Wednesday, May 18, 2011

Some Quick Observations

I was chatting with a colleague who told me that his precious metals investing clients were telling him that everyone they know seems to be sitting on homes they bought 20 years ago for $200k that have $700k mortgages and are worth maybe $400k.   To me that is the prototypical profile of any slightly "above median" U.S. suburb.  In fact, although official statistics show that 25% of all homes with mortgages are underwater, I would bet good money that, if we were to use rigid market valuations, the number of homes underwater would be closer to 50%.  The reality is that Greenspan encouraged everyone to use their homes like "ATM's" (remember that famous speech he gave to Congress?) and he removed all credit standards enforced on banks and Wall Street.  Greenspan essentially became the lending-equivalent of a heroin dealer to the majority of the middle class in this country.  I define "middle class" to be anyone who is not wealthy enough to buy a Congressman.  I know there are plenty of formerly multi-million dollar homes in the Denver area that are trading for $1 million or less.  Those folks are not wealthy enough to buy one of the seven House Reps or two Senators here...

Economic Woes Mount:  The latest economic sentiment survey from Gallup shows that 74% of Americans think the economy is the biggest problem facing our country.  That number is at its highest in two years.  Here's the link, which I sourced from  No Recovery Here  This statistic supports my post yesterday and further supports my view that the real economy is in far worse shape than is reflected by the phony Government/Wall Street-generated economic statitics release almost daily.

"World on course for next crisis, warns Gordon Brown" - This article from England's Telegraph further supports my view that the action in the global stock, credit and commodity markets is an omen of a possible financial/economic crisis that will be much bigger than what we experienced in 2008.  I thought it might be helpful to hear that view from a global elitist and not just a "chippie"  (British term for blue collar plebian) like me.  Here's the LINK  Keep in mind that recently Carl Icahn, one of the most successful and astute investors in this country, announced that he was liquidating his hedge funds and withdrawing from the markets in order to take shelter from a massive brewing crisis...

And finally - Regarding what I see as persistent and growing Government "creep" into the control of our lives, it was reported today that a Bill was being introduced in the Senate that would restrict the ability of Americans to tap into their 401k's, even if they need the money to live. Here's the LINK  This is just more evidence that the Government is headed down the slippery-slope of full confiscation.  But then again, we know that most State pension funds have already been tapped into and are hopelessly underfunded; now the Treasury is tapping into Federal pension funds, setting a dangerous trend that will become even worse - and that money will never be repaid.  What do you think is going to happen when public workers start complaining about their pensions being used to fund our Government?

Foretold is forewarned...


  1. " they bought 20 years ago for $200k that have $700k mortgages and are worth maybe $400k. ... Greenspan essentially became the lending-equivalent of a heroin dealer to the majority of the middle class in this country."
    I have no sympathy for these folks. No one twisted their arms and forced them to use their homes as ATM's. If a guy walked up to you on the street and offered you heroin, would you take it? I certainly wouldn't. My house is paid off because I used common sense and refused Greenspan's ATM drug. People need to start taking responsibility for their lives and quit blaming everyone else for their problems.

    Also, if they are underwater on their mortgage, how can they afford to be investing in precious metals? Why aren't they paying off their mortgage instead?

  2. Hey Dave:

    the Bloomberg article really discusses borrowing from your retirement account. While restricting that may be the beginning of the slippery slope, I kind of agree philosophically that borrowing during working years should be discouraged, even though its ones own money.

    Otherwise, knowing how foolish most are with money it gets permanently spent.

    Then, knowing how foolish Congress is I don't put anything past them, whether intentional or not.

  3. Sam, I have no sympathy either. But now we are bailing the banks out of those loans and a lot of people made a lot of money off of those loans, the losses of which are being socialized by you and me.

    RE: 401k's. It's not for you or me or Congress to tell anyone what they can do or can't do with their 401k/IRA money. Yes it is restricting your ability to borrow. But that will lead to greater restrictions down the road. What people do with THEIR own friggin' money is their business and it's not for anyone else to tell them how to save or spend it, especially not the Government.

  4. I thought that was 'forwarned is forearmed.'


  5. ROFLMAO. Was chatting with a silverbug today who's motto is: "you need 4 metals: gold, silver, platinum and lead"

  6. BTW, a bank account full of electronic dollars is douloureux

  7. I own my home, lock, stock and barrel, if one excludes the tribute I am forced to pay to my overlord betters in the form of property taxes. You see, if you don't pay the overlords protection money every year, they will STEAL my home, legally, all in the name of freedom.

  8. gold, silver platinum, lead and food in foil

  9. Permit me to disagree, as I borrowed some money from my 401k. Blew it all on gold and silver. Sold my last batch trading silver at around $49, and took out all the dollars I had in it. Left the rest on the table to ride.

    I borrowed the money at 4.25%, which is somewhat better than the Money Market was paying me. Did we ever consider I took the loan in the same manner as a bank. My loan was backed by gold and silver as collateral. I'm making a mini-pile off this loan, compared to the standard investment selections available in the account.

    Evidently, they presume we are all investing incompetents who are unable to trade when it is appropriate to do so, and to invest for the long term when the prices are statistically low.

    A long-only format, without the loan facility means we have to eschew historic opportunities like the recent silver mini-moonshot. My sell points were 3x - 4x my money. It went higher before I could get it sold.

    The proceeds? I pay down my 5.875% mortgage with my 4.25% borrowings. Now I have insurance via the metals that I retain, which costs me utterly nothing, a lower mortgage, and a decent return on my 401k cash for a change.

    Top that, and I'll change my mind.

    To be fair, the metals were (and are) a once-in-a-lifetime opportunity. I was not expecting our 1st quarter performance, but I was quite satisfied that the loan was money-good. That's rare -- so rare, I used my retirement money to take advantage of it.

  10. 'Chippie' in England means a carpenter, not a blue collar worker.

  11. My roommate in b-school, who was from England and from a wealthy family used the term perjoratively to refer to blue collar types in general.

  12. The economic indicators are getting worse and Gold as an asset is fairing the worst. Please, Please can someone explain that to me.

    I am beginning to think that we need a main market bull phase like we had from 2003 to 2007 for gold miners even to perform.

    Has anybody got some evidence of uncoupling in the past.

    This is nuts and frustrating. One can't even use ETF's to short as the indices just move up.

  13. Eventually the mining stocks will respond. Look at what happened in 1929. Miners got hammered with the stock market then spent the next 5 years hitting new highs.

  14. Every county have their own words and their own meanings. That public service is a worthy pursuit and that lawyers have a professional obligation to participate in public service throughout the course

  15. "What do you think is going to happen when public workers start complaining about their pensions being used to fund our Government?"

    We'll respond with it's not OUR government - nor OUR jobs being funded.

    Of course, we all know who's going to win that debate.