David Stockman, ex-budget director for President Reagan, has published a new book entitled “The Great Deformation: The Corruption of Capitalism in America” set to hit the bookstores today, April 2, 2013.
I downloaded a sample from iBooks over the weekend and have found it to be provocative reading, to say the least…that is if you don’t mind wading through the wonky stuff.
Already the naysayers and market pundits have decreed that Stockman is just some “cranky old man” who has an ax to grind.
Question: What does the 2002-07 housing and mortgage bubble have to do with the current stock market bubble?
Answer: Everything. Both have been created by BAD government policy, easy money and greedy Wall Street players.
Yesterday, CNBC’s stock market expert, Jim Cramer, stated: “we all know it’s going to end badly, but in the meantime we can make some money” – Translation: “just make sure to sell (stocks) ahead of everyone else.”
The word “illusion” conjures up images of the movie “The Matrix”. In that world, Neo (Keanu Reeves) discovers that the world he has taken for granted his entire life, is an illusion. Unfortunately, the world we live in today bears much similarity.
Fed Chairman Ben Bernanke is pumping $40 billion of stimulus spending per month into the economy arguing that stimulus spending (quantitative easing, printing money) is the only thing that will “save” America from economic collapse.
Bernanke was quoted as saying that stimulus spending helps the stock market to rise… thus creating a wealth effect. “If people feel that their financial situation is better because their 401(k) looks better, or for whatever reason, their house is worth more, they are more willing to go out and spend.”
Here’s what you need to know if you’re thinking about investing in single family, income producing property in 2013:
- Even after 5 million foreclosures, there is still an excess supply of single family homes, relative to demand.
- Home prices will rise in 2013, but only modestly… about 3% on average.
According to a recent survey (a joint BiggerPockets.com/Memphis Invest venture), “investor owned homes have established single family rentals as a $100 billion business and single family rentals have become so numerous that today they outnumber apartments.
And, despite rising prices and shrinking foreclosure inventories, most active real estate investors plan to buy as many or more residential properties in the next 12 months as they did in the past year”.
Fear is defined as “an unpleasant emotion caused by the belief that someone or something is dangerous, likely to cause pain, or a threat”.
We are all aware that these are dark and perilous economic times, even though there are glimmers of light shining through here and there.
Unfortunately, many retirement investors are just plain “fearful”…afraid to make a decision about what to do about their future. Most have a list (if not written down, then mental) of economic conditions and issues that could have very negative effects, both real and imagined, on their lives.
In September 2011, the Securities and Exchange Commission, Office of Investor Education and Advocacy, published a report entitled “Investor Alert: Self Directed IRAs and the Risk of Fraud”. (http://www.sec.gov/investor/alerts/sdira.pdf)
As the report points out, a number of Self Directed IRA account holders have been the victim of fraud by criminals intent on separating account holders from their money. The report lists 6 examples totaling at least $40 million in IRA funds that were lost through illegal and fraudulent schemes.
At this moment, in the midst of a Presidential election cycle that is bringing out the very worst in some people, I cannot help but make the following observation:
Unless you live in a cave, or under a rock, you know that the world, and the U.S., is in a very perilous state of affairs. And, people are acting like “deer in the headlights”…frozen in place.
In the last four years, we’ve seen the Dow Jones Industrial Average go from 8776 on December 31, 2008 to over 13,000 as of the date of this posting.
Is it a coincidence that global central banks have pumped nearly $7 trillion into the world’s stock markets?
In most recessions or economic downturns, central banks strengthen the economy by lowering interest rates. But when times are so bad that banks won’t lend or borrowers won’t borrow, interest rate lowering simply does not work.
The Wizards of Wall Street Are Back With A New Twist
Certain venture capital companies are promoting a “new” asset class to be sold as securities…single family home rentals!
Remember the last time Wall Street created a new asset class? That’s right, they packaged up single family home mortgages that were sold as securities. And, we all know what happens when bad government policy and Wall Street financial experts conspire to take advantage of Main Street…don’t we?