December 31, 2007: MyRealEstateBubble Newsletter: Wealth Resolutions for 2008

November 19, 2007: MyRealEstateBubble Newsletter: Inflation is under control (not really!)

 Welcome to MyRealEstateBubble.com's Newsletter!

 The Internet's Most Popular Real Estate Bubble & Economy Newsletter!
Questions or Comments - info@myrealestatebubble.com
888-58EBOOK (888-583-2665) 

www.MyRealEstateBubble.com
Monday, November 19, 2007 

Newsletter #30: Inflation is under control (not really!)

In this issue: 

1. An interesting victim of the housing bubble bursting
2. New inflation statistics
3. The government inflation numbers are bogus
4. Consumer spending is up?
5. What does this mean to you?

  

1. An interesting victim of the housing bubble bursting 

Recently I met with a client of ours who lives at a very affluent country club community in Naples, Florida. He said that their country club in their community is in financial trouble. Why? Because the number of new home sales in their community is much lower than they were used to that they are no longer getting the new home buyer’s initial club membership fee. This has caused a financial strain on the club. This shows you that even the rich are struggling in their own way from the real estate bubble bursting. 

 

2. New inflation statistics

Inflation has been a real issue lately, especially for anyone who has bought food or gas! The most recent government inflation statistics (Consumer Price Inflation or CPI) came out this week, and the “headline” inflation is 3.5% over the last 12 months, well above a comfortable level.  “Core” inflation (inflation without food and energy in the numbers) is running at 2.1% over the same period according to the Bureau of Labor Statistics (BLS).  These inflation numbers are likely to get worse over the next few months because during all of 2007 we have consistently seen increasing monthly inflation rates and it seems like this will continue through the winter months.
 

3. The government inflation numbers are bogus 

As anyone who follows the CPI numbers know, the government inflation numbers do not really represent the world we live in. In the Clinton presidential era, the way the Bureau of Labor Statistics calculated CPI numbers was changed to benefit the government by lowering CPI. The reality is that if you calculated inflation today the way they did pre-Clinton, inflation is actually running at 7%. Other methods even show a substantially higher inflation. 

How did CPI calculation change, you ask?  Before Clinton, inflation was measured by a fixed basket of goods and the changes in the prices of these goods measured the change in inflation. However, under Clinton the BLS created a new way of measuring inflation that used a geometrically weighted basket of goods. This geometrically weighted basket automatically gave a lower weighting to CPI components that were rising in price, and a higher weighting to those items dropping in price. So if the price of steak went up and the price of light bulbs went down, then the weight of the steak in the calculation would go down and the weight of light bulbs in the calculation would go up. The result is lower stated rates of inflation because they assumed you would buy less steak and more light bulbs. 

The net effect of this change is that reported CPI was approximately 2.7% lower than what it should have been and has reduced annual cost of living adjustments in Social Security by more than a third since the 1990s.  There have been other adjustments to the CPI calculation, but that will be discussed in a future project.
 

4. Consumer spending is up? 

Consumer spending makes up 71% of the United States GDP. The most recent statistics show that consumer spending is up 5.2% year over year which implies a growing economy. However, the numbers suggest that U.S. consumers bought 16% more gasoline than last year, but in reality the increase in spending for gasoline was all related to price. The same goes for food.  If you take out food and gas from retail sales, consumer spending would be flat. There were actual spending declines on furniture, music, electronic games, online sales and other categories.  FedEx even warned that their earnings would be down due to less shipments and higher energy costs. And retailers are expecting a modest Christmas season. These signs all points to a slowing economy. And the job layoffs continue rolling on. 

Is the economy slowing so the Fed will further cut rates, or is inflation rising which will force the Fed to start raising rates?  The Fed has to be careful when deciding what to do with interest rates because if they cut too far they will cause runaway inflation and if they don’t cut they could slow down the economy. However, the real problem is that if we get stagflation, a combination of a slowing economy and rising inflation, the Fed would have a hard time fixing this situation. They couldn’t cut rates or increase rates. This is what I predict will happen.
 

5. What does this mean to you?

Inflation is a serious concern for the world’s economy. If you look at the history of inflation since the Middle Ages, we have seen four long periods of inflation that each lasted more than 100 years. We are currently in the tail end of the fourth inflation period, and this tail end is always the most volatile and challenging. My next project will be on inflation and what you need to know to prosper during it. If you are interested in becoming involved in this project please let me know by emailing me at louishill@myrealestatebubble.com.

You can  buy the real estate bubble eBook using the secure shopping cart and receive a discount by using the coupon code "newsletter" at checkout - only $9.50!:  http://shop.outstandingebooks.com/product.sc?productId=1

 

Have a happy Thanksgiving!

 
Warm Regards,

 

Louis Hill, MBA
www.MyRealEstateBubble.com
www.OutstandingEBooks.com  
888-58EBOOK (888-583-2665)
 

To unsubscribe from the newsletter please reply to this email and type "unsubscribe" in the subject line.
 

***Disclaimer: The information in this newsletter and the corresponding websites do not constitute professional services, including, but not limited to investment advice. Please consult a finance and/or investment professional for services and advice.
 

 

October 15, 2007: MyRealEstateBubble Newsletter:  Lower interest rates... what you should know now

Welcome to MyRealEstateBubble.com's Newsletter!

 

The Internet's Most Popular Real Estate Bubble & Economy Newsletter!
Questions or Comments - info@myrealestatebubble.com
888-58EBOOK (888-583-2665) 

www.MyRealEstateBubble.com
Monday, October 15, 2007 

Newsletter #29: Lower interest rates... what you should know now 

In this issue:
 

1.  Lower interest rates
2.  Short term effects of lower interest rates
3.  Long term effects of lower interest rates
4.  What does this mean to you?

  

1. Lower interest rates
 

A lot has happened since the last newsletter, but perhaps the most significant is the Federal Reserve cutting its target for the fed funds rate by ½ percent, from 5.25% to 4.75%. This is a very aggressive move by Fed Chairman Ben Bernanke that really should have come to no surprise to those of us who know Bernanke’s background (okay, I was surprised too!). 

Previously I have told you that Bernanke’s nickname is “Helicopter” Ben Bernanke because he is famous for being very aggressive with monetary policy to “solve” the economy’s current ailments. To be more specific, he is called “helicopter” because he will print as much money as he feels is needed to pump the economy up. Bernanke has been printing money so rapidly the Fed even stopped publishing the M-3 report which told us how much money is being printed! 

On a side note, did you know that US dollars are made using the excess denim from the manufacturers of blue jeans? I saw an interesting documentary on the History Channel and denim is what gives the US dollar its tensile strength. I am sure they need tons of denim for the amount of bills they have been printing lately!  :-)
 

2. Short term effects of lower interest rates 

Some people mistakenly believe that the ½% cut will make a difference for all of the homes in foreclosure and the people who bought adjustable mortgages. This couldn’t be further from the truth. A ½% decrease to a person with an adjustable mortgage whose interest rate adjusted up by 3% will make very little difference in their monthly payment. 

On the other hand, lower interest rates will help the economy in the short term because people can buy cars cheaper, homes are a bit cheaper, credit cards rates should be a little lower, and other purchases of expensive goods should be easier. This should stimulate the economy in the short run. 

This short term bump in the economy has contributed to the rally in the stock market we have had in the past few weeks, however I believe this is only a temporary move up in the market and that we are due for a strong correction. 
 

3. Long term effects of lower interest rates 

Long term effects of lowering interest rates are another story altogether. This kind of economic stimulation is not smart in the long run for many reasons discussed in the eBook. A further stimulated economy will only artificially drive up short-term demand in the economy and in the long-term it will increase prices leading to even higher inflation. High levels of inflation could be devastating to the worldwide economy as shown in the late 1970s and throughout history. Keep in mind that from 2001 – 2004 the Fed kept (real) rates at the lowest they’ve been since the late 1970s.
 

4. What does this mean to you? 

The current housing bubble is one result of these historic low rates but a more severe liquidation seems unavoidable. The recent Fed cut might postpone the day of reckoning, but it will only make the coming adjustment that much harsher.  Prepare yourself with a more defensive portfolio as shown in the eBook:

• Buy the eBook using the secure shopping cart and receive a discount by using the coupon code "newsletter" at checkout - only $9.50!:  https://shop.outstandingebooks.com/displayProductDocument.hg?productId=1  
• You can also purchase a full-color printed version of the book and special reports by clicking here: http://www.lulu.com/content/336678. The price is $26.99. It looks great! 

Warm Regards,
 

Louis Hill, MBA
www.MyRealEstateBubble.com
www.OutstandingEBooks.com  
888-58EBOOK (888-583-2665) 

To unsubscribe from the newsletter please reply to this email and type "unsubscribe" in the subject line. 

***Disclaimer: The information in this newsletter and the corresponding websites do not constitute professional services, including, but not limited to investment advice. Please consult a finance and/or investment professional for services and advice.
 

© 2007 www.MyRealEstateBubble.com

September 10, 2007: Foreclosures are up 93%.... even in my own rented bubble condo!

 Welcome to MyRealEstateBubble.com's Newsletter!

 The Internet's Most Popular Real Estate Bubble & Economy Newsletter!
Questions or Comments - info@myrealestatebubble.com
888-58EBOOK (888-583-2665)
 
www.MyRealEstateBubble.com
Monday, September 10, 2007

 
Newsletter #28: Foreclosures are up 93%… even in my own rented bubble condo! 

In this issue: 

1.  A MUST-SEE COMIC STRIP - HYSTERICAL!!
2.  Foreclosures are up 93%… even in my own rented bubble condo!
3.  What does this mean to you?
  

1. A MUST-SEE COMIC STRIP – HYSTERICAL!!

If you can’t see the attached comic strip, please click on the link below! It sums up the foreclosure situation and America’s weight situation! More to come on the weight issue soon:

http://www.browardpalmbeach.com/php/comics/art/thecity/thecity.jpg

 
2. Foreclosures are up 93%… even in my own rented bubble condo!
 
The slumping US housing market has caused a record number of borrower defaults. Lenders began the foreclosure process on .65% of US mortgage holders in the second quarter of 2007 versus .58% in the first quarter. To put this in perspective, foreclosures are up 93% from July 2006 to July 2007. 

As longtime readers know, I sold my Miami Beach bubble condo in early 2005 and have been renting ever since.  I currently live in downtown Fort Lauderdale at a bubble condo that is really amazing… if it was a hotel it would be a five star hotel easily… pool, hot tubs, gym, full spa, cigar humidor, wine cellar, business center, recreation rooms, marble everywhere, right on the intercoastal, it is really first class. I am sure my rent only covers 2/3 of the costs to own… a perfect example of a bubble condo. 

However, I recently found out that the owner of this condo is going into foreclosure because he bought at the top of the market and the property is now worth far less than he bought it for. I know everything will work out (for me, not necessarily for the buyer), but this example is just the tip of the foreclosure iceberg. 

And the overall problem is getting worse as the number of homes for sale has reached 4.4 million… the most ever. This means that prices will not go up for quite some time especially with all the new construction still occurring. 

Countrywide mortgage has recently announced that it is going to cut 10,000 to 12,000 jobs, but because Countrywide is the largest mortgage lender in the country their job losses will carry over to other mortgage companies. A research firm in NY believes the job losses could be as high as 100,000 jobs in the mortgage industry alone. I recently met a woman who owns her own mortgage and title company and she says that she is starting to look for other work out of real estate, a trend that worsens every day.

 

3. What does this mean to you?

The slowing real estate market will cause consumer spending to drop and will slow the entire economy down. Auto sales are down as Autonation stated that the slower car sales are due to less people making second-mortgage equity withdrawals from their homes because of a combination of lower equity in the home and the increasing difficulty to get loans.  Furniture sales are also down, home improvement is slowing and people are losing their jobs in many areas. Because consumer spending is 71% of U.S. GDP, a slower consumer means that recession will be here in short order if it is not already at our door. 

You want a more defensive portfolio as shown in the eBook:

• Buy the eBook using the secure shopping cart and receive a discount by using the coupon code "newsletter" at checkout - only $9.50!:  https://shop.outstandingebooks.com/displayProductDocument.hg?productId=1
• You can also purchase a full-color printed version of the book and special reports by clicking here: http://www.lulu.com/content/336678. The price is $26.99. It looks great! 

Warm Regards,
 

Louis Hill, MBA
www.MyRealEstateBubble.com
www.OutstandingEBooks.com  
888-58EBOOK (888-583-2665)
 

To unsubscribe from the newsletter please reply to this email and type "unsubscribe" in the subject line. 

***Disclaimer: The information in this newsletter and the corresponding websites do not constitute professional services, including, but not limited to investment advice. Please consult a finance and/or investment professional for services and advice.

 

August 14, 2007: Gold and WhiteGold (AKA Milk!) + How to Laugh & Learn for Fitness


June 25, 2007 - Global Bubble Popping Warning from the Bank of all Banks