Wednesday, April 30, 2008

Nevada Tops in Foreclosures AND Price Declines!

Housing prices post record declines--Las Vegas, Miami and Phoenix all saw prices plummet by at least 20%. And so far, there is no sign of a bottom.

Home prices have posted another record decline, as most of the nation's largest markets suffered double-digit drops over last year, a survey released Tuesday shows.

The S&P Case/Shiller Home Price Index, which tracks 20 of the largest housing markets, showed prices plummeting by 12.7% in the 12 months ending February. That's the biggest fall since the index began tracking prices in 2000.

The 10-city Case/Shiller index is down 13.6% year-over-year, the biggest drop since its launch in 1987.

"There is no sign of a bottom in the numbers," S&P spokesman David M. Blitzer, said in a prepared statement. "Prices of single family homes continue to drop across the nation."

"This is huge," said Dean Baker, co-director of the Center for Economic and Policy Research. "Back a couple of years ago, people were saying, 'Housing prices are not like stocks; they change slowly,'" he said.

But the drop in home prices appears to be accelerating. Indeed, Baker said that at the rate prices are falling, as much as $6 trillion in home values could be wiped out from the top of the market in June, 2006, through the end of this year.

Prices in the Las Vegas metro area have plunged more than any other city, down 22.8% over the 12 months through February. Miami prices plummeted 21.7%. In Phoenix, they've fallen 20.8%.

The declines create a vicious cycle, according to Peter Schiff, the president of the investment firm Euro Pacific Capital. He was sounding alarms about the housing bubble more than two years ago.

As housing price losses extend, he said, the fall-off in demand for homes will deepen. And Schiff expects to see a national price decline of 30% - and by as much as 50% in the worst hit markets.

U.S. Foreclosure Filings Double in First Quarter, Led by Nevada

April 29 (Bloomberg) -- U.S. foreclosure filings more than doubled in the first quarter as payments rose for subprime adjustable mortgages and falling home prices left property owners unable to sell or refinance without losing money.

Almost 650,000 properties were in some stage of foreclosure during the quarter, or 1 in every 194 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of foreclosure data, said today in a statement. The number was 112 percent above a year ago. Nevada, California and Arizona had the highest rates.

Home prices in 20 U.S. metropolitan areas fell 10.7 percent in January from a year earlier, the most on record, declining for the 13th straight month, according to the S&P/Case-Shiller home- price index. A record 18.6 million homes stood empty in the first quarter, the U.S. Census Bureau said yesterday.

Government attempts to slow the flood of defaults ``could be simply deferring another flood of foreclosures,'' Saccacio said in the statement. ``That could extend the length of time it takes the market to recover from this downward cycle.''

Nevada led the nation with the highest foreclosure rate in the first three months of the year. Filings rose 137 percent to 19,595 from the year-earlier period. One in every 54 households there was in default or foreclosure, said RealtyTrac, which counts default notices, auction notices and bank repossessions and has a database of more than 1 million properties.

Home prices sink at record clip; foreclosures keep mounting

Jody Hanson and her boyfriend Scott Harrison want to buy a two-story house with at least three bedrooms in Las Vegas for no more than $225,000. So far they have been out-bid on four foreclosed homes.

"There are just a ton of people here getting foreclosed upon," Hanson said, "so there are just so many deals waiting for you."

Half of all sales in Las Vegas are foreclosures, said Karen Wilson, a local Century 21 agent, though she said the glut of homes on the market has started to wane and transactions have picked up.

Nevada posted the country's worst foreclosure rate in the first quarter, RealtyTrac Inc. said Tuesday, with one in every 54 households receiving a foreclosure-related notice.

"Once the market starts in a given direction, the momentum will carry it down, even below the (historic) trend line, until something happens to change the overall psychology," said Jim Gaines, a research economist at Real Estate Center at Texas A&M University.

Bottom Line: We aren't anywhere near the bottom yet. I've already seen (very nice) bank-owned foreclosure selling for ~ 60% of their Peak prices (a 40% haircut) and with increasingly tight credit markets, waves of future mortgage resets (can you say EXPLODING ARMS), declining tourism/gaming revenues and a weakening job market, foreclosures will continue to increase and prices will keep on falling... Banks can't continue to hold their increasingly massive inventories and will eventually have to resort to fireside sales... I honestly expect to see 1999-2000 prices again ($65 a SF) -- within 24-36 months.

Note: Here's a late add video-- sent to me by a reader:

VIDEO: Angry owners vandalizing foreclosed homes in Las Vegas

All the best


The new universal symbol for gasoline

But rather than solely blaming US energy companies for high gas prices, we should place much of the accountability/responsibility at the feet of our inept foreign and fiscal Gvt. policymakers. Their actions, combined with the hyperinflationary activities of our non-Federal, Federal Reserve Banking System, have brought this problem to our door.

Bottom Line: there is no light at the end of this tunnel and prices are going much higher over the long run. Get ready to bend over at each fillup!

Monday, April 28, 2008

April Consumer Confidence Report Released Tomorrow

Keep your eye on April's Consumer Confidence Data which gets released tomorrow, as it may have a big impact on markets -- data will be released at 10:00 EST. Note: the consensus feels we'll see a reading of 61.

For those of you unaware, Consumer Confidence has been dropping like a rock over the past year -- The March 08 reading fell to a 5 year low and the expectations index hit a 35 year low.

Take a good look at the Consumer Confidence Index graph (Note -- Kinda resembles the US Dollar Index; doesn't it?):

Bottom Line: Anything lower than a 61 reading tomorrow will likely be taken quite negatively and may have far reaching market implications...

The Official March 2008 Consumer Confidence report (released March 25th) is below -- I can't imagine reading a more gloomy report, but feel April's data will probably be worse nonetheless:

The Conference Board Consumer Confidence Index, which had declined sharply in February, fell further in March. The Index now stands at 64.5 (1985=100), down from 76.4 in February. The Expectations Index declined to 47.9 from 58.0. The Present Situation Index decreased to 89.2 from 104.0 in February.

The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world's largest custom research company. The cutoff date for March's preliminary results was March 18th.

Says Lynn Franco, Director of The Conference Board Consumer Research Center: "Consumers' confidence in the state of the economy continues to fade and the Index remains at a five-year low (March 2003, 61.4). The decline in the Present Situation Index implies that the pace of growth in recent months has weakened even further. Looking ahead, consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon. The Expectations Index, in fact, is now at a 35-year low (Dec. 1973, 45.2), levels not seen since the Oil Embargo and Watergate."

Consumers' assessment of present-day conditions weakened further in March. Those claiming business conditions are "bad" increased to 25.4 percent from 21.3 percent, while those claiming business conditions are "good" declined to 15.4 percent from 19.1 percent. Consumers' appraisal of the job market was also more pessimistic than last month. Those saying jobs are "hard to get" rose to 25.1 percent from 23.4 percent, while those claiming jobs are "plentiful" decreased to 18.8 percent from 21.5 percent.

Consumers' short-term expectations also deteriorated further in March. Those expecting business conditions to worsen over the next six months increased to 25.4 percent from 21.6 percent, while those anticipating business conditions to improve declined to 8.1 percent from 9.7 percent in February.

The outlook for the labor market was also more pessimistic. Consumers expecting fewer jobs in the months ahead increased to 29.0 percent from 28.0 percent, while those anticipating more jobs declined to 7.7 percent from 8.9 percent. The proportion of consumers expecting their incomes to increase declined to 14.9 percent from 18.0 percent.

Best Regards


Sunday, April 27, 2008

US warns Iran -- $10 Gas?

Back in February 08, I wrote: Iran’s Oil Bourse Set to Open this Sunday which explained how Iran's new Bourse was provoking future military action by posing a huge long-term threat to both the US Dollar & continued American global hegemony.

I warned that rhetoric w/regard to Iran would probably soon ratchet up again; a catalyst to military action would likely be found; and that bombs might be falling from the sky before November 08, as the Bush administration would not take lightly this deliberate slap in the face of US global economic power; nor did they trust leaving the problem for the the next regime.

Times Online today: US warns Iran of retaliation over Iraq action

America's top military officer has ratcheted up the pressure on Iran by issuing an unusual public warning that the Pentagon is planning for “potential military courses of action”. .”

Admiral Mike Mullen, chairman of the joint chiefs of staff, blamed the Iranian government and Quds force of the Iranian Revolutionary Guard for its “increasingly lethal and malign influence” in Iraq. He said conflict with Iran would be “extremely stressing” for America’s overstretched forces, but added: “It would be a mistake to think that we are out of combat capability.

Mullen said he was increasingly concerned about Iran’s growing involvement in supplying munitions and training to rebel Shiite militias and “killing American and coalition soldiers in Iraq”.

Speaking at a Pentagon news conference late on Friday, he said recent operations in the southern port city of Basra had revealed “just how much and how far Iran is reaching into Iraq to foment instability”. A Pentagon source said the admiral’s frankness was “extremely significant” and could pave the way for some form of attack on Iran. However, Mullen said: “The solution right now still lies in using other levers of national power, including diplomatic, financial and international pressure.”

Mullen’s tough rhetoric came shortly after General David Petraeus, the US commander in Iraq responsible for the troop surge, briefed Congress about the “nefarious activities” of the Quds force in stirring violence in Iraq. There were a total of 923 civilian deaths in Iraq last month, the highest number since August 2007.

“We should all watch Iranian actions closely in the weeks and months ahead, as they will show the kind of relationship that Iran wishes to have with its neighbour,” Petraeus said.

Petraeus was nominated last week to take over as commander of all US forces in the Middle East from Admiral William Fallon, who resigned in March after becoming an outspoken critic of American policy towards Iran.

My Thoughts:

As a USAF veteran, let me assure you that my following comments are not un-patriotic, but I can NOT buy into ANY of this administration's B.S. propaganda.

The whole middle east issue (Iraq, Iran, Afghanistan, you pick who may be next) is all about controlling Oil, maintaining US dollar hegemony and supporting massive contracts for companies like Haliburton -- to make Dick Cheney's rich friends richer.

Our troops are dying in a futile attempt to (1) save our dying currency (caused by excessive Gvt spending/debt and a Federal Reserve Banking system that has created one too many popping bubbles -- which has ultimately led to the present crashing financial/banking system that will require a hyperinflationary event to save it from a full-blown collapse) and (2) to control dwindling worldwide oil supplies.

Food for thought: The world can currently extract and bring to market ~ 87 Million Barrels of Oil per day (Mbpd) and we consume ~ 86Mbpd -- 40% of which comes from the Persian Gulf market and must traverse through the very narrow Strait of Hormuz (see picture below)... Note where Iran sits on this narrow Channel...

If we DO start dropping bombs on Iran, they will likely mine the Strait and/or sink a supertanker or two with missiles/etc -- locking up 40% of the world's oil supply. You think gas/oil prices are painful today? Better start preparing for $200+ barrel oil and $10+ gallon gas (if you can actually find it anywhere)



Which City do we want to lose?

Saturday, April 26, 2008

Weekend Funnies

Sometimes the best humor comes from reality

End of the road for FOMC rate cuts; Pause to come?

Consensus feels, due to rising inflation pressures, a slowdown in unemployment figures, a rising equity market and a less volatile credit market, that the FOMC may be towards the end of their rate cutting and many now feel a "pause" will be in order (either this time - April 30th or next - June 25th)

Dollar Rallies on Fed Rate Pause Speculations

The dollar rallied in NY trading Thursday following a WSJ report that the Federal Reserve may signal an interest-rate pause at the next FOMC meeting due to inflation concerns.

A Wall Street Journal report by Fed watcher Greg Ip said the Federal Reserve may cut the federal funds rate by 25 basis points next week and then keep the rate steady from there.

The Case For Dollar Strength?

The FOMC-There’s evidence that policy makers may want to pause now in order to give the actions they have already taken time to work their way into the system. Fed Governor Kevin Warsh said last week that as credit markets begin to operate more smoothly, more of the Fed’s interest-rate cuts will filter through to the economy. "The problems afflicting our financial markets are indeed long-in-the-making," he said. "Time is an essential tool of our policy response."

There have been some remarkable changes recently in how the market sees the FOMC members making policy changes at the April 29-30 meeting and beyond. Four weeks ago, traders saw a 72% chance for a 50 basis point move in April and a 28% chance for 25 basis points. Last week, traders began seeing no chance for a 50 basis point cut and now see an 18% chance the Fed will make no move at all (the rest of the bets are for a 25 basis point cut, which is the outcome that is most likely). What’s more, the chances of the Fed going below 2.0% on the overnight rate are decreasing rapidly-there currently is a 69% chance that the Fed will make no move at all at the June meeting. This doesn't mean the Fed is necessarily finished adjusting policy, but rather a that period to pause in order to assess the effectiveness of the policy changes that have already been made seems to be in order.

U.S. stocks set to face a sterner Fed

U.S. stocks will face renewed pressure next week, with investors facing not only another heavy week of earnings, but also key data that may confirm the U.S. economy is in recession and a Federal Reserve increasingly expected to pause its campaign to lower interest rates

Although many commentators are talking as if the Federal Reserve has already decided to cut interest rates by a quarter-point rate cut next week followed by a pause over the summer, there is a chance the Fed could instead decide to just pause right here, Fed watchers said

My thoughts:

I don't buy it, as there are still far too many uncertainties out there for the Fed. I expect a 25Bp cut this time around followed by another in June (or an emergency cut if warranted beforehand) and a 1.25% rate by the end of the year.

Certainly we may see a small dollar rally beforehand, but I expect the USDX to easily fall below 70 this year as the fed continues to add fuel (liquidity) to the raging economic fire.

We are nowhere near the end of this housing/credit/insolvency crisis and think ZIRP (Zero Interest Rate Policy) is not out of the question in our future. Each time a new crisis erupts, the fed will print/cut/inject in an effort to contain it, but will eventually run out of monetary ammunition... That's when the real hyperinflationary fireworks will begin.

Again, we're no where close to the end of this financial crisis: Will the Fed Cut Rates again? ; Ushering In a New Economic Era


Friday, April 25, 2008

Ron Paul interview on state of the US economy

A superb/fascinating one-on-one interview with Presidential candidate, Congressman Ron Paul.

Perhaps the last honest politician in Washington, Congressman Paul speaks candidly about the Federal Reserve System, our system of easy credit/debt, inflation, falling dollar, gold/silver, poor foreign policy, entitlements, taxes, the US Constitution and the economic collapse that will likely soon follow...

Bottom Line: The poor state of our economy, the falling dollar and our corrupt system bodes quite poorly for our future.

Clips 1-3 below mainly discuss the issues mentioned above;

Clips 4 & 5 cover Ron Paul's Presidential campaign, biased media coverage, freedom & liberty, etc.


Part 1

Part 2

Part 3

Part 4

Part 5

FIAT EMPIRE - Why the Federal Reserve Violates the U.S. Constitution

One of the finest videos I've seen on the Federal Reserve Banking System. This clip runs about 50 minutes long, but I guarantee it will be well worth your time. I plan to leave this post towards the top for a couple of weeks. Really hope you take the time to watch. (NOTE: Click Start twice and give it a few seconds to load)

Find out why some feel the Federal Reserve's practices are a violation of the U.S. Constitution and others feel it's simply "a bunch of organized crooks." Discover why experts agree the Fed is a banking cartel that benefits mainly bankers and their corporate clients as well as a Congress that would rather increase the National Debt to over $9 trillion than raise taxes. Find out how the corporate media facilitates the partnership between the Fed and Congress and why it fails to disclose what's going on. Lastly, find out how the Federal Reserve-member banks are owned and controlled by an elite group of insiders.

Thursday, April 24, 2008

Thursday's Economic News Roundup

The Major US indices closed in the green today on good news from Ford and an unexpected drop in US Jobless claims:

Wall Street rallied Thursday after the government's jobless claims data and Ford Motor Co.'s first-quarter results helped reinject some optimism about the economy into the market.

The Dow Jones industrial rose more than 80 points as investors focused on the Labor Department data showing weekly unemployment claims dropped and word that Ford had a $100 million profit in the first quarter.

Investors were also able to set aside any concerns about another drop in factory orders for big-ticket manufactured goods and weak forecasts from Inc. and Starbucks Corp.

OK, I'll give the indices credit for this, but what of other news today?

New home sales plunge to lowest level in 16 1/2 years, prices drop by largest amount in 38 years

Sales of new homes plunged in March to the slowest pace in 16 1/2 years as a two-year housing downturn extended into the start of another spring sales season. The median price of a new home in March compared to a year ago fell at the fastest clip in 38 years.

Sales of new homes dropped by 8.5 percent last month to a seasonally adjusted annual rate of 526,000 units, the slowest sales pace since October 1991, the Commerce Department reported Thursday.

The median price of a home sold in March dropped by 13.3 percent compared with March 2007, the biggest year-over-year price decline since a 14.6 percent plunge in July 1970.

As financial markets grow increasingly worried about inflation pressures, Freddie Mac reports that fixed-rate mortgages move higher--Rates on 30-year mortgages now top 6%

"Average rates on mortgages increased across the board this last week as the most recent economic data raised inflationary concerns in the capital markets," said Frank Nothaft, Freddie Mac's chief economist.

Fueling those concerns was a bigger-than-expected 1.1% jump in wholesale prices and a renewed surge in energy costs, which have pushed gasoline and crude oil prices to record levels.

US Airways, following Delta & Northwest, Reports Loss

US Airways Group Inc. said Thursday it swung to a loss in the first quarter, punished like other airlines by the rising cost of jet fuel.

US Airways said it lost $236 million, or $2.56 a share, in the January-March period, compared with a profit of $66 million, or 70 cents a share, a year earlier. Excluding special items, the net loss was $239 million, or $2.60 a share.

US Airways' earnings report came a day after Northwest Airlines Corp. and Delta Air Lines Inc. reported combined losses of more than $10 billion. Most of those losses came on write-downs to reflect a decline in market value.

Motorola 1st-qtr loss widens as mobile-device sales plunge and it forecasts 2nd-qtr loss

Struggling cell phone maker Motorola Inc. disappointed investors Thursday when it posted a wider first-quarter loss and failed to meet revenue forecasts.

The suburban Chicago company, which is in the midst of a massive reorganization that includes splitting itself into two publicly traded companies, said it lost $194 million, or 9 cents per share, for the quarter that ended March 31.

Sales fell about 21 percent to $7.45 billion, down from $9.43 billion a year ago.

Microsoft reports 11 pct profit drop

Microsoft Corp.'s third-quarter profit fell 11 percent, the software maker reported Thursday as executives renewed their warning that they may go hostile or walk away from their $44 billion-plus offer for Yahoo Inc. if Yahoo doesn't agree to a deal by Saturday

Sales of Windows software were not as strong as Microsoft or analysts had predicted in the quarter, despite Microsoft's comments that sales of Vista licenses -- now at 140 million, up from the 100 million mark reached in January -- are on track.

Revenue in that division fell 24 percent to $4.02 billion.

American Express profit falls 6%; New York-based credit-card company slips as U.S. cardholders struggle to make their payments.

American Express Co.'s first-quarter profit slipped 6% as the credit-card lender saw more U.S. cardholders fail to make their payments, it said Thursday.

Like other lenders, the New York-based company has been writing off more loans as unpaid as U.S. borrowers struggle with slumping home prices, rising costs, and a less certain job market.
The company's total provisions for credit losses amounted to $1.27 billion, a 48% increase from the first quarter of 2007.

U.S. card services profit fell 19% to $523 million in the first quarter compared with the same period a year earlier, as profit from international card services rose 30% to $133 million.

The writeoff rate in U.S. card services, including both on-balance sheet cardmember loans and off-balance sheet securitized cardmember loans, increased to 5.3% from 3.7% a year ago - faster than the company anticipated.

United hikes fares 3% to 5%, blaming fuel costs; The second-largest U.S. carrier increases almost all of its domestic airfares for the third time in two weeks.

United Airlines, the second-largest U.S. carrier, raised nearly all its domestic airfares by 3% to 5% Thursday as it struggles to cope with soaring fuel costs.

The widespread increase is the third in a row initiated by United in just over two weeks, and will likely entice other carriers to follow suit. The Chicago-based carrier's last two attempts were quickly matched by competitors and remain in place in many markets.

The move comes just two days after Delta Air Lines Inc. Chief Executive Richard Anderson said domestic carriers need to raise tickets 15% to 20% just to break even at existing fuel prices.

"This is the most challenging financial period in the history of the industry," said John Heimlich, chief economist of the Air Transport Association. "Just at the same time we have this unprecedented surge in jet fuel prices with no end in sight, we're bumping up against a weakening economy."

My Thoughts:

Maybe I'm biased, but based on the news reports above, it certainly doesn't look like our economy is getting any better... Could the PPT and pundits possibly be trying to lull the cattle into a false sense of security while leading them to the slaughterhouse? Oh well, until the sheeple (cattle) pull their heads out of the sand there is really nothing I can do about it...

OK, last but certainly not least, here is a very good opinion article that I thought you would enjoy:

The U.S. Dollar has Been the Gold Bug’s Best Friend – Until the “Amero” Debuts

As all gold bugs know, gold’s historic rise since 2001 has largely been attributed to the dilution of the U.S. dollar. Trade deficits, government overspending and the more recent sub-prime mortgage debacle have all helped deflate the greenback while driving up the price of gold.

However, what would happen if the U.S. dollar just disappeared? How would gold and other hard assets be valued then?

This week the three NAFTA amigos, President George Bush, Prime Minister of Canada Stephan Harper and Mexican President Felip Calderon met to ram new polices down our throats which will impact gold and other commodity prices going forward.

The reopening of the North American Free Trade Agreement is the first strategic move toward a North American Union that will create a new currency to compete with the Euro.

On Tuesday, the U.S. dollar sank yet again with the Euro breaching the psychologically significant $1.60 mark for the first time.

It’s only a matter of time before the U.S. dollar collapses to the point of no return internationally. With the Fed unable to manage the slide with higher interest rates due to the economic slowdown in the U.S., the three amigos are setting up the chess pieces for the inevitable next move: the creation of a North American currency, the “Amero.”

The Hallmark of Bush’s presidency could very well be the creation of the Amero, the perfect solution and savior to the failing U.S. dollar. Whether it’s Bush or the next president, at some point in the not too distant future the dollar will be abandoned and a new game will begin.

International trade has already started to price commodities in Euros as foreign governments holding dollars have lost their shirts while holding Euros has increased their buying power.

The Euro was introduced with the same degree of stealth such that the citizens of Europe had little choice but to adopt it.

Some thought a European union was an impossible dream but now they have 27 nations under its authority with more members waiting in the wings.

The U.S. is already facing economic hardship which will only get worse. The Amero will be introduced to the American public as the administrations solution to recover from the current financial mess.

In Canada, the Canadian dollar has been trading at close to par for several months. Canadian politicians can easily sell the idea of the Amero by simply making promises of cheaper gas prices (Americans pay amongst the lowest prices in the western world.) Plus many Canadians who live near the border travel to the U.S. for major shopping binges buying assortment of much cheaper goods from dairy products, used cars, electronics and clothing. If they can get the same prices at home, the NAU will be an easy sell.

As far as the Mexicans are concerned well, doesn’t nearly everyone already speak Spanish from California to Florida?

In the interim, gold’s still got a long way to go so stay tuned. However be aware that the Amero will put the brakes on gold’s march as the illusion of strength and power will put confidence into the world’s latest fiat money system. Also know that in the history of mankind, fiat money systems have always failed. The U.S. dollar is the latest victim. Bill Ridley:

Best regards


Wednesday, April 23, 2008

Worse than a Recession?

Peter Schiff on Bulls and Bears says YES -- We're on the verge of economic collapse

Fed Underrates Inflation

CNN Interview with John Williams (from John has been an economist for many years and his keen investigative work has been responsible for illustrating how our Gvt manipulates a myriad of figures to radically understate inflation and unemployment while overstating GDP and a whole host of other data products -- yes, all the bogus, but "Official" data products that get cited by our gvt/media.

Here John discusses the rapid growth of M3 (our money supply) and what we can expect to see in our economic future -- Severe Inflation, falling dollar (worth_less) and a severe recession (the worst business cycle since the great depression); "potentially" followed by a Depression

Tuesday, April 22, 2008

Busy Day for Economic News

Existing home sales fall in March

Sales of existing homes fell in March, the seventh drop in the past eight months, as the spring sales season got off to a rocky start.

The median price of a home was down compared with a year ago, and some economists predicted home prices could keep falling for many more months given all the troubles weighing on housing, from a severe credit crunch to a rising tide of foreclosures.

The median price of a home sold last month was $200,700, a decline of 7.7 percent from a year ago and the seventh consecutive year-over-year price drop. It was also the second biggest decline following a record 8.4 percent drop in February. These records go back to 1999.

Patrick Newport, an economist with Global Insight, said he believed existing home sales would keep declining for another six months, with home prices falling well into 2009 given all the headwinds facing the housing market, including sinking consumer sentiment.

Yale economist Robert Shiller, who developed one of the widely followed gauges of home prices, said in a speech Tuesday that home prices, which have already fallen about 15 percent from their peak in 2006, may fall further than the 30 percent drop experienced during the Great Depression of the 1930s, so far the biggest decline in home prices in the country.

"Basically we are in uncharted territory," Shiller said, noting that the 85 percent rise in home prices from 1997 to 2006 after adjusting for inflation had represented the biggest housing boom in U.S. history, so the fall in prices could be just as historic.

"It will be a long and painful end to the housing downturn because it will take a lot more price cutting to work off all of the inventory that is out there".

The inventory of unsold homes rose 1 percent in March to 4.06 million homes, representing a 9.9 month supply at the current sales pace, as rising foreclosures dump more homes on the market.

Supply Scare Sends Oil Toward $120

Oil was flirting with $120 on Tuesday, driven by a familiar theme: overseas supply concerns.

By late afternoon, light sweet crude for May delivery was up 13 cents to $119.50 on the New York Mercantile Exchange.

Oil's rise wasn't the result of oil alone, as the dollar weakened further and the National Association of Realtors reported a drop in both home sales and prices.

At the pump, the average price of a gallon of regular gas rose 0.8 cents Tuesday to a record $3.511, according to a survey of stations by AAA and the Oil Price Information Service. Although gas prices follow moves made by oil, gas is also being affected by falling supplies that comes with a seasonal switch made by refiners.

The high cost of oil has been drowning the highly oil-dependent airline industry. Airline stocks plunged Tuesday, after United Airlines parent UAL dropped the biggest earnings bombshell of the day, reporting a whopping first-quarter loss of $4.45 a share. United revealed plans to rein in costs in an effort to temper the impact of spiking jet fuel prices.

AirTran also announced that soaring fuel prices pushed it into the red during the first quarter, and kept it from enacting its expansion plans.

Euro breaks through $1.60 as dollar slumps to record low

The euro roared to another record high Tuesday, crossing $1.60 for the first time ever after a pair of European Central Bank governors said high inflation may cause the bank to raise interest rates. The U.S. dollar also fell against the Japanese yen and the British pound.

The euro rose as high as $1.6018, more than a penny above the $1.5916 it bought late Monday. The 15-nation currency, which was introduced in 1999, has traded as low as 82 cents. It has surged recently, rising 20 cents against the dollar in just five months and 10 cents in just two months.

The dollar has been weighed down by a combination of gloomy U.S. economic data and high European inflation — fueling expectations that the Fed will cut interest rates yet again while the European Central Bank will leave rates unchanged.

California home foreclosures climb as risky loans sour

Foreclosure proceedings against California homeowners jumped by more than 140 percent in the first quarter compared to a year ago, the result of risky loans during boom times, a real estate research firm said Tuesday.

Most loans that went into default originated between August 2005 and October 2006, according to DataQuick Information Systems, which said the market was shaking off its "'loans-gone-wild' activity" during that time.

Lenders sent homeowners 113,676 default notices from January through March, up 143.1 percent from 46,760 during the same period of 2007 and up 39.4 percent from 81,550 during the last three months of 2007.

The first quarter numbers marked the highest foreclosure level since DataQuick began keeping track in 1992.

Default notices hit their highest levels in nearly all of California's 58 counties, but Los Angeles County was just shy of its peak in the first quarter of 1996, DataQuick said.

One of every three resale homes sold in California from January through March had been foreclosed at some point during the previous year, up from 3.2 percent a year earlier, DataQuick said.

And I saved the best article for last:

Commercial Banks Heading for Huge Derivatives Losses- Credit Crisis Turning into Credit Armageddon (Click link above for entire article--snippets below)

While most investors are focused on the latest stock market rally, hidden from view is a monumental change that few recognize and fewer understand: Unprecedented amounts of old debts are coming due in America, and many are not getting refinanced.

Even worse, borrowers are going into default, lenders are taking huge losses, and outstanding loans are turning to dust.

The numbers are large; the government's response is equally massive. So before you look at one more stock quote or any other news item, I think it behooves you to understand what this means and what to do about it ...

First, the Federal Reserve is reporting a big contraction in short-term debts.

This is not a mere “slowdown” in new lending, which would be relatively routine. This is an actual reduction in the short-term loans outstanding, which is anything but routine ... which implies a rupture in the nation's credit spigots ... and which could deliver a new shock to the U.S. economy.

If this represented a planned and voluntary effort by lenders to begin trimming America's debt excesses, it might actually be a good thing.

But that's not the case here, not even close. Rather, this debt reduction is almost exclusively forced on lenders by the pressure of events — the plunging value of mortgages, the surging defaults by debtors, and the huge losses that have caught both banks and regulators off guard.

Second, the Comptroller of the Currency (OCC) is reporting havoc in the derivatives market.

In recent decades, derivatives have grown far beyond any semblance of reason. But in its latest report , the OCC reveals that in the fourth quarter of 2007 ...

- For the first time in history, the notional value of derivatives held by U.S. commercial banks plunged dramatically — by $8 trillion ...

- For the first time in history, U.S. banks suffered a massive overall loss on their derivatives — $9.97 billion, and, again ...

- These numbers do not yet reflect this year's disasters at Bear Sterns and other institutions.

The OCC's chart below illustrates the magnitude and drama of the decline:

The chart shows that, until the third quarter of last year, U.S. commercial banks had been making consistent profits from their derivatives quarter after quarter.

Their total revenue from these and related transactions (red line) never dipped into negative territory ... rarely suffered a significant decline ... and was even making brand new highs through the first half of 2007.

Then, suddenly, in the fourth quarter of last year, we witnessed a landmark game-changing event: For the first time ever, U.S. commercial banks lost big money in derivatives in the aggregate ( as you can plainly see by the sharp nosedive of the red line).

Again, if this were part of a planned retreat by the banks to more prudent trading approaches, it would be a positive. But it's anything but!

Indeed, the OCC specifically states in its report that the sudden and unusual reduction in derivatives was due entirely to the turmoil in the credit markets.

And ironically, nearly all of that turmoil was concentrated in “credit swaps” (blue line in the chart) — the one sector that was designed to protect investors from this precise situation.

These credit swaps were supposed to act as insurance policies that big banks and others bought to help cover their risk in the event of defaults and failures. But they're not working out as planned: Just in the fourth quarter, U.S. banks had a net loss (after all profitable trades) of $11.8 billion on credit swaps alone, according to the OCC.

Those losses helped wipe out all the profits they made in other derivatives, leaving a net overall loss of $9.97 billion.

Third, the International Monetary Fund (IMF) predicts that this crisis is barely ONE-THIRD over!

The Bottom Line for You Right Now

First, whether the stock market goes up or down in the near term, this crisis is far from over — and it's likely to get a lot worse.

Second, credit is already scarcer and is probably going to be even harder to get as this crisis progresses.

Bottom line: If you're looking forward to a future day when you can buy properties at bargain prices, don't count on doing so with a lot of borrowed money. Instead, be prepared to put up substantial amounts of cash.

Third, some banks won't survive this crisis.

Click here for the rest of this superb article


Monday, April 21, 2008

Death of a Dream

I just read a great article that needs to be shared. Though quite unconventional and slightly radical in his rant, Roger Mason makes many very good points and I rather enjoyed his writing style/perspective... However, if his timeline and conclusions are correct (which I have some reservations about), we are in far worse trouble than even I envisioned. Enjoy!

Death of a Dream

After 232 years the American Dream is over folks. In the 1780's Alexander Tyler wrote, "A democracy is always temporary in nature lasting on average 225 years and cannot exist as a permanent form of government." The U.S. Constitution and Bill of Rights have been gutted. We almost elected an openly Marxist lesbian as our President and Commander in Chief. Obama Osama is to the left of Hillary, if you can comprehend that. McCain is dying of jaw cancer as if that isn't obvious. 1 in 10 American adults, children, and infants are on food stamps. One in six are government employees. The housing crash is just warming up! 59% of homes for sale in Los Angeles are fore-closures. They are selling for 50 cents on the dollar at auction. Adjusted for inflation since 2005 it is a quarter on the dollar. The dollar is useless. Our trade and budget deficits are egregious. The DJI is ready to collapse down to 5,000 ultimately. The DJT and DJU are hopeless. Dow Theory is telling us the house of cards is about to fall. Illegal immigration is completely out of control, and McCain will open the border gates even wider. Real unemployment is 14%, and real inflation is 18%. Four major airlines just went bankrupt- ATA, Skybus, Frontier, and Aloha (ATA was once the 10th largest). Alan Greenspan just publically admitted we're in a recession. We've been in one for months, and 70% of Americans know that. Gordon Brown (England's Prime Minister) just said we face the greatest economic crisis of the century. George Soros said the economic situation is hopeless. Warren Buffet basically said the same thing. Only 10% of our jobs are in manufacturing. We're now a mere service economy. We are closer to the Much Greater Depression every day.

Real inflation is now up to 18% as proven by configured M3 figures (which the government refuses to print anymore). See if you want to verify that. Has your salary gone up 18%? Your home? Your private or government pension? Your Social Insecurity? Of course not. Your wealth has to go up 18% a year now just to break even! Let's take a prime example: General Electric (GE) was $28 five years ago.

Estimating 10% real inflation over that time GE stock would have to go up ($31, $34, $37, $41, $45) to $45 just to break even. It is $32 now, so it is DOWN 30% in the last five year. The real purchasing power is down almost a third in only five years.

What can you do? Put every penny you have into silver. If you can't convert your IRA/401k to American silver stocks then dump it. Take the 40% hit, and put the 60% into silver. There is a severe shortage of silver bullion, but you can still buy it at Gaithersburg Coin in Maryland. There has never been a silver shortage in the history of the world until now. Soon we will be completely out of silver, and mine supply (and recycling) will not begin to cover the shortage. Silver will go to $200 an ounce and probably keep going. Gold should merely go to $3,000.

Look for $30 silver by Christmas. In addition to Quaterra, Silverstone, Impact, U.S. Silver, ECU, Fury, Endeavor, and First Majestic, we're going to add Genco today (we don't own this). There are only about 50 real silver mines in the world, and only maybe a dozen are worth buying. You must hold any bullion in your own personal physical possession. You cannot own ETF's, silver certificates, or other paper silver. You cannot let anyone store it for you. If you don't possess it, you don't own it. The $4 correction from $21 to $17 makes this a strong market which is now blue skies all the way to $30. Silver has far, far more potential than gold, and cannot be confiscated.

With Admiral Fallon out of the way, our illegal, immoral, insane, unethical attack on Iran looms closer. McCain and Petraeus won't shut up about the "danger" Iran poses to us. We have already attacked the Iranian banks with FinCEN. The Saudis are preparing for it. The Russians have detected American military buildup on the Iran border. Our war- ships are in the Persian Gulf. We have a record number of troops in Afghanistan. Syria is preparing for an attack by the U.S. CNBC, CNN, and the media constantly beat the Iran-ian war drum. An attack on Iran is going to end in disaster in many, many ways. Go to and read Paul Craig Roberts about this. No more oil will be just one of the results. Gasoline and diesel are now $10 in Europe, and soon will be $10 here. Can you say "$10 gasoline"? Truckers are already starting to strike to stop federal and state diesel taxes for trucks. They are going to have a nationwide strike as they can't feed their families. American moves by truck. A trucking strike will freeze this country. Suspend-ing all commercial diesel fuel taxes would be good for this country. Support the truckers, unless you want the economy to grind to a halt overnight.

CNBC is the official government disinformation center, and Jim Cramer the Emperor of Disinformation. Watch his show to see what NOT to do. Whatever he tells you to buy, you sell it. Notice that Cramer missed the move in gold from $300 to $1,000, and the move in silver from $5 to $20. He still ignores both gold and silver, while he tells you to invest in the house-of-cards stock market. Do the opposite of anything he says. The DJI to gold ratio used to be 1:1 in 1980, but went to 45:1 in 2000. It is now 13:1 (12,300: $930) and headed back to 1:1.

Have you noticed your local shopping mall is going under? Have you noticed how many empty stores there are in your local strip malls? The Big Three Auto Makers are all broke. The entire banking system is bankrupt. The fifth largest bank in the world, Bear Stearns, is bankrupt. Citibank, Wells Fargo, Lehman, Bank of America are all next. Wachovia, the fourth largest, is about to go under as well. Open your eyes! Nothing like this has happened in almost 80 years since the last depression. You don't need to be a psychic to see the future; just look closely at today. The bailout (at YOUR expense) will just make things worse. The entire world banking system is coming unglued with the DERIVATIVES unraveling. Now the Federal Reserve is going to take over our entire investment system, nationalize the banks, and make Russia look like a free country. After the Federal Reserve was formed in 1913 the dollar has lost 99% of it's value. That's right- the Fed has made the dollar worth a penny in 95 years. Countless major chains are going under every day. The Top 10 Home Builders are completely and totally done in. The budget deficit worsens every day. The national debt gets deeper. The trade deficit worsens. We can't even sell T-Bills and T-Bonds to the fools who were buying them. The U.S. dollar is Monopoly Money. Inflation is destroying the middle class here- the very bedrock of America. We used to have the cheapest most plentiful food supply on earth bar none. No longer. Seen $1.19 lemons lately? Watch beef become unaffordable by the end of the year like in socialistic Europe. Restaurants are going broke. Hotels are going broke. Most everyone is going broke.

The energy crisis is a lie; we have endless energy available now. Global warming is complete scam. Ethanol is a government funded scam- at your expense. Coal, natural gas, and uranium are plentiful, and will last for hundreds of years. The military has enough oil off the coast of Alaska for 100 years. We don't even have any oil refineries now. Oil is useless without refineries. Windmills for power is a joke out of the 18th century. Hydrogen fuel cells are a long, long way off in the future. Hydroelectric is limited. We have no SASOL plants in the U.S. to make endless $4 liquid fuel out of coal. 60% of all our energy is ELECTRIC, and we can generate all we want with coal, natural gas, and uranium.

If you think things are bad now, by Christmas you'll be ready to jump off a bridge. 2009 to 2010 will usher in the Much Greater Depression, and events will unfold so quickly you'll be shocked and blindsided. We'll get Patriot Act II for finances. Banks will be nationalized as all police states do. Food and gasoline will be rationed. You'll think you're in Cuba, only you won't have bananas. There are already worldwide food riots. People around the world cannot cannot even get rice to eat. The housing crash is just beginning, along with the stock market collapse. It's just getting warmed up folks.

Your salary, your house, your pension, your Social Insecurity, the stock market all have to go up 18% just to break even! That's just to break even and not lose. Are they all going up 18% or more? Of course they aren't, and your standard of living is going to hell every day- as is your future. Silver is $18, and will be $30 by the end of the year. Silver is your financial saviour. Silver has almost quadrupled in the last five years. Silver is going to $200 an ounce in the next five years. Silver is a much better investment than gold, and gold is a great investment.

So many major longtime companies and chains are closing stores and going out of business you can't name them all. Sharper Image, Wilson's Leather, Pep Boys, Comp USA, Ethan Allen, Macy's, Levitz, PacSun, Lane Bryant, Talbots, Krispy Kreme, Starbucks, Harley Davidson, 84 Lumber, Home Depot, RentACenter, Rite Aid, Sprint, Disney Store, and Linen'n'Things are just SOME of them. The list gets longer every month.

If you want to read more go to and read the Contributed Commentaries.
Go to to see what Ted Butler has to say about silver.

Join GATA at can get a two week free trial and it's $199 a year.

Or you can just read the Econmic Rants twice a month for free. Soon the website will open. Free of course.

Now go out and buy all the silver you can!

Click here for Roger's Past Monthly Rants

News of Interest today

Sallie Mae affirms outlook, warns of "train wreck"

WASHINGTON (Reuters) - Sallie Mae (SLM.N), the largest U.S. student loan company, on Thursday affirmed its 2008 profit forecast, but warned of a "train wreck" in the $85 billion education financing market without urgent government intervention

Chief Executive Al Lord told analysts on a conference call: "We've been predicting something of a train wreck" in mid-2008 without prompt changes in a market hit by fallout from the subprime mortgage crisis and cuts last year in federal subsidies to student lenders.

Legislation pending in Congress would let the Department of Education buy federally guaranteed student loans from lenders unable to sell them on the secondary market, where investors have retreated from securitized debt.

The bill would also let the department funnel capital to colleges through state guaranty agencies and call on federal financial institutions, including the Federal Financing Bank, to pump liquidity into the student loan market.

Sallie was being flooded with loan applications from students, reflecting the exit of dozens of other lenders from the business.

He said loan demand at Sallie was running at $3 billion a month, while the company has only been able to access funding of about $1 billion a month -- at record-setting costs

Dollar under pressure after Bank of America misses

The dollar was weaker against most major counterparts Monday, after Bank of America Corp.'s earnings shortfall reminded investors that the U.S. financial sector is not out of the woods yet.

Bank of America Corp.'s first-quarter profit fell 77% as credit-loss provisions jumped $4.78 billion, driven by weakness in home-equity loans as well as credit extended to small businesses and home builders.

Comments from European Central Bank Governing Council member Axel Weber also gave euro sentiment a lift. Weber reportedly said inflation is likely to remain elevated and suggested the ECB might have to hike rates.

The British pound sterling was under pressure itself, after the Bank of England announced details of a plan to let commercial banks use mortgage-backed securities as collateral for loans in an effort to thaw frozen credit markets.

Meanwhile, another house price index showed further weakness in the U.K. housing market. Rightmove said annual house price inflation, without seasonal adjustments, slowed to 1.3% in April from 5%, the slowest pace since July 2005.

Crude Oil Trades Near Record After Attackers Cut Nigeria Supply

April 22 (Bloomberg) -- Crude oil traded near a record above $117 a barrel in New York after attacks cut Nigerian output and the dollar dropped against the euro.

Royal Dutch Shell Plc said yesterday 169,000 barrels of oil a day was suspended because of attacks last week in Nigeria, Africa's largest oil producer. OPEC should help replenish oil inventories because prices are ``too high,'' International Energy Agency Executive Director Nobuo Tanaka said yesterday.

``We are clearly headed over $120 a barrel and we are targeting $125,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York. ``The last thing we need is another supply disruption. The outage certainly adds to the bullish sentiment.''

``This is a wild bull market,'' said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago. ``It's getting harder and harder to stand in the way of this. As long as the dollar is weak investors are going to buy oil as a hedge.''

The dollar fell to within a cent of a record low against the euro after European Central Bank officials reiterated concern inflation is accelerating, increasing chances interest rates will stay at a six-year high.

The dollar traded at $1.5909 per euro at 6:05 a.m. in Tokyo, after falling 0.6 percent yesterday. It touched $1.5983 on April 17, the lowest level since the European currency's 1999 debut

``If the dollar continues its slide, I can see prices go up,'' Iranian Oil Minister Gholamhossein Nozari told reporters yesterday in Rome. ``OPEC is supplying enough in the market. There are other factors keeping the oil price high.''

As Australia dries, a global shortage of rice

Six long years of drought have taken a toll, reducing Australia's rice crop by 98 percent

The collapse of Australia's rice production is one of several factors contributing to a doubling of rice prices in the last three months — increases that have led the world's largest exporters to restrict exports severely, spurred panicked hoarding in Hong Kong and the Philippines, and set off violent protests in countries including Cameroon, Egypt, Ethiopia, Haiti, Indonesia, Italy, Ivory Coast, Mauritania, the Philippines, Thailand, Uzbekistan and Yemen.

Workers Get Fewer Hours, Deepening the Downturn

Not long ago, overtime was a regular feature at the Ludowici Roof Tile factory in eastern Ohio. Not anymore. With orders scarce and crates of unsold tiles piling up across the yard, the company has slowed production and cut working hours, sowing worry and thrift among its workers.

“We don’t just hop in the car and go shopping or get something to eat,” said Kim Baker, whose take-home pay at the plant has recently dropped to $450 a week, from more than $600. “You’ve got to watch everything. If we go to town now, it’s for a reason.”

Throughout the country, businesses grappling with declining fortunes are cutting hours for those on their payrolls. Self-employed people are suffering a drop in demand for their services, like music lessons, catering and management consulting. Growing numbers of people are settling for part-time work out of a failure to secure a full-time position.

The gradual erosion of the paycheck has become a stealth force driving the American economic downturn. Most of the attention has focused on the loss of jobs and the risk of layoffs. But the less-noticeable shrinking of hours and pay for millions of workers around the country appears to be a bigger contributor to the decline, which has already spread from housing and finance to other important areas of the economy.

While official unemployment has risen only modestly, to 5.1 percent, the reduction of wages and working hours for those still employed has become a primary cause of distress, pushing many more Americans into a downward spiral, economists say.

Moreover, this slippage is a critical indicator that the nation may well be on the verge of a recession, if not already in one.

Last month, the hours worked by those on American payrolls dropped, compared with six months earlier, according to an index maintained by the Labor Department. The last time the index moved into negative territory was February 2001, when the economy was on the doorstep of recession. A similar slide emerged in August 1990, one month into what proved an even more severe downturn.

From March 2007 to March of this year, the average workweek reported in the private sector slipped slightly to 33.8 hours, from 33.9 hours, while overtime for manufacturing workers fell by a larger margin.

At the end of last month, more than 4.9 million people were working part time either because they could not find full-time jobs or because their companies had cut hours in the face of slack business, according to a Labor Department survey. That represented an increase of 400,000 since November.

And on Wednesday, the government reported that average earnings slipped in March after accounting for the rising costs of food and fuel — the sixth consecutive month that pay failed to keep pace with inflation.

As people bring home paychecks that do not go as far, they are forced to economize, eliminating demand for goods and services that once captured their dollars, spreading pain to providers like auto dealers and lawn care providers. They, too, must trim their outlays on pay, shrinking working hours more and furthering the slowdown

“It means spending slows going forward,” said Robert Barbera, chief economist at the trading and research firm ITG.

Paychecks are diminishing just as millions of Americans are finding their access to credit constricted as well. Borrowing against the value of real estate — a crucial artery of household finance in recent years — has been pared back as home prices have plummeted and as banks have tightened lending standards in the aftermath of the collapse of the housing bubble.

“At this point, those avenues are blocked,” said Jared Bernstein, senior economist at the labor-oriented Economic Policy Institute in Washington. “Consumption going forward is going to be in large part a good old-fashioned function of paychecks and incomes.”

Even before the rollback in working hours, pay was barely keeping up with the rising costs of gas and food. From February to September of last year, the average hourly earnings for workers in the private sector was still growing at a slightly faster clip than the pace of inflation, according to the Labor Department. But from November through March, as employers began to scale back in a variety of ways, wage growth fell below the pace of inflation, meaning that paychecks were effectively shrinking.

Now, work opportunities are themselves declining, as the downturn snuffs out business.

In the suburbs of Denver, Max Garcia was netting as much as $2,000 a month last year as a self-employed computer repairman, he said. As recently as November, he was still receiving three and four calls for help a week. But since early February, calls have dropped to one a week or fewer, he said.

“Everybody’s getting tighter,” he said — himself included. With his income cut in half, Mr. Garcia, a single father, no longer takes his two young daughters out for fast food, he said. For clothing, he now goes to secondhand stores instead of the mall. For amusement, he visits the park instead of the museum.

“We spend more time at home,” Mr. Garcia said. “We don’t drive anywhere we don’t have to.”
In Los Angeles, William Righi, a musician, bemoans the sudden difficulty of getting jazz and blues gigs at restaurants and parties. He gives fewer private singing lessons to high school students.
“Their parents don’t want to pay,” Mr. Righi sighed. “They don’t have the money to burn. In the last month, it’s really dropped off.”

With his income down, Mr. Righi has been putting off buying new musical instruments and sheet music. He has curtailed his traveling.

At a factory in Lancaster, Pa., Armstrong World Industries, which makes flooring products, cut production of vinyl sheets for two weeks in March in reaction to softening demand for its goods, the company said.

Management is now seeking to slow production further, said Joe Rumberger, president of the local branch of the United Steelworkers, which represents workers there.

Some of those sent home received temporary unemployment benefits, he said, securing government checks of about $520 a week in lieu of paychecks that reached $900.
“It hurts,” he said. “If you’re not working, unemployment checks only go so far.”

At many companies, management is hanging on to as many workers as it can, cutting hours to try to limit layoffs, while hoping that business improves.

As the construction business deteriorated rapidly last fall, so did demand for the ceramic tiles produced in New Lexington, Ohio, at the Ludowici factory. In November, the company began drastically cutting overtime for many workers. The following month it laid off several people.

Last month, the factory resorted to layoffs, cutting the hourly work force to 81, from 93. It idled the kiln on weekends.

But even as sales fell, the company kept producing, building up stocks of tiles that it assumed it could sell eventually.

“We thought that would be a smart way to do it in order to keep people working,” said Derek Thomas, the plant manager. “The philosophy around here is we remain hopeful that things are going to pick up.”

But if fresh orders do not arrive soon, Mr. Thomas acknowledged that his hopes were likely to be dashed. In that case, he said, the company was facing further “head count reductions.”

With his overtime pay gone and faced with the ugly potential of a layoff from the job he has known for 14 years, Mr. Baker, the plant worker, is streamlining his spending every way he can.

This time of year, he would normally be planning a trip through Ohio in his camper. But he does not expect to take to the road anytime soon. “Not with the money flowing the way it is,” he said, “and the price of gas.”

To John E. Silvia, chief economist for Wachovia, the banking company based in Charlotte, N.C., Mr. Baker and his boss are representative of a national economy that is hunkered down and awaiting better while worrying about worse.

“You’ve got a lot of people sitting around now,” he said, “waiting and hoping for orders.”

Sunday, April 20, 2008

Empty shelves at Food Banks

For the first time in its 25 year history, most of the shelves at the Food Bank's warehouse in New York are barren. A sputtering economy and rising food prices have hiked demand for food aid while food donations have sharply dropped.

Empty shelves at Food Bank

BILL MOYERS JOURNAL | Hunger in America | PBS

Food pantries in need - by News Channel 8's Tina Detelj

Food Prices Squeeze Families, Food Banks -

Getting used to high oil/gas prices yet?

I hope so, because it's only going to get worse from here. Currently, I'm paying ~ $3.45 a gallon for the cheap stuff (~ $55 to fill up my gas sipping Accord), but I expect we'll easily see $4 a gallon nation wide as summer approaches.

The falling dollar can be blamed for much of this price rise, but increasing worldwide energy demand, combined with supply/delivery pressures (Nigeria, Iran, etc)is making the pain worse.

These higher oil prices are already starting to, and will continue to ripple across the spectrum -- showing up as price increases in everything you buy -- a double whammy for your wallet/pocketbook.

Oil prices to head even higher says Opec chief

The secretary-general of Opec said yesterday that oil prices could rise even higher than the present record level of $117 a barrel.

Speaking at the start of the biannual conference between oil-producing and consumer countries in Rome, Abdullah al-Badri said that factors other than supply and demand, particularly the weakness of the US dollar, were pushing oil prices higher.

Many analysts expect oil to rise above $120 a barrel by the summer.

Government ministers will meet energy companies, charities and consumer groups to discuss the issue of energy prices at a fuel poverty summit on Wednesday, hosted by Ofgem.

Allan Asher, the chief executive of energywatch, a consumer watchdog, criticised the record of the Government and energy companies. “Relying on more voluntary social programmes from energy suppliers is tantamount to sticking your head as far into the sand as it will go,” he said.

“Government has to be bold enough to admit its fuel poverty strategy has been broken on a vicious cycle of price rises. Price rises on such a shocking scale would be catastrophic for consumers; 25 per cent on energy bills means another million households consigned to the misery of fuel poverty.”

Chakib Khelil, the president of Opec, said yesterday that he saw no need to raise oil production to counter high oil prices, dealing a further blow to big oil-consuming countries such as Britain and the United States. Gordon Brown and President Bush have called on Opec, which produces 40 per cent of the world’s oil, to increase its output, but Opec kept its daily output quota at 29.67 million barrels at its last meeting last month.

Last month, China imported almost 150 per cent of what it had imported the previous month. The country is building its fuel reserves for the Olympic Games later this year. Moreover, its spring planting season is under way, which is usually a time of high consumption.

Saturday, April 19, 2008

Can Gold Hit $2,000?

"Inflation adjusted, going back to 1980 prices, gold today should be over $2,300 an ounce, so making the statement that gold could go to $2,000 is not irrational," Frank Holmes, CEO of U.S. Global Investors told CNBC.

Holmes notes that most commodities have gone through their "inflation-adjusted 1980price levels," with the notable exception of gold. Holmes later discusses the US dollar, financials, stock markets, energy, etc. (click start button twice)


Peter Schiff on Bloomberg 4-17-08

$68M of student loans required this year to fund educations, but BoA decides to halt/discontinue their student loan programs.

Peter Schiff's take: This action will cause Universities to cut back on expenditures and tuition will (over time) fall/become more affordable.

Regarding recent Merrill Lynch $6.5B write-down and subsequent stock rally: Peter says people are believing the fed won't let ML fail -- though they should. Peter still thinks US stocks and the US dollar are in serious trouble...

Deconsumption: Timeline for Unfolding Crisis of Mankind

I'd like to refer you to a very prophetic article written by Steven Lagavulin back in May 2004 (Mainpage:

Steve's 2004 vision is absolutely amazing, and though his timeline has been off slightly, he has NAILED many of the events that have transpired through 2008. With such spot-on foresight (thus far), I think his outlook & viewpoints for the next decade should be seriously considered.

Main thoughts are: As we enter into a predicted depressionary period, we will deindustralize, deconsume, detach from the material world AND detox from mindless spending... Resources will become scarce, US Superpower status will be lost and WW III becomes quite possible. This depressed period will hone and temper our souls... Those that chose this as a test, and rise to the occasion will do just fine... those that are weak and cannot change will enter into the dustbin of history.

It is quite a long article and I've extracted the "meat" of it for you, but if you desire the full effect, please click on hyperlink below

Timeline for Unfolding Crisis of Mankind

Rules of Prediction

Rule #1) The three principle factors to take into consideration in any prediction are the Force of the event being viewed, the Conditions external to it that can alter its propagation, and the length of Time outward which we are trying to foresee. This rule really only applies in generality, since it inherently shows that there are so many different variables affecting the totality of events proceeding in the world and their further influences on each other, that we can really only claim to view possible future outcomes in broad brushstrokes. It also shows that the ability to foresee the future necessarily only takes into question the particular field we have elected to consider.

Keeping this rule in mind, I will try to present this outline in broad brushstrokes, and ask the reader to remember that the items I’ve selected to represent the unfolding Crisis are simply my own subjective reference points. Also, I make no attempt to look further out than 10 years, and will be broadening the brushstrokes even that far out until hopefully, like a Master Brush-painter, I’ll be able to represent the essence of the thing with only a minimum of ink. And if that isn’t the case, then maybe try to think of it as a work by Jackson Pollack…

Rule #2) The tendency when making predictions is to accelerate the natural propagation of events, and to do so on even course. Experience shows that large-scale events tend to unfold “in fits and starts”: moving at what seems to be glacial speed, and then suddenly seeming to “erupt” when some extraneous event acts as a catalyst to precipitate them.

Rule #3) It’s not realistically possible to predict how the Power Possessing Beings of the world will react to influence events, but they will almost certainly do so adversely. It’s somewhat easier to foresee the reactions of a large group of people than those of a small group, since a greater number of entities serves to regulate and streamline the degree of choices that are available to individuals. And the chief reason why the future almost never unfolds “naturally”, and in the manner we foresee that it will is because powerful people are always trying to manipulate it. Thus government entities, corporate directors, religious leaders, etc are continually acting to try to shape the future in their image. It’s a perfectly human impulse, and rooted in the nature of our consciousness: if we have this unique capacity to foresee how cause and effect will unfold, then our response will usually be to try to alter conditions—to the degree that we're willing and able—in an attempt to achieve a more desirable outcome. We all do this at almost every moment of every day. People with power, however, can obviously accomplish things on a much larger scale. But at the same time their actions will always be directed by their own imperfect, subjective view of the world--and almost invariably a view of the world that helps them to achieve more money, more power and more control.

Possible Timeline for Unfolding of Crises (w/ a US-centric bias):

Year 2004-2006

At first the significant stressors to Mankind will be economic collapse, social unrest, and to a very limited extent, the first signs of difficulty coping with the transition to a life of hydrocarbon scarcity.

During this period, currency devaluation—especially in the US Dollar—will be the significant problem, along with the resulting inflation as prices of basic commodities rise (or more accurately, fluctuate wildly following a general rising direction). There may be a triggering event which causes a sharp downward movement in the price of the Dollar, or it may be a continuation of the slow, “controlled” devaluation we are seeing currently, but regardless, even that will eventually accelerate as the foreign holders begin to capitulate. Inflationary pressures will be further exacerbated by the rising costs of gasoline and fuel oil, and their residual price effect on transport and shipping, travel, and food production. This will not be a result of “Peak Oil” conditions—although this will likely rise up to become the “cause du jour” for American and European activists. Rather, higher oil prices will simply be reflecting the instability of conditions in oil-rich regions, and also the insistence by foreign suppliers for higher prices to offset the declining value of the US Dollar (which oil is currently priced in). In fact, toward the end of this period we can expect to see oil-rich countries demanding payment in Euros or even Gold. This will accelerate the fall of the Dollar if it has not already crashed prior to this event, since Dollars will no longer be necessary to settle trade in the world’s most important resource.

In the US, the Federal Reserve will find itself chasing two rabbits (and catching neither): trying to reverse the massive inflation they’ve created over the past couple decades while simultaneously raising interest rates. The will try to telegraph each rate move in hopes they can control the resulting bond market decline. Consumers, especially in the US, will begin to drastically rein in their spending as rising interest rates force them to confront their massive personal debts. Unemployment will continue to rise in the US and EU as companies struggle to control costs and pare back under the growing realization that their customers are tapped out. On the heels of these events, debt default on all levels (Government, Corporate, and Personal) will likely begin to become problematic for banks and finance companies, which will be forced to turn the screws a little bit on their debtors. We may even see the first hints from Congress or the Senate toward reforming or repealing personal bankruptcy laws. There might be a return to “union busting” as corporations become desperate to survive, and strikes may become commonplace.

Housing prices will begin to decline, especially in upscale suburbs, as interest rates are forced up and many people find they cannot support—or are even upside-down on—their mortgage loans. Downsizing will become attractive (or more likely, necessary) in the face of rising unemployment. However, modestly-priced houses—especially those in or near cities having a diverse economic core—should hold up well.

There will likely be the beginning of a shift in public opinion away from SUV’s and toward the newly “fashionable” hybrid cars (and possibly alternative fuel cars as well). Expect the Hummer to become a watershed symbol for the end of an era. Still, it’s unlikely that Americans will give up their SUV’s without a fight, so it’s possible that Hybrid-Hummers, Enviro-Escalades, etc will be slated by the Big 3 automakers in an attempt to put a mind-spin on the more legitimate fuel-efficiency movement. National energy conservation and fuel economy campaigns appear.

The rising cost of oil will take its toll initially on industries such as air and ground transport and intensive agriculture. We will undoubtedly see at least one more major airline go under, and possibly more, as the government will be extremely hard pressed to get any kind of bail-outs approved. The rising costs of nitrogenous fertilizer and diesel fuel will drive up food production prices—further aggravated by the increased fuel costs for transport. As such, non-corporate, local agriculture and meat producers will become more competitive.

Violent civil unrest will begin to increase around the world as any number of angry, disenfranchised groups take their lessons from the Al-Queda handbook. The effectiveness of focused, persistent terror-strikes has grafted itself onto the world-view as a successful means for combating authority…or just simply sending a message. It’s possible the next terrorist attack on America will not involve foreigners….

The US-Mid-East War (nee War on Terror) is a major area of uncertainty because of the high probability for unexpected events. The US looks to be on track for repeating the mistakes of Vietnam, and public opinion is currently declining as the US is losing control of Iraq in many ways. The problem is that, unlike Vietnam, the US cannot simply “withdraw” as the region will quickly destabilize without their presence (thus cutting-off their control of the oil). The reinstatement of the Draft is already being bandied about, which might have flown if Gen-Xers were still of military age, but Boomers are not going to be eager to send their children off to Viet Nam II….especially when CNN has already shown them how un-romantic the defense of freedom really is over there. Still, a significant terror-event could serve to turn public opinion around, especially one on American soil…which is highly likely over this period of time. (Should such an event happen shortly before the November 2004 elections, however, it could backfire and become a public-relations time bomb for the current administration….). There is little doubt that Middle Eastern terrorist gangs are plotting attacks on American soil, and most likely the plans are of a sufficiently large scale to justify the effort. Most of these, however, will be poorly executed or thwarted altogether. Still, it’s likely that American society will have to suffer images of car-bombings at Pike Place Market in Seattle, or rockets fired into a major Las Vegas hotel, or some such.

One incident of high likelihood is that the rulership of the Saudi royal family will be overthrown or effectively compromised. This will severely weaken the US military position in the Middle East, and probably lead to a withdrawal of forces. In this event, oil prices would rise much more quickly and speed along most of the events in this Timeline.

World opinion of the US will probably continue to slide along with its economic and imperialistic fortunes. If President Bush is defeated for re-election this year, and his successor blames all problems on him and promises to redeem the American image, then there might be an opportunity to improve the country’s branding with the world. At least for a while. Any successor will find himself immediately caught up in the oil addiction issue, and with bad feelings in the Middle East and our troops already embedded there, it may seem awfully tempting to continue the Project for a New American Empire agenda. Meanwhile, Australia and Russia will be courting their Chinese neighbors, since that’s where their bread will be buttered. The same goes for the East Asian countries, including Japan.


This is the period where life will begin to seem more uncertain, and “triggering events” will undoubtedly pop up in many spheres to propel mankind headlong into the future. Because the “tectonic plates” of human interaction will be sliding and grinding together in all directions, there is also a high likelihood for some type of new and unexpected “extraneous” crisis to erupt—one that could not even be imagined today.

The Western-centric concept of “Globalization” will be fizzling fast as it becomes more costly to move resources around the globe. Money will be flowing fast out of the US looking for safe havens, and probably out of Western Europe as well. Asian currencies may become the beneficiaries of this, if their economies haven’t been stalled by the devaluation of their own massive dollar holdings, and the dwindling external markets for their products. But all currencies will be sliding, so perceived “strength” in any of them will be only relative. China will be hard-pressed to orchestrate a transition from an export economy to an import one, turning toward its own internal prosperity to provide a market for their goods. With massive overpopulation, it’s going to be almost impossible to sustain the kind of heated growth they’ve enjoyed for the past few years—without even mentioning the ravaging effects this growth is having on the environment worldwide. Critical pressures for food and oil there (China currently has no arable land left) will almost certainly turn Chinese aspirations northward toward Russia, with its overabundance of both—perhaps to forge friendly alliances…or perhaps not….

If not already underway, there is a high likelihood of a derivatives crisis triggering global bankruptcy in the financial world during this period, probably initiating in the US mortgage industry. Governments will be unable to honor real or implied guarantees. This will effectively doom any hope that the Central Banks might be able to “manage” the economic and currency crises that have been unfolding. Bond rates will continue to soar, driving bankruptcy rates much higher, especially among residential and small business borrowers.

Worldwide, a void will begin to be felt by the beginning decline of the US as a superpower. The signal for this won’t be hard to miss: China will “repatriate” Taiwan. Regional (or tribal) wars will spark up everywhere as both social distress and resource scarcity escalate. In South America, drug-cartels will almost certainly step up their terror-tactics against local authorities. Indian/Pakistani relations will probably breakdown become a global concern, for want of a more specific word…. The worst tragedies will occur in Africa, which will further become a basket-case of violence and disease.

China’s oil consumption will be outpacing any kind of conservation the US and Western Europe are struggling to achieve. Relations between these regions will almost certainly break down as they vie for control of remaining reserves. Much of this will obviously depend on developments in the US / Middle East conflict. If the US does not have direct control of Middle Eastern reserves, then it US will probably be on the short end of the negotiations, as Russia and the Middle East side with (or bow to) China in oil agreements. Poorer countries will be crushed by the cost of fossil fuel, and may become suicidally desperate (North Korea comes to mind…). The United Nations might possibly try to enact some type of import/export restrictions to help ease the strain on poorer countries. If World War III is in the cards for the Human race, we will probably see the powers of the globe positioning themselves sometime around 2010.

The US might likely begin implementing “stabilizing” policies to control the price of oil during this period, and certainly we will see more energy conservation campaigns to address electricity and natural gas use. By now the whole economy will be suffering, but hard-hit industries during this period will include ground transport, petrochemical processing, mail and shipping dependent companies, the automotive industry, and tourism. On the brighter side, congestion may clear a bit in major cities as two-car families downsize, and the poor return to the “car-free” way of living they’ve traditionally enjoyed. (This applies primarily to the car-centric US, where the number of registered vehicles presently exceeds the number of registered drivers). If not already, expect to see legislation imposing some type of sin tax on gas-guzzlers (perhaps even singling out SUV’s) and corresponding subsidies on fuel-efficiency and alternative-fuel vehicles. Flying thousands of miles to lie on a beach will become a thing of the past for all but the wealthy. Only a couple airlines will survive bankruptcy through this period, and its likely that the government will be initiating emergency subsidies to keep them going. Small resorts within two or three hours of major metropolitan cities will experience increased business.

Sometime in this period the media may assert the belief that we are making real headway in correcting our oil crisis. This might be attributed to new investments in drilling and exploration triggered by the past few years of rising price-profits at energy firms, and which will be coming online during this period. Or there may be reports of large new reserve discoveries (probably invented, but no one will be able to verify them). It may also be touted that we have been offsetting consumption by adopting a kind of hodge-podge of alternative energy systems. Regardless, this feeling that perhaps all will be right with the world once again will be illusory and will not last long, since China/East Asia will continue to gobble up all the hydrocarbons that we are potentially pumping or saving—and out-negotiating us for import contracts.

Power outages in the US and Western Europe will become more problematic as the outdated transmission infrastructure begins to sag. Rising natural gas prices will take heating and electrical generation costs with them. Here again, energy rationing will be all the rage, as it was in the 1970’s. Photovoltaic systems (solar electricity panels) should finally achieve a roughly breakeven cost-effectiveness toward the end of this period, as technological advances combine forces with the rising costs (and unreliability) of getting electricity directly from the grid. Still, PV and Solar-Reflective generating plants will be slow to come online. Domestic PV systems will be most popular, but only the well-off will be able to afford truly self-sufficient homes. Solar domestic water heating systems, however, will become de facto in new home construction, and will improve the resale value for existing ones.

We will probably begin to see a shift in housing demographics away from the suburbs, as people begin to migrate either “inward” to the convenience of the cities or “outward” to the safety of more rural areas (most likely to communities about 1 ½ to 3 hours from a major city). Furthermore, many people in cold climates will begin to move southward, while people in extremely hot climates move a little further north. Lastly, some will decide to leave the country altogether, perhaps in an effort to stretch the value of their remaining savings as far as possible.

The “whole foods” movement will really begin to latch-on in Western societies, as industrialized, processed foods, meats and milk become more expensive than locally produced goods. This, combined with economic hardship and unemployment, will lead many people—especially those in small towns—to rediscover to some extent an economy of barter and local markets.

Social discomfort will erupt in various ways, and we could expect at least a couple incidents of large-scale rioting in one or more large cities (highest probability lies with Los Angeles). More common will be the rising presence of anti-government and anti-corporate sentiment. In the drive to become independent of the high costs of social infrastructure, many will embrace the emerging popularity of sustainable-living communities, or eco-villages. This will lay the groundwork for how our society will overcome the Crisis period, and will involve a re-discovery of the “local economies” that people participated in before hydrocarbon energy fueled the Industrial Age.

Movies will begin to take on much lighter, more uplifting subject and tone. The classic Musical may return as a popular style.

There is some chance—probably somewhat less than 50/50—that the US may see a legitimate Third-party contender for the Presidency in 2008. If so, it would be a populist candidate running on a platform of public austerity and a return to the pre-Wilson ideology of US independence from international imperialism and diplomatic endeavors.


By this time period, the “impending-ness” of Peak Oil will be much more apparent. If no significant new reserves have been discovered, or conversely if China / East Asia have not experienced an economic collapse, then the developed countries of the world will find themselves in a position of extreme desperation to take direct control of the world’s supply from whomever currently has it—which will mean world war, concentrated in the Middle East, especially Saudi Arabia. Even if new reserves are found, where they are discovered will be a significant factor. If sufficiently large reserves are found in North America, violent crisis will be easily avoidable for the time being. The chance of this is extremely unlikely, however. Therefore, it needs to be recognized that if these events ensue then, because oil will mean life-or-death for the developed (and even under-developed) nations of the world, any conflict will quickly escalate to the use of nuclear and other “weapons of mass destruction”. If this happens then there will be no way to predict how the future will unfold, and the rest of the predictions for this period will be either accelerated or just moot….

In the US, oil and gas will gradually become more regulated as it is concentrated in places of greatest need, such as electrical generation, agricultural production, water processing, necessary transport, military uses, etc. Undoubtedly some kind of high-level (regulated) and/or low-level (unregulated) black market will develop, especially for gasoline. On the renewable front, solar photovoltaic systems may become more widespread, especially if sufficient investment has been made over the past few years to encourage the PV manufacturing industry.

Life in the cities will begin to break down, as basic services become unreliable and fresh food becomes scarce, and lines will frequently form at grocery stores when shipments come in. Things like blue jeans and tennis shoes may become luxury items. Crime of all kinds will have increased dramatically. Racial strife may flare up in some cities. Western communities will probably find that access to water becomes a point of contention, as rivers and reservoirs become coveted resources, especially around Denver, Phoenix and Southern California.

Even as city life becomes more difficult, many rural towns will experience a rebirth as they find themselves reorganized into eco-villages and self-sustaining communities, experiencing an influx of educated, industrious individuals. Life will begin to de-centralize (from an urban-centric structure) and regionalize (around natural resources), and the price of arable land and “hobby farms” will skyrocket. With this return to small, prosperous communities where whole families will be working together for the benefit of the community, a renewed sense of spirituality may begin to bloom. As distribution to these rural areas becomes costlier and more problematic, many things will become unavailable outside of the cities: fast food restaurants will close, as will many other chain stores, and things like truck stops, overnight hotels, and billboards might begin to disappear. However, items that are difficult to manufacture locally will also become scarce, or disappear altogether from smaller communities: electronics (including computers and cell phones), pharmaceutical medicine and medical supplies, plastic and rubber items, etc. Also, rural life may not be entirely safe and secure, as it’s likely that many people with more fearful, xenophobic tendencies will adopt the Survivalist mentality and form paramilitary communities far from the cities. This may lead to civil conflict over local land and resources, which would entail further government intervention in domestic security. More likely, however, is that most these groups will just bunker down with their fingers on their triggers until society appears to stabilize, and then seek to reunite and find a place within more organized and prosperous communities.

In developing countries, it seems likely that poverty and food scarcity worldwide will lead to civil disorder and social strife, especially in urban areas. This may in turn lead to government intervention in the daily life of people. There is some chance that outbreaks of disease will take their toll, especially in Africa, India, China, East Asia and Indonesia, as medical treatment becomes difficult to sustain at suitable levels and malnourishment and breakdown in social services become more widespread.

My closing thoughts: it's a pretty dire viewpoint but very plausible considering the events that are unfolding (food shortages looming, consumer inflation raging, Unprecedented US debt levels (consumer/corporate and gvt), dollar falling quickly, oil becoming scarce while demand increases, G7 financial crisis unwinding, China/Russia bonding and their control of natural resources growing, and the list goes on...)

Guess only time will tell, but I think Steve's viewpoint is worth serious consideration in any future planning.