Like I’ve mentioned before, I don’t have much faith in the US dollar. Here’s an article I read today that supports the theory. Enjoy…

Nothing fails like success.

As recently as a half-century ago, the American stood like a colossus in a New World…young, free, healthy; and a creditor to the rest of the world, which owed him not only money…but liberty, for he had lent his muscle, his oil, his manufacturers – and even risked his life to win World War II for the Allies.

“What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?” asked Adam Smith.

Here at The Daily Reckoning headquarters, we too are occasionally beset with bouts of debt-free happiness. But we count on our natural gloominess to get us through.

But…what about people who have more debt than any one else…whose health suffers from too much sustenance…and whose conscience is encumbered with a bloody war made on people they didn’t even know, for a purpose no one knows? Can they expect happiness?

As to their conscience and health, we have no opinion. But as to their debt we have many.

Fallen into our hands is a report from the CIA, ranking nations in order of their current account balance. The current account, we remind readers, is like the operating statement of a business or an individual. Income must exceed outflow or your upkeep is your downfall. The difference between what comes in and what goes out, if it is positive, accumulates as though it were a profit. If it is negative, it builds up – but not necessarily, in the form of debt.

So what do we see? The country with the best position is Japan – with a current account balance of plus $165 billion. China is in the number two position, with almost as much. And here we pause to give readers a chance to gasp. China – a country run by communists – has the second best current account balance in the world. Figure that. In other words, Marxism…at least as practiced in the Middle Kingdom…has proven no bar whatever to capitalist success.

But we will move on…

Germany is the third most ‘profitable’ country in the world – with a positive current account balance of $115 billion. Then the list goes into various oil producers, watchmakers, and assorted national curiosities…such as Algeria…with – would you believe it – has an $18 billion surplus! Even tiny Hong Kong ended last year nearly $20 billion to the good.

But between Swaziland and the Comoros (which, we believe is an island nation somewhere off the coast of Africa) the figures make the kind of transformation that can only be likened, in the material world, to going from light to darkness, or in the sentient world, from life to death. That is, they go from positive to negative. The numbers which were such a comfort to Germany and such a delight to Japan become an embarrassment.

Poor Burkina Faso, perhaps the most God-forsaken hole on the surface of the whole planet, suffers a $438 million deficit and still manages to hold its head up in public.

“Hey, wait a minute,” said a friend at a dinner party recently, “Burkina Faso is not so bad. My wife and I love to go there for desert trekking. There is nothing there…no restaurants…no hotels you’d want to go to…no theatres…not much of anything. But out there in the natural world… in the desert, there is a quality that is sublime. I wish I could describe it to you…but you have to see it for yourself.”

That said, at least Burkina Faso is far from the worst on the CIA’s list. The rest of Africa follows…and then come the Banana Republics of Latin America…and finally, guess who makes the end of the line-up? Guess who has the worst current account deficits in the entire world? Guess which countries spend more than they earn – regularly and spectacularly?

Last in line are the nations of the Anglo-Saxon, English-speaking debt-based empire! New Zealand has a deficit of nearly $10 billion. Then, South Africa…and India…and Australia all have deficits too. Among the major former colonies of the British Empire, only Canada seems to have any sense. It runs a surplus. The others are all debtors. The UK itself is third from the bottom with a $57 billion negative current account balance.

For no reason we can think of, the penultimate on the list is Spain. And then comes the worst of all…the United States of America, with a current account balance of a minus $829 billion.

Add up all the deficits of the entire world and you get a figure barely half of the U.S. total.

The U.S. economy makes up a quarter of the world total…that it should have more than half of the world’s current account deficits is a spectacular success – only made possible by its great wealth and status.

And here, in yesterday’s news, comes the latest: “Record $68 billion trade deficit in July,” reports Bloomberg.

Nothing fails like success.

If you’d like to check out the facts for yourself, go to the CIA Factbook. [The CIA can’t be wrong about this. After all, didn’t they provide irrefutable evidence that Saddam had weapons of mass destruction! 😉 ]

Just got my hands on
Getting Rich In America: Eight Simple Rules for Building a Fortune–And a Satisfying Life by Dwight R. Lee and Richard B. McKenzie.

It picks up where The Millionaire Next Door left off.

The books is broken down into 8 steps that are easy to read and follow. You know, work hard, learn compound interest, get an education, get married and stay married etc. Nothing you already didn’t know. However, the authors do a great job explaining the math behind each decision you make in life. Every little expense you make today can have a tremendous ripple effect in the future.

The first chapter is essentially motivational and says that if you work hard, take personal responsibility for your wealth[or lack thereof] and quit complaining, you can become rich.

The authors go into considerable detail giving examples of how someone who makes minimum wage can retire in style. Various salary, returns and durations are calculated and the answers are quite eye-opening. Effects of excessive consumption are also calculated. Not buying a new car every 3 years and instead buying a used car can make your retirement $840,000 richer!!!! Similarly the costs of buying regular coffee instead of a fancy latte can help you be $74,000 richer in retirement. Not only do they provide the examples, but they also explain how to get the answers in excel or on a financial calculator. Pretty Neat!

All in all, I like it. It didn’t change my life, but its good to read these books once in a while. I strongly recommend it as a gift to your young kids,neices or nephews in high schools, or people about to get married or divorced or mid-way through life…..ok, basically its for everyone!

I give it 2 thumbs up.

Since I own investment property in Indiana, it makes sense to follow whats happening there.

The Indy Star just had an article on ballooning property taxes.

Basically the assessors office is changing the way property is being assessed which is likely raise the average tax bill by 15%. That sucks! Taxes on my property are already at 2.2%. I’m not keen on paying any more than that.

Yet another reason I prefer SLC over other regions in the country. Its tax rate is only 0.7%, a lot lower than Texas’s 2.8% and definitely a lot lower than New York and New Jersey where its over 5%.

To the unsuspecting Californian who assumes that its 1.2% all over the country, that can turn into a nasty shock. As always, do you homework before you invest anywhere.

I finally got my account open at Interactive Brokers. It was a lot easier than at Everbank and I didn’t have to provide them with blood samples or fingerprints!! [yeah thanks George W, this is what I get for being pro-Republican!]

My base currency is Aussie Dollars and I get paid a whopping 5.4% interest. And unlike Everbank, the money is liquid and isn’t tied up for 3 months.[plus I get a tad higher interest].

On top of that, the USD has been showing a little strength this week so I might get more bang for my buck in terms of appreciation too.

The only drawbacks are that you have to have atleast $15,000 AUD to get paid interest[thats about $11,250 USD] and the customer service isn’t as easy as picking up the phone, but they respond well to email. Also withdrawals cost $4 via check and $1 via ACH. [But its still liquid for a buck.]

Spain’s Housing Boom Faces a Test
Economists Worry About a Hard Landing
And a Resulting Ripple Effect
By KEITH JOHNSON
September 11, 2006; Page A6

MADRID — A decade of red-hot growth in the Spanish housing market fueled a jump in such things as jobs and consumer spending, turning Spain into one of the fastest-growing countries in the euro zone. But now, economists say the real-estate boom is coming unmoored from the economic fundamentals that once drove it, and they worry the market is headed for a hard landing that could have repercussions for the rest of the economy.

Incomes are no longer rising, but home prices continue to soar. Meanwhile, interest rates have started to head higher, making mortgages more expensive. Housing starts jumped 15% in the first half, while more than 3.5 million homes remain empty as owners wait for the value of the house to appreciate

“Spain is headed for a first-class beating, and the only question now is when it will come,” says Lorenzo Bernaldo de Quirós, an economist and head of Freemarket International Consulting in Madrid.

According to the WSJ,

Nomura Real Estate IPO
Could Raise $1.12 Billion
By KAZUHIRO SHIMAMURA
September 12, 2006

TOKYO — Nomura Real Estate Holdings Inc. set a tentative price range of 3,200 yen to 3,500 yen ($27.37 to $29.94) a share for its coming initial public offering of stock.

The real-estate arm of Nomura Holdings Inc. could raise at least 131.2 billion yen ($1.12 billion). The shares are scheduled to start trading on the Tokyo Stock Exchange Oct. 3.

Based on the tentative price range, the IPO of 41 million shares would be the largest by far in Japan this year, exceeding the 52 billion yen offering in March by Alpen Co. At that price range, the newly offered shares would trade at 19.9 to 21.8 times the company’s projected earnings for the fiscal year ending in March.

The company will take orders from institutional investors for a week starting tomorrow. The offering price will be announced Sept. 21.

Write to Kazuhiro Shimamura at kazuhiro.shimamura@dowjones.com

Sounds like a good play in the Japanese RE market which was flat for 15 years and has just started to rise. Also a good hedge against the US dollar. A lot of people think the Yen will also rise against the USD in the near future.

I got this email from someone. It was adapted from someone else’s article. I don’t know who, so I can’t provide a citation.

It is widely assumed that rising stock and house prices will keep American consumers both willing and able to spend, spend, spend their way to wealth – indefinitely. But the transfer of U.S. net worth to interests overseas is alarming, and it endangers U.S. economic and political health. Warren Buffett, who kept his vast fortune invested at home for more than 70 years, decided in 2002 to invest in foreign currencies for the first time. Buffett and management of Berkshire Hathaway believe the dollar is going to continue its decline. We should not need confirmation such as this to recognize the inevitable; but it bolsters the argument that the dollar is, in fact, in serious trouble, and that this trouble is likely to continue.

In addition to debt problems at home, Buffett made his decision based at least partially on the ever-growing trade deficit. He warned:

“We were taught in Economics 101 that countries could not for long sustain large, ever-growing trade deficits. At a point, so it was claimed, the spree of the consumption-happy nation would be braked by currency-rate adjustments and by the unwillingness of creditor countries to accept an endless flow of IOUs from the big spenders. And that’s the way it has indeed worked for the rest of the world, as we can see by the abrupt shutoffs of credit that many profligate nations have suffered in recent decades. The U.S., however, enjoys special status. In effect, we can behave today as we wish because our past financial behavior was so exemplary – and because we are so rich.

Buffett is especially concerned about the transfer of wealth to outside interests. He notes:

“Foreign ownership of our assets will grow at about $500 billion per year at the present trade-deficit level, which means that the deficit will be adding about one percentage point annually to foreigners’ net ownership of our national wealth. As that ownership grows, so will the annual net investment income flowing out of this country. That will leave us paying ever-increasing dividends and interest to the world rather than being a net receiver of them, as in the past. We have entered the world of negative compounding – goodbye pleasure, hello pain.”

According to the Salt Lake Tribune Utah housing is still doing well.

Utah’s home price appreciation, the worst in the country just three years ago, is now the 10th best nationwide.
Home prices statewide rose 15.2 percent in the year that ended in June, according to a report released Tuesday by the Office of Federal Housing Enterprise Oversight, a government agency that tracks housing values nationally. Utah moved into the top 10 from No. 15 in the agency’s last report three months ago.
Nationally, home prices rose only 10.1 percent in the year that ended in June, reflecting a downturn seen in markets throughout the country that experienced a rapid run-up in prices in the past several years.
Salt Lake City economist Jeff Thredgold, a Zions Bank consultant, believes Utah may be ranked sixth or seventh in home price appreciation by the end of the year.
He attributes that rosy outlook to Utah’s strong economy, which continues to outperform much of the rest of the country.
In addition, “Home prices are still reasonably cheap here, compared with neighboring states,” he said, which tends to fuel investment in the area.
That said, he expects appreciation along the Wasatch Front to kick down into the 8 percent to 12 percent range next year.

According to the Desert Times, Salt Lake City housing is likely to keep booming!

Plunging housing sales and sagging values may mean the end to one of the nation’s biggest housing booms, but Salt Lake City’s hot housing market will likely continue to show double-digit price gains for at least another year, according to industry experts.
The Commerce Department reported that U.S. home sales in July fell 22 percent compared to July 2005. And new-home prices decreased 1.7 percent in July compared to June.
“We’re going the other direction,” said James Wood, director of the University of Utah’s Bureau of Economic and Business Research. “We’ve had one year of really strong price increases. I think we have a ways to go. I think we have another year of double-digit growth.”
At 14.68 percent in the first quarter, Utah ranked 15th among all states in highest house-price appreciation rates, according to the U.S. Office of Federal Housing Enterprise Oversight. Second-quarter rankings are set to be released Tuesday.
However, while home values and sales in nearly all Wasatch Front communities are soaring, Utah’s real estate market is not immune from a national slowdown.
New construction in the state in the first seven months of 2006 is down about 1 percent compared to the same period in 2005. And in the greater Salt Lake region, finished unsold vacant home inventory, which includes single-family and multifamily units, rose to 1,492 units in the second quarter, a 29 percent increase from 1,156 units in the first quarter, according to Metrostudy, a Houston-based real estate research firm with offices in West Jordan.
A June report by National City Corp. revealed that 71 of 317 metro areas across the country were considered “extremely overvalued” in this year’s first quarter, having appreciation rates in excess of 34 percent.
St. George ranked among those areas considered extremely overvalued. The Salt Lake metro region, while considered overvalued by the report, only carried an 8 percent housing premium. Just 18 months ago, Salt Lake was considered one of the most undervalued real estate markets in the country.

Finally closed on my St George house. Its really quite nice. Unfortunately, the market has gotten a bit saturated [despite the tremendous influx of people]. Seeing as I have too many things going on, I’ve decided to sell it and take my cash out of it. I’m heavily invested in Salt Lake City and I don’t think it makes sense to spread myself thin in different geographic areas.

Here’s the virtual tour. Let me know if you’re interested!