Blast from the Past: Real Estate Then and Now

This is just a reminder to those who don't know about me. 

Originally posted June 14, 2009

I thought I’d take a look at where we are currently in real estate versus what I predicted a few years ago for those of you who never read either of my books which detailed this mess.

And of course, I also wanted to remind you that the so-called experts really have no idea what’s going on. Rather than forecasters and investment strategists, they’re broadcasters and extremists.

Now, this is somewhat of a marketing piece. However, as you will see, there are no bogus claims….just verifiable facts. I’m going to show you just a small bit of my track record.

Just so that I am perfectly clear about my intentions…

I’m doing this for 3 reasons.

#1 – I want you to know my track record so you can decide who to listen to.

#2 – I want you to ask yourself why the media would black-ball me. 

#3 – I want to remind you how you can’t trust anything from the media.

 

So let’s begin.

One of the most closely followed measures of real estate prices is the Case-Shiller Index. This of course tracks average home values based on recent single-family homes sold in 20 major metropolitan areas across the United States. It is run principally by Karl Case and Robert Shiller.

Last month, the results were bad.

This past month, the bad news continues.

Amidst all of the media coverage, instead of real experts, what you see are data collectors (Robert Shiller), perpetual doomers (Roubini, Schiff, Krugman and others), and hindsight clowns who are only jumping aboard now that things are obvious (everyone on CNBC, FBN, radio, and various financial websites).

Yet, as the facts show, the entire group of these “experts” (labeled as such by the media) has very little credibility based on their track record, which includes the perpetual doom forecasters.

Make no mistake, while these “experts” are media clowns, some of them actually have some value to add; but only if you were completely clueless. 

The problem is that not a single one of them are real experts in this economic mess because not a single one made specific forecasts that materialized. Some of them made forecasts that were completely wrong, costing those who followed them BIG money. Thus, without getting the full picture, these guys can be dangerous.

For instance, when I want real estate or historical stock market data, I would go to Shiller; but certainly not for forecasting or investment guidance. You need to learn to use Shiller for what he is good for and that is data collection. Even his book, “The Subprime Crisis” is a waste of time. It’s complete garbage in my opinion. I urge you to get a copy yourself if you doubt me. 

In none of the cases I have mentioned would I look these individuals for a comprehensive understanding of what is going on because quite frankly, based upon what I have seen and heard from them, they don’t know. But the media continues to insist they do. And most people believe what the media says. That’s part of the game.

And I certainly wouldn’t go to them for anything related to investments. The problem is that most people are much more clueless, so when they hear or read what these guys have to say, they think they really know what’s going on. This is the same reason why I say they’re clueless; because it’s all relative right? 

Relative to my insights, they’re lost; relative to you they seem to know what’s up. But therein lays the danger because if you aren’t given the full picture, you’ll be in as much trouble as if you remained completely blind. In some cases, you might even be worse off.

For example, consider reports from Peter Schiff’s clients. Apparently, they did much worse than the overall market. In my opinion, a much better title for his book would be “The Economy for Dummies.”

While some might say that want such an approach, if you really think you can make money from such a simplistic view of the economy, I’m here to tell you that you’re very wrong. 

The truly smart money (what little there is out there) realizes all of this. And they certainly don’t go to these guys. The reality is that these “experts” who have been labeled by the media as such are for retail investors; the sheep who watch CNBC and FBN. The sheep continue to be herded by the fluff from the mainstream media and their hand-picked “experts.” 

Some of these so-called experts are nothing more than snake-oil sales men, looking to make money on commissions from you, while others have spent most of their careers sitting in their office on a college campus, and thus have no clue about the real world.

Yet, these are the ONLY guys the media offers you because they serve the media’s agendas. These are the facts, so I suggest you wake up and stop checking in with the mainstream media when you want to find out what’s happening. Otherwise, you will continue to remain in the dark.

The media black-balled me and continues to today for a very good reason. They do not want to air my expertise on the economy and stock market, despite the fact that my 2006 book, “America’s Financial Apocalypse” alone is direct evidence that I stand alone as the leading expert in America’s Second Great Depression.

My predictions are irrefutable and many have already materialized with stunning accuracy. The media wouldn’t want someone like me around…a real expert with a remarkable track record… an expert who laid out a case for permanent decline for America (although I end my book with a statement of hope)… because it’s political and cultural taboo to speak of such a devastating decline.

It’s also a sin in the eyes of Wall Street. And when you are running a business (the financial media) you will protect the interests of your biggest customers (Wall Street).

But after everyone has lost most of what they have, whether it’s their job, home or retirement savings, the media will step in and change from the denial phase to the doomsday mentality. And they do this because Wall Street wants investors to throw in the towel and sell everything so they can buy it on the cheap. You might recall the same thing played out just a few years ago during the dotcom charade.

Only after you have seen your investments get cut in half will the financial media air views contrary to the bubble mentality.

But they interview and feature doomers and others who have predictions that make mine look benign; guys in the “media club.” They stay within the boundaries laid out by the media so that their financial and political agendas are held intact.

This is the way it works I can assure you.

You see, America’s entire media industry is controlled by only a few men, so they not only have financial agendas (i.e. almost all of their revenues come from corporate America and Wall Street), but they also have political agendas. My clear identification of the problems and solutions to this depression, detailed over two years before it began would upset both their financial and political leaders. 

So now, I will show you just a few excerpts from one chapter (of eighteen) from my 2006 book, America’s Financial Apocalypse, so you can see that no one else made warnings with such accuracy and detail as I.

With just this tiny sampling of my excerpts, should be able to decide who the real expert is. Once you put the pieces of the puzzle together, you’ll understand why the media black-balled me.

So let’s begin…

From Chapter 10 of America’s Financial Apocalypse (2006)…

“In many parts of America, home prices have risen as high as 150 percent in just a few years. Amongst the cities with the biggest housing bubbles are Phoenix, Las Vegas, Portland, Los Angeles, Boston, San Diego, San Francisco, Miami, and Washington D.C. As well, much of California and Florida have experienced a huge surge in home prices in just a few years.”  

“At its bottom, I would estimate a 30 to 35 percent correction for the average home. And in ‘hot spots’ such as Las Vegas, selected areas of Northern and Southern California and Florida, home prices could plummet by 55 to 60 percent from peak values.”

 

The “Poor Effect”

     “Considerable research has shown that Americans view their homes as a significant portion of their future wealth. Therefore, when home prices increase rapidly, they save less. Instead, they consume excessively because they feel richer than before (i.e. the “wealth effect”). A similar situation occurs during bullish stock markets, as previously discussed. But can not the opposite be true as well?”

“Across the nation, even if we assume a very conservative 20 percent correction, there would still be several major regions that would experience declines of 35 to 40 percent. Declines of this magnitude would wipe out the wealth effect, as many watch their home equity evaporate into thin air. This will not only halt consumer spending, but it will also force millions of foreclosures across America, causing housing inventories to rise, which could cause a further collapse in home prices. The aftermath of record foreclosures will send shockwaves to the stock and bond markets.” 

“This will cause a record number of foreclosures, as over 10 million are possible within the next 6 to 8 years.”

“According to the Federal Reserve Board, American home owners extracted $600 billion in equity from their homes in 2004 (up by $39 billion from 2003) and spent half of this money on goods and services. This $300 billion accounted for 40 percent of the GDP growth in 2004. Between 2003 and 2004 alone, the Federal Reserve estimates that Americans tapped into over $1 trillion of equity from their homes using home equity loans, refinancings, and cash-out purchases at closing (figure 10-19). Alone, these cash-out financings have been estimated to account for a significant portion of inflated values during the more recent stages of the bubble. It has been this source of credit that has fueled the primary portion of GDP growth since 2003.”  

“Ironically, it has been the flight from the scandals of the recent stock market bubble that have caused many to seek real estate as a “safe” investment alternative. And while the stock market is by no means finished correcting from the bull market period of the 1990s, we now have a real estate bubble that must also correct.”

“Washington has permitted this industry to engage in irresponsible lending practices to increase access to credit for the purpose of fueling the phantom recovery. This has served to enhance consumer spending that has boosted many industry wages; fees and commissions of brokers in the real estate and mortgage industry, commercial banking salaries, and revenues in all industries as a result of reckless debt spending. Hence, without this real estate bubble, there would be very few signs of improvement in the economy since 2003.”  

“As well, remember that the majority of government discretionary spending items have been for Iraq, Afghanistan, Katrina, and homeland security—none of which resulted in a direct improvement in living standards, as normally implied by GDP numbers. Therefore, if we adjust for the effects of spending due to credit released from the real estate bubble and due to government expenditures that have not resulted in an improved economic benefit, America has actually registered negative GDP growth since 2003. Yet, aided by the loose monetary policies of Greenspan, the financial industry has helped create the illusion of a recovery.”

“Even the riskiest of these loans can be manipulated into AAA-rated debt and sold to pensions and other large funds because the same standards that apply to corporate debt are not applied to collateralized debt products.