We have seen this time and time again whereby U.S. politicians and their inept political parties argue their positions and point fingers at the other side regarding budget deficits and the national debt. We could surely solve the problem if the other side would just cooperate they say. Holy crap, seems no one in office made it past kindergarten math and no one wants to be truthful about the "true" state of this country. They agree what we are doing is unsustainable but taking action is just not in their pre-school vocabulary.
Nearly every media article gives you a glimpse of the enormous problem we face. Here's a math problem for a student - what's the national debt in four years under the sequester law if fully implemented by reading the below excerpt (without either party trying to water down its impact as we speak - which they are doing in earnest)?:
AP Tom Raum 2/22/13 Gov't downsizes amid GOP demands for more cuts: ...The federal budget deficit for the fiscal year ending Sept. 30 is estimated to be $845 billion — the first time it's dropped below $1 trillion in five years. But it's on track to rise again as more and more baby boomers retire and qualify for federal benefits and as interest payments on the national debt keep going up. The national debt first inched past $1 trillion early in the Reagan administration and has grown in leaps and bounds ever since through both Democratic and Republican presidencies. It now stands at $16.6 trillion and is on a path toward soon becoming unsustainable, both parties agree. Unchecked, entitlement payments will add roughly $700 billion to the debt over the next four years. ... Under the sequester law, roughly $85 billion in federal spending would be slashed in the remaining seven months of this fiscal year and a total of $1.2 trillion in cuts over 10 years.
Answer: $16.6T + ($845B x 4) + $700B - (($1.2T / 10) x 4) = $20.2T
According to the U.S. National Debt Clock on this day in 2017 the answer is $22.6T. Let's just say anyone with an answer above $20T gets an "A". So, what does this all mean...politicians are squabbling about pennies when we have $100 bills at stake! Austerity will come and it will be forced upon us...and it will be ugly.
I'm actually of the opinion that it has gone on too long and it is not possible to solve our national debt problem without default...yes, I'm talking about the U.S. defaulting on its debt obligations. Of course, this is the "event of last resort" but it will take this action (effectively a negotiation of reduced principal amount for a sustainable long-term payment stream) to rightsize this sinking ship.
To this end, let all U.S. citizens stop being hypocrites and complaining about the spending in Washington all the while buying the "safehaven" of U.S. Treasury's in our IRA's, 401K's and other investment accounts. Sell your investment funds that even dab in these instruments. Sell your US dollars for safer currencies like C$, A$ and Swiss franc. Let's tell the politicians their math stinks and their debt instruments including the fiat US$ are worthless like a piece of gum stuck under the desk!
Friday, February 22, 2013
Saturday, February 16, 2013
Buy, Buy, Buy Or Is It Really Sell, Sell, Sell!
Maybe it's the contrarian in me or me just not wanting to follow the masses but all this talk about the housing market continuing its rise from the depths of the Great Recession is making me nauseous. Not that a good hike up a stable but increasingly difficult mountain terrain is not in the cards for me, on the contrary, I would welcome the challenge. However, when looking at this housing market recovery and the basis for its climb, I can only think of those buying and speculating now as latecomers to the ascent of Kilimanjaro: the climbing party already left when the weather report was more opportunistic and it's not as rosy as it might appear at this point!
A review of my older posts would tell you that six months ago, I said we're in the eye of the housing storm. This followed my earlier blog regarding the impact on housing prices should interest rates double from historically low rates of this time period. Those posts still seem on track to me. But why not revisit this another time when things surely look much better than they did only last summer.
As I write today, we are seeing an historically low level of housing inventory in the Greater Sacramento area, housing prices that have jumped upwards of 20% or more from early 2012, Zillows forecasting the Sacramento area housing market to increase 11.9% in 2013 and the California Association of Realtors noting that 72% of active listings are receiving multiple offers. With all of this great news on housing (well maybe except if you are a buyer competing in this environment), how could one not buy? Why would anyone want to sell?
Well, to me, the 800 lb. gorilla is still hanging from the branches of the tree in the front lawn of every home in this country. Until that beast is subdued, housing as well as nearly everything else we hold true in dollar terms is in for a wild ride unlike anything we've ever seen before. There's just no way to relate what the future holds this time around based on the historical housing market cycles of the past. I truly believe the mess we're in is bigger than most people can imagine and housing to me will be one of the biggest losers when the main arterial branches of this "recovery" give way.
What are the main arterial branches? (1) The US Federal Reserve's ability to print money by buying US Treasury Bonds to keep rates artificially low and, (2) The US Federal Government's continuing burden of the citizens of this country with massive debt that far exceeds our ability to service let alone repay. So, historical market cycles of the past that didn't have this beast lurching through the front window simply must be dismissed from our thought processes. We are then left with a severe damaging blow as any homeowner knows when trees/branches overhang a property and the next big storm is not if but when.
I guess I would rather climb Pikes Peak in CO than a housing market that feels a lot like Mount St. Helen's in WA before its great volcanic eruption in 1980!
A review of my older posts would tell you that six months ago, I said we're in the eye of the housing storm. This followed my earlier blog regarding the impact on housing prices should interest rates double from historically low rates of this time period. Those posts still seem on track to me. But why not revisit this another time when things surely look much better than they did only last summer.
As I write today, we are seeing an historically low level of housing inventory in the Greater Sacramento area, housing prices that have jumped upwards of 20% or more from early 2012, Zillows forecasting the Sacramento area housing market to increase 11.9% in 2013 and the California Association of Realtors noting that 72% of active listings are receiving multiple offers. With all of this great news on housing (well maybe except if you are a buyer competing in this environment), how could one not buy? Why would anyone want to sell?
Well, to me, the 800 lb. gorilla is still hanging from the branches of the tree in the front lawn of every home in this country. Until that beast is subdued, housing as well as nearly everything else we hold true in dollar terms is in for a wild ride unlike anything we've ever seen before. There's just no way to relate what the future holds this time around based on the historical housing market cycles of the past. I truly believe the mess we're in is bigger than most people can imagine and housing to me will be one of the biggest losers when the main arterial branches of this "recovery" give way.
What are the main arterial branches? (1) The US Federal Reserve's ability to print money by buying US Treasury Bonds to keep rates artificially low and, (2) The US Federal Government's continuing burden of the citizens of this country with massive debt that far exceeds our ability to service let alone repay. So, historical market cycles of the past that didn't have this beast lurching through the front window simply must be dismissed from our thought processes. We are then left with a severe damaging blow as any homeowner knows when trees/branches overhang a property and the next big storm is not if but when.
I guess I would rather climb Pikes Peak in CO than a housing market that feels a lot like Mount St. Helen's in WA before its great volcanic eruption in 1980!
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