By Greg Hunter’s USAWatchdog.comI was a featured guest on the nationwide overnight radio show “Coast to Coast AM” last week. The show airs on more than 500 radio stations. “Coast to Coast AM” has a huge audience. So, after my appearance, I was flooded with emails. Many people who contacted me said they were “scared” of what is happening in the economy and wanted to know what to do with their money to keep it safe. I want to share a couple of excerpts from the emails with you:
Marjorie wrote, “… we are confused about what to do regarding a new home purchase now. On the one hand you say the cost of housing should continue to drop, and at the same time you say the new loan coverage of Fannie and Freddie will cause enormous inflation…. How can prices drop at the same time as this runaway inflation is coming?”
Thank you for your kind words. My dad used to say, “What’s the difference
between a $150,000 house at 10% and a $300,000 house at 5%?” (assuming both
houses are identical) Answer: The payments would be about the same, but the
$150,000 house would be a much better value. Why? Because you do not buy
an interest rate, you buy a house. Interest rates are going up at some point;
and, as rates rise, house prices will drop. Inflation is not uniform… gas
and food can go up (as they have already) and home prices can go down at the
same time. (Sound familiar? This is just what is happening now.) I don’t
see a bottom in home prices until at least 2012. Please check out my
favorite chart in “Real Estate at a Bottom?…Not!” There will be plenty of
houses on the market in the future. Save and invest your money wisely and be patient. The deals will still be there after 2012 and, I think, at even lower prices than today.”
In another email, Dorothy wrote, “Greg, we heard you last night on the Coast-to-Coast radio program…you were brilliant…but we are scared. What should we do: (1) take savings from C bank and put in A bank (in FL)? (2) sell investment properties at big losses now? (3) withdraw IRA/401K monies, despite penalties, and put into precious metals (or where else)? (4) renew annuity coming up? Thank you for your help.”
(1) Definitely move your money to the highest rated bank you can. There is nothing wrong with having some cash right now. (2) Depends on cash flow and how much you owe on the property. That said, the real estate market is not coming back for a long time…. You will have to decide what to do on that one. (3) Talk to your accountant before you withdraw any IRA money so you understand the tax implications ….Please check out a September post titled “Get Out of Debt and Stay out of Debt”, but it is also about hedging. You cannot
properly hedge yourself while you are in debt. Also, read “The Smell of Money Harvesting is in the Air!” There will be another big sell off in stocks and Wall Street will, once again, harvest some of your money. We have had a very big run up since the March lows of 2009.”
My overall take from the dozens of emails I received from “Coast to Coast AM” listeners is people are scared. The folks who wrote me also want help in coming up with ways to protect their hard earned money. I did not get the feeling that anyone was trying to get rich. The collective masses know there is something big coming but can’t put their finger on it. One thing is for sure, no country in history has built up this much debt. This huge debt load permeates the United States:
– The government has tens of trillions of dollars in debt and liability.
– Nearly every state budget is in deficit with more than $200 billion in annual shortfall.
– The public pension system alone is two trillion bucks in the hole.
– The banks still have hundreds of billions of dollars in hidden financial problems.
– The FDIC is broke and is facing hundreds of bank failures in the next few years.
– Residential and commercial real estate is in the tank and sinking deeper.
– We are fighting two very expensive wars abroad.
– And we just added more than $6.2 trillion in liabilities on Christmas Eve last year with Fannie and Freddie. (The Fed bought at least $1.25 trillion in Fannie and Freddie MBS.)
There is something wrong, alright, and people across the country can feel it. My advice is to plan for the worst and hope for the best. 2010 will be a year of surprises and not the kind you find under the tree at Christmas.