April 28, 2006

"What a dream it is to become wealthy without effort"


Unfortunately, the common American does not understand he is being manipulated and impoverished by the Federal Reserve.

When money is no longer real (i.e. fiat currency vs. gold and silver), then people may come to believe in the surreal, and a hyperreality emerges.

In particular, during the reign of Alan Greenspan, money and credit – created out of thin air – rained upon Americans as if to assure us that crop failures and misfortune had been banished from U.S. soil.

Hence, we came to live in a world of plenty where one may become wealthy by simply purchasing a house – with lots of borrowed money – and by "investing" in stocks for the long run.

What a dream it is to become wealthy without effort.

This mass delusion is only one step away from collectively believing that cotton candy is a cash crop.

Alas, Americans will soon discover that housing values don’t grow to the sky and that heavy mortgage debt leads to a harvest of financial despair.

The Austrian theory of the trade cycle will be validated yet again.

- Eric Englund, April 2006

33 comments:

new 200 Mbps BROADBAND over POWER LINES said...

read: Disappointing results sock home builders
Sector in heavy retreat after companies warn on softening markets


By John Spence, MarketWatch
Last Update: 6:34 PM ET Apr 27, 2006

BOSTON (MarketWatch) -- Home-builder stocks pulled back Thursday as investors reacted to a string of earnings reports littered with order declines, missed expectations and lowered outlooks.
A trio of the largest companies in the sector released quarterly results before the markets opened Thursday, and the disappointing results sent the group into a tailspin.
Centex Corp. (CTX : Centex Corporation
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CTX0.00, 0.00, 0.0%) started the trouble shortly after Wednesday's closing bell when the company said its fiscal fourth-quarter earnings rose 6% from the year-earlier period but that it took a 14 cents a share tax write-off on land that has fallen in value. The company's backlog of homes awaiting construction dropped 6% and orders tumbled 11%.
Centex also significantly lowered its fiscal 2007 earnings outlook to a range of $8.50 to $10 a share. In January the company said it expected profit between $10.75 and $11.25 a share.
"The deterioration in home-building trends is materializing more rapidly than many had anticipated, including ourselves, and is likely to continue to put pressure on earnings expectations for the sector," wrote Raymond James analyst Rick Murray in a research note.
Wachovia Securities on Wednesday downgraded shares of Centex to market perform from outperform on worries over 2006 and 2007 earnings and declining margins.
Shares of Centex fell $5.05, or 8.3%, to $55.70 Thursday.
Pulte Homes Inc. (PHM : Pulte Corporation
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PHM0.00, 0.00, 0.0%) also released quarterly earnings after the closing bell Wednesday, saying profit rose 20% from the previous year. Yet new-home orders, which analysts closely monitor to predict revenue, fell 11% from the year-ago quarter to 10,725 homes. Orders fell in the company's Northeast, Southeast, Midwest and West markets, and rose slightly in the Central region.
Pulte, the second-largest builder in terms of 2005 worldwide deliveries, reiterated its 2006 profit outlook of $6 to $6.25 a share. Analysts polled by Thomson First Call see earnings of $5.98 a share for the year. Analysts at Friedman Billings Ramsey & Co. lowered their 2006 earnings estimate to $5.70 from $6.05, and trimmed their price target on Pulte shares by a dollar to $42, citing anticipated margin erosion and valuation. Other analysts have voiced concerns over the increasing use of incentives to move homes, which could also squeeze margins.
Shares of Pulte were off $1.15, or 3%, to close at $37.89 in Thursday trading.
More bad news hit the home-building sector Thursday morning after Beazer Homes USA Inc. (BZH : Beazer Homes USA, Inc.
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BZH0.00, 0.00, 0.0%) posted its quarterly numbers.
The company said it swung to a profit in the fiscal second-quarter, but lowered its 2006 earnings forecast as the builder sees sales and prices slowing in several of its housing markets.
"In a number of markets across the country, we have seen the pace of sales decline and price appreciation moderate relative to that experienced over the past several years, as evidenced by the lower net orders this quarter," said Ian McCarthy, Beazer chief executive, in a statement.
Orders fell 19% on a unit basis and the company's chief executive said sales are slowing and price appreciation is moderating. Cancellation rates also moved up from the year-earlier quarter and Beazer lowered its 2006 profit forecast. See related story.
On Thursday, Beazer shares fell $2.20, or 3.6%, to $59.05.
Aside from sagging home prices and sales, investors are also worried about rising mortgage rates after the yield on the benchmark 10-year Treasury note recently broke through 5%.
In its latest weekly survey, Freddie Mac (FRE : Freddie Mac
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FRE0.00, 0.00, 0.0%) said the average rate on the 30-year fixed-rate mortgage stood at 6.53%, up from 5.8% at the same time the prior year.
The steep pullback in the builder sector Thursday came one day after the stocks rallied on stronger-than-expected new-home sales data in March. Read the story.
Through Wednesday's close, the Dow Jones U.S. Home Construction Index (DJ_HOM : DJ US Home Construction Index
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DJ_HOM0.00, 0.00, 0.0%) is down about 8% year to date.

Anonymous said...

‘The Housing Boom Is Over’ In New York

The New York realtors have their march numbers out. “Sales of existing single-family homes in New York gained strength in March compared to the previous month. The March 2006 sales total fell 3.4 percent from the March 2005 sales total of 7,007.”

“While sales were up, the preliminary data showed a decline in the median sales price from February 2006. The median remained unchanged in March 2006 compared to the same period a year earlier.”

The group reports each month as preliminary, and the numbers are revised the next month. According to the printouts from January 2006, the statewide median of $319,000 was revised down to $300,000. Now the February 2006 statewide median of $300,000 has been revised down to $278,000.

The March 2005 statewide median is reported at $259,900. The preliminary number for March 2006 is $260,000.

Some county medians from the NYSAR files: Nassau is down 5.1% from the previous month. Putnam is off 8.5% from the previous month and 11.7% from a year ago. The Rockland median dropped 9.1% from the previous month. And Westchester declined 9.45 from February 2006 levels.

About Westchester. “A Westchester real estate agents’ group is declaring that the local housing boom has fizzled. The median selling price of a house in Westchester this winter was $650,000, up just 5.7% over a year, the Westchester-Putnam MLS announced yesterday.”

“It was the sixth consecutive quarter of single-digit increases, and the real estate group proclaimed that after eight years, ‘The boom is over.’”

“The number of houses sold was down 14% from a year ago, and the number of available houses was up by a third. The record median price for Westchester was set last summer at $711,700. In the fall, the median price was $652,250.”

“In Putnam County, the median price for a house was $375,000, down 8.5% from the year before, the group said.”

Written By: Ben Jones

NetNerdvana said...

Once again Keith nails it. The whole housing and stock market booms could not go to the extremes they have without our current Super Debtist system of creating money out of thin air... little fingers go to the keyboard ... hmmm how much money shall we create today ... 1 0 0 0 0 0 0 0 0 0 0 0 0 0 [tippy typey clicky clacky ...] wooopsieee too many zeros.... backspace backspace ...

there! ... that looks right! [hitting the enter key] ... its done!!!

Im waiting for the whole stinkin mess to collapse and then the media will blame the free-market/capitalism on the failures of the debtism/fake funny money out of thin air and how we need a "centrally managed" economy...

HAHAHAHHAHAHAHAHAHAHA

excuse me but if it really really really really really a free market WHY THE HELL DON'T I GET TO CREATE ANY MONEY OUT OF THIN AIR like the fed does?

But what gets me even more is ...

There aren't ANY LEFTY MEDIA LIMO LIBERAL TYPES

nor

ANY NEO-CON CRONY CORPORATE TYPES

nor

ANY COMMIE ECO-GREENIE TYPES

nor

ANY DUMB-ASS SHEEPLE TYPES

that have a single problem with the funny-money-out-of-thin-air
system because they all want big government and control.

Im waiting with my bowl of popcorn to watch the blame games begin. Its gonna be freaking amazing!

keith said...

does anyone question why the fed pulled the M3 two months ago now?

good god some of this is so obvious. our media is either too corrupt or too stupid to figure this out.

poweredchicken said...

keith - they wanted to save the tax payer money.

and if you believe that i've got a bridge to sell you.

the m3 money supply numbers have been ressurected in part due to some great work by a guy called Bart on behalf of FSN.

http://www.financialsense.com/fsu/editorials/2006/0425.html

there's the guy's webpage -

http://www.nowandfutures.com/

with some interesting stuff on it.

uknowwhoiyam said...

Unfortunately, the common American does not understand he is being manipulated and impoverished by the Federal Reserve.

Impoversished? By the Fed?!

Do you really believe this or are you just trying to be funny?

uknowwhoiyam said...

does anyone question why the fed pulled the M3 two months ago now?

M3 does not convey any additional information about economic activity that is not already embodied in M2.

Anonymous said...

Personal savings are at an all-time low.

Personal debt is at an all-time high.

The majority's "wealth" is mostly tied into their house or condo, which they can't really sell to spend that wealth unless they have more than property.

I would say we are worse off than before. All ponzi schemes come to an end. I just hope this one has a few decades left before it collapses.

moman said...

Impovershed is correct - the FED is creating an entire class of wage-class slaves.

When people I know who are 35-40 have no 401k but one hell of a nice Escalade and a 4-bedroom suburban house for a single person things are out of whack.

Consumerism has run amok...

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Anonymous said...

Even in the 19th century, money was "created out of thin air".

The romantic delusion that every single dollar issued was once backed 1 to 1 with gold is preposterous.

The difference then was that banks themselves issued the notes, and you had to personally examine the notes and decide whether they came from a bank you trusted or didn't.

"theoretically" all notes were exchangable 1 to 1 for gold but nobody did that except in cases of bank runs and panics, and in those cases of course there wasn't remotely enough gold available.

It was fractional reserve banking, but unregulated, and quite prone to fraud, criminality and cronyism.

It was deemed essential for banks to be able ot 'create money' because of the need to keep up with population and economic growth.

Then of course there were massive deflationary backlashes and "panics" where credit was contracted and banks quickly took back title on all sorts of property: rich got richer and poor got poorer.

(the word "depression" started as a euphemism for the previously used word for sharp economic decline, and when that was tarnished, it became 'recession').

The problem isn't clickityclickity click the problem is bad underlying economic policy.

People have a strange fixation on the accounting system (numbers and money) and not on the real life economy.

Yes, under the present system there will inevitably be some inflation. Get used to it---it's just a change of basis.

Far more important than the 'value of the money' is the value of the work done in the real life physical economy, whether measured in dollars, euros, quatloos, gold, uranium or yuan.

Here US policy is directly intended to enrich tycoons here and tycoons overseas by the export of technology and strategic destruction of US industrial capability for temporary profits for a few.

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Anonymous said...

whats with the "secret shopping' bullsh*t? everyonr knows its a scam. besides, why are you posting that HERE? ENOUGH ALREADY!!!!

uknowwhoiyam said...

the m3 money supply numbers have been ressurected in part due to some great work by a guy called Bart on behalf of FSN.
...
TinyURL: http://tinyurl.com/fphru


Good site; thanks for the URL. But did you realize that it contradicts the conspiracy theorists' claims that the Fed is hiding data:

"the surprising result is that (except for the Eurodollars element of M3), the data is still available with which to reconstruct M3."

It's also worth noting that the site's reconstruction of M3 shows no surprises or unusual trends.

You guys seem to buy into every kooky conspiracy theory that comes down the road.

uknowwhoiyam said...

Impoverished is correct - the FED is creating an entire class of wage-class slaves.

When people I know who are 35-40 have no 401k but one hell of a nice Escalade and a 4-bedroom suburban house for a single person things are out of whack.


You haven't yet explained the Federal Reserve Bank's role in this.

Let's start there.

uknowwhoiyam said...

Personal savings are at an all-time low.
Personal debt is at an all-time high.
The majority's "wealth" is mostly tied into their house or condo, which they can't really sell to spend that wealth unless they have more than property.
I would say we are worse off than before. All ponzi schemes come to an end. I just hope this one has a few decades left before it collapses.



I agree... with all the points you raised.

But this is not the doing of The Fed.

Blaming the Fed for this is like blaming the local supermarket because you couldn't control your appetite and ended up morbidly obese.

Anonymous said...

Do you notice everytime the Fed lowers rates, speculation goes into a frenzy resulting in a bubble and eventually a huge mess? If we the taxpayers are responsible for keeping the banks afloat, then the Fed and bank regulators have the responsibility to keep borrowing at sane levels. Why are the banks allowed to give out loans that they know people cannot make the payment on? If the banking system is allowed to run amuck, then the FDIC should be dissolved and taxpayers should not have to guarantee deposits. Why am I responsible for banks giving out loans to homeless people?

Anonymous said...

uknowwhoiyam said...
does anyone question why the fed pulled the M3 two months ago now?

M3 does not convey any additional information about economic activity that is not already embodied in M2.
________

don't you love reading posts by people who believe everything the government, their leaders, their church and fox news tell them?

I wonder what life must be like for such a simpleton. Easy I'd guess - you never think for yourself, never challenge authority, and go along with life like the drone you are

easy.

but so sad.

Anonymous said...

How about all those braindead morons who believe the NPR and CNN lies? The collective IQ of those leftard morons is in the single digits.

moman said...

Sure, here's the explanation.

The FED has never curtailed and has even encouraged exceesive speculation due to excess liquidity in the markets.

There need to be regs on lending but no; the banks are selling federally guaranteed loans to Fannie & Freddie who then sells them as MBSes on the open market.

So when this ponzi scheme fails, banks run out of liquidity and a good portion of people are bankrupt, the FED will have to pump money into the economy again and many people will walk away without savings. At least they were able to drive a Hummer H2 for a couple years, and who cares about retirement since it's only 15 years away?

Grinch34 said...

Far more important than the 'value of the money' is the value of the work done in the real life physical economy, whether measured in dollars, euros, quatloos, gold, uranium or yuan.

Gamesters of Triskelion?

Grinch34 said...
This comment has been removed by a blog administrator.
Grinch34 said...

I agree with some of what unowwhoiyam says of about peoples spending. If people did not agree to pay these ridiculous home prices then the home prices would not have shot up like they did. People also do not need to buy these gas guzzlers (unless they need them for a work truck)either. People complain about the salaries that pro athletes make, but if they did not agree to pay for the high priced tickets, then the salaries would not be that high. If you do not attend pro sports, the worse that can happen to you is that you do not receive the specific entertainment that you want. If you do not receive healthcare or adequate healthcare then you either get more sick or die.

I agree with Moman that the fed is creating wage class slaves (this includes educated people). This is happening because basic necessities have shot up in price also. Health care has gone off the charts in price. Nobody wants to be sick, but people need to get well. People need home heating and air conditioning to prevent freezing to death and dying from heat exhaustion. Tax breaks are only benefiting the rich corporations. I have been saying this for quite some time, but have concrete evidence after I did my sisters (and her husbands) taxes. I did her taxes on one of those tax programs before I did the updates (over the internet). After do the updates, they were getting 1000 dollars less back on their return. Case in point and concrete evidence.

Grinch34 said...
This comment has been removed by a blog administrator.
Anonymous said...

There need to be regs on lending but no; the banks are selling federally guaranteed loans to Fannie & Freddie who then sells them as MBSes on the open market.


OK, so run that by me again about how this is a Ponzi scheme that will make everyone go bankrupt, in relation to the above comment? In other words, you're saying that all of the Ivy League educated, devoted-their-careers-to-finance types within Fannie & Freddie cannot see this dilemma, but you can?

Do you understand that there is a significant part of the subprime lending market that Fannie & Freddie does not guarantee?

uknowwhoiyam said...

moman wrote:
Sure, here's the explanation.
The FED has never curtailed and has even encouraged exceesive speculation due to excess liquidity in the markets.
<

You're blaming cheap money for people using it unwisely?! Are you serious?!

No one's making you buy a Hummer or house you can't afford. No one's preventing you from contributing to a savings account.

No one's keeping you from better use of the money you earn and have.

If you're a "wage class slave," then get off your ass and take steps to improve your life.

You can start with learning better fiscal restraint and discipline.

Use your spare time for education instead of complaining on blogs.

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