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.

In addition, these ratings do not account for whether investors will receive a return on principal.”  

“And since companies that securitize these loans are not regulated like banks, they don’t have a capital requirement that would ensure adequate reserves to fund payments to investors.” 

“Because Fannie and Freddie lack sufficient government oversight, they haven’t maintained adequate capital reserves needed to safeguard the security of payments to investors. And due to exemption from the SEC Act of 1933, they aren’t required to reveal their financial position. In fact, they’re the only publicly traded companies in the Fortune 500 exempt from routine SEC disclosures required for adequate transparency and investor accountability. Exemption from the Act of 1933 also releases the GSEs from adherence to rules governing tender offers and public reporting of insider stock transactions. Finally, they’re not required to register their debt offerings with the SEC, which diminishes transparency further.”

“What would happen if one or more GSE (i.e. Fannie or Freddie) got into financial trouble? Not only would investors get crushed, but taxpayers would have to bail them out since the GSEs are backed by the government. Everyone would feel the effects. With close to $2 trillion in debt between Freddie Mac and Fannie Mae alone, as well as several trillion held by commercial banks, failure of just one GSE or related entity could create a huge disaster that would easily eclipse the Savings & Loan Crisis of the late 1980s.”

“Furthermore, the GSEs have created very risky derivatives exposures for themselves and many financial institutions.  

As these debt instruments evolve into different products, less transparency and more uncertainty is created. These mortgage derivatives are complex and considered very speculative.”

“I want you to stop and think for a minute about all of the fraudulent practices that have occurred within the housing industry, from known problems of poor workmanship and cheap materials by some builders, to inflated appraisals performed to generate ease of lending and to support cash-out deals.”

“From inflated appraisals alone, 10 to 15 percent of MBS securities or up to $1.5 trillion have been overvalued by conservative estimates. Combine that with the lack of transparency, questionable risk exposure and fraudulent practices by executives at Fannie and Freddie, and you have a disaster ready to strike.”

“Now combine that with over 10 million Americans holding interest-only and ARM mortgages, throw in a million or two job losses due to say the failure of Delta, Ford, General Motors, or some other large vulnerable company, and you could end up with a blowup in the MBS market. This scenario would devastate the stock, bond and real estate markets. Most likely, there would also be an even bigger mess in the swaps and derivatives markets. In conclusion, the collateralized securities market is a very tall and fragile house of cards poised to collapse, and all it might take is one card to be dislodged.”

“The real estate fallout will no doubt cripple smaller companies such as mortgage lenders, home builders, and home improvement stores. But it will also affect huge financial institutions such as Citigroup, Bank of America, Chase, General Motors (GMAC), General Electric (GE Finance), and Washington Mutual, depending upon the extent of their exposure. As well, if things get really nasty the credit problems could extend to the ABS market which would cause further devastation.”

“Based on today’s grossly overvalued housing prices, a 35 percent correction on average seems very likely. And in some areas, a 50 to 60 percent correction is possible.   

Most likely, it will take several years for the real estate washout to be completed. We can only hope that the MBS market doesn’t experience its first blow up since inception, but don’t bet on it.”

“Under normal conditions, anywhere from 25 to 30 percent of the U.S. economy is directly affected by the housing sector. However, due to exaggerated asset prices from the housing bubble, this share is significantly higher. I have shown the magnified effects of a loss of housing value on home equity, but this also has a magnified affect on the stock market because the wealth effect is reversed, resulting in dampened consumer spending. Accordingly, numerous studies have shown that housing prices have up to two times the effect on consumer spending as they do on declines in stock prices. Consequently, if housing prices decline by 25 percent, the economic impact will be as if the stock market declined by 50 percent.”   

That’s what you call real forecasting, real insight, and real guidance from a real expert.

Not scare tactics and extremist doom scenarios with generalizations positioned to sell you investments or pump up the gold market.

But remember, there are 17 additional chapters.

Remember, this book was released in 2006.

Now look at what has happened since the 2006 release of my book…

Nationwide, median real estate prices are down by an average of over 30% from the peak reached in 2006, and still declining.

Nearly all of the cities/regions I warned about are down by 50-60%. 

The stock market has already declined by over 55% (the real estate/stock market double whammy effect) as I warned.

- The MBS and ABS market has blown up. 

- My warnings about the derivatives blowup have materialized. 

- My warnings of Fannie and Freddie failure have materialized. 

- My warnings of a Fannie and Freddie bailout materialized. 

- The banking system has collapsed. 

- My warnings of major problems for GM and GE materialized.

All of these things were predicted based upon exhaustive analysis and data in my book; some 300 figures, tables and charts and over 700 references for the entire book. Try finding anywhere near that in any other book. Don’t bother wasting your time because you won’t find it.

Remember, this was just from my real estate chapter in America’s Financial Apocalypse.

You might also recall the specific guidance I provided in my other book, Cashing in on the real Estate Bubble, released in early 2007 whereby I show readers how to short the mortgage, banks and homebuilders.

As you can see, I advised readers to consider shorting FNM, FRE, LEND, NFI, FMT, C, BAC, JPM, WM, LEN, BZH, TOL, KBH, and CTX.

Those who followed my guidance would have gained up to 95% on average.

All for a $25 book!

Let's get serious. This isn't a book. It's world'class investment research.

Read the book and see for yourself.

So now, please tell me who the leading expert of this economic collapse is.

Who might you think would best know what to expect in the future?

>> Guys who didn’t truly understand what was going on?

>> Or someone who made specific warnings and forecasts, all of which have materialized?

As well, I recommended gold, oil trusts, healthcare, TIPS, china and lots of cash to use when the market sold off.

I also made predictions no one else who saw this coming did such as a major correction in commodities and so on. And much more.

Once you read America’s Financial Apocalypse, you will see for yourself. And you will know much of what will happen for the next several years.

Don’t you think it’s time for you to start asking the reporters from print media such as the Wall Street Journal, New York Times, Washington Post, Financial Times, Barron’s, Forbes, Fortune, Business Week, Time Magazine, Reuters, Associated Press, USA Today

…and producers and hosts on ABC, CBS, FOX, FBN, NBC, CNBC, MSNBC, CNN, PBS, all of the syndicated radio shows…

Why they haven’t interviewed me?

WHY ARE THEY HIDING MY INSIGHTS FROM THE PUBLIC?

WHY HAVE THEY BLACK-BALLED ME?

I can assure you many of them have my book and most of them know well who I am and are familiar with my predictions. They were ALL contacted several times over the past three years.

Yet, they continue to interview hacks and clowns who have been wrong over and over. Check their track records and see for yourself.

If you don’t take action and demand answers from these hacks, they will continue this game over and over.

By now, you should know why they hide the truth. If not, you need to read my articles on media deception.

Fact is, after demonstrating the absolute best accuracy in predicting this mess, I am best poised to understand what will happen and what the solutions are. Yet, the media has no desire to hear my views.

Let them know YOU know why.

Tell them you aren’t going to fall for their games anymore.

Tell them you aren’t going to watch, read or listen to their trash anymore.

Perhaps even more important than my leading expertise in this depression is the fact that I don’t deal in securities so I have no bias and no agendas.

I get paid to be righT

Who else can make that claim and still have an excellent track record? 

My intent is not to boast. My intent is to show you my track record so that you will understand that for the media to ban me is clear evidence that they are out to screw you. 

You need to understand this. You need to SPREAD this to EVERYONE.

The cycle of lies and deceit by the media will never end until enough people understand what's going on and demand an end to it.

Simply STOP PROVIDING THE MEDIA WITH AN AUDIENCE. 

Without an audience they will file for bankruptcy.  Their audience is required in order to seek interest from corporate sponsors.