Rise in Asset Prices all an Illusion-Fabian Calvo

Fabian CalvoBy Greg Hunter’s USAWatchdog.com 

Real estate expert Fabian Calvo says, “There’s a lot of manipulation from government agencies and the Fed that is creating this rise in asset prices . . . but it is all an illusion.”  Calvo’s company, TheNoteHouse.us, buys and sells $100 million in distressed debt a year.  Calvo says, “The Fed thinks this will work.  I don’t believe it.  I think we’re going to end up in some kind of currency crisis or come kind of bond crisis.”  Nevertheless, the Fed policy of suppressing interest rates is working–for now.  Calvo says, “The Fed realizes there needs to be a low rate environment for housing to recover or it’s a huge implosion.  They have thrown underwriting guidelines out the window.  They are going to continue with no money down loans or very little equity.”  The Fed also knows that many big banks are technically insolvent.  Calvo contends, “You have a lot of these zombie banks.  If you mark-to-market their assets, they would be bankrupt.”  So, the Fed and the government will continue to print money to keep housing prices and the big banks from collapsing.  Join Greg Hunter as he goes One-on-One with Fabian Calvo from TheNoteHouse.us.   

Comments
  1. justin king

    That was max info in just 12 minutes.- A lightning round of sound intellect. Greg’s Q’s were even better than the answers,which were spot-on.

    • Greg

      Thank you Justin King for the kind words.
      Greg

  2. Mitch Bupp

    I just saw yesterday that zero percent loans are back …. the market has adjusted and there is no going back to higher rates without crashing the market. Today, the markets are so distorted we really don’t know what is going on. The under current of a two-tier economy where the takers are the makers and the rest loose. Even Bernanke noted in his speech about Japanese deflation that an essential part of any debasement of a currency to stimulate aggregate demand had to have good accounting controls and regulatory enforcement for them to work. Do we have either?

    Thanks Greg and Fabian

    • Greg

      Mitch,
      Yes it’s another bubble in real estate being blown as we watch in dumbfounded amazement!! You can’t make this stuff up!!
      Greg

  3. art barnes

    Greg, I believe Mr. Calva is right in his likely hypothesis that there is nowhere else ready to accept the role of a “reserve currency” nation.because they are all in debt with the exception of China whose economy is not likely ready yet. The FED knows it, and that is why I accept the idea that Mr. Calva discussed about a 3 or 4 year low interest control in opposition of Mr. Williams 2013 hyperinflation scenario. However, be that as it may, the middle east is still the game changer. In that regard, President Obama is going to Israel in March, that’s a signal that some fence mending is due or that Obama is finally tired of Iran’s in your face nuclear program and is giving Israel a strike date. Interesting to note that it was just after the latest Iranian announcement of stepped nuclear program of just a few days ago that the meeting with Israel was announced. Notice how Hilary got out so that any left over stink if things go wrong won’t stick to her for political reasons. Last, but very important, is the fact that the strike could come sooner rather than later if there is going to be super cuts in the military due to the automatic fiscal cliff looming in March as well. Who could cut military spending in the middle of a middle eastern crisis, I submit no one. Thanks for your site as its always interesting and enlightening.

    • Greg

      Art,
      He might be spot on and he usually is. My only question what if he’s not? I am happy to have many sides and opinions to help people decipher what in the heck is going on. One thing is crystal clear, we are headed for an even bigger crash. The only question is when?
      Greg

  4. therooster

    The FED is aware that the best way to move people to real-time gold-as-money is via the market. They are carrying “the stick”. A migration to debt-free bullion has to done bottom-up and organically or else the legacy system (debt based) would crash.

  5. Jim H

    Housing is not in a bubble. Housing is in a ownership transition much like farmland was after the Great Depression.

    Before the Great Depression, the vast majority of farmland was owned by the private citizens of the US. After the depression farmland began to transition to corporations and today the vast majority of farm land is corporate owned.

    The same thing is happening with residential real estate. The increase in home sales is not being driven by homeowners purchasing primary residences; it is being driven by investors purchasing investment real estate looking for vehicles that will benefit from the current inflationary environment.

    The Fed is pumping tens of billions of dollars a month into the economy while at the same time real interest rates are negative.

    Anyone who is not taking advantage of this window is either blind, or is one of the huge multitude who no longer have the money, credit, or income to take advantage of this opportunity.

    I believe that real estate will continue rise until it is out of reach of the average working person and that at some point in the future the majority of residential real estate in America will be corporate owned and the average working person will be a renter.

    • Greg

      Jim H,
      Thank you for adding your perspective and analysis to this post. Good stuff to think about.
      Greg

    • art barnes

      Correct that the large investor is buying our homes. In Stockton Ca an investor recently bought 75 homes for “renting” and “flipping”. What in effect happens as a result is a rise in prices (bubble) as well as increase rents for the average citizen who lost their home. The higher rents will result in increased inflation and a downward living standard. Those proud American investors will end up eating those homes at some point because rents can’t kept up with the “flipping” for profit, especially in what is now known as a jobless recovery.

    • BigB

      Jim H, you could not be that isolated in your thought process. The number of vacant homes in America is staggering. The homes that are being sold by members of the Natioanal Realators Association our out numbered by over 7 to 1 by house being sold on the court house steps. Sold to investment companies that can pay cash. 30% to Chinese investment companies.

      Do you know where the 40 Billion per month the Feds are printing is going? I don’t think you do. It is going to HUD, ie, Fannie Mae and Freddie Mac to pay off the investment companies who bought the loans from the financial institutions. It is called Primary Mortgage Insurance. That is what the FMac and FMae do. They insure those 95% loans.

      Why do you think there is such a large inventory (hidden albiet)? Because if the government released these homes on the market it would destroy any equity any one may still have. The Feds who are giving this money, made up and fiat, to the government are using these properties as collateral on the bonds and treasuries it sells to foriegn governments.

      This is a Ponzi scheme on a level never before equaled in history.

  6. Edward Ulysses Cate

    The unfortunate side-effect of this illusion is the very-real acquisition of title through the buying of mortgage bonds; they’re not just “printing money.” Even before the crisis, Fannie and Freddie “owned” over half the mortgages. I suspect that’s what the old 1889 book “Great Red Dragon” meant by sociopaths (bullies with means) trying’ to “own the earth in fee-simple.”

    What amazes me is that a few sociopaths can steal the savings of entire generations and walk free. Must be like taking candy from a baby.

    • Greg

      Edward Ulysses Cate,
      Good point my friend!! Thank you for making it here.
      Greg

    • Jim H

      What you are witnessing is the perfection of slavery.

  7. This guy

    Dear Greg…
    I cannot thank you enough-both for the work you do here, as well as for this interview which I found immensely informative.

    While I’m not one to doubt John Williams and his fine work (of course number don’t lie), I have to agree with Mr Calvo on his opinion that things won’t crash too soon, as TPTB will manipulate whatever they can in any way neccesary to keep the ponzi going until such time as their desires change-either via war, cyber attack, or some other paradigm shifting event.

    During my awakening process, I fell prey to the usual conspiracy minded things that tend to stick during a broadening of one’s awareness. However, since coming back to earth I realized that trying to figure out future events by using ‘laws’ and ‘statistics’ was futile, simply b/c those are rules that TPTB do not play by. Laws and facts are for us ‘little people.’

    Therefore I just prepare for any eventuality as best I can. Your work has been incredibly valuable in letting me know what truly happens in this world. And while I’m grateful for all of the info, I would suggest that you never limit the audacity of those in charge when it comes to what they THINK they can pull off!

    All the best!

    • Greg

      This Guy,
      You are totally correct to try to put yourself in the best position as possible. We know this mess is far from over. All the massive money printing is doing is buying time. Sounds like you are using it wisely. Thank you for your kind words of encouragement.
      Greg

  8. Troy

    Good interview and perspective

    Thank You Greg!

    • Greg

      Thank you Troy for checking in!
      Greg

  9. DAVE

    Hi Greg
    Nice reporting .Well I tend to disagree with his time line but lets hope he is right for the sake of a lot of unwitting people.Anyhow news out today is insider’s are dumping there shares at a alarming rate/9 to 1 to be specific which is huge!!!!I tend to agree with the report which adds these people know much more than any investor, analysts,commentator.More indicators are rising gas prices and 15% surge in rice, the largest since world war 2.Time will tell
    Thanks again
    Dave

    • Greg

      Thank you Dave for the comment.
      Greg

  10. justin king

    I worked Marin county real estate for 10 years and I do believe Jim H. could be correct. As Greg mentioned,it’s food for thought.

  11. Agent P

    The $USD will likely Not ‘collapse’ by this May. Then again, that is also Not what Williams said or suggested. What he said was that if there was not any meaningful decisions by our political-cum-monetary leaders regarding our debts/deficits and unfunded liabilities by May of this year, the cake would effectively be ‘baked’ – in other words, no turning back. That doesn’t translate into the Wicked Witch coming ’round at the stroke of midnight on May 01, 2013, but common sense already told you that…

    It is going to be a continuation of Lies, Distortions and Debauchery by our political-cum-monetary ‘leaders’ right up until the bitter end. ~That~ you really can take to the $Bank with a guarantee of return on (temporal) investment…

  12. BK

    Just about every furniture store ad on TV is advertising 0% interest until 2018.
    House flippers are back. Subprime auto loans are back.
    Bernanke has succeeded in reflating a bubble.

    • art barnes

      Couldn’t have said it better, yes, Old Ben has did it again, yes, a new bubble. The elite and home flippers are dancing!

  13. Mike

    Fabian’s insights were very interesting. One consideration is that the FHA loans are probably recourse loans – meaning that the bank can go after the borrower’s assets in case of default.

    Although not a real estate expert, I disagree with Jim. Traditionally real estate prices have risen due to increasing incomes. But that is flat to falling and the only driver is low interests rates. Once that reverses then housing is done. Some people will do fine but the majority will see their disposable income shrink due to inflation and higher taxes and be forced to make tough decisions.

    When taking out any loan there is the assumption that your income in the future will be equal or greater than it is currently. I don’t think that assumption will hold true for most people in the foreseeable future.

  14. DAVE

    Hi Greg
    Here’s another news bulliten you may want to include on your wrap up.Just on Lou Dobbs tonite /Homeland Security makes another purchase for 21.6 million rounds of ammo.
    Dave

  15. DAVE

    Here’s another one Greg that is really strange //A purchase to the National Weather Service for ammo as well.Very strange strange mate
    https://www.fbo.gov/index?s=opportunity&mode=form&id=bfd95987a1ad9a6dfb22bca4a19150cb&tab=core&tabmode=list&=

    • Greg

      Dave,
      Something bad is coming. God help us all. Thank you for the link!
      Greg

  16. Nick

    I think that inflation, and the fact that there is really no safe haven for your money may be a reason why Blackstone and others are putting dollars into property.

    Also, does the big players, who have an ear in DC, buying up all this realestate have a correlation to the clamoring to change the immigration policies? More people to buy those homes.

    • Greg

      Nick,
      Good questions and analysis. Thank you for posting it here!!
      Greg

  17. Liquid Motion

    Hi Greg,
    Yes Fabian’s Right on the “money”…apologies..!!
    But then again its no big surprise to anyone who is financially literate and understands the whole charade of propping up asset values.
    Although….
    This time its different (famous last words)…
    Easy monetary policy at turn of the century …led to massive speculation in housing after internet stocks crashed and burned. Speculation was excessive and caused the bubble in housing together with those nasty (sub-prime)MBS’s being created and packaged ( as AAA)by the Banking fraternity which in turn has led to this continued money printing to ensure continuity of the financial system.

    IMHO Property prices still haven’t had the opportunity to run their full course. Whilst we have similar metrics for monetary policy (low int rate environment) we are missing the necessary speculation and confidence whilst concurrently seeing no improvement in Employment. All the money in the world doesnt replace confidence.
    Deflation of debt on the part of the mortgage holder is primarily to blame. Housing will not recover unless the debt burden is reduced or eliminated. Household’s are now in lock down mode….not spending because of job insecurity. Remember USA is an economy built on the consumer spending ..(~75% is consumer based). Without the consumer spending there is no economy. Without confidence..there is no housing recovery.The geniuses at the FED know this…and yet ??..dumbasses !!
    Here’s a thought …instead of the FED saving the ass of all its cartel members (via money printing) and not forcing (via congress) marked to market valuations on housing carried on books of banks…..WHY DOESNT THE FED ABSORB THE MORTGAGES THAT ARE UNDER WATER (NEGATIVE EQUITY) AND FORCE BANKS TO TAKE EQUITY IN NEWLY WRITTEN MORTGAGES.YOU WOULD GET PRICE DISCOVERY QUICK SMART IN THAT PLAY. AFTER ALL WE HAD TARP DIDNT WE…???
    Not entering the Moral Hazard debate here…but havent the FED been wasteful and inefficient in their esteemed printing and allocation?
    Oh yeah I forgot …they are crooked…they cant play fair…they cant extend the credit lines to the one thing that drives the country. “IT” is only interested in looking after its creators.

    So here we are wondering what of the housing market.
    The FED keeps with its mandate…to print ’till eternity…..it doesnt have any choice…rates and bonds are intertwined.
    I did a quick back of the envelope calculation in regard to the debt limit….in relation to GDP. The USA can take another 20 years at current rate of printing to get to a debt/gdp ratio on par with that of Japan’s. That of course excludes the debts that are off balance sheet (which represent contingent liabilities only). That merely implies that an extended period of low interest rates and enormous debt creation will ensure a depressed housing market. Debt will not create growth nor will it re-establish confidence. The harsh reality is that a stock market and housing market are giving false signals. The secular bear market has but barely begun. One decade is but a third of the cleansing process. Considering the extreme extension of the cycles we have a considerable amount of unwinding to do….which is delationary for asset prices. The FED is trying its utmost to fight the losing battle by artifically ensuring the bottom doesnt fall out. That’s the real reason behind the charade of GAAP being avoided and Banks NOT taking their medicine. We all lose….BIG TIME.
    Either way you look at it we are all screwed….you hold Bonds…you lose (negative returns), stocks priced at better than perfection…high risk….housing ….more pain to come….currency…crisis alert !!! Oh and if you have a pension fund…watch out….they are coming after that…disguised as patriotism.
    Be well comrade…we face even darker days ahead.

  18. Ted

    Owning real estate is the way forward.

    Gold is going nowhere for the rest of the year.

    Stocks will be choppy and then jump higher by 3rd or 4th qtr.

    Currency will NOT collapse by May.

  19. Greg

    Ted,
    What happens to the economy if the Fed stopped printing money ($85 billion per month)? How long will the Fed keep printing this money? What happens to the dollar as a result of all this currency debasement? What happens if the folks holding the $12 trillion in our debt outside the country start selling? What happens if there is nuclear war as Iran has just announced it has the bomb? You must have a plan for these contingencies if you are an investor. Thank you for your comment.
    Greg

  20. Mitch Bupp

    True Greg but you can not get around the math… the basics of the exponential function can not be disputed…. Have you ever watched AL Bartlett series on math and how the exponential function works in real life? These are great and every high schooler should be given the tools to think not just regurgitate from memory.

    http://albartlett.org/presentations/arithmetic_population_energy_video1.html

  21. Greg

    Good point Mitch. Thank you for posting this link. Very important for folks to understand this.
    Greg

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