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March
16
2017

A Bubble Ready to Pop?
Bill Gross

A storm is on the horizon.  Just because it’s another hurricane season, the tempest ready to engulf will not be tracked by eyes in the skies.  A forecast for this whirlwind won’t be made on the weather channel or by a meteorologist.  The climate that triggers this downpour is financial.  The causes for this calamity have been brewing for decades.  The major fronts that push the airstreams toward disaster are well known.  Balance of trade deficits, federal debt financed by foreigners, soaring government liabilities, loss of viable wages for domestic employment and offshore exodus of any job that improves the bottom line of transnational corporations.  But have you heard of the other gusts that will blow your house down?     

The actual net worth of ordinary Americans is sliding into a sinkhole.  Don’t allow yourself to be confused, net worth is not simply what is left after you subtract your debt from what you own.  The real value of your financial worth is the purchasing price power available in the marketplace after you liquidate all your worldly possessions.  Forget about your borrowing abilities, the sky is the limit is a major contributing factor to this tornado.  It just doesn’t add up.  Factor in the underlying underreported inflation, look at your after tax (from all jurisdictions) income and, if you are honest with yourself, ask if you can afford to buy your own house?

Oh, the heaven of low interest rates – pray that they be eternal!  Speculation on pre-construction real estate makes every condo a castle.  Leverage and turn over the contract to the next investor is the latest rage – rags to riches and prosperity.  Hot spots won’t cause melanoma sun spots, just tanning hues of that universal green – federal reserve notes.  The more you make the bigger your next re-invest.  Defer and push off into the future those capital gains, trade up get affluent the old fashion way by earring it . . .

Now if you are one of these neophytes and late coming to the party, the building sector is booming.  Only a Neanderthal wants to pay off their home and stay there forever.  But in the slight possibility that you might one day want to fall into this Paleolithic clan, will you be able to have enough money to pay the bills and stay in your own abode?  Real Estate taxes far out pace that non-existent inflation.  Replacement cost insurance climbs higher than a gable roof or the price of boarding up all those windows.  Just rebuild if you take a hit.  As we all know, they aren’t making ocean view land anymore.

Just look at all your passive income – bank savings, bonds and stock dividends – they are just rolling in, surely this income will pay for the cost of holding and carrying all that expensive real estate?  Hey, this isn’t the South Seas, its America and the only bubble that attaches to the siding is used up gum.  The safest place in the world is your own home, so why worry about paying it off or affording the upkeep, your seasonal rental investments will cover any shortfalls.

Banks know how secure all those mortgages and equity loans are, that’s why they love to package them for resale.  Those new  bankruptcy laws just mean you will need to sell off a couple of condos to keep funding you’re your own primary fun house.   No problem, the bazaar of sizzling sale prices covers all sins.  This market is different from those risky internet stocks, they weren’t making a profit.  So what if you have a little shortfall on rental fees, you chose not to lease but to own!  Your wealthy, just look at your financial statement . . .

So let’s pose the big question.  Are you able to buy your own house at current asking prices?  Are you able to afford the new assessment in property tax on the higher selling price?  Can you pay the elevated cost of homeowner insurance?  You know that those 80% minimum value full replacement coverage clauses with their 70% content coverage translates into kingly sums to pay for possessions that you don’t even own.  Hey, that’s the American way, stay ahead of the curve mandate the coverage before you borrow more money to buy the contents.  It’s OK, you are now successful and numbered among the newborn rich.

If by your own blunder you reside in a section of the country that isn’t experiencing this boomtown prosperity, you can become a prospector.  Fools gold won’t be found in the fields of estate planning - Trump style.  Time sharing is for the holiday pleasure seeker, you are a home owner, be proud pay those accelerated bills.  Fuel, electric, phone, cable, DSL escalate but you are secure as long as the ADT bill is paid. 

Don’t worry about a bubble, the fizz still flows through the straw.  Suck it up and enjoy the refreshment.  Bread lines all serve croissants and you don’t need to tip the illegal waiters.  You are living the dream and there is little risk of a repossession nightmare.  You can always buy back your house at auction.  Ditech your life - keep the hope alive!

"Breaking All The Rules" is a state of mind. In order to understand its meaning, the correct essence of human nature must be known and admitted. If you fantasize that Voltaire's Candide is attainable, you are doomed to a plight of continuous confusion. Mankind is flawed at best, favors an immoral inclination and affirms a corrupt demeanor by his deeds. Perfection is reserved for the deity, while righteousness is the province of saints. The predominance of the human race is disposed towards self-centered expediency, abandoning any norm of moral virtue. Confirmed by the annals of history, the incontestable record of inhumanity and depravity is the actual legacy of social behavior.

Society is an abstract, while government is a tyrant. The State exists to survive and control. It operates on designs of dominance and its edicts are enforced by coercion. Arbitrary standards are the norm, while a pretense of lawful order is maintained. Disguised as public service, the preferable results for the favored and submissive, are the artificial rewards for compliance. Independent thinking is dangerous, dissent becomes the ultimate transgression and disobedience to the dictates of the State is the supreme sin.

The fraud of democracy conceals the curse of equalitarianism. Altruism is put forth as noble, while fairness is used as an excuse to demand conformity. Intrinsic, inherent and basic human rights are violated as the deceit of the "common good" is adopted to insure the regimentation of individuals. All the time, elites foster the rules of men, as they transgress the laws given to man, by God. Social Darwinism promotes the insanity of progress through the practice of collectivism. Secular relativism is the faith that makes possible the commands of totalitarian despots. The mob demands a more inclusive "free lunch" which invites further pretexts from charlatan politicians to consolidate their control.

Resisting depraved authority is the purpose behind the philosophy of Breaking All The Rules. Liberty entails responsibility. Because man is condemned to be free, society is damned to an eternal struggle against the partisans of enslavement. Our duty is not to any State, but resides within the advocacy and defense of principles for sensible moral human conduct. Accountability is essential. Social justice is a core ingredient of traditional values. Since each person is endowed with universal dignity, it behooves citizens to respect and protect not only the less fortunate; but also ourselves.

Sincere genuine self-interest is premised upon the reality of the human condition. Natural inborn rights of free association and property are fundamental. Authorities are obligated to attain consent of the citizen, in order to institute social policies that may conflict with individual rights. Withholding that permission is prudent, when those programs are harmful. When enactments, regulations and mandates are imposed against the will of objectors, the government violates any semblance of legitimacy.

There is no moral charge to engage or support in treating dissimilar and divergent persons as coequal, especially when they avow and retain their differences. The meaning of equal resides in the ability to accept separation. Countries succumb to national suicide when they destroy the rudimentary quality of their civilization and heritage.

When an artificial society deviates and diverts from exemplary standards, the equitable solution is to dissolve the theoretical relationship. Justification for disintegration is in the best mutual interest of clashing communities. Governments never have the rightful authority to compel coerced cohabitation. This assertion holds true for all ideologies, cultures and nations.

The multiculturalists' lunacy that underpins the social disenfranchisement of the technocrat age inevitably produces perpetual animosity. The pragmatic and ethical alternative is agreed disunion and detachment. The horrors of internationalism are a direct result of abandoning the right of individuals to disconnect themselves from unwanted social relationships. The same applies for nations and countries. The will of the world community is synonymous to a rule by elites. An attempt to foster equivalency through free trade is a scheme that diminishes independence for the innovators and creators of substance.

 

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