| Michael’s Personal Notes:
Who’s this fellow, Shaun Donovan?
Apparently, he’s the U.S.Secretary of Housing and Urban Development. Why do I care?
Donovan said last week that he believesU.S.home prices will climb as soon as the third quarter, as the number of foreclosures falls.
I totally disagree with Donovan. Rising long-term interest rates, 1.7 million homes in the U.S. in the foreclosure process, banks that will not loosen their lending requirements, about one-quarter of U.S. homes underwater (their mortgages are more than the value of the homes)…housing will not recover for years to come.
Yes, if you are lucky enough to have cash and pay cash for a foreclosed-upon home you buy from a bank, you will get a good deal. But how many people are in that position? And how long will you need to wait before you can flip that property to another buyer who will pay more than you did and qualify for a loan to buy the property?
I like to buy investments when they are rising, not when they are dead in the water and I need to wait years for them to recover…not a good use of investment capital.
Where the Market Stands: Where it’s Headed:
Is 428 points on the Dow Jones Industrial Average a lot of ground to cover? Not really. The Dow Jones is 428 points south of the 13,000 mark—an attainable and physiologically important milestone I believe the market can achieve.
I see that stock advisor sentiment is starting to turn bullish again, but there’s nothing to be overly concerned about yet. The government will spend more, the Fed will loosen more, corporate profits will continue. The immediate term looks good…the bear market rally plows along.
Short- to long-term, the risks of increasing national debt, the debasing of the greenback, and rapid inflation will be too overwhelming for the stock market. Enjoy profits in the market while they last, because they won’t.
What He Said:
“I’ve been writing to my readers for the past two years claiming the decline in the U.S. property market would not be the soft landing most analysts were expecting, but rather a hard landing. My view remains unchanged. The U.S. housing bust will be cut deeper and harder than most can realize today.” Michael Lombardi in PROFIT CONFIDENTIAL, June 13, 2007. While the popular media was predicting a bottoming of the real estate market in 2007, Michael was preparing his readers for worse times ahead.
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