Tuesday, January 10, 2006

 

Housing Slump To Hit Economy, Rates, US Dollar

Reuters reports on the US dollar and housing. "The dollar's strength isn't wholly dependent on the state of the U.S. housing market, but investors said on Tuesday they are focusing more closely on that key segment of the world's largest economy than they have in years."

"As house prices appreciated, existing homeowners simultaneously cashed out equity to buy consumer goods, adding to the economy's advance and helping to create new jobs. The growing economy did two things: raise confidence in U.S. assets and increase investor demand for the dollars to buy them. At the same time, steady growth prompted the Federal Reserve's policy setting committee to raise benchmark interest rates which further stoked demand for dollar-denominated securities."

"But after 13 interest rate hikes with at least one more expected, analysts say slower demand for housing is reducing consumer spending and eroding demand for dollars. 'With a year and a half of hikes, there are indications now that (home) prices are starting to moderate across the country,' said Charmaine Buskas."

"'With the housing market expected to cool through 2006, the drivers of U.S. growth are expected to change, but this is unlikely to keep the Fed from tying up its tightening cycle any later than' March, she added."

" If 'the U.S. housing market simply falls under its own weight, a distinct possibility given the major overhangs in property values in many segments of the nation, the hit on wealth-dependent consumption and GDP growth could then be a major negative for the dollar,, said Stephen Roach, chief economist at Morgan Stanley."

"With U.S. homeownership running at 68.8 percent in the third quarter of 2005, according to the Census Bureau, a stall in the housing market will be felt across a wider swathe of the U.S. population than the stock market crash of 2000."

Comments:
I'm amazed that there isn't more activity here. Hey, Any thoughts on uranium? I hear we'll need to go nuclear in a big way soon. How about coal?
 
Austin Yankee,

Several hundred visit here everyday, just not many comments. I blogged for months at HB before I got a single comment. And then it was something like, 'why a housing bubble blog?'
 
This comment has been removed by a blog administrator.
 
Wow, now that's persistence! BTW, thanks for the tip about http://www.apmex.com/ They have the best prices that I could find on the Web.

While I'm blithering.. I read about a college student who furnished his entire apartment using Fedex boxes and duct tape.. he made a bed, desk, etc. I wonder if anyone has found creative ways to utilize their silver bars?
 
AustinYankee,
You can wear it. The ropes of silver and gold are close to bullion prices, if you find a good source. I've never done it.

Security becomes an issue and the best security is for no one to know you have it at home. Years ago, Ron Paul said to package your metals in plastic, put it inside two different sections of PVC with the ends glued on with PVC resin, and to bury this in your back yard at 3AM on a rainy night. I never did that either, but it's good to know.
 
I'm amazed that there isn't more activity here. Hey, Any thoughts on uranium? I hear we'll need to go nuclear in a big way soon. How about coal?

Coal prices have historically been flat in this country, but have been trending upward over the last several years, following the trend in oil and gas prices (but still a fraction of the price). New technologies promise fewer emissions from coal. Coal is poised for a big comeback as a number of power companies have announced plans to build new coal-fired generating capacity. Also, regulators are beoming more coal friendly as coal is a domestic source of energy and less subject to dramatic price swings.

I expect upgrates at existing nuclear plants to increase generation, but I don't expect to see a new nuclear plant for a while. Despite the benefits, nuclear is still a tough sell. However, increased capacity at existing plants could increase demand for uranim.
 
On a whim, I signed up to goldmoney.com and am considering purchasing Gold through them. From what I can tell, it's a bit different way of buying it.

Anyone with any thoughts on their system. I believe e-gold is similar. It's mostly a speculative move with small amount that I can afford to lose. =)

As a sidenote... I think it's less popular here because it's not housing and doesn't truly affect virtually everyone. And personally, I prefer the formatting of the housing blog as pure asthetics go. =)
 
Ben,

You're right, it's just like the early days on HB2 (where I lurked for the longest time).

AY,

Uranium definitely looks good. There's a great interview with Dines over at FSO; he talks about how demand is outstripping supply, which has driven the price from under $10 to over $36 in just five years. The fundamentals are phenomenal.

Village,

Doesn't affect everyone? What's that green stuff in your wallet???
 
I think this is the first article that I've seen that directly connects the housing bubble to foreign investors. (It's exciting since I'm betting on these market shifts which have been tied together in my mind.)

I believe this blog will become more active over time since I notice people looking for the next big thing (or at least something retaining value).
 
Ben,

Someone else on this thread already mentioned it so I figure I'll second it just to throw in another vote re: aesthetics.

Hardly a major issue, but I always find myself decreasing the font size.


: )
 
Village,

Doesn't affect everyone? What's that green stuff in your wallet???


I should have clarified. I don't think the population at large recognizes the affect, or potential affect it has.

Though, if you want to be technical. The green stuff in my wallet is Fiat currency and worthless in and of itself.
 
RentinginNJ: On a whim, I signed up to goldmoney.com and am considering purchasing Gold through them. From what I can tell, it's a bit different way of buying it.

Anyone with any thoughts on their system. I believe e-gold is similar. It's mostly a speculative move with small amount that I can afford to lose. =)


Have a Goldmoney account for about a year and a half and been using it to gradually accumulate a physical gold position. Mostly try to buy the dips if I can (to cover the spread of purchasing costs). What is interesting about the gold spot market over the last year is almost like clockwork you have a strong drop which is quickly followed by a rather quick recovery to a new hight. So far this strategy has been very rewarding (15-17%).
They appear to be a serious initiative and was able to use my goldgrams to buy some silver eagles at Kitco in early 2005.
I consider this strategy on the opposite of speculation; a way to preserve wealth and as an offshore savings account very simple to manage and redeem in several major currencies. Do your homework as the site contains a full explanation about how the system work. I have a cautious confidence in them. The holdings they manage is growing quite quickly both from purchases and valuation; quite a virtuous circle.
 
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