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Message: Price of FOOD Up ... Housing Down
Food Costs See Biggest Jump Since 1974!
The good news is the government and Keynesian economists are happy to report to you that the core inflation index only rose 0.2 percent, the bad news only applies to everyone who eats and uses energy. Wholesale prices jumped last month by the most in two years due to the rising cost of oil and a steep increase in food prices. Vegetable costs rose nearly 50%! Overall food prices rose 3.9% in a month, the biggest gain since 1974, energy prices rose 3.3%, and gasoline specifically rose 3.7% last month. However, we should note that AAA's fuel gauge shows gas prices rising 13.7% in the past month, the national average is now $3.56. This is a trend that we see going forward. A few weeks ago >'Food Inflation Report' making the case for severe food price inflation over the next decade. On Friday, we will be releasing a video showing the rise of China. Many people have ignored our concerns about food inflation, but the fact is right now we have a small percentage of the global population (U.S. 4.5%) consuming many of the worlds' resources using borrowed money. As China and others begin to demand more resources with a rising middle class, this will create even more food price inflation, especially if China stopped loaning their main resource competitor money to compete with them. China is already experiencing price inflation, it's doubtful to us that they will risk their economy so that the U.S. can borrow money from them in order to fake a recovery. You have to remember, when the Federa l Reserve creates more money, they are causing global price inflation since the dollar is the world reserve currency. So it may feel good for Wall Street that the S&P is up due to QE policies, but the entire world is suffering from food price increases. >FutureMoneyTrends.com believes that housing, even after seeing a price correction, is still way overvalued. Last year the Treasury Department either funded, guaranteed, or back stopped 90% of mortgages. The Federal Reserve has interest rates artificially low and the government is helping people buy homes again with almost no money down. The housing market is clearly being propped up, there is no other way to explain it. Once interest rates begin to rise, even if it's just by a few percentage points, housing will fall again. In fact, demographically housing is due for a long down turn since the largest generation 'the Baby Boomers' peaked in their home buying in 2005. Baby boomers who want to sell their homes in order to downsize will add to an already bloated inventory of homes over the next decade. Jobs and oil prices will also be other factors causing a continued downward pressure on housing. The only way to fix the housing market, in our opinion, is for the government to stop propping it up and allow natural market forces to enter the market. Yes, prices will collapse, but that's exactly our point. Housing prices are not sustainable without government intervention, tax dollars are being used to prop up the few. Once prices fall, affordable buying will begin, housing isn't going to go to zero, it's just going to go to a point at which people can start buying aga in without artificially low interest rates or a tax payer funded loan program.
The Markets
Yesterday, the markets worldwide got slammed hard. Red across the board, even gold during this meltdown saw a $40 drop at on point. However, we do want to point out that gold was actually only down $5 when the Japanese stock market closed. In fact, if you look at this chart, gold actually was very steady during the Asian crisis. It wasn't until the COMEX was about to open that it actually saw a huge paper sell off. Let's be real, Americans weren't running to their local gold shops to sell their bullion yesterday because of Japan, the paper markets which trade at least 100 to 1 have caused the volatility.
Yesterdays big drop, notice the big drop for gold begins when the COMEX is about to open.
When looking at the commodity sell off, in our opinion it was way over done. Japan is going to need a hell of a lot of commodities to rebuild, many economist are saying that oil will go down since there will be less demand from Japan. Okay, but what about all the other commodities that are going to be purchased from Japan in huge amounts, they are literally rebuilding much of the country, including vehicles and ships. In our opinion, commodities getting hit this hard is an opportunity for a lot of people who are just learning about commodity trends. As our friend Peter Schiff of Euro Pacific Capital likes to point out, the smart money always invests with the wind at their backs.
The junior mining companies yesterday, for example, were all hit extremely hard. This is a group that has possibly the most potential in any sector, yet almost across the board the juniors were down. It's days like yesterday that remind us to not get greedy, if you find yourself up in a profitable position, it's okay in our opinion to lock in profits. Wall Street does it everyday, yet for some reason Main Street has been conditioned to buy and hold no matter what the circumstances. This absolutely blows our staff away, yes we have some of our favorite companies that we like to hold, but if someone is up in a trade, for example 30 or 40% in a short time, why risk it. Wall Street always tells people to buy on the dips, meanwhile Wall Street buys on the dips and sells on the moves up. Of course this is a very touchy subject since most people are taught to diversify and 'buy buy buy!' A famous quote from Warren Buffet is, "to put all your eggs in one basket and watch that basket closely."
FutureMoneyTrends.com
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