Consumers (human beings) are more “optimistic” about the “economy” than they have been for a few months. Good for them. What is happening in the REAL world?

1) Home prices got hammered. Here in Minneapolis home prices are back to where they were in 2001. That’s not “average” that’s how much did THAT house sell for in 2001? $300,000? That’s what it sold for yesterday. That’s 8 years. More expensive homes are doing a little less poorly. All told, a $300,000 house in 2006 is worth $200,000 today. Interestingly houses are moving FAST in St. Paul, staying on the market for 36 days. Now that’s just here in MSP. Throughtout the USA, house values continue to get hammered. (some places have moderated like Denver, Dallas, Cleveland and Detroit) But there is still plenty of room to drop for most of the country. Las Vegas and Phoenix home prices have been cut in HALF in the last three years. That’s flat out amazing. And when you look at the chart of sale prices of same homes, THEY HAD to come down, a lot. They still haven’t fallen in line with inflation over time, but they are getting closer.

2) The stock market has had a brilliant display of irrational exuberance. For absolutely no reason the market has added 2000 points without a correction or fall into hell. Truly an impressive streak. It will end soon. Could the market hit 10,000? Certainly. It’s all what someone will pay for it and of course the government is PRINTING money to PAY for the market so the government will soon OWN companies doing biz in INSURANCE, BANKING and AUTO’S.  (How ya’ feelin’ about that?) So do I think that shorting the market is smart today? Not a chance. Don’t get me wrong the market isn’t worth 8500 which is where the Dow is. It’s not worth CLOSE that amount. BUT you have people buying BECAUSE they are FEELING BETTER. Emotions trump intellect in the short term….in the short term….in the short term…

3) And what of Gold? Gold/Silver Stocks? I’ve kept my kids in Gold stocks and emerging market stocks for, well, without change.  I continue to have my “tax me later at a higher bracket/401k accounts” in gold and gold stocks (along with some Citibank). Gold’s at 950 an ounce but all the reports I see are that gold coins are selling at a blistering pace.  Gold should logically rocket into new highs and soon. Will it? I haven’t a clue. I’ve got about 20% of my net worth in gold/gold stocks.  Everything else is in FDIC backed stuff….because the FDIC is helpful? No, because money has to be SOMEWHERE. What do I tell my friends to do? 

a) have their own Coffee table business. Part Time/Full Time. Whatever. DO IT. This is far and away the most important thing you can do. If you rely on a “pension” or “social security” or “medicare” or Obama or a State or ANYONE but yourself to take “care” of you, you have lost your mind. Grow up. Be responsible. Get IT together.

b) keep cash on hand. keep gold on hand. speculate 10% of retirement in gold stocks. They’ve already had an amazing run this year returning massive profits. AND be prepared to sell stocks when they go DOWN because ANY STOCKS can crash at a moments notice. In the old days (like 2007) consumers were told by planners that their retirement accounts were to be monitored quarterly. I have different advice. MONITOR THEM DAILY. Decide in ADVANCE what is an acceptable loss on your gamble and SELL when you hit that number. SIMILARLY, decide what is an acceptable win/gain and SELL when you hit THAT number. Do NOT get greedy. You’ve made 30% on gold stocks this year. The Dow/SP 500? ZERO.  You did right. You bought logical stocks when they were dirt cheap. Good job. NOW WATCH your money lest someone take it from you.  

c) Bank stocks are priced at what they are worth. Almost nothing. But the GOVERNMENT is taking OWNERSHIP in banks/insurers/autos. You figure it out. The government SCREWS UP EVERYTHING….ALL THE TIME, but IF they got this right it’s worth having 5% of your money where the government has their new pieces of paper.

First and foremost, take care of yourself in the NEAR TERM. If you have less than 100k to invest, THINK ABOUT IT. That is two years of income when you pull that from the 401k and almost certainly LESS because of new taxes that will come in soon.

SPEAKING OF WHICH…..TAXES…. What a surprise, the government receipts for April were $134 BILLION less than they “expected.”

WHY?
How stupid is the government? They are so stupid they hire people who brought down the world’s economies…from Goldman Sachs and similar and let them RUN the SHOW.  So they will TAX the small business person and people who work TWO JOBS EVEN MORE. And they will GIVE that money in exxchange for NOTHING to people of their choice.

You figure it out. How long does that party last?

Not long….

Is there good news?

Sure.

All of it’s good news if you are invested correctly and have friends and family who care about you and vice versa.

Kevin Hogan

www.kevinhogan.com