Stephen Roach says, U.S. Consumer Deleveraging is Just Beginning

Stephen Roach

Stephen Roach

Stephen Roach: “The market is in for a rude awakening,” said the chairman of Morgan Stanley Asia, whose grim outlook seems to remain constant wherever he’s domiciled. “This will be an usually weak recovery,” Roach said. “The damage done to the system [will be] lasting – we are not even close to healing. It’s ‘game over’ for the U.S. consumer. Deleveraging is just beginning.”

Here We Are Again – We Reached Dow 10,000 in March of 1999

Peter Boockvar, equity strategist at Miller Tabak, points out a lot has changed since the Dow first broke the magical 10,000 barrier in March of 1999.  While most other assets have gained value, the Dow is stuck in the mud.  Worse yet, we’re not even close to break even if you factor in the fact the dollar has lost 25% of its value in the last 10 years, based on the Dollar Index.

Here’s some of Boockvar’s other sobering stats comparing today vs. the first time the Dow cracked 10,000:

  • Total US debt was $24.6T vs $50.8T today.
  • The CRB commodity index was at 192.40. Today, it stands at 269
  • Gold was at $280. Now, it’s hitting all-time highs above $1,060 per ounce.
  • A barrel of crude oil was $16.44, today it cracked $75.

Elizabeth Warren says, Housing Market Getting Worse

Home Foreclosures Will Last For Years

10 to 12 million U.S. Homes Could Ultimately Go Into Foreclosure

There’s been a lot of talk lately about a recovery in the housing market – even reports of bubbles re-inflating in certain markets. Elizabeth Warren, chair of the Congressional Oversight Panel, isn’t buying it. “We see things getting worse in the housing market,” Warren says, citing the pernicious effects of foreclosures, which rose 5% in the third quarter to a total of 937,840, according to RealtyTrac. “The long-term impact of high foreclosure rates on our housing market and overall economy would be disastrous,” Warren warns, citing estimates that 10 to 12 million U.S. homes could ultimately go into foreclosure. “We have to get foreclosures under control. “Why the sense of urgency?

A single foreclosure property brings prices down an average of $5000 for every house in a two-block radius and costs investors an average of $120,000, she says. In its most recent report, Warren’s panel criticized the Treasury’s foreclosure modification efforts as “inadequate” and “targeted at the housing crisis as it existed six months ago, rather than as it exits right now. “Specifically, the Treasury program is targeted at subprime borrowers hit with ballooning mortgage payments vs. prime borrowers hit by job losses.  As for the “morality question” of whether the government should be bailing out homeowners, Warren says “I’m passed that,” noting “there’s plenty of unfairness to go around.”More importantly, “ultimately the American taxpayer — thanks to Fannie, Freddie and FHA — is going to stand behind many of these mortgage,” she says. “We need to be thinking more globally what is cheapest possible way to bring this crisis to an end. “One solution: Force investors holders these mortgages who may be betting on a government bailout to take a haircut, as occurred with GM and Chrysler creditors. “That’s why they call it investing,” Warren says. “You make profits in good times, take losses in bad times. That’s the fundamental part of this [modification effort] that’s missing.”

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Commercial Real Estate Market – Next Shoe to Drop

Great Dpression Homless Man

Great Depression Homless Man

NYC Commercial Real Estate Wreckage

Here’s the scary thing about the commercial real estate situation:   It’s not even starting to get better, actually — Things are still getting worse faster says Moody’s.

The Moody’s Delinquency Tracker (DQT) measured a 41 basis point increase in the month of September. The DQT now stands at 3.64%. This represents a 310 basis points increase over the same time last year. The DQT is now nearly 350 basis points higher than the low of 0.22% reached in July 2007.

September had the largest monthly basis point change in the history of the tracker. The 41 basis point increase is slightly larger than the increases in May and June earlier this year. The tracker resumed its large monthly growth after a lower than average change in August.

The average rise in delinquency in the past six months is 34 basis points. This compares to a three basis point average increase for the same six month period in 2008 (April through September). In 2009 the delinquency rate has risen 269 basis points, nearly tripling since the beginning of the year.

The PBS NewsHour took a look at the bearish obsession du jour, the commercial real estate market.  Real estate analyst Bob White took them around to show some of the ugliest cases out there in New York City.

http://www.businessinsider.com/a-guided-tour-of-nyc-commercial-real-estate-wreckage-video-2009-10

Moody’s Delinquency Tracker - Commercial Real Estate

Moody’s Delinquency Tracker - Commercial Real Estate

Jim Rogers Says, Gold Will Hit $2,000 and USA Will Lose Status As The World’s Reserve Currency

Good Time To Buy Gold

Good Time To Buy Gold

Famed investor Jim Rogers is “quite sure gold will go over $2000 per ounce during this bull market.”Rogers’ confidence gold will continue to rally stems from a view the U.S. dollar is on its way to losing status as the world’s reserve currency.”Is it going to happen? Yes,” Rogers says. “I don’t like saying it [and] I’m extremely worried about it but we have to deal with the facts. America is not getting better [and] the dollar is going to be replaced just like pound sterling [was].”Rogers didn’t offer a timetable, and it’s likely gold would exceed $2000 per ounce if the dollar were to lose its reserve status.Still, “I wouldn’t buy gold today,” Rogers says. “I think I’ll make more money in other commodities, which are cheaper,” as discussed in more detail here.Among many others, Rogers is “worried about the fact the U.S. government is printing huge amounts, spending gigantic amounts of money it doesn’t have,” the investor and author says. “People are very worried [and] skeptical about paper money [and] looking for places to protect themselves. The best way is to buy real assets. [That] has always protected one during currency turmoil, and it will again.”

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Jim Rogers Says, Inflation Inevitable – Could Be Much Worse Than the 1970’s

Given the Fed’s extremely easy policies, runaway government spending and shortages of many commodities, inflation pressures are building and destined to get much worse, according to famed investor Jim Rogers of Rogers Holdings.”The Federal Reserve has laid the groundwork for some serious inflation down the road by printing all this money,” Rogers says. “So have many other central banks.”Although “the U.S. government lies about inflation” in its official data, inflationary pressures are already evident in nearly everything, excluding energy, Rogers says. Inflation is “going to continue, going to accelerate,” he says. “We’re going to be paying more for just about everything down the road.”Asked if he foresees a 1970s-style stagflation period ahead, Rogers chuckled and gave an ominous reply: “I hope it’s that good. It might be much, much worse.”Given that view, Rogers remains very bullish on commodities as we discuss in subsequent clips.

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Jim Rogers Says, Commodities Cycle Won’t Be Over for Years and Food Crisis Looms

Jim Rogers, famed investor and best-selling author, announced the start of a global commodities rally in 1999. It turned out to be a heck of call: Since then, commodities have dramatically outperformed stocks. Just this year, gold has hit record highs above $1000 per ounce, copper has nearly doubled and oil has rallied sharply off its March lows. So does Robers still believe in the commodity boom?You bet. “The story is not over, not for a while,” he tells Tech Ticker in this video clip. “I don’t see any reason it’s going to be over for a few years because no one is bringing new supply on stream.”The chairman of Rogers Holdings still owns gold though it’s not his favorite metal. “Gold is mystical to many people. I think I’ll make money in other commodities that are more useful.”Rogers is far more bullish on agricultural commodities. As he sees it, “most agricultural products are still depressed on a historic basis.”The lack of supply Rogers sees is especially concerning when it comes to agricultural products. “A catastrophe is looming,” he says. “The world is going to have a period when we cannot get food at any price in some parts of the world.”A potential food crisis transcends money, but Rogers warning may still prove to be another great investment lesson. As he told us in parting, “instead of getting an MBA, get yourself a farming degree. You’ll make a lot more money.”

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