BIGGER OR BIGGEST REAL ESTATE BUST

"The Next Real Estate Crisis"
"By April 2009, hundreds of thousands of option ARM mortgages will begin resetting, bringing on a fresh wave of foreclosures."

- Business Week, June 5, 2008

Here's what will happen:

Beginning in April 2009, hundreds of thousands of U.S. homeowners who took out "option adjustable-rate mortgages" (ARMs) will start to see their monthly payments skyrocket as those interest rates begin to reset.

You see - at this very moment, there are roughly $500 billion worth of option ARM loans outstanding in the U.S. These loans were especially popular during the height of the real estate boom, as they allowed buyers to enjoy low initial payments that would then "adjust" after several years.

But, hey, at the height of the real estate bubble, everyone assumed that home values would continue climbing, so there was nothing to worry about, right?

Wrong.

The real estate boom hit its peak in April 2004... and the majority of option ARM loans are due to begin resetting after five years. In other words... in April 2009.

In December 2008, investment fund manager Whitney Tilson told the 60 Minutes television program that he expected as many as 70% of these loans to default.

He also predicted that over the next four years, more than 8 million Americans will lose their homes to foreclosure.

And he estimated that the total damage from the collapse of the sub-prime lending market is already approaching $1 trillion... but the coming collapse of the Option ARMs and Alt-A loans (which were made to borrowers with low credit scores) could mean another $1.5 trillion in damage.

Let me put that another way...

We're already $1 trillion in the hole... and we're still not even halfway through this disaster

And it all begins to unravel in April 2009 - just a few weeks from now - when those Option ARM loans begin resetting.

Because here's what will happen:

* As we've seen consistently over the last year... the U.S. Government will step in and attempt to "bail out" the U.S. homeowner and prevent the onslaught of massive foreclosures...

* In order to do this, the government will be forced to throw even more money into the system... in what could end up being the most costly bailout to date...

* Once this begins, the stock market will take a nosedive - with the Dow heading to 6,500 or lower...

* Finally - and most incredibly - this latest huge increase in the U.S. money supply will put the United States in danger of having its own credit rating slashed!

"Here's how I did with your last two trades: AXPMQ, bought 11/12 for $2.50, sold 11/13 for $4.20 for a 68% one day gain. XJZMM, bought 11/11 for $1.56, sold 11/13 for $2.43 for a 56% gain in two days… Take care, Ryan..." In fact, Moody's warned in January 2008 that "the U.S. is at risk of losing its top-notch triple-A credit rating."

And in August, The Kiplinger Letter reported, "The idea of the U.S. losing its AAA debt rating isn't far-fetched anymore. Standard & Poor's credit rating agency says the U.S. is taking on a huge risk."

A downgrade of the U.S. credit rating would spell immediate financial disaster - instantly crippling the new administration's ability to revive the economy...

And not to mention - the overall financial chaos created will help send investors fleeing from stocks once again and back into "safe havens" such as U.S. Treasuries.

LOSING JOBS FAST!

In just the past 24 hours alone, Corning, Caterpillar, Home Depot, Pfizer, Texas Instruments, Sprint, GM, ING, Phillips Electronics and other large companies have announced more than 75,000 layoffs worldwide.

WORSE: So far in January, 52 large U.S. companies have announced 210,000 layoffs!

WORST OF ALL: This is just the beginning! And now, even the most optimistic of observers finally admit it. They now see the impact it will have on millions of Americans. But they don’t yet see how it could trample your investm

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HOME TIPS: BUYERS AND SELLERS

9 tips for homebuyers and sellers in 2009

By Steve McLinden • Bankrate.com


In residential real estate, 2009 arrives much the same way that 2008 did: via a rocky road with deepening potholes. While more homebuyers are swooping in and picking up great deals, and sales are slowly increasing in many markets, the ongoing excess inventory of foreclosed homes continues to depress the market.

While potential buyers are getting very low mortgage rates, they also are facing much tighter credit standards and demands for significantly larger down payments. And we haven't even started absorbing the financial fallout from adjustable-rate mortgages, slated to ratchet up in 2009.

No one can really say quite when this downward spiral will cease. If former Fed Chairman Alan Greenspan and current Chairman Ben Bernanke were surprised by the depth of this housing crisis, who among us can accurately make the call?

There is growing sentiment out there that this darkness directly precedes a new dawn. A late-2008 consensus survey by PricewaterhouseCoopers and the Urban Land Institute, based on input from more than 600 industry experts, projects the U.S. residential market should start rebounding appreciably in 2010.

But what about now? Well, this new economy has added some wrinkles to home buying and home selling strategies, while reintroducing some of those old-school favorites like sound fundamental fiscal practices. So here are nine tips for homebuyers and nine for sellers to help them survive and hopefully thrive in the transition year of 2009.


9 tips for homebuyers and sellers in 2009


Tips for homebuyers
1. Cash is the new king
2. Negotiate extras ... and more extras
3. Start a down payment fund
4. Determine your own home buying budget
5. Clean up your credit score
6. Research equals savings
7. Don't overlook neighborhood issues
8. Watch for foreclosed-property inventory to loosen
9. Look for other looming opportunities

Tips for home sellers
1. Price correctly from the get-go
2. Fix earlier pricing mistakes
3. Looks do matter
4. Don't overdo it
5. Don't be an ambiguous seller
6. Be an energy miser
7. Know all of your options
8. Become a landlord
9. Hold fast: Don't sell in a panic

WHY GOLD?

Why Gold and Why Now?
Do you remember the last time gold sold for over $2,000 per ounce?
Of course you do. Maybe you didn't think of that way. But actually, gold has already sold for more than $2,000 per ounce. Let me show you.
First, you have to think for a moment as if it's 1971. Gold is selling for $35. This is the year Nixon breaks it from ties to the dollar. Gold prices start climbing. By 1975, it's hit $196. And by 1980, we're talking $850. Sure, you say, that I remember.
But maybe you also remember back then you could you could also make $27,700 per year and it was a pretty decent living. About as good as making $100,000 per year today.
You could also buy a house for $50,000 then and, just on an inflation basis, it would be worth $250,000 today. (In real estate terms, it might sell now for $500,000 or more.) And back then, you could retire on $270,000 in savings... and it would be as good today as being a millionaire.
So you can see, trying to compare yesterday's gold price to today's — on an even basis — is like trying to compare apples and armadillos!

In today's dollars, 1975 gold at $196 is more like $750 in the current market. And 1980 gold, the peak year at the historical price of $850, would now clock in closer to $2,176. And remember, this is what you get using only the most conservative market calculation of gold's worth. There are other, even more telling ways to value gold.

Some Tips for Frugality

The shift to a frugal lifestyle is more likely to succeed, Dr. Joseph Hullett said, if you do the following:

1. Establish a time frame for making the change.

2. Plan the steps necessary to achieve your goal.

3. Let others know about your plans.

4. Share the results as well.

Or take it even further, Hullett said, and "engage not just yourself but friends and family, and become part of a community that desires to do these things and see how other people are taking steps to make changes."

This from The Daily Reckoning - - -

The real truth is that our nation’s financial condition is even worse than advertised...
The Treasury has already lost $64 billion of our dollars in the TARP program by giving it to bankrupt banks...they’ve stolen our hard earned money to make sure the Detroit CEO’s continue to work...and they’ve already earmarked another $825 billion to “stimulate” the economy. The federal government will go $1.2 trillion deeper in the red this year alone. If consumer’s aren’t borrowing and spending...and corporations are laying people off and closing up stores...the government, the conventional wisdom says, is the only entity that can bail the economy out.
At some point, you have to take a step back and wonder, “Hmmmm...where’s all of this money coming from?” This government, like so many others in history, is trying to print their way out of trouble. “Hyperinflation” no longer seems like an “if”, but a “when.” And most people are blissfully ignorant...and believe someone in Washington or New York is smart enough to figure all this stuff out.

This report from Dr. Martin Weiss of SafeMoney Report:
FACT #1: More than 2.6 million families lost a paycheck in 2008. That brought the total number of unemployed workers to over 11 million — fully 74% as many as were unemployed in The Great Depression.
FACT #2: This great lost paycheck pandemic is still accelerating. One year ago — in January 2008 — an average of 1,000 U.S. workers lost their paychecks every workday. By December, 28,727 paychecks vanished per workday — nearly 29 times more.
FACT #3: Obama warns more jobs may be lost than in The Great Depression. This crisis is still in its early stages. President Obama himself has warned that the unemployment rate will explode to at least 10% in 2009.
If he’s right, more than 15 million workers will be without a job — more, even than during the depths of The Great Depression.
And even these sobering facts don’t begin to fully describe the financial pain about to be felt by millions of American families ...
Wage freezes and outright salary reductionsare ALREADY spreading like wildfire!
In his inauguration speech, President Obama tacitly called on private sector workers to voluntarily reduce their own incomes ...
"It is ... the selflessness of workers who would rather cut their hours than see a friend lose their job which sees us through our darkest hours."
And yesterday, to lead by example, he announced a salary freeze for White House employees earning over $100,000 a year — including his Chief of Staff, his National Security Advisor and his Press Secretary.
But many companies are not waiting around for the President’s lead ...
Tropicana Casino and Resort of Atlantic City is freezing all wages …
Avis Budget Group is freezing management salaries on top of cutting more than 2,200 jobs.
The Cleveland Clinic in Ohio imposed a hiring and salary freeze across the board on its 33,000-worker health system in December.
Alcoa’s new salary and hiring freeze impacts all employees who are left after slashing 13,500 workers.
And many more companies are actually cutting employees’ income and benefits ...
USA Today publisher Gannett has frozen wages and imposed one-week unpaid furloughs for most of its U.S. employees.
Luxury retailer Saks is not only terminating 1,100 jobs, it’s also eliminating merit raises and suspending matching contributions to its 401(k) plan.
Caterpillar is cutting executive compensation by up to HALF and cancelling pay increases for managers and support staff.

Tulip Mania! What's that?

The first stock exchange in the world was the Amsterdam Stock Exchange, established in 1602. Amsterdam was also the site of the worlds FIRST SPECULATIVE BUBBLE, TULIP MANIA, which appeared shorly thereafter, 1621- 1636.



This is from Wikipedia's recounting of Tulip Mania:

http://en.wikipedia.org/wiki/Tulip_mania:



. . .traders signed contracts before a notary to purchase tulips at the end of the season (effectively futures contracts). Thus the Dutch, who developed many of the techniques of modern finance, created a market for durable tulip bulbs.



Short selling was banned by an edict of 1610, which was reiterated or strengthened in 1621 and 1630. Short sellers were not prosecuted under these edicts, but their contracts were deemed unenforceable. . .



As the flowers grew in popularity, professional growers paid higher and higher prices for bulbs with the virus (a tulip-specific virus that caused more spectacular colored tulips). By 1634, in part as a result of demand from the French, speculators began to enter the market.



In 1636, the Dutch created a type of formal futures markets where contracts to buy bulbs at the end of the season were bought and sold. Traders met in "colleges" at taverns and buyers were reauired to pay a 2.5% "wine money" fee, up to a maximum of three florins, per trade.



Neither party paid an initial margin nor a mark-to-market margin, and all contracts were with the individual counterparties rather than with the exchange. No deliveries were ever made to fulfill these contracts because of the market collapse in February 1637.



The contract price of rare bulbs continued to rise throughout 1636. That November, the contract price of common bulbs without valuable mosaic virus also began to rise in value. The Dutch derogatorily described tulip contract trading as windhandel (literally "wind trade") because NO bulbs were actually chaning hands. However in February 1637, tulip bulb contract prices collapsed abruptly and the trade of tulips ground to a halt!



It is clear that today's "complex and sophisticated" markets are not as unique as some would believe. What is new, however, are the circumstances and consequences of the current collapse. Today, financial markets are a global phenomena; and so, too will be the consequences.



The invention of the stock market in Amsterdam in 1602 combined with the issuance of the Bank of England's credit-based paper money in 1694 was to change the course of human history for the next three hundred years. That epoch is now ending.



The world that crdit gave rise to is collapsing as is its credit-based foundation, turning the proverbial carriage into a pumpkin at midnight, as the hoped for financial fairy tale turns instead into a nightmare of defaulting debt in 2009.



The collapse of global markets and global trade is a sign we have reached the end of this epoch. The current financial collapse is the beginning of the end. When it is over, so, too, will be the era it spawned. Human history moves in waves. Another is about to begin.

2009 Train Wreck

Get ready for Bank Crisis II! Today's news tells us that Bank of America posted a massive $1.79 BILLION loss in the last three months of 2008. . . it slashed dividends and accepted a $1.38 BILLION emergency lifeline. Also Citigroup reported total losses of $18.7 BILLION in 2008 . . . $8.29 BILLION in the fourth quarter ALONE! A new phase of bank crisis is beginning. . .soaring unemployment, plunging stocks, cancelled dividends and sinking investment income ahead.
The phrase, speculative bubble, is used to describe the financial tumescence that characterizes the often manic unfounded rise of asset values. The phrase, however, inadequate for it fails to convey the destructive aftermath that follows; for such purposes, train wreck, is a better description. In 2009, the largest train wreck in economic history is about to occur.
Unfounded manic speculation, e.g. the 2002-2007 real estate bubble, is not new. Similar manic speculation occurred in internet stocks in the 1990s, radio stocks in the 1920s, as it did in railroad stocks in the 19th century and in the tulip bulbs in the 17th century. Manic speculation is as human as the markets.
Next time: The famous Dutch Tulip Mania!

Please see my Blog: http://Whysilverandgold.blogspot.com
It ties in with what we are saying here and is very important to your financial well being.

It's over!

"The America of Henry David Thoreau, of Mark Twain, of Walt Whitman, of Thomas Jefferson and Tom Paine and the millions more who brought this nation into being and kept it alive in their hearts and, to a large extent, on the ground, for so long – that America, the real America, the 'asylum for mankind' that Paine wrote about so eloquently – that America is gone, fading already into myth and legend, gone soon even from living memory as the last citizens who remember America's dying embers wink out from this world, one by one." Glen Allport.

Barack Obama's Shocking Warnings

Here is what he warns: (From Weiss Research)
1) U.S. unemployment could surge to double digits.
2) This recession could linger for years.
3)This could be the worst crisis of our lifetime!

In his radio address he said:
"In the past month alone, we lost more than half a million jobs - a total of nearly 2.6 million in the year 2008. Another 3.4 million Americans who want and need work have had to settle for part-time jobs."
and about family finances:
"Families across America are feeling the pinch as they watch debts mount, bills pile up and savings disappear."
and about the severity of the crisis:
"This recession could linger for years and the unemployment rate could reach double digits" like it did during the Great Depression.
and about YOUR immediate future:
"Things will get worse before they get better".

It is imperative that you take action to protect yourself, your family, and all that you own from this coming shut down.
Earn all you can, save all you can and give all you can to help the less unfortunate.

One thing you can do is to take membership in Strong Future International, which lets you buy products at wholesale cost for yourself or even to sell them at a profit if you so desire to make some money.
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The Biggest Flood of Red Ink in the World!

This report just came from 'Money and Markets' research:

"How much is $1.186 trillion - - or $1,186,000,000,000, written out the long way?
. It's more than the inflation-adjusted cost of the Vietnam ($698 billion) and Korean Wars ($454 billion).
. It's more than the Louisiana Purchase ($217 billion) and the Savings and Load bailouts ($256 billion)
. It's greater than the 2007 Gross Domestic Product of all but 13 other countries in the world.
. It's equal to $3,881 for every man, woman, and child in the U.S. (Have you made out a check for you and your families shares yet?)
. It could buy 189,760,000,000 bushels of wheat at recent prices. 26,893,424,036 barrels of oi. Or 1,581,333,333,333 cans of Diet Coke at my trusty vending machine in the break room.
Why do I bring this up? Because that $1.186 trillion figure is the projected 2009 deficit, according to the latest report from the Congressional Budget Office (CBO).
And it is downright scary!
THESE NUMBERS ARE BIG - - REALLY BIG! That $1.186 trillin is such a large number - so out of control -that it's hard for most of us mere mortals to process it. Suffice to say - - - It's the biggest flood of budgetary red ink ANY country has ever seen in world history. And it makes last year's $455 billion deficit look like chump change.
Still not worried? Then get a load of this:
THE CBO ESTIMATE DOESN'T EVEN INCLUDE ANY POTENTIAL STIMULUS PACKAGE FROM CONGRESS AND THE OBAMA ADMINISTRATION."
It's time to do everything you can to get your financial house in order and prepare yourself mentally, socially, physically and spiritually to prepare, not just 2009, but the years beyond as well.
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National Bankruptcy Day - Feb 10

February 10th is unofficially known as 'National Bankruptcy Day' because of HR4040.
See http://nationalbankruptcyday.com/. Conress passed the Consumer Product Safety Improvement Act of 2008, or HR 4040, a retroactive rule mandating that all items sold for use by children under 12 must be tested by an independent party, for lead and phthalates, which are chemicals used to make plastics more pliable.
This will cause a terrific strain on thousands of businesses and cause many to shut their doors for good.
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Car troubles? Here's the Story

Here's a video that explains the problem with the car industry and what is going on:

http://www.wimp.com/totalcollapse/

HAPPY NEW YEAR!

Well,
Here we go into the new year of 2009. There is much doubt as to whether it will be any better than last year. Many feel it will be much worse and we are at the beginning of the equivalent of 1929. Tony Sagami of 'Money and Markets' expects:

1. Real estate prices will continue falling.
2. Unemployment will continue rising.
3. Our economy will continue contracting, and
4. Out stock market will reflect the deterioration of those long-term systemic economic woes.

I tend to agree with him. We do need to look at the negative because we need to face reality but at the same time we need to "keep our head - -- - while all others are losing theirs" - part of an old quote. In the Great Depression, while there were millions having very tough times, there were a good number of people living luxuriously because they did the right things. I'm planning on being that side of the equation. What about you? Are you preparing? Saving money? Starting a business or getting involved with some opportunities on the internet? Buying silver or gold coins? What are you doing? Tell me. This enquiring mind wants to know :)
Talk to you next post. Larry