PRICE DISCOVERY by kliguy38 GREAT DEPRESSION NEWS

Recently I have had the opportunity to give my advice on whether purchasing real estate at this point would be a reasonable investment. During the course of the conversation, a number of points must be addressed. There has been a massive collapse in the second home market in a number of areas. But don’t be fooled by the hype I believe its going to ultimately get worse. We have continued issues facing us with unemployment long term that will keep downward pressure on residential prices overall. Any positive employment prints this year will be wiped out in 2012 as the Ponzi faces overwhelming forces of deflation and the dislocations and imbalances it’s illusions have created. We already are facing a worldwide disintegration of confidence in ALL central bank planning.

The revolutions in many developing nations are reaching a tsunami level that threatens to feed back to many developing nations. Wait until we try to bring our fiscal houses in order here. Note Wisconsin this week and that is only a test case. Harvey then brought up Nat gas vs propane. Nat gas is at an astounding level vs propane(which only supplyies heat to a small percent of homes). Nat gas should be up 200% at this point if it weren’t being artificially controlled. Can you imagine if the average person’s heating bill were up three-fold this winter. Yes that’s correct there would be riots as people began freezing. Essentials in food will continue to explode as the base grains begin to feed into inputs costs more and more. THIS TAKES TIME FOLKS BUT ITS COMING!! If you haven’t begun preparation for this inevitable outcome then bless you…..you’ll need it.

Back to price discovery. Let’s go back to our real estate dilemna. Do you buy that investment property in Florida or at your nearby vacation area now. After all its being discounted 30-40%. How can I go wrong you many ask? WELL…….here is how. First some basics. Let’s assume a ten year investment horizon. You are able to buy a 350K house built 5 years ago for 200K. What a deal!! In Foriday and many vacation areas the property taxes can be horrific. That 200K home is carrying a 15K property tax bill…add in fees and assessments and it could cost you 20K a year with no problem. Let’s say your rental income erases your utilities and interests carrying costs and incidentals. After 10 years you are ready to sell. throw in another 25K for new carpet/appliances….and you are ready to go with you now 500K home just to break even. Add in your 7% realitor and presto 535K. Now suppose you make a mistake on your original “price discovery” and you get a house that depreciates another 50%….and it could easily happen….just because of the previous details discussed as fewer investors get back in to this mess. OR…..the government removes the mortgage deduction. OUCH!! Back again to “price discovery” and why I am giving you the heads up on real estate. The illusion of a real estate recovery is being aided by a variety of schemes coordinated through the Fed, the Gov, and the media. Abnormally low borrowing rates, shadow foreclosure market, back door supplements to the banks for foreclosures, off balance sheet hidden sales, and on and on. In other words …Who Knows what a “real” market in housing looks like. My final example and there are plenty of these out there. While having coffee last week with a friend of mine that is a prominent builder here…I mentioned a 2.2 million dollar home that had been auctioned this summer and the best offer was a million. The seller declined and paid his “fine”. Later in the fall the seller was forced to put the home back on auction. Unknown to me as I discussed the story, my friends company had built the home…..and it was a premier quality home…..over 12,000 sq ft. The rest of the story…The home sells in the second auction for 400K and there was NO RESERVE. My friend tells me at this point that he had been the original contractor 5 years ago and was just sick when he found out after the fact this had happened. Unfortunately this was true “price discovery”. At least as close as you can come in this rigged economy. Get ready this will ultimate affect many of the markets around the world. The ONLY thing that changes this will be if Ben can plug in hyperinflation and keep food and energy prices from exploding…..ie asset hyperinflation……hehehhehe. GL Ben with that trick. One more thing buy bullion and farmland….this does not end well.