Review of How to Profit from the Coming Real Estate Bust: Money-Making Strategies for the End of the Housing Bubble (Hardcover)

SUMMARY:

I personally think the advice about "profiting" from the bust in this book is mostly worthless, indeed possibly even dangerous, but the arguments about whether there is a bubble & how to recognize it IMO are better.

DETAILS:

The first half of the book (which another reviewer suggests you could skip -- !!!) is actually the most useful IMO.It gives a general summary of the reasons that suggest current housing prices are unsustainable.The arguments are not very complex in construction, but I don't fault the book for it, I think it has a target audience, and that is the general public, not the subset who have a firm grasp of macroeconomics & math. My biggest gripe with this part of the book is that he expresses some facts in a misleading way, to my mathematically semi-sophisticated eye. For example, on p. 62 he has a graph of total US debt and GDP vs. a 45 year time axis. To the "untrained eye" (and he supports this impression in his text), it looks like debt is growing much faster than gdp. This impression is created by the fact that both are under $5trillion in 1957, and by 2002 gdp is $10t and debt around $34t. However, I suspect if you graphed the RATIO of debt to GDP (which is really the issue, what multiple of gdp is debt, i.e. very roughly, how many years of earnings collectively would it take to pay it off), you'll see the ratio MUCH higher at the start of the period than now, you'd probably see a decline in the graph slope for many years, then maybe an increase starting around 1985, based upon an eyeball evaluation of the two curves. That would have been a MUCH more meaningful graph, a more useful historical perspective. Maybe he thought that too abstract for his intended audience, being a derivative of the data (change over time in the rate of change of the ratio), but in this particular case I believe he has made more out of those historical numbers than is really warranted.The problem for me is, when you see that once you start to trust less all the rest of the arguments he makes, you instead find yourself wondering "what did he leave out or misrepresent this time?"But with that caveat, this is still the best overall attempt to make a case for a housing bubble, with the possible exception of a "Special Survey" done by the magazine Economist on 5/29/2003, which looks at the issue from an international perspective.

The last 1/2 of the book (the ostensible purpose, "how to make (or save) your money when the bubble bursts") seems even less well thought out. I'm not a professional investor, but I have been doing it a couple decades now & I came out of reading this book with very few viable (IMO) ideas on how to achieve what the title promises. For example, buying cash rich companies -- he lists msft, csco, intl, dell, nok. This advice is totally bereft of the context of stock price or p/e, and I'm sorry, a dollar is worth a dollar, and you can't say a company with cash is a good buy without even referencing how much cash you will pay for that cash!!!The suggestion of convertible bonds is also curious, I admit I have not looked at them much in my years, but my intuitive reaction is, won't these only do better than normal bonds as the stock price INCREASES (i.e. as it approaches the conversion price?), these bonds pay a lower rate & make up for that with the option to convert to shares at a fixed stock price. The value of that conversion option drops with the stock price (indeed for convertibles close to strike price, stock price changes are MAGNIFIED in the convertible pricing). So if what he suggest comes true, convertibles will be a WORSE buy than plain old bonds, overall.(maybe he suggests convertibles just as a safer alternative to stocks, and not necessarily better to buy than plain old bonds?If that's what he meant he should have SAID it though).And regarding gold pricing -- I actually have one raw gold producer that he mentions on my watch list right now, they are a major player in many other metals markets as well (copper, silver, etc). Having that POV, I can tell you that he has totally ignored the whole question of decreased industrial demand that would come with the kind of financial catastrophe he envisions, very relevant given the exposure this particular stock has to these other metal productions. Heck that is the reason that I am still on the sidelines, reduction of demand in China (which is creeping up in the news more in recent weeks as they attempt to engineer a "soft landing" to a badly overheated economy) could totally take the floor out from underneath a lot of these raw material producing companies.

Finally, while by no means suggesting this is a fair way to evaluate his advice in this second half of the book -- since the whole argument is predicated on the collapse of the housing market, which has not (yet) happened -- it should be noted that a quick review of many of his suggested strategies shows that anyone following his advice in the one year approx since he finished writing it (he mentions this being the beginning of June 2003) would have vastly underperformed the market, or even lost money, in the interim.

So, in short, I find the first half the book (is there a bubble, why) a pretty good introduction to the argument for it, not perfect, but perhaps the best one out there. I find the other half (what will happen to the economy when it bursts, how to profit/protect yourself from it) very much unsatisfying, and I am stuck where I started, thinking "I think there is a serious risk here" but still unable to figure out how to translate this concern into concrete action for my own personal finances.

*** UPDATE 9/12/04: Since writing this review on 5/2/04, I have found and read John Talbott's book from 2003 on the same subject,
"The Coming Crash in the Housing Market : 10 Things You Can Do Now to Protect Your Most Valuable Investment."Having read that, I have changed the title of the review, & I would now change my statement in my review above that this book is 'perhaps the best introduction to the argument for a housing bubble out there.'I now believe the Talbott book is better, the statistics in that book are more carefully and rigorously presented, and do not seem to suffer from the misleading presentations you see in this book.In other words, although both books make essentially the same argument, the Talbott book makes it more completely & convincingly.



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Review of The Coming Collapse of the Dollar and How to Profit from It: Make a Fortune by Investing in Gold and Other Hard Assets (Hardcover)

I just finished reading The Coming Collapse of the Dollar and How to Profit From It By James Turk & John Rubino published in 2004. James Turk is founder of GoldMoney.com, the leading digital gold currency payment system. John Rubino is the author of How to Profit from the Real Estate Bust.

I've posted a lot about inflation and gold, the Federal Reserve, and the destruction of the US Dollar. I have read about the inflation that Germany experienced after WWII, the devaluation of the Mexican Peso and the Argentine Peso. If that is our future, I wanted to have some idea of what is in store for us and. The book is divided into four parts and is well written and difficult concepts are explained well:

Part One - Why the dollar will collapse
Part Two - Money Then and Now
Part Three - Wht Gold Will Soar
Part Four - Profiting From The Dollar's Collapse

In part one we learn that we have a fiat currency, backed by nothing except a decree that the US Dollar is legal tender. Throughout history, in order for governments to satisfy demands without raising taxes, a government not only begins to debase its money, but inflates as well. Both are happening in the US and no government has been successful. We have a history of that in this country with the Continentals and the Confederate currency, both worthless.

Another fact that dooms our currency is that we have too much debt. Total unfunded liabilities of the US are in excess of $43 Trillion, as a society we owe another $37 Trillion and Derivatives are in excess of $200 Trillion.

Then we have a trade imbalance which just topped $800 Billion for 2005. We have been up in arms lately by the Chinese wanting to buy Unocal, then Dubai wanting to own our eastern port management companies and Dubai wanting to own some of our critical defense industry by trying to buy Doncasters Turk and Rubino point out on p31:

Foreign investors now own about $8 trillion of U.S. financial assets, including 13 percent of all U.S. stocks, 24 percent of corporate bonds, 43 percent of Treasury bonds, and 14 percent of government agency debt. By the end of 2003, about a third of Fannie Mae's mortgage-backed bonds were being sold outside of the U.S.

That was in 2003 and it has gotten considerably worse. What's in store for us:

Over time, the gap between tax revenue and the demands placed on government tends to grow, and spending, borrowing, and currency creation begin to expand at increasing rates. Inflation accelerates, and the populace comes to see the process of "debasement" for what it is: the destruction of their savings. They abandon the currency en masse, spending it or converting it to more stable forms of money as fast as possible. The currency's value plunges (another way of saying prices soar), wiping out the accumulated savings of a whole generation. Such is the fate of every fiat currency.

The government wants to keep this game going as long as possible by issuing phony CPI numbers, then by excluding energy and food, concentrating on a "core" rate. Phoney low inflation numbers keep bond yields down and "COLA" adjustments low. What is the housing bubble, but selling USDs for a tangible asset. Gold is a warning sign and a rising gold exchange rate is fought by capping and leasing gold, until the central banks are short 12,000 to 16,000 tons. And now one of the tools Turk and Rubino use, The Fear Index, to gauge where gold is going in the next few years will be handicapped by the ending of release of M3 data.

Turk and Rubino do an excellent job of instructing you in Part Four. Can you profit from your knowledge of an impending collapse of the dollar? How can you protect yourself? How can you protect your accumulated savings?

I highly recommend this book to professional and novice, alike.



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Review of Clean Money: Picking Winners in the Green Tech Boom (Hardcover)

This book is a great summary of numerous clean technologies, spanning the range of power production (solar, wind, biofuels, geothermal, fuel cells), energy storage, energy conservation, food, water, vehicles, houses, materials, and more. John Rubino and his team must have spent an incredible amount of time digging into all the areas of clean tech, detailing their pros and cons, and surveying individual companies in each sector.

(I was able to get a sneak preview and comment on the book before its publication. But when the official version came out, I immediately re-read it, because there were so many pieces of valuable information that I had already forgotten.)

While I am a veteran in the field of alternative energy, I was surprised how many technologies are out there that I didn't fully know about. It can sometimes be overwhelming, or even uncomfortable, to hear about all these different technologies. But I am so glad that I now read about all these potential future developments. As an investor myself, it never hurts to have as much information as possible, and I don't even want to imagine what I would miss if I hadn't read the book.

John Rubino also blends the book with great macro-economics sections and investor advice. He is one of the few people right on the money, as he had predicted the real estate bust in his 2003 book, and he was consistently recommending to avoid or short homebuilders and investment banks, as in his regular interviews on Howestreet.com. He has certainly helped me and my investor group to stay clear of some of the collapses on Wall Street this year.

The current book is by no means just a promotion of all new clean technologies. On the contrary, it contains ample warnings about what can happen to overhyped technologies, what to look for, and how to avoid possible traps. It is an objective book for those interested in new technologies and investing.




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