"Non, je ne regret rien" - Édith Piaf, Alan Greenspan

It seems the former Fed chairman just can't stop talking, though many of us would probably do the same thing if we were being paid what he is. Here's another Bloomberg report (hat tip CB) with Alan Greenspan's latest thoughts on the mess he left behind.

Former Federal Reserve Chairman Alan Greenspan said he has 'no particular regrets' about his time at the central bank, adding that the deepening U.S. housing-market slump isn't a result of his policies.

"Markets are becoming aware of the fact that the decline in house prices is not stopping," Greenspan said today in Oslo. "I have no particular regrets. The housing bubble is not a reflection of what we did, as it is a global phenomenon."

Home prices fell in a third of U.S. cities last quarter as stricter lending standards caused a 14 percent drop in sales nationwide, the National Association of Realtors said Nov. 21. Declines in sales and prices signal the housing slump that began in 2006 may extend into its third year, matching the slowdown 18 years ago that ended in the 1991 recession.

The collapse of the U.S. subprime market "was a shocker because no one expected it," Greenspan said. "It was the weakest link in the international financial sector." He said that the rout in the market for subprime loans "is over" because it "went to zero and cannot go any further."
...
Joseph Stiglitz, a Nobel Prize-winning economist, said Nov. 16 that there is a 50 percent probability that the U.S. will tumble into a recession after the "mess" left by Greenspan. The retired Fed chairman defended his record in a statement released the same day, saying the criticisms were "inaccurate or incomplete."

After the 2001 recession, the Fed cut its benchmark rate to a four-decade low of 1 percent. That move, along with a hands-off approach to regulation, has brought Greenspan under fire as the bursting of the housing bubble and the subprime mortgage crisis threaten to sink the economy.

From Wikipedia: "Non, je ne regrette rien" is a French song written in 1956 which is best known through the recording made by French singer, Édith Piaf, on 10 November 1960. Its title translates as "No, I regret nothing" but has often been rendered simply as "No regrets". It was composed by Charles Dumont and its lyrics were written by Michel Vaucaire.

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The gold price over Thanksgiving

For some reason, there are larger and larger gains in the price of gold during the Thanksgiving holiday almost every year in the new decade.
With the recent volatility, who knows where things will end up today, but so far, the trend remains intact.

To learn more about investing in natural resources using commonly traded ETFs, stocks, and mutual funds, see this description at Iacono Research. Or, sign up for a free trial.

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Gobble Gobble

Online references Wikipedia and About.com are once again the source of some interesting information about one of America's favorite holidays. The lengthy "Thanksgiving Proclamation" by Abraham Lincoln in 1863, about halfway down on Wikipedia's Thanksgiving page, is particularly intriguing, in light of today's ongoing national cultural debates.

Historical Highlights from Wikipedia

"George Washington, leader of the revolutionary forces in the American Revolutionary War, proclaimed a Thanksgiving in December 1777 as a victory celebration honoring the defeat of the British at Saratoga. The Continental Congress proclaimed annual December Thanksgivings from 1777 to 1783, except in 1782.

In the middle of the Civil War, prompted by a series of editorials written by Sarah Josepha Hale, the last of which appeared in the September 1863 issue of Godey's Lady's Book, President Abraham Lincoln proclaimed a national Thanksgiving Day, to be celebrated on the final Thursday in November 1863.


In 1939, President Franklin D. Roosevelt declared that Thanksgiving would be the next to last Thursday of November rather than the last. With the country still in the midst of The Great Depression, Roosevelt thought this would give merchants a longer period to sell goods before Christmas. Increasing profits and spending during this period, Roosevelt hoped, would aid bringing the country out of the Depression.

At the time, it was considered inappropriate to advertise goods for Christmas until after Thanksgiving. However, Roosevelt's declaration was not mandatory; twenty-three states went along with this recommendation, and 22 did not. Other states, like Texas, could not decide and took both weeks as government holidays. Roosevelt persisted in 1940 to celebrate his "Franksgiving," as it was termed. The U.S. Congress in 1941 split the difference and established that the Thanksgiving would occur annually on the fourth Thursday of November, which was sometimes the last Thursday and sometimes the next to last. On November 26 that year President Roosevelt signed this bill into U.S. law.

Since 1947, or possibly earlier, the National Turkey Federation has presented the President of the United States with one live turkey and two dressed turkeys. The live turkey is pardoned and lives out the rest of its days on a peaceful farm. While it is commonly held that this tradition began with Harry Truman in 1947, the Truman Library has been unable to find any evidence for this. Still others claim that that the tradition dates back to Abraham Lincoln pardoning his son's pet turkey. Both stories have been quoted in more recent presidential speeches."

Trivia from About.com

"According to most historians, the Pilgrims never observed an annual Thanksgiving feast in autumn. In the year 1621, they did celebrate a feast near Plymouth, Massachusetts, following their first harvest. But this feast most people refer to as the first Thanksgiving was never repeated. Oddly enough, most devoutly religious pilgrims observed a day of thanksgiving with prayer and fasting, not feasting.

In the United States, Thanksgiving Day is celebrated on the fourth Thursday in November. But did you know that seven other nations also celebrate an official Thanksgiving Day? Those nations are Argentina, Brazil, Canada, Japan, Korea, Liberia, and Switzerland."

Q. How long did the first Thanksgiving celebration last?
A. It lasted three days (the celebration consisted of games as well as food).

Q. Who wanted to make the turkey the national bird of the United States of America?
A. Benjamin Franklin, but he was opposed by Thomas Jefferson. Legend has it that Franklin then named the male turkey a "tom turkey" to spite Jefferson. (The female is called a "hen turkey" and the baby a "poult.")

Q. What drink did the Puritans bring with them in the Mayflower?
A. Beer.

-- HAPPY THANKSGIVING --

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Planes, Trains, and Automobiles

All that Neal Page wants to do is to get home for Thanksgiving. His flight has been canceled due to bad weather so he decides on other means of transport. As well as bad luck, Neal is blessed with the presence of Del Griffith, "Shower Curtain Ring Salesman" and all-around blabbermouth, who is never short of advice, conversation, bad jokes, or company. And when he decides that he is going the same direction as Neal...

This afternoon, a brief departure from the normal fare is in order to recall the 1987 John Hughes classic Planes, Trains, and Automobiles starring Steve Martin and John Candy. Over the years, the viewing of this film on Thanksgiving eve has become a family tradition here - this summary is provided to readers courtesy of IMDb (Internet Movie Database) and various fan sites.

Owen: I'm to drive you to Wichita to catch a train?
Del: Yeah, we'd appreciate it.
Owen: Train don't run out of Wichita... unlessin' you're a hog or a cattle.
[Clears his throat]
Owen: People train runs out of Stubbville.

Cue the music - doooo, doooo, doooo.

Planes, Trains and Automobiles is the story of two very different men who wind up traveling together from New York to Chicago in the day and a half before Thanksgiving. Due to bad weather and various other mishaps, it turns into a worst-case travel scenario.

Neal Page is stuck in a meeting in New York, desperate to get home. He glances at his watch to see that he has less than two hours to get to the airport. He tries desperately to hail a cab, and when he finally gets one, Del Griffith steals it, accidentally. This is the first of many encounters between Neil and Del.

When Neil finally gets to the airport, he is horrified to find that his flight is cancelled due to weather. Neil recognizes Del, who is sitting across from him at the gate.

Neil finally boards the plane only to discover that he’s been bumped to coach. No sooner than he can say, “I can’t wait to see what happens next!” he finds out he’s sitting next to Del.

Neal: Eh, look, I don't want to be rude, but I'm not much of a conversationalist, and I really want to finish this article, a friend of mine wrote it, so...
Del: Don't let me stand in your way, please don't let me stand in your way. The last thing I want to be remembered as is an annoying blabbermouth... You know, nothing grinds my gears worse than some chowderhead that doesn't know when to keep his big trap shut... If you catch me running off with my mouth, just give me a poke on the chubbs...

The plane is diverted to Wichita, where Del offers to share a hotel room with Neil for the night when Neil has no luck finding one himself. Waking up after sharing the same bed (.wav file):

Neal: Del... Why did you kiss my ear?
Del: Why are you holding my hand?
Neal: Where's your other hand?
Del: Between two pillows...
Neal: Those aren't pillows!
[They both stand up and awkwardly walk around the room]
Neal: Did you see that Bears game last week?
Del: Yeah, hell of a game, hell of a game. The Bears have a great team this year - they're going go all the way.

From here, they embark on a desperate journey to get home in time for Thanksgiving. After being unable to find his rental car in the remote lot and barely surviving the three-mile hike back to the rental office, Neal has this now-famous exchange with a too-cheerful rental car agent played by Edi McClurg (.wav file):

Car Rental Agent: Welcome to Marathon, may I help you?
Neal: Yes.
Car Rental Agent: How may I help you?
Neal: You can start by wiping that f**king dumbass smile off your rosy f**cking cheeks! Then you can give me a f**king automobile: a f**king Datsun, a f**king Toyota, a f**king Mustang, a f**king Buick! Four f**king wheels and a seat!
Car Rental Agent: I really don't care for the way you're speaking to me.
Neal: And I really don't care for the way your company left me in the middle of f**king nowhere with f**king keys to a f**king car that isn't f**king there. And I really didn't care to f**king walk down a f**king highway and across a f**king runway to get back here to have you smile at my f**king face. I want a f**king car RIGHT F**KING NOW!
Car Rental Agent: May I see your rental agreement.
Neal: I threw it away.
Car Rental Agent: Oh boy.
Neal: Oh boy what?
Car Rental Agent: You're f**ked!

After Del manages to rent a car for the two of them, they find themselves driving the wrong way on a divided highway late at night. Another motorist, driving in the proper direction on the other side of the highway, tries to tell them that they are going the wrong way, toward oncoming traffic, as Neal awakens from a nap:

Neal: He says we're going the wrong way...
Del: Oh, he's drunk. How would he know where we're going?

After barely surviving the encounter with two tractor-trailers, they accidentally set their rental car ablaze. It remains drivable (barely), until they are pulled over:

State Trooper: What the hell are you driving here?
Del: We had a small fire last night, but we caught it in the nick of time.
State Trooper: Do you have any idea how fast you were going?
Del: Funny enough, I was just talking to my friend about that. Our speedometer has melted and as a result it's very hard to see with any degree of accuracy exactly how fast we were going.

With the rental car impounded, they are left with no alternative than to seek bus transportation:

Del: You're in a pretty lousy mood, huh?
Neal: To say the least.
Del: You ever travel by bus before?
[Neal shakes his head]
Del: Hmm. Your mood's probably not going to improve much.

After more tumult, they finally make it back to Chicago, both having learned a lot about themselves and each other.

Planes, Trains and Automobiles is a wonderful film - very funny, with great performances from the entire cast, especially John Candy, who may have given the best performance of his career, which was tragically cut short by his untimely death in 1994.

Highly recommended.

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Retirement planning for dummies

In the months and years ahead, there will be more writing here about retirement planning and managing retirement income. About six months removed from mostly ordinary work-a-day lives and still close enough to our mid-forties to call it such, things are going pretty well so far - the great unknown is now a little less unknown.

But, every time one of these articles pops up - Six Critical Retirement Missteps - it reminds me of how our retirement is anything but ordinary.

Money Magazine and Kiplingers provide much useful information about all the things that you should and shouldn't do when planning for and/or during retirement and the six missteps in the story above are all things that you really should avoid:

1. Withdrawing money too soon
2. Interrupting annual payments
3. Taking a check
4. Mishandling company stock
5. Ignoring taxes
6. Waiting too long

But, clearly, all of these helpful articles miss the big picture ideas that are far more important than all the common sense minutia that seems so commonplace in these personal finance publications.

In my first attempt ever, I'm going to try to sum up my views on how to properly plan and execute a sound retirement plan.

Here goes:

1. Build a big pile of money
2. Retire
3. Don't outlive your big pile of money

A brief description of the three step process is provided below and the details will be filled in over the coming months and years.

Don't Buy Things You Don't Need

In many ways, building a big pile of money is a lot like that Saturday Night Live skit "Debt Management" - getting out of debt really can be as simple as "don't buy stuff you can not afford", yet it seems the entire world is set up to work against you when you attempt to do that.

Saving for retirement is a lot like that - spend less money than you make, then save the rest. If you don't make much money, then your options are a bit more limited - certainly my approach will do you little good because it is predicated on having a big pile of money at some point in time.

But, if you do have a good income and you don't ratchet up your spending to keep up with the neighbors as your income rises, you stand a good chance of succeeding at building a good-sized pile. That's reason numero uno why most people will never accumulate any real wealth - they spend too much and go into debt to spend even more, in many cases in a vain attempt to keep up with their neighbors.

Of course the entire U.S. economy is predicated on spending more than you make, so it's easy to understand why so many people do it.

Now Stop Working

The second step in the process - retiring - that's actually the easiest part. At some point during step 1 you'll realize that you probably have enough money and you can exit the rat-race and go live somewhere that you used to just take vacations.

Of course if you're one of those individuals who just wants to work for the rest of your life or if you've got three ex-wives and seven kids, you may find it more difficult to stop than others might.

You should keep this in mind during step 1.

If you can operate your own part-time business in retirement - something that you love to do and would continue doing even though it isn't enormously profitable - well, that's the best kind of business to run because it's not really work.

Change the Way You Think About Money

By far, the hardest part of the process is step number three - making your pile of money make more money so that you don't outlive it. Unfortunately, most people work until they are around 55 or 60 and then they try to learn an entire life's worth of personal finance in just a couple of years. They are wholly unprepared for the kind of measures that you have to take today to stay ahead of the great monetary debasement train that is making its way down the tracks.

Yes, you really have to change the way you think about money to avoid outliving your pile of money. Despite what the government tells you, money doesn't maintain its value like it did fifty years ago and you can't live off of interest earned on bonds and CDs like your grandparents did. That is, unless your pile is really, really big.

Also, remember that if you are anywhere near our age, you are much closer to the end of the social security line than you are to the beginning. Unfortunately, most people don't have an option here as something like two-thirds of senior citizens count social security as their only source of income - they'll take what the government gives them and, if necessary, they'll work at the local Wal-Mart until they drop dead to make ends meet. Don't let that happen to you.

Step number one is a prerequisite to step number three and even then step number three can be very difficult.

That's what I spend most of my time thinking about lately - step number three.

So far so good.

Unfortunately most people aren't going to make it past step 1.

To learn more about investing in natural resources using commonly traded ETFs, stocks, and mutual funds, see this description at Iacono Research. Or, sign up for a free trial.

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Larry Kudlow loves the Liberty Dollar

Sometimes, you can learn a lot by listening to Larry Kudlow on CNBC - yesterday was one of those times as Liberty Dollar founder Bernard von NotHaus was on talking about the FBI raids of his "inflation proof money" operation and upcoming legal proceedings.

Click to play in a new window

Just remember that you should question everything that Larry says and think for yourself, lest you find yourself falling under the powerful spell of supply-side group-think where all the world's problems can seemingly be solved by lower taxes and higher asset prices.

Anyway, just having the Liberty Dollar guy on CNBC was a real breakthrough - talking about the nature of money, the Federal Reserve, and the seemingly contradictory indicators of low inflation and a soaring gold price.

Along with Larry, the writers at Forbes seem to have a kind of affinity toward precious metals, as exemplified by their fearless leader who not only espoused a post-Katrina $35 oil price but who also believes that the Fed should target the gold price.

What is most important about the Liberty Dollar raid is that it helps to raise awareness about the value of the U.S. dollar and the workings of the Federal Reserve. The timing of the FBI raid couldn't be better, coming when oil is about to hit $100, gold is near 27-year highs, and other countries are increasingly talking about dumping the dollar.

The Ron Paul Presidential candidacy is another piece of the U.S. dollar puzzle - have you seen these latest poll numbers from Real Clear Politics?

Still probably just a snowball's chance in hell, but stranger things have happened.

The more people talk about the dollar, the worse it looks, and then the more people talk about it - at least that's the way it seems.

To learn more about investing in natural resources using commonly traded ETFs, stocks, and mutual funds, see this description at Iacono Research. Or, sign up for a free trial.

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My first million!

No, I'm not talking about dollars - unique visitors! This must have happened yesterday sometime and while it's not much compared to some of the other guys out there, it's still a million unique visitors and almost two million page views according to Sitemeter.




One million visitors.

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Notes from the Hard Assets Investment Conference

Just a couple of notes from the Resource Investor Hard Assets Investment Conference in San Francisco, but, before that, one more reminder that the special offer at the companion investment website Iacono Research expires tomorrow.

Two Year Subscription - Only $99 per Year

Remember, if you sign up for a FREE 30-DAY TRIAL before the end of the day tomorrow, you will be eligible for the special rate during your entire free trial period.

[Note: You only get one free trial per person, per lifetime (multiple free trials kind of defeats the purpose of this being a subscription service). There have been a raft of repeat requests in recent weeks - from eight months ago to more than a year ago. If you'd have purchased a subscription back then and followed along with even a relatively small investment, you would have made back the subscription price many, many times over. The model portfolio has gained 21 percent from March of this year and 27 percent from last November at this time - you do the math.]

An Updated Watchlist

The most important benefit of having attended the Hard Assets Conference over the last couple days is that an updated Watchlist will be available for subscribers this weekend - after listening to a bevy of company presidents, investor relations types, and other newsletter writers, I came away with a solid list of companies that will be featured in this weekend's update.

It's not clear when new positions will be added to the model portfolio since market gyrations are really getting wild now - actually, this makes for better buying opportunities from distressed sellers who apparently think that since the yen is rising against the dollar, they have to sell their mining shares.

We'll see - maybe something will be added this weekend.

Old Men in Suits

There were more than 200 companies represented at the show - mostly gold and silver mining companies but with a fair number looking for other precious metals or uranium - behind nearly every booth sat old men in suits.

There were a few exceptions, but, for the most part, this is clearly a very old industry that has not yet attracted much of a younger crowd. The audience appeared to be, on average, even older than the company execs, but they were mostly dressed in Sansabelt slacks and comfortable, off-white walking shoes.

There were a few younger folks in the audience who were all dressed up - finance or fund manager types apparently - but they were few and far between. I kind of stood out like a sore thumb with jeans and sneakers, maybe looking like I belonged at the Apple Store across the street. The only other casually dressed younger man I saw was with his octogenarian father.

It was quite spectacle outside the hotel when this crowd mixed with the locals (if you've been to San Francisco, you'll know what I mean).

James Dines, Rock Star!

Speaking of octogenarians (at least according to Peter Brimelow at MarketWatch), James Dines sure gets around pretty good for an eighty year old. Of course, it probably helps if you have three beautiful "assistants" that are not much more than a third your age - that'll keep you young.

The "original uranium bug" was clearly the star of the show - the presentation room would fill when he was about to go on and it was a shame that he only had 15 or 20 minutes to talk in his solo appearance.

You get a completely different impression of the man than in the picture above when you see him in the hotel lobby about to go out on the town with his three "assistants".

Patrick is gonna buy a few gold coins

I was able to sit down for about an hour or so and talk with World famous Patrick Killea of Patrick.net - I think I convinced him to buy at least a couple one-ounce gold coins.

When I used to work at a regular job, I would occasionally bring in two one-ounce American Eagles and place them into the hand of a co-worker and, while they felt the heft of the metal, I'd go on to explain how they are stamped "Fifty Dollars" on their face but you can get 15 times that amount at a coin shop.

Yeah, "Denser than lead", I told Patrick. I just wish I'd brought a couple of coins - I thought we were going to talk about housing but he was more interested in the Federal Reserve, money, money printing, and investments. It was a very pleasant talk.

Bashing the Fed and the U.S. Dollar on Christian radio

I've never heard of the Paul McGuire radio program before - I only listen to Christian Radio accidentally and usually not for very long. But, while scanning to find something interesting on the way home yesterday, I heard voices on the radio bashing the Federal Reserve and begging for a recession (or worse), so I stopped and listened.

The guest was Craig Smith, who apparently is much harder to find on Google, and there was no end to the gloom and doom they were preaching.

I had heard similar talk before (some of it quite scary) - it sounds as though the apocalypse is now dollar-denominated.

More at the Investment Website

There will be more (useful) news from the Hard Assets Investment Conference either this weekend or next for subscribers at the investment website - nothing earth-shattering, just a little more insight into some of the companies in the model portfolio.

To learn more about investing in natural resources using commonly traded ETFs, stocks, and mutual funds, see this description at Iacono Research. Or, sign up for a free trial.

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Peak oil, peak dollar on the front page of the WSJ

The folks over at The Oil Drum were understandably a little excited yesterday as the subject of "Peak Oil" finally made it onto the front page of the Wall Street Journal. Today's headline is more along the lines of "Peak Dollar", a much easier event to detect with certainty, though it appears that many have waited longer than they should have to take action as a result.

First, to the apparently no-longer "fringe" thinking that the world may have reached a peak in crude oil production. If you read this entire report($) closely, you can detect some interesting choices of words as the authors seem to want to remain optimistic but grudgingly accept the possibility that the Peak Oil theorists might be right.

A growing number of oil-industry chieftains are endorsing an idea long deemed fringe: The world is approaching a practical limit to the number of barrels of crude oil that can be pumped every day.

Some predict that, despite the world's fast-growing thirst for oil, producers could hit that ceiling as soon as 2012. This rough limit -- which two senior industry officials recently pegged at about 100 million barrels a day -- is well short of global demand projections over the next few decades. Current production is about 85 million barrels a day.

The world certainly won't run out of oil any time soon. And plenty of energy experts expect sky-high prices to hasten the development of alternative fuels and improve energy efficiency. But evidence is mounting that crude-oil production may plateau before those innovations arrive on a large scale. That could set the stage for a period marked by energy shortages, high prices and bare-knuckled competition for fuel.

The current debate represents a significant twist on an older, often-derided notion known as the peak-oil theory. Traditional peak-oil theorists, many of whom are industry outsiders or retired geologists, have argued that global oil production will soon peak and enter an irreversible decline because nearly half the available oil in the world has been pumped. They've been proved wrong so often that their theory has become debased.
...
The oil industry has long been beset by doom-and-gloom scenarios, which so far haven't panned out. "The entire oil industry in the late 1970s was convinced the price [of oil] would be $100 by 1990 and we would need huge oil shale mines" to exploit oil locked away tightly in rock, says Michael C. Lynch, president of Strategic Energy & Economic Research Inc. Of course, that didn't happen, as discoveries ushered in new eras of low-priced oil in the mid-1980s through the late 1990s.

Well, the folks at the oil drum were surely pleased with the press, but Gail the Actuary had some issues with a few parts of the story.

In a critique of the WSJ report that appeared late in the day yesterday, the characterization of the "global oil tank" being close to the "half-empty point" seemed to cause the most discomfort and understandably so, as anyone familiar with the fine work that appears at TOD should well understand.

Gail? Tank half empty? Debased theories?

This is non-sense. One by one, each field that has been pumped extensively has gone into irreversible decline. The production of the majority of countries of the world is now in irreversible decline. It is becoming increasingly clear that in the not-too-distant future, world production will begin to decline. The coming decline of oil production has been predicted by many. The estimated date has varied, but the general time frame has been around 2000 to 2020.

One aspect of peak oil theory that is being refined is the method of prediction. One of the earliest techniques predicted that oil production would begin to decline when half of the available oil had been extracted. Methodology has been expanded, so other forecasting techniques are now also used. (It is doubtful that this was ever the only technique used.) Some reasons for not relying on this technique:

• There are many types of oil resources, including free flowing traditional oil and the very difficult to develop oil sands and oil shale. If a 50% factor is applied, it must be applied to each type separately. Thus, adding oil sands reserves which are very slow to be developed does virtually nothing to push forward the peak oil date.
  
  
• New technology can change the pattern of production. Sometimes, new extraction techniques can "hold up" production until perhaps 60% of the ultimate resource extracted has been removed, so that the decline begins later, and is steeper.
  
  
• Many of the frequently quoted reserve amounts appear to be seriously overstated. OPEC numbers appear to be too high, as indicated by this analysis. Even US Geological Study reserves have been questioned as being too high, in analyses such as this one. Reserve estimates are not audited, and different organizations have different standards for setting their reserves.

Because of the these issues, those involved with the study of peak oil use a variety of techniques to project the peak in future production, rather than simply applying a 50% factor to estimated ultimate production.

What will make "Peak Oil" all the more interesting is what now appears to be "Peak Dollar", that is, the irreversible decline in the world's reserve currency for most of the last century - the U.S. Dollar.

Today's front page story($) at the Wall Street Journal tells of oil-rich nations that are either de-pegging, revaluing, or thinking about one of these two options as the "global dollar tank" appears to be overflowing.

For many years, oil-rich Persian Gulf states have pegged their currencies to the dollar. Now that link is stoking a bad bout of inflation in their red-hot economies and putting policy makers in a dilemma: Break the dollar peg and risk undermining the U.S. currency, or keep it and face growing local discontent.

The dollar peg has "served the economy...very well in the past," said Sultan Nasser al-Suweidi, the governor of the United Arab Emirates' central bank, last week. "However, we have reached a crossroads."

Because countries such as the UAE, Saudi Arabia and Qatar sit on large reserves of U.S. dollars, their decisions will have repercussions beyond their borders. If they move away from their strict dollar pegs -- perhaps following Kuwait, which earlier this year switched to a basket of currencies -- it could undermine demand for dollars and encourage others to diversify their holdings. Many nations have already created sovereign wealth funds to invest their holdings in a broader array of assets.

The Persian Gulf nations originally tied their currencies to the dollar to stabilize their revenue from oil, which is traded in dollars. Also, some nations had little central-banking expertise and found it easier to tie their monetary policy to that of the Federal Reserve in Washington.

Now, however, the Fed is cutting rates to prop up the slowing U.S. economy and forestall damage from the U.S. housing downturn. That's precisely the wrong prescription for economies trying to tame galloping growth, such as those in the Persian Gulf.

This is probably not going to end well.

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Housing starts rebound (a little)

The Census Bureau reported that housing starts rose in October, but not by much. Building permits, a more important leading indicator for residential construction, fell for the 18th time in the last 21 months to a new 14-year low.
This report at Bloomberg has a few more details - it sounds like the cheery headline was a result of new condominium projects that may prove to be a tough sell when they are done:

Housing starts in the U.S. unexpectedly rose in October as a jump in work on condominium projects outstripped the weakest construction of single-family homes in 16 years.

Builders broke ground on 1.229 million homes at an annual rate last month, up 3 percent from September, the Commerce Department said in Washington today. Construction of single- family homes fell 7.3 percent to the lowest since October 1991. Multifamily home building surged 44 percent.

Sales of single-family homes are dropping as potential buyers wait for prices to fall even more and some banks make it more difficult to get mortgages. Demand is declining as fast as construction, preventing builders from trimming inventories and suggesting the real-estate recession will linger into 2008.

"All of us are ratcheting down our expectations for the bottom of the housing sector and I don't think we're there yet," said David Resler, chief economist at Nomura Securities International Inc. in New York.
...
Toll Brothers Inc., the largest U.S. luxury homebuilder, said Nov. 8 that fourth-quarter revenue fell 36 percent and the cancellation rate rose to the highest ever.

"We do think that this is worse than it was in '88 through '90," Chairman Robert Toll said on a conference call. "We can't predict how long this down period will last."

No, it's still too early to call the bottom, though some will probably do so anyway.

To remind readers of past "bottom calling" folly, here's a brief stroll down memory lane from nine months ago - Definitely Not the Bottom. It contains the memorable late-2006 National Association of Realtors ad campaign along with the late-2006 bottom call by former Fed chief Alan Greenspan under the heading POSITIVE OUTLOOK:

Former Federal Reserve Chair Alan Greenspan recently said that housing prospects are looking up. "Most of the negatives in housing are probably behind us. The fourth quarter should be reasonably good, certainly better than the third quarter."

In retrospect, maybe NOT SO POSITIVE. How many people do you think bought real estate a year ago based on this reassurance?

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Go west young man

I'm off to the Resource Investor Hard Assets Conference in San Francisco for the next couple of days - look for something new here sometime on Tuesday.

The laptop is staying home as there seems little reason to pay the hotel an extra $15 a day for internet service just to read mail and complain here again about how expensive everything is.

Parking costs $50 per day, so that means that the car stays at the BART terminal about 50 miles away from the city - it's probably better that way since driving in town can't be any fun for a mountain man like me.

The hotel bill is going to be much higher than I'd like to pay and there doesn't seem to be any way to avoid the extra $20 room tax that gets tacked on - as I understand it, I'm getting off pretty easy, but, really, how can people afford to go there?

One of the highlights of the trip will be sitting down for a cup of coffee with Patrick Killea of the world famous housing crash site Patrick.net.

Oh yeah, gotta pick up some sourdough bread too.

ooo

This week's cartoon from The Economist:

To learn more about investing in natural resources using commonly traded ETFs, stocks, and mutual funds, see this description at Iacono Research. Or, sign up for a free trial.

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