More On Housing, Gold, Etc...

The financial system of the United States of America is like the Titanic. Hubris led many to declare it financially unsinkable even as its fundamental design was riddled with fatal flaws and the human pilots in charge ran it straight into the ice field at top speed.  - Charles Hugh Smith, LINK

I want to post some interesting articles without too much commentary.  I hope you read them in their entirety, as they underscore some of the themes about which I've been ranting for the past several months.

First, as has been reported by several non-mainstream media sources, China continues its aggressive accumulation of gold and mining assets.  This is an article about that from Australia's biggest selling national newspaper: 

A very reliable source close to several gold companies tells us Chinese interests are not only taking stakes in explorers and miners, they are also buying gold directly from producers and shipping it home

Here's the LINK (note:  if you have trouble loading the whole article, copy the title of the article into a google search bar and then click on the link that comes up - it should load in its entirety).

This article reinforces the fact that China is looking to diversify a large portion of its dollar-based foreign reserves into physical gold and mining assets and is doing so in ways camouflage the obviousness of overt physical buying in London.  In fact, China seems to think that right now it's cheaper to buy gold in the ground on a per ounce basis by buying mining companies than it is to buy refined bars on the open market.   I happen to agree with that.

Second, I've been ranting about the next wave down in the U.S. housing market.  I have argued that there was a substantial slowdown in bank foreclosures while the robo-signing fraud suit was settled.  FNM and FRE also slowed down their foreclosures so they could figure out how to unload their massive REO inventory.  Here's an article that reinforces my claim.  It quotes a couple of non-Government and non-industry organizations that track the housing market.  As you'll see, foreclosures have started to ramp up again:  LINK

Furthermore, the Fed just established a framework of rules and policies that enable big banks to rent out their housing inventory:  LINK.  Wouldn't you think that if the housing market was recovering the way the Government and the National Association of Realtors are both claiming that banks would want to unload their inventory to buyers?  What I find amusing about this is that the Fed has put its banks in direct competition with the Taxpayers/Govt in renting out housing inventory that can't be sold.  The banks will be competing directly with investor groups who are buying blocks of homes for the purpose of renting from Fannie and Freddie under a new dedicated rental program rolled out by the Government to enable FNM/FRE to unload inventory in order to make room for even more.

Bottom line:  the next year will be a great time to look for a nice home to rent and rental prices should decline considerably as bank and GSE inventory hits the rental market.  Conversely, it looks like this rental supply will soak up a lot of potential buyers and housing prices will start tanking again.  Per the recent monthly Case-Shiller data, prices have already begun to drop.  My bet is that they will drop precipitously over the next 12 months.

Make no mistake about it.  The economy is slipping back into crash mode.  Regarding the Fed and QE3, I'm still waiting for someone to explain to me in detail how the Government will fund its massive Treasury issuance for the rest of this year without creating downside chaos in Treasury prices (causing yields to spike a lot higher) unless the Fed prints up new money to buy the coming supply of Treasuries...