Amazing Housing Glut, Currency and Resource Forecasts, National WiFi, $1 Million in the Trash, and More!

by Addison Wiggin & Ian Mathias

  • The incredible number of homes without inhabitants… housing CEOs say worst is yet to come
  • Ready for $2.10 pound sterling? Chuck Butler on the return of this staggering high
  • Record level of gold futures contracts in play… how to follow the “smart money”
  • Nationwide high-speed wireless Internet… which companies are working to turn the USA into one big “hot spot”
  • Need a million bucks? Try looking through Manhattan garbage… how it worked for one woman
  • Plus, The 5 is flooded with your tax-related reader mail… highlights below

A staggering 17.9 million homes were without residents during the third quarter, reports the Census Bureau. Never before have so many homes stood empty. Over 1 million properties were added to the list since this time last year alone.

Geez, what happened to the never-ending “supply crunch” lauded by property bulls when the real estate bubble was in full sway a year or two ago?

Of those 17.9 million empty homes, only 2 million are for sale, highlighting the incredible rise of foreclosures. The bureau reported that 0.65% of all properties under mortgages were in the process of being seized in the second quarter, another record high.

The CEOs of two housing sector powerhouses said the worst is yet to come for the housing crisis.

“Falling values is what continues to be the problem here,” said Angelo Mozilo, Countrywide chief . “And as long as values keep on falling, the subprime situation will get worse and begin to spill into prime [loans].” When asked if the worst was over, Mozilo flatly said, “No. I don’t think so.”

“We anticipate things are going to stay tough for quite some time,” said Jeffrey Mezger of KB Home, one of the country’s biggest home builders. Mezger and Mozilo sat on a panel last night for the Milken Institute… must have been one scintillating evening.

The U.S. markets have taken the early part of this week off. Traders are lying in wait for Bernanke and his sexy band of rate-cutting Fed governors to disrobe on Wednesday following the Halloween FOMC party.

“How about that pound sterling?” asks our buddy Chuck Butler this morning. Rising in the face of a possible rate cut next week, sterling hit a sweet level of 2.065 overnight.

“I had given up the ghost of $2.10 once the credit crunch hit Europe,” writes Chuck. “Then came the calls for a Bank of England rate cut, even though inflation is bumping up against the ceiling target. Sound familiar? Sounds to me as though the BoE has taken a page from the Fed Reserve’s book on how to stoke inflation.

“But surprisingly, that hasn’t thrown cold water on the pound. Look at it like this: If the BoE decides to cut rates 25 points, the pound will still enjoy a hefty positive rate differential to the U.S., Japan and the eurozone. Maybe the ghost of $2.10 for sterling is still walking around.”

The pound sterling trades at the low, low price of $2.05 this morning.

The dollar regained an inch or two against the euro overnight. Euro traders took profits from yesterday’s record high $1.44 and pushed the currency back to $1.43. The yen retreated ever so slightly into the 114 range.

Still at incredible highs are the loonie and Aussie. The Canadian dollar fetched $1.05 for an instant yesterday, and the Aussie dollar remains deeply in the 0.92 range.

Open interest in NYMEX’s (COMEX) gold futures contracts breached an all-time high of 500,000 this week. Never have so many traders been betting for — or against — gold than right now.

So… you might ask… where’s the smart money, long or short?

“‘The funds’ are long about 46% of the market,” reports Ed Bugos from Vancouver, referring to investors who’re betting the price will go up. “‘The commercials’ are short about 63% of the market,” eyeballing banks. The funds and commercials are a good guide to where your money should be.

“Throughout the ’90s and all the way through 2006,” Ed says, “the funds were right in gold and the commercials were wrong — like clockwork.”

“Starting in October 2005, over a nine-month period that followed record “fund” longs, gold rallied almost $300, or over 70%.” Ed’s looking for a repeat this year. We’ll keep you posted…

Barring a biblical flurry of hurricane-force storms over the next nine weeks, 2007 will probably go down as the most inactive hurricane season since 1983. And this is why they call it speculation…

You’ll recall early in the season, we saw the rapid formation of Dean and Felix, the first time in over 150 years that two Category 5 hurricanes landed in the same season. Forecasters from the University of Colorado jumped on their computer models and predicted at least six more major Atlantic hurricane events for 2007.

Well… it didn’t happen. In fact, 2007 was a very tame year. We nicked this chart from Florida State University’s latest study:


Since 1968, only the year 1977 saw less tropical storm activity than this year.

Tropical storm Noel ripped into Haiti yesterday, killing at least 13 people. But it’s expected to graze Florida and land in the Bahamas with a possibly tamer force. Speculators will probably have to save their next round of hurricane trades for the 2008 season.

This next bit is cool if you use your laptop a lot. Despite the recent loss of CEO Gary Forsee, representatives of Sprint Nextel claim they are moving forward with the creation of WiMAX — the country’s first national wireless broadband service. Sprint signed a letter of intent with Clearwire earlier this summer with the plan of enabling high-speed wireless Internet access anywhere in the U.S… essentially making the whole country one big hot spot for Sprint customers.

“The tech is called Worldwide Interoperability for Microwave Access (WiMAX),” reports our emerging tech adviser Jonathan Kolber. “Instead of the roughly 100-foot radius that current wireless solutions can cover with a broadband signal, a single WiMAX base station can blanket a radius of up to 30 miles with high-speed microwave-based Web access for hundreds of users.

“These tech giants intend to start bringing most of America’s major metro and suburban areas high-speed Web access before the end of this year — reaching full capacity by New Year’s Eve 2008.”

WiMAX “as a strategy,” said Paul Saleh, acting CEO of Sprint Nextel, last week, “is the future of the business.” Let’s hope the idea actually works, eh? You can read more about WiMAX and the $4 dollar stock Jonathan says is using it to solve the “Last Mile” problem faced since the advent of the Internet.

Elizabeth Gibson found this funky painting lying in the trash on the street while walking through Manhattan four years ago:

Last week, while surfing the all-too-thrilling Web site of PBS’ Antiques Roadshow, she recognized her own find in the site’s “Missing Masterpieces” area. It’s a Rufino Tamayo. Sotheby’s estimates it will fetch $1 million at auction. It was stolen in the ’80s and thought to be lost forever.

If you have a piece of priceless art to throw away, there is a very accessible, spacious Dumpster behind 808 St. Paul, Baltimore, MD.

“I am in awe of the people who write in support of Rangel’s tax plan,” writes a reader. “My one question that I always ask the tax proponents is what happens when the rich who pay the vast majority of the taxes finally say, “Enough!” and move to Dubai or Singapore or any other number of tax-friendly countries?

“What happens when companies stop choosing America as their base of operations? Come on, people… wake up! The income tax is immoral. How backward is it to tax people to work?! It is a ludicrous idea that will ultimately fail as patriotism continues to decline and our wealthy citizens move overseas.”

“Your response on Oct. 29 to the ‘partisan’ views on government was right on!” exclaims another. “The only answer is less government. The U.S. had four Cabinet departments in 1800, thinly staffed, and it funded the federal budget from tariffs alone.

“I’m afraid, however, that the only way we will learn the bad lessons of allowing a centralized government to evolve is by watching it collapse. People in the U.S., in general, just don’t get it, largely because Big Government and Big Media have masked reality. Sadly, Americans will have to learn the hard way… and probably very soon.”

“The end of yesterday’s 5 must have been a thinly veiled attempt to see just how many ardent Ron Paul supporters make up your readership,” writes a third. “We know you know about him, we know you know what he’s about. You should be repping him the way Lew Rockwell
is, not acting like he doesn’t exist or doesn’t have a chance.”

The 5 Responds:
There was nothing thinly veiled about what we wrote. We’ve written about Ron Paul. We’ve run his essays on the dollar, the Federal Reserve and his views on the troops and the war in many of our publications. His interview is getting prominent placement in our film, which will hit theatres (with the right distribution deal) during the height of the campaign next year. And he graciously invited us to attend the Liberty Caucus luncheon he hosts at his office in Washington.

But who among the mainstream press or establishment politicians advocates limited government? Our point stands. There’s little sense in preaching to the choir. Please don’t tell us what we should and shouldn’t do. That’s the whole crux of the matter, isn’t it?


Addison Wiggin
The 5 Min. Forecast

P.S. Ron Paul is on Leno tonight sandwiched in between Tom Cruise promoting Lions for Lams — an anti-war film — and The Sex Pistols. Heh. Perfect.

By the way, you might want to make a note: Travesty as it is, you must be a registered Republican if you want to vote for Ron Paul in the primary in your state. His website gives deadlines and details for registration.

P.P.S. The top three closed positions in Jonathan Kolber’s Emerging Capital Report are
PowerChannel Inc., up 371%; Anatolia Minerals, up 321%; and Cray Inc., up 287% His largest open recommendation is currently up 360%… from now until Monday of next week, you can get six months of the service for free. Read here for details.

Countrywide CEO: More trouble ahead for housing market
Pulling a million dollar painting out of the trash
Mish’s Global Economic Trend Analysis: Pent Up Housing Supply
2007 Yearly Tropical Cyclone Activity to Date


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