Archive for July, 2015

What Assets Will Crash – Stocks, Bonds, or Real Estate?

Driven by the rise in interest rates, higher taxes, declining home ownership, and the reduction in long-term mortgages, real estate prices should peak with the Economic Confidence Model on 10/1/15, which Armstrong calls the Big Bang (the collapse in sovereign debt and the peak in govt). Since homeowners are only owners as long as they can afford the taxes, the headwinds will convert more and more into renters until the prices reach equilibrium. The only thing that may surprise investors more is the rise of the dollar.

Greece has been the epicenter for the coming sovereign debt crisis, and London real estate looks to be the canary in the coal mine for real estate. The US could continue to benefit in the short-term, because it’s still the best horse on the plot of land where the glue factory resides. However, on the other side of 2015.75, when the economy turns down and declining tax receipts “force” govt to raise taxes (instead of downsizing and reforming), distressed capital will look for a more liquid safe haven that doesn’t have a deflationary tailwind, especially when the cycle has another 17 years to decline.realestate-cycle

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Can Greece Show the West the Way Out?

Greece finally does the right thing by kicking out the debt pushers. They also used a democratic process by using a referendum to let the people decide their fate, instead of unelected bureaucrats or pretend Representatives that have been bought off by donors. Yet, all one hears from the financial media and so-called freedom lovers on FOX is how Greece is full of a bunch of lazy tax cheats.

Those critical of Greece either don’t understand the flawed structure of the euro, are hypocritically talking their book, or failed miserably in history class. First of all, countries that had a currency weaker than Germany prior to the creation of the euro, immediately had their debt increased when it was converted to euros. For Greece and the Drachma, it resulted in Greece’s debt doubling due to a currency event as the value of the euro increased.

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Bernie’s Just Another “Magical Thinker” from GOVT

I will use Bernie’s “10 radical ideas that most Americans agree on” to summarize the problems he does not solve, including climate change, which will not stop changing even if all carbon-producing machines were turned off tomorrow.

Referencing the above article, I have no problem with items 1, 2, 6, 9, and 10, but Bernie whiffs on the other items. If we don’t fix the economy, the other things won’t matter. In general, Bernie believes that socialist policies provide economic solutions that have never worked – even once. I guess people are just determined to get their turn at bat to prove they too can strike out.

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