Hello World,
Recently I was a guest on the Michael Ray Dresser "Dresser After Dark" talk radio via lifestyles streaming radio and had a chance to discuss my perceptions of the current economic climate.
Listen to the program where I am the first guest on this segment.
Click here
-- H. L. Quist
Pass this on to your friends and family and suggest they subscribe to this blog for regular updates on my views of current economic issues facing America.
Wednesday, December 24, 2008
Tuesday, December 16, 2008
Holiday Greeting from H. L. Quist
Hello World,
I want to wish you all a Happy New Year!
Click here to watch my Holiday Greeting Video!
There are opportunities, even in this challenging time. Consult your financial adviser, and stay tuned to my blog, video reports, and radio program.
I welcome your feedback.
And, if you are stuck for a gift, I would like to suggest my book as the perfect gift for family, friends or employees. It is a great educational tool. While you are ordering the book for others, consider a copy, print or download, for yourself!
Happy New Year!
H. L. Quist
www.lulu.com/hlquist
I want to wish you all a Happy New Year!
Click here to watch my Holiday Greeting Video!
There are opportunities, even in this challenging time. Consult your financial adviser, and stay tuned to my blog, video reports, and radio program.
I welcome your feedback.
And, if you are stuck for a gift, I would like to suggest my book as the perfect gift for family, friends or employees. It is a great educational tool. While you are ordering the book for others, consider a copy, print or download, for yourself!
Happy New Year!
H. L. Quist
www.lulu.com/hlquist
Monday, December 1, 2008
ANOTHER BUBBLE
As detailed in my book "GREED", I forecast in July 2005 that the massive real estate and credit bubble would "implode endangering the financial security of millions of Americans." Unfortunately, my forecast was accurate.
As I finished writing "GREED" in December 2007, the Dow Jones Industrial Average (DJIA) had declined about 7% from its October 2007 high and I wrote:
"At present the US stock market is overbought and over-valued. There could be a near-term nasty correction of (an additional) 10% to 30% in early 2008..."
As we painfully know the equity market bubble imploded into an all-out-bear market rout which exceeded my estimate.
Now, as all America ponders what's ahead in this "Aftermath of Greed," a third bubble has found helium and will, in your author's opinion, burst in 2009 catching unwary investors unprepared — again.
What is this latest asset bubble? Believe it or not, it's US Treasury debt!
Since this past summer, as the stock market began its precipitous decline and the housing and credit sector worsened, investors sought the safe-haven of US Treasuries, preparing for a recession or even a depression economy. Demand has been so great that yields have reached historic lows. One and two month T-bills pay less than one-tenth of one percent whereas they were about 5% in August 2007! Two year rates are below one percent and the bellwether ten year note currently yields under 3%. Although investors were principally seeking safety, those that bought Treasury debt a year ago have also enjoyed huge realized and un-realized capital gains (as yields decline the principal market value of the bond increases).
BUT — what happens (or perhaps when) the threat of the dreaded "Double D" — Default and Depression — subsides and the signs of recovery are promoted by the talking heads on CNBC? And, what happens when the inevitable whiff of inflation burns the market's nostrils? Billions, yes maybe a trillion will flee from the Treasuries as fast as John's during a raid on a house of ill- repute!
But, alas, there could be a silver lining in this bubble. Where will a large portion of this money go?
First, equities. A dramatic bear market rally could be ahead.
Second, gold. The ultimate money and inflation hedge.
Third, real estate. A surprising rebound could defy all prognosticators.
Most market mavens and economists predict there will be a slow road to recovery in all these sectors. "The Myth Buster" doesn't agree and envisions continued volatility in all markets. But barring a catastrophic event, there could be a decided upside bias in 2009. There isn't an easy way to quantify the amount of capital that will be re-deployed from Treasuries elsewhere, but I suspect that a considerable amount of the multi-trillions is not traditional, patient money. It's "smart money" looking for opportunity and outsized gains.
Where's the downside? At the US Treasury Department. The Government's refinancing needs may exceed $2 Trillion in 2009. Who is going to step up and buy Treasury debt in a rising interest rate environment? And, who is going to invest in a country whose currency is being defaced daily? The US shouldn't count on the Chinese. They're already holding $1.9 trillion US Dollars and Treasury debt and rumors out of China indicate that they're contemplating converting some of these dollars to gold bullion (4,000 tonnes). The reality is that the entire G20 is more than a little concerned about the global imbalances that the US has created.
Stay tuned to "The Myth Buster." Change is coming!
Subscribe to this feed by clicking here!
-- H. L. Quist
As I finished writing "GREED" in December 2007, the Dow Jones Industrial Average (DJIA) had declined about 7% from its October 2007 high and I wrote:
"At present the US stock market is overbought and over-valued. There could be a near-term nasty correction of (an additional) 10% to 30% in early 2008..."
As we painfully know the equity market bubble imploded into an all-out-bear market rout which exceeded my estimate.
Now, as all America ponders what's ahead in this "Aftermath of Greed," a third bubble has found helium and will, in your author's opinion, burst in 2009 catching unwary investors unprepared — again.
What is this latest asset bubble? Believe it or not, it's US Treasury debt!
Since this past summer, as the stock market began its precipitous decline and the housing and credit sector worsened, investors sought the safe-haven of US Treasuries, preparing for a recession or even a depression economy. Demand has been so great that yields have reached historic lows. One and two month T-bills pay less than one-tenth of one percent whereas they were about 5% in August 2007! Two year rates are below one percent and the bellwether ten year note currently yields under 3%. Although investors were principally seeking safety, those that bought Treasury debt a year ago have also enjoyed huge realized and un-realized capital gains (as yields decline the principal market value of the bond increases).
BUT — what happens (or perhaps when) the threat of the dreaded "Double D" — Default and Depression — subsides and the signs of recovery are promoted by the talking heads on CNBC? And, what happens when the inevitable whiff of inflation burns the market's nostrils? Billions, yes maybe a trillion will flee from the Treasuries as fast as John's during a raid on a house of ill- repute!
But, alas, there could be a silver lining in this bubble. Where will a large portion of this money go?
First, equities. A dramatic bear market rally could be ahead.
Second, gold. The ultimate money and inflation hedge.
Third, real estate. A surprising rebound could defy all prognosticators.
Most market mavens and economists predict there will be a slow road to recovery in all these sectors. "The Myth Buster" doesn't agree and envisions continued volatility in all markets. But barring a catastrophic event, there could be a decided upside bias in 2009. There isn't an easy way to quantify the amount of capital that will be re-deployed from Treasuries elsewhere, but I suspect that a considerable amount of the multi-trillions is not traditional, patient money. It's "smart money" looking for opportunity and outsized gains.
Where's the downside? At the US Treasury Department. The Government's refinancing needs may exceed $2 Trillion in 2009. Who is going to step up and buy Treasury debt in a rising interest rate environment? And, who is going to invest in a country whose currency is being defaced daily? The US shouldn't count on the Chinese. They're already holding $1.9 trillion US Dollars and Treasury debt and rumors out of China indicate that they're contemplating converting some of these dollars to gold bullion (4,000 tonnes). The reality is that the entire G20 is more than a little concerned about the global imbalances that the US has created.
Stay tuned to "The Myth Buster." Change is coming!
Subscribe to this feed by clicking here!
-- H. L. Quist
Monday, November 17, 2008
The Aftermath of Greed ... and Elections
A special presentation by H. L. Quist.
Mark your Calendar – RSVP Today
Thursday, December 11, 2008
10:00 – Noon
Southwest Valley location TBD
Tentatively: The Paseo Apartments Clubhouse
H. L. Quist
Author of "The Aftermath of GREED: Get Ready for the Coming Inflationary BOOM"
Host of "The Myth Buster Show" on KFNN radio
He correctly forecasted the last 5 Boom and Bust cycles since 1993, including the recent real estate boom and the ensuing bust.
H.L. "Buster" Quist will now share his economic forecasts for the aftermath of the Mother of All Bailouts, about how inflation will impact your future, help you understand what a "Crack-Up Boom" is, and what could be the greatest opportunity of a lifetime to build or protect your nest egg!
Fee: Free early registration by November 30, 2008; $10 afterwards
Information: www.TheRonald.us
RSVP: 623.249.4792 OR office@bi-solutions.biz
Mark your Calendar – RSVP Today
Thursday, December 11, 2008
10:00 – Noon
Southwest Valley location TBD
Tentatively: The Paseo Apartments Clubhouse
H. L. Quist
Author of "The Aftermath of GREED: Get Ready for the Coming Inflationary BOOM"
Host of "The Myth Buster Show" on KFNN radio
He correctly forecasted the last 5 Boom and Bust cycles since 1993, including the recent real estate boom and the ensuing bust.
H.L. "Buster" Quist will now share his economic forecasts for the aftermath of the Mother of All Bailouts, about how inflation will impact your future, help you understand what a "Crack-Up Boom" is, and what could be the greatest opportunity of a lifetime to build or protect your nest egg!
Fee: Free early registration by November 30, 2008; $10 afterwards
Information: www.TheRonald.us
RSVP: 623.249.4792 OR office@bi-solutions.biz
Monday, November 10, 2008
The Myth Of The Week - November 9th
The Dollar Is As Good AS Gold
Hello World,There's an event that will occur in Washington, D.C., Friday, November 15th, which will impact all Americans. Watch my video and then listen to my Radio program today (Monday, November 10th) from 1- 2 p.m. Phoenix time at KFNN 1510AM, to learn why I say, The Us Dollar was the once and future king of currencies. If you miss the live radio show, click on the mic to the right anytime after 2:30 p.m. and listen to this week's archive of the show. You can also listen to the radio show streaming live between 1-2 p.m. at www.kfnn.com.
--H. L. Quist
Wednesday, November 5, 2008
H L Quist Forecasted Obama Victory
Hello World,
This past Saturday, November 1st, at the Financial Fest in Phoenix, I told the crowd that Obama would be our next President, and an inflationary boom would follow!
For those of you who were not there, I sent out a Press Release last night, click here to read about it.
Send this blog to your friends and ask them to subscribe. Continue to follow for updates.
And don't forget to tune in every Monday, 1-2 p.m. Phoenix time at KFNN 1510AM or listen live at www.kfnn.com, to get the Myth of The Week, and current events.
Click on the microphone to the right to tune into this week's program from my radio show "The Myth Buster Show"
This past Saturday, November 1st, at the Financial Fest in Phoenix, I told the crowd that Obama would be our next President, and an inflationary boom would follow!
For those of you who were not there, I sent out a Press Release last night, click here to read about it.
Send this blog to your friends and ask them to subscribe. Continue to follow for updates.
And don't forget to tune in every Monday, 1-2 p.m. Phoenix time at KFNN 1510AM or listen live at www.kfnn.com, to get the Myth of The Week, and current events.
Click on the microphone to the right to tune into this week's program from my radio show "The Myth Buster Show"
Monday, October 27, 2008
H. L. Quist is Speaker at Financial Fest November 1, 2008
Mark you calendars and pre-register (free!) at http://financialfest.net/ for this Saturday, November 1, 2008, and catch up with H. L. Quist at his booth from 8 a.m. to 2:45 p.m., and then listen to his presentation at 3 p.m. in Room #165.
H. L. Quist will be autographing his book "The Aftermath of Greed: Get Ready For The Coming Inflationary Boom," and he and Tom Miner (Miner Kennedy Chmura Associates, Inc.--sponsors of his radio show "The Myth Buster Show" Phoenix KFNN 1510AM) will be answering questions, and, you can enter a drawing to win one of two prizes: 1) a 1 hour free financial consultation with H. L. Quist, or 2) a free home appraisal by Tom Minor.
Where: The Phoenix Convention Center (South Ballroom) Northeast corner of Jefferson and 3rd Street.
When: Booth — 8: a.m. to 2:45 p.m.
When: Seminar — H. L. Quist (Room 165) 3 p.m.
And don't forget to catch "The Myth Buster Show" on your radio every Monday, 1-2 p.m. Phoenix KFNN 1510 AM, live or listen to streaming at www.kfnn.com.
The archive for the current show will be available for 1 week beginning every Monday at 2:30 p.m. (until the following week's show) Phoenix time at: show archive link.
See you at the Financial Fest! — H. L. Quist
H. L. Quist will be autographing his book "The Aftermath of Greed: Get Ready For The Coming Inflationary Boom," and he and Tom Miner (Miner Kennedy Chmura Associates, Inc.--sponsors of his radio show "The Myth Buster Show" Phoenix KFNN 1510AM) will be answering questions, and, you can enter a drawing to win one of two prizes: 1) a 1 hour free financial consultation with H. L. Quist, or 2) a free home appraisal by Tom Minor.
Where: The Phoenix Convention Center (South Ballroom) Northeast corner of Jefferson and 3rd Street.
When: Booth — 8: a.m. to 2:45 p.m.
When: Seminar — H. L. Quist (Room 165) 3 p.m.
And don't forget to catch "The Myth Buster Show" on your radio every Monday, 1-2 p.m. Phoenix KFNN 1510 AM, live or listen to streaming at www.kfnn.com.
The archive for the current show will be available for 1 week beginning every Monday at 2:30 p.m. (until the following week's show) Phoenix time at: show archive link.
See you at the Financial Fest! — H. L. Quist
Thursday, October 23, 2008
America's Parallel Universe — Back to The Future
As America faces a critical and defining moment in its 232 year history, history itself may offer us a rare glimpse into the future.
Those who are over the age of fifty will find themselves in a sort of parallel universe. It's August 9, 1974, and Richard M. Nixon has just resigned in disgrace from the office of the Presidency of the United States. The stock market shakes but does not crash. Less than two months later, however, OPEC (Organization of Petroleum Exporting Countries) announces that they will terminate all oil exports to the US. The Dow Jones Industrial Average (DJIA) begins a sharp 45% decline from 1051 to 577. The economy sinks into a severe recession as gasoline increases from $.30/gal to $1.25/gal.
Fast forward into our parallel universe. It is exactly 34 years later. Another Republican, George W. Bush, is a lame duck president, discredited and seemingly unable to deal effectively with a similar potentially calamitous collapse of the country's financial system. The DJIA has declined over 40% and the Country is on the verge of a severe recession or worse.
Back to the future. Richard Nixon has been succeeded by Gerald Ford, an honorable and under- rated President whose media-induced image is one of a clumsy ex-football player who played too many games without a helmet and is portrayed as an ideological clone of the ex-president.
Out of the deep south emerges a two-year term, unknown but charismatic governor from Georgia who charms the nation with his drawl, easy manner and forthrightness. He promises change, to cleanse the government of corruption and get the economy going again. Jimmy Carter decisively wins the presidency in 1976.
Carter appoints a long-time friend, G. William Miller, as Chairman of the Federal Reserve Board with a strategy to grow the stagnant economy. The stock market soon returns to its 1974 high and consumer sentiment rises as pent-up demand and easy money boosts the economy. The President glows with an aura of success despite the ominous signs of inflation brewing.
By 1978 the Consumer Price Index (CPI) reaches 13%, the highest inflation since the civil War. Despite long term mortgage interest rates rising dramatically from 7% when Carter took office to 16% by 1980, real property values in some areas of the country double in four years. As Paul Volker assumes the role of the new Fed Chairman, the prime rate reaches 21.5% and gold, the ultimate inflation barometer, increases 700% to $850/oz. On November 4, 1979, the Iranian Theocracy over throws the Shah and Jimmy Carter's world unravels in the oily sands of the Persian Gulf.
January 20, 2009, Barrack Obama, begins his first term as the nation's 44th President determined to do whatever needs to be done to cure the economic ills of America's middle class. Congress has already made fundamental changes as it always does through legislation (Housing & Economic Recovery Act of 2008 and Troubled Asset Relief Protection Act) which will infuse (potential) trillions of newly created fiat dollars into America's financial system. The young, charismatic President, like his parallel predecessor, Jimmy Carter, successfully alters the mood of the country and euphoria breaks out as the DJIA reaches and then exceeds its previous historic high.
Suddenly, however, after a couple years of a seemingly stable growth economy, the evil dragon known as inflation emerges from its lair and begins its relentless and accelerated destruction of the US dollar. When the understated and fraudulent CPI increases at an annualized rate of 25% inflation morphs into HYPERINFLATION and an ultimate "Crack-Up Boom" will mark the second calamitous economic event in American history.
This parable of a parallel universe offers us an opportunity as well as an omen. During the first couple years of this new administration, outsized gains could be realized in stocks, real estate and commodities. The time will come however, when it may be prudent to divest yourself from all equity investments. God willing, I'll be able to alert you how to deal with hyperinflation. In the interim, now is the time to read, "The Aftermath of Greed: Get Ready for the Coming Inflationary Boom." Your perspective of the future begins in the past.
-- H. L. Quist
Those who are over the age of fifty will find themselves in a sort of parallel universe. It's August 9, 1974, and Richard M. Nixon has just resigned in disgrace from the office of the Presidency of the United States. The stock market shakes but does not crash. Less than two months later, however, OPEC (Organization of Petroleum Exporting Countries) announces that they will terminate all oil exports to the US. The Dow Jones Industrial Average (DJIA) begins a sharp 45% decline from 1051 to 577. The economy sinks into a severe recession as gasoline increases from $.30/gal to $1.25/gal.
Fast forward into our parallel universe. It is exactly 34 years later. Another Republican, George W. Bush, is a lame duck president, discredited and seemingly unable to deal effectively with a similar potentially calamitous collapse of the country's financial system. The DJIA has declined over 40% and the Country is on the verge of a severe recession or worse.
Back to the future. Richard Nixon has been succeeded by Gerald Ford, an honorable and under- rated President whose media-induced image is one of a clumsy ex-football player who played too many games without a helmet and is portrayed as an ideological clone of the ex-president.
Out of the deep south emerges a two-year term, unknown but charismatic governor from Georgia who charms the nation with his drawl, easy manner and forthrightness. He promises change, to cleanse the government of corruption and get the economy going again. Jimmy Carter decisively wins the presidency in 1976.
Carter appoints a long-time friend, G. William Miller, as Chairman of the Federal Reserve Board with a strategy to grow the stagnant economy. The stock market soon returns to its 1974 high and consumer sentiment rises as pent-up demand and easy money boosts the economy. The President glows with an aura of success despite the ominous signs of inflation brewing.
By 1978 the Consumer Price Index (CPI) reaches 13%, the highest inflation since the civil War. Despite long term mortgage interest rates rising dramatically from 7% when Carter took office to 16% by 1980, real property values in some areas of the country double in four years. As Paul Volker assumes the role of the new Fed Chairman, the prime rate reaches 21.5% and gold, the ultimate inflation barometer, increases 700% to $850/oz. On November 4, 1979, the Iranian Theocracy over throws the Shah and Jimmy Carter's world unravels in the oily sands of the Persian Gulf.
January 20, 2009, Barrack Obama, begins his first term as the nation's 44th President determined to do whatever needs to be done to cure the economic ills of America's middle class. Congress has already made fundamental changes as it always does through legislation (Housing & Economic Recovery Act of 2008 and Troubled Asset Relief Protection Act) which will infuse (potential) trillions of newly created fiat dollars into America's financial system. The young, charismatic President, like his parallel predecessor, Jimmy Carter, successfully alters the mood of the country and euphoria breaks out as the DJIA reaches and then exceeds its previous historic high.
Suddenly, however, after a couple years of a seemingly stable growth economy, the evil dragon known as inflation emerges from its lair and begins its relentless and accelerated destruction of the US dollar. When the understated and fraudulent CPI increases at an annualized rate of 25% inflation morphs into HYPERINFLATION and an ultimate "Crack-Up Boom" will mark the second calamitous economic event in American history.
This parable of a parallel universe offers us an opportunity as well as an omen. During the first couple years of this new administration, outsized gains could be realized in stocks, real estate and commodities. The time will come however, when it may be prudent to divest yourself from all equity investments. God willing, I'll be able to alert you how to deal with hyperinflation. In the interim, now is the time to read, "The Aftermath of Greed: Get Ready for the Coming Inflationary Boom." Your perspective of the future begins in the past.
-- H. L. Quist
Monday, October 20, 2008
The Myth Buster Radio Show
Hello World,
My radio show today is now in its third week, and I invite you to listen in online or locally (Phoenix Metro Area), and call in with your comments, thoughts, concerns and questions. 602-324-KFNN (5366)
1-2 p.m. Phoenix local time on KFNN 1510 AM, or www.kfnn.com. For information on the show at the radio site click here.
To listen live click here
I welcome your comments and suggestions,
-- H. L. Quist
Saturday, September 27, 2008
The Mother of All Bailouts
It's unfathomable to most Americans to comprehend the cause and effect of this nation's greatest financial crisis, since the Great Depression. The amount of dollars that it could take to head off a potential collapse of our financial system is unknowable. It may require a trillion or even two. One thing is certain, however; we are all witnessing the beginning of the end of a global, over leveraged, fiat (paper) money system and the possible demise of the US dollar.
I finished writing GREED at the end of the year 2007. I new at that time, as prominent a place as the "subprime mess" was occupied in the media, that it was the "highly leveraged derivative scheme (which I improperly termed the ‘daisy chain') that was the major threat to the world's financial system. (It was Warren Buffett who called derivatives, weapons of financial mass destruction.) Spot on. It is the collapse of this inverted pyramid that has brought the global financial markets to its knees.
Readers of my book will recall (page 93) an episode that occurred exactly a decade ago which was the poster child of things to come. Robert Merton and Myron Scholes won the Nobel Prize in economic sciences for a "Black Fox" system of using derivatives later utilized at their company Long Term Capital Management (LTCM) that would produce outsized gains while at the same time, minimize risk. In September 1998 (when Russia defaulted on its sovereign debt) the fund lost billions in a matter of days and created a Wall Street panic. A crisis was averted when a government-initiated Wall Street funded bailout saved the day. The concept of moral hazzard (bail out by Uncle Sam) worked so well on a small scale, Wall Street took it to an unknowable level ($300-$400 Trillion dollars) in the next decade. So Wall Street greed conveniently forgets its sins of the past. Is that the story? No. Here's what you don't know.
After the LTCM fiasco of 1998, there was (as always) a mission by Congress to investigate and regulate the derivative market. The strongest advocate and defender of the continued use of these super-sophisticated contracts (which means few knew what they were) was none other than Alan Greenspan (the "Emperor who had no clothes"). To assure that the inverted pyramid scheme would continue unregulated, Senator Phil Gramm (R-Texas), on December 15, 2000 just hours prior to Congress adjourning for the Christmas break, slipped an amendment into the appropriations bill. This cleverly-timed amendment forbade federal agencies to regulate financial derivatives that would open the door for the creation of the subprime mortgage-backed securities and other super leveraged paper contracts. And, that's not the end of this sordid story.
Senator Gramm's other contribution to the financial crisis was the "Enron Loophole" which prevented federal oversight of Enron's electronic energy trading which of course resulted in devastating losses to the employees and shareholders of that company. According to Ms. Froma Harrop of The Providence Journal, Enron's CEO Ken Lay chaired Gramm's 1992 re-election campaign and his wife Wendy Gramm, severed on Enron's Board earning as much as $1.8 million.
What lessons are to be learned?
Be circumspect of all legislation passed just prior to Congressional recess. Remember, the Federal Reserve Act of 1913 was passed at the same opportune moment when barely a quorum was present which transferred control of America's banking system to a private cabal. Today's crisis can be traced back to that fateful day, almost 100 years ago.
Secondly, this entire crisis and the necessity for The Mother Of All Bailouts is a by-product of a dereliction of duty by our nation's leadership and the ethical impairment of Wall Street. Our political and financial leaders are all member of the "good ole' boys club" whose credo is "do onto ourselves before we do onto others." I never thought I would live long enough to declare that our government is corrupt at its core! The system is broke and broken.
The central theme of GREED is that we will survive this crisis and there will be an inflationary boom, possibly hyper-inflationary. This unknowable amount of money infused into our financial system virtually guarantees that obscene inflation lies dead ahead. Re-read pages 3 to 5 of GREED that describes the inflationary boom from 1976 to 1980. Enormous profits were made during this period but when the boom ended in 1980 (16% long term mortgage rates and 21.5% prime rate) rapid asset deflation ensued.
We are all (except the CEO's with golden parachutes) experiencing the aftermath of GREED. Sweeping powers will be granted to those who led us to this abyss, markets will no longer be free and most Americans will be left to their own devices. My fervent hope is that I can bring some light into this darkness.
I finished writing GREED at the end of the year 2007. I new at that time, as prominent a place as the "subprime mess" was occupied in the media, that it was the "highly leveraged derivative scheme (which I improperly termed the ‘daisy chain') that was the major threat to the world's financial system. (It was Warren Buffett who called derivatives, weapons of financial mass destruction.) Spot on. It is the collapse of this inverted pyramid that has brought the global financial markets to its knees.
Readers of my book will recall (page 93) an episode that occurred exactly a decade ago which was the poster child of things to come. Robert Merton and Myron Scholes won the Nobel Prize in economic sciences for a "Black Fox" system of using derivatives later utilized at their company Long Term Capital Management (LTCM) that would produce outsized gains while at the same time, minimize risk. In September 1998 (when Russia defaulted on its sovereign debt) the fund lost billions in a matter of days and created a Wall Street panic. A crisis was averted when a government-initiated Wall Street funded bailout saved the day. The concept of moral hazzard (bail out by Uncle Sam) worked so well on a small scale, Wall Street took it to an unknowable level ($300-$400 Trillion dollars) in the next decade. So Wall Street greed conveniently forgets its sins of the past. Is that the story? No. Here's what you don't know.
After the LTCM fiasco of 1998, there was (as always) a mission by Congress to investigate and regulate the derivative market. The strongest advocate and defender of the continued use of these super-sophisticated contracts (which means few knew what they were) was none other than Alan Greenspan (the "Emperor who had no clothes"). To assure that the inverted pyramid scheme would continue unregulated, Senator Phil Gramm (R-Texas), on December 15, 2000 just hours prior to Congress adjourning for the Christmas break, slipped an amendment into the appropriations bill. This cleverly-timed amendment forbade federal agencies to regulate financial derivatives that would open the door for the creation of the subprime mortgage-backed securities and other super leveraged paper contracts. And, that's not the end of this sordid story.
Senator Gramm's other contribution to the financial crisis was the "Enron Loophole" which prevented federal oversight of Enron's electronic energy trading which of course resulted in devastating losses to the employees and shareholders of that company. According to Ms. Froma Harrop of The Providence Journal, Enron's CEO Ken Lay chaired Gramm's 1992 re-election campaign and his wife Wendy Gramm, severed on Enron's Board earning as much as $1.8 million.
What lessons are to be learned?
Be circumspect of all legislation passed just prior to Congressional recess. Remember, the Federal Reserve Act of 1913 was passed at the same opportune moment when barely a quorum was present which transferred control of America's banking system to a private cabal. Today's crisis can be traced back to that fateful day, almost 100 years ago.
Secondly, this entire crisis and the necessity for The Mother Of All Bailouts is a by-product of a dereliction of duty by our nation's leadership and the ethical impairment of Wall Street. Our political and financial leaders are all member of the "good ole' boys club" whose credo is "do onto ourselves before we do onto others." I never thought I would live long enough to declare that our government is corrupt at its core! The system is broke and broken.
The central theme of GREED is that we will survive this crisis and there will be an inflationary boom, possibly hyper-inflationary. This unknowable amount of money infused into our financial system virtually guarantees that obscene inflation lies dead ahead. Re-read pages 3 to 5 of GREED that describes the inflationary boom from 1976 to 1980. Enormous profits were made during this period but when the boom ended in 1980 (16% long term mortgage rates and 21.5% prime rate) rapid asset deflation ensued.
We are all (except the CEO's with golden parachutes) experiencing the aftermath of GREED. Sweeping powers will be granted to those who led us to this abyss, markets will no longer be free and most Americans will be left to their own devices. My fervent hope is that I can bring some light into this darkness.
Wednesday, September 24, 2008
Are You Ready For The Boom?
"The Aftermath Of Greed: Get Ready For The Coming Inflationary Boom"
Read The Book and Follow The Blog!
Read The Book and Follow The Blog!
Wednesday, September 10, 2008
A Historian Sees The Real Power Staying In China, While The Symbolic Olympic Baton is Passed To London
Quist says China Stakes Its Claim As The World's Future Superpower.
Every four years the summer Olympic Games evokes my personal lament of what could have been. This year, however, the games were a forecast of what is going to be.
Almost five decades ago I was a Silver Medalist in the US Track & Field Championships and a Gold Medalist and record holder in the javelin at the Pan American Games. Based upon my number two ranking in 1959 I was an odds-on favorite to earn a spot on the US Olympic Team headed for Rome in 1960. While attempting to qualify for the Olympic trials that year however a field judge ruled that my first two throws landed flat and my third throw was out of bounds. My Olympic dream ended without a mark.
Four years in a long time to prepare for a second chance to chase an Olympic dream. Marriage, a new career and a family took precedence but the inner lure of the dream lingered and the passion prevailed. Three weeks prior to the 1964 trials at the age of 28, I threw 15 feet beyond my previous personal best five years earlier — a sure sign that the dream was in sight. On my very next throw a sharp pain seared through my Achilles tendon and the fickle finger of fate struck again. I joined a long list of those who "couda, woulda, and shoulda" made the team.
For those who just observed the XXIX Olympiad, there was a consensus that the Beijing Games were "spectacular." To the athletes themselves, most of whom were millennials, the event was "awesome." To this writer however, who has observed this, the greatest athletic event in the world since 1956, Beijing was a portent of change to come.
For decades and maybe even centuries, China has endured an image as a backward, unprogressive, tightly controlled feudal country while at the same time confident that western civilization (particularly America) was in a rapid moral and financial decline. The 2008 Beijing Olympic games was to the Chinese all about global perception and respect for the host country. Few could claim that China did not achieve their goal.
The opening ceremonies were a divining rod. The men's furious, well-synchronized beating of the drums symbolized China's power. The women, who discarded their drab olive-green, Mao Tse Tung pant suits for svelte, body revealing costumes exuded grace and beauty. The exorbitant cost of the spectacle was a testament to China's wealth and status as a global financial colossus. And, of course, the nation's garnering of the most gold medals was viewed by the hosts as a demonstration of the superiority of the new Chicom system.
Prior to World War II, the sun never set on the British Empire and the pound was the world's reserve currency. The War bankrupted the island nation and the US assumed the role as the world's foremost superpower and the dollar became the world's reserve currency. What all the world has just witnessed is the start of the third leg of this superpower relay where the baton of power could be passed from the US to China.
Is the Renminbi the world's future reserve currency? Given our leaders propensity to weaken the dollar and burden our nation with debt this race could be a short contest.
Every four years the summer Olympic Games evokes my personal lament of what could have been. This year, however, the games were a forecast of what is going to be.
Almost five decades ago I was a Silver Medalist in the US Track & Field Championships and a Gold Medalist and record holder in the javelin at the Pan American Games. Based upon my number two ranking in 1959 I was an odds-on favorite to earn a spot on the US Olympic Team headed for Rome in 1960. While attempting to qualify for the Olympic trials that year however a field judge ruled that my first two throws landed flat and my third throw was out of bounds. My Olympic dream ended without a mark.
Four years in a long time to prepare for a second chance to chase an Olympic dream. Marriage, a new career and a family took precedence but the inner lure of the dream lingered and the passion prevailed. Three weeks prior to the 1964 trials at the age of 28, I threw 15 feet beyond my previous personal best five years earlier — a sure sign that the dream was in sight. On my very next throw a sharp pain seared through my Achilles tendon and the fickle finger of fate struck again. I joined a long list of those who "couda, woulda, and shoulda" made the team.
For those who just observed the XXIX Olympiad, there was a consensus that the Beijing Games were "spectacular." To the athletes themselves, most of whom were millennials, the event was "awesome." To this writer however, who has observed this, the greatest athletic event in the world since 1956, Beijing was a portent of change to come.
For decades and maybe even centuries, China has endured an image as a backward, unprogressive, tightly controlled feudal country while at the same time confident that western civilization (particularly America) was in a rapid moral and financial decline. The 2008 Beijing Olympic games was to the Chinese all about global perception and respect for the host country. Few could claim that China did not achieve their goal.
The opening ceremonies were a divining rod. The men's furious, well-synchronized beating of the drums symbolized China's power. The women, who discarded their drab olive-green, Mao Tse Tung pant suits for svelte, body revealing costumes exuded grace and beauty. The exorbitant cost of the spectacle was a testament to China's wealth and status as a global financial colossus. And, of course, the nation's garnering of the most gold medals was viewed by the hosts as a demonstration of the superiority of the new Chicom system.
Prior to World War II, the sun never set on the British Empire and the pound was the world's reserve currency. The War bankrupted the island nation and the US assumed the role as the world's foremost superpower and the dollar became the world's reserve currency. What all the world has just witnessed is the start of the third leg of this superpower relay where the baton of power could be passed from the US to China.
Is the Renminbi the world's future reserve currency? Given our leaders propensity to weaken the dollar and burden our nation with debt this race could be a short contest.
Wednesday, August 27, 2008
Bernanke's Hail Mary
There was a virtual imaginary football game last week between bitter Wall Street rivals — The Investment Bankers known as the "Brokers" and the Commodity Traders, competing as the "Pits."
For three quarters the Pits, led by the offensive-minded triple threat Gold Brothers, Protein (grains), Black (oil), and Bullion (metals), pummeled the Brokers but failed to deliver a decisive touchdown to put the game out of reach. The Pits' impenetrable defense, anchored by a host of hogs held the Brokers vaunted ground attack in check and their All-Pro wide-out receiver Ulysses S. (Buck) Dollar failed to catch a single pass. As the third quarter ended the increasingly desperate Titan coach summoned his quarterback, Sammy Slick to the sideline.
"We're goin' for the home run, Slick. Throw the Hail Mary, kid," the coach ordered confidently. "The time is right."
Slick took the ball for his center, eluded two hogs as his pocket collapsed and while sprinting towards the sideline, launched a 50-yard bomb to Buck. Incredibly, the resilient Dollar fought off his defenders and caught the pigskin for a T.D.! Motivated by Buck's stellar performance, the Brokers tallied again in the fourth quarter and defeated the befuddled Pits.
In the press room, a reporter asked the triumphant coach:
"Why did you wait so long to call on Dollar when Black Gold was making all those gains?"
"Son, I'm just the coach. I don't call the big plays."
"Coach? If Slick doesn't call the plays and you don't call the plays, who does?" The reporter inquired.
"Those calls are made upstairs, ya know. I don't question those decision and I don't think you should either," the coach admonished his inquisitor.
IN THE REAL WORLD:
For almost three quarters of 2008, a strategically weakened US dollar has enabled US multinational corporations to profit with cheaper exports and prevented higher unemployment but it also dramatically raised oil and commodity prices in the country. July's annualized Consumer Price Index (CPI) was at 5.6% — a 17-year high. The Producer Price Index (P.P.I.) was an unexpected 1.2% in July, a 27-year high and a 9.8% increase in one year. Unable to raise interest rates to cool inflation, a desperate Fed Chairman, Ben Bernanke, was forced to call a bold play — a Hail Mary.
In June (according to the Wall Street Journal) Bernanke "signaled" to Wall Street mavens that he did not like the popular dollar-oil play. Investors and speculators were selling the US dollar and buying oil creating a weak dollar and higher oil and commodity prices.
Bernanke called for an unprecedented play. In the week-ending August 15th, foreign central banks bought $26 billion of U.S. Treasury debt and the U.S. Treasury's Exchange Stabilization Fund sold 10 Billions euros. In addition, Bernanke's inside move called for two U.S. Banks to increase their short position in silver five-fold and their gold short position eleven times, causing a precipitous fall in precious metals prices. Black and Protein Gold took similar hits creating an illusion that the commodity boom was over and inflation's demise was at hand.
Bernanke's orchestrated and well-timed Hail Mary also succeeded in diverting investor's cash from the Pits to the Brokers, thereby securing an early season victory for a team on a year-long losing streak.
The reality is that this is an example of monetary manipulation orchestrated by the Federal Reserve which destroys the free market. Laissez-faire, if it was ever on the Fed's roster, has been relegated to the role of water boy.
-- H. L. Quist
For three quarters the Pits, led by the offensive-minded triple threat Gold Brothers, Protein (grains), Black (oil), and Bullion (metals), pummeled the Brokers but failed to deliver a decisive touchdown to put the game out of reach. The Pits' impenetrable defense, anchored by a host of hogs held the Brokers vaunted ground attack in check and their All-Pro wide-out receiver Ulysses S. (Buck) Dollar failed to catch a single pass. As the third quarter ended the increasingly desperate Titan coach summoned his quarterback, Sammy Slick to the sideline.
"We're goin' for the home run, Slick. Throw the Hail Mary, kid," the coach ordered confidently. "The time is right."
Slick took the ball for his center, eluded two hogs as his pocket collapsed and while sprinting towards the sideline, launched a 50-yard bomb to Buck. Incredibly, the resilient Dollar fought off his defenders and caught the pigskin for a T.D.! Motivated by Buck's stellar performance, the Brokers tallied again in the fourth quarter and defeated the befuddled Pits.
In the press room, a reporter asked the triumphant coach:
"Why did you wait so long to call on Dollar when Black Gold was making all those gains?"
"Son, I'm just the coach. I don't call the big plays."
"Coach? If Slick doesn't call the plays and you don't call the plays, who does?" The reporter inquired.
"Those calls are made upstairs, ya know. I don't question those decision and I don't think you should either," the coach admonished his inquisitor.
IN THE REAL WORLD:
For almost three quarters of 2008, a strategically weakened US dollar has enabled US multinational corporations to profit with cheaper exports and prevented higher unemployment but it also dramatically raised oil and commodity prices in the country. July's annualized Consumer Price Index (CPI) was at 5.6% — a 17-year high. The Producer Price Index (P.P.I.) was an unexpected 1.2% in July, a 27-year high and a 9.8% increase in one year. Unable to raise interest rates to cool inflation, a desperate Fed Chairman, Ben Bernanke, was forced to call a bold play — a Hail Mary.
In June (according to the Wall Street Journal) Bernanke "signaled" to Wall Street mavens that he did not like the popular dollar-oil play. Investors and speculators were selling the US dollar and buying oil creating a weak dollar and higher oil and commodity prices.
Bernanke called for an unprecedented play. In the week-ending August 15th, foreign central banks bought $26 billion of U.S. Treasury debt and the U.S. Treasury's Exchange Stabilization Fund sold 10 Billions euros. In addition, Bernanke's inside move called for two U.S. Banks to increase their short position in silver five-fold and their gold short position eleven times, causing a precipitous fall in precious metals prices. Black and Protein Gold took similar hits creating an illusion that the commodity boom was over and inflation's demise was at hand.
Bernanke's orchestrated and well-timed Hail Mary also succeeded in diverting investor's cash from the Pits to the Brokers, thereby securing an early season victory for a team on a year-long losing streak.
The reality is that this is an example of monetary manipulation orchestrated by the Federal Reserve which destroys the free market. Laissez-faire, if it was ever on the Fed's roster, has been relegated to the role of water boy.
-- H. L. Quist
Monday, August 4, 2008
A Paradigm Shift In The Aftermath of Greed
This report is the first of many blogs that will update my readers of "The Aftermath of Greed, Get Ready for the Coming Inflationary Boom" as well as those of you who may not have read my book.
Since the recovery of the residential real estate market is perhaps the primary exponent for a rebound of the broader economy, a critical update of the mortgage industry and the bailout of Fannie Mae and Freddie Mac (hereinafter referred to by their respective stock symbols FNM and FRE) is first and foremost.
Over five years ago I referred to FNM and FRE as the "evil twins", while teaching "Trends & Cycles in Real Estate" at the Southwestern School of Real Estate. Most attendees dismissed the inference, until now.
Citing reference from the excellent and courageous investigative journalism at the Wall Street Journal, I informed my classes that management at FNM was "cooking the books" and in time the story would unfold that could imperil FNM's existence as a publically traded company.
As I pointed out in GREED, the looting of FNM by Franklin Raines, its CEO, and others was particularly onerous. In 2000, Mr. Raines paid himself $20 million in compensation based, in part, upon $10 billion in profits that did not exist. Although Raines was ultimately fired, he was not required to repay bonuses received based upon fraudulent numbers and retired comfortably on $1.6 million per year — when he should have been serving time. Paul A. Gigot, who is the editor of the Wall Street Journal's editorial page and FNM's chief protagonist (and who was vilified from all quarters) sums it up appropriately when he said on July 23, 2008:
"The abiding lesson here is what happens when you combine private profit with government power. You create political monsters that are protected both by journalists on the left (like Paul Krugman of the New York Times), pseudo capitalists on Wall Street, by liberal democrats, and country club Republicans. Even now, after all their dishonesty and failure Fannie and Freddie could emerge from this taxpayer rescue more powerful than ever."
FNM and FRE, the "zombies" of finance (the dead feeding off the living), have been bailed out by US taxpayers as part of a broader housing bill that will become effective October 1, 2008, which allows the US Treasury to extend an unspecified (say unlimited) credit line to the twins. The bill also authorizes the government to buy stock in either company. FNM's and FRE's stock price had fallen more than 80% in the past year. It appears to this writer that this equity provision was inserted into the bill to reassure institutional investors who had been called upon to shore up the firms' capital, that there wasn't going to be a full nationalization of the companies (near term) rendering their investment worthless.
Capitalism has morphed into a new economic model. Profits are retained by private interests and losses are absorbed by taxpayers (more later).
The other major component of the housing bill (which is tabbed the "Housing & Economic Recovery Act of 2008") is the expansion of the Federal Housing Administration (FHA) which will insure up to $300 billion in new loans for desperate homeowners who could not qualify for FHA loans under existing rules and law. Forget the old Great Depression era FHA. This is a new turbo-charged, gas guzzling, super slick version of the old Model T and it runs on your greenbacks.
Based upon information available as of this date, here's an example of how the new FHA program might work.
A homeowner (who has spent at least 31% of their income on a mortgage) has an existing high interest sub-prime loan with (let's say) Countrywide Financial. The loan may already be in default as is 48% of Countrywide's $30 billion sub-prime portfolio. The borrower can refinance with the new FHA on a 30-year fixed rate loan at an interest rate significantly lower than any prime borrower on a conventional basis. Countrywide agrees to write down their mortgage to 85% of the current appraised value in exchange for a new loan guaranteed by FHA. The borrower presumably now has a loan that is affordable, Countrywide owns a loan that is fully valued on its balance sheet and the risk of default is assumed by taxpayers. A perfect win-win you-lose scenario.
The housing bill (HERA 2008) has a myriad of other features. Some are:
— A fund to provide more low income housing.
— A tax credit up to $7,500 for home buyers repayable interest free over 15 years
— A provision whereby the homeowner will share in any gains with FHA on a sale or refinance of the home.
— Grants for states and local government to buy foreclosed homes
— Counseling for homeowners being foreclosed.
— Raise loan limits for FNM and FRE to $625,000
— Raises the Federal Debt Limit to $10.6 trillion from $9.8
The paramount question is: What impact will this legislation have on the real estate market and when?
Once the massive bureaucracies at FNM, FRE, and FHA initiate their new guidelines, I believe that the results will be decidedly positive. Markets move on fundamentals and emotion. The housing bill changes the fundamentals. The present psychologically depressed market atmosphere will quickly turn positive as refinancings slow the foreclosures and new sales begin to absorb inventory. Hope Now Alliance has reported that it has renegotiated 181,000 loans in June and almost 2,000,000 homeowners have remained in their homes since the program started — another positive.
The new FHA loan limits are the greater of $271,050, or 115% of the local area median home price capped at $625,000, therefore the largest market segment in the US will come under the new law. The down payment has been increased from 3% to 3.5%. Starting October 1, 2008, the FHA will no longer accept down payment "gifts" that are funded by the seller (unless provided by an uninterested third-party) which will negatively impact sales but some experts believe that the $7,500 tax credit provision will be as effective longer term for home buyers. Given the history of the ten boom and bust cycles in the US over the past 34 years, this bail out plan was predictable and should serve as the cornerstone of the inflationary boom I forecasted in GREED.
For all the positives, there is a cost.
Every crises creates an opportunity for those who seek more power. Henry Paulson, the US Secretary of the Treasury, has proposed that ALL lending agencies, banks, investment banks, mortgage companies, mortgage brokers, et al, come under the jurisdiction of the Federal Reserve. That may comfort some, but to this writer it is a consolidation of power in the hands of a few — collectivism. Remember, it was the Fed's Greenspan Plan that initiated the real estate and lending bubble in 2002 and the Federal Reserve that took no action to curb the "Merchants of Debt" which led to the market's implosion and this aftermath.
Market consideration aside, I'm compelled to advise my readers that what has occurred in July 2008 represents a paradigm shift in America. Capitalism, as I've known it during most of my lifetime (the 1930's an exception) has acquired a terminal (but curable) illness. The Greenspan Era marked by the commoditization of credit (where character didn't count) and the securitization of debt (where the originators of the loan no longer retained an interest in the loan) has imploded in the aftermath of greed and in its place America begins its slippery slide to Socialism. As outlined in GREED, this fifth bust cycle since 1974, has prompted another short- term government fix that will manifest itself in a greater problem later. As a market analyst, I can give you this upbeat positive economic forecast for the near term. As an erudite pundit, I have to admonish you:
SOCIALISM HAS AN UNBLEMISHED RECORD
IT HAS NEVER BEEN SUCCESSFUL
Your comments and inquiries are welcomed.
H. L. Quist.
Since the recovery of the residential real estate market is perhaps the primary exponent for a rebound of the broader economy, a critical update of the mortgage industry and the bailout of Fannie Mae and Freddie Mac (hereinafter referred to by their respective stock symbols FNM and FRE) is first and foremost.
Over five years ago I referred to FNM and FRE as the "evil twins", while teaching "Trends & Cycles in Real Estate" at the Southwestern School of Real Estate. Most attendees dismissed the inference, until now.
Citing reference from the excellent and courageous investigative journalism at the Wall Street Journal, I informed my classes that management at FNM was "cooking the books" and in time the story would unfold that could imperil FNM's existence as a publically traded company.
As I pointed out in GREED, the looting of FNM by Franklin Raines, its CEO, and others was particularly onerous. In 2000, Mr. Raines paid himself $20 million in compensation based, in part, upon $10 billion in profits that did not exist. Although Raines was ultimately fired, he was not required to repay bonuses received based upon fraudulent numbers and retired comfortably on $1.6 million per year — when he should have been serving time. Paul A. Gigot, who is the editor of the Wall Street Journal's editorial page and FNM's chief protagonist (and who was vilified from all quarters) sums it up appropriately when he said on July 23, 2008:
"The abiding lesson here is what happens when you combine private profit with government power. You create political monsters that are protected both by journalists on the left (like Paul Krugman of the New York Times), pseudo capitalists on Wall Street, by liberal democrats, and country club Republicans. Even now, after all their dishonesty and failure Fannie and Freddie could emerge from this taxpayer rescue more powerful than ever."
FNM and FRE, the "zombies" of finance (the dead feeding off the living), have been bailed out by US taxpayers as part of a broader housing bill that will become effective October 1, 2008, which allows the US Treasury to extend an unspecified (say unlimited) credit line to the twins. The bill also authorizes the government to buy stock in either company. FNM's and FRE's stock price had fallen more than 80% in the past year. It appears to this writer that this equity provision was inserted into the bill to reassure institutional investors who had been called upon to shore up the firms' capital, that there wasn't going to be a full nationalization of the companies (near term) rendering their investment worthless.
Capitalism has morphed into a new economic model. Profits are retained by private interests and losses are absorbed by taxpayers (more later).
The other major component of the housing bill (which is tabbed the "Housing & Economic Recovery Act of 2008") is the expansion of the Federal Housing Administration (FHA) which will insure up to $300 billion in new loans for desperate homeowners who could not qualify for FHA loans under existing rules and law. Forget the old Great Depression era FHA. This is a new turbo-charged, gas guzzling, super slick version of the old Model T and it runs on your greenbacks.
Based upon information available as of this date, here's an example of how the new FHA program might work.
A homeowner (who has spent at least 31% of their income on a mortgage) has an existing high interest sub-prime loan with (let's say) Countrywide Financial. The loan may already be in default as is 48% of Countrywide's $30 billion sub-prime portfolio. The borrower can refinance with the new FHA on a 30-year fixed rate loan at an interest rate significantly lower than any prime borrower on a conventional basis. Countrywide agrees to write down their mortgage to 85% of the current appraised value in exchange for a new loan guaranteed by FHA. The borrower presumably now has a loan that is affordable, Countrywide owns a loan that is fully valued on its balance sheet and the risk of default is assumed by taxpayers. A perfect win-win you-lose scenario.
The housing bill (HERA 2008) has a myriad of other features. Some are:
— A fund to provide more low income housing.
— A tax credit up to $7,500 for home buyers repayable interest free over 15 years
— A provision whereby the homeowner will share in any gains with FHA on a sale or refinance of the home.
— Grants for states and local government to buy foreclosed homes
— Counseling for homeowners being foreclosed.
— Raise loan limits for FNM and FRE to $625,000
— Raises the Federal Debt Limit to $10.6 trillion from $9.8
The paramount question is: What impact will this legislation have on the real estate market and when?
Once the massive bureaucracies at FNM, FRE, and FHA initiate their new guidelines, I believe that the results will be decidedly positive. Markets move on fundamentals and emotion. The housing bill changes the fundamentals. The present psychologically depressed market atmosphere will quickly turn positive as refinancings slow the foreclosures and new sales begin to absorb inventory. Hope Now Alliance has reported that it has renegotiated 181,000 loans in June and almost 2,000,000 homeowners have remained in their homes since the program started — another positive.
The new FHA loan limits are the greater of $271,050, or 115% of the local area median home price capped at $625,000, therefore the largest market segment in the US will come under the new law. The down payment has been increased from 3% to 3.5%. Starting October 1, 2008, the FHA will no longer accept down payment "gifts" that are funded by the seller (unless provided by an uninterested third-party) which will negatively impact sales but some experts believe that the $7,500 tax credit provision will be as effective longer term for home buyers. Given the history of the ten boom and bust cycles in the US over the past 34 years, this bail out plan was predictable and should serve as the cornerstone of the inflationary boom I forecasted in GREED.
For all the positives, there is a cost.
Every crises creates an opportunity for those who seek more power. Henry Paulson, the US Secretary of the Treasury, has proposed that ALL lending agencies, banks, investment banks, mortgage companies, mortgage brokers, et al, come under the jurisdiction of the Federal Reserve. That may comfort some, but to this writer it is a consolidation of power in the hands of a few — collectivism. Remember, it was the Fed's Greenspan Plan that initiated the real estate and lending bubble in 2002 and the Federal Reserve that took no action to curb the "Merchants of Debt" which led to the market's implosion and this aftermath.
Market consideration aside, I'm compelled to advise my readers that what has occurred in July 2008 represents a paradigm shift in America. Capitalism, as I've known it during most of my lifetime (the 1930's an exception) has acquired a terminal (but curable) illness. The Greenspan Era marked by the commoditization of credit (where character didn't count) and the securitization of debt (where the originators of the loan no longer retained an interest in the loan) has imploded in the aftermath of greed and in its place America begins its slippery slide to Socialism. As outlined in GREED, this fifth bust cycle since 1974, has prompted another short- term government fix that will manifest itself in a greater problem later. As a market analyst, I can give you this upbeat positive economic forecast for the near term. As an erudite pundit, I have to admonish you:
SOCIALISM HAS AN UNBLEMISHED RECORD
IT HAS NEVER BEEN SUCCESSFUL
Your comments and inquiries are welcomed.
H. L. Quist.
Tuesday, July 8, 2008
Buster's Blog
Welcome to my blog.
This will serve as a forum in order to keep my reader's up to date on matters relating to Fed monetary policy, Congressional legislation, market conditions, and other matters developed in my book.
To read a full description of, and purchase my book, click here, or on the book cover to the right.
This will serve as a forum in order to keep my reader's up to date on matters relating to Fed monetary policy, Congressional legislation, market conditions, and other matters developed in my book.
To read a full description of, and purchase my book, click here, or on the book cover to the right.
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