage of the savings a worker sets aside THEMSELVES each month in a company 401K, etc… And if the worker doesn’t set aside anything then the company is free from obligation to a large degree too. Robert T. Kiyosaki calls this a shift from “defined benefit” (DB) to “defined contribution” (DC).
POINT 7:
It gets UGLIER. The MAJORITY of such company funded plans (401K’s etc…) are tied up to STOCK MARKET INDEXES! In other words, if a worker has $400,000 saved up in their company’s 401K and the market goes up 50%, GREAT! And most of the time the capital gains are “tax DEFFERED” (NOT tax free).
HOWEVER, if the market goes DOWN 50% (as has happened after the bursting of the Dotcom bubble in 2000) then that $400,000 worth of savings and contributions by the worker and the company becomes $200,000!
And this HAS HAPPENED to several MILLIONS of people in the early 2000’s.
POINT 8:
The first of the aging Baby Boomer population (which has a roughly 19 year span – from the eldest baby boomers to the youngest) will hit age 65 – “retirement age” – beginning in year 2010. This is a population of about 78 million in the U.S. alone (not including Canada and other WW2 countries). And though they are estimated to have a $2.5 trillion per year spending power (which is expected to grow to $3.0 trillion by year 2007) it will be very difficult for them to retire since most of their wealth is tied to paper assets like stocks and hard assets like real estate. So though they have roughly $32,000 - $38,400 of spending power per person per year who will buy all those assets from them when they start pulling funds out of the market and real estate?
POINT 9:
This brings us to the next point, REAL ESTATE. After the Dotcom bubble burst most of the proceeds went into housing. This created the biggest bubble the residential housing market has ever seen in U.S. history after the first housing crash in 1995! Ten years later, up until the summer of 2005 at least, everyone was flipping condos and getting rich. Now, though the bubble hasn’t burst, it’s flattened out and will deflate slowly AT FIRST. But come year 2010 when the U.S. economy will go into a tailspin with Baby Boomers cashing out an all, the burst WILL happen – especially in the more overbought / overvalued areas like California.
POINT 10:
The U.S. WON’T win the “War On Terror” as the Bush Administration promises because terrorism is cheap. Robert Kiyosaki says, “you don’t need an MBA degree to be a terrorist” – and it’s true. All you need is the feeling of being angry at the world and with the crisis the U.S. economy is in and the troubled times ahead “domestic terrorism” (bad term, but I guess I’m the first to coin it) will increase more than threats from overseas. People riot and rally when they’re unhappy (hey that rhymes). And they’ll have PLENTY of reason to be unhappy with the U.S. government and the U.S. economy in the decade ahead.
POINT 11:
U.S. dependence on oil from the OPEC (Oil and Petroleum Exporting Countries) is greater than every before. Now with China’s oil consumption going through the roof since it’s economy is booming things are getting scary. If even 10% of it’s 1.3 billion population starts looking for cars to drive it’ll put a damper on the ALREADY LIMITED supply while the demand keeps going up and up!
Gas prices will continue to rise after year 2010 (though before that they’re expected to come back down to $40/barrel). Harry S. Dent believes so, and I agree.
POINT 12:
The Fed keeps lying to Americans that GDP is great, inflation is low, and debt “can be managed if we do something quickly”.
Actually, the truth is that it’s more like “we can’t do jack now!” The situation IS, in fact, “damage beyond repair”.
GDP is a flawed economic indicator. The reason is because most of the time people (who care – as most people could give a damn since they have to get back to watching the twentieth re-run of “Friends” instead) only look at the RESULTING GDP figure rather than breaking it back down into separate parts and examining each part individually.
The individual parts which make up GDP are:
(1) Consumption
(2) Business Investment
(3) Government Spending (Federal Budget a.k.a. National Debt)
(4) Exports
(5) Imports
The GDP equation is:
(1) + (2) + (3) + (4) – (5) = Gross Domestic Product
The Fed also uses other deceiving measures like “consumer confidence” which is only a monthly survey of 5,000 U.S. homes regarding their (consumer) optimism about current and future economic conditions. Such measures GREATLY MASK reality because for one thing it doesn’t make sense to go by the opinion of a measly 5,000 out of a population of about 300 million. And secondly, I’m willing to bet most of those surveyed don’t themselves know the truth underlying the U.S. economy. If they can buy an iPod, High Definition LCD TV and finance a new car OF COURSE they’ll say “we’re confident in the U.S. economy!”
I’ll add more points to this list as I come by them.
The US Dollar is tanking and will more than likely continue to weaken (especially hard after year 2010) because of the economic problems plaguing the US economy which are covered up by Fed economists, the media, and the carefree attitude of the American public. This will have a MAJOR negative impact on the US and Canada (of whom the US is the largest trading partner).
POINT 1:
U.S. federal budget deficit (national debt) is around $8 trillion and continues to grow WITH INTEREST each year. This is just the money the U.S. government has put to uses like,
i] "Health and Human Services" - roughly $565 billion set aside for budget in 2005 (the largest spending sector)
ii] "Department of Defense" - roughly $460 billion budgeted for 2005 (second largest)
iii] "Tresury Department" - roughly $380 billion, which includes interest paid on debt like T-bills and long-term bonds (third largest)
POINT 2:
U.S. consumer debt (credit card debt, mortgage debt, student loans, car loans, etc...) is at an ALL TIME HIGH which the average house hold carrying an average of 8 credit cards and 50% of credit cardholder sending in just the minimum payment or slightly more than the minimum payment, but not paying balances in full each month.
Also, U.S. consumers tend to get too many loans against the value of the equity in their homes - in effect, SHRINKING their equity in their homes and increasing the amount of debt they owe the banks (with interest, of course).
If someone wants an iPod and a 50" Plasma screen TV they'll more than likely not have the cash to buy it outright so they'll either buy it on their credit card, or if the credit cards are maxed out they'll roll-over the card debt into their home equity, in effect "wiping the card clean" for new use, or get a line of credit against their home equity.
IT'S JUST TOO EASY GETTING CREDIT IN THE UNITED STATES. And this is NOT exactly a good thing!
POINT 3:
The U.S. trade deficit (the EXCESS of FOREIGN goods it IMPORTS over the amount of domestic goods it exports to foreign countries) is also at an ALL TIME HIGH. Currently hovering around $11 TRILLION.
The U.S. used to be a SELLER goods to other countries in the past. Now it has primarily become a BUYER of goods from other countries because the standard of living in North America has risen so much that more and more goods are needed to support it. Like, for example, where having just one car was a big deal some time ago, the needs (and wants) of consumers has grown so great that having TWO CARS is considered average now. And these cars are primarily low-priced FOREIGN cars made in Japan.
Three major problems are evident here:
i] U.S. consumers let their greed and ego get the best of them and this leads them to do (foolish) things which are NOT supported by their personal economic conditions
ii] As a result they get into further and further debt, but think nothing of it since everything is "financed" (with interest) and the "monthly payments are so low"
iii] As a result US dollars go to FOREIGN economies, like China and Japan
POINT 4:
U.S. workers are losing jobs to foreign competition, like the new economy of China for example, where goods can be produced cheaper since labor is cheaper.
For example, a U.S. raw materials like cotton to China and gets back finished goods (of high quality we might add) like t-shirts, and it’s done in the most economic way to the U.S. consumer and the manufacturing plant.
However, as a result, the Chinese make money, while the U.S. consumer spends money, and the American guy who could’ve been given the job no sits unemployed because it went offshore to China.
POINT 5:
This brings us to the next point, off-shoring / outsourcing of jobs from the U.S. to foreign countries like China and India where workers will (in most cases) HAPPILY perform the job for a fraction of the cost it would cost if American workers were hired to do it. Therefore, the U.S. IS LOSING HIGH-PAYING JOBS (which have traditionally been the factory-type, “industrial age” jobs, and is supplementing them with low-paying “frontline” jobs (like working in McDonalds).
POINT 6:
The U.S. government passed a law called the “Employee Retirement Income Security Act (ERISA)” in the 1970’s. As a result of this law the idea of “social security” has been removed from the U.S. economy. Under the old law a person would work for a company (usually for life since the pay standards of old jobs where much higher, thus, workers didn’t have to frequently change careers to make ends meet) retire and expect to be taken care of by the company through pension which the company was required to set aside for it’s aging workers till death or till the company itself went bankrupt. Under the ERISA law a company is only required to meet a certain percentage of the savings a worker sets aside THEMSELVES each month in a company 401K, etc… And if the worker doesn’t set aside anything then the company is free from obligation to a large degree too. Robert T. Kiyosaki calls this a shift from “defined benefit” (DB) to “defined contribution” (DC).
POINT 7:
It gets UGLIER. The MAJORITY of such company funded plans (401K’s etc…) are tied up to STOCK MARKET INDEXES! In other words, if a worker has $400,000 saved up in their company’s 401K and the market goes up 50%, GREAT! And most of the time the capital gains are “tax DEFFERED” (NOT tax free).
HOWEVER, if the market goes DOWN 50% (as has happened after the bursting of the Dotcom bubble in 2000) then that $400,000 worth of savings and contributions by the worker and the company becomes $200,000!
And this HAS HAPPENED to several MILLIONS of people in the early 2000’s.
POINT 8:
The first of the aging Baby Boomer population (which has a roughly 19 year span – from the eldest baby boomers to the youngest) will hit age 65 – “retirement age” – beginning in year 2010. This is a population of about 78 million in the U.S. alone (not including Canada and other WW2 countries). And though they are estimated to have a $2.5 trillion per year spending power (which is expected to grow to $3.0 trillion by year 2007) it will be very difficult for them to retire since most of their wealth is tied to paper assets like stocks and hard assets like real estate. So though they have roughly $32,000 - $38,400 of spending power per person per year who will buy all those assets from them when they start pulling funds out of the market and real estate?
POINT 9:
This brings us to the next point, REAL ESTATE. After the Dotcom bubble burst most of the proceeds went into housing. This created the biggest bubble the residential housing market has ever seen in U.S. history after the first housing crash in 1995! Ten years later, up until the summer of 2005 at least, everyone was flipping condos and getting rich. Now, though the bubble hasn’t burst, it’s flattened out and will deflate slowly AT FIRST. But come year 2010 when the U.S. economy will go into a tailspin with Baby Boomers cashing out an all, the burst WILL happen – especially in the more overbought / overvalued areas like California.
POINT 10:
The U.S. WON’T win the “War On Terror” as the Bush Administration promises because terrorism is cheap. Robert Kiyosaki says, “you don’t need an MBA degree to be a terrorist” – and it’s true. All you need is the feeling of being angry at the world and with the crisis the U.S. economy is in and the troubled times ahead “domestic terrorism” (bad term, but I guess I’m the first to coin it) will increase more than threats from overseas. People riot and rally when they’re unhappy (hey that rhymes). And they’ll have PLENTY of reason to be unhappy with the U.S. government and the U.S. economy in the decade ahead.
POINT 11:
U.S. dependence on oil from the OPEC (Oil and Petroleum Exporting Countries) is greater than every before. Now with China’s oil consumption going through the roof since it’s economy is booming things are getting scary. If even 10% of it’s 1.3 billion population starts looking for cars to drive it’ll put a damper on the ALREADY LIMITED supply while the demand keeps going up and up!
Gas prices will continue to rise after year 2010 (though before that they’re expected to come back down to $40/barrel). Harry S. Dent believes so, and I agree.
POINT 12:
The Fed keeps lying to Americans that GDP is great, inflation is low, and debt “can be managed if we do something quickly”.
Actually, the truth is that it’s more like “we can’t do jack now!” The situation IS, in fact, “damage beyond repair”.
GDP is a flawed economic indicator. The reason is because most of the time people (who care – as most people could give a damn since they have to get back to watching the twentieth re-run of “Friends” instead) only look at the RESULTING GDP figure rather than breaking it back down into separate parts and examining each part individually.
The individual parts which make up GDP are:
(1) Consumption
(2) Business Investment
(3) Government Spending (Federal Budget a.k.a. National Debt)
(4) Exports
(5) Imports
The GDP equation is:
(1) + (2) + (3) + (4) – (5) = Gross Domestic Product
The Fed also uses other deceiving measures like “consumer confidence” which is only a monthly survey of 5,000 U.S. homes regarding their (consumer) optimism about current and future economic conditions. Such measures GREATLY MASK reality because for one thing it doesn’t make sense to go by the opinion of a measly 5,000 out of a population of about 300 million. And secondly, I’m willing to bet most of those surveyed don’t themselves know the truth underlying the U.S. economy. If they can buy an iPod, High Definition LCD TV and finance a new car OF COURSE they’ll say “we’re confident in the U.S. economy!”
I’ll add more points to this list as I come by them.
posted by Raphael Blogger @ 1:40 PM
6 comments
Wednesday, June 08, 2005
Residential Real Estate Speculation
"The Housing Bubble"
01] Interest rates being raised at a “measured pace” by the fed.
02] Unemployment figures could go up.
03] New employment figures continue to miss economists projections.
04] Inflation rising.
05] Supply/demand in residential real estate is to be questioned. “Authentic” supply vs. demand (i.e., s/d which exists outside of speculation) seems artificial.
06] CPI (Consumer Price Index) rising.
07] Large speculative sentiment (flipping) vs. small ownership sentiment. In 2004, 23% of home purchases were made by such investors. (Rising interest rates, among other things, could cause these people to pull out money abruptly).
08] Baby boomer retirement approaching. 80 million North Americans will be turning 65 between years 2010 – 2014 while a large majority of them have lost money in the stock market crash of 2000 (the biggest crash in world history) which wiped out nearly $7 - $9 trillion in investments… The rich got richer.
09] Social security – US government program that provides retirement income, health care for the aged, and disability coverage for eligible workers and their dependents – is under fire and will likely not suffice so many retirees (baby boomers) when the need arises.
10] Warren Buffett and Alan Greenspan warned of caution in the residential real estate market. The stock market crashed in 2000, 2 to 3 years after the two authorities warned of an overpriced market.
"...irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?" - Alan Greenspan, December 5, 1996
11] Wide gap continues to develop between the residential rental and residential ownership real estate markets (Residential Affordability Index – RAI – decreasing).
12] Gap between median income and median home price widening.
13] Unforeseen events as terrorist attacks on North American soil, or corporate blunders the likes of another Enron, could damage the market (real estate) severely.
14] Oil prices at all time highs.
15] US dollar fallen causing foreign investors to withdraw investments from US bonds.
16] Outsourcing (layoffs) to countries like India poses a significant threat to North American employment.
17] Federal budget and payment deficits sitting around $10 trillion.
18] Mortgage loans sitting around $8 trillion.
19] Average time on market for a residential property was 4 weeks (30 days) in 2004. In 2001 the average time on market was between 180 days – 210 days. As the time on market drops lower the issue of mass speculation in the residential real estate market becomes more evident.
20] Housing industry hasn’t grown in the past 50 years. 2 million new housing units per year were built in the 1950’s – 60’s, 1.8 million in the 70’s, dropped slightly in the 80’s – 90’s, and now back to 1.8 million/year.
21] 300,000 – 400,000 of these homes each year are “second homes”.
22] Corporate accounting problems at Fannie Mae and Freddie Mac (a GSE - Government-Sponsored Enterprise) being brought to light.
23] Low income housing shortage (1.6 million units were short last year) even after potential $400 million - $1 billion in financing from the government.
24] The financing’s main purpose is to provide new, more stringent regulation for the two GSE’s – not to make life easier for low income earners.
25] The funding could result in anywhere between 4,000 and 14,000 new units each year (significantly less than low income demands).
DON'T SIDE WITH THE DUMB MONEY! BE PATIENT AND BUY AFTER EVERYONE SELLS! "BUY LOW, SELL HIGH!"
posted by Raphael Blogger @ 2:30 PM
2 comments
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- The Sinking U.S. Dollar
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Buffett continued, "There is just an incredible resistance to thinking or changing. I quoted Bertrand Russell one time, saying, 'Most men would rather die than think. Many have.' And in a financial sense, that's very true."
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