American home prices just suffered their worst quarter in recorded history.

That’s the word from the National Association of Realtors today… the median home price fell 14% from the first quarter of 2008 to the first three months of 2009, to just $169,000. Of the 152 metropolitan areas surveyed by the NAR, just 18 registered annual price gains. Nearly half of all sales during the first quarter were foreclosed properties or short sales. A whopping 3.7 million previously owned homes are still on the market.

Is this rock bottom for U.S. housing? Ehh… probably not.

After staying flat for most of the ’90s, the Case/Shiller home price index more than tripled during a 10-year boom. If this “credit crisis” is what people say it is — a generational calamity, Bill Bonner’s “Depression with a capital ‘D’” — then a mere 26% retrenchment from the peak seems kind of… lame. Even the Dow managed a bigger fall than that.
If you’re a real estate opportunist (or just looking for a damn cheap house), you might want to check out Saginaw, Mich. The median existing home price there during the first quarter was a stunning $30,300, the lowest in the U.S. We won’t pretend to know what’s going on over there, but geez… they’re practically giving ’em away.

And if you’re also a newshound, like us, Saginaw might bring back the memory of this little love shack:

Back in October 2008, a Chicago woman famously bought this Saginaw home on eBay for $1.75. Ouch.
Foreclosures set a new record in April, says a separate report from RealtyTrac today. 342,000 homes were in some form of foreclosure last month. That’s one for every 374 homes in the U.S. — just in April. Over 1.3 million homes have now been lost to foreclosure since the housing correction began in August 2007.
A study out today shows that minorities are suffering the worst of the housing crisis. The homeownership rate among all Americans has fallen 1.7% from its 2004 peak. But for black households, the rate of ownership has plunged 3.8%, more than double the national average. Native-born Latinos have it even worse — down 4.6% from their high.

According to Pew Research, this rise and fall among minority homeowners was directly correlated with the popularization of subprime lending. “Blacks and Hispanics were more than twice as likely to have subprime mortgages as white homeowners, even among borrowers with comparable incomes,” reports The New York Times. (Queue the predatory lending lawsuits.)

And the only ethnicity to not see homeownership rates decline? Latino immigrants, with the lowest rate of all groups studied, have managed to maintain a homeownership rate of 44.7% since peaking in 2007. (Ugh… and queue the flood of hate mail into our humble inbox.)
The credit crunch has hastened the predicted demise of Social Security and Medicare. The Obama administration admitted yesterday that they now expect Medicare to run out of money in 2017, two years sooner than the Bush administration predicted in 2008. Social Security’s imminent insolvency was bumped up four years, to 2037. That’s all under the assumption, naturally, that the economy will recover by the end of 2009.

Even those already sucking the government teat got a dose of bad news. Social Security trustees now predict, for the first time in over 30 years, that recipients will not receive any cost of living increase next year, or in 2011.

In just seven years (2016), the Social Security trust will enter deficit. Eight years at the current pace and Medicare will be totally wiped out. When do you think we’ll start worrying about it… 2015? What a mess.
Last month’s budget deficit was the first April loss since 1983. We hit most of the details of the latest deficit yesterday, but felt obligated to raise this one point today: How can Uncle Sam possibly lose money during tax month? Only the U.S. government can “earn” $266 billion in one month (mostly our confiscated income) and still end up $20 billion in the hole.
All the above is weighing heavily on the market today, but the latest retail sales numbers are pushing traders over the edge. Retail sales fell 0.4% in April and were revised down to a 1.3% decline in March, the Commerce Dept. said today. The Street was expecting flat sales this month and no March revision.

Declines for both months proved to be the last straw for an already nervous market. After registering small gains yesterday, the Dow and S&P 500 raced down almost 2% at the opening bell this morning.
“Who’s surprised?” asks our currency man Bill Jenkins in response today’s retail “shock.” “Economists predicted a rise in sales from last month, but based on what? Here’s the bottom line: 3 million more people have been added to the lines of the unemployed since the beginning of 2009. I’m not sure where a person learns the following lesson, but apparently not in Keynesian Economics 101. So our readers can learn it here: Unemployed people spend no money. (Or at least they spend a lot less, if they have any sense.) Less spending equals fewer sales.

“As of the first quarter, we have already had record budget deficits, and Moody’s has announced that with the planned and continued spending, America puts at risk her AAA bond rating. What will happen to the dollar then? Dollar weakness is going to shock the world even more than today’s shocking sales numbers. Get ready to short the dollar aggressively.”

Need a hand trading currencies? Then definitely check out Bill’s Master FX Options Trader. His strategy is one of the only ways to profitably trade worldly monies without taking on loads of leverage. Details here.
But don’t short the ol’ greenback just yet. Today’s equity decline is doing wonders for the dollar. After cratering at a four-month low of 81.9 yesterday, the dollar index is back up to 82.5 this morning.
“One of the most exciting growth industries,” writes Jim Nelson, finding opportunity amid today’s sell-off, “is Far East Internet service providers. According to internetworldstats.com, 73.8% of Japanese and 76.1% of South Koreans are on the Internet. Even about one in every four Chinese citizens has Internet access. But too many forget that these superpowers aren’t the only places where you can make big money.

“Indonesia has the world’s fourth largest population, over 200 million people, but it ranks No. 16 in GDP purchasing power. Internet access is trailing in the region, with just 10.5% of its population online.

“But it’s the growth that impresses us. In 2000, only 2 million Indonesians had the Internet. That number is going to reach 25 million this year. That’s a massive growth rate… and serious investing opportunity.”

Jim just gave his readers a solid dividend-yielding play in this sector. If you’d like to get the details, be sure to check out his Lifetime Income Report.
Oil is holding up today, even though stocks are in the dumps. As we write, the front-month contract is actually up about a quarter from yesterday’s close, to $59 a barrel.
“Take your coal profits and run,” Bryon King told his Outstanding Investments readers late yesterday. “Coal is besieged. The coal industry wrestles daily with weak demand due to the U.S. economic slowdown. At the same time, the build rate for coal-fired power plants is at a historic low. Sure, in ‘ordinary’ times, coal might stage a comeback. But these are not ordinary times.

“The ‘rock that burns’ is under attack from many quarters of the environmental movement. Primarily, coal is guilty of the environmental sin of emitting carbon dioxide when burned — much more, pound for pound, than natural gas or oil. But it’s not just coal. Coal ash is also under attack, as are the many other byproducts of coal combustion (mercury, arsenic and much else).

“Is the anti-coal movement over the top? Yep. Is the anti-coal ‘science’ valid? Some of it is good; some is dramatically bad. Will the U.S. economy benefit from a precipitous rush away from burning coal? Nope. Will many Americans eventually look back and regret it if the current anti-coal frenzy prevails? Probably.

“But for now, I’m not going to get into the whole scientific and economic debate over the merits of the anti-coal claims. I’m just going to say that if you have a chance to make money in your coal positions, you should take it and move onto other ideas.”
It’s a great day to own some gold. The spot price has perked up $20 from yesterday’s low, now at just over $925 an ounce.
“You asked a question yesterday,” a reader writes: “‘Would you expect more credit card losses during this recession (aka the credit crisis) or the tech bust?’

“For what it’s worth (not much, as it is only my gut-feeling guess), here’s an extreme answer. I expect that the chart you’ve provided will hit 20-30% by the time it is all over, many years from now. Unlike any previous recession/depression, the use of credit cards today is at an all-time high globally, particularly in the U.S. As such, The Daily Reckoning Dicta No. 2 as provided by Mr. Bonner comes into play: ‘The force of a correction is equal and opposite to the deception that preceded it.’

“And with the marginal utility of debt approaching zero with each passing day, one may even be enticed to provide a higher number than merely 20-30%, but I do not wish to go that far into the gloom.”

The 5: Thanks for the forecast.

Source: The Housing Bottom, Doomed Entitlements, Retail Sales Suffer, Sell Coal and More!

You also have to know that the Social Security System was flushed away by congress a long time ago. The general fund, or the excess contributions made to Social Security for the last 50 years, was squandered along with another nine trillion dollars.

That leaves all of us over 50 with the responsibility of funding most, if not all of our retirement. Unfortunately, the down turn in the stock market, as the result of congress mandating that Fannie Mae (FNM) and Freddie Mac (FRE) guarantee mortgages to people who could never possibly pay for them, has crushed an entire generation’s retirement funding.

The simple fact is, since ‘87, the majority of Americans have poured almost all of their retirement dollars into stock mutual funds in their IRA’s and their 401k’s. Prior to the mid 80’s all of it went into bank investments. Our exposure to the stock market is the largest and most wide spread ever. Losses in investments this time will be much greater than 1987.

Time has almost run out! For the majority of Boomers there is only one more opportunity to secure their retirement. Most of us will live far below what we should have been able to afford no matter what we do. But, if we don’t spend the next ten years doing more than playing the stock market lottery, we are in deep kimshi.

Every person over the age of 50 has no choice but to shift into a reduced risk investment strategy. We no longer have enough time in our working lives to wait out another disaster in the stock market. We also cannot delude ourselves that we will somehow avoid another huge down turn in the market.

The truth of the matter is that the very nature of the stock market is to flush out the weak every few years. No one knows what will cause the next explosion, but it is coming.

There is some good news. Holy cow! Do we need some good news, or what?

Reduced Risk Portfolio.

Most investors avoid this type of strategy because it implies stodgy, turtle like returns. But if you reduce the risk level of your holdings by diversifying into corporate or tax-free bonds, you don’t necessarily reduce your return. In fact, history has taught us you actually increase your overall return because you don’t give back any in a correction, almost zero.

The stability bonds add to your portfolio will actually let you sleep at night. You know going in exactly how much you will make and exactly when it will appear in your account. And with a little effort, you can see the same returns from bonds that the stock market has produced long term.

In the past few corrections you ended up giving back almost as much as you earned during the Bull Run. The really sad part is that most people have to get hit over the head many times to get the message. Most have nothing left by the time they learn the truth about stocks.

The critical point for the boomers reading this is, you don’t have the time anymore to wait out another correction. If we get slammed again, we don’t have the working years left to replenish our accounts. We will be up the proverbial creek. This is your last window of opportunity to secure a retirement.

If there is any good to come of this sell off it may be a final wake up call for us to stop playing Vegas with money we can’t afford to lose. We are not 35 years old anymore with 30 years to get it right. Get it right this time or learn to live below the poverty level.

In my head I am still 25. I am still thin, fast and almost immortal. But my lower back tells me loud and clear I am 55. We all need to feel our age in our wallets, too.

This country is on the verge of a financial tragedy. If the baby boomers don’t wake up and get their money house in order, we could be setting up our children to live at the third world level. The financial burden of keeping us in our old age will make their lives a mere shadow of what we have known.

Our time is not running out, our time is up.

Let the other guy go down with his ship. We live to fight another day.

Source: The Baby Boomers’ Last Window of Opportunity

What’s more, that result gave a majority to the center-right government of Silvio Berlusconi. Berlusconi, a media billionaire, is pro-U.S. and strongly pro-capitalist. While the forces preventing free-market reform in Italy are extremely strong, he should at least be able to make some improvement in Italy’s economic position, with consequent benefit to the local stock market. While sensible investors have in the past avoided Italy, with Berlusconi in office, it might be worth taking another look.

There’s no doubt that Italy has some weaknesses. By European standards, it is fairly corrupt, ranking 41st on Transparency International’s Corruption Perceptions Index, below the other major European countries (but above such investor magnets as China and India).

Italy has a budget deficit of 3% of Gross Domestic Product, with too much government spending at 50% of GDP, and far too much government debt at 105% of GDP. The country had relatively slow economic growth of 1.9% in 2007.

The home to Rome also has a declining population – not in itself a problem, but since its social security system is generous it creates difficulties in funding Italy’s pension system. It has suffered badly in the past few years from expensive government and expensive labor costs, particularly as it is a member of the euro, which has almost doubled in value against the dollar since 2002.

All this would make you think Italy was a basket case, except for one fact: it has enjoyed very considerable economic growth in the decades after World War II and again in the 1990s. It’s a wealthy country, nearly as wealthy as Britain, France and Germany. And it is famous for high-end design in the clothing and home furnishings industries. Some of Italy’s medium-sized family-owned companies are the best run in the world.

From time to time, investment in the right Italian companies has made international investors a lot of money. With expectations low – the Milan 30 index trades only 30% above its level of five years ago, and on a price-earnings ratio of a mere 11 – and with Berlusconi likely improve the outlook for Italian business, this may well be such a time.

There are only a few Italian companies with full American Depositary Receipt (ADR) listings in the United States – most of firms choose to concentrate on the London market for their foreign capital – but at least a couple of these would appear very interesting investments.

A list of the companies easily investable by US individual investors is as follows:

ENI SPA (E): This firm is Italy’s entry in the Big Oil stakes. Because of Italy’s neutral foreign policy posture, it has the advantage of being able to operate in countries like Kazakhstan, Libya and Venezuela where U.S. companies often have difficulty. On a price-earnings ratio of only 8.4% and with a yield of 5.6%, it currently offers excellent value. Strong buy.

Gentium SPA (GENT): A small loss-making drug company, which has lost investors 67% of their money in the last year. Better pass.

Luxottica Group SPA (LUX): A manufacturer of sunglasses with worldwide operations, Luxottica is a quintessential way to buy into Italy’s superlative design skills. On 14.7 times historic earnings, 13.1 times prospective earnings and with a dividend yield of 2.7%, the firm is also reasonably priced. The only caveat would be that a worldwide recession could badly hit sales of even lower-priced luxury goods. Still, we think it’s a buy.

Natuzzi SPA (NTZ): A medium-sized leather furniture manufacturer, Natuzzi is currently booking losses and pays no dividend, so maybe not.

Telecom Italia SPA (TI): Italy’s main fixed line and mobile integrated telephone company, with a P/E ratio of 11.3 and a historic dividend yield of 10%. However, as those ratings would suggest, earnings dropped 19% last year on price cuts and heavy competition and the dividend is now uncovered. There is also talk of a merger with Spain’s Telefonica. Speculative.

iShares MSCI Italy Index (EWI): And finally, you can buy the Italian market as a whole through this exchange-traded fund (ETF), which has a reasonable market capitalization of $340 million, a price-earnings ratio of 11 and a juicy yield of 5.04%. If you’re excited by the possibility of economic improvement that the Berlusconi election victory offers, that is an attractive alternative. Buy.