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  Jim Kingsland

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  General News, Jim Kingsland Market Commentary

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  10/22/12

  Let’s start this Monday on a bright and look at Real Estate. Yes, the words “real estate” and “bright” in the same sentence. I’ll not get carried away as the improvement -news focuses on Northern Nevada, specifically Reno and Sparks, but there is some good news (for sellers, not necessarily for the buyers) of a sharp trn around. It this is of interest to you, please click this link:

  Housing market turns sharply: http://sns.mx/41lxy8

  This scenario may well be playing out in other markets, but not to be a Monday morning wet blanket, this communication has already noted some evidence that certain markets may have already topped out with the end of summer. Wouldn’t it be a shame that just as the gusto starts to build in residential real estate that things would quickly come to a halt should other factors interfere.

  What other factors? Funny you should ask, here a few that come to mind:

  • ·       The fiscal cliff
  • ·       The European crisis
  • ·       That little matter of over 150 million empty condos in China and its overall economic health
  • ·       The health of the Japanese bond market
  • ·       The notionally valued $1 quadrillion and something derivatives market
  • ·       $1 trillion+ annual U.S. deficits, along with the rest  of the debt that has already accumulated
  • ·       A CBO long term funding gap officially reported at over $200 trl.

   Ah, yes – perfect conditions for a housing mini boom. Let us say our Monday prayers and ask, beg that super low mortgage rates will save the real estate market and everything else. Yet, the factors above which amount to causing negative real interest rates on an on going basis are likely to be overwhelming thorn in the side of real estate.  

  My own personal thoughts on the economic and financial issues at hand lead me to conclude that stagflation is going to pick up its pace. Financial laws have been violated. The Fed policy of near zero interest rates has set off a great sickness that has infected the financial system called negative real interest rates. There is no turning back as that would push interest rates higher, which would in turn kill TBTF banks. Good luck to housing, the deck is still stacked against it.

  Related: Massive Foreclosures after Election-Fabian Calvo | Greg Hunter’s USAWatchdog#more-9224 http://usawatchdog.com/massive-foreclosures-after-election-fabian-calvo/#more-9224

  –

  Gold

  Fundamentally, the factors for gold could not get any better, especially for the long term as fiat  currencies are on a fast track to shriveling up. However, the technical picture has seen $1800 rejected by the market.  There should be a major floor of support between the $1620’s and the low 1700’s. Worst case would be a retest of lows at around $1540. I am still biased toward being bullish on a longer term basis, but I do recognize that the investment community has an engrained bias toward the U.S. dollar when times get rough in the financial system. $1,540 is an outlier, but you can never say never.  The positives for gold are unmistakable in the months ahead..

  • ·       The U.S. goes over the fiscal cliff and its credit rating is downgraded. However, it’s hard to believe our lawmakers won’t come to an agreement on the debt ceiling in the nick of time since it would their feeding trough they would destroy if the government default on its debt, causing a seizure in the banking system.
  • ·       Gold will become a tier-one banking asset.
  • ·       Seasonality is positive for this time of year for gold
  • ·       Wall Street analysts continue to warm up to gold (maybe that’s a contrary indicator!)
  

  I would add that thus far the gold-doomsayers have been completely wrong. Some voices stated late last year that gold would test $1,000, or below. It did not happen. The market does not have such bearish blinders on with respect to gold, or most every other asset that trade on the futures exchanges, though it can be argued that the market for gold has been range bound since the $1,900 an ounce peak of over a year ago. I still see little doubt that the default currency of human history, gold, won’t one of these days sail past $2,000.

  Related: Billionaire Frank Giustra: Gold will be the final bubble http://bit.ly/RInkMo

  The stock market has also come in for woodshed treatment. Earning seasons has been lousy thus far….

   

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