GOOD ADVICE

Most people just don't care about Economics. Yet, the impact of global economic conditions are now effecting nearly everyone. And, it will get much worse before it gets better. Time for a crash course in Econ.

In 2005 I began to read small stories about the coming crisis in the housing market. The "Housing Bubble" as it was called was straining and about to burst. Simple economics of supply and demand had been spun out of control with excessive speculation. A house is worth say, a dollar, based on the cost of land and the cost of building the house. Supply and demand alter the value. If the dollar house has increased demand because of low supply...the price will go up. If there are too many dollar houses available the price will decline. Simple stuff.

However, since 1997, the demand for houses increased because lenders had increasingly cheaper loan rates. More and more people flooded the home buying market. Many of those people expected loan rates to remain low for the future. People with low income and poor credit were allowed to qualify for loans that were just...stupid. Loans they could never repay. All of this was built on the idea that HOME VALUES would remain high.

But, homes values were all built on cheap loan artificial demand. As interest rates increased, loans slowed and monthly mortgages went up. This brought demand to a stand still. Then came the crash.

Only one guy saw this coming, Nouriel Roubini. He repeatedly warned of this crash because he had spent years watching boom and bust third world economies. He saw all the same signs in the US Housing Market and he predicted the current crisis.

So what does Mr Roubini say now? He thinks it will get much worse. Not a Depression, like the 1930s but long term recession of perhaps 10 years. All of the retirement income drained from stocks for the Baby Boomers. Long term unemployment around 9% or more. Heavy spending by US and Europe on government programs will increase inflation. Overall: NOT GOOD.

What can you do? Bob Dylan said.."you don't need a weather man to know which way the wind blows." In 2005 I started to bail our family out of real estate. We sold two Condos at crazy high prices and went to zero debt, cash in the bank. Last year I bought Gold. [See below] Going forward, we all need to rethink how we spend money. If you have it...SAVE IT. If you don't know or care about Economics....you should.