The Khan Academy referred to is brilliant!

These concepts are far more superior than the socialist 1Goal projects of which the only intention is to create another 72 million drones dumbed down through the current school system.

By Nico Isaac

Everywhere you look, the mainstream financial experts are pinning on their “WIN 2″ buttons in a show of solidarity against what they see as the number one threat to the U.S. economy: Whip Inflation Now.

There’s just one problem: They’re primed to fight the wrong enemy. Fact is, despite ten rate cuts by the Federal Reserve Board to record low levels plus $13 trillion (and counting) in government bailout money over the past three years — the Demand For and Availability Of credit is plunging. Without a borrower or lender, the massive supply of debt LOSES value, bringing down every exposed investment like one long, toppling row of dominoes.

This is the condition known as Deflation.

And, in a special, expanded November 19, 2009 Elliott Wave Theorist, Bob Prechter uncovered more than a dozen “value depreciating” developments underway in the U.S. economy as the two main engines of credit expansion sputter: Banks and Consumers. Off the top of the Theorist’s watch list are these “Continuing and Looming Deflationary Forces”:

• A riveting chart of Treasury Holdings as a Percentage of US Chartered Bank Assets since 1952 shows how “safe” bank deposits really are. In short: today’s banks are about 95% invested in mortgages via the purchase of federal agency securities. Unlike Treasuries, IOU’s with homes as collateral have “tremendous potential” to fall in dollar value.
• Loan Availability to Small Businesses has fallen to the lowest level since the interest rate crises of 1980. In Bob Prechter’s own words: “The means of debt repayment [via business growth] are evaporating, which implies further deflationary pressure within the banking system.”
• An all-inclusive close-up of the Number Of Banks Tightening Their Lending Standards since 1997 has this message to impart: Since peaking in October 2008, lending restrictions have soared, thereby significantly reducing the overall credit supply.
• Both residential and commercial mortgages are plummeting as home/business owners walk away from their leases at an increasing rate.
• The major sources of bank revenue — consumer credit and state taxes — are plunging as more people opt to pay DOWN their debt. Also, a compelling chart of leveraged buyouts since 1995 shows a third catalyst for the credit binge — private equity — on the decline.

All that is just the beginning. The November 2009 Elliott Wave Theorist includes 13 pages of commentary, riveting charts, and unparalleled insight that make it impossible to ignore the deflationary shift underway in the financial landscape. For that reason, we have compiled the most timely insights from the entire, two-part Theorist in a special article for Club EWI members. In our opinion, this bundle of exclusive Theorist excerpts are “the most important investment report you’ll read in 2010.”

Elliott Wave International’s latest free report puts 2010 into perspective like no other. The Most Important Investment Report You’ll Read in 2010 is a must-read for all independent-minded investors. The 13-page report is available for free download now. Learn more here.

By Susan C. Walker

“Cash on the sidelines is bullish for stocks.” Have you ever heard some stock market pundit utter these words? Have you ever wondered if the statement were true? Read this item from the latest issue of The Elliott Wave Financial Forecast, and you’ll wonder no more:

Myth — Cash on the sidelines is bullish for stocks. This refrain rang like a gong all the way through the declines of 2000-2002 and 2007-2009. In February 2000, when mutual fund cash hit 4.2% (compared to 3.8% in November), The Elliott Wave Financial Forecast issued its “cash is king” advice. Once again, the word on the street is that there is way too much “cash on the sidelines” for stocks to fall precipitously. This chart shows net cash available to investors plotted beneath the DJIA. In December 2007, available net cash expanded to a new high, besting all extremes since at least 1992, a 15-year time span. Despite the presence of this mountain of cash, the DJIA lost more than half its entire value over the next 15 months. Indeed, as the chart shows, cash remained high right as the stock market entered the most intense part of the crash in 2008. Available cash does correlate with the market’s moves, but the market is in charge, not the cash.
--The Elliott Wave Financial Forecast, Jan. 29, 2010

Now take a look at these 10 statements and decide if they are true:

1. Earnings drive stock prices.
2. Small stocks are the place to be.
3. Worry about inflation rather than deflation.
4. It’s enough to simply beat the market.
5. To do well investing, you have to diversify.
6. The FDIC can protect depositors.
7. It’s bullish when the market ignores bad news.
8. Bubbles can unwind slowly.
9. People can make money speculating.
10. News and events drive the markets.

Bob Prechter and our other analysts have debunked each of these statements as a market myth. You can discover how we exposed these ideas as myths, and in turn make more informed decisions about your investing.

We’ve gathered the writings that expose these 10 statements as market myths in our 33-page eBook, called Market Myths Exposed. They come from two of our premier publications, The Elliott Wave Theorist and The Elliott Wave Financial Forecast, as well as two of our books, Prechter’s Perspective and The Wave Principle of Human Social Behavior.

Get Market Myths Exposed for FREE
The 33-page eBook takes the 10 most dangerous investment myths head on and exposes the truth about each in a way every investor can understand. You will uncover important myths about diversifying your portfolio, the safety of your bank deposits, earnings reports, investment bubbles, inflation and deflation, small stocks, speculation, and more! Protect your financial future and change the way you view your investments forever! Learn more, and get your free eBook here.

By Ron Paul,

Last week we were reminded that ours is not the only country suffering from severe economic turmoil.  The Greek government is the latest to come close to default on their massive public debt.  Greece has insufficient funds in their treasury to make even the minimum payments that are now coming due.  Their debt level is about 120 percent of their gross domestic product and their public sector absorbs what amounts to 40 percent of GDP.  Any talk of cutting costs and spending is met with violent protests from the many Greeks heavily dependent on government payments.  Mounting fears of default have sent shockwaves through their creditors and all of the eurozone countries.

But there have been statements made by the European Central Bank to calm fears and give assurances that Greece will get the aid it needs.  Details of agreements are not forthcoming.

Is it possible that our Federal Reserve has had some hand in bailing out Greece?  The fact is, we don’t know, and current laws exempt agreements between the Fed and foreign central banks from disclosure or audit.

Greece is only the latest in a series of countries that have faced this type of crisis in recent memory.  Not too long ago the same types of fears were mounting about Dubai, and before that, Iceland.  Several other countries (Spain, Portugal, Ireland, Latvia) are approaching crisis levels with public debt as well.  Many have strong ties to Goldman Sachs and the case could easily be made that default could have serious implications for big US banking cartels.  Considering the ties between the Fed and these big banks, it is not outlandish to wonder if the US taxpayer is secretly bailing out the entire world, country by country, even as our real unemployment tops 20 percent.  Unless laws are changed to allow a complete and meaningful audit of the Federal Reserve, including its agreements with foreign central banks, we might never know if this is occurring or not.

This global financial crisis is a predictable result of secretive central banking and unsound fiat currency.  Governments are entirely committed to this system of fiat money and fractional reserve banking for obvious reasons: it enables them to do what they love most, namely, spend hoards of money with near impunity.  Without the limitations of sound money, governments will spend without limit.  They will spend money to hire their cronies, pay off special interests, give out favors, create dependence and generally distract from the terrible job they do at their chief mandate, which is to protect the liberties of the people.  Fiat money is a blank check to government, which is very dangerous, and we are witnessing the death throes of the system as the bills come due and the underlying capital is squandered away.

Because of our globe-straddling empire and lingering reserve currency status, perhaps no one has a more vested interest in keeping this system cobbled together than our own government and the Federal Reserve.  The agreements that Iceland and Dubai and Greece have negotiated can amount to little more than kicking the can down the road, as their overall spending habits remain largely intact, fiat currencies are still legal tender and more debt is issued on top of unsustainable debt.  The American people have the right to know if they are going to be the ones holding the bag in the end because the Federal Reserve secretly put them on the hook for it.  This knowledge would be a key factor in peacefully dismantling this immoral and unconstitutional system.

Are US Taxpayers Bailing out Greece originally appeared in Ron Paul’s Texas Straight Talk on 16/02/2010.

By Vadim Pokhlebkin

Today, the EUR/USD stands well below its November peak of $1.51. Find out what Elliott wave patterns are suggesting for the trend ahead now — FREE. You can access EWI’s intraday and end-of-day Forex forecasts right now through next Wednesday, February 10. This unique free opportunity only lasts a short time, so don’t delay! Learn more about EWIs FreeWeek here.

What moves currency markets? “The news” is how most forex traders would undoubtedly answer. Economic, political, you name it — events around the world are almost universally believed to shape trends in currencies.

A January 14 news story, for example, was high up on the roster of events that supposedly have a major impact on the euro-dollar exchange rate. That morning, the European Central Bank announced it was leaving the “interest rate unchanged at the record low of 1% for an eighth successive month.” (FT.com)

The euro fell against the U.S. dollar after the news. But could it have rallied instead? You bet. In fact, traditional forex analysis says it should have. Here’s why.

Analysts always say that the higher a country’s interest rates, the more attractive its assets are to foreign investors — and, in turn, the stronger its currency. Well, U.S. interest rates are now at 0-.25% and in Europe, at 1%, they are 3 to 4 times higher. Isn’t that wildly bullish for the EUR? Apparently not, and wait till you hear why — because in today’s announcement ECB president Jean-Claude Trichet warned that European recovery would be “bumpy.” Ha!

By no means is this the first time a supposedly bullish event failed to lift the market. On June 6, 2007, for example, the ECB raised interest rates. Bullish, right? But the euro didn’t gain that day, either — the U.S. dollar did.

Watch forex markets with these “inconsistencies” in mind and you’ll see them often. In time you realize that it’s not news that creates market trends — it’s how traders interpret the news. That’s a subtle — but hugely important — distinction.

So the real question becomes: What determines how traders interpret the news? The Elliott Wave Principle answers that question head-on: social mood — i.e., how they collectively feel. Currency traders in a bullish mood disregard bad news and buy, leaving it to analysts to “explain” why. Bearishly-biased traders find “reasons” to sell even after the rosiest of economic reports.

If you know traders’ bias, you know the trend. How do you know? Watch Elliott wave patterns in forex charts – it’s reflected in there, on all time frames.

Today, the EUR/USD stands well below its November peak of $1.51. Find out what Elliott wave patterns are suggesting for the trend ahead now — FREE. You can access EWI’s intraday and end-of-day Forex forecasts right now through next Wednesday, February 10. This unique free opportunity only lasts a short time, so don’t delay! Learn more about EWIs FreeWeek here.

Pool of Greater Housing Fools in Australia Finally Runs Out; OZ Dollar, Where to From Here?

By Michael Shedlock

Today the Royal Bank of Australia (RBA) unexpectedly held interest rates at 3.75%. No doubt this was in fear of the Australia’s enormous housing bubble that exceeds the height of the bubble that long ago burst in the US. 20 economists predicted the RBA would hike. Not a single one predicted anything else.

Fear in the board of governors over the pending crash is palpable. Prime Minister Kevin Rudd did not learn a single thing from the US and the disastrous policies of Greenspan. He gave one last goose to the housing market with $14,000 tax credits in a foolish attempt to stem the tide of the global recession that started two years ago.

Prime Minister Rudd brags about Australia’s ability to duck the recession. It will did not work. All Rudd did was delay the inevitable, fueling an even bigger housing bubble. The bigger the bubble, the bigger the crash, and rest assured Australia is headed for a housing crash.

Here are a few snips from the Bloomberg article Australia Unexpectedly Keeps Interest Rate at 3.75%.

The Reserve Bank of Australia kept the overnight cash rate target at 3.75 percent after three increases, it said in Sydney today. The decision confounded the forecast of all 20 economists in a Bloomberg News survey for a quarter-point move, and futures contracts that signaled a 74 percent chance of an increase.

Australia’s dollar tumbled to a six-week low and Asian stocks pared gains after the announcement sparked concern at the economy’s ability to withstand higher borrowing costs. Business confidence fell to a six-month low, a report showed today, and Woolworths Ltd., the country’s biggest retailer, warned last week that rate increases would hurt consumers.

Business confidence fell in December to the lowest level in six months, a report by National Australia Bank Ltd. showed today. The bank’s sentiment index dropped 11 points to 8. Lending to companies “has continued to fall as companies have sought to reduce leverage, and lenders have imposed tighter lending standards,” Stevens said today. “Credit conditions remain difficult for many smaller businesses,” he said.

Here is a statement from the article that particularly caught my eye: Prasad Patkar, who helps manage about $1.5 billion at Platypus Asset Management in Sydney said “Today’s decision reduces the serious risk of a policy blunder.”

Serious Policy Blunder

Sorry Prasad, a serious policy error was made long ago, and there is not a damn thing the RBA or anyone else can do to stop the impending housing crash in Australia.

What follows is a post I actually wrote yesterday. I intended to post this before the rate decisions, but it never happened. I too, thought one more hike was coming. That it did not come is a sign of panic at the RBA.

First Time Buyers In Severe Stress

Just as happened in the United states with subprime borrowers, Australia’s first-home buyers struggle as interest rates rise.

Almost half of first-home buyers lured into the market by the Rudd Government’s $14,000 grant are struggling to meet their mortgage repayments and many are already in arrears on their loans.

Thousands of young home buyers are using credit cards or other loans to meet obligations, while those in “severe stress” are missing payments.

Just weeks after the grant was withdrawn, a survey of more than 26,000 borrowers conducted by Fujitsu Consulting has found 45 per cent of first-home owners who entered the market during the past 18 months are experiencing “mortgage stress” or “severe mortgage stress”.

“The dream of home ownership has turned sour for many thousands of first-home buyers now that the reality of rising interest rates is kicking in,” said Fujitsu Consulting managing director Martin North.

“Rising utility costs and school fees are also cited as reasons for hardship, and many first-home owners are living without proper furniture or carpets as they divert all their cash to their monthly repayments.”

During the past 18 months, more than 135,000 first-home buyers have entered the market, encouraged by the generous grants and stamp-duty relief.

As a result, more than 50 per cent of first-home owners are forecast to be in the “mortgage stress” category by the end of this year.

“This was a disaster waiting to happen,” Steve Keen, professor of economics at the University of NSW, said yesterday.

“The grant panicked first-home buyers to rush into the market, which pushed prices up by far more than the grant itself. Now we have buyers falling behind with their repayments as rates increase and thousands of owners exposed to the danger of bankruptcy as the situation deteriorates.”

No Lessons Learned

“LD”, a reader from Australia who sent me the link asked and answered his own question: “What have Australians learned from Americans over the last 2 years? Nothing!”

Credit Squeeze Coming Up

Craig, another reader from Australia writes …

Mish

I’ve been waiting a long time to buy a house in Australia. Looks like I may not have to wait too much longer for the Aussie bubble to burst. As always, love your blog. Cheers, Craig

Craig is referring to Tighter credit rules to halve home loans.

Last week Westpac cut its loan-to-value ratio (LVR) for new customers to just 87 per cent of the property’s value – a new low for a big bank. Although it may appear relatively small, such a cut has a disproportionate effect on how much people can borrow and can halve the value of the property they can afford to buy.

“If you have a $50,000 deposit and you can get a 95 per cent loan, you are able to bid on a property worth $1 million,” said Steve Keen, associate professor of economics at the University of Western Sydney. “But if the LVR is cut to 90 per cent, your $50,000 deposit is only equivalent to 10 per cent deposit on a $500,000 property, so the amount you can spend is halved.”

Westpac’s reduction from a maximum LVR of 92 per cent means that buyers with a $50,000 deposit will see the maximum that they can afford to pay for a property slashed from $625,000 to $384,615. Somebody with a $20,000 deposit would see the amount that they could spend reduced from $250,000 to $153,846, says Professor Keen.

Experts are worried that, if other banks follow suit, credit to the property market will be choked off and property prices could collapse. According to research by broker Mortgage Choice, fewer than half of all new home buyers have a deposit of more than 10 per cent of the property’s value.

“Westpac’s move could affect many thousands of buyers and they will be forced to go to new lenders,” a spokesman said. “It’s a very worrying development because if others follow suit, we could see the majority of first-home buyers priced out of the market.”

Further restrictions now appear to be inevitable. “And banks can’t go on lending forever.”

Lenders have gradually been cutting back the size of loans that they are prepared to offer home buyers. Just over a year ago, 100 per cent – or even 105 per cent – loans were relatively common. But over the past 12 months, the LVR has fallen steadily to 95 per cent, then to 90 per cent, and now to 87 for new borrowers approaching Westpac.

It was this same tightening of credit that led to the collapse of property prices in the UK in 2008, even though the country was still suffering from a massive shortgage of homes at the time.

Deposit Math

Note the above paragraph in red by Steve Keen, one of few economists in the world who actually has a clue. His blog is Steve Keen’s Debtwatch.

Also note the worries of the so-called housing experts in the above article: Experts are worried that, if other banks follow suit, credit to the property market will be choked off and property prices could collapse.

If those “experts” had an ounce of common sense they would be worried the housing bubble would get bigger.

Indeed, housing prices are so stretched in Australia that the bubble will bust soon enough regardless of whether lenders tighten standards or not.

The US housing bubble burst with credit standards still getting looser a year or more later.

When Do Bubbles Burst?

Bubbles burst when the pool of greater fools runs out, and not before.

That is exactly why Economist Steve Keen lost housing bet against Rory Robertson.

AN ECONOMIST known as the “Merchant of Gloom” will have to walk from Canberra to the top of Australia’s highest mountain after losing a bet about the resiliency of Australian house prices.

Last November, University of Western Sydney associate professor of economics and finance Steve Keen made a high-profile bet with Macquarie Group interest rate strategist Rory Robertson.

The two parts of the bet were that house prices would tank by the end of 2009 and that house prices would fall 40 per cent from their all-time high within 15 years.

The loser of the bet would have to make the more than 200km trek from Canberra to the top of Mount Kosciuszko wearing a T-shirt that says “I was hopelessly wrong on house prices! Ask me how.”

Why The Bet Went Wrong

Keen’s mistake (miscalculation is a better word as I am positive he will ultimately be proven correct), was that he misjudged actions the Rudd administration might take to keep the bubble going.

Bear in mind that once the trend changes, it changes for good, but until the trend does change, efforts to keep bubbles alive frequently produce blowoff tops.

In Australia’s case I finally sense a blowoff top in fools. The US suffered the same fate in 2005 when the cover of Time Magazine went “gaga over real estate” and people were camping out overnight and entering lotteries for the right to buy Florida condos.

Inquiring minds might be interested in the following flashbacks, the first showing the funniest Time Magazine cover in history, the second shows approximately where we are today although I do have to move the arrow one notch closer to the bottom.

April 10, 2006: US vs. Japan Land Prices Pictorial Update

July 13, 2009: Housing Update – How Far To The Bottom?

How did Bernanke and other experts fair?
Let’s answer that with a few more flashbacks.

The initial data point on my chart came in the post It’s a Totally New Paradigm on March 26, 2005. Here are some excerpts from that post.

• Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors says that “South Florida is working off of a totally new economic model than any of us have ever experienced in the past.” He predicts that a limited supply of land coupled with demand from baby boomers and foreigners will prolong the boom indefinitely.
• “I just don’t think we have what it takes to prick the bubble,” said Diane C. Swonk, chief economist at Mesirow Financial in Chicago, who was an optimist during the 90′s. “I don’t think prices are going to fall, and I don’t think they’re even going to be flat.”
• Gregory J. Heym, the chief economist at Brown Harris Stevens, is not sold on the inevitability of a downturn. He bases his confidence in the market on things like continuing low mortgage rates, high Wall Street bonuses and the tax benefits of home ownership. “It is a new paradigm” he said.

Flashback October 27, 2005

Inquiring minds may wish to review Bernanke: There’s No Housing Bubble to Go Bust.

Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president’s Council of Economic Advisers, in testimony to Congress’s Joint Economic Committee. But these increases, he said, “largely reflect strong economic fundamentals,” such as strong growth in jobs, incomes and the number of new households.

Flashback February 12, 2008

Bernanke Expects Housing Recovery by Year End

Federal Reserve Chairman Ben Bernanke told lawmakers Tuesday he expects the downtrodden U.S. housing sector to improve by the end of the year, a senator who participated in the closed-door meeting said.

“He let us believe that the housing situation should begin to ameliorate by the end of the year,” said Sen. Pete Domenici, a New Mexico Republican, told reporters.

“He gave a very good, succinct, short overview of where he thought the economy was right now and how it might move forward,” said Sen. Jon Kyl of Arizona.

Bubbles and Humpty Dumpty

Bernanke has proven all the king’s horses and all the king’s men cannot put bubbles together again.

For further proof please see Bernanke’s Deflation Preventing Scorecard.

After bubbles burst, nothing matters including loose lending standards in the US that lasted long after the housing peak in summer of 2005.

Supply of Fools Exhausted

I am willing to bet that at long last, Australia’s pool of greater fools just ran out. Rudd’s ridiculous $14,000 grant and stamp-duty relief programs were likely enough to exhaust that pool.

The ultimate irony of Keen’s bet is that by the time he starts his hike in April he will likely be right.

Bear in mind however, that prices tend to fall slowly at first as inventory builds up. Then the losses accelerate quickly.

A Long Wait

By the way, Australia buyers might need to wait 5-7 years or more for reasonable valuations. Look how long it took for the US housing bubble to implode. We have not hit bottom yet after 5 years, and the Australia bubble has a bigger starting point.

Please see Housing Bubble Comparison: US, UK, Canada, Spain, Australia, Japan for a county by country comparison of housing bubbles from the Ecomomist.

Demographia International Housing Survey

Inquiring minds are reviewing the results of the 6th Annual Demographia International Housing Affordability Survey. Countries in the survey include Australia, Canada, Ireland, New Zealand, the United Kingdom, and the United States.

Least Affordable Cities

The article shows the top 58, I captured the top 20 above.

Congratulations To Canada And Australia

Congratulations go to Vancouver, Canada for being the least affordable city in the survey. Vancouver thus wins the gold medal in the individual competition.

Sydney Australia proudly wins the Silver medal and the Sunshine Coast Australia wins the bronze. It was close but no cigar for Australia’s Gold Coast. Honolulu Hawaii came in a respectable fifth place.

Most Affordable Cities

Detroit, South Bend, Youngstown, Flint, Toledo, Akron, Peoria, Cleveland, and many other “affordable” cities are not places where anyone would particularly want to live. Indeed many cities at the top of the affordability list are places that most would hope to escape from.

The high school graduation rate in Detroit is a mere 25%!

I am willing to bet that Detroit’s graduation rate is far and away the worst of any city in the survey. See Michigan Forces Business Owners Into Public Sector Unions; Detroit’s Aura of Hopelessness for more details.

Moreover, there are houses in Detroit, Cleveland, Flint, etc, that one could buy for $500 that have no takers. Unlivable houses no one wants at any price skew the results.

Demographia Summary by Nation

All of the affordable markets were located in Canada and the United States, while most markets in Australia, New Zealand and the United Kingdom were severely unaffordable.

Australia: House prices have continued to rise in Australia (Figure 2), which registered the worst housing affordability (the highest Median Multiple) in the
history of the Survey. Overall, housing in Australia is severely unaffordable, with a Median Multiple of 6.8, more than double the 3.0 historic maximum norm. Housing had been affordable in Australia in the late 1980s, with a Median Multiple of under
3.0. The Median Multiple remained at or under 3.5 until the late 1990s.

All of Australia‟s major markets were severely unaffordable (Median Multiple above 5.0). Moreover, all markets, including smaller markets were severely unaffordable except Ballarat (Victoria), which was seriously unaffordable (Median Multiple between 4.1 and 5.0).

Canada: Housing is moderately unaffordable, as in previous Surveys. Canada‟s Median Multiple is 3.7. Housing had been affordable in Canada in the late 1990s, with a Median Multiple of 3.0. Canada had 5 affordable markets, 13 moderately unaffordable markets, 5 seriously unaffordable markets and 5 severely unaffordable markets.

Vancouver remained the least affordable market of any size in the surveyed nations, at 9.3, worsening from 8.4 last year. Toronto joined Vancouver as severely unaffordable, with a Median Multiple of 5.2. However, Barrie, within the Toronto region was moderately unaffordable, at 3.4. Victoria, Abbotsford and Kelowna (all in British Columbia) were also severely unaffordable.

Ireland: Housing in Ireland has become moderately unaffordable with a Median Multiple of 3.7, showing a trend toward historic norm of 3.0.20 Housing had been affordable as late as the middle 1990s, with a Median Multiple below 3.0. The extent of Ireland‟s recent housing affordability improvement is illustrated by the EBS/DKB Affordability Index, which indicates that mortgage payments have been halved in Ireland since the peak of the bubble in relation to first home buyer incomes.

New Zealand: Housing in New Zealand was severely unaffordable, with a Median Multiple of 5.7, nearly double the historic maximum norm of 3.0. Housing had been affordable in the early 1990s, with a Median Multiple of under 3.0. Auckland is the least affordable larger market, with a Median Multiple of 6.7, while Christchurch (6.1) and Wellington (5.7) were also severely unaffordable.

Tauranga-Bay of Plenty was again the least affordable market, with a Median Multiple of 6.8. Five of the 8 New Zealand markets were severely unaffordable, while Palmerston North, Napier-Hastings and Hamilton were seriously unaffordable New Zealand had no affordable markets and no moderately unaffordable markets

United Kingdom: Housing in the United Kingdom remains severely unaffordable, with a Median Multiple of 5.1, well above the historic maximum norm of 3.0. Housing had been affordable in the late 1990s, with a Median Multiple of under 3.0. Less than one-half of the United Kingdom markets were severely unaffordable (14 of 33), while the other 19 markets were seriously unaffordable. The United Kingdom had no affordable markets and no moderately unaffordable markets.

United States: Housing in the United States is rated as affordable, with the Median Multiple of 2.9.The recent house price declines have restored U.S. housing affordability to the below 3.0 historic norm (last achieved in the early 2000s), as the price bubble burst in many plan-driven markets. The United States had 98 affordable markets, 58 moderately unaffordable markets, 8 seriously unaffordable markets and 11 severely unaffordable markets.

The most affordable major market (population over 1,000,000) was Detroit. Other affordable major markets were Atlanta, Buffalo, Cincinnati, Cleveland, Columbus (Ohio), Dallas-Fort Worth, Houston, Indianapolis, Kansas City, Las Vegas, Louisville, Memphis, Minneapolis-St. Paul, Oklahoma City, Phoenix, Riverside-San Bernardino, Rochester, Sacramento, St. Louis and Tampa-St. Petersburg.

Gold, Silver, Bronze Medals

In terms of national unaffordability (the team competition) Australia wins the gold medal, New Zealand, the silver medal, and the UK wins the bronze medal.

Because of a preponderance of “affordable” cities in the US and the way the national rankings are made, I question the results of the national survey although it likely did not affect the top three medal-winning rankings.

Email Exchange With Survey Developer

I had this exchange with Hugh Pavletich of Performance Urban Planning who helped develop the survey.

Mish: When you come up with “national affordability” are all the cities given equal weight? Does Detroit count as much as San Francisco?

Hugh: Yes.

Mish: In my opinion, a weighted average is what matters most (at least for the purpose of figuring out how big the bubble still is).

Hugh: We are NOT attempting to explain how big the bubble is on a country wide basis. We are simply illustrating what the Median Multiple is at the 3rd Qtr of each of the urban markets listed.

Other researchers are most welcome of course to take the next step and do a population weighting, if they wish to do so.

Our goal is simply to illustrate the degrees of housing stress of the urban markets listed.

Bear in mind my goal is quite different than Hugh Pavletich’s. He wants to show the role local planning rules have in affordability. Hugh makes a case that local zoning rules play a huge factor on a city by city affordability basis while I am concerned with “How Big Is The Bubble?”

From my perspective, the US and Canadian bubble problems are very understated, and the national affordability rankings of the US and Canada are thus overstated. To be certain, one would have to take a weighted average of populations and rankings. One would also need to take into consideration unlivable houses offered at $500 that no one would take. If one did that, we would see the bubbles are where the most people live.

There is much more in the survey. Please give it a look.

Mortgage Stress in Australia

If this chart does not scream “nationwide bubble”, nothing ever will.

Australian Interest Rate Hikes

On December 2, the Royal Bank of Australia hiked rates to 3.75%.

At its meeting today, the Board decided to raise the cash rate by 25 basis points to 3.75 per cent, effective 2 December 2009.

With the risk of serious economic contraction in Australia having passed, the Board has moved at recent meetings to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker. These material adjustments to the stance of monetary policy will, in the Board’s view, work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead.

Let’s come back to that last paragraph a year from now. Two years from now it is likely to look downright silly.

One more hike is in the cards, too, on February 2. Some will lay the blame on what is about to happen on these last couple hikes. The reality is the blame for the coming bust lay in the ridiculous expansion of credit that preceded it.

Australia’s problems have not yet started. Remember too, that commercial real estate follows residential with a lag. Australia can look forward to a bust in commercial real estate down the road as well.

Email From “Down Under”

Here is another email from Australia that readers may appreciate.

“Down Under” Writes …

Mish,

I actively watch this chart and a colleague of mine updated it today. RBA balance sheet collapsed in early part of 08 ahead of the debacle.

Add this to the recent report of Sydney being second most expensive city in the world. And add in likely tightening of bank prudential standards by our regulator APRA (extend liquidity requirements out to 21 days) and not looking so pretty. Deja vu all over again.

You can get the data straight from the RBA on the web: RBA Liabilities and Assets – Weekly

Kind regards,
“Down Under”

Australian Dollar Outlook

Two of the biggest factors affecting currency fluctuations are interest rate differentials between countries along with trends in interest rate differentials. The latter is more important. The Fed clearly is not going to cut rates (at zero bound it can’t).

The Australian dollar has strengthened vs. the US dollar on the back of rate hikes. If the RBA hikes once more and the Australian dollar sinks anyway, the top is likely in.

$XAD Australian Dollar vs. US Dollar Monthly

click on chart for sharper image

Déjà vu all over again?

At some point the RBA will stop hiking and start cutting. In turn, speculators in Australian dollars will start taking profits. At a bare minimum, at least a fair sized pullback in the Australian dollar vs. the US dollar is likely.

$USD – US Dollar Index Monthly Chart

click on chart for sharper image

Most underestimate how far the US dollar can strengthen. Another run at 90 is certainly not out of the question.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

In my new video I will show you how the NASDAQ index has broken a very important trend line and what the ramifications are for this index.

We can all learn from the simplicity of this approach and how effective it is in the long run.

As always our videos are free to watch and there are no registration requirements.

Click here to watch

Enjoy the video and please feel free to comment on blog about this simple yet effective way of trading.

All the best,

Adam Hewison
President, INO.com
Co-creator, MarketClub

After amassing a collection of silver coins, you quickly realize you have to find a place to store it – quickly.  There are a number of ways and places to safely and discretely store your silver to protect it from corrosion, as well as theft.

Never Store Bullion in Safety Deposit Boxes

Anyone who lived through the Great Depression will tell you that a safety deposit box is one of the worst places to store bullion.  Although safety deposit boxes are generally regarded as being the safest place to store valuables, it isn’t always safe from the law. In 1933, then President Franklin D. Roosevelt made it illegal for US citizens to own more than $100 worth of gold.

As a result, safety deposit boxes of wealthy individuals were seized, and federal marshals were deployed into private banks to watch customers open their boxes.  The contents were routinely examined, and the gold was immediately converted into paper currency.  Very few gold coins survived the era, and the few that did are so rare that they fetch anywhere from $2000 to $30,000 each.

Although silver was never made illegal to own, the possibility is most certainly there, especially in times of extreme hardship.

Don’t Bury Precious Metals

Avid silver collectors and “gold bugs” recommend burying silver and gold as a means to protect it from unsuspecting robbers and the government should bullion again be made illegal to possess.  Unfortunately, burying silver is hardly a good idea, as it is a metal most prone to corrosion and loss of value.  In fact, silver investors should handle their pure silver holdings as little as possible; even the oils from your own skin will tarnish and devalue the silver content.

Besides corrosion, many people bury silver only to forget its location or move without recovering the silver.  Year after year, news headlines showcase the huge hoards of paper money and bullion left behind during the Great Depression – only to be found by new lucky homeowners.

Although you may think it’s hard to leave a cache of precious metals behind, most buried silver remains buried for years and becomes merely an afterthought when moving to a new home.

A Bolted Safe is Best

There is no better solution to safely storing your silver than the ownership of a heavy safe in your own home.  Not only is it in your possession at all times (unlike a safety deposit box), it is also kept safe from the elements and is incredibly difficult to steal.

Ideally, the safe should be bolted to the ground in the least elevated part of the home, such as the basement.  Storing your silver in a basement safe ensures that any potential burglar will have to either pick the safe or move the safe and then carry your treasures up a flight of stairs before exiting. Although there is no such thing as 100% security, making theft a difficult task increases the time it takes to steal your belongings – thus increasing the chance the thief will be caught red-handed.

Holding physical silver in today’s inflationary economy is a smart strategy, and finding the right place to store your investments will help protect your wealth.

Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

By Elliott Wave International

Like a spy who gets a burn notice, Federal Reserve Chairman Ben Bernanke has suddenly lost his support.

Bernanke has gone from being Time magazine’s Man of the Year in 2009 to … what? A Fed chairman embroiled in a controversial reconfirmation process before U.S. Congress. Why the sudden turnaround in his fortunes?

Robert Prechter, president of the research firm Elliott Wave International, has written about the history of the Fed and its chairmen several times over the years, and his research shows that their popularity rises and falls with social mood, which is measured by the stock market. Here is a compilation of excerpts from Prechter’s monthly market letter, The Elliott Wave Theorist, from 2005-2009 about the trouble he sees brewing at the Fed.

Can the Fed Stop Deflation? Robert Prechter answers this all-important question in his Free Deflation Survival Guide. The guide gives you a 60-page ebook that will help you understand deflation and its effects on society; you’ll even learn how to survive and prosper in such an environment. Download Your Free 60-Page Deflation eBook Here.

(November 2005) The Coming Change at the Fed | Public figureheads have a way of representing eras. This is certainly true of entertainment icons and politicians. The history of Fed chairmanship implies a similar tendency for changes of the guard to coincide with changes in social mood and therefore stock prices and the economy. [The chart below] depicts our social-mood meter—the DJIA—since the Fed’s creation in 1913, marked with the reigning chairmen according to a list on the Fed’s website.

The first chairman, Hamlin, presided over a straight-up boom. As it ended, Harding took over and presided over an inflationary period that accompanied a bear market, exiting just as a new uptrend was developing. Crissinger took over at the onset of the Roaring Twenties, and Young presided over the boom, the peak and the rebound into 1930. Meyer took over just as confidence was collapsing and left the office in early 1933 at the exact bottom of the Great Depression. The next three chairmen struggled through the choppy years of the 1940s. Then Martin presided over virtually the entire advance from the early 1950s through 1969, exiting just before the recession of 1970. Burns and Miller presided over a bear market and exited as the new uptrend was developing. Volcker, after weathering an inflation crisis, presided over the explosive ’80s. Greenspan has presided over the manic ’90s and the topping process. [Ben Bernanke] will have his own era. Given the eras that have immediately preceded the coming change in leadership, the odds are that this new environment will be a bear market.

(June 2006) Economists are convinced that the Fed can “fight” inflation or deflation by manipulating interest rates. But for the most part, all the Fed does is to follow price trends. When the markets fall and the economy weakens, the price of money falls with them, so interest rates go down. When the markets rise and the economy strengthens, the price of money rises with them, so interest rates go up. The Fed’s rates fell along with markets and the economy from 2001 to 2003. They have risen along with markets and the economy since then. Regardless of the Fed’s promise to keep raising rates, you can bet that the price of money will fall right along with the markets and the economy. Pundits will say that the Fed is “fighting” deflation, but it will simply be lowering its prices in line with the others.

It is highly likely that the next eight years or so will test the nearly universally accepted theory—among bulls and bears alike—that the Fed can control anything at all. The Great Depression made it look like a gang of fools, as will the coming deflationary collapse. We have predicted unequivocally that the new Fed chairman will go down as Hoover did: the butt of all the blame, and if you are reading the newspapers you can see that it’s already started. “When Bernanke Speaks, the Markets Freak” (San Jose Mercury News, June 10, 2006); “Bernanke is being blamed for spooking Wall Street” (USA Today, June 7, 2006); “Bernanke to blame for volatility” (Globe and Mail, Canada, Jun 13, 2006). The new chairman had a brief honeymoon (which we also predicted), but it’s already over.

By the way, I heard his commencement speech at MIT last week, and in it he spoke eloquently of the value of technology and free markets. But he also opined that economists have successfully applied technology to macroeconomics. We believe that the collective unconscious herding impulse cannot be tamed, directed or managed. In our socionomic view, the Fed cannot control the mood behind the markets, but rather, the mood behind the markets controls how people judge the Fed. We’ll ultimately find out who’s right.

Can the Fed Stop Deflation? Robert Prechter answers this all-important question in his Free Deflation Survival Guide. The guide gives you a 60-page ebook that will help you understand deflation and its effects on society; you’ll even learn how to survive and prosper in such an environment. Download Your Free 60-Page Deflation eBook Here.

(December 2009) Bernanke’s greatest achievement was not the measly $1.25t. of debt that he arranged to have the Fed monetize; it was convincing the government to shift the burden of debt default from the speculators and creditors to taxpayers.

(September 2009) Thanks to the Fed Chairman and two Treasury Secretaries, profligate bankers have been cashing checks off the Fed’s and the Treasury’s accounts, and the poor savers and taxpayers who fund these institutions are unaware that their personal bank accounts are being tapped by counterfeiters and thieves.

That lack of awareness may soon change. Declining social mood is fueling the drive to expose the Fed’s secrets. [Ed. note: Bloomberg News has sued the Fed under the Freedom of Information Act; Congressmen Ron Paul, R-Texas, and Barney Frank, D-Mass., are leading a charge to audit the Fed.] Exposing the Fed’s secret deals could lead to scandal and the collapse of major money-center banks. But most important to our monetary outlook, it will serve to curb the Fed’s reflation efforts. As I have written many times, deflation will win. Social mood is impulsive and cannot be stopped. The downtrend will claim its victims by whatever measures it must take to do so.

(August 2009) On July 26, in a speech in Kansas City, MO, Fed Chairman Ben Bernanke declared, “I was not going to be the Federal Reserve chairman who presided over the second Great Depression.” (WSJ, 7/27) We think this implication of a fait accompli is premature. Clearly, the Fed Chairman and the majority of economists are of the opinion that the worst of the financial crisis is past and that the Fed’s unprecedented lending has averted deflation and depression. But wave 3 down in the stock market will dispel these illusions. Years ago, we suggested that Chairman Greenspan quit if he wanted to keep his lofty reputation. He didn’t do it. Now Chairman Bernanke should consider this option.

So will Bernanke serve a second term as Fed chairman? The January 2010 Elliott Wave Financial Forecast says, “Social mood is still too elevated to deny Bernanke reappointment as head of the Fed. … But rising political tension confirms that his next term will be far more stressful than his first.”

Can the Fed Stop Deflation? Robert Prechter answers this all-important question in his Free Deflation Survival Guide. The guide gives you a 60-page ebook that will help you understand deflation and its effects on society; you’ll even learn how to survive and prosper in such an environment. Download Your Free 60-Page Deflation eBook Here.