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Real estate, housing bubble, gold prices, falling dollar, stock market

Fri Feb 23, 2007 03:02PM | By Tony

See more in Economy | Permalink | Email | Comments (0)

I start with Sacramento story where about one of every five existing homes on the market is a "short sale", meaning the home is worth less than the value of the mortgage, and the lender is willing to accept less than full repayment of the loan to avoid foreclosure. That is happening here in Chicago area as well, and yes, it will get worse, much worse. Seven months ago I closed the loan, and my appraiser had no problems giving me the value of $830,000. Yesterday the most I could get was $775,000.

Then there is Novastar Financial which stock has dropped close to 55% in the last 3 days. The red vertical line that I added, shows the total collapse, when the company posted a fourth-quarter loss of 39 cents a share, vs. with a year-earlier profit of 84 cents a share, and announced that "it may realize no taxable income from 2007 to 2011 and may drop its tax-friendly real estate investment trust status in 2008."

This is the must-read on the many who neither learn anything nor lost everything on dot.com stock market bubble in 2000. Instead they kept some for more real Real estate bubble. That shows you other side of the housing boom, where large number of small investors - dilettantes got sucked in. Just like with stock market, for few big ones to win, many, many small ones must lose.

Gold meanwhile is pulling higher and higher, little by little is getting to the $700 level. In my opinion, it will break through in the near future and go higher. Some projecting 4-digit gold prices, and interestingly enough, the gold mining companies hedge much less against low prices.

The dollar is going further down, with oil prices going back up. The USD-To-Euro chart below is quite telling.

As far as stock market goes, it is primed for a major correction, in my opinion. But with the few exceptions, no one want to hear that.

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