Monday, December 22, 2008

Fortune on Sacramento Real Estate: 5th-Worst Market in 2009

Fortune Magazine says the Sacramento real estate market will be the 5th-worst market in 2009, with the median home price projected to decline 22%. However, Fortune expects prices to rise in 2010, albeit only 2%. (hat tip DJ)

High jobless rates and low population growth are helping burst the capital city's inflated housing market.
Stockton is #2.

From the Sacramento Bee:
[Average Buyer:] Back then (early 2007) I interviewed several agents. They all said the same thing: "Oh, it's just going to kind of ebb a little bit and go down." I'm thinking, "How can that be?"...That's when I kind of went looking for alternative answers and the experts in the field. That's when I found some of the other regional blogs and found an alternative view.

[Jim Wasserman:] What was that?

[Average Buyer:] They were more bearish on the market. They were saying things which were not mainstream at all at that point. That was the point before Wall Street, before pundits started acknowledging that things were going to happen. I read the Wall Street Journal every day. In August 2007 everyone was saying, "Oh, it's just a little shaky. Things are good now." Then it was spring (2008) and we start losing Bear Stearns. And it was, "Oh, we're over it now and we're into summer." They just keep having this false sense of delusion.
From the Sacramento Business Journal:
Not everybody is a fan of Sacramento’s vacant building ordinance, which was approved in August 2007. “The city is creating a perfect storm for themselves with this new ordinance,” said Bruce Slaton, a real estate agent who works in south Sacramento. “If a house has $20,000 in fees and $30,000 in fines on a property that’s worth $40,000, the deal just doesn’t work,” he said. “The city might end up getting a lot of these handed to them by the banks.”

In some cases, he said, potential sales of foreclosed homes don’t work because the house was cited for violating the city’s dangerous or vacant building codes. “By the time the banks get these homes back from the trustee sale, they’ve got thousands of dollars of fines and fees on them,” which some banks try to pass through to the buyer, Slaton said. “And if the city doesn’t relax some of these fees, it precludes a lot of buyers from doing anything with them.”
From the Sacramento Business Journal:
The Sacramento Metropolitan Statistical Area, which includes Sacramento, Arden-Arcade and the Roseville area, saw its occupancy fall to 93.8 percent in the third quarter compared to 94.3 percent in third-quarter 2007, according to TRI Commercial’s apartment advisory team.
From the Sacramento Bee:
Five Sacramento County ZIP codes had median sales prices below $100,000 in November, according to property researcher MDA DataQuick.
From the Modesto Bee:
"It comes down to just the sheer volume of problem loans in your area," said Rick Sharga, senior vice president of RealtyTrac, which monitors foreclosures nationwide. Sharga predicted the [Northern San Joaquin Valley] region will continue to lead the country in foreclosures through 2009.
...
Mike Zagaris, president of Modesto-based PMZ Real Estate...is concerned that many current owners are giving up their homes because they've lost so much equity. "I'm being told by my people in the trenches that the vast majority of those facing foreclosures now have no interest in redoing their loans. They just want out," Zagaris said. "If that's true, there's no stopping these foreclosures."
From the Modesto Bee:
The recession dug deeper into Stanislaus County last month, sending the jobless rate to a nearly 10-year high of 12.4 percent, the state reported Friday. It was the county's highest monthly rate since the 12.8 percent of January 1999 and the worst November since the 12.5 percent in 1997.
...
The collapse of the housing market in the past three years bears much of the blame. Real estate agents, builders and people in related businesses have lost jobs. "Those industries, of course, are related to the housing and credit crisis," said Liz Baker, a labor market analyst for the EDD.
...
Still, the overall numbers...are well down from the early and mid-1990s, when unemployment sometimes hit the high teens.
Uh-oh. Last time the media said something was not as bad as the 1990s, all hell broke loose.

From the Modesto Bee:
The Northern San Joaquin Valley has been hit especially hard in the economic downturn because of foreclosures and other fallout from the housing market collapse. Agriculture and related fields have been relatively strong, but even they can be hit by the economy's troubles. Roberts Ferry Nut Co., which sells almonds and other items in Christmas gift packages, has seen a roughly 15 percent drop, co-owner Dan Mallory said. "I just don't think the consumer has the same buying power as before," he said.
From the Associated Press:
Robert Ecker was bored with retirement, so he went back to work as a housing appraiser in Stockton. He trained four other appraisers during the real estate boom — all of them are now out of the business. "Since the real estate market closed down, I grew a beard and now I'm doing this," said Ecker, dressed in the trademark red suit with white trim. "The older kids are asking for clothes now, rather than gifts," he said. "Most of them are asking for one gift."

From Stockton to Miami, from ritzy Las Vegas to gritty Detroit, cities with the worst real estate markets led the U.S. economy into recession. Skidding home prices and soaring foreclosures have magnified the broader woes of unemployment, stock market turmoil and hard-to-get loans. Holiday shoppers are making a list, checking it twice, and then scratching off the nonessentials.

43 comments:

Cow_tipping said...

That must mean we are hitting bottom.
Yea right ... bottom ...
Wink wink, bottom.
Cool.
Cow_tipping.

Buying Time said...

So I had meant to say (or thought I said).....that the Realtors were telling me that it was just going to ebb a little bit then go up (not down).

And yes, I was certainly grateful to google into your site Lander. It was very comforting to know I wasn't the only person in the entire Sac metro area that thought housing prices were way out of step with income and rents.

Diggin Deeper said...

Sacto RE will follow up or down based on the job picture alone...Throw in the alt-a resets, a faltering commercial market, and the picture worsens. The lack of industrial/business diversity strips away any insulation Sacramento would have with it...Imo I continue to believe Sacramento is it's own little island isolated from the money corridors in the state.

I just hope we don't break over 10% unemployment in the area...As crazy as this next diddy may seem.

From the Phoenix Business Journal.

http://phoenix.bizjournals.com/phoenix/stories/2008/12/15/daily34.html

Ariz. police say they are prepared as War College warns military must prep for unrest; IMF warns of economic riots

"A new report by the U.S. Army War College talks about the possibility of Pentagon resources and troops being used should the economic crisis lead to civil unrest, such as protests against businesses and government or runs on beleaguered banks.

“Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security,” said the War College report."

I guess you have to plan for all contingencies....

Deflationary Jane said...

Wow DD, it's one thing to know it's coming, but another to see it.

I have been saying that this cycle wasn't over until a city burns for years but I hadn't considered wide-spread unrest.

I also hadn't foreseen the TARP, which has so many people pissed off. Even the PollyAnnas I know are boiling over the handouts to banks who are continuing to pay bonues and shore up for corporate buyout opportunities instead of working to repair the credit situation*. The widening of the gap between the haves and the have-nots and the perceived cultural and ethical differences between them is generating a lot of anger out there that I worry people are not taking seriously. Admitting that they (the banks) don't know what they spent the money on or wouldn't tell might be the worst public relations mistake of the decade and certainly a move they will regret.

As to unemployment, I moved here in 93 and the economy here was just awful. This will be worse, imo; sadly there is just no avoiding it at this point.

* I haven't personally experienced any lack of credit nor has anyone I know other then folks that would have been denied credit in moderate times. I say this as it is a repeated sound bite that gets plenty of attention and blame.

patient renter said...

Pentagon resources and troops being used ...runs on beleaguered banks

I'm not seeing the problem here. If all of the customers of a bank decide to make a run on it, so be it. They have every right to do so. Are we going to treat them like criminals and exert military force on them? Completely ridiculous.

Jacob said...

I haven't seen problems on the credit side either. I have a fico score in the 800s and no debt so I don't expect any credit problem.

The problem is that loans, credit lines, these are being based on, get this, the recipients ability to repay. I know, crazy right?

If you look at the money that was flowing a few years ago, we are never going to get back to that level. And business grew to absorb that amount of money from consumers, and that market is dead.

A couple years ago I saw online that AMEX was doing credit increases online, and were not doing credit checks or income verification for amounts under $25k.

So I had a credit limit of $5k at the time and put in for $24.9k and instant approval. Now I can afford it, and hardly use it at all, but how many people took that money and burned through it and now will never be able to pay it back.

Times that loose money by 1000s of credit card companies and banks and this is what you get.

I do agree about the state loosening some fines but only for owner occupant buyers. If you buy a home to live in the state will reduce the fees by 20% each year. So if you live there 5 years, the back fees are all waived. If you sell before then, then whatever balance remains is due at closing.

But given our budget problems I see more taxes and fees instead of less, which will have the opposite of the desired effect and cause the state to take in less money overall.

patient renter said...

David Lereah has finally come out, as the shill he is (was?) in a Money magazine interview:

Q: Were you wrong to be so bullish?

A: I worked for an association promoting housing, and it was my job to represent their interests.

Q: The NAR’s latest forecast calls for a slight increase in home prices next year. Thoughts?

A: My views are quite different now. I’m pretty bearish and have been for the past year and a half. Home prices will continue to drop. I think we’ll see a very modest recovery in sales activity in 2009. But we’ve still got excess inventories, a bad economy and a credit crunch that will push prices down further, another 5% to 10% more. It’ll take a long time to get back to the peak prices we saw in many markets.

--

Ok, so now even Lereah, the spinmaster himself, is saying we're not near a bottom yet. Who are these clowns saying otherwise?

PeonInChief said...

It's not actually the job of the NAR to do anything but represent the interests of its members (selling houses). It is the job of the press, government analysts, and real economists to say, "This guy's job is to sell houses, so it's always going to be a good time to buy. Our job is to point out that what he's saying is hooey." What's interesting, of course, is that so many people recited the NAR line.

Cow_tipping said...

Except that they - Realtors and consequently the NAR are paid out of the buyers outlay.
Cool.
Cow_tipping.

Diggin Deeper said...

"I haven't personally experienced any lack of credit nor has anyone I know other then folks that would have been denied credit in moderate times. I say this as it is a repeated sound bite that gets plenty of attention and blame"

I really think all the credit "noise" is fogging the real problem....and that's solvency...Banks are hoarding Fed/Treasury money because they don't know what they've got in the way of liabilities on their off balance sheet assets....All you need is for one rating agency to give you a credit downgrade, and you're then forced to scramble and shore up with more cash to meet tighter regs...You run out of cash, you're out of business.

Banks aren't lending to banks or other financial firms because of the same problem. What it says to me is that we are facing the probability of 100's if not 1000's of bank failures before this is over. If the banks don't trust their own asset quality, they're not going to trust another bank's carte blanche...


But a consumer with a great credit score will get all the money they can borrow...because their credit worthiness is right up front...

smf said...

Banks and many entities are suffering from many problems because realistically they don't know how much money they have.

It boils down to assumptions.

Is that house (or other asset) worth $150K now really worth $100K, or $300K as some people assume?

(BTW, just heard another pundit mention how assets will go up in the long term)

That's why it is in everyone's interest to really realize what is going on, instead of whitewashing the problems the world is facing.

Markets HATE uncertainty. Why would you produce anything when you don't have a clue how much to produce, and at what price level?

Cow_tipping said...

Right ... wrong ... no such thang ...
There is the majority's opinion, monority's opinion and fringe opinion ... possibly.
What is important is ... you dont want to be in the majority when that opinion begins to cease being the majority ... in effect you need to be the first to leave and you also need to be the first when the minority starts to turn into the majority.
The fringe - well, its where you go to count your $$ if succesful in executing the above plan.
Cool.
Cow_tipping.

Diggin Deeper said...
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Diggin Deeper said...

Cow_tipping...

a simple but unique description of the contrarian thought process...and one I completely agree with...

Thanks for that one...

patient renter said...

DD: Re: the conversation we were having the other day about how the Feds are managing to keep the lights on without enough bidders for treasury bonds - as they say, the simplest explanation is usually the correct one. I hadn't read this elsewhere, but according to Professor Fekete, the Fed/Treasury are simply bypassing open market operations, and the Treasury is handing over bonds to the Fed for them to use as collateral for newly created FRNs. Apparently this was also done during WW2, but doesn't bode well for the economy being far weaker than it was then.

http://www.professorfekete.com/articles%5CAEFRevisionistTheoryOfDepressions.pdf

Diggin Deeper said...

PR...great find!

Doesn't it remind you of what we're doing with SS and Medicare?

How can these Federal Reserve Notes get paid back and not immediately monetized as debt for services rendered? As I see it, the monthly nut gets paid and TBonds are placed in the Treasruy vaults as collateral to be paid later...Collateral for what and when?

When you really think about it, what's the difference between the Madoff Ponzi scheme and this type of operation?

At some point the bloom comes this rose and once confidence begins to wane in our Government bond market, there won't be doors big enough to let everyone out...

Play with the FX market, play with the Comex market, but don't screw with the integrity and confidence in our government bonds or there will be hell to pay.. rating agencies across the world will not hesitate to downgrade our debt, at some point, if the risks begin to creep into the picture...

paranoid renter said...

rating agencies across the world will not hesitate to downgrade our debt, at some point, if the risks begin to creep into the picture...

They don't have a choice so this won't happen. No country is in any better shape then we are. The whole world partied America-style!

Diggin Deeper said...
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Diggin Deeper said...

It's interesting that 8 out of 10 worst markets noted in the Forbes article were from California. No wonder state govt is in a panic. Huge revenue short falls to follow. I remember when OC bankrupted... has a state ever declared bankruptcy?

"No country is in any better shape then we are."

For the most part I think that's true, however, countries that are on the positive side of their trade balance, or are rich in natural resources, or where citizens are savers...They are much better off then we are. China, Brazil, and Japan come to mind as countries that can finance from within as they are holdng well over a $Trillion in our notes already.

Without the world's continued support by buying our Treasury debt, we have no choice but to print money, stick an IOU in the vault, and hope that someday we'll grow our way out of that debt. Liken it to a credit card without a limit and you're only going to make the minimum payment each month. Pretty soon the debt service overwhelms you.

But hey, you won't get a better interest rate on a 30yr mortgage. You buy today at a sub 5% rate, and we're hit with good dose of inflation, you get to pay it off with inflated dollars...a mortgage payment of $2000 might look like bargain.

Helluva a deal!

patient renter said...

Collateral for what and when?

Exactly! They'll never be paid back. This is real (monetary) inflation at work.

When you really think about it, what's the difference between the Madoff Ponzi scheme and this type of operation?

That's the question :)

You buy today at a sub 5% rate, and we're hit with good dose of inflation, you get to pay it off with inflated dollars

This is a great argument for buying a home within the next few years actually... I hadn't thought of that.

BTW: I hadn't read Fekete before. He has a lot of interesting ideas, most recently having to do with the backwardation in gold and the real threat that poses to the Comex.

Diggin Deeper said...

PR...

This is OT but in response to what you've posted...

People are wising up to Comex manipulation by central banks, and are taking possession of 100 oz bars instead of holding the contract paper. It's not as difficult to take delivery as one might think. If you take delivery the shorts (ie. central banks) can't sell against your buy and hold prices down.

When backwardation is added to the mix, it causes the pressure to mount, the spring to coil, and the more contracts that are physically delivered, means fewer paper contracts that can be shorted. Frankly, if the public demands enough delivery of product, the Comex would have to shut down...

Try and buy gold coins or bar from a dealer and you'll find the price at $900 or better for Maple Leafs, Kruggerands, or Eagles...and it will take you weeks to get it. Our mint stopped making Buffalos as they couldn't keep up. There's a shortage all over the world right now.

Jacob said...

Jobless claims are up again this week and consumer spending has declined for the 5th straight month.

This party is just getting started.

Even some of the cheerleaders are predicting a 10%-20% decline next year... So I assume that means we will actually get 30%-50% from here.

norcaljeff said...

So a few comments on the Sacto RE market:

I want to point out that many bulls on this blog, and even some bears, were saying that population growth would continue in Sacramento and CA and that the State of CA doesn't layoff people and therefore RE will have a very padded bottom. Are we in agreement yet that those statements are in fact NOT true? I also want to point out to you as I talk to colleagues in the bay area about SF absolutely has to come down in value, people as late as this spring were saying things like you are crazy, "Google will always pay well and hire thousands of employees," "They aren't building anymore homes in Silicon Valley so prices will continue higher," "There will always be a huge demand of tech labor that pays well in the bay area," and the best "The SF is just different. Prices don’t retreat here." Well I hope myself and others have been proven right in the past 30 months. Never say never. Google didn't pay out cash bonuses this year; they gave out G phones instead. Tech is laying off in huge numbers. Labor demand is falling off a cliff, as well as demand on those 1000 sqft multi-million dollar homes. This should teach everyone that no market, no matter what market is is, is immune to the downside. It should also teach you that if you investment advisor is showing 30+ years of solid steady market returns (e.g. Madoff), that something smells in the state of Denmark, or W. Palm Beach, whatever your location of choice is.

And finally, I don't know why Stockton isn't #1 on this dead real estate market list. If Patterson or those other BFE towns between the middle of nowhere and LA are included in Stockton, fine, but I don't see that in another 100 years will bring them back to their 2006 highs. It was just unbelievable what they were charging for homes in those far off places where commutes averaged close to 2 hours one-way. They are just lucky gas still isn't $4.25 otherwise those home prices would have gone to $0 in a nanosecond. I just wish that Prof Schiller started his exchange market for homes back in 2005, I would have retired at a young ripe age shorting the h_ll out of the entire Valley of CA, from the Oregon border all the way down to Chula Vista! :)

Merry Christmas everyone!

sacramentia said...

@norcaljeff - What is your bet for 2009? .. the kind that you can retire early on.

Merry Christmas, or if that is offensive to you translate it into whatever term you'd like to hear.

norcaljeff said...

Sac, I'm not offended by being wished a Merry Christmas. Even the people in Europe still say Happy (Merry) Christmas to each other, France and Germany too :) I guess they're more civilized than we are.

Anyway, what info are you looking for? The financial mess isn't letting up for 09, short anything tied to finance. And as gas prices eventually go up again, the more far away places will get aniliated.

Diggin Deeper said...
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Diggin Deeper said...

Merry Christmas All!

What a year we've been through here in the valley.

NocalJ...good assessment of the last twelve months...no one on this blog could have predicted how devastating and swift this recession would be. What lies ahead is anybody's guess. Some of us knew we were in a recession long before the official word hit the street and if you go back through the blogs on this site you'll be able to see this. All we can do now is stay alert, contingency plan, and try to stay one step ahead of this mess.

The saying "the cure for high prices is high prices" is so true as we've seen in our RE market, gasoline, other commodities, etc. But we all must keep in mind the reverse is also true. Once we get comfortable believing that these low prices are here to stay, get prepared for a shift in the opposite direction.

Predictions for 2009: (caveat...margin of error 100%)

1. Median real estate prices drop in Sacramento to $170-175K and hold at that level as higher end home sales will tend to move the median price higher.

2. Mortgage rates briefly fall to 4-4.25% and then end 2009 at 6%or more as the Fed bond bubble bursts.

3. Gasoline prices bottom at $1.60 per gallon and end up at $2.50 or more by 2009 yearend. More if there's unexpected international unrest during the year...with a new president this is almost a given.

4. The real rate of inflation, once the deleveraging subsides, will hit 8% or higher before 2009 yearend.

5. The dollar weakens and continues its fall yoy in 2009 against the Yen, Swiss Franc, gold, oil, and agricultural commodities.

6. Food prices will rise dramatically in 2009 as world population consumes supplies faster than they can be replenished.

7. Wall St rallies early and then falls in the Dow 5-6K range sometime in 2009. Long bond falls below $100 and when it falls it will be quick and nasty.

8. Job losses in the state go over 10%, crime rises dramatically, and more cities declare bankruptcy.

There are many more but since everyone's predictions have been wrong up to this point, these 8 will do for me.

Happy New Year!

paranoid renter said...

Regarding the 100K in Rocklin condo I was looking at...it was in pretty bad shape -- broken windows, very dirty carpet/floor/walls/bathtubs/kitchen, appliances removed. But that wasn't the only thing. I didn't like the location/complex and I didn't like that it was a 2nd floor unit in a 3 floor building. So I decided to pass on it. I figure with the market the way it is, there's no hurry...something better will show up eventually.

paranoid renter said...

>>>>
Long bond falls below $100 and when it falls it will be quick and nasty.
>>>>

Can you elaborate more on what you mean by this? I don't understand what it means for long bond to fall to $100.

BTW, can you share what you are invested in now? Cash? Gold? If Gold, how did you buy it? Gold ETF?

Diggin Deeper said...

paranoid renter...

These are NOT my recommendations and they're not for the risk adverse...Please do your own due diligence and take these with a grain of salt....All have trailing stops in place for maximum protection...

Long gold and gold stocks through ETF's plus physical gold coins, gold CD, and small positions in selected juniors. Buying the dips that fall between $700-800 per oz.

Long TIP ETF or inflation protected bonds. Largest position

Short 30 yr Treasuries through ETF, and dollar cost averaging in more in January.

Short 10 yr Treasuries through mutual fund and dca more in January.

Short S&P. Tight stops in place if rally occurs and the market starts to run away.

Long Swiss govt bonds maturing in 2011. About the same size as the TIP position.

Long a very small position of stem cell stocks as speculative investments. This is a fascinating technology that just intrigues my curiosity.

Beginning to build a small position in oil and natural gas through ETF's. Will be adding the closer we move toward $30 per barrel. Will eventually become a core position again.

Long Asian currencies (Singapore, Aussie, Yuan, Yen).

Long Swiss Franc.

40% cash position for adding to the above.

Par value on the long bond is $100(the original value placed on the bond)and it's now sitting at approx. $114-$116.

I lost money last year just like most, but am quite satisfied considering what markets gave most traditional investors in 2008.

Again, I'm not recommending anything above. If you've got cash and you don't want to lose a dime...stay away from this market...

Rich said...

"3. Gasoline prices bottom at $1.60 per gallon and end up at $2.50 or more by 2009 yearend. More if there's unexpected international unrest during the year...with a new president this is almost a given."

I'd call that optimistic. If not 2009, then by 2010 gas is going to get a lot more expensive. Even at $5 it was a lot cheaper than in any other oil importing nation.

You listed long on the Aussie Dollar- what do you think of the Loonie? Canada's fate depends enough on the US that they can't help but be pulled down (softwood is of course already hit big time) but I think in general they'll be stronger than us.

Diggin Deeper said...
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Diggin Deeper said...

The loonie is intriguing and I wouldn't be surprised to see it get to parity with the dollar, if oil runs up again. The problem is that they've got so much riding on the tar sands and it's a loser with oil below $50-60 (more for newer projects) per barrel. That shuts down many of their $Billion projects and creates job loss problems...I'd want to see an oil price of at least $50 before considering the Canadian Dollar...however any country rich in natural resources, imo, will outperform our dollar in the coming years

RV6Flyer said...

"I'd call that optimistic. If not 2009, then by 2010 gas is going to get a lot more expensive. Even at $5 it was a lot cheaper than in any other oil importing nation."

Based upon what? Demand is weak, the last run was very speculative. The dollar will have to be completely crused against the euro and pound for that to happen. With the troubles they are having, I don't see that.

On Tuesday I closed my short on Jan CL 09 contracts now that they come into line with last months close in the 30's. The contango was just too steep and it was a no brainer. Product inventories are building faster by the week. No way will we see $5.00 gas in 09. I will say though, I am keeping my powder dry for some unleaded at $0.75-80 per gallon. Currently around .88 right now, so getting very close to the bottom.

DD:

Those calls I wrote against the 30 year bonds have gained about 30% and the corporate notes are up about 6%. I am closing out in the morning and getting back in after the next bond rally.

Also looking at small broad market rally into the end of the year.

Diggin Deeper said...

RV6Flyer...

Yup, the stars lined up for you on that trade...TBill down corps up over the last several days.

The RE market is much more predictable under current conditions, although I'm not so sure we'll see prices throughout every segment of our local market continue to fall...a correction, whether sustainable or not, is not out of the question...

Low mortgage rates are key to the Fed's strategy...the refi mortgage market's hot right now (if your right side up), and some of that is spilling over into RE purchases...especially the new home market as builders will buy down even further to get out from under their inventory. But this strategy is shortsighted and more of a remedy than a cure... and imho, will blow up the Treasury market before we get out from under this recession....

paranoid renter said...

Digging,

What does it mean for a treasury market to blow up? (I'm economics challenged.)

Diggin Deeper said...

Higher long treasury bond interest rate yields... equating to lower bond face values (bond prices)on the same.

Sold in '05 said...

So what if things don't inflate and deflation (which we have right now) really takes hold? Will gold sink along with everything else or lag? What the hell happened to platinum? $2500 now to $975! It's almost on par with physical gold. Is it too industrialized or is it a good physical buy now?

CD

Diggin Deeper said...

"So what if things don't inflate and deflation (which we have right now) really takes hold?"

That is the key question! And it really puts us all in a "you pick em" situation. Either the Fed fails and the country falls into depression, or the Fed creates enough inflation to moderate deflation and succeeds....

Those that watch monetary supply have seen a 100% increase since September of this year...that's a whole lot of new green dollar bills to deal with...and probably not enough to do the job yet.

Gold in the depression went from $20 per oz to $35 per oz when FDR confiscated it from the public...Not a bad investment during those trying times.

Rich said...

Diggin Deeper: Gasoline prices bottom at $1.60 per gallon and end up at $2.50 or more by 2009 yearend. More if there's unexpected international unrest during the year...with a new president this is almost a given.

Rich: I'd call that optimistic. If not 2009, then by 2010 gas is going to get a lot more expensive. Even at $5 it was a lot cheaper than in any other oil importing nation.

RV6Flyer: Based upon what? Demand is weak, the last run was very speculative. The dollar will have to be completely crused against the euro and pound for that to happen. With the troubles they are having, I don't see that.

Based on the fact that relative to the rest of the world, our gas is extremely cheap. And because I'm a 'peak oil' believer. Not everyone is, but we're throwing prognostications out there. We did hit a low in gas prices pretty quickly, and appear to be headed back up. Maybe the industry is over correcting, or maybe it's just the holidays. But I think gas prices are a like a lot of things, the piper is going to show up with his hand out.

It doesn't hurt that our mass transit ridership has remained high. Maybe, just maybe, we 'get it' this time.

Cow_tipping said...

So now are realtors in sac telling people their houses are worthless - unless they were the one that sold it to them. In that case, they just hide and never return calls. Its happening in Charlotte. In fact there is an explosion of "buyers agents". Which has led to the curious explosion of "unemployed agents" cos there isn't any buyers. You enter relaty trac and put in your information and in 15 mins flat you'd get a call from some starving realtor. Tell them you want to buy at a certain price off the peak, say 30% down from the peak and they back pedal so fast you'd think you're downhill skiiing backwards.
Cool.
Cow_tipping.

Sold in '05 said...

"We did hit a low in gas prices pretty quickly, and appear to be headed back up."

Crude oil has continued to fall even though the gas price spiked up the last week. The price spike in gas coincided with the OPEC production cut announcement. In my opinion, the refiners priced in a big jump in crude prices following the OPEC announcement. That spike was down rather than up as expected, but what the hell, keep the preprogrammed gas price hike and enjoy a little extra crack spread. It boils down to some "seasonal pricing" from refiners that will melt away again after the holidays.

As for peak oil... It'll happen someday, but not today. The big run-up this year was PURE speculation. Mostly it would seem by CALPERS and other instittutional investors looking to backstop their crumbling real estate investments with some sure thing commodity investments. Both have worked out remarkably well. It seems that whatever CALPERS thinks is a good investment is a good place to look for shorts...

Here's my bet for the new year... by second quarter there will be mass municipality bankruptcies, with subsequent muni bond mass defaults, triggering a blowup in those currently in vogue investments, then sometime later in the year a U.S. state (this one maybe?) will reach the point of and without fed bailout will default on it's debts and set off major down leg in everything, culminating with world wide downgrades on U.S. sovereign debt and the accompanying massive flight from treasuries into... I have no idea what. Just my gut feelings based on NOT following the herd into muni bonds and "high quality" corporate bonds.

Diggin Deeper said...

"As for peak oil... It'll happen someday, but not today."

It already might be happening. The IEA reported that in ground supply will drop 6-9% per year (cumulative)as field depletions far outstrip repelenished supply.

The World Bank reported that we'll see a drop in demand of 500,000 bbld as a result of a world wide downturn...that's nothing compared to where we are as far produced supply vs. demand...

Imo, get it while you can at the levels we're at...we're not running out of oil, we're quickly running out of cheap oil...

As far as the rest of your predictions...scary but very possible especially here in California...a re-rate on US debt would be devastating to the dollar and to our present low interest rate scenario...and the inflation cat would indeed be out of the bag...