Gold down %10,Oil down %10,US Dollar is bouncing...The Fed is DONE lowering

General Real Estate Investing
1

I have said it in many past threads that the Fed was running out of bullets…Now the reaction I have been seeing is proving my feelings to be correct…Expect the Fed to NOT be lowering anymore or very slightly at all…Gold’s run is over (in my opinion) and Oil will float around between $85 to $110 per barrel for remainder of the year…

You have to be ahead of the curve to make money in ANY market…The US dollar is the greatest bargain to be bought…Hedge funds and money managers alike are buying US $ in large amounts…Trust me a year from now or more you will see how things will change…Interest rates will hit record HIGHS in the years to come and the dollar will continue it’s rally…Deflation is the new concern now…

2

Rookie, when you say interest will hit record highs, are you talking double digit 18% or higher?

Why do you think it will go that high?

I have several long term line of credits against assets that I own. If rates are going to take off, I want to make them as large as I can and lock them down to use for operating and expansion.

Thanks,

DB

3

I have to correct my previous post…I should NOT have used the term record…What I will say is I truly believe the Fed will not lower anymore and he will start the up cycle in interest rates…It is my opinion that we will eventually see the highest interest rates in the last two decades in the coming years…

I also believe that if the US economy does encounter deflation then the situations for the credit markets will become even more strict…The lowering of interest rates only increases debt accumulation literally masking a problem that is growing increasingly worse…All we have to do is look back to the 1990’s with Japan and the lowering of interest rates to record low levels…It did NOTHING except make matters worse by increasing the borrow from peter to pay paul mentality…

So long as our US dollar isn’t gaining value vs world currencies this country’s economic outlook will only steepen…The Fed needs to support our currency and big money is betting he will have to sooner than later…So YES I do believe that you are currently looking at the lowest interest rates will ever be…Bernanke is a moron but I highly doubt he will look to replicate the mistake Japan made during the 1990’s…He is done lowering…

4

So you believe sometime in the next couple years we are going to see the 9,10,13% rates like back in 80’s?

5

This is NOT going to be a popular post…

I’m starting to think Bernanke might be the PERFECT man for the current condition of this economy.

Uncle Benny spent his entire academic career studying and dissecting the causes and effects of the GREAT DEPRESSION. I’ve read a few of his books on the subject and they are very interesting. The steps he took last week with Bear Stearns were extraordinary. Opening the discount window to banks so they can EXCHANGE their asset backed securities for treasuries may have saved this economy. We’re not out of the woods yet, not by a long shot, but I have to say, just when you think this guy is out of ammo he pops back up with another fully loaded weapon.

I think rates will rise…that’s not a tremendously bold prediction. Hell, rates have been in the toilet for over a DECADE, of coarse they’ll rise. Especially after everyone on the PLANET is up to their eyeballs in debt and the banks are taking a BEATING.

The interesting aspect of this cycle is it’s GLOBAL effects. Think about this for a minute…Mortgages made in the U.S. on AMERICAN HOMES are KILLING banks around the world. This is a new world we now live in. Banks now realize that IF THEY DON’T all work through this… THEY’RE ALL SCREWED!!!

We’re in for some serious pain here. But I have to admit, Bernanke is doing a decent job. He’s in a NO WIN position. He does NOTHING, he’s an idiot or worse, CAUSES an economic COLLAPSE. He does something, it’s the wrong thing.

They did NOTHING in 1929…We all know how THAT worked out. At least Uncle Benny isn’t sitting on his hands. If he was, it would have been over last September.

Markets never change because markets are PEOPLE. Fear, Greed, and Hope, it’s all in there. It’s a giant 3 dimensional puzzle were pieces are taken, and given everyday.

Is oil gonna stay at $100/ barrel…not with a world wide econmic slow down.
Is the U.S. dollar FINISHED…Not in a million years… I was reading a VERY interesting article on why the Dollar has been the CURRENCY of choice in uncertain economic times…The REASON???

OUR LAWS…this country is a country of LAWS. ANYONE, can buy property or assets here and KNOW they too will be protected ny those laws. I’m not going to debate the fact that THOUSANDS of people lost their savings and investments with BEAR STEARNS. The point is when the world is in turmoil, the U.S. is a safe haven.

Think about what was lost MONDAY when Bearn stearns went to $3/share??? BILLIONS!!!

Anyone see rioting in New York City??
Anyone see Bear Stearns Head Quarters being burned down??

NOPE.

THIS HAS ALL HAPPENED in MEXICO and BRAZIL in the recent past. When THOSE countries faced similar economic uncertainity the people went CRAZY!!! They Burned State buildings, Banks, politicians were attacked!! THAT doesn’t happen here. THAT is a BIG reason why this country has an EDGE!!

Anyone see the news coverage of the RIOTS in China over recent INFLATION!!
Where are our RIOTS???

We are the luckiest people on this planet to simply have been BORN were we are.

Oh…just so you guy’s don’t think I was body snatched last night…

Real Estate is STILL going to get KILLED for the next 2 to 3 years!!! :biggrin

6

Rookie,

How does one “buy” the dollar.

7

Dave T,
The easiest and most cost efficient way is UUP…Thats the Bullish US Dollar ETF (exchange traded fund)…You can get more risky by searching for a fund but I recommend the UUP…But please if you plan to buy pair your way into the position…This way you can buy a few more shares…

http://finance.yahoo.com/q/pr?s=UUP

FUND SUMMARY
The investment seeks to track the price and yield performance, before fees and expenses, of the Deutsche Bank Long US Dollar Futures index. The index is comprised solely of long futures contracts. The futures contract is designed to replicate the performance of being long the US Dollar against the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

If you are looking for more volatility I would suggest looking into forex options…I don’t recommend it but if you have the nerve the volatility is there…UUP is not nearly as volatile thats why I recommend it…

8

Does anyone ever have anything positive to say or should we change the name of this site to chickenlittles.com! Listening to some of you would make a fragile person think that the world is going to come to an economic checkmate and the world is going to end. It’s this kind of speak that facilitates a downturn. Consumer confidence carries alot of weight, especially with the way we all have access to information and communication. So the price of gas is up, eggs cost a little more, big freakin’ deal. Save money here, make more money there and you’ll be fine. These are cycles, businesses have cycles and so do economies. We’re coming off a housing boom never before matched in our countries history, of course it has to correct itself. Bear Stearns gets bought up, so what, they should have been smarter than they obviously are/were. Plenty of other big banks aren’t dead.

fdjake - nice to see you impart some positive outlooks but I still don’t get “real estate will get killed in the coming years”. Define killed. Will people who saw 20, 30, 40% appreciation in the last few years only enjoy 5,6,7% over the next few? To me that’s normal. Are all these shows on TV about house flippers going to fade away because it’s just not as interesting or sexy or financially feasible as it was 2-3 yrs. ago? Probably so, but so what, they weren’t around 5 yrs. ago anyways. Thoughts?

9

Guys. I simply can’t keep up anymore. Everyone is going back and forth from the D&G theories to the “we may just make it afterall” comments, I don’t know if I should just shoot myself now and prevent the future suffering or if I’m gonna be wealthy beyond my wildest dreams. So please clarify. Is this a duck your head and hold onto your a$$ post, or is it a it’s not as bad as it seems post?

Real Estate is STILL going to get KILLED for the next 2 to 3 years!!!
Thanks. At least I’m not totally lost.

jbaldwin,

You bring up points that I’ve been making for awhile now. Most of the depreciating markets are those that had several years of 20-40% annual appreciation. In 2007, the hardest hit markets suffered only a 20% decline in value. Now, that’s severe, but when taken into account that many of those markets have had 100-200% increases in value in 5 years or so, that ain’t so bad.

It’s the bubble theory again really. How long did we hear about a RE bubble and the impedding bursting of that bubble? What exactly happened? No bursting, but a slow leak that will eventually get patched. Now it’s the economy bubble and theories of it’s impending bursting.

Raj

10

A 20% decrease in value in a SINGLE YEAR IS as bad as it has EVER BEEN!! It’s REALLY bad when you have that level of price correction at the EXACT TIME a recession is just starting!!!

Here’s my prediction…prices CONTINUE to fall through out 2008-09 and those declines will accelerate as our economy weakens. IE my statement that Real Estate continues to get killed for the next 2 to 3 years. A 20% annual loss in ANYTHING is getting KILLED in my opinion. ESPECIALLY if that 20% loss has an extrememly high likelyhood of being followed by MORE OF THE SAME!!!

Are there pockets of price stability??? Yes…but based on the FACT that banks around the WORLD are losing TRILLIONS. It’s not OPINION that a LARGE NUMBER of mortgage backed securities are either in default or are so upside down they’re basically worthless. If the MAJORITY of the U.S. housing market was like Jbaldwins or Roger J’s NONE of this would be happening!!! It’s not chicken little, it’s chicken sh*t mortgages that created this GLOBAL CRISIS!

Now…when I say it gets killed…I also have absolutely NO DOUBT that this will be THE GREATEST BUYING ENVIROMENT we will ever see!!! Buyers will be even more desparate to sell which means WE will get GREAT deals!! It’s not ALL bad news. I’m BUYING…RIGHT NOW!!!

Do any of the more optimistic folks here see ANYTHING on the horizon that revs this economy??? I sure as hell don’t. My $600 check from George W. sure as hell isn’t going to REV anything.

I find it mind boggling that we sit here in the midst of a GLOBAL financial CRISIS completely brought on buy LOUSY Real Estate investments and we STILL have people who refuse to see it. Today a Swiss investment fund announced that it will probably liquidate due to U.S. mortgage backed securities it has lost BILLIONS on. It’s not “chicken little” when International Banks are blowing up left and right BECAUSE OUR REAL ESTATE MARKET IS FALLING THROUGH THE FLOOR!!!

THAT’s not an OPINION, THAT’S OUR NEW REALITY!!!

11
Does anyone ever have anything positive to say or should we change the name of this site to chickenlittles.com!

What you don’t seem to understand is that the sky IS FALLING! In fact, it already fell. If it were not for the Fed throwing around money in an unprecedented fashion, we very likely would have already had a complete economic collapse (like the one in 1929). What has happened instead is that the Fed has basically nationalized Bear Strearns by having the Fed guarantee that JP Morgan will not lose money on their purchase of Bear Stearns. You’ve also had unprecedented drops in interest rates (with the Fed in Panic Mode) and a HUGE infusion of funny money pumped into the system (hundreds of billions of dollars). The Fed is accepting collateral for this money THAT IS ABSOLUTELY WORTHLESS!

The question is what effect this will have in the future. After the dot-com bust and 911, the Fed pumped massive amounts of cheap money into the economy and caused the housing bubble. That infusion is peanuts compared to what’s happening now. This time the Fed has used every bullet it had and then manufactured more bullets. There WILL be consequences to that. Even with all this wild spending and these wild cuts in the Fed Funds Rate, the stock market is barely holding on. One big unexpected shock is all that is needed to send this runaway train off the track and down the mountain! Contrary to the talking heads on TV and the cheerleading by the government and the Fed, I’m still expecting to wake up one morning and find out that the market is going to drop 2,000 points in a single day. I don’t think this is over - not by a long way!!!

Mike

12

Europe and especially the UK saw strong gains in their Real Estate. Allot of Brits took second mortgages and bought second houses in Spain and other coastal countries. The BBC also has quite a few Rehab shows.
Europe’s housing market has also soured, so Europe is also seeing large increases in the number of bankruptcies. Their banks have allot of local bad loans plus their exposure to US. So when you see International Banks struggling, it is not just based on the US Real Estate collapse. The Real Estate market globally is being corrected.
Europe’s banks have not lowered their Interest Rates along with the Fed; they are more worried about inflation. The Fed will also have to start focusing on inflation; too many major worldwide commodities are tied to the US Dollar.

13

It’s not just the Europeans who are worried about inflation!!!

Not seeing any economic RIOTS???

Check this little GEM out…

www.intentblog.com/archives/2008/03/chinatibet_infl.html

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fdjake,

Good to see you return to form, had us worried there for a minute. :biggrin

On a seperate note, my main business is farming and we are seeing some interesting things right now. I have a large tractor that requires 8 large tires, and we are having to scour the country to find them. I need a small tire for a crop sprayer, and they say they have two in their system and won’t get any more all summer :shocked. I started checking on combine tires since this is making me nervous, and they are 9 months out for a large tire for my harvesting equipment. This is making me very nervous. Where are the tires going? China…

Right now you cannot order a large self propelled crop sprayer from John Deere as they are busy filling a large order from Russia.

None of this is at all normal. It looks to me like the decreasing value of the dollar is causing our exports to go up a lot. I don’t pretend to know what this means on large economic scale, but it is definitely not something my industry has ever seen before. Expenses are running rampant, and commodity markets are very volitale.

Yet with all of this going on, there is still the age old ahead of the curve rule that I learned in college.

I didn’t have to get everything right to get good grades, all I had to do was beat most of the other kids in the class.

Or to put it another way, two hunters are in the woods and they see a bear. One guy gets all excited and wants to run in case the bear charges, the other guy calmly sits down and starts to put on running shoes. The first hunter asks in disbelief," are you nuts, shoes or no shoes, you can’t outrun a bear." The second hunter responds" I don’t have to outrun the bear, I only have to outrun YOU!"

I have to position myself and apply myself so that I am in the top tier in my businesses and I will be fine.

Our nation has to stay in the top tier and it will be fine. Bumps along the way, but in the long run, fine. No matter what happens, we still have one of the strongest positions in the world. We have the most stable government, we have lots of resources ( it may take a recession for us to get hungry enough for us to tap them if we have to ) We have a people that understands growth and business and capitalism. Very few other places in the world have anywhere close to our standard of living or our opportunity for self improvement. A recession could be just what we need to be reminded of that and get many of our people back off of their butts and moving again.

My two cents,

DB

15

Let’s take the numbers in context, please. Yes, a 20% drop in price is bad, and if it was the whole “national market” it would be down right scary, but it’s not.

What I said was that the hardest hit market suffered only a 20% loss (almost anyway) in value. Now, in comparsion, if that same market jumped 200% + in the last 4-5 years, it’s still not that bad.

In fact, of the top ten worst markets of 2007, the total average loss is slightly less than 10%. The National market has only dropped about 5% or so. Not hardly a major down cycle.

Interesting that you say that the housing market is going to get worse because of a recession that was caused by the housing slowdown following a unheard of before housing boom that was caused by Fed’s reaction to a recession. Whew!

And while I don’t wholly agree with PM’s theories on “funny money” there is always a cause and effect of events. That said, one of the major things affecting the stock market now (and I’m not a stock guy, so for what it’s worth) is the high prices for oil, gold and such. These can’t maintain, as they are already dropping. Lower prices there mean better lending rates, lower prices in stores and a whole lot of other “betters.”

Raj

16

D_sbrown

GREAT POST!!

I agree with everything you said.

Roger,

This entire MESS could have been EASILY avoided had ALAN GREENSPAN simply let the tech bubble bust and got on with things. But thats not what happened. He DUMPED interest rates to a point that hadn’t been seen for half a century. That, and ONLY that, created our current situation. If those rates hadn’t been ARTIFICALLY LOWERED, we would have never seen a housing boom in this country.

What we DID SEE was unprecidented SPECULATION in real estate because money was cheap!! The banks all dove in because housing prices were sky rocketing and just when you thought they couldn’t go higher they DID!! The banks threw GAS on this fire with the FUNNY MONEY (no doc, BS appraisals)mortgages that spouted up. MORONS who ordinarily wouldn’t have been able to finanace a 10 year old YUGO were now HOMEOWNERS!!!
Then it happened. People simply decided they could no longer afford to CHASE housing, so they didn’t. THAT and ONLY THAT, cracked a foundation that was built on sand. Once prices stopped rocketing skyward they started falling. Once that occured the ARM/SUB-PRIME disaster reared it’s ugly head. With those FALLING prices people couldn’t refi, then the fall really started to accelerate.

If the NATIONAL market is only down 5% WHY aren’t banks simply taking that 5% loss and refinancing all these people?? I’m tired of hearing the 5% theory. Banks all over the WORLD are FAILING because of a 5% housing correction??? If the U.S. housing market is down just 5%, why are Swiss banks BLOWING UP because they mortgaged a HOME in Massachusetts is now worth JUST 5% less than it was in 2005??? My GOD…even as I type this I can’t believe YOU believe that :shocked

Again. If national housing is down only 5%, MILLIONS would NOT be LOSING THEIR HOMES. Banks are foreclosing on a RECORD NUMBER of properties in this country. Please explain how I can SHORT SALE a foreclosed home for a 25% to 50% DISCOUNT in a market that is only down 5%??? Why would a bank sell ME, that home, at that discount, if YOUR CORRECT???

The answer is… Home prices have crumbled. Banks don’t loan people $300,000 on $200,000 HOMES. THAT is the EXACT situation this country and a HUGE number of international banks are in right now. THEY DID loan money on $300,000 homes that are now worth $200,000 and the homeowners are SIMPLY WALKING AWAY!!!

I find it a little insulting hearing that prices have fallen by just 5%. Yea, OK…I think I may have seen that on the National Assoc. of Realtors Web site. Aren’t they the same folks who told us in 2006 that a bust WOULD NEVER HAPPEN because DEMAND for housing was so GREAT. Cripes, it got so RIDICULUS that they had NO CHOICE but to FIRE their Chief Economist because the interent was playing his excuses and BS predictions on so many sites it became embarassing.

Roger…before I blow MY brains out…Please…cut the 5% theory. It makes you sound like an NAR economist.

SERIOUSLY…You and Baldwin are starting to sound like this guy…

http://economicdespair.blogspot.com/2007/05/lereah-finally-goes.html

17

Pete, ol’ buddy, I’d much rather sound like a “NAR economist” than what you currently sound like. It’s refreshing to know now that you’re getting your information from websites like “economic despair.” Really puts things into perspective. I believe that I’ve already mentioned in various posts how the media can spin this in any way that they want to make it appear worse, or better, depending on their goals. Be interesting to learn who exactly is behind some of these sites, like “despair” above.

And you can believe what you want about the “5% theory.” It’s fact, plain and simple. You can look it up on ANY report that monitors the US housing market (and just to clarify, I think that term is moronic). Heck even the lousy monitoring reports that ONLY the TOP 300 or so markets, most of which were the hyper inflating markets, show only drops of 7-8%. I guess if you pick and choose your facts to present, this one doesn’t qualify.

jake, I’ve been able to shortsale properties for years at 25-50% of value, in any market. In fact, if I bet you’ve been able to do it too. Shortsales discount for alot of reasons NOT associated with the current economic or market. You know that. It just adds drama at this point.

Frankly, I haven’t heard of all of these banks all over the world failing because they loaned money to us sorry Americans. Now, to me, that means that the media in general, is doing one heck of a job hiding this from the public (yeah, right!) or it’s simply not a major story, hence also not a major threat. But then again, I don’t pull my info from D&G websites.

If you can’t believe I said something, then PLEASE stop trying to say that I said something that I did NOT. I NEVER said that a home in Mass. was worth only 5% less than it was in 2005. What I said was that the NATIONAL housing market (that’s ALL of the local markets combined for those following along at home boys and girls) was down a total of 5%. I’m not in Mass’s market, haven’t checked it out, don’t know WHAT it is actually. I do know that it’s NOT in the top 10 worst markets of 2007 which a quick recap the worst was about 7%, if memory serves. Just so we don’t have to clarify this AGAIN, that doesn’t mean that it’s not worse than that NOW. It’s 2008, now (see, I can be negative, too. Make you feel better?)

You’re in a bad market. I get it. It was a good market for years. I doubt that it’s worse than it was in 2001-02. Maybe it’s just me. Maybe it’s because I’m in a market that’s NEVER had a major appreciation (nor a major drop) that has jaded me to my way of thinking. Of course, the fact behind that is that MOST markets are like this, not just a few. Most are slow and steady. It’s the “big swingers” that take the big leaps (and falls) and affect the “National housing markets” numbers the most.

And thanks for the detailed recap of why we’re here. It’s what I said, just not in so many words.

Hey, and just to clarify, no one is saying that tomorrow we’re all going to be dancing in the streets naked and crapping money out our butts.

It’s going to be slow for a while at best, major recession at worst. Alot depends on exactly what measures the gov’t takes AND what the people do with those measures that will greatly determine the outcome. I doubt that we’ll have anything close to the G.D., but who knows? And that is the point, it’s pure speculation.

Raj

18

Here’s a very interesting little 5-minute video about what has happened to borrowers in this country.

http://www.wellcomemat.com/video/38BAC1820B

Mike

19

Great diagram of what is happening, but hardly new news, at this point.

Brings up the point that if lenders do not find ways to broaden the scope of their lending, it’s going to get worse, which is very true.

Case in point, I’ve personally had 3 loans with calls get readjusted from 30 year terms to 12, 12 and 8 year terms. Now, these were doublewides, which is the only market segment in my market that has suffered a severe downturn, so lenders here are very wary of them at the moment. I laughed at the lenders reasoning, which was that they were at a higher risk on this loan because of the amount of foreclosures of DWs and my high level of open loans. So, it’s very risky for you to lend me money at $350/month, which has been coming in like clockwork for 5 years, yet less risky when that gets bumped up to $600/month? That’s lender logic for you!!

Now, on the surface, this appears bad. Cashflow is killed (on the surface, if you don’t include option fees and cashout loans). What to do? You switch from renting/lease-optioning these properties to doing owner financed deals, that’s what!
Now, what could rent for $650, lease/option for $750, will loan for $850-950/month and people will pay it because that is the ONLY way that they can get home ownership.

Raj

20

Isn’t the value of the dollar declining against all the major world currencies? Since the dollar is the currency standard for oil (maybe gold too) doesn’t seem that the cost of oil in US dollars will rise as a consequence of the declining value of the dollar?

As oil prices increase, so does the cost of everything derived from oil or dependent upon oil. The prices for gasoline, home heating oil, motor oil, electric power, plastics, and a lot of synthetic fabrics (just to name a few) are all more expensive because oil is more expensive.

Now, someone will have to make the link for me how the sub-prime mortgage crisis caused the devaluation of the dollar which drove oil prices higher which in turn made the average American’s cost of daily living more expensive. I am sure there is a causal link, I am not economically astute enough to ariculate it.

When the cost of living keeps increasing without real growth in wages, then we are surely headed to a recession if we are not already there.

Just how I see it with my tunnel vision view of the world