The Home Of The Bruce Collins Show

Monday, November 15, 2004


I've been busy lately so it's been a good month since I even checked this website.

Bush won the election. Oil went up past $50 but has tapered back a bit.

Gold is at a 16 year high and the dollar has dropped.

Tuesday, September 21, 2004

Oil Up to $47.00

I don't fully understand the oil market as I've begun to learn that most of the pricing that gets factored in has a lot to do with speculation...

Monday, September 20, 2004

Greenspan Grumblings...

Complacency and the Rain Dance for Money

By: Richard Benson, SFGroup

September 16, 2004

One has to appreciate, in theory and in practice, Alan Greenspan’s genius, at least in the Machiavellian sense, and how it has been used in the financial markets to drive the real economy. Indeed, many notable economists, financial market participants and the press, are now acknowledging how the Fed has used asset bubbles in stocks, bonds, and housing to facilitate the continued household spending of borrowed money. This has created a false sense of wealth and has kept the economy rolling with no savings.

What is becoming crystal clear is that if the United States’ bond and stock markets suddenly “re-priced to fair value”, the world would witness a crash in stocks, bonds, housing prices and the dollar. This inevitable re-pricing, caused by unsustainable Treasury and Trade deficits, will be fiercely and politically delayed, at all costs, until after the November election. Also, the extent to which the Treasury and Fed can use legal but undisclosed Exchange Stabilization Policies is not widely understood by the financial markets.

More importantly, while the magnitude of aid – amounting to $1.3 Trillion – given to America’s financial markets by foreign central banks has been disclosed, it is not appreciated that these holdings will most likely keep US Treasury rates 3% lower than they would be if the Treasury needed to fund its deficits within the US.

Evidence of the government’s “active hands” in the markets continues to grow. First, there is the manipulation of the gold market that has been solidly documented but not widely disseminated in the press. Beginning under the Clinton Administration, the dollar has been made to look strong by holding down the price of gold. This legal and logical market manipulation has been accomplished by central bank gold sales and by lending gold to bullion banks that could, in turn, sell the gold to earn carry trade profits. You might wonder why our government is so actively involved in keeping the price of gold down. Well, a logical reason would be that when the price of gold takes off, even the investment masses will focus attention on the real problems of massive trade and federal deficits and world-wide money creation. For investors with a long-term view, the price of gold is being subsidized and held well below market. If you like government subsidies, you can get one by buying gold.

Second, evidence also appears in the stock market’s strange but predictable behavior. Whenever the markets look like they are about to crash, major buying suddenly appears at the regular scheduled times during the day to keep the stock indexes from breaking down below major psychological barriers. It always looks like a major player has stepped in with an unlimited checkbook. In reality, the checkbook is a printing press owned by the Fed that can flood the market with REPO funds, and allocate a few billion to have market agents buy stock futures to smooth the market out.

We do know that Greenspan understands and uses psychology to try and create a self-fulfilling prophecy when it comes to the markets. He understands that if he is telling the world one day that the economic recovery has “traction” and the next day the stock market goes south, any economic recovery would suddenly be history. So, what must the Fed hope for and encourage? From their perspective, the best thing would be for a massive stock market rally to occur in anticipation of a Bush re-election. However, with rising interest rates and a slowing economy - the peak having already passed in the corporate earnings cycle – a stock market rally is unlikely with stock and bond prices currently at record levels. So, the best outcome is boredom and complacency in the bond, stock, and currency markets. The key to engendering complacency is engineering low volatility - the Fed’s gift to the White House. With low volatility and high complacency, the stock market looks just as safe as an insured FDIC bank CD.

Keeping volatility low is neither difficult nor expensive. Now that there is no clear market trend, it will pay for major funds and banks to “sell volatility”. These institutions sell puts and calls, take in premiums, and hope that the options will expire “out of the money”. For experienced traders, it is no surprise that close to or on key expiration dates for options, market prices of the index the option is based on are temporarily brought into line so that as many options as possible expire worthless. Just like Las Vegas where small speculators take option bets, the markets spin and, surprise, they lose! (When it comes to “efficient market theory”, all that can be said is that the large financial institutions and commercial market players are very efficient at “skinning the small speculators.)

Finally, you might wonder where the really big market manipulation is. Simply look at the Federal Reserve’s Foreign Custodial Account. Since 2001, it has risen by $700 billion to $1.3 Trillion today. This is a record! All this money has been printed up out of thin air by foreign central banks to buy United States’ Treasury debt and support the dollar at a far higher level, and hold US longer term interest rates at a lower level than they would be without this direct and unprecedented market manipulation. (When it comes to central banks, the polite word for manipulation is intervention). This intervention, which holds the value of the dollar up and interest rates down, also makes bond and stock prices artificially high. In turn, artificially high asset prices encourage consumers to spend and not save. Indeed, with over $1,300 Billion of reported central bank intervention currency what does it matter if a few billion dollars spill over into the stock market?

From the perspective of a prudent investor who is interested in the preservation of capital, two choices seem obvious. The first choice is to use the foreign central bank intervention as a window to get out of US stocks, bonds and the dollar. The second choice is to study with Navajo Indians to learn the secrets of their “rain dance for money” and perform it for the foreign central banks. Hopefully, they will then keep printing up money to buy $300 - $400 billion of dollar assets forever. Perhaps complacency, as a long-term investment policy, is becoming over-rated.

-- Posted Thursday, September 16 2004

- Richard Benson, SFGroup, is a widely published author on securitization and specialty finance, and a sought after speaker at financing conferences on raising equity for mid-market companies.

Prior to founding the Specialty Finance Group in 1989, Mr. Benson acted as a trading desk economist for Chase Manhattan Bank in the early 1980's and started in the securitization business in 1983 at Bear Stearns, and helped build the early securitization businesses at Citibank and E.F. Hutton.

Mr. Benson graduated from the University of Wisconsin in 1970 in the Honors Program in Math, and did his doctoral work in Economics at Harvard University. Mr. Benson is a member of the Harvard Club of New York and Palm Beach.

The Specialty Finance Group, LLC is a Florida Limited Liability Company and is registered with the NASD/SIPC as a Broker/Dealer.

Bush to pull troops from Iraq after election?

Looks like Bush plans to pull us out of Iraq after the Iraqi elections. That's smart. It's unfortunate but that country will have to figure out it's own turmoil. At least for now, we know they will not be a threat to our interests, i.e. funding terrorists.

Sunday, September 19, 2004

Bubble Trouble (Money Magazine)

In Texas, Randy Steadham, a former oil services exec who is president of the Realty Investment Club of Houston (none too subtle acronym: RICH), says his membership has quadrupled since 2001, to 2,100 people.

"I for one," he drawls, "have pulled all my money out of the stock market and put it into real estate."

Hmm. Substitute the words tech stocks for real estate, margin loan for interest-only mortgage, and the housing boom takes on an ominously familiar tone.

Economic Website

Economic advice from a Biblical perspective

Economic website
Several great economists share this website

Another one

All of these websites share the same line of thinking. The Credit Bubble is dangerous to the United States.

Saturday, September 18, 2004

Baby Boomers and U.S. Debt

Speeches ignore impending U.S. debt disaster
No mention of fiscal gap estimated as high as $72 trillion
- Carolyn Lochhead, Chronicle Washington Bureau
Sunday, September 12, 2004

Washington -- The first of the 77 million-strong Baby Boom generation will begin to retire in just four years. The economic consequences of this fact -- as scary as they are foreseeable -- are all but ignored by President Bush and Democratic challenger John Kerry, who discuss just about everything but the biggest fiscal challenge of modern times.

Yet whoever wins the 2004 race will become the first U.S. president to confront what sober-minded experts across the political spectrum describe as an impending "fiscal catastrophe" lying right around the corner.

Astronomical federal debt, coming due as the Baby Boom generation collects Medicare, Medicaid and Social Security, is enormous enough to swamp the promises both candidates are making to voters, whether for tax cuts, health care, 40,000 more troops or anything else.

"Chilling" is the word U.S. Comptroller General David Walker uses to describe the budget outlook.

"The long-term budget projections are just horrifying," added Leonard Burman, co-director of tax policy for the Urban Institute. "I've got four children and it really disturbs me. I just think it's irresponsible what we're doing to them."

What these numbers portend are crippling tax increases on workers, slashed benefits for retirees, gutted budgets for homeland security, highways, research and everything else, and an economic decline or a financial collapse that devastates the middle class, as happened recently in debt-strapped Argentina. Eventually, analysts insist, someone -- today's children or tomorrow's elderly or both -- will pay this debt.

Traditional budget measures used by politicians and the press give what Walker and many others call a highly misleading view of the U.S. debt. These focus on publicly held debt already incurred, now at $4.5 trillion, or 10-year budget forecasts like the one released last week by the Congressional Budget Office showing a record $422 billion deficit this year and a $2.3 trillion 10- year deficit.

'Fiscal gap' in the trillions

But these figures, worrisome enough, are deceptive because they ignore future liabilities such as Social Security and Medicare payments to the Baby Boomers. An array of government and private analysts put the actual U.S. "fiscal gap," which means all future receipts minus all future obligations, at $40 trillion (Government Accountability Office) to $72 trillion (Social Security Board of Trustees).

These are not sums, but present-value figures, heavily discounted to show in today's dollars what it would cost to pay off the debt immediately. The International Monetary Fund estimates the gap at $47 trillion, the Brookings Institution at $60 trillion.

"To give you idea how big the problem is," said Laurence Kotlikoff, economics chairman at Boston University, who has written extensively on the subject, to close a $51 trillion fiscal gap, "you'd have to have an immediate and permanent 78 percent hike in the federal income tax."

These obligations are not imaginary. And unlike the 1980s and 1990s, economic growth cannot bail out the government because the Baby Boom retirement is at hand. Those born in 1946 will reach age 62 in 2008, allowing them to take early retirement and receive Social Security benefits.

"It's a number that's so large that people find it implausible, and so they don't think about it," said Alan Auerbach, a UC Berkeley economist who studies the issue and consults for the Kerry campaign. "But it's based simply on the projections we have for Social Security and Medicare. People aren't making these numbers up."

A pathbreaking study by Jagadeesh Gokhale of the Federal Reserve Bank of Cleveland and Kent Smetters, a former deputy assistant secretary at the Treasury -- commissioned by former Treasury Secretary Paul O'Neill -- estimated a $44 trillion fiscal gap. It laid out a few painful options on how to meet the liabilities:

-- More than double the payroll tax, immediately and forever, from 15.3 percent of wages to nearly 32 percent;

-- Raise income taxes by two-thirds, immediately and forever;

-- Cut Social Security and Medicare benefits by 45 percent, immediately and forever;

-- Or eliminate forever all discretionary spending, which includes the military, homeland security, highways, courts, national parks and most of what the federal government does outside of the transfer of payments to the elderly.

Such corrective actions grow more severe each year. Waiting just until 2008, the end of the next presidency, would mean raising the payroll tax to 33. 5 percent instead of 32 percent, the study found.

Gokhale said that fresh numbers from the Medicare trustees show the fiscal gap has since grown to $72 trillion, $10 trillion of that for Social Security and an astonishing $62 trillion for Medicare, the government health care program for the elderly.

"The long-term picture is pretty bad," Gokhale said.

Election's absent issue

These numbers are seldom discussed, least of all in the 2004 presidential race. Ironically, as the Baby Boom retirement has neared -- and the remedies grow more painful -- political discussion has faded. Gone is Ross Perot's anti-deficit crusade. Gone is Newt Gingrich's call for Medicare restraint. Gone is Al Gore's "lockbox" for the Social Security surplus.

Instead, Kerry and Bush promise only to halve the current deficit in four years -- "both (of them) relying on pretty imaginative accounting to get there" said Burman -- while promising more spending and more tax cuts.

Yet today's deficit is a tiny fraction of the government's actual liabilities, which are so daunting they promise to make Bush's tax cuts a distant memory and Kerry's health care plan a fantasy.

While Bush and Kerry propose to address parts of the problem, "the numbers don't add up on either side," Walker said.

Medicare makes up the bulk of these liabilities, driven mainly by the expanding elderly population and rapidly rising health costs. Social Security, more often discussed as a looming problem, actually accounts for far less in future debt.

While Congress squabbles over whether the administration hid the new prescription drug benefit's 10-year cost -- pegged by the White House at $534 billion versus CBO's $395 billion -- the actual liability incurred by the new drug benefit is estimated at $8 trillion to $12 trillion.

Kerry and Democrats call the drug benefit inadequate. They would do little to restrain Medicare costs other than allowing the importation of price- controlled drugs from Canada.

Bush and Republicans added the drug benefit along with costly subsidies to providers. Even optimists do not expect their modest market reforms to cut costs.

Promises, promises

Kerry has promised not to cut Social Security. "I will not cut benefits," he said recently. "I will not raise the retirement age."

Democrats generally cite "trust fund" numbers that show Social Security - - and Medicare to a lesser extent -- remaining solvent for decades, even though government officials repeatedly call the numbers an accounting fiction. CBO director Douglas Holzt-Eakin last week said the funds contain nothing but "electronic chits" that measure government obligations to itself.

Bush proposes adding private accounts to Social Security for younger workers, which could reduce future government obligations, but would do so by diverting a portion of the payroll tax, adding $1 trillion to the short-term deficit. That might have been feasible when Bush took office in 2000 facing a projected $5.6 trillion surplus, but the surplus is gone. Similar plans in Congress that instead rely more on benefit cuts have gone nowhere.

"The country's absolutely broke, and both Bush and Kerry are being irresponsible in not addressing this problem," Kotlikoff said. "This administration and previous administrations have set us up for a major financial crisis on the order of what Argentina experienced a couple of years ago."

If this sounds far-fetched, former Bush Treasury Undersecretary Peter Fisher and former Clinton Treasury Secretary Robert Rubin both alluded to such a scenario at a June budget forum in Washington.

"Having been involved in markets for a long, long time," Rubin said, "I can tell you these things can change unexpectedly and without warning," referring to potential financial market reactions to the U.S. fiscal position.

Fisher warned of a "pivot point" when "the collective wisdom of bond traders thinks that the deficit horizon has turned," adding, "Both Bob and I are nervous."

The world has seen fiscal imbalances of this sort before, in Asia and Russia in the late 1990s and more recently in South America. Such financial panics can be triggered by any number of events -- a flight from Treasury bonds by the foreigners who buy much of the U.S. debt, for example -- if investors' views of the market, which are focused on the short term, suddenly change.

"If you look at financial crises, they occur seemingly overnight," said Kotlikoff. "More and more pieces of straw drop on the camel's back, and all of a sudden, the camel collapses. ... Nobody knew exactly what day Argentina was going to go south or exactly what day Russia was going to default. The timing is up for grabs."

But early signs of a problem are now appearing, analysts said, starting with the mounting deficits under Bush caused not just by the recession and terrorist attacks, but also by enormous spending increases and tax cuts. The brief window of surpluses that appeared during the late 1990s economic boom offered a chance to address long-range liabilities, but those surpluses now are gone.

"Maybe the public doesn't want to hear it," Kotlikoff said. "Maybe politicians think ... the American public can't understand the truth or hear the truth or bear the truth. I think this is garbage. I think that people care about their kids and grandchildren and need to know the dangers facing them --

and us."

E-mail Carolyn Lochhead at

Friday, September 17, 2004

Thursday, September 16, 2004


All Time Top 20 Movies at the US Box Office

Released Film Name Total Box Office
1 1997 Titanic $600,788,188
2 1977 Star Wars $460,998,007
3 2004 Shrek 2 $436,471,036
4 1982 ET: The Extra-Terrestrial $435,110,554
5 1999 Star Wars: Phantom Menace $431,088,297
6 2002 Spider-Man $403,706,375
7 2003 Lord of the Rings: The Return of the King $377,027,325
8 2004 Spider-Man 2 $370,651,825
9 2004 Passion of the Christ, The $370,270,943
10 1993 Jurassic Park $357,067,947
11 2002 Lord of the Rings: The Two Towers $340,478,898
12 2003 Finding Nemo $339,714,367
13 1994 Forrest Gump $329,693,974
14 2001 Harry Potter and the Sorcerer's Stone $317,557,891
15 2001 Lord of the Rings: The Fellowship of the Ring $313,837,577
16 1994 Lion King, The $312,855,561
17 1983 Return of the Jedi $309,205,079
18 1996 Independence Day $306,169,255
19 2003 Pirates of the Caribbean $305,411,224
20 2002 Star Wars: Attack of the Clones $302,181,125

How are mortgage rates determined?

I have to admit, I wasn't exactly sure. We see today that interest rates are slowly on the rise (with September 21st being the next probable quarter point increase) so why are mortgage rates falling? Here's why:

More Housing News

Yet another commentary on the 'irrational exuberance' of the housing market.

Wednesday, September 15, 2004


Dick Morris, former staffer in the Clinton administration, latest op-ed piece.

Tuesday, September 14, 2004

Kerry and the Killing

Commentary by Mark Hyman

In his campaign book Massachusetts Senator John Kerry notes there was fine line between actions that merited a court martial -- or a medal. He reported that medals were given for questionable activities in order to boost morale.

This narrow distinction figures into the controversy that has raged for a several weeks regarding the Silver Star Kerry was awarded for killing a Vietnamese man.

For more than 30 years, Kerry has portrayed a heroic version of a life and death struggle -- of staring down a suspected guerilla who was about to fire upon Kerry's swift boat. It was kill. Or be killed. At least, that's the version Kerry tells.

Eyewitnesses offer a far different account. They allege Kerry shot a wounded teenager retreating from battle.

Kerry has made public, hundreds of pages of official Navy documents to bolster his many claims. Conspicuous by its absence is the official after action report of what actually happened that day. The after action report written by John Kerry, himself.

In an exclusive, The Point has obtained this document from U.S. Navy archives (you can see it here). The pertinent section reads:

"PCF 94 beached in center of ambush in front of small path when Viet Cong sprung up from bunker 10 feet from unit. Man ran with weapon towards hootch. Forward M-60 machine gunner wounded man in leg. Officer-in-charge, LTjg Kerry, jumped ashore and gave pursuit while other units saturated area with fire and beached placing assault parties ashore. Kerry chased VC inland behind hootch and shot him while he fled -- capturing one B-40 rocket launcher with round in chamber."

So there you have it. The official record -- written by John Kerry -- supports what the critics have alleged rather than the John Wayne Kerry version the Massachusetts liberal has been telling.

Death is a reality of war. Events occur that are not for the faint of heart. Yet, John Kerry's account of killing what turned out to really be a wounded man while he fled continues Kerry's pattern of lies, exaggerations and embellishments.

Killing a wounded man while he retreated from battle is not an action that most servicemen would brag about. But then again, most servicemen would not return home and attack the very country they were supposed to fight for.

And that’s the Point.

Slowing US housing market may stir inflation


NEW YORK - As US home purchases slow, an expected rise in demand for rentals will result in a spike in inflation, analysts say, citing studies showing housing costs have been under-reported by the government.

The concern about a sudden gain in inflation centres on how much the record low interest rates have fuelled the housing market since the economy softened dramatically nearly four years ago and how the rental market has softened as a consequence of so much home buying.

The worry now is that as the economy regains its footing and rates rise to keep inflation in check, would-be home buyers will instead look in the rental market.

All these concerns relate to the government's broadest inflation gauge, the consumer price index, which some analysts say has understated the true cost of housing because it more closely analyses rents as opposed to home purchase prices.

"It's clear to me that the reported CPI (housing) metric is artificially restrained," said Richard DeKaser, chief economist at National City Corp. in Cleveland, Ohio.

Housing costs -- a reflection of what the CPI survey refers to as "owners' equivalent rent," make up 25 per cent of the CPI and are the index's biggest component.

But in the second quarter, home prices rose by 9.36 per cent, or more than 3.5 times the 2.6 per cent year-on-year increase of the CPI's owners' equivalent rent as of June 30, according to US government data.

To complicate matters further, the rental-market bias of the government's CPI survey will haunt inflation forecasters in an entirely new way as greater demand starts pushing up rents.

In other words, as rising interest rates help cool the housing market and the rents start heating up, inflation, as measured by the CPI, will go from being understated to being overstated.

On the surface, such talk about the CPI appears academic. But even modest variance in the CPI can have notable impact on the economy because the US government adjusts Social Security and certain debt interest payments based on the CPI. Some wage contracts also tie salary increases to the CPI.

The CPI's "rental-equivalence" index gauges how much homeowners would charge themselves for living in their own homes.

Using this formula, CPI inflation was understated by more than 1 percentage point annually in 2002 and 2003, according to Joseph Carson, director of global economic research at AllianceBerstein in New York, in a study released last week.

Given this approach to gauge housing inflation, Carson worries that the Federal Reserve's current monetary policy may not be doing enough to contain inflation.

"Most seriously, in our view, it is resulting in the Federal Reserve holding interest rates too low for too long," he said in the report.

However, the core personal consumption expenditure (PCE) index, the Fed's preferred inflation measure, was unchanged in July versus June and was up 1.5 per cent from a year ago -- a relatively tepid reading that might support the Fed's current policy of hiking rates in a "measured" way.

Last week, government and industry data showed that sales of new homes and existing homes fell 6.4 per cent and 2.9 per cent, respectively, in July.

It is unclear how soon and how strongly rents will rebound, given the historically high level of apartment vacancies, analysts said. Some analysts fear that when rents do start rising, the CPI would be skewed, overstating inflation, rather understating it.

The latest CPI data for July show CPI owners' equivalent rent was running merely 2.5 per cent higher than a year earlier, below the overall CPI inflation rate of 3.0 per cent.

Average US home prices were up 7.7 per cent in the second quarter from the same quarter in 2003, according to the Office of Housing Enterprise Oversight.

The housing market has been stubbornly strong, even with the modest rise in mortgage rates this year. But this torrid pace of home appreciation cannot be sustained as mortgage rates rise, leading to fewer people eligible to borrow and buy homes, analysts caution.

"It's not likely to continue with rising interest rates. The affordability of homeownership diminishes," said National City Corp.'s DeKaser.


Some Devote Half Their Income to House Payments,0,3845132.story?coll=stam-news-local-headlines

Oil Up/ Retail Sales Down

Oil is spiking up again today as Ivan bears down on the Gulf of Mexico and "insurgents" blow up oil facilities in Northern Iraq. Is it any wonder that here at home, employers are still hiring cautiously, according to the latest Manpower Survey?

Higher gas prices have already taken a bite out of consumer spending, and as winter approaches rising natural gas prices and higher home heating oil prices could also take pinch.

The August retail sales are down despite the fact that we are in "back to school" season.

Monday, September 13, 2004

Busy at work... Blog Work Posted by Hello

Article from Palo Alto News- Housing Collapse

The bottom is likely to drop out of the housing boom within the next couple of years,and this downturn will probably be accompanied by an economic recession, according to a University of California, Los Angeles, forecast.

“Absent something of the magnitude of the Vietnam War, we should expect a housing col-lapse and an attendant recession. Probably late 2005 or 2006, though it is impossible to say when right now,” said Edward E. Leamer,director of the UCLA Anderson Forecast. “We are building up the same kind of mountain of home spending that eventually crashed into the valleys of eight recessions.”

Picture of the Week: Al Goregantuan


Al Gore beefing up on the campaign trail!

Hey Al, Gore/ Lieberman was 4 years ago!

Credit risks creep into housing market

Vulnerability is particularly acute in California, where, last month, nearly 75 percent of home buyers used adjustable-rate mortgages. Such loans ratchet up payments if a benchmark interest rate increases, a situation experts say is extremely likely.

Concerns extend to the health of the lending industry, the keystone of the national economy. Analysts worry that a recession, a sharp rise in interest rates or a big drop in home values could trigger thousands of foreclosures as families lose the struggle to keep their homes after job loss, illness or overwhelming jumps in payments.

Another Housing Bubbletin <-- Ok, I'm copyrighting that word! Bruce

Lenders Now Assuming Greater Risk, says E&Y Speaker
September 13, 2004
By J.W. Elphinstone, Assistant Editor

Real estate is increasingly taking a "front and center" position in the economy, said Dale Anne Reiss, global director of real estate, hospitality and construction at Ernst & Young L.L.P., in her opening keynote address today at Commercial Property News' 2004 Net Lease Summit."Money is getting poured into real estate because there's no other good alternative," Reiss said. "It's an income-oriented investment."

Consumer confidence remains fairly high despite gas prices, weak labor and the war on terror, and investing in real estate, both commercial and residential, has become the status quo.

"Capital investments are at a five-year high and foreign investors are growing because the returns compare favorably to investments in their own backyard."

On the residential side, existing home sales have been very strong, though higher prices in building materials have slowed the new home business. And although a housing bubble exists, it will likely become flat rather than deflate dramatically like the dot-com bust, according to Reiss. (A lot of Californians hope she's right! -Bruce)

But U.S. lenders should watch the bubble more closely, Reiss warned.

Because of the competition that low interest rates have created, lenders have been forced to take on more risk, especially with residential and commercial real estate loans. "These new bankers in place don't remember the late '80s and the early '90s when real estate suffered."

Reiss touched on other trends in the sector, including the rise of global REIT activity and the good reception that private REITs are experiencing in the marketplace. Office occupancy is heading up as corporations seek to expand. And the net lease market remains competitive as a result of M&A and LBO activity.

Reiss predicted that several factors will impact the industry in the near future. Accounting is becoming a key issue because of the expense involved in implementing FIN 46. The off-shoring of service jobs and the need for 24/7 operations will affect the demand for office space. And in hospitality, toxic mold will become a hot topic because of the active hurricane season.

In Regards to the Bush "Memos"

Those Discredited Memos

The "documents" put forward by CBS News about George W. Bush's service have all the earmarks of forgeries. By WILLIAM SAFIRE

Washington - Alert bloggers who knew the difference between the product of old typewriters and new word processors immediately suspected a hoax: the "documents" presented by CBS News suggesting preferential treatment in Lt. George W. Bush's National Guard service have all the earmarks of forgeries.The copies of copies of copies that formed the basis for the latest charges were supposedly typed by Guard officer Jerry Killian three decades ago and placed in his "personal" file. But it is the default typeface of Microsoft Word, highly unlikely to have been used by that Texas colonel, who died in 1984. His widow says he could hardly type and his son warned CBS that the memos were not real.

Cooperative agreement between SPIEGEL ONLINE and the "New York Times" SPIEGEL ONLINE and the online version of the "New York Times" offer their readers a new service. Approximately twice a week, you can read selected analyses and commentary from the "New York Times" on SPIEGEL ONLINE. In return, our colleagues in New York will publish selected and translated articles from DER SPIEGEL on their website each week.

When the mainstream press checked the sources mentioned or ignored by "60 Minutes II," the story came apart.The Los Angeles Times checked with Killian's former commander, the retired Guard general whom a CBS executive had said would be the "trump card" in corroborating its charges. But it turns out CBS had only read Maj. Gen. Bobby Hodges the purported memos on the phone, and did not trouble to show them to him. Hodges now says he was "misled" - he thought the memos were handwritten - and believes the machine-produced "documents" to be forgeries. (CBS accuses the officer of changing his story.)

The L.A. Times also checked out a handwriting analyst, Marcel Matley (of Vincent Foster suicide-note fame), who CBS had claimed vouched for the authenticity of four memos. It turns out he vouches for only one signature, and no scribbled initials, and has no opinion about the typography of any of the supposed memos. The Dallas Morning News looked into the charge in one of the possible forgeries dated Aug. 18, 1973, that a commander of a Texas Air Guard squadron was trying to "sugar coat" Bush's service record. It found that the commander had retired from the Guard 18 months before that. The Associated Press focused on the suspicion first voiced by a blogger on the Web site about modern "superscripts" that include a raised th after a number.

CBS, on the defense, claimed that "some models" of typewriters of the 70's could do that trick, and some Texas Air National Guard documents released by the White House included it.

"That superscript, however," countered The A.P., "is in a different typeface than the one used for the CBS memos."

It consulted the document examiner Sandra Ramsey Lines of Paradise Valley, Ariz., and reported "she could testify in court that, beyond a reasonable doubt, her opinion was that the memos were written on a computer."The Washington Post reported Dan Rather's response to questions about the documents' authenticity: "Until someone shows me definitive proof that they are not, I don't see any reason to carry on a conversation with the professional rumor mill" and questioned the critics' "motivation."

After leading with that response, Post media reporter Howard Kurtz noted that the handwriting expert Matley said that CBS had asked him not to give interviews, and that an unidentified CBS staff member who had examined the documents saw potential problems with them: "There's a lot of sentiment that we should do an internal investigation."

Newsweek (which likes the word "discredited") has apparently begun an external investigation: it names "a disgruntled former Guard officer" as a principal source for CBS, noting "he suffered two nervous breakdowns" and "unsuccessfully sued for medical expenses."

It may be that CBS is the victim of a whopping journalistic hoax, besmearing a president to bring him down. What should a responsible news organization do?To shut up sources and impugn the motives of serious critics - from opinionated bloggers to straight journalists - demeans the Murrow tradition. Nor is any angry demand that others prove them wrong acceptable, especially when no original documents are available to prove anything.

Years ago, Kurdish friends slipped me amateur film taken of Saddam's poison-gas attack that killed thousands in Halabja. I gave it to Dan Rather, who trusted my word on sources. Despite objections from queasy colleagues, he put it on the air.

Hey, Dan: On this, recognize the preponderance of doubt. Call for a panel of old CBS hands and independent editors to re-examine sources and papers. Courage.

2005 Recession?

Interesting blog on the possibility of a recession next year:

The future of Oil

Oil going back up in the near future?

And now a word from Ric Drasin....

See comments...

Congratulations to Terrence Jordan

Congratulations to Terrence Jordan, a Bay Area resident, for winning the "Best Johnny Cash" impersonation award!


Interesting Read on Silver:

SILVER - Investment Opportunity of the Decade

by Richard J. Greene
Portfolio Manager, Thunder Capital Management
August 27, 2004

The environment for investment opportunities is, right now, in the process of undergoing a radical change that only a relative handful of investors has come to recognize. A vastly greater number of people believe they are going to become wealthy over the next decade by investing in technology stocks, rather than in the areas we have targeted. When all is said and done at the end of the next decade, we believe silver and silver stocks will have been by far the best performing asset classes on the planet.

First, we think it is appropriate to view the historic bear market that has unfolded since (not 1980 as many believe when silver hit $50, but) 1477 when silver hit an equivalent $806 per ounce!

When one views this stunning chart (see above link), it is most amazing that for one to appreciate the investment merits of silver, it is not even necessary to rely on silver returning to its historic role as money, although that would truly be the icing on the cake.
Silver is an industrial metal whose price has fallen so low that only a handful of primary silver producers are efficient enough to produce silver profitably. Much of the world’s silver production today is produced as a byproduct of gold, copper, lead, and zinc. Many market observers are dumbfounded and question why these producers would continue to sell their product into the market at a loss. Some observers, most notably Jason Hommel and Ted Butler have prodded managements to do the opposite, by either withholding their production or using their excess cash to buy silver. In light of the increasingly rapid money creation, this appears to be a brilliant strategy. Silver Standard (SSRI) has lead the way by purchasing silver on the open market, and Nevada Pacific Gold (NPG) – Toronto is another producer that has announced it will withhold some production.

The truth of the matter is that supply is rapidly drying up. The US Government had a 60-year stockpile of silver that has been completely depleted. There has been a supply deficit in silver for 15 years running and this year the deficit could be as high as 50 million ounces. It is uncertain how or if this deficit will be filled. Whereas 95% of the gold that has been mined still exists, estimates run that only between 250 and 650 million ounces of the silver that has been mined is still in existence, excluding silver jewelry. This means that there is probably as much as seven times as much gold still in existence as silver. In addition, silver is incredibly cheap relative to gold. The long run price of gold to price of silver ratio has been about 16 to 1. Currently, the ratio exceeds 60 to 1 which suggests that silver should appreciate several times the rate of appreciation of gold. The reason this could be explosive is there are a multitude of commercial uses for silver that are difficult if not impossible to replace. Much is made of the replacement of traditional photography with digital photography and its bearish implications for silver usage. Realistically, a good portion of the world’s population does not own a computer and in the huge population centers such as China and India, it is much more likely that growth will be seen from these countries in the traditional photography area which uses silver. Silver’s unusual chemical properties ensure increased demand in high technology and medical markets which make up 40% of demand. Among its most important properties: it is superconductive, highly reflective, malleable, ductile, it endures extreme temperature ranges, and has electrically low contact resistance. While demand from these areas alone are enough to make the silver story an exciting investment theme, the real home run is if silver returns to its more traditional role in history as money. Incredibly, while not given much publicity this is already happening in at least two US states.

We feel strongly that paper fiat money systems are already in the process of failing. Ever more desperate measures are being taken by the Fed and government statistical agencies to present economic releases in the most favorable light, in an effort to cover up a financial system that is coming apart at the seams. For gold and silver to return as money for the entire world, a combination of money destruction in the form of defaults and a tremendous increase in the prices of gold and silver by many, many times will be required. The world is deluged in credit that must not be stopped, or slowed for that matter, or the system will surely implode. Gold and silver have long been trusted as a barometer for the economy and financial system. There are a number of market commentators, Ted Butler in particular, whom have provided overwhelming evidence that gold and silver markets are being manipulated to project a message that all is well with the financial system. The silver paper traders at the COMEX know their days are numbered as the physical demand for the above mentioned uses will overwhelm their limitless paper sales. Financial derivatives now number $392 TRILLION according to the Bank of International Settlements, and are increasing at a parabolic pace that can not sustain the sheer magnitude of such numbers relative to the total value of, well - Earth!

So, we have an investment opportunity, with $6.50 downside and $800 upside to its old high, that is in a supply deficit, is rarely produced at a profit at current levels, has growing and irreplaceable industrial demand, and is hardly even being used in its traditional role as money!

SILVER - What are you waiting for?

© 2004 Richard J. Greene

Talk Like a Pirate Day, Sept. 19

September 19th is Talk Like a Pirate Day.

I know a couple of people who celebrate that day every single year (Phil, Dan and Darrell).



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Here's some CNN/ Money magazine "HOUSING BUBBLE TIPS".

It seems like when I first started looking into the housing bubble, it was just a few 'weird' economists who were talking about bubbles. Now, it's working it's way into the mainstream.

Very, very interesting.

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Hurricanes could have impact on economy

Did anybody see the picture of Gore on ? Man, he's gaining weight!


This is a test, only a test.

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