Five reasons not to buy US real estate
by Andrew Henderson | Apr 1, 2014 |
The future of US real estate investments?
Dateline: Tallinn, Estonia
I frequently talk about my five magic words for enhancing your freedom and prosperity: “go where you’re treated best”.
This is based around my idea that no one place is perfect for everything. For instance, the country with the world’s safest banks… but that charges you $80,000 to register your car if you dare live there.
In my mind, the US real estate market has been propped up by a bunch of people who don’t follow that rule. How many Americans do you see buying foreign real estate? The insular nature of American culture means that, unlike wealthy Russians or Chinese who gobble up overseas properties at lightning speed, few Americans look beyond their own borders for opportunities.
Worse, the US government’s fascination with thrusting homeownership on the public – complete with unsustainable tax deductions that makes every homeowner a crony capitalist – distorts the marketplace.
Back in 2005, I was just starting my business in the broadcast infomercial industry. I was living in Phoenix, Arizona at the time and real estate was hot as a pistol. People were camping out in front of new developments to pay insane prices for plots of land with little cookie cutter homes on the edges of the desert.
For me, this was good business. The real estate industry in California, Arizona and beyond was spending money like water. Everyone with a pulse wanted to produce radio infomercials for ego and profit. But as much as I enjoyed the success, I knew one thing: buying some tract house at an inflated price was a recipe for disaster.
Back then, my clients were shouting at radio listeners that “mortgage rates would never get any lower!” The idea that you could finance a house for 6% interest was unheard of at the time, and every bartender-turned-mortgage guru was making sure you knew all about it.
Of course, they were merely salesmen, not economic prognosticators. I later purchased a house not only at a fire sale price, but a 3.75% interest rates.
The point of this is simple: I benefitted from the mortgage frenzy in a way that benefitted me, without having to deal with the bad parts (such as buying a home that would plummet in value).
When I decided to travel full-time rather than just six months a year, I made the long-term decision to sell that house. And when the real estate agent told me I would earn a 60% return on a short-term holding, I knew something was wrong.
Yes, my conscious decision to wait until the bottom fell out of an obviously exuberant market paid off handsomely. But it paid off handsomely in large part because prices got so low that every hedge fund was buying up properties to rent out, drive up prices, and eventually dump. I believe that the nice price drops are well on their way in places like Arizona as cash buyers exit the market.
Five reasons not to buy US real estate
All of this got me to thinking about all of the reasons not to buy US real estate. I came up with five reasons not to buy, and I’m open to your comments below.
Poor rental yields
The average gross rental yield in the United States is a measly 4.2%, narrowly beating yields in Canada. Of course, Americans and even some foreign investors can get mortgages with as little as 10-20% down, making leveraged yields higher. Of course, the amount of leverage in the US real estate market is a large part of the problem.
Anyone with $25,000 lying around can become a landlord, often having no clue what’s involved. When he or she realizes they should actually have a few bucks stashed away to fix a leaking roof, they could lose the property and effect the entire market.
I saw this firsthand during my regrettable seven months living in California, where a guy earning $80,000 a year (in Los Angeles, mind you) not only had a highly-leveraged primary residence valued at $1 million, but owned four new construction condos in the suburbs that he paid $400,000 each for.
I can’t say I was surprised when I started getting foreclosure notices in my mailbox one day.
If you have no money and want to gamble in the US real estate market, go ahead. What do you have to lose when not putting up your own money? If you actually have some money, though, you shouldn’t settle for a 4.2% yield – nor the likely possibility that your fellow investors will crash the market.
Many of the places I’ve been in Asia offer yields of 8-9%. In Nicaragua, I saw a few properties with gross yields as high as 13%! (That’s why I’m offering anyone who joins The Nomad Society this month gets a free ticket to a three-day investment tour in Nicaragua.)
As a lifelong investor, I understand the power of leverage. However, the fundamentals of the US market are weak and don’t allow for much growth without leverage. This forces a bunch of ill-advised investors into the market who may ultimately increase your yield merely by causing the value of your property to plummet.
If you don’t have a lot of money to invest, there are plenty of properties in frontier markets like Cambodia for around $30,000 – the same as an investor’s down payment on a starter home. And because fast-growing markets like that actually have fundamentals for their price increases, you can actually do fix-and-flips that are based on real value, not bubbles.
Speaking of fundamentals..
The US real estate market has weak fundamentals.
What will drive US real estate going forward? One of the world’s lowest birth rates? The country’s declining status as a “wealthy” country? Most Americans would be surprised to learn that Singapore, not their homeland, is the richest country on earth. Next up: Luxembourg, Qatar, and Liechtenstein.
Americans who understand how bankrupt the western world is likely wouldn’t want to invest in Italy. The average salary in Italy is only about 18,000 euros. However, salaries in the United States are declining, as well.
On top of that, while there is a trend on “onshore” some jobs back from places like the Philippines, I believe further anti-business government policy will cause a long-term elimination of jobs due to further offshoring, companies moving their operations overseas, and technology replacing positions.
If real wages are decreasing, who will buy your real estate for a future appreciation gain, or rent it for a good rental yield?
Very little growth in the US is truly organic. It’s all on paper. In Southeast Asia, growth is very simple. People are getting better educations and higher paying jobs as their countries experience more entrepreneurship, more tourism, and more of other things that allow wealth in the country to increase.
The US, on the other hand, has just about hit a brick wall. Compare the number of people getting MBAs who would have dropped out of high school thirty years ago to sell gum on the street. In the US, the number is very low. In Cambodia, it’s very high. That is good for emerging markets real estate, but not so good for US real estate.
On top of that, governments can vote to keep investors out on a dime. Canada recently torched its Immigrant Investor Program, which attracted thousands of Chinese millionaires to buy high-end real estate in Toronto and Vancouver. Now that the government cancelled the program, real estate experts in Canada are bracing for the worst.
A single act of jingoism could send the value of your real estate tumbling.
Governments can (selectively) increase taxes on a dime.
Sure, this is true of any jurisdiction. It’s the same reason I wouldn’t be in a rush to buy real estate in Spain even with their offer of second residency.
But among “gotcha” tax jurisdictions, The Land of the Free must take the cake. This is a country whose President claimed his Obamacare wasn’t a tax… only for the Supreme Court to later rule it was to avoid having it overturned. The US government is the master of playing both sides of the coin.
Let’s say you’re doing well and you buy a nice home in the US. Your local or state government, which is likely drowning in red ink from decades of fiscal imprudence, realizes it needs more revenue and decides to append a “luxury property” assessment to your home. After all, you’re not living in a trailer park with the 99%, so you ought to be the one to bear the burden, you greedy fat cat.
While there are laws in states like California that purport to cap property taxes, there’s nothing stop almost any government from imposing “special fees” or something similar to wring more money out of you. In jurisdictions with no caps on property taxes, governments can simply raise rates. If you think they won’t, remember that “it’s for the children” is the easiest way to get voters to approve a new tax on you, and property taxes are part of what funds schools.
American voters will gladly raise your cost of property ownership in two seconds.
If you’re buying US real estate as an investment, you could be equally vulnerable. In a country where success is demonized and the rich are viewed as being deserving of punishment, it’s not inconceivable that local governments could impose special taxes on rental property. After all, owning a house you live in is one thing. Renting it is another.
The US government has proposed taxes and fees on investors from Wall Street to Main Street, and they’d be all too happy to curb your already mediocre rental yields by making you pay for their fiscal waste.
US real estate is denominated in US dollars.
An obvious but an important point. As the value of the US dollar declines and countries like Russia seek to wean themselves off of the global reserve currency, the global value of your real estate assets in the United States will decline. Sure, you’ll be able to buy locally made products (how ironic, right?), but imports will cost a fortune.
Remember what happened when Iceland’s economy totally collapsed several years ago? It cost a fortune just to go to McDonald’s. I suppose some American investors don’t ever intend to leave the United States to begin with, lessening the blow of a US dollar collapse on their lifestyle, but everyone will feel the pain.
Courts can seize US real estate, even if it’s held in an offshore trust.
We talk here about the benefits of using an offshore trust to protect your assets, not only from creditors and angry ex-spouses, but from future government confiscation. However, the entire point of an offshore trust is to be offshore.
If the government where an asset is located wants that asset badly enough, it will get it. Governments have repeatedly shown they don’t respect even their own rule of law.
One recent example of this involves infomercial king Kevin Trudeau, who is currently serving a ten-year sentence for “contempt of court”. While Kevin rented his primary residence in Chicago to avoid asset confiscation by a government that was constantly at odds with him, he did own a property in California through an Isle of Man corporation.
When the government imposed a $37 million fine on him, it eventually got around to forcing the sale of the house. Had it not been encumbered by a mortgage, the government would have sold it and pocketed all of the profits. That’s because some nut job on a California court could easily circumvent any provision of an offshore trust he likes. It may not be “legal” according to the laws of the trust, but what does a bankrupt nation care about other countries’ laws?
After all, the United States has been busy enforcing FATCA on as many other countries as possible, forcing banks in other countries to PAY for the privilege of tattling on Americans who bank with them. The United States doesn’t respect other countries’ laws, and if they ever claim you owe them money, no amount of asset protection will save you from the wrong court.
Of course, some of these reasons to avoid real estate investments in the US could be applying to other bankrupt western countries that have a kleptomaniac streak. When it comes to investing in real estate, “go where you’re treated best”.
By Jeff Thomas
The average person in the First World receives more information than he would if he lived in a Second or Third World country. In many countries of the world, the very idea of twenty-four hour television news coverage would be unthinkable, yet many Westerners feel that, without this constant input, they would be woefully uninformed.
Not surprising, then, that the average First Worlder feels that he understands current events better than those elsewhere in the world. But, as in other things, quality and quantity are not the same.
The average news programme features a commentator who provides “the news,” or at least that portion of events that the network deems worthy to be presented. In addition, it is presented from the political slant of the controllers of the network. But we are reassured that the reporting is “balanced,” in a portion of the programme that features a panel of “experts.”
Customarily, the panel consists of the moderator plus two pundits who share his political slant and a pundit who has an opposing slant. All are paid by the network for their contributions. The moderator will ask a question on a current issue, and an argument will ensue for a few minutes. Generally, no real conclusion is reached—neither side accedes to the other. The moderator then moves on to another question.
So, the network has aired the issues of the day, and we have received a balanced view that may inform our own opinions.
Or have we?
In actual fact, there are significant shortcomings in this type of presentation:
The scope of coverage is extremely narrow. Only select facets of each issue are discussed.
Generally, the discussion reveals precious little actual insight and, in fact, only the standard opposing liberal and conservative positions are discussed, implying that the viewer must choose one or the other to adopt as his own opinion.
On a programme that is liberally-oriented, the one conservative pundit on the panel is made to look foolish by the three liberal pundits, ensuring that the liberal viewer’s beliefs are reaffirmed. (The reverse is true on a conservative news programme.)
Each issue facet that is addressed is repeated many times in the course of the day, then extended for as many days, weeks, or months as the issue remains current. The “message,” therefore, is repeated virtually as often as an advert for a brand of laundry powder.
So, what is the net effect of such news reportage? Has the viewer become well-informed?
In actual fact, not at all. What he has become is well-indoctrinated.
A liberal will be inclined to regularly watch a liberal news channel, which will result in the continual reaffirmation of his liberal views. A conservative will, in turn, regularly watch a conservative news channel, which will result in the continual reaffirmation of his conservative views.
Many viewers will agree that this is so, yet not recognise that, essentially, they are being programmed to simply absorb information. Along the way, their inclination to actually question and think for themselves is being eroded.
The proof of this is that those who have been programmed, tend to react with anger when they encounter a Nigel Farage or a Ron Paul, who might well challenge them to consider a third option—an interpretation beyond the narrow conservative and liberal views of events. In truth, on any issue, there exists a wide field of alternate possibilities.
By contrast, it is not uncommon for people outside the First World to have better instincts when encountering a news item. If they do not receive the BBC, Fox News, or CNN, they are likely, when learning of a political event, to think through, on their own, what the event means to them.
As they are not pre-programmed to follow one narrow line of reasoning or another, they are open to a broad range of possibilities. Each individual, based upon his personal experience, is likely to draw a different conclusion and, thorough discourse with others, is likely to continue to update his opinion each time he receives a new viewpoint.
As a result, it is not uncommon for those who are not “plugged-in” to be not only more open-minded, but more imaginative in their considerations, even when they are less educated and less “informed” than those in the First World.
Whilst those who do not receive the regular barrage that is the norm in the First World are no more intelligent than their European or American counterparts, their views are more often the result of personal objective reasoning and common sense and are often more insightful.
Those in First World countries often point with pride at the advanced technology that allows them a greater volume of news than the rest of the world customarily receives.
Further, they are likely to take pride in their belief that the two opposing views that are presented indicate that they live in a “free” country, where dissent is encouraged.
Unfortunately, what is encouraged is one of two views—either the liberal view or the conservative view. Other views are discouraged.
The liberal view espouses that a powerful liberal government is necessary to control the greed of capitalists, taxing and regulating them as much as possible to limit their ability to victimise the poorer classes.
The conservative view espouses that a powerful conservative government is needed to control the liberals, who threaten to create chaos and moral collapse through such efforts as gay rights, legalised abortion, etc.
What these two dogmatic concepts have in common is that a powerful government is needed.
Each group, therefore, seeks the increase in the power of its group of legislators to overpower the opposing group. This ensures that, regardless of whether the present government is dominated by liberals of conservatives, the one certainty will be that the government will be powerful.
When seen in this light, if the television viewer were to click the remote back and forth regularly from the liberal channel to the conservative channel, he would begin to see a strong similarity between the two.
It’s easy for any viewer to question the opposition group, to consider them disingenuous—the bearers of false information. It is far more difficult to question the pundits who are on our own “team,” to ask ourselves if they, also, are disingenuous.
This is especially difficult when it’s three to one—when three commentators share our political view and all say the same thing to the odd-man-out on the panel. In such a situation, the hardest task is to question our own team, who are clearly succeeding at beating down the odd-man-out.
Evolution of Indoctrination
In bygone eras, the kings of old would tell their minions what to believe and the minions would then either accept or reject the information received. They would rely on their own experience and reasoning powers to inform them.
Later, a better method evolved: the use of media to indoctrinate the populace with government-generated propaganda (think: Josef Goebbels or Uncle Joe Stalin).
Today, a far more effective method exists—one that retains the repetition of the latter method but helps to eliminate the open-ended field of alternate points of view. It does so by providing a choice between “View A” and “View B.”
In a democracy, there is always an “A” and a “B.” This illusion of choice is infinitely more effective in helping the populace to believe that they have been able to choose their leaders and their points of view.
In the modern method, when voting, regardless of what choice the individual makes, he is voting for an all-powerful government. (Whether it calls itself a conservative one or a liberal one is incidental.)
Likewise, through the modern media, when the viewer absorbs what is presented as discourse, regardless of whether he chooses View A or View B, he is endorsing an all-powerful government.
One solution to avoid being brainwashed by the dogmatic messaging of the media is to simply avoid watching the news. But this is difficult to do, as our associates and neighbours are watching it every day and will want to discuss with us what they have been taught.
The other choice is to question everything.
To consider that the event that is being discussed may not only be being falsely reported, but that the message being provided by the pundits may be consciously planned for our consumption.
This is difficult to do at first but can eventually become habit. If so, the likelihood of being led down the garden path by the powers-that-be may be greatly diminished. In truth, on any issue, there exists a wide field of alternate possibilities.
Developing your own view may, in the coming years, be vital to your well-being.
IRS seized 1.7 million GB of data last year
on March 26, 2014
March 26, 2014
Sovereign Valley Farm, Chile
Every organization has a unique way of measuring its own success.
Apple tracks very closely, for example, how many iPhones and iPads they sell. Facebook monitors how many total users they have.
And for the brand new Cyber Crime Unit (CCU) of the IRS Criminal Investigative Division, one of their key metrics for success apparently is the volume of data that they ‘seize’ in any given year.
In its recently released annual report detailing their operations and results during fiscal year 2013, the IRS Criminal Investigative Division (CID) announced that they had seized 1.7 MILLION gigabytes of data last year.
This equates to about 729 billion pages of text, or 24.3 BILLION email messages– roughly 78 email messages for every man, woman, and child in the Land of the Free.
More importantly, this constitutes a 100% increase over the amount of data seized in fiscal year 2012. And to be clear, “seized” means that you no longer have access to, or control of, the data.
I’m sure we can all acknowledge that there are bad people out there who commit crimes. And this is precisely who the CID is trying to go after.
Their report lists dozens of examples of nefarious criminals they caught last year, ranging from identity thieves to bank fraudsters to corrupt public officials.
But they don’t get it right all the time. They barely get it right half the time.
According to their own data, 43.1% of the people they’ve investigated over the last two years are either never indicted, or they’re acquitted at trial.
This means that 43.1% of people being investigated have not committed a crime. Yet many of them have had their data confiscated (and probably their assets frozen) while the investigation is pending.
Each business day, the CID opens an average of 40 new investigations. While 23 of them will end up serving time, 17 of them are wrongfully deprived of their assets.
Imagine if you’re an entrepreneur– watching a team of gun-toting investigators walk out of your office with all of your computers, even though you’ve done nothing wrong.
A simple misunderstanding or administrative error can bring your business to its knees.
If you use a service like Dropbox, it makes things even easier for the government to seize your digital assets and freeze you out of your own data.
In terms of asset protection, though, our digital assets are some of the easiest (and quickest) to protect.
Instead of using Dropbox, you can opt for a service like Wuala.
Wuala is quite similar to dropbox in that it synchs and backs up data securely in the cloud. The key difference, however, is that Wuala is based in Switzerland… so the company is not obliged to immediately follow law enforcement requests from North America (or anywhere else) without a great deal of diplomatic bureaucracy.
What’s more, Wuala ensures that your files are encrypted before they even leave your computer.
And since only you know your password, the most that Wuala employees would be able to hand over to any government agency is a bunch of encrypted gibberish.
Best of all, making the move to a service like Wuala costs nothing. Dropbox offers the first 2 GB of storage for free. Wuala offers 2.5x that– 5 GB for free. So it makes sense… no matter what.
Simon Black reports IRS dreaming up new ways to tax BTC holders. On the one hand, the government denies BTC is a currency. On the other, they are trying to tax them. Not that any of us are suprised that the government is greedy or hypocritical.
Latest “Report from the Field” by Simon Black
I highly recommend Simon’s “crash course” and, if you are serious about protecting your assets and freedom, subscribe to his services.
March 26, 2014
Sovereign Valley Farm, Chile
Well the IRS has certainly had a busy week.
1) Yesterday, the service released brand new rules pertaining to the taxation of Bitcoin.
And particularly for anyone who was an early adopter of the digital currency, the new tax rules are a major blow.
In short, the Treasury Department has chosen to tax Bitcoin as ‘property’ rather than as a currency.
This means that all those ‘Bitcoin millionaires’ out there who traded the Bitcoins they purchased for $0.01 for a shiny new Maserati will actually owe beaucoup bucks in back taxes.
More importantly, though, I think these rules set a rather dangerous precedent for gold.
2) Last week, the Criminal Investigative Division of the IRS released its annual report, highlighting all sorts of lovely statistics about how many people they put behind bars.
To be fair, there are definitely some lowlifes out there. Corrupt Congressmen and thieving banksters were all nailed to the wall by the CID last year.
Unfortunately they only get it right about half the time, according to their own statistics.
And the report shows a rather disturbing trend– they ‘seized’ 1.7 million gigabytes of data last year from individuals under investigation, more than double the volume of data seized in 2012.
But since almost half of these people are innocent, you can just imagine how much these investigation turn people’s lives upside down.
The CID report is a perfect example of the ‘multiple flags’ strategy that I advocate.
If you use a cloud service like Google Drive or Dropbox, for example, you are making it incredibly easy for the government to freeze you out of your digital assets, even if you’ve done nothing wrong.
By shifting your assets to a similar service based overseas, especially one that’s encrypted, you can save yourself this risk.
And best of all, it costs you absolutely nothing.
Another timely article by the Head Trouble Maker over at Zerohedge. Although US banks are supposedly carrying insurance from the FDIC, there is never nor has their ever been enough in the FDIC to cover more than a small bank failure. The ratios regulated in the US are a joke, thus US banks are highly insolvent:
A depository institution’s reserve requirements vary by the dollar amount of net transaction accounts held at that institution. Effective December 29, 2011, institutions with net transactions accounts:
- Of less than $12.4 million have no minimum reserve requirement;
- Between $12.4 million and $79.5 million must have a liquidity ratio of 3%;
- Exceeding $79.5 million must have a liquidity ratio of 10%.
What A Bank Run In China Looks Like: Hundreds Rush To Banks Following Solvency Rumors
Submitted by Tyler Durden on 03/25/2014 12:22 -0400
Curious what the real, and not pre-spun for public consumption, sentiment on the ground is in a China (where the housing bubble has already popped and the severe contraction in credit is forcing the ultra wealthy to luxury real estate in places like Hong Kong) from the perspective of the common man? The photo below, which shows hundreds of people rushing today to withdraw money from branches of two small Chinese banks after rumors spread about solvency at one of them, are sufficiently informative about just how jittery ordinary Chinese have become in recent days, and reflect the growing anxiety among investors as regulators signal greater tolerance for credit defaults.
Domestic media reported, and a local official confirmed, that ordinary depositors swarmed a branch of Jiangsu Sheyang Rural Commercial Bank in Yancheng in economically troubled Jiangsu province on Monday. The semi-official China News Service quoted the bank’s chairman, Zang Zhengzhi, as saying it would ensure payments to all the depositors. The report did not say how the rumour originated.
Chen Dequn, a resident in Yandong, just outside Yancheng, said she saw a crowd of about 70 to 80 people gathering in a branch of Sheyang Rural Commercial Bank in her town on Tuesday.
“At the moment there are about 70 or 80 people in there. Normally there’d only be about 10,” she told Reuters by telephone.
Officials at another small bank, Rural Commercial Bank of Huanghai, said they had faced similar rushes by depositors, triggered by rumours of insolvency at Sheyang. “We will be holding an emergency meeting tonight,” an official at the bank’s administration office told Reuters, but declined to comment further.
Why Yancheng investors suddenly lost confidence in the security of their bank deposits is not clear, given that the Sheyang bank is subject to formal reserve requirements, loan-to-deposit ratios and other rules to ensure it keeps sufficient cash on hand to meet demand.
Why the jitteriness? Because until now, bank failures in China have been unknown, as Chinese banks are considered to operate under an implicit guarantee from the government. That is changing. Which is why the rumor mill is on overdrive:
“It’s true that these rumours exist, but actually (the bank going bankrupt) is impossible. It’s a completely different situation from the problem with the cooperatives,” said Zhang Chaoyang, an official at the propaganda department of the Communist Party committee in Tinghu district, where the bank branch is located.
And Bear Stearns is fine…
Zhang was referring to an incident that rattled depositors in Yancheng in January, when some rural cooperatives — which are not subject to the supervision of the bank regulator — ran out of cash and locked their doors. Local officials say several co-op bosses fled after committing fraud.
China’s central bank governor said this month that deposit rates are likely to liberalised in one to two years – the most explicit timeframe to date for what would be the final step in freeing up banks to set their own interest rates.
It is widely expected to introduce a deposit insurance scheme before freeing up deposit rates, to protect savers in case a liberalised market puts major strains on smaller banks and alarms the public. Analysts also expect the controls on deposit rates to be lifted gradually. Is China’s debt nightmare a province called Jiangsu?
Why are bank runs like these only set to accelerate? Simple – unlike the US China has zero deposit insurance. Reuters expplains:
The case highlights the urgency of plans to put in place a deposit insurance system to protect investors against bank insolvency, as Chinese grow increasingly nervous about the impact of slowing economic growth on financial institutions.
Regulators have said they will roll out deposit insurance as soon as possible, without giving a firm deadline.
In the meantime, there are always helpful investor relations people willing to explain calmly just what is going on:
When contacted by Reuters by phone on Tuesday, an official at the Jiangsu Sheyang Rural Commercial Bank branch hung up, saying she was busy.
Others were even more helpful:
An official at the administrative office at Jiangsu Sheyang Rural Commercial Bank said the bank would publish a statement shortly. On its website, the bank says it is capitalised at 525 million yuan and had total deposits of 12 billion yuan as of end-February,
Officials at the Jiangsu branch offices of the China Banking Regulatory Commission (CBRC) declined to comment. The Yancheng branch of CBRC and the propaganda offices in Yancheng city and Sheyang county did not answer calls seeking comment.
Busy or not, for now, the banks may have survived following yet more capital infusions from the local government, but what happens when the default wave that has claimed solar, coal, and real estate developers finally impacts a deposit-holding institution? How will China – which has far more total deposits within its banking system than in the US (since the US banks fund themselves mostly using ultra-short term, overnight shadow funding) – survive a nationwide bank run we wonder?
Wall Street’s cheerleaders in the media have been pumping pointless “hope and optimism” for too long. There is a hidden increase in the rate of devaluation of the dollar, bankruptcy and insolvency of governments, low interest and printing. Nothing bursts bubbles like fast moving money. True market gains and losses must be weighed against those factors as well.
The next nail in the coffin of the US dollar is going to be when the rest of the world decides to dump the dollar as the reserve currency.
The Bretton Woods arrangement gave the dollar a serious edge- commodities and other global trade was all exchanged in dollars. Oil was expressed in dollars. Foreign nations had to keep dollars just to trade with each other .
Then we closed the “gold window” so we could print money like it was going out of style.
These countries are still holding trillions of our dollars and other debt instruments we created in order to spend more than we actually produced.
If Russia, China, and India team up economically (it’d be a more natural arrangement than what we have) and dump all their dollar holdings during a realignment, what happens?
What happens is our already inflated domestic currency is joined by the trillions of overseas dollars rushing back home. Hyperinflation.