The economic decline continues, and nothing CNBC can do with all their fake “news” and bright commentators will help. Helicopter Ben, I am sure, stays awake at night, worrying about what his predecessor got him into…while his predecessor takes his morning bubble bath. The point is that the housing slump has spread to the UK and is like a disease which is infiltrating all the economies around the world. While the trigger may have been the over-bought, over-priced, houses along with under-qualified buyers, plus crooked appraisers and mortgage brokers, the problem is deeply entrenched. It all seems to be coming apart.
I’ll make this a separate paragraph because it is IMPORTANT. A client of mine’s relative just lost his entire life’s savings in a money market account. No money market is insured, and this guy’s money market was in deep with sub prime mortgages, and it went the way of all flesh. Do NOT believe that a money market is a safe place to store dollars, even if the dollar was a safe place to store surplus assets. Neither are any good. Muni bonds? Suppose the municipalities have suffered so great a decline in their tax base that they can’t pay? Bond insurance? Those companies are on the verge of insolvency. Stock market? I think it is in for a possible re-test of its low of 8 years ago. Foreign currencies? Why go to other pieces of paper? The euro is being printed, just like the buck, only at a slower speed. Real estate? The bottom is not anywhere near yet. Every time I get a surplus asset condition, I buy more silver and gold. No cash! No paper!
There are over 22,000 foreclosed houses in Las Vegas, and over a million in America right now. AT&T stock took a tumble, because of all the disconnects from people unable to pay their phone bills. Cell phones, in many cases, are all they have left with which to communicate. Housing sales and construction are at a standstill, and at a party last week, the local Coldwell Banker owner, who is a friend of mine admitted that his business was down 21%. Just imagine all the carpenters, plumbers, roofers, electricians, painters, landscapers, and sheet rockers who are now, or will soon be out of jobs. Just imagine the truckers who haul all this stuff, and the hardware stores and lumber yards who sell it, not having enough customers to stay afloat. Mass unemployment, in other words. I have clients who are doctors and dentists whose business is off, because people cannot afford their services. Desperate people who are hungry, may soon be on the streets of big cities, in my opinion anyway, and it is not a pleasant thought.
What can they do? What could government do to alleviate the depression, which is already here, although no one will admit it? Helicopter Ben may indeed drop hundred dollar bills from helicopters, as he once said he would do if necessary. Print, in other words, which is what all collapsing nations do as a last resort. If they didn’t have printing presses, they degraded money in other ways, but the effect was the same. The second, is to lower interest rates, and those two are the only things government can do, at least as far as I can figure. Cutting rates, which will happen, won’t help those out of work, in deep debt with ruined credit or foreclosed, nor will it bring back lost industry or jobs. High tariffs might help, but it will never happen, and besides, it’s too late for that. Tax cuts? That’s the same as printing, because revenues will necessitate increased printing. If Helicopter Ben eventually floods the nation with gobs of fiat dollars, those of you with debts may pay those mortgages and credit cards off with funny money and be out of debt. If someone has a $100,000 mortgage, and dollars are fluttering down like spring rains, grab all you can, rush to your mortgage company and pay it off, before someone stops it by new laws or regulations. Time may be of the essence. I forwarded to some of my clients a tip about the low price of natural gas last week, and before I could call to buy a contract, it went up $2. Things happen quickly when there is a huge problem, like an economy going down the tubes or an un-noticed bargain, perhaps like silver.
Why hasn’t silver gone up to lower the ratio? I think it is because around the world, millions are gobbling up gold as a safety measure, and historically, gold has always represented safety, whereas silver has been regarded as an industrial as well as a precious metal. Much silver, when used, is not recoverable, but virtually all gold ever mined, still exists. Silver is still the best buy, and especially the 22 cents over spot for hundred ounce bars (in lots of five) we now have. The 16 to 1 ratio will again happen, and if it were 16 to 1 now, silver would be $55, not $16. Since government can do only two things, and they are lower interest rates or print, they can do nothing to stop what has already begun in an undeniable way.
Sir Edmund Hillary is dead at age 88. I Last saw him at the Explorer’s Club banquet at the Waldorf Astoria in New York three years ago, when he gave a speech which brought tears to my eyes. What a wonderful explorer and gentleman he was. Imagine driving a farm tractor to the South Pole, and exploring the origin of the Ganges among other things, plus his immense help to the Nepalese. In 1953, no one thought the summit of Mt. Everest could be achieved. Sir Edmund and sherpa Tenzing Norgay proved them wrong, and without modern climbing accessories and oxygen.
Protect yourself, and of course, have a great weekend.