Marc Faber - Financial Sense Newshour - 07 Dec 2011

A Bottom for Home Prices ?

Housing prices will stop sinking next spring. But recovery will be a gradual process -- too slow to help the economy much next year. Look for prices, which have fallen an average of 31% since 2006, to drop an additional 2% or so in the early months of 2012 and then recover that lost ground by the end of the year.

The growth in 2013 won’t be dramatic Come 2013, expect home prices to rise only 3% to 4% -- not too far from the pre-boom average of 4.8% a year, but well short of the bounce that usually follows a housing slump. After the milder housing downturn in the early 1980s, home prices grew an average of 6.5% for six years.

A key signal that the bottom is near: A change in the ratio of average homes prices to personal income -- houses are affordable again. After soaring to 4-to-1 during the housing boom, the ratio is now well below the long-term average of 3-to-1.

Another reason for optimism: Foreclosure numbers are set to level off after a recent surge to clear up the backlog that developed when banks were found to be rushing though the paperwork for seizing homes. Although the 3.5 million foreclosures still in the pipeline are weighing heavily on the housing market, that effect will diminish when it is clear that the worst has passed.

Look for home sales to tick up next year as well, hitting 5.5 million for new and existing homes. That’s up 4% from 2011, the low point since the housing bubble burst.

Demand from abroad will help. Canadians are buying homes in Phoenix; Brazilians are investing in Miami; and Chinese are buying in California, Las Vegas and New York City. To these investors with bulging pockets, good values can be found where the price declines have been greatest.

U.S. investors remain more conservative, largely avoiding single-family homes and diving into the multifamily rental market. It has heated up in recent years, thanks in part to the crowds of former homeowners who need a place to live, as well as to would-be home buyers who are waiting to see if prices have further to fall.

Home starts will jump 15% next year, driven largely by construction of new apartment buildings. Among the strongest areas are Texas, Louisiana, Oklahoma and the Dakotas, where the robust energy industry is lifting local economies and earlier overbuilding was avoided. Other states that have benefited from past restraint are Montana, Washington, Iowa and Nebraska.

Even so, new construction will be only around 750,000 in 2012, down from 2 million in 2005 and far below the pre-crash average of 1.5 million from 1959 through 2006.

Farther down the road, there is plenty of pent-up demand. The lousy housing market has muffled the typical rate of household formation, deterring many young folks from getting their own homes. As a result, there are 2 million new households waiting for an improvement in economic conditions: recent graduates eager to leave their parents’ nests and 30-something couples who have delayed marriage or having children. As the economy picks up steam, they will emerge, helping to soak up the glut of foreclosed homes and putting construction on a faster track.

By 2014, the housing market will start to look more like its old self, with housing starts near the long-term average of 1.5 million a year, sales of about 6 million and price gains of over 4% a year.

Shorter term, even the modest reversal likely in 2012-2013 is crucial, easing the crushing weight the housing market has imposed on the economy. Homeowners, who lost a large share of their net worth in the housing crash, have been trying to rebuild their wealth by saving more in recent years. Since the market crash, consumers have held on to more than 5% of income, up from less than 2% during the housing boom. Since consumer spending accounts for two-thirds of economic activity, this uptick in saving and correlating downtick in spending has spelled the difference between a solid recovery and the shaky one the U.S. is experiencing.

Since a good deal of this saving is due to uncertainty -- not knowing just how much more home prices will drop -- reaching a clear turning point is important. Once homeowners know the worst is over, they’ll take a breath, start planning their saving for the long term and spend more in the short term.

Of course, the market shift won’t make much immediate difference for the millions of homeowners who owe more than their homes are worth. But for the majority with equity in their homes, even a modest gain in prices can change their spending behavior.

McAlvany Weekly Commentary

Massive Emergency Bailout Temporarily Saves European Implosion

A Look At This Week’s Show:
- Disaster temporarily averted when 6 Central Banks dump 357 billion into Europe. How long this will work is anyone’s guess.
- Lower wages and higher debt imply slow growth and a collapse in equity prices. This trend could last years.
- Learn and use a “back of a napkin” financial solution to show your holiday guests and family.

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Google Running Out of Steam – Sell Now

Google (NASDAQ:GOOG) — The world’s largest Internet company may see an increase in revenues in 2012, but a decrease in net profits in likely due to costs from recent acquisitions and a slowing world economy.

On the long-term weekly charts, GOOG has been in a rectangle for over four years without a successful breakout. Major support is around $460, and a break below that line could lead to a serious decline.

Buying momentum is falling and internal indicators are universally overbought. The recent advance may be an early present to those that cash in on Google. At the very least, holders should take protective steps to limit losses by selling calls or buying puts on the stock.

Exclusive Interview – Jim Willie: “The Public Will Not Wake Up Until At Least One Million Private Accounts Are Stolen”

I had the chance to speak with the “Golden Jackass” this afternoon out of Costa Rica, namely, Jim Willie, publisher of the Hat Trick Letter. It was a riveting interview, as Jim’s global information and news sources paint a blackening financial future for participants in the Western financial system.

According to Jim, US & European investors are at incredible risk. “The entire financial system of the Western world is imploding,” said Jim. “There is exponentially rising risks for individuals and their money…the risk right now–is people losing their entire life savings. I cannot seem to get people to understand this”

As we began discussing the MF Global collapse, Jim articulated his belief in a financial slight-of hand originating from “notice to deliver” requests for gold and silver submitted through MF before the collapse, which had the potential to cause a Comex delivery default. “Comex was ready to default on gold and silver in November, and rather than honor the notices for delivery, JP Morgan stole the funds in the accounts that were calling for delivery…notices for delivery were replaced by stolen accounts.” The evidence of this according to Jim is that, “JPM increased the amount of silver in their registered vaults by precisely the amount that was suppose to be delivered…JPM effectively averted both a Comex default and a European Sovereign Debt implosion.”

Before closing Jim provided a stark warning, saying, “Several million private accounts may vanish–Brokerage accounts, Pension funds, Mutual funds, they’re all at risk. We are getting into the middle stages of implosion, where I believe the public will not wake up until at least one million private accounts are stolen, and completely vanish.“

This was a truly sobering interview, and given the real losses borne by MF Global account holders in the past month, Jim’s comments cannot be taken lightly.

To listen to the interview, left click the following link and/or right click and “save target as” or “save link as” to to your desktop:

Interview with Jim Willie

Big Name Financials Putting In A Bottom: AIG, C, GS, MS, XLF

So far this year, the financial sector has been hit hard by selling. The SPDR Financial ETF (NYSE:XLF) is down 19.2% so far this year, to $13.17, from $16.30. Some big names have seen extensive selling, and at some point these stocks become a value. Four big name stocks are showing indications of a turning tide, and a buying opportunity may be presenting itself in a handful of big-name financial companies.

Morgan Stanley (NYSE:MS) has been one of the hardest hit major financial players; in the last six months the stock is down 26.42% to $16.57, from $22.52. In November, the stock could not reach the low it hit in October, indicating buying support. Prior to this, in late October the stock had surged above September highs. The combination of these price moves indicates an uptrend could be underway. The ultimate test will be $20 (October resistance) - if the price can push through, it would confirm the uptrend. On-balance volume is rising aggressively, and this signals that buyers are willing to step in at these levels. If the stock drops back below $13, it is a sign of weakness. (For more, see Support & Resistance Basics.)

Citigroup (NYSE:C) has also had a rough past six months, down $21.64% to $29.83, from $38.07. This stocks also created a higher high in October, followed by a higher low in November. This provides evidence that an uptrend is underway. On-balance volume is rising, and it is also in an uptrend, showing there is buying interest in the stock. $34.40 was the October high and the level to watch on the upside. If Citigroup can push through that level, the uptrend is confirmed. On the other hand, a drop below $24 is a negative signal.

Goldman Sachs (NYSE:GS) is one of the most recognizable names in finance, yet it is down 25.45% in the last six months to $99.82, from $133.90. Similar to Morgan Stanley and Citigroup, Goldman also made a higher high in October and a higher low in November. The higher low in November was not as pronounced, though - a sign the stock still had some aggressive selling taking place. On-balance volume is rising though, and this confirms the recent moves higher.

There are obstacles for the stock. Mainly it has failed to significantly push past the 50-day moving average, and GS must also still push through the psychological $100 level. If it can do this, it still has a long way to go to reach the October high at $118.07. If that level is surpassed, though, the uptrend is confirmed. A drop below $88 would point to continued downward pressure.

American International Group (NYSE:AIG) has lost more than half its value so far this year, and is down 13.44% in the last six months to $23.57, from $27.23. The stock has a very similar outlook to GS. It is facing some headwinds, but also showing some positive signs. The stock made a higher high in October and a higher low in November - although not by much - which are signs an uptrend is emerging. On-balance volume is rising and the stock has cleared its 50-day moving average. A drop below $20 indicates this stock is still under significant selling pressure.

The Bottom Line
Four big names in the financial sector are at a potential turning point. All have seen a higher high in October and a higher low in November, which are signs of a potentially emerging uptrend. Rising on-balance volume indicates there is buying interest in these stocks at these levels, yet until the stocks clear resistance overhead, the uptrend is not confirmed. Support levels should be monitored closely, as this sector still poses risks. If support is broken to the downside, the uptrend is taken off the table, at least for the short term.

The Inflation Deception by Obama Bernanke

These are 2 TV spots developed by Phoenix-based Swiss America Trading Corp a firm specialized in selling U.S. gold and silver bullion coins and bars , both commercials have been rejected by major television networks, including Fox News , Fox Business, NBC, MSNBC, CNBC, ABC, CBS, CNN/HLN and the Discovery Channel, for apparently political reasons.pay your debt and start saving in Gold, as Gold is Money and is more valuable than the dollar. Gold has been used as currency for 2000 years. There is no way a country can survive by printing money from thin air, the consequences are hyperinflation and devaluation, this is basic economics , you need to have money to back up the assets or products you buy or sell

Hyperinflation is coming. The Federal Reserve is printing trillions of bogus dollars every year with no end in sight. Now is the time to stockpile a year's supply of food and water while you still can. Buy guns, ammo, gold, and silver. Have wood and a wood stove. Or kerosene stoves, heaters, and kerosene. We will see a complete collapse of our economy in the coming years.