ILLEGAL PARKING: Housing Prices Sinking, Wall Street Stays Rich and Investors Head for Gold for Safety

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EDITORIAL COMMENT: Practically everyone seems to know that housing prices are going down, the dollar is getting trashed, and our position in world finance is tenuous at best and that the problems are all related. We also know that as the value of the dollar goes down, foreign imports become “cheaper”. Yet the MYTH persists that we must live a lie: that the foreclosures must continue, the volume of stolen houses on the market must be preserved, and that the wealth drained from the middle class and the poor must be sustained — meaning that the money that would otherwise be coming into the economy as consumer spending that would stimulate business spending and hiring will continue to be parked on Wall Street. And of course money that would otherwise constitute taxable commerce will continue to be withheld from Federal, State and local government.

The idea that there can be a bottom to the housing market without resolving the foreclosure mess and the underlying mortgage mess that has corrupted our title system is absurd. This is very simple: if fewer and fewer people have less and less and money and no prospects for improving their condition, and a bleak future buried under a mountain of fictitious debt created by appraisal fraud and predatory lending mixed in with the rest of the ingredients in the fraudulent and illusory securitization scheme, THEN IT FOLLOWS THAT THEY WON’T AND CAN’T BUY ANYTHING, THAT BUSINESSES WILL HOLD BACK SPENDING AND HIRING AND THE SITUATION WILL CONTINUE TO GET WORSE. A few apparent spikes of activity do not constitute a recovery. The foundation is rotting and it won’t stop until we stop lying and tell the truth. LET’S STOP LIVING LIES!!!

HERE’S THE TRUTH: The illusion of securitization and all the compounding fractures caused by fraudulent documentation, misrepresentation, invalid documents has enabled Wall Street to distract us from the very real transaction that took place between the investor and the borrower. Our title and financial system is corrupted and like a crack in the window will continue to spider crack out indefinitely unless we acknowledge that the MONEY transaction was between investor and homeowner, and that those are the people who need to be accorded relief like any victim of fraud. As soon as we do that and forget the Wall Street myth, we will be back on firm footing, the foreclosures will stop, the pension funds will recover far more than they are going to in the current status quo, and the economy will be stimulated to new heights.

Prices Surge as Investors Rush to Safety of Gold

By MATTHEW SALTMARSH

The price of gold rose above $1,500 an ounce on Wednesday for the first time, pushed higher by investor concerns about global inflation, government debt and turmoil in the Arab world.

The prices of other precious metals, like silver and platinum, have also surged recently on what analysts call a flight to quality, when uncertainty about the economic and political outlook sends investors into assets that are perceived to be safest.

“We’re seeing a perfect storm for gold and silver prices,” said Robin Bhar, a senior metals analyst in London for the French bank Crédit Agricole.

The list of factors that have supported the price of precious metals in recent weeks is long. It includes worries about the sustainability of European debt levels and whether countries like Greece will soon default; the weaker dollar; rising inflation in many parts of the world; continued unrest in North Africa and the Middle East, which has also pushed up oil prices; and concern over the United States budget, which also stirred fear in world stock markets earlier in the week.

Stocks recovered somewhat Wednesday after strong earnings reports restored investor confidence, analysts said.

Other factors that are helping precious metals include the buildup to the early autumn wedding season in India, during which families lavish gifts of gold on brides; the longstanding shortage of skilled labor and equipment at certain mines; and the increase in the number of mutual funds investing in gold.

The recent popularity of gold-based exchange-traded funds has also propelled prices of the underlying metal by making it easier for more investors to trade in gold.

Each share in a gold exchange-traded fund represents part of an ounce of bullion, but it comes without the inconvenience of holding the metal or the risk of buying futures and options. Before such funds became popular in the middle of the last decade, individuals who wanted to invest in gold had to buy gold jewelry, coins or bullion — and pay the high security and transaction costs. They could also invest in the shares of gold mining companies — more of an arm’s-length exercise — although the cost of investing in those companies has also risen recently.

In addition to benefiting from increased demand for the underlying metal, gold and silver futures contracts are seen as attractive substitutes for paper investments, given that they can be redeemed for a physical commodity.

“Gold is sometimes a currency, sometimes a commodity and sometimes a store of value,” analysts at Merrill Lynch wrote recently.

Gold for June delivery rose as high as $1,506.50 a troy ounce during trading in New York on Wednesday before settling at $1,498.90, a gain of $3.80 on the day. It was the first time that gold had breached the $1,500 level.

While that represented the highest level in nominal terms, the inflation-adjusted price was higher during the early 1980s, when it was well above $2,000 in current dollars.

Silver prices also climbed on Wednesday. Silver for May delivery climbed 1.2 percent, to $44.46 a troy ounce in New York, after rising as high as $45.40, the highest price since 1980. A troy ounce is 31.1 grams, or 1.1 ounces.

Although gold prices are likely to remain volatile and are vulnerable to retreat as investors take profits on their gains, few analysts are willing to bet on a sharp reversal in the near term. “As the purchasing power of workers in emerging markets increases, we see demand for gold as a commodity increasing over the next few years,” the Merrill Lynch report said.

In a research note published Friday, Goldman Sachs forecast a gold futures price of $1,690 an ounce in 12 months’ time, driven primarily by the assumption that the Federal Reserve’s continued stimulus policy, known as quantitative easing, would keep interest rates low in the United States, bolstering demand for the metal as an investment.

The market for silver, which Mr. Bhar of Crédit Agricole described as a “poor man’s gold,” is far more illiquid than gold. Mr. Bhar said several hedge funds appeared to have been “bullying” the price higher in recent sessions. Prices of palladium and platinum have also climbed.

Less valuable base metals like copper, tin, aluminum and zinc, which are used in large quantities in construction and heavy industries, have also climbed since last year, after plummeting during the financial crisis.

But among these commodities, there have been more divergences, according to Jim Lennon, head of commodity research in London for Macquarie Securities.

Markets for commodities like coking coal, used to make steel, iron ore and copper have been tight, he said, driven by inventory accumulation from producers and concerns about output bottlenecks at mines in Africa, Australia, Brazil, Chile and China.

For other base metals like aluminum, zinc and nickel, supply and demand appear better matched, he added.

Overhanging many of these markets remained the question of China, and whether its roaring economy might soon cool down. Many metals’ traders and analysts have had to become China watchers, poring over the economic data issued by that country and studying accumulations of stocks in Chinese warehouses. During the first quarter, China’s economy expanded 9.7 percent from a year earlier.

Investment and consumer spending in China have remained robust despite the government’s effort to temper growth through interest rate increases and curbs on bank lending.

5 Responses

  1. […] ILLEGAL PARKING: Housing Prices Sinking, Wall Street Stays Rich … […]

  2. As the dollar weakens – actually – foreign imports become dearer. As the dollar weakens, our exports become cheaper.

  3. I agree.

    I do think that we will see lenders bulldozing sufficient housing so that the public won’t see the true effects of the process. It was actually discussed on cbnc yesterday. When you pass an empty lot you don’t typically ask questions about who owns the vacant lot. When you pass a boarded up home it’s a different story.

    During inflationary times even a vacant lot will gain in value.

  4. Homer ,

    Post Weimar Germany (hyperinflation etc.) Germany backed their new Deutschemark with the land assetts of the country.

    If what you infer occurs I can imagine every courthouse (and the records they contain) burning to the ground…

  5. We are getting closer to the real reason servicers are pushing people into foreclosure.

    After the federal government spends so much money there will be inflation/hyper-inflation at some point. During inflationary/hyper-inflationary times owning hard assets over currency is a good thing.

    Banks can exchange money/loans for hard assets/houses through the process of foreclosure.

    Just saying.

    Do we now understand why servicers have been pushing people into foreclosure and the government has been doing nothing about it?

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