Did he really say that?
The reality is that Americans receive a huge subsidy as a result of U.S. currency being stashed away in foreign suitcases. It's like writing checks that no one cashes. Dollars circulating abroad do not bid up consumer prices at home, which results in Americans having more goods to consume at lower prices. If the hoarded bills were to suddenly return to domestic circulation, the result would not be more growth but only higher prices and interest rates. Alternatively, were those dollars deposited in foreign bank accounts, Americans would be required to pay interest on balances that previously earned nothing.
Any way you slice it, the fact that criminals are moving from dollars to euros is a negative development for an American economy accustomed to the subsidy. In addition, it reveals the diminishing prestige of the dollar and the increasing concerns others have for its reliability as a dependable store of value. Because cash under a mattress earns no interest, the only consideration given is it's preservation of purchasing power. The fact that criminals increasingly prefer euros to dollars speaks volumes. If only Gartman had the good sense to listen.
Going from the sublime to the ridiculous, this week, in response to the first national year-over-year decline in housing prices since 1995, David Lereah, chief economist for the National Association of Realtors said "We've been anticipating a price correction and now it's here. The price drop has stopped the bleeding for housing sales. We think the housing market has now hit bottom.''
First of all, when did Lereah ever predict a price decline? Isn't he the same guy who constantly assured us that real estate prices would never fall? That all that would happen to prices is that they would rise more slowly.
Second, what makes him an economist? Is he really employed to give an honest assessment of the future prospects of the housing market and real estate prices? Lereah is no more an economist than Henry Blodget was an analyst. Despite their titles, both were hired to help salesmen move inventory. For Blodget it was internet stocks, and for Lereah it is houses. Realtors cannot convince as many people to over-pay for houses if their own economist forecasts prices to drop. Why this man still gets taken serious by the media is beyond me. Anything he says should either be printed in the classified section or as part of a legitimate display advertisement for realtors.
Finally, what the hell is he talking about? How can he say that the bleeding has stopped, when its barely just begun? It reminds me of the Monty Python skit where the Black Knight claims his severed limb is "just a flesh wound." Does it seem feasible that the biggest real estate bubble in U.S. history would bottom out after a mere 1.7% price decline? What signs could he possibly see to confirm that the housing market has bottomed? Let's see, national home prices fell for the first time in 11 years, with 2006 likely to be the first calendar year in 70 where that occurred. Inventories are at record levels and still rising, sales have fallen for five months in a row and are down 12.6% in the past year, foreclosures are surging, builders are offering additional incentives to sell houses, reporting higher cancellation rates, and repeatedly lowering their earnings estimates. Further, over-stretched homeowners are facing a wave of ARM resets beyond their abilities to pay, the economy is headed for a recession and everyone is still expecting a soft-landing. Yep, it sure looks like a bottom to me.
Anecdotally, the house I rented
two years ago, and moved out of six months ago, sits vacant,
despite its advertised rent being 15% below what I initially
leased it for. In addition, when I first rented it in New Canaan,
CT there were only about a half dozen single family rentals available
there. Now there are over a hundred.
In the mean time, why not take advantage of the big drop in oil and gas prices. Download my must-read, free report on Canadian Energy Trusts here, and discover the best way to profit from this timely opportunity.
Mr. Schiff is one of
the few non-biased investment advisors (not committed solely to
the short side of the market) to have correctly called the current
bear market before it began and to have positioned his clients
accordingly. As a result of his accurate forecasts on the U.S.
stock market, commodities, gold and the dollar, he is becoming
increasingly more renowned. He has been quoted in many of the
nation's leading newspapers, including The Wall Street Journal,
Barron's, Investor's Business Daily, The Financial Times, The
New York Times, The Los Angeles Times, The Washington Post, The
Chicago Tribune, The Dallas Morning News, The Miami Herald, The
San Francisco Chronicle, The Atlanta Journal-Constitution, The
Arizona Republic, The Philadelphia Inquirer, and the Christian
Science Monitor, and has appeared on CNBC, CNNfn., and Bloomberg.
In addition, his views are frequently quoted locally in the Orange