Juggling Dynamite

Bloomberg radio hosted an hour long dicussion on challenges and ideas to promote recovery in America. Listen here to: Gross, Orszag, Calomiris, Shiller Debate Economy, Policy.

More and more buzz these days about gold fever. See: Gold Fever strikes mom and pop prospectors in US west

“The poor economy and a record price of gold have renewed interest in prospecting in Western states where public lands are rich with deposits and small-scale operators are all but free from government regulation.”
“…When gold goes over $1,000 an ounce, everybody becomes a miner,” said Russ Bjorklund, minerals manager with Salmon-Challis National Forest in Idaho”
“…We've got all types: individuals out there with pick and shovel and companies with heavy equipment”
“…You start finding a little gold in the pan—that's when gold fever kicks in. It's like a drug and you're ready to work all night”
“…it doesn't replace a full-time job with benefits, but you work hard enough at it, you might get lucky,”

“You might get lucky” sound like a rational investment thesis to anyone?
Just daring to express scepticism about gold-love today is sure to insight the anger and attack of many ardent worshippers. However as George Soros pointed out this week, the gold rally can continue for a while, but it is definitely not a “safe” bet: “It's certainly not safe and it's not going to last forever.”
No rational investor can afford to fall in love with any one theme or asset class. Buyers beware.

A new study released on US housing today confirms there were 4 million homes listed with brokers for sale as of July. It would take a record 12.5 months for those properties to be sold at that month’s sales pace. Another 2 million houses are expected to be seized by lenders by the end of next year:

“Shadow inventory — the supply of homes in default or foreclosure that may be offered for sale — is preventing prices from bottoming after a 28 percent plunge from 2006, according to analysts from Moody’s Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners.
“Whether it’s the sidelined, shadow or current inventory, the issue is there’s more supply than demand,” said Oliver Chang, a U.S. housing strategist with Morgan Stanley in San Francisco. “Once you reach a bottom, it will take three or four years for prices to begin to rise 1 or 2 percent a year…”
After reaching bottom, prices will gain at the historic annual pace of 3 percent, requiring more than 10 years to return to their peak…”