Home builder Lennar (NYSE:LEN) reported earnings today, which are noteworthy because they are the first to include August results. The report show significant deterioration in the market. Revenue was down 44%. Backlog is down over 60%, new order and closing were both down almost 50%.

I have no position in LEN, but I'm short Centex (again).

Here is a link to RSI's for stocks in Bill's key etf groupings. It's a JAVA carpet chart. Just cursor over each little box in the grouping of choice and the stock name, previous day's RSI, and current RSI is shown. The colors of the little boxes also reveal strength of the stock. Neat! (Note: I don't know if membership is required to see this chart.)

http://stockcharts.com/charts/carpet.html

I have a question about the price behavior of stocks around a secondary public offering. For example, this morning, USU announced that the price of their upcoming 20 million share offering would be 9.76, the price at the closing yesterday. They also announced a concurrent pricing of senior convertible shares at an initial conversion price of 11.96. The stock also has, or had, a sizable short interest. This morning, USU is being bought like crazy with the price rising. Seems to me the 9.76 price would now be a ceiling, with the new 20 million shares acting dilutional, but the stock is not responding this morning as if that's the case. SO, my question is, does the price of the secondary establish a near-term floor in the price of the stock, or does it now create resistance at that level? No position.

Re: my last post on Java RSI carpet. That link doesn't quite take you far enough. Just click on the link and then click in the menu box where it shows "price" for "RSI". Hope this helps.

The playbacks from yesterday's Denver Gold forum are available at:

http://events.onlinebroadcasting.com/denvergold/092407/index.php?mode=1&sel_date=1

http://tinyurl.com/2y67yd

Bill,

I think the larger U.S. salaries in the upper tier reflect the fact that America, while professing to be a meritocracy, is in fact what I call a "pyramid of privilege".

In other words, big shots pay themselves and each other a lot here, while the shareholder gets shafted.

I have often thought that the new American Revolution should be a shareholder revolution. Throw the bums out, 'cause that's what they are...Bums. Few are the corporate "leaders" who earn their keep; few are the shareholders with the guts to stand up to these thieves.

And the biggest lie, the biggest mirage of all is the myth of "professional management" of money, particularly retirement money. Only about half, maybe, of money under management is being "professionally" managed; the other half are bunglers and aggrandized amateurs with very little market sense (lots of these guys can't even read a stock chart, and I'm not kidding!)

Well, one of the realities of governance is that we get the governance that we deserve.

How many people throw away their proxies? I know a lot of folks do.

How many bother to show up at an annual meeting? I know most don't.

"If you don't vote you have no right to bitch" comes to mind..... both in politics and corporate governance.

noticed many properties on sale driving down to irvine and back last weekend...what n2son points out above is not a surprise. thought quite a bit about market risk during the drive > bottom line is 100% cash makes the most sense for the family right now, which is exactly what we're moving to. at the very least a recession looms. sometimes nothin' is a pretty hand (cool hand luke)...

"pretty cool hand.." few things in life rival the feeling of holding cash while the market drops...how many money managers are going to suggest that clients step out to avoid the suffering..

UXG seems attractive here in the low 6's. I added at 6.18 today.

Jock -

Re. F/U from yesterday.

He didn't lose me any money since as far as I know I never invest in his funds. My point was addressed to the unsuitable strategies he hammers through for an less-than-sophisticated audience. He would do better to become a true educator dispensing the tools with which reasonable investing and risk management (as preached by Bill here) are conducted. I love a good book as much as the next guy. So I don't doubt his could be a good read (I'll put it in my long list that I can't seem to read myself out of).

As for his performance, I trust that Barron has done their jobs tallying the numbers. I seem to recall that his fund benefitted from the largess of his Wall Street friends and got handed a rescue balloon at the most opportune of times. Nonetheless, I wholly recognize his trading talent.

JML

Billy, nice bounce by UXG from its 50 ema.

Sometimes you just get lucky and they come to you right when you are looking at them. I think UXG is one miner that hasn't run away on us yet and has firm/stable support in the low 6's.

Jumble/Jock, re: Cramer

I think his TV show should be labeled as "entertainment", not "education". Cramer knows how to make money and obviously decided the best way to get an audience was by the antics he uses. If you want to know why his opinions and thoughts matter, you have to read the books. If you want education and to get his thoughts on the market today, you need to subscribe to realmoney.com. But I don't think you can only watch the show and have any insight into the man, or his stock picking. I can't stand the show, but I appreciate the man.

But I do feel guilty when I renew my subscription to realmoney.com as I compare what I receive from it, to what I receive from billcara.com for substantially less. Oh wait, I don't pay anything here. Something's wrong!

The S&P/Case-Shiller Home Price Index fell to -3.9% in July, officially giving us the worst 12-month decline since 1991. “Declining home prices are largely a function of the huge imbalance in the housing market,’’ said Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York, before the report. “Home prices are likely to continue to decline probably through the end of next year and that rate will actually accelerate.’’

OMG, CPSL is making me cry.

Shark -

What is your basis for suggesting that "Only about half, maybe, of money under management is being "professionally" managed; the other half are bunglers and aggrandized amateurs with very little market sense (lots of these guys can't even read a stock chart, and I'm not kidding!)"

As a person in the industry, I found that there are those that dispense poor advice if any advice at all, however, there are far more dispensing quality advice, sometimes in spite of their firms position.

Remember, at the end of the day, all individual investors are responsible for their own decisions. If one is unhappy with the performance of his/her investments, they have only one person to blame.

Your idea of professional management is likely different from what the average client expects (in my experience). The job is more about managing emotion and preventing a client from assuming too much risk.

Just my two cents worth, nothing more.

the housing decline can actually be viewed as a LT positive for the economy...there is no other way for new graduates to buy homes in certain areas of the country...

Dear Outoftexas,

I am not referring to advice givers here, I'm talking about money managers who never dispense advice.

The basis for my assertion is my extensive first and second-hand knowledge of the activites of said individuals...In other words, I know a few of these guys and those close to me work for and know many more. My only sibling helps run one of the largest mutual funds in the country. It is, in short, about a decade's worth of stories (of amateurish bungling) that leads me to my conclusion; obviously the percentage figure is a throwaway guesstimate, but it's probably in the neighborhood.

By the way I bought GSS this morning at $4.0275.

Shark -

I understand now your point of view.

I do not have any experience on the institutional side of advice and decision making, I have been with two of the major wire houses and now am working independent.

Today I am positioning (short term - 3 to 5 days) in SDS, QID and DUG - obviously I expect some weakness in the market. However, I expect it to be short lived, indices moving through the July highs is likely.

Have a good day.

Bill -

Aren't most fund managers set up to fail/underperform if they follow the strategy that their prospectus dictates? Most funds are still long only funds and must remain invested, in spite of market condition. This is especially true when we enter into a period when the market corrects or enters a bear phase.

It seems as though the fund manager is given a free pass, all he/she has to do is point to the strategy that they are to follow. So long as you do not dramatically underperform your peer group, all is well.

Do you still see mutual fund managers leaving to run their own hedge fund? An environment where they are not handicapped by a distinct investment charter, and an environment where compensation (aside from the management) is tied to performance?

I am leery of hedge funds at present as the proliferation of funds is sure to be a sign/precursor of diluted performance. A good cleansing would serve the market well.

I appreciate all of your commentary and insight. You serve your community well and have helped many individuals take control of their financial future.

Take care and enjoy your day.

ALOHA !!

I used to say "ONLY IN AMERICA"! Well, it looks like I can add in the UK! I often wonder how GM can afford to pay dividends and BIG salaries? I am sure the union strikers also wonder about that! Although unions need to tread lightly and consider the prospect of having no work at all. Seems these unions are like politicians ... they only plan for the short term!

I love how failed UK banks look to US Banks like Goldman and Merrill for advice. Isn't that like the chickens asking the fox for advice on repairing the chicken coop? I suppose Goldman and Merrill will be charging a fee? These guys engineer the bank fraud and then get paid for fixing it! HUMMMMMMMMM???? What a con job ... and the taxpayers get the bill!! I'll bet all those Brits are really happy about voting Brown into office. After all he is the guy that sold all their GOLD reserves a few years back for $300USD per ounce! I am amazed at how far losers,underperformers and draft-dodgers advance their politicial careers. It proves to me the US and UK voters are totally asleep at the wheel and have been for many decades now ...

READ ON:
Anger as Northern Rock Plans Dividend

By Philip Aldrick and Harry Wallop
The Telegraph, London
Tuesday, September 25, 2007

The Government has hired investment bank Goldman Sachs to advise it on options for Northern Rock amid fading hopes of a rescue and growing anger at the beleaguered mortgage lender's decision to pay shareholders a dividend.

Goldman was brought in after the Treasury guaranteed Northern Rock's debts alongside savers' deposits. It will advise on implications for taxpayers of any rescue plan, while considering alternative scenarios and working through the detail of the guarantee.

For the time being, Goldman will take a back seat, leaving the rescue plan to Merrill Lynch, which is advising Northern Rock's board. Merrill Lynch is seeking a buyer, but banks appear to have balked at the lender's potential L20 billion funding liability. The shares fell a further 22 to 172p yesterday as bankers said a white knight was unlikely to emerge.

Northern Rock's growing troubles have led to resentment that shareholders will profit from the taxpayers' guarantee. The bank plans to pay a L59 million dividend next month to everyone on the share register this week, despite having drawn L2.9 billion from the Bank of England's emergency facility just to keep the business running.

Professor Andrew Clare at Cass Business School, said: "Had the Government not stepped in, there would be no dividend and no company. ... I'm sure it wasn't the Government's intention for the dividend to be paid."

The Taxpayers' Alliance pressure group added that the payment set "a very bad precedent."

A spokesman for the bank said: "We confirmed on September 14 that the intention was to pay the dividend. If there is anything new to announce on that then we would make that announcement."

Matt Ridley, Northern Rock chairman, also appeared to defend the dividend policy in a letter sent to almost 100 MPs yesterday. He wrote: "The board is well aware of its responsibility to its many shareholders, including tens of thousands of small shareholders, as well as to our largest shareholder, the charitable Northern Rock Foundation. The board fully acknowledges its responsibilities and stands ready to account for its actions."

The Prime Minister yesterday issued a thinly-veiled rebuke over Adam Applegarth's L1.3 million pay. Gordon Brown told Radio 4's Today programme: "A company doing badly cannot afford to pay its executives exorbitant salaries or even high salaries."

Goldman Sachs' appointment is a clear signal that the Treasury is ready to seize control of the lender. Bankers say if a buyer cannot be found soon, the Treasury may wind up the bank, leaving shareholders with nothing. They added the lender's L113 billion of mortgage assets are unlikely to be sold as, at present prices, buyers would demand a 5 percent discount that could mean a L5.65 billion loss. With just L2.35 billion of net assets, the bank would then be insolvent.

Link: http://tinyurl.com/2r92yl

Tex,

A brief history of the thing is in order at this point. Back in the day, a stockbroker would call a dentist or a widew and sell a single stock, one customer at a time. This was both wildly inefficient as well as ineffectual, as most of these "licensed telemarketers" couldn't pick their own noses, let alone stocks. It should be added that client performance had nothing to do with their compensation, and was little regarded by the industry.

Another problem was, sooner or later that stock needed to be sold, and perhaps, another purchased. This required thought on the part of the client, who generally had as little expertise in this regard as the broker. Also, the client might decide to go to cash, or worse yet, withdraw his money. Balderdash!

A novel solution was then discovered.

In conjunction with a concerted media-led effort to convince Americans that the Social Security program would not provide for their retirement needs (and implying that the situation with SS was politically unfixable), tax "advantaged" methods of investing (read 401-k) saw regular, systematic investments being made each month by individuals. Clearly, the stockbroker was the wrong model to fully exploit this new arrangement, hence, the decline of the retail broker and the explosion of the mutual fund, which had been around for years, but was mostly used by the well-to-do much as hedge funds are now.

Regular, systematic payments to HBB needed to be smoothly absorbed into a system whereby money was pumped in by individuals who were then compelled by tax law and conventional wisdom to leave that money there for 20, 30, even 40-plus years.

This necessitated having someone there to make the buy/sell decisions, hence, the "professional" money manager, whose primary mandate was to mirror, as best as possible, the performance of the broad market, while the money sat essentially "on ice" at the broker/dealer for, in many cases, decades.

Sometime in the late 90's, "hedge fund" became a buzzword, and investors wanted in. i think they just liked the word "hedge", coupled with it's air of exclusivity. The more adept managers (as well as those with any entrepreneurial gumption) started hedge funds, leaving the less talented and in many cases less interested to run the mutual funds.

Now, many mutual funds are basically warehouses for 401-k money and obviously, only a small percentage of players can ever "beat the market", so that isn't required. What's essential is, that the money never be returned!

Comments appreciated.

Bobj, Jumble

Cramer indicates that his fund did so well by working companies which seemed ripe to go way up or down. Spreading lots of commissions around got them info on which companies were experiencing lots of block buy or sell orders. They would then contact the company, and get a feel from the CEO or CFO as to what was up. ANYTHING to get in front of the key people. One time, Berko managed to meet a CEO in the elevator after work, and get valuable info before ground floor. After an upgrade or downgrade, they would advise mgmt. on how to stimulate more upgrades, or avoid more downgrades. Then, Cramer had 2 traders with an uncanny feel for market direction. Cramer felt they used this simple "up close and personal" approach more intensively than any other fund. They never got into crazy financial instruments, just stocks and options. Isn't that interesting and instructive to know?

Looks like NOT has been halted again. Lucky or unlucky those who were caught in "pending news". ???

Another fellow who is knowledgeable on commodities is Don Coxe. Bill has linked to him before, I think. Coxe's name came up at a subscription service popular among canadians.

http://events.startcast.com/events/199/B0003/code/eventframe.asp

Mauldin's letter
(Volume 3 - Issue 50
September 24, 2007
Do Not Forget About
Changes in Velocity
from GaveKal Research) has had some interesting commentary.Anyone else reading it? If I understand his latest point....the velocity of money supply measures how much money is changing hands. Although the absolute supply is up if people are not using money, then demand falls and the threat of inflation is less of an issue, and therefore aspirations for the really high gold prices may not be fulfilled. Not sure if this is an accurate read, but the issue of velocity could very well be quite important in the final equation. At least he sounded convincing.

ALOHA !!

Mutual funds were set up to invest retirement funds "long term". The client is allowed certain allocations into International and Domestic growth, speculative and asset protection and cash categories. So there is some amount of "self direction" although limited. The Mutual Funds best advice was to invest long term to take advantage of the long term rise in the stock market. I have yet to go into any financial advisor's office who is tied into the Wall Street Spin Machine that does not have a long term chart of the DOW plastered on their wall going back to 1920 or so! They point to it and say "SEE ... see how it has always gone up long term!" They don't show you the little "valleys" ... They never say anything about "timing" those valleys! Retirement funds are suppose to be funds you won't need for another 20 years or more! We all know that is a fool's game and getting more foolish by the day! I have not seen any statistics as to how many retirement funds are being cashed out prematurely. Of course the government and the funds have "penalties" for such poor judgement!

I personally quit contributing a long time ago. Had I continued down that path I would not be as "debt free" as I am today. People are conned into believing that stock investment is better than being "debt free". I believe the best retirement goal is to attain a goal of debt freedom prior to retirement. That philosophy is lost on many people until they actually retire and find themselves pumping out 40% of fixed income on mortgage related costs. As any mortgage broker will attest if you pay out your loan to term you will have paid more than double the original purchase price of your home. I also believe as the US government gets starved for tax revenues the capital gains tax will rise as social security and medicare benefits will fall. Not a good combo for retirement planning.

Retirment101 in three words ... "LOSE THE DEBT"!

France May Sell Areva Shares to Public, People Say

http://www.bloomberg.com/apps/news?pid=20601085&sid=a3_uQnjdBIX4&refer=europe

There is some more in here about a potential Areva tie up with ABB. I didn't realize that a French investor had purchased a 25% stake in ABB!

Also, I recently found my entry on some shares of Areva (CEI.PA). I bought the European shares at $686 Euro. I think this one is a very long-term hold.

Noront (NOT) issued the following assay report. http://tinyurl.com/yu37ps
Other miners in the area FNC, FWR and BMK fell back on the news.

Subprime Panic Freezes $40 Billion of Canadian Commercial Paper

Bloomberg

http://www.bloomberg.com/apps/news?pid=20601109&sid=as9QkuEv9Wqw&refer=home

Kaimu,

The reason that financial professionals don't preach market timing is (at least) twofold. One, it is very difficult to be nimble with a vast array of client assets at the drop of a hat. Two, if they were so good at it, they would manage funds only for themselves, or at least charge you 2 and 20 for the trouble instead of the 1% flat fee they often charge now. Of course, there are probably other reasons why market timing is difficult on that scale. In any case, I would argue that "timing" becomes less and less important when the end goal is further, ie 20 years or more.

With respect to paying off mortgage debt, are you sure you are better off being debt free versus carrying a mortgage and having a pool of assets to draw from? It really comes down to personal choice, but those in higher tax brackets and have longer term mortgages are often better off saving instead of paying down debt. Depending on the investment vehicle, how many times could you double your investments in 30 years? I bet it is more than twice for even a 50/50 stock bond mix. Compare that to paying double the purchase price for your home (because of interest) and most times you will come out ahead. In fact, if your total return was just 7% annually, you should AT LEAST triple your money in 30 years, if not more (rule of 70). This could be argued back and forth and each side would have merit. However, as I said before, it comes down to personal choice.

And if that’s not all bad enough… it will cost about 10% more to heat your home this winter. The National Energy Assistance Directors Association (NEADA) said yesterday it expects the average U.S. household will spend $992 on heating their home this winter, up $94 from a year before.

Those using heating oil will get it far worse… the NEADA forecast a 28% rise in such costs. If you’re still using oil to heat su casa, expect to pay around $1,834 this winter, says the NEADA. That’s twice as much as the same forecast in 2004.

"They never say anything about "timing" those valleys!" timing was a dirty word until the spring of 2000 (and still is in some circles)..that was one valley some people did not survive..

"I believe the best retirement goal is to attain a goal of debt freedom prior to retirement. That philosophy is lost on many people until they actually retire and find themselves pumping out 40% of fixed income on mortgage related costs."

two phrases rarely emphasized (if at all) to housing newbies: "additional principal payments" and "pre-payment penalty..."

Someone at Westwind (a brokerage I am not familiar with) swallowed up 200,000 shares of ValGold (VAL.V) at $.40 CAD today. It came in one fell swoop at about 1:30 ET.

2nd hits the nail.
I paid a piddly $40 a month extra and paid off my house in half the time. I can't imagine prepayment penalties.....insane.

And heating: last year $850, this year $950. That's something like 12.5% and my toilet paper example is about 15% increase.

I would say inflation is getting away faster than anyone expects and the fed is WAY behind.

Trading question.
If you have a stop limit placed on an order when a trading halt occurs what happens? Do you get taken out at your stop price, or do you receive the bid price when trading resumes?
Thnx,

Norwegian TV just covered a story on mining company Crew Minerals. They acquired the rights to 10 square kilometres of farmland in Indonesia somwhere, to drill for Zink. This is the land the natives have lived of for generations, and where they have buried their forefathers. Now the natives are being moved by force, because their tribal leaders signed a contract with Crew.

Actually, they didn't sign the contract, because they can't read or write. Rather, they put their fingerprints on the document, which the corporation explained the contets of orally. They also got a nice compensation of 2 kg. of rice for the agreement.

The management of Crew firmly assert the press they have done nothing unethical. At least some investors have the conscience to sell out.

I say screw Crew!

Is this a Cara 100?

ALOHA !!

ricej11 ... I was not refering to "short term" timing. Imagine hitting retirment age and being forced to sell off stock assets in a 1929 style depression? I believe a number of baby-boomers will see such an event. What will they write off their losses against? You have to have gains or losses are useless.

ME? I am sure I'd rather be debt free ... You know and I know making 7% is not enough because "real inflation" is running much higher. I speak of the "cost of living" ... or as I call it the "cost of surviving"! If you own a home that means I assume you are making a net income that would cover mortgage payments. Right off the bat the US government and state governments and county have trimmed on average 49%(2006) off your earned income in various income and excise taxes. Add in the "stealth tax of inflation" at 11% and we're up to 60%. Add in food and medical insurance and medical costs and its higher. Taxes and food and health care are the basics any human needs today ... but shelter is a necessity also. You can argue with the percentages as outlandish but for each of us it is different. It may be more or less ... but my point is you are running a huge "tax" gauntlet before you even buy one share of KRY or even pay one cent of your mortgage! In the Bush Fiscal Year Budget 2008 there is a built in tax revenue increase of 53% for individuals by 2012. For corporations it is a measley 13% by 2012. Typically Americans don't save ... how can they? So don't believe that anyone is saving up for anything because most of us follow our government's lead and spend more than we make. It should be clear by now that the stock markets are essentially rigged casinos. If it were anything else you would see Goldman and Merrill making less profit and maybe even on the verge of bankruptcy. I contend it is their clients who have the most chance of falling into the later category of bankruptcy. You are gambling ... period! The big Las vegas casinos are akin to the big banks of Wall Street. Set aside how confident you are feeling with your past trades and you vast knowledge of the markets that will guarantee you huge profits! It does not matter what you call it forex, bonds, mutuals, GE ... its all a gamble. My priority was to pay off debt and secure a safety net for my family that is virtually risk free. Buying land here in Hawaii fit that goal.

You are right ... its all a personal choice. You choice is about "risk levels". Just don't let the casino overtake your morals and better judgement. There is nothing new under the Sun. Back in 1929 the same brokers hyping the market then were jumping out windows and if they didn't jump then their clients pushed them! All those old documentaries of people in soup lines and homeless bought into the "credit" game hook line and sinker ... Those who survived best owned producing farms and oil and gold and silver but above all owned NO DEBT ... I am not so sure any of us here can time a severe market or monetary collapse. We can judge or guess that a downturn may be approaching but can we say with all accuracy the duration or severity of such a "downturn"? I am not prepared to risk my family's future on that one ... Risking "net income" in the stock market is not the same as paying off a mortgage. Unless you have a paid off property you will never know such a financial freedom ... The banks are counting on the fact that millions of Americans will go to their grave owing at least a mortgage payment.

Well said Kaimu. Thanks, and thanks to the community for your comments.

Rookie

All,
It was interesting to see that the POG was under pressure today while the USDX was making new lows. Is this an unusual phenomenon?
THanks,
Brendan

Kaimu,

You are correct, this may be more of a discussion about risk tolerance than anything, and your point that Americans typically don't save was spot on. I agree that issue is the bigger deal here, moreso than anything else. Regardless if people have any debt or not, they still don't save anything (on average).

However, I guess I am a bit less cynical than you with respect to the markets. The vibe you give off is that all investments (publicly traded) will eventually lose. I don't find that necessarily to be true. Those fancy charts dating back to the 1920's have to mean something, don't they? Sure inflation is prevalent. Is it 5%, 10%, 15%? Who really knows (although I KNOW that the Fed doesn't know or is simply indifferent by the way they act). Regardless, inflation should treat your investment (whether it be shares of GE or your home) fairly equally when it is all said and done.

Taxes, of course, are outrageous. Nobody disputes that. I might feel it more than most as a MN resident (thank you Jesse Ventura for returning the surplus instead of saving it to pay future debts).

indptrader:

May want to read this before you place a stop order:

http://en.wikipedia.org/wiki/Order_(exchange)

just happened to see this headline on realmoney and recognized the byline:

Michael Panzner
Rush to Sell Gold
For the near term, the right move is to shed exposure..

ALOHA !!

ricej11 ... I find it odd that at the end of June this year nobody even heard of CDOs or SIVs or CDSs or ABCP mentioned on TV or newspapers or ever saw "bank runs" on TV!! Here you say I am cynical in the face of a derivatives debacle that is rendering cash in a money market CD as too risky. I have to laugh! I had to pull all my cash out of CDs. When they matured in August I did not renew because I felt it was too risky. Thats the first time in my life that I have ever had to reconsider "cash" as being a risk! Some people won't see how red the red flags are until their financial coffins are draped over them! It wasn't that long ago during the week of August 13th that the stock markets were seizing up with volume issues and some online traders went dead! Jeez, a few weeks of semi-normalcy after a rate cut and everybody's memory goes blank! Are we the "investing public" that easy to fool?

HELLO ... cash is now risky! HUMMMMM%#@*&^>?<?? HELLO ... so are the banks you keep cash in ...

Please, didn't anyone here read my earlier post today about Northern Rock execs and shareholders? Even in the UK the BIG BANKS and the people that run them are yelling at the top of their lungs ... "WE DON'T CARE!" They expect a "get-out-of-jail-free-card" total BAILOUT every time they go belly up now! UK taxpayers should be in the streets on that one! The fact they are not says as UK taxpayers "WE DON'T CARE EITHER!" The fact is bailouts work until they don't! TOO BIG TO FAIL will someday become TOO BIG TO BAILOUT since there are no "small banks" left!

In case nobody has noticed even the WORLD has become much more riskier! I have never seen a more unstable financial system coupled with rampant global political instability in all my life. I do not think it is a coincidence either. I am not cynical just prudent and cautious!

ALOHA !!

2nd_ave ... I have to wonder when the US Federal Reserve will announce they plan to sell gold to "pay debts"? I mean here we have all these European governments like Spain and Portugal and Italy selling gold to "pay debts". Certainly the USA has some debts to pay. All that gold sitting there collecting dust and no interest is certainly motivation! Will the foreigners force that sell have they already taken our gold in exchange for more trade deficits? Do we have any gold left? I wish the US government was as open and transparent as other countries and their central banks are. I as a US taxpayer and a US citizen have not a clue as to the "real" amount of gold in our Ft. Knox/NYC reserves. Even more so I have no clue if our government has gone and leased out all our gold or swapped gold. I know Congress needs to approve a gold sale but I doubt they have to approve a gold lease. Kind of like Congress has to approve War but not a "pre-emptive" War. Like Congress has to approve a draft but not hiring mercenaries! There seems to be many ways around any politically disdainful obstacles these days.

kaimu- to the extent that i'm holding 5.5% fixed rate property loans, can't say i'm not looking forward to a little inflation ;)

2nd_ave,
Im expecting a deep correction in the xau as well.

ALOHA !!

2nd_ave ... so long as you have sufficient income and are in good health and can pay your loan and property taxes on time that's great!

I have been creditor to a few bankruptcy petitions in my life and have attended a few bankruptcy court hearings. I was surprised at how many people, even back in the late 1980s and 1990s, were filing bankruptcy due to medical reasons. Most who filed under medical conditions had already sold their houses and possessions yet still could not come up with the cash to settle their ongoing medical debts. I realize that the odds of a medical crisis increase as I get older. Waiting to pay off my property until I was in my 60's or 70's was not the safest way to play it!

Ah, the fine print ... What do your loan agreement say about early repayment or the bank "calling" your loan? Under what conditions can it be "called"? Can it be "called" on descretion if your loan is sold to another bank? Can it be "called" if your mortgage bank is insolvent and the loan becomes part of seized "general assets"? Once it is "called" can the rate be restated at a higher rate? What protection does "fixed" really offer? Who reads fine print?

There's more to a loan than a fixed 5.5% rate!

You are making a serious mistake wishing for more "inflation". While it mught make paying your loan off faster if your wages rise as fast as survival costs ... don't count on it. Wages tend to lag such circumstances and jobs tend to disappear. The more of it(inflation)that comes your way the less money you have for your mortgage and property tax payments, since most people prefer eating! Do I eat or do I pay my mortgage? I guarantee you "eating" wins every time! Besides you can always move in with your parents if all else fails ...

Bill,
I just wanted to write to express my appreciation for your consistently informative and open blog and the excellent analysis to teach us to trade price.

kaimu-

"I realize that the odds of a medical crisis increase as I get older."

brings to mind a colleague of mine, few years older/mentor of sorts...beautiful riverside home in the Central Valley, property in Brazil ready for retirement, huge retirement portfolio built up over many years (wife, no kids)...after retiring early, *gambled* big on his health: family history made insurance expensive, so he stopped coverage while waiting to qualify for medicare...ended up with a medical emergency that ate it all up...smart guys can sometimes make really bad judgment calls out of arrogance...

"Ah, the fine print..."

agree completely. blessed with a broker we have worked with since the early nineties who lives up the hill from us..the only guy i know who will turn down business if he is unable to get his clients loans that include prepayment penalties or any other "insane" condition..we emailed him every month in 2004/05 until he finally had us fill out paperwork in preparation for the exact moment the rates hit his target..

"..so long as you have sufficient income and can pay your loan and property taxes on time that's great!"

exactly what we're trying to teach the kids...it's great to spend your college years "exploring" if you can afford it...and i don't think most of them are able to any more..the UC system now has grad school tuition in the 40K/year range within 3 years..they need to be targeting high-income careers if they expect to live in the bay area...

"and are in good health.."

just as getting good grades in HS can translate into more financial points in college than a part-time job, good health throughout life makes far more financial sense than the the long hours and vacant social life espoused by the work hard/play hard set...

"Besides you can always move in with your parents if all else fails.."

we've already told the kids they can forget about this option (lol)...

"the only guy i know who will turn down business if he is unable to get his clients loans that include prepayment penalties or any other "insane" condition"

replace "include" with "do not include"

hey 2nd, the only problem with real estate during accelerating inflation is that long rates eventually skyrocket and home values plummet, so be careful what you wish for. real estate may track inflation in the long run, but in the medium term its the price of and access to credit that drives prices.