Inflation is being crushed from the system by vastly larger forces of deflation that have been lurking for decades. Although we might have expected the trillions in funny money that were force-fed into the U.S. economy during the covid era to have a longer-lasting effect on prices, inflation never had much of a chance. With real and nominal mortgage costs rising, home prices have begun to fall sharply, along with rents, used-car prices, gasoline and even some basic grocery items such as milk and eggs.
Real estate is the 800-pound gorilla, though, because it is the chief source of loans that are destined to implode. This is particularly ominous for the commercial sector, since even the sky-high rents that still obtain in New York City, for one, are proving insufficient to service borrowing costs. Residential real estate will not be far behind, however. The median price for existing homes fell 3.1% in May, to a still-pumped $396,100, from a year earlier. We have some catching up to do with Germany, though, where even higher mortgage rates and official recession have caused home values to fall by a record 6.8% year-over-year.
The 800-pound gorilla will ultimately be dwarfed by King Kong himself as the biggest cities in America spiral toward economic doom. This will be a key feature of the Second Great Depression, which awaits only an end to the nutty rally on Wall Street to commence. A very run-down San Francisco seems likely to lead the pack, but don’t expect New York, Chicago, L.A. et al. to fare much better over the long run. The cities will collapse economically on three levels: above ground (i.e., skyscrapers); at ground level (virtually all amenities, from hot dog carts to concert halls); and below ground (subways, with fixed costs that include $90,000 retirement packages for even the most menial jobs.) For more on this, click here to access the interview I did last week with Howe Street’s Jim Goddard.
Hard to find articulate 115 year-olds these days.
Difficult to learn from active traders who survived – 89 % Black Thursday, Black Monday and Black Tuesday Market Total Crashes from 1929 to 1932.
Some of us learned how families survived the Great Depression with variations of the Rothschild’s selling too soon and buying with blood in the streets ignoring the hype.
We profited from Spokane Geologist CV Myers Finance and Energy Letter and his 1976 ‘The Coming Deflation: Its Dangers–and Opportunities’. Vern presented the benefits of self-reliance living on a 40 acre farm during the Roaring Twenties, Depressing Thirties, Warring Forties and Boomers.
He exposed the myth of FDR’s New Deal, noted 1929 markets did not recover in real terms for 37 years until 1966.
Vern served two years in Prison for tax evasion after arrested crossing the Canadian border to visit his dying wife in hospital. He passed in 1990 after convincing his son to continue the letter for a non-deflationary time.
His son passed last year after selling it.
Milwaukee Harry Schultz owned 13 newspapers and published an International Investment Letter for 45 of his 99 years. He moved to Monaco. A friend advised him with astrology like JP Morgan. Harry’s subscribers included world leaders.
Harry published ‘Bear markets: how to survive and make money in them’ in 1964 and 2002.
He researched Weimar Republic Wheelbarrow Money in detail for his 1972 book, ‘Panics & crashes and How you can make money out of them.’
He reported a person bought an entire block of downtown Berlin real estate in 1932 with a single one ounce gold coin for taxes.
Myers and Schultz both profited with copper, gold, oil and silver, tangible unlike QQQ.
So we patently accumulate XOM, SLVP and VGPMX with targets of +53 %, +94 % and 108 % respectively.
We still tip our hat to Rick’s timely ideas.
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Thanks for the trip down memory lane, Richard. I interviewed Vern Myers for ‘Barron’s’ shortly before he died, but it never made it into print. The tax evasion charge was phony and related to gold he held for others in a single account with his name on it.
Grabbing him when he went to see his dying wife was what some deranged revenuer probably thought was a real coup. Myers’ harrowing ‘escape’ from prison, with an assist from Ron Paul, whom he didn’t know, was fitting justice. RA