The Golden Year & Economic Highlights from the Past Week


Real Estate

* The average price of a home is down almost 6% from a year ago, though up by 3.6% in the second quarter, according to Case Shiller  (August 30 Housing Wire)
* The Congressional Budget Office (CBO) estimates that Fannie and Freddie will cost taxpayers another $51 billion between 2012 and 2021 — $9 billion higher than their June estimate (August 25 Housing Wire)
* New privately owned housing starts are the lowest in recorded history, going back to the 1950’s (Dept. of Commerce)
* 6.54 million homes are either delinquent or in some stage of the foreclosure process (September 1 Dr. Housing Bubble)

* Second quarter GDP revised down to 1% after only a 0.4% rise in the first quarter (August 26 MarketWatch)
* Consumer spending up in July by 0.8%, though consumer confidence plunged (August 30 WSJ)
* CBO projects unemployment to stay above 8% through 2014.  Deficits will total $3.5 trillion assuming that Bush-era tax cuts expire and Medicare fees to doctors are reduced – both of which are unlikely (August 25 WSJ)

As a mortgage note buyer, I watch real estate news and trends like a hawk.  Over the years, I’ve been pulled more and  more to also closely follow general economic news.  After all, real estate does not operate in a vacuum , and is heavily affected by economic factors like unemployment, interest rates, regulatory decisions, etc.

One thing that I do not do is closely follow the stock market.  Oh sure, I generally know how the overall market and the few stocks/mutual funds that I own are performing.  But this “research” involves a few minutes per week of updating myself rather than doing any deep investigations.

The performance of the stock market lies, for me, somewhere between fascinating and disgusting.  Buying stocks feels much more like speculating than actual investing.  Given all of the bad economic news, the stock market should be well below where it is today.  Government spending programs and short-term corporate profits have kept prices artificially propped up.  My feeling when buying a stock is that I have much less information than needed to make any brilliant decisions.  The stock market game is made more risky as Wall Street and the government manipulate a lot of pieces behind the scenes.

Gold seems to be a more pure investment that can’t be as easily controlled by evil forces.  Oh sure, there can still be margin calls on gold stocks and rampant speculation, but gold still feels safer.  After all, an increasing gold price is inversely correlated with good government fiscal decisions.  So, every time that Congress, the President, or the Fed launch a new destined-to-fail program, gold is likely to go up.  The value of the U.S. dollar is being so thrashed by those folks that it takes more dollars to buy an ounce of gold.

Gold has increased in price by 11% over the past month, 47% during the past year, and 193% since five years ago.  Those are might sweet returns, especially when compared with the returns of stocks, real estate, and just about every other investment vehicle.

I’ve come to appreciate that buying gold is betting that the government will do the wrong thing financially – a fairly safe bet, if you ask me.  Congress is starting up again and the President is back from vacation, so we will see lots of new programs and political bickering, all of which will only make the country worse off.  My gut has been telling me for a couple of years to buy gold, but I’ve never actually pulled the trigger.  Is now a good time buy, with price per ounce at over $1800?  Your guess is as good as mine, though I would think it should exceed $2000/ounce by year-end, and much higher if the Fed decides to pursue a QE3.  How lucky do you feel?

About Author

Alan Noblitt

Alan Noblitt is a nationwide note buyer and a licensed real estate broker in California. His business, Seascape Capital Inc., started in 2002.


  1. Much of the FED’s actions are geared towards the stock markets to promote main street’s recovery via the “wealth effect”. Which is misguided but does have some validity, just not enough for the extreme ephasis.

    That is truly the great thing about real estate, you can actually have some control over your investment, unlike stocks unless you have huge amounts of capital and that doesn’t even always help, ask Carl Icahn.

    As for gold the inverse correlation is their but Gold as an inbestment is one of the most purely speculative bets their are. Gold has value as a manufacturing and jewelery metal but no longer (currently at least) as currency. No country, major at least requires any gold to back up their currency, and they would be foolish to try. The belief that gold is money is pervasive but lacks the causation mechanism to truly be effective when needed outside the speculative arena. This isn’t to say gold doesn’t have room to grow, it most likely does.

    The great news for real estate investors is as people start to accept the interest rates staying lower even though they don’t understand why, this leads to great financing rates for investors. The 10 yr treasuries hit 2% again today, low mortgage rates for a while!!

    Thanks for the thought provoking article.

    • Kyle,
      Good response.

      My feeling is that gold should be backing national currencies, as the dollar has progressively declined ever Nixon took us off the gold standard in 1971. Otherwise, we get activities like we have been seeing over the past few years, with the government spending money that it doesn’t have and leaving it to future generations to recover. Nixon’s short-sighted decision helped in paying bills for the Vietnam but has had terrible consequences ever since.


      • Well last checked the US government has around $400 billion worth of gold. The US economy is roughly $15 trillion and the net worth of the American people is roughly $70 trillion. There would need to be some massive revaluations somewhere in order for this to come about. Also how far should we open the gold window, to all or just in exchange for soveriegn debt?

        Aside from that I see much of our economic malaise in the last 30-40 years do to the explosion of consumer credit to the masses. Added on top of this when Nixon closed the gold window, that was pretty much all he did, he or congress never modified the rest of the laws regarding this which still left our hands tied.

        The amount of money (simply a unit of measure signifying value in the economy) should be matching of the value in the economy, if it outstrips it we get inflation, and if it is too little we get deflation. For example, when I purchase an investment property with debt and improve the property that had no debt associated with it for years and ran into disrepair, I have used debt to create economic value, not only in the property itself but also the neighboring homes. If the federal government were to invest a $ trillion (pick a number) in an infrastructure or my preference an energy independance goal in colaboration with the private sector this is similiar. The amount of money spent would have to be equivilent to long term economic growth. If we could invest in a plan to fully supply, even be a net energy exporter and have our unemployment problem eliminated and long term economic growth we would not have high inflation because it would be countered by the economic value in our economy. Never in our history have we lowered oir debt but cutting back only by growing out of it. Greece ( has many other problems) as well as other European countries try austerity and their deficits grow because mathmatically their is no other way for it to work. Even Reagan whom I am a fan of grew and spent into ptosperity through economic growth.

        I love your topics, thanks Alan. It will most certainly be a very interesting couple of years.

Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here