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From our sister blog Investorazzi.com earlier today:

“Marc Faber, Jeremy Grantham Warn Of Global Bubble”

“‘I am officially scared,’ GMO investment manager Jeremy Grantham told professionals from as far away as Abu Dhabi and Malaysia. ‘In 2000, we had a technology bubble. But this is massive, a massive credit crisis and a bubble in global housing, global equity and global land.’”

Jim Rogers Was Right About Wall Street And Their Maseratis

Over the past several months, legendary investor Jim Rogers has made a few comments about a certain make of car— the Maserati. Now, it doesn’t appear that Mr. Rogers dislikes Maseratis for any reason in particular. Rather, he’s been mentioning the Italian manufacturer of racing and sports cars to make a point about how out of whack things have gotten down on Wall Street. Back on June 6, Rogers told Bloomberg in an interview:

You don’t see any 29-year old cotton farmers driving around in Maseratis, but you do see a lot of 29-year olds on Wall Street driving around in Maseratis. This is not the way the world is supposed to work.

The CEO of Rogers Holdings said such a situation exists due to the tremendous excesses that have taken place in the financial communities over the past several years.

And it’s not only Wall Street traders who have been associated with the exotic sports car. Investment bankers too. Yet, they almost came close to losing theirs a few months ago— if it weren’t for their pals over at the Federal Reserve. Rogers told Bloomberg on March 17:

And here he [Fed Chair Ben Bernanke] goes and gives more of our money to Bear Stearns so these guys can continue to drive around in their Maseratis… The Federal Reserve is using taxpayer money to buy a bunch of Bear Stearns traders Maseratis.

Looks like Jim was right about Maserati being the vehicle of choice down on Wall Street. While surfing the web yesterday, I happened to notice that Bloomberg.com had posted a review of the $115,000 Maserati GranTurismo on their site. Bloomberg’s Jason Harper wrote:

The Maserati GranTurismo delivers on a quality increasingly rare in the auto world: beauty. Put it against any dozen modern cars and the GT’s supple lines, perfect swells and ideal dimensions will outshine them all.

At $115,000 it’s not exactly a drop in the bucket, yet those exotic looks leave most people thinking it’s as expensive as a Ferrari.

Don’t fret, Wall Streeters. A few more taxpayer bailouts here, and some government interference/market manipulations there, and you’ll have enough of Main Street’s hard-earned cash to finally afford that Ferrari…

Jamiroquai, “Cosmic Girl” (1996)
YouTube Video Link

Sources:

Jim Rogers Interview
Bloomberg News Video
Bloomberg, June 6, 2008

Jim Rogers Interview
Bloomberg News Video
Bloomberg, March 17, 2008

“Maserati GT, $115,000, Evokes Classic Beauty of Italian Coupes”
Jason H. Harper
Bloomberg, July 23, 2008

Using The ‘Rule Of 15’ To Identify Local Housing Bubbles

“All real estate is local.” A statement often repeated by those in the housing industry. Now, there might be a way to determine if housing bubbles are local too. CNBC contributor Carmen Wong Ulrich wrote on July 10:

Ever hear of the real estate Rule of 15? I mentioned it yesterday on a segment with Al Roker on the TODAY Show as we discussed a question tossing and turning through many American heads these days: “Should I buy or rent?”

Here’s how the rule goes: Let’s say you’re looking at a 2-bedroom house or apartment:

1) Find the going rent in the neighborhood or location you’re interested in—which you can track down through sites like Zillow.com and Trulia.com—and calculate how much you’d spend in rent a year. Say, $2,000 a month would mean an annual rent of $24,000.
2) Multiply that number—your annual rent—by 15. (in this case: $360,000)
3) Now look up and compare the going price of a comparable space in the same area, to buy.
4) If that number is much greater than your annual-rent-times-15, the location probably still has a way to go down in home value. The bubble here ain’t done burstin’ and you should rent for a while. The last thing you want to be is upside-down on a mortgage—owing more than your new home is worth.

Hmm. Time to whip out the old calculator and try the “Rule of 15” myself:

1) My girlfriend and I rent out a 2-bedroom, 2-bath apartment on the northwest side of Chicago. We pay $1,100 a month, or $550 each, which is more-or-less the going rate in the neighborhood. Therefore, annual rent is $13,200.
2) Multiplied by 15, this comes out to $198,000.
3) I took the average going price of comparable 2-bedroom, 2-bath condo units for sale in our neighborhood, and found that this number comes out to $223,444.
4) The difference between the numbers arrived at in step 3 versus 2 is $25,444. According to the “Rule of 15,” prices for comparable 2-bedroom, 2-bath units in the area are headed south. Judging by the number of “for sale” signs in front of some of these buildings (and in the neighborhood in general), there might be something to this Rule.

Just one thing I don’t understand though. Why the “15?” I’ve sent an e-mail to Ms. Wong Ulrich, hoping for an explanation…

Source:

“Buy or Rent? Learn the Rule of 15”
Carmen Wong Ulrich
CNBC, July 10, 2008

Holiday Schedule

No new material will appear on Boom2Bust.com until Monday, July 7, 2008, in observance of Independence Day.

Have a happy, and safe, Fourth of July!

Christopher E. Hill
Editor

James Brown, Apollo Creed, “Living In America”
Scene From Rocky IV
YouTube Video Link

Dow Headed Below 10,000?

Remember some of those “literary classics” from a few years ago that predicted new heights for the Dow Jones Industrial Average?:

• Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market, released November 14, 2000
• Dow 40,000: Strategies for Profiting From the Greatest Bull Market in History, released June 26, 1999
• Dow 100,000: Fact or Fiction, released September 30, 1999

Well, here’s a new forecast that points in the opposite direction. CNBC ran a piece today on how some analysts are saying that the Dow, which closed down 1.5% today to end at 11,215.5, is heading below 10,000. According to CNBC this morning:

Investors should ignore recent signs of strength and face up to the fact that we will face a prolonged bear market, John Carter, president of Trade The Markets, told CNBC Wednesday.

“Longer term we’re looking at a market that is a bear market,” Carter told “Squawk Box Europe.”

While we can expect a rally over the next three to five weeks, this is a downward spiral that is not going away any time soon, he said.

“A trend is a trend until it ends, and we’re actually looking for the Dow to take out 10,000 by the end of the year,” he added.

There are too few sectors holding the markets up, and too many dragging it down, to consider getting back into non-recession-proof sectors, according to Carter.

“A large percentage [of sectors], like financials, are getting hammered. A lot of the darlings of the past are going to get taken out back and get shot,” he said.

“I’m Your Man”

CNBC also spoke to Hugh Hendry, a partner at hedge fund Eclectica Asset Management, who added that technology stocks are also likely to be gunned down as the two were affected by bubble conditions. From the CNBC piece:

Hendry said the outlook is particularly bleak for financial and technology stocks — the two largest components of the S&P 500 — which he said have both seen a bubble.

“When a sector becomes infected by a bubble…what history reveals is it takes 25 years to regain the highs that we saw in real terms,” he said.

Source:

“Dow Will Sink Below 10,000: Strategist”
CNBC, July 2, 2008

Maintenance And Upgrades

Will continue until Monday, June 30, at which time new material will appear on Boom2Bust.com.

Consider this my “summer vacation” from posting…

Christopher E. Hill
Editor

Reprieve

To spare you from the escalating bombardment of bad economic news, no new material will be posted on Boom2Bust.com for the remainder of this week.

In all seriousness, I will be doing some re-tooling of both B2B and its sibling blog, Investorazzi.com. In addition, there are some other projects, including two new websites focusing on gold and silver due to be unveiled in a couple of weeks, that I’ll be working on.

Thank you for your patience.

Christopher E. Hill
Editor
editor(AT)boom2bust(DOT)com

Maintenance And Upgrades

There will be no posts today or Tuesday due to much-needed maintenance and upgrades.

Your patience is appreciated.

Christopher E. Hill
Editor

WSJ Survey: U.S. Economy In Recession, Further To Fall

The Wall Street Journal’s Phil Izzo talked about the latest Journal forecasting survey of 55 economists. Izzo wrote:

The weakening U.S. economy has further to fall, according to the majority of economists in the latest Wall Street Journal forecasting survey.

By a 3-to-1 margin, respondents said the economy is in a recession, and almost three quarters said the economy hasn’t yet hit bottom.

Highlights from the survey included:

• Fed Chairman Ben Bernanke’s approval rating rose slightly to 78 out of 100 from a 75 in February, which was the last time the question was asked.
• U.S. Treasury Secretary Henry Paulson’s rating fell a point to 73 from 74 in February.
• When asked what the biggest downside risk was to their forecasts, 35% of the economists said it was further deterioration in the credit markets, 25% said it was a sharp drop-off in consumer spending, and 13% said it was continued housing weakness.
• The survey group expects the economy to shed 1,625 jobs a month, on average, over the next year.
• They unemployment rate, now 5.1%, is expected to rise to 5.6% by December.
• Just 21% of economists predict home prices will reach a bottom this year. 67% see the bottom in 2009, and 12% say it won’t be until 2010.
• While most of those polled say the U.S. economy hasn’t hit a bottom yet, they expect gross domestic product to expand, on average, by 0.2% in the first quarter and 0.1% in the second, followed by a 2.1% increase in the third quarter.
• The group expects the Federal Reserve to cut its benchmark federal funds rate by another half-percentage point by June, then keep rates unchanged for the remainder of 2008.

Source:

“Economy Has Further to Fall, According to Economists’ Survey”
Phil Izzo
Wall Street Journal, April 10, 2008

Vacation Day!

After spending what seems like weeks upgrading Boom2Bust.com, I will be taking a “vacation day” to make improvements to my other weblog, Investorazzi.com. Therefore, no new posts on B2B today.

If you haven’t taken a look at Investorazzi yet, by all means, stop by. I’ve always been interested in the investment activities of legendary investors like Tom Barrack, Warren Buffett, Bill Gross, Jeremy Grantham, Eddie Lampert, T. Boone Pickens, Jim Rogers, and George Soros. Now, with the debut of Investorazzi.com earlier this month, I’m able to track their moves, and share them with you— for free. Hey, who doesn’t want to know what the “smart money” is doing, especially during these topsy-turvy times? Up and down, up and down…

YouTube Video Link

Internet TV For Finance Junkies

Print media giving you headaches? For all you finance junkies out there with high-speed internet access, you might want to check out this post on the CurrencyTrading.net website that was recommended to me. “Must-See Investing TV: 20 Free Online TV Channels for Finance Junkies” has a list of the top 20 free online financial TV channels. Divided into three categories (Major Business Publications, Regular TV Meets Online TV, and Online Specials), it’s a nice collection of resources.

Check it out!

Source:

“Must-See Investing TV: 20 Free Online TV Channels for Finance Junkies”
CurrencyTrading.net, January 28, 2008

New Blog!

In case you’re wondering why it’s been a little slow on Boom2Bust.com lately, it’s because I’ve been putting the finishing touches on a new weblog called Investorazzi.com, “Tracking The World’s Greatest Investors.” From my first post earlier in the day:

Welcome to Investorazzi.com, a new financial weblog that tracks the investment activities of the world’s greatest investors. At the present time, the list of legendary investors includes:

• Tom Barrack, “The World’s Greatest Real Estate Investor”
• Warren Buffett, “The Oracle of Omaha”
• Jeremy Grantham
• Bill Gross, “The King of Bonds”
• Eddie Lampert, “The Next Warren Buffett”
• T. Boone Pickens, Jr., “The Oracle of Oil”
• Jim Rogers
• George Soros, “The Man Who Broke the Bank of England”

Stop on by and take a look when you have time! Any suggestions on how to improve the blog are appreciated.

New material will be posted Tuesday on both sites…

TGIF

As everyone winds down their workweek, how about a little fun? For a long time, my weekend ritual used to go like this: Saturday- watch college football, Sunday- watch NFL, visit drinking establishments here/there, nurse hangover(s), the end. As I’ve gotten older, I’ve haven’t been able to watch as much American football as I once did. Regardless, now that the BCS Championship Game and Super Bowl have come and gone, the weekends seem soooo quiet. For two NFL quarterbacks, however, I have a feeling they might be trying to develop some post-football skills during the downtime. Check out Indianapolis Colts quarterback Peyton Manning and New England Patriots quarterback Tom Brady in these Saturday Night Live skits on YouTube.

(Editor’s note: The following may contain offensive material. Do not view if you are easily offended. Otherwise, enjoy!)

Tom Brady in a “Sexual Harassment” workplace training film

Peyton Manning in an NFL/United Way spoof

Updates

Hope everyone had a nice weekend. Unfortunately, I spent most of it behind this computer updating the weblog.

“Not right now, Lumbergh. I’m kinda busy.”

Stop by and check out the changes, so at least I’ll feel like the effort was worth it! In all seriousness, a couple of things should stand out:

• New font- While the old font seemed like a good idea at the time, it was starting to get a little bit difficult to read. I hope the new font is easier on the eyes.
• New colors- Just wasn’t enough flair, I guess.
• New category list- Great, another list. I hope you find this one helpful. At the beginning of each post you will find a list of categories the post is filed under.
• New post details- Click on an individual post, and the details of that particular posting are shown at the end, along with some options.
• Updated pages- “The Evidence,” “About,” and “Resources” have all been updated with new data, charts, and other items.

Boom2Bust.com, which was created to warn and educate readers of a coming U.S. financial crash, has really taken off since its inception on Memorial Day Weekend. When the blogosphere was first notified of its existence back on July 16, the blog received only 18 visits that very first day.

By December 31, only 5½ months later, Boom2Bust.com had received 23,110 visits by 12,219 unique visitors, according to AWStats.

Already in January, the blog has been averaging 486 visitors per day. Needless to say, I’m very pleased with the exposure the weblog has received to date, considering the short amount of time involved. Boom2Bust.com will be continually updated on a regular basis, and provided to readers at no cost.

Save your money for the coming financial storm…

Have a great week,

Christopher E. Hill
Editor
editor@boom2bust.com