Thursday, April 27, 2006

Has Easy Al been blowing bubbles?

Eric Englund has an interesting guest editorial on financial sense university-

"This mortgage-debt bubble, as engendered by the Federal Reserve, is leading millions of Americans to financial ruin. This may become the most calamitous clustering of financial error in U.S. history. If anything positive comes out of this economic mess, perhaps it will be the demise of the Federal Reserve itself. Regrettably, the Fed’s failure will have come at an enormous price, including the possibility of volatile social unrest."

"A terrifying thought it is."

and a key point from a referenced book ( Austrian Theory of the Trade Cycle ) to consider -

"The Austrian theory of the business cycle emerges straightforwardly from a simple comparison of savings-induced growth, which is sustainable, with a credit-induced boom, which is not. An increase in saving by individuals and a credit expansion orchestrated by the central bank set into motion market processes whose initial allocational effects on the economy's capital structure are similar. But the ultimate consequences of the two processes stand in stark contrast: Saving gets us genuine growth; credit expansion gets us boom and bust."

Is GM the canary in the economic coal mine?

Excellent article from Bill Gross, head of PIMCO compares the fate of the GM with that of the US economy.

"How are we to pay for this future burden of healthcare and social security expenses? Aside from contractual legislative changes to both areas (which are surely just around the corner), the way a reserve currency nation gets out from under the burden of excessive liabilities is to inflate, devalue, and tax."

"Another way the U.S. could escape the burden of its future liabilities is to “grow” its way out, much in the same manner GM is attempting to make its models more attractive and relevant to current car buyers. We could do that by accelerating relative productivity gains, by emphasizing innovation, and upscaling education. Other nations however, understand the same rules and it will be difficult to “grow” assets and/or reduce liabilities via increased savings if we have a reduced “product line.” With our manufacturing and service base being increasingly hollowed out by foreign competitors, the primary export we have that can be made more attractive are our Treasury bonds in the form of higher relative yields. It will be an easier task, in fact for GM to renovate its product line than for the U.S. to revamp its. "

"Owners of these liabilities (either existing/future debt holders, or tax paying corporations/citizens) will likely be the sacrificial lambs of the future. Investors, therefore, should factor in an increasing propensity for higher inflation in future years as debt principal is eroded much like the shaved edges of a Roman coin. Higher taxes, as well, are just around the corner. Finally, currency devaluation effected through a low Fed Funds policy vs. competitor nations and/or global policy coordination should apply the coup de grace for foreign holders of U.S. liabilities. Chinese, Japanese, OPEC, and other substantive holders of U.S. Treasuries will have two ways to lose in future years: they will watch U.S. inflation erode their principal and on top of that the real dollar value of their global purchasing power will decline as the dollar sinks. Actually, the same applies to U.S. citizens although the decline in global purchasing power can be masked by domestic asset appreciation in the short-term (houses, stocks)."

"If the U.S. chooses to pursue many or most of the above policies, the investment implications are significant, although it must be recognized that I am not speaking to “overnight” developments but instead to changes that should occur in future years. Higher inflation, higher personal and corporate taxes, and a lower dollar point U.S. and global investors away from U.S. assets and toward more competitive economies less burdened by health and pension liabilities – those personified by higher savings rates and investment as a percentage of GDP. Need I say more than to sell U.S. assets and buy Asian ones denominated in their local currencies; or if necessary to hire a global asset manager with sufficient flexibility and proper foresight to thrive in an increasing difficult investment environment?"

Tuesday, April 25, 2006

Some more sites to check out

Essential Reading

Get a quick snapshot of the market

Read up on the critical economic indicators:
-Orders for capital goods
-Initial jobless claims
-Home-builder sentiment
-Retail sales
-The bond market

And don't forget the commentary from Morgan stanley. In addition to Stephen Roach, Richard Berner has some food for thought.

Richard asks, "Does the latest energy shock represent another “perfect storm” for the US economy?"

Despite other economic factors, he sees engergy as the most critical component:
"A much sharper-than-expected jump in energy quotes seems likely to depress near-term US growth by more than we have anticipated. And such slower growth and rising headline and core inflation may even create another unappetizing whiff of stagflation. Equally, however, investors would do well to pay heed to the economy’s underlying vitality. As I see it, although near-term growth may slip, even modest energy price relief likely would contribute to a rebound soon."

Interesting article on saving tax!

The ultimate tax shelter: Owning your own business

By Jeff Schnepper

The surest way to reduce your taxes is to convert personal expenditures into allowable deductions. Turn even a hobby into a business and you'll cut your tax bill.

The No. 1 way to reduce your taxes with a smile is to convert your personal expenditures into allowable deductions. It sounds tricky, but it may not be so difficult as you think.

Here's how you do it: Turn yourself into a business owner. This is not complicated, expensive or difficult to do, and incorporation is not necessary.

Establishing a ‘profit motive’ is the keyTo be in business, you merely declare it. And by doing so, you can magically turn personal expenses into tax deductions. If you want to operate in a noncorporate format, as an individual proprietorship, but under a different name than your own, no problem. It’s easy.

In some states, you may have to file a “DBA” (doing business as) form with your local county clerk. Basically, you just fill out a form with your name, address and the assumed name under which you’re doing business. For example, I might be “Jeff A. Schnepper DBA Super Tax Savings Associates.”

Here’s the best part: Your business doesn’t have to make a profit for your expenses to be deductible. All you have to do is establish a “profit motive.” Under the Internal Revenue Code, a “profit motive” is presumed if you earn any net income in any three out of five business years.
It’s recognized and expected that new businesses probably won’t make a profit in the early years. In fact, in the early years, you can insist that the IRS defer any challenge for the first five years as to the legitimacy of your business by filing Form 5213.

Remember you don’t have to show a profit -- just a “profit motive.” In one case, despite 20 years of losses, the court found a profit objective and allowed the deduction of business losses in full for one company. The case was not unusual.

The test for deductibility is whether you have an actual and honest profit objective. You need not have a reasonable expectation of a profit. While the Tax Court requires a primary or dominant profit motive, the U.S. Claims Court has held that having a reasonable chance to make a profit, apart from tax considerations, will suffice.

The test is subjective: Was your intent to earn a profit? The IRS looks at the following factors to decide if your intentions are honorable:

-The manner in which you carry on the activity.
-Your expertise and the expertise of your advisers.
-The time and effort you expend in carrying out this activity.
-The expectation that the assets used in your business may appreciate in value.
-Your success in carrying on similar or dissimilar activities.
-Your history of income and losses with respect to the activity.
-The amount of occasional profits, if any, that are earned.
-Your financial status.
-The elements of personal pleasure and recreation.

That doesn’t mean that just because you enjoy doing your “job” that the expenses aren’t tax-deductible. The Tax Court has ruled that “suffering has never been made a prerequisite for deductibility.”Moreover, even if you’re employed full time elsewhere, that doesn’t prevent you from having another vocation on the side. I spent many years as a full-time college professor while running a legal and accounting practice on the side. This technique works whether your business is your primary source of income or it’s a sideline.

Your hobby can be a businessThat means your hobby could qualify as a business. In the process, you’ll cut your tax bill.

How to qualify as a business deduction-
To qualify as business deductions, your expenses must be:

-Ordinary and necessary -- defined by the courts and the IRS as “reasonable and customary.”
-Paid or incurred during the taxable year.
-Connected with the conduct of a trade or business.The term “reasonable and customary” depends on your specific business and the business customs in your locale. The expenses don’t have to necessarily be reasonable and customary to you, but simply to your particular trade or industry. There are innumerable cases of “hobbies” converted into “businesses” with expenses allowed.

Focus on your profit-making motive. Remember that it’s not what you pay in taxes that counts, it’s what you keep.

Tuesday, April 11, 2006

Housing Supply and Demand

Inman News reports a NAR Press release..

"Existing-home sales are projected to drop 6 percent to 6.65 million this year from a record 7.08 million in 2005, according to the latest annual forecast by the National Association of Realtors trade group."

"New-home sales, meanwhile, are projected to fall 10.9 percent to 1.14 million from the record 1.28 million last year – both sectors would see the third best year following 2005 and 2004. Housing starts are forecast at 2 million in 2006, which is 3.2 percent below the 2.07 million in total starts last year, according to the forecast."

So in 2005 there were 2.07 million housing starts, and 1.28 million houses/housing units sold. In 2006 the estimate is 2.0 million housing starts and 1.14 million sales. Wait a minute. Isn't this a huge imbalance? New house inventory will have increased by 1.65 million housing units in 2005/2006 if these figures are correct. In 2004 the average existing home inventory was around 2.5M units. (I'm not sure what the new home inventory was in 2004). Any way you look at is, 1.65 million additional units is a huge inventory increase! This is based on the NAR's (read house price appreciation cheerleaders) own figures and does not evenconsider any possible flipper flops, Boomer drops, bankrupt no-docs pushing additional supply back onto the market.

Analyzing these figures is so straightforward, yet few seem to do it. I guess people look for, and believe what they want, until it's too late and they loose their shirt. Of course it doesn't help that the NAR reports these figures and then make statements such as:

"Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau..."
- David Lereah, NAR, 1929, er I mean 2006.

Friday, April 07, 2006

California Dreaming?

A very straightforward but valuable (IMO) way to see if house prices are in line with fundamentals is to compare salaries with house prices. Median house price is usually compared with Median Salary. A study(PDF) from Demographia took a good look at this ratio for cities in the US, Canada, UK, Ireland, Australia and New Zealand. The results show that six out of the top ten most unaffordable places within these countries are in California. Topping the list, LA, with a ratio of 11.2. I.e. Someone earning the median wage in LA would need to borrow 11.2 times their income just to afford a median-priced house.

1 US Los Angeles
2 US San Diego
3 US Honolulu
4 US Ventura County
5 US San Francisco
6 US Miami
7 Australia Sydney
8 US New York
9 US Riverside
10 US San Jose

To put this in perspective, anything over 3 (i.e. median house costs 3x median salary) is considered unaffordable. San Jose for example has a ratio of 7.4, so if prices halved, it would still be considered unaffordable.

California is nice, but is LA really so much better than say, Austin, where the ratio is only 2.8? No wonder California has a net out migration of people. Most people admit there are at a minimum some localized real estate bubbles in the US. Surely the list above has to represent the biggest of these. For LA to be affordable, houses would have to loose nearly 75% of their value. I’m not quite sure things will go as far as that, but I think California housing is set for a fall.

Thursday, April 06, 2006

View from the Top?

It's easy to spot a market top.... with hindsight. Only if we spot one when it happens, can we react accordingly.

I remember the late 90's very well. Everyone was making money, it didn't matter what stock you bought, or which no-name, no-chance IPO you 'invested' in, it was hard to loose money. Everyone knew it was crazy, everyone knew it could, and probably would end, but it kept going up up up, so people's fears of a real 'top' seem unrealistically low (again from the benefit of hindsight).

Nowadays seems eerily similar to late 99/early 2000, to me, at least in the housing market. Big 'investment' seminars, people giving up their jobs to almost 'day trade' houses and condo's. It seems like a mania, a bubble, tulips anyone..? I think the stock markets also seem over confident in my opinion. Will a declining dollar may cause foreign investors to withdraw from the market? Will inflation rear it's ugly head? Will housing's impressive support of the economy turn tail and have the opposite effect?

There are many signals flashing yellow, especially in housing where there is disconnection of (house) prices from fundamentals (wages, rents). Housing aside, there are other warning signals - high oil prices, excess liquidity, US trade imbalance. The FED lauds our economies resilience to such potentially damaging factors. But surely, these factors take time impact the economy? If you smoke a cigarette, and wake up the next day feeling fine, you may conclude that your body is resilient to the effects of smoking. If you take a longer term view, and study history, you may change your mind.

Written by Christian Weller in February 2000, arguably at the top of the NASDAQ bubble:
"The macroeconomic characteristics of fragile economies are remarkably consistent. Economies become more likely to experience financial crises when growth is based on a credit expansion that follows from overly optimistic expectations by banks. In particular, real credit growth is fueled by booming stock and real estate markets"

If you have been following the recent house and stock price rises, and consider the recent credit expansion, there should be a signal flashing yellow.. a very big signal.

To try and correlate current market psychology, with possible future outcomes, there is great benefit in turning to history. With that in mind, here is the entire piece by Christian Weller. If I were to file this as a historical missive, I would title it "View from the Top"
Are the economic warning signals flashing yellow?
"Weakness and volatility in the stock market has spooked investors. The fear on Wall St. is that market sentiment will shift, a herd mentality will take hold as everyone makes a mad dash for the exit, and the long boom in stock prices will end in rapidly falling stock prices. The history of financial crises suggests that this particular fear is unfounded. While shifts in market sentiment do occur, economies rarely experience a financial crisis unless the economic fundamentals are weak."

"That does not mean, however, that the U.S. has nothing to fear. Economic booms do not last forever. As the end of a boom approaches, early signs of growing weaknesses can be found among the good news on employment and growth. Warning signals begin flashing yellow in the months before a crisis, giving policy makers enough time to avert trouble -- if they recognize the signals and take appropriate action."

"The macroeconomic characteristics of fragile economies are remarkably consistent. Economies become more likely to experience financial crises when growth is based on a credit expansion that follows from overly optimistic expectations by banks. In particular, real credit growth is fueled by booming stock and real estate markets, and by capital inflows from abroad that are both attracted by rising stock and real estate prices and are a prime contributor to that rise. More capital inflows, meanwhile, cause an overvaluation of the currency, and a widening trade deficit, which they in turn help to finance. A growing trade deficit spells trouble for an economy as industrial production slows. In other words, while the financial sector is expanding, the real economy shows some strains."

"Real and financial sectors grow apart domestically. The growth of stock prices slows while the gap between credit growth and industrial output increases. International trade and finance relationships also come unglued. In particular, the currency appreciates and the trade deficit balloons."

"The danger is that, despite apparently strong growth in economic activity and employment, the economy is financially fragile. It faces the very real possibility of a sharp decline in its currency and an unraveling of the dynamics that previously propelled its growth. Capital inflows are replaced by capital outflows and foreign funds are withdrawn from the U.S. stock market. Share prices fall, as do real estate and other asset values. The trade deficit is suddenly unsustainable. The country finds itself on the horns of a dilemma. Either a financial crisis is allowed to unfold, or the Fed raises the interest rate sharply to prop up the dollar and the real economy goes into a nose dive and income and employment fall."

"It sounds eerily like the United States. Are early warning signs flashing?
The growth of the stock market is slowing. Investors reaped average returns on stocks of well over 20% from 1994 to 1998. In 1999, the market recovered in the fourth quarter after a sluggish performance in the first three where the rate of return has been close to 6%. The third quarter has been an especially sobering experience, with an almost 3% decline in stock prices in September alone and a sharp fall the week of October 11. Similarly, since the beginning of the year, the Dow Jones has fallen by 1,000 points within two weeks, and only begun to recover slowly."

"Another yellow light is a widening gap between the growth of credit and the growth of industrial production. Industrial production grew by less than 3%, compared to the same month in the previous year, for eleven out of the past twelve months. This is a marked slow down compared to growth rates at or above 5-6% in late 1996, 1997 and the early part of 1998. In contrast, commercial bank loans are outpacing growth in the real economy. Loans have increased from 33% of GDP in the first quarter of 1993 to 38% of GDP in the second quarter of 1999. In addition to growing commercial loans, there is a particularly worrisome trend in debt that is used to fund stock purchases -- so-called margin debt -- which has increased four-fold since the beginning of 1993."

"The dollar has appreciated since May 1997 and remains overvalued, despite the recent decline against the Yen. As a result, U.S. exports are not competitive on global markets, and imports are available to Americans at bargain basement prices. Not surprisingly, the trade deficit has spiraled out of control. The trade deficit has grown from $37 billion in 1992 to $164 billion last year. In the first seven months of this year, the trade deficit already exceeded that record and reached $169 billion."

"The warning signs are there. We can reassure ourselves that the U.S. is different -- after all, it is not an emerging economy or a small, industrialized nation. Perhaps it can sustain a slow down in the stock market boom, a credit expansion fueled by capital inflows, an overvalued currency, and a ballooning trade deficit. Perhaps."

"But perhaps not. What to do, though? One possibility would be for Treasury secretary Larry Summers to negotiate a new Plaza agreement with our trading partners to bring down the value of the dollar. Like the agreement reached at the Plaza Hotel in 1985, it would engineer a soft landing for the overvalued dollar and gently let the air out of the stock market bubble. To avoid rapid capital outflows, though, such an agreement needs to be combined with capital controls. If this is too drastic a regulatory step, the Fed could lower interest rates instead. This would translate into real wage gains that would both spur domestic output, and lower the credit exposure of US households. Since real wage gains would cut into corporate profits, lower interest rates should also help to slowly deflate the stock market bubble."

"The alternative is for Americans to bet on our continuing good fortune. If we lose this bet, we will face a financial crisis, a serious recession, or both."

All I can say is, good call Christian!
Now, if I were a betting person, I would predict Q2 2006 is the stock market top, and there will be a long (but not straight line) slide back to 1992-1995 levels for the Dow. After all, wasn't Captain Greenspan talking about irrational exuberance in 1996. But surely there is none of that now? (of course I didn't say if I'm a betting person..)

Wednesday, April 05, 2006

The Housing Economy

The Washington Post takes a look into the effect of housing on the economy.

Investment in residential real estate, as a proportion of gross domestic product, is at its highest level since 1950, when the nation was in a post-World War II housing boom. This grapic from last year sums it up nicely.

Worried about Inflation?

If you really want to get fancy, you could invest in Treasury Inflation-Protected Securities (TIPS). The principal of TIPS, is adjusted according to the Consumer Price Index. With a rise in the index, or inflation, the principal increases. With a fall in the index, or deflation, the principal decreases.

Interest and Principal
TIPS pay interest every six months. The interest rate is a fixed rate determined at auction. Though the rate is fixed, interest payments vary because the rate is applied to the adjusted principal. Specifically, the amount of each interest payment is determined by multiplying the adjusted principal by one-half the interest rate.

The Treasury provides TIPS Inflation Index Ratios to allow you to easily calculate the change to principal resulting from changes in the Consumer Price Index. To determine your inflation-adjusted semi-annual interest payment, simply follow this three step process:
  1. Locate your TIPS on the TIPS Inflation Index Ratios page. Follow the link and locate the Index Ratio that corresponds to the interest payment date for your security.
  2. Multiply your original principal amount by the Index Ratio. This is your inflation-adjusted principal.
  3. Multiply your inflation-adjusted principal by half the stated coupon rate on your security (i.e., 2%). The resulting number is your semi-annual interest payment.

When TIPS mature, we pay either the adjusted principal or the original principal, whichever is greater.

Terms and Price
TIPS are issued in terms of 5, 10, and 20 years, and are offered in multiples of $1,000. The price and interest rate of a TIPS are determined at auction. The price may be greater than, less than, or equal to the TIPS' par amount. (See prices and interest rates in recent auctions.)

Bottom line: Are They Worth It?
One way to calculate the possible advantage is to take a look at the average maturity of a 10 Year Treasury (4.3 % for example) and subtract the average maturity of a 10 Year Treasury Inflation Protected Security (2.5% for example). Once you get this number, you will know what inflation must be for the next ten years in order to make the purchase worth it.
Submitted by Yogi R

Tuesday, April 04, 2006

The Effect of Debt

What will be the future effect of the currently amassed debt?

Well, how much debt is there? We know USA Gov Inc will soon own 9 trillion dollars.
But what about the total debt of everyone and everything in the Good old USA?

Closer to 40 trillion..

A more detailed breakdown:

It may or may not be coincidence that the loss of the dollars link to gold occurred not long before the debt starts to explode. I don't know, you can draw your own conclusions. What will be the effect of all this debt on the economy, with rising short and long rates? Again, I don't know, but I read it as a more negative than positive. Surely debt needs to be paid back at some point?

Images from The Money Files

Are markets are currently dismissing downside growth risks?

I'm a bear. While it's true that people tend to see only what they want to see, I find it hard for a bull to miss the downside risk that Stephen Roach sees. As he is 'Chief Economist' and 'Director of Global Economic Analysis' Morgan Stanley, he is someone who knows what he's talking about.

"As the housing bubble continues to deflate and equity extraction from property fades, I continue to believe that income-constrained American consumers will prune discretionary spending -- putting the risks to overall consumption growth on the downside of the 3% average pace recorded over these two quarters. China could well be a second source of deceleration over the course of this year, as the government makes a downpayment on its avowed rebalancing away from exports and fixed investment toward private consumption. Rising protectionist risks could well provide a third source of deceleration -- operating not just through the seemingly all-powerful Chinese export dynamic but also through the currency and interest rate implications of a US current account adjustment."

"Financial markets are currently dismissing downside growth risks leaning the other way -- betting more on the upside of the global momentum play or, at worst, believing that any deceleration in the pace of world activity is likely to be minimal. That’s certainly the message to take from the recent sharp back-up in real interest rates, as well as the latest surge in metals prices -- precious and industrials, alike. Central banks have reinforced this pro-growth cyclical play by sending signals that they remain very focused on the traditional closed-economy linkage between rapid growth and inflation. In my view, that leaves markets increasingly exposed on the other flank to the possibility of a downside growth surprise. If those risks play out, bonds could rally and equities could sag on growth concerns."

"The biggest risk, however, is that it doesn’t take all that much to turn the global liquidity cycle. For their part, the world’s major central banks are all on the tightening side of the monetary equation for the first time in 15 years. The Federal Reserve has already gone a long way down the road toward policy neutrality, and there are those who argue that it may already have entered the restrictive zone (see Joachim Fels and Manoj Pradhan’s 28 March dispatch, “The Supernatural Fed”). Nor should we underestimate the potential impacts of the sea change in Japanese monetary policy now under way -- the shift away from quantitative easing that has already commenced and a possibly sooner-than-expected ending of the BOJ’s zero-interest-rate policy this summer (see Takehiro Sato’s 28 March dispatch, “Earlier and Smaller”). If the turn in the global liquidity cycle reinforces a downshift in global growth, financial markets could be especially vulnerable. Recent action in some of the more exotic corners of the markets may well be providing a hint of how that vulnerability might spread. An unwinding of carry trades in Iceland and New Zealand, corrections in Middle Eastern equity markets, and very recent pullbacks in commodity-linked currencies (i.e., Canada and Australia) could well be canaries in a much bigger coal mine. Even the big equity markets in the US, Europe, and Japan have looked a bit toppy in recent days as yields on long-dated US Treasuries close in on the 5% threshold. "

"The global economy has just come off a very hot and increasingly synchronous burst of growth. Momentum-driven financial markets are betting this trend will continue. However, there is good reason to suspect that the ever-fickle pendulum of global growth is now about to swing the other way. If that turns out to be the case, increasingly myopic markets could reverse course in a flash."

His commentary is one of the many reasons I am bearish about the outlook for 2nd half of 2006.

Monday, April 03, 2006

The National debt and an Honest Congressman

Ron Paul is certainly not your average Texan Republican congressman. If I didn't know better, I would have taken him for a fiscally conservative democrat (but then again, US politics are not my strong point!)

From Ron Paul's Texas Straight Talk

"Today our national debt stands at $8.2 trillion, which represents about $26,000 for every man, woman, and child in America. Interestingly, the legal debt limit is only $8.18 trillion, a figure that was reached a few weeks ago. This means the Treasury department must ask Congress to raise the debt limit very soon, most likely as part of a larger bill so it can be hidden from the American people."

"Raising the debt ceiling is nothing new. Congress raised it many times over the last 15 years, despite the supposed “surpluses” of the Clinton years. Those single-year surpluses were based on accounting tricks that treated Social Security funds as general revenues. In reality the federal government ran deficits throughout the 1990s, and the federal debt rose steadily."

"Former Federal Reserve Chairman Alan Greenspan made it easier for Congress to obscure the extent of federal debt. He endorsed a change in the law that redefined Social Security and veterans pensions. In reality those obligations are debts, just like any other bill that must be paid in the future. But Mr. Greenspan urged renaming these obligations “intergovernment accounts,” which magically changed them from debts to “accrued liabilities.” This semantic shift frees up lots of room under the debt ceiling for more borrowing."

"Debt and credit, wisely used, can be proper tools for individuals and businesses. In a free society, however, we can never view expansion as a proper goal for government. Unlike a private business, our federal government should not be seeking out new ways to increase the scope of its dubious “services.” Any government that consumes at least 25% of the American economy and still can't balance its books is a government that vastly overspends."

"I disagree with the supply-side argument that government debt doesn't matter. The issue is not whether the Treasury has sufficient current income to service the debt, but rather whether a government that spends so much ultimately will destroy its own economy. Debt does matter, especially to future generations that will be asked to pay for our extravagance."

"When government borrows money, the actual borrowers- big spending administrations and politicians- never have to pay it back. Remember, administrations come and go, members of congress become highly paid lobbyists, and bureaucrats retire with safe pensions. The benefits of deficit spending are enjoyed immediately by politicians, who trade pork for votes and enjoy adulation for promising to cure every social ill. The bills always come due later, however. Nobody ever looks back and says, “Congressman so-and-so got us into this mess when he voted for all that spending 20 years ago.” "

"For government, the federal budget is essentially a credit card with no spending limit, billed to somebody else. We hardly should be surprised that Congress racks up huge amounts of debt! By contrast, responsible people restrain their borrowing because they will have to pay the money back. It's time for American taxpayers to understand that every dollar will have to be repaid. We should have the courage to face our grandchildren knowing that we have done all we can to end the government spending spree."

Housing Bubble? - Part 1

A few house price related stats,

US National median home price, adjusted for inflation (from

California vs. Florida (from Investment U):

On the possibility of a global housing bubble, The Economist had a good article in June 2005, the bottom line - "The worldwide rise in house prices is the biggest bubble in history"

Make your own mind up.



This blog is intended to allow mutual financial resarch and opionon to be posted. The aim is to allow sharing of ideas, viewpoints, stock research and general investing discussion.

Some of the areas to be covered are:
Global Credit/debt
Housing Bubble
Gold Standard
M3 Money Supply
Peak (cheap) Oil
Precious Metals

More later..