Homeowners with little of their own money in their homes may think they will do what strapped homeowners in the 1990s did: turnover the keys to the lender if things get really bad and walk away.
Things will be different this time because so many people have refinanced. The difference is the recourse loan. In California, refinanced loans, second trust deeds and home equity lines of credit are considered recourse loans. A lender can file suit and go after almost any of the borrowers’ assets once they obtain a court judgment. They can literally go after everything you have.
A foreclosure may mean a big tax bill from the IRS and the California Franchise Tax Board for any shortfall between what the bank gets for the sale of the house and the value of the loan. If you live in California you had best check where you stand.
In Orange County lenders sent out 444 local default notices in May, but that was 57% more than May of last year. It is estimated that as many as 8,000 Orange County homeowners could lose their homes to foreclosure over the next four years. Most all of these defaulters do not know that if there is a negative difference between the value of the home and the sale price, he may also have to pay income taxes on the difference because it is considered debt relief income. The tax owed on debt relief is based on the homeowner’s ordinary income tax rate, not the lower capital gains rate. Wonderful government we have. You lose and then you pay taxes on the loss. Only in America.
Homebuilder KB Home said negative trends in the US housing market could persist into 2007 as inventory accumulates amid higher interest rates and much higher cancellation rates. That is why we have been and are short builders.
You would think Americans would wise up. Obviously they are incapable of exercising even a modicum of discipline. Consumers took on a bigger-than expected $4.4 billion more in debt in May, mostly in revolving debt like credit cards. Consumers pushed up credit by 2.4%, or $4.4 billion, to $2.173 trillion. Credit cards and other forms of revolving credit were the problem. Consumers added $6.7 billion in revolving debt in May, up 10% from the previous month. Auto loans fell 2%. They will never learn.
There is no question that if Republicans are reelected, and control both Houses again, there will be an effort to privatize Social Security, which could cause huge debt for decades and boost the stock market so that banks and brokerage houses can get richer than they already are. The Social Security Trust is broke. All the money has been looted going back to 1936. We do not know whether the Democrats or Independents will save SS, but we know the Republicans won’t. They have already proven that. Again, this is why incumbents have to be removed from office. We know what they will bring us. Think about it. You do not want to lose your Social Security do you?
The trade deficit widened by 0.8% in May to $63.8 billion as both imports and exports set monthly records. Exports increased 2.4% to $118.7 billion, the biggest percentage gain since 12/04. Imports rose $182.5 billion.
In the first five months of the year, imports were up 12.3% y-o-y. Exports rose 12% y-t-d. The y-t-d deficit was up 1.8% to $317.9 billion. Last year the deficit totaled a record $716.7 billion.
Imports from China rose 4.1% to $22.3 billion, while exports to China rose 4.6% to $4.5 billion. Exports to China have grown twice as fast as imports through the first five months of the year. If you were to eliminate exports of civilian aircraft exports would have fallen to $1 billion. We find that very disturbing.
Syria is accused by the US of supporting terrorism, and it plans to end its currency peg to the dollar by December to reflect closer ties to Europe. That is a strident statement, but understandable in as much as Russia is building two military bases in Syria. Other dollar sellers this year will be Russia, China, Kuwait, Qatar, Sweden, UAE and Finland that we know of. The dollar will remain under perpetual pressure. The euro was begun in 1999 and euros comprised 18.1% of different government reserves. That figure is now close to 25%.
As you know from reading Ted Butler’s latest article the CFTC, commodity Futures Trading Corporation, the regulatory group is considering eliminating the COT, Commitment of traders Report, the same as the Fed did when they eliminated M3. It is to totally obscure what is going on in the commodities market. Please e-mail the CFTC and tell them you do not want them to do that at secretary@cftc.gov. Do so before 8/21/06. You can also call 202-418-5041...
The financially deadly scam of naked shorting continues as the SEC twiddles its thumbs. Big brokers assume upon shorting that that long positions exist in the house, so they can borrow from those long positions without bothering to check if the shares are actually available for borrowing and without ascertaining if those same shares have already provided reasonable grounds to permit another short sale of the same security. Supposedly this is how over-shorting happens. After many years in the brokerage business we can promise you there is little checking done to see if securities are actually available.
Suits are pending accusing brokers of collecting fees for lending shares to short-sellers without actually having borrowed the shares. If these allegations are proved the result would be another in a long string of scandals. It will mean large settlements and much tighter regulation. Of course no one will go to jail. Elitists at large, brokerage firms are immune from prosecution.
We see light at the end of the tunnel on the issue of naked shorts. We hope they go back 25 years on these big firms. They have made billions of dollars screwing the public while the SEC assisted them and they unilaterally drove thousands of companies out of business. Some CEO’s committed suicide and some we knew personally died of heart attacks. We want total retribution for all the naked shorts and all the companies this cabal destroyed. We want jail time for brokerage executives going back 25 years and criminal action against SEC executives and attorneys who were party to these crimes...
GOLD, SILVER, PLATINUM, PALADIUM AND DIAMONDS
In 2004 Iran imported 139 tons of gold. They were the 6th largest gold jewelry consuming country in 2004.
During the period of the ancient Persian Empire (500-330BC), its capital Persepolis was famous as the richest city in the world. Then the city was sacked by Alexander the Great in 330BC and it is said 7,000 pack animals were used to carry away about 300 tons of Persian gold ornaments and jewelry, bars and coins. This was Iran’s golden era. Today not only is gold jewelry consumption growing, but so are exports. There is an effort to eliminate the 4% import duty on gold bars, which would enhance consumption.
The old saying is you can’t keep a good man down. Well, you can’t keep real money down either. Tuesday gold and silver moved up again big time, breaking to new recent recovery highs. Gold rose $17.50 to $640.90 and silver moved up $0.47 to $11.49. This should come as no surprise to readers of this publication. The bottom was in $100.00 ago in gold. The shorts probably have another 60,000 contracts to cover, not counting their core short position. With very little long buying gold and silver should be challenging their old highs in the fall if not sooner. Surprisingly gold and silver rallied on no positive news. They have recently corrected on positive news. We saw no huge buyers in the market so the combination was long buying and short covering. Gold open interest rose 2,210 contracts to 309,658 and silver gained 714 contracts to 98,583. The large Tocom shorts cut their positions 2,0991 contracts to 144,377 on Monday. Silver shorts reduced their shorts 65 contracts to 4,899 contracts.
The HUI broke out to the upside, up 9.58 to 347.16 and the XAU closed up 3.38 to 148.38. We believe the HUI will break out on Wednesday about 350 and finally start moving again. We believe the appointment of Hank Paulson at Treasury was made to deal with the crisis that is coming in stocks and bonds and with surging gold and silver prices. Our guess is he and the cartel will try to hold gold at either $730 or $850, so be prepared for it. We are going to lose battles along the way, but we can assure you we will win the war – be patient. Corrections will be planned and accompanied by events, usually manufactured ones. Paulson gets appointed and gold and silver fall. They fell because the shorts were sellers recently trying to get prices lower to cover. That is often why there is little explanation for most corrections. The Dow was down 75 and closed up 31 to 11,135, another miracle. The 10-year note was 5.11%, but more significant was that the 2’s were 5.17%, a large 6 bps inversion spread. This is week three for this stage of inversion. Oil was up $0.55 to $74.16. The dollar index fell .12 to 85.02. People are not totally dumb. If you add in the cost of foreign occupation, the budget deficit will be well over $400 billion. Then throw in Social Security and you are close to $700 billion. Lies, lies and more lies and Congress is just as guilty as the neocons – so throw them out...
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