Rental Nation

  • Where did all the homeowners go?
  • “Cost burdened” renters: How to cash in on the trend without becoming a landlord
  • Evidence Americans are resuming their free-spending ways
  • An FDA policy shift good for patients and investors alike
  • Schoolkids develop a thriving black market in salt… why Social Security “will never go bankrupt”… pulling back the curtain on the Iraqi dinar… and more!

  The year was 1993. Apartheid was breathing its last in South Africa. The World Trade Center was bombed — the first time. Buffalo lost the Super Bowl — again.
Little did anyone expect at the time that legions of Americans would start to become homeowners — a surge that continued for the following decade.
Now in 2015, the U.S. homeownership rate is back where it was 22 years ago — below 64%.

  What’s more, “the trend does not appear to be abating,” says Chris Herbert, managing director of Harvard University’s Joint Center for Housing Studies.
Many of the people who’ve fallen out of the homeownership ranks never really “owned” a home in the first place. They had mortgages, often more than one, but no equity. Then came the Panic of 2008.
The steepest decline has come among Generation X, the folks unlucky enough to marry and procreate as the housing bubble steadily blew up in the early 2000s. But the rate has also declined among baby boomers. Only the over-65 set has a homeownership rate that’s stayed stable the last decade.
Thus are millions of adults returning to the rental market. Vacancy rates are at a two-decade low. Rental costs grew 3.2% last year, double the official inflation rate.
  Result: Nearly half of all U.S. renters are “cost burdened,” in Harvard’s estimation. That is, they shell out at least 30% of their income to their landlords.
In the counties with the darkest shading on this map, it’s more than half paying at least 30% of their income for housing…

Construction of new rental property can’t keep up with demand, even though multifamily housing starts hit their highest level last year since 1987. Meanwhile, wage growth is sluggish and lenders are reluctant to lend.
  Another wrinkle: “There are plenty of buyers looking for homes — just very few quality homes available for them to buy!” says one veteran of the residential real estate market.
This individual is an old friend of our income specialist Zach Scheidt. “Whenever I see Jackie,” he tells us, “I try to get her perspective. Few have the hands-on experience she’s accumulated, and even fewer have such firsthand views of how the market’s performing.”
Says Jackie, “Every time a new buyer contacts me, we start the process of looking for a home for them. I drive the buyer all over town looking for just the right house. But it’s nearly impossible to find a nice home for sale. And when we do find a good home in the right neighborhood, someone else makes an offer before we can write a contract. I haven’t seen such a tight real estate market in years!”
In many locations, “the number of quality homes available to would-be buyers is very low,” Zach elaborates. “That’s because new construction’s been down because homebuilders have been afraid to build new communities. Following the financial crisis, homebuilders faced too much risk investing money in developing a new community. They weren’t sure they’d be able to sell their homes. But that’s changing.”
  “So we’re now in a period of low home ownership, low rental vacancies and high rental rates,” Zach sums up. “That’s a perfect environment for homebuilders to start developing new communities again, and I expect to see homebuilder stocks trade higher this summer.”
Just one problem if you’re trying to scratch out some income — the homebuilders as a group pay out paltry dividends. Some pay no dividend at all.
But last week, Zach’s premium subscribers had a chance to pounce on the trend for a $320 instant payout. During the month of May, they collected up to $2,548 playing everything from airlines to energy to social media.
The common thread — Zach’s “perpetual income strategy.” Using it, you can pocket hundreds of dollars in just minutes. See for yourself when you click here.
  Major U.S. stock indexes are catching their breath after yesterday’s selloff. As we write, the Dow has clawed its way back above 18,000. The Nasdaq is the strongest performer, up a third of a percent, to 5,138.
The elite media attributed the drop yesterday to a breakdown in the talks over Greece. This morning, the BBC tells us the crisis has “deepened”… but the drop has been arrested. Go figure.
Treasury rates are inching up, the 10-year at 2.41%. Gold languishes at $1,172.
  Americans began spending out of an empty pocket again during May, per this morning’s “income and spend” report from the Commerce Department.
Personal incomes grew 0.5% last month, we’re told. But consumer spending grew at a much stronger clip — 0.9%. That’s a reversal from the mighty American consumer’s tightfisted ways most of the last year. Whether it sticks remains to be seen.
This report also features “core PCE” — the Federal Reserve’s preferred measure of inflation. It registers a year-over-year increase of 1.2% — nowhere near the Fed’s 2% sweet spot.
  A shift in policy at the FDA is turning into profits for readers of Technology Profits Confidential.
The FDA has long dragged its feet in reviewing new drugs, keeping lifesaving treatments off the market. But two months ago, editor Ray Blanco told us, “The FDA has shown greater willingness to look at alternative measures of a drug’s effectiveness.”
So it went for one of Ray’s recommendations, Aerie Pharmaceuticals (AERI). In early May, shares sold off 70% when the company reported its glaucoma drug appeared to be no better than other treatments already on the market.
“However,” Ray says, “actually digging into the trial data showed that the drug was superior in 80% of glaucoma sufferers — those patients with a lower pressure in the eye.
“The company also reported it was talking to the FDA to alter an ongoing Phase 3 trial in order to change the objective to recognize the drug’s effect on those at the lower end of the intraocular pressure (IOP) range. This is a large market that could benefit from a new effective glaucoma drug.”
Last week, the FDA agreed… and AERI shares soared. Ray urged his readers to sell half their shares for a 110% gain in only six weeks.

For access to Technology Profits Confidential, our entry-level tech advisory, look here.
  From the Hoosier state comes shocking news of children trading contraband on school property during school hours.

Or as Elizabeth Harrington at the Washington Free Beacon sums up, “Children are creating their own black markets to trade and sell salt due to first lady Michelle Obama’s school lunch rules.”
So we learned recently during a House subcommittee hearing. “Students have been caught bringing — and even selling — salt, pepper, and sugar in school to add taste to perceived bland and tasteless cafeteria food,” testified John Payne, president of the Blackford County, Indiana school board.
A federal school-lunch law, championed by the first lady, took effect in 2012. Mr. Payne suggests decentralization as the solution. “When local school districts have the authority and flexibility to make adjustments honoring the spirit and intent of the law they can provide students with healthy, nutritious, and appetizing meals.”
We concur. Alas, we fear in other districts, the solution might be siccing armed “school resource officers” on the budding dealers.
  “Glad to see Jim Rickards thinks the Iraqi dinar is a scam,” says a note from our friend Chuck Butler, managing director at EverBank Global Markets and creator of the Daily Pfennig. “We’ve been telling people that for years now.
“A few years ago, I was in Panama speaking at a conference. A middle-aged man approached the desk I was sitting at and proceeded to tell me a story that shocked me. He told me he had inherited the family business that had been in operation for over 70 years, and he decided to sell it and take all the proceeds — that’s right, I said all the proceeds — and put them into Iraqi dinar.
“He then asked me what I thought of that investment decision. I told him that I feared that the Iraqi dinar was an Internet scam, and brother, did he throw a fit, pounding on the table and spitting words out that I couldn’t really make out…
“After he finished, I told him that it was really easy to tell… Call the place he bought the dinar from, and see if they would give him a price to buy it back from him… I told him I doubted they would… He stormed away, shouting so everyone would hear him, ‘You’ll see when the revalue of the dinar comes around, and that will be real soon!’
“That was 2008… There’s been no revalue yet.”
As it happens, Chuck helped your editor piece together the Iraqi dinar story back in 2013. It’s worth a revisit… which we’ll do during an Overtime briefing today. Read on…
  “Thanks so much,” a reader writes, “for including the links to Chris Campbell’s articles on Jade Helm.
“I’ve been keeping up with this for a year or more. I’ve read much of it and more, but reaped a lot of new info, especially from the Europe training. Please keep us up to date.”
The 5: Chris had a third and final installment in yesterday’s Laissez Faire Today — including input from Jim Rickards.
  “I am 25 years old: Can I piggyback on ‘Canada’s Social Security’ as well?” a reader inquires.
“I know you suggest I purchase the risk-free guide, but I do not want to waste my time if I do not qualify.”
The 5: You can start collecting “benefits” at any age. Indeed, the younger you start, the more the magic of compounding works for you. Details here.
  “All the talk about Social Security running out of funds is hogwash,” a reader asserts.
“When either Lyndon Johnson or Richard Nixon nationalized the Social Security fund, they canceled the fund’s reliance on workers’ contributions and instead placed the U.S. government in its place to forever pay off Social Security benefits. They usurped the funds from the fund, and then legally had the responsibility to make benefit payments as a result.
“Social Security should never run out of funds as long as the U. S. government stays solvent or does not declare bankruptcy. This may explain why Congress could not authorize a privatization of the ‘fund,’ such as was done by Canada and which has resulted in their fund becoming more valuable every year, paying larger benefits each year as well.
“Our Congress would not be able to determine what funds might be available to Social Security, since all the funds were mixed together with the government’s general funds back in the ’60s or ’70s. The Social Security fund died back then. It is the U.S. Treasury who is responsible for the income to it and the benefit payments from it. End of story.”
The 5: Well yes, there’s a lot of truth to that. Your FICA taxes get dumped into Uncle Sam’s general fund along with your income taxes. There’s no Social Security “lockbox,” to use the term made infamous by Darrell Hammond playing Al Gore on Saturday Night Live.
So yes, Social Security will always be funded as long as the government remains solvent.
But funded at what level? As we said on Monday, they can change the rules at any time… and have.
Best regards,
Dave Gonigam
The 5 Min. Forecast

P.S. The fleeting and ever-changing promises of politicians are the reason we’re so keen on the Canada Pension Plan — professionally managed, running a surplus, with reserves set to quadruple by 2040.
And as noted above, you can be any age to “piggyback” on the plan. You don’t have to be a Canadian citizen or even visit Canada to take part. With three simple steps, you can start collecting checks of hundreds or even thousands a month. Take the first step here.

The hopes and dreams of easy riches via the Iraqi dinar live on, as we saw this week when a reader urged our Jim Rickards to address the matter — which he did in The 5 on Tuesday.
But why are those misplaced hopes so persistent?
Your editor took on the question a couple of years ago in a piece I prepared with our executive publisher Addison Wiggin for Apogee Advisory, the forerunner to Rickards’ Strategic Intelligence. The following was originally published Oct. 31, 2013.

The Wizard of Babylon

Pulling Back the Curtain on the Iraqi Dinar
“Please give us some feedback on the Iraqi dinar,” a reader wrote us at the daily 5 Min. Forecast over the summer. “Is really a scam, or is it going to do what so many people are predicting — hitch a ride on a rocket!”
We scratched our head. The question was posed as if we were supposed to have an opinion.
Then came another in the same vein. Only this one was dripping with sarcasm: “With all the brilliant people you have working there, I have not heard a single person talk about the world currency realignment-reboot — the revaluation of Iraq’s dinar.
“I’m just an old country boy, and if it weren’t for friends in a big highfalutin city such as LA, I’d have never known about anything… I’ve learned more from them and their friends and connections in different parts of the U.S. — for free! What good is your service if you don’t tell the people? What’s been holding you all back? You people are almost like ABC, NBC, CBS, CNN… pooh-pooh.”
Out of curiosity, we searched The 5’s inbox for previous inquiries about the Iraqi dinar we might have overlooked. They were few, but they went as far back as 2009: “I have many friends that are buying the Iraqi dinar, speculating on the notes to be revalued in the very near future. Some of the banks in America now are buying and selling their currency. Do you have any information?”
Evidently, we trudge around different parts of the Internet than some of our readers. But sure enough, if you plug “Iraqi dinar” into Google, you’re bombarded with splashy come-ons: “Best price on Iraqi dinar!” “The trick is knowing when your dinars are going to revalue!”
For levelheaded answers, we turned to a fellow contributor; to the Middle East press; and to our old friend Chuck Butler, currency specialist extraordinaire at EverBank World Markets in St. Louis.
The short answer: You stand a much better chance of blowing up on the launch pad than ever taking a “rocket ride.”
A Glimmer of Truth Surrounded by a Giant Pack of Lies
Foreign exchange (or forex) scams have been around for as long as currencies have freely floated against each other — ever since Nixon cut the dollar’s last tie to gold in 1971. They proliferated in the ’90s shortly before the launch of the euro.
Most of the con artists never bought currency on the poor customers’ behalf; they took the money and ran. The unique genius of the dinar scheme is that it involves real, physical Iraqi dinars you can keep in a shoebox or a safe-deposit box.
And you still get taken to the cleaners. “The ruse is simple,” writes John Wasik, whose Forbes blog zeroes in on swindles: “Get dinar buyers to believe that the currency will be favorably revalued soon so they can sell their dinars at a huge profit.
“While that may happen, it’s highly unlikely given the current political and economic situation. No U.S. bank will handle the dinar while dealers reap huge commissions and markups.”
Like any good ruse, this one is built on a foundation of truth: The Iraqi government is, indeed, considering a revaluation of the dinar. The independent National Iraqi News Agency quotes a member of parliament’s finance committee as saying the move will come next year.
Alas, such reports have poured out of Iraq almost from the moment U.S. troops poured in more than 10 years ago.
“The Central Bank of Iraq (CBI) has been attempting to delete three zeros from the Iraqi currency since 2003,” according to Al-Monitor — a media site that partners with 17 major news agencies across the Middle East.
What’s the holdup? Al-Monitor cites “fears that are mostly related to the lack of security, the presence of a market open to foreign commodities without any restrictions, the prevalence of counterfeit money in the market and rampant corruption in the country.”
Those sound like mighty steep obstacles. Don’t underestimate the “lack of security” part: Bombings and other killings of Iraqi civilians are back to 2008 levels, even if they don’t make headlines anymore.
No matter: The schemes proliferate. Ohio-based attorney Tom Pigott has filed a class action lawsuit against an outfit called BH Group. He says one of his friends was taken in by a guy named Fred. “Fred makes his money by selling you actual Iraqi dinars at a huge markup. Typically, they are sold at somewhere like 1 million dinars for $1,200. Try to trade your dinars in at a reputable dealer and they will offer you approximately $650 for your million dinars.”
BH Group, by the way, has been under federal indictment for more than a year now.
The schemers are nothing but inventive, forever coming up with new catalysts for the dinar’s revaluation. Around Labor Day, they began spreading the rumor Wells Fargo was making arrangements to start buying dinars. A Wells Fargo spokeswoman dismisses the rumor out of hand:
Wells Fargo does not currently buy or sell Iraqi dinar and has no plans to do so in the future. When we provide banknote services to customers, it is generally for travel-related purposes, and we do not foresee a high number of customers traveling to Iraq for business or leisure purposes in the near future.
Oh, well. Next month, it’ll be something else. While the Iraqi dinar scheme is new to us, it’s old hat to our friend Chuck Butler, who knows currencies inside out in his role as president of EverBank World Markets.
“Through the years,” he tells us, “we have heard about an Iraqi dinar revaluation over and over again. Every time, the callers tell us it’s going to happen on ‘x’ date for sure, and then ‘x’ day comes and goes without a revaluation. We have tried to find dealers who would buy the dinar back; we’ve never found one. I really can’t begin to tell you how many times over the last 10 years we’ve heard the calls for a revaluation of the dinar and nothing happens. It’s all very fishy to me.”

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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