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This article on Yahoo Finance talks about how the housing market is continuing to decline. As with most government intervention, the effect of the first time buyer’s credit had a short term benefit and I think it will have a long term negative effect.

Besides that, it enticed the most naive and inexperienced buyers to buy at the worst time possible. The housing market is going down and there is nothing to slow it down. Unemployment is high and the economy is weak. It is quite easy to see that housing prices are not likely to rebound any time soon.

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Money, Success, US Economy business, buyers credit, entrepreneurship, foreclosure, government, housing, markets, unemployment, yahoo

After reading this article on Forbes.com, I feel like the writing is on the wall, and I have posted about it before. The government’s massive spending may not have been enough to turn the economy around. It was enough to delay the destruction, but in doing so only makes it worse.

Many people who bought houses in the last year thought that they could get a free $8,000 just by buying a house. Hate to break it to you, but it’s not that simple. The reason the government was giving away the money was in an attempt to prop up the housing market. The only problem is that it was unlikely to work.

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Investing, Money, Success, US Economy houses, housing, markets, Money, real estate, Success, tax credit, unemployment

Right now I am reading The Big Short by Michael Lewis. It is the story of Mike Burry,  a one-eyed medical student, and his ability to pick value stocks. His hedge fund was a runaway success, and his investment career is really amazing.

Ultimately, his success seems to be caused by his ability to see things differently. He has the confidence to analyze a stock, and decide for himself what the value should be. It’s a pretty common strategy for value investors.

He used his ideas for analyzing stocks and applied them to the housing market. By 2005 he was convinced that the housing market would come down and that many of the subprime loans would default. The interesting thing is that when he started investing in derivatives that would make him hundreds of millions of dollars (if not billions), everyone else was oblivious. Including the people on Wall Street.

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Great Books, Investing, Money, Success, US Economy debt, default, hedge fund, housing, Investing, Money, short, subprime, Success

One of the most powerful and least talked about investing strategies is disaster investing. What’s that? Disaster investing is buying after a disaster occurs, which could be natural, financial or political.

Once I went to buy a cat from a Russian lady, and she told me the story of how she bought a house in Beverly Hills for $200,000. In 10 years the house appreciated to over $2,000,000. How did she do it? She bought it right after a large earthquake. Read more…

Dreams Come True, Investing, Money, Success beverly hills, cat, detroit, disaster, housing, Investing, los angeles, Money, russian lady, Success

As the effects of the government stimulus plan are seen, there are more and more signs that the recession is ending. The media is quick to pick up on any changes and report that the economy is recovering. This article at Yahoo Finances is all about the improving housing market. Yet I think that all the positive news is only one side of the story.

The other side is that the fundamentals have not really changed. Unemployment is high, and is rising. There is no evidence that it will improve. All of the improvements in the economy are from government spending: Cash for Clunkers, First Time Home Buyers Plan, etc. These measures are good at getting people who aren’t financially responsible to spend money. It is a short term improvement but will have a longer term negative effect.

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Investing, Success, US Economy america, cars, Cash for Clunkers, debt, deficit, economy, housing, spending

Recently, as the stock market soars, there has been a large amount of news about how well the economy is doing. They say that the housing market has hit bottom, and that the economy is recovering. However, this article by the Associated Press is about how unemployment is rising.

Regardless of what the newspapers say, it is important to look at the fundamentals that drive the economy. The government has created massive band-aids to prevent a depression, and they seem to have worked. But it is important to understand the difference between a recovery and a temporary band-aid.

What effect will the band-aid have?

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Money, US Economy bailout, CNN, debt, deficit, dollar, economy, foreclosure, housing, media, Money, Obama, spending, unemployment, USA Today

Lately there has been quite a bit of good news about the economy. The stock market is up. Housing sales volume is up. Corporate profits are up.

But I don’t think the economy will improve any time soon. The collapse in the housing market touched off the crisis, and I don’t think the housing market will get better soon. With rising unemployment, there are still way too many sellers. And, the majority of adjustable rate mortgages have yet to readjust. That will happen in the next two years. Therefore, over the next two years the housing market will be flooded with still more foreclosures.

What about another bailout?

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Money, US Economy crisis, economy, housing, Money, Obama, unemployment

Everyone seems to running around complaining about the economy and unemployment and lamenting the fall in the stock or housing markets. Let’s stop running for a second and ask an important question.

How did we get into this situation?

The markets did not suddenly decide to go down by themselves. They are simply going down after going up for a long, long time. Markets go up and markets go down. It’s part of the grand scheme of things.

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Investing, Money, Success, US Economy housing, Investing, markets, Money, news, sheep, Success

Everyone remembers how things were so cheap once upon a time. “I remember when ice cream only cost 15 cents a scoop.” How often have you heard that sort of comment? The surprising thing is that since inflation happens slowly, we don’t notice the effect until a large amount of time has passed.

One detail that most financial advisors fail to mention is that inflation will destroy your savings. Most financial advisors will tell you that if you can get 8% return on your savings, you can retire in 40 years. I wouldn’t really trust that they can help me get 8% per year return. But even if they could, it would not be enough to retire on.

Why? Because a scoop of ice cream will cost $1,000. Right now, many experts are predicting that we will go into a period of massive inflation. This is because America is printing more money than ever. The rate of inflation is directly related to the amount of money that we print. Therefore, inflation is likely to increase in the near future.

The need to print money is largely fueled by the massive budget deficit. America doesn’t have the money to pay, so it just prints more. The bigger the deficit, the more it prints. And, it looks like we’ll be printing at record rates for the next few years.

It’s important to be aware of inflation, because it directly affects our finances. In just a few years the cost of housing and gasoline doubled. The same thing will happen again. If we do not double our income in that time, we will become much poorer. And our savings will drop in value by half.

This is the eighth post in a series entitled Secrets the Financial Industry doesn’t Want you to Know.

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Investing, Money, US Economy financial advisors, financial planners, housing, inflation, Investing, prices, savings, stock market

It’s quite surprising that the most popular post we’ve had to date is about the possibility of a depression in 2009. I wrote that post at the end of last year, when this whole economic crisis is just getting started. Since then, the economy has steadily deteriorated. I wonder if more and more people are getting the idea that we could have another depression in the near future.

Notice that the title of today’s post is about the next depression. Many so-called financial experts on TV say, “I have never seen anything like this. We’re in uncharted waters.” This just means that they are clueless. There is nothing uncharted about depressions. In fact, a depression happens, on average, once every 80 years. There is no question that we will have another depression. The question is, will it be this year, or in another year?

Over the last few days, the stock market has rallied in a big way. Does this mean that the financial crisis is over? Absolutely not. There is nothing but bad financial news these days. And, the effects of layoffs, the falling stock market and bankrupt businesses is just beginning to have its effect. Besides that, it’s pretty obvious that the housing market will continue to fall quickly.

The chart of a stock or financial market index is nothing more than the sum of human emotion over time. Many people who think that they are financially educated, and have gone to college or sport MBAs believe that the price of the stock depends on fundamental values such as PE ratios. Although these fundamentals have some bearing on the stock price, there are other factors that are far more important. The most powerful factor that contributes to the valuation of the stock is human emotion.

Imagine a train going downhill, and the brakes are broken. How can you possibly stop it? It has so much momentum, and it’s so heavy, it is hard to imagine how much force is required to get it to stop. Our economy is quite similar. It has already generated so much momentum that it will continue to go down.

Is Obama going to be able to save us? Personally speaking, I don’t think so. However, the good news is that every individual has the power to save themselves. Each person can choose to drift along the river of financial loss, or take control of their ship and improve their financial future.

If you think this economy is all bad news, then consider this: in every economy, there are ways of making money. Here’s a recent post about some ideas about how to profit in the current falling economy.

Investing, Money, US Economy 2009, bankruptcy, depression, economy, finances, housing, layoffs, Obama, recession, stock market